ASSET PURCHASE AGREEMENT entered into as of December 31, 1999, by and
among Casino Resource Corporation, a Minnesota corporation ("CRC"),
XxxxxxXxxxXxxxx.xxx, Inc., a Nevada corporation and wholly owned subsidiary of
CRC ("Buyer"), Digital Development & Distribution, LLC, a California limited
liability company dba Raw Data Corp. ("Seller"), and Xxxxx Xxxxx, an individual
residing in the State of California (hereinafter referred to by his last name or
collectively with Seller as the "Sellers"). The Sellers, Buyer and CRC may
referred to collectively herein as the "Parties" or individually as a "Party."
BACKGROUND
Birks is the sole Manager and the holder of a 67% membership interest
in Seller.
CRC desires to acquire indirectly substantially all of the assets of
Seller, and Sellers desire to sell substantially all of Seller's assets to
Buyer, on and subject to the terms set forth below.
Neither CRC nor Buyer shall assume any of the liabilities of the
Sellers.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller, including all of its (A) tangible personal property
(such as machinery, equipment, inventories of raw materials and supplies,
manufactured and purchased parts, goods in process and finished goods,
furniture, automobiles, trucks, tractors, trailers, tools, jigs, and dies), (B)
Intellectual Property, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder, remedies
against past, present and future infringements thereof, and rights to protection
of interests therein under the laws of all jurisdictions, (C) agreements,
contracts, indentures, mortgages, instruments, Security Interests, guaranties,
other similar arrangements, and rights thereunder, (D) accounts, notes, and
other receivables, (E) securities, (F) claims, deposits, prepayments, refunds,
causes of action, choses in action, rights of recovery, rights of set off, and
rights of recoupment (including any such item relating to the payment of taxes),
(G) franchises, approvals, permits, licenses, orders, registrations,
certificates, variances, and similar rights obtained from governments and
governmental agencies, and (H) books, records, ledgers, files, documents,
correspondence, lists, plats, architectural plans, drawings, and specifications,
creative materials, advertising and promotional materials, studies, reports, and
other printed or written materials; provided, however, that the Acquired Assets
shall not include (i) the articles of organization, taxpayer and other
identification numbers, seals, minute books, and other documents relating to the
organization, maintenance, and existence of the Seller as a limited liability
company; (ii) any of the rights of the Sellers under this Agreement (or under
any side agreement between the Sellers on the one hand and the Buyer on the
other hand entered into on or after the date of this Agreement); (iii) any
leases for real estate or any other leases to which the Sellers are a party; or
(iv) cash and cash equivalents in Seller's checking account at the Closing.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations, taxes,
liens, losses, expenses, and fees, including court costs and reasonable
attorneys' fees and expenses.
"Birks" has the meaning set forth in the preface above.
"Buyer" has the meaning set forth in the preface above.
"Buyer Shares" has the meaning set forth in Section 2.2 below.
"Closing" has the meaning set forth in Section 2.3 below.
"Closing Date" has the meaning set forth in Section 2.3 below.
"Confidential Information" means any information concerning the
businesses and affairs of CRC or the Buyer that is not already generally
available to the public.
"Financial Statement" has the meaning set forth in Section 3.6 below.
"Income Tax" means any federal, state, local, or foreign income tax,
including any interest, penalty, or addition thereto, whether disputed or not.
"Income Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all domain names, trademarks, service marks, trade
dress, logos, trade names, and corporate names, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and renewals in
connection therewith, (c) all copyrightable works, all copyrights, and all
applications, registrations, and renewals in connection therewith, (d) all mask
works and all applications, registrations, and renewals in connection therewith,
(e) all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals), (f) all computer software
(including data and related documentation), (g) all other proprietary rights,
including without limitation the right to xxx for past infringements, and (h)
all copies and tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge or knowledge that could be
reasonably imputed to the persons who own and actively manage Seller's business.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
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"Positive Cash Flow" means the excess of cash receipts during a
calendar quarter over cash expenditures during such calendar quarter, net of
reserves for cash expenditures reasonably foreseeable for the forty-five days
following the end of such calendar quarter and for amortization of debt.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest.
