ASSETS PURCHASE AGREEMENT
This is an Assets Purchase Agreement dated as of November 20,1996,
(this "Agreement"), between Florida Gaming Corporation, a Delaware
Corporation ("Purchaser"), Florida Gaming Centers, Inc., a wholly owned
subsidiary of Purchaser (the "Subsidiary"), and WJA Realty Limited
Partnership, a Massachusetts limited partnership ("Seller").
RECITALS
A. Seller is engaged in the business of the operation of Xxx Xxxx
(and related businesses, including inter track wagering)in Miami, Tampa,
and Ocala, Florida.
B. Seller wishes to sell, and Purchaser wishes to purchase, upon
the terms and conditions set forth in this Agreement, substantially all
of Seller's assets.
C. This Agreement is the definitive acquisition agreement contemplated
by and superseding the letter agreement among the parties dated October 9,
1996.
NOW, THEREFORE, in consideration of the mutual benefits and covenants
contained herein, and subject to the terms and conditions set forth herein,
the parties agree as follows:
Section 1
Definitions
1.01 Definitions. As used in this Agreement, the following terms shall
have the following meanings:
"Accounts Receivable" shall mean all of Seller's accounts receivable
which exist on the Closing Date.
"Assets" shall mean all of Seller's assets and all assets used in
the conduct of the Business (other than the assets described on Schedule
1.01(A)), including, without limitation, the Accounts Receivable, Contract
Rights, Equipment, Good Will, Inventory, Permits and Real Property, and
Seller's Intellectual Property, name, and positive cash account, if any.
"Assignment of Contracts" shall mean the Assignment of Contracts,
substantially in the form attached hereto as Annex 1.01(B), pursuant to which
Seller shall assign the Contracts to Purchaser.
"Assignment of Lease" shall mean the Assignment of Lease,
substantially in the form attached hereto as Annex 1.01(C), pursuant to which
Seller shall assign to Purchaser its lease of the portion of the Real Property
which Seller leases.
"Assignment of Land Trust Interest" shall mean the Assignment of
Beneficial Interest in Land Trust, substantially in the form attached hereto
as Annex 1.01(N), pursuant to which Seller shall assign to Purchaser Seller's
interest as beneficiary under the Land Trust.
"Xxxx of Sale" shall mean the Xxxx of Sale, substantially in the
form attached hereto as Annex 1.01(D), pursuant to which Seller shall transfer
to Purchaser all of the Assets other than the Contracts, including but without
limitation the Accounts Receivable, Equipment, Good Will, Inventory and
Permits, and Seller's Intellectual Property, name, and positive cash account,
if any.
"Business" shall mean all business conducted at or from the Real
Property including, without limitation, the operation of Xxx Xxxx (and related
businesses, including, without limitation, inter track wagering and the sale
of food and beverages) in Miami, Tampa, and Ocala, Florida. [and all business,
wherever conducted, related to the foregoing and conducted by Xxxxx X.
Xxxxxxx, Xx. ("RMW"), as Individual General Partner of Seller, or by any
employee, agent or other representative of Seller].
"Closing" shall mean the consummation of the transactions
contemplated in this Agreement in accordance with the provisions of Section 9.
"Closing Date" shall mean the later of (i) November 30, 1996, or
(ii) the third business day after the condition set forth in Section 7.05 of
this Agreement has been satisfied, or such other date to which the parties
may mutually agree.
"Closing Financial Statements" shall mean Seller's most recent
unaudited balance sheet, prepared in the ordinary course of business,
available on the Closing Date (the "Closing Balance Sheet"), and the most
recent related unaudited statement of operations, prepared in the ordinary
course of business, available on the Closing Date (the "Closing Income
Statement"), copies of which shall be delivered to Purchaser at or before the
Closing.
"Consulting Agreements" shall mean the Consulting and Noncompetition
Agreements, in the forms attached hereto as Annex 1.01(E), to be entered into
among Purchaser and Xxxxxxx X. Xxxxxxx and Xxxxx X. Xxxxxxx, Xx. (the
"Consultants") at the Closing.
"Contracts" shall mean all contracts, leases and other commitments,
whether written or oral, to which Seller is a party or otherwise obligated,
other than this Agreement, the Guaranty Agreement and the Other Agreements.
"Contract Rights" shall mean all rights of Seller under any of the
Contracts.
"Current Financial Statements" shall mean Seller's most recent
unaudited balance sheet, prepared in the ordinary course of business,
available at the date of this Agreement (the "Current Balance Sheet"), and
the most recent related unaudited statement of operations, prepared in the
ordinary course of business, available at the date of this Agreement (the
"Current Income Statement"), copies of which are delivered herewith as
Annex 1.01(G).
"Equipment" shall mean all furniture, fixtures, machinery,
equipment, vehicles and other tangible personal property owned by Seller
and all other furniture, fixtures, machinery, equipment and other tangible
personal property used in the operation of the Business, together with all
manufacturers'warranties pertaining to the same, to the extent that such
warranties may exist and be assignable.
"Financial Statements" shall mean the Seller's audited balance
sheets, audited statements of operations, audited statements of partners'
equity, and audited statements of cash flows as of its fiscal years ended
December 31, 1995, 1994, 1993 and 1992, respectively, copies of which are
delivered herewith as Annex 1.01(I).
"Good Will" shall mean Seller's good will and name, and the going
concern value of Seller's business.
"Guaranty Agreement" shall mean the Guaranty Agreement, in the form
delivered herewith as Annex 1.01(O), to be signed and delivered by Purchaser
to Seller at the Closing.
"Intellectual Property" shall mean trade names, trademarks or
service marks, together with the Good Will associated therewith; copyrights;
pending or issued registrations for any of the foregoing; patents and patent
applications; unpatented inventions; trade secrets and other confidential or
proprietary information, computer programs, processes, formulas and methods;
and all other intangible property rights of any kind.
"Inventory" shall mean the raw materials, manufacturing supplies,
packaging materials, purchased products, finished goods and all other goods,
merchandise and materials owned by Seller, as more particularly described
(including storage locations) on Schedule 1.01(J).
"Knowledge" of Xxxxx X. Xxxxxxx, in any capacity including without
limitation in his capacity as the Individual General Partner of Seller, shall
mean the actual conscious knowledge of RMW, without any obligation to make any
investigation for the purpose of obtaining further information, and shall not
include any imputed or derivative information known to others but not
consciously known to RMW. "Knowledge" of Seller shall refer to matters which
are known, or which with the exercise of reasonable care should have been
known, by the Seller after consultation with Seller's current executive
management and supervisory personnel, and after their due investigation of
corporate records and due inquiry (provided that in making due inquiry with
respect to any matter, Seller shall not be required to make an inquiry beyond
that which a reasonable person would make under the circumstances).
"Land Trust" shall mean the Trust Agreement dated January 3, 1979,
and known as Trust Number 5003471, between Miami Jai-Alai, Inc., a predecessor
of Seller, and City National Bank of Miami, Miami, Florida, as trustee, as
such Trust Agreement may have been amended from time to time.
"Liabilities" (whether or not capitalized) shall mean all accounts
payable, notes payable, liabilities, commitments, indebtedness or obligations
of any kind whatsoever, whether absolute, accrued, contingent, matured or
unmatured, direct or indirect, known or unknown, whether arising in tort or
contract or otherwise, of Seller, or to which any of Seller's properties
or assets are subject. Liabilities arising pursuant to contracts are
referred to herein as Contract Liabilities. All other Liabilities are
referred to herein as Tort Liabilities.
"Material" (whether or not capitalized) shall include any matter
which might influence Purchaser's decision to consummate the transactions
contemplated herein.
"Other Agreements" shall mean the Assignment of Contracts,
Assignment of Lease, Xxxx of Sale, Consulting Agreements, Assignment of Land
Trust Interest and all other agreements, certificates, opinions, instruments
or documents contemplated by, required by or referred to in, this Agreement
for the consummation of the transactions contemplated hereby.
"Permits" shall mean all permits, licenses, franchises, approvals,
certificates or authorizations of any federal, state or local governmental
or regulatory body required in order to permit the Business to be carried out.
"Person" shall mean any individual, person, firm, trust, partnership,
corporation or other business entity.
"Real Property" shall mean all real estate owned of record by
Seller, or held in the Land Trust, or leased or used by it, a description of
which, including a brief description of all structures and improvements
located thereon, is set forth on Schedule 1.01(M).
1.02 Additional Terms. Other capitalized terms used in this Agreement
but not defined in Section 1.01 above shall have the meanings ascribed to
them wherever such terms first appear in this Agreement; or, if no meanings
are so ascribed, the meanings customarily associated with such terms in the
gaming industry.
Section 2
Purchase and Sale
2.01 Purchase of the Assets. Subject to the terms and conditions of
this Agreement, Seller hereby agrees to sell, transfer and deliver to the
Subsidiary, and the Subsidiary hereby agrees to purchase, the Assets.
2.02 Purchase Price. The purchase price (the "Purchase Price") for the
Assets shall be (a) the cancellation of Seller's bank notes and all related
obligations (the "Seller Notes") recently acquired by Purchaser from the Bank
of Oklahoma, National Association ("BOK"), and
(b) a profit sharing arrangement described in Section 2.06,
below (the "Profit Sharing Arrangement"), and
(c) Assumption by the Subsidiary of, and agreement to pay
the following items (the "Assumed Liabilities")
1. The following Liabilities of Seller ("Regular Assumed
Liabilities"):
(A) All Liabilities of Seller stated on the
balance sheet of the Closing Financial
Statements.
(B) The principal amount outstanding under a
$500,000 promissory note owed to Xxxxxxx-
Phoenix, Inc. (the "Xxxxxxx-Phoenix Note");
provided, that Purchaser shall have no obligation
to pay any amounts on the Xxxxxxx-Phoenix Note
other than the repayment of principal over a
ten year period following the Closing Date in
equal annual installments and the annual payment
of interest at an annual rate of 6%; Purchaser
may at any time and from time to time prepay all
or part of its obligation hereunder without penalty
or premium.
(C) All Liabilities of Seller (other than Tort
Liabilities) arising in the ordinary course
of the Business after the date of the Closing
Financial Statements.
(D) All Liabilities of Seller arising under any
of the Contracts.
(E) All Tort Liabilities of Seller arising in the
ordinary course of the Business to the extent
that (i) such Tort Liabilities are covered by
insurance previously maintained by Seller and
to be maintained by Buyer after the Closing,
or (ii) such Tort Liabilities would have been
covered by such insurance but for deductibles
under such insurance policies that shall not
exceed $100,000 per occurrence or $500,000 in
the aggregate.
(F) All Liabilities described on any Schedule to
this Agreement or in any of the Other
Agreements.
2. Any other Liabilities of the Seller arising in the
ordinary course of the Business to the extent that
they do not exceed $250,000 in the aggregate
(Special Assumed Liabilities).
(d) Guaranty by Purchaser, pursuant to the Guaranty Agreement, of
payment and performance by the Subsidiary of the obligations of
the Subsidiary under the Profit Sharing Arrangement.
2.03 Allocation of Purchase Price. The Purchase Price shall
be allocated among the Assets as set forth on Schedule 2.03
hereto. Purchaser and Seller shall report the transactions con-
templated herein for all tax purposes in accordance with such
allocation and, in any proceeding related to the determination of
any tax, neither Purchaser nor Seller shall contend or represent
that such allocation is not a correct allocation.
2.04 Seller's Liabilities. Except as described in Section
2.02, Purchaser is not assuming, and the parties do not intend
for Purchaser to assume, pursuant to this Agreement or otherwise,
any of the Liabilities, and Seller agrees and confirms that it
is, and will remain, responsible for and will pay any and all of
the Liabilities which are not assumed pursuant to Section 2.02.
2.05 Employees of Seller. The following special provisions
regarding Seller's employees supersede any inconsistent provisions of
general application in this Agreement.
(a) For the period beginning at the Closing and ending at
the close of business on December 31, 1996 (the "Employee Lease
Period"), Seller shall provide the Subsidiary with the full time
use of all of its employees (the "Leased Employees"); provided,
Subsidiary, in its discretion may from time to time by notice in writing
to Seller designate persons to be excluded from the Leased Employees.
The Subsidiary shall reimburse Seller for the full amount of its
direct costs of employing the Leased Employees during the
Employee Lease Period at rates consistent with those in effect
prior to the Closing (including the cost of all employee benefit plans
as defined in Section 3.24 of this Agreement and any costs incurred in
connection with the termination of an employee during the Employee Lease
Period after the Subsidiary designates that such employee is not to be a
Leased Employee). Seller shall use its good faith efforts to maintain for
the benefit of the Subsidiary the good will and services of all of
its employees not designated by the Subsidiary as excluded from Leased
Employees.
(b) Effective January 1, 1997, (i) Seller shall cease
providing the Subsidiary with the use of the Leased Employees,
(ii) the Subsidiary may hire any or all of the Leased Employees,
(iii) the Subsidiary shall assume and honor all employment
contracts listed on Schedule 1.01(F), and (iv) the Subsidiary
may, but shall not be required to, assume any collective
bargaining agreements of the Seller
(c) If the Closing takes place after December 31, 1996,
subparagraph 2.05(a) shall be of no effect and subparagraph
2.05(b) shall be effective at the Closing rather than January 1,
1997.
2.06 Profit Sharing Arrangement.
(a) The Subsidiary. Purchaser shall take all
necessary steps so that immediately after the Closing, the
Subsidiary's assets and liabilities shall consist solely of the
following:
(1) All assets owned by Purchaser and used in
connection with the operation of Purchaser's
Xxx Xxxx and intertrack wagering facility in
Ft. Xxxxxx, Florida, and all Liabilities
incurred in connection with such operation
(including, without limitation, leases,
contracts, etc.). (The only real property
that shall be included in such assets shall
be that real property previously acquired by
Purchaser from Seller.)
(2) The Assets and the Assumed Liabilities.
(3) The assumption of Purchaser's obligations to
BOK incurred in connection with Purchaser's
acquisition of the Seller Notes. .
(4) An interest bearing debt to Purchaser in the
amount of $6,000,000.
(5) All unpaid liabilities incurred by Purchaser
(and debt to Purchaser in the amount of any
of such liabilities paid by Purchaser) in
connection with card room gaming to be
conducted by the Subsidiary and all related
assets of Purchaser acquired in exchange for
incurring such liabilities.
(b) Subsidiary Net Profits. The Profit Sharing Arrangement
will be based on the net profits before income taxes (e.g.,
before any reimbursement to Purchaser of the income tax
attributable to the Subsidiary) of the Subsidiary ("Net
Profits"). Net Profits shall be determined (a) in accordance
with generally accepted accounting principles, applied
consistently with those previously applied to Purchaser, but (b)
as if the Subsidiary was a stand alone entity and not part of any
other consolidated group or subject to other similar tax and
accounting treatments.
(c) 20% Payments. Purchaser shall cause Subsidiary to, and
the Subsidiary shall, pay to Seller 20% (the "20% Payment") of
the cumulative Net Profits of the Subsidiary (a) for each of the
calendar years 1997 through 2006 (the "Ten Year Period"), subject
to a cumulative $1,000,000 per year cap (the "20% Cap"). To
determine the amount of the 20% Payment, the following
calculation shall be made as of the end of each of the calendar
years during the Ten Year Period:
(A) The Net Profits for each completed year during the
Ten Year Period shall be added together; if this
results in a negative number, there will be no 20%
Payment with respect to the year most recently
completed.
(B) If the result of (A) is positive, that result
shall be multiplied by 20 percent.
