U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
AMENDMENT NO. 1
TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
ADVANCED GAMING TECHNOLOGY, INC.
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(Name of Small Business Issuer in Its Charter)
Wyoming 98-015-222-6
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2482-650 West Georgia Street, P.O. Box 11610
Vancouver, British Columbia V6B 4N9
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(Address of principal executive offices) (Zip Code)
(604) 689-8841
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(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
None
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.005 Par Value
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(Title of Class)
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Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
PART I*
Item 1. Description of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Description of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 3. Directors, Executive Officers and Significant Employees . . . . . . . . . . . . 15
Item 4. Remuneration of Directors and Officers . . . . . . . . . . . . . . . . . . . . . 16
Item 5. Security Ownership of Management and Certain Security Holders . . . . . . . . . 18
Item 6. Interest of Management and Others in Certain Transactions . . . . . . . . . . . 19
Item 7. Description of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity
and Other Shareholder's Matters . . . . . . . . . . . . . . . . . . . . . 20
Item 2. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Item 3. Changes in and Disagreements with Accountants . . . . . . . . . . . . . . . . . 21
Item 4. Recent Sales of Unregistered Securities . . . . . . . . . . . . . . . . . . . . 21
Item 5. Indemnification of Directors and Officers . . . . . . . . . . . . . . . . . . . 25
PART F/S
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
PART III
Item 1. Index to Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Item 2. Description of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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* The Company has elected to provide the disclosure required by Alternative
2 of Part I of Form 10-SB (Items 6-12 of Model B of Form 1-A).
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INFORMATION REQUIRED IN REGISTRATION
STATEMENT
PART I*
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Advanced Gaming Technology, Inc., a Wyoming corporation (the
"Company"), is engaged in the design, assembly, supply, marketing and servicing
of gaming products, the core of which is its MAX Electronic Bingo Systems. The
Company is also engaged in developing and establishing gaming and entertainment
facilities in China and the Philippines, as well as designing and developing a
wireless, hand-held bingo unit for use in the United Kingdom. In addition, the
Company owns, through one of its wholly-owned subsidiaries, 178 acres of
undeveloped property in Stone County, Missouri. The Company's Common Stock is
traded on the National Association of Securities Dealers, Inc.'s (the "NASD's")
OTC Bulletin Board under the symbol "AGTI."
The Company was incorporated pursuant to the laws of the state of
Wyoming on November 20, 1963, under the name "MacTay Investment Co." On June
19, 1987, the Company's changed its name to "Auto N Corporation." On April 22,
1991, the Company changed its name again to "Advanced Gaming Technology, Inc."
when it acquired all of the assets and certain liabilities of Selectro Vision
Ltd., a California corporation, in exchange for 1,359,000 shares of the
Company's common stock, $.005 par value per share (the "Common Stock").
The Company has seven wholly-owned subsidiaries: (i) Executive Video
Systems, Inc., a Maryland corporation ("Executive Video"), (ii) Palace
Entertainment Limited, a company organized under the laws of the British Virgin
Islands ("Palace Entertainment"), (iii) Branson Signature Resorts, Inc., a
Nevada corporation ("Branson"), (iv) River Oaks Holdings, Inc., a Missouri
corporation ("River Oaks"), (v) Prisms, Inc., a North Carolina corporation
("Prisms"), (vi) Pleasure World Ltd., a company organized under the laws of the
Bahamas ("Pleasure World") and (vii) A.G.T. Acceptance Corp., a Nevada
corporation ("A.G.T. Acceptance Corp.").
Executive Video owns certain proprietary software and technology
relating to the Max Bingo Systems, and prior to the merger with the Company,
operated five bingo locations (three of the five locations are currently
operated by the Company). See "Description of Business -- Recent Acquisitions."
Palace Entertainment was organized in August 1996 to be a joint venture
partner with various entities in China for the operation of entertainment
centers in China. None of the entertainment centers are presently in operation.
See "Description of Business -- Proposed Operations in China."
Branson and its wholly owned subsidiaries are resort and land
developers located in Branson, Missouri, which owned two separate real estate
properties: (i) a resort property with limited existing development on site and
(ii) 178 acres of undeveloped property in Stone County, Missouri. On November
17, 1995, the Company disposed of the resort property. The Company transferred
the 178 acres of undeveloped property to River Oaks and is currently attempting
to sell such property. See "Description of Business -- Real Estate Holdings."
Prisms, Inc. transferred certain patents to Prisms Bahamas Ltd., a
company organized under the laws of the Bahamas and a wholly-owned subsidiary
of Pleasure World ("Prisms Bahamas"), for the development of bingo and
other entertainment games which management of the Company believes favorably
complement the Company's MAX Electronic Bingo Systems. Prisms Inc. invented
seven games under the patents and Prisms Bahamas has trademarks in place for
such games. See "Description of Business -- Recent Acquisitions."
The principal executive offices of the Company are located at 2482-650
West Georgia Street, P.O. Box 11610, Vancouver, British Columbia, Canada, V6B
4N9. The Company also has a distribution center in Phoenix, Arizona, a
marketing office in Cleveland, Ohio, and an office in Branson, Missouri, where
its real estate holdings are located.
OPERATING LOSSES. The Company has incurred net losses of $5,629,961
and $8,983,277 for the fiscal years ended December 31, 1996 and December 31,
1995, respectively. Such operating losses reflect developmental and other
start-up activities. The Company expects to incur significant losses in the
near future. The Company's operations are subject to numerous risks associated
with establishing any new business, including unforeseen expenses, delays and
complications. There can be no assurance that the Company will achieve or
sustain profitable operations or that it will be able to remain in business.
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* The Company has elected to provide the disclosure required by Alternative
2 of Part I of Form 10-SB (Items 6-12 of Model B of Form 1-A).
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FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING. The Company
has generated minimal revenues from product distribution. Revenues are not yet
sufficient to support the Company's operating expenses and are not expected to
reach such levels during the next year. Since the Company's formation, it has
funded its operations and capital expenditures primarily through private
placements of debt and equity securities. See "Recent Sales of Unregistered
Securities." The Company expects that it
will be required to seek additional financing in the future. There can be no
assurance that such financing will be available at all or available on terms
acceptable to the Company.
GOVERNMENT REGULATION. The Company's operations are subject to state
and local gaming laws as well as various federal laws and regulations governing
business activities with Native American Tribes. The state and local laws in
the United States which govern the lease and use of gaming products are widely
disparate and continually changing due to legislative and administrative
actions and judicial interpretations. If any changes occur in gaming laws
through statutory enactment or amendment, judicial decision or administrative
action restricting the manufacture, distribution or use of some or all of the
Company's products, the Company's present and proposed business could be
adversely affected. The operation of gaming on Native American reservations is
subject to the Indian Gaming Regulatory Act ("IGRA"). Under IGRA certain types
of gaming activities are classified as Class I, Class II or Class III. The
Company's business will be impacted based upon how its products are ultimately
classified. See "Business -- Government Regulation" and "Business -- Native
American Bingo Operations."
RISK OF LOW-PRICED STOCKS. Rules 15g-1 through 15g-9 promulgated
under the Securities Exchange Act of 1934 (the "Exchange Act") impose sales
practice and disclosure requirements on certain brokers and dealers who engage
in certain transactions involving "a penny stock."
Currently, the Company's Common Stock is considered penny stock for
purposes of the Exchange Act. The additional sales practice and disclosure
requirements imposed on certain brokers and dealers could impede the sale of
the Company's Common Stock in the secondary market. In addition, the market
liquidity for the Company's securities may be severely adversely affected, with
concomitant adverse effects on the price of the Company's securities.
Under the penny stock regulations, a broker or dealer selling penny
stock to anyone other than an established customer or "accredited investor"
(generally, an individual with net worth in excess of $1,000,000 or annual
incomes exceeding $200,000, or $300,000 together with his or her spouse) must
make a special suitability determination for the purchaser and must receive the
purchaser's written consent to the transaction prior to sale, unless the broker
or dealer or the transaction is otherwise exempt. In addition, the penny stock
regulations require the broker or dealer to deliver, prior to any transaction
involving a penny stock, a disclosure schedule prepared by the Securities and
Exchange Commission (the "SEC") relating to the penny stock market, unless the
broker or dealer or the transaction is otherwise exempt. A broker or dealer is
also required to disclose commissions payable to the broker or dealer and the
registered representative and current quotations for the securities. In
addition, a broker or dealer is required to send monthly statements disclosing
recent price information with respect to the penny stock held in a customer's
account and information with respect to the limited market in penny stocks.
LACK OF TRADEMARK AND PATENT PROTECTION. The Company relies on a
combination of patent, trade secret, copyright and trademark law, nondisclosure
agreements and technical security measures to protect its products.
Notwithstanding these safeguards, it is possible for competitors of the Company
to obtain its trade secrets and to imitate its products. Furthermore, others
may independently develop products similar or superior to those developed or
planned by the Company. While the Company may obtain patents with respect to
certain of its products, the Company may not have sufficient resources to
defend such patents, such patents may not afford all necessary protection and
competitors may develop equivalent or superior products which may not infringe
such patents. See "Business -- Patents and Trademarks."
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PRODUCTS
The Company's MAX Electronic Bingo Systems products currently include
three different products:
MAX(PLUS) The MAX(PLUS) Bingo System is the first
proprietary electronic bingo system developed by the Company.
Approximately 440 MAX(PLUS) units are currently in use across the
United States.
MAX(PLUS) is designed to increase bingo revenue at bingo
halls, reduce administration costs and increase the excitement of play
and the opportunity for bingo players to win. MAX(PLUS) gives players
the opportunity to play electronically up to 300 bingo cards
simultaneously. The maximum physical number of cards that an average
bingo player can manually daub (cover) is approximately 18. The
electronically operated MAX(PLUS) system keeps track of each card and
gives the player the option to display on the screen those most likely
to reach bingo first (6 to 300 cards at any given time). As the bingo
numbers are called they can be entered manually or automatically. The
manual setting keeps the players focused and feeling part of the game
as if they were playing a paper-based system. The automatic setting
lets the players relax and concentrate on their paper daubing, if they
are playing paper as well, or eating, drinking or engaging in
conversation if they are not.
For the bingo hall operator, electronic bingo systems, such as
the MAX(PLUS) Bingo System, may increase the revenue generated on a
daily basis by allowing players to play many more cards at a time.
Concession stand sales may also increase because players can consume
greater amounts within the same bingo session. By generating greater
gross revenues, the hall operator may be able to increase the size of
the prizes awarded and thereby attract larger and more spendthrift
crowds. In addition, the MAX(PLUS) Bingo System lets the operator
track necessary financial and analysis information by providing a
fully integrated accounting package.
MAX(LITE) The MAX(LITE) Bingo System is the newest addition
to the Company's electronic bingo product line. It is a portable,
hand-held electronic bingo unit which stores up to 50 different games
and allows users to play up to 300 bingo cards per game. The unit
measures 12" x 9" and offers many of the advantages of the MAX(PLUS)
system in a lightweight wireless package, which allows players freedom
of movement in the bingo hall, thus increasing the players' enjoyment
and the hall operators' revenue. Approximately 400 MAX(LITE) units
are currently in use in the United States.
MAX(SPEED) is a pari-mutuel system which has five progressive
jackpots with five different patterns for each game. A percentage of
player purchases can be selected and allocated toward a jackpot, which
allows a jackpot to be offered on every game. MAX(SPEED) is a high
speed bingo game which can be played every 45/60 seconds.
SONIC BINGO. In addition to the products described above, the Company
entered into a Letter of Intent with Sega Gaming Technology, Inc. ("Sega"),
dated May 13, 1996 (the "Sega Letter of Intent"), to manufacture and test Sonic
Bingo, a new fast-action electronic speed bingo game, which uses the Company's
MAX(SPEED) software. The Sega Letter of Intent provides for the creation of a
new corporation, to be owned sixty percent (60%) by Sega and forty percent
(40%) by the Company.
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Sonic Bingo is a high-stakes electronic speed bingo unit capable of
playing multiple cards simultaneously in sixty (60) second intervals. The
Sonic Bingo units will be available in various styles capable of accommodating
from 4 to 250 stations. The system is capable of being networked throughout
gaming halls, cruise ships, as well as an entire city or even a country
(depending upon regulatory approvals), which facilitates games involving major
progressive jackpots.
The Sonic Bingo prototype was introduced to the market at the World
Gaming Show held in Las Vegas held from October 1 to October 4, 1996, and is
being developed for introduction in 1997.
SALES AND MARKETING
The MAX Electronic Bingo Systems are leased to bingo halls by a
network of sales representatives and distributors, some of which are employees
of the Company and some of which are independent contractors. The cost to the
hall operator is based on a daily lease rate per unit, which reduces the
initial capital outlay of the operator. The Company's MAX Electronic Bingo
Systems complement paper-based bingo halls. The systems are modular and,
consequently, as their popularity builds, additional units can be added to the
systems. The Company is actively working to expand its distribution network
across North America and intends to accelerate its expansion schedule as its
network of distributors increases.
TARGET MARKETS. Native American, charity, military, casino and cruise
line bingo operations are considered by the Company to be prospective markets
for the Company's electronic bingo systems. Currently, the Company is focusing
its marketing efforts on the Native American and charity markets.
Initially, the Company has targeted the United States and Canadian
markets due to their size, proximity and familiarity. Other world markets with
significant bingo operations are the United Kingdom, Australia, New Zealand and
Europe. A large potential for electronic bingo also exists in Asia and Central
and South America. The Company may pursue these and other international
markets in the future.
MARKET SEGMENTS. The key segments of the bingo market are as follows:
HIGH STAKES NATIVE AMERICAN BINGO. There are presently over
200 bingo operations located on Native American reservations in the
United States and Canada. The largest bingo games in the United States
are believed to be run on Native American reservations. The bingo
halls located on these reservations typically seat between 300 and
2,000 players. Bingo games are conducted three to seven days per
week, playing up to 28 bingo sessions per week. The Company currently
has approximately 165 MAX(PLUS) units and approximately 250 MAX(LITE)
units in use on Native American reservations.
CHARITY BINGO. Charity bingo sessions are conducted on a
regular basis by parochial, private and public schools, churches,
fraternal orders, sororities, little leagues, symphony orchestras,
cultural and civic organizations, auxiliaries, various clubs,
synagogues, day care centers, retirement associations and a host of
other not-for-profit organizations across the United States and
Canada. Some of these bingo operations, because of their small size
or infrequency of operation, are not candidates for permanent
electronic installations, although portable electronic systems may be
provided to certain operations on a predetermined date and removed
after completion of the session.
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In many states, it is legal for a number of charities to
associate with each other for the purpose of operating bingo halls.
In North America, it is estimated that the majority of charity bingo
is conducted in this manner. Under this concept, the association
leases a suitable hall, plays bingo seven days per week, with a
specific charity accepting responsibility for operations each day of
the week. In the United States, this type of operation is known as a
"bingo barn." The result is a bingo operation that is much more
efficient than isolated charity games. All of these charity bingo
operations are strong candidates for the electronic systems.
The Company currently has approximately 275 MAX(PLUS) units and
approximately 150 MAX(LITE) units in use by charitable organizations.
REAL ESTATE HOLDINGS
On June 22, 1995, pursuant to an Agreement and Plan of Reorganization
by and among the Company, Branson and certain shareholders of Branson, dated
June 1, 1995 (the "Exchange Agreement"), the Company acquired all the capital
stock of Branson and its wholly-owned subsidiaries in exchange for 5,999,820
shares of the Company's Common Stock. Branson and its subsidiaries are resort
and land developers located in Branson, Missouri, which owned two separate real
estate properties: (i) a resort property with limited existing development on
site and (ii) 178 acres of undeveloped property in Stone County, Missouri. On
November 17, 1995, the Company disposed of the resort property by forfeiture to
the mortgage holder. The Company is currently attempting to capitalize on the
178 acres of undeveloped property and has no present plans for the improvement
or development of such property.
The undeveloped property has been pledged to secure the repayment of
(i) promissory notes in an aggregate principal amount of $1,339,792 bearing
interest at nine percent (9%) per annum and due in July 2002, (ii) a promissory
note in the principal amount of $60,812 bearing interest at nine percent (9%)
per annum and due on demand (iii) a promissory note in the principal amount of
$500,000 bearing interest at 3% above the Chase Manhattan prime lending rate
and due in 2002 and (iv) convertible debentures in the aggregate principal
amount of $745,000 bearing interest at two percent (2%) per month, compounded
monthly, which are convertible into Common Stock at $.40 per share of Common
Stock until December 21, 1997.
RECENT ACQUISITIONS
PRISMS, INC. The Company entered into a Share Purchase Agreement, dated
September 26, 1996 (the "Prisms Agreement"), among (i) the Company, (ii) Prisms
and (iii) the shareholders of Prisms, to acquire all the issued and outstanding
shares of Prisms. The purchase price for the acquisition was $600,000, payable
in 300,000 shares of the Company's Common Stock, with such shares having a
deemed value of $2.00 per share (the "Acquisition Shares"). Prisms' primary
assets are certain patents for the development of bingo and other entertainment
games which management of the Company believes favorably complement the
Company's MAX Electronic Bingo Systems. Prisms has invented seven (7) games
under the patents (the "Patented Products") and has trademarks in place for the
Patented Products.
Pursuant to the Prisms Agreement, in the event the Acquisition Shares
do not trade at a minimum average closing price of $2.00 per share as reported
by the NASD for the ten (10) day trading period preceding October 1, 1997, the
Company is required to issue additional shares of Common Stock so that the
total value of the Acquisition Shares issued is equal to $600,000. In
addition, upon the receipt by the
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Company of $10,000 of net sales for a Patented Product, the Company is required
to issue an additional 28,572 shares of Common Stock, at a deemed value of
$2.00 per share, for each such Patented Product (the "Product Shares"). In the
event the issued Product Shares do not trade at a minimum average closing price
of $2.00 per share as reported by the NASD for a ten (10) day trading period
commencing 12 months after the issuance of the Product Shares, the Company is
required to issue additional shares of Common Stock so that the total value of
the Product Shares is $57,144. The Company has not issued any Product Shares.
The former Prisms shareholders are also entitled to a royalty, payable
on a quarterly basis, equal to two percent (2%) of the net sale price of the
products after deduction of packaging and shipping costs, allowances made for
defective products, excise duties, value-added taxes or other similar taxes
charged or included in the price to the customer.
EXECUTIVE VIDEO SYSTEMS, INC. On February 9, 1995, pursuant to an
Agreement of Sale between the Company and the shareholders of Executive Video,
which owns certain proprietary software and technology relating to the MAX Bingo
Systems, the Company acquired all of the capital stock of Executive Video. The
aggregate purchase price of $715,650 consisted of cash and a Promissory Note in
the principal amount of $515,650 (the "Promissory Note"), plus a three percent
(3%) royalty on the gross revenues from the sale or lease of MAX(PLUS) until
February 9, 1998. All of the capital stock of Executive Video, as well as
250,000 shares of Common Stock of the Company, are held in escrow as security
for the Promissory Note. During 1995, a total of $10,342 was paid in royalties,
and the outstanding amount on the Promissory Note was $114,087 at October 12,
1996.
NATIVE AMERICAN BINGO OPERATIONS
The Company currently has approximately 165 MAX(PLUS) units and
approximately 250 MAX(LITE) units in use on Native American reservations in
California, Connecticut, Iowa, New Mexico, Oklahoma and Washington.
THE INDIAN GAMING REGULATORY ACT. IGRA classifies games that may be
played on Native American land into three categories. Class I gaming includes
traditional Native American social and ceremonial games and is regulated only
by the tribes. Class II gaming includes bingo, pull-tabs, lotto, punch boards,
instant bingo, certain card games played under limited circumstances and other
games similar to bingo if those games are played at the same location where
bingo is played. Class III gaming consists of all forms of gaming that are not
Class I or Class II, such as video casino games, slot machines, most table
games such as black jack, craps and keno. Generally, Class II gaming may be
conducted on Native American lands if the state in which the Native American
reservation is located permits such gaming for any purpose by any person.
Class III gaming, on the other hand, may only be conducted pursuant to a
compact reached between the Native American tribe and the state in which the
tribe is located. See "Business -- Government Regulation."
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CHARITY OPERATIONS
The Company currently has approximately 275 MAX(PLUS) units and
approximately 150 MAX(LITE) units in use by charitable organizations in
California and Maryland.
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PROPOSED OPERATIONS IN CHINA
GAOMING CITY, GUANGDONG, CHINA. In February 1995, the Province of
Guangdong, China granted a business license and certificate of approval for the
formation of a joint venture between the Company and Gaoming City Santian
Economic Development Company, a company affiliated with the City of Gaoming,
Guangdong, China ("Santian") to manufacture and sell in China a variety of
electronic gaming machines, including the Company's electronic bingo products..
The Company will own eighty percent (80%) of the joint venture and Santian will
own twenty percent (20%.) Pursuant to the joint venture agreement, the Company
will contribute the technology and, in conjunction with a major gaming
manufacturer, will design and build the manufacturing facilities and provide
$5,000,000 in start-up capital. The Company is currently searching for a major
gaming manufacturer to pursue this project and to provide the financing.
Santian will contribute a twenty (20) acre parcel of land for the manufacturing
plant, offices in Gaoming City and provide skilled labor, sales coordination
and will acquire the necessary development permits, zoning approvals and other
required permits and approvals. A finder's fee of 500,000 shares of the
Company's Common Stock was paid to a party in Hong Kong to facilitate securing
of the license and joint venture.
ENTERTAINMENT CENTERS. In August 1996, Palace Entertainment entered
into a joint venture agreement (the "Hainan Bosun Joint Venture Agreement") with
Hainan Bosun Tourism & Amusement Co. Ltd., a company organized under the laws of
China ("Hainan Bosun") in connection with the operation of a 23 seat Royal Ascot
Horse Racing Machine (the "Royal Ascot Unit") in Haikou, Hainan Island, China.
Under the Hainan Bosun Joint Venture Agreement, Palace Entertainment is to
provide the Royal Ascot Unit and is responsible for the operation, maintenance
and repair of the machine as well as the hiring of personnel to operate the
machine. Hainan Bosun is responsible for providing certain licenses and permits
required for the operation and certain other costs and expenses. Palace
Entertainment will receive sixty percent (60%) and Hainan Bosun will receive
forty percent (40%) of the revenues (or losses) derived from the Royal Ascot
Unit, after deduction of certain expenses. The Hainan Bosun Joint Venture
Agreement terminates in August 1999.
The Company purchased the Royal Ascot Unit from Sega pursuant to a
Purchase, Finance and Security Agreement, dated February 21, 1996 (the 'Sega
Purchase Agreement").
In January 1996, the Company entered into a joint venture agreement
(the "Hainan Xin Joint Venture Agreement") with Hainan Xin Dao Trading Limited
("Hainan Xin") in connection with the operation of 150 slot/entertainment
machines (the "Slot Machines") in Haikou, Hainan Island, China . Under the
Hainan Xin Joint Venture Agreement, the Company is responsible for providing
the Slot Machines and working capital as well as managing the Slot Machines.
Hainan Xin is responsible for providing certain licenses and permits required
for the operation. The Company will receive thirty two percent (32%) and
Hainan Xin will receive sixty-eight percent (68%) of the net profits.
Currently, neither of these centers is operational due to the periodic
nationwide clean up of various black market activities, prostitution and
gambling. This clean up campaign ended at or about the end of July 1996, and
entertainment centers, such as the centers described above, which are not
considered gambling and therefore are legal, are gradually beginning to re-open
and new licenses are
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currently being issued. The Company is cautiously optimistic that both of the
entertainment centers described above will be operational in the near future.
Y.K.L. CORPORATION. Due to delays caused by the nationwide clean up
in China, the Company entered into a Letter of Agreement, dated December 17,
1996 (the "Letter Agreement"), with Y.K.L. Corporation, a company organized
under the laws of the Philippines ("Y.K.L."), pursuant to which Y.K.L. has
agreed to lease, for a period of 120 days commencing on the date of
installation, 25 of the Company's Slot Machines, which were originally to be
used in the Hainan Xin Joint Venture, for use on Y.K.L.'s luxury ocean liners.
Under the Letter Agreement, the Company will receive seventy percent (70%) of
the gross revenues, after payment of winnings, generated by the slot machines.
PROPOSED OPERATIONS IN THE PHILIPPINES
PASAY. The Company is pursing approvals to import and operate slot
machines in the City of Pasay. The City of Pasay has drafted an ordinance
designating the Company as a licensed gaming operation and a request from the
Mayor of Pasay has gone to the President of the Philippine's office seeking
permission to enact this ordinance under the Charter of the City of Pasay. The
Company is cautiously optimistic that the President will approve the ordinance.
The initial license fee is $400,000.
POLITICAL, LEGAL, ECONOMIC AND OTHER UNCERTAINTIES IN DEVELOPING COUNTRIES
GENERAL
The Company's proposed operations in China are subject to political
instability and government regulations relating to the gaming industry and
foreign investors. Any changes in regulations or shifts in political
conditions are beyond the control of the Company and may materially adversely
affect its business. Corporations are affected in varying degrees by
government regulations with respect to restrictions on production of sales,
price controls, import/export controls, income tax, expropriation of property
and environmental legislation. Operations may also be materially affected by
political and economic instability, economic or other sanctions imposed by
other countries, terrorism, civil wars, guerrilla activities, military
repression, crime, extreme fluctuations in currency exchange rates and
inflation. The stability of China and the Philippines may make it more
difficult for the Company to attain any required project financing from lending
institutions or private funding sources because such lending institutions or
private funding sources may be unwilling to finance projects in these countries
due to the investment risk.
DOING BUSINESS IN CHINA
JOINT VENTURES IN CHINA. Joint ventures between Chinese and foreign
parties in China take two basic forms: equity joint ventures ("Equity JVs")
and cooperative joint ventures ("Cooperative JVs"). Such entities are governed
by the Law of the People's Republic of China on Joint Ventures Using Chinese
and Foreign Investment and the Law of the People's Republic of China on Chinese
and Foreign Cooperative Joint Venture Enterprises, respectively, and
implementing regulations related thereto.
An Equity JV is a distinct legal entity established and registered as
a limited liability corporation. The parties to an Equity JV have rights in the
returns of the joint venture in proportion to their respective joint venture
interests. The operations of Equity JVs are subject to a number of laws and
regulations governing such matters as registered capital, capital
distributions, accounting, taxation, foreign exchange, labor and liquidation.
Transfer of an interest in an Equity JV requires both government
- 9 -
<PAGE>
approval and agreement among the parties. In addition, the parties in an Equity
JV cannot recover their investment of registered capital until the expiration
of the term of the joint venture.
A Cooperative JV may be structured as a legal entity similar to a
partnership or as a limited liability company. Cooperative JVs allow more
flexibility in arrangements among the parties. For example, the rights of a
party to a Cooperative JV in its profits need not correspond to its relative
capital investment in the venture. Cooperative JVs are subject to many of the
same laws and regulations as Equity JVs governing such matters as registered
capital, accounting, taxation, foreign exchange, labor and liquidation.
Transfer of an interest in a Cooperative JV also requires both government
approval and agreement among the parties.
RESTRICTIONS ON FOREIGN CURRENCY EXCHANGE. In order to meet foreign
currency obligations and remit dividends to foreign owners, a joint venture
operating in China must convert a portion of its funds from the Chinese
currency, the Renminbi (the "RMB"), to other currencies. Because China controls
its foreign currency reserves, RMB earnings within China cannot be freely
converted into foreign currencies except with government permission and at
rates which are determined in part by supply and demand at authorized financial
institutions, such as the People's Bank of China. In the event of shortages of
foreign currencies, joint ventures may be unable to convert sufficient RMB into
foreign currencies to enable them to comply with their foreign currency payment
obligations or to make distributions to equity holders located outside of
China.
The laws and regulations of China provide that only accounting profits
after payment of taxes, provision for losses for prior years and contributions
to special funds (for enterprise expansion, employee welfare and bonuses and a
general reserve), are available for dividend distributions to the partners of a
joint venture.
VOLATILITY OF EXCHANGE RATES. There has been significant volatility
in the exchange rates of RMB to U.S. Dollars in the recent past and future
exchange rates may also experience significant volatility.
ENVIRONMENTAL REGULATION. The Company's proposed operations in China
will be subject to central, provincial and local environmental protection laws
and regulations, which currently impose a uniform fee on industrial wastewater
discharges and a graduated schedule of pollution fees for the discharge of
waste substances in excess of applicable standards, require the payment of
fines for violations of laws, regulations or decrees and provide for the
possible closure by the central, provincial or local government of any facility
which fails to comply with orders requiring it to cease or cure certain
activities causing environmental damage.
PROPOSED OPERATIONS IN THE UNITED KINGDOM
The Company entered into a Leasing and Service Agency Agreement, dated
September 15, 1996 (the "Service Agency Agreement") with the Edward Thompson
Group, a privately held corporation established in 1867 and organized under the
laws of the United Kingdom ("Edward Thompson"). Edward Thompson has been
producing bingo tickets since 1957 and, the Company believes, is the leading
manufacturer and supplier of bingo paper and related products in the United
Kingdom.
The Service Agency Agreement requires the Company to use its best
efforts to engineer, manufacture, design and develop a wireless electronic
hand-held bingo unit named PartiMAX ("PartiMAX") for the United Kingdom bingo
market. Under the Service Agency Agreement, Edward
- 10 -
<PAGE>
Thompson is responsible for, among other things, the marketing, leasing,
installation, training, customer service, repair service, warranty and
maintenance service of PartiMAX, and for all administration and collection
costs. Edward Thompson is also responsible for obtaining all necessary United
Kingdom government approvals required for the sale of PartiMAX in the United
Kingdom.
Under the Service Agency Agreement, until the aggregate revenue
received by the parties equals the lesser of 500,000 pounds sterling or the
Company's documented cost of the design, engineering and development of
PartiMAX, Edward Thompson will receive sixty percent (60%) and the Company will
receive forty percent (40%) of the gross revenues generated from the leasing,
installation and maintenance of PartiMAX in the United Kingdom, and thereafter,
both parties will receive fifty percent (50%) of the gross revenues. The
Company has not received any revenues to date in connection with the Service
Agency Agreement.
The Company intends to have a prototype PartiMAX unit ready for the
International Casino Exhibition Show to be held in London, England in late
January 1997.
PARTICIPATION AGREEMENT WITH FORTUNE ENTERTAINMENT CORPORATION
The Company entered into an Agreement, dated July 17, 1996 (the
"Participation Agreement"), with Fortune Entertainment Corporation, a company
organized under the laws of the Bahamas ("Fortune Entertainment"), under which
Fortune Entertainment has the right to receive a participating interest in the
Company's various international businesses (China, Philippines and United
Kingdom) as well as having the option to provide funding for the Company's
MAX(LITE) handset on a lease basis.
Under the Participation Agreement, Fortune Entertainment acquired or
has the right to acquire the following interests:
- upon receipt by the Company of $2,000,000 with respect to the
Company's gaming projects in China, a fifty percent (50%)
interest in the Company's interest in the Company's gaming
projects in China for $250,000 to be paid to the Company.
Fortune Entertainment is also entitled to acquire a fifty
percent (50%) interest in each additional slot parlor project
in China by payment of $250,000 with respect to each such
project. Fortune Entertainment will be required to pay its
pro rata share of the expenses and liabilities of the project.
Fortune Entertainment is also entitled to appoint one
representative to the board of directors of each joint venture
for every two directors appointed by the Company. See
"Business -- Proposed Operations in China."
- the right to acquire twenty five (25%) of the Company's
interest in each slot machine in the City of Pasay,
Philippines, for $250 for each slot machine. Fortune
Entertainment will also receive a minimum of twenty percent
(20%) in the complete City of Pasay project upon the receipt
of the Company of an aggregate of $1,000,000 with respect to
the slot machines. See "Business -- Proposed Operations in
the Philippines."
- the right to participate in the revenues received from the
leasing of the first 3,000 MAX(LITE) handsets. Fortune
Entertainment paid $1,000,000, in two separate payments, in
exchange for the right to receive $1.25 per day per MAX(LITE)
handset during the first year, $.75 per day per MAX(LITE)
handset during the second year and $.25 per day per MAX(LITE)
handset during the third and fourth years, based upon a 6-day
week and 52 week year. See "Business -- Products."
- 11 -
<PAGE>
- the right to acquire up to a fifteen percent (15%) carried
interest in the Company's bingo projects currently being
developed in the United Kingdom for $600,000 to be paid to the
Company. Fortune Entertainment must pay its pro rata share of
the costs and liabilities of the United Kingdom bingo
projects. On October 31, 1996, Fortune Entertainment exercised
its right and paid the Company $600,000.
- the right to acquire an 18.75% interest in the Company's
interest in the development of the Sega Sonic Bingo game in
exchange for $750,000 to be paid on or before September 30,
1996, of which $390,000 was paid to the Company on September
30, 1996. The Company and Fortune Entertainment are currently
negotiating the terms with respect to an extension of the
exercise date and payment terms.
- the right to acquire a fifty percent (50%) interest in the
Company's interest in the Sega Royal Ascot Horse Racing
Machine for approximately $375,000 for every unit installed.
See "Business -- Proposed Operations in China -- Entertainment
Centers."
If Fortune Entertainment exercises all of its rights under the
Participation Agreement, the Company will receive approximately $5,725,000 for
participating in the various ventures of the Company. As at October 31, 1996,
Fortune Entertainment had provided the Company with approximately $990,000.
GOVERNMENT REGULATION
In the United States, bingo is a legal gambling enterprise in the
District of Columbia and all states, except Utah and Hawaii. In 46 of those
States, it must be operated either by, or in association with, a not-for-profit
organization. The two states where it may be played under private ownership
for profit are Nevada and certain parts of Maryland. In any of the 48 states
where bingo and other forms of gaming are legal, bingo may be played on tribal
lands under tribal ordinance and with licensing approval by the tribes without
state regulation.
In each of the states where bingo is legal, the opening and operation
of a game requires a license. In other states licensing is controlled at the
state level. In some states it is controlled and issued at the local level.
Some states have formed and maintain formal gaming commissions. In several
states, the gaming commissions require that distributors, manufacturers and
suppliers of bingo products and equipment as well as their sales representative
obtain licenses. State regulations may limit the amount of revenues which the
Company can generate by limiting the number of sessions, revenues per session,
number of locations which may be operated, or other matters. The application
for administrative approval by the Nevada Gaming Control Board to market and
operate the Company's electronic bingo systems was filed to obtain access to
the Nevada market. The Company has also submitted applications for licenses in
several states where it expects to conduct business.
The state and local laws in the United States which govern the lease
and use of gaming products are widely disparate and continually changing due to
legislative and administrative actions and judicial interpretations. If any
changes occur in gaming laws through statutory enactment or amendment, judicial
decision or administrative action restricting the manufacture, distribution or
use of some or all of the Company's products, the Company's present and
proposed business could be adversely affected.
- 12 -
<PAGE>
Currently, the Company is leasing the majority of its products to
casinos and bingo halls operated by Native Americans. Under IGRA certain types
of gaming activities are classified as Class I, Class II or Class III. Class I
gaming includes traditional Native American social and ceremonial games and is
regulated only by the tribes. Class II gaming includes bingo, pull-tabs,
lotto, punch boards, instant bingo, certain card games played under limited
circumstances and other games similar to bingo if those games are played at the
same location where bingo is played. Class III gaming consists of all forms of
gaming that are not Class I or Class II, such as video casino games, slot
machines, most table games such as black jack, craps and keno. Generally,
Class II gaming may be conducted on Native American lands if the state in which
the Native American reservation is located permits such gaming for any purpose
by any person. Class III gaming, on the other hand, may only be conducted
pursuant to a compact reached between the Native American tribe and the state
in which the tribe is located. The Company's business will be impacted based
upon how its products are ultimately classified.
No assurances can be given that any of the Company's contracts will
be renewed upon the expiration of their term or that, if renewed, the terms
and conditions thereof will be favorable to the Company, nor can any assurances
be given that a tribe or tribes will not cancel any of such agreements prior to
expiration of their stated term. A failure to renew such contracts upon terms
favorable to the Company or the cancellation of a significant number of such
contracts would have a material adverse effect upon the Company's business and
results of operations.
COMPETITION
The fixed-base electronic bingo system market is presently an
established niche market in the bingo industry, but the portable electronic
bingo market has yet to be penetrated to any significant degree. The Company
believes it is well positioned to be one of the most advanced video style,
fixed-base bingo product and state-of-the-art portable electronic bingo
systems.
The Company believes it has approximately five main competitors, most
of which have substantially greater financial, marketing and technological
resources than the Company. In addition, since electronic bingo comprises only
a very small segment of the industry, it is conceivable that there will be new
products and new companies entering this area of business. Notwithstanding
this, the Company's management is of the opinion that with its constant
upgrading of its product and introduction of new products, the Company will be
able to attain a meaningful share of this relatively untapped market.
PATENTS AND TRADEMARKS
The Company relies on a combination of patent, trade secret, copyright
and trademark law, nondisclosure agreements and technical security measures to
protect its products. Notwithstanding these safeguards, it is possible for
competitors of the Company to obtain its trade secrets and to imitate its
products. Furthermore, others may independently develop products similar or
superior to those developed or planned by the Company. While the Company may
obtain patents with respect to certain of its products, the Company may not
have sufficient resources to defend such patents, such patents may not afford
all necessary protection and competitors may develop equivalent or superior
products which may not infringe such patents.
- 13 -
<PAGE>
RESEARCH AND DEVELOPMENT
During the fiscal years ended December 31, 1996 and 1995, research and
development expenses of the Company totaled approximately $1,691,546 and
$2,180,865 respectively. During 1996 and 1995 the majority of research and
development expenses were relating to the development of MAX(LITE), the
refinement of MAX(PLUS), and the development of PartiMAX.
EMPLOYEES
As of March 5, 1997, the Company had 30 full-time employees, none
of whom is represented by any labor union.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's principal executive offices are located in Vancouver,
British Columbia, Canada. In addition, the Company has a distribution center
in Phoenix, Arizona, a marketing office in Cleveland, Ohio and an office in
Branson, Missouri, where its real estate holdings are located. The Company
believes that such facilities are adequate to the Company's needs for the
foreseeable future.
Pursuant to lease dated March 13, 1995 and amended February 22, 1996
(the "Vancouver Lease"), the Company leases approximately 4,252 square feet in
Vancouver, British Columbia for its principal executive office. The annual
base rent under the Vancouver Lease is CDN $34,788. The Vancouver Lease
expires on March 31, 2000.
Pursuant to a lease dated July 1, 1996 (the "Phoenix Lease"), the
Company occupies 4,160 square feet as its showroom and distribution center in
Phoenix, Arizona. The annual base rent under the Phoenix Lease is
approximately $28,595. The Phoenix Lease expires June 30, 1999.
Pursuant to a lease, dated May 31, 1996 (the "Westlake Lease"), the
Company leases approximately 781 square feet in Westlake, Ohio. The annual
base rent under the Westlake Lease is $10,934. The Westlake Lease expires May
31, 1997.
The Company's wholly-owned subsidiary, River Oaks Holdings, Inc.
("River Oaks"), leases approximately 900 square feet in Branson, Missouri
pursuant to an Office Space Lease dated November 1, 1996 (the "Branson Lease").
River Oaks pays $300 per month rent under the Branson Lease. The Branson Lease
expires April 30, 1997.
On June 22, 1995, pursuant to the Exchange Agreement, the Company
acquired all the capital stock of Branson and its wholly-owned subsidiaries in
exchange for 5,999,820 shares of the Company's Common Stock. Branson is a
resort and land developer located in Branson, Missouri, which owned two
separate real estate properties: (i) a resort property with limited existing
development on site and (ii) 178 acres of undeveloped property in Stone County,
Missouri. On November 17, 1995, the Company disposed of the resort property by
forfeiture to the mortgage holder. The Company is currently attempting to
capitalize on the 178 acres of undeveloped property and has no present plans
for the improvement or development of such property.
The undeveloped property has been pledged to secure the repayment of
(i) promissory notes in an aggregate principal amount of $1,339,792 bearing
interest at nine percent (9%) per annum and due in July 2002, (ii) a promissory
note in the principal amount of $60,812 bearing interest at nine percent (9%)
per annum and due on demand (iii) a promissory note in the principal amount of
$500,000 bearing interest at three percent (3%) above the Chase Manhattan prime
lending rate and due in 2002 and (iv) convertible debentures in the aggregate
principal amount of $745,000 bearing interest at two percent (2%) per month,
compounded monthly, which are convertible at $.40 per share of Common Stock
until December 21, 1997.