"Seller(s)" has the meaning set forth in the preface above.
2. Basic Transaction.
2.1 Purchase and Sale of Assets. On and subject to the terms and conditions
of this Agreement, the Buyer agrees to purchase from the Seller, and the Seller
agrees to sell, transfer, convey, and deliver to the Buyer, all of the Acquired
Assets at the Closing for the consideration specified below in this Section 2.
2.2 Consideration. On and subject to the terms and conditions of this
Agreement, the Buyer agrees to, at the Closing, (i) pay to Seller $85,000 in
cash; (ii) deliver to Seller Buyer's promissory note in the principal amount of
$65,000 in the form attached hereto as Exhibit A; (iii) issue, after the
Closing, in the manner and subject to the terms and conditions set forth in
Section 5.7 below, an aggregate of 1,000 shares of the Buyer's common stock (the
"Buyer Shares") to the persons and in the amounts set forth in Section 5.7
below. Neither the Buyer nor CRC shall assume or have any responsibility with
respect to any obligation or liability of the Sellers.
2.3 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at such place and on such date (the
"Closing Date") as the parties shall mutually agree, provided that the Closing
Date shall not be later than December 31, 1999.
2.4 Deliveries at the Closing. At the Closing, (i) Birks and Buyer shall
execute and deliver the Employment Agreement between Birks and Buyer; (ii)
Seller will execute and deliver to Buyer a Xxxx of Sale in the form attached
hereto as Exhibit B; and (iii) Buyer will execute and deliver to the Seller its
promissory note in the form attached hereto as Exhibit A.
2.5 Conditions to the Closing. The Parties' obligations to close shall be
conditioned upon the satisfaction or waiver of the following conditions prior to
the close:
(i) Birks and Buyer shall have executed an employment agreement
in form satisfactory to Birks and Buyer.
(ii) Each of the members of Seller shall have approved the Seller
and Birks entering into this Agreement and the transactions
described in this Agreement, and the sale of Xxxxx Xxxxxx'x
membership interest to Birks.
(iii)The Xxxxxxxxxx Family Trust shall have executed a release
of all claims to equity in Seller, Buyer and/or CRC.
(iv) Each of the members of Seller shall have executed a waiver
of conflict of interest for Xxxxx Xxxxxx to represent the
Seller, Birks and each of the other members in this
transaction or the members shall have waived their right to
counsel or have obtained separate counsel which shall have
approved the form of these agreements.
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3. Representations and Warranties of the Sellers. Each of the Seller and Birks
represents and warrants to the Buyer that the statements contained in this
Section 3 are correct and complete as of the Closing Date, except as set forth
in the disclosure schedule accompanying this Agreement (the "Disclosure
Schedule"). The Disclosure Schedule will be arranged in sections corresponding
to the lettered and numbered sections contained in this Section 3.
3.1 Organization and Capitalization of the Seller. The Seller is a limited
liability company duly organized, validly existing, and in good standing under
the laws of California. All of the issued and outstanding membership interests
of the Seller are held of record by the following persons in the following
amounts: (i) Birks holds a 67.0% membership interest; (ii) Xxxxx Xxxxxx holds a
20.0% membership interest; (iii) Xxxxx Xxxxx holds a 8.0% membership interest;
(iv) Xxxxx Xxxxxxx holds a 2.5% membership interest; and (v) Xxxxx XxXxxxxxxx
holds a 2.5% membership interest. Immediately prior to the Closing, Birks will
purchase the entire 20.0% membership interest held by Xxxxx Xxxxxx. As a result
of such purchase, at the Closing, Birks will hold a 87.0% membership interest in
Seller. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Seller to issue, sell, or
otherwise cause to become outstanding any of its membership interests. There are
no voting trusts, proxies, or other agreements or understandings with respect to
the voting of the membership interests of the Seller.