(C) The sum of all amounts previously paid in 20%
Payments will then be subtracted from the result
of (B); if this results in a negative number,
there will be no 20% Payment with respect to the
year most recently completed.
(D) If the result of (C) is positive, the 20% Payment
will be the lesser of the result of (C) and the
20% Cap. The 20% Cap for each year shall be equal
to (i) the product of $1,000,000 multiplied by the
number of years of the Ten Year Period then
completed, minus (ii) the sum of all amounts
previously paid in 20% Payments.
(d) 5% Payments. If the Subsidiary has Net Profits in any
of the calendar years during the Ten Year Period in excess of
$5,000,000, but does not receive 20% Payments on a portion of
those Net Profits because of the 20% Cap (the "Capped Portion"),
Purchaser shall cause the Subsidiary to, and the Subsidiary
shall, pay to Seller 5% (the "5% Payment") of the Capped Portion.
(e) Examples of 20% and 5% Payment Calculations. The
following table depicts two examples of the calculations of the
20% and 5% Payments:
Example 1 Example 2
20% 20%
Net Profit 20% Payment 5% Net Profit 20% Payment %5
Year (Cumulative) Payment Explanation Payment (Cumulative) Payment Explanation Payment
1 $2,500,000 $6,000,000
($2,500,000) $500,000 $-0- ($6,000,000) $1,000,000 Annual Cap $50,000
2 $4,000,000 $4,000,000
($6,500,000) $800,000 $-0- ($10,000,000) $1,000,000 20% of $-0-
$10,000,000
minus
$1,000,000
paid in
previous year
3 $9,000,000 Annual Cap $25,000 $7,500,000 $1,000,000 Annual Cap $125,000 (20%
($15,500,000) $1,700,000 ($3,000,000 (20% not ($17,500,000) ($3,000,000 not applied to
minus applied to minus $2,500,000
$1,300,000) $500,000 $2,000,000) because of
because of 20% Cap)
20% Cap)
(f) Subsidiary Operations. During the Ten Year Period,
Purchaser shall cause (i) all transactions between the Subsidiary
on the one hand and any of its affiliates on the other to be on
an arm's length basis, on terms and conditions that are
competitive with and at least as favorable to the Subsidiary as
those available from non-affiliated third parties with respect to
similar transactions, (ii) officers and employees of the
Subsidiary to be paid no more than fair compensation ("Fair
Compensation") (including fringe benefits) regardless of whether
the officer or employee is an affiliate of Purchaser
(Subsidiary's determination of Fair Compensation for affiliates
shall be based upon a comparison to similarly situated officers
and employees in the parimutuel and gaming industry), (iii)
expenses incurred by Purchaser that are attributable to the
Subsidiary (including, without limitation, a fair allocation of
general and administrative expenses and income taxes attributable to the
Subsidiary) to be passed through to and paid by the Subsidiary without
any add-ons or markups ("Reimbursements"), (iv) all debt of the Subsidiary
to Purchaser or its affiliates ("Affiliate Debt") to be at rates and
terms that are the same as those available to Purchaser or such
affiliate from unaffiliated lenders, (v) all accounting for the
Subsidiary to be according to generally accepted accounting
principals, applied in a manner consistent with the accounting
for Purchaser, and (vi) Subsidiary to not make distributions in excess
of the sum of its Net Profits plus any amounts received by Subsidiary
pursuant to a Disposition (as defined in Section 2.06(g)); less any
amounts paid to Seller pursuant to this Paragraph 2.06; provided, that
any payment by Subsidiary of Fair Compensation, Reimbursements and
principal and interest on Affiliate Debt shall not be treated as a
distribution, and further provided, that Subsidiary shall not
make any distributions while any amounts are owed to Seller under
this paragraph 2.06 but remain unpaid.
(g) Dispositions. If, during the Ten Year Period, the
Subsidiary disposes of any of its significant assets or
operations (a "Disposition"), then Purchaser shall cause
Subsidiary to pay to WJA an amount equal to ten percent of the
Subsidiary's gain, if any, on the Disposition (a "Disposition
Payment"). The Subsidiary's gain, if any, on a disposition shall
not be included in determining Net Profits for purposes of
determining the amount of 20% Payments and 5% Payments. There
will be no cap or limit on the amount of any Disposition Payment.
However, Disposition Payments shall count as 20% Payments in
determining the cumulative annual cap on 20% Payments. The Subsidiary
shall not during the Ten Year period make any Disposition to an affiliate
of the Subsidiary for less than the fair market value of the assets or
operations comprising the Disposition.
(h) Calculations. All calculations under this Section 2.06
shall be performed by Purchaser based on financial statements
audited by Purchaser's regularly employed firm of certified
public accountants. Promptly after the audit of the financial
statements is complete, Purchaser shall provide to Seller a
worksheet showing how the calculations were performed and the
amounts due determined. Seller may have the calculations
reviewed at its expense by a firm of certified public accountants
of its choosing reasonably acceptable to Purchaser. Purchaser
shall provide such accountants with reasonable access to all
requisite information subject to the accountants' execution of a
proper confidentiality and nondisclosure agreement with
Purchaser. Purchaser and Seller shall attempt to resolve any
disputes related to the calculations. Any unresolved disputes
shall be subject to binding arbitration pursuant to Section 11.17
of this Agreement. Subsidiary shall pay all amounts due under
this Section 2.06 promptly after any disputes are resolved,
whether directly or through arbitration.
Section 3
Representations and Warranties of Seller
Seller represents and warrants to Purchaser as follows:
3.01 Organization. Seller is a limited partnership duly
organized and validly existing under the laws of the Commonwealth
of Massachusetts, and has full power and authority to own, lease
and operate its properties as such properties are now owned,
leased and operated, and to conduct its business as and where its
business is now conducted. Seller is qualified to do business and
is in good standing in the state of Florida which is the only
jurisdiction in which the character of the properties owned or
leased by it, or the nature of the activities conducted by it,
makes such qualification necessary. Trueand complete copies, with
all amendments, of the Certificate of Limited Partnership of Seller
(certified as of a recent date by Massachusetts' Secretary of State)
and the Partnership Agreement of Seller (certified as of the date
hereof by RMW) are attached hereto as Annex 3.01. All partnership
actions required of Seller have been taken, and all reports or returns
required to be filed by Seller have been filed. Except as stated on
any Schedule or Annex to this Agreement, Seller is not a party to any
agreement or instrument, and is not subject to any charter or other
restriction, or any judgment, decree, writ, injunction, order,
award, law, rule, regulation, code or ordinance which materially
adversely affects, or might reasonably be expected to materially
and adversely affect, the properties or assets, earnings,
business, operations, affairs, prospects or condition (financial
or otherwise) of Seller.
3.02 Partners. Schedule 3.02 sets forth a list of all of
Seller's general and limited partners designating the percentage
interests each has in Seller. The partners listed on Schedule
3.02 are the partners of Seller, and there are no options,
rights, warrants or similar obligations outstanding pursuant to
which any other Person could acquire an interest in Seller.
3.03 Subsidiaries. Except as stated on Schedule 3.03,
Seller does not own or control, and has not for the last five years
owned or controlled, directly or indirectly, any capital stock of any
other corporation or any interest in any other Person.
3.04 Authority.
(a) Seller has full right, power, authority, and
capacity to execute and deliver this Agreement and the Other
Agreements, and to perform its obligations under this Agreement
and the Other Agreements. This Agreement and the Other
Agreements constitute valid and legally binding obligations of
Seller, enforceable in accordance with their terms.
(b) The execution and delivery of this Agreement and
the Other Agreements, the consummation of the transactions con-
templated hereby and thereby, and the performance and fulfillment
of its obligations and undertakings hereunder and thereunder by
the Seller will not, (i) violate any provision of, or result in
the breach of or accelerate or permit the acceleration of any
performance required by the terms of, the partnership agreement
or certificate of Seller; any contract, agreement, arrangement or
undertaking to which either Seller or any of its partners is a
party or by which any of them may be bound; any judgment, decree,
writ, injunction, order or award of any arbitration panel, court
or governmental authority; or any applicable law, ordinance, rule
or regulation of any governmental body; (ii) result in the
creation of any claim, lien, charge or encumbrance upon any of
the properties or assets (whether real or personal, tangible or
intangible) of Seller; (iii) terminate or cancel, or result in
the termination or cancellation of, any agreement or undertaking
to which Seller is a party; or (iv) in any way affect or violate
the terms or conditions of, or result in the cancellation,
modification, revocation or suspension of, any of the Permits.
(c) The execution and delivery of, and the performance
and consummation of the transactions contemplated by, this Agree-
ment and the Other Agreements have been duly authorized by all
requisite partnership action. All other consents, approvals,
authorizations, releases and orders required of or for Seller for
the authorization, execution, and delivery of, and for the
performance and consummation of the transactions contemplated by,
this Agreement and the Other Agreements have been obtained, other
than those referred to in paragraphs 7.05 and 8.03 below.
3.05 Financial Statements. Seller has marked for
identification by reference to this Agreement and delivered to
Purchaser Annexes 1.01(G) and 1.01(I), respectively, which are
true and complete copies of the Current Financial Statements and
the Financial Statements. Seller shall deliver to Purchaser a
true and complete copy of the Closing Financial Statements at or
before the Closing. The Financial Statements have been examined
and reported on as described in Annex 1.01(I) by Xxxxxx Xxxxxxxx
& Company, Certified Public Accountants. The Financial
Statements in all material respects (a) present fairly,
accurately and correctly the results of operation of Seller for
the periods covered thereby and the financial condition of Seller
as at the dates thereof; and (b) were in all material respects
prepared in conformity with generally accepted accounting
principles applied on a basis consistent with prior periods. The
Current Financial Statements have been, and the Closing Financial
Statements shall have been, prepared in the ordinary course of
business in a manner consistent in all material respects with the
preparation by Seller of such statements for prior periods. In
all material respects the Current Financial Statements present,
and the Closing Financial Statements shall present, fairly,
accurately and correctly the results of operation of Seller for
the periods covered thereby and the financial condition of Seller
as at the dates thereof, and in all material respects the Current
Financial Statements accurately reflect, and the Closing
Financial Statements shall accurately reflect, the books and
records of account of Seller.
3.06 Title to Assets. Seller has, and on the Closing Date
will have, good and marketable title to all of the Assets, free
and clear of any claims, liens, charges, mortgages, security
interests or encumbrances whatsoever, other than those arising
from the Regular Assumed Liabilities. The execution and delivery
of this Agreement, and the consummation of the transactions con-
templated by this Agreement, will not result in the creation of
any such encumbrance on the Assets.
3.07 Real Property. No instrument of record, easement,
license, grant, applicable zoning or building law, ordinance,
administrative regulation, urban redevelopment law or other
impediment of any kind prohibits or interferes with, limits or
impairs, or would, if not permitted by any prior nonconforming
use, prohibit or interfere with, or limit or impair, the use,
operation, maintenance of or access to the Real Property owned or
leased by Seller or any item thereof, as now used, operated or
maintained by Seller. No notice of any violation of any
applicable zoning or building law or ordinance or administrative
regulation has been received by Seller, and Seller does not know,
or have any reasonable grounds to know, of the threat of any such
notice. No condemnation proceeding has been instituted or is to
Seller's Knowledge threatened with respect to any of the Real
Property. Good and marketable title to the Real Property is held
in the Land Trust free and clear of all claims, mortgages,
charges, liens, easements, restrictions, security interests, and
encumbrances whatsoever. At the Closing, Seller shall transfer
and cause to be transferred to the Second Level Subsidiary all
right, title and interest in and to the Land Trust.
3.08 Assets. Schedule 3.08 sets forth a complete list of
all of the Assets not otherwise described on any other Schedule
to this Agreement. Except as otherwise stated in the Schedules
to this Agreement, the tangible real and personal property,
including, without limitation, plants, buildings, structures,
equipment, machinery, and vehicles, owned or leased by Seller or
used or employed by it in its business, are (a) sufficient and
adequate to carry on its business as presently conducted; (b) in
good condition and repair, ordinary wear and tear excepted; and
(c) in the state of maintenance, repair and operating condition
required for the proper operation and use thereof in the ordinary
course of business.
3.09 Inventory. The Inventory consists solely of good and
merchantable items which are usable or saleable at regular market
prices in the ordinary course of Seller's business.
3.10 Absence of Material Change. Except as set forth on
Schedule 3.10:
(a) Since December 31, 1995, the business and affairs
of Seller have been conducted only in the ordinary course.
(b) Since December 31, 1995, (i) there has been no
change in the condition (financial or otherwise), assets,
Liabilities, earnings, business, operations, affairs or prospects
of Seller, other than minor changes in the ordinary course of
business, none of which either singly or in the aggregate has
been materially adverse; and (ii) there has been no damage,
destruction, loss or other occurrence or development (whether or
not insured against), which either singly or in the aggregate
materially adversely affects (and Seller does not know, or have
any reasonable grounds to know, of any threatened occurrence or
development which could materially adversely affect) the assets,
Liabilities, earnings, business, operations, affairs or prospects
of Seller.
(c) Since December 31, 1995, Seller has not (i)
created or incurred any liability, commitment or obligation
(absolute or contingent), except unsecured current Liabilities
incurred for other than money borrowed in the ordinary course of
business; (ii) mortgaged, pledged or subjected to any lien or
otherwise encumbered any of its assets, tangible or intangible;
(iii) discharged or satisfied any lien, security interest or
encumbrance, or paid any obligation or liability (absolute or
contingent), other than current Liabilities due and payable in
the ordinary course of business; (iv) waived any rights of sub-
stantial value; canceled any debts or claims; or terminated or
amended, or suffered the termination or amendment of, any con-
tract, lease, agreement or license to which Seller is or was a
party; (v) made any capital expenditures or any capital additions
or betterments; (vi) sold or otherwise disposed of any of its assets,
tangible or intangible, except in the ordinary course of business;
(vii) declared or paid any dividends or made any other distribution
on or in respect of, or directly or indirectly purchased, retired,
redeemed, or otherwise acquired, any equity interest in Seller,
(viii) paid or agreed to pay, conditionally or otherwise, any
bonus, extra compensation, pension or severance pay to any of
Seller's partners or executive management, whether under any
existing pension or other plan or otherwise, or increased the
compensation (including salaries, fees, commissions, bonuses,
profit sharing, incentive, pension, retirement or other similar
payments) being paid as of December 31, 1995 to any of Seller's
partners, or executive management, (ix) renewed, amended, become
bound by or entered into any contract, commitment or transaction
other than in the ordinary course of business; or (x) changed any
accounting practice followed or employed in preparing the Xxxxx-
cial Statements or the Current Financial Statements.
3.11 Tax Matters.
(a) As used in this Agreement, the term "Code" means
the Internal Revenue Code of 1986, as amended. The term "Tax"
means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including
taxes under Code Sec. 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether
disputed or not. The term "Tax Return" means any return,
declaration, report, claim for refund, or information return or
statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
(b) Except as described on Schedule 3.11, Seller has
filed all Tax Returns that it was required to file; all such Tax
Returns were correct and complete in all material respects; all
Taxes owed by Seller (whether or not shown on any Tax Return)
have been paid; Seller currently is not the beneficiary of any
extension of time within which to file any Tax Return; no claim
has ever been made by an authority in a jurisdiction where Seller
does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction; and there are no liens on any of
the assets of Seller that arose in connection with any failure
(or alleged failure) to pay any Tax.
(c) Seller has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or
owing to any employee, creditor, independent contractor, or other
third party, and Seller has collected and paid all taxes required
to have been collected and paid in connection with any amounts
received from any customer or other third party.