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<PAGE>
ITEM 3. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The current executive officers, directors and significant employees of
the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Firoz Lakhani 52 President, Secretary and Chief Operating Officer and Director
Donald Robert MacKay 44 Chief Financial Officer
Robert C. Silzer, Jr.* 31 Vice President - Operations and Director
Robert C. Silzer, Sr.* 50 Chairman, Chief Executive Officer and Director
<FN>
- ----------
* Robert C. Silzer, Jr. is the son of Robert C. Silzer, Sr.
</FN>
</TABLE>
Pak Cheung resigned from the Board of Directors on March 27, 1997 to
pursue other business commitments. Robert C. Silzer, Jr., the son of Robert C.
Silzer, Sr., replaced Mr. Cheung on the Board of Directors until the next annual
meeting of shareholders of the Company.
Each director is elected to hold office until the next annual meeting
of stockholders and until his successor is elected and qualified. All officers
serve at the discretion of the Board of Directors.
The following sets forth certain biographical information with respect
to the directors and executive officers of the Company.
FIROZ LAKHANI has been the President, Chief Operating Officer and a
Director of the Company since September 1995 and the Secretary of the Company
since September 1996. Mr. Lakhani served as a Director at Olds Industries, Inc.,
a Canadian public company, from August 1993 to September 1995, and was employed
at Park Georgia Realty, a real estate and land development brokering company,
from July 1990 to August 1993. From 1979 to 1990, Mr. Lakhani was employed at
Montreal Trust Company, where he headed the Commercial Real Estate Division.
DONALD ROBERT MACKAY has been the Chief Financial Officer of the
Company since August 1995. Prior to joining the Company, Mr. MacKay served as
the Manager -- Business Analysis at TCG International Inc. from March 1994 to
July 1995. Prior to that, Mr. MacKay was the Controller of Attachmate
Canada, Inc. (formerly KEA Systems Ltd.) from September 1993 to March 1994 and
was a Senior Financial Accountant at GLENTEL, Inc. from 1989 to September 1993.
ROBERT C. SILZER, SR., has been the Chairman, Chief Executive Officer
and a Director of the Company since November 1993. He also currently serves as a
Director of InFOREtech Golf Technology Inc., since September 1995. From 1986 to
1992, Mr. Silzer served as President and Chief Executive Officer of Supercart
International, Inc.
- 15 -
<PAGE>
ROBERT C. SILZER, JR., has been a director of the Company since March
31, 1997 and the Vice President -- Operations since February 1994. From December
1992 through December 1993, Robert C. Silzer, Jr. worked as a sales
representative at Mills Printing in Vancouver.
ITEM 4. REMUNERATION OF DIRECTORS AND OFFICERS
The following table summarizes the aggregate annual
remuneration paid or accrued by the Company to each of the Company's three
highest paid persons during the last completed fiscal year and to all officers
and directors as a group.
<TABLE>
<CAPTION>
Name of individual Capacities in which Aggregate
or identity of group remuneration was received Remuneration
- ------------------------------------- ------------------------------------- ------------
<S> <C> <C>
Firoz Lakhani President, Secretary, Chief Operating Officer
and Director $150,492(1)
Robert C. Silzer, Jr. Vice President -- Operations $ 85,938
Robert C. Silzer, Sr. Chairman, Chief Executive Officer
and Director $201,692(2)
Officers and Directors
as a Group (4 persons) $560,622
<FN>
- --------------
(1) Amount includes (i) deferred salary of $33,333, (ii) an automobile
allowance of $9,600 and (iii) certain employee benefits.
(2) Amount includes (i) deferred salary of $37,500, (ii) an automobile
allowance of $10,800 and (iii) certain employee benefits.
</FN>
</TABLE>
COMPENSATION TO DIRECTORS
Directors do not receive any additional compensation in connection with
their services on the Company's Board of Directors.
EMPLOYMENT AGREEMENTS.
Effective January 1, 1994, the Company entered into an employment
agreement with Robert C. Silzer (the "Silzer Employment Agreement"), under which
Robert C. Silzer, Sr. serves as Chairman and Chief Executive Officer of the
Company. Pursuant to the Silzer Sr. Employment Agreement, Mr. Robert C. Silzer,
Sr. was paid a salary of $75,000 in 1994, $125,000 in 1995 and $137,500 in 1996.
He deferred $37,500 of his salary for the year 1996. Robert C. Silzer, Sr. will
be paid a salary of $225,000 in 1997, $275,000 in 1998, $325,000 in 1999 and
$375,000 in 2000. In addition, Robert C. Silzer, Sr. is eligible to receive an
annual bonus in an amount equal to 5% of the net income of the Company and its
subsidiaries (the Company and its subsidiaries did not have any net income in
1996). Robert C. Silzer, Sr. received a signing bonus of 250,000 shares of
Common Stock. Robert C. Silzer, Sr. was also paid an automobile allowance of
$800 per month in 1995 and $900 per month in 1996 and will be paid an additional
$100 per month for each calendar year of the term of the Silzer Sr. Employment
Agreement. Pursuant to the Silzer Sr. Employment Agreement, Robert C. Silzer,
Sr. was granted options to purchase (i) 500,000 shares of the Company's Common
Stock in 1995 at an exercise price of $.30 per share and (ii) 750,000 shares of
the Company's Common Stock in 1996 at an exercise price of $.50 per share and
will be granted options to purchase 1,000,000 shares of Common Stock of the
Company for each of the years 1997, 1998 and 1999, all at an exercise price
equal to fifty percent (50%) of the ten day average trading price prior to the
effective date of the option.
In addition, pursuant to the Silzer Sr. Employment Agreement, Robert C.
Silzer, Sr. is entitled to receive a lump sum payment equal to the present
value, using an eight percent (8%) discount factor, of his salary for the
unexpired term of the Silzer Sr. Employment Agreement, plus the amount of any
performance bonus, grants of Common Stock and options which Robert C. Silzer,
Sr. is entitled, which shall be a minimum of $5,500,000 (the "Silzer Severance
Payment") if (i) Robert C. Silzer, Sr. is terminated by the Company without
"just cause" as determined under the common law of British Columbia or (ii) (a)
there is a change of control (as defined), (b) the Company employs any other
senior executive without Robert C. Silzer, Sr.'s prior written consent or (c)
materially alters the duties of Robert C. Silzer, Sr. without Robert C. Silzer,
Sr.'s prior written consent. The Silzer Sr. Employment Agreement also provides
that Robert C. Silzer, Sr. shall not compete with the Company for a period of
twelve (12) months after termination of his employment with the Company. The
Silzer Sr. Employment Agreement terminates on December 31, 2000.
- 16 -
<PAGE>
Effective September 5, 1995, the Company entered into an employment
agreement with Firoz Lakhani (the "Lakhani Employment Agreement"), under which
Mr. Lakhani serves as President, Secretary and Chief Operating Officer of the
Company. Pursuant to the Lakhani Employment Agreement, Mr. Lakhani was paid a
salary of $6,250 per month from September 1, 1995 to December 31, 1995 and
$91,667 in 1996. He deferred $33,333 of his salary for the year 1996. Mr.
Lakhani will be paid a salary of $175,000 in 1997, $225,000 in 1998, $275,000 in
1999 and $325,000 in 2000. In addition, Mr. Lakhani is eligible to receive an
annual bonus in an amount equal to 3.5% of the net income of the Company and its
subsidiaries (the Company and its subsidiaries did not have any net income in
1996). Mr. Lakhani received a signing bonus of 200,000 shares of Common Stock.
Mr. Lakhani was also paid an automobile allowance of $700 per month in 1995 and
$800 per month in 1996 and will be paid an additional $100 per month for each
calendar year of the term of the Lakhani Employment Agreement. Pursuant to the
Lakhani Employment Agreement, Mr. Lakhani was granted options to purchase (i)
300,000 shares of the Company's Common Stock in 1995 at an exercise price of
$.30 per share and (ii) 500,000 shares of the Company's Common Stock in 1996 at
an exercise price of $.50 per share and will be granted options to purchase
750,000 shares of Common Stock of the Company for each of the years 1997, 1998
and 1999, all at an exercise price equal to fifty percent (50%) of the ten day
average trading price prior to the effective date of the option.
In addition, pursuant to the Lakhani Employment Agreement, Mr. Lakhani
is entitled to receive a lump sum payment equal to the present value, using an
eight percent (8%) discount factor, of his salary for the unexpired term of the
Lakhani Employment Agreement, plus the amount of any performance bonus, grants
of Common Stock an options which Mr. Lakhani is entitled, which shall be a
minimum of $4,250,000 (the "Lakhani Severance Payment") if (i) Mr. Lakhani is
terminated by the Company without "just cause" as determined under the common
law of British Columbia or (ii) (a) there is a change of control (as defined),
(b) the Company employs any other senior executive without Mr. Lakhani's prior
written consent or (c) materially alters the duties of Mr. Lakhani without Mr.
Lakhani's prior written consent. The Lakhani Employment Agreement also provides
that Mr. Lakhani shall not compete with the Company for a period of twelve (12)
months after termination of his employment with the Company. The Lakhani
Employment Agreement terminates on December 31, 2000.
Effective February 15, 1994, the Company entered into an employment
agreement with Robert C. Silzer, Jr. (the "Silzer Jr. Employment Agreement"),
under which Mr. Robert C. Silzer, Jr. serves as Vice President -- Operations of
the Company. Pursuant to the Silzer Jr. Employment Agreement, Robert C. Silzer,
Jr. was paid a salary of $49,500 in 1994, $55,000 in 1995 and $85,938 in 1996
and will be paid a salary of not less than $90,000 per annum in 1997, 1998,
1999. In addition, Robert C. Silzer, Jr. was granted options to purchase 50,000
shares of the Company's Common Stock on January 1, 1994, 1995, 1996 and 1997,
all at an exercise price of $1.00 per share and will be granted options to
purchase 50,000 shares of Common Stock on January 1, 1998 at an exercise price
of $1.00 per share.
STOCK OPTIONS
Pursuant to separate stock option agreements and employment
agreements, the Company has granted options to purchase shares of Common Stock
of the Company to certain officers, directors, employees and consultants of the
Company. The following table sets forth information with respect to stock
options granted to the officers and directors of the Company and all executive
officers as a group:
<TABLE>
<CAPTION>
SHARES ISSUABLE EXERCISE PRICE EXPIRATION
NAME UPON EXERCISE PER SHARE DATE
---- -------------- --------- ----
<S> <C> <C> <C>
Firoz Lakhani 500,000 $ .55 November 4, 2001
750,000 50% of the ten day January 1, 2000
average trading price
prior to the effective
date of the option
Donald Robert MacKay 225,000 $ .55 November 4, 1998
Robert Silzer, Jr. 207,693 $ .26 December 21, 1997
400,000 $ .55 November 4, 1998
50,000 $1.00 January 1, 1998
50,000 $1.00 January 1, 1999
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
Robert Silzer, Sr. 517,000 $.26 December 20, 2001
800,000 $.55 November 4, 2001
1,000,000 50% of the ten day January 1, 2000
average trading price
prior to the effective
date of the option
Officers and Directors
as a Group (4 persons)
</TABLE>
ITEM 5. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS
The following table sets forth the beneficial ownership of Common Stock
of the Company by (i) each person who, at March 31, 1997, was known by the
Company to own beneficially more than ten percent (10%) of the 48,867,287
outstanding shares of Common Stock of the Company, (ii) each of the three
highest paid persons who are officers and directors of the Company and (iii) all
officers and directors as a group.
<TABLE>
<CAPTION>
Name and Address Number of Shares Percent
of Beneficial Owner Owned of Class
- -------------------------------------------- ---------------- --------
<S> <C> <C>
Paragon Holdings Ltd.(1) 3,650,000 7.4%
P.O. Box N-272
Nassau Bahamas
Robert C. Silzer, Sr.(2) 4,381,948(3) 8.56%(3)
2482-650 West Georgia Street
P.O. Box 11610
Vancouver, British Columbia
Firoz Lakhani 2,650,000(4) 5.35%(4)
2482-650 West Georgia Street
P.O. Box 11610
Vancouver, British Columbia
Robert C. Silzer, Sr. 1,025,000(5) 2.07%(5)
2482-650 West Georgia Street
P.O. Box 11610
Vancouver, British Columbia
All officers and directors
as a group (4 persons) 8,381,948(6) 16.64%(6)
<FN>
- -------------------
* Less than one percent (1%)
</FN>
</TABLE>
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<PAGE>
(1) Anthony L.M. Inder Rieden is the President of Paragon Holdings, Ltd.
(2) Robert C. Silzer, Jr. is the son of Robert C. Silzer, Sr.
(3) Includes stock options which are exercisable by Robert C. Silzer, Sr. to
acquire 2,317,000 shares of Common Stock and 165,000 share held by Madj
Silzer, Robert C. Silzer, Sr.'s wife.
(4) Includes stock options which are exercisable by Mr. Lakhani to acquire
680,000 shares of Common Stock.
(5) Includes stock options which are exercisable by Robert C. Silzer, Jr. to
acquire 657,693 shares of Common Stock.
(6) Includes all shares currently outstanding and those which are not
outstanding but which are subject to issuance upon exercise of stock
options. See footnotes (3), (4) and (5).
ITEM 6. INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
Firoz Lakhani, the President, Chief Operating Officer, Secretary and a
Director of the Company, borrowed an aggregate principal amount of $444,000 from
the Company, pursuant to (i) a promissory note in the principal amount of
$250,000 dated January 30, 1996 and due on or before January 29, 2001, (ii) a
promissory note in the principal amount of $90,000 dated January 18, 1996 and
due on or before January 18, 2001 and (iii) a promissory note in the principal
amount of $104,000 dated January 3, 1996 and due on or before January 2, 2001
(the "Lakhani Notes"). Interest is paid monthly on the Lakhani Notes at the
United States Base Rate as may be set from time to time. At March 31, 1997, the
United States Base Rate was eight and one-half percent (8 1/2%).
Robert C. Silzer, Sr., the Chairman, Chief Executive Officer and a
Director of the Company, borrowed an aggregate principal amount of $597,800 from
the Company, pursuant to (i) a promissory note in the principal amount of
$375,000 dated January 30, 1996 and due on or before January 29, 2001, (ii) a
promissory note in the amount of $150,000 dated January 18, 1996 and due on or
before January 17, 2001, (iii) a promissory note in the principal amount of
$72,800 dated January 2, 1996 and due on or before January 17, 2001 (the "Silzer
Notes"). Interest is paid monthly on the Silzer Notes at the United States Base
Rate as may be set from time to time. At March 31, 1997, the United States Base
Rate was eight and one-half percent (8 1/2%).
ITEM 7. DESCRIPTION OF SECURITIES
The Company's authorized capital stock consists of 150,000,000 shares
of Common Stock, par value $.005 per share (the "Common Stock"), and 4,000,000
shares of cumulative, 10% cumulative Preferred Stock, par value $.10 per share
(the "Preferred Stock"). As of March 31, 1997, there were 48,867,287 shares of
Common Stock outstanding and 286 holders of record. None of the Company's shares
of Preferred Stock have been issued or are outstanding.
Each of the shares of Common Stock has equal dividend, liquidation and
voting rights. Holders of shares of Common Stock are entitled to one vote per
share on all matters to be voted upon by shareholders. Holders of the shares
of Common Stock are entitled to receive dividends when, and if, declared by the
board of directors from funds legally available therefore. The shares of
Common Stock are not redeemable, have no conversion rights and carry no
preemptive or other rights to subscribe for additional shares.
The rights of holders of shares of Common Stock as described above
will be subject to, and may be adversely affected by, the rights of holders of
any Preferred Stock that may be issued in the future. The Board of Directors
currently does not contemplate the issuance of any Preferred Stock.
- 19 -
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
MARKET INFORMATION. The Company's Common Stock is traded on the
NASD's OTC Bulletin Board under the symbol "AGTI." The following table
presents the high and low bid quotations for the Common Stock as reported by
the NASD for each quarter during the last two years. Such prices reflect
inter-dealer quotations without adjustments for retail markup, markdown or
commission, and do not necessarily represent actual transactions.
<TABLE>
<CAPTION>
Year Period Low High
---- ------ --- ----
<S> <C> <C> <C>
1995 Second Quarter .69 1.69
Third Quarter .28 1.13
Fourth Quarter .16 .44
1996 First Quarter .25 .99
Second Quarter .64 2.19
Third Quarter .99 1.61
Fourth Quarter .49 1.26
1997 First Quarter .45 1.04
</TABLE>
DIVIDENDS. The Company has never declared or paid any cash dividends.
It is the present policy of the Company to retain earnings to finance the
growth and development of the business and, therefore, the Company does not
anticipate paying dividends on its Common Stock in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS.
In addition to ordinary routine litigation incidental to its business
operation, which the Company does not believe, in the aggregate, will have a
material adverse effect on the Company, or its operations, the Company is
engaged in the following lawsuits:
Braintech, Inc. ("Braintech") filed a statement of claim in the Supreme
Court of British Columbia on November 24, 1995 and amended on March 26, 1996
claiming default by the Company on three promissory notes. Braintech is claiming
damages in the amount of $200,000, plus interest of ten percent (10%) per annum,
and costs. The Company has filed a statement of defense denying the material
allegations of the statement of claim and has opposed a motion for summary
judgment.
In January 1996, Tierra Corporation ("Tierra") commenced an action in
the Circuit Court of Stone County, Missouri, claiming that River Oaks Resort and
Country Club, Inc., a Texas corporation and a subsidiary of Branson ("River Oaks
Resort") defaulted on a promissory note. Judgment is sought in the principal
amount of $74,105, plus interest since October 18, 1995, at 10% per annum. An
answer has been filed on behalf of River Oaks Resort averring that Tierra has
not performed conditions precedent to assessing any deficiency and that no
accounting regarding the disposition of security for such note has been provided
and, in addition, a counterclaim asserting Tierra disposed of stock collateral
in a commercially unreasonable manner. Preliminary discovery has occurred but no
depositions have been taken.
In February 1996, P.D.I., LLC, a Missouri limited liability company
("PDI") commenced an action in the Circuit Court of Stone County Missouri,
claiming breach of a real estate purchase agreement which provided, in part, for
the construction of a sewage treatment facility, for which damages are claimed,
including the awarding to P.D.I. of all escrow funds, costs and expenses
incurred by P.D.I. over and above the amount of escrow funds, and costs and
expenses, including attorneys fees in connection with the commencement of the
action.
- 20 -
<PAGE>
In response, the Company and River Oaks Resort have counterclaimed for damages,
in an amount to be determined at trial, incurred when plaintiff PDI withdrew
funds from the escrow fund created for construction of the sewage treatment
facility and the permit application for construction approval by the Missouri
Department of Natural Resources. Moreover, a claim has also made by River Oaks
Resort and the Company that subsequent development attempted by PDI has
encroached upon property development belonging to River Oaks Resort and the
Company without right to do so, including damages for disruption resulting
therefrom.
In April 1996, Larry Newman ("Newman") commenced a mechanics' lien in
the Circuit Court of Stone County, Missouri, seeking $177,282, plus interest,
for excavation work performed during the period between July 19, 1995 to
September 25, 1995 on a road across the River Oaks development in Stone County.
Thereafter, on or about June 24, 1996, Jack L. Holt ("Holt") filed a similar
petition in the Circuit Court of Stone County, Missouri, claiming a mechanics'
lien for engineering and land surveying during the period May 16, 1995 to July
4, 1995 for a road across the River Oaks development property in the amount of
$9,610, plus interest. The Holt case has now been consolidated in the case
originally filed by Newman. The Company has filed a counterclaim alleging
Newman and Holt extended the road beyond the boundaries of the River Oaks
development property onto land owned by Sunset Cove, Ltd., a Missouri
corporation. The court has since ordered Sunset Cove, Ltd. joined as a party
needed for just adjudication. Discovery has not yet commenced.
On November 15, 1996, Fortunet, Inc., a Nevada corporation
("Fortunet"), filed a patent infringement claim in the United States District
Court Southern District of California against the company and certain other
companies which manufacture and distribute electronic bingo systems, claiming
that the defendants, including the Company, infringed Fortunet's United States
Patent No. 4,624,462 (the "Patent"). Fortunet seeks to enjoin the defendants
from any further alleged infringement of the Patent and is seeking actual and
enhanced damages as well as attorneys fees and other costs.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
The Company retained the services of Grant Thornton LLP ("Grant
Thornton") to perform an audit for the Company's 1995 fiscal year. Subsequent
to the retention, the Company and Grant Thornton learned that the Securities
and Exchange Commission (the "SEC") commenced a private investigation of the
Company and others involving possible violations of the registration and
antifraud provisions of the federal securities laws of the United States. At
such time as Grant Thornton learned of the investigation, it elected to cease
all audit activities. In December 1996, the SEC terminated its inquiry of the
Company and indicated that no enforcement action had been recommended.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
The following sets forth certain information regarding sales of, and
other transactions with respect to, securities of the Company issued within the
past three years, which sales and other transactions were not registered
pursuant to the Securities Act of 1933, as amended (the "Securities Act").
Unless otherwise indicated, no underwriters were used in such transactions.
On June 22, 1995, pursuant to the Branson Exchange Agreement, the
Company acquired all the capital stock of Branson and its wholly-owned
subsidiaries in exchange for the issuance of 5,999,820 shares of the Company's
Common Stock to the shareholders of Branson, of which 3,423,720 were issued
pursuant to the exemption afforded by Regulations S under the Securities Act
and 2,576,100 were issued pursuant to the exemption afforded by Section 4(2) of
the Securities Act.
- 21 -
<PAGE>
In December 1995, the Company issued 6,666,666 shares of Common Stock
to Paragon Holdings Ltd, a Bahamian corporation at a price of $.15 per share
for net proceeds to the Company of $1,000,000. The shares were issued in
reliance upon the exemption afforded by Rule 504 of Regulation D of the
Securities Act.
In December 1995, the Company issued a convertible promissory note
(the "December 1995 Note") in the principal amount of $70,000 to a non-U.S.
resident in an offshore transaction for net proceeds to the Company of $70,000.
The December 1995 Note was converted into 100,000 shares of Common Stock. The
December 1995 Note and the shares issued upon conversion were issued pursuant
to the exemption afforded by Regulations S under the Securities Act.
Pursuant to a Subscription Agreement, dated December 20, 1995, the
Company sold to S.D.A. List Brokers, Inc., a company organized under the laws
of Bermuda (the "Purchaser"), 600 Convertible Debenture Units, with 450 issued
on December 20, 1995 and 150 issued on January 19, 1996 for an aggregate
purchase price of $600,000. Each Convertible Debenture Unit is comprised of a
convertible debenture (the "Convertible Debenture") in the principal amount of
$1,000 and 3333.33 transferable and detachable warrants to purchase shares of
the Company's Common Stock (the "Warrants"). The Purchaser is also entitled to
a bonus payment of $150,000 per year payable each December 20th of 1996, 1997,
1998 and 1999. The bonus payment for 1996 was added to the principal amount
owed to the Purchaser and was not paid by the Company. The Convertible
Debentures bear interest at the rate of two percent (2%) per month, compounded
monthly, and are convertible at a conversion price of $.40 per share of Common
Stock until December 20, 1997. The Warrants are exercisable until December 21,
1997 at an exercise price of $.40 per share of Common Stock. The Purchaser has
the option to acquire an additional 1,000 Convertible Debenture Units. The
Convertible Debenture Units, including the Convertible Debentures and Warrants
were issued pursuant to the exemption afforded by Regulations S under the
Securities Act.
On June 22, 1995, pursuant to the Branson Exchange Agreement, the
Company acquired all the capital stock of Branson and its wholly-owned
subsidiaries in exchange for the issuance of 5,999,820 shares of the Company's
Common Stock to the shareholders of Branson, of which 3,423,720 shares were
issued pursuant to the exemption afforded by Regulations S under the Securities
Act and 2,576,100 shares were issued pursuant to the exemption afforded by
Section 4(2) of the Securities Act.
In May, 1996, the Company issued 200,000 shares of Common Stock to
Firoz Lakhani and 250,000 shares of Common Stock to Robert C. Silzer, Sr. as
signing bonuses in connection with the execution of such officer's employment
agreements. The shares were issued pursuant to the exemption afforded by Section
4(2) of the Securities Act. See "Remuneration of Directors and Officers --
Employment Agreements."
On September 26, 1996, the Company entered into an Agreement with
Prisms, Inc., a corporation organized under the laws of the State of North
Carolina, to acquire all the issued and outstanding shares by the Company
issuing 300,000 shares of Common Stock of the Company. The Company relied upon
the exemption afforded by Section 4(2) of the Securities Act. See "Business --
Recent Acquisitions -- Prisms, Inc."
The Company and River Oaks Resort borrowed $1,125,000 from Transworld
Capital Ltd., a limited liability company organized under the laws of the Cayman
Islands ("Transworld") pursuant to a promissory note dated December 10, 1994 in
the principal amount of $1,125,000 (the "Transworld Note"). In June 1995, River
Oaks Resort, the Company and Transworld agreed to amend the promissory note
pursuant to which Transworld was issued 608,000 shares of the Company's Common
Stock and a promissory note in the amount of $500,000 by River Oaks Resort and
the Company to Transworld in exchange for cancellation of the Transworld Note.
The Company relied upon the exemption afforded by Section 4(2) of the Securities
Act.
- 22 -
<PAGE>
In January 1996, the Company issued an aggregate of $500,000 in
convertible promissory notes (the "January 1996 Notes") and warrants (the
"January 1996 Warrants") to non-U.S. residents in an offshore transaction for
net proceeds to the Company of $500,000. The January 1996 Notes are interest
bearing, at the United States Base Rate and are all due in July 1997. At
January 9, 1997, the United States Base Rate was 8.5%. The January 1996 Notes
are convertible at the option of the holder into shares of Common Stock of the
Company at a conversion price of $.25 per share. The January 1996 Warrants
have an exercise price of $.50 per share and are exercisable until July 1997.
The Company relied upon the exemption from registration afforded by Regulation
S. Robert Hand received a finder's fee of $50,000 for placing certain of the
January 1996 Notes in the form of a convertible promissory note (the "Hand
Note") bearing interest, unless converted, at the United States Bank Prime
Rate. The Hand Note is convertible until July 1997 at the option of the holder
into shares of Common Stock of the Company at a conversion price of $.25 per
share. The Company relied upon the exemption afforded by Regulation S of the
Securities Act for the issuance of the Hand Note.
The Company also issued in January 1996 a convertible promissory note
in the principal amount of $250,000 (the "8.5% January 1996 Note") to a
non-U.S. resident in an offshore transaction for net proceeds to the Company of
$250,000. The 8.5% January 1996 Note bears interest at 8.5% per annum and is
due on January 20, 1997. The Company is currently negotiating an extension of
the 8.5% January 1996 Note. The 8.5% January 1996 Note is convertible into
781,250 shares of the Company's Common Stock at a conversion price of $.32 per
share. The Company relied upon the exemption from registration afforded by
Regulation S under the Securities Act.
The Company also issued a convertible note in the principal amount of
$200,000 (the "February 1996 Note") and warrant (the "February 1996 Warrant")
to a non-U.S. residents in an offshore transaction for net proceeds to the
Company of $200,000. The February 1996 Note, unless converted, bears interest
at the rate of the United States Bank Base Rate and is due in February 1997.
The February 1996 Note is convertible at the option of the holder into shares
of Common Stock of the Company at a conversion price of $.50 per share. The
February 1996 Warrant has an exercise price of $.80 per share and is
exercisable until February 1997. The Company relied upon the exemption from
registration afforded by Regulation S.
In April 1996, the Company issued an aggregate of $780,700 in
convertible notes (the "April 1996 Notes") and warrants (the "April 1996
Warrants") to non-U.S. residents in an offshore transaction for net proceeds to
the Company of $745,000. The April 1996 Notes do not bear interest and are all
due in April 1997. The April 1996 Notes are convertible at the option of the
holder into shares of Common Stock of the Company at a conversion price of $.50
per share. The April 1996 Warrants have an exercise price of $.70 per share
and are exercisable until April 1997. The Company relied upon the exemption
from registration afforded by Regulation S with respect to the issuance of the
April 1996 Notes. Kimbell Holdings Limited, a Wyoming Corporation, received a
finder's fee of $35,700 for placing certain of the April 1996 Notes in the form
of a convertible promissory note (the "Kimbell Note") bearing interest, unless
converted, at the United States Bank Prime Rate. The Kimbell Note is
convertible until May 15, 1997 at the option of the holder into shares of
Common Stock of the Company at a conversion price of $.50 per share. The
Company relied upon the exemption afforded by Section 4(2) of the Securities
Act for the issuance of the Kimbell Note.
The Company also issued an aggregate of $50,000 in convertible notes
(the "12% April 1996 Notes") and warrants (the "12% April 1996 Warrants") to
non-U.S. residents in an offshore transaction for net proceeds to the Company
of $50,000. The 12% April 1996 Notes, unless converted, bear interest at the
rate of 12% per annum and are due in April 1997. The 12% April 1996 Notes are
convertible at the
- 23 -
<PAGE>
option of the holder into shares of Common Stock of the Company at a conversion
price of $.50 per share. The 12% April 1996 Warrants have an exercise price of
$.80 per share and are exercisable until April 1997. The Company relied upon
the exemption from registration afforded by Regulation S.
In May 1996, the Company issued an aggregate of $450,000 in
convertible notes (the "May 1996 Notes") and warrants (the "May 1996 Warrants")
to non-U.S. residents in an offshore transaction for net proceeds to the
Company of $450,000. The May 1996 Notes, unless converted, bear interest at
the United States Bank Prime Rate and are all due in May 1997. The May 1996
Notes are convertible at the option of the holder into shares of Common Stock
of the Company at a conversion price of $1.00 per share. The May 1995 Warrants
have an exercise price of $1.30 per share and are exercisable until May 1997.
The Company relied upon the exemption from registration afforded by Regulation
S. Robert Taylor received a finder's fee of $45,000 for placing certain of the
May 1996 Notes in the form of a convertible promissory note (the "Taylor Note")
bearing interest, unless converted, at the United States Bank Prime Rate. The
Taylor Note is convertible until May 13, 1997 at the option of the holder into
shares of Common Stock of the Company at a conversion price of $1.00 per share.
The Company relied upon the exemption afforded by Regulation S of the
Securities Act for the issuance of the Taylor Note.
The Company also issued in May 1996 four convertible notes to investors
it believed to be sophisticated for an aggregate of $755,000 in (the "May 1996
U.S. Notes") and net proceeds to the Company of $755,000. The May 1996 U.S.
Notes, unless converted, bear interest at the United States Bank Prime Rate and
are all due in May 1997. Three of the four May 1996 U.S. Notes are convertible
at the option of the holder into shares of Common Stock of the Company at a
conversion price of $1.20 per share and one is convertible at the conversion
price of $1.50 per share. The Company relied upon the exemption afforded by
Section 4(2) of the Securities Act.
The Company issued in August 1996 two convertible promissory notes to
investors it believed to be sophisticated in the aggregate principal amount of
$125,000 (the "August 1996 Notes") for net proceeds to the Company of $125,000.
The August 1996 Notes bear interest at the United States Bank Base Rate and are
due in August 1997. The August 1996 Notes are convertible into shares of the
Company's Common Stock on the basis of one share for every $.75 of the August
1996 Notes. The Company relied upon the exemption afforded by Section 4(2) of
the Securities Act.
The Company issued in September 1996 two convertible promissory notes
in the aggregate principal amount of $254,545.45 (the "September 1996 Notes") to
non-U.S. residents in an offshore transaction for net proceeds to the Company of
$254,545.45. The September 1996 Notes bear interest at the United States Bank
Base Rate and are due in September 1997. The September 1996 Notes are
convertible into shares of the Company's Common Stock on the basis of one and
one-third (1 1/3) share for every $1.00 of the September 1996 Notes. The Company
relied upon the exemption afforded by Regulation S of the Securities Act.
The claims of the Section 4(2) exemptions for the shares of Common
Stock of the Company are based upon the fact that (a) such sales were made to a
limited number of knowledgeable and informed investors who are believed to have,
or to have had access to, such information about the Company as was necessary to
make an informed investment judgment, (b) the shares were acquired for
investment and with no view to distribution to the public and (c) the
certificates representing the shares bear legends which call attention to
restrictions on the distribution of the shares.
The claims of the Regulation S exemptions for the shares of Common
Stock of the Company are based upon the fact that (a) the purchasers were not
U.S. persons (as defined by Regulation S) and were outside the United States at
the time the buy was originated, (b) neither the Company nor any of the
Company's affiliates, nor any person acting on behalf of them, made any
directed selling efforts in the
- 24 -
<PAGE>
United States and (c) the certificates representing the shares bear legends
which call attention to restrictions on the distribution of the shares.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Wyoming Business Corporation Act ("WBCA"), W.S. 17-16-850 et seq.,
provides for indemnification of the Company's officers, directors, employees,
and agents against liabilities which they may incur in such capacities. A
summarization of circumstances in which such indemnification may be available
follows, but is qualified by reference to the Company's Articles of
Incorporation and the text of the statute.
In general, the Company may provide indemnification to any person made
a party to a proceeding because he is or was a director, officer, employee or
agent against liability incurred in the proceeding if such person (i) conducted
himself or herself in good faith; (ii) reasonably believed that his or her
conduct was in or at least not opposed to the Company's best interests; and
(iii) in the case of a criminal proceeding, has no reasonable cause to believe
that his or her conduct was unlawful. The Company may not, however, indemnify a
present or former director, officer, employee or agent in connection with (i) a
proceeding by or in the right of the Company in which the director, officer,
employee or agent was adjudged liable to the Company or (ii) any other
proceeding charging improper personal benefit to the director, officer,
employee or agent, whether or not involving action in his or her official
capacity, in which he or she was adjudged liable on the basis that personal
benefit was improperly received by such present or former director, officer,
employee or agent. The Company may pay for or reimburse the reasonable
expenses of present and former directors, officers, employees and agents who
are parties to a proceeding in advance of the final disposition of such
proceeding if the person seeking payment or reimbursement (i) furnishes a
written affirmation of his or her good faith belief that he or she met the
applicable standard of care under the WBCA; (ii) furnishes a written
undertaking to repay the advance if it is ultimately determined that he or she
did not meet the applicable standard of conduct; and (iii) it is determined, in
accordance with the WBCA, that the facts then known would not preclude
indemnification. The Company must indemnify a present or former director who is
wholly successful, on the merits or otherwise, in a proceeding against
reasonable expenses incurred in connection with the proceeding.
In addition, the Company has statutory authority to purchase insurance
to protect its officers, directors, employees, and agents against any
liabilities asserted against them, or incurred in connection with their service
in such capacities. Further, the Company may advance or reimburse funds to a
director who is a party to a proceeding, for reasonable expenses incurred in
connection with a proceeding.
- 25 -
<PAGE>
PART F/S
The following financial statements are filed as part of this
registration statement on Form 10-SB:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Certified Public Accountants F-1
Financial Statements
Consolidated Balance Sheets as of December 31, 1996
and 1995 F-2
Consolidated Statement of Operations for the years ended
December 31, 1996 and 1995 F-4
Consolidated Statement of Stockholders' Deficit
for the year ended December 31, 1995 F-5
Consolidated Statement of Stockholders' Deficit
for the year ended December 31, 1996 F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1996 and 1995 F-7
Notes to Financial Statements F-9
</TABLE>
- 26 -
<PAGE>
PART III
Item 1. Index to Exhibits
The following list describes the exhibits filed as part of this
registration statement on Form 10-SB:
<TABLE>
<CAPTION>
Exhibit Number Exhibit Page
- -------------- --------------------------------------------------------------------- ----
<S> <C>
2.1 Articles of Amendment to Articles of Incorporation of the Company
dated July 16, 1996.*
2.2 Articles of Amendment to Articles of Incorporation of the Company
dated June 17, 1996.*
2.3 Articles of Amendment of Auto N Corporation.
2.4 Articles of Amendment of MacTay Investment Co.
2.5 Articles of Incorporation of MacTay Investment Co.
2.6 Bylaws of the Company
6.1 Leasing and Service Agency Agreement dated September 15, 1996 with the
Edward Thompson Group.
6.2 Letter of Intent with Sega Gaming Technology, Inc., dated May 13, 1996.*
6.3 Agreement, dated July 17, 1996, with Fortune Entertainment Corporation.
6.4 Share Purchase Agreement, dated September 26, 1994 among the Company,
Prisms and the shareholders of Prisms.
6.5 Agreement of Sale dated July 14, 1994 between the Company and the
shareholders of Executive Video Systems, Inc.
6.6 Agreement and Plan of Reorganization by and among the Company, Branson
Signature Resorts, Inc. and certain shareholders of Branson, dated June 1, 1995.
6.7 Letter of Agreement, dated December 17, 1996, by and between the Company
and Y.K.L. Corporation.
6.8 Joint Venture Agreement, dated August 1996, between Palace Entertainment
Limited and Hainan Bosun Tourism & Amusement Co. Ltd.
6.9 Joint Venture Agreement dated January 1996, between the Company and Hainan
Xin Dao Trading Limited.
6.10 Employment Agreement with Robert Silzer, Sr.*
6.11 Employment Agreement with Firoz Lakhani.*
6.12 Employment Agreement with Robert C. Silzer, Jr.
6.13 $250,000 Promissory Note of Firoz Lakhani dated January 30, 1996.*
6.14 $90,000 Promissory Note of Firoz Lakhani dated January 18, 1996.*
6.15 $104,000 Promissory Note of Firoz Lakhani dated January 3, 1996.*
6.16 $150,000 Promissory Note of Robert Silzer, Sr. dated January 18, 1996.*
6.17 $375,000 Promissory Note of Robert Silzer, Sr. dated January 30, 1996.*
6.18 $72,800 Promissory Note of Robert Silzer, Sr. dated January 2, 1996.*
8.1 Consent of Accountants.
27.1 Financial Data Schedule
</TABLE>
- -----------------
* Previously filed
- 27 -
<PAGE>
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ADVANCED GAMING TECHNOLOGY, INC.
DECEMBER 31, 1995 AND 1994
AND
SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
<PAGE>
CONTENTS
Page
----
Report of Independent Certified Public Accountants F-1
Financial Statements
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-4
Consolidated Statement of Stockholders'
Deficit for the year ended December 31, 1994 F-5
Consolidated Statements of Stockholders' Deficit
for the year ended December 31, 1995 F-6
Consolidated Statements of Cash Flows F-7
Notes to Financial Statements F-9
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Advanced Gaming Technology, Inc.
We have audited the accompanying consolidated balance sheets of Advanced Gaming
Technology, Inc. and subsidiaries as at December 31, 1996 and 1995, and the
consolidated statements of operation, stockholders' deficit, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Advanced Gaming Technology,
Inc. and subsidiaries as of December 31, 1996 and 1995 and the results of their
operations, and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
Respectfully submitted,
/S/ ROBISON, HILL & CO.
----------------------------
Certified Public Accountants
Salt lake City, Utah
January 27, 1997
F-1
<PAGE>
Advanced Gaming Technology, Inc.
CONSOLIDATED BALANCE SHEETS
As at December 31
-------------------
1996 1995
---- ----
ASSETS
Current Assets
Cash and cash equivalents $ 76,615 $ 17,739
Accounts receivable, net of allowance of
$85,500 ($63,079 in 1995) 56,492 34,827
Inventory (note 2 (b)) 43,000 18,000
Prepaid expenses 129,969 71,705
Notes receivable (note 3) 129,426 --
---------- ----------
Total current assets 435,502 142,271
---------- ----------
Notes Receivable (note 3) 1,099,300 --
Property and Equipment (note 2(c))
Office equipment 103,985 43,408
Leasehold improvements 30,132 --
Display equipment 20,763 17,521
Product molds 330,718 --
Revenue generating equipment - uninstalled 930,564 226,667
Revenue generating equipment - installed 1,137,131 510,436
---------- ----------
2,553,293 798,032
Less - accumulated depreciation 583,412 248,798
---------- ----------
Net property and equipment 1,969,881 549,234
---------- ----------
Other Assets
Security deposit 50,930 50,930
Deferred development costs 131,313 --
Gaming equipment 765,138 175,359
Intangible assets (notes 2 (d) and 4) 856,069 1,061,782
Investment - Land 4,137,432 4,126,307
---------- ----------
Total other assets 5,940,882 5,414,378
---------- ----------
Total assets $9,445,565 $6,105,883
========== ==========
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
Advanced Gaming Technology, Inc.