3.2 Authorization of Transaction. The Seller has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of both Seller and Birks, enforceable
in accordance with its terms and conditions.
3.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments referred to in Section 2 above), will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which Sellers are subject or any provision of the operating agreement
of the Seller or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Sellers are a party or by which they are bound or to which any of Seller's
assets is subject (or result in the imposition of any Security Interest upon any
of its assets), except where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation, failure to give notice,
or Security Interest would not have a material adverse effect on Seller's
business or assets or on the ability of the Parties to consummate the
transactions contemplated by this Agreement. The Seller need not give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement (including the assignments referred
to in Section 2 above), except where the failure to give notice, to file, or to
obtain any authorization, consent, or approval would not have a material adverse
effect on Seller's business or assets or on the ability of the Parties to
consummate the transactions contemplated by this Agreement.
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3.4 Brokers' Fees. The Sellers have no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
3.5 Title to Assets. The Seller has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by it, located on
its premises, or shown in the Financial Statements or acquired after the date
thereof, free and clear of all Security Interests, except for properties and
assets disposed of in the Ordinary Course of Business since the date of the
Financial Statements. Without limiting the generality of the foregoing, the
Seller has good and marketable title to all of the Acquired Assets, free and
clear of any Security Interest or restriction on transfer.
3.6 Financial Statements. Attached hereto as Exhibit C are the balance
sheet and statement of income for the Seller as of and for the period beginning
February 1, 1999 and ending December 17, 1999 (collectively the "Financial
Statements"). The Financial Statements (including the notes thereto) are
auditable and present fairly the financial condition of the Seller as of such
date and the results of operations of the Seller for such period.
3.7 Events Subsequent to the Date of the Financial Statements. Since
December 17, 1999, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of the Seller. Without limiting the generality of the foregoing, since
that date:
3.7.1 Seller has not sold, leased, transferred, or assigned any
material assets, tangible or intangible, outside the Ordinary Course of
Business;
3.7.2 Seller has not entered into any material agreement, contract,
lease, or license outside the Ordinary Course of Business;
3.7.3 no party (including Seller) has accelerated, terminated, made
material modifications to, or canceled any material agreement, contract, lease,
or license to which the Seller is a party or by which it is bound;
3.7.4 Seller has not imposed any Security Interest upon any of its
assets, tangible or intangible;
3.7.5 Seller has not made any material capital expenditures outside the
Ordinary Course of Business;
3.7.6 Seller has not made any material capital investment in, or any
material loan to, any other Person outside the Ordinary Course of Business;
3.7.7 Seller has not created, incurred, assumed, or guaranteed more
than $5,000 in aggregate indebtedness for borrowed money and capitalized lease
obligations;
3.7.8 Seller has not granted any license or sublicense of any material
rights under or with respect to any Intellectual Property;
3.7.9 there has been no change made or authorized in the articles of
organization or the operating agreement of Seller;
3.7.10 Seller has not issued, sold, or otherwise disposed of any of its
membership interests, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any of its
membership interests;
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3.7.11 Seller has not declared, set aside, or paid any dividend or made
any distribution with respect to its membership interests (whether in cash or in
kind) or redeemed, purchased, or otherwise acquired any of its membership
interests;
3.7.12 Seller has not experienced any material damage, destruction, or
loss (whether or not covered by insurance) to its property;
3.7.13 Seller has not made any loan to, or entered into any other
transaction with, any of its members, managers, officers, and employees outside
the Ordinary Course of Business;
3.7.14 Seller has not entered into any employment contract, written or
oral, or modified the terms of any existing such contract;
3.7.15 Seller has not granted any increase in the base compensation of
any of its members, managers, officers, and employees outside the Ordinary
Course of Business;
3.7.16 Seller has not adopted, amended, modified, or terminated any
bonus, profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its members, managers, officers, and
employees;
3.7.17 the Seller has not made any other material change in employment
terms for any of its members, managers, officers, and employees outside the
Ordinary Course of Business; and
3.7.18 Seller has not committed to any of the foregoing.
3.8 Undisclosed Liabilities. Seller has no material liability (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due, including any liability for taxes), except for
(i) liabilities set forth on the face of the Financial Statements (rather than
in any notes thereto) and (ii) liabilities which have arisen after the dated of
the Financial Statements in the Ordinary Course of Business.
