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CONVERSION AGREEMENT
By and Among
VIVA GAMING & RESORTS INC.,
THOMSON KERNAGHAN & CO. LTD.,
R. A. XXXXX XxXXXXXX
and
XXXX XXXXXXX
July __, 2001
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CONVERSION AGREEMENT
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THIS CONVERSION AGREEMENT (this "Agreement") is made as of July __,
2001, by and between Viva Gaming & Resorts Inc., a Florida corporation with
headquarters at 0000 X. Xxxxxxx Xxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxx 00000-0000
(the "Company"), Thomson Kernaghan & Co. Ltd. ("TK"), R. A. Xxxxx XxXxxxxx.
("XxXxxxxx") and Xxxx Xxxxxxx ("Xxxxxxx").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Conversion of Existing Debt into Equity.
1.1 Cancellation of Existing Debt. Subject to the terms and
conditions of this Agreement, upon closing of this Agreement, as consideration
for the issuance of securities in Section 1.2 hereof, the $1,000,000 owing by
the Company to TK, as evidenced by that certain Promissory Note dated August 22,
2000 payable to the order of TK, and the Collateral Security (as defined
therein) pledged by TK thereunder (the "Indebtedness"), shall be canceled.
1.2 Issuance of Securities. Subject to the terms and
conditions of this Agreement, upon closing of this Agreement, as consideration
for the cancellation of the Indebtedness, the Company agrees to (i) issue at
Closing (as defined below) from its authorized but unissued capital stock and to
give to McDonald 2,500,000 shares of the Company's common stock, $.001 par value
per share (the "Common Stock"); and (ii) issue at closing from its authorized
but unissued capital stock and to give to Xxxxxxx (Xxxxxxx together with
McDonald, the "Investors"), 2,500,000 shares (such shares, together with the
2,500,000 shares issued to McDonald, the "Shares") of the Common Stock.
1.3 Closing. (a) The cancellation of the Indebtedness and the
issuance of the Shares of Common Stock (the "Closing") shall take place as soon
as reasonably practical after the satisfaction of the conditions set forth in
Sections 4 and 5 hereof, at the offices of Xxxxx Xxxxxx Xxxxxx & Xxxxxxxx, 000
Xxxxx Xxxxxxx Xxxxx, Xxxxx X, Xxx Xxxxx, Xxxxxx 00000, or at such other time and
place as shall be mutually agreed upon between the Investor and the Company (the
"Closing Date").
(b) At the Closing, the Company shall deliver to
the Investors a certificate for the Shares to be issued to the Investors in
definitive form and duly registered in the name of each of the Investors.
2. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Investors (it is expressly acknowledged
and agreed that Xxxx X. Xxxxxx and Xxxxx X. XxXxxxxx, the Company's newly
appointed President and Chief Executive Officer and Secretary and Chief
Financial Officer, respectively, did not participate in the drafting of this
Agreement,
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related exhibits and schedules and shall have no accountability whatsoever in
connection with the information contained in this Agreement, exhibits or
schedules) that:
2.1 Organization; Good Standing; Qualification and Corporate
Power.
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida and
has all requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its business or
properties. True and correct copies of the Company's Articles of Incorporation,
as amended, and Bylaws have been provided to the Investor.
(b) The Company has all requisite legal and
corporate power and authority to execute and deliver this Agreement, to issue
the Shares of Common Stock, to carry out and perform its obligations under the
terms of this Agreement and to consummate the transactions contemplated hereby.
All necessary corporate action has been taken by the Company with respect to the
execution, delivery and performance by the Company of this Agreement and the
consummation of the transactions contemplated hereby.
2.2 Capitalization and Voting Rights. The authorized capital
of the Company consists of, and will consist at the Closing of:
(a) Common Stock. 100,000,000 shares of Common
Stock, of which 8,942,700 shares are issued and outstanding as of the date
hereof.
(b) Preferred Stock. 10,000,000 shares of
preferred stock, par value $0.10 (the "Preferred Stock"), no shares of which are
issued and outstanding as of the date hereof.
(c) Except as set forth on Schedule 2.2, there are
no outstanding options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from the Company of any
shares of its capital stock. The Company is not a party or subject to any
agreement or understanding of any kind, and, to the Company's knowledge, there
is no agreement or understanding of any kind between any individual,
corporation, partnership, limited liability company, association, trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof (a "Person"), which affects or relates to the
acquisition, disposition or voting or giving of written consents with respect to
any security of the Company.
2.3 Subsidiaries; Interests of the Company. The Company does
not currently own or control, directly or indirectly, any equity interest in any
other Person, except as listed on Schedule 2.3.
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2.4 No Breach. The execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions contemplated
herein will not (with the passage of time or otherwise):
(a) violate any provision of the Articles of
Incorporation or By-Laws of the Company;
(b) violate, conflict with or result in the
breach of any of the terms of, result in a material modification of, otherwise
give any other contracting party the right to terminate, or constitute (or with
notice or lapse of time or both constitute) a default under, any contract or
other agreements to which the Company is a party or by or to which the Company
or any of its assets or properties may be bound or subject; or
(c) violate any law, rule or regulation to which
the Company is a party.