CONSOLIDATED BALANCE SHEETS
(Continued)
As at December 31
-------------------
1996 1995
---- ----
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Bank loan (note 5) $ 354,100 $ 175,897
Accounts payable 1,494,617 1,186,461
Accrued liabilities
Salaries, wages and other compensation 696,849 194,800
Other 984,644 1,192,975
Stockholders' loans (note 6) 28,387 931,462
Notes payable (note 7) 619,356 603,680
Convertible notes (note 8) 3,292,715 --
Deferred revenue (note 2(i)) 765,380 7,073
Current maturities of
long-term debt (note 9) 2,459,528 1,433,508
----------- -----------
Total current liabilities 10,695,576 5,725,856
Long-Term Debt (note 9) 1,911,864 2,376,941
----------- -----------
Total liabilities 12,607,440 8,102,797
----------- -----------
Commitments and Contingencies (notes 15 and 16)
Stockholders' Deficit
Preferred stock-10% cumulative $.10
par value; authorized 4,000,000
shares; issued - nil -- --
Common stock - $.005 par value;
authorized 150,000,000 shares;
issued and outstanding 42,248,368
in 1996 and 27,138,517 in 1995 211,242 135,693
Additional paid-in capital 20,000,471 15,611,020
Accumulated deficit (23,373,588) (17,743,627)
----------- -----------
Net stockholders' deficit (3,161,875) (1,996,914)
----------- -----------
Total liabilities and
stockholders' deficit $ 9,445,565 $ 6,105,883
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
Advanced Gaming Technology, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended
December 31,
---------------------
1996 1995
---- ----
Revenues $ 1,155,035 $ 381,928
Cost of sales 282,509 66,782
----------- -----------
Gross margin 872,526 315,146
----------- -----------
Expenses
Research and development 1,691,546 2,180,865
General and administration 2,510,106 2,077,779
----------- -----------
4,201,652 4,258,644
----------- -----------
Operating loss (3,329,126) (3,943,498)
Other income (expense)
Foreign exchange adjustments(note 2 (e)) (6,616) 3,209
Financing costs and interest (1,223,210) (1,923,756)
China development costs and
equipment write-downs (976,129) --
Equipment write-down (94,880) --
Loss on sales of assets -- (23,728)
----------- -----------
Loss from continuing operations (5,629,961) (5,887,773)
Discontinued operations (note 10) -- (3,095,504)
----------- -----------
Net Loss $(5,629,961) $(8,983,277)
Net loss per common share
Loss from continuing operations $ (0.16) $ (0.34)
Loss from discontinued operations -- (0.18)
----------- -----------
Net loss $ (0.16) $ (0.52)
=========== ===========
Weighted average common shares outstanding
(note 2 (g)) 35,794,434 17,273,196
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
Advanced Gaming Technology, Inc.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
for the year ended December 31, 1995
<TABLE>
<CAPTION>
Price
Range Common Stock Additional
Per Share ----------------------- Paid-in Accumulated
($) Shares Amount Capital Deficit Total
---------- ---------- -------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 10,106,516 $ 50,532 $ 6,196,851 $ (8,760,350) $(2,512,967)
Issuance of common shares
for cash, less finders fees of $75,000 0.15-0.63 2,666,667 13,333 794,167 -- 807,500
for security 0.26-1.60 1,535,000 7,675 -- -- 7,675
for financing costs and interest,
less finders fees of $54,219 0.26-1.75 880,206 4,401 676,894 -- 681,295
to settle stockholders loans 0.40-0.92 3,452,940 17,265 1,638,984 -- 1,656,249
to acquire subsidiary 0.63 5,999,820 30,000 3,807,158 -- 3,837,158
for signing bonuses 0.41-1.50 160,000 800 151,612 -- 152,412
for consulting services 0.39-1.82 1,279,368 6,397 915,644 -- 922,041
for share and warrant options 1.50 450,000 2,250 672,750 -- 675,000
to settle long-term debt 1.25 608,000 3,040 756,960 -- 760,000
Net loss for the year -- -- -- (8,983,277) (8,983,277)
---------- -------- ----------- ------------ -----------
Balance at December 31, 1995 27,138,517 $135,693 $15,611,020 $(17,743,627) $(1,996,914)
========== ======== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
Advanced Gaming Technology, Inc.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
for the year ended December 31, 1996
<TABLE>
<CAPTION>
Price
Range Common Stock Additional
Per Share ----------------------- Paid-in Accumulated
($) Shares Amount Capital Deficit Total
---------- ---------- -------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 27,138,517 $135,693 $15,611,020 $(17,743,627) $(1,996,914)
for cash, less finders fees of $30,000 0.15-0.50 7,266,666 36,333 1,233,667 -- 1,270,000
for security 0.45-0.61 1,099,794 5,499 -- -- 5,499
to settle stockholders loans 0.25-0.50 1,346,452 6,732 465,962 -- 472,694
to acquire subsidiary 1.25 300,000 1,500 373,500 -- 375,000
for signing bonuses 0.06 450,000 2,250 23,850 -- 26,100
for consulting services 0.30-0.79 105,000 525 43,650 -- 44,175
for share and warrant options 0.22-0.50 3,380,273 16,902 1,314,880 -- 1,331,782
to settle convertible notes 0.50-1.20 666,666 3,333 621,667 -- 625,000
for finders fees 0.20-1.20 395,000 1,975 290,775 -- 292,750
to terminate employment contract 0.22 100,000 500 21,500 -- 22,000
Net loss for the year -- -- -- (5,629,961) (5,629,961)
---------- -------- ----------- ------------ -----------
Balance at December 31, 1996 42,248,368 $211,242 $20,000,471 $(23,373,588) $(3,161,875)
========== ======== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
Advanced Gaming Technology, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended
December 31,
-------------------
1996 1995
---- ----
Cash flows from operating activities:
Net loss $(5,629,961) $(8,983,277)
Adjustments to reconcile net loss to net cash
Used in operating activities:
Depreciation and amortization 1,178,357 448,986
Loss on sale of assets -- 23,728
Bad debt expense -- 35,401
Issuance of common stock for
expenses 471,955 1,828,369
Deferred revenue 758,307 7,073
Change in operating assets and liabilities:
Accounts receivable (21,665) (34,827)
Notes receivable -- 108,595
Minimum lease payments receivable -- 68,705
Inventory (25,000) 13,350
Prepaid expenses (58,264) (71,705)
Bank overdraft and revolving loan 178,203 175,897
Accounts payable 308,156 869,224
Accrued liabilities 293,718 1,025,733
----------- -----------
Net cash used in operating activities (2,546,194) (4,484,748)
----------- -----------
Cash flows from investing activities:
Intangible assets (414,432) --
Notes and advances 15,676 603,680
Purchase of property and
equipment (2,568,638) (915,064)
Security deposit -- (50,930)
Acquisition of subsidiary -- (200,000)
Acquisition of land (11,125) --
Deferred development costs (131,313) --
----------- -----------
Net cash used in investing activities (3,109,832) (562,314)
----------- -----------
F-7
<PAGE>
Advanced Gaming Technology, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Continued)
For the years ended
December 31,
-------------------
1996 1995
---- ----
Cash flows from financing activities:
Stockholders' loans 28,387 60,680
Proceeds from issuance of common stock 1,986,483 1,482,500
Proceeds from convertible notes 3,169,089 --
Finders' fees (30,000) --
Principal payments on notes payable (926,345) (853,462)
Proceeds from notes payable 1,487,288 4,189,898
----------- -----------
Net cash provided by financing activities 5,714,902 4,879,916
----------- -----------
Net increase (decrease) in cash
and cash equivalents 58,876 (167,146)
Cash and cash equivalents at beginning of year 17,739 184,885
----------- -----------
Cash and cash equivalents at end of year $ 76,615 $ 17,739
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 403,602 $ 52,138
Non cash investing and financing activities:
- --------------------------------------------
Issuance of common stock for finders' fees $ 292,750 $ 129,219
Issuance of common stock as settlement
of stockholders' loans $ 472,694 $ 1,656,249
Issuance of common stock for acquisition
of subsidiary $ 375,000 $ 3,837,158
Issuance of common stock for debt reduction $ -- $ 760,000
The accompany notes are an integral part of these financial statements.
F-8
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and December 31, 1995
NOTE 1 - HISTORY AND ORGANIZATION
The Company was incorporated under the laws of the State of Wyoming in 1963
under the name of Mactay Investment Co. At a special shareholders' meeting held
in 1987, the Corporation's name was changed to Auto N Corporation. The Company
changed its name to Advanced Gaming Technology, Inc. in 1991.
The Company's executive offices are in Vancouver, B.C. Canada. The Company
is principally engaged in the development and marketing of electronic bingo
equipment in the United States and the United Kingdom, and in the development of
gaming opportunities in Asia.
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation
of the accompanying financial statements follows.
(a) Principles of Consolidation
The consolidated financial statements include the accounts of Advanced
Gaming Technology, Inc. and its wholly-owned subsidiaries, Executive Video
Systems, Inc. Palace Entertainment Limited, Branson Signature Resorts, Inc.,
Branson Bluffs Resorts, Inc., River Oaks Resorts and Country Club, Inc., Allied
Resorts, Inc., River Oaks Holding, Inc., and Prisms, Inc. All significant
intercompany accounts and transactions have been eliminated. Joint venture
operations are accounted for under the equity method of accounting.
(b) Inventory
Inventory consists of bingo equipment parts and is carried at lower of cost
(first-in, first-out method) and market value.
(c) Property and Equipment
Property and equipment is stated at cost. Depreciation is provided in
amounts sufficient to relate the cost of depreciable assets to operations over
their estimated service lives, principally on a straight-line basis from 3 to 5
years.
Upon sale or other disposition of property and equipment, the cost and
related accumulated depreciation or amortization are removed from the accounts
and any gain or loss is included in the determination of income or loss.
F-9
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and December 31, 1995
(Continued)
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (Continued)
Expenditures for maintenance and repairs are charged to expense as
incurred. Major overhauls and betterments are capitalized and depreciated over
their useful lives.
(d) Investment - Land
Investment in real estate is carried at the lower of cost or net realizable
value.
(e) Intangible Assets
Organization costs are recorded at their acquisition costs and are
amortized to operations over their estimated useful lives of five years.
Amortization is computed on the straight-line method.
Goodwill and software rights were created by the excess of the purchase
price over cost of acquisitions made in 1995 and 1996, and are amortized on a
straight-line basis over five years. Software rights are capitalized after
technological feasibility has been established. Capitalization of computer
software cost is discontinued when the computer software product is available to
be sold, leased or otherwise marketed. Cost for maintenance and customer support
are charged to expense when incurred or when the related revenue is recognized,
whichever occurs first. Management regularly assesses the carrying amount of
intangible assets and where, in their opinion, the value is less than the
carrying amount, the loss is recognized immediately. Unamortized computer
software costs that have been capitalized are reported at net realizable value.
The company has implemented the provisions of SFAS No. 121, "Accounting for
the impairment of Long-Lived Assets and for Long-Lived Assets Disposed of." SFAS
No. 121 requires that long-lived assets and certain identifiable intangibles to
be held and used by the Company be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. If the sum of the expected future cash flows from the use of the
assets and its eventual disposition (undiscounted and without interest charges)
is less than the carrying amount of the asset, an impairment loss is recognized.
(f) Translation of Foreign Currency
All balance sheet accounts of foreign operations are translated into U.S.
dollars at the year-end rate of exchange and statement of operations items are
translated at the weighted average exchange rates for the year. The resulting
translation adjustments are made directly to a separate component of the
stockholders' equity. Certain foreign activities are considered to be an
extension of the U.S.
F-10
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and December 31, 1995
(Continued)
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (Continued)
operations, and the gain or loss resulting from re-measuring these transactions
into U.S. dollars is included in income. Gains or losses from other foreign
currency transactions, such as those resulting from the settlement of foreign
receivables or payables, are included in the Statements of Operations.
(g) Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
or to bach equivalents.
(h) Net Loss Per Common Share
Net loss per common share is calculated using the weighted average number
of common shares outstanding during each year. Common share equivalents are not
considered in the calculation of the weighted average number of shares
outstanding because they would decrease the net loss per common share.
(i) Revenue Recognition
Revenue is generated on operating leases and is recognized and amortized
over the lease term on a straight-line basis except where the agreement provides
for a percentage of gross revenue in which case it is recognized on an accrual
basis.
(j) Deferred Revenue
Revenues are deferred until commencement of the project operations and will
be recognized as revenue over the lesser of the project term and five years.
(k) Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Certain reclassifications have been made in the 1995 financial statements
to conform with the 1996 presentation.
F-11
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and December 31, 1995
(Continued)
NOTE 3 - NOTES RECEIVABLE
Notes receivable consist of the following:
1996 1995
---- ----
Due from employees pursuant to the exercise of
stock options, repayable over five years,
interest at U.S. base rate $ 103,595 $ --
Due from officers/directors pursuant to the
exercise of stock options, interest repayable
monthly at U.S. base rate, principal due 2001 1,125,131 --
---------- ----
1,228,726 --
Less current maturities (129,426) --
---------- ----
Net notes receivable $1,099,300 $ --
========== ====
NOTE 4 - INTANGIBLE ASSETS
Intangible assets consist of the following:
1996 1995
---- ----
Manufacturing license rights
Gross $ 500,000 $ 500,000
Accumulated amortization and allowance (500,000) (50,000)
---------- ----------
Net -- 450,000
---------- ----------
Software rights
Gross 1,106,837 692,405
Accumulated amortization (286,042) (121,171)
---------- ----------
Net 820,795 571,234
---------- ----------
Organization Costs
Gross 57,175 57,175
Accumulated amortization (21,901) (16,627)
---------- ----------
Net 35,274 40,548
---------- ----------
Net Intangible assets $ 856,069 $1,061,782
========== ==========
F-12
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and December 31, 1995
(Continued)
NOTE 5 - BANK LOAN
The Company's line-of-credit agreement with a bank has terminated
and these funds are due on demand, including interest at the bank's
prime rate plus 5%.
NOTE 6 - STOCKHOLDERS' LOANS
Stockholders' loans consist of the following:
1996 1995
---- ----
Due to employees, non-interest bearing $ -- $ 183,333
Due to officer/director, non-interest bearing 28,387 25,000
Due to stockholders, non-interest bearing -- 723,129
-------- ---------
28,387 931,462
Less current maturities (28,387) (931,462)
-------- ---------
Net stockholders' loans $ -- $ --
======== =========
Of the 1995 loans, $931,462 was settled in 1996 for stock.
Of the 1996 loans, $28,837 was settled in 1997, for stock.
NOTE 7 - NOTES PAYABLE
1996 1995
---- ----
Due to a corporation, interest at 12%, repayable
at $15,000 per month, secured by certain equipment
and 500,000 shares of the Company $109,785 $134,750
Due to individuals, interest equal to principal,
principal and interest repayable in January 1996,
unsecured -- 291,848
Due to a corporation, interest at 10%, principal
and interest due at year end, unsecured -- 24,172
Due to an individual, interest at U.S. base rate,
due on demand, unsecured 100,000 70,000
Due to a corporation, interest at 10%, principal
and interest due on demand, unsecured 199,910 82,910
Due to an individual, interest negotiated at $20,000,
secured by property, principal and interest due in
February 1997 106,441 --
Due to a corporation, interest negotiated at $10,000,
secured by property, principal and interest due in
February 1997 103,220 --
-------- --------
Total notes payable $619,356 $603,680
======== ========
F-13
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and December 31, 1995
(Continued)
NOTE 8 - CONVERTIBLE NOTES
Due to individuals and corporations, bearing interest at rates between U.S.
base rate and 12% per year with varying maturity dates up to October, 1997. The
notes are convertible into common stock of the Company at prices ranging from
$0.25 to $1.50 per share. Certain convertible notes have warrants attached
thereto granting the holders the option to purchase a total of 3,440,000 common
shares of the Company at prices ranging from $0.50 to $1.30 per share. These
warrants are included in Note 11 - Stock Options and Warrants.
NOTE 9 - LONG-TERM DEBT
Long-term debt consists of the following:
1996 1995
---- ----
Notes payable with interest at 9%, quarterly
interest only payments through July 2002,
principal due in July 2002, collateralized
by deed of trust $1,339,792 $1,339,792
Note payable with interest at 10%, quarterly
interest only, balance due on demand,
collateralized by deed of trust. 60,812 60,812
Loan payable with interest at 13.2%, due in
monthly installments of $31,000 including
interest, matures August 1997, secured by
equipment 293,862 --
Note payable with interest at 3% above the
Chase Manhattan prime lending rate, due
in quarterly principal installments of
$17,857 plus accrued interest, matures
January 2002 464,286 500,000
Note payable with interest at 10%, principal
is due at year end, and is secured by 100,000
shares of the Company 75,106 75,106
F-14
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and December 31, 1995
(Continued)
NOTE 9 - LONG-TERM DEBT (Continued)
1996 1995
---- ----
Note payable with interest at 10%, due in monthly
installments of $1,613 including interest,
collateralized by contract for deed $ 37,644 $ 37,644
Note payable with interest at 10%, due on demand 3,600 3,600
Note payable with interest at 9%, due on demand 55,000 55,000
Note payable with interest at 8%, due in August
1997, secured by software rights and 250,000
shares of the Company, repayable in monthly
installments of $11,828 94,020 496,516
Loan payable with interest at 20%, due in monthly
installments of $12,953 including interest,
matures June 1997, secured by 500,000 shares
of the Company; additionally, the Company is
required to pay 10% of net revenues from a
joint venture project. 102,965 191,979
Convertible Debenture, total facility $1,000,000
plus accrued interest, interest at 2% per month
compounded monthly, principal and accrued interest
convertible into common stock in whole or part at
holder's option, redeemable by the Company at any
time to maturity; subsequent to year end, $449,205
was converted to common stock of the Company. 1,098,492 450,000
Bonus consideration of $150,000 per year for four
years due on loan anniversary, convertible to stock
at holder's option. 600,000 600,000
Loan payable with interest at 13/2%, due in monthly
Loan payable with interest at 12%, due in monthly
installments of $1,000 including interest, matures
December 1999, secured by a patent 32,070 --
Loan payable with interest at 8.5%, due in monthly
installments of $56,121 including interest,
secured by equipment and 1,200,000 shares of
the Company 113,743 --
---------- ----------
4,371,392 3,810,449
Less current maturities 2,459,528 1,433,508
---------- ----------
Net long-term debt $1,911,864 $2,376,941
========== ==========
F-15
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and December 31, 1995
(Continued)
NOTE 9 - LONG-TERM DEBT (Continued)
Annual principal payments on long-term debt are as follows:
1997 $2,459,528
1998 375,034
1999 197,038
2000 --
2001 --
thereafter 1,339,792
----------
$4,371,392
==========
NOTE 10 - DISCONTINUED OPERATIONS
In June 1995, the Company acquired two separate real estate properties in
Branson, Missouri. The resort property (Branson Bluffs Resort, Inc.) had limited
existing development on the site (restaurant, golf course, motel, time share
units). In order to bring this resort operation into an economically viable
segment, a substantial capital injection had to be made. Since the Company's
focus is not on long-term real estate development, the Company disposed of this
holding by forfeiture to the mortgage holder on November 17, 1995.
The Company's remaining property comprises approximately 178 acres of prime
development site in Stone Country, Missouri. This asset has shown substantial
appreciation from the date of acquisition. The Company is currently attempting
to capitalize on this asset.
1996 1995
---- ----
Loss from operations (income taxes - nil) $ -- $ (83,594)
Loss on disposal (income taxes - nil) -- (3,011,910)
---- -----------
Total discontinued operations $ -- $(3,095,504)
==== ===========
F-16
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and December 31, 1995
(Continued)
NOTE 11 - STOCK OPTIONS AND WARRANTS
All Options and warrants have been granted at exercise prices greater than
the market value on the date of granting except for 4,225,000 options issued to
employees. All options vest 100% at date of grant.
1996 1995
---- ----
Options outstanding, beginning of year 7,224,097 625,000
Granted 11,791,667 6,999,097
Expired (1,212,124) (350,000)
Exercised (3,380,273) (50,000)
------------ ------------
Options and warrants outstanding, end of year 14,423,367 7,224,097
============ ============
Option and warrant price for options and
warrants outstanding, end of year $0.25 - 3.00 $0.25 - 2.19
============ ============
Options and warrants granted subsequent to
year end 1,850,000 2,611,400
============ ============
Option and warrant price range granted
subsequent to year end $0.50 - 1.00 $0.25 - 2.19
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." As permitted by the standard, the Company has elected to continue
to follow existing accounting guidance, Accounting Principles Board Opinion No.
25 and related interpretations (APB No. 25), for stock-based compensation.
However, SFAS No. 123 requires companies electing to follow existing accounting
rules to disclose in a note the pro forma effects as if the fair value based
method of accounting had been applied. The Company recorded compensation expense
of $1,074,453 and $92,275 for the years ended December 31, 1996 and 1995
respectively, in connection with its performance shares, restricted stock and
other stock compensation awards. In accordance with APB No. 25, no compensation
expense has been recognized for the Company's stock options. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions for grants
in 1996 and 1995, respectively: dividend yield of 0.0 percent for both years,
expected volatility of 149.05 percent for both years, risk-free interest rates
of 6.2 percent and 5.3 percent and expected lives of 5 years for both years. If
compensation expense for the Company's stock options granted in 1996 and 1995
had been determined based on the fair value at the grant dates for such awards
in accordance with SFAS No. 123, the effect on the Company's net income and
earnings per share for each of the years ended December 31, 1996 and 1995 would
have been immaterial.
F-17
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and December 31, 1995
(Continued)
NOTE 12 - SEGMENTED INFORMATION
Geographic segments:
1996 1995
---- ----
Revenue
United States $1,155,035 $ 381,928
Operating loss
Asia $ 461,017 $ 794,058
United States 779,278 507,530
Other corporate expenses 2,088,831 2,641,910
---------- ----------
$3,329,126 $3,943,498
========== ==========
1996 1995
---- ----
Assets
Asia $ 805,138 $ 666,359
United States 8,538,575 5,370,419
Canada 101,852 69,105
---------- ----------
$9,445,565 $6,105,883
========== ==========
NOTE 13 - INCOME TAXES
Deferred taxes result from temporary differences in the recognition of
income and expenses for income tax reporting and financial statement reporting
purposes. Deferred benefits of $1,914,000 and $3,000,000 for the years ended
December 31, 1996 and 1995 respectively, are the result of net operating losses
and the gaming license rights reserve.
The Company has recorded net deferred income taxes in the accompanying
consolidated balance sheets as follows:
As at December 31
-----------------------
1996 1995
---- ----
Future deductible temporary differences
related to reserves, accruals, and net
operating losses $ 8,000,000 $ 6,100,000
Valuation allowance (8,000,000) (6,100,000)
----------- -----------
Net deferred income tax $ -- $ --
=========== ===========
As of December 31, 1996, the Company had a net operating loss ("NOL")
carryforward for
F-18
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and December 31, 1995
(Continued)
NOTE 13 - INCOME TAXES (Continued)
income tax reporting purposes of approximately $23,000,000 available to offset
future taxable income. This net operating loss carryforward expires at various
dates between December 31, 2008 and 2011. A NOL generated in a particular year
will expire for federal tax purposes if not utilized within 15 years.
Additionally, the Internal Revenue Code contains provisions which could reduce
or limit the availability and utilization of these NOLs if certain ownership
changes have taken place or will take place. In accordance with SFAS No. 109, a
valuation allowance is provided when it is more likely than not that all or some
portion of the deferred tax asset will not be realized. Due to the uncertainty
with respect to the ultimate realization of the NOLs, the Company established a
valuation allowance for the entire net deferred income tax asset of $8,000,000
as of December 31, 1996, which includes $603,000 from the gaming license and
manufacturing rights reserve and $7,100,000 from net operating loss
carryforward. Also consistent with SFAS No. 109, an allocation of the income
(provision) benefit has been made to the loss from continuing operations.
The differences between the effective income tax rate and the federal
statutory income tax rate on the loss from continuing operations are presented
below.
For the years ended
December 31,
-------------------
1996 1995
---- ----
Benefit at the federal statutory rate of 34% $ 1,914,000 $ 3,000,000
Nondeductible expenses (20,000) (88,000)
Utilization of gaming license rights (212,000) --
Utilization of net operating loss carryforward (1,467,000) (2,919,000)
Other (215,000) 7,000
----------- -----------
$ -- $ --
=========== ===========
NOTE 14 - ACQUISITION OF SUBSIDIARIES (Continued)
(a) Prisms, Inc.
On September 26, 1996, pursuant to an agreement, the Company acquired all
of the capital stock of Prisms, Inc., a North Carolina corporation which holds
certain patents and trademarks for the development of bingo and other
entertainment games, in exchange for 300,000 shares of the Company. The
acquisition has been accounted for by the purchase method.
In the event that the shares of the Company trade at less than $2.00 per
share by October 1, 1997, the Company will issue additional shares sufficient to
adjust the purchase prices to an equivalent market value of $600,000.
F-19
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and December 31, 1995
(Continued)
NOTE 14 - ACQUISITION OF SUBSIDIARIES (Continued)
The Company is also required to issue up to 200,000 further shares at a
guaranteed price of $2.00 upon commencement of revenues from each patented
product developed. Additionally royalties of 2% will be payable on net revenues
generated.
(b) Executive Video Systems, Inc.
On February 9, 1995, pursuant to an agreement, the Company acquired all of
the capital stock of Executive Video Systems, Inc., a Maryland Corporation. The
acquisition has been accounted for by the purchase method.
The following is a summary of the assets acquired, at fair value assigned
thereto:
Equipment $ 22,672
Intangible assets - Software rights 692,978
--------
Total $715,650
========
Purchase consideration:
Cash $200,000
Promissory notes 515,650
--------
Total $715,650
========
The Company has issued 250,000 common shares held in escrow as security to
the promissory notes. All of the capital stock of Executive Video Systems, Inc.
is held in escrow as security to the promissory notes.
The Company is committed to pay to former stockholders of Executive Video
Systems, Inc. a royalty of three percent of gross revenues from the use of its
software rights until February 9, 1998. During 1996, a total of $22,914 was paid
in royalties ($10,342 in 1995).
(c) Branson Signature Resorts, Inc.
On June 22, 1995, pursuant to an agreement, the Company acquired all of the
capital stock of Branson Signature Resorts, Inc. and its wholly-owned
subsidiaries. Branson Signature Resorts, Inc. is a resort and land developer
located in Branson, Missouri. The acquisition was accounted for by the purchase
method. The following is a summary of the net assets acquired, at fair value
assigned thereto:
F-20
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and December 31, 1995
(Continued)
NOTE 14 - ACQUISITION OF SUBSIDIARIES (Continued)
Investment-land $ 4,090,000
Property and equipment 3,880,000
Current liabilities (573,322)
Long-term debt (2,783,303)
-----------
$ 4,613,375
===========
The Company issued 5,999,820 shares under Regulation S and 144 of the
Securities Act of 1934. On November 17,. 1995, the Company determined that it
was in the best interest of the Company to divest itself of the resort
operations segment of its business (note 10).
NOTE 15 - COMMITMENTS
The Company leases its offices and certain equipment under long-term
operating leases. Future minimum lease payments under these operating leases are
as follows:
1997 $146,436
1998 146,285
1999 145,663
2000 38,330
2001 664
NOTE 16 - CONTINGENCIES
(a) Proposed operations in China - In February 1995, the Province of
Guangdong, China granted a business license and certificate of approval for the
formation of a joint venture between the Company and Gaoming City Santian
Economic Development Company, a company affiliated with the City of Gaoming,
Guangdong, China to manufacture and sell in China a variety of electronic gaming
machines, including the Company's electronic bingo products. The Company will
own eighty percent of the joint venture and Santian will own twenty percent.
Pursuant to the joint venture agreement, the Company will contribute the
technology and, in conjunction with a major gaming manufacturer, will design and
build the manufacturing facilities and provide $5,000,000 in start-up capital.
The Company is currently searching for a major gaming manufacturer to pursue
this project and to provide the financing.
In August 1996, Palace Entertainment Limited, a wholly-owned subsidiary of
the Company under the laws of the British Virgin Islands entered into a joint
venture agreement with Hainan
F-21
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and December 31, 1995
(Continued)
NOTE 16 - CONTINGENCIES (Continued)
Bosun Tourism & Amusement Co. Ltd., a company organized under the laws of
China in connection with the operation of a 23 seat Royal Ascot Horse Racing
Machine in Haikou, Hainan Island, China. Under the Hainan Bosun Joint Venture
Agreement, Palace Entertainment is to provide the Royal Ascot Unit and is
responsible for the operation, maintenance and repair of the machine as well as
the hiring of personnel to operate the machine. The Company purchased the Royal
Ascot Unit from Sega pursuant to a Purchase, Finance and Security Agreement,
dated February 21, 1996.
In January 1996, the Company entered into a joint venture agreement with
Hainan Xin Dao Trading Limited in connection with the operation of 150
slot/entertainment machines in Haikou, Hainan Island, China. Under the Hainan
Xin Joint Venture Agreement, the Company is responsible for providing the slot
machines and working capital as well as managing the slot machines.
Currently, neither of these centers is operational due to the periodic
nationwide clean up of various black market activities, prostitution and
gambling. This clean up campaign ended at or about the end of July 1996, and
entertainment centers, such as the centers described above, which are not
considered gambling and therefore are legal, are gradually beginning to re-open
and new licenses are currently being issued. The Company is cautiously
optimistic that both of the entertainment centers described above will be
operational in the near future.
Due to delays caused by the nationwide clean up in China, the Company
entered into a Letter Agreement dated December 17, 1996 with Y.K.L. Corporation,
a company organized under the laws of the Philippines pursuant to which Y.K.L.
has agreed to lease, for a period of 120 days commencing on the date of
installation, 25 of the Company's slot machines, which were originally to be
used in the Hainan Xin Joint Venture, for use on Y.K.L.'s luxury ocean liners.
(b) Proposed operations in the United Kingdom - The Company entered into a
Leasing and Service Agency Agreement, dated September 15, 1996 with Edward
Thompson Group, a privately held corporation established in 1867 and organized
under the laws of the United Kingdom. Edward Thompson has been producing bingo
tickets since 1957 and, the Company believes the leading manufacturer and
supplier of bingo paper and related products in the United Kingdom.
F-22
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and December 31, 1995
(Continued)
NOTE 16 - CONTINGENCIES (Continued)
The Service Agency Agreement requires the Company to use its best efforts
to engineer, manufacturer, design and develop a wireless electronic hand-held
bingo unit named PartiMax for the United Kingdom bingo market.
(c) The Company entered into an Agreement, dated July 17, 1996 with Fortune
Entertainment Corporation, a company organized under the laws of the Bahamas,
under which Fortune Entertainment has the right to receive a participating
interest in the Company's various international ventures (China, Philippines and
United Kingdom). If Fortune Entertainment exercises all of its rights under the
Participation Agreement, the Company will receive approximately $5,725,000 for
participating in the various ventures of the Company. As of December 31, 1996,
Fortune Entertainment had provided the Company with approximately $990,000.
(d) Pursuant to the purchase of Prisms, Inc., on September 26, 1996, the
Company has a contingent obligation to issue additional shares of the Company to
the extent that the shares of the Company trade at less than $2.00 per share by
October 1, 1997. The number of shares to be issued will be determined by the
difference between the market price of the 300,000 shares originally issued and
$600,000. (See also Note 14(a)).
(e) In addition to ordinary routine litigation incidental to its business
operation, which the Company does not believe, in the aggregate, will have a
material adverse effect on the Company, or its operations, the Company is
engeged in the following lawsuits:
Braintech, Inc. filed a statement of claim in the Supreme Court of British
Columbia on November 24, 1995 and amended on March 26, 1996 claiming default by
the Company on three promissory notes. Braintech is claiming damages in the
amount of $200,000, plus interest of ten percent per annum, and costs. The
Company has filed a statement of defense denying the material allegations of the
statement of claim and has opposed a motion for summary judgement.
In January 1996, Tierra Corporation commenced an action in the Circuit
Court of Stone County, Missouri, claiming that River Oaks Resort and Country
Club, Inc. a Texas corporation and a subsidiary of Branson ("River Oaks Resort")
defaulted on a promissory note. Judgement is sought in the principal amount of
$75,106, plus interest since October 18, 1995 at 10% per annum. An answer has
been filed on behalf of River Oaks averring that Tierra has not performed
conditions precedent to assessing any such note has provided and, in addition, a
counterclaim asserting Tierra disposed of stock collateral in a
F-23
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and December 31, 1995
(Continued)
NOTE 16 - CONTINGENCIES (Continued)
commercially unreasonable manner. Preliminary discovery has occurred but no
depositions have been taken.
In February 1996, P.D.I., LLC, a Missouri limited liability company
commenced an action in the Circuit Court of Stone County Missouri, claiming
breach of a real estate purchase agreement which in part, provided for the
construction of a sewage treatment facility for which damages are claimed,
including the awarding to PDI of all escrow funds, costs and expenses incurred
by PDI over and above the amount of escrow funds and cost and expenses,
including attorney fees in connection with the commencement of the action.. In
response, the Company and River Oaks Resort have counterclaimed for damages, in
an amount to be determined at trial, incurred when plaintiff PDI withdrew funds
from the escrow fund created for construction of the sewage treatment facility
and the permit application for construction approval by the Missouri Department
of Natural Resources. Moreover, a claim has also been made River Oaks Resort and
the Company that subsequent development attempted by PDI has encroached upon
property development belonging to River Oaks Resort and the Company without
right to do so, including damages for disruption resulting therefrom.
In April 1996, Larry Newman commenced a mechanics' lien in the Circuit
Court of Stone County, Missouri, seeking $177,282, plus interest, for excavation
work performed during the period between July 19, 1995 to September 25, 1995 on
a road across the River Oaks development in Stone County. Thereafter, on or
about June 24, 1996, Jack Holt filed a similar petition in the Circuit Court of
Stone County, Missouri, claiming a mechanic's lien for engineering and land
survey during the period May 16, 1995 to July 4, 1995 for a road across the
River Oaks development property in the amount of $9,610, plus interest. The Holt
case has now been consolidated in the case originally filed by Newman. The
Company has filed a counterclaim alleging Newman and Holt extended the road
beyond the boundaries of the River Oaks development property onto land owned by
Sunset Cove, Ltd., a Missouri corporation. The court has since ordered Sunset
Cove, Ltd., joined as a party needed for just adjudication. Discovery has not
yet commenced.
On November 15, 1996, Fortunet, Inc., a Nevada corporation filed a patent
infringement claim in the United States district Court Southern District of
California against the company and certain other companies which manufacture and
distribute electronic bingo systems, claiming the that the defendants, including
the Company, infringed Fortunet's United States Patent No. 4,624,462. Fortunet
seeks to enjoin the defendants from any further alleged infringement of the
Patent and is seeking actual and enhanced damages as well as attorneys fees and
other costs.
F-24
<PAGE>
Advanced Gaming Technology, Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and December 31, 1995
(Continued)
NOTE 17 - SUBSEQUENT EVENTS
In January, 1997, the investigation of the Company previously commenced by
the United States Securities and Exchange Commission ("SEC"), in compliance with
which the Company furnished documents to the SEC, was terminated and no
enforcement action was recommended by the SEC.
On January 17, 1997 the Company filed a registration statement (Form 10SB)
with the SEC to register shares of its capital stock under Section 12 of the
Securities Act of 1934. This filing becomes effective 60 days after filing, at
which time the Company will become a "reporting issuer".
In February, 1997 the Company negotiated financing totaling $2,137,500 of
which $1,504,800 has been received. This financing is in the form of 12%
Subordinated Convertible Redeemable Debentures. These funds have been used to
meet the Company's working capital requirements and the settlement of bank and
other debt.
Subsequent to year end, $1,598,404 of certain debt and liabilities was
settled by the issuance of 4,634,129 common shares.
F-25
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant has duly caused this Amendment to registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
Advanced Gaming Technology, Inc.
Date: May 6, 1997 By: /s/ Firoz Lakhani
---------------------------------
Firoz Lakhani, President, Chief
Operating Officer and Director
This registration statement has been signed by the following persons
in the capacities and on the dates indicated.
Name Title Date
- ---------------------- -------------------------- ---------------
/s/ Robert C. Silzer, Sr. Chairman, Chief Executive Officer May 6, 1997
- ---------------------- and Director
Robert C. Silzer, Sr.
/s/ Donald Robert MacKay Chief Financial Officer May 6, 1997
- ------------------------
Donald Robert MacKay
/s/ Firoz Lakhani President, Secretary, Chief May 6, 1997
- ---------------------- Operating Officer and Director
Firoz Lakhani
EXHIBIT 2.3
ARTICLES OF AMENDMENT OF
AUTO N CORPORATION
The Articles of Amendment to the original Articles of Incorporation of Auto N
Corporation, a Wyoming corporation, are set forth as follows:
A. ARTICLE I - Name
The name of the corporation is Auto N Corporation.
AMENDMENT - ARTICLE I - Name
The name of the corporation is amended to: Advanced Gaming Technology, Inc.
B. ARTICLE IV - Stock
The aggregate number of shares of common stock which this corporation shall have
authority to issue is 10,000,000 shares of five mil($0.005) par value common
stock.
B. AMENDMENT - ARTICLE IV - Stock
The aggregate number of shares of stock which this corporation shall have
authority to issue is 10,000,000 common shares of five mil ($0.005) par value
common stock and four million shares of cumulative, ten percent (10%) cumulative
preferred stock with a ten cent ($0.10) par value.
C. Date of Adoption: The aforesaid Amendments to the Articles of Incorporation
of Auto N Corporation, were adopted at a special Shareholders Meeting held April
22, 1991.
D. As of the date of the Special Shareholders Meeting the corporation had issued
and outstanding three million twenty thousand (3,020,000) of $0.005 par value
stock, all of which were entitled to vote on the proposed Amendments. None of
the shares of the corporation were entitled to vote as a class.
E. At the Special shareholders Meeting held April 22, 1991, two million five
hundred seventy thousand (2,570,000) voted in favor of the Amendments to Article
I and Article IV and zero (0) voted against the Amendments. None of the shares
were entitled to vote as a class.
Dated this 22nd day of April, 1991.
- -------------------------------- --------------------------------
Robert M. Nordstrom John Richardson
Secretary President
EXHIBIT 2.4
ARTICLES OF AMENDMENT OF
MACTAY INVESTMENT CO.
The Articles of Amendment to the original Articles of Incorporation of Mactay
Investments Company, a Wyoming Corporation are set forth as follows:
A. ARTICLE I - Name
The name of the Corporation is Mactay Investment Co.
B. ARTICLE I - Name
The name of the Corporation is amended to: Auto N Corporation.
B. ARTICLE IV - Stock
The aggregate number of shares of common stock which this corporation shall have
authority to issue is 500 shares, $100.00 par value per share.
AMENDMENT ARTICLES IV - Stock
The aggregate number of shares of common stock which this corporation shall have
authority to issue is 10,000,000 shares of five mils par ($0.005).
C. Date of Adoption: The aforesaid amendments to the Articles of Incorporation
of Mactay Investments Company, were adopted at a special shareholders meeting
held June 19, 1987.
D. As of the date of the special shareholders meeting the corporation had issued
and outstanding Five Hundred (500) shares of $100.00 par value stock, all of
which were entitled to vote on the proposed amendments. None of the shares of
the Corporation were entitled to vote as a class.
E. At the special shareholders meeting held June 19, 1987, Five hundred (500)
shares voted in favor of the amendments to Article I and IV respectively and
zero (0) voted against the amendments. None of the shares were entitled to vote
as a class.
Dated this 19th day of June, 1987.
- ----------------------------------
Secretary
- ----------------------------------
President
EXHIBIT 2.5
ARTICLES OF INCORPORATION OF
MACTAY INVESTMENT CO.
I, the undersigned, Gordon MacManus, over the age of twenty-one years, acting as
incorporator of a corporation under the Wyoming Business Corporation Act, adopt
the following Articles of Incorporation:
I.
The name of the corporation is MacTAY Investment Co.
II.
The period of its duration is perpetual unless otherwise voluntarily
terminated by the corporation.
III.
The purpose for which the corporation is organized is to have unlimited power to
engage in and to do any lawful act concerning any or all lawful businesses for
which corporations may be organized under the Wyoming Business Corporation Act.
IV.
The aggregate number of shares which the corporation shall have authority to
issue is five hundred, common only, having a part value of $100.00 per share.
V.