(d) There is no dispute or claim concerning any Tax
liability of Seller either (i) claimed or raised by any authority
in writing, or (ii) as to which Seller has knowledge based upon
personal contact with any agent of such authority. Schedule 3.11
lists all federal, state, local, and foreign income Tax Returns
filed with respect to Seller for taxable periods ended on or
after December 31, 1993; indicates those income Tax Returns that
have been audited; and indicates those income Tax Returns that
currently are the subject of audit. Seller has delivered to Purchaser
correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed
against or agreed to by Seller since December 31, 1991.
(e) Seller has not waived any statute of limitations
in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(f) Seller has not made any payments, is not obligated
to make any payments, and is not a party to any agreement that
under certain circumstances could obligate it to make any payments
that will not be deductible under Code Sec. 280G. Seller has disclosed
on its federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal income Tax
within the meaning of Code Sec. 6661 as to returns due on or before
December 31, 1989, or Code Sec. 6662 as to returns due after that date.
Seller has no liability for unpaid Taxes because it once was a member of
an affiliated group during any part of any consolidated return year.
3.12 Undisclosed Liabilities.
(a) Seller has no, and Seller's properties and assets
are not subject to any, liability, commitment, indebtedness or
obligation of any kind whatsoever, whether absolute, accrued,
contingent, known or unknown, matured or unmatured, which (i) is
not shown and adequately reserved against in the Financial State-
ments; (ii) is not shown and adequately reserved against in the
Current Financial Statements; or (iii) was incurred subsequent to
the date of the Current Financial Statements other than in the
ordinary course of business and not in violation of any provision
of this Agreement.
(b) Schedule 1.01(K) sets forth a true and complete
list of all Material Regular Assumed Contract Liabilities, and
all currently known Regular Assumed Tort Liabilities, including a
description of (i) the basis for such Liabilities; (ii) all of
Seller's properties or assets which are subject to a lien,
mortgage or security interest related to such Liabilities; and
(iii) the basis for each such lien, mortgage or security
interest. The principal amount outstanding under the Xxxxxxx-Phoenix
Note is $500,000.
(c) Seller has disclosed to Purchaser all information
regarding Seller's product warranty, claims handling, and product
repair procedures and practices, and Seller's product warranty
and liability history, including, without limitation, the
existence of recurring defects.
3.13 Contracts.
(a) Schedule 1.01(F) is a listing of all material
Contracts to which Seller is a party or otherwise obligated.
Except as set forth on Schedule 1.01(F), Seller is not a party to
or bound by, and neither Business nor the Assets are bound or
affected by, any material written or oral contract, agreement or
commitment of any kind whatsoever, including, but not limited to,
any (i) employment agreement; (ii) promotion or advertising
agreement; (iii) bonus, profit sharing, deferred compensation,
hospitalization, retirement, insurance, pension, welfare, stock
option or stock purchase plan, arrangement or agreement, or any
other plan, arrangement or agreement providing for employee bene-
fits or for the remuneration, direct or indirect, of its
partners, directors, officers or employees; (iv) agreement with
any partner, director or officer of Seller; (v) agreement
containing covenants by Seller not to compete in any lines of
business or commerce; (vi) franchise or distributorship agree-
ment; (vii) loan, credit or financing agreement, including all
agreements for any commitments for future loans, credits or
financing; (viii) guarantee; (ix) mortgage or security agreement;
or (x) agreement to purchase raw materials, packaging, supplies
or services used regularly in Seller's business, or to sell the
products or services provided by Seller.
(b) Except as stated in Schedule 1.01(F), Seller has
performed all material obligations required to be performed by it
to date under all contracts and commitments to which it is a
party, and Seller does not know, or have any reasonable grounds
to know, that any other party is in default (or would be in
default on the giving of notice or the lapse of time or both)
under any contract or commitment to which Seller is a party.
(c) True and complete copies of all contracts and com-
mitments to which Seller is a party or which are listed on Sched-
ule 1.01(F) or which are otherwise referred to in this Agreement,
including any Schedule or Annex hereto, have been delivered to
Purchaser or made available for Purchaser's inspection, and there
are no amendments to or modifications of, or significant agree-
ments of the parties relating to, any such contract, agreement or
commitment which have not been disclosed to Purchaser, and each
such contract, agreement or commitment is valid and binding on
the parties thereto in accordance with its respective terms.
Schedule 1.01(F) includes a true and complete description of the
terms of any material unwritten contract or commitment to which
Seller is a party or by which Seller is bound.
(d) The prices which Seller shall receive or pay under
all outstanding contracts, agreements and commitments with its
customers, suppliers and others have been determined in accor-
dance with Seller's established pricing principles. After due
inquiry, Seller does not know of any adverse change in the
availability or cost of any of Seller's supplies that is likely
to occur and that would materially and adversely affect the
operation and financial performance of Seller.
3.14 Litigation and Pending Proceedings. Except as set
forth on Schedule 3.14, there are no claims of any kind or any
actions, suits, proceedings, arbitrations or investigations pend-
ing or to the knowledge of Seller threatened in any court or
before any governmental agency or instrumentality or arbitration
panel or otherwise against, by or affecting the Seller, or
Seller's business, prospects or condition (financial or
otherwise), or any of Seller's properties or assets, or which
would prevent the performance of this Agreement or the Other
Agreements or any of the transactions contemplated hereby or
thereby, or which declare the same unlawful or cause the
rescission thereof. Seller has complied with and is not in
default in any respect under (and has not been charged or
threatened with, and is not under an investigation known to
Seller with respect to, any charge concerning any violation of
any provision of) any federal, state or local law, regulation,
ordinance, rule or order (whether executive, judicial, legisla-
tive or administrative), or any order, writ, injunction or decree
of any court, agency or instrumentality.
3.15 Notes and Accounts Receivable. Except as set forth on
Schedule 3.15, all notes and accounts receivable of Seller shown
on the Current Balance Sheet or thereafter acquired by Seller
have been collected or are current and collectible in the ordi-
nary course (in the case of any such note in accordance with its
terms, and in the case of any such account within 45 days after
billing) at the aggregate recorded amounts thereof on Seller's
books, less the bad debt reserves provided therefor on the Cur-
rent Balance Sheet, as such reserves may have been adjusted on
Seller's books in the ordinary course of business to date. No
note or account receivable of Seller is subject to counterclaim
or setoff.
3.16 Permits, Etc. Seller has all Permits which are neces-
sary for the conduct of its business, and all such Permits are
listed on Schedule 3.16. All such Permits are currently in full
force and effect, and no misrepresentations or willful or
negligent omissions were made of any material fact in obtaining
any such Permits. Such Permits are sufficient to permit Seller
to conduct its business in the manner in which it is now being
conducted. No proceedings known to Seller have been instituted
or threatened or are contemplated seeking the suspension,
termination, modification, revocation, alteration or amendment of
any such Permits, or to declare any of them invalid in any
respect, and Seller does not know of any reason for any such
revocation or limitation.
3.17 Intellectual Property. Schedule 3.17 sets forth a true
and complete identification and summary description of all Intel-
lectual Property either owned by Seller or utilized by Seller in
its business ("Seller's Intellectual Property"), including a
description of the nature of Seller's interest therein. Except
as set forth on Schedule 3.17, all of Seller's Intellectual Prop-
erty is owned by Seller and is free and clear of all liens, secu-
rity interests, charges, encumbrances, equities and other adverse
claims; Seller is not a party to any licenses, consents, settle-
ments or other agreements involving Seller's Intellectual Prop-
erty; there are, and have been, no claims, actions or judicial or
adversarial proceedings involving Seller's Intellectual Property,
and no such actions or proceedings are threatened or anticipated;
Seller has the right and authority to use Seller's Intellectual
Property in connection with the conduct of its business and such
use has not and will not infringe upon, constitute a misappropri-
ation of, or otherwise violate the rights of any other person in,
any Intellectual Property; and Seller does not know of any past
or present occurrences of any probable infringement or
misappropriation of, or violation of Seller's rights in, any of
Seller's Intellectual Property.
3.18 Working Relationships. Seller enjoys good working
relationships under all of its franchise, dealer, sales repre-
sentative, and similar agreements or arrangements necessary to
the normal operation of its business.
3.19 Proprietary Information. Prior to or in conjunction
with the Closing, Seller shall have fully disclosed to Purchaser
all customer lists, trade secrets, processes, inventions,
formulas, methods, know-how and other proprietary information
used or developed by Seller in connection with its business.
Neither Seller nor any of its partners has disclosed or permitted
the disclosure of any such proprietary information to any other
Person, and the use by Seller of such proprietary information
does not violate any other Person's proprietary rights.
3.20 Customers, Etc. Listed on Schedule 3.20 are the names
and addresses of all of Seller's material customers, suppliers
and distributors with whom or which Seller has done business
since 1994, together with the amount of such business in Seller's
current fiscal year. Seller does not know, or have any
reasonable grounds to know, that any such customer, supplier or
distributor has terminated or expects to terminate a portion of
its normal business with Seller, as a result of the transactions
contemplated in this Agreement or otherwise.
3.21 Employees of Seller. Schedule 3.21 sets forth the
names and job descriptions of all of Seller's employees whose
total compensation from Seller for the fiscal year ending
December 31, 1996 will exceed $25,000, together with a statement
of the full amount paid or payable to each such person in respect
of such year, a summary of the basis on which each such person is
compensated if the basis is other than a fixed salary rate, and
any changes in any of the foregoing since December 31, 1995.
Except for any currently effective collective bargaining agree-
ments listed on Schedule 3.23, no person is employed by Seller
other than at the will of Seller for an indefinite period of
time. At the option of either Seller or the employee, an
employee's employment with Seller may be terminated with or with-
out cause, and with or without notice, at any time.
3.22 Insurance. The tangible real and personal property and
assets, whether owned or leased, of Seller are insured against
the hazards and in the amounts stated in the policies of insur-
ance listed on Schedule 3.22. Seller carries insurance against
personal injury and property damage to third persons and in
respect of its services and operations and such other insurance
as is stated in the policies of insurance listed on Schedule
3.22. All such insurance is in full force and effect, is carried
with reputable insurers and, in any event, the insurance carried
by Seller in respect of its physical properties is of an amount
and character such as to prevent Seller from being a co-insurer
in respect of any loss thereto. Schedule 3.22 sets forth a true
and complete list of all claims in excess of $5,000 made by
Seller during the past three years under any such policy.
3.23 Labor Relations. Except as set forth on Schedule 3.23,
(a) Seller is not a party to, or negotiating, and has no obliga-
tions under, any agreement, collective bargaining or otherwise,
with any party relating to the compensation or working conditions
of any of Seller's employees; (b) Seller is not obligated under
any agreement to recognize or bargain with any labor organization
or union on behalf of its employees; (c) Seller does not know or
have any reasonable grounds to know, of any union organizational
or representational activities underway among any of Seller's
employees; and (d) Seller has not been charged or threatened with
a charge of any unfair labor practice. There are no existing or
threatened labor strikes, slowdowns, disputes, grievances or
disturbances affecting or which might affect operations at, or
deliveries from or into, any facility of Seller. No work
stoppage against Seller or its business is pending or threatened,
and no such work stoppage has ever occurred.
Seller has not committed any act or failed to take any
required action with respect to any of Seller's employees which
has resulted or which may result in a material violation of ERISA
(as that term is defined in Section 3.24 below), or similar
legislation as it affects any employee benefit or welfare plan of
Seller; the Immigration Reform and Control Act of 1986; the
National Labor Relations Act, as amended; Title VII of the Civil
Rights Act of 1964, as amended; the Rehabilitation Act of 1973;
the Occupational Safety and Health Act; Executive Order 11246;
the Fair Labor Standards Act; and all regulations under such
Acts, and all other federal, state and local laws, regulations
and executive orders relating to the employment of labor, includ-
ing any provisions thereof relating to wages, hours, collective
bargaining, the payment of Social Security and similar taxes,
unemployment and workmens' compensation laws, any labor relation
laws, or any governmental regulations promulgated thereunder, as
the same affect relationships or obligations of Seller with
respect to any of Seller's employees, and which will or reason-
ably could result in any material liability, penalty, fine or the
like being imposed upon Seller. Seller is not liable for any
arrearage of wages or taxes or penalties for failure to comply
with any of the foregoing, and there are no proceedings before
any court, governmental agency, instrumentality or arbitrator
relating to such matters, including any unfair labor practice
claims, either pending to the knowledge of Seller threatened.
3.24 Employee Benefit Plans. Seller represents and warrants that
Seller has no employee benefit plans, policies and practices other than
those listed on Schedule 3.24. Seller further represents and warrants
as follows:
(a) For purposes of this Section 3.24, the term "em-
ployee benefit plan(s)" shall have the meaning ascribed to it in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and the regulations promulgated
thereunder, and the term "employee pension benefit plan(s)" shall
have the meaning ascribed to it in Section 3(2) of ERISA.
(b) Schedule 3.24 sets forth a complete list of all
employee benefit plans, policies and practices (whether or not
subject to ERISA) applicable to employees of the Seller, includ-
ing, without limitation, plans, funds or programs providing medi-
cal, surgical or hospital care or benefits; benefits in the event
of sickness, accident, disability, death or unemployment; xxxx-
tion benefits; apprenticeship or other training programs; day
care centers; scholarship funds; prepaid legal services; benefits
described in Section 302(c) of the Labor Management Relations
Act; retirement income; income deferral for periods extending to
the termination of covered employment or beyond; severance pay
arrangements; and supplemental retirement income payments which
take into account increases in the cost of living. Each employee
benefit plan, policy or practice which is funded through a policy
of insurance is indicated by the word "insured" placed by the
listing of the plan on Schedule 3.24.
(c) True and complete copies of all (i) employee bene-
fit plans and related trust agreements; (ii) policies and prac-
tices; (iii) summary plan descriptions; (iv) most recent alloca-
tion or actuarial reports prepared for each employee pension ben-
efit plan; (v) insurance policies; and (vi) communications to or
from the Internal Revenue Service (the "IRS") (including the most
recent Form 5500 filed with the IRS and the most recent determi-
nation letter received from the IRS), the Pension Benefit Guar-
anty Corporation (the "PBGC") or the United States Department of
Labor and other governmental filings with respect to the employee
benefit plans have been delivered by the Seller to Purchaser or
made available for Purchaser's inspection.
(d) Except as specifically provided in the documents
described in this Section 3.24 and delivered to Purchaser, or as
otherwise described on Schedule 3.24, there are no amendments,
modifications, extensions, changes in benefits or benefit struc-
tures, or other alterations which are currently in effect or
which the Seller has undertaken to become effective in the
future, or which the Seller has knowledge of, to any of the
employee benefit plans, policies or practices.
(e) Each of the Seller's employee benefit plans has
been executed, managed and administered in material compliance
with the applicable provisions of all applicable laws, specifically
including, as appropriate, ERISA and the Code, and the regulations
promulgated thereunder. The Seller has no knowledge of any fact which
would adversely affect the qualified status of any of the employee
benefit plans, or of any threatened or pending claim against any of
the employee benefit plans or their fiduciaries by any participant,
beneficiary or government agency.
