EXHIBIT 2
[EXECUTION COPY]
PLAN AND AGREEMENT OF MERGER AND AMALGAMATION
PLAN AND AGREEMENT OF MERGER AND AMALGAMATION dated as of May 13, 1997
(this "Agreement") among Sky Games International Ltd., a Bermuda exempted
company ("Parent"), SGI Holding Corporation Limited, a Bermuda exempted company
and a wholly-owned subsidiary of Parent ("Sub"), and Interactive Entertainment
Limited, a Bermuda exempted company ("IEL") (Sub and IEL being hereinafter
collectively referred to as the "Amalgamating Companies") and Xxxxxx'x
Interactive Investment Company, a Nevada corporation ("HIIC").
W I T N E S S E T H:
WHEREAS, Parent, Sub, IEL and HIIC desire IEL to amalgamate with and into
Sub (the "Amalgamation"), upon the terms and subject to the conditions herein
set forth, whereby each issued and outstanding share of common stock, U.S.$1.00
par value per share, of IEL ("IEL Common Shares"), not owned directly or
indirectly by Sub or Parent, will be converted into shares of common stock,
Cdn.$.01 par value, of Parent ("Parent Common Shares");
WHEREAS, the Board of Directors of Parent has determined that the
Amalgamation is in furtherance of and consistent with its long-term business
strategies and is fair to and in the best interests of its shareholders;
WHEREAS, the respective Boards of Directors of Parent and Sub have approved
and declared advisable the Amalgamation;
WHEREAS, Sub has approved as a shareholder of IEL and Parent has approved
as the sole shareholder of Sub this Agreement and the Amalgamation;
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties hereto agree as follows:
ARTICLE I
THE AMALGAMATION
Section 1.1 The Amalgamation. Upon the terms and subject to the
conditions herein set forth, and in accordance with The Companies Act 1981
("CA"), the Amalgamating Companies shall make the appropriate filings with the
Registrar of Companies in Bermuda and IEL shall be amalgamated with and into Sub
at the Effective Time (as hereinafter defined). Following the Amalgamation, the
separate corporate existence of IEL shall cease and IEL and Sub shall continue
as the amalgamated company (the "Amalgamated Company") and shall continue to
exist as a company incorporated and governed by the laws of Bermuda.
Section 1.2 Effective Time. The Amalgamation shall be effective on the
date shown in the Certificate of Amalgamation issued by the Registrar of
Companies in Bermuda (the "Effective Time").
Section 1.3 Effects of the Amalgamation. At the Effective Time, the
effect of the Amalgamation shall be as provided in the applicable provisions of
the CA and as set forth in this Agreement. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, except as otherwise
provided herein:
(a) the amalgamation of the Amalgamating Companies and their
continuance as one company shall become effective;
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(b) all of the property, rights, privileges, powers and franchises of
Sub and IEL shall vest in the Amalgamated Company;
(c) all debts, liabilities and duties of Sub and IEL shall become the
debts, liabilities and duties of the Amalgamated Company;
(d) any existing cause of action, claim or liability to prosecution
shall be unaffected;
(e) any civil, criminal or administrative action or proceeding by or
against an Amalgamating Company may be continued to be prosecuted by or against
the Amalgamated Company; and
(f) any conviction against, or ruling, order or judgment in favor of
or against, an Amalgamating Company may be enforced by or against the
Amalgamated Company.
Section 1.4 Memorandum of Association; Bye-laws; Directors and Officers.
(a) At the Effective Time, the Memorandum of Association of Sub, as in effect
immediately prior to the Effective Time, shall be the Memorandum of Association
of the Amalgamated Company until thereafter changed or amended as provided
therein or by applicable law.
(b) The Bye-Laws of Sub, as in effect immediately prior to the
Effective Time, shall be the Bye-laws of the Amalgamated Company until
thereafter changed or amended as provided therein or as provided by applicable
law.
(c) The Board of Directors of the Amalgamated Company shall consist of
not less than three (3) directors to be designated by Parent, who shall serve
until their respective successors are duly elected and qualified. The names and
addresses of each of the individuals to serve as directors of the Amalgamated
Company are as follows:
(i) Xxxxxx Xxxxxxxxx, 0000 Xxxxxx Xxxx, Xxxxxxx, Xxxxxxxxx
00000;
(ii) Xxxxxxxx Xxxxxx, 00 Xxxxx Xxxxxx Xxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxxxxx 00000; and
(iii) Xxxx Xxxxxx, 0000 Xxxxxx Xxxx, Xxxxxxx, Xxxxxxxxx 00000.
(d) The officers of IEL immediately prior to the Effective Time shall
be the officers of the Amalgamated Company until their respective successors are
duly elected and qualified.
Section 1.5 Conversion of Securities. As of the Effective Time, by virtue
of the Amalgamation and without any action on the part of the shareholders of
either of the Amalgamating Companies:
(a) All IEL Common Shares owned by Sub or Parent shall be cancelled
without any repayment of capital in respect thereof and no capital stock of
Parent or other consideration shall be delivered in exchange therefor.
(b) Each IEL Common Share issued and outstanding immediately prior to
the Effective Time (other than shares to be cancelled in accordance with Section
1.5(a)) shall be converted into 5.879040 (such number being hereinafter referred
to as the "Conversion Number") validly issued and fully paid shares of Parent
Common Shares. All such IEL Common Shares, when so converted, shall no longer
be outstanding and shall automatically be cancelled and retired without any
repayment of capital in respect thereof; and each holder prior to the Effective
Time of any such IEL Common Shares shall cease to have any rights with respect
thereto, except the right to receive (i) certificates representing the shares of
Parent Common Shares into which such IEL Common Shares have been converted and
(ii) any dividends and other distributions in accordance with Section 1.7.
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Section 1.6 Parent to Make Stock Certificates Available. (a) Exchange of
Certificates. As soon as practicable after the Effective Time, Parent shall
cause its Transfer Agent and Registrar (the "Transfer Agent") to issue to the
holders of IEL Common Shares converted in the Amalgamation, certificates (the
"Parent Certificates") representing the shares of Parent Common Shares issuable
pursuant to Section 1.5(b) in exchange for the outstanding IEL Common Shares.
(b) Status of Company Certificates. Subject to the provisions of
Section 1.7, each certificate which immediately prior to the Effective Time
represented IEL Common Shares to be converted in the Amalgamation (the "IEL
Certificates") shall, from and after the Effective Time and until surrendered in
exchange for Parent Certificate(s) in accordance with this Section 1.6, be
deemed for all purposes to represent the number of shares of Parent Common
Shares into which such IEL Common Shares shall have been so converted. For
purposes of this Section 1.6, Parent may rely conclusively on the shareholder
records of IEL in determining the identity of, and the number of IEL Common
Shares held by, each holder of an IEL Certificate at the Effective Time.
Section 1.7 Dividends; Transfer Taxes; Withholding. (a) No dividends or
other distributions that are declared on or after the Effective Time on Parent
Common Shares, or are payable to the holders of record thereof who became such
on or after the Effective Time, shall be paid to any person entitled by reason
of the Amalgamation to receive Parent Certificates representing Parent Common
Shares until such person shall have surrendered its IEL Certificate(s) as
provided in Section 1.6. Subject to applicable law, there shall be paid to each
person receiving a Parent Certificate representing such shares of Parent Common
Shares: (i) at the time of such surrender or as promptly as practicable
thereafter, the amount of any dividends or other distributions theretofore paid
with respect to the shares of Parent Common Shares represented by such Parent
Certificate and having a record date on or after the Effective Time and a
payment date prior to such surrender; and (ii) at the appropriate payment date
or as promptly as practicable thereafter, the amount of any dividends or other
distributions payable with respect to such shares of Parent Common Shares and
having a record date on or after the Effective Time but prior to such surrender
and a payment date on or subsequent to such surrender. In no event shall the
person entitled to receive such dividends or other distributions be entitled to
receive interest on such dividends or other distributions.
(b) If any Parent Certificate representing shares of Parent Common
Shares is to be issued in a name other than that in which IEL Certificate
surrendered in exchange therefor is registered, it shall be a condition of such
exchange that the IEL Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange shall pay to the Transfer Agent any transfer or other taxes required by
reason of the issuance of such Parent Certificate in a name other than that of
the registered holder of IEL Certificate so surrendered, or shall establish to
the satisfaction of the Transfer Agent that such tax has been paid or is not
applicable.
Section 1.8 No Further Ownership Rights in IEL Common Shares. All
certificates representing Parent Common Shares delivered upon the surrender for
exchange of any IEL Certificate in accordance with the terms hereof shall be
deemed to have been delivered in full satisfaction of all rights pertaining to
IEL Common Shares represented by such IEL Certificate.
Section 1.9 Closing of Company Transfer Books. At the Effective Time, the
transfer books of IEL for IEL Common Shares shall be closed, and no transfer of
IEL Common Shares shall thereafter be made. If, after the Effective Time, IEL
Certificates are presented to the Amalgamated Company, they shall be cancelled
and exchanged as provided in this Article I.
Section 1.10 Further Assurances. If, at any time after the Effective
Time, the Amalgamated Company shall consider or be advised that any deeds, bills
of sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (i) to vest, perfect or confirm, of record or otherwise, in
the Amalgamated Company its right, title and interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of either of the
Amalgamating Companies or (ii) otherwise to carry out the purposes of this
Agreement, the Amalgamated
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Company and its proper officers and directors or their designees shall be
authorized to execute and deliver, in the name and on behalf of either
Amalgamating Company, all such deeds, bills of sale, assignments and assurances
and to do, in the name and on behalf of either Amalgamating Company, all such
other acts and things as may be necessary, desirable or proper to vest, perfect
or confirm the Amalgamated Company's right, title and interest in, to and under
any of the rights, privileges, powers, franchises, properties or assets of such
Amalgamating Company and otherwise to carry out the purposes of this Agreement.
Section 1.11 Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall be deemed to take place at the offices of
Altheimer & Xxxx, 00 Xxxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx at 12:01
p.m., Central Daylight Savings Time, on the first business day on which each of
the conditions set forth in Article VII shall have been (and continue to be)
fulfilled or waived, or at such other time and place as Parent and HIIC may
agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant, jointly and severally, to HIIC as
follows:
Section 2.1 Organization, Standing and Power. Each of Parent and Sub is
an exempted company duly organized, validly existing and in good standing under
the laws of Bermuda; and each of Parent and Sub has the requisite corporate
power and authority to carry on its business as now being conducted. Each
Subsidiary (as hereinafter defined) of Parent is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated and has the requisite corporate power and authority to
carry on its business as now being conducted. Parent and each of its
Subsidiaries are duly qualified to do business, and are in good standing, in
each jurisdiction where the character of their properties owned or held under
lease or the nature of their activities makes such qualification necessary,
except where the failure to be so qualified would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect (as
hereinafter defined) on Parent. Parent and its Subsidiaries are not subject to
any material joint venture, joint operating or similar arrangement or any
material shareholders agreement relating thereto other than the Shareholders
Agreement among Sub, HIIC and IEL dated December 30, 1994 (the "Shareholders
Agreement") and the Management Agreement between IEL and Xxxxxx'x Interactive
Entertainment Company, a Nevada corporation ("HIEC"), dated December 30, 1994
(the "Management Agreement"). For purposes of this Agreement: (i) "Material
Adverse Change" or "Material Adverse Effect" means, when used with respect to
Parent or HIIC, as the case may be, any change or effect that is materially
adverse to the business, properties, assets, liabilities, condition (financial
or otherwise) or results of operations of Parent and its Subsidiaries and IEL
taken as a whole, or HIIC and its Subsidiaries taken as a whole, as the case may
be, except, in the case of a Material Adverse Change, for any change resulting
from conditions or circumstances generally affecting the industry as a whole in
which Parent or HIIC, as the case may be, operates; and (ii) "Subsidiary" means
any corporation, partnership, joint venture or other legal entity of which
Parent or HIIC, as the case may be (either alone or through or together with any
other of its Subsidiaries), owns, directly or indirectly, fifty percent (50%) or
more of the capital stock or other equity interests the holders of which are
generally entitled to vote with respect to the election of directors or other
managing authority and/or other matters to be voted on in such corporation,
partnership, joint venture or other legal entity, other than, with respect to
Parent and Sub, IEL and its Subsidiary.
Section 2.2 Capital Structure. As of the date hereof, the authorized
capital stock of Parent consists of: 50,000,000 shares of Parent Common Shares.