The corporation will not commence business until consideration of a value of
at least $500.00 has been received for the issuance of shares.
VI.
The address of the corporation's initial registered office shall be 2321 Drake
Place, Casper, Wyoming, and the initial registered agent at such address is
Gordon MacManus.
VII.
There shall be three directors constituting the initial board of directors,
and the persons designed to serve as such directors until the first annual
meeting of shareholders or until their successors are elected and qualified are:
Gordon MacManus, Leona MacManus and Donald E. Chapin.
VIII.
The name and address of the incorporator is Gordon MacManus, 2321 Drake Place,
Casper, Wyoming.
DATED this 18th day of November, 1963.
- -------------------------------------
Gordon MacManus
STATE OF WYOMING )
) ss
COUNTY OF NATRONA )
Gordon MacManus, of lawful age, being first duly sworn, says that he is the
incorporator mentioned in the foregoing Articles of Incorporation, that he has
read the same, knows the contents thereof and that the statements therein
contained are true, as he verily believes.
- --------------------------------------
Gordon MacManus
Subscribed and sworn to before me this 18 day of November, 1963.
- --------------------------------------
Notary Public
My commission expires:
May 28, 1966
EXHIBIT 2.6
BY-LAWS OF
ADVANCED GAMING TECHNOLOGY, INC.
ARTICLE 1 - OFFICES
The principal office of the corporation shall be located in the City
and County of San Diego, State of California, or such other place as the board
of directors may from time to time designate. The corporation may have such
other offices, either within or without the state, as the business of the
corporation may require and as the board of directors may from time to time
designate.
ARTICLE II - STOCKHOLDERS
1. ANNUAL MEETING
The annual meeting of the stockholders shall be held each year on a
date and at a time designated by the board of directors. The date so designated
shall be within five (5) months after the end of the fiscal year of the
corporation, and within fifteen (15) months after the last annual meeting. At
each annual meeting directors shall be elected, and any other proper business
within the power of the stockholders may also be transacted.
2. SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president or vice
president, or by one or more stockholders holding shares in the aggregate
entitled to vote of not less than twenty-five (25) percent of all outstanding
shares of the corporation entitled to vote at the meeting, unless otherwise
prescribed by statute.
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president, any
vice president, or the secretary of the corporation. The officer receiving the
request shall cause notice to be promptly given to the stockholders entitled to
vote, in accordance with the Provisions of Article II, that a meeting will be
held at the time requested by the person or persons calling the meeting, not
less than thirty-five (35) nor more than sixty (60) days after the receipt of
the request. If the notice is not given within twenty (20) days after receipt of
the request, the person or persons requesting the meeting may give the notice.
Nothing contained in this paragraph of this Article II shall be construed as
limiting, fixing, or affecting the time when a meeting of stockholders called by
action of the board of directors may be held.
3. NOTICE OF MEETING
All notices of meetings of stockholders shall be sent or otherwise
given in accordance with paragraph 3 of this Article II, and shall be given not
less than ten (10) nor more than sixty (60) days before the date of the meeting.
The notice shall specify the place, date and hour of the meeting and (i) in
1
<PAGE>
the case of a special meeting, the general nature of the business to be
transacted, or (ii) in the case of the annual meeting, those matters which the
board of directors, at the time of giving notice, intends to present for action
by the stockholders. The notice of any meeting at which directors are to be
elected shall include the name of any nominee or nominees whom, at the time of
the notice, management intends to present for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest as defined in the Corporations Code of Wyoming, (ii) an amendment of
the articles of incorporation under that code, (iii) a reorganization of the
corporation, under that code, (iv) a voluntary dissolution of the corporation
under that code, or (v) a distribution in dissolution other than in accordance
with the rights of outstanding preferred shares under that code, the notice
shall also state the general nature of the proposal.
4. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Notice of any stockholders' meeting shall be given either personally or
by first-class mail or telegraphic or other written communication, charges
prepaid, addressed to the stockholder at the address of that stockholder
appearing on the books of the corporation or given by the stockholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or has been so given, notice shall be deemed to have been
given if sent to that shareholder by first-class mail or telegraphic or other
written communication to the corporation's principal executive office, or if
published at least once in a newspaper of general circulation in the county
where that office is located. Notice shall be deemed to have been given at the
time when delivered personally, deposited in the mail, delivered to a common
carrier for transmission to the recipient by the person giving the notice, or
sent by other means of written communication.
If any notice addressed to a stockholder at the address of that
stockholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the stockholder
at that address, all future notices or reports shall be deemed to have been duly
given without further mailing if these shall be available to the stockholder on
written demand at the principal executive office of the corporation for a period
of one year from the date of giving the notice.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting may be executed by the secretary, assistant secretary, or
any transfer agent of the corporation giving the notice, and filed and
maintained in the minute book of the corporation.
5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE
For the purpose of determining stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or stockholders
entitled to receive payment of any dividend, or in order to make a determination
with respect to the stockholders for any other proper purpose, the directors of
the corporation may provide that the stock transfer books shall be closed for a
stated period of time, but not to exceed, in any case, thirty (30) days. If the
stock transfer books shall be closed for the purpose of determining stockholders
entitled to notice of or to vote at a meeting of
2
<PAGE>
stockholders, such books shall be closed for at least twenty (20) days
immediately preceding such meeting. In lieu of closing the stock transfer books,
the directors may fix in advance a date as the record date for any such
determination of stockholders, such date in any case to be not more than thirty
(30) days and, in the case of a meeting of stockholders, not less than ten (10)
days prior to the date on which the particular action requiring such
determination of stockholders is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of stockholders
entitled to notice of or to vote at a meeting of stockholders, or stockholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the directors declaring
such dividend is adopted, as the case may be, shall be the record date for such
determination of stockholders. When determination of the status of stockholders
has been made as provided in this section, such determination shall also apply
to voting for any adjournment thereof.
6. VOTING LIST
The officer or agent having charge of the stock transfer books for the
corporation shall make, at least ten (10) days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for a period of
ten (10) days prior to such meeting, shall be subject to and available for
inspection by any stockholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any stockholder during the whole time of
the meeting. The original stock transfer book shall be prima facie evidence as
to eligibility of any stockholder entitled to examine such list or transfer
books or to vote at the meeting of stockholders.
7. QUORUM
The presence in person or by proxy of the holders of thirty (30)
percent of the outstanding shares of the corporation entitled to vote shall
constitute a quorum for the transaction of business. The stockholders present at
a duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum.
8. PROXIES
Every person entitled to vote for directors or on any other matter
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation. A proxy shall be deemed signed if the stockholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission, or otherwise) by the stockholder or the stockholder's attorney in
fact. A validly executed proxy that does not state that it is irrevocable shall
continue in full force and effect unless (i) revoked by the person executing it,
before the vote pursuant to that proxy, by writing delivered to the corporation
stating that the proxy is revoked, or by attendance at the meeting and voting in
person by the person executing the proxy, or by a subsequent proxy executed by
the same person and presented at the meeting; or (ii) written notice of the
death or incapacity of the maker of that proxy is
3
<PAGE>
received by the corporation before the vote pursuant to that proxy is counted;
provided, however, that no proxy shall be valid after the expiration of eleven
(11) months from the date of the proxy, unless otherwise provided in the proxy.
The revocability of a proxy that states on its face that it is irrevocable shall
be governed by the provisions of the Corporations Code of Wyoming.
9. ADJOURNED MEETING; NOTICE
Any stockholders' meeting, annual or special, whether or not a quorum
is present, may be adjourned from time to time by the vote of the majority of
the shares represented at that meeting, either in person or by proxy, but in the
absence of a quorum, no other business may be transacted at that meeting, either
in person or by proxy, but in the absence of a quorum, no other business may be
transacted at that meeting, except as provided herein.
When any meeting of stockholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at the meeting at which the
adjournment took place, or unless the adjournment is for more than forty-five
(45) days from the date set for the original meeting, in which case the board of
directors shall set a new record date. Notice of any such adjourned meeting, if
required, shall be given to each stockholder of record entitled to vote at the
adjourned meeting in accordance with the provisions of this Article II. At any
reconvened adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting.
10. VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of these by-laws and the
Corporations Code of the State of Wyoming. The stockholders vote may be by voice
vote or by ballot; provided, however, that any election for directors must be by
ballot if demanded by any stockholder before the voting has begun. On any matter
other than the election of directors, any stockholder may vote part of the
shares in favor of the proposal and refrain from voting the remaining shares, or
vote them against the proposal, but, if the stockholder fails to specify the
number of shares which the stockholder is voting affirmatively, it will be
conclusively presumed that the shareholders' approving vote is with respect to
all shares that the stockholder is entitled to vote. If a quorum is present (or
if a quorum has been present earlier at the meeting but some stockholders had
withdrawn) the affirmative vote of a majority of the shares represented and
voting, provided such shares voting affirmatively also constitutes a majority of
the number of shares required for a quorum, shall be the act of the
shareholders, unless the vote of a greater number or voting by classes is
required by the General Corporation Law or by the articles of incorporation.
At a stockholders' meeting at which directors are to be elected, no
stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such stockholder normally
is entitled to cast), unless the candidates' names have been placed in
nomination before the commencement of the voting and a shareholder has given
notice before the commencement of the voting of the stockholders' intention to
cumulate votes. If any stockholder has given such notice, then every shareholder
entitled to vote may cumulate votes equal to the number of
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directors to be elected multiplied by the number of votes to which that
stockholder's shares are normally entitled, or distribute the stockholder's
votes on the same principle among any or all of the candidates, as the
stockholder thinks fit. The candidates receiving the highest number of votes, up
to the number of directors to be elected, shall be elected.
11. INSPECTION OF ELECTION
Before any meeting of stockholders, the board of directors may appoint
any persons other than the nominees for office to act as inspectors of election
at the meeting or its adjournment. If no inspectors of election are so
appointed, the chairman of the meeting may, and on the request of any
stockholder or stockholder's proxy shall, appoint inspectors of election at the
meeting. The number of inspectors shall be either one (1) or three (3). If
inspectors are appointed at a meeting on the request of one or more stockholders
or proxies, the holders of a majority of shares or their proxies present at the
meeting shall determine whether one (1) or three (3) inspectors are to be
appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, the chairman of the meeting shall, upon the request of any
stockholder or a stockholders' proxy, appoint a person to fill the vacancy.
These inspectors shall:
(a) Determine the number of shares and the voting power of each;
the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity and effect of proxies;
(b) Receive votes, ballots, or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election
or vote with fairness to all stockholders.
ARTICLE III - DIRECTORS
1. POWERS
Subject to the provisions of the Wyoming General Corporation Law and
any limitations in the articles of incorporation and these by-laws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
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Without prejudice to these general powers, and subject to the same
limitations, the board of directors shall have the power to:
(a) Select and remove all officers, agents and employees of the
corporation; prescribe any powers and duties for them that are
consistent with law, with the articles of incorporation, and
with these by-laws; fix their compensation; and require from
them security for faithful service.
(b) Change the principal executive office or the principal
business office in the state from one location to another;
cause the corporation to be qualified to do business in any
other state, territory, dependency, or country and conduct
business within or without the state; and designate any place
within or without the state for the holding of any
stockholders' meeting or meetings; including annual meetings.
(c) Adopt, make, and use a corporate seal; prescribe the forms of
certificate of stock; and alter the form of the seal and the
certificates.
(d) Authorize the issuance of shares of stock of the corporation
on any lawful terms, in consideration of money paid, labor
done, services actually rendered, debts or securities
canceled, or tangible or intangible property actually
received.
(e) Borrow money and incur indebtedness on behalf of the
corporation, and cause to be executed and delivered for the
corporation's purposes, in the corporate name, promissory
notes, bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations, and other evidences of debt and securities.
2. NUMBER AND QUALIFICATION OF DIRECTORS
The authorized number of directors of the corporation shall be not less
than three (3) nor more than nine (9). The exact number of authorized directors
shall be three (3) until changed, within the limits specified above, by a by-law
amending this Paragraph 2, duly adopted by the board of directors or by the
shareholders. The indefinite number of directors may be changed, or a definite
number fixed without provision for an indefinite number, by a duly adopted
amendment to the articles of incorporation or by an amendment to this by-law
duly adopted by the vote or written consent of a majority of the outstanding
shares entitled to vote; provided, however, that an amendment reducing the
number or the minimum number of directors to less than five cannot be adopted if
the votes cast against its adoption at a meeting of the stockholders, or the
shares not consenting in the case of action by written consent, are equal to
more than 16- 2/3 percent of the outstanding shares entitled to vote. No
amendment may change the stated maximum number of authorized directors to a
number greater than two times the stated minimum number of directors minus one.
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3. ELECTION AND TERM OF OFFICE OF DIRECTORS
Directors shall be elected at each annual meeting of the stockholders
to hold office until the next annual meeting. Each director, including a
director elected to fill a vacancy, shall hold office until the expiration of
the term for which elected and until a successor has been elected and qualified.
No reduction of the authorized number of directors shall have the
effect of removing any director before the director's term of office expires.
4. VACANCIES
A vacancy or vacancies in the board of directors shall be deemed to
exist in the event of the death, resignation, or removal of any director, or if
the board of directors by resolution declares vacant the office of a director
who has been declared of unsound mind by an order of court or convicted of a
felony, or if the authorized number of directors is increased, or if the
stockholders fail at any meeting of stockholders at which any director or
directors are elected to elect the number of directors to be voted for that
meeting.
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary, or the board of directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
board of directors may elect a successor to take office when the resignation
becomes effective.
If a person is elected to the board but fails to participate in any
meetings or to communicate with the other board members, it cannot be assumed
that the position has become vacant. In the absence of death, resignation, or
removal proceedings, the absent member must be carried on the board until that
member's term expires.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, whether or not less than a quorum, or by a sole remaining
director, except that a vacancy created by the removal of a director by the vote
or written consent of the stockholders or by court order may be filed only by
the vote of a majority of the shares entitled to vote represented at a duly held
meeting at which a quorum is present, or by the unanimous written consent of the
holders of the outstanding shares entitled to vote. The stockholders may elect a
director or directors at any time to fill any vacancy or vacancies not filled by
the directors, but any such election by written consent shall require the
consent of a majority of the outstanding shares entitled to vote, except that
filling a vacancy created by removal of a director shall require the written
consent of the holders of all outstanding shares entitled to vote.
Each director so elected shall hold office until the next annual
meeting of the stockholders and until a successor has been elected and
qualified.
5. PLACE OF MEETING AND MEETINGS BY TELEPHONE
Regular meeting of the board of directors may be held at any place
within or outside the state that has been designated from time to time by the
board. In the absence of such designation, regular meetings shall be held at
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the principal executive office of the corporation. Special meetings of the board
shall be held at any place within or outside the state that has been designated
in the notice of the meeting or, if not stated in the notice or if there is no
notice, at the principal executive office of the corporation. Any meeting,
regular or special, may be held by conference telephone or similar
communications equipment, as long as all directors participating in the meeting
can hear one another, and all such directors shall be deemed to be present at
the meeting.
6. ANNUAL MEETING
Immediately following each annual meeting of stockholders, the board of
directors shall hold a regular meeting at the place that the annual meeting of
stockholders was held or at any other place that shall have been designated by
the board of directors, for the purpose of organization, any desired election of
officers, and the transaction of other business. Notice of this meeting shall
not be required.
7. OTHER REGULAR MEETINGS
Other regular meetings of the board of directors shall be held without
call at such time as shall from time to time be fixed by the board of directors.
Such regular meetings may be held without notice.
8. SPECIAL MEETINGS
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board or president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. In case the notice is mailed,
it shall be deposited in the United States mail at least five (5) days before
the time of meeting. In case the notice is delivered personally, or by telephone
or telegram, it shall be delivered at least forty-eight (48) hours before the
time of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
whom the person giving the notice has reason to believe will promptly
communicate it to the director. The notice need not specify the purpose of the
meeting, nor need is specify the place if the meeting is to be held at the
principal executive office of the corporation.
9. QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in
Paragraph 11 of this Article III. Every act or decision done or made by a
majority of the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the board of directors, subject to the
provisions of the Corporation Code of Wyoming (as to approval of contracts or
transactions in which a director has a direct or indirect material financial
interest, or as to indemnification of directors). A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action is approved by at least a majority of the
remaining directors at that meeting.
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10. WAIVER OF NOTICE
The transaction of any meeting of the board of directors, however
called and noticed or wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice of a quorum is present and if
each director (i) has received notice of the meeting, (ii) attends the meeting
without protesting before or at the beginning of the meeting, the lack of notice
to such director or (iii) before or after the meeting signs a waiver of notice,
a consent to holding the meeting, or an approval of the minutes of the meeting.
Any such waiver of notice or consent need not specify the purpose of the
meeting. All such waivers, consents, and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
11. ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place.
12. NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not
be given, unless the meeting is adjourned for more than twenty-four (24) hours,
in which case notice of the time an place shall be given before the time of the
adjourned meeting, in the manner specified in Paragraph 8 of this Article III,
to the directors who were not present at the time of adjournment.
13. ACTION WITHOUT MEETING
Any action required or permitted to be taken by the board of directors
may be taken without a meeting, if all members of the board shall individually
or collectively consent in writing to that action. Such action by written
consent shall have the same force and effect as the unanimous vote of the board
of directors. Such written consent or consents shall be filed with the minutes
of the proceedings of the board.
14. FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services, and such reimbursement of expenses, as may be fixed and
determined by resolution of the board of directors. This Section 14 shall not be
construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee, or otherwise and receiving compensation
for those services as well.
ARTICLE IV - COMMITTEES
1. COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent member at any meeting of the committee. Any
committee, to the extent provided in the resolution of the board, shall have all
the authority of the board, except with respect to:
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(a) The approval of any action which, under the General
Corporation Law of Wyoming, also requires stockholders'
approval or approval by the outstanding shares;
(b) The filling of vacancies on the board of directors or in any
committee;
(c) The fixing of compensation of the directors for serving on the
board or on any committee;
(d) The amendment or repeal of by-laws or the adoption of new
by-laws;
(e) The amendment or repeal of any resolution of the board of
director which by its express terms is not so amendable or
repealable;
(f) A distribution to the stockholders of the corporation, except
at a rate or in a periodic amount or within the price range
determined by the board of directors; or
(g) The appointment of any other committees of the Board of
directors or the members of these committees.
2. MEETINGS AND ACTION OF COMMITTEES
Meeting and action of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these by-laws,
Paragraph 5 (place of meetings), 7 (regular meetings), 8 (special meetings and
notice), 9 (quorum), 10 (waiver of notice), 11 (adjournment), 12 (notice of
adjournment), and 13 (action without meeting), with such changes in the context
of those by-laws as are necessary to substitute the committee and its members
for the board of directors and its members except that the time of regular
meetings of committees may be determined either by resolution of the board of
directors or by resolution of the committee; special meetings of committees may
also be called by resolution of the board of directors; and notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these by-laws.
ARTICLE V - OFFICERS
1. OFFICERS
The officers of the corporation shall be a chairman of the board and/or
a president, a secretary, and a vice president-finance who shall be the chief
financial officer. The names and addresses of the principal officers shall be
filed annually with the secretary of state. The corporation may also have, at
the discretion of the board of directors, a chairman of the board, one or more
vice presidents, one or more assistant secretaries, one or more assistant
treasurers, and such other officers as may be appointed in accordance with the
provisions of Paragraph 3 of this Article V. Any number of offices may be held
by the same person.
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2. ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provision of Paragraph 3 or Paragraph 5 of this
Article V, shall be chosen by the board of directors, and each shall serve at
the pleasure of the board, subject to the rights, if any, of an officer under
any contract of employment.
3. SUBORDINATE OFFICERS
The board of directors may appoint, and may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority and perform
such duties as are provided in the by-laws or as the board of directors may from
time to time determine
4. REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors, at any regular or special meeting of the board, or, except
in the case of an officer chosen by the board of directors, by any officer upon
whom such power or removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5. VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification, or any other cause shall be filled in the manner prescribed in
these by-laws for regular appointments to that office.
6. CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer is elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may be from time to time assigned to him by the
board of directors or prescribed by the by-laws. If there is no president, the
chairman of the board shall in addition be the chief executive officer of the
corporation and shall have the powers and duties prescribed in Paragraph 7 of
this Article V.
7. PRESIDENT
Subject to such powers, if any, as may be given by the by-laws or board
of directors to the chairman of the board, if there is such an officer, the
president shall be the general manager and chief executive officer of the
corporation and shall, subject to the control of the board of directors, have
general supervision, direction and control of the business and the officers of
the corporation. He shall preside at all meetings of the stockholders and, in
the absence of the chairman of the board, or, if there is none, at all meetings
of the board of directors. He shall have the general powers and duties of
management usually vested in the office of president of a
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corporation, and shall have such other powers and duties as may be prescribed by
the board of directors or the by-laws.
8. VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the president, and when so acting shall have all the powers of,
and be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors or the
by-laws, or by the president, or by the chairman of the board if there is no
president.
9. SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office or such other place as the board of directors may direct, a
book of minutes of all meetings and actions of the directors, committees of
directors and stockholders, with the time and place of holding, whether regular
or special, and if special, how authorized, the notice given, the names of those
present at directors' meetings or committee meetings, the number of shares
present or represented at stockholders' meetings, and the proceedings.
The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, as determined by resolution of the board of directors, a record of
stockholders, or a duplicate record of stockholders, showing the names of all
stockholders and their addresses, the number and classes of shares held by each,
the number and date of certificates issued for the same, and the number and date
of cancellation of every certificate surrendered for cancellation.
The secretary or assistant secretary, or if they are absent or unable
to act or refuse to act, any other officer of the corporation, shall give, or
cause to be given, notice of all meetings of the stockholders, of the board of
directors, and of committees of the board of directors, required by the by-laws
to be given. The secretary shall keep the seal of the corporation if one is
adopted, in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or the by-laws.
10. CHIEF FINANCIAL OFFICER
The chief financial officer who shall have the title of vice president-
finance, shall keep and maintain, or cause to be kept and maintained, adequate
and correct books and records of accounts of the properties and business
transactions of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, retained earnings and shares.
The books of account shall at all reasonable times be open to inspection by any
director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the board of directors. He shall disburse
the funds of the corporation as may be ordered by the board of directors, shall
render to the president and directors, whenever they request it, an account of
all of his
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transactions as chief financial officer and of the financial condition of the
corporation, and shall have other powers and perform such other duties as may be
prescribed by the board of directors or the by-laws.
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS
The corporation shall, to the maximum extent permitted by the Wyoming
General Corporation Law, have power to indemnify each of its agents against
expense, judgments, fines, settlements and other amounts actually and reasonably
incurred in connection with any proceeding arising by reason of the fact that
any such person is or was an agent of the corporation, and shall have power to
advance to each such agent expenses incurred in defending any such proceeding to
the maximum extent permitted by that law. For purposes of this Article, an
"agent" of the corporation includes any person who is or was a director,
officer, employee, or other agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise, or
was a director, officer, employee, or agent of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
ARTICLE VII - RECORDS AND REPORTS
1. MAINTENANCE AND INSPECTION OF RECORD OF STOCKHOLDERS
The corporation shall keep at its principal executive office, or at the
office of its transfer agent or registrar, if either be appointed and as
determined by resolution of the board of directors, a record of its
stockholders, giving the names and addresses of all stockholders, and the number
and class of shares held by each stockholder.
A stockholder or stockholders of the corporation holding at least
twenty-five (25%) in the aggregate of the outstanding voting shares of the
corporation may (i) inspect and copy the records of stockholders' names and
addresses and shareholdings during usual business hours on five (5) days' prior
written demand on the corporation, and (ii) obtain from the transfer agent of
the corporation, on written demand, and on the tender of such transfer agent's
usual charge for such list, a list of the stockholders' names and addresses, who
are entitled to vote for the election of directors, and their shareholdings, as
of the most recent record date for which that list has been compiled or as of
the date specified by the stockholder after the date of demand. This list shall
be made available to any such stockholder or stockholders by the transfer agent
on or before the later of five (5) days after the demand is received or the date
specified in the demand as the date as of which the list is to be compiled. The
record of stockholders shall also be open to inspection on the written demand of
any stockholder or holder of a voting trust certificate, at any time during
usual business hours, for a purpose reasonably related to the holder's interests
as a stockholder or as the holder of a voting trust certificate. Any inspection
and copying under
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this Paragraph 1 may be made in person or by an agent or attorney of the
stockholder or holder of a voting trust certificate making the demand.
2. MAINTENANCE AND INSPECTION OF BY-LAWS
The corporation shall keep at its principal executive office, the
original or copy of the by-laws as amended to date, which shall be open to
inspection by the stockholders at all reasonable times during office hours. If
the principal executive office of the corporation is outside the State of
Wyoming and the corporation has no principal business office in that state, the
Secretary shall, upon the written request of any stockholder, furnish to that
stockholder a copy of the by-laws.
3. INSPECTION BY DIRECTORS
Every director shall have the absolute right at any reasonable time to
inspect all books, records and documents of every kind and the physical
properties of the corporation and each of its subsidiary corporations. This
inspection by a director may be made in person or by an agent or attorney and
the right of inspection includes the right to copy and make extracts of
documents.
4. ANNUAL REPORT TO STOCKHOLDERS
Nothing herein shall either require or prohibit the board of directors
from issuance of an annual or other periodic reports to stockholders, unless
otherwise prescribed by the State of Wyoming General Corporation Law.
5. FINANCIAL STATEMENTS
A copy of any annual financial statement and any income statement of
the corporation for each quarterly period of each fiscal year, and any
accompanying balance sheet of the corporation as of the end of each such period,
that has been prepared by the corporation shall be kept on file in the principal
executive office of the corporation for twelve (12) months and each such
statement shall be exhibited at all reasonable times to any stockholder
demanding an examination of any such statement or a copy shall be mailed to any
such stockholder.
If a stockholder or stockholders holding at least ten (10%) percent of
the outstanding shares of any class of stock of the corporation make a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the current fiscal year ended
more than thirty (30) days before the date of the request, and a balance sheet
of the corporation as of the end of that period, the chief financial officer
shall cause that statement to be prepared, if not already prepared, and shall
deliver personally or mail that statement or statements to the person making the
request within thirty (30) days after the receipt of the request.
The corporation shall also, on the written request of any stockholder,
mail to the stockholder a copy of the last annual, semi-annual, or quarterly
income statement which it has prepared, and a balance sheet as of the end of
that period.
The quarterly income statements and balance sheets referred to in this
paragraph shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or the certificate of an authorized
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officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
6. ANNUAL STATEMENT OF GENERAL INFORMATION
The corporation shall, each year during the calendar month in which its
articles of incorporation originally were filed with the Wyoming Secretary of
State, or during the preceding five (5) calendar months, file with the Secretary
of State, on the prescribed form, a statement setting forth the authorized
number of directors, the names and complete business or residence addresses of
all incumbent directors, the names and complete business or residence addresses
of the chief executive officer, secretary, and chief financial officer, the
street address of its principal executive office or principal business office in
the state, and the general type of business constituting the principal business
activity of the corporation, together with a designation of the agent of the
corporation for the purpose of service of process, all in compliance with the
Wyoming Corporations Code.
ARTICLE VII - GENERAL CORPORATE MATTERS
1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE OR AND VOTING
For purposes of determining the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or
entitled to exercise any rights in respect of any other lawful action (other
than action by stockholders by written consent without a meeting), the board of
directors may fix, in advance, a record date, which shall not be more than sixty
(60) nor less than ten (10) days before any such action, and in that case only
stockholders of record on the date so fixed are entitled to receive the
dividend, distribution or allotment of rights or to exercise the rights, as the
case may be, notwithstanding any transfer of shares on the books of the
corporation after the record date so fixed, except as otherwise provided in the
Wyoming General Corporation Law.
If the board of directors does not so fix a record date, the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution or the
sixtieth (60) day before the date of that action, whichever is later.
2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS
All checks, drafts, or other orders for payment of money, notes, or
other evidences of indebtedness, issued in the name of or payable to the
corporation, shall be signed or endorsed by such person or persons in such
manner as, from time to time, shall be determined by resolution of the board of
directors.
3. CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these by-laws,
may authorize any officer or officers, agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation, and this authority may be general or confined to specific
instances; and, unless so authorized or ratified by the board of directors or
within the agency power of an officer, no officer, agent, or employee shall have
any power or authority to bind the corporation by any contract or
15
<PAGE>
engagement or to pledge its credit or to render it liable for any purpose or for
any amount.
4. CERTIFICATES FOR SHARES
A certificate or certificates for shares of the capital stock of the
corporation shall be issued to each stockholder when any of these shares are
fully paid, and the board of director may authorize the issuance of certificates
or shares as partly paid provided that these certificates shall state the amount
of the consideration to be paid for them and the amount paid. All certificates
shall be signed in the name of the corporation by the chairman of the board or
vice chairman of the board or the president or vice president and by the chief
financial officer or an assistant treasurer or the secretary or any assistant
secretary, certifying the number of shares and the class or series of shares
owned by the stockholder. Any or all of the signatures on the certificate may be
facsimile. In case any officer, transfer agent, or registrar who has signed, or
whose facsimile signature has been placed on a certificate, shall have ceased to
be that officer, transfer agent, or registrar before that certificate is issued,
it may be issued by the corporation with the same effect as if that person were
an officer, transfer agent, or registrar at the date of issue.
5. LOST CERTIFICATES
Except as provided in this Paragraph 5, no new certificates for shares
shall be issued to replace an old certificate unless the latter is surrendered
to the corporation and canceled at the same time. The board of directors may, in
case any share certificate or certificates for any other security is lost,
stolen, or destroyed, authorize the issuance of a replacement certificate on
such terms and conditions as the board may require, including provision for
indemnification of the corporation secured by a bond or other adequate security
sufficient to protect the corporation against any claim that may be made against
it, including any expense or liability, on account of the alleged loss, theft,
or destruction of the certificate of the issuance of the replacement
certificate.
6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, or any vice president, or any
other person authorized by resolution of the board of directors or by any of the
foregoing designated officers, is authorized to vote on behalf of the
corporation any and all shares it may own of any corporation or corporations,
foreign or domestic. The authority granted to these officers to vote or
represent on behalf of the corporation any and all shares held by the
corporation in any other corporation or corporations may be exercised by any of
these officers in person or by any person authorized to do so by proxy duly
executed by these officers.
7. CONSTRUCTION AND DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Wyoming General Corporation Law shall
govern the construction of these by-laws. Without limiting the generality of
this provision, the singular, and the term "person" includes both a corporation
and a natural person.
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<PAGE>
ARTICLE IX - AMENDMENTS
1. AMENDMENT BY STOCKHOLDERS
New by-laws may be adopted or these by-laws may be amended or repealed
by the vote or written consent of holders of a majority of the outstanding
shares entitled to vote, except as otherwise provided by law, these by-laws, or
the articles of incorporation provided, however, that if the articles of
incorporation of the corporation set forth the number of authorized directors of
the corporation, the authorized number of directors may be changed only by an
amendment of the articles of incorporation.
17
EXHIBIT 6.1
LEASING AND SERVICE AGENCY AGREEMENT
This Agreement is dated for reference the 15th day of September, 1996.
BETWEEN: ADVANCED GAMING TECHNOLOGY, INC. an entity incorporated under the
laws of the State of Wyoming, United States of America, and having
an office at PO Box 11610, Suite 2482 - 650 West Georgia Street,
Vancouver, British Columbia, Canada, V6B 4N9.
(hereinafter refereed to as the "Manufacturer")
AND: EDWARD THOMPSON GROUP, an entity incorporated under the laws of
England and having an office at Richmond Street, Sunderland,
England, SR5 1BQ
(hereinafter refereed to as the "Agent")
RECITALS
WHEREAS:
A. The Manufacturer is engaged in the business of manufacturing a two-way
electronic bingo device that shall be marketed for lease to customers under
the name "PartiMAX" (the "Product"):
B. The Manufacturer wishes to appoint an exclusive agent to lease and service
the Product in the Territory and to fulfill those other duties that are set
forth in this Agreement;
C. The Agent wishes to accept the appointment as the Manufacturer's exclusive
agent on the terms set forth in this Agreement:
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
covenants and agreements of the parties hereafter set out an in consideration of
the sum of One ($1.00) Dollar now paid by each party to the other, the receipt
and adequacy of which is hereby acknowledged, the parties hereto agree as
follows:
PART 1
Interpretation
1.01 Definitions
Unless the context requires otherwise the terms defined in this part have
for all purposes of this Agreement the following meanings:
<PAGE>
Approved Budgets - "Approved Budgets" means the annual budgets that are
approved by the parties as provided in Part VIII.
Business - "Business" means the design, development, manufacture,
marketing leasing, installation and maintenance of two-way
portable electronic bingo devices to augment he play of
merchandised cash bingo in the United Kingdom.
Product - "Product" means the two-way electronic bingo device that is
manufactured by the Manufacturer under the name "PartiMAX",
the current specifications of which are appended to this
Agreement as Scheduled "A".
Revenue - "Revenue" means the gross revenue generated from the Business
in the Territory.
Territory - "Territory" means the United Kingdom.
PART II
Appointment of Agent
2.01 Appointment
The Manufacturer hereby appoints the Agent as its exclusive agent to
solicit leases of the Product in the Territory and to fulfill the other
duties that are set forth in this Agreement. The Agent hereby accepts such
appointment upon the terms and conditions contained in this Agreement.
2.02 Exclusive Agency
The appointment of the Agent is an exclusive appointment within the
Territory.
2.03 Territorial Restriction
The Agent shall not lease, install or service the Product in any location
outside of the Territory without the express written consent of the
Manufacturer.
2.04 Best Efforts by Agent
The Agent shall use its best efforts to carry out and complete all tasks
and services reasonably necessary for the marketing, leasing,
installation, training, customer service, repair service, administration
and collection functions that are directly or indirectly associated with
the Business and to obtain all necessary approvals of the Product as may
be required under the gaming regulatory structure within the Territory.
The Agency further agrees that its merchandising policies, from time to
time, shall be designed to preserve the goodwill that is associated with
the name and reputation of both the Manufacturer and the Product.
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<PAGE>
2.05 Best Efforts by Manufacturer
The Manufacturer shall use its best efforts to carry out and complete all
tasks and services reasonably necessary for the design, engineering,
development and manufacturing of the Product in order to enable the Agent
to obtain necessary approvals for the leasing and servicing of the Product
in the Territory. The Manufacturer acknowledges that the Product must
conform with EMC Directive 89/336/EMC, a copy of which is attached hereto
as Schedule "B". The Manufacturer further acknowledges that it will be
responsible for the cost of transportation and delivery, including customs
duties, if applicable, of the Product to a location designated by the
Agent in the Territory.
PART III
Facilities
3.01 Place of Business
Throughout the term of this Agreement, the Agent shall maintain within the
Territory one or more places of business, each with a display room as well
as service and installation equipment with which it can carry out its
obligations under this Agreement.
3.02 Location of Facility
The Agent shall not lease or offer to lease the Product from any location
within the Territory without first obtaining the written approval of the
Manufacturer, which approval shall not be unreasonably withheld.
PART IV
Cost and Revenue Allocation
4.01 Costs
Each party shall be solely responsible for and shall pay for the costs
that are incurred by it within its sphere of responsibility as provided in
Sections 2.04 and 2.05 of this Agreement. Without restricting the
generality of the foregoing, the parties agree that:
(a) the Manufacturer shall be responsible for paying all costs incurred
in the design, engineering, development and manufacturing of the
Product and for all transportation costs, taxes or duties relating
to the delivery of the Product to the Agents premises;
(b) the Agent shall be responsible for paying all costs in the
marketing, leasing, installation, training, customer service, repair
service, warranty and maintenance service of the Product and for all
administration and collection costs associated with the Business,
including the cost of obtaining all necessary approvals of the
Product from any regulatory authorities within the Territory, and
including the cost of preparing, registering and maintaining the
registration of leases of the Product; and
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<PAGE>
(c) the Agent shall be responsible for all travel, entertainment,
office, clerical, accounting, general leasing and service expenses
relating to the Business and for the cost of collecting and
remitting any Value Added Tax or Sales Tax applicable to the leasing
or servicing of the Product.
4.02 Pricing of Product
The Agent shall only quote such lease rates and lease terms for the
Product as the Agent and the Manufacturer shall from time to time agree in
writing. The Agent shall have no right, power or authority to represent
that the Product may be obtained on terms and conditions different from
those provided.
The Agent shall quote prices and terms for the installation and
maintenance of the Product, from time to time, as it shall consider
appropriate, provided that the prices and terms quoted by the Agent shall
be competitive with the prices and terms applicable to the installation
and maintenance of any comparable gaming devices within the Territory.
4.03 Acceptance of Orders
All orders taken by the Agent for the Product shall be subject to
acceptance or rejection by the Manufacturer in accordance with policies
and procedures established from time to time by agreement between the
Manufacturer and the Agent. Subject to the foregoing, the Manufacturer
agrees to use its best efforts to fill all orders for the product that are
placed by the Agent and to arrange for delivery of the Product to the
Agent's designed facility within thirty (30) days of its receipt of an
accepted order.
4.04 Revenue Allocation
Until such time as the Manufacturer has received aggregate Revenue equal
to the lesser of:
(a) 500,000 pounds sterling; or
(b) the Manufacturer's actual documented cost of the design,
engineering, development of the Product;
all Revenue from the Business shall be distributed 60% to the Manufacturer
and 40% to the Agent. Thereafter, all Revenue shall be shared equally
between the Manufacturer and the Agent. Revenue from the Business during
each month throughout the term of this Agreement shall be distributed by
the Agent by the 15th Day of the following month together with an
accounting for all Revenue that has been received by the Agent during the
preceding month.
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<PAGE>
4.05 Bank Accounts
All Revenue shall be collected by the Agent and deposited to a segregated
account or accounts maintained by it for those purposes.
PART V
Agent's Other Obligations
5.01 Marketing of Products
The Agent agrees to conduct its activities under this Agreement in a
lawful manner, consistent with the high standards of fair trade, fair
competition and business ethics.
5.02 Approval of Advertising
A programme for all advertising or promotion shall be prepared by the
Agent, from time to time, and the same shall be reviewed and mutually
agreed by both the parties before implementation.
5.03 Expenses
The Agent shall pay any and all of its costs and expenses under this
Agreement when the same shall be due and payable and shall be solely
responsible for the acts of its employees, agents and representatives.
5.04 Installation of Product
The Agent shall provide installation service of the Product to all
customers.
5.05 Maintenance and Servicing of Product
The Agent shall provide servicing and maintenance of the Product under the
same terms and conditions as it now supports existing electronic
installations in the United Kingdom, provided always that the Agent will
exercise its very best effort to provide services and maintenance of the
Product to all customers requesting same within two (2) business days of
the Agent's receipt of such request.
5.06 Sales Tax
The Agent shall be responsible for collecting and remitting any and all
Value Added Tax or Sales Tax applicable to the leasing, installation or
servicing of the product.
5.07 Risk of Product
All Product delivered to the Agent shall remain the property of the
Manufacturer but shall be at the risk of the Agent while in its
possession. The Agent shall maintain in force during the continuaton of
this Agreement, policies of insurance issued by carriers approved by the
Manufacturer acting reasonably and covering insurable risks in such
amounts as are specified by the Manufacturer acting reasonably. Such
insurance policies shall insure the Agent and the Manufacturer and shall
provide for at least thirty (3) days prior written notice to the
Manufacture of any material modification, cancellation or expiration of a
policy. The Agent shall provide evidence that such insurance is in effect
prior to taking delivery of Product.
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<PAGE>
PART VI
WARRANTIES
6.01 Manufacturer's Warranties
The Manufacturer shall provide a written copy of the Manufacturer's
limited warranty with each Product that is delivered to the Agent and the
Agent shall pass such limited warrant on to its retail customers. The
Agent shall make no changes to said warranty either orally or in writing.
6.02 Defects
The Agent shall notify the Manufacturer immediately of any customer
complaints or claimed defects in any Product. The Manufacturer shall be
entitled to inspect all Product which the Agent is notified is defective
and shall determine the validity of any such claim as being a
manufacturing defect.
PART VII
Trademarks and Copyrights
7.01 Trademarks and Copyrights
The Agent shall not acquire any right to any goodwill, trademark,
copyright, industrial design or other form of intellectual or commercial
property of the Manufacturer. The Manufacturer authorizes and the Agent
agrees to use the name "PartiMAX" in association with the leasing and
servicing of the Product, which authorization shall terminate upon the
termination of this Agreement.