2.5 No Undisclosed Liabilities. There are no liabilities or
obligations of the Company of any kind whatsoever, liquidated or unliquidated,
whether accrued, direct, contingent, absolute, determined, determinable or
otherwise, and there is no existing condition, situation or set of circumstances
which could reasonably be expected to result in such a liability, other than (a)
liabilities included as part of the Company's unaudited balance sheet dated
Xxxxx 00, 0000, (x) liabilities incurred subsequent to March 31, 2001 in the
ordinary course of business consistent with past practice, which in the
aggregate are not material to the Company and (c) liabilities disclosed on
Schedule 2.5.
2.6 Authorization. This Agreement has been duly authorized,
executed and delivered by the Company and constitute the legal, valid and
binding obligations of the Company, enforceable in accordance with its terms,
subject to (i) applicable bankruptcy, insolvency, reorganization and moratorium
laws, (ii) other laws of general application affecting the enforcement of
creditors' rights generally and general principles of equity, (iii) the
discretion of the court before which any proceeding therefor may be brought and
(iv) rights to indemnity that may be limited by federal or state securities laws
or by public policy.
2.7 Valid Issuance of Stock.
(a) The outstanding shares of Common Stock are
duly and validly authorized and issued, fully paid, and non-assessable. The
issuance, sale and delivery of the Shares being purchased by the Investor
hereunder have been duly authorized by all requisite corporate action on the
part of the Company and paid for and delivered in accordance with the terms
hereof for the consideration expressed herein, will be duly and validly issued,
fully paid and non-assessable and free of any liens or encumbrances, except for
restrictions under applicable federal and state securities laws.
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(b) Except as set forth in this Agreement, and
on Schedule 2.7, no other shares of Common Stock have been reserved for issuance
by the Company.
2.8 Financial Statements. The Company has delivered to the
Investor (i) its audited income statement and balance sheet as of December 31,
2000, and (ii) its unaudited income statement and balance sheet as of March 31,
2001 (together, the "Financial Statements"). The Financial Statements (A) have
been prepared from the books and records of the Company, (B) present fairly the
financial condition of the Company at the balance sheet dates and its results of
operations, stockholders' equity and cash flows as at the dates and for the
periods therein specified and (C) have been prepared in accordance with
generally accepted accounting principles ("GAAP"), except, with respect to the
March 31, 2001 financial statements, for the absence of accompanying notes
thereto, applied on a consistent basis (except as required by changes
promulgated by accounting authorities) throughout the periods indicated. The
Financial Statements fairly present the financial condition and results of
operations of the Company as of the date and during the periods indicated
therein, subject to normal year end audit adjustments which are neither
individually nor in the aggregate expected to be material. At March 31, 2001, to
the best of the Company's knowledge, the Company had no material liability
(matured or unmatured, fixed or contingent) which was not provided for on the
balance sheet of the Company as of such date, and all reserves established by
the Company and set forth on such balance sheet were adequate for the purposes
for which they were established. There were no loss contingencies (as such term
is used in Statement of Financial Accounting Standards No. 5 issued by the
Financial Accounting Standards Board in March 1975) which were not adequately
provided for in the March 31, 2001 balance sheet.
2.9 Changes. Except as disclosed on Schedule 2.9, since March 31, 2001, there
has not been:
(a) any change in the assets, liabilities,
condition (financial or otherwise), affairs, earnings, business, operations or
other prospects of the Company from that reflected in the balance sheet as at
March 31, 2001, referred to in Section 2.8 above, except for changes in the
ordinary course of business, which, individually or in the aggregate have not
been materially adverse;
(b) any borrowings or other material change in
the liabilities or obligations of the Company, contingent or otherwise, whether
due or to become due, whether by way of guaranty, endorsement, indemnity,
warranty, or otherwise, except current liabilities incurred in the ordinary
course of business, none of which materially and adversely affects the business,
prospects, condition, affairs, properties, or assets of the Company;
(c) any damage, destruction or loss, whether or
not covered by insurance, materially and adversely affecting the properties,
operation, or business of the Company;
(d) any waiver or compromise by the Company of a
valuable right held by it or of a material debt owed to it;
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(e) any loans made by the Company to its
employees, officers, or directors other than advances of expenses made in the
ordinary course of business;
(f) any declaration or payment of any dividend
or other distribution of the assets of the Company to stockholders or any direct
or indirect redemption, purchase, or acquisition of any securities of the
Company other than repurchases of Common Stock from terminated employees,
consultants, officers, and directors pursuant to written agreements;
(g) any labor organization activity or organized
labor trouble;
(h) any other event or condition of any
character which has materially and adversely affected the business, operations,
properties, or assets of the Company;
(i) any increase in compensation of any of its
existing officers, or the rate of pay of its employees as a group, except as
part of regular compensation increases in the ordinary course of business, or
any material change of such officers' or employees' employment agreements;
(j) any resignation or termination of employment
of any officer, director or key employee of the Company and the Company has not
received any written notice of the impending resignation or termination of any
such officer, director or key employee;
(k) any material change in any material contract
or agreement by which the Company or any of its assets is bound or subject;
(l) any mortgage, pledge, transfer of a security
interest in, or lien, created by the Company with respect to any of its material
properties or assets, except for liens (i) incurred in the ordinary course of
business or (ii) for taxes not yet due or payable;
(m) any issuance of any capital stock, bonds or
other corporate securities by the Company or options, warrants or rights or
agreements or commitments to purchase or issue such securities or grant such
options, warrants or rights;
(n) any change in the accounting methods or
practices followed by the Company;
(o) any satisfaction or discharge of any lien,
claim, or encumbrance or payment of any obligation by the Company, except in the
ordinary course of business and that is not material to the business,
properties, prospects, or financial condition of the Company (as such business
is presently conducted and as it is presently proposed to be conducted); or
(p) any agreement to do or enter into any of the
foregoing.