3.9 Legal Compliance. To Seller's Knowledge, Seller has complied with all
applicable laws (including rules, regulations, codes and plans). Seller has
complied with all applicable injunctions, judgments, orders, decrees, rulings,
and charges thereunder of federal, state, local, and foreign governments (and
all agencies thereof), and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply, except where the failure to
comply would not have a material adverse effect on Seller's business or assets.
3.10 Real Property. The Seller neither owns nor leases any real property.
3.11 Intellectual Property.
3.11.1 To Seller's Knowledge, Seller has not interfered with, infringed
upon, misappropriated, or violated any material Intellectual Property rights of
third parties in any material respect. None of the members, managers or officers
of the Seller has ever received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation, or violation
(including any claim that Seller must license or refrain from using any
Intellectual Property rights of any third party). To the Knowledge of any of the
members, managers, officers or employees of the Seller, no third party has
interfered with, infringed upon,
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misappropriated, or violated any material Intellectual Property rights of the
Seller in any material respect.
3.11.2 Section 3.11.2 of the Disclosure Schedule identifies each patent
or registration which has been issued to the Seller with respect to any of its
Intellectual Property, identifies each pending patent application or application
for registration which the Seller has made with respect to any of its
Intellectual Property, and identifies each material license, agreement, or other
permission which the Seller has granted to any third party with respect to any
of its Intellectual Property (together with any exceptions). The Seller has
delivered to the Buyer correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as amended
to date). Section 3.11.2 of the Disclosure Schedule also identifies each
material trade name or unregistered trademark used by the Seller in connection
with any of its businesses. With respect to each item of Intellectual Property
required to be identified in Section 3.11.2 of the Disclosure Schedule:
3.11.2.1 the Seller possesses all right, title, and interest in
and to the item, free and clear of any Security Interest, license, or other
restriction;
3.11.2.2 the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
3.11.2.3 no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the Knowledge of any of
the members, managers, officers or employees of the Seller, is threatened which
challenges the legality, validity, enforceability, use, or ownership of the
item; and
3.11.2.4 the Seller has never agreed to indemnify any Person for
or against any interference, infringement, misappropriation, or other conflict
with respect to the item.
3.11.3 Section 3.11.3 of the Disclosure Schedule identifies each
material item of Intellectual Property that any third party owns and that the
Seller uses pursuant to license, sublicense, agreement, or permission. The
Seller has delivered to the Buyer correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to date). With
respect to each such item of used Intellectual Property required to be
identified in Section 3.11.3 of the Disclosure Schedule:
3.11.3.1 the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full force and
effect in all material respects;
3.11.3.2 no party to the license, sublicense, agreement, or
permission is in material breach or default, and no event has occurred which
with notice or lapse of time would constitute a material breach or default or
permit termination, modification, or acceleration thereunder;
3.11.3.3 no party to the license, sublicense, agreement, or
permission has repudiated any material provision thereof; and
3.11.3.4 the Seller has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or permission.
3.12 Tangible Assets. The machinery, equipment, and other tangible
assets that the Seller owns and leases are free from material defects (patent
and latent), have been maintained in
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accordance with normal industry practice, and are in good operating condition
and repair (subject to normal wear and tear).