(f) The Seller has fully complied with the notice and
continuation requirements of Sections 601 through 608 of ERISA
and the proposed regulations thereunder. All reports,
statements, returns and other information required to be
furnished or filed with respect to the Seller's respective
employee benefit plans have been timely furnished, filed or both
in accordance with Sections 101 through 105 of ERISA and Sections
6057 through 6059 of the Code, and they are true, correct and
complete in all material respects. Records with respect to the
employee benefit plans have been maintained in material
compliance with Section 107 of ERISA. Neither the Seller nor any
other fiduciary (as that term is defined in Section 3(21) of
ERISA) with respect to any of the Seller's employee benefit plans
has any material liability for any breach of any fiduciary duties
under Sections 404, 405 or 409 of ERISA.
(g) Seller has not, with respect to any of the
employee benefit plans, nor has any administrator of any of the
employee benefit plans, the related trusts or any trustee
thereof, engaged in any prohibited transaction which would
subject the Seller, any of the employee benefit plans, any
administrator or trustee or any party dealing with any of the
employee benefit plans or any such trusts, to a tax or penalty on
prohibited transactions imposed by ERISA, Section 4975 of the
Code, or to any other liability under ERISA.
(h) All employee pension benefit plans maintained by
or covering employees of the Seller which are intended to be
qualified under Section 401(a) or 403(a) of the Code, and the
related trusts which are intended to be exempt under Section
501(a) of the Code, are, and have been since adoption, so quali-
fied, and are identified on Schedule 3.24 as "qualified plans,"
and the date of the most recent determination letter from the IRS
confirming the qualification of each such plan is set out on
Schedule 3.24.
(i) Except as set forth on Schedule 3.24, none of the
employee pension benefit plans nor any of the related trusts has
been terminated. None of the employee pension benefit plans has
an accumulated funding deficiency (as that term is defined in
Section 302 of ERISA and 412 of the Code), whether or not waived.
No material liability to the PBGC has been incurred with respect
to any of the employee pension benefit plans; there have been no
reportable events (as described in Section 4043 (b) of ERISA);
and no event or condition has occurred which presents a material
risk of termination of any of the employee pension benefit plans
by the PBGC.
(j) The present value of all accrued benefits, whether
forfeitable or not, under the employee pension benefit plans sub-
ject to Title IV of ERISA do not exceed the value of the assets
of such plans allocable to such accrued benefits. The actuarial
present value of all accrued deferred compensation entitlements
of employees and former employees of the Seller (and their
respective beneficiaries) other than entitlements accrued pursu-
ant to funded retirement plans subject to the provisions of Sec-
tion 412 of the Code are fully reflected on the Financial State-
ments and the Current Financial Statements.
(k) None of the employee pension benefit plans is, and
the Seller has never contributed to, a "multi-employer plan," as
that term is defined in Section 3(37) of ERISA (as particularly
amended by The Multi-Employer Pension Plan Amendments Act of
1980).
(l) The Seller is not now liable, nor has it potential
liability, under Sections 4063 or 4064 of ERISA, and cannot,
whether by reason of the transactions contemplated by this Agree-
ment or otherwise, be treated as a withdrawing substantial
employer under an employee pension benefit plan to which more
than one employer makes contributions by application of Section
4062(f) of ERISA. The Seller is not now, and will not at any
time be by virtue of any action heretofore taken or to be taken
prior to the Closing Date, subject to a requirement to provide
security under Section 401(a)(29) of the Code, nor shall any
asset of the Seller be subject to a lien by reason of the provi-
sions of Section 412(n) of the Code.
(m) The Seller has provided to Purchaser the informa-
tion reasonably necessary to determine the accounting treatment
which may be accorded any of the Seller's retiree welfare bene-
fits currently in force at the Seller under proposed Financial
Accounting Standards Board guidelines.
(n) Any trust or fund maintained by or contributed to
by the Seller or its employees to fund an employee benefit plan
(other than an employee pension benefit plan) is qualified as an
exempt organization under Section 501(c)(9) of the Code and the
regulations thereunder as a Voluntary Employee's Benefit Associa-
tion (a "VEBA"). Any "welfare benefit fund" within the meaning
of Section 419(a) of the Code (including, but not limited to, any
VEBA), provided by or pursuant to a plan of the Seller has been
maintained in accordance with Section 419 of the Code and no con-
tributions have been made to such a fund in excess of the "quali-
fied costs" of the benefits provided for a taxable year (within
the meaning of Section 419(b) of the Code), except as set forth
on Schedule 3.24.
3.25 Potential Competing Interests. Except as set forth on
Schedule 3.25, none of the partners, officers, directors or
employees of Seller, has any direct or indirect interest in any
entity which competes with, is a supplier, customer or sales
agent of, or is engaged in any business of the kind being con-
ducted by, Seller, and none of the partners, officers, directors
or employees of Seller, has any interest, direct or indirect, in
any contract or agreement with, commitment or obligation of or
to, or claim against, Seller. Except as set forth on Schedule
3.25, no real or personal property in which any of the partners,
officers, directors or employees of Seller has an interest is
used by Seller in the operation of its business, or located on or
at any premises used by Seller in its business, and no such
property is significant to the operation of Seller's business.
On the Closing Date, all indebtedness of the partners, officers,
directors or employees of Seller to Seller reflected or which
should have been reflected in the Financial Statements or the
Current Financial Statements shall have been paid in full, or
such amounts will be set off against the Purchase Price. All such
indebtedness is set forth on Schedule 3.25.
3.26 Environmental Matters. Except as set forth on Schedule 3.26:
(a) As used in this Section 3.26, the term "Hazardous
Material" shall mean any substance, chemical or waste (including,
without limitation, asbestos, polychlorinated biphenyls (PCBs)
and petroleum) that is designated or defined (either by inclusion
in a list of materials or by reference to exhibited characteris-
tics) as hazardous, toxic or dangerous, or as a pollutant or con-
taminant, in any federal, state or local law, code or ordinance,
now existing or hereafter in effect, and all rules and regula-
tions promulgated thereunder, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), 42 U.S.C. Section 9601, et seq., and any analogous or
similar Florida law.
(b) Seller has duly complied with, and its business,
operations, assets, equipment, leaseholds and facilities, includ-
ing, without limitation, the Real Property, are in full compli-
ance with, the provisions of all federal, state and local envi-
ronmental, health and safety laws, codes and ordinances, and all
rules and regulations promulgated thereunder, including, without
limitation, all laws and regulations with respect to reporting
releases of Hazardous Materials and the registration, testing and
maintenance of underground storage tanks.
(c) Seller has been issued, and will maintain, all
required federal, state and local permits, licenses, certificates
and approvals relating to (i) air emissions; (ii) discharges to
surface water or ground water; (iii) noise emissions; (iv) solid
or liquid waste disposal; (v) the use, generation, storage,
transportation or disposal of Hazardous Materials; and (vi) other
environmental, health or safety matters. A true, accurate and
complete list of all such permits, licenses, certificates or
approvals is set forth on Schedule 3.26.
(d) Seller has not received notice of, nor does it
know of or suspect, any fact(s) which might constitute
violations(s) of any federal, state or local environmental,
health or safety laws, codes or ordinances, or any rules or
regulations promulgated thereunder, which relate to the use,
ownership or occupancy of any of the Real Property, and Seller is
not in violation of any covenants, conditions, easements, rights
of way or restrictions affecting any of the Real Property or any
rights appurtenant thereto.
(e) Except in accordance with a valid governmental
permit, license, certificate or approval listed on Schedule 3.26,
there has been no emission, spill, release, discharge or threat-
ened release into or upon (i) the air; (ii) the soils or any
improvements located thereon; (iii) the surface water or ground
water; or (iv) the sewer, septic system or waste treatment, stor-
age or disposal system servicing the Real Property, of any Haz-
ardous Material at or from any of the Real Property (any of which
is hereafter referred to as a "Hazardous Discharge").
(f) There has been no complaint, order, directive,
claim, citation or notice by any governmental authority or any
other Person with respect to (i) air emissions; (ii) spills,
releases or discharges to soils or any improvements located
thereon, surface water, ground water or the sewer, septic system
or waste treatment, storage or disposal systems servicing the
Real Property; (iii) noise emissions; (iv) solid or liquid waste
disposal; (v) the use, generation, storage, transportation or
disposal of Hazardous Materials; or (vi) other environmental,
health or safety matters, affecting Seller, any of the Real Prop-
erty, any improvements located thereon or the business conducted
thereon (any of which is hereafter referred to as an "Environmen-
tal Complaint").
(g) Hazardous Materials disposed of, treated or stored
on or off-site of any real property owned or operated at any time
by Seller have been disposed of, treated and stored in full com-
pliance with all applicable laws, codes and ordinances and all
rules and regulations promulgated thereunder. To the best of
Seller's knowledge, Schedule 3.26 identifies all of the locations
where Hazardous Materials owned, possessed or generated at any
time by Seller have been disposed of or have been, or are being,
treated or stored. Schedule 3.26 identifies all underground
storage tanks owned or operated at any time by Seller.
(h) Except for supplies listed on Schedule 3.26 that
are to be used or sold in the ordinary course of Seller's busi-
ness and in full compliance with all applicable laws, codes and
ordinances, all of the Real Property is free of all (i) Hazardous
Materials; (ii) underground storage tanks; and (iii) underground
pipelines. Except for those supplies listed on Schedule 3.26,
Seller has not stored, treated or disposed of any Hazardous Mate-
rials on, in or under the Real Property, or any part thereof, and
has not permitted the Real Property, or any part thereof, to be
used for the storage, treatment or disposal of Hazardous Materi-
als. Except for the supplies listed on Schedule 3.26, there has
been no storage, treatment, disposal or release of Hazardous
Materials on, in or under the Real Property at any time by any
Person.
(i) Except in accordance with a valid governmental
permit, license, certificate or approval listed on Schedule 3.26,
Seller has not transported or accepted for transport any Hazard-
ous Materials. Schedule 3.26 identifies all of the Persons for
whom or which Seller has transported (or from whom or which
Seller has accepted for transport) Hazardous Materials. Schedule
3.26 identifies all locations to which Seller has transported
Hazardous Materials.
(j) Seller has provided Purchaser with true, accurate
and complete information pertaining to the environmental history
of all of the Real Property. Seller shall also promptly furnish
to Purchaser true, accurate and complete copies of all sampling
and test results obtained from all environmental and/or health
samples and tests taken at and around any of the Real Property
prior to the Closing.
3.27 Bulk Sales. The purchase and sale of the Assets and
the other transactions contemplated in this Agreement will be
free and clear of any and all claims by creditors of Seller under
any bulk sales or similar laws or statutes.
3.28 Immigration Matters. Seller has complied with all rel-
evant provisions of Section 274A of the Immigration and National-
ity Act, as amended (the "Act"). Without limiting the foregoing:
(a) each "employee" (as that term is defined in the Act) of
Seller is permitted to be so employed in the United States under
the Act; (b) Seller has examined (and made copies of, if applica-
ble) the documents presented by said employee to establish appro-
priate employment eligibility under the Act; (c) Seller has com-
pleted and required each employee hired on or since November 11,
1986 to complete a Form I-9 verifying employment eligibility
under the Act; (d) Seller has retained each such completed Form
I-9 for the length of time required under the Act; and (e) no
monetary penalties have been assessed against the Seller for
violation of Section 274A of the Act.
3.29 Completeness of Statements. No statement, Schedule,
Annex, certificate, information, representation or warranty of
Seller contained in this Agreement or the Other Agreements, or
furnished by or on behalf of Seller to Purchaser or any of its
agents pursuant hereto or thereto, or in connection with the
transactions contemplated hereby or thereby, contains or will
contain any untrue statement of a material fact, or omits or will
omit to state a material fact necessary in order to make a
statement contained herein or therein not misleading. All
representations and warranties of Seller contained in this
Agreement and in the Other Agreements are true and complete as of
the date hereof, and Seller shall use its best efforts to cause
this to be true and complete as of the Closing Date.
Section 4
Representations and Warranties of Purchaser
Purchaser represents and warrants to Seller as follows:
4.01 Organization. Purchaser is a corporation duly orga-
nized and validly existing under the laws of Delaware, and has
full corporate power and authority to own and lease its
properties as such properties are now owned and leased, and to
conduct its business as and where its business is now conducted.
4.02 Authority.
(a) Purchaser has full right, power, authority and
capacity to execute and deliver this Agreement and the Other
Agreements, and to perform its obligations under this Agreement
and the Other Agreements. This Agreement and the Other Agree-
ments constitute valid and legally binding obligations of Pur-
chaser, enforceable in accordance with their terms.
(b) The execution and delivery of this Agreement and
the Other Agreements, the consummation of the transactions
contemplated hereby and thereby, and the performance and
fulfillment of its obligations and undertakings hereunder and
thereunder by the Purchaser will not, (i) violate any provision
of, or result in the breach of or accelerate or permit the
acceleration of any performance required by the terms of, the
Certificate of Incorporation or Bylaws of Purchaser or the
Subsidiary, or any contract, agreement, arrangement or
undertaking to which either Purchaser or Subsidiary is a party or
by which any of them may be bound; any judgment, decree, writ,
injunction, order or award of any arbitration panel, court or
governmental authority; or any applicable law, ordinance, rule or
regulation of any governmental body; (ii) result in the creation
of any claim, lien, charge or encumbrance upon any of the
properties or assets (whether real or personal, tangible or
intangible) of Purchaser or Subsidiary, other than those referred
to herein.
Section 5
Covenants of Seller
Seller covenants and agrees with Purchaser that from the
date hereof through the Closing:
5.01 Investigations. Seller shall continue to give Pur-
chaser and the employees, accountants, attorneys and other autho-
rized agents and representatives of Purchaser full access during
all reasonable times to all the premises, properties, books and
records (including, without limitation, all corporate minute
books and stock transfer records) of Seller, and to furnish Pur-
chaser with such financial and operating data, analyses and other
information of any kind respecting the business and properties of
Seller as Purchaser shall from time to time request, including,
but not limited to, the work papers of Seller's accountants. Any
investigation shall be conducted in a manner which does not
unreasonably interfere with the operation of Seller's business.
In the event of the termination of this Agreement, Purchaser
shall return to Seller all documents, work papers and other
materials obtained from Seller in connection with the transac-
tions contemplated hereby, and shall use all reasonable efforts
to keep confidential any information obtained in any investiga-
tion, unless such information is readily ascertainable from pub-
lic or published information or trade sources.
5.02 Consents. Seller shall use Seller's best efforts to
procure, upon reasonable terms and conditions, all consents and
approvals; to complete all filings, registrations and
certificates; and to satisfy all other requirements prescribed by
law, including obtaining any approval necessary under antitrust
laws, which are necessary to consummate the transactions
contemplated in this Agreement and the Other Agreements.