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2.10 Registration Rights. The Company has not granted, except
as set forth on Schedule 2.10, or agreed to grant any registration rights,
including piggyback registration rights, to any person.
2.11 Litigation. The Company is not a party to any legal
proceeding, the outcome of which could (i) adversely affect consummation of the
transactions contemplated herein or (ii) result in any representation or
warranty of the Company contained herein becoming inaccurate.
2.12 Title to Property and Assets. The Company has good and
marketable title to its property and assets free and clear of all mortgages,
liens, loans, and encumbrances, except such encumbrances and liens which arise
in the ordinary course of business and do not materially impair the Company's
ownership or use of such property or assets. With respect to the property and
assets it leases, the Company is in compliance in all material respects with
such leases and holds a valid leasehold interest free of any liens, claims, or
encumbrances. All of the Company's properties and assets are, in all material
respects, in good operating and usable condition, subject to normal wear and
tear.
2.13 Agreements; Action.
(a) Except for agreements expressly contemplated
by this Agreement, there are no agreements, understandings, or proposed
transactions between the Company and any of its officers, directors, affiliates,
or any affiliate thereof.
(b) Except as contemplated by this Agreement or
as listed on Schedule 2.13 hereto, there are no agreements, understandings,
instruments or contracts to which the Company is a party or by which it is
bound, which (i) involve obligations (contingent or otherwise) of, or payments
to, the Company in excess of $100,000, (ii) are material to the conduct and
operations of the Company's business or properties, including, without
limitation, the license of any patent, copyright, trade secret, or other
proprietary rights to or from the Company or provisions restricting or affecting
the development, manufacture, or distribution of the Company's products or
services, or (iii) involve any employment or consulting arrangement, whether
written or oral, between the Company and any Person.
(c) Except as listed on Schedule 2.13 hereto,
the Company has not (i) declared or paid any dividends, or authorized or made
any distribution upon or with respect to any series or classes of its capital
stock, (ii) incurred any indebtedness for money borrowed or any other
liabilities individually in excess of $100,000 or, in the case of indebtedness
and/or liabilities individually less than $100,000, in excess of $200,000 in the
aggregate, or (iii) sold, exchanged, or otherwise disposed of any of its assets
or rights, other than the sale of its inventory in the ordinary course of
business.
(d) For the purposes of subsections (b) and (c)
above, all indebtedness, liabilities, agreements, understandings, instruments,
contracts, and proposed transactions involving
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the same Person (including Persons the Company has reason to believe are
affiliated therewith) shall be aggregated for the purpose of meeting the
individual minimum dollar amounts of such subsections.
(e) The Company is not a party to any indenture,
loan or credit agreement or any lease or other agreement or instrument or
subject to any charter or corporate restriction which has a material adverse
effect on the Company, or limits or restricts the ability of the Company to
carry out its obligations under this Agreement. The Company is not in default in
any respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument
material to its business to which it is a party.
(f) The contracts, agreements and instruments
listed on Schedule 2.13 are valid, binding and in full force and effect in all
material respects, and are valid, binding and enforceable by the Company in
accordance with their respective terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief or other equitable remedies.
The Company is not in material default under any material contract, and, to the
Company's knowledge, no other party to any such contract is in material default.
2.14 Compliance with Laws; No Defaults. The Company is not, in
violation of any provisions of any law, regulation, judgment, injunction, order
or decree binding upon or applicable to the Company, except for violations that
have not had and would not reasonably be expected to have, individually or in
the aggregate, a material adverse effect upon the Company.
2.15 Insurance. The Company has in full force and effect fire,
casualty, and liability insurance policies, in such amounts and with such
coverage as is reasonable and prudent in view of the business and operations of
the Company.
2.16 Tax Matters. The Company (i) has filed all tax returns
that are required to have been filed by it with all appropriate governmental
agencies (and all such returns are true and correct and fairly reflect its
operations for tax purposes); and (ii) has paid all taxes owed or assessments by
it as indicated on such tax returns (other than taxes the validity of which are
being contested in good faith by appropriate proceedings). The assessment of any
additional taxes for periods for which returns have been filed is not expected
to exceed the recorded liability therefor and, to the Company's knowledge, there
are no material unresolved questions or claims concerning the Company's tax
liability. Except as disclosed on Schedule 2.16, the Company's knowledge, there
is no pending dispute with any taxing authority relating to any of said returns
which, if determined adversely to the Company, would result in the assertion by
any taxing authority of any valid deficiency in a material amount for taxes. The
Company has withheld or collected from each payment made to each of its
employees the amount of all taxes, including, but not limited to, income taxes,
Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes
required to be withheld or collected therefrom, and has paid the same to the
proper tax receiving officers or authorized depositaries, except for failures to
pay the same which, either individually or in the aggregate, have not had, or
may be reasonably expected to result in, a material adverse effect.
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2.17 Governmental Regulation. The Company is not subject to
regulation under the Investment Company Act of 1940, or to any United States of
America, state or local statute or regulation limiting its or their ability to
incur Debt.
2.18 Securities Act.
(a) Assuming the accuracy of the representations
of the Investor set forth in Sections 3.4 and 3.6 hereof, no registration of any
security under the Securities Act of 1933, as amended (the "Securities Act") or
the securities laws of any state, is required in connection with the issuance,
execution and delivery of the Shares the manner contemplated hereunder.