3.13 Contracts. Section 3.13 of the Disclosure Schedule lists the following
contracts and other agreements to which the Seller is a party:
3.13.1 any agreement (or group of related agreements) for the lease of
personal property to or from any Person;
3.13.2 any agreement (or group of related agreements) for the purchase
or sale of supplies, products, or other personal property, or for the furnishing
or receipt of services;
3.13.3 any agreement concerning a partnership or joint venture;
3.13.4 any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation;
3.13.5 any agreement concerning confidentiality or noncompetition;
3.13.6 any agreement involving any of the Seller's members or managers
or their affiliates (other than the Seller);
3.13.7 any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of Seller's current or former members, managers,
officers, and employees;
3.13.8 any agreement for the employment of any Person on a full-time,
part-time, consulting, or other basis;
3.13.9 any agreement under which it has advanced or loaned any amount
to any of its directors, officers, and employees; or
3.13.10 any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $5,000.
The Seller has delivered to the Buyer a correct and complete copy of each
written agreement listed in Section 3.13 of the Disclosure Schedule (as amended
to date) and a written summary setting forth the material terms and conditions
of each oral agreement referred to in Section 3.13 of the Disclosure Schedule.
With respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect in all material respects; (B) no party
is in material breach or default, and no event has occurred which with notice or
lapse of time would constitute a material breach or default, or permit
termination, modification, or acceleration, under the agreement; and (C) no
party has repudiated any material provision of the agreement.
3.14 Litigation. Section 3.14 of the Disclosure Schedule sets forth
each instance in which Seller (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or, to the
Knowledge of any of the members, managers, officers or employees of the Seller,
is threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator.
3.15 Product Warranty. Substantially all of the products manufactured,
sold, leased, and delivered by the Seller have conformed in all material
respects with all applicable contractual
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commitments and all express and implied warranties, and of the Seller has no any
material liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due) for replacement or repair
thereof or other damages in connection therewith. Substantially all of the
products manufactured, sold, and delivered by the Seller are subject to standard
terms and conditions of sale. Section 4.15 of the Disclosure Schedule includes
copies of the standard terms and conditions of sale for the Seller (containing
applicable guaranty, warranty, and indemnity provisions).
3.16 Guaranties. Seller is not a guarantor or otherwise is responsible for
any liability or obligation (including indebtedness) of any other Person.
3.17 All Assets Necessary to Conduct Business. The Acquired Assets comprise
all of the assets, properties and rights of every type and description, tangible
and intangible, used by the Seller in, and, in the reasonable opinion of Birks,
necessary to, the conduct of the Seller's business as currently conducted and as
proposed by Birks to be conducted. No member, manager, officer or employee of
the Seller owns any material asset, tangible or intangible, which is used in the
business of the Seller.
3.18 Investment. Each of Seller and Birks (i) understands that the Buyer
Shares have not been, and will not be, registered under the Securities Act, or
under any state securities laws, and are being offered and sold in reliance upon
federal and state exemptions for transactions not involving any public offering,
and that the certificate(s) evidencing the Buyer Shares will therefore be
imprinted with restrictive legends, (ii) is acquiring the Buyer Shares (in the
case of Birks, acquiring the Buyer Shares pursuant to a possible liquidation of
the Seller subsequent to the Closing) solely for its or his own account for
investment purposes, and not with a view to the distribution thereof, (iii) is a
sophisticated investor with knowledge and experience in business and financial
matters, (iv) has received certain information concerning the Buyer and has had
the opportunity to obtain additional information as desired in order to evaluate
the merits and the risks inherent in holding the Buyer Shares, (v) is able to
bear the economic risk and lack of liquidity inherent in holding the Buyer
Shares, and (vi) is an "accredited investor" as that term is defined in Rule 501
promulgated under the Securities Act.
3.19 Disclosure. The representations and warranties contained in this
Section 3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 3 not misleading.
4. Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Sellers that the statements contained in this Section 4 are
correct and complete as of the Closing Date.
4.1 Organization and Capitalization of the Buyer. The Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of Nevada. Buyer's authorized capital stock consists of 10,000 shares of
common stock, no par value, of which 4,000 shares are issued and outstanding.
Upon the Closing, the Buyer Shares issued in accordance with Sections 2.2 and
5.7 hereof shall constitute 20% of the total amount of Buyer's capital stock
issued and outstanding.
4.2 Authorization of Transaction. The Buyer has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its
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obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of the Buyer, enforceable in accordance with its terms and
conditions.