PART VIII
Records
8.01 Books of Account
The Agent shall cause to be established and supervise the books of account
of the Business. All books of account shall be kept at the office of the
Agent and the Agent shall cause the books of accounts to be retained by it
and by the Agent's accountants or as otherwise agreed upon by the parties
for a period of two (2) years following the termination of this Agreement.
8.02 Method of Accounting
The books of accounts shall be maintained by the Agent on an accrual basis
in accordance with generally accepted accounting principles consistently
applied.
8.03 Inspection of Accounts
The Manufacturer has the right during the term of this Agreement and for
two (2) years following the termination of this Agreement, at all
reasonable time during normal business hours, to audit, examine and make
copies of or extracts from the books of account. Such right may be
exercised through an agent or an employee or
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<PAGE>
other authorized representative of the Manufacturer. The expenses incurred
in any such audit or examination shall be paid by the Manufacturer unless
any accounting irregularities are discovered, in which event the expenses
incurred shall be paid by the Agent.
8.04 Monthly Reports
The Agent shall, not more than fifteen (15) days after the end of each
calendar month, furnish to the Manufacturer a reasonably detailed
operating statement and other appropriate information for the calendar
month in question, summarizing the operations of the Business and giving a
detailed accounting for all Revenue collected by the Agent.
8.05 Annual Report
The Agent shall, within ninety (90) days after the end of each operating
year, deliver to the Manufacturer audited Financial Statements of the
Business prepared in accordance with generally accepted accounting
principles consistently applied.
8.06 Budget
Prior to October 1, 1996 and the same date of each subsequent year during
the term of this Agreement, the Agent shall cause to be prepared and shall
deliver to the Manufacturer a proposed budget for the next ensuing fiscal
year, setting forth in reasonable the number of units of the Product that
the Agent estimates will be leased during each moth of the next ensuing
fiscal year, including the projected Revenue of the Business for both the
leasing and servicing of the Product.
8.07 Approval
Each budget referred to in Section 8.06 hereof is subject to the approval
of both parties. If the parties do not mutually approve the budget for the
next ensuing fiscal year, either party may give the other party sixty (60)
days written notice of its intention to terminate this Agreement. If the
parties are unable to approve the budget within the aforesaid sixty (60)
day period, either party may terminate this Agreement and shall be under
no further obligation to the other save and except for the obligation to
account for all Product delivered to the Agent and all Revenue from the
Business up to the date of termination of this Agreement.
PART IX
Term
9.01 Effective Date
This Agreement is effective on execution by both parties.
9.02 Term
Subject to earlier termination of this Agreement as provided in Section
8.07 hereof, this Agreement shall have a term of five (5) years commencing
on the effective date and may be renewed for successive five (5) year
terms upon the terms and conditions
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<PAGE>
that are provided in this Agreement or as the parties may otherwise
mutually agree in writing.
PART X
Amendment of Agreement
10.01 Amendments
This Agreement may only be amended with the written consent of both
parties.
PART XI
ASSIGNMENT
11.01 Assignment
This Agreement may not be assigned by either of the Manufacturer or the
Agent without the prior written consent of the other party, except that
this Agreement may be assigned to a wholly owned subsidiary of the party
making the assignment. No assignment of this Agreement shall be valid
unless the assignee has given its covenant to the other party hereto to be
bound by the terms of this Agreement. In the event of any such assignment,
the Manufacturer and the Agent, as the case may be, shall remain liable to
the other under this Agreement notwithstanding such assignment unless it
is specifically released by the other party either prior to or
concurrently with the effective date of such Assignment.
PART XII
General
12.01 Proper Law and Choice of Forum
This Agreement is to be governed by and interpreted in accordance with the
laws of the United Kingdom. Both the parties hereby agree that nay
disputes arising out of this Agreement that cannot be mutually settled
shall be referred to an arbitrator who shall be acceptable to both the
parties.
If the parties cannot decide on the arbitrator, then the arbitrator of the
International Court shall be asked to appoint an arbitrator to rule on the
dispute.
12.02 Waiver
A waiver on the art of any party to this Agreement relating to the strict
compliance with any term of this Agreement will not in itself, constitute
a waiver of the rights of that party in the event of a subsequent beach of
a term or condition of this Agreement by another party.
12.03 Severability
If any provision of this Agreement is found to be unreasonable or
unenforceable, or both, by a Court of competent jurisdiction, then such
provision shall be deemed to be severed from this Agreement and the
remainder of this Agreement will not be affected
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<PAGE>
and will remain in full force to the extent permitted by law.
12.04 Execution by Facsimile and Counter Parts
This Agreement may be executed by facsimile transmission and/or in one or
more counter parts, each of which so executed will constitute an original
and all of which will constitute one and the same Agreement.
12.05 Notice
Any notice to be given under this Agreement shall be duly and properly
given if delivered, or if transmitted by fax to such Fax number as the
parties may from time to time designate, or if mailed by prepaid
registered post in Canada, or in the United Kingdom addressed as set out
at the beginning of this Agreement or at such other address or addresses
as the parties may from time to time designate by notice in writing to
each other. Any notice mailed pursuant to this Section will be deemed to
be received on the tenth (10th) business day next following the day of
mailing.
12.06 Headings
All captions contained in this Agreement are for convenience only and do
not constitute a part of this Agreement. Whenever required, the singular
will be deemed to include the plural and vice versa. Whenever required,
the masculine gender will include the feminine and vice versa.
12.07 No Partnership
The parties do not intend to form a partnership nor shall either of them
for any purpose be or be deemed or be treated in any way whatsoever to be,
liable or responsible under this Agreement as partners.
12.08 No Pledging of Credit
Neither party shall pledge the credit of or legally bind the other party
hereto without the express written consent of that party.
12.09 Successors and Assigns
This Agreement ensures to the benefit of and is binding upon the parties
to this Agreement, their heirs, executors, administrators, successors and
assigns.
IN WITNESS WHEREOF the parties hereto set their hands and seals as of the day
and year first above written.
ADVANCED GAMING TECHNOLOGY, INC. EDWARD THOMPSON GROUP
Per: /s/ Firoz Lakhani Per:
--------------------------- ---------------------------
Authorized Signatory
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EXHIBIT 6.3
THIS AGREEMENT made and dated for reference the 17th day of July, 1996.
BETWEEN:
ADVANCED GAMING TECHNOLOGY, INC., a company incorporated pursuant to the
laws of the State of Wyoming and having an office at 2482 - 650 West
Georgia Street, Vancouver, British Columbia, V6B 4N9;
("AGTI")
OF THE FIRST PART
AND:
FORTUNE ENTERTAINMENT CORPORATION, a company incorporated pursuant to the
laws of the Bahamas, c/o 1600 - 609 Granville Street, Vancouver, British
Columbia V7Y 1C3;
("FEC")
OF THE SECOND PART
WHEREAS AGTI has varying interests in certain gaming ventures in China the
Philippines, the United States and the United Kingdom;
AND WHEREAS FEC desires to acquire from AGTI certain interests in AGTI's
interests in those gaming ventures;
NOW THEREFORE THIS AGREEMENT WITNESSETH and in consideration of the mutual
premises and covenants and for other good and valuable consideration, the
receipt and sufficiency whereof is hereby acknowledged by AGTI, the parties
hereto hereby agree as follows:
1. AGTI hereby grants to FEC the right to acquire an interest in various
gaming ventures in which AGTI has an interest including, but not limited to, the
following:
a) AGTI grants to FEC the right to acquire 50% of AGTI's interest in each
and every gaming project in the People's Republic of China ("PRC"),
with all future costs and liabilities of each such project in which
FEC acquires an interest to be assumed pro-rate by AGTI and FEC to the
extent of their respective interests in such projects. The
consideration for this right and
<PAGE>
for FEC to acquire a fully paid up 50% interest in AGTI's interest in
the slot parlor currently under construction in Kaikou, Kainan Island,
PRC shall be the amount of $250,000 U.S. payable on or before July 31,
1996. FEC may acquire a 50% interest in AGTI's interest in each
additional slot parlor project in the PRC by payment to AGTI of
$250,000 (U.S.) in respect of each such project, said amount to be
paid following receipt by FEC of a properly executed Joint Venture
Agreement with the Chinese party (it being acknowledged that prior to
making the payment FEC will have a reasonable period of time to
conduct a legal due diligence review of the Joint Venture Agreement).
When all payments made to AGTI by FED under this section 1(a)
(excluding FEC's pro-rate) share of costs and liabilities) total
$2,000,000 U.S., FEC shall thereafter automatically receive 50% of
AGTI's interest in each and every project in the PRC, subject to FEC
paying its pro-rata share of all costs and liabilities of each
project. FEC shall have the right to appoint one representative to the
board of directors of each joint venture for every two directors
appointed by AGTI, but shall nonetheless have a minimum of one
director on the board of directors for each joint venture project. All
revenues payable to FEC will be paid monthly;
(b) AGTI grants to FEC the right to purchase up to a 25% interest in
AGTI's interest in AGTI's slot parlor projects in the city of Pasay,
Philippines. The "Pasay project" entails the installation and
operation of up to 4,000 slot machines. FEC may acquire 25% of AGTI's
interest in each slot machine by paying AGTI:
(i) $250 U.S. for each slot machine in which FEC desires to acquire
an interest payable upon documented proof of shipment; provided
that
(ii) FEC shall receive a minimum of a 20% interest in the complete
project involving 4,000 slot machines and any other gaming
machines installed in the city of Pasay in which AGTI derives an
interest upon aggregate payment of a total of $1,000,000 U.S. by
FEC to AGTI pursuant to section 1(b)(i) of this Agreement;
FEC will also pay its pro rata share of all future costs and
liabilities in respect of the projects and slot machines in which it
acquires and interest. All revenues will be paid to FEC on a monthly
basis;
(c) (i) AGTI grants to FEC the right to participate in revenue received
from the leasing of the first 3,000 in-house account Max Lite
handsets. In order to exercise the right, FEC shall pay AGTI the sum
of $1,000,000 U.S. as to $350,000 U.S. on or before
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<PAGE>
September 30, 1996 and the balance of $650,000 U.S. on or before
December 1, 1996. Upon FEC exercising the right.
A. AGTI will pay FEC $1.25 U.S. per day per handset during the first
year from the date of exercise of the right based on a 6-day
week, 52 weeks per year (312 days);
B. AGTI will pay to FEC $0.75 U.S. per day per handset during the
second year from the date of exercise of the right based upon a
6-day week. 52 weeks per year (312 days);
C. AGTI will pay to FEC $0.25 U.S. per day per handset during the
third year from the date of exercise of the right based upon a
6-day week, 62 weeks per year (312) days); and
D. AGTI will pay FEC $0.25 U.S. per day per handset during the
fourth year from the date of exercise of the right based upon a
6-day week, 52 weeks per year (312 days);
AGTI will guarantee full payment on a monthly basis and hereby agrees
to a late payment charge of 18% annually;
FEC shall be able to exercise the right on a lesser number of handsets
than the 3,000 referred to in section 1(c)(i) with pro rate
adjustments in the revenue and exercise price, and
(d) AGTI grants to FEC the right to acquire up to a 15% carried interest
in AGTI's interest in Bingo Projects currently being developed by AGTI
in the United Kingdom. The payment for the 15% interest shall be the
sum of $600,000 U.S. payable on or before September 15, 1996. FEC must
also pay its pro rata share of all future costs and liabilities of the
Bingo Projects. AGTI will grant to FEC the right to acquire a minimum
15% carried interest in AGTI's interest in Bingo Projects in the
European Economic Community and South America under terms and
conditions to be negotiated in good faith between the parties;
(e) AGTI grants to FEC the right to acquire an 18.75% interest in AGTI's
interest in the development and marketing of the Sega Sonic Bingo
game. In order to exercise the right FEC must pay to AGTI the sum of
$750,000 U.S. on or before September 30, 1996. FEC must also pay its
pro rata share of all future costs and liabilities in respect of the
development and marketing of the Sega Sonic Bingo game; and
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<PAGE>
(f) AGTI grants to FEC the right to acquire a 50% interest in AGTI's
interest in the Sega Royal Ascot, Craps & Golden Knight entertainment
units at a price of approximately $375,000 U.S. for every unit
installed. In order to exercise the right FEC must pay its pro rata
share of AGTI's costs at the time of the purchase order being issued
to Sega.
AGTI acknowledges receipt from FEC of a non-refundable deposit in the
amount of $289,000 U.S. The sum of $289,000 U.S. hereby paid shall be applied to
the right payments required to be made by FED under section 1(a) above, or as
otherwise directed by FED.
3. FEC and AGTI agree to enter into a formal agreement (the "Formal
Agreement") to be negotiated between the parties embodying the following terms:
(a) right of first refusal to acquire each other's interests in the
various projects;
(b) restrictions or assignments and transferability of the parties'
interests in the various projects;
(c) default provisions;
(d) representations and warranties by the parties as to corporate power
and authority to enter into the Formal Agreement, AGTI's ownership of
an interest in the various projects and its right to transfer a
portion of its interest to FEC; and
(e) such other terms and provisions as are commonly contained in
agreements of the nature of the Formal Agreement.
4. The parties agree that the funds which are advanced for the specific
projects shall be used substantially to fund the specific project for which they
were advanced and that separate accounting will be maintained for each project
and that the accounting will be made available to both parties on a timely
basis, in no event longer than 30 days after each month end. FEC shall have the
right to examine the accounting for all projects in which FEC has invested
monies and shall be permitted full access to all records upon giving 14 days
notice to AGTI or AGTI's joint venture partner. The parties further acknowledge
that each of the rights set forth in sections 1(a) - 1(e) hereof is a separate
right and the exercise of any particular right is not dependent on the exercise
of any other right.
5. AGTI hereby represents and warrants to FED that it has the full
corporate power and authority to enter into this Agreement and to consummate the
transactions
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<PAGE>
contemplated hereby and that there are no restrictions on AGTI's ability to
grant the rights to FEC described herein and to transfer its interests to FEC in
the event FEC exercises such rights.
6. If either party is in default of any provision of this Agreement, it
will not lose the reasonable steps to any of its rights hereunder, and this
Agreement may not be terminated unless the non-defaulting party has first given
written notice to the defaulting party specifying the nature of the default and
the defaulting party has failed to cure the default or to cure the default
within 30 days of receipt of such notice.
7. In the even the parties are unable to agree on the terms of a Formal
Agreement on or before the expiration of 90 days from the date of this
Agreement, this Agreement shall constitute a final and binding agreement between
the parties.
8. For purposes of this Agreement, all references to AGTI shall be deemed
to include AGTI and any other company with which it is affiliated within the
meaning of section 1(3) of the Securities Act (British Columbia), as amended.
9. This Agreement enures to the benefit of and is binding upon the parties
and their respective successors and assigns.
10. This Agreement supersedes and replaces all previous agreements between
the parties in respect of the subject matter hereof.
11. This Agreement shall be construed and interpreted in accordance with
the laws of the Province of British Columbia.
IN WITNESS WHEREOF the parties hereof have executed this Agreement
effective as of the day and year first above written.
THE COMMON SEAL OF )
ADVANCED GAMING TECHNOLOGY )
INC. was hereunto affixed in the )
presence of: )
___________________________________________________ ) c/s
Authorized Signatory
BRYAN DEAR ON behalf of )
FORTUNE ENTERTAINMENT )
CORPORATION )
___________________________________________________ ) c/s
Authorized Signatory
-5-
EXHIBIT 6.4
This Share Purchase Agreement made as of the 26th day of September, 1996.
BETWEEN:
ADVANCED GAMING TECHNOLOGY, a company duly incorporated under the laws of
the State of Wyoming and having its head office at P.O. Box 11610, Suite
2482 - 650 West Georgia Street, Vancouver, British Columbia, V6B 4N9
(hereinafter called the "Purchaser")
OF THE FIRST PART
AND:
THE UNDERSIGNED SHAREHOLDERS OF PRISMS, INC.
(hereinafter collectively called the "Vendors")
OF THE SECOND PART
PRISMS, INC., a company duly incorporated under the laws of the State of
North Carolina and its predecessor Prisms, L.L.C., a North Carolina limited
liability company, having its office at 140 Ivy Ridge Circle, Mars Hill,
North Carolina, 28754
(hereinafter called the "Company")
OF THE THIRD PART
A. The Vendors are the legal, beneficial and registered owners of all the issued
and outstanding capital stock of the Company; and
B. The Vendors have agreed to transfer and the Purchaser has agreed to purchase
all of the issued and outstanding shares in the Company (the "Shares"), upon the
terms and conditions as set forth in this Agreement.
<PAGE>
NOW THEREFORE THIS AGREEMENT WITNESS that in consideration of the premises,
covenants, agreements, representations and warranties herein set forth, the
parties hereby agree as follows:
1. DEFINITIONS
1.1 In this agreement unless there is something in the subject matter of context
inconsistent therewith:
(a) "Agreement" means this agreement and including all Schedules attached
hereto, as may be amended from time to time;
(b) "Associated Company" means:
(i) any corporation which owns directly or through any other means
not less than 30% of the outstanding capital stock of a party
hereto;
(ii) any corporation of which a party hereto owns directly or through
any other means not less than 30% of the outstanding capital
stock; and
(iii) any corporation of which either of the corporations referred to
in paragraphs (i) and (ii) owns directly or through any other
means not less than 30% of the outstanding capital stock;
(c) "Closing Date shall mean:
(i) the 16th day of October, 1996; or
(ii) such other date as the parties hereto shall agree upon in
writing.
(d) "Commercial Production" shall mean the date when the Company receives
net sales of US $10,000 for any Product;
(e) "Financial Statements" shall mean the unaudited financial statements
of the Company as at September 23, 1996, a copy of which is attached
hereto as Schedule "A", such Financial Statements having been prepared
in accordance with generally accepted accounting principles
consistently applied;
(f) "Net Sale Price" means the price at which any Product is sold but
deducting costs of packaging, transport, allowances made for defective
Products, excise duties, value-added taxes or other similar tax
charged on and included in the price to the customer;
-2-
<PAGE>
(g) "Product" means any manufacture or production of an item making use of
any one of the Patents or Trademarks;
(h) "Patents and Trademarks" means all Patent applications and letters
Patent and all Trademarks and Trademark applications, which the
Company now owns or controls, a copy of which is described in Schedule
"C".
2. SALE AND PURCHASE
2.1 On the Closing Date, the Vendors hereby transfer, sell and convey to the
Purchaser the Shares for the total purchase price of US$600,000 to be paid by
the issuance of 300,000 shares of the Purchaser at a deemed price of US$2.00 per
share as quoted on the NASDAQ Bulletin Board or such other stock exchange where
the shares are publicly traded, provided that the average closing price of the
shares of the Purchaser for the ten day trading period preceding October 1, 1997
("Closing Price") is equal to or greater than US$2.00; and if the Closing Price
is less than US$2.00 per share then the number of shares issued shall be
adjusted within 14 days such that additional shares will be issued in order that
the total value of all the shares issued pursuant to this paragraph will be
US$600,000 based on the Closing Price.
2.2 The Purchaser shall issue, within 7 days of Commercial Production, 28,572
shares of the Purchaser to the Vendors at a deemed price of US$2.00 per share
for each of the following games brought to Commercial Production:
(a) Rainbow 21;
(b) Rainbow Keno;
(c) Rainbow U.S.A.;
(d) Rainbow Trump;
(e) Rainbow Triumph;
(f) Rainbow YES!; and
(g) Rainbow BINGO.
The games set forth in items (a) through (g) above are described in the
specifications attached hereto as Schedule "D" and shall be within the scope of
the Patents and Trademarks.
-3-
<PAGE>
If the average closing price of the Purchaser for a ten day trading period
commencing 12 months after each share issuance of the Purchaser (the "Adjusted
Price") pursuant to this paragraph is less than US$2.00 per share then
additional shares will be issued within 14 days such that the total value of
each share issuance pursuant to this paragraph will be US$57,144 based on the
Adjusted Price.
2.3 The shares issued pursuant to paragraphs 2.1 and 2.2 shall be issued pro
rata to each of the Vendors based on the number of shares of Prisms transferred
to the Purchaser at closing.
2.4 The issuance of shares pursuant to Paragraph 2.2 shall occur notwithstanding
the fact that a game(s) is referred to by a trademark or name other than as set
forth herein.
3. ROYALTIES
3.1 The Purchaser shall pay to the Vendors a royalty at the rate of two percent
(2%) of the Net Sale Price of the Product. Royalties shall be paid pro rata to
each of the Vendors based on the number of shares of Prisms transferred to the
Purchaser at closing. The Net Sales Price must be based on a bona fide arms
length transaction.
3.2 Royalties for which payment is due to the Vendors shall be payable within
60 days of the end of each quarter and such payment shall be accompanied by the
quarterly financial statements prepared by the Purchaser.
3.3 If any of the Patents and Trademarks are declared invalid or revoked by a
court or tribunal of competent jurisdiction all royalties payable in respect of
the Patents and Trademarks so refused, declared invalid or revoked shall cease
to be payable as from the date of such refusal, judgment or decision but the
Vendors shall be entitled to all sums which shall have fallen due at such date
whether paid or unpaid at such date and if the judgment or decision of the court
or tribunal is reversed on appeal the royalties shall as from the date of such
reversal become payable together with all royalties which would have been
payable but for the adverse judgment or decision.
4. REPRESENTATIONS AND WARRANTIES OF THE VENDORS
4.1 In order to induce the Purchaser to enter into and consummate this
Agreement, the Vendors jointly and severally represent and warrant to and
covenant with the Purchaser that:
(a) the Company has the corporate power to carry on the businesses carried
on by it and is duly registered and qualified to carry on business in
the State of North Carolina;
-4-
<PAGE>
(b) all necessary corporate action on the part of the directors of the
Company will have been taken to authorize and approve the execution
and delivery of this Agreement and the indentures or commitments to be
entered into by the Company pursuant to this Agreement and the
completion of the transactions contemplated herein and the observance
and performance by the directors of the Company its covenants and
obligations contained herein, and thereupon this Agreement will
constitute a valid and binding obligation of, and which is enforceable
against the Vendors in accordance with its terms except as limited by
laws of general application affecting the rights of creditors
generally and except as limited by the application of usual equitable
principles when equitable remedies are sought;
(c) the performance of this Agreement will not be in violation of the
constating documents of the Company or of any agreement to which any
of the Vendors or the Company is a party and will not give any person
or company any right to terminate or cancel any agreement or any right
enjoyed by the Company and will not result in the creation or
imposition of any lien, charge, encumbrance or restriction of any
nature whatsoever in favour of a third party or against the assets of
the Company except as disclosed in writing to the Purchaser;
(d) the corporate records and minute books of the Company, all of which
have been provided to the Purchaser, contain complete and accurate
minutes of all meetings of the directors and shareholders of the
company held since its incorporation, and original signed copies of
all resolutions and by-laws duly passed or confirmed by the directors
or shareholders of the Company. All such meetings were duly called and
held. The share certificate books, register of directors and any
similar corporate records of the Company are complete and accurate.
All eligible security transfer tax or similar tax payable in
connection with the transfer of any securities of the Company have
been duly paid except for any such tax that may be payable upon the
transfer of securities pursuant to this Agreement;
(e) the constating documents of the Company have not been altered since
the incorporation of the Company;
(f) the issued and outstanding capital of the Company consists of that
number of shares as detailed in Schedule "A" and all such issued share
capital has been duly and validly issued and is outstanding as fully
paid and non-assessable;
(g) there are no options, warrants or other rights to purchase shares or
other securities of the Company which have been authorized or agreed
to be issued or are outstanding;
-5-
<PAGE>
(h) the Vendors are collectively the legal and beneficial owners of all
the Shares listed in Schedule "B" and each hold the Shares free and
clear of any and all liens adverse claims, charges, pledges,
hypothecation and encumbrances whatsoever;
(i) each of the Vendors have due and sufficient right, power and authority
to enter into this Agreement on the terms and subject to the
conditions herein set forth and to collectively transfer the legal and
beneficial title and ownership of the Shares to the Purchaser free
from all restriction and claims;
(g) there are no shareholder agreements, proxies, pooling agreements,
voting trust agreements or similar agreement among the Vendors with
respect to the Shares and all necessary corporate actions and
proceedings have been taken by each of them to authorize the execution
and delivery of this Agreement and the performance of all of their
respective obligations hereunder; and
(k) no person, firm or corporation has any agreement, option or right,
present or future, contingent or absolute, or any right capable of
becoming a right, agreement or option;
(i) to require the Company to issue any further or other shares in
its capital or any other security convertible or exchangeable
into shares in its capital or to convert or exchange any
securities into or for shares in its capital;
(ii) for the issue or allotment of any of the authorized but unissued
shares in the capital of the Company;
(iii) to require the Company to purchase, redeem or otherwise acquire
any of the issued and outstanding shares in its capital;
(iv) to purchase or otherwise acquire any of the Shares;
(l) the Vendors have incurred no obligation or liability, contingent or
otherwise, for brokers' or finders' fees in respect of the
transactions contemplated by this Agreement for which the Purchaser or
the Company will have any obligation or liability whatsoever;
(m) the Company has not agreed to pay any finders' fees or commissions in
connection with the sale or transfer of the Shares contemplated by
this
-6-
<PAGE>
agreement for which the Purchasers or the Company shall have any
obligation or liability;
(n) the Company has the corporate power to own the properties and assets
owned by it;
(o) the Company possess all permits, licenses, consents and authorizations
which are necessary or reasonably required in connection with the
conduct and operation of their businesses and the ownership or leasing
of their property and assets as the same are now conducted, owned or
leased and the Company is not in breach of or in default under any
terms or condition of, and are not subject to any challenge to or
threatened termination of, any such permit, license, consent or
authorization;
(p) the Company has good and marketable title to all its properties and
assets, that are set out in the Financial Statements attached hereto,
and is not subject to any mortgage, pledge, deed of trust, lien,
conditional sales agreement, encumbrance or charge, except as
otherwise disclosed herein;
(q) all tangible rights, assets and properties of the Company are free
from material defect, are in good condition and repair and (where
applicable) are in proper working order, having regard to the use and
age thereof;
(r) the Company does not own, directly or indirectly, any shares or
interest in any other company or firm;
(s) the Company has no subsidiaries and has no agreement of any nature to
acquire any subsidiaries or to acquire or lease any other business
operations and will not, prior to the Closing Date, acquire, or agree
to acquire, any subsidiary or business without the prior written
consent of the Purchaser;
(t) except as disclosed in writing to the Purchaser, the Company is not in
default or breach of any of its obligations under any one or more
contracts, agreements (written or oral), commitments, indentures or
other instruments to which it is a party or by which it is bound and
there exists no state of facts which, after notice or lapse of time or
both, would constitute such a default or breach. All such contracts,
agreements, commitments, indentures and other instruments are now in
good standing and in full force and effect without amendment thereto,
the Company is entitled to all benefits thereunder and, to the best of
the knowledge of the directors of the Company, the other parties to
such contracts, agreements, commitments, indentures and other
instruments are not in default or breach of any of their obligations
thereunder. There are no contracts,
-7-
<PAGE>
agreements, commitments, indentures or other instruments under which
the Company's rights or the performance of its obligations are
dependent upon or supported by the guarantee of or any security
provided by any other person;
(u) as at the date hereof, there are no outstanding powers of attorney or
other authorizations granted by the Company to any person to bind the
Company to any contract, agreement, liability or obligation;
(v) no royalty or other fee is required to be paid by the Company to any
other person in respect of the use of any of the Patents and
Trademarks except that the Company is indebted to Alan J. Powers in
the principal amount of $31,087.15 plus accrued interest. Other than
as disclosed in writing to the Purchaser the Company has the exclusive
right to use all of the Patents and Trademarks and has not granted any
license or other right to any other person in respect of the Patents
and Trademarks;
(w) except as disclosed in writing to the Purchaser, there is no agreement
respecting the assets or Patents and Trademarks to which the Company
is a party other than this Agreement and no person, firm or
corporation has any proprietary or possessor interest in the assets or
Patents and Trademarks and no person is entitled to any royalty on the
Patents and Trademarks being brought to the market commercially except
as contemplated by this Agreement;
(x) the Company has good and marketable title to all of the Patents and
Trademarks that are set out in Schedule "C" attached hereto, and they
are not subject to any mortgage, pledge, deed of trust, lien,
conditional sales agreement, encumbrance or charge, except as
otherwise disclosed herein;
(y) except as disclosed in writing to the Purchaser, there are no
restrictions on the ability of the Company or any successor to or
assignee from the Company to use and exploit all rights in the Patents
and Trademarks. All statements contained in any application for
registration of the Patents and Trademarks were true and correct as of
the date of such application. No right of the Company in the Patents
and Trademarks will be impaired or affected in any way by the
transaction contemplated by this Agreement;
(z) the Company has not received any notice, complaint, threat or claim
alleging infringement of any patent, trade mark trade name, copyright,
industrial design, trade secret or other intellectual property or
proprietary right of any other person;
-8-
<PAGE>
(aa) the Financial Statements have been prepared in accordance with
generally accepted accounting principals applied on a consistent basis
and are true and accurate and present fairly the financial position of
the Company and the results of its operations for the period described
therein and, since that time there has not been:
(i) any change in the condition or operations of the business,
assets or financial condition of the Company other than changes
in the ordinary and normal course of business, which are
not, individually or in the aggregate, materially adverse; or
(ii) any damage, destruction or loss, labour trouble or other event,
development or condition of any character (whether covered by
insurance) materially and adversely affecting the business,
assets, or properties; or
(iii) transferred, assigned, sold or otherwise disposed of any of the
assets shown in the Financial Statements attached hereto or
cancelled any debts or claims except as disclosed and approved
by the Purchaser; or
(iv) incurred or assumed any obligation or liability (fixed or
contingent), except unsecured current obligations and
liabilities incurred in the ordinary and normal course of
business except as disclosed herein; or
(v) declared, made or authorized in any manner whatsoever any
payment of any dividend or other distribution in respect of any
of its shares or purchased or redeemed any of its shares or
split, consolidated or reclassified any of its shares; or
(vi) suffered an operating loss or any extraordinary loss, waived
any rights of substantial value, surrendered any license, or
entered into any material commitment or transaction not in the
ordinary and usual course of business; or
(vii) mortgaged, pledged, subjected to lien, granted a security
interest in or otherwise encumbered any of its assets or
property, whether tangible or intangible; or
(viii) suffered any extraordinary loss, waived any rights of
substantial value, surrendered any license, or entered into any
material commitment or transaction not in the ordinary course
of business; or
(ix) issued or sold any shares of capital stock or any warrants,
bonds, debentures or other corporate securities or issued,
granted or delivered any
-9-
<PAGE>
right, option or other commitment for the issuance of any such
or other securities; or
(x) authorized or agreed or otherwise have become committed to do
any of the foregoing;
(bb) except as disclosed in the Financial Statements of the Company
attached hereto as Schedule "A", there are no other liabilities,
contingent or otherwise, of the Company and the Company has not
guaranteed, or agreed to guarantee, any debt, liability or other
obligation of any person, firm or corporation, except as disclosed in
writing to the Purchaser;
(cc) the salaries, pensions, bonuses and other remuneration of any nature,
including accrued vacation pay, severance pay and unpaid earned wages
of the present officers, directors and employees of the Company have,
as of the date hereof, been paid in full;
(dd) the Company is not indebted nor under obligation to any of the
Vendors, any affiliate of any of the Vendors, or any past or present
director or officer of the Company, other than as disclosed in writing
to the Purchaser;
(ee) none of the Vendors nor any present or former officer, director
employee or shareholder of the Company are indebted or under any
financial obligation to the Company on any account whatsoever;
(ff) there are no returns in respect of income taxes, Workers' Compensation
Board, corporation capital tax, social service tax or other reports or
returns of information which are required to be filed by the Company
on or before the Closing Date;
(gg) all tax returns and reports of the Company required by law to be filed
prior to the date hereof have been filed and are substantially true,
complete and correct and all taxes and other governmental charges have
been paid or accrued in the Financial Statements;
-10-
<PAGE>
(hh) with respect to income taxes, corporation capital tax, social service
tax and federal sales tax, the Vendors are not aware of any tax
liabilities or outstanding or proposed tax assessment by any taxing
authority, which relate to or affect the Company;
(ii) all excise, sales, business and property taxes and other rates,
charges, assessments, levies, duties, taxes and fees payable to any
level of government which are due and payable by the Company have been
paid and there are no active or threatened proceedings with respect to
any of the aforesaid;
(jj) to the best knowledge and belief of the Vendors are reasonable inquiry
there is no basis for and there are no actions, investigations,
judgments, suits or proceedings including appeals and applications for
review, in progress, pending, outstanding or threatened against or
affecting the Company;
(kk) to the knowledge of the Vendors after reasonable inquiry, the Company
is not in breach of any laws, ordinances, statutes, regulations,
by-laws, orders or decrees to which it is subject or which apply to
it;
(ll) there is not presently outstanding against the Company any judgment,
decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator;
(mm) other than disclosed to the Purchaser in writing, the Company has not
entered into any non-disclosure, confidentiality, non-competition or
similar agreement or arrangement with any person, firm or corporation;
(nn) the Company is not party to any collective agreement with any labour
union or other association of employees and does not have any
contracts, agreements, pension plans, profit sharing plans, bonus
plans, undertakings or arrangement, whether oral, written or implied,
with employees, lessees, licensees, managers, accountants, suppliers,
agents distributors, officers, directors, lawyers, or others which
cannot be lawfully terminated without recourse by the other party or
parties on not more than one month's notice;
(oo) all facts relating to the Company or to its business, operations,
assets or financial condition, that are known, or which on reasonable
inquiry ought to be known, to the Vendors and that are material to the
business, operation, assets or financial condition of the Company have
been disclosed to the Purchasers;
(pp) the consummation of the transaction contemplated hereby will vest in
the Purchaser legal and beneficial title to the Shares free and clear
of any claims or liens under any agreement or obligation of the
Vendor, and free and clear of claims of any creditor or creditors
generally of the Vendors and no claim of any
-11-
<PAGE>
kind in respect of the sale of the Shares including any claims in the
course of any insolvency or bankruptcy proceedings against the Vendor,
can be asserted against the Purchaser.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
5.1 To induce the Vendors to enter into and consummate this Agreement, the
Purchaser represents and warrants to and covenants with the Vendors as follows:
(a) it is duly incorporated, validly subsisting and in good standing under
the laws of the State of Wyoming and has the power and capacity to
enter into this Agreement and carry out its terms;
(b) the execution and delivery of this Agreement and the completion of the
transactions contemplated hereby have been duly and validly authorized
by all necessary corporate action on the part of the Purchaser and
this Agreement constitutes a legal, valid and binding obligation of
the Purchaser enforceable against the Purchaser in accordance with its
terms except as limited by laws of general application affecting the
rights of creditors generally and except as limited by the application
of usual equitable principles when equitable remedies are sought;
(c) neither the execution and delivery of this Agreement nor the
consummation of the transactions between the parties contemplated
hereby will conflict with or result in a breach of any of the terms,
conditions or provisions of the constating documents of the Purchaser
or of any Agreement or instrument to which the Purchaser is a party or
by which it is found or which constitute a default under any of the
foregoing or violate any law, rule, regulation or judgment or decree
by which the Purchaser is bound, the consequence of which would impair
the ability of the Purchaser to perform its obligations hereunder.
(d) any capital stock of the Purchaser to be issued pursuant to this
Agreement shall be fully paid and nonassessable and free and clear of
all trading referendums except those trading restrictions imposed by
securities laws having jurisdiction over the parties; it shall keep
accurate and detailed accounts of the operations coming under the
scope of the Product royalty and shall render a statement in writing
accompanied by an opinion of its correctness by the Purchaser's
independent auditor to the Vendors within 120 days after the Company's
year end each year and shall pay to the Vendors the amount of royalty
accrued during the corresponding year;
(f) the Vendors shall be given the right at their own expense and not more
often than twice per fiscal year to examine the books of the Company
and
-12-
<PAGE>
the Purchaser to verify the royalty statements of the operation coming
under the scope of this Agreement.
(g) to the best knowledge and belief of the Purchaser after reasonable
inquiry there is no basis for and there are no actions,
investigations, judgments, suits or proceedings including appeals and
applications for review, in progress, pending, outstanding or
threatened against or affecting the Purchaser;
(h) to the knowledge of the Purchaser after reasonable inquiry, the
Purchaser is not in breach of any laws, ordinances, statutes,
regulations, by-laws, orders or decrees to which it is subject or
which apply to it;
(i) there is not presently outstanding against the Purchaser any judgment,
decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator,
6. SURVIVAL OR REPRESENTATIONS AND WARRANTIES
6.1 The representations, warranties, covenants and agreements of each of the
parties hereto contained in this Agreement or any certificates or documents
delivered pursuant to the provisions hereof or in connection with the
transactions contemplated hereby shall be true at and as of the Closing Date as
though such representations and warranties were made at and as of such time.
Notwithstanding any investigations or inquiries made by any of the parties
hereto prior to Closing or the waiver of any condition by such party, the
representations, warranties, covenants and agreements of each of the parties
shall survive the Closing Date and, notwithstanding the Closing of the purchase
and sale herein provided for, shall continue in full force and effect. In the
event that any of the said representations and warranties are found to be
incorrect or there is a breach of any covenant or agreement of a party, which
incorrectness or breach shall result in any loss or damage sustained directly or
indirectly by any of the other parties then the party sustaining the loss shall
submit proof of such loss or damage to the party in default and the party in
default shall pay the amount of such loss or damage to the other party within 30
days. The representations, warranties, covenants and agreements of each of the
parties contained in the Agreement shall survive the merger or sale of the
Purchaser and shall be binding on the new company or new owner.
7. COVENANTS OF THE VENDOR
7.1 Subject to the provisions of this Agreement or unless the Purchaser gives
its prior written consent, from the date hereof the Vendors will cause the
Company to conduct their business diligently and only in the ordinary and usual
course and, without limiting the generality of the foregoing, that the Company
will:
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<PAGE>
(a) promptly advise the Purchaser of any facts that come to their
attention which would cause any of the Vendor's representations or
warranties herein contained to be untrue in any respect;
(b) disclose to the Purchaser the name and address of each bank, trust
company or similar institution with which the Company has one or more
accounts or one or more safe deposit boxes, the number of each such
account and safe deposit box and the names of all persons authorized
to draw thereon or to have access thereto are to be disclosed to the
Purchaser;
(c) keep in full force all of the Company's insurance policies;
(d) not enter into any contract or agreement or transaction whatsoever,
other than in the ordinary and usual conduct of its business;
(e) not incur any incur any indebtedness or liability whatsoever, secured
or unsecured, other than current liabilities for trade accounts
payable in the ordinary and usual conduct of its business;
(f) not sell, lease, mortgage, hypothecate or otherwise dispose of or
encumber any of its Patents and Trademarks, property, assets or
rights, provided that the foregoing will not operate to prevent it
from consuming supplies in the ordinary and usual conduct of its
business;
(g) not purchase, lease or otherwise acquire, or agree to purchase, lease
or otherwise acquire, any additional property or assets, except
purchases of supplies and other chattels for use in the ordinary and
usual conduct of its business; and
(h) keep its business organization intact and, where applicable and so far
as possible, maintain and preserve its relationships with suppliers,
customers and others having business relations with it and not to do
or permit to be done any act or thing which would or might reasonable
be expected to diminish the value of its business.
8. COVENANTS OF THE PURCHASER
8.1 The Purchaser shall use its best efforts to bring each of the games listed
in Paragraph 2.2 into United States and international Commercial Production.
8.2 The Purchaser shall file and diligently prosecute national patent
applications in all countries designated in the International Application listed
on Schedule "C". The Purchaser shall timely pay all maintenance fees and
annuities for the U.S. Patent
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<PAGE>
Application listed on Schedule "C" and the national applications referred to
herein as well as any resulting Patents and Trademarks. The Purchaser shall
promptly forward to the Vendors copies of all correspondence with various patent
offices. The Purchaser shall give the Vendors 30 days written notice prior to a
due date if the Purchaser decides not to prosecute or pay a maintenance fee or
annuity regarding any of the Patents and Trademarks. If the Purchaser fails to
make such filings or pay such maintenance fees or annuities, the Vendors may
make the filings and pay the fees and the Purchaser shall promptly reimburse the
Vendors for their costs and expenses in connection therewith.
8.3 At the request of the Vendors, the Purchaser and the Company shall execute a
security agreement with respect to the Patents and Trademarks in a reasonable
form and substance to protect the Vendors' interests.