(b) All outstanding capital stock of the Company
has been offered, issued and sold in material compliance with the requirements
of all Federal and state laws applicable to the offer, issuance and sale of
securities.
2.19 Related Party Transactions. Except as set forth on
Schedule 2.19, no employee, officer, stockholder or director of the Company or
member of his or her immediate family is indebted to the Company, nor is the
Company indebted (or committed to make loans or extend or guarantee credit) to
any of them, other than (i) for payment of salary for services rendered, (ii)
reimbursement for reasonable expenses incurred on behalf of the Company, and
(iii) for other standard employee benefits made generally available to all
employees (not including stock option agreements outstanding under any stock
option plan approved by the Board of Directors of the Company). To the Company's
knowledge, no employee or officer of the Company has any direct or indirect
ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation that competes with the Company, except that employees, officers or
directors of the Company and members of their immediate families may own stock
in publicly traded companies that may compete with the Company. Except as set
forth in Schedule 2.19, to the best of the Company's knowledge, no officer or
stockholder or any member of their immediate families is, directly or
indirectly, interested in any material contract with the Company (other than
such contracts as relate to any such person's ownership of capital stock or
other securities of the Company and other than employment agreements).
2.20 SEC Documents. The Company has filed all required
reports, schedules, forms, statements and other documents with the SEC (the "SEC
Documents"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Securities Exchanges Act of 1934, as
amended (the "Exchange Act"), as the case may be, and the rules and regulations
of the SEC promulgated thereunder applicable to such SEC Documents and, except
to the extent that information contained in any SEC Document has been revised or
superseded by a later SEC Document, none of the SEC Documents contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except as set forth in the SEC Documents, neither the Company nor
any of its subsidiaries has any liabilities or obligations of any
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nature (whether accrued, absolute, contingent or otherwise) that, individually
or in the aggregate, would reasonably be expected to have a material adverse
effect on the Company.
3. Representations and Warranties of McDonald. McDonald hereby
represents and warrants to the Company that:
3.1 Organization and Existence; Good Standing. McDonald is a
corporation duly organized and validly existing under the laws of its
jurisdiction of organization.
3.2 Authorization. This Agreement has been duly authorized,
executed and delivered by McDonald and constitutes the legal, valid and binding
obligations of McDonald, enforceable in accordance with their respective terms,
subject to (i) applicable bankruptcy, insolvency, reorganization and moratorium
laws, (ii) other laws of general application affecting the enforcement of
creditors' rights generally and general principles of equity (iii) the
discretion of any court before which any proceeding therefor be brought and (iv)
rights to indemnity that may be limited by federal or state securities laws or
by public policy. All action required for the lawful execution and delivery of
this Agreement has been taken.
3.3 Purchase Entirely for Own Account. The Shares to be
received by McDonald pursuant to the terms hereof will be acquired for
investment for McDonald's own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof. McDonald has no present
intention of selling, granting any participation in, or otherwise distributing
the Shares acquired by it. McDonald has no contract, undertaking, agreement or
arrangement with any Person to sell or transfer, or grant any participation to
such Person or to any third Person, with respect to any of the Shares to be
acquired by McDonald
3.4 Access to Information, Experience, Etc.
(a) McDonald has been furnished access to the
business records of the Company and such additional information and documents as
McDonald has requested and has been afforded an opportunity to ask questions of,
and receive answers from, representatives of the Company concerning the terms
and conditions of this Agreement, the purchase of the Shares, the business,
operations, market potential, capitalization, financial condition and prospects
of the Company, and all other matters deemed relevant to McDonald.
(b) McDonald acknowledges that it has had an
opportunity to evaluate all information regarding the Company as it has deemed
necessary or desirable in connection with the transactions contemplated by this
Agreement, has independently evaluated the transactions contemplated by this
Agreement and has reached its own decision to enter into this Agreement.
3.5 Restricted Securities. McDonald understands that the
Shares to be acquired by it have not been registered under the Securities Act or
the laws of any state and may not be sold or transferred, or otherwise disposed
of, without registration under the Securities Act and applicable
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state securities laws or an exemption therefrom. McDonald will sell or transfer,
or otherwise dispose of, the Shares to be acquired by it only in a manner
consistent with the representations, warranties and agreements set forth herein,
and any applicable federal and state securities laws.
3.6 Legends. It is understood that the certificates
evidencing the shares of Common Stock my bear one or all of the following
legends:
(a) THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH
RESPECT TO THE SECURITIES EVIDENCED BY THIS CERTIFICATE, FILED AND MADE
EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND SUCH APPLICABLE
STATE SECURITIES LAWS, OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER
SUCH ACT AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
(b) Any legend required by the Blue Sky laws of
any state.
The legend referred to in clause (a) above shall be
removed by the Company from any certificate at such time as the holder of the
securities represented by the certificate delivers an opinion of counsel
reasonably satisfactory to the Company to the effect that such legend is not
required in order to establish compliance with any provisions of the Securities
Act, or at such time as the holder of such shares satisfies the requirements of
Rule 144(k) or such other substantially similar rule promulgated under the
Securities Act then in effect under the Securities Act; provided, that the
Company has received from the holder a written representation that (i) such
holder is not an affiliate of the Company and has not been an affiliate during
the preceding three (3) months, (ii) such holder has beneficially owned the
shares represented by the certificate for a period of at least two (2) years (or
the period of time then required by Rule 144(k) or such other substantially
similar rule promulgated under the Securities Act then in effect), and (iii)
such holder otherwise satisfies the requirements of Rule 144(k) as then in
effect with respect to such shares.