At the close of business on April 21, 1997, 13,304,405 shares of Parent Common
Shares were issued and outstanding, all of which were validly issued and are
fully paid and are free of preemptive rights. All of the shares of Parent
Common Shares issuable in exchange for IEL Common Shares at the Effective Time
in accordance with this Agreement will be, when so issued, duly authorized,
validly issued and fully paid. As of the date of this Agreement, other than
outstanding options for 1,190,000 shares of Parent Common
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Shares; the authority to issue options for 4,070,105 additional shares of Parent
Common Shares; outstanding share purchase warrants for the purchase of 308,528
shares of Parent Common Shares; the rights of HIIC pursuant to that certain
convertible secured promissory note and that certain warrant issued to HIIC in
connection with the Funding Agreement among Parent, Sub, IEL and HIIC dated May
13, 1997 (the "Funding Agreement"); and the agreement to issue, subject to
necessary shareholder approvals to create a class of preference shares and
authorize such issuance, up to 3,000 shares of convertible redeemable preference
shares of Parent to B/E Aerospace, Inc., a Delaware corporation ("B/EA"), which
are convertible into Parent Common Shares at a percentage of the trading price
of the Parent Common Shares as previously disclosed to HIIC (the "B/E
Conversion") (collectively, the "Parent Stock Rights"), there are no options,
warrants, calls, rights or agreements to which Parent or any of its Subsidiaries
is a party or by which any of them is bound obligating Parent or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of Parent or any such Subsidiary or
obligating Parent or any such Subsidiary to grant, extend or enter into any such
option, warrant, call, right or agreement. Each outstanding share of capital
stock of each Subsidiary of Parent is duly authorized, validly issued, fully
paid and nonassessable and each such share is beneficially owned by Parent or
another Subsidiary of Parent, free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
voting rights, charges and other encumbrances of any nature whatsoever, other
than those interests granted to HIIC pursuant to the Funding Agreement. All of
Sub's outstanding shares of capital stock are owned directly by Parent. Sub
owns four million (4,000,000) shares of IEL Common Shares in the aggregate
represented by IEL Certificate numbers 3, 8, 10, 12, 14, 16, 18, 20, 22, 33, 34,
37, 38, 39 and 40 issued in the name of Sub and neither Parent nor any of its
Subsidiaries owns any other IEL Common Shares or, except pursuant to the
Shareholders Agreement, any option, warrant, call, right or agreement to receive
any other IEL Common Shares.
Section 2.3 Authority. The Board of Directors of Parent has declared as
advisable and fair to and in the best interests of the shareholders of Parent
(and, in the case of clauses (b) and (c) below, has resolved to recommend to
such shareholders for approval) (a) the Amalgamation and the transactions to be
effected thereby, (b) amendments to the Bye-Laws of Parent set forth on Exhibit
A attached hereto (collectively, the "Bye-Law Amendments") and (c) the
resolutions to be adopted by the shareholders of Parent set forth on Exhibit B
attached hereto (the "Resolutions"). The Boards of Directors of Parent and Sub
have each approved this Agreement and all agreements to be entered into by
Parent or Sub in connection therewith (collectively, "Parent Ancillary
Agreements"). Parent has approved the Amalgamation and this Agreement as the
sole shareholder of Sub. The Board of Directors of Sub has declared the
Amalgamation advisable, and Sub has approved the Amalgamation and this Agreement
as a shareholder of IEL. Parent has all requisite power and authority to enter
into this Agreement and the Parent Ancillary Agreements to which it is a party
and (subject to (x) approval of the Resolutions by a majority of the votes cast
at the Parent Shareholder Meeting (as hereinafter defined) by the holders of
Parent Common Shares, and (y) adoption of the Bye-Law Amendments by seventy-five
percent (75%) of the votes cast at the Parent Shareholder Meeting by the holders
of Parent Common Shares) to consummate the transactions contemplated hereby and
thereby. Sub has all requisite power and authority to enter into this Agreement
and the Parent Ancillary Agreements to which it is a party and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the Parent Ancillary Agreements by Parent and Sub and the consummation by
Parent and Sub of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of Parent and Sub,
subject, in the case of this Agreement, to (x) approval of the Resolutions by a
majority of the votes cast at the Parent Shareholder Meeting by the holders of
Parent Common Shares, and (y) adoption of the Bye-Law Amendments by seventy-five
percent (75%) of the votes cast at the Parent Shareholder Meeting by the holders
of Parent Common Shares. This Agreement and the Parent Ancillary Agreements
have been duly executed and delivered by Parent and Sub and (assuming the valid
authorization, execution and delivery hereof and thereof by HIIC and any other
parties hereto and thereto and the validity and binding effect hereof and
thereof on HIIC and any other parties thereto) each constitutes the valid and
binding obligation of Parent and Sub enforceable against Parent and Sub in
accordance with its terms, except as to the effect, if any, of (a) applicable
bankruptcy and other similar laws affecting the rights of creditors generally,
(b) rules of law governing specific performance, injunctive relief and other
equitable remedies, and (c) the enforceability of provisions requiring
indemnification in connection with the offering, issuance or sale of securities.
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Section 2.4 Consents and Approvals; No Violation. The execution and
delivery of this Agreement and the Parent Ancillary Agreements do not, and the
consummation of the transactions contemplated hereby and thereby and compliance
with the provisions hereof and thereof will not, result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
the loss of a material benefit under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
Parent or any of its Subsidiaries under: (i) subject to adoption of the
Resolutions and Bye-Law Amendments as described in Section 2.3, any provision of
the Memorandum of Continuance and Bye-laws of Parent or the comparable charter
or organization documents or by-laws of any of its Subsidiaries, (ii) assuming
approval by HIIC under the Shareholders Agreement and HIEC under the Management
Agreement and the consent of Singapore Airlines Limited ("XXX") to IEL as
previously furnished by IEL to HIIC and Parent (the "XXX Consent"), any loan or
credit agreement, note, bond, mortgage, indenture, lease, agreement, instrument,
permit, concession, franchise or license applicable to Parent or any of its
Subsidiaries or (iii) assuming adoption of the Resolutions and Bye-law
Amendments as described in Section 2.3, any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Parent or any of its
Subsidiaries or any of their respective properties or assets, other than, in the
case of clauses (ii) and (iii), any such violations, defaults, rights, liens,
security interests, charges or encumbrances that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
Parent and would not materially impair the ability of Parent or Sub to perform
their respective obligations hereunder or under the Parent Ancillary Agreements
or prevent the consummation of any of the transactions contemplated hereby or
thereby. No filing or registration with, or authorization, consent or approval
of, any domestic (federal and state), foreign (including provincial) or
supranational court, commission, governmental body, regulatory agency, authority
or tribunal (a "Governmental Entity") is required by or with respect to Parent
or any of its Subsidiaries in connection with the execution and delivery of this
Agreement or the Parent Ancillary Agreements by Parent and Sub, or is necessary
for the consummation of the Amalgamation and the other transactions contemplated
by this Agreement or the Parent Ancillary Agreements, except: (i) for the filing
with the Registrar of Companies in Bermuda of an application for consent and an
application for registration of the Amalgamation and appropriate documents with
the relevant authorities of other states in which IEL or any of its Subsidiaries
is qualified to do business; (ii) for receipt of consent of the Minister of
Finance in Bermuda and such other consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the laws of any
foreign country (including, without limitation, any political subdivision
thereof) in which Parent or its Subsidiaries conducts any business or owns any
property or assets; and (iii) for such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to obtain or make
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Parent and would not materially impair the ability of
Parent or Sub to perform their respective obligations hereunder or under the
Parent Ancillary Agreements or prevent the consummation of any of the
transactions contemplated hereby or thereby.
Section 2.5 SEC Documents and Other Reports. As of their respective
dates, all documents filed by Parent with the U. S. Securities and Exchange
Commission (the "SEC") on or after January 4, 1994 (the "Parent SEC Documents"),
copies of which have been delivered to HIIC, complied in all material respects
with the requirements of the U. S. Securities Act of 1933, as amended (the
"Securities Act"), and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as the case may be, and none of the Parent SEC Documents
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
Section 2.6 Absence of Certain Changes or Events. Except as set forth in
the Parent SEC Documents filed prior to the date hereof, on or after January 4,
1994: (i) Parent and its Subsidiaries have not incurred any material liability
or obligation (indirect, direct or contingent), or entered into any material
oral or written agreement or other transaction, that is not in the ordinary
course of business or that has resulted or would reasonably be expected to
result in a Material Adverse Effect on Parent; (ii) Parent and its Subsidiaries
have not sustained any loss or interference with their business or properties
(whether or not covered by insurance) that has had or that would reasonably be
expected to have a Material Adverse Effect on Parent; (iii) there has been no
material change in the indebtedness of Parent and its Subsidiaries (other than
changes in the ordinary course of business or as a result of a contemplated
private
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placement by Parent of 8% convertible debentures in an amount not to exceed $3.5
million (the "Debentures"), no change in the outstanding shares of capital stock
of Parent except for the issuance of Parent Common Shares pursuant to the Parent
Stock Rights and no dividend or distribution of any kind (including stock
dividends, stock splits and the like) declared, paid or made by Parent on any
class of its capital stock and (iv) there has been no Material Adverse Change
with respect to Parent, nor any event or development that would, individually or
in the aggregate, reasonably be expected to result in a Material Adverse Change
with respect to Parent.
Section 2.7 No Existing Violation, Default, Etc. Neither Parent nor any
of its Subsidiaries is in violation of (i) its Memorandum of Continuance,
Memorandum of Association or Bye-laws, (ii) any applicable law, ordinance or
administrative or governmental rule or regulation or (iii) any order, decree or
judgment of any Governmental Entity having jurisdiction over Parent or any of
its Subsidiaries, except for any violations that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
Parent. Assuming consummation of the B/E Conversion, there is no existing event
of default or event that, but for the giving of notice or lapse of time, or
both, would constitute an event of default under any loan or credit agreement,
note, bond, mortgage, indenture or guarantee of indebtedness for borrowed money
and there is no existing event of default or event that, but for the giving of
notice or lapse of time, or both, would constitute an event of default under any
lease, other agreement or instrument to which Parent or any of its Subsidiaries
is a party or by which Parent or any such Subsidiary or any of their respective
properties, assets or business is bound, in the case of each clause immediately
above, which, individually or in the aggregate, has had or would reasonably be
expected to have a Material Adverse Effect on Parent.
Section 2.8 Actions and Proceedings. There are no outstanding orders,
judgments, injunctions, awards or decrees of any Governmental Entity against
Parent or any of its Subsidiaries, any of its or their properties, assets or
business, or, to the knowledge of Parent, any of its or their current or former
directors or officers, as such, that would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent. Other
than continuing monthly review by the National Association of Securities Dealers
of Parent's compliance with the continued listing requirements of the Nasdaq
SmallCap Market, there are no actions, suits or claims or legal, administrative
or arbitration proceedings or investigations pending or, to the knowledge of
Parent, threatened against Parent or any of its Subsidiaries, any of its or
their properties, assets or business, or, to the knowledge of Parent, any of its
or their current or former directors or officers, as such, that would reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on Parent. As of the date hereof, there are no actions, suits or claims or
legal, administrative or arbitration proceedings or investigations pending or,
to the knowledge of Parent, threatened against Parent or any of its
Subsidiaries, any of its or their properties, assets or business, or, to the
knowledge of Parent, any of its or their current or former directors or
officers, as such, relating to the transactions contemplated by this Agreement.
Section 2.9 Contracts. All of the material contracts of Parent and its
Subsidiaries that are required to be described in the Parent SEC Documents or to
be filed as exhibits thereto have been described or filed as required. Neither
Parent or any of its Subsidiaries nor, to the knowledge of Parent, any other
party is in breach of or default under any such contracts which are currently in
effect, except for such breaches and defaults which would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Parent. Except as set forth in the Parent SEC Documents, neither Parent nor any
of its Subsidiaries is a party to or bound by any non-competition agreement or
any other agreement or obligation which purports to limit in any material
respect the manner in which, or the localities in which, Parent or any such
Subsidiary is entitled to conduct all or any material portion of the business of
Parent and its Subsidiaries taken as whole.
Section 2.10 Liabilities. Except as fully reflected or reserved against
in the most recent audited consolidated financial statements for the fiscal year
ended February 28, 1997, or disclosed in the footnotes thereto, Parent and its
Subsidiaries had no liabilities (including, without limitation, liabilities for
income, use or any other taxes) at the date of such consolidated financial
statements, absolute or contingent, of a nature which are required by generally
accepted accounting principles to be reflected on such consolidated financial
statements or disclosed in the footnotes thereto, that were material, either
individually or in the aggregate, to Parent and its Subsidiaries and IEL taken
as a whole.
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Except as so reflected, reserved, disclosed or set forth, Parent and its
Subsidiaries have no commitments which are reasonably expected to be materially
adverse, either individually or in the aggregate, to Parent and its Subsidiaries
and IEL taken as a whole.
Section 2.11 Operations of Sub. Sub was formed solely for the purpose of
owning its interest in IEL and has engaged in no other business activities and
has conducted its operations only as contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HIIC
HIIC represents and warrants to Parent and Sub as follows:
Section 3.1 Organization, Standing and Power. HIIC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada; owns one million (1,000,000) shares of IEL Common Shares in the
aggregate represented by IEL Certificates numbers 5, 6, 25, 26, 27, 28, 29, 30,
31, 32, 35 and 36 issued in the name of HIIC and neither HIIC nor any of its
Affiliates (as hereinafter defined) owns any other IEL Common Shares; or, except
pursuant to the Shareholders Agreement, any option, warrant, call, right or
agreement to receive any other IEL Common Shares and has the requisite corporate
power and authority to carry on its business as now being conducted. For
purposes of this Agreement, "Affiliates" means, any Person which Controls a
party to this Agreement, which that party Controls or which is under common
Control with that party; "Person" means an individual, partnership, limited
partnership, corporation, limited liability company, association, joint stock
company, trust, joint venture or unincorporated organization, or the United
States of America or any other nation, any state or other political subdivision
thereof, or any entity exercising executive, legislative, judicial, regulatory
or administrative functions of government; and "Control" means the power, direct
or indirect, to direct or cause the direction of the management and policies of
a Person through voting securities, contract or otherwise.