4.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments referred to in Section 2 above), will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which the Buyer is subject or any provision of its charter or bylaws or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which the Buyer is a party or by
which it is bound or to which any of its assets is subject. The Buyer does not
need to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement (including
the assignments and assumptions referred to in Section 2 above).
4.4 Brokers' Fees. The Buyer has no liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which either the Seller or Birks could become
liable or obligated.
5. Covenants. The Parties agree as follows with respect to the period following
the Closing.
5.1 General. In case at any time after the Closing any further action is
necessary to carry out the purposes of this Agreement, each of the Parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other Party reasonably may request, all at the
sole cost and expense of the requesting Party (unless the requesting Party is
entitled to indemnification therefor under Section 6 below). The Sellers
acknowledge and agree that from and after the Closing the Buyer will be entitled
to possession of all documents, books, records (including tax records),
agreements, and financial data of any sort relating to the Seller.
5.2 Transition. The Sellers shall not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of the Seller from maintaining the same
business relationships with the Buyer after the Closing as such third party
maintained with the Seller prior to the Closing.
5.3 Confidentiality. Each of the Seller and Birks shall treat and hold as
such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to the Buyer or destroy, at the request and option of the Buyer, all
tangible embodiments (and all copies) of the Confidential Information which are
in his or its possession.
5.4 Covenants Not to Compete or Solicit; Injunctive Relief. For a period of
three years from and after the Closing Date, neither the Seller nor Birks will
(A) engage, directly or indirectly, in the design, manufacture, marketing or
distribution of CD cards (or related products or their functional equivalents)
or engage, directly or indirectly, in any other business that the Buyer conducts
as of the date of termination of Birks' employment with the Buyer in any
geographic area in which the Buyer conducts such business as of such termination
date, provided, however, that ownership of less than 1% of the outstanding stock
of any publicly
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traded corporation shall not be deemed a breach of this provision; or (B)
solicit the employment, consulting or other services of any employee of the
Buyer or otherwise induce any of such employees to leave the Buyer's employment
or to breach an employment agreement therewith. If the final judgment of a court
of competent jurisdiction declares that any term or provision of this Section
5.4 is invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed. Seller and Birks agree that in
the event of a breach or threatened breach of the covenants contained in this
Section 5.4, the Buyer shall be entitled to injunctive relief restraining such
person, and any and all persons acting for or with him or it, from such breach
or threatened breach.
5.5 CRC Board of Directors. Provided that Birks continues to be employed by
CRC or any affiliate of CRC (including Buyer), CRC shall use its best efforts to
cause the election, no earlier than Spring, 2002, of Birks to the Board of
Directors of CRC as a Class C director, subject to the approval of the
shareholders and the Board of Directors of CRC.
5.6 Funding and Location of Buyer. Following the Closing, CRC shall use its
best efforts to fund the Buyer with a minimum of $2,000,000 in working capital,
with appropriate funding to match an agreed-upon budget. Such budget will be
prepared by Birks with a necessary approval needed by Xxxx Xxxxxx, CEO of CRC.
The minimum amount of working capital to be provided to the Buyer by CRC will be
$500,000, $100,000 of which shall be funded by February 1, 2000 and the
remaining $400,000 of which shall be funded by December 31, 2000. Such funding
shall be in the form of loans bearing interest at the prime rate. Each loan
shall be repaid by Buyer to CRC in quarterly payments over five years commencing
on the first anniversary of the loan, provided that such payments shall not be
required to exceed 50% of the Buyer's Positive Cash Flow for the preceding
calendar quarter. The parties agree that the corporate offices of the Buyer will
be located in the Silicon Valley area as determined by Birks.