3.7 No Violation. Neither the execution and delivery of this
Agreement nor the consummation by McDonald of the transaction contemplated
hereby will (i) constitute a violation by Investor of any statute or law or any
rule, regulation or order of any governmental authority or (ii) constitute a
violation of, or a default under, or conflict with, any term or provision of the
Certificate of Incorporation or the Bylaws of McDonald or (iii) constitute a
violation of, or a default under, or conflict with any contract, commitment,
indenture or other agreement, or any other private restrictions of any kind, to
which McDonald is a party or by which it is bound.
4. Representations and Warranties of Xxxxxxx. Xxxxxxx hereby
represents and warrants to the Company that:
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4.1 Authorization. This Agreement has been duly authorized,
executed and delivered by Xxxxxxx and constitutes the legal, valid and binding
obligations of McDonald, enforceable in accordance with their respective terms,
subject to (i) applicable bankruptcy, insolvency, reorganization and moratorium
laws, (ii) other laws of general application affecting the enforcement of
creditors' rights generally and general principles of equity (iii) the
discretion of any court before which any proceeding therefor be brought and (iv)
rights to indemnity that may be limited by federal or state securities laws or
by public policy. All action required for the lawful execution and delivery of
this Agreement has been taken.
4.2 Purchase Entirely for Own Account. [Intentionally Omitted]
4.3 Access to Information, Experience, Etc.
(a) Xxxxxxx has been furnished access to the
business records of the Company and such additional information and documents as
Xxxxxxx has requested and has been afforded an opportunity to ask questions of,
and receive answers from, representatives of the Company concerning the terms
and conditions of this Agreement, the purchase of the Shares, the business,
operations, market potential, capitalization, financial condition and prospects
of the Company, and all other matters deemed relevant to Xxxxxxx.
(b) Xxxxxxx acknowledges that he has had an
opportunity to evaluate all information regarding the Company as he has deemed
necessary or desirable in connection with the transactions contemplated by this
Agreement, has independently evaluated the transactions contemplated by this
Agreement and has reached his own decision to enter into this Agreement.
4.4 Restricted Securities. Xxxxxxx understands that the Shares
to be acquired by him have not been registered under the Securities Act or the
laws of any state and may not be sold or transferred, or otherwise disposed of,
without registration under the Securities Act and applicable state securities
laws or an exemption therefrom. Xxxxxxx will sell or transfer, or otherwise
dispose of, the Shares to be acquired by him only in a manner consistent with
the representations and warranties set forth herein, and any applicable federal
and state securities laws.
4.5 Legends. It is understood that the certificates
evidencing the shares of Common Stock may bear one or all of the following
legends:
(a) THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH
RESPECT TO THE SECURITIES EVIDENCED BY THIS CERTIFICATE, FILED AND MADE
EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND SUCH APPLICABLE
STATE SECURITIES LAWS, OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE
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COMPANY TO THE EFFECT THAT REGISTRATION UNDER SUCH ACT AND SUCH APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED.
(b) Any legend required by the Blue Sky laws of
any state.
The legend referred to in clause (a) above shall be
removed by the Company from any certificate at such time as the holder of the
securities represented by the certificate delivers an opinion of counsel
reasonably satisfactory to the Company to the effect that such legend is not
required in order to establish compliance with any provisions of the Securities
Act, or at such time as the holder of such shares satisfies the requirements of
Rule 144(k) or such other substantially similar rule promulgated under the
Securities Act then in effect under the Securities Act; provided, that the
Company has received from the holder a written representation that (i) such
holder is not an affiliate of the Company and has not been an affiliate during
the preceding three (3) months, (ii) such holder has beneficially owned the
shares represented by the certificate for a period of at least two (2) years (or
the period of time then required by Rule 144(k) or such other substantially
similar rule promulgated under the Securities Act then in effect), and (iii)
such holder otherwise satisfies the requirements of Rule 144(k) as then in
effect with respect to such shares.
4.6 No Violation. Neither the execution and delivery of this
Agreement nor the consummation by Xxxxxxx of the transaction contemplated hereby
will (i) constitute a violation by Investor of any statute or law or any rule,
regulation or order of any governmental authority or (ii) constitute a violation
of, or a default under, or conflict with any contract, commitment, indenture or
other agreement, or any other private restrictions of any kind, to which Xxxxxxx
is a party or by which it is bound.
5. Conditions of the Investor's Obligations at Closing. The obligations
of the Investors under Sections 1.1 and 1.2 of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor unless such Investor
has consented in writing thereto:
5.1 Representations of this Agreement. The representations and
warranties of the Company contained in Section 2 shall be true and correct in
all material respects on and as of the date of the Closing with the same effect
as though such representations and warranties had been made on and as of the
date of the Closing.
5.2 Compliance Certificate. The Chairman of the Board,
Xxxxxx Xxx, shall deliver to the Investors at Closing a certificate certifying
to the matters set forth in Section 5.1.
5.3 Share Certificates. The Investors shall have r
eceived a certificate or certificates representing the Shares to be issued
hereby, with all such certificates registered in the name of the Investor.