5.03 Conduct of Business in the Ordinary Course. Seller
shall conduct its business only in the ordinary course. By way
of amplification and not limitation, except as otherwise provided
herein, Seller shall not, without the prior written consent of
Purchaser:
(a) issue or cause to be issued any of Seller's
partnership interest, or any options, warrants, or other rights
to subscribe for or purchase any of Seller's partnership
interest, or any securities convertible into or exchangeable for
Seller's partnership interest;
(b) declare, set aside, or make any payments or
distributions to partners, whether in cash, stock or other
securities, other than payment of RMW's current salary and
related benefits, or otherwise make any distributions, including
payment of intercompany debts and management fees, directly or
indirectly, of any property of Seller;
(c) directly or indirectly redeem, purchase or other-
wise acquire any of Seller's partnership interests;
(d) amend its certificate or partnership agreement;
(e) grant any increase in the compensation payable or
to become payable to its officers or salaried employees (includ-
ing any salary, bonus, insurance, pension or other benefit plan,
payment or arrangement made to, for or with any of such officers
or employees);
(f) except in the ordinary course of business borrow
or agree to borrow any amount of funds; directly or indirectly
guarantee or agree to guarantee any obligations of others; or,
except in the ordinary course of business, incur any obligation
or liability;
(g) except in the ordinary course of business, place
or suffer to exist on any of the Assets any mortgage, pledge,
lien, charge or other encumbrance;
(h) except in the ordinary course of business, cancel
any material indebtedness owing to Seller or any claims which
Seller may have possessed, or waive any material rights of
substantial value, or discharge or satisfy any material non-current
Liabilities;
(i) enter into any agreement, contract or commitment
which, if entered into prior to the date of this Agreement, would
be required to be listed on a Schedule delivered to Purchaser
pursuant to the terms of, or in connection with, this Agreement,
or modify, amend or terminate any agreement required to be listed
in any such Schedule
(j) sell or otherwise dispose of any of the Assets,
except in the ordinary course of business;
(k) commit any act or omit to do any act which would
cause a material breach of any agreement, contract or commitment
which is listed on a Schedule delivered to Purchaser pursuant to
the terms of, or in connection with, this Agreement, or which
would have an adverse affect on business, financial condition or
earnings of Seller;
(l) violate any law, statute, rule, governmental
regulation or order, which violation might have an adverse effect
on the business, financial condition or earnings of Seller;
(m) fail to maintain its books, accounts and records
on a basis consistent with that heretofore employed; or
(n) fail to pay, or to make provisions adequate for
the payment of, all taxes (current or deferred), interest pay-
ments and penalties (whether or not reflected in its returns as
filed) due and payable (and/or accruable for all periods to the
Closing Date, including that portion of its fiscal year to and
including the Closing Date) to any city, county, state, foreign
country, the United States or any other taxing authority.
Notwithstanding the foregoing provisions of this paragraph
5.03, Purchaser and the Subsidiary acknowledge and agree:
a. Seller is currently experiencing a severe shortage of
cash to meet the obligations of Seller arising in the
normal course of the Business, and failure by Seller to
satisfy any obligation attributable to such shortage of
cash shall not be a violation of the covenants stated
above, and
b. Seller has historically and regularly challenged
various regulatory agencies concerning their
interpretation of tax and other laws, rules and
regulations, and any such position taken by Seller
shall not be a violation of the covenants stated in
this Section 5.03, unless such position is taken in bad
faith.
5.04 Preservation of Business. Without in any way limiting
the provisions of Section 5.09, Seller shall cooperate with
Purchaser in making any announcements concerning the transactions
contemplated in this Agreement to Seller's material suppliers,
distributors and customers. Seller shall use Seller's best
efforts to preserve the possession and control of the Assets; to
preserve the good will of suppliers, distributors, customers and
others having business relations with Seller; and to do nothing
to impair the ability to keep and preserve the business of Seller
existing on the date of this Agreement.
5.05 Notification of Material Changes and Litigation. Sel-
ler shall provide Purchaser with prompt written notice, accomp-
anied by a detailed description and analysis, (a) of any adverse
or potentially adverse material change in its condition, earn-
ings, prospects or business; (b) of any event or condition of any
character (whether actual, threatened or contemplated) pertaining
to the financial condition, business or assets of Seller that has
materially adversely affected, or which can reasonably be
expected to materially and adversely affect, its financial condi-
tion, business or assets, or to cause its business to be carried
on materially less profitably than prior to this Agreement; and
(c) of all claims, regulatory proceedings and litigation (whether
actual, threatened or contemplated, and whether or not material)
against or possibly involving Seller or involving any officer or
director of Seller where such claims, regulatory proceedings or
litigation arise in connection with actions taken by any officer
or director in his capacity as an officer or director. Such
adverse or potentially adverse material changes or such litiga-
tion shall include, without limitation, any adverse or poten-
tially adverse material change in, or any litigation arising in
connection with any item or matter reported on, any Schedule,
Annex or document delivered by Seller to Purchaser in connection
with this Agreement.
5.06 Cooperation. Seller shall use Seller's best efforts to
cooperate fully, completely and promptly with Purchaser in
connection with satisfying all conditions to the Closing and
effecting the transactions contemplated by this Agreement.
5.07 Discussions with Other Purchasers. Neither Seller nor
any of its partners, nor any of Seller's directors, officers,
agents or employees, shall solicit, authorize the solicitation
of, or enter into any discussions with any third party (a) to
purchase any of Seller's partnership interests, any option or
warrant to purchase any of Seller's partnership interests, any
securities convertible into any of Seller's partnership
interests, or any other equity security of Seller; (b) to make a
tender or exchange offer for any of Seller's partnership
interests, or any other equity security of Seller; (c) to
purchase, lease or otherwise acquire all or a substantial portion
of the Assets; or (d) to merge, consolidate, engage in a share
exchange or otherwise combine with Seller.
5.08 Representations and Warranties. Seller shall use its
best efforts to not cause or permit any of the representations
and warranties made in this Agreement, including, without limita-
tion, their representations and warranties contained in Section 3
of this Agreement, to be untrue or incomplete on the Closing Date
or at any time prior thereto.
5.09 Publicity. Except as required by applicable law, with-
out the prior written consent of Purchaser, Seller shall not
disclose or publish, or permit the disclosure or publication of,
any information concerning the execution and delivery of this
Agreement, or the transactions contemplated by this Agreement, to
any third party.
Section 6
Covenants of Purchaser
Purchaser covenants and agrees with Seller that from the
date hereof through the Closing:
6.01 Cooperation. Purchaser shall cooperate fully, com-
pletely and promptly with Seller in connection with satisfying
all conditions to the Closing and effecting the transactions con-
templated by this Agreement.
6.02 Representations and Warranties. Purchaser will not
cause or permit any of its representations and warranties made in
this Agreement, including, without limitations, its representa-
tions and warranties contained in Section 4 of this Agreement, to
be untrue or incomplete on the Closing Date or at any time prior
thereto.
Section 7
Conditions to Obligations of Purchaser
The obligations of Purchaser to consummate the transactions
contemplated herein shall be subject to the satisfaction of the
following conditions at or before the Closing:
7.01 Representations, Warranties and Covenants. The repre-
sentations and warranties of Seller contained herein shall be
true on the Closing Date, with the same effect as though made at
such time, except to the extent of changes permitted by the terms
of this Agreement. Seller shall have performed all obligations
and complied with all covenants required by this Agreement to be
performed or complied with by it prior to the Closing. In
addition, Seller shall have delivered to Purchaser a certificate
dated the Closing Date and signed by Seller's President and
Secretary, and by each of its general partners, to the effect
that, except as disclosed in the certificate, they do not know,
and have no reasonable grounds to know, of any failure or breach
of any representation, warranty or covenant made by Seller or any
of the conditions to Purchaser's obligation to consummate the
transactions contemplated herein.
7.02 No Material Adverse Change. There shall not have
occurred any material adverse change since the date of this
Agreement in the financial condition, business, assets or results
of operations of Seller.
7.03 Opinion of Counsel for Seller. Purchaser shall have
received an opinion from Xxxxxxx, Xxxx & Xxxxx, counsel for
Seller, dated the Closing Date, substantially in the form
attached hereto as Annex 7.03.
7.04 Environmental Matters. Prior to the Closing, there
shall not have occurred any Hazardous Discharge or Environmental
Complaint.
7.05 Statutory Requirements. All statutory requirements for
the valid consummation by Purchaser of the transactions contem-
plated by this Agreement shall have been fulfilled, and all
authorizations, consents and approvals of all federal, state,
local and foreign governmental agencies and authorities required
to be obtained in order to permit the consummation by Purchaser
of the transactions contemplated by this Agreement, and to permit
the business presently carried on by Seller to continue
unimpaired in all material respects immediately following the
Closing, shall have been obtained.
7.06 Consulting Agreements. The Consultants shall have exe-
cuted and delivered the Consulting Agreements.
7.07 Deliveries. At or before the Closing, Seller shall
make all of its deliveries contemplated in this Agreement,
including, without limitation, all of the deliveries listed on
Schedule 7.07.
7.08 Closing. The Closing shall occur on or before December
31, 1996.
Section 8
Conditions to Obligations of Seller
The obligations of Seller to consummate the transactions
contemplated herein shall be subject to the satisfaction of the
following conditions at or before the Closing:
8.01 Representations, Warranties and Covenants. The repre-
sentations and warranties of Purchaser contained herein shall be
true on the Closing Date, with the same effect as though made at
such time, except to the extent of changes permitted by the terms
of this Agreement. Purchaser shall have performed all obliga-
tions and complied with all covenants required by this Agreement
to be performed or complied with by it prior to the Closing. In
addition, Purchaser shall have delivered to Seller a certificate
dated the Closing Date and signed by its President and Secretary
to the effect that, except as disclosed in the certificate, they
do not know, and have no reasonable grounds to know, of any fail-
ure or breach of any representation, warranty or covenant made by
Purchaser or of any of the conditions to Seller's obligations to
consummate the transactions contemplated herein.
8.02 Opinion of Counsel for Purchaser. Seller shall have
received an opinion of Xxxxx, Xxxx & Heyburn PLLC, counsel for
Purchaser, dated the Closing Date, substantially in the form
attached hereto as Annex 8.02.
8.03 Statutory Requirements. All statutory requirements for
the valid consummation by Seller of the transactions contemplated
by this Agreement shall have been fulfilled, and all authoriza-
tions, consents and approvals of all federal, state, local and
foreign governmental agencies and authorities required to be
obtained in order to permit the consummation by Seller of the
transactions contemplated by this Agreement shall have been
obtained.
8.04 Deliveries. At or before the Closing, Purchaser shall
make all of its deliveries contemplated in this Agreement,
including, without limitation, all of the deliveries listed on
Schedule 8.04.
8.05 Closing. The Closing shall occur on or before December
31, 1996.
8.06 Consulting Agreements. Purchaser shall have executed
and delivered the Consulting Agreements.
Section 9
The Closing
9.01 Date and Place. The Closing shall be held on the Clos-
ing Date at 10:00 a.m. in the offices of Xxxxx, Xxxx & Xxxxxxx,
3200 Capital Holding Center, Louisville, Kentucky, or at such
other place or time on the Closing Date as the parties may
mutually agree.
9.02 Deliveries. At or before the Closing, the parties
shall make all of the deliveries contemplated in this Agreement,
including, without limitation, the deliveries set forth on
Schedules 7.07 and 8.04.
Section 10
Survival of Representations and Warranties--Indemnification
10.01 Survival. Each of the parties' representations, war-
ranties, covenants and agreements set forth in this Agreement
shall survive the Closing.
10.02 Indemnity by Seller. Seller shall indemnify and hold
Purchaser and the Subsidiary harmless from and against, and shall
pay to Purchaser the full amount of, any loss, claim, damage,
liability or expense (including reasonable attorneys' fees)
resulting to Purchaser or the Subsidiary, either directly or
indirectly, from (a) any undisclosed Liabilities, contracts or
commitments of Seller, including, without limitation, any
commitments to existing or former employees, distributors,
customers or suppliers; (b) any inaccuracy in any representation
or warranty, or any breach of any covenant or agreement, by
Seller contained in this Agreement or in any of the Other
Agreements; and (c) any of the Liabilities, except for those
specifically assumed by Purchaser pursuant to Section 2.02.
Provided, however, that all losses arising under subparagraphs
(a) and (b) above shall be deemed to be Special Assumed
Liabilities to the extent that the aggregate amount of Special
Assumed Liabilities does not exceed $250,000, as provided in
Section 2.02(c)(3) above, and Seller shall be liable under
subparagraphs (a) and (b) of this Section 10.02 only to the
extent such losses are not deemed to be Special Assumed
Liabilities. For purposes of this Section 10.02, Liabilities and
other matters shall be "undisclosed" if they are not fully and
specifically described on a Schedule to this Agreement.
Purchaser shall give Seller prompt notice once Purchaser knows
that it has any basis to assert a claim for indemnification
hereunder. Such notice shall include a summary of the facts
giving rise to the claim. If a claim is made against Purchaser
or either of the Subsidiary for which Purchaser and the
Subsidiary are entitled to indemnification under this Section
10.02, Purchaser shall provide a reasonable defense to such claim
and shall pay the reasonable costs of such defense (the "Defense
Costs"). If the defense is wholly successful, Purchaser and the
Subsidiary shall not seek indemnification for the Defense Costs
other than to setoff the amount of the Defense Costs against the
Profit Sharing Arrangement. If the defense is not wholly
successful, Purchaser and the Subsidiary shall be indemnified by
the Seller for the amount of the settlement or judgment plus the
Defense Costs.
10.03 Remedies; Right of Offset. Upon the occurrence
of any event for which Purchaser is entitled to indemnification under
this Agreement, it shall have all the rights and remedies in law
and in equity available to it. Without limiting the foregoing,
Seller hereby agrees to pay promptly upon receipt of notice from
Purchaser the amounts which Seller may owe to Purchaser from time
to time by reason of the provisions of this Agreement or
otherwise. Should Seller fail or refuse to pay any such amounts
promptly after the request of Purchaser, then Purchaser, at its
election, may offset any amounts thus due and owing to Purchaser
against the Profit Sharing Arrangement and the Consulting
Agreement with RMW.
10.04 Exculpation of RMW and Seller's Limited Partners.
Purchaser and Subsidiary agree:
(a) That if the Closing occurs, they will not assert
any claim against the Limited Partners of Seller for any reason
arising from or in connection with this Agreement or the Other
Agreements, or the transactions herein or therein contemplated;
and
(b) That if the Closing occurs, any claims against
Seller arising hereunder or under the Other Agreements will be
asserted only against the partnership entity of Seller and
Seller's assets, and not against any General Partner of seller as
a separate person or entity, and Purchaser and Subsidiary will
not assert any claim against any of the General Partners of
Seller for any reason arising from in connection with this
Agreement or the Other Agreements (other than claims arising
under the Consulting Agreement with RMW), or the transactions
herein or therein contemplated, other than claims arising under
the representation and warranty of RMW stated in Section 10.05
below.
(c) Notwithstanding the foregoing, Purchaser may
assert a claim against any of Seller's limited or general
partners to the extent of (i) such partners actual fraud and (ii)
the amount of any distributions made by Seller to such partner
after the date of this Agreement.
10.05 Representation and Warranty of RMW. RMW
represents and warrants to Purchaser that to the extent of the
Knowledge of RMW the representations and warranties of the Seller
stated in Section 3 above are true and correct in all material
respects.
Section 11
Miscellaneous
11.01 Notices. Any notices or other communications required
or permitted hereunder shall be deemed to have been duly given
(a) if delivered in person and a receipt is given; or (b) if sent
by registered or certified mail, return receipt requested, post-
age prepaid, and addressed as follows:
(a) If to Seller:
WJA Realty Limited Partnership
000 Xxxx 0xx Xxxxxx
Xxxxx 000
Xxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx, Xx.
with a copy to:
Xxxxx X. Xxxxxx, Esq.
Xxxxxxxx Xxxxxxxx Xxxxxxx Xxxxxx
Xxxxxxx & Sellers
Ten Xxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxx, XX 00000-0000
(b) If to Purchaser:
Florida Gaming Corporation
c/o Freedom Financial Corporation
0000 Xxxxxxxxxxx Xxxx, Xxxxx X
Xxx Xxxxxx, Xxxxxxx 00000
ATTN: X. Xxxxxxx Xxxxxxx
with a copy to:
Xxxxx, Xxxx & Heyburn PLLC
0000 Xxxxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxxxxxx
or if sent to such substituted address as any of the parties has
given to the others in writing in accordance with this Section
11.01.