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASERS
9.1 All obligations of the Purchaser under this Agreement are subject to the
fulfillment, prior to Closing, of each of the following conditions:
(a) the receipt of all necessary regulatory and shareholder approval, if
any;
(b) the receipt of a release executed by Alan J. Powers of a Collateral
Patent Assignment and the cancellation of a Promissory Note in the
principal amount of US$3 1,087.15 to Alan J. Powers;
(c) receipt by the Purchaser an opinion of Company's attorney addressed to
the Purchaser, in form and substance acceptable to the Purchaser;
(i) that all necessary documents have been filed, proceedings taken
and other renal requirements fulfilled under the laws of the
State of North Carolina to permit the Shares to be transferred
by the Vendors to the Purchaser;
(ii) as to the due execution and delivery of this Agreement;
(iii) as to the due incorporation and existence in good standing of
the Company;
(iv) that the issued and outstanding capital of the Company consists
of that number of shares as set out in Schedule "B" which have
been and are allotted and issued as fully paid and
non-assessable shares in the capital of the Company; that the
Patents and Trademarks listed in Schedule "C" are validly and
beneficially owned by the Company with the sole and exclusive
right to use same and they
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<PAGE>
are in good standing and duly registered in all appropriate
offices to preserve the right thereof and thereto; and
(vi) as to other matters as counsel to the Purchaser may reasonably
request.
(d) the representations and warranties of the Vendors as set forth in this
Agreement or in any other document delivered to the Purchaser pursuant
hereto shall be true and correct at and as of the Closing Date as if
they were made by the Vendor as of such time;
(e) the Vendors shall have performed and complied with all covenants,
agreements and conditions required to be performed or complied with at
or prior to the Closing Date;
(f) the Vendors will take all necessary steps and proceedings as approved
by counsel for the Purchaser to permit all of the Vendors' shares in
the Company to be duly transferred to the Purchaser; and
(g) that as of the Closing Date, if requested by the Purchaser, all the
directors and officers of the Company shall resign and the board of
directors and officers shall consist solely of nominees of the
Purchaser.
9.2 Each of the foregoing conditions is for the exclusive benefit of the
Purchaser and any such condition may be waived in whole or in part by the
Purchaser at or prior to the Closing Date by delivering to the Vendors a written
waiver to that effect signed by the Purchaser.
10. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE VENDORS
10.1 All obligations of the Vendors under this Agreement are subject to the
fulfillment, prior to or at the Closing Date, of the following conditions:
(a) the execution of an employment agreement between Deborah Leake and the
Purchaser;
(b) the execution of a promissory note by the Purchasers in favour of Alan
J. Powers in the principal amount of US$31,087.15 with interest at the
U.S. prime rate plus 1% per annum calculated annually with interest
accruing from the day after the closing of the Agreement with blended
monthly payments of principal and interest of $1,000 beginning January
15, 1997, and continuing on the same day each month thereafter until
the outstanding balance is paid;
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<PAGE>
(c) receipt by the Vendor an opinion of Purchaser's attorney addressed to
the Vendor, in form and substance acceptable to the Vendor;
(i) as to the due execution and delivery of this Agreement;
(ii) as to the due incorporation and existence in' good standing of
the Purchaser;
(d) the Purchaser shall have performed and complied with all covenants,
agreements and conditions required to be performed or complied with at
or prior to the Closing Date; and
(e) the Purchaser's representations and warranties contained in this
Agreement shall be true at and as of the Closing Date as though such
representation and warranties were made as of such time.
10.2 Each of the foregoing conditions are for the exclusive benefit of the
Vendors and any such condition may be waived in whole or in part by the vendors
at or prior to the Closing Date by delivering to the Purchaser a written waiver
to that effect signed by the Vendors.
11. INDEMNIFICATION
11.1 The Vendors covenant and agree to indemnify and save harmless the Purchaser
from and against or brought against the Purchaser or which the Purchaser may
suffer or incur as a result of, in respect of or arising out of:
(a) all debts, liabilities, contracts, or engagements whatsoever,
including any liabilities for federal, state, sales, excise, property,
income, corporate or any other taxes of the Company existing as of the
Closing Date and not disclosed on or included in such Financial
Statements attached hereto, save and except those liabilities
disclosed herein or accruing or incurred in the ordinary course of
business subsequent to the date of such Financial Statements;
(b) any reassessment against the Company for income, sales, excise,
property or corporate tax, interest and/or penalties for any period up
to the date of the Financial Statements attached hereto for which no
adequate reserve has been provided and disclosed in such Financial
Statements;
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<PAGE>
12. CLOSING
12.1 The transactions provided for in this Agreement shall be closed at such
time and place as may be mutually agreed upon in writing by the parties.
12.2 At the Time of Closing the Vendors shall deliver to the Purchaser
certificates representing all the Shares of the Company duly endorsed in blank
for transfer and will cause transfers of such shares to be duly recorded in the
name of the Purchaser, and will deliver or cause to be delivered all other
documents, opinions or certificates to be delivered hereunder to the Purchaser
whereupon, subject to all other terms and conditions hereof being complied with
the issuance of shares of the Purchaser as described in paragraph 2.1 and
detailed in Schedule "B".
12.3 It will be a condition of Closing that all matters of payment, execution
and delivery of documents by each party pursuant to the terms hereof and
conditional upon all matters of payment, execution and delivery of documents by
the parties, except for the royalties and the future issuance of shares, shall
be deemed to be concurrent requirements and it is specifically agreed that
nothing will be completed at the closing until everything required as a
condition precedent in section 9 has been paid, executed and delivered according
to the terms of this Agreement.
13. DISPUTE RESOLUTION
13.1 If the Vendors and the Purchaser do not agree as to any of the matters
which, if no agreement is reached upon them, are by the provisions hereof to be
determined by arbitration, or if any provisions of this Agreement specifically
refer issues or disputes to arbitration hereunder, or if there is a disagreement
or dispute between the parties hereto with respect to any other provisions of
this Agreement or the interpretation thereof, any such disagreement, issue or
dispute shall, except as hereinafter provided, be determined and resolved by
arbitration pursuant to the provisions of the American Arbitration Association.
13.2 The following provision shall govern any arbitration hereunder:
(a) the reference to arbitration shall be to a single arbitrator, or if
the parties are unable to agree to a single arbitrator within 7 days
from the reference to arbitration, then the reference shall be to
three arbitrators, one of whom shall be chosen by the Vendors, one by
the Purchaser and the third by the two so chosen, and the third
arbitrator so chosen shall be the chairman; and
(b) the award shall be unanimous or made by the majority of the
arbitrators; and
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<PAGE>
(c) the arbitrators shall make their award in writing either within 2
months after entering on the reference or after having been called on
to act by notice in writing from either party to the submission,
whichever is the earlier, or on or before any later date to which the
parties to the submission by writing signed by them may from time to
time enlarge the time for making the award; and
(d) the arbitrators may, if they think fit, on application of either of
the parties to the submission make an order that, prior to
commencement of any hearings on the reference, the parties shall be
entitled to discovery of witnesses under oath and/or production and
discovery of documents; and
(e) the parties to the submission and persons, corporations and other
legal entities claiming through them shall, subject to any legal
objections, submit to be examined on oath by the arbitrators on the
matter in dispute as well as by the other party to this Agreement or
its legal representatives and shall, subject to the said American
Arbitration Association, produce before the arbitrators all records
within their possession or power which may be called for, and do all
other things which during the proceedings on the reference the
arbitrators may require; and
(f) the witnesses on the reference shall, if the arbitrators think fit, be
examined on oath; and
(g) the award shall be final and binding on the parties to the arbitration
and the persons, corporations and other legal entities claiming
through them; and
(h) the costs of the reference and award shall be borne as follows:
(i) the parties to the submission shall each bear their own costs of
the reference and award including the fees and expenses of the
arbitrator appointed by each respectively; and
(ii) the fees and expenses of a single arbitrator or the third
arbitrator shall be shared equally by the parties to the
arbitration.
13.3 The parties agree that with respect to any amendment to the said American
Arbitration Association which makes provision that there shall be incorporated
in any submission any provision not herein contained, such provision shall not
be part of such submission to arbitration hereunder unless the parties hereto
all in writing expressly agree to the incorporation of such provision herein.
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14. FURTHER ASSURANCES
14.1 Either of the parties hereto shall execute and deliver all such further
document and instruments and do all such further acts and things as the other
may, either before or after the Closing Date, reasonably require to evidence,
carry out and give full effect to the terms, conditions, intent and meaning of
this Agreement.
15. NOTICE
15.1 All notices required or permitted to be given hereunder shall be in writing
and delivered to the address of the intended recipient set forth on the first
page hereof or to such other address as may from time to time be notified by any
of the parties hereto and any such notice will be deemed to be received on the
day of delivery.
16. ENTIRE AGREEMENT
16.1 This Agreement contains the whole Agreement between the parties and
supersedes all previous oral or written communications and there are no
warranties, representations, terms, conditions or collateral agreements,
express, implied or statutory other than as expressly set forth in this
Agreement.
17. TIME OF THE ESSENCE
17.1 Time shall be of the essence of this Agreement.
18. APPLICABLE LAW
18.1 This Agreement is and will be deemed to be made in Wyoming and for all
purposes will be exclusively governed by and construed and enforced in
accordance with the domestic laws prevailing in Wyoming and the rights and
remedies of the parties will be determined in accordance with those laws.
19. SUCCESSORS AND ASSIGNS
19.1 This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, personal representatives,
successors and permitted assigns.
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EXHIBIT 6.5
AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into this 14 of July, 1994
by and between Executive Video Systems, Inc. a Maryland Corporation with offices
at 5361 West Del Rio Drive, Chandler, Arizona 85226 ("EVS"), Larry Weinstein and
Sam Whitlock (the "EVS Stockholders") and Advanced Gaming Technology, Inc., a
Wyoming Corporation with offices at 7373 North Scottsdale Road, Suite D222,
Scottsdale, Arizona 85253 and 1818-701 West Georgia Street, Vancouver, British
Columbia, Canada ("AGT").
WHEREAS, AGT is in the business of supplying bingo halls ("AGT Halls") with
electronic bingo devices, fixed video systems and stand alone handsets
("Handsets"); and
WHEREAS, EVS presently has contracts with five bingo halls ("Existing
Locations") with its proprietary fixed video systems installed as noted on
Schedule A affixed hereto; and
WHEREAS, EVS also has been marketing new hall locations ("Eminent Halls")
as noted on Schedule B hereto, a majority of which it anticipates will become
Existing Locations; and
WHEREAS, AGT wishes to market the EVS System (as hereafter defined) to the
exclusion of the fixed video systems it presently is using which EVS has agreed
to in accordance with the terms of this Agreement. In addition, AGT desires to
exclusively market the EVS System in the North American continent.
Now, therefore, in consideration of the mutual promise of the parties
hereto and other good and valuable consideration the parties agree as follows:
1. Granting of License
Subject to the payment of all fees due hereunder, EVS hereby grants to AGT
and AGT hereby accepts an exclusive and nontransferable (except with EVS'
written consent) license to use the EVS System (including all executable files,
exclusive of source codes, for bingo, speed bingo, poker, Keno, including
modifications and upgrades) during the term hereof and to grant sublicenses (the
"License"). Any sublicenses granted hereunder shall be on terms and conditions
consistent with this Agreement.
2. Term
Unless otherwise terminated or canceled as provided herein, this License
shall be for a term of three years ("Term") with an Option to renew for five (5)
additional three year
<PAGE>
periods. The Option to renew will automatically apply unless the Agreement is
terminated pursuant to paragraph 15 hereof. However, the Option to renew shall
not be applicable if EVS receives a bona fide third party offer to purchase the
assets of EVS or 100% of the outstanding stock of EVS. If EVS does receive a
third party offer, AGT shall have fifteen days, from the date of written notice,
to agree to match the terms of said offer.
3. Best Efforts
AGT hereby covenants to use best efforts to promote and market the EVS
System to new customers and to existing customers ("New Halls").
4. Distribution
The parties hereto agree that EVS is entitled to revenues generated from
the sublicensing of the EVS system, worldwide, as follows:
A. Fifty percent (50%) of the gross monies received by AGT from
Eminent Halls;
B. Thirty-five percent (35%) of the gross monies received by AGT from
New Halls in North America; and
C. Five percent (5%) of the gross monies received by AGT from New
Halls other than those described in A or B of this paragraph four.
5. Marketing
EVS will notify AGT of any leads resulting from previous marketing efforts
of EVS exclusive of Eminent Halls. AGT hereby covenants to pursue these leads in
a timely and efficient manner.)
6. Training
EVS will thoroughly and completely train any employees, officers, directors
or agents of AGT in the use, maintenance, manufacture and installation of the
EVS System. All expenses of the training will be paid by AGT. EVS will provide
AGT with complete owner/operator manuals and a guide for any trouble shooting
which needs to be done on the EVS System.
7. Leads
Within sixty (60) days of receiving the lead, AGT will supply all necessary
monies which may be needed for the equipment required for EVS to perform the
terms and conditions of this Agreement so as to meet any reasonable deadline
established by an Eminent
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Hall or a New Hall. If this Paragraph 7 is not met on a timely basis, EVS may
proceed directly with the lead and, as to that lead, no monies will be due AGT
under this Agreement. However, the terms of this Agreement will remain in full
force and affect for any other potential leads. AGT will bear the cost of any
replacement hardware necessary to maintain the EVS system in a good and working
manner.
8. Equipment Purchase
AGT shall be entitled to purchase any equipment independent of EVS provided
it meets specifications necessary for the EVS System to operate efficiently. AGT
shall also be entitled to pay any vendors on a direct basis with all receipts
and purchase documents being the property of AGT.
9. Storing of Equipment
Any equipment purchased by AGT may be stored at a location at AGT's choice,
including existing space utilized at Cactus Bingo Supply ("Cactus"), 3210 East
Roeser Road, Suite 15, Phoenix, Arizona 85040, provided however, such space is
readily and conveniently located for accessibility by EVS employees. Storage
space at Cactus is limited to no more than forty-eight (48) total terminals and
all related components and cabinets and will be provided at no cost to AGT.
10. Marketing
A. AGT covenants to be responsible for all marketing and sales
activity for the EVS System and all costs associated with such activity.
B. EVS covenants to be responsible for all manufacturing,
installation, and maintenance activity for the EVS System and all costs
associated with such activity, exclusive of international duties, tariffs,
taxes and international shipping charges prorated based on distance from
international border to destination.
11. Inventory
AGT agrees to purchase the following inventory from EVS for the sum of
$10,527.00. All costs associated with delivery and training shall be the
responsibility of AGT and reimbursable to EVS I within 14 days from the date of
departure of EVS employees from Vancouver.
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A. One (1) complete demonstration system with all peripheral
equipment, executable files and four (4) player terminals;
B. AGT shall deposit $10, 527.00 into an escrow account with EVS's
attorneys, Houlon & Berman, to be released to EVS upon completion of
delivery, assembly and presentation of original invoices to AGT.
11. 1. AGT agrees to further purchase the following inventory at cost, from
EVS upon verification of inventory, but no later than 30 days from date of
execution of this Agreement, in US Funds, totaling $50,500.00.
A. Forty (40) player terminals and all related components, plus 4
additional light pens.
B. Ten (10) custom cabinets.
C. (1) 486 Server and Touch screen with 2 VGA NTSC Video Cards.
D. Ethernet repeater
12. Stock Option
A. At any time during the Term of this Agreement, AGT shall have the
right to purchase, from the EVS Stockholders, outstanding stock of EVS (the
"Option"). At least ninety (90) days prior to the date upon which the
Option is to be exercised, AGT shall deliver to the EVS Stockholders
written notice of its intent which shall specify the date and time for the
transfer of the shares. The purchase price ("Purchase Price") shall be
determined as follows:
i. If AGT shall exercise this Option during the initial twelve
(12) month period of this Agreement, the Purchase Price shall equal to
$1,000,000.00 or $1,000.00 per share and shall be paid as described
below in either (a) or (b):
(a)(i) Five Hundred Thousand Dollars ($500,000.00) in cash
or cash equivalent on the date the Option is exercised; and
(ii) A promissory note in the principal amount of Five
Hundred Thousand ($500,000.00) at eight percent (8%) interest
payable in twelve (12) equal monthly installments of $43,494.23.
The note will be secured by stock of AGT. Said stock shall be
nonrestricted and publicly traded.
(iii) For a period of one (1) year from the date the Option
is exercised, EVS will consult, advise, assist, and train the
employees of AGT in the operation of the EVS System.
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<PAGE>
The EVS Shareholders will receive 500.00 per day plus expenses
for each full business day their resources are needed.
ii. If AGT shall exercise the Option after the initial twelve
(12) month period of this Agreement, but prior to the end of the 24th
month of this Agreement, the Purchase Price shall equal $1,500,000.00
and shall be paid as follows:
(a) Seven Hundred Fifty Thousand Dollars ($750,000.00) in
cash or cash equivalent on the date this Option is exercised; and
(b) A promissory note in the principal amount, of Three
Hundred Seventy Five Thousand Dollars ($375,000.00) at eight
percent (8%) interest payable in twenty four (24) equal monthly
installments of $16,960.22; and
(c) Stock in AGT with a current market value of $375,000.00.
Said stock must be registered, unrestricted and freely tradable
in either the New York, American or NASDAQ Exchange. The value of
the stock is to be determined based on a 20 day average of the
trading price (for the 20 days prior to the date of the exercise
of the Option) less a discount of fifteen percent (15%).
iii. If AGT shall exercise the Option after the initial (24)
month period of this Agreement, but prior to the end of the 36th month
of this Agreement, the Purchase Price shall equal $2,000,000.00 and
shall be paid as follows:
(a) One Million Dollars ($1,000,000.00) in cash or cash
equivalent on the date this Option is exercised; and
(b) A promissory note in the principal amount of, Five
Hundred Thousand Dollars ($500,000.00) at eight percent (8%)
interest payable in twenty four (24) equal monthly installments
of $22,613.63; and
(c) Stock in AGT with a current market value of $500,000.00.
Said stock must be registered, unrestricted and freely tradable
in either the New York, American or NASDAQ Exchange. The value of
the stock is to be determined based on a 20 day average of the
trading price (for the 20 days prior to the date of the exercise
of the Option) less a discount of fifteen percent (15%).
5
<PAGE>
B. If AGT shall desire to exercise the Option, upon notifying EVS of
said intention, AGT shall deposit Twenty-Five Thousand Dollars ($25,000.00)
into an escrow account with EVS' attorneys, Houlon & Berman (the
"Deposit"). The Deposit shall be applied towards the cash or cash
equivalent required at the time of exercise of the Option.
C. The Option discussed herein may also be exercised by AGT by
purchasing all of the assets of EVS. The terms of the sale of the assets
shall be the same as described herein in paragraph 12.
13. Royalties
If, pursuant to the Option, AGT does acquire the outstanding stock of EVS,
as additional compensation under this Agreement, EVS or its assigns shall
receive continuing royalties equal to three percent (3%) of gross revenues
received by AGT from the EVS System. All monies due under this paragraph
thirteen shall be paid within fifteen days of the end of each month and shall be
accompanied by the necessary financial statements. The obligation of this
paragraph thirteen shall continue for a period of ninety nine (99) years. If,
after the acquisition of EVS stock by AGT or their assigns, the stock or assets
of AGT are sold, any sale of said stock or assets shall contain a requirement
that the obligation of this paragraph 13 shall continue.
14. Monies from Eminent Halls
In the event AGT does not exercise the Option nor does it renew this
Agreement beyond the initial Term, AGT shall pay an amount equal to twenty-five
(25%) percent of the gross revenues received from all Eminent Halls for a period
of three years from the final effective date of this Agreement. The requirement
of this paragraph 14 shall be due regardless of any system being used by AGT at
the Eminent Halls.
15. Termination or Cancellation
A. EVS may terminate or cancel this Agreement anytime and the License
granted herein if:
1. AGT fails to materially pay any and all monies due EVS
hereunder;
2. AGT is in default of any provision hereof and such default has
not been cured within thirty (30) days after EVS gives AGT written
notice;
3. AGT becomes insolvent or seeks voluntary or involuntary
protection under any bankruptcy law.
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<PAGE>
In the event of a termination or cancellation, EVS may:
(i) declare all amounts owed hereunder to be immediately due
and payable;
(ii) require AGT to cease any further use or marketing of
the EVS System provided that such restriction does not affect
AGT's ability to operate the EVS Systems that have already been
installed;
(iii) cease performance of all of EVS' obligations hereunder
without any liability to AGT.
B. EVS may terminate or cancel this Agreement, at the end of any three
(3) year term if AGT has not successfully placed 250 player terminals
during the previous three (3) year term.
C. AGT may terminate or cancel this Agreement if:
1. EVS becomes insolvent or seeks voluntarily or involuntarily
protection under any bankruptcy law;
2. EVS is unable to market the EVS System to a third party
infringement action.
3. If AGT terminates this Agreement pursuant to paragraph 15, the
terms of paragraph 14 herein shall survive.
16. Damages
In no event shall EVS be liable or responsible to AGT or their sublicensees
for any indirect, special or consequential damages, lawsuits or lost profits
arising out of or related to this Agreement.
17. Taxes
AGT shall pay all taxes on or in any way measured by this Agreement
including, but not limited to personal property taxes, if any.
18. Warranties and Representations of EVS
EVS warrants and represents, the following:
18.1 Corporate Organization. EVS is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland, is duly
qualified to do business in said State, and has full power and authority to
carry on its current business.
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18.2 Corporate Authority. The execution and delivery of this Agreement to
AGT and the carrying out of the provisions hereof have been duly authorized by
the Board of Directors of EVS and authorized by EVS' shareholders.
18.3 Noninfringement. The EVS System in whole or in part, does not infringe
any patents, copyrights, trade secrets, trademarks or other proprietary rights
of any third parties.
18.4 Proprietary Rights. The EVS System is full force and has no liens,
claims, proceedings or causes of action which in any way affect the validity or
enforceability of such EVS System.'
18.5 Litigation. There is no suit or action, or legal, administrative,
arbitration or other proceeding or governmental investigation affecting EVS, or
to the best knowledge and belief of EVS, threatened against EVS which materially
or adversely affects the business of EVS.
18.6 Effect of Agreement. The terms and conditions of this Agreement and
all other instruments and agreements to be delivered by EVS to AGT pursuant to
the terms and conditions of this Agreement are valid, binding and enforceable
against EVS in accordance with their terms, subject only to the applicable
bankruptcy, moratorium and other laws generally affecting the rights and
remedies of creditors.
19. Warranties and Representations of AGT
AGT warrants and represents, the following:
19.1 Corporate Organization. AGT is a corporation duly organized, validly
existing and in good standing under the laws of the State of Wyoming, is duly
qualified to do business in said State, and has full power and authority to
carry on its current business.
19.2 Corporate Authority. The execution and delivery of this Agreement to
EVS and the carrying out of the provisions hereof have been duly authorized by
the Board of Directors of AGT and authorized by AGT's shareholders.
19.3 Binding Nature. This Agreement shall be, when duly executed and
delivered, a legal and binding obligation of AGT, enforceable in accordance with
its terms.
19.4 Representations and Warranties. No representation or warranty by AGT
in this Agreement contains or will contain any untrue statement or omissions, or
will omit to state a material fact necessary to make the statements contained
herein not misleading. All
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<PAGE>
representations and warranties made by AGT in this Agreement shall be true and
correct as of Closing with the same force and effect as if they had been made on
and as of such date.
19.5 Litigation. There are no pending, or to the best knowledge and belief
of AGT, threatened actions or proceedings before any court or administrative
agency or other authority which might or will materially or adversely affect
AGT's ability or right to perform all of AGT's obligations hereunder.
20. EVS Indemnification
EVS covenants and agrees to defend, indemnify and hold AGT harmless against
loss, damage, claim of third parties' actions, suits, demands, judgment or
expenses (including legal and other fees), costs and charges incurred or
sustained by AGT as a result of or attributable, in whole or in part, to any
misrepresentation or breach of any representation, warranty, covenant or
agreement herein, given or made by EVS.
21. AGT Indemnification
AGT covenants and agrees to defend, indemnify and hold EVS harmless against
loss, damage, claim of third parties' actions, suits, demands, judgment or
expenses (including legal and other fees), costs and charges incurred or
sustained by EVS as a result of or attributable, in whole or in part, to any
misrepresentation or breach of any representation, warranty, covenant or
agreement herein, given or made by AGT.
22. Arbitration
In the event a dispute is unable to be settled directly between the parties
herein, after thirty days notice of one party to the other, either party may
refer the matter to arbitration and thereafter, the parties agree that the
matter will be settled by binding arbitration in accordance with the arbitration
rules of the American Arbitration Association.
23. No Competition
No parties shall have any interest, direct or indirect in any competitive
company or system. This paragraph 23 shall include all officers, directors and
key employees of AGT. However, notwithstanding the terms of this paragraph 23
any relationships which may exist on the day this Agreement is executed, shall
not be subject to the terms of this Paragraph 23. Notwithstanding the,terms of
Paragraph 23, EVS has a right to operate Existing Halls independently and with
no financial or other obligations to AGT. Those Existing Halls are those
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halls listed on Schedule A hereto. A situation will not be deemed as competitive
if EVS does not possess the capability to develop modifications to the work as a
whole or does not substantially cooperate to develop such modifications.
24. Payment
All monies due EVS under paragraph 4 of this Agreement, shall be due and
payable within fourteen days of receipt of said funds by AGT. The parties hereto
agree that if AGT fails to meet the conditions of this paragraph 24, an
independent third party shall be appointed to review AGT's financial situation
and to distribute the money in accordance with the terms of this Agreement. This
cost of administering this distribution and review will be shared by the parties
in the same percentage as gross revenues are shared.
25. System Modifications
EVS shall provide to AGT, any corrections, revisions or modifications to
the EVS System at no cost to AGT so long as such revisions or modifications do
not alter the work as a whole. AGT may require versions to be developed that
does alter the EVS System as a whole and EVS covenants to use best efforts to
develop such versions with the new resources (including financial) to be
provided by AGT.
26. Hardware
The Parties understand that all hardware is owned by AGT and the executable
files contained on the hard disk of the server are the property of AGT during
the term of this Agreement. EVS may not interfere with the operation of any EVS
System at any location as long as this Agreement is in effect.
27. Notice
Any notice that is to be delivered under this Agreement shall be delivered
first class mail and addressed as follows:
28. Governing Law
The parties hereto agree to this Agreement shall be governed by the laws of
the state of Maryland.
29. No Partnership
The parties hereto agree that nothing contained herein shall serve as to
create a partnership between the parties.
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<PAGE>
30. Counterpart
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument.
31. Prior Agreement
This Agreement supersedes all prior agreements between the parties with
regards to the subject matter hereof.
32. Binding Nature
This Agreement shall be binding upon and enure to the benefits of the
parties hereto and their respective heirs and assigns.
33. Time of Essence
For purposes of this Agreement, time shall be of the essence.
IN WITNESS WHEREOF, The parties have executed this Agreement the date and
your first above written.
WITNESS: EXECUTIVE VIDEO SYSTEMS, INC.
- --------------------------------- BY: ---------------------------------
ADVANCED GAMING TECHNOLOGY, INC.
- --------------------------------- BY: ---------------------------------
WITNESS:
- --------------------------------- ---------------------------------
Larry Weinstein
- --------------------------------- ---------------------------------
Sam Whitlock
11
<PAGE>
PROMISSORY NOTE
$200,000.00 February 12, 1996
For value received, ADVANCED GAMING TECHNOLOGY, INC. (the "Maker") promises
to pay to the joint order of LAWRENCE WEINSTEIN and SAM WHITLOCK or their
assigns (the "Noteholder") TWO HUNDRED THOUSAND DOLLARS and 00/100 ($200,000.00)
together with interest, from the date hereof at the rate of Eight percent (8%)
per annum on the unpaid portion of this Note, payable in Eighteen (18) equal
monthly installments of ELEVEN THOUSAND EIGHT HUNDRED TWENTY EIGHT DOLLARS and
06/100 ($11,828.06) beginning on March 12, 1996 and continuing on the 12th day
of each month until paid. All monies due under this Note will be due and payable
on or before August 12, 1997 (the "Maturity Date").
And it is expressly agreed that if default be made in the payment of any
one of the aforesaid installments is uncured for five (5) days after written
notice thereof all payments including unpaid principal and interest shall be
accelerated and shall become due and payable immediately, time being of the
essence of all installments due under this obligation.
In addition, upon the happening of any one of the following events, this
Note shall become at once due and payable without notice, presentment or demand
of payment:
1. The insolvency of, or the execution of an assignment to the benefit
of creditors or of the appointment of a receiver of the, property of the
Maker.
2. The filing of the petition of bankruptcy by or against the Maker or
the commencement of any proceeding in bankruptcy or any acts relating to
the relief of debtors or to the relief or adjustment of any indebtedness of
the Maker, either through reorganization, composition, extension or
otherwise or for the attachment of credit or property of the Maker.
Upon a default in the payment of any amounts due under this Note, and such
default continues for two (2) consecutive months, the Noteholder may apply as a
setoff against any amount due under the Note, any monies being held or collected
by Noteholder on behalf of the Maker pursuant to Paragraph 8(b)(i) of the
Agreement of Sale dated February 9, 1995.
No delay or failure on the part of the Holder to exercise any power or
right shall be deemed continuous, nor shall a partial exercise preclude full
exercise thereof; and no right or remedy of the Holder shall be deemed abridged
or modified by any course of conduct, and no waiver
Page 1 of 2
<PAGE>
thereof shall be predicated thereon, nor shall failure to exercise any such
power or right subject the Holder to any liability.
The right is reserved to prepay at any time without penalty or premium all
or any part of the principal hereof.
The Makers jointly and severally hereby authorize and empower any Court of
Record or any attorney at law to enter judgment by confession upon the
occurrence of any default, hereunder by Makers against Maker in favor of the
Holder hereof, for the principal balance and all accrued interest due hereunder
plus costs, including reasonable attorney's fees, expressly waiving summons or
other process, and do further consent to the immediate execution of said
judgment, expressly waiving benefit of all exemption laws.
ADVANCED GAMING TECHNOLOGY, INC.
- --------------------------------- BY: ---------------------------------
Firoz Lakhani, President
Page 2 of 2
EXHIBIT 6.6
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
BRANSON SIGNATURE RESORTS, INC. ("BRANSON")
AND
ADVANCED GAMING TECHNOLOGY, INC. ("AGTI")
AND
THE EXCHANGING SHAREHOLDERS (AS DEFINED HEREIN)
DATED AS OF JUNE 1, 1995
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I. EXCHANGE OF SHARES........................................... 2
Section 1.1. Plan of Reorganization................................ 2
Section 1.2. Exchange of Stock..................................... 2
Section 1.3. Ownership of All Property and the Entire Business .... 2
A. Assets..................................................... 3
B. Interests.................................................. 3
C. Realty..................................................... 3
D. Authorities................................................ 4
E. Property................................................... 4
Section 1.4. Liabilities, Obligations and Contracts................ 4
Section 1.5. Excluded Property..................................... 5
ARTICLE II. AGTI EXCHANGE SHARES, OTHER TRANSFER AND OBLIGATIONS ....... 5
Section 2.1. AGTI Exchange Shares.................................. 5
Section 2.2. Other Transfers and Obligations....................... 6
A. Excluded Property.......................................... 6
ARTICLE III. CLOSING PROVISIONS......................................... 6
Section 3.1. The Closing and Closing Provisions.................... 6
Section 3.2. Deliveries by Exchanging Shareholders at the Closing.. 6
A. Branson Stock Certificates................................. 6
B. Conditions Precedent....................................... 6
C. Miscellaneous.............................................. 6
D. Corporate Records.......................................... 6
Section 3.3. Deliveries by AGTI at the Closing..................... 7
Section 3.4. Deliveries by Branson................................. 7
Section 3.5. Exhibit Deliveries.................................... 7
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BRANSON AND
EXCHANGING SHAREHOLDERS..................................... 7
Section 4.1. Organization, Good Standing and Approval.............. 8
Section 4.2. Capitalization and Title to Shares.................... 8
Section 4.3. Ownership and Authority............................... 9
Section 4.4. Branson Subsidiaries.................................. 9
Section 4.5. Financial Statements.................................. 9
Section 4.6. Undisclosed Liabilities............................... 10
A. Permitted Encumbrances..................................... 10
B. Indebtedness............................................... 10
C. Economic, Property or Personal Liability................... 10
Section 4.7. Absence of Conflicting Agreements or Required Consents 10
Section 4.8. Schedule of, Title to, and Condition of
Branson Property...................................... 11
A. Title and Encumbrances..................................... 11
B. Realty; Leases............................................. 11
<PAGE>
C. Contracts, Authorities, Etc................................ 12
D. Bank Accounts.............................................. 13
E. Subsidiaries............................................... 13
Section 4.9. Compliance with Laws.................................. 13
A. Notice of Non-Compliance................................... 13
B. Defaults................................................... 14
C. Governmental Regulations................................... 14
D. Authorities................................................ 14
1. General............................................ 14
2. Federal and State Law.............................. 14
Section 4.10. Legal Proceedings..................................... 14
A. No Outstanding Judgments................................... 14
B. Pending or Threatened Litigation or Proceedings............ 14
C. Permits and Payments....................................... 15
Section 4.11. Taxes and Tax Returns................................. 15
Section 4.12. Insurance............................................. 16
Section 4.13. Adequacy of Authorities, Etc.......................... 17
A. Existence and Validity..................................... 17
B. Full Force................................................. 17
C. Enforceability............................................. 17
Section 4.14. Unfulfilled Commitments............................... 17
Section 4.15. Assumed Name.......................................... 17
Section 4.16. Personnel............................................. 17
Section 4.17. Employment Contracts and Benefits..................... 18
Section 4.18. Shareholders Directors and Officers................... 18
Section 4.19. No Other Commitment to Sell........................... 18
Section 4.20. Enforceability........................................ 19
Section 4.21. Commissions........................................... 19
Section 4.22. Patents, Trademarks, Licenses, Etc.................... 19
Section 4.23. Disclosure............................................ 19
ARTICLE V. COVENANTS OF BRANSON AND EXCHANGING SHAREHOLDERS............. 20
Section 5.1. Affirmative Covenants Pending Closing................. 20
A. Access..................................................... 20
B. Conduct of Business........................................ 20
C. Preservation of Business................................... 20
D. Corporate Matters.......................................... 20
E. Maintenance of Insurance................................... 20
F. Employees and Compensation................................. 21
G. New Transactions........................................... 21
H. Dividends, Distributions and Acquisitions of Shares........ 21
I. Liabilities and Waiver of Claim............................ 21
J. Existing Agreements........................................ 21
K. Consents................................................... 21
Section 5.2. Exception............................................. 22
ARTICLE VI. REPRESENTATIONS, WARRANTIES AND COVENANTS OF AGTI........... 22
Section 6.1. Authority............................................. 22
Section 6.2. Commissions........................................... 22
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<PAGE>
Section 6.3. No Breach; Consents................................... 22
Section 6.4. Litigation............................................ 22
Section 6.5. Acquisition for Investment............................ 23
Section 6.6. Consents, Etc......................................... 23
Section 6.7. Exchange Shares....................................... 23
Section 6.8. Organization, Good Standing and Approval.............. 23
Section 6.9. Capitalization and Title to Shares.................... 23
Section 6.10. Financial Statements.................................. 24
Section 6.11. Undisclosed Liabilities............................... 24
A. Permitted Encumbrances..................................... 24
B. Indebtedness............................................... 24
C. Economic, Property or Personal Liability................... 25
Section 6.12. Absence of Conflicting Agreements or Required Consents 25
Section 6.13. Title to and Condition of AGTI Property............... 25
A. Title and Encumbrances..................................... 25
B. Realty; Leases............................................. 26
C. Contracts, Authorities, Etc................................ 26
D. Subsidiaries............................................... 27
Section 6.14. Compliance with Laws.................................. 27
A. Notice of Non-Compliance................................... 27
B. Defaults................................................... 27
C. Governmental Regulations................................... 27
D. Federal and State Law...................................... 28
Section 6.15. Taxes and Tax Returns................................. 28
Section 6.16. Insurance............................................. 29
Section 6.17. Adequacy of Authorities, Etc.......................... 29
A. Existence and Validity..................................... 29
B. Full Force................................................. 29
C. Enforceability............................................. 29
Section 6.18. Unfulfilled Commitments............................... 30
Section 6.19. Assumed Name.......................................... 30
Section 6.20. Employment Contracts and Benefits..................... 30
Section 6.21. Directors and Officers................................ 30
Section 6.22. Enforceability........................................ 31
Section 6.23. Patents, Trademarks, Licenses, Etc.................... 31
Section 6.24. Disclosure............................................ 31
Section 6.25. Affirmative Convenants Pending Closing................ 31
A. Access..................................................... 31
B. Conduct of Business........................................ 31
C. Preservation of Business................................... 32
D. Corporate Matters.......................................... 32
E. Maintenance of Insurance................................... 32
F. Employees and Compensation................................. 32
G. New Transactions........................................... 32
H. Dividends, Distributions and Acquisitions of Shares........ 32
I. Liabilities and Waiver of Claim............................ 33
J. Existing Agreements........................................ 33
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<PAGE>
ARTICLE VII. CONDITIONS PRECEDENT........................................ 33
Section 7.1. Conditions Precedent to AGTI's Obligations
to Consummate the Exchange............................ 33
A. Branson Stock Transfer..................................... 33
B. Compliance................................................. 33
C. Representations, Warranties and Covenants.................. 33
D. No Changes................................................. 34
E. Corporate Approval......................................... 34
F. Termination of Shareholder Agreements...................... 34
G. Outstanding Branson Stock.................................. 34
Section 7.2. Deliveries Precedent to AGTI's Obligations
to Consummate the Exchange...................................... 34
A. Conveyances and Other Documents............................ 34
B. Certificate of Exchanging Shareholders..................... 34
C. Post-Closing Agreements.................................... 35
D. Consents................................................... 35
E. Release.................................................... 35
F. Legal Opinion.............................................. 35
G. FIRPTA Certificate......................................... 36
H. Stock Offering............................................. 36
Section 7.3. Conditions Precedent to the Obligations of the
Exchanging Shareholders to Consummate the Exchange ... 36
A. Compliance................................................. 36
B. Representations, Warranties and Covenants.................. 37
C. Certificate................................................ 37
D. Legal Opinion.............................................. 37
Section 7.4. Conditions to All Parties' Obligation to
Consummate the Exchange......................................... 37
A. Value of Branson........................................... 37
B. Employment Agreements...................................... 37
C. Major Decisions............................................ 37
D. Separate Business Units.................................... 38
Section 7.5. Post-Closing Undertakings............................. 38
ARTICLE IX. POST-CLOSING OBLIGATIONS.................................... 39
ARTICLE X. GENERAL PROVISIONS........................................... 40
Section 10.1. Statements Deemed Representations..................... 40
Section 10.2. Survival.............................................. 40
Section 10.3. Exchanging Shareholders' Agreement to Indemnify....... 40
A. Indemnification............................................ 40
B. Limitation of Liability.................................... 40
C. Conditions of Indemnification.............................. 41
D. Non-exclusivity............................................ 42
Section 10.4. AGTI's Agreement to Indemnify......................... 42
A. Indemnification............................................ 42
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<PAGE>
B. Limitation of Liability.................................... 42
C. Conditions of Indemnification.............................. 43
D. Non-exclusivity............................................ 43
E. Representative............................................. 43
Section 10.5. Additional Conveyances................................ 43
Section 10.6. Notices............................................... 43
Section 10.7. Assignment or Substitution............................ 44
Section 10.8. Several Obligations of Exchanging Sh-
areholders...................................................... 44
Section 10.9. Applicable Law and Remedies.......................... 44
Section 10.10. Taxes and Expenses................................... 45
Section 10.11. Parties in Interest.................................. 45
Section 10.12. Waiver............................................... 45
Section 10.13. Entire Agreement; Alteration or Amendment............ 45
Section 10.14. Captions............................................. 45
Section 10.15. Counterparts......................................... 45
Section 10.16. Approval of Documents................................ 45
Section 10.17. Expenses of Enforcement.............................. 46
Section 10.18. Compliance with Conditions........................... 46
Section 10.19. Materiality.......................................... 46
Section 10.20. Pronouns and Terms................................... 46
Section 10.21. Severability......................................... 46
-v-
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT (herein "Agreement") is made as of June 1, 1995, by and
among BRANSON SIGNATURE RESORTS, INC., a Nevada corporation with its principal
executive office in Branson, Missouri ("Branson"); ADVANCED GAMING TECHNOLOGY,
INC., a Wyoming corporation with its principal business office in Vancouver,
Province of British Columbia, Canada ("AGTI"); and the shareholders of Branson
who shall execute and deliver this Agreement and thereby agree to be bound by
the terms hereof (each herein an "Exchanging Shareholder" and sometimes
collectively herein the "Exchanging Shareholders"); Branson, Exchanging
Shareholders and AGTI sometimes collectively herein the "Parties."