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5.4 Other Documents. The Investors shall have received all
documents they may reasonably request relating to the existence of the Company
and its authority to enter into and perform this Agreement, all in form and
substance reasonably satisfactory to the Investors.
5.5 Consents and Waivers. The Company shall have obtained any
and all consents and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement.
5.6 Delivery of Gaming Machines. The delivery of all
components of all Gaming Machines constituting the Assets (as such terms are
defined in that certain Revised and Restated Gaming Equipment Sale Agreement, by
and between Phoenix Leisure, Inc. and ABD Gaming Supply, dated as of the date
hereof (the "Gaming Equipment Agreement")) shall have been completed.
6 Conditions of the Company's Obligations at Closing. The obligations
of the Company under Sections 1.1 and 1.2 of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against the Company unless the Company
has consented to such waiver in writing:
6.1 Representations of this Agreement. The representations and
warranties of Investors contained in Sections 3 and 4 shall be true and correct
in all material respects on and as of the date of the Closing with the same
effect as though such representations and warranties had been made on and as of
the date of the Closing.
6.2 Evidence of Canceled Indebtedness. TK shall deliver
at the Closing evidence that the Indebtedness has been canceled pursuant to the
terms and conditions of this Agreement.
6.3 Delivery of Gaming Machines. The delivery of all
components of all Gaming Machines constituting the Assets (as such terms are
defined in the Gaming Equipment Agreement) shall have been completed.
7. Indemnity
7.1 Indemnification by the Company. Subject to the limits set
forth in this Article 7, the Company agrees to indemnify, defend and hold the
Investors and each of McDonald's directors and officers harmless from and
against any and all loss, liability, damage, costs and expenses (including
interest, penalties and attorneys' fees) (collectively, "Losses") that the
Investors or any of their affiliates may incur or become subject to arising out
of or due to any (i) inaccuracy of any representation or the breach of any
warranty or covenant of the Company contained in this Agreement (including,
without limitation, the Schedules, Annexes and Exhibits hereto and the
certificates delivered hereunder) or as provided herein, and (ii) any and all
Losses arising from any actions, suits, proceedings, claims, demands,
assessments, judgments incidental to the foregoing or the enforcement of such
indemnification. The Company will reimburse the Investors and each
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controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding.
7.2 Indemnification by the Investors. Subject to the limits
set forth in this Article 7, each Investor agrees to indemnify, defend and hold
the Company harmless from and against any and all Losses that the Company or its
affiliates may incur or become subject to arising out of or due to (i) any
inaccuracy of any representation or the breach of any warranty or covenant of
such Investor contained in this Agreement (including, without limitation, the
Schedules, Annexes and Exhibits hereto and thereto and the Certificates
delivered hereunder) or as provided herein and (ii) arising out of the conduct
of the business of the Company from and after the date hereof, except to the
extent any such Loss arises out of or is related to any matter for which such
Investor is entitled to be indemnified by Company hereunder. Such Investor will
reimburse the Company for any legal or other expenses reasonably incurred by him
in connection with investigating or defending any such loss, claim, liability,
action or proceeding.
7.3 Survival. The representations and warranties of the
Company set forth in Article 2 of this Agreement shall survive the Closing until
the first anniversary of the Closing Date. The representations and warranties of
each of the Investors set forth in Articles 3 and 4 of this Agreement shall
survive the Closing until the first anniversary of the Closing Date. The
covenants and agreements of the Company and each of the Investors shall survive
the Closing, and shall continue in full force and effect forever, except as
otherwise explicitly limited by their terms and as otherwise provided by
applicable law.
7.4 Limitations. No Indemnified Person hereunder shall be
entitled to seek indemnification from an Indemnifying Person until and unless
the aggregate of all claims for indemnification by the Indemnified Person
exceeds $50,000, in which event the Indemnified Person shall be entitled to
indemnity for all amounts in excess of $50,000. The indemnification obligations
of the Company pursuant to this Agreement shall be limited to an aggregate of
$500,000.
7.5 Third Party Claims. In order for a party (the "Indemnified
Party") to be entitled to any indemnification provided for under this Agreement
in respect of, arising out of, or involving a claim or demand or written notice
made by any third party against the Indemnified Party (a "Third Party Claim")
after the Closing Date, such Indemnified Party must notify the Indemnifying
Party (the "Indemnifying Party") in writing of the Third Party Claim within 30
business days after receipt by such Indemnified Party of written notice of the
Third Party Claim; provided that the failure of any Indemnified Party to give
timely notice shall not affect his right of indemnification hereunder except to
the extent the Indemnifying Party has actually been prejudiced or damaged
thereby. If a Third Party Claim is made against an Indemnified Party, the
Indemnifying Party shall be entitled, if it so chooses, to assume the defense
thereof with counsel selected by the Indemnifying Party (which counsel shall be
reasonably satisfactory to the Indemnified Party). If the Indemnifying Party
assumes the defense of a Third Party Claim, the Indemnified Party will cooperate
in all reasonable respects with the Indemnifying Party in connection with such
defense, and shall have the right to participate in such defense with counsel
selected by it. The fees and disbursements of such counsel,
-15-
however, shall be at the expense of the Indemnified Party; provided, however,
that, in the case of any Third Party Claim of which the Indemnifying Party has
not employed counsel to assume the defense, the fees and disbursements of such
counsel shall be at the expense of the Indemnifying Party.