5.7 Issuance of Buyer Shares. As soon as practicable after the Closing, the
aggregate 1,000 Buyer Shares shall be allocated as follows: (i) 870 Buyer Shares
shall be issued to Birks; (ii) 80 Buyer Shares shall be issued to Xxxxx Xxxxx;
(iii) 25 Buyer Shares shall be issued to Xxxxx Xxxxxxx; and (iv) 25 Buyer Shares
shall be issued to Xxxxx XxXxxxxxxx (each of Xxxxx Xxxxx, Xxxxx Xxxxxxx and
Xxxxx XxXxxxxxxx may hereinafter be referred to as an "Other Seller Member").
None of the Buyer Shares shall be issued to any Other Seller Member unless and
until such Other Seller Member executes and delivers to Buyer an agreement (in a
form reasonably acceptable to Buyer and its counsel) providing for, among other
things, an irrevocable grant of a voting proxy to Birks, an agreement limiting
the remedies for disputes arising out of the Other Seller Member's ownership of
the Buyer Shares to repurchase by Buyer of the Buyer Shares, restrictions on
transfer of the Buyer Shares, a general release of Buyer and CRC, standard
investor representations, and other matters. In the event any Other Seller
Member fails to deliver such an agreement to Buyer prior to January 31, 2000,
Birks shall promptly purchase from such Other Seller Member all of his or her
rights arising hereunder and acquire the right to receive the Buyer Shares that
otherwise were to have been issued to such Other Seller Member. Buyer further
agrees to grant "piggyback" registration rights to the holders of the Buyer
Shares
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in the event Buyer registers any shares of its common stock under the Securities
Act. The terms of such "piggyback" registration rights shall be set forth in a
separate Registration Rights Agreement to be executed and delivered by Buyer
following the Closing.
5.8 Buyout and Registration of Buyer Shares. Promptly following the second
anniversary of the Closing Date, Buyer at its option shall either (i) offer to
purchase all of the Buyer Shares from the holders thereof at an appraised fair
market value; or (ii) subject to applicable law, commence paying to such holders
quarterly payments, due within 30 days of the end of each calendar quarter, in
the aggregate amount of 12% of the Buyer's Positive Cash Flow for the preceding
calendar quarter. Such aggregate quarterly payments shall be allocated among
each holder of the Buyer Shares in the same proportion that such holder's Buyer
Shares bears to the total number of Buyer Shares.
6. Remedies for Breaches of this Agreement.
6.1 Survival of Representations, Warranties and Covenants. All of the
representations, warranties and covenants of the Parties contained in this
Agreement shall survive the Closing (even if the damaged Party knew or had
reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect forever thereafter (subject to
any applicable statutes of limitations).
6.2 Indemnification Provisions for Benefit of the Buyer and CRC. The Seller
and Birks each agrees to jointly and severally indemnify the Buyer and CRC from
and against the entirety of any Adverse Consequences the Buyer or CRC may suffer
resulting from, arising out of, relating to, in the nature of, or caused by (i)
the breach of any of the representations, warranties, and covenants of the
Sellers contained in this Agreement; or (ii) any liability or obligation of the
Sellers, including without limitation any liability or obligation arising in
connection with Birks' purchase of Xxxxx Xxxxxx'x membership interest in Seller
or the payment and cancellation by Seller of its $10,000 promissory note dated
November 2, 1999; provided, however, that the Sellers shall not have any
obligation to indemnify the Buyer or CRC from and against any Adverse
Consequences arising out of the breach of any of the representations,
warranties, and covenants of the Sellers until the Buyer and CRC together have
suffered such Adverse Consequences in excess of a $5,000 aggregate deductible
(after which point the Sellers will be obligated only to indemnify the Buyer
from and against further such Adverse Consequences).
6.3 Indemnification Provisions for Benefit of the Sellers. The Buyer and
CRC each agrees to jointly and severally indemnify each of the Seller and Birks
from and against the entirety of any Adverse Consequences the Sellers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
breach of any of the representations, warranties, and covenants of the Buyer
contained in this Agreement; provided, however, that Buyer and CRC shall not
have any obligation to indemnify the Seller or Birks from and against any
Adverse Consequences arising out of the breach of any of the representations,
warranties, and covenants of the Buyer until the Seller and Birks together have
suffered such Adverse Consequences in excess of a $5,000 aggregate deductible
(after which point the Buyer and CRC will be obligated only to indemnify the
Seller and Birks from and against further such Adverse Consequences).