Section 3.2 Authority. Subject to the approval of the Board of Directors
of HIIC, prior to the Effective Time, HIIC shall have approved the Amalgamation
and this Agreement as a shareholder of IEL. Subject to the approval by the Board
of Directors of each of HIIC and HIEC, HIIC and, as applicable, HIEC have all
requisite power and authority to enter into this Agreement and all agreements to
be entered into by HIIC and HIEC in connection therewith (collectively, "HIIC
Ancillary Agreements") and to consummate the transactions contemplated hereby
and thereby. Subject to the approval of the Board of Directors of each of HIIC
and HIEC, prior to the Effective Time, the execution and delivery of this
Agreement and the HIIC Ancillary Agreements by HIIC and HIEC and the
consummation by HIIC and HIEC of the transactions contemplated hereby and
thereby shall have been duly authorized by all necessary corporate action on the
part of HIIC and, as applicable, HIEC. Subject to the approval by the Board of
Directors of each of HIIC and HIEC, prior to the Effective Time, this Agreement
and the HIIC Ancillary Agreements shall have been duly executed and delivered by
HIIC and HIEC, as applicable, (assuming the valid authorization, execution and
delivery hereof by Parent, Sub and any other parties hereto and thereto and the
validity and binding effect hereof on Parent, Sub and any other parties thereto)
and each constitutes the valid and binding obligation of HIIC and HIEC, as
applicable, enforceable against HIIC and HIEC, as applicable, in accordance with
its terms, except as to the effect, if any, of (a) applicable bankruptcy and
other similar laws affecting the rights of creditors generally, (b) rules of law
governing specific performance, injunctive relief and other equitable remedies,
and (c) the enforceability of provisions requiring indemnification in connection
with the offering, issuance or sale of securities.
Section 3.3 Consents and Approvals; No Violation. The execution and
delivery of this Agreement and the HIIC Ancillary Agreements does not, and the
consummation of the transactions contemplated hereby and thereby and compliance
with the provisions hereof and thereof will not, result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
the loss of a material benefit under, or result in the creation of any lien,
security interest, charge or encumbrance
8
upon any of the properties or assets of HIIC or HIEC under: (i) any provision of
the Articles of Incorporation or By-Laws of HIIC or its Affiliates, (ii)
assuming approval by the other parties thereto under the Shareholders Agreement
and the Management Agreement and the XXX Consent, any loan or credit agreement,
note, bond, mortgage, indenture, lease, agreement, instrument, permit,
concession, franchise or license applicable to HIIC or HIEC or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to HIIC or HIEC or any of its properties or assets, other than, in the case of
clauses (ii) and (iii), any such violations, defaults, rights, liens, security
interests, charges or encumbrances that, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect on HIIC or HIEC and
would not materially impair the ability of HIIC or, as applicable, HIEC to
perform its obligations hereunder or under the HIIC Ancillary Agreements or
prevent the consummation of any of the transactions contemplated hereby or
thereby. No filing or registration with, or authorization, consent or approval
of, any Governmental Entity is required by or with respect to HIIC or HIEC in
connection with the execution and delivery of this Agreement or the HIIC
Ancillary Agreements by HIIC or HIEC or is necessary for the consummation of the
Amalgamation and the other transactions contemplated by this Agreement or the
HIIC Ancillary Agreements, except: (i) for the filing with the Registrar of
Companies in Bermuda of an application for approval and for registration of the
Amalgamation, (ii) for receipt of consent of the Minister of Finance in Bermuda
and such other consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the laws of any foreign
country (including, without limitation, any political subdivision thereof) in
which HIIC or HIEC conducts any business or owns any property or assets and
(iii) for such other consents, orders, authorizations, registrations,
declarations and filings the failure of which to obtain or make would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on HIIC or HIEC and would not materially impair the ability of
HIIC or HIEC to perform its obligations hereunder or under the HIIC Ancillary
Agreements or prevent the consummation of any of the transactions contemplated
hereby and thereby.
Section 3.4 Actions and Proceedings. As of the date hereof, there are no
actions, suits or claims or legal, administrative or arbitration proceedings or
investigations pending or, to the knowledge of HIIC, threatened against HIIC or
any of its Subsidiaries or Affiliates, any of its or their properties, assets or
business relating to the transactions contemplated by this Agreement.
Section 3.5 Ownership of Parent Capital Stock. Neither HIIC nor any of its
Affiliates owns any shares of the capital stock of Parent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF IEL
IEL represents and warrants to HIIC, Parent and Sub as follows:
Section 4.1 Organization, Standing and Power. IEL is an exempted company
duly organized, validly existing and in good standing under the laws of Bermuda;
and IEL has the requisite corporate power and authority to carry on its business
as now being conducted. Each Subsidiary of IEL is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated and has the requisite corporate power and authority to
carry on its business as now being conducted. IEL and each of its Subsidiaries
are duly qualified to do business, and are in good standing, in each
jurisdiction where the character of their properties owned or held under lease
or the nature of their activities makes such qualification necessary, except
where the failure to be so qualified would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on IEL. IEL is not
subject to any material joint venture, joint operating or similar arrangement or
any material shareholders agreement relating thereto other than the Shareholders
Agreement and the Management Agreement.
Section 4.2 Capital Structure. As of the date hereof, the authorized
capital stock of IEL consists of: 5,000,000 shares of IEL Common Shares, all of
which are issued and outstanding, were validly issued, are fully paid
9
and are free of preemptive rights, except for rights under the Shareholders
Agreement. As of the date of this Agreement, other than rights and options
which may arise under the Shareholders Agreement (collectively, the "IEL Stock
Rights"), there are no options, warrants, calls, rights or agreements to which
IEL or any of its Subsidiaries is a party or by which any of them is bound
obligating IEL or any of its Subsidiaries to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock of IEL or
obligating IEL to grant, extend or enter into any such option, warrant, call,
right or agreement. Each outstanding share of capital stock of each Subsidiary
of IEL is duly authorized, validly issued, fully paid and nonassessable and each
such share is beneficially owned by IEL, free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal, agreements,
limitations on voting rights, charges and other encumbrances of any nature
whatsoever.
Section 4.3 Authority. Prior to the Effective Time, the Board of Directors
of IEL shall have approved this Agreement, and subject to approval of the Board
of Directors of IEL and the approval of Sub and HIIC as the only shareholders of
IEL, IEL has all requisite power and authority to enter into this Agreement and
all agreements to be entered into by IEL in connection therewith (collectively,
"IEL Ancillary Agreements") to which it is a party and to consummate the
transactions contemplated hereby and thereby. Prior to the Effective Time, the
execution and delivery of this Agreement and the IEL Ancillary Agreements by IEL
and the consummation by IEL of the transactions contemplated hereby and thereby
shall have been duly authorized by all necessary corporate action on the part of
IEL. Subject to approval of the Board of Directors of IEL and the approval of
Sub and HIIC as the only shareholders of IEL, this Agreement and the IEL
Ancillary Agreements has been duly executed and delivered by IEL and (assuming
the valid authorization, execution and delivery hereof and thereof by the other
parties hereto and thereto and the validity and binding effect hereof and
thereof on the other parties thereto) each constitutes the valid and binding
obligation of IEL enforceable against IEL in accordance with its terms , except
as to the effect, if any, of (a) applicable bankruptcy and other similar laws
affecting the rights of creditors generally, (b) rules of law governing specific
performance, injunctive relief and other equitable remedies, and (c) the
enforceability of provisions requiring indemnification in connection with the
offering, issuance or sale of securities.
Section 4.4 Consents and Approvals; No Violation. The execution and
delivery of this Agreement and the IEL Ancillary Agreements do not, and the
consummation of the transactions contemplated hereby and thereby and compliance
with the provisions hereof and thereof will not, result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
the loss of a material benefit under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
IEL or any of its Subsidiaries under: (i) any provision of the Memorandum of
Association and Bye-laws of IEL or the comparable charter or organization
documents or by-laws of any of its Subsidiaries, (ii) assuming approval by the
other parties thereto under the Shareholders Agreement and the Management
Agreement and the XXX Consent, any loan or credit agreement, note, bond,
mortgage, indenture, lease, agreement, instrument, permit, concession, franchise
or license applicable to IEL or any of its Subsidiaries (other than (a) the
Mutual Confidentiality and Non-Disclosure Agreement, dated March 22, 1996, by
and between IEL and the In-Flight Entertainment Division of B/E Aerospace, Inc.,
(b) the Software Integration Assistance Agreement, dated as of June 1, 1995, by
and between IEL and Matsushita Avionics Systems Corporation, (c) the Public
Relations Services Agreement dated March 28, 1996, by and between Xxxxx Xxxxxx
Xxxxxxxx Associates, Inc. and IEL) and (d) Sublicense Agreement effective as of
October 11, 1996 between Xxxxxx'x Operating Company, Inc. and IEL or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to IEL or any of its Subsidiaries or any of their respective properties or
assets, other than, in the case of clauses (ii) and (iii), any such violations,
defaults, rights, liens, security interests, charges or encumbrances that,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on IEL and would not materially impair the ability of
IEL to perform its obligations hereunder or under the IEL Ancillary Agreements
or prevent the consummation of any of the transactions contemplated hereby or
thereby. No filing or registration with, or authorization, consent or approval
of any Governmental Entity is required by or with respect to IEL or any of its
Subsidiaries in connection with the execution and delivery of this Agreement or
the IEL Ancillary Agreements by IEL, or is necessary for the consummation of the
Amalgamation and the other transactions contemplated by this Agreement or the
IEL Ancillary Agreements, except: (i) for the filing with the Registrar of
Companies in Bermuda of an application for approval and for registration of the
Amalgamation and appropriate documents with the relevant authorities of other
states in which IEL
10
or any of its Subsidiaries is qualified to do business; (ii) for receipt of
consent from the Minister of Finance in Bermuda and such other consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under the laws of any foreign country (including, without
limitation, any political subdivision thereof) in which IEL or any of its
Subsidiaries conducts any business or owns any property or assets; and (iii) for
such other consents, orders, authorizations, registrations, declarations and
filings the failure of which to obtain or make would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on IEL and
would not materially impair the ability of IEL to perform its obligations
hereunder or under the IEL Ancillary Agreements or prevent the consummation of
any of the transactions contemplated hereby or thereby.
Section 4.5 Absence of Certain Changes or Events. Since December 30, 1994,
(i) IEL has not incurred any material liability or obligation (indirect, direct
or contingent), or entered into any material oral or written agreement or other
transaction, that is not in the ordinary course of business or as otherwise
authorized by the Management Agreement or the 1995 business plan of IEL, the
1996 business plan of IEL or the 1997 business plan of IEL (the "1997 IEL Plan")
or reflected or reserved against in the annual audited consolidated financial
statements of IEL or disclosed in the footnotes thereto for the fiscal years
ending December 31, 1995 and 1996, each as approved by the Board of Directors of
IEL, or that has resulted or would reasonably be expected to result in a
Material Adverse Effect on IEL; (ii) IEL and its Subsidiaries have not sustained
any loss or interference with their business or properties (whether or not
covered by insurance) that has had or that would reasonably be expected to have
a Material Adverse Effect on IEL; (iii) there has been no material change in the
indebtedness of IEL and its Subsidiaries (other than changes in the ordinary
course of business or pursuant to the Funding Agreement), no change in the
outstanding shares of capital stock of IEL, except for any increases in the
authorized share capital approved by Sub and HIIC, and no dividend or
distribution of any kind (including stock dividends, stock splits and the like)
declared, paid or made by IEL on any class of its capital stock and (iv) there
has been no Material Adverse Change with respect to IEL, nor any event or
development that would, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Change with respect to IEL.
Section 4.6 No Existing Violation, Default, Etc. IEL is not in violation
of (i) its Memorandum of Association or bye-laws, (ii) any applicable law,
ordinance or administrative or governmental rule or regulation or (iii) any
order, decree or judgment of any Governmental Entity having jurisdiction over
IEL or any of its Subsidiaries, except for any violations that, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect on IEL. There is no existing event of default or event that, but for the
giving of notice or lapse of time, or both, would constitute an event of default
under any loan or credit agreement, note, bond, mortgage, indenture or guarantee
of indebtedness for borrowed money and there is no existing event of default or
event that, but for the giving of notice or lapse of time, or both, would
constitute an event of default under any lease, other agreement or instrument to
which IEL or any of its Subsidiaries is a party or by which IEL or any such
Subsidiary or any of their respective properties, assets or business is bound,
in the case of each of clause (i) and (ii) immediately above, which,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect on IEL.