7.6 Reduction for Insurance. The gross amount which an
Indemnifying Party is liable to, for, or on behalf of the Indemnified Party
pursuant to this Article 7 (the "Indemnifiable Loss") shall be reduced
(including, without limitation, retroactively) by any insurance proceeds
actually recovered by or on behalf of such Indemnified Party related to the
Indemnifiable Loss. If an Indemnified Party shall have received or shall have
had paid on its behalf an indemnity payment in respect of an Indemnifiable Loss
and shall subsequently receive directly or indirectly insurance proceeds in
respect of such Indemnifiable Loss, then such Indemnified Party shall pay to
such Indemnifying Party the net amount of such insurance proceeds or, if less,
the amount of such indemnity payment.
8. Miscellaneous.
8.1 Representation. The Company has been represented by Xxxxxx
Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP in connection with this transaction and
the documents executed in connection therewith. The Investors have not been
represented by Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP in connection with
this transaction and the documents executed in connection therewith and have
been advised to seek independent counsel.
8.2 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided that the Company may not
assign, delegate or otherwise transfer any of its rights or obligations under
this Agreement without the consent of the Investors. Except as provided under
Section 7, neither this Agreement nor any provision hereof is intended to confer
upon any Person other than the parties hereto any rights or remedies hereunder.
8.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Florida, without regard to principles
of conflicts of laws and rules of such state. The parties hereto agree to submit
to the jurisdiction of any Federal or state court located in the State of Nevada
for the purpose of resolving any action or claim arising out of the performance
of the provisions of this Agreement.
8.4 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.5 Further Assurances. Each party shall do and perform, or
cause to be done or performed, all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry
-16-
out the intent and accomplish the purposes of this Agreement, and the
consummation of the transactions contemplated hereby and thereby.
8.6 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.7 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given (i) upon personal delivery to the party to be notified, (ii)
four (4) days after deposit with the United States Post Office, by registered or
certified mail, postage prepaid, or (iii) one day after deposit with a reputable
overnight courier service and addressed to the party to be notified at the
address indicated for such party on the signature page hereto, or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties, with a copy for the Company to Xxxxxx Xxxxxxxx Frome
Xxxxxxxxxx & Xxxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000,
Attention: Xxxxxx Xxxxxxxx, Esq.
8.8 Entire Agreement; Amendments and Waivers. This Agreement,
including the schedules and exhibits hereto constitute the full and entire
understanding and agreement among the parties with regard to the subjects
hereof. Any term of this Agreement may be amended and the observance of any term
of this Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of the
Company and the Investor. Any amendment or waiver effected in accordance with
this Section 7.7 shall be binding upon the Investor and the Company.
8.9 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
8.10 Expenses. The Company shall be responsible for all costs
and expenses (except for any and all taxes incurred with the transaction shall
be the responsibility of each respective party) incurred in connection with the
transactions contemplated by this Agreement.
8.11 Transfer.
(a) For a period of one (1) year from the date
of this Agreement (except for a Permitted Transfer (as defined below)), Xxxxxxx
shall not transfer any Shares. Thereafter, Xxxxxxx (including permitted
transferees of Xxxxxxx) shall not transfer any Shares, or any interest therein,
whether by operation of law or otherwise, except in accordance with all of the
provisions of this Agreement. As used in this Agreement, the term "transfer"
shall include any sale, pledge, gift, assignment or other disposition of Shares.
-17-
(b) If Xxxxxxx desires to transfer any or all
of his Shares (the "Offered Stock"), Xxxxxxx shall first give written notice (a
"Transfer Notice") thereof to the Company, identifying the proposed transferee,
the number of shares sought to be transferred, the proposed purchase price (the
"Offered Price"), if applicable, the terms of the proposed transaction including
the proposed transaction date and a copy of any written offer or other writing
setting forth the terms and conditions of the proposed transaction. Such
Transfer Notice shall constitute an irrevocable offer by Xxxxxxx to sell all of
the Offered Stock to the Company at the Offered Price and upon the same terms
and conditions as Xxxxxxx is willing to sell the Offered Stock to the proposed
transferee. To the extent the consideration proposed to be paid by the proposed
transferee consists of property other than cash, the reasonable cash equivalent
of such property, and the manner of determining the same, shall be stated in
such Transfer Notice. Once given, a Transfer Notice may not be modified or
amended except with the written consent of the Company. Within the ten (10) day
period following the giving of the Transfer Notice (the "Offer Period"), the
Company may, by a majority vote of its disinterested directors, elect, by giving
written notice of such election to Xxxxxxx, to purchase all but not less than
all of the Offered Stock.
If the Company and the Shareholders do not
elect, by notice in writing given to Xxxxxxx within the Offer Period, to
purchase all (but not less than all) of the Offered Stock to which they are
entitled, then Xxxxxxx shall be free to dispose of all of the Offered Stock
within ninety (90) days of the end of the Offer Period to the original proposed
transferee, at a price not lower than the Offered Price, and upon the terms
stipulated in the Transfer Notice in all material respects. However, as a
condition to the effectiveness of such transfer, said transferee shall agree to
become a party to this Section 8.11 and shall confirm such fact by executing a
counterpart of this Agreement. If such Offered Stock is not so disposed of by
Xxxxxxx within such ninety (90) day period, Xxxxxxx shall continue to hold such
Shares subject to all of the terms and conditions of this Agreement and may not
sell the Shares without again complying with all of the provisions hereof.