6.4 Matters Involving Third Parties.
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6.4.1 If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this Section 6, then the Indemnified Party shall promptly notify
each Indemnifying Party thereof in writing; provided, however, that no delay on
the part of the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
6.4.2 Any Indemnifying Party will have the right to assume the defense
of the Third Party Claim with counsel of her, his or its choice reasonably
satisfactory to the Indemnified Party at any time within 15 days after the
Indemnified Party has given notice of the Third Party Claim; provided, however,
that the Indemnifying Party must conduct the defense of the Third Party Claim
actively and diligently thereafter in order to preserve its rights in this
regard; and provided further that the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in the defense of the
Third Party Claim.
6.4.3 So long as the Indemnifying Party has assumed and is conducting
the defense of the Third Party Claim in accordance with Section 6.4.2 above, (i)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably)
unless the judgment or proposed settlement involves only the payment of money
damages by one or more of the Indemnifying Parties and does not impose an
injunction or other equitable relief upon the Indemnified Party and (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably).
6.4.4 In the event none of the Indemnifying Parties assumes and
conducts the defense of the Third Party Claim in accordance with Section 6.4.2
above, however, (i) the Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim in any manner she, he or it reasonably may deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith) and (ii) the Indemnifying Parties
will remain responsible for any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by the Third Party Claim to the fullest extent provided in this Section 6.
7. Miscellaneous.
7.1 Press Releases and Public Announcements. Neither Seller nor Birks shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement without the prior express consent of the Buyer.
7.2 No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
7.3 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings,
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agreements, or representations by or between the Parties, written or oral, to
the extent they related in any way to the subject matter hereof.
7.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the relevant other Party(ies); provided, however, that the Buyer may (i)
assign any or all of its rights and interests hereunder to one or more of its
affiliates and (ii) designate one or more of its affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
7.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
7.6 Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.7 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller to: Rawdata, LLC
0000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
With a copy to: A. Xxxxx Xxxxxx III, Esq.
Motschiedler, Xxxxxxxxxxx & Xxxxxx LLP
0000 Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
If to Birks to: Xx. Xxxxx Xxxxx
0000 Xxxxx Xxxxxxx
Xxxxxx, XX 00000
With a copy to: A. Xxxxx Xxxxxx III, Esq.
Motschiedler, Xxxxxxxxxxx & Xxxxxx LLP
0000 Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
If to the Buyer
or CRC to: Casino Resource Corporation
14
000 Xxxxxxxxx Xxxx.
Xxxxx Xxxxxxx, XX 00000
With a copy to : Xxxxxx X. Xxxxxx, Esquire
Mesirov Xxxxxx Xxxxx Xxxxxx & Xxxxxxxx, LLP
36th Floor
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
7.8 Governing Law, Arbitration. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Mississippi
without giving effect to any choice or conflict of law provision or rule.
7.9 Amendments and Waivers. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by the Party to be
charged thereby. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
7.10 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
7.11 Expenses. CRC shall pay, at or promptly following the Closing, the
Sellers' reasonable attorney's fees and expenses incurred in connection with
this Agreement as set forth on Schedule 7.11 attached hereto.
7.12 Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
7.13 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
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IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement on [as of] the date first above written.
Digital Development & Distribution, LLC XxxxxxXxxxXxxxx.xxx, Inc.
by: _______________________ by: _______________________
Xxxxx Xxxxx, Manager Xxxx X. Xxxxxx, President
Casino Resource Corporation
__________________________ by: _______________________
Xxxxx Xxxxx, individually Xxxx X. Xxxxxx, President
Exhibit A Form of Promissory Note
Exhibit B Xxxx of Sale
Exhibit C Financial Statements
Disclosure Schedule
Schedule 7.11 - Seller's attorney's fees and expenses
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