Section 4.7 Actions and Proceedings. There are no outstanding orders,
judgments, injunctions, awards or decrees of any Governmental Entity against IEL
or any of its Subsidiaries, any of its or their properties, assets or business,
or, to the knowledge of IEL, any of its or their current or former directors or
officers, as such, that would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on IEL. There are no actions, suits or
claims or legal, administrative or arbitration proceedings or investigations
pending or, to the knowledge of IEL, threatened against IEL or any of its
Subsidiaries, any of its or their properties, assets or business, or, to the
knowledge of IEL, any of its or their current or former directors or officers,
as such, that would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on IEL. As of the date hereof, there are no
actions, suits or claims or legal, administrative or arbitration proceedings or
investigations pending or, to the knowledge of IEL, threatened against IEL or
any of its Subsidiaries, any of its or their properties, assets or business, or,
to the knowledge of IEL, any of its or their current or former directors or
officers, as such, relating to the transactions contemplated by this Agreement.
Section 4.8 Contracts. Neither IEL or any of its Subsidiaries nor, to the
knowledge of IEL, any other party is in breach of or default under any material
contract to which it is a party which is currently in effect, except for such
11
breaches and defaults which would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on IEL. Neither IEL
nor any of its Subsidiaries is a party to or bound by any non-competition
agreement or any other agreement or obligation which purports to limit in any
material respect the manner in which, or the localities in which, IEL or any
such Subsidiary is entitled to conduct all or any material portion of the
business of IEL and its Subsidiaries taken as whole (other than the Shareholders
Agreement).
Section 4.9 Liabilities. Except as fully reflected or reserved against in
the most recent audited consolidated financial statements of IEL for the year
ended December 31, 1996, or disclosed in the footnotes thereto, IEL had no
liabilities (including, without limitation, liabilities for income, use or other
taxes) at the date of such consolidated financial statements, absolute or
contingent, of a nature which are required by generally accepted accounting
principles to be reflected on such consolidated financial statements or
disclosed in the footnotes thereto, that were material, either individually or
in the aggregate, to IEL and its Subsidiaries taken as a whole, except for
amounts owed to HIEC pursuant to and in accordance with the terms and provisions
of the Management Agreement. Except as so reflected, reserved, disclosed or set
forth, IEL and its Subsidiaries have no commitments which are reasonably
expected to be materially adverse, either individually or in the aggregate, to
IEL and its Subsidiaries taken as a whole, assuming IEL has adequate financial
resources to fulfill its obligations to XXX under the Software License and
Software Service Agreement dated November 7, 1995 with XXX and the Services
Agreement dated November 7, 1995 and XXX (collectively, the "XXX Agreements").
Section 4.10 Operations of Subsidiary. The Subsidiary of IEL was formed
solely for the purpose of conducting all operations required to be conducted by
IEL in Singapore pursuant to the XXX Agreements and attempting to secure
additional contracts with other Asian airlines and has engaged in no other
business activities.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
-----------------------------------------
Section 5.1 Conduct of Business Pending the Amalgamation. (a) Actions by
Parent. During the period from the date of this Agreement through the Effective
Time, except as otherwise expressly required by this Agreement and the Parent
Ancillary Documents, Parent shall, and shall cause each of its Subsidiaries to,
in all material respects carry on its business in, and not enter into any
material transaction other than in accordance with, the ordinary course of its
business as currently conducted and, to the extent consistent therewith, use its
reasonable best efforts to preserve intact its current business organization,
keep available the services of its current officers and employees and preserve
its relationships with customers, suppliers and others having business dealings
with it, all to the end that its goodwill and ongoing business shall be
unimpaired at the Effective Time. Without limiting the generality of the
foregoing, and except as otherwise expressly contemplated by this Agreement and
the Parent Ancillary Documents, Parent shall not, and shall not permit any of
its Subsidiaries to, without the prior written consent of HIIC:
(i) (A) declare, set aside or pay any dividends (including any
stock dividends) on, or make any other actual, constructive or deemed
distributions or stock splits or similar actions in respect of, any of its
capital stock, or otherwise make any payments to its shareholders in their
capacity as such; or (B) purchase, redeem or otherwise acquire any shares
of its capital stock or those of any Subsidiary or any other securities
thereof or any rights, warrants or options to acquire any such shares or
other securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise encumber
any shares of its capital stock (other than pursuant to the Funding
Agreement), any other voting securities or equity equivalent or any
securities convertible into, or any rights, warrants or options to acquire,
any such shares, voting securities, equity equivalent or convertible
securities (other than the issuance of Parent Common Shares during the
period from the date of this Agreement through the Effective Time upon the
exercise of Parent Stock Rights, except for the issuance of Parent Common
Shares upon conversion of the convertible redeemable preference shares of
Parent issued upon the B/E Conversion) unless a number of voting shares of
Parent are issued to
12
HIIC upon payment by HIIC of the par value thereof such that such number of
shares plus the number of Parent Common Shares into which HIIC's IEL Common
Shares are to be converted pursuant to Section 1.5 plus the number of
shares of Parent Common Shares issuable to HIIC under the Funding Agreement
constitutes the same percentage of the outstanding voting shares of Parent
on a fully diluted basis (as used in this Agreement, "fully diluted basis"
shall be as defined in the bye-laws of Parent as to be amended by the Bye-
Law Amendments in substantially the form attached hereto as Exhibit A) as
the number of Parent Common Shares into which HIIC's IEL Common Shares are
to be converted pursuant to Section 1.5 plus the number of shares of Parent
Common Shares issuable to HIIC under the Funding Agreement constituted of
the outstanding voting shares of Parent on a fully diluted basis prior to
such issuance;
(iii) amend its Memorandum of Association; or amend its bye-laws if
such amendment would adversely affect the rights of HIIC hereunder or upon
consummation of the Amalgamation;
(iv) acquire or agree to acquire, by amalgamating, merging or
consolidating with, by purchasing a substantial portion of the assets of or
equity in or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof
or otherwise acquire or agree to acquire any assets, other than
transactions that are not material to Parent and its Subsidiaries taken as
a whole;
(v) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets (other than the real property owned
by a Subsidiary of Parent), other than transactions that are not material
to Parent and its Subsidiaries taken as a whole;
(vi) incur or assume any indebtedness for borrowed money or
guarantee any such indebtedness (other than pursuant to the Funding
Agreement or as a result of the issuance of the Debentures) or make any
loans, advances or capital contributions to, or other investments in, any
other person;
(vii) violate or fail to perform any material obligation or duty
imposed upon Parent or any Subsidiary by any applicable federal, state,
local, foreign or provincial law, rule, regulation, guideline or ordinance;
(viii) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect to
accounting policies or procedures; or
(ix) authorize, recommend, propose or announce an intention to do
any of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
Parent shall promptly advise HIIC orally and in writing of any change
or event having, or which would reasonably be expected to have, a Material
Adverse Effect on Parent.
(b) Actions by HIIC. During the period from the date of this
Agreement through the Effective Time, except as otherwise expressly required by
this Agreement or the HIIC Ancillary Agreements, HIIC shall cause HIEC to manage
the business of IEL in accordance with the terms of the Management Agreement,
the Shareholders Agreement and the 1997 IEL Plan and to cause IEL not to enter
into any material transaction, contract or agreement other than as authorized by
the Management Agreement, the Shareholders Agreement, the 1997 IEL Plan or by
the Board of Directors of IEL in writing. Without limiting the generality of the
foregoing, and except as otherwise expressly contemplated by this Agreement,
HIIC shall not, and shall cause HIEC not to, without the prior written consent
of Parent, during the period from the date of this Agreement through the
Effective Time:
(i) with respect to any employees or agents of IEL or employees or
agents used to conduct the business of IEL, enter into or adopt any
employee benefit or welfare plan, or amend in any material respect
13
any existing employee benefit or welfare plan, other than as required by
law or in the ordinary course of business consistent with past practices;
(ii) with respect to any employees or agents of IEL or employees or
agents used to conduct the business of IEL, increase the compensation
payable or to become payable to its officers or employees or grant any
severance or termination pay to, or enter into, or amend or modify, any
employment, severance or consulting agreement with, any director, officer,
employee or agent of IEL or any of its Subsidiaries, or, except in the
ordinary course of business consistent with past practices, establish,
adopt, enter into or, except as may be required to comply with applicable
law or, except in the ordinary course of business consistent with past
practices, amend in any material respect or take action to enhance in any
material respect or accelerate any rights or benefits under, any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee; or
(iii) acquire any shares of capital stock of Parent.
HIIC shall promptly advise Parent orally and in writing of any change
or event having, or which would reasonably be expected to have, a Material
Adverse Effect on IEL.
ARTICLE VI
ADDITIONAL AGREEMENTS
---------------------
Section 6.1 Shareholder Meetings. Parent shall call a meeting of its
shareholders (the "Parent Shareholder Meeting") to be held as promptly as
practicable (but in no event prior to the fulfillment of the conditions
specified in Section 7.1(c) to each party's obligation to effect the
Amalgamation) for the purpose of voting upon the Bye-Law Amendments and the
Resolutions.
Section 6.2 Access to Information. Parent shall, and shall cause each of
its Subsidiaries to, afford, during normal business hours during the period from
the date of this Agreement through the Effective Time, to the accountants,
counsel, financial advisors, officers and other representatives of HIIC
reasonable access to, and permit them to make such inspections as may reasonably
be requested of, its properties, books, contracts, commitments and records
(including, without limitation, the work papers of independent public
accountants), and also permit such interviews with its officers and employees as
may be reasonably requested; and, during such period, Parent shall, and shall
cause each of its Subsidiaries to, furnish promptly to HIIC (i) a copy of each
report, schedule, registration statement and other document filed by it during
such period pursuant to the requirements of federal or state securities laws and
(ii) all other information concerning its properties, assets, business and
personnel as the other may reasonably request.
Section 6.3 Stock Exchange Listings. Parent shall use its reasonable
best efforts to list on the Nasdaq SmallCap Market, upon official notice of
issuance, the Parent Common Shares to be issued in connection with the
Amalgamation.
Section 6.4 Fees and Expenses. Except as otherwise provided in this
Section 6.4, whether or not the Amalgamation shall be consummated, all costs and
expenses incurred in connection with this Agreement, the Parent Ancillary
Agreements and the HIIC Ancillary Agreements and the transactions contemplated
hereby and thereby, including, without limitation, the fees and disbursements of
counsel, financial advisors, accountants, actuaries and consultants, shall be
paid by the party incurring such costs and expenses. Parent and HIIC hereby
acknowledge and agree that IEL has not incurred any costs and expenses in
connection with this Agreement, the Parent Ancillary
14
Agreements and the HIIC Ancillary Agreements and the transactions contemplated
hereby and thereby; provided, HIEC may receive reimbursement in accordance with
the terms and provisions of the Management Agreement for services provided to
IEL solely for the benefit of IEL which involved any of the foregoing.
Section 6.5 Reasonable Best Efforts. (a) Upon the terms and subject to
the conditions set forth in this Agreement, each of the parties hereto agrees to
use its reasonable best efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable, to consummate and make
effective, as soon as reasonably practicable, the Amalgamation and the other
transactions contemplated by this Agreement, including, but not limited to: (i)
the obtaining of all necessary actions or non-actions, waivers, consents and
approvals from all Governmental Entities and the making of all necessary
registrations and filings with, and the taking of all other reasonable steps as
may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity; (ii) the obtaining, of all necessary
consents, approvals or waivers from persons other than Governmental Entities;
(iii) the defending of any lawsuits or other legal proceedings, whether judicial
or administrative, challenging this Agreement, the Parent Ancillary Agreements
and HIIC Ancillary Agreements, or the consummation of the transactions
contemplated hereby or thereby, including seeking to have any stay or temporary
restraining order entered by any court or other Governmental Entity vacated or
reversed; and (iv) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by this Agreement.
(b) Each party hereto shall use its reasonable best efforts not to
take any action, or to enter into any transaction, which would cause any of its
representations or warranties contained in this Agreement to be untrue or to
result in a breach of any of its covenants in this Agreement.
(c) Notwithstanding any provision in this Agreement to the contrary
neither Parent nor HIIC shall be obligated to use its reasonable best efforts or
to take any action (or omit to take any action) pursuant to this Agreement if
the Board of Directors of Parent or HIIC, as the case may be, shall conclude in
good faith on the basis of the advice of its outside counsel that such action
would be inconsistent with the fiduciary obligations of such Board of Directors
under applicable law.
Section 6.6 Public Announcements. Parent and HIIC shall consult with each
other before issuing any press release or otherwise making any public statement
with respect to the transactions contemplated by this Agreement and shall not
issue any such press release or make any such public statement prior to such
consultation and without the written approval (which shall not unreasonably be
withheld) of the other, except as may be required by applicable law or
regulation or by existing obligations pursuant to any listing agreement with any
national securities exchange.