RECITALS
A. Branson and AGTI previously have entered into a letter agreement dated
November 30, 1994, together with an addendum thereto dated on or about January
31, 1995, which concerns the subject matter of this Agreement.
B. The Exchanging Shareholders own the issued and outstanding shares of
the capital stock of Branson set forth in Exhibit A (as may be amended from time
to time), which collectively constitute the percentage of the issued and
outstanding capital stock of Branson set forth in said Exhibit A (the "Branson
Stock").
C. Branson owns, either directly or indirectly, the "Branson Property" (as
defined in Section 1.3), together with all licenses, permits and charters,
franchises and other rights necessary to engage in the destination resorts
development, management and operations business in the jurisdiction(s) in which
it currently operates and conducts business or in which any of the Property is
located (the "Branson Business").
D. AGTI desires to acquire, and the Exchanging Shareholders desire to
transfer, the Branson Stock; provided that, AGTI shall acquire not less than
ninety percent (90%) of the issued and outstanding capital stock of Branson on
the "Closing Date" (as hereinafter defined) and, through such ownership of
Branson, a pro rata indirect ownership interest in all rights, title and
interests in and to the Branson Property and Branson Business on the terms and
subject to the conditions contained in this Agreement.
E. The Parties desire to consummate the transaction described in this
Agreement as a tax-free type "B" reorganization under the United States Internal
Revenue Code of 1986, as amended.
<PAGE>
NOW, THEREFORE, the Parties, intending to be legally bound, and for and in
consideration of the mutual covenants, agreements, representations and
warranties contained in this Agreement and other good and valuable
consideration, the receipt and sufficiency of which are mutually acknowledged,
agree as follows:
ARTICLE I
EXCHANGE OF SHARES
Section 1.1. Plan of Reorganization. The Parties adopt this Agreement as a
Plan of Reorganization governed by Section 368(a)(1)(B) of the United States
Internal Revenue Code of 1986, as amended, and applicable Treasury Regulations
issued pursuant thereto.
Section 1.2. Exchange of Stock. Subject to the terms and conditions set
forth in this Agreemen , at the "Closing" (as defined in Section 3.1) each
Exchanging Shareholder agrees to exchange, convey, transfer, assign and deliver
all Branson Stock owned by such Exchanging Shareholder to AGTI in exchange for
the "AGTI Exchange Shares" (as defined in Section 2.1), and AGTI agrees to
accept the same, all such Branson Stock to be free and clear of any and all
liens, charges, claims or encumbrances of any kind, nature or quantity
whatsoever, with the certificates representing such Branson Stock duly endorsed
for transfer in blank, or with properly executed stock transfer powers, with
signature guarantees thereon.
Section 1.3. Ownership of All Property and the Entire Business" of Branson.
The Parties intend that, by AGTI's acquisition of the Branson Stock as set forth
in this Agreement, AGTI shall acquire proportionate ownership interest in
Branson which, as of the date of this Agreement, owns (directly or indirectly
through Branson's subsidiaries) good, sufficient and marketable title in and to
all the Branson Property, and any other assets, rights, privileges and interests
related to and now owned and used or held for use in the operation of the
Branson Business of whatever source, nature, kind or quality and wherever
located, together with any of the same as may have been subsequently acquired
prior to the Closing Date, provided, however, that such of the "Excluded Branson
Property" (as defined in Section 1.5) that shall have been conveyed or otherwise
disposed of prior to the Closing as permitted by this Agreement shall not be
required to be owned directly or indirectly by Branson at the Closing Date.
The properties, assets, rights, privileges and interests owned (directly or
indirectly) and to be owned at Closing by Branson include, but shall not be
limited to:
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<PAGE>
A. Assets. All fixed or tangible or corporeal moveable assets now
owned (directly or indirectly through Branson's subsidiaries) or hereafter
acquired to the Closing Date, including, but not limited to, all
automobiles, other vehicles and motorized or moveable equipment, machinery,
equipment, furniture, supplies; all computer hardware and software; all
buildings and improvements (not otherwise included as "Branson Realty" [as
defined in Section 1.2.C]); all cash on hand and on deposit; all accounts
and other investments; all drawings, blueprints, plats, plans and
specifications relating to the facilities and developments of the Business;
all inventories of materials and supplies of whatever kind, quantity or
nature; and all other tangible personal property, assets and equipment
owned and used or usable by Branson (or its subsidiaries) in connection
with the Branson Business (all collectively herein the "Branson Assets").
The material Branson Assets are described generally in Exhibit B attached,
and include those included in the financial statements constituting Exhibit
F.1 attached, excluding those disposed of in the normal course of business
subsequent to the date of such financial statements or such other
dispositions otherwise disclosed and consented to by AGTI, and including
those acquired after the date of such financial statements (including any
to be acquired pursuant to an agreement described in Exhibit K).
B. Interests. All rights, privileges, benefits and interests under any
and all contracts, agreements, partnership, limited liability company or
joint venture agreements, franchises, consents, insurance policies, or
licenses, permits or certificate. (except those included as Branson
Authorities [as defined in Section 1.3.D]), including, but not limited to,
computer software licenses; agreements and permits or lease arrangements
(or rights thereunder) with respect to intangible, personal or real
property or interests therein; consents, licenses, authorities,
certificates; agreements with suppliers, purchasers and agents; statements,
filings and submissions with governmental agencies; business and other
licenses and prepaid expenses, and all claims and rights relating to any of
the Branson Business; the rights to the use of any and all names or marks
(including, without limitation, all trademarks, trade names and logos used
prior to Closing with respect to the Branson Business); and any and all
management or agency agreements or arrangements of, or pertaining to any
of, the Branson Business, and all other agreements, approvals, consents and
authorizations used or owned in connection with the Branson Business,
whether intangible, personal, real or mixed, owned (directly or indirectly
through Branson's subsidiaries) by Branson and used or usable by reason of,
or in connection with, any of the Branson Business (collectively herein the
"Branson Interests"). All of the material Branson Interests are identified
and set forth on Exhibit C attached.
C. Realty. All real property (or mixed real and personal property)
owned (directly or indirectly through the Branson
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<PAGE>
subsidiaries) by Branson and used or held for use by reason of, or in
connection with, any of the Branson Business, including, but not limited
to, land, structures, buildings, easements, servitudes or licenses and
agreements or arrangements or leases (or rights thereunder) with respect to
real property or interests therein, development agreements, leasehold
improvements, building improvements, other improvements, fixtures and
rights-of-way and any other or similar properties, which are described in
or relate to any of the properties and interests described in said exhibit
(collectively herein the "Branson Realty"). All of the material Branson
Realty is identified and set forth on Exhibit D attached.
D. Authorities. All authorities (including, but not limited to, all
prior and current modifications and amendments thereto, proposals, requests
and applications therefor, submissions or filings in connection therewith,
acceptances and transfers thereof, all orders, enactments or resolutions,
if any, pursuant to which the authorities may have been originally issued
or subsequently modified, reissued or transferred and all prior and current
transfers and acceptances thereof and consents thereto), permits, consents,
licenses, franchises, and agreements or arrangements creating or setting
forth obligations, rights, privileges or interests issued, granted or
undertaken by or with persons or entities used or held for use by reason
of, or in connection with, the Branson Business, including, but not limited
to, governmental or quasi-governmental authorities or others, to establish,
maintain or operate the Branson Business, and all similar items owned
(directly or indirectly through Branson's subsidiaries) by Branson
(collectively herein the "Branson Authorities"). All of the material
Branson Authorities are identified and described on Exhibit E attached.
E. Property. As used in this Agreement, "Branson Property" means
collectively the Branson Assets, the Branson Interests, the Branson Realty
and the Branson Authorities, excluding (i) the Excluded Branson Property
(as defined in Section 1.5), (ii) any Branson Property disposed of in the
ordinary course of business following the date of this Agreement, and (iii)
any Branson Property not disposed of in the ordinary course of business,
but disclosed and consented to by AGTI, and including any property or asset
acquired by Branson or its subsidiaries subsequent to the date of this
Agreement and set forth in the records of Branson.
Section 1.4. Liabilities, Obligations and Contracts. Except as set forth in
Exhibit F, and subject, however, to (i) the restrictions, exceptions,
reservations, conditions, limitations, interests and other matters, if any, set
forth or referenced in the specific descriptions set forth in Exhibits B, C or D
or the records of Branson; and (ii) the liens, encumbrances or security
interests of any lender permitted pursuant to the provisions of this Agreement,
all of the Branson Property to be transferred
-4-
<PAGE>
indirectly to AGTI in connection with the transactions contemplated by this
Agreement shall be free and clear of any and all liens, claims, security
interests or encumbrances of whatever kind, quantity or nature, excluding,
however, for this purpose any inchoate tax liens, undetermined or inchoate
materialmen's, mechanics', workmen's, repairmen's or employees' liens or other
like liens arising in the ordinary course of business, whether accrued,
absolute, contingent or otherwise or any arising under or pursuant to
indebtedness described, set forth or accounted for in the financial statements
of Branson (on a consolidated basis) and its subsidiaries referred to in Section
4.5 of this Agreement or otherwise described in the exhibits hereto.
Section 1.5. Excluded Property. The property described in Section 2.2.A of
this Agreement shall be excluded for purposes of Section 1.3 of this Agreement
when transferred to the person or persons entitled thereto in compliance with
the provisions of such section ("Excluded Branson Property").
ARTICLE II
AGTI EXCHANGE SHARES, OTHER TRANSFERS AND OBLIGATIONS
Section 2.1. AGTI Exchange Shares.
At the Closing but subject to the terms and conditions of this Agreement,
AGTI shall deliver 8,500,000 shares of its authorized but unissued (or treasury
stock) common stock, $0.005 par value at a deemed value, of $1.00 per share, for
each share of the issued and outstanding common stock, $0.001 par value, of
Brans n (i.e., the Branson Stock) delivered by the Exchanging Shareholders. The
Exchanging Shareholders shall deliver to AGTI not less than ninety percent (90%)
of the issued and outstanding capital stock of Branson as of the Closing Date.
It is the intent of the Parties that the shareholders of Branson exchanging
their Branson Stock for AGTI Exchange Shares shall own in the aggregate not more
than thirty-seven percent (37%) of the issued outstanding capital stock of AGTI
at the Closing (taking into account the issuance of the AGTI Exchange Shares)
assuming that shareholders of Branson shall have tendered to AGTI 100% of the
issued and outstanding capital stock of Branson pursuant to this
Agreement(herein the "Branson Shareholder AGTI Ownership Percentage"). If less
than 100% (but at least 90%) of the issued and outstanding capital stock of
Branson is tendered to AGTI pursuant to this Agreement, then the Branson
Shareholder AGTI Ownership Percentage shall be deemed reduced to an equivalent
percentage of 37%. The aggregate number of shares of AGTI's common stock, $0.005
par value, to be issued in exchange for the Branson Stock is referred to in this
Agreement as the "AGTI Exchange Shares."
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<PAGE>
Section 2.2. Other Transfers and Obligations.
A. Excluded Property. The Excluded Property is designated on Exhibit
B1, which i a part of Exhibit B. Branson shall convey the Excluded Property
to the persons described in said Exhibit B1.
ARTICLE III
CLOSING PROVISIONS
Section 3.1. The Closing and Closing Provisions. The closing of the
exchange of the Branson Stock for the AGTI Exchange Shares contemplated by this
Agreement (the "Closing") shall take place on or before 5:00 p.m., July 15, 1995
(the "Closing Date"), at a location to be agreed upon by the parties prior to
the closing, or such other date and time or location as the Parties may
otherwise later agree.
Section 3.2. Deliveries by Exchangi g Shareholders at the Closing. At the
Closing, the Exchanging Shareholders shall deliver (or cause to be delivered)
the following to AGTI:
A. Branson Stock Certificates. Certificates, endorsed in blank by each
Exchanging Shareholder, or with appropriate and separate attached stock
transfer powers properly signed, with signature guarantees by a commercial
bank or stock brokerage company attached, representing all of the issued
and outstanding shares (of whatever character) of the capital stock of
Branson owned by each such Exchanging Shareholder.
B. Conditions Precedent. Any consent, certificate, list, document,
instrument or other matter designated as a condition precedent under
Sections 7.1 and 7.2 of this Agreement.
C. Miscellaneous. All filings and submissions to any governmental
agency, indentures, agreements, contracts, mortgages, leases, licenses,
files, correspondence, memoranda, other documents of like character, books
and records, papers and all other documents or instruments or things
pertaining to the Branson Business made, created or filed prior to the
Closing Date.
D. Corporate Records. Complete and correct copies (or when available,
originals) of Branson's and its subsidiaries' articles of incorporation,
bylaws (all as amended to the Closing Date), stock transfer books,
corporate minute books, books of account and ot er financial records, tax
returns, reports and documents, all corporate seals, keys, safe
combinations, and similar items, and all certificates of title,
certificates of deposit, passbooks, checkbooks, bank records, paid
invoices, bonds, insurance policies, bills of sale, deeds, assignments,
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<PAGE>
conveyances and any and all evidence of title, and all other papers,
documents or instruments or things similar or dissimilar to those referred
to herein of or pertaining to Branson, its subsidiaries, the Branson
Property, the Branson Interests or the Branson Business. Delivery of such
records and other documents, instruments or items shall be considered made
as long as such records are located in the principal office(s) of or at an
on-site construction office of, Branson or its subsidiaries on the Closing
Date. Following the Closing, AGTI agrees that Branson may provide any of
Exchanging Shareholder, at such Exchanging Shareholder's expense, with
unrestricted access to original records, documents, instruments and items
of Branson (or its subsidiaries) existing at the Closing Date during normal
business hours upon reasonable notice setting forth a proper purpose
therefor) by such Exchanging Shareholder to Branson from time to time
deemed necessary for a period of three 13) years following the Closing
Date.
Section 3.3. Deliveries by AGTI at the Closing. At the Closing, AGTI shall
deliver to the Exchanging Shareholders (i) the AGTI Exchange Shares, and (ii)
the documents, certificates, items and, other matters designated as conditions
precedent under Section 7.3, all in the manner and orm provided for in this
Agreement.
Section 3.4. Deliveries by Branson. At the Closing (or in conjunction
therewith) or thereafter as required by this Agreement, Branson shall deliver to
appropriate persons (or assigns), (i) appropriate assignments for the Excluded
Property, ii) any certificate, consent, list, document, instrument or other
matter designated as a condition precedent under Section 7.2 of this Agreement.
Section 3.5. Exhibit Deliveries. The Parties acknowledge that it is not
feasible to attach Exhibits C, E and G through O for Branson and Exhibits AA
through II for AGTI at the date of this Agreement. Such exhibits will be
prepared by Branson AGTI respectively within forty-five (45) days following the
Closing. Upon approval of such exhibits by all Parties, they shall be . attached
to this Agreement, and, upon their attachment, shall be deemed effective for all
purposes of this Agreement as of the date of this Agreement notwithstanding
their attachment at a later date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BRANSON AND
EXCHANGING SHAREHOLDERS
Branson and each (severally and not jointly) Exchanging Shareholder
represents and warrants as to the following:
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Section 4.1. Organization, Good Standing and Approval. Branson and each of
its subsidiaries are duly organi ed, validly existing and in good standing under
the laws of the state of its organization. Branson and each subsidiary of
Branson is qualified to do business and in good standing in each jurisdiction in
which its activities require it to be so qualified if material to the Branson
Business. Branson and each subsidiary of Branson has all necessary power and
authority to own, lease, and operate its properties and assets and to engage in
the business which is contemplated by Branson as and in the places where its
property and assets are owned, leased, or operated or where such business is
being or is to be conducted. Branson and its subsidiaries have no business other
than owning and operating the Branson Business.
Section 4.2. Capitalization and Title Shares. As of the closing, the
authorized capital stock (of whatever class or character) of Branson consists of
100,000,000 common shares, $.001 par value, of which 9,000,000 shares currently
are issued and outstanding. All such issued and outstanding shares have been
issued fully paid and nonassessable. Except for shares held by Branson as
treasury stock, Branson's issued and outstanding capital stock owned by an
Exchanging Shareholder, beneficially and of record, is set forth opposite such
shareholder's name in Exhibit A attached. All of the shares of Branson Stock are
validly issued, fully paid and non-assessable, and are free and clear, or on or
before the Closing Date shall be free and clear of any and all liens,
encumbrances, obligations, options, commitments, restrictions, charges and
claims of whatever kind, nature or quantity whatsoever. The Branson Stock is not
subject to any restrictions or limitations prohibiting or restricting transfer,
other than restrictions on transferability imposed generally on securities by
federal and state securities laws or shareholder agreements among the Exchanging
Shareholders and Branson previously disclosed to AGTI or in the exhibits to this
Agreement, none of which will prevent the transactions contemplated by this
Agreement. There are no outstanding subscriptions, options, rights, puts, calls,
warrants, convertible securities or other agreements or commitments obligating
Branson to issue or to transfer from treasury any additional shares of its
capital stock of any class. Such Exchanging Shareholder has, or shall have on
the Closing Date, full legal right, power and authority to sell, transfer and
deliver his/her/its shares of Branson Stock to AGTI in exchange for AGTI
Exchange Shares. No action is pending or has been threatened against such
Exchanging Shareholder's ownership of, or right to transfer, the Branson Stock
set forth opposite such shareholder's name in Exhibit A attached. The delivery
of the Branson Stock to AGTI pursuant to the provisions of this Agreement will
transfer valid title and full legal and beneficial ownership to all of such
shares of Branson Stock owned by such Exchanging Shareholder as and in the kind,
nature, quantity, quality and condition required by this Agreement.
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Section 4.3. Ownership and Authority. Such Exchanging Shareholder is the
legal and beneficial owner of the Branson Stock, set forth opposite his/her/its
name in Exhibit A, free and clear of any claims, liens or encumbrances of any
kind, nature or quantity whatsoever. Such Exchanging Shareholder has full right,
power, legal capacity and authority to enter into and perform his/ her/its
obligations under this Agreement. The execution and delivery of this Agreement
by such Exchanging Shareholder has been duly authorized, and the provisions of
this Agreement are binding upon and enforceable against such Exchanging
Shareholder. Except as set forth on Exhibit A, for purposes of the transactions
contemplated by this Agreement, such Exchanging Shareholder is a citizen or tax
resident of the United States for purposes of Sections 897 and 1445 of the Code
(as defined in Section 4.11).
Section 4.4. Branson Subsidiaries. The only subsidiaries of Branson are
Branson Bluffs Resorts, Inc., a Missouri corporation ("Branson Bluffs"), and
River Oaks Resort and Country Club, Inc., a Texas corporation ("River Oaks").
The authorized capital stock (of whatever class or character) of Branson Bluffs
consists of 30,000 shares of common stock, no par value, of which 30,000 shares
are issued and outstanding, and all of which are owned (or will be owned at
Closing) by Branson, free and clear of any liens, claims or encumbrances of any
kind, nature, quality or quantity whatsoever except transfer restrictions as may
be imposed pursuant to federal or applicable state securities laws generally.
The authorized capital stock (of whatever class or character) of River Oaks
consists of 1,000,000 shares, $1.00 par value, of which 1,000 shares are issued
and outstanding, and all of which are owned (or will be owned at Closing) by
Branson, free and clear of any liens, claims or encumbrances of any kind,
nature, quality or quantity whatsoever except transfer restrictions as may be
imposed pursuant to federal or applicable state securities laws generally.
Section 4.5. Financial Statements. The financial statements for Branson on
a consolidated basis with its subsidiaries attached as Exhibit F.1 are, and will
be, true, correct and complete statements of the financial condition, assets and
liabilities, and all reserves and accruals of Branson as of the dates and for
the periods covered, and they fairly present, in all material respects, the
financial condition of Branson for the period or periods covered and all of them
were prepared in accordance with generally accepted accounting principles on a
consistent basis with that of prior periods. Between the date(s) of such
financial statements and the date of this Agreement, there has not been (i) any
material adverse change in the condition, financial or otherwise, of Branson,
the Branson Business or the Branson Property, except as set forth on Exhibit F.2
or covered by subclause (iii) below, (ii) any damage, destruction or loss,
whether or not covered by insurance, that materially and adversely affects
Branson or the Branson Business, (iii) any disposition or
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acquisition of any material Branson Property other than in the normal course of
business or otherwise disclosed to AGTI.
Section 4.6. Undisclosed Liabilities.
A. Permitted Encumbrances. Except as set forth or described in Exhibit
G, as of the Closing there shall be n liens or encumbrances of any kind,
nature or quantity whatsoever, directly, indirectly, actually or
purportedly burdening, encumbering or pertaining to the Branson Business or
the Branson Property.
B. Indebtedness. Other than items (i) specified in the exhibits
pertaining to either Branson or the Exchanging Shareholders in this
Agreement, (ii) incurred pursuant to contracts, agreements or other
commitments listed, described or referred to in the exhibits pertaining to
either Branson or the Exchanging Shareholders in this Agreement, or (iii)
of a type described in or referred to in any provision of this Agreement
but not set out in the exhibits pertaining to either Branson or the
Exchanging Shareholders in this Agreement, Branson does not have any debts,
liabilities or obligations of any nature, kind or quantity, whether
accrued, absolute, contingent or otherwise and whether due or to become
due, known or unknown, except:
1. To the extent set forth on or reserved against in the balance
sheet of Branson dated as of May 31, 1995;
2. Liabilities incurred since such balance sheet date and
obligations under agreements entered into in the ordinary course of
business; and
3. Items that will not req ire payments by Branson in excess of
Two Hundred Thousand Dollars ($200,000.00) in the aggregate, within
forty-five (45) days following the date of this Agreement.
C. Economic, Property or Personal Liability. Except as summarized in
Exhibit H, neither such E changing Shareholder nor Branson has any
knowledge of any fact, circumstance or occurrence which has given or might
give rise to any material liability, obligation or claim for economic,
property or personal injury or harm to any person, entity or property
against Branson.
Section 4.7. Absence of Conflicting Agreements or Required Consents. The
execution, delivery and consummation of this Agreement and the transactions
contemplated hereby are not prohibited by, and will not conflict with,
constitute grounds for termination of, or result in a breach of, the terms,
conditions or provisions of, or constitute a default under:
A. Branson's articles of incorporation, bylaws or other organizational
or constating documents; or
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B. Any other agreement or instrument to which such Exchanging
Shareholder or Branson is now a party, or to which such Exchanging
Shareholder or Branson or any of the Branson Business or the Branson
Property is subject or bound, including, without limitation, any of the
Branson Authorities or any Branson Interest. Except for governmental
authorities from time to time hereafter generally applicable to the Branson
Business, all approvals and consents required to consummate the
transactions contemplated by this Agreement have been obtained, or such
Exchanging Shareholder and Branson, in good faith, believe they will be
obtainable within a reasonable period following the date of this Agreement.
Neither the ownership, use nor conduct of any of the Branson Business
conflicts with any rights, whether arising out of contract or otherwise, of
any other person or entity.
Section 4.8. Schedule of, Title to, and Condition of Branson Property.
Branson (including its subsidiaries) has no assets, properties or interests
which it owns, or which is used, reasonably held for use or available for use in
connection with the Branson Business which are not set forth in the exhibits or
schedules or otherwise described in Article I. The Branson Assets, Branson
Interests, Branson Realty and Branson Authorities are respectively summarized,
subject to any express exclusions, in Exhibits B, C, D and E attached. Branson
(or its subsidiaries) owns, and at Closing shall own, without material
exception, all Branson Realty, in the form of real property owned in fee or
merchantable title or valid and binding rights, licenses, permits, easements or
rights-of-way for periods of time sufficient for the purpose of the conduct and
operation of the Branson Business.
A. Title and Encumbrances. Except as set forth in or in connection
with indebtedness described in Exhibit G, no financing statement, deed of
trust, chattel or other mortgage, or other security instrument or device,
or notice of any thereof, under the aws of any jurisdiction with respect to
any of the Branson Business or the Branson Property has been filed or
recorded in any jurisdiction; and Branson has not executed, nor has any
person or entity executed on behalf of Branson, any document or instrument
authorizing any secured party thereunder to file any such financing
statement, mortgage, deed of trust statement or other security device or
instrument or notice of any thereof.
B. Realty; Leases. A summary of the Branson Realty is set forth in
Exhibit D. Except for the Branson Bluffs' property previously disclosed to
AGTI, all such interests are valid, subsisting, binding and enforceable by
Branson and there is no material default or breach by Branson or, to the
knowledge of such Exchanging Shareholder or Branson, by the other party or
parties thereto nor has any event occurred that, with the passage of time
or the giving of notice, or both, would become a material breach
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or default, except as set forth in Exhibit D. With respect to Branson
Realty:
i) Branson has not received any notice of the exercise of eminent
domain or condemnation which may affect any of its material real
property in any way, or any notice regarding the annexation of all or
any of such property, and, to the best knowledge and belief of
Branson, no such action is pending or threatened.
ii) No material part thereof is subject to any preferential right
of purchase in favor of any other person.
iii) Branson has no knowledge of any material structural defects
or deficiencies or any subsurface or soil problems related to any
material real property or improvement. The material HVAC, electrical
and other operating systems within or about any improvements have been
maintained in a good and workmanlike manner and are in good working
order and condition normal wear and tear excepted.
iv) Branson has no knowledge of, nor has Branson released or caus
d to be released, any hazardous substances on, about or from any part
of the Branson Realty. To the best knowledge of Branson, Branson and
its subsidiaries are in compliance with all environmental laws and
regulations, except to the extent such non-compliance would not have a
material adverse affect on the financial condition of Branson or any
of the material Branson Realty. For purposes of this agreement,
"environmental laws" means all or any federal, state or local
statutes, ordinances, regulations or other similar governmental
promulgations relating to the environment or to emissions, discharges,
releases, actual or threatened, of hazardous wastes or substances into
the environment. For this purpose, "hazardous wastes or substances"
refers to pollutants, contaminants, chemicals, or industrial toxic or
hazardous wastes or substances regulated by or subject to any
environmental law.
C. Contracts, Authorities, Etc. All presently existing contracts,
agreements, licenses, permits, Branson Authorities, applications, consents,
commitments, insurance policies, easements, servitudes, leases,
rights-of-way, understandings or other arrangements creating or setting
forth obligations, liabilities, rights, privileges or interests, whether
written or oral, expressed or implied, connected with or relating to the
Branson Business, are either:
i) agreements, commitments, obligations or understandings, which
if written, are listed in the exhibits referred to in this Secti n
4.8, and true and complete copies have been made available to AGTI or,
if oral and material to
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be the Branson Business, their terms are described and summarized in
the exhibits referred to in this Section 4.8; or
ii) miscellaneous service or other contracts or agreements, all
of which are terminable at will or upon notice of not more than sixty
(60) days without penalty or other liability of any kind.
Branson (or its subsidiaries), has complied in all material respects with
all material provisions of such agreements and arrangements required to be
complied with by Branson (or its subsidiaries) in connection with the
Branson Business or the Branson Property. All payments required thereunder
are current, and there are no material breaches or defaults thereunder in
any respect. No event has occurred, which upon the giving of notice or
lapse of time, or both, would constitute any such material breach or
default. All of such agreements have been duly executed and delivered, and
are now, and at Closing shall be, valid, binding upon, and enforceable by
Branson (or its subsidiaries) in accordance with their respective terms.
True and complete copies of all documents referred to or covered by this
Section 4.8 which have not been previously made available to AGTI will be
made available promptly to AGTI upon request or upon discovery that they
have not been previously made available to AGTI.
D. Bank Accounts. Exhibit H identifies all accounts and safety deposit
boxes with banks or other financial institutions maintained by or on behalf
of Branson or its subsidiaries, together with the authorized signatories
for such accounts or boxes.
E. Subsidiaries. Branson does not own, directly or indirectly, any
interest or investment, whether equity or debt, in any corporation,
partnership, company, trust or other entity other than as set forth in
Exhibit B attached or described in Section 4.4 above.
Section 4.9. Compliance with Laws. Branson (and its subsidiaries) has
complied and will continue to the Closing to comply in all material respects
with all applicable material federal, state and local laws, rules and
regulations, and with all material, pertinent provisions of the Branson
Interests and agreements or arrangements pertaining to any of the Branson Realty
or the Branson Authorities.
A. Notice of Non-Compliance. Branson has not received any notice,
written or oral, asserting noncompliance in any material respect with
applicable laws, rules or regulations of the United States of America, any
state, county, municipality, or other political subdivision or any agency
thereof having jurisdic-
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tion over Branson, its subsidiaries or any of the Branson Business or the
Branson Property.
B. Defaults. Neither Branson (or its subsidiaries) nor such Exchanging
Shareholder is in default with respect to any judgme t, order, injunction
or decree of any court, administrative agency or other governmental
authority in any respect material to the transactions contemplated by this
Agreement.
C. Governmental Regulations. There are no pending, or, to the best
knowledge of such Exchanging Shareholder or Branson after due inquiry,
threatened, administrative, judicial, investigative, inspection or other
proceedings involving the operation of any material part or portion of the
Branson Business or Branson Property, or Branson's operation or involvement
therewith.
D. Authorities.
1. General. Except as set forth in Exhibit E, no notice, written
or oral, of modification, cancellation, default or dispute of or
regarding any of the Branson Authorities has been received by Branson
or is known to either Branson or such Exchanging Shareholder. Branson
has not caused, suffered or permitted any breach or default to occur o
exist under or with respect to any of the Branson Authorities. To the
best of such Exchanging Shareholder's and Branson's knowledge, no
material ground, basis, circumstance or event exists for modification,
termination, suspension, restriction or limitation upon, or notice of
default with regard to, the rights or authority granted by or pursuant
to any of the Branson Authorities.
2. Federal and State Law. Branson has timely and properly filed
all reports and made all submissi ns known to be required under (i)
all material federal laws, and (ii) the material laws of the states
that are relevant to the conduct and operation of the Branson
Business. Branson and the Branson Business are in all material
respects in compliance with all such laws, rules and regulations.
Section 4.10. Legal Proceedings. Except as set forth in Exhibit I:
A. No Outstanding Judgments. There are no outstanding judgments
against such Exchanging Shareholder or Branson (or its subsidiaries)
encumbering or purporting to encum er any of the Branson Stock owned by
such Exchanging Shareholder, the Branson Business or the Branson Property.
B. Pending or Threatened Litigation or Proceedings. There is no
litigation or proceeding, including, without limitation, hearings,
nvestigations and inspections, known to such
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Exchanging Shareholder or Branson to be pending or, to the best knowledge
of such Exchanging Shareholder or Branson, threatened against any such
Exchanging Shareholder or Branson in which Branson (or any of its
subsidiaries) is a party, or against the Branson Business or the Branson
Property, and which in the aggregate might result in a material adverse
change in the Branson Business, Branson, the Branson Property or the
prospects for or condition, financial or otherwise, of Branson or the
Branson Business, or which questions the validity of any action taken or to
be taken pursuant to or in connection with any of the provisions of this
Agreement. Neither such Exchanging Shareholder nor Branson has any
knowledge or information of incidents, circumstances or grounds that will
or might reasonably result in the institution of any such litigation or
proceedings in the reasonably foreseeable future.
C. Permits and Payments. The execution, delivery and consummation of
this Agreement will not affect: (i) the validity or e forceability of any
permit, license, approval, license fees, taxes or tax agreements, or any of
the Branson Authorities; or (ii) the operation of any of the Branson
Business.
Section 4.11. Taxes and Tax Returns. All taxes pertaining to Branson,
its subsidiaries or the Branson Business required to be paid prior to the date
of this Agreement by Branson, and all tax returns and documents required to be
filed or submitted prior to such date on behalf of Branson (subject to proper
extensions of time to file or pay), have been paid and properly and timely filed
or submitted and were truly and correctly completed. Branson shall pay and file
or submit in compliance with applicable law all taxes pertaining to Branson (or
its subsidiaries) and the Branson Business that accrue or are incurred from the
date of this Agreement to the Closing Date, together with all corresponding tax
returns and documents. To the knowledge of Branson, there are no audits pending
nor any outstanding agreements or waivers extending the statutory period of
limitations applicable to any tax or tax return or document for any period.
Branson has paid or caused to be paid all taxes which have become due pursuant
to all tax returns and has paid all installments of estimated taxes due (subject
to proper extensions of time to file or pay). All taxes and other assessments
and levies which Branson (or its subsidiaries) is required by law to withhold or
to collect have been duly withheld and collected, and have been paid over timely
to the proper governmental authorities or trustee to the extent due and payable.
Subsequent to the date hereof and prior to the Closing Date, all such returns
and reports shall be timely and accurately filed, and any tax payable as shown
thereby shall have been paid, as required by applicable law. There are no
determined tax deficiencies or proposed tax assessments known to Branson, or the
prospect for the same, against Branson or the Branson Business. Branson has made
available true, complete and correct information to AGTI with regard to any and
all taxes and tax
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returns, reports and documents referred to in this Section 4.11, including,
without limitation, Branson's liability for the payment, filing or submission
thereof. Branson has established (and until the Closing will establish) on its
books and records reserves that are reasonably believed to be adequate for the
payment of all taxes not yet due and payable, and there shall be no material
difference between the amounts of the book basis and the tax basis of assets
(net of liabilities) of Branson that are not accounted for by an accrual on the
books for federal income tax purposes and Branson has accounted for deferred
taxes in accordance with generally accepted accounting principles. There are no
liens for taxes upon the assets of Branson, except liens, claims or encumbrances
for taxes not yet due. No power of attorney has been granted with respect to or
involving Branson with respect to any matter relating to taxes which is
currently in force. Branson is not a party to any agreement or arrangement
providing for the allocation or sharing of taxes. Branson has not filed (and
shall not have filed prior to the Closing) a consent pursuant to Section 341(f)
of the Internal Revenue Code of 1986, as amended, including Treasury Regulations
issued thereunder (the "Code") or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by Branson. Branson is not required to
include in income any adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary change in accounting method initiated with respect to
Branson, and Branson does not have knowledge that the Internal Revenue Service
has proposed or has the basis to propose any such adjustment or change in
accounting method. Branson is not a party to any agreement, contract or
arrangement that would result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of Section 280G of the Code.
Branson is not required to file any returns or pay taxes in any jurisdiction
outside the United States. No election has been made with respect to Branson
which was set forth on a statement, form or schedule (other than a statement,
form or schedule with respect to depreciation) attached to a return and filed
separately. All transactions which could give rise to an understatement of
federal income tax (within the meaning of Section 6661 of the Code) with respect
to Branson are adequately disclosed (or, with respect to returns filed before
the Closing will be adequately disclosed) on the returns required in accordance
with Section 6661(b)(2)(B) of the Code.
Section 4.12. Insurance. Branson has, and shall continue to have through
the Closing, fire, theft, casualty and general liability insurance in full force
and effect, the continuation of which shall not be adversely affected by the
execution or delivery of this Agreement. Except as set forth in Exhibit J,
Branson has no unpaid claim under any such insurance and has received no notice
of termination of any such insurance. Branson currently has, and at Closing will
have, all bonds, insurance coverage or
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insurance or surety arrangements in such amounts and providing such coverages as
required by, and in compliance with, all of the Branson Interests, Branson
Realty and Branson Authorities and applicable laws. All such bonding, insurance
and surety agreements or arrangements are set forth in Exhibit J.
Section 4.13. Adequacy of Authorities, Etc.
A. Existence and Validity. The Branson Authorities necessary for the
lawful operation of the Branson Business are listed in Exhibit E. Branson
(or its subsidiaries) is curr ntly, and at the Closing shall be the valid
holder of each of the Branson Authorities. Branson (or one of its
subsidiaries) has all authorities that are necessary to carry on the
operation of the Branson Business.
B. Full Force. All of the material Branson Authorities are and shall
be at Closing in full force and effect in all material respects based on
their current terms and conditions.
C. Enforceability. All of the Branson Authorities have been duly
entered into and authorized and are validly issued and were obtained by or
transferred to and accepted by Branson (or one of its subsidiaries) in
accordance w th, and as required by the terms thereof and by applicable
law. All of the material Branson Authorities are valid, binding and legally
enforceable against third parties in accordance with their terms to the
fullest extent authorized by law.
Section 4.14. Unfulfilled Commitments. Branson has disclosed in Exhibit K
all existing unfulfilled promises or commitments (other than those set forth in
any agreement entered into in the usual and normal course of business) which
Branson has made, including, without limitation, those for capital expenditures,
assets or improvements, whether or not legally binding, which have been made or
offered in connection with any of the Branson Business or any of the Branson
Property, and including, without limitation, all construction and improvement
programs in progress, including the status and contemplated completion date. The
statements set forth in Exhibit K concerning the Branson Business and Branson
Property are true and complete in all material respects.
Section 4.15. Assumed Name. Branson has not owned the Branson Business or
held any of the Branson Property under any fictit ous or assumed business name
or trade name other than in its name, the names of its subsidiaries or those set
forth in Exhibit L attached.
Section 4.16. Personnel. Exhibit M is a list of the names and addresses of
all officers, directors, employees, agents and
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other representatives of Branson and its subsidiaries. The number of Branson's
full-time and part-time employees at the date of this Agreement does not exceed
twenty (20).
Section 4.17. Employment Contracts and Benefits. Exhibit N to this
Agreement is a list of all employment contracts and collective bargaining
agreements and all pension, bonus, profit-sharing, stock option, or other
agreements or arrangements providing for employee remuneration or benefits to
which Branson (or its subsidiaries) is a party or by which Branson (or its
subsidiaries) is bound. All such contracts and arrangements are in full force
and effect (except at the Closing, those required to be terminated pursuant to
this Agreement or terminating prior to the Closing Date in accordance with their
terms), and neither Branson (or its subsidiaries, if a party) nor any other
party is in default under any of them. There have been no claims of default and,
to the best of Branson's knowledge, there are no facts or conditions that if
continued, or unnoticed, will result in a default under such contracts or
arrangements. There is no pending or, to Branson's knowledge, threatened labor
dispute, strike, or work stoppage affecting Branson or the Branson Business.
Branson has complied with all applicable laws for its employee benefit plans,
including the provisions of the Employee Retirement Income Security Act (ERISA),
if and to the extent applicable; there are no threatened or pendinq claims by or
on behalf of any such benefit plan, by or on behalf of any employee covered
under any such plan, or otherwise involving any such benefit plan, that allege a
breach of fiduciary duties or violation of other applicable state or federal
law, nor is there, to Branson's knowledge, any basis for such a claim. Branson
has not entered into any severance or similar arrangement in respect of any
present or former employee that will result in any obligation, absolute or
contingent, of AGTI or Branson (or its subsidiaries), to make any payment to any
present or former employee following termination of employment.
Section 4.18. Shareholders Directors and Officers. The shareholders,
directors, and officers of Branson for the present and previous two (2) fiscal
year periods, together with any owner or holder of rights or options to acquire
any capital stock of Branson, including those granted by Branson, any of its
subsidiaries or any Exchanging Shareholder, are set forth in the list of
Officers, Directors and Shareholders attached as part of Exhibit O.
Section 4.19. No Other Commitment to Sell or Exchange and Acquisition for
Investment. None of the following is directly or indirectly in any manner
subject to any written or oral commitment or arrangement, in whole or in part,
for sale, exchange, transfer, assignment or disposition, including, without
limitation, by operation of law or otherwise, other than as contemplated by this
Agreement: (a) the Branson Stock, or (b) the Branson Business or the Branson
Property. Such Exchanging Shareholder will acquire
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the AGTI Exchange Shares to which such person is entitled under the terms of
this Agreement for such Exchanging Shareholder's individual account for
investment and not with a view to its public sale or distribution.
Section 4.20. Enforceability. The terms and provisions of this Agreement
and all instruments, documents, certificates and agreements made or delivered by
or on behalf of such Exchanging Shareholder or Branson by reason of the
transaction contempl ted hereby constitute the valid and legally binding
obligations of such Exchanging Shareholder and Branson, and are enforceable
against such Exchanging Shareholder or Branson, respectively, in accordance with
the terms hereof and thereof, and constitute, or, upon their delivery, will
constitute, the valid and legally binding obligations of the parties thereto,
and each are, or, upon their delivery, will be enforceable in accordance with
the terms of this Agreement and thereof.