11.02 Waivers. No waiver or failure to insist upon strict
compliance with any obligation, covenant, agreement or condition
of this Agreement shall operate as a waiver of, or an estoppel
with respect to, any subsequent or other failure.
11.03 Expenses. The fees and expenses of RMW, and of the
lawyers, accountants and other consultants to Seller incurred in
connection with the negotiation of this Agreement and the
consummation of the transactions herein contemplated, shall be
included in the Regular Assumed Liabilities.
11.04 Headings; Interpretation. The headings in this Agree-
ment have been included solely for ease of reference and shall
not be considered in the interpretation or construction of this
Agreement. All references herein to the masculine, neuter or
singular shall be construed to include the masculine, feminine,
singular, neuter or plural, as appropriate.
11.05 Annexes and Schedules. The Annexes and Schedules to
this Agreement are incorporated herein by reference and expressly
made a part hereof.
11.06 Entire Agreement. All prior negotiations and agree-
ments by and among the parties hereto with respect to the subject
matter hereof are superseded by this Agreement, and there are no
representations, warranties, understandings or agreements with
respect to the subject matter hereof other than those expressly
set forth herein or on an Annex or Schedule delivered in connec-
tion herewith.
11.07 Representations and Warranties, Etc. The representa-
tions and warranties of each party contained herein shall not be
deemed to be waived or otherwise affected by any investigation
made by any other party hereto, provided, however, that Purchaser
shall before the Closing inform Seller in writing of any matter
known to Purchaser which would constitute a breach of any
representation or warranty of Seller if the Closing were to
occur.
11.08 Governing Law. This Agreement shall be governed by,
and construed and interpreted in accordance with, the laws of the
State of Florida.
11.09 Brokers. The parties covenant and agree with one
another that they have not dealt with any broker or finder in
connection with any of the transactions contemplated in this
Agreement and, insofar as they know, no broker or other Person is
entitled to a commission or finders' fee in connection with these
transactions. Each party shall indemnify and hold the other par-
ties harmless from and against any claim by any agent or broker
claiming by or through it for any fee or other compensation due
or allegedly due that broker or agent.
11.10 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but
all of which together shall constitute one and the same
instrument.
11.11 Severability. If any provision of this Agreement or
its application will be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of all other
applications of that provision, and of all other provisions and
applications hereof, will not in any way be affected or impaired.
If any court shall determine that any provision of this Agreement
is in any way unenforceable, such provision shall be reduced to
whatever extent is necessary to make such provision enforceable.
11.12 Benefit and Binding Effect. This Agreement shall be
binding upon, and shall inure to the benefit of Purchaser and
Seller and each of their successors and assigns; provided,
however, that no party to this Agreement shall assign his or its
rights or obligations hereunder without the express written
consent of the other parties, which consent shall not be
unreasonably withheld.
11.13 Risk of Loss. The risk of any loss or damage to any of
the Assets by fire or any other casualty or cause shall be borne
by Seller at all times through the Closing, and by Purchaser
thereafter.
11.14 Further Assurances. From time to time at another
party's request and without further consideration, a party shall
execute and deliver such further instruments of conveyance,
assignment and transfer, and take such other actions as the
requesting party may reasonably request, in order to more effec-
tively convey and transfer any of the Assets. In addition, any
monies collected by a party which are due and payable to another
party will be promptly remitted to such party upon receipt
thereof.
11.15 Prorations and Adjustments. Except as otherwise herein
provided with respect to the Assumed Liabilities, all income and
operating expenses pertaining to the conduct and operation of
Seller's business shall be prorated as of the Closing Date, so
that, as between Seller and Purchaser, Seller shall receive all
revenues and be responsible for all expenses, costs and
Liabilities allocable to the period prior to the Closing Date,
and Purchaser shall receive all revenues and be responsible for
all expenses, costs and Liabilities allocable to the Closing Date
and thereafter.
11.16 Sales and Transfer Taxes and Fees. All sales and
transfer taxes, and all recording, filing and other fees
(including any penalties or interest), incurred in connection
with this Agreement and the transactions contemplated hereby will
be borne by Purchaser. The parties will assist each other in the
filing of all necessary tax returns and other documentation with
respect to all such taxes and fees, and, if required by
applicable law, will join in the execution of any such tax
returns or other documentation.
11.17 Arbitration. All controversies, disputes or claims
arising among the parties in connection with, or with respect to,
any provision of this Agreement or any of the Other Agreements,
which has not been resolved within fifteen (15) calendar days
after either Purchaser or the Seller shall notify the other in
writing of such controversy, dispute or claim, shall be submitted
for arbitration in accordance with the rules of the American
Arbitration Association or any successor thereof. Arbitration
shall take place at an appointed time and place in Dade County,
Florida. Each party shall select one (1) arbitrator (who shall
not be counsel for such party), and the two (2) so designated
shall select a third arbitrator. If either party shall fail to
designate an arbitrator within seven (7) calendar days after
arbitration is requested, or if the two (2) arbitrators shall
fail to select a third arbitrator within fourteen (14) calendar
days after arbitration is requested, then such arbitrator shall
be selected by the American Arbitration Association or any suc-
cessor thereto upon application of either party. Judgment upon
any award of the majority of arbitrators shall be binding and
shall be entered in a court of competent jurisdiction. The award
of the arbitrators may grant any relief which might be granted by
a court of general jurisdiction, including, without limitation,
award of damages and/or injunctive relief, and may, in the
discretion of the arbitrators, assess, in addition, the cost of
the arbitration, including the reasonable fees of the arbitrators
and reasonable attorneys' fees, against either or both parties,
in such proportions as the arbitrators shall determine. Nothing
herein contained shall bar the right of any of the parties to
seek and obtain temporary injunctive relief from a court of
competent jurisdiction in accordance with applicable law against
threatened conduct that will cause loss or damage, pending
completion of the arbitration.
11.18 Financial Information. Seller shall prepare, or cause
to be prepared, and deliver to Purchaser at the Closing each of the
following financial statements of WJA prepared in accordance with
generally accepted accounting principles (the "Financial
Statements")
Financial Date or Period
Statement Ending Date Period Audited
Balance Sheet December 31, 1994 and 1995 N/A YES
(or 1995 and 1996 if Closing
occurs after February 11, 1997)
Calendar quarter end no more N/A NO
than 130 days before Closing
Statements of December 31, 1993, 1994, and 12 months YES
Income, 1995 (or 1994, 1995, and
Cash Flows and 1996 if Closing occurs after
Changes in Equity February 11, 1997)
Calendar quarter end no more quarter and NO
than 130 days before Closing year to date
(comparative
with previous
year's quarter
and year to
date)
Seller shall use its best efforts to obtain and to deliver to Purchaser
at the Closing, an audit of those Financial Statements noted above to be
audited, certified by Xxxxxx Xxxxxxxx & Co., independent public accountants
(the "Audit"). Seller shall make available to Purchaser after the Closing
all records of Seller pertaining to the Business and the Real Property as
Purchaser may reasonably request for use in the operation of the Business
or to prepare reports and other documents required to be filed with the
Securities and Exchange Commission or any other governmental agency or
authority. Seller hereby consents, effective at the Closing, for its agents
and accountants to release copies of all such records to Purchaser. If the
Closing does not occur for any reason, Purchaser shall maintain all such
Financial Statements and related information in confidence and not disclose
or publish them except under the compulsion of legal process issued by a
court or other governmental agency.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date set forth in the preamble hereto, but actually on
the dates set forth below.
WJA Realty Limited Partnership
By /s/ Xxxxx X. Xxxxxxx, Xx.
Title: General Partner
Date: 11/22/96
Florida Gaming Corporation
By /s/ X. Xxxxxxx Xxxxxxx
Title: Chairman, Chief Executive Officer
Date: 11/23/96
Florida Gaming Centers, Inc.
By /s/ X. Xxxxxxx Xxxxxxx
Title: Chairman, Chief Executive Officer
Date: 11/23/96
ANNEXES
1.01(B) Assignment of Contracts
1.01(D) Xxxx of Sale
1.01(E) Consulting Agreements (including stock option and
registration rights)
[included in the Current Report on Form 8-K dated
November 25, 1996]
1.01(G) Current Financial Statements of WJA
1.01(I) Financial Statements of WJA
1.01(N) Assignment of Land Trust Interest
1.01(O) Guaranty
3.01 Certificate of Limited Partnership
Partnership Agreement
7.03 Seller's Legal Opinion
8.02 Purchaser's Legal Opinion
SCHEDULES
1.01(A) Excluded Assets
[included in the Current Report on Form 8-K dated
November 25, 1996]
1.01(F) Material Contracts
1.01(J) Inventory
1.01(K) Material Regular Assumed Contract Liabilities
1.01(M) Real Property
2.03 Allocation of Purchase Price
3.02 Partners Percentage Interest
3.03 Subsidiaries
3.08 Assets Not Otherwise Described
3.10 Material Changes
3.11 Tax Matters
3.14 Litigation
3.15 Collectibility of Notes and Receivables
3.16 Permits
3.17 Intellectual Property
3.20 Customers, etc.
3.21 Employees of Seller
3.22 Insurance
3.23 Collective Bargaining Contracts, etc.
3.24 Employee Benefit Plan
3.25 Potential Competing Interests
3.26 Environmental Matters
7.07 Seller's Deliveries
8.07 Purchaser's Deliveries
ANNEX 1.01(E)
CONSULTING AND NONCOMPETITION AGREEMENT
This is a Consulting and Noncompetition Agreement (this
"Agreement") dated ________________, 1996, among Florida Gaming
Centers, Inc., a Delaware Corporation (the "Company") and Xxxxxxx
X. Xxxxxxx (the "Consultant").
Recitals
A. The Company is purchasing the assets of WJA Realty
Limited Partnership, a Massachusetts limited partnership ("Seller")
pursuant to an Assets Purchase Agreement dated as of __________,
1996 (the "Purchase Agreement"), between Florida Gaming Corporation
("FGC"), the Company and Seller. All capitalized terms used, but
not defined herein shall have the meanings assigned to them in the
Purchase Agreement.
B. Following the Company's purchase of the Assets, the
Company wishes to benefit from the Consultant's experience and
knowledge by utilizing him as a consultant to the Company, and the
Company further wishes to prevent Consultant from competing with
the Company subject to the terms and conditions set forth herein.
Terms and Conditions
1. Consulting Services. In consideration of the Company's
purchase of the Assets from Seller and the payment by the Company
to the Consultant of $20,000.00 per month for each of the sixty
months following the date hereof, the Consultant agrees for a
period of five years from the date hereof to provide such
consulting services as may reasonably be requested by officers or
directors of the Company, including, without limitation, (i)
advising the Company regarding the operations of the business; (ii)
advising the Company regarding its marketing and promotional plans
and activities; (iii) participating in the preparation of
competitive analyses; (iv) advising the Company regarding political
matters (v) assisting with Corporate expansion and business
development programs. Notwithstanding the foregoing, the
Consultant shall be obligated to assist and advise the Company
sixty hours per month (but no more) to the extent he is requested
to do so by officers or directors of the Company.
2. Insurance. The Company will pay the premiums for
Consultant's life insurance policy with Xxxx Xxxxx Insurance
Company for the term of this Agreement. The premium obligation of
the Company for the Consultant's life insurance policy will not
exceed $14,000 per annum. During the term of this Agreement, the
Company shall provide the Consultant with coverage under the group
health insurance plan in effect from time to time for the Company's
employees (the "Plan") on the same terms and conditions that the
Company generally provides such insurance to its employees from
time to time; provided, that the Company shall have no obligation
to provide the Consultant with health insurance except to the
extent that the Plan permits the Company to do so under the Plan.
3. Stock Option. Concurrent with the purchase of the
Assets, and the execution of this Agreement, the Company will
cause FGC to grant Consultant an option to purchase 50,000 shares
of the common stock of FGC pursuant to an option agreement between
the Company and the Consultant in the form of Attachment A hereto.
The exercise price shall be the market price at the close of
business on the Closing Date. The option shall be exerciseable at
any time within five years of the Closing.
4. Covenants of the Consultant. In further consideration
for the Company's purchase of the Assets and the payments to be
made to the Consultant hereunder, the Consultant covenants and
agrees as follows:
(a) Covenant Not To Compete. During the term of this
Agreement, except for the services to be rendered by the Consultant
under this Agreement, the Consultant shall not, directly or
indirectly, either individually or as an employee, agent, partner,
shareholder, investor, director, consultant or in any other
capacity (i) participate or engage in, or assist others in
participating or engaging in, a parimutuel or gaming business
within 75 miles of any of the jai-alai frontons located in Miami,
Ft. Xxxxxx, Tampa, and Ocala, Florida; or (ii) solicit, or assist
others in soliciting, any employees of Company from leaving their
employ (including the current and former employees of Seller).
(b) Confidentiality. The Consultant shall not
communicate, disclose or use for the benefit of himself or any
other person, firm, partnership, corporation or other entity (a
"Person") in any way, or anywhere, any customer or supplier lists,
business secrets or methods, business policies, manuals of
instruction, reports, research, records, catalogs, samples,
advertising, brochures, or other forms, or any other confidential
or proprietary information or trade secrets of any type or
description whatsoever belonging to the Company, including, without
limitation, those formerly belonging to Seller which are being
purchased by the Company pursuant to the Purchase Agreement
("Confidential Information"). The Consultant acknowledges that to
the best of his knowledge, after due investigation, he has
delivered to the Company all documents, memoranda, notes, and other
writings whatsoever (and all copies thereof) prepared by the
Consultant or otherwise, which contain or relate to Confidential
Information (the "Confidential Documents") which were in his
possession or control whether prepared by the Consultant or
otherwise. Should the Consultant discover that he does have
possession or control of any Confidential Documents, he shall
immediately deliver them to the Company.
(c) Reasonableness of Covenants. It is expressly
understood and agreed that although the Company and the Consultant
consider the covenants contained in this paragraph 4 to be reason-
able for the purpose of preserving the Company's proprietary rights
and ongoing business value including, without limitation, such
rights and value transferred to the Company pursuant to the
Purchase Agreement, if a final judicial determination is made by a
court having jurisdiction that the time or territory or any other
restriction contained in this paragraph 4 is an unenforceable
restriction against the Consultant, the provisions of such
restriction shall not be rendered void but shall be deemed reduced
as to a duration or scope or otherwise amended to such extent as
such court may judicially determine or indicate to be reasonable.
Alternatively, if the court referred to above finds that any
restriction contained in this paragraph 4 is unenforceable, and
such restriction cannot be amended so as to make it unenforceable,
such finding shall not affect the enforceability of any of the
other restrictions contained herein.
5. Remedies. The Consultant acknowledges that the Company
has consummated the transactions contemplated in the Purchase
Agreement in reliance upon Consultant's fulfillment of the
obligations imposed by this Agreement. The Consultant agrees that
the Company may not be adequately compensated by money damages for
a breach by the Consultant of any of the covenants contained
herein, and the Consultant agrees that the Company shall be
entitled, in addition to all other remedies, to injunctive relief
and specific performance of this Agreement. The parties further
agree that, if the Company reasonably determines that the
Consultant has breached any of his covenants contained herein, in
addition to all other remedies, the Company shall have the right to
set off the amount of any damages which it sustains as a result of
such breach against any amounts the Company owes to the Consultant,
including, without limitation, any payments owed to Seller pursuant
to the Purchase Agreement.