Section 6.7 Notification of Certain Matters. Parent shall give prompt
notice to HIIC and HIIC shall give prompt notice to Parent, of: (i) the
occurrence, or non-occurrence, of any event the occurrence, or non-occurrence,
of which does or would be likely to cause (A) any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
or (B) any covenant, condition or agreement contained in this Agreement not to
be complied with or satisfied; and (ii) any failure of Parent, Sub, HIIC or IEL,
as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 6.7 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
Section 6.8 Amalgamation of Parent and Sub. Parent and Sub agree to use
their reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done all things necessary, proper or advisable, to consummate
and make effective, as soon as reasonably practicable after the Effective Time,
the amalgamation of the Amalgamated Company with and into Parent and, as part of
such transaction, to change the name of Parent to "Interactive Entertainment
Limited, " in accordance with the CA (the "Parent Amalgamation").
15
ARTICLE VII
CONDITIONS PRECEDENT TO THE AMALGAMATION
----------------------------------------
Section 7.1 Conditions to Each Party's Obligation to Consummate the
Amalgamation. The respective obligations of each party hereto to consummate the
Amalgamation shall be subject to the fulfillment at or prior to the Effective
Time of the following conditions:
(a) Shareholder Approval. The Resolutions shall have been duly
approved by a majority of the votes cast at the Parent Shareholder Meeting by
the holders of shares entitled to vote thereon, in accordance with applicable
law and the Bye-laws of Parent, and the Bye-Law Amendments shall have been duly
adopted by seventy-five percent (75%) of the votes cast at the Parent
Shareholder Meeting by the holders of shares entitled to vote thereon in
accordance with applicable law and the Bye-laws of Parent.
(b) XXX and Other Approvals.
(i) IEL shall have received the written consent of XXX to the
Amalgamations and the transactions contemplated thereby, including, without
limitation, termination of the Management Agreement; and
(ii) all authorizations, consents, orders, declarations or
approvals of, or filings with, or terminations or expirations of waiting
periods imposed by, any Governmental Entity, which the failure to obtain,
make or occur would have the effect of making the Amalgamation or any of
the transactions contemplated hereby illegal (or without which the
Amalgamation could not become effective) or would have a Material Adverse
Effect on Parent or IEL (as the Amalgamated Company), assuming the
Amalgamation had taken place, shall have been obtained, shall have been
made or shall have occurred.
(c) No Order. No court or other Governmental Entity having
jurisdiction over IEL or Parent, or any of their respective Subsidiaries, shall
have enacted, issued, promulgated, enforced or entered any law, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is then in effect and has the effect
of making illegal or prohibiting the Amalgamation or any of the transactions
contemplated hereby.
(d) Termination Agreements. The parties thereto shall have entered
into agreements reasonably satisfactory to the parties thereto to terminate the
following agreements:
(i) the Management Agreement effective as of the Effective Time
(which shall contain a mutual release by the parties thereto);
(ii) the Shareholders Agreement effective as of the Effective
Time (which shall contain a mutual release by the parties thereto); and
(iii) the Cross-License Agreement among Parent (f/k/a Creator
Capital Inc., a Yukon Territory corporation), IEL and HIEC dated December
30, 1994 effective as of the effective time of the Parent Amalgamation.
(e) Litigation. There shall not have been instituted and be pending
any suit, action or proceeding by any Governmental Entity or any shareholder of
Parent (including any shareholder derivative action) with proper standing to
bring such suit, action or proceeding as a result of this Agreement or any of
the transactions contemplated hereby which, if such Governmental Entity or
shareholder of Parent were to prevail, would reasonably be expected to have the
effect of preventing or materially delaying the Amalgamation.
16
(f) Performance of Obligations; Representations and Warranties. IEL
shall have performed in all material respects each of its agreements contained
in this Agreement required to be performed at or prior to the Effective Time,
each of the representations and warranties of IEL contained in this Agreement
that is qualified by materiality shall be true and correct at and as of the
Effective Time as if made at and as of the Effective Time and each of such
representations and warranties that is not so qualified shall be true and
correct in all material respects at and as of the Effective Time as if made at
and as of the Effective Time, in each case except as contemplated or permitted
by this Agreement; and each of Parent and HIIC shall have received a certificate
signed on behalf of IEL by its President and its Treasurer to such effect.
(g) Material Adverse Change. Since the date of this Agreement, there
shall have been no Material Adverse Change with respect to IEL, except as
contemplated in the 1997 IEL Plan; and each of Parent and HIIC shall have
received a certificate signed on behalf of IEL by Xxxxxx Xxxxxxxxx, President,
and Xxxxxxxx Xxxxxx, Vice President, to such effect.
(h) Continuing Services Agreement. Parent and HIEC shall as of the
Closing have entered into a Continuing Services Agreement regarding the
provision of certain administrative and support services by HIEC to Parent after
the Closing on terms reasonably satisfactory to the parties and terminable by
Parent upon sixty (60) days' notice; provided Parent bears the cost of
termination.
(i) Continued Listing of Parent Common Shares. There shall not be a
cease trading order in effect as to the trading of the Parent Common Shares
through the Nasdaq SmallCap Market, the Parent Common Shares shall be listed on
the Nasdaq SmallCap Market and Parent shall not have received a written or an
official oral notice of non-compliance from Nasdaq as to any applicable SmallCap
Market continued listing requirement and such notice shall not have been
rescinded or such non-compliance remedied.
(j) Receipt of Legal Opinion. HIIC, Parent and Sub shall have
received the legal opinion of Xxxxxxx, Xxxxxxxx & Xxxxx addressed to each of
them in such form as is reasonably acceptable to each of HIIC, Parent and Sub.
Section 7.2 Conditions to Obligation of HIIC to Consummate the
Amalgamation. The obligation of HIIC to consummate the Amalgamation shall be
subject to the fulfillment at or prior to the Effective Time of the following
additional conditions:
(a) Approval of HIIC Board and HIIC. The Board of directors of HIIC
shall have approved this Agreement and the HIIC Ancillary Agreements and HIIC
shall have approved the Amalgamation and this Agreement as a shareholder of IEL.
(b) Performance of Obligations; Representations and Warranties. Each
of Parent and Sub shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed at or prior to
the Effective Time, each of the representations and warranties of Parent and Sub
contained in this Agreement that is qualified by materiality shall be true and
correct at and as of the Effective Time as if made at and as of the Effective
Time and each of such representations and warranties that is not so qualified
shall be true and correct in all material respects at and as of the Effective
Time as if made at and as of the Effective Time, in each case except as
contemplated or permitted by this Agreement; and HIIC shall have received a
certificate signed on behalf of Parent by its Chief Executive Officer and its
Chief Financial Officer to such effect.
(c) Consents Under Agreements. HIIC shall have obtained the consent
or approval of each person (other than XXX and the Governmental Entities
referred to in Section 7.1(c)) whose consent or approval shall be required in
connection with the transactions contemplated hereby under any indenture,
mortgage, evidence of indebtedness, license, lease or other agreement or
instrument, except where the failure to obtain the same would not
17
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on HIIC or upon the consummation of the transactions contemplated
hereby.
(d) Material Adverse Change. Since the date of this Agreement, there
shall have been no Material Adverse Change with respect to Parent, except as
contemplated in the 1997 IEL Plan or as a result of the write-down of real
estate assets owned by a Subsidiary of Parent; and HIIC shall have received a
certificate signed on behalf of Parent by its Chief Executive Officer and its
Chief Financial Officer to such effect.
(e) Delivery of Agreements. Parent and HIIC shall have entered into
the following agreements as of the Closing:
(i) a Shareholder Rights Agreement between HIIC and Parent, in
such form as is reasonably acceptable to HIIC and Parent, regarding
approval by HIIC and the Affiliates of HIIC for as long as they
collectively own:
(A) twenty percent (20%) or more of the outstanding voting
shares of Parent, on a fully diluted basis, as to:
(1) the sale of all or any material portion of the
assets of Parent together with its Subsidiaries;
(2) the incurrence, renewal, refinancing, prepayment
or amendment of the terms of indebtedness of Parent together with
its Subsidiaries in excess of $5 million in any one fiscal year;
(3) Parent or any of its Subsidiaries entering into
any material joint venture or partnership agreement outside of
its previously approved scope of business;
(4) any material acquisition of assets by Parent or
any of its Subsidiaries, including by lease or otherwise (other
than by merger, consolidation or amalgamation) and other than
pursuant to a previously approved budget or plan, or the
acquisition by Parent or any of its Subsidiaries of the stock of
another entity, in each case involving an acquisition valued at
$5 million or more;
(5) any material change in the nature of the business
conducted by Parent or any of its Subsidiaries;
(6) any material amendments to the management
incentive plan covering 4,070,105 Parent Common Shares (the
"MIP") for 12 months following the Closing;
(7) the adoption of any stock option plans for
greater than 5% of the then outstanding Parent Common Shares on a
fully diluted basis, other than the MIP, in any one fiscal year;
(8) material changes in accounting policies; and
(9) the creation or adoption of any shareholder
rights plan; and
18
(B) 10% or more of the outstanding voting shares of Parent
on a fully diluted basis, as to (1) any change in or conduct of
Parent's or any of its Subsidiaries' business or proposed
business (including, but not limited to, the terms of repurchase
or redemption of any debt from any holder thereof if such holder
would be a Disqualified Holder (as such term is defined in the
bye-laws of Parent (as to be amended by the Bye-Law Amendments in
substantially the form attached hereto as Exhibit A) if such
Person held shares of Parent) that would constitute or result in,
or (2) any action or inaction of or by Parent or any of its
Subsidiaries' which HIIC or the Affiliates of HIIC determine in
their reasonable business judgment would result in, in the case
of either (1) or (2), any actual or threatened disciplinary
action or any actual or threatened regulatory sanctions with
respect to or affecting the loss of, or the inability to obtain
or failure to secure the reinstatement of, any registration,
certification, license or other regulatory approval held by HIIC
or the Affiliates of HIIC in any jurisdiction in which HIIC or
any of the Affiliates of HIIC are actively conducting business or
as to which any of them has received final approval or
authorization to proceed, even on a preliminary basis, from its
respective board of directors (or any appropriate committee
established by such board of directors) of plans to conduct
business (each such change, conduct, action or inaction referred
to herein as a "Disqualifying Action"); provided, the reasonable
business judgment to be exercised by HIIC and the Affiliates of
HIIC in determining whether a Disqualifying Action has occurred
or would result need not involve any consideration of the effect
of the Disqualifying Action on Parent alone or together with its
Subsidiaries because the purpose of the protections afforded by
the determination of a Disqualifying Action is for the benefit of
the separate businesses and investments of HIIC and the
Affiliates of HIIC;
(ii) a Registration and Preemptive Rights Agreement on
substantially the following terms:
(A) HIIC would have two (2) demand registration rights to
cause Parent to register Parent Common Shares owned by HIIC
and/or the Affiliates of HIIC, provided, prior to June 30, 1998,
no such demand registration shall be brought for a number of
shares in excess of one million (1,000,000) unless Parent
receives the opinion of its investment banker that the trading
price of the Parent Common Shares would not fall by more than
twenty-five percent (25%) for more than fifteen (15) consecutive
trading days as a result of such sale, in which case a demand
could be brought with respect to up to such number of Parent
Common Shares as would not cause the market price to fall below
such level. Each such offering shall be underwritten on a firm
commitment basis by an underwriter chosen by Parent. The demand
rights would be subject to customary restrictions such as 120 day
blockage periods for corporate developments or registered
offerings by Parent, cut-backs and etc.;
(B) Parent would also agree pursuant to such registration
rights agreement that until HIIC and the Affiliates of HIIC
collectively own less than 5% of the outstanding voting shares of
Parent on a fully diluted basis, HIIC and the Affiliates of HIIC shall
have customary piggy-back rights to include their Parent Common Shares
in registered offerings by Parent;
(C) HIIC and the Affiliates of HIIC would bear the costs of
their legal counsel and any underwriting discounts, commissions or
allowances in connection with all sales pursuant to the foregoing, and
Parent would bear all other fees and expenses of such registrations;
19
(D) HIIC and/or the Affiliates of HIIC would have the right
to purchase voting shares of Parent (or securities convertible
into voting shares of Parent) offered by Parent for as long as
HIIC and the Affiliates of HIIC collectively owned twenty percent
(20%) or more of the outstanding voting shares of Parent on a
fully diluted basis at the same price and terms such securities
are otherwise being offered. HIIC and/or the Affiliates of HIIC
would also have the right for as long as HIIC and the Affiliates
of HIIC collectively owned twenty percent (20%) or more of the
outstanding voting shares of Parent on a fully diluted basis to
participate on a proportionate basis in any non-pro rata stock
repurchases or redemptions conducted by Parent;
(E) at any time that HIIC and the Affiliates of HIIC
collectively own less than ten percent (10%) of the outstanding
voting shares of Parent, on a fully diluted basis, (1) Parent
shall have the right to cause HIIC and the Affiliates of HIIC to
sell their voting shares of Parent pursuant to a registered sale
and (2) HIIC shall have the right to cause Parent to file a
registration statement to sell its and its Affiliates' voting
shares of Parent, in each case of (1) and (2), in the event (x)
of any change in or conduct of the business or proposed business
of Parent or any of its Subsidiaries or any other action or
inaction of Parent or any of its Subsidiaries which would
constitute or result in a Disqualifying Action or (y) Parent does
not redeem a "Disqualified Holder" pursuant to Bye-law 4B of its
bye-laws (as to be amended by the Bye-Law Amendments in
substantially the form attached hereto as Exhibit A), and in each
case of (1) and (2), at Parent's expense (other than HIIC's and
the Affiliates of HIIC underwriting discounts, commissions or
allowances) without being subject to the limitations set forth in
the foregoing paragraph (A); and
(F) upon any conversion of any shares of convertible
redeemable preference shares of Parent issued to B/EA as part of
the B/E Conversion, Parent shall issue to HIIC and/or the
Affiliates of HIIC a number of Parent Common Shares upon payment
by HIIC of the par value thereof such that such number of shares
plus the number of Parent Common Shares into which HIIC's IEL
Common Shares are to be converted pursuant to Section 1.5 plus
the number of shares of Parent Common Shares issuable to HIIC
under the Funding Agreement collectively constitutes the same
percentage of the outstanding voting shares of Parent on a fully-
diluted basis as the number of Parent Common Shares into which
HIIC's IEL Common Shares are to be converted pursuant to Section
1.5 plus the number of shares of Parent Common Shares issuable to
HIIC under the Funding Agreement constituted of the outstanding
voting shares of Parent on a fully diluted basis prior to such
issuance; and
(iii) a License Agreement regarding use by HIIC and its of IEL
intellectual property on substantially the following terms: Parent
would grant a fully paid and perpetual worldwide license to Xxxxxx'x
to use IEL's gaming technology in non-competitive uses in traditional
casino venues which it or its Affiliates own, operate or manage. The
license would include source codes for all software, and neither party
would have any obligation to share or provide any improvements or
modifications with the other party. The license would contain
customary provisions regarding limitations on the use of and
protections regarding the IEL intellectual property.