(c) Except as otherwise expressly provided
herein, the restrictions on dispositions of Shares contained in this Section
8.11 shall not be construed to prohibit the following transfers of Shares
("Permitted Transfers"):
(i) transfers of Shares by Xxxxxxx to
Gillman's Family Group (as defined below) or by will or the laws of descent and
distribution to such Gillman's Family Group ("Family Group" means an
individual's spouse and lineal descendants, parents, grandparents and any family
limited partnership or trust or other fiduciary relationship solely for the
benefit of such individual and/or such individual's spouse, parents,
grandparents and/or lineal descendants);
(ii) transfers of Shares upon the death
of Xxxxxxx to his executors, administrators or legal successors, including
without limitation trustee(s);
Any and all Shares in the hands of any transferee pursuant to
this Section 8.11 (each a "Permitted Transferee") shall remain subject to this
Agreement.
-18-
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
VIVA GAMING & RESORTS, INC.
By:
Name:
Title:
Address: 0000 Xxxxxxx Xxxx
Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
THOMSON KERNAGHAN & CO. LTD.
By:
Name:
Title:
Address: ___________________________
R. A. XXXXX XxXXXXXX
Address: ___________________________
---------------------------------------
XXXX XXXXXXX
Address: ___________________________
TABLE OF CONTENTS
Page
1. Conversion of Existing Debt into Equity................................................................-2-
1.1 Cancellation of Existing Debt................................................................-2-
1.2 Issuance of Securities........................................................................-2-
1.3 Closing.......................................................................................-2-
2. Representations and Warranties of the Company..........................................................-2-
2.1 Organization; Good Standing; Qualification and Corporate Power................................-3-
2.2 Capitalization and Voting Rights..............................................................-3-
2.3 Subsidiaries; Interests of the Company........................................................-3-
2.4 No Breach.....................................................................................-4-
2.5 No Undisclosed Liabilities....................................................................-4-
2.6 Authorization.................................................................................-4-
2.7 Valid Issuance of Stock.......................................................................-4-
2.8 Financial Statements..........................................................................-5-
2.9 Changes.......................................................................................-5-
2.10 Registration Rights...........................................................................-7-
2.11 Litigation....................................................................................-7-
2.12 Title to Property and Assets..................................................................-7-
2.13 Agreements; Action............................................................................-7-
2.14 Compliance with Laws; No Defaults.............................................................-8-
2.15 Insurance.....................................................................................-8-
2.16 Tax Matters...................................................................................-8-
2.17 Governmental Regulation.......................................................................-9-
2.18 Securities Act................................................................................-9-
2.19 Related Party Transactions....................................................................-9-
2.20 SEC Documents................................................................................-9-
3. Representations and Warranties of McDonald............................................................-10-
3.1 Organization and Existence; Good Standing....................................................-10-
3.2 Authorization................................................................................-10-
3.3 Purchase Entirely for Own Account............................................................-10-
3.4 Access to Information, Experience, Etc.......................................................-10-
3.5 Restricted Securities........................................................................-10-
3.6 Legends......................................................................................-11-
3.7 No Violation.................................................................................-11-
4. Representations and Warranties of Xxxxxxx.............................................................-12-
4.1 Authorization................................................................................-12-
4.2 Purchase Entirely for Own Account............................................................-12-
4.3 Access to Information, Experience, Etc.......................................................-12-
4.4 Restricted Securities........................................................................-12-
4.5 Legends......................................................................................-12-
4.6 No Violation.................................................................................-13-
-i-
5. Conditions of the Investor's Obligations at Closing...................................................-13-
5.1 Representations of this Agreement............................................................-13-
5.2 Compliance Certificate.......................................................................-13-
5.3 Share Certificates...........................................................................-14-
5.4 Other Documents..............................................................................-14-
5.5 Consents and Waivers.........................................................................-14-
5.6 Delivery of Gaming Machines..................................................................-14-
6 Conditions of the Company's Obligations at Closing....................................................-14-
6.1 Representations of this Agreement............................................................-14-
6.2 Evidence of Canceled Indebtedness............................................................-14-
6.3 Delivery of Gaming Machines..................................................................-14-
7. Indemnity.............................................................................................-14-
7.1 Indemnification by the Company...............................................................-14-
7.2 Indemnification by the Investors.............................................................-15-
7.3 Survival.....................................................................................-15-
7.4 Limitations..................................................................................-15-
7.5 Third Party Claims...........................................................................-15-
7.6 Reduction for Insurance......................................................................-16-
8 Miscellaneous.........................................................................................-16-
8.1 Representation...............................................................................-16-
8.2 Successors and Assigns.......................................................................-16-
8.3 Governing Law................................................................................-16-
8.4 Counterparts.................................................................................-16-
8.5 Further Assurances...........................................................................-17-
8.6 Titles and Subtitles.........................................................................-17-
8.7 Notices......................................................................................-17-
8.8 Entire Agreement; Amendments and Waivers.....................................................-17-
8.9 Severability.................................................................................-17-
8.10 Expenses.....................................................................................-17-
8.11 Transfer.....................................................................................-17-
Schedules, Annexes and Exhibits
Schedule 2.2 Outstanding Warrants, Rights, Etc.
Schedule 2.3 Subsidiaries
Schedule 2.5 Liabilities
Schedule 2.7 Shares Reserved for Issuance
Schedule 2.9 Changes
Schedule 2.10 Registration Rights
Schedule 2.11 Governmental Consents
Schedule 2.14 Agreements
Schedule 2.17 Tax Matters
Schedule 2.20 Related Party Transactions
-ii-