6. Reimbursement of Expenses. The Company shall reimburse
the Consultant for all reasonable travel, entertainment, and
similar expenses that the Company directs the Consultant to incur
in connection with the provision of consulting services under this
Agreement. The Company shall not reimburse any expense that is not
specifically approved by the Company before it is incurred. Any
reimbursements under this paragraph shall be made upon the
Consultant's presentation to the Company, from time to time, of an
account of such expenses in such form and in such detail as the
Company may reasonably request.
7. Hold Harmless from Agreement with Seller. The Consultant
has been an employee of the Seller for a number of years. The
Consultant represents and warrants to the Company that (i) he has
not received compensation from the Seller in the last six months in
excess of the Consultant's base salary plus benefits listed in the
schedules to the Purchase Agreement, (ii) he has not received in
the last six months any bonus, (iii) he is not entitled to any
bonus from Seller with respect to all or any part of calendar year
1996 or any period thereafter, (iv) he is not entitled to any
severance payment from Seller or any similar benefit, and (v) the
Seller owes nothing to the Consultant other than the Consultant's
base pay for the days completed in the current pay period and
normal unreimbursed out of pocket expenses. The Consultant shall
indemnify and hold the Company harmless against any losses it
incurs as a result of any inaccuracy in any of the foregoing
representations and warranties. The Company may setoff the amount
of any such losses against amounts that would otherwise be payable
to the Consultant under this Agreement.
8. Miscellaneous.
(a) Assignability. The services to be rendered by the
Consultant under this Agreement are unique and personal, and the
Consultant may not assign any of his rights or delegate any of his
duties under this Agreement. The rights or obligations of the
Company under this Agreement shall benefit and bind the successors
and assigns of the Company.
(b) Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Florida.
(c) Entire Agreement. This Agreement and the
accompanying Option Agreement constitute the entire agreement of
the parties and supersedes all prior understandings with respect to
the subject matter hereof. No change in or modification of this
Agreement shall be enforceable, unless in writing and signed by the
party against whom enforcement is sought.
(d) Independent Contractor. The parties acknowledge and
agree that the Consultant shall perform his consulting services
hereunder as an independent contractor and not as an employee of
the Company. The Consultant shall not have, receive or be entitled
to receive under this Agreement any of the rights, privileges, or
benefits of employees of the Company.
(e) Severability. If any provision of this Agreement or
the application thereof shall be adjudged by any court of competent
jurisdiction to be invalid, illegal, or unenforceable in any
respect, the validity, legality, and enforceability of all other
applications of such provision, and of all other provisions and
applications hereof, shall not in any way be affected or impaired
unless such provision is of the essence of this Agreement.
(f) No Waivers. No failure or delay on the part of any
party exercising any power or right under this Agreement shall
operate as a waiver thereof, and no single or partial exercise of
any such right or power shall preclude any other or further
exercise thereof, or the exercise of any other right or power under
this Agreement.
(g) Headings. The headings used in this Agreement have
been included solely for ease of reference and shall not be deemed
a part of this Agreement in construing or interpreting the
provisions hereof.
(h) Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original.
It shall not be necessary in making proof of this Agreement or the
terms hereof to produce or account for more than one such
counterpart.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first set forth above.
Florida Gaming Centers, Inc.
By____________________________
Title:________________________
Date:__________________________
Consultant
Name:_________________________
Xxxxxxx X. Xxxxxxx
Signature:____________________
Date:__________________________
CONSULTING AND NONCOMPETITION AGREEMENT
This is a Consulting and Noncompetition Agreement (this
"Agreement") dated ________________, 1996, among Florida Gaming
Centers, Inc., a Delaware Corporation (the "Company") and Xxxxx X.
Xxxxxxx, Xx. (the "Consultant").
Recitals
A. The Company is purchasing the assets of WJA Realty
Limited Partnership, a Massachusetts limited partnership ("Seller")
pursuant to an Assets Purchase Agreement dated as of __________,
1996 (the "Purchase Agreement"), between Florida Gaming Corporation
("FGC"), the Company and Seller. All capitalized terms used, but
not defined herein shall have the meanings assigned to them in the
Purchase Agreement.
B. Following the Company's purchase of the Assets, the
Company wishes to benefit from the Consultant's experience and
knowledge by utilizing him as a consultant to the Company, and the
Company further wishes to prevent Consultant from competing with
the Company subject to the terms and conditions set forth herein.
Terms and Conditions
1. Consulting Services. In consideration of the Company's
purchase of the Assets from Seller and the additional consideration
described below, the Consultant agrees for a period of ten years
from the date hereof to provide such consulting services as may
reasonably be requested by officers or directors of the Company,
including, without limitation, (i) advising the Company regarding
the operation of its business; (ii) advising the Company regarding
its marketing and promotional plans and activities; (iii)
participating in the preparation of competitive analyses; and (iv)
advising the Company regarding political matters. Notwithstanding
the foregoing, the Consultant shall be obligated to consult with
and advise the Company not more than ten hours per month if so
requested by officers or directors of the Company. The Company
shall:
(a) Pay to the Consultant a fee (the "Consulting Fee"), as
follows:
(1) One hundred thousand dollars ($100,000) for each of
the first five years commencing at the Closing
Date, payable in arrears in twelve equal monthly
installments commencing one month after the Closing
Date,
(2) Fifty thousand dollars ($50,000) for each of the
five years commencing at the fifth anniversary of
the Closing Date, payable in arrears in twelve
equal monthly installments, commencing one month
after such fifth anniversary,
(b) Cause to be issued to the Consultant an option to
purchase twenty five thousand (25,000) shares of the
Common Stock of FGC pursuant to an option agreement in
the form of Attachment A hereto. The exercise price
shall be the market price of such stock as of the close
of business on the date of the Closing contemplated by
the Purchase Agreement. Such option shall be exercisable
for five years.
(c) Cause the Consultant and one other person designated by
the Consultant and approved by the Company (such approval
shall not to be unreasonably withheld) (i) to be
appointed to the board of directors of FGC and (ii)
unless it would be inconsistent with the fiduciary duties
of the directors of FGC (as determined in good faith by
such directors) (a "Fiduciary Inconsistency"), to be
renominated for election to the FGC board of directors in
connection with each expiration of each of their terms
during the entire ten year period commencing at the
Closing Date (the "Ten Year Period"). Upon each
Fiduciary Inconsistency, if any, FGC shall give notice to
the Consultant and the Consultant may, but shall not be
required to, propose by written notice to FGC a different
individual to serve on the FGC board. Upon such a
proposal, the designated individual shall be treated as
the Consultant (or his designee, as appropriate) for the
purposes of clause (ii) of the first sentence of this
subsection 1(c) and shall therefore be nominated to the
FGC board absent a Fiduciary Inconsistency with respect
to that individual. If the Consultant should die during
the Ten Year Period, Seller shall have the authority to
designate a different individual who shall, for the
remainder of the Ten Year Period, be treated as the
Consultant for all purposes under this subsection 1(c).
The Consulting Fee shall terminate upon the death of the
Consultant, provided, however, that the Company shall pay a death
benefit to the estate of the Consultant, in an amount equal to the
Consulting Fee payments remaining to be paid during the entire ten
year duration of the Consulting Fee, as and when those payments
would have been due in the absence of the death of the Consultant.
2. Covenants of the Consultant. In further consideration
for the Company's purchase of the Assets and the payments to be
made to the Consultant hereunder, the Consultant covenants and
agrees as follows:
(a) Covenant Not To Compete. For a period of three
years after the date of this Agreement, except for the services to
be rendered by the Consultant under this Agreement, the Consultant
shall not, directly or indirectly, either individually or as an
employee, agent, partner, shareholder, investor, director,
consultant or in any other capacity (i) participate or engage in,
or assist others in participating or engaging in, a parimutuel or
gaming business within 75 miles of any of the xxx xxxx frontons
located in Miami, Ft. Xxxxxx, Tampa, and Ocala Florida; or (ii)
solicit, or assist others in soliciting, any employees of Company
from leaving their employ (including the current and former
employees of Seller).
(b) Confidentiality. The Consultant shall not
communicate, disclose or use for the benefit of themselves or any
other person, firm, partnership, corporation or other entity (a
"Person"), in any way, or anywhere, any customer or supplier lists,
business secrets or methods, business policies, manuals of
instruction, reports, research, records, catalogs, samples,
advertising brochures, or other forms, or any other confidential or
proprietary information or trade secrets of any type or description
whatsoever belonging to the Company, including, without limitation,
those formerly belonging to Seller which are being purchased by the
Company pursuant to the Purchase Agreement ("Confidential
Information"). The Consultant acknowledges that he has in his
possession or control documents, memoranda, notes and other
writings (and copies thereof) prepared by the Consultant or
otherwise, which contain or relate to Confidential Information (the
"Confidential Documents"). Consultant shall take all steps
necessary to maintain the confidentiality of the Confidential
Documents and shall not use the Confidential Documents for any
purpose other than in connection with (i) his duties under this
Agreement and (ii) any matters related to the Purchase Agreement.
(c) Reasonableness of Covenants. It is expressly
understood and agreed that although the Company and the Consultant
consider the covenants contained in this paragraph 2 to be reason-
able for the purpose of preserving the Company's proprietary rights
and ongoing business value including, without limitation, such
rights and value transferred to the Company pursuant to the
Purchase Agreement, if a final judicial determination is made by a
court having jurisdiction that the time or territory or any other
restriction contained in this paragraph 2 is an unenforceable
restriction against the Consultant, the provisions of such
restriction shall not be rendered void but shall be deemed reduced
as to a duration or scope or otherwise amended to such extent as
such court may judicially determine or indicate to be reasonable.
Alternatively, if the court referred to above finds that any
restriction contained in this paragraph 2 is unenforceable, and
such restriction cannot be amended so as to make it unenforceable,
such finding shall not affect the enforceability of any of the
other restrictions contained herein.
3. Remedies. The Consultant acknowledges that the Company
has consummated the transactions contemplated in the Purchase
Agreement in reliance upon Consultant's fulfillment of the
obligations imposed by this Agreement. The Consultant agrees that
the Company may not be adequately compensated by money damages for
a breach by the Consultant of any of the covenants contained
herein, and the Consultant agrees that the Company shall be
entitled, in addition to all other remedies, to injunctive relief
and specific performance of this Agreement. The parties further
agree that, if the Company reasonably determines that the
Consultant has breached any of his covenants contained herein, in
addition to all other remedies, the Company shall have the right to
set off the amount of any damages which it sustains as a result of
such breach against any amounts the Company owes to the Consultant,
including, without limitation, any payments owed to Seller pursuant
to the Purchase Agreement.
4. Reimbursement of Expenses. The Company shall reimburse
the Consultant for all reasonable travel, entertainment, and
similar expenses that the Company directs the Consultant to incur
in connection with the provision of consulting services under this
Agreement. The Company shall not reimburse any expense that is not
specifically approved by the Company before it is incurred. Any
reimbursements under this paragraph shall be made upon the
Consultant's presentation to the Company, from time to time, of an
account of such expenses in such form and in such detail as the
Company may reasonably request.
5. Miscellaneous.
(a) Assignability. The services to be rendered by the
Consultant under this Agreement are unique and personal, and the
Consultant may not assign any of his rights or delegate any of his
duties under this Agreement. The rights or obligations of the
Company under this Agreement shall benefit and bind the successors
and assigns of the Company.
(b) Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the state of Florida.
(c) Entire Agreement. This Agreement constitutes the
entire agreement of the parties and supersedes all prior under-
standings with respect to the subject matter hereof. No change in
or modification of this Agreement shall be enforceable, unless in
writing and signed by the party against whom enforcement is sought.
(d) Independent Contractor. The parties acknowledge and
agree that the Consultant shall perform his consulting services
hereunder as an independent contractor and not as an employee of
the Company. The Consultant shall not have, receive or be entitled
to receive under this Agreement any of the rights, privileges, or
benefits of employees of the Company.
(e) Severability. If any provision of this Agreement or
the application thereof shall be adjudged by any court of competent
jurisdiction to be invalid, illegal, or unenforceable in any
respect, the validity, legality, and enforceability of all other
applications of such provision, and of all other provisions and
applications hereof, shall not in any way be affected or impaired
unless such provision is of the essence of this Agreement.
(f) No Waivers. No failure or delay on the part of any
party exercising any power or right under this Agreement shall
operate as a waiver thereof, and no single or partial exercise of
any such right or power shall preclude any other or further
exercise thereof, or the exercise of any other right or power under
this Agreement.
(g) Headings. The headings used in this Agreement have
been included solely for ease of reference and shall not be deemed
a part of this Agreement in construing or interpreting the
provisions hereof.
(h) Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original.
It shall not be necessary in making proof of this Agreement or the
terms hereof to produce or account for more than one such
counterpart.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first set forth above.
Florida Gaming Centers, Inc.
By________________________________
Title:____________________________
Date:_____________________________
Consultant
Name:_____________________________
(Please Print)
Signature:________________________
Date:_____________________________
Freedom Financial Corporation, in order to induce the Consultant to
enter into this Agreement, hereby agrees to cast, or to cause to be
cast, one vote for each of the shares of FGC to which it (or any
entity controlled by it) is entitled to vote in the election of FGC
directors in favor of the individuals nominated pursuant to clause
(ii) of the first sentence of subsection 1(c) of the agreement set
forth above between the Company and the Consultant.
Freedom Financial Corporation
By___________________________
Title:_______________________
Date:________________________
X. Xxxxxxx Xxxxxxx, in order to induce the Consultant to enter into
this Agreement, hereby agrees to cast, or to cause to be cast, one
vote for each of the shares of FGC to which he (or any entity
controlled by him) is entitled to vote in the election of FGC
directors in favor of the individuals nominated pursuant to clause
(ii) of the first sentence of subsection 1(c) of the agreement set
forth above between the Company and the Consultant.
_____________________________
X. Xxxxxxx Xxxxxxx
Date:________________________
Florida Gaming Corporation, in order to induce the Consultant to
enter into this Agreement, hereby guarantees the Company's
performance of its obligations under Section 1 of the agreement set
forth above between the Company and the Consultant.
Florida Gaming Corporation
By__________________________
Title:_______________________
Date:________________________
STOCK OPTION AGREEMENT
This is a Stock Option Agreement dated as of ____________,
1996, between FLORIDA GAMING CORPORATION ("FGC") and ______________
(the "Optionee").
Recitals
Optionee has entered into a Consulting and Noncompetition
Agreement (the "Consulting Agreement") dated _____________, 1996,
with Florida Gaming Centers, Inc., a Delaware Corporation (a
subsidiary of FGC). Pursuant to the terms of the Consulting
Agreement, FGC agreed to grant the Optionee an option to purchase
_____ shares of FGC's common stock on the terms and conditions set
forth herein.
Agreement
1. Option Grant. In consideration of the agreements and
covenants of the Optionee contained in the Consulting Agreement and
this Stock Option Agreement, FGC hereby grants the Optionee the
option (the "Option") to purchase ___________ shares of FGC's
common stock, par value $.10 per share (the "Shares") at an
exercise price of $_________ (The "Exercise Price").
2. Option Term and Exercise. Subject to the terms and
conditions of this Agreement, the Option may be exercised at any
time up to and including _____________, 2001, after which the
Option shall expire.
3. Method of Exercise. The Optionee shall exercise the
Option by delivering written notice to FGC (the "Exercise Notice"),
which shall:
a. State the election to exercise the Option, the
number of Shares in respect of which the Option is being exercised,
and such other information as the Corporation or its transfer agent
shall require;
b. Be signed by the Optionee; and
c. Be accompanied by payment of the full exercise
price, in cash or by a certified check reasonably acceptable to
FGC, for the Shares with respect to which the Option is being
exercised.