(f) Escrow Shares. Parent shall have entered into binding written
agreements with the record holders of all 3,525,000 Parent Common Shares being
held in escrow by Montreal Trust Company of Canada under an Escrow Agreement
dated May 27, 1992 ("Performance Shares"), pursuant to which such holders have
agreed to allow Parent to redeem and/or cancel such Parent Common Shares. In
connection with such redemption and/or cancellation of the Performance Shares,
Parent shall not issue or agree to issue more than 1,175,000 Parent Common
20
Shares, and HIIC shall have received a certificate signed on behalf of Parent by
its Chief Executive Officer to such effect. Each record holder of Performance
Shares shall have executed and delivered to a national banking association
selected by HIIC and acceptable to Parent (the "Proxy Holder") an irrevocable
proxy appointing the Proxy Holder proxy for such holder with respect to the
Performance Shares. The Proxy Holder shall have entered into an agreement with
Parent and HIIC regarding the Proxy Holder's agreement not to vote the
Performance Shares.
(g) Bye-Law Amendments. The Bye-Law Amendments substantially in the
form attached hereto as Exhibit A shall have been approved and adopted by
seventy-five percent (75%) of the votes cast at the Parent Shareholder Meeting
by the holders of shares entitled to vote thereon in accordance with applicable
law and the Bye-Laws of Parent.
(h) B/E Conversion. Parent shall have prior to or at the Effective
Time consummated the B/E Conversion.
(i) B.C. Securities Compliance Certificate. Parent shall have
delivered to HIIC a certificate of the British Columbia Securities Commission
certifying that Parent is in compliance with its filing obligations under the
British Columbia Securities Commission dated no more than ten (10) days prior to
the date of the Closing.
Section 7.3 Conditions to Obligations of Parent and Sub to Consummate the
Amalgamation. The obligation of Parent and Sub to consummate the Amalgamation
shall be subject to the fulfillment at or prior to the Effective Time of the
following additional conditions:
(a) Performance of Obligations; Representations and Warranties. HIIC
shall have performed in all material respects each of its agreements contained
in this Agreement required to be performed at or prior to the Effective Time,
each of the representations and warranties of HIIC contained in this Agreement
that is qualified by materiality shall be true and correct at and as of the
Effective Time as if made at and as of the Effective Time and each of such
representations and warranties that is not so qualified shall be true and
correct in all material respects at and as of the Effective Time as if made at
and as of the Effective Time, in each case except as contemplated or permitted
by this Agreement; and Parent shall have received a certificate signed on behalf
of HIIC by its President and its Treasurer to such effect.
(b) Consents Under Agreements. Parent and Sub shall have obtained the
consent or approval of each person (other than XXX and the Governmental Entities
referred to in Section 7.1(c)) whose consent or approval shall be required in
connection with the transactions contemplated hereby under any indenture,
mortgage, evidence of indebtedness, license, lease or other agreement or
instrument, except where the failure to obtain the same would not reasonably be
expected, in the good faith opinion of Parent, individually or in the aggregate,
to have a Material Adverse Effect on Parent or Sub or upon the consummation of
the transactions contemplated hereby.
ARTICLE VIII
TERMINATION; AMENDMENT AND WAIVER
---------------------------------
Section 8.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after any approval by the
stockholders of Parent of the matters presented in connection with the
Amalgamation:
(a) by mutual written consent of Parent and HIIC;
(b) by Parent, by written notice to HIIC, if (i) HIIC shall have
failed to comply in any material respect with any of its covenants or agreements
contained in this Agreement required to be complied with prior to the
21
date of such termination, which failure to comply has not been cured within five
(5) business days of written notice of such failure to comply, (ii) the
shareholders of Parent shall not approve and adopt the Resolutions at the Parent
Shareholder Meeting or any adjournment thereof or by written consent or (iii)
the shareholders of Parent shall not approve and adopt the Bye-Law Amendments at
the Parent Shareholder Meeting or any adjournment thereof or by written consent;
(c) by HIIC, by written notice to Parent, if (i) Parent or Sub shall
have failed to comply in any material respect with any of its respective
covenants or agreements contained in this Agreement required to be complied with
prior to the date of such termination, which failure to comply has not been
cured within five (5) business days after written notice of such failure to
comply, (ii) the shareholders of Parent shall not approve and adopt the
Resolutions at the Parent Shareholder Meeting or any adjournment thereof or
(iii) the shareholders of Parent shall not approve and adopt the Bye-Law
Amendments at the Parent Shareholder Meeting or any adjournment thereof or by
written consent;
(d) by either Parent or HIIC, by written notice from the terminating
party to the other parties, if there has been (i) a material breach by the other
(and/or by Sub if HIIC is the terminating party) of any representation or
warranty that is not qualified as to materiality or (ii) a breach by the other
(and/or by Sub if HIIC is the terminating party) of any representation or
warranty that is qualified as to materiality, in each case which breach has not
been cured within five (5) business days after receipt by the breaching party of
written notice of the breach;
(e) by either Parent or HIIC, by written notice from the terminating
party to the other parties, if there has been (i) a failure by IEL to comply in
any material respect with any of its covenants or agreements contained in this
Agreement required to be complied with prior to the date of such termination,
which failure to comply has not been cured within five (5) business days of
written notice of such failure to comply, (ii) a material breach by IEL of any
representation or warranty that is not qualified as to materiality or (iii) a
breach by IEL of any representation or warranty that is qualified as to
materiality, in each case which breach has not been cured within five (5)
business days after receipt by the breaching party of written notice of the
breach;
(f) by either Parent or HIIC, by written notice from the terminating
party to the other parties, if: (i) the Amalgamation has not been effected on or
prior to the close of business on June 21, 1997; provided, however, that the
right to terminate this Agreement pursuant to this clause (e) shall not be
available to any party whose failure to fulfill any obligation of this Agreement
has been the cause of, or resulted in, the failure of the Amalgamation to have
occurred on or prior to such date or (ii) any court or other Governmental Entity
having jurisdiction over a party hereto shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or otherwise
prohibiting the transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and nonappealable.
The right of Parent or HIIC to terminate this Agreement pursuant to this
Section 8.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of such party, whether prior to or after
the execution of this Agreement. Notwithstanding Sections 7.1(f) and 8.1(e), in
the event a party has failed to fulfill a material obligation under this
Agreement and such failure is the direct or proximate cause of the failure by
IEL to satisfy any of the conditions set forth in Section 7.1(f), such party
shall not be released from its obligation to consummate the Amalgamation
pursuant to Section 7.1(f) and shall not have the right to terminate this
Agreement pursuant to Section 8.1(e).
Section 8.2 Effect of Termination. In the event of the termination of
this Agreement by either Parent or HIIC as provided in Section 8.1, this
Agreement shall forthwith become void without any liability hereunder on the
part of HIIC, IEL, Parent, Sub or their respective directors or officers, except
for Section 6.2 and Section 6.4, which shall survive any such termination;
provided, however, that nothing contained in this Section 8.2 shall relieve any
party hereto from any liability for any breach of this Agreement.
22
Section 8.3 Amendment. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Boards of Directors,
at any time before or after approval by the stockholders of Parent of the
matters presented to them in connection with the Amalgamation; provided,
however, that after any such approval, no amendment shall be made if applicable
law would require further approval by such stockholders, unless such further
approval shall be obtained. This Agreement shall not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 8.4 Waiver. At any time prior to the Effective Time, the parties
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any instrument delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein which may legally be waived. Any agreement on the
part of any party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE IX
GENERAL PROVISIONS
------------------
Section 9.1 Survival of Representations and Warranties. The
representations and warranties in this Agreement and in each instrument
delivered pursuant hereto shall survive the Effective Time (i) for a period of
thirty-six (36) months solely with respect to the representations and warranties
set forth in Section 2.5 and for (ii) the period terminating on the date of the
first report of Parent's independent auditors on the audited financial
statements of Parent for the period ending December 31, 1997, with respect to
all other representations and warranties in this Agreement and in each
instrument delivered pursuant hereto.
Section 9.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given when delivered personally, one day after
being delivered prepaid to an overnight courier or when telecopied (with a
confirmatory copy sent by overnight courier) to the other parties hereto at the
following addresses (or at such other address for any party as shall be
specified by like notice):
(a) if to Parent or Sub, to:
Sky Games International Ltd.
0000-000 Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Attention: Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxx Xxxxxx
00 X. Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
23
and to:
Altheimer & Xxxx
00 Xxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
(b) if to IEL, to:
Interactive Entertainment Limited
0000 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx
Facsimile: (000) 000-0000
(c) if to HIIC, to:
Xxxxxx'x Interactive Investment Company
0000 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx Xxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx'x Entertainment, Inc.
0000 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx X. XxXxxxxx, Esq.
Facsimile: (000) 000-0000
and to:
Fenwick & West LLP
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
Section 9.3 Interpretation. When reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
Section 9.4 Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts shall have been signed by
each of the parties hereto and delivered to the other parties.
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Section 9.5 Entire Agreement; No Third-Party Beneficiaries. This
Agreement (and the schedules and attachments to the foregoing) constitutes the
entire agreement of the parties hereto and supersede all prior agreements and
understandings, both written and oral, among such parties with respect to the
subject matter hereof.
Section 9.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of Bermuda, regardless of the laws that
might otherwise govern under applicable principles of conflict of laws of such
country.
Section 9.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by operation of law or
otherwise by any of the parties hereto without the prior written consent of the
other parties.
Section 9.8 Severability. If any term or provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other terms, provisions and conditions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party hereto. Upon any determination that any term or
other provision hereof is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of such parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
may be consummated as originally contemplated to the fullest extent possible.
Section 9.9 Enforcement of this Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the terms or provisions
of this Agreement were not performed in accordance with their specific wording
or were otherwise breached. It is accordingly agreed that each of the parties
hereto shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States of America or any state having jurisdiction, such
remedy being in addition to any other remedy to which any party may be entitled
at law or in equity. In any action to enforce its rights hereunder, the
prevailing party shall be entitled to recover its reasonable fees and expenses
(including reasonable attorney's fees and expenses) from the non-prevailing
party.
Section 9.10 Indemnification Obligations of Parent. From and after the
Closing, Parent shall indemnify, defend, save and keep HIIC, HIEC and the
Affiliates of HIIC (including their respective directors, officers, employees
and agents) (each, an "Indemnitee") forever harmless against and from all loss,
cost, damage, liability and expense, including reasonable attorney's fees and
expenses (collectively, "Damages"), sustained or incurred by any Indemnitee as a
result of or arising out of or by virtue of or in connection with any inaccuracy
in or breach of any representation or warranty made by Parent or Sub in Article
II of this Agreement.
(a) Limitations on Parent's Indemnification Obligations. Parent shall
not have any indemnification obligation and no Indemnitee shall be entitled to
recover under this Section 9.10, unless a claim for indemnification has been
asserted by written notice, specifying the details of the alleged inaccuracy in
or breach of any representation or warranty, delivered to Parent on or prior to
the end of the period terminating on the date of the first report of Parent's
independent auditors on the audited financial statements of Parent for the
period ending December 31, 1997; provided, however, that claims under this
Section 9.10 with respect to any alleged inaccuracy in or breach of any
representation or warranty in Section 2.5 may be asserted by such written
notice, delivered to Parent on or prior to the end of the period terminating
thirty-six (36) months after the date of the Closing.
(b) Third Party Claims. Within thirty (30) days following the receipt
of notice of a Third Party Claim, and in any event within the period necessary
to respond to such pleading, if applicable, the party receiving the notice of
the Third Party Claim shall (i) notify Parent of the existence of such Third
Party Claim setting forth with reasonable specificity the facts and
circumstances of which such party has received notice, and (ii) specifying the
basis hereunder upon which the Indemnitee's claim for indemnification is
asserted. As used herein, "Third Party Claim"
25
shall mean any claim, action, suit, proceeding, investigation, or like matter
which is asserted or threatened by any party other than the parties hereto,
their successors and permitted assigns, against an Indemnitee. The failure to
deliver the notice described in the first sentence of this Section 9.10(b)
within the time frame required shall relieve Parent of any liability with
respect to such Third Party Claim. Each Indemnitee shall, upon reasonable
notice, tender the defense of a Third Party Claim to Parent if so requested by
Parent in writing. Then, except as hereinafter provided, such Indemnitee shall
not, and Parent shall, have the right to contest, defend, litigate or settle
such Third Party Claim. Each Indemnitee shall have the right to be represented
by counsel and to participate at its own expense in any such contest, defense,
litigation or settlement conducted by Parent. Parent shall have the exclusive
right to contest and defend the Third Party Claim and shall have the right, upon
receiving the prior written approval of such Indemnitee (which shall not be
unreasonably withheld) and which shall be deemed automatically given if a
response has not been received within the ten (10) day period following a
written request for such consent), to settle any such matter, either before or
after the initiation of litigation, at such time and upon such terms as it deems
fair and reasonable. If an Indemnitee is entitled to indemnification against a
Third Party Claim, and Parent fails to accept a tender of, or assume, the
defense of a Third Party Claim pursuant to this Section 9.10(b), such Indemnitee
shall have the right, without prejudice to its right of indemnification
hereunder, in its discretion exercised in good faith and upon the advice of
counsel, to contest, defend, litigate and settle such Third Party Claim, either
before or after the initiation of litigation, at such time and upon such terms
as such Indemnitee deems fair and reasonable, provided that written notice of
its intention to settle is given to Parent at least ten (10) days prior to
settlement. If, pursuant to this Section 9.10(b), such Indemnitee so contests,
defends, litigates or settles a Third Party Claim for which it is entitled to
indemnification hereunder as hereinabove provided, such Indemnitee shall be
reimbursed by Parent for the reasonable attorneys' fees and other expenses of
defending, contesting, litigating and/or settling the Third Party Claim which
are incurred from time to time, forthwith following the presentation to Parent
of itemized bills for said attorneys' fees and other expenses.
(c) Tax and Insurance Benefits. All indemnification or reimbursement
payments required pursuant to this Agreement shall be made net of all cash, tax
and insurance benefits received by HIIC, HIEC or their Affiliates. In the event
that any claim for indemnification asserted hereunder is, or may be, the subject
of any insurance coverage or other right to indemnification or contribution from
any third person, HIIC, HIEC and their Affiliates shall be required to, and HIIC
expressly agrees that it shall, promptly notify the applicable insurance
carrier of any such claim or loss and tender defense thereof to such carrier,
and shall also promptly notify any potential third party indemnitor or
contributor which may be liable for any portion of such losses or claims. HIIC,
HIEC and their Affiliates shall be required to, and HIIC expressly agrees that
it shall, promptly pursue, at the cost and expense of Parent, such claims
diligently and to reasonably cooperate, at the cost and expense of Parent, with
each applicable insurance carrier and third party indemnitor or contributor.
Notwithstanding Section 9.10(b) and this Section 9.10(c), no Indemnitee shall be
required to tender the defense of a Third Party Claim more than once unless so
requested by Parent and Parent has acknowledged in writing its liability
pursuant to Section 9.10(b) for such Third Party Claim.
(d) Remedies and Undertakings. Except as otherwise specifically
provided in this Agreement, the sole and exclusive remedy after the Closing of
HIIC, HIEC and their Affiliates under this Agreement for an inaccuracy in or
breach of any representation or warranty made by Parent or Sub in Article II of
this Agreement shall be restricted to the indemnification rights set forth in
this Section 9.10. Prior to the assertion of any claims for indemnification
under this Agreement, each Indemnitee shall utilize all reasonable efforts,
consistent with normal practices and policies and good commercial practice, to
mitigate such Damages. Notwithstanding anything to the contrary contained
herein, the foregoing limitations set forth in this Section 9.10(d) shall not
apply to actions arising from a default or an alleged default in the performance
of any provision of this Agreement (other than a representation or warranty in
Article II of this Agreement), and the parties hereto shall have all remedies
available to them at law and equity with respect to any such default or alleged
default.
Section 9.11 Limitation of Liability. Notwithstanding Section 8.2 and
Section 9.10, no party to this Agreement or any of its Affiliates shall be
liable to any other party for such damage, loss or injury due to a breach of
this Agreement which does not flow directly and immediately from the act or
omission of the party or any of its
26
Affiliates and each party hereto hereby waives all rights to bring any action in
respect of such liability. Such limitation of liability shall apply to, among
other things, liability arising from tort (including negligence) and liability
for lost revenues or profits, and such limitation of liability shall apply even
if the party or its Affiliates causing damage, loss or liability to which this
limitation of liability applies have been advised of the possibility of such
damage, loss or liability.
27
IN WITNESS WHEREOF, Parent, Sub, IEL and HIIC have caused this Agreement to
be executed and attested by their respective officers thereunto duly authorized,
all as of the date first written above.
SKY GAMES INTERNATIONAL LTD.
By:/s/ Xxxxxxx Xxxxx
Its: President
Attest:/s/ X.X. Xxxxxxx
------------
SGI HOLDING CORPORATION LIMITED
By: /s/ Xxxxxxx Xxxxx
Its:President
Attest:/s/ X.X. Xxxxxxx
------------
INTERACTIVE ENTERTAINMENT LIMITED
By:/s/ Xxxxxxx Xxxxx
Its: President
Attest:/s/ X.X. Xxxxxxx
------------
XXXXXX'X INTERACTIVE INVESTMENT COMPANY
By:/s/ Xxxx Xxxxxx
Its:Sr. Vice President
Attest:/s/ X.X. Xxxxxxx
------------
28
Exhibit A
---------
Form of Bye-Law Amendments
29
SCHEDULE OF
PROPOSED AMENDMENTS TO THE BYE-LAWS OF
SKY GAMES INTERNATIONAL LTD.
The Board of Directors is recommending the following Bye-law amendments to
the shareholders for approval at the Special General Meeting:
Bye-Law 1
---------
The following definitions are inserted in alphabetical order in Bye-law 1:
"Affiliates" means, with respect to any person or entity, any person or entity
that directly or indirectly Controls such person or entity, or any person or
entity which is Controlled by or under common Control with such person or
entity.
"Common Shares" has the meaning set forth in Bye-law 3(B).
"Control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a person or entity,
whether through the ownership of voting securities, by contract or otherwise.
"Director" means a director of the Company.
"fully diluted basis" means at any time that number of (A) Common Shares equal
to the sum, without duplication, of (i) the total number of Common Shares then
outstanding (other than 3,525,000 shares of Common Shares held in escrow
pursuant to that Escrow Agreement dated May 27, 1992, as amended, among Montreal
Trust Company of Canada, the Company and certain shareholders), plus (ii) the
total number of Common Shares into which all then outstanding Preference Shares
or any other shares of the Company are then convertible directly or indirectly,
provided that Common Shares issuable upon conversion of Class A Preference
Shares shall not be included until such conversion occurs, plus (iii) the total
number of Common Shares then issuable directly or indirectly upon exercise of
all then outstanding options, warrants (including the warrant for 650,000 Common
Shares exercisable at $1 per Common Share issued to Xxxxxx'x Interactive
Investment Company, a Nevada corporation, and exercisable at the option of the
Company), unexercised stock subscriptions, convertible debentures and other
convertible securities, plus (B) Other Voting Shares equal to the sum, without
duplication (including without duplication of any Common Shares) of (i) the
total number of Other Voting Shares then outstanding, plus (ii) the total number
of Other Voting Shares into which all then outstanding Preference Shares or any
other shares of the Company are then convertible directly or indirectly, plus
(iii) the total number of Other Voting Shares then issuable directly or
indirectly upon exercise of all then outstanding options, warrants, unexercised
stock subscriptions, convertible debentures and other convertible securities.
"HIIC Entities" means Xxxxxx'x Interactive Investment Company, a Nevada
corporation, and any of its Affiliates owning shares in the Company.
"HIIC Directors" means the Directors appointed pursuant to Bye-law 54(B) or the
second sentence of Bye-law 55.
"Other Voting Shares" means shares of the Company having the right to vote for
election of directors other than Common Shares or securities convertible into
Common Shares.
"Preference Shares" has the meaning set forth in Bye-law 3(B).
1
"Special Board Majority" means (i) a majority of the Directors voting at a
meeting of the Board which also includes a majority of the HIIC Directors then
in office or (ii) a written resolution executed by all the members of the Board.
"Special Shareholders Majority" means a majority of the votes cast at a general
meeting which also includes the votes attaching to a majority of the Voting
Shares of the Company on a fully diluted basis then heir by the HIIC Entities.
"Voting Shares" means Common Shares having the right to vote for election of or
to appoint Directors and any shares convertible directly or indirectly into such
Common Shares and Other Voting Shares and any shares convertible directly or
indirectly into Other Voting Shares.
Bye-Law 3(B)
------------
Bye-law 3(B) is replaced with the following:
"The authorised share capital of the Company at the date of the adoption of
these Bye-laws is US$550,030 divided into 50,000,000 common shares of par value
US$0.01 each (the "Common Shares"), 3,000 non-voting convertible redeemable
preference shares of par value US$0.01 each (the "Class A Preference Shares")
and 5,000,000 redeemable preference shares of par value US$0.01 each (the "Class
B Preference Shares" and together with the Class A Preference Shares, the
"Preference Shares")."
Bye-Law 4
---------
Delete paragraph (c) and the word "and" immediately preceding it.
Delete the last sentence of Bye-law 4 and insert the following as Bye-law 4A:
The Board shall be authorised to issue from time to time in one or more series
the Preference Shares on such terms as it deems appropriate, including, without
limitation, the following:
(a) the number of shares of the Preference Shares, less than or equal to
the total number of Preference Shares authorised in Bye-law 3(B) for each class
of Preference Shares, respectively;
(b) whether dividends, if any, shall be cumulative or noncumulative and the
dividend rate of the Preference Shares;
(c) the dates at which dividends, if any, shall be payable;
(d) the redemption rights of the Preference Shares;
(e) the terms and amount of any sinking fund provided for the purchase or
redemption of shares of the Preference Shares;
(f) the amounts payable on shares of the Preference Shares in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Company;
(g) whether the shares of the Preference Shares shall be convertible into
shares of any other class or preference shares, or any other equity security, of
the Company or any other company, and, if so, the specification of such other
class or preference shares or such other equity security, the conversion price
or prices or rate or rates, any adjustments thereof, the date or dates as of
which such shares shall be convertible and all other terms and conditions upon
which such conversion may be made; and
2
(h) the voting rights, if any, of the holders of shares of the Preference
Shares; provided that the Class A Preference Shares shall be not-voting.
Insert the following as Bye-law 4B:
"(A) Any Common Shares, Preference Shares or shares of any other class shall
always (i) be redeemed whenever the HIIC Entities own 10% or more of the Voting
Shares on a fully diluted basis and (ii) be subject to redemption by the Company
in accordance with the Companies Act, by action of the Board whenever the HIIC
Entities own less than 10% of the Voting Shares on a fully diluted basis, if any
holder of such shares is a Disqualified Holder or if such action otherwise
should be taken pursuant to any applicable provision of law, to the extent
necessary to avoid any regulatory sanctions against, or to prevent the loss of,
inability to obtain or secure the reinstatement of any license, franchise or
entitlement from any governmental agency held by, the Company, any Affiliate of
the Company, any entity in which the Company or such Affiliate is an owner or
the HIIC Entities or their Affiliates which license, franchise or entitlement
is (i) conditioned upon some or all of the holders of the Company's shares of
any class or series possessing prescribed qualifications, or (ii) needed to
allow the conduct of any portion of the business of the Company or any such
Affiliate or other entity or the HIIC Entities or their Affiliates.