Such exercise shall be deemed effective immediately prior to the
close of business on the day FGC shall have received such Exercise
Notice (including the payment), and thereupon the Optionee shall be
deemed to be the holder of record of the Shares issuable on such
exercise. FGC shall issue a certificate or certificates for the
number of Shares issuable on such exercise.
4. Nonassignability of Option. The Option shall not be
transferrable or assignable by the Optionee, and shall be
exercisable only by the Optionee; provided, however, that on the
death or incapacity of the Optionee, the rights of the Optionee
hereunder may be exercised by the executor, administrator,
guardian, conservator or other personal representative of the
Optionee appointed by a court; and further provided, that the
Option may be transferred by will or the operation of law upon the
death of the Optionee. The Option shall not be pledged or
hypothecated in any way, and shall not be subject to execution,
attachment or similar process. Any attempted transfer, assignment,
pledge, hypothecation or other disposition of the Option contrary
to the provisions of this Agreement, and the levy of any process
upon the Option shall be null, void, and without effect.
5. Adjustment in Certain Events.
5.01 General Adjustment. To prevent dilution or
antidilution of the Option, the Exercise Price shall be subject to
adjustment from time to time as provided in this paragraph 5 (such
price or price as last adjusted pursuant to the terms hereof, as
the case may be, is herein called the "Exercise Price") and the
number of Shares issuable on exercise of the Option shall be
subject to adjustment from time to time as provided in this
paragraph 5.
5.02 Subdivision or Combination of Common Stock. If FGC
at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) its outstanding Common Stock into a
greater number of shares, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced and the
number of Shares obtainable on the exercise of the Option will be
proportionately increased. If FGC at any time combines (by any
reverse stock split or otherwise) its outstanding Common Stock into
a smaller number of shares, the Exercise Price in effect
immediately prior to such combination will be proportionately
increased and the number of Shares obtainable on the exercise of
the Option will be proportionately decreased.
5.03 Reorganization, Reclassification, Consolidation,
Merger, or Sale. Any capital reorganization, reclassification,
consolidation, merger, or sale of all or substantially all of FGC's
assets (a "Sale") to another person or entity which is effected in
such a way that holders of Common Stock are entitled to receive
(either directly or, with respect to a Sale, upon a subsequent
liquidation done as part of the same plan that also involved the
Sale) stock, securities, or assets with respect to or in exchange
for Common Stock is referred to herein as an "Organic Change."
Prior to the consummation of an Organic Change, FGC shall make fair
and appropriate provisions to ensure that Optionee will thereafter
have the right to acquire and receive in lieu of or in addition to
(as appropriate) the Shares immediately theretofore receivable on
exercise of the Option, such shares of stock, securities, or assets
as may be issued or payable with respect to or in exchange for the
number of Shares immediately theretofore receivable upon exercise
of the Option (the "Substitute Property"). Upon such an Organic
Change, the Option shall be to acquire the Substitute Property (and
if appropriate the Shares) instead of the Shares. In any Organic
Change, FGC shall make fair and appropriate provision with respect
to Optionee to ensure that the provisions of this paragraph 5 will
thereafter continue to apply to the Option.
5.04 Certain Events. The purpose of this paragraph 5 is to
maintain the essence of the Option notwithstanding an Organic
Change, a subdivision or combination of Common Stock, or events of
a similar nature. If any of these occur, whether or not
specifically addressed in this paragraph 5, this Agreement shall be
interpreted in a manner that results in an appropriate adjustment,
determined by FGC's board of directors, in the Exercise Price and
the number of Shares obtainable upon the exercise of the Option, so
as to protect the rights of Optionee and FGC.
6. Securities Representations and Warranties. The Optionee
represents and warrants to FGC as follows:
a. The Optionee acknowledges that the Optionee has
received and reviewed a copy of FGC's:
(1) 1995 Annual Report to Stockholders and
definitive proxy statement for the 1996 Annual
Meeting of Stockholders;
(2) Quarterly Reports on Form 10-QSB for the
quarters ended March 31, June 30, and
September 30, 1996;
(3) Current Reports on Form 8-K dated September
12, and October 9, 1996; and
(4) Description of FGC's common stock.
The Optionee acknowledges that FGC has made available to the
Optionee any exhibits listed in the documents listed in the
immediately preceding sentence.
b. In making the decision to accept the Option to
purchase the Shares, the Optionee has relied on an independent
investigation made by the Optionee and/or on the advice given to
the Optionee by its own counsel, accountant or other advisors. The
Optionee further represents that the Optionee and its advisors have
had the opportunity to ask questions and receive answers concerning
an investment in Shares and to obtain any additional information
(to the extent that FGC possesses or can acquire such information
without unreasonable effort or expense) necessary to verify the
accuracy of any information contained in the documents listed in
paragraph 6.a. or otherwise furnished to the Optionee and its
advisors.
c. The Optionee realizes that an investment in the
Shares involves certain risks. The Optionee (either alone or
together with its purchaser representative) has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of an investment in Shares. The
Optionee hereby certifies that the Optionee has total assets in
excess of $500,000.
d. The Optionee has evaluated the risks of investing in
Shares in light of the foregoing and is satisfied that the
investment is appropriate.
e. The Optionee understands (i) that when issued, the
Shares will not have been registered under the Securities Act of
1933, as amended (the "Act"); and (ii) that the Shares must
therefore be held indefinitely unless the sale thereof is
registered under the Act, or an exemption from such registration is
available.
f. The Optionee understands (i) that the Shares have
not been registered or qualified with, or reviewed by, any state
securities administrator in reliance upon certain exemptions to the
securities laws; and (ii) therefore, that the Shares may not be
sold, conveyed or transferred without registering or qualifying
them for sale under applicable state securities laws, unless the
transfer is exempt from such registration or qualification. The
Optionee further acknowledges and agrees that a restrictive legend
in substantially the following form will be placed on certificates
representing the Shares:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended
(the "Act") or qualified under applicable state law and
may not be sold, pledged, hypothecated, or otherwise
transferred unless registered under the Act and qualified
under applicable state law or an exemption is available
from such registration and qualification.
g. The Optionee is purchasing Shares solely for the
Optionee's own account for investment purposes only, and not for
the account of any other person or for distribution, assignment or
resale to others. The Optionee warrants that no other person has,
or will have, a direct or indirect beneficial interest in the
Shares issued to the Optionee pursuant to this Agreement.
h. The Optionee agrees to indemnify and hold harmless
FGC and its agents, attorneys, accountants and employees from and
against all damages, losses, costs and expenses (including
reasonable attorneys' fees) that any of them may incur by reason of
the Optionee's failure to fulfill any of the terms or conditions of
this paragraph 6 or arising out of the distribution or attempted
distribution of any of the Shares in violation of the Act or any
applicable state securities laws, or by reason of the material
breach of any of the representations and warranties made by the
Optionee herein.
7. Notices. All notices required or referenced by the
Agreement shall be hand delivered or sent by U. S. certified mail,
return receipt requested, or other form of delivery requiring
signature by the person receiving the delivery, to the following
addresses.
To The Optionee:
With a copy to:
To FGC: Florida Gaming Corporation
0000 Xxxxx Xxxxx Xxxxxxx
Xxxx Xxxxxx, Xxxxxxx 00000-0000
Attn: X. Xxxxxxx Xxxxxxx, Chairman
With a copy to: Xxxxx, Xxxx & Heyburn PLLC
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attn: Xxxxx X. Xxxxxxxxx
502/589-5400
All notices shall be deemed delivered upon the earlier of the date
the receiving party signs the return receipt or five days after the
notice is postmarked.
8. Governing Law. This Agreement and the relationship
between the parties shall be governed by the laws of the State of
Florida.
9. Entire Agreement. This Agreement contains the entire
understanding between the parties and may not be modified in any
manner, except by written amendment duly executed by each of the
parties hereto.
10. Registration Rights. Optionee shall have the
registration rights with respect to any shares of FGC stock
acquired pursuant to this Agreement as set forth in the attached
Annex A.
11. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all
of which shall constitute one and the same instrument.
12. Benefit and Binding Effect. This Agreement shall be
binding upon, and shall inure to the benefit of FGC and its
successors and assigns and Optionee and his successors and
permitted assigns.
The parties have executed and delivered this Agreement as of
the date set forth in the preamble hereto.
Optionee
Name:_________________________
FLORIDA GAMING CORPORATION
By____________________________
X. Xxxxxxx Xxxxxxx
Chairman of the Board and
Chief Executive Officer
REGISTRATION RIGHTS
This is a statement of Registration Rights granted to
________________ ("Optionee") by Florida Gaming Corporation (the
"Corporation") pursuant to a Stock Option Agreement dated as of
_____________, 1996, between Optionee and the Corporation dated as
of ______________ (the "Agreement").
1. Definitions.
As used herein:
(a) The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a regis-
tration statement in compliance with the Securities Act of 1933
(the "Securities Act"), and the declaration or ordering of the
effectiveness of such registration statement.
(b) The term "Registrable Securities" means all shares of the
Corporation's Common Stock which Optionee acquires pursuant to the
Agreement.
(c) Capitalized terms used but not defined in this statement
shall have the meanings assigned them in the Agreement.
2. Corporation Registration.
(a) If at any time or from time to time, the Corporation
shall determine to register any of its securities for the account
of Freedom Financial Corporation, in a registration statement
covering the sale of shares of the Corporation's Common Stock
pursuant to an underwritten public offering, the Corporation will:
(i) promptly give to Optionee written notice thereof (which shall
include a list of the jurisdictions in which the Corporation
intends to attempt to qualify such securities under the applicable
blue sky or other state securities laws); and (ii) include in such
registration (and any related qualification under blue sky laws or
other compliance) and in any underwriting involved therein, all the
Registrable Securities specified in a written request or requests,
made within thirty days after receipt of such written notice from
the Corporation, by Optionee, except as set forth in subparagraph
2(b) below.
(b) Underwriting. The right of Optionee to registration
pursuant to paragraph 2 shall be conditioned upon Optionee's par-
ticipation in the underwriting and the inclusion of Optionee's
Registrable Securities in the underwriting to the extent provided
herein. Optionee and the Corporation shall enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Corporation.
Notwithstanding any other provision of this paragraph 2, if the
underwriter determines that marketing factors require a limitation
of the number of shares to be underwritten, the underwriter may
limit the number of Registrable Securities to be included in the
registration and underwriting; provided, however, the underwriter
may not limit the amount of Registrable Securities included in such
registration and underwriting to less than an amount equal to 20
percent of the amount of all the Corporation's securities included
within such registration and underwriting. If Optionee disapproves
of the terms of any such underwriting, it may elect to withdraw
therefrom by written notice to the Corporation and the underwriter.
c. Termination. The rights granted to Optionee pursuant to
this paragraph 2 shall terminate upon the earlier to occur of:
(i) three years from the date Optionee first acquires Registrable
Securities on exercise of the Option provided for in the Agreement
or (ii) the Corporation has effected two registrations pursuant to
subparagraph 2(a) and such registrations have been declared or
ordered effective.
3. Expenses of Registration.
All expenses incurred in connection with any registration,
qualification or compliance pursuant to this Agreement, including
without limitation, all registration, filing, and qualification
fees, printing expenses, fees and disbursements of counsel for the
Corporation, and expenses of any special audits incidental to or
required by such registration, shall be borne by the Corporation;
provided, however, the Corporation shall not be required to pay
fees of legal counsel of Optionee, or underwriters' fees,
discounts, or commissions relating to the Registrable Securities.
4. Registration Procedures.
In the case of each registration, qualification, or compliance
effected by the Corporation pursuant to this Agreement, the Corpor-
ation will keep Optionee advised in writing as to the initiation of
each registration, qualification and compliance and as to the
completion thereof. At its expense the Corporation will:
(a) Keep such registration, qualification or compliance pur-
suant to paragraph 2 effective for a period of 180 days or until
Optionee has completed the distribution described in the
registration statement relating thereto, whichever first occurs;
and
(b) Furnish such number of prospectuses and other documents
incident thereto as Optionee from time to time may reasonably
request.
5. Indemnification.
(a) The Corporation will indemnify Optionee, each of
Optionee's officers and directors, and each person controlling
Optionee, with respect to such registration, qualification, or
compliance effected pursuant to this statement and each underwriter
and each person who controls any underwriter of the Registrable
Securities held by Optionee, against all claims, losses, damages,
and liabilities (or actions in respect thereto) arising out of or
based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or
other document (including any related registration statement,
notification or the like) incident to any such registration,
qualification, or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
or any violation by the Corporation of any rule or regulation
promulgated under the Securities Act applicable to the Corporation
and relating to action or inaction required of the Corporation in
connection with any such registration, qualification, or
compliance, and will reimburse Optionee, each of Optionee's
officers and directors, and each person controlling Optionee, each
such underwriter and each person who controls any such underwriter,
for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss,
damage, liability or action, provided that the Corporation will not
be liable in any such case to the extent that any such claim, loss,
damage or liability arises out of or is based on any untrue state-
ment or omission based upon written information furnished to the
Corporation by an instrument duly executed by Optionee or such
underwriter specifically for use therein.
(b) Optionee will, if Registrable Securities held by Optionee
are included in the securities as to which such registration,
qualification, or compliance is being effected, indemnify the
Corporation, each of its directors and officers who sign such
registration statement, each underwriter of the Corporation's
securities covered by such a registration statement, each person
who controls the Corporation within the meaning of the Securities
Act, and each other stockholder including shares of Common Stock in
the registration, each of such other stockholder's officers and
directors and each person controlling such other stockholder,
against all claims, losses, damages, and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any
such registration statement, prospectus, offering circular, or
other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and will reimburse
the Corporation, such directors, officers, persons, or underwriters
for any legal or any other expenses reasonably incurred in con-
nection with investigating or defending any such claim, loss,
damage, liability, or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular, or other
document in reliance upon and in conformity with written infor-
mation furnished to the Corporation by an instrument duly executed
by Optionee specifically for use therein.
(c) Each party entitled to indemnification under this para-
graph 5 (the Indemnified Party) shall give notice to the party
required to provide indemnification (the Indemnifying Party)
promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose
approval shall not be unreasonably withheld), and the Indemnified
Party may participate in such defense at such party's expense, and
provided further that the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party
of its obligations under this paragraph. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment
or enter into any settlement which does not include as an uncon-
ditional term thereof the giving by the claimant or plaintiff to
such Indemnified Party of a release from all liability with respect
to such claim or litigation.
6. Information by Optionee.
Optionee shall furnish to the Corporation such written
information regarding Optionee and the distribution proposed by
Optionee as the Corporation may request in writing and as shall be
required in connection with any registration, qualification, or
compliance referred to in this paragraph.
7. Transfer of Registration Rights.
The rights to cause the Corporation to register the
Registrable Securities granted to Optionee by the Corporation under
paragraph 2 hereof may be assigned by Optionee to a transferee or
assignee of any of the Registrable Securities, provided, that the
Corporation is given written notice by Optionee at the time of or
within a reasonable time after said transfer, stating that name and
address of said transferee or assignee and identifying the secu-
rities with respect to which such registration rights are being
assigned.
Schedule 1.01(A)
Items Excluded from Assets
The following will be excluded from the Assets (i.e., Seller
shall retain):
1. The 200,000 shares of Purchaser common stock
currently owned by Seller
2. All tangible personal property of Sellers
located at the office of Seller in Tulsa,
Oklahoma, the aggregate value of which shall
not exceed $10,000.