The terms and conditions of such redemption shall be as follows:
(a) the redemption price of the Common Shares and the shares convertible
into Common Shares to be redeemed pursuant to this Bye-law shall be equal to the
Fair Market Value of such shares, and as to such convertible shares, as if any
such convertible shares were converted into Common Shares, (or such other
redemption price as required by any applicable law, regulation or rule) and the
redemption price of shares of the Company of any class (or classes) or series
other than Common Shares or shares convertible into Common Shares shall be the
Fair Market Value of such shares; provided that in both of the previous cases
there shall be excluded any dividends thereon not entitled to be received
pursuant to paragraph (e) of this Bye-law;
(b) the redemption price of such shares may be paid only in cash;
(c) if less than all the shares held by Disqualified Holders are to be
redeemed, the shares to be redeemed shall be selected in such manner as shall be
determined by the Board, which may include selection first of the most recently
purchased shares thereof, selection by lot or selection in any other manner
determined by the Board;
(d) at least 30 days' written notice of the Redemption Date shall be given
to the record holders of the shares selected to be redeemed pursuant to this
Bye-law (unless waived in writing by any such holder), provided that the
Redemption Date may be the date on which written notice shall be given to record
holders if the cash necessary to effect the redemption shall have been deposited
in trust for the benefit of such record holders and subject to immediate
withdrawal by them upon surrender of the share certificates for their shares to
be redeemed together with any other documentation required to effect such
redemption; and
(e) from and after the Redemption Date or such earlier date as required by
any applicable law, regulation or rule, any and all rights of whatever nature,
which may be held by the owners of shares selected for redemption (including
without limitation any rights to vote or participate in dividends declared on
stock of the same class or series as such shares), shall cease and terminate and
they shall thenceforth be entitled only to receive the cash upon redemption.
As used in these Bye-laws:
(i) "Disqualified Holder" shall mean any holder of shares of the Company of
any class (or classes) or series: (1) who, either individually or when taken
together with any other holders of shares of the Company of any class (or
classes) or series is or would reasonably be expected to be determined by any
gaming regulatory agency to be unsuitable, or has or would reasonably be
expected to have an application for a gaming license, permit or other
3
necessary regulatory approval rejected, or has or would reasonably be expected
to have a previously issued gaming license, permit or other necessary regulatory
approval rescinded, suspended, revoked, not renewed or not reinstated, as the
case may be, whether or not any of the foregoing is or would reasonably be
expected to be final and nonappealable; or (2) whose holding of such shares,
either individually or when taken together with the holding of shares of the
Company of any class (or classes) or series by any other holder could reasonably
be expected to cause the Company (or any other company engaged in the gaming
business in any jurisdiction if such holder of shares were a shareholder of that
company) to be denied a licence, permit or other necessary regulatory approval
to engage in any aspect of the gaming business or the serving or sale of
alcoholic beverages in connection with the operation of a gaming business.
(ii) "Fair Market Value" of a share of (1) the Common Shares shall mean the
average Closing Price for such share for each of the 45 most recent days of
which Common Shares shall have been traded preceding the day on which notice of
redemption shall be given pursuant to paragraph (d) of this Bye-law; provided,
however, that "Fair Market Value" as to any shareholder who purchased any Common
Shares subject to redemption within 120 days of a Redemption Date need not
(unless otherwise determined by the Board) exceed the purchase price paid by him
for any Common Shares purchased within such 120 days and (2) shares of the
Company of any class (or classes) or series other than Common Shares or shares
convertible into Common Shares (including, Other Voting Shares) shall be
determined by the Board in good faith; provided, however, that "Fair Market
Value" as to any shareholder who purchased any such shares subject to redemption
within 120 days of the Redemption Date need not (unless otherwise determined by
the Board) exceed the purchase price paid by him for any such shares of the
Company purchased within such 120 days.
(iii) "Closing Price" on any day means the reported closing sales price
or, in case no such sale takes place, the average of the reported closing bid
and asked prices on the Composite Tape for the New York Stock Exchange-Listed
Stocks, or, if such stock is not listed on such Exchange, on the principal
United States securities exchange registered under the Securities Exchange Act
of 1934 on which such shares are listed, or, if such shares are not listed on
any such exchange, the highest closing sales price or bid quotation for such
shares on the National Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use, or if no such prices or quotations
are available, the fair market value on the day in question as determined by the
Board in good faith.
(iv) "Redemption Date" shall mean the date fixed by the Board for the
redemption of any shares of the Company pursuant to this Bye-law; provided,
however, with respect to any redemption pursuant to Bye-law 4B(A)(i), the
Redemption Date shall not be more than 90 days after the date the Board first
learned of the existence of a Disqualified Holder.
(v) "Subsidiary" shall mean any company (wherever incorporated),
association, partnership or other business entity more than 50% of whose
outstanding stock or other ownership interests entitled to vote generally in the
election of directors (or their equivalent in such form of entity and under the
laws of the jurisdiction of organisation of such entity) is owned by the
Company, by one or more Subsidiaries or by the Company and one or more
Subsidiaries.
(B) So long as a holder of Preference Shares is not a Disqualified Holder, such
Preference Shares shall be redeemed in accordance with the terms set forth
in the resolutions adopted by the Board."
Bye-Law 17
----------
Bye-law 17 is amended by deleting the words "within three months" and inserting
the words "within three days".
4
Bye-Law 49
----------
Bye-law 49 is renumbered as "Bye-law 49(A)", and the following words are
inserted at the beginning of the second sentence thereof:
"Subject to Bye-law 49(B),".
A new Bye-law 49(B) is inserted as follows:
"Any Shareholder may irrevocably appoint a proxy, and in such case, such proxy
shall be irrevocable in accordance with the instrument of appointment and the
Shareholder may not vote at any meeting at which the proxy holder is present
either in person or pursuant to s. 75A of the Companies Acts."
Bye-Law 52
----------
In Bye-law 52, insert the following words immediately after the words "provided
that":
", subject to Bye-law 49(B),".
Bye-Law 53
----------
In Bye-law 53, insert the words "Bye-law 49(B) and" immediately before the words
"the Companies Acts".
Bye-Laws 54-56
--------------
Bye-laws 54, 55 and 56 are deleted in their entirety and are replaced with the
following:
"54(A) Until the HIIC Entities own less than 5% of the Voting Shares on a
fully diluted basis, the Board shall consist of 10 Directors who shall, subject
to Bye-law 54(B), be elected or appointed, except in the case of a casual
vacancy filled pursuant to Bye-law 55, at the annual general meeting or at any
special general meeting called for the purpose of electing or appointing
Directors and who shall hold office for such term as the Shareholders may
determine or, in the absence of such determination, until the next annual
general meeting or until their successors are elected or appointed or their
office is otherwise vacated. At such time as the HIIC Entities own less than 5%
of the Voting Shares on a fully diluted basis, the Board shall consist of such
number not less than three as the Company by Resolution may from time to time
determine. At least two of the Directors, other than the Directors appointed
pursuant to Bye-law 54(B), shall be individuals who are not otherwise officers
or employees of the Company.
54(B) At any time at which the HIIC Entities own 10% or more of the Voting
Shares on a fully diluted basis, the HIIC Entities shall be entitled to appoint
a percentage of Directors which is the same percentage of the size of the entire
Board as the number of Voting Shares held by the HIIC Entities is of the total
number of Voting Shares on a fully diluted basis (such percentage of Voting
Shares owned by and such number of Directors appointed by the HIIC Entities
shall be determined as follows: the fractional portion of any percentage of
ownership shall be disregarded and whole numbers ending in 5 through 9 shall be
rounded up to the next highest multiple of 10 and whole numbers ending 1 through
4 shall be rounded down to the next lowest multiple of 10 (e.g., 24.9% shall be
rounded down to 20% and 25.1% shall be rounded up to 30%) (and the resulting
percentage shall be multiplied by 10). At any time at which the HIIC Entities
own 5% or more, but less than 10%, of the Voting Shares on a fully diluted
basis, the HIIC Entities shall be entitled to appoint one Director.
55. The Company in general meeting may authorise the Board to fill any vacancy
on the Board other than a vacancy in the office of a Director who was appointed
pursuant to Bye-law 54(B). Any vacancy in the office of a Director appointed
pursuant to Bye-law 54(B) may be filled by a written resolution deposited at the
Registered Office, signed by each of the HIIC Entities holding Voting Shares.
5
56. The Company may in a Special General Meeting called for that purpose remove
a Director provided notice of any such meeting shall be served upon the Director
concerned not less than 14 days before the meeting and he shall be entitled to
be heard at that meeting and provided further that only the HIIC Entities shall
be entitled to vote on any resolution for the removal of an HIIC Director unless
the reason for removal is disqualification of such Director under Bye-law 58(f)
in which case such Director shall be subject to removal by the Company in
accordance with the foregoing provisions of this Bye-law 56. Any vacancy
created by the removal of a Director at a Special General Meeting may be filled
at the Meeting pursuant to Bye-law 54 by the election of another Director in his
place or, in the absence of such election, pursuant to Bye-law 55."
Bye-Law 58
----------
Insert the words "and Officers" after the word "Director" in the heading.
Rename Bye-Law 58 as "Bye-law 58A"
----------------------------------
In paragraph (e) of Bye-law 58, replace the words "a Special Resolution of the
Company"' with the words "Bye-law 56", and replace the period with a semi-colon.
Insert a new paragraph (f) as follows:
"(f) if he would be a Disqualified Holder if he were to own any shares of the
Company".
Insert a new Bye-law "58B" as follows:
The office of any officer shall be vacated upon the happening as to such officer
of the events set out in Bye-law 58A (except the events described in paragraph
(d) and (e)).
Bye-Law 59
----------
In the first sentence of Bye-law 59, immediately after the words "of the
Directors" insert the words, ", other than the HIIC Directors,"; replace the
words "a Director may appoint" with the words "an HIIC Director may appoint" and
in the second sentence thereof replace the words "may be removed by Resolution
of the Company" with the words "may be removed in the same manner as the
Director in respect of whom he is appointed in the alternative".
Bye-Law 64
----------
At the beginning of the third sentence of Bye-law 64, insert the words "Subject
to Bye-law 71,", and in the fourth sentence insert the words ", subject to Bye-
Law 71," immediately after the words "PROVIDED that".
Bye-Law 70
----------
At the beginning of Bye-Law 70(A) and the beginning of the first sentence of
Bye-law 70(B) insert the words "Subject to Bye-law 71(B).".
Bye-law 70(B) is amended by the insertion of the following at the end thereof:
Notwithstanding the first sentence of this paragraph and Bye-law 70(C), for so
long as the HIIC Entities hold at least 5% but less than 10% of the Voting
Shares on a fully diluted basis, the HIIC Directors shall be entitled to elect
one member to each of the Board's executive committee, compensation committee
and audit committee (or any other committee with powers similar thereto); for
such time as the HIIC Entities hold 10% or more of the Voting Shares on a fully
diluted basis, the HIIC Directors shall be entitled to appoint a percentage of
members to each of the Board's executive committee, compensation committee and
audit committee (or any other committee with powers similar
6
thereto) which is the same percentage of the total number of members of such
committee as the percentage of Voting Shares so held by the HIIC Entities is of
the total number of Voting Shares on a fully diluted basis (such number to be
determined follows: the fractional portion of any percentage of ownership shall
be disregarded and whole numbers ending in 5 through 9 shall be rounded up to
the next highest multiple of 10 and whole numbers ending 1 through 4 shall be
rounded down to the next lowest multiple of 10 (e.g., 24.9% shall be rounded
down to 20% and 25.1% shall be rounded up to 30%) and the fractional portion of
the number of members shall be rounded up to the nearest whole number (e.g., 30%
of a committee of 4 members would result in the right to appoint 2 members of
such committee)).
Bye-law 70(C) is amended by the substitution of the word "Affiliate" for the
word "affiliate".
Bye-Law 71
----------
Bye-law 71 is renumbered "Bye-law 71(A)", and at the beginning of the second
sentence thereof, the following shall be inserted: "Save as otherwise provided
in these Bye-laws,".
Insert a new Bye-law "71(B)" as follows:
At any time that the HIIC Entities own 20% or more of the Voting Shares on a
fully diluted basis, any of the following actions by the Company would require
the approval by a Special Board Majority and a Resolution:
(i) the amalgamation, merger or consolidation of the Company; and
(ii) the amendment of these Bye-laws, including, without limitation, Bye-
laws 0X, 00, 00, 00, 00X, 00X, 00(X) or 71(C), in a manner that would have
a material adverse effect on the rights of the HIIC Entities hereunder.
Insert a new Bye-law "71(C)" as follows:
At any time that the HIIC Entities own 20% or more of the Voting Shares of the
Company on a fully diluted basis, any of the following actions by the Company
would require the approval by a Special Shareholder Majority:
(i) the winding-up or dissolution of the Company; and
(ii) appointment of the Company's independent auditors.
Bye-Law 72
----------
Bye-law 72 is amended by deleting the words "word of mouth" and substituting
therefor the word "verbally".
Bye-Law 73
----------
Bye-Law 73 is amended by the deletion of the words "may be fixed by the Board
and, unless so fixed at any other number".
Bye-Law 95
----------
In Bye-law 95 insert the words: "or to vote at" before the words "general
meetings".
7
Bye-Law 107
-----------
Bye-law 107 is amended by the insertion of the words "Subject to Bye-law 71(B),"
at the beginning thereof and by the deletion of the words "by Special Resolution
at which time" and substituting therefor the words ", and upon such
confirmation".
8