Section 4.21. Commissions. Neither such Exchanging Shareholder nor Branson
has en ered into any agreement, commitment or obligation with regard to any
brokerage commission or finder's fee in connection with negotiations leading up
to the execution of, or arising out of any of the transactions contemplated by,
this Agreement. AGTI shall not be liable, in whole or in part, for any brokerage
commission or finder's fee incurred by Branson or any Exchanging Shareholder in
connection with this Agreement or negotiations leading up to, or including, the
execution of this Agreement or arising out of this Agreement or any transaction
contemplated by this Agreement.
Section 4.22. Patents, Trademarks, Licenses, Etc. Branson does not own or
use any trademarks, trade names, service marks, patents, copyrights,
registrations and has no application therefor or licenses or rights thereto
except as set forth in Exhibit P. There is no violation or infringement of which
Branson knows or reasonably should know, caused by the conduct of Branson's
business, of any laws, statutes, ordinances or regulations or any right or
concession, patent, trademark, trade name, copyright, know-how or other
proprietary right of others, the enforcement of which would have a material
adverse effect on the Branson Business.
Section 4.23. Disclosure. No representation or warranty by such Exchanging
Shareholder or Branson hereunder, nor any statement, instrument, schedule,
exhibit or certificate furnished by or on behalf of such Exchanging Shareholder
or Branson pursuant to or by reason of this Agreement or the Closing, knowingly
contains or will contain any untrue statement of material fact, or knowingly
omits to state a material fact necessary (i) to make the statements contained in
this Agreement or therein not misleading, and (ii) to provide AGTI with
complete, accurate and reliable
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information with respect to such Exchanging Shareholder, Branson, the Branson
Business or the Branson Property.
ARTICLE V
COVENANTS OF BRANSON AND EXCHANGING SHAREHOLDERS
Section 5.1. Affirmative Covenants Pending Closing. Branson shall, and each
such Exchanging Shareholder shall, or shall cause Branson to, act, between the
date of this Agreement and the Closing, as follows:
A. Access. AGTI and its counsel, accountants and other representatives
shall have reasonable access during normal business hours to all
properties, books, accounts, records, contracts, documents and all data and
information concerning the Branson Business, Branson's finances and the
Branson Property, provided, however, that AGTI shall not impede or
interfere unreasonably with the operations of either Branson or the Branson
Business.
B. Conduct of Business. Branson shall carry on he Branson Business
diligently and in substantially the same manner as it previously has been
carried out and shall not make or institute any unusual or novel methods of
purchase, sale, lease, management, accounting or operation that vary
materially from those methods used by Branson as of the date of this
Agreement.
C. Preservation of Business. Each Exchanging Shareholder and Branson
shall use their respective best efforts to preserve Branson's business
organization intact, to keep available to Branson its present employees
(other than with respect to redu tions in force disclosed to AGTI), and to
preserve present relationships with agents, suppliers, customers and others
having material business relationships with Branson.
D. Corporate Matters. Neither Branson nor any of its subsidiaries
shall (i) amend its articles certificate of incorporation or bylaws; (ii)
issue any additional shares of its capital stock (including any treasury
stock); (iii) issue or create any warrants, obligations, subscriptions,
options, convertib e securities, call, puts or other commitments under
which any additional shares of its capital stock of any class might be
directly or indirectly authorized, issued or transferred from treasury; or
(iv) agree to do any of the acts listed above; nor shall any Exchanging
Shareholder agree to, or vote his/her/its Stock in favor of, any such
amendment, issuance or creation.
E. Maintenance of Insurance. Branson will continue to carry its
existing insurance, subject to variations in amounts required by the
ordinary operations of the Branson Business.
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F. Employees and Compensation. Branson shall not agree to or agre to
do, other than in accordance with the terms of a contract, to which Branson
is currently a party, or a governmental, judicial or arbitration proceeding
which has been disclosed in this Agreement, any of the following acts: (i)
make any change in compensation payable or to become payable by Branson to
any director, officer, employee, consultant, agent or representative; (ii)
make any change in benefits payable to any director, officer, employee,
agent, or representative under any bonus or pension plan or other contract
or commitment; or (iii) modify any collective bargaining agreement to which
Branson or any of its subsidiaries is a party or by which it is bound.
G. New Transactions. Branson will not do or agree to do, without
AGTI's consent, any of the following acts: (i) enter into any contract,
commitment or transaction not in the usual and ordinary course of the
Branson Business; (ii) enter into any contract, commitment, or transaction
in the usual and ordinary course of business involving an amount exceeding
$10,000, individually, or $50,000 in the aggregate; (iii) make any capital
expenditure in excess of $10,000 for any single item or $50,000 in the
aggregate, or enter into any leases of capital equipment or property under
which the annual lease charge is in excess of $10,000; or (iv) sell or
dispose of any fixed assets with a net book value exceeding $10,000,
individually, or $50,000 in the aggregate.
H. Dividends, Distributions and Acquisitions of Shares. Branson will
not: (i) declare, set aside, or pay any dividend or make any distribution
in respect of it capital stock; (ii) directly or indirectly purchase,
redeem or otherwise acquire any shares of its capital stock; or (iii) enter
into any agreement obligating it to do any of the foregoing acts.
I. Liabilities and Waiver of Claims. Branson will not do, or agree to
do, any of the following acts: (i) pay any obligation or liability, fixed
or contingent, other than current liabilities in accordance with their
previously agreed terms; (ii) waive or compromise any right or claim; or
(iii) cancel, without full payment, any note, loan, or other obligation
owing to Branson.
J. Existing Agreements. Branson will not materially modify, amend,
cancel, or terminate any of Branson's existing contracts or agreements
which are material to the continuation of the Business following the
Closing, or agree to do any of those acts.
K. Consents. As soon as reasonably practicable after the execution and
delivery of this Agreement, each Exchanging Shareholder and Branson will
obtain the written consent of the persons described in Exhibit Q to this
Agreement and will furnish to AGTI executed copies of those consents.
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Section 5.2. Exception. The foregoing covenants standing, Branson may pay
legal fees and other charges it in connection with the negotiation and
consummation Agreement.
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS OF AGTI
AGTI hereby represents and warrants to and covenants with each of the
Exchanging Shareholders as follows:
Section 6.1. Authority. AGTI has full power and authority to execute and
deliver this Agreement according to its terms and to consummate the transactions
contemplated on AGTI's part by this Agreement. No consent of any third person is
necessary to authorize the execution and delivery of this Agreement by AGTI or
the consummation by AGTI of the transactions contemplated by this Agreement.
This Agreement has been duly executed and delivered by AGTI and is the valid and
binding agreement of, and enforceable against, AGTI in accordance with the terms
of this Agreement.
Section 6.2. Commissions. AGTI has not entered into any agreement,
commitment or obligation with regard to any brokerage commissions or finders'
fees in connection with this Agreement, negotiations leading to the execution
of, or arising out of any of the transactions contemplated by, this Agreement.
Section 6.3. No Breach; Consents. The execution, delivery and performance
of this Agreement by AGTI and the consummation of the ransactions contemplated
hereby (a) do not and will not conflict with or result in any breach of any of
the provisions of, constitute a default under, result in a violation of, result
in the creation of any lien, security interest, charge or encumbrance upon the
assets of AGTI under, or require any authorization, consent, approval, exemption
or other action by or notice to any third party under the provisions of any
indenture, mortgage, lease, loan agreement or other agreement (oral or written)
or instrument to which AGTI is a party, and (b) do not require any
authorization, consent, approval, exemption or other action, other than as
provided for in Section 6.6, by or notice to any court or governmental body
under any law, statute, rule, regulation or decree to which AGTI is subject.
Section 6.4. Litigation. There is no claim action, suit or proceeding
pending or, to the knowleedge of AGTI, threatened against AGTI or any of its
properties which seeks to prohibit, restrict or delay consummation of the
transactions contemplated by this Agreement or to limit in any manner the right
of AGTI to control Branson or any material aspect of the business of AGTI after
the Closing Date, and there is no judgment, decree,
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injunction, ruling or order of any court, governmental department, commission,
agency or instrumentality or arbitrator outstanding against AGTI having, or
which AGTI believes may in the future have, any such effect.
Section 6.5. Acquisition for Investment. AGTI will acquire the Branson
Stock for its individual account for investment and not with a view to its
public sa e or distribution.
Section 6.6. Consents, Etc. AGTI shall be responsible for obtaining any
consents, approvals or authorizations of or designations, declarations or
filings with, any person in connection with its execution, delivery or
performance of this Agreement.
Section 6.7. Exchange Shares. At Closing, AGTI will have sufficient shares
of its capital stock available as AGTI Exchange Shares as required under Section
2.1. and in accordance with the specific terms thereof.
Section 6.8. Organization, Good Standing and Approval. AGTI is duly org
nized, validly existing and in good standing under the laws of the state of its
organization. AGTI is qualified to do business and in good standing in each
jurisdiction in which its activities require it to be so qualified. AGTI has all
necessary power and authority to own, lease, and operate its properties and
assets and to engage in the business which is contemplated by AGTI as and in the
places where its property and assets are owned, leased, or operated or where
such business is to be conducted. AGTI has no business other than described in
its most recent Form 10-K, a copy of which has been provided to Branson.
Section 6.9. Capitalization and Title to Shares. The authorized capital
stock (of whatever class or character) of AGTI consists of 40,000,000 shares of
common stock, $.005 par value, of which approximately 14,000,000 shares are
currently issued and outstanding [other described]. All outstanding shares of
AGTI's capital stock are validly issued, fully paid and non-assessable. The AGTI
Exchange Shares will not be subject to any restrictions or limitations
prohibiting or restricting transfer, other than restrictions on transferability
imposed generally on securities by federal or applicable state securities laws,
none of which will prevent the exchange transaction contemplated by this
Agreement. There are no outstanding subscriptions, options, rights, puts, calls,
warrants, convertible securities or other agreements or commitments obligating
AGTI to issue or to transfer from treasury any additional shares of its capital
stock of any class, except those set forth in Exhibit AA attached and all of
which have been taken into account in arriving at the Branson Shareholder AGTI
Ownership Percentage (as defined in Section 2.1). When issued, the AGTI Exchange
Shares shall be fully paid and nonassessable shares of the outstanding capital
stock of AGTI.
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Section 6.10. Financial Statements. The financial statements for AGTI (on a
consolidated basis with its subsidiaries) attached as Exhibit BB are, and will
be, true, correct and complete statements of the fina cial condition, assets and
liabilities, and all reserves and accruals of AGTI as of the dates and for the
periods covered, and they fairly present, in all material respects, the
financial condition of AGTI for the period or periods covered and all of them
were prepared in accordance with generally accepted accounting principles on a
consistent basis with that of prior periods. Between the date(s) of such
financial statements and the date of this Agreement, there has not been (i) any
material adverse change in the condition, financial or otherwise, of AGTI or its
business or assets except as set forth on Exhibit BB.1 or covered by subclause
(iii) below, (ii) any damage, destruction or loss,. whether or not covered by
insurance, that materially and adversely affects AGTI or its business, (iii) any
disposition or acquisition of any material asset other than in the normal course
of business or otherwise disclosed to Branson, or (iv) any violations of any of
AGTI's covenants, representations and warranties set forth in this Agreement.
Section 6.11. Undisclosed Liabilities.
A. Permitted Encumbrances. Except as set forth or described in Exhibit
CC or taken into account in the financial statements described in Section
6.10 above, as of the Closing there shall be no liens or encumbrances of
any kind, nature or quantity whatsoever, directly, indirectly, actually or
purportedly burdening, encumbering or pertaining to AGTI, its business or
its assets.
B. Indebtedness. Other than items (i) specified in the exhibits
pertaining to AGTI in this Agreement, (ii) incurred pursuant to contracts,
agreements or other commitments listed, described or referred to in the
exhibits pertaining to AGTI in this Agreement, or (iii) of a type described
in or referred to in any provision of this Agreement but not set out in the
exhibits pertaining to AGTI in this Agreement, AGTI does not have any
debts, liabilities or obligations of any nature, kind or quantity, whether
accrued, absolute, contingent or otherwise and whether due or to become
due, known or unknown, except:
1. To the extent set forth on or reserved against in the balance
sheet of AGTI included as Exhibit BB;
2. Liabilities incurred since such balance sheet date and
obligations under agreements entered into in the ordinary course of
business; and
3. Items that will not require payments by AGTI in excess of Two
Hundred Thousand Dollars ($200,000.00)] in the
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aggregate within forty-five (45) days following the date of this
Agreement.
C. Economic, Property or Personal Liability. Except as su marized in
Exhibit CC, AGTI has no knowledge of any fact, circumstance or occurrence
which has given or might give rise to any material liability, obligation or
claim for economic, property or personal injury or harm to any person,
entity or property against AGTI.
Section 6.12. Absence of Conflicting Agreements or Required Consents. The
execution, delivery and consummation of this Agreement and the transactions
contemplated hereby are not prohibited by, and will not conflict with,
constitute grounds for termination of, or result in a breach of, the terms,
conditions or provisions of, or constitute a default under:
A. AGTI's articles of incorporation, bylaws or other organizational or
constating documents; or
B. Any other agreement or instrument to which AGTI is now a party, or
by which any of AGTI's business or assets is subject or bound. All
approvals and consents required for AGTI to consummate the transactions
contemplated by this Agreement have been obtained, or AGTI, in good faith,
believes they will be obtainable within a reasonable period following the
date of this Agreement.
Section 6.13. Title to and Condition of AGTI Property. AGTI has no assets,
properties or interests which it owns, or whi h is used, reasonably held for use
or available for use in connection with its business which are not set forth in
the financial statements referred to in Section 6.10 above. AGTI owns, and at
the Closing shall own, without material exception, all of its assets and
business in the manner and nature as necessary for the conduct of AGTI's
operations and as taken into for purposes of their presentation in the financial
statements referred to in Section 6.10 above.
A. Title and Encumbrances. Except as arising in connection with the
indebtedness of AGTI escribed in the financial statements referred to in
Section 6.10 above or described in Section 6.11 above, no financing
statement, deed of trust, chattel or other mortgage, or other security
instrument or device, or notice of any thereof, under the laws of any
jurisdiction with respect to AGTI's assets or business has been filed or
recorded in any jurisdiction; and AGTI has not executed, nor has any person
or entity executed on behalf of AGTI, any document or instrument
authorizing any secured party thereunder to file any such financing
statement, mortgage, deed of trust statement or other security device or
instrument or notice of any thereof.
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B. Realty; Leases. All material interests in real property owned by
AGTI are valid, subsisting, binding and enforceable by AGTI and there is no
material default or breach by AGTI or, to the knowledge of AGTI, by the
other party or parties thereto nor has any event occurred that, with the
passage of time or the giving of notice, or both, would become a material
breach or default, except as set forth in Exhibit DD. With respec to any
such real property:
i) AGT has not received any notice of the exercise of eminent
domain or condemnation which may affect any of its material real
property in any way, or any notice regarding the annexation of all or
any of such property, and, to the best knowledge and belief of AGTI,
no such action is pending or threatened.
ii) None is subject to any preferential right of purchase in
favor of any other person.
iii) AGTI has no knowledge of any material structural defects or
deficiencies or any subsurface or soil problems related to any
material real property or improvement. The material HVAC, electrical
and other operating systems within or about any improvements have been
maintained in a good and workmanlike manner and are in good working
order and condition normal wear and tear excepted.
iv) AGTI has no knowledge of, nor has AGTI released or caused to
be released, any hazardous substances on, about or from any part of
its real property. To the best knowledge of AGTI, AGTI is in
compliance with all environmental laws and regulations, except to the
extent such non-compliance would not have a material adverse affect on
the financial condition of AGTI or any of the material assets of AGTI.
C. Contracts, Authorities, Etc. All presently existing contracts,
agreements, licenses, permits, authorities, applications, consents,
commitments, insurance policies, easements, servitudes, leases,
rights-of-way, understandings or other arrangements creating or setting
forth obligations, liabilities, rights, privileges or interests, whether
written or oral, expressed or implied, connected with or relating to AGTI's
business, are either:
i) agreements, commitments, obligations or understandings, which
if written, are listed in the exhibits referred to in this Section
6.13, and true and complete copies have been made available to Branson
and the Exchanging Shareholders or, if oral and material to the
business of AG I, their terms are described and summarized in the
exhibits referred to in this Section 6.13; or
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ii) miscellaneous service or other contracts or agreements, all
of which are terminable at will or upon notice of not more than thirty
(30) days without penalty or o her liability of any kind.
AGTI (and its subsidiaries) has complied in all material respects with all
material provisions of such agreements and arrangements required to be
complied with by AGTI in connection with its business or its assets. All
payments required thereunder are curre t, and there are no material
breaches or defaults thereunder in any respect. No event has occurred,
which upon the giving of notice or lapse of time, or both, would constitute
any such material breach or default. All of such agreements have been duly
executed and delivered, and are now, and at Closing shall be, valid,
binding upon, and enforceable by AGTI (and its subsidiaries) in accordance
with their respective terms. True and complete copies of all documents
referred to or covered by this Section 6.13 which have not been previously
made available to Branson or the Exchanging Shareholders will be made
available promptly to Branson and the Exchanging Shareholders upon request
or upon discovery that they have not been previously made available to
Branson or the Exchanging Shareholders.
D. Subsidiaries. AGTI does not own, directly or indirectly, any
interest or investment, whether equity or debt, in any corporation,
partnership, company, trust, or other entity other than as set forth in
Exhibit EE attached.
Section 6.14. Compliance with Laws. AGTI (and its subsidiaries) has omplied
and will continue to the Closing to comply in all material respects with all
applicable material federal, state and local laws, rules and regulations, and
with all material, pertinent provisions of any agreements or arrangements
pertaining to any of its assets or business.
A. Notice of Non-Compliance. AGTI has not received any notice, written
or oral, asserting noncompliance in any material respect with applicable
laws, rules or regulations of the United States of America, any state,
county, municipality, or other political subdivision or any agency thereof
having jurisdiction over AGTI, its subsidiaries or any of its business or
assets.
B. Defaults. AGTI (and its subsidiaries) is not in default with
respect to any judgment, order, injunction or decree of any court,
administrative agency or other governmental authority in any respect
material to the transactions contemplated by this Agreement.
C. Governmental Regulations. There are no pending, or, to the best
knowledge of AGTI after due inquiry, threatened, administrative, judicial,
investigative, inspection or other
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proceedings involving the operation of AGTI's (or its subsidiaries)
business or assets.
D. Federal and State Law. AGTI has timely and properly filed all
reports and made all submissions known to be required under (i) all
material federal laws, and (ii) the material laws of the states that are
relevant to the conduct and operation of AGTI's (or its subsidiaries)
business. AGTI (and its subsidiaries) is in all material respects in
compliance with all such laws, rules and regulations.
Section 6.15. Taxes and Tax Returns. All taxes pertaining to AGTI, its
subsidiaries or its business required to be paid prior to the date of this
Agreement by AGTI, and all tax returns and documents required to be filed or
submitted prior to such date on behalf of AGTI (subject to proper extensions of
time to file or pay), have been paid and properly and timely filed or submitted
and were truly and correctly completed. AGTI shall pay and file or submit in
compliance with applicable law all taxes pertaining to AGTI (or its
subsidiaries) that accrue or are incurred from the date of this Agreement to the
Closing Date, together with all corresponding tax returns and documents. To the
knowledge of AGTI, there are no audits pending nor any outstanding agreements or
waivers extending the statutory period of limitations applicable to any tax or
tax return or document for any period. AGTI has paid (or caused to be paid) all
taxes which have become due pursuant to all tax returns and has paid all
installments of estimated taxes due (subject to proper extensions of time to
file or pay). All taxes and other assessments and levies which AGTI (or its
subsidiaries) is required by law to withhold or to collect have been duly
withheld and collected, and have been paid over timely to the proper
governmental authorities or trustee to the extent due and payable. Subsequent to
the date hereof and prior to the Closing Date, all such returns and reports
shall be timely and accurately filed, and any tax payable as shown thereby shall
have been paid, as required by applicable law. There are no determined tax
deficiencies or proposed tax assessments known to AGTI, or the prospect for the
same, against AGTI. AGTI has made available true, complete and correct
information to Branson and the Exchanging Shareholders with regard to any and
all taxes and tax returns, reports and documents referred to in this Section
6.15, including, without limitation, AGTI's liability for the payment, filing or
submission thereof. AGTI has established (and until the Closing will establish)
on its books and records reserves that are reasonably believed to be adequate
for the payment of all taxes not yet due and payable, and there shall be no
material difference between the amounts of the book basis and the tax basis of
assets (net of liabilities) of AGTI that are not accounted for by an accrual on
the books for federal income tax purposes and AGTI has accounted for deferred
taxes in accordance with generally accepted accounting principles. There are no
liens for taxes upon the assets of AGTI, except liens, claims or
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encumbrances for taxes not yet due. AGTI has not filed (and shall not have filed
prior to the Closing) a consent pursuant to Section 341(f) of the Code or agreed
to have Section 341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as such term is defined in Section 341(f)(4) of the Code) owned by
AGTI. AGTI is not required to include in income any adjustment pursuant to
Section 481(a) of the Code by reason of a voluntary change in accounting method
initiated with respect to AGTI, and AGTI does not have knowledge that the
Internal Revenue Service has proposed or has the basis to propose any such
adjustment or change in accounting method. AGTI is not a party to any agreement,
contract or arrangement that would result, separately or in the aggregate, in
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code. AGTI is not required to file any returns or pay taxes in any
jurisdiction outside the United States. No election has been made with respect
to AGTI which was set forth on a statement, form or schedule (other than a
statement, form or schedule with respect to depreciation) attached to a return
and filed separately. All transactions which could give rise to an
understatement of federal income tax (within the meaning of Section 6661 of the
Code) with respect to AGTI are adequately disclosed (or, with respect to returns
filed before the Closing will be adequately disclosed) on the returns required
in accordance with Section 6661(b)(2)(B) of the Code.
Section 6.16. Insurance. AGTI has, and shall c ntinue to have through the
Closing, fire, theft, casualty and general liability insurance in full force and
effect, the continuation of which shall not be adversely affected by the
execution or delivery of this Agreement. Except as listed in Exhibit FF, AGTI
has no unpaid claim under any such insurance and has received no notice of
termination of any such insurance. AGTI currently has, and at Closing will have,
all bonds, insurance coverage or insurance or surety arrangements in such
amounts and providing such coverages reasonably as required by, AGTI's business
and operations. All such bonding, insurance and surety agreements or
arrangements are set forth in Exhibit FF.
Section 6.17. Adequacy of Authorities, Etc.
A. Existence and Validity. AGTI has all governmental authorities,
licenses and rights that are necessary to carry on its business ("AGTI
Authorities").
B. Full Force. All of the material AGTI Authorities are and shall be
at Closing in full force and effect in all material respects based on their
curre t terms and conditions.
C. Enforceability. All of the AGTI Authorities have been duly entered
into and authorized and are validly issued and were obtained by or
transferred to and accepted by AGTI in accordance with, and as required by
the terms thereof and by applicable
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law. All of the material AGTI Authorities are valid, binding and legally
enforceable against third parties in accordance with their terms to the
fullest extent authorized by law.
Section 6.18. Unfulfilled Commitments. AGTI has disclosed in Exhibit GG all
existing unfulf lled promises or commitments (other than those set forth in any
agreement entered into in the usual and normal course of business) which AGTI
has made, including, without limitation, those for capital expenditures or
improvements, whether or not legally binding, which have been made or offered in
connection with any AGTI's business.
Section 6.19. Assumed Name. AGTI has not conducted its business or held any
of its assets under any fictitious or assumed business name or trade name other
than "Selectro Vision," the AGTI logo and "Max Plus."
Section 6.20. Employment Contracts and Benefits. Exhibit FF to this
Agreement is a list of all employment contracts and collective bargaining
agreements and all pension, bonus, profit-sharing, stock option, or other
agreements or arrangements providing for employee remuneration or benefits to
which AGTI is a party or by which AGTI is bound. All such contracts and
arrangements are in full force and effect (except at the Closing, those required
to be terminated pursuant to this Agreement), and neither AGTI (or its
subsidiaries, if a party) nor any other party is in default under any of them.
There have been no claims of default and, to the best of AGTI's knowledge, there
are no facts or conditions that if continued, or unnoticed, will result in a
default under such contracts or arrangements. There is no pending or, to AGTI's
knowledge, threatened labor dispute, strike, or work stoppage affecting AGTI.
AGTI has complied with all applicable laws for its employee benefit plans,
including the provisions of the Employee Retirement Income Security Act (ERISA),
if and to the extent applicable; there are no threatened or pending claims by or
on behalf of any such benefit plan, by or on behalf of any employee covered
under any such plan, or otherwise involving any such benefit plan, that allege a
breach of fiduciary duties or violation of other applicable state or federal
law, nor is there, to AGTI's knowledge, any basis for such a claim. Except as
set forth in Exhibit FF, has not entered into any severance or similar
arrangement in respect of any present or former employee that will result in any
obligation, absolute or contingent, of AGTI (or its subsidiaries), to make any
material payment to any present or former employee following termination of
employment.
Section 6.21. Directors and Officers. The directors and officers of AGTI
for the present and previous two (2) fiscal year periods, are set forth in the
list of Officers and Directors attached as part of Exhibit HH.
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Section 6.22. Enforceability. The terms and provisions of this Agreement
and all instruments, documents, certificates and agreements made or delivered by
or on behalf of AGTI by reason of the tra saction contemplated hereby constitute
the valid and legally binding obligations of AGTI, and are enforceable against
AGTI in accordance with the terms hereof and thereof, and constitute, or, upon
their delivery, will constitute, the valid and legally binding obligations of
AGTI, and each are, or, upon their delivery, will be enforceable in accordance
with the terms of this Agreement and thereof.
Section 6.23. Patents, Trademarks, Licenses, Etc. AGTI does not own or use
any trademarks, trade names, service marks, patents, copyrights, registratio s
and has no application therefor or licenses or rights thereto except as set
forth in Section 6.19 and Exhibit II attached. There is no violation or
infringement of which AGTI knows or reasonably should know, caused by the
conduct of Branson's business, of any laws, statutes, ordinances or regulations
or any right or concession, patent, trademark, trade name, copyright, know- how
or other proprietary right of others, the enforcement of which would have a
material adverse effect on AGTI's business or financial condition.
Section 6.24. isclosure. No representation or warranty by AGTI, nor any
statement, instrument, schedule, exhibit or certificate furnished by or on
behalf of any AGTI pursuant to or by reason of this Agreement or the Closing,
knowingly contains or will contain any untrue statement of material fact, or
knowingly omits to state a material fact necessary (i) to make the statements
contained in this Agreement or therein not misleading, and (ii) to provide
Branson and the Exchanging Shareholders with complete, accurate and reliable
information with respect to AGTI and its business and assets.
Section 6.25. Affirmative Covenants Pending Closing. AGTI shall act,
between the date of this Agreement and the Closing, as follows:
A. Access. Branson, the Exchanging Shareholders and their counsel,
accountants and other representatives shall have reasonable access during
normal business hours to all properties, books, accounts, records,
contracts, documents and all data and information concerning AGTI and its
business and assets, provided, however, that neither Branson nor any
Exchanging Shareholder shall impede or interfere unreasonably with the
operations of AGTI.
B. Conduct of Business. AGTI shall carry on its business diligently
and in substantially the same manner as it previously has been carried out
and shall not make or institute any unusual or novel methods of purchase,
sale, lease, management, accounting or operation that vary materially from
those methods used by AGTI as of the date of this Agreement.
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C. Preservation of Business. AGTI shall use its best efforts to
preserve AG I's business organization intact, to keep available to AGTI its
present employees, and to preserve present relationships with agents,
suppliers, customers and others having material business relationships with
AGTI.
D. Corporate Matters. Neither AGTI nor any of its subsidiaries shall
(i) amend its articles, certificate of incorporation or bylaws; (ii) issue
any additional shares of its capital stock (including any treasury stock);
(iii) issue or create any warrants obligations, subscriptions, options,
convertible securities, call, puts or other commitments under which any
additional shares of its capital stock of any class might be directly or
indirectly authorized, issued or transferred from treasury; or (iv) agree
to do any of the acts listed above.
E. Maintenance of Insurance. AGTI will continue to carry its existing
insurance, subject to variations in amounts required by the ordinary
operations of its business.
F. Employees and Compensation. AGTI shall not agree to or agree to do,
other than in accordance with the terms of a contract, to which AGTI is
urrently a party, or a governmental, judicial or arbitration proceeding
which has been disclosed in this Agreement, any of the following acts: (i)
make any change in compensation payable or to become payable by AGTI to any
director, officer, employee, consultant, agent or representative; (ii) make
any change in benefits payable to any director, officer, employee, agent,
or representative under any bonus or pension plan or other contract or
commitment; or (iii) modify any collective bargaining agreement to which
Branson is a party or by which it is bound.
G. New Transactions. AGTI, without Branson's consent, shall not do or
agree to do any of the following acts: (i) enter into any contract,
commitment or transaction not in the usual and ordinary course of AGTI's
business; (ii) enter into any contract, commitment, or transaction in the
usual and ordinary course of business involving an amount exceeding
$[10,000], individually, or $[50,000] in the aggregate; (iii) make any
capital expenditure in excess of $[10,000] for any single item or $[50,000]
in the aggregate, or enter into any leases of capital equipment or property
under which the annual lease charge is in excess of $[10,000]; or (iv) sell
or dispose of any fixed assets with a net book value exceeding $[10,000],
individually, or $[50,000] in the aggregate.
H. Dividends, Distributions and Acquisitions of Shares. AGTI will not:
(i) declare, set aside, or pay any dividend or make any distribution in
respect of its capital stock; (ii) directly or indirectly purchase, redeem
or otherwise acquire any shares of its capital stock; or (iii) enter into
any agreement obligating it to do any of the foregoing acts.
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I. Liabilities and Waiver of Claims. AGTI will not do, or agree to do,
any of the following acts: (i) pay any obligation or liability, fixed or
contingent, other than current liabilities in accordance with their
previously agreed terms; (ii) waive or compromise any right or claim; or
(iii) cancel, without full payment, any note, loan, or other obligation
owing to AGTI.
J. Existing Agreements. AGTI will not materially modify, amend,
cancel, or terminate any of AGTI's existing contracts or agreements which
are material to the continuatio of its business following the Closing, or
agree to do any of those acts.
The foregoing covenants notwithstanding, AGTI may pay legal fees and other
charges incurred by it in connection with the negotiation and consummation of
this Agreement.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1. Conditions Precedent to AGTI's Obligations to Consummate the
Exchange. AGTI's obligations to consummate the transactions contemplated by this
Agreement are, at its option (collectively exercised), subject to compliance
with, at or prior to Closing, each of the following conditions precedent:
A. Branson Stock Transfer. The Exchanging Shareholders shall be eady,
willing and able to transfer to AGTI indefeasible title to the Branson
Stock as and in the kind, nature, quality, quantity and condition required
by this Agreement. The Branson Stock delivered by the Exchanging
Shareholders at the Closing shall not be less than ninety percent (901) of
the issued and outstanding capital stock of Branson.
B. Compliance. The Exchanging Shareholders and Branson shall have
delivered to AGTI such evidence as AGTI may require that the Exchanging
Shareholders and Branson have fully performed and complied with, wit out
deviation materially adverse to AGTI, all required covenants, agreements,
deliveries and conditions in the manner required by this Agreement.
C. Representations, Warranties and Covenants. Branson's and each
Exchanging Shareholder's representations and warranties, including, without
limitation, those made to the knowledge of such Exchanging Shareholder or
Branson, and the covenants of such Exchanging Shareholder and Branson shall
be substantially true or performed and without material adverse change or
deviation as of the Closing Date.
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D. No Changes. There shall be no actual or threatened order, de ree or
ruling of any court or governmental agency, which has a material adverse
affect on Branson, the Branson Business or the Branson Property. There
shall not have occurred any event or condition materially and adversely
affecting the Branson Business or its future prospects. There shall not
have occurred any material adverse alteration or amendment of any of the
terms, provisions or conditions of any of the Branson Interests, Branson
Realty or Branson Authorities, nor shall any of the same shall have been
materially and adversely modified (except as specifically required by this
Agreement), suspended, restricted or canceled.
E. Corporate Approval. The execution and delivery of this Agreement by
Branson, and the performance of its covenants and obligations under it,
shall have been duly authorized, and AGTI shall have received copies of all
resolutions pertaining to that authorization, certified by the secretary or
an assistant secretary of Branson.
F. Termination of Shareholder Agreement. All shareholder agreements
among any of Branson or any of the Exchanging Shareholders with respect t
any of the Branson Stock owned by the Exchanging Shareholders shall have
been terminated or shall be terminated effective with the Closing.
G. Outstanding Branson Stock. At the Closing, there shall be no issued
and outstanding capital stock of Branson other than (i) the Branson Stock,
(ii) shares held by Branson as treasury stock or (iii) shares of Branson's
capital stock held by shareholders other than the Exchanging Shareholders
in a number not to exceed the number of shares of Branson's capital stock
outstanding at the date of this Agreement less the number of shares of the
Branson Stock to be delivered by the Exchanging Shareholders pursuant to
this Agreement.
Section 7.2. Deliveries Precedent to AGTI's Obligations to Consummate the
Exchange. AGTI's obligation to consummate the share exchange contemplated by
this Agreement is, at its option, subject to receiving from the Exchanging
Shareholders or Branson, as appropriate, each of the following items at the
Closing:
A. Conveyances and Other Documents. All stock certificates and stock
powers duly executed in accordance wit the provisions of this Agreement to
consummate the transfer of all Branson Stock to AGTI.
B. Certificate of Exchanging Shareholders. The certificate(s) of the
Exchanging Shareholders stating that, as of the Closing Date: (i)
Exchanging Shareholder's representations and warranties, including, but not
limited to, those made to the knowledge of such Exchanging Shareholder and
Branson, set forth in
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this Agreement have been re-examined and are true, correct and complete, in
all material respects and (ii) the Exchanging Shareholder's and Branson's
covenants, agreements and conditions set forth in this Agreement have been
fulfilled and complied with in the manner required by this Agreement, with
only such exceptions as have been or may be reasonably approved prior to or
at Closing in a separate writing by AGTI, such approval not to be withheld
if such exceptions do not materially and adversely affect the transactions
contemplated by this Agreement.
C. Post-Closing Agreements. All agreements necessary to effectuate the
provisions of undertakings to be performed subsequent to the Cl sing shall
have been delivered by the persons required to deliver the same or AGTI
shall have received such assurances of the Exchanging Shareholders that any
such agreements not delivered at the Closing will be delivered promptly
following the Closing.
D. Consents. All necessary approvals, amendments and consents to the
transfer or assignment of the Branson Stock and the resulting change in
ownership of Branson, on terms not less favorable than those currently
afforded to Branson, or the Branson Business, including, without
limitation, all Branson Interests, Branson Realty, Branson Authorities,
permits, licenses, easements, rights-of-way and leases. AGTI, the
Exchanging Shareholders and Branson shall cooperate to obtain such
approvals, amendments and consents, but any failure to so cooperate shall
not affect theo Exchanging Shareholders' or Branson's obligation to obtain
the same as required by this Agreement.
E. Release. Branson shall have received a release or releases, in form
and substance reasonably satisfactory to AGTI, executed by each Exchanging
Shareholder in favor of Branson and rel asing Branson from any and all
manner of actions, causes of action, suits, proceedings, claims, demands or
damages which such Exchanging Shareholder(s) ever had, now has or may have
against Branson for or by reason of any matter, cause or thing whatsoever
done or omitted to be done by Branson up to the Closing Date other than in
respect of obligations to such Exchanging Shareholder arising in respect
of:
i) on-going obligations (including indebtedness in respect of
promissory notes or advances) of Branson to such shareholder(s), as
agreed to in writing by GTI; or
ii) earned but unpaid salary or employee o director benefits for
the then current or any past pay period.
F. Legal Opinion. AGTI shall have received an opinion or opinions of
U.S. counsel to Branson and the Exchanging Shareholders in form and
substance reasonably satisfactory to AGTI and its counsel covering (i) the
due incorporation and good
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standing of Branson, (ii) the due issuance and non-assessibility of the
Branson Stock and (iii) the due authorization, execution and delivery of
this Agreement by Branson and the Exchanging Shareholders and the
enforceability hereof against each of them.
G. FIRPTA Certificate. AGTI shall have received an appropriate
statement or certificate complying with the requirements of Sections 897
and 1445 of the Code from each Exchanging Shareholder to the extent
required by such sections.
H. Stock Offering. AGTI shall have undertaken and completed the
following issuance of or transaction involving the common stock, $.005 par
value, of AGTI:
i) An offering of 1,000,000 units, consisting of one (1) share of
AGTI common stock and an option to purchase one (1) additional share
of AGTI common stock at an nitial exercise price of U.S. $1.50 per
share, to an investor or group of investors to be designated by
Branson. The per unit purchase price shall be the lesser of (a) U.S.
$1.00 or (b) a 37% discount from the average closing bid price for
AGTI common stock for the 30-day period prior to the effective date of
such offering. The options shall be exercisable for at least twelve
(12) months following their issuance. Such offering will be undertaken
in reliance on Rule 504, and the AGTI common stock sold pursuant
thereto shall not be "restricted stock," but the options and
underlying AGTI common stock may be restricted. AGTI shall have the
obligation to undertake the registration of such options at a price
equal to at least U.S. $1.50 per option share upon the written request
of the holder(s) of at least fifty one percent (51%) of the then
outstanding options; provided that AGTI has not within the previous
twelve (12) months completed a registered offering of its securities
under which the holders of the common stock issued under this clause
7.2H have not registered or qualified their stock. It is further
agreed and understood that the said holders will at all times have the
right to have their shares registered with any offerings made to the
public of AGTI's shares commonly referred to as "piggy back"
registration rights.
Section 7.3. Conditions Precedent to the Obligations of the Exchanging
Shareholders to Consummate the Exchange. The obligations of the Exchanging
Shareholders under this Agreement are, at the option of the Exchanging
Shareholders collectively exercised), subject to compliance with, at or prior to
Closing, each of the following conditions precedent:
A. Compliance. AGTI shall have delivered to the Exchanging
Shareholders such evidence as the Exchanging Shareholders may require that
AGTI has fully complied with and performed, without deviation materially
adverse to the Exchanging Shareh-
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olders, all covenants, agreements and conditions required to be complied
with or performed by AGTI in the manner required by this Agreement.
B. Representations, Warranties and Covenants. All of AGTI'S
representations nd warranties, including those made to the knowledge of
AGTI, and covenants shall be substantially true or performed, as
applicable, without material adverse change as of the Closing Date.
C. Certificate. AGTI shall have delivered to the Exchanging
Shareholders a certificate stating that (i) the representations and
warranties of AGTI set forth in this Agreement have been re-examined and
are true, correct and complete in all material respects, and (ii) AGTI's
covena ts, agreements and conditions set forth in this Agreement have been
fulfilled and complied with in the manner required by this Agreement in all
material respects as of the Closing Date with only such exceptions, if any,
as have been or may be approved prior to or at Closing in a separate
writing by the Exchanging Shareholders (collectively) at their sole
discretion, such approval not to be withheld if such exceptions do not
materially and adversely affect the transactions contemplated by this
Agreement.
D. Legal Opinion. A legal opinion of AGTI' counsel dated the Closing
Date and addressed to the Exchanging Shareholders covering such matters as
required by, and in form and substance reasonably acceptable to, the
Exchanging Shareholders and their counsel.
Section 7.4. Conditions to All Parties' Obligation to Consummate the
Exchange.
A. Value of Branson. The Branson Property shall have an appraised
value (or AGTI shall agree that such value shall exist) in excess of U.S.
$8,000,000.
B. Employment Agreements. An employment agreement for Robert Silzer as
the principal executive and operating official of AGTI, Branson and their
subsidiaries, from and after the Closing Date be ween such persons and
their respective employers (i.e., AGTI, Branson or their subsidiaries, as
appropriate) shall have been agreed in form and substance acceptable to
each of the parties thereto and shall be in effect as of the Closing Date,
subject only to the Closing having occurred.
C. Major Decisions. AGTI and Branson shall have agreed to a written
operating procedure whereby such persons shall have designated what matters
involving AGTI and Branson shall be considered "Major Operating Decisions,"
including, but not limited to, disposition of a material asset, agreements
with affiliates, and the procedure(s) to be followed by the persons who act
as
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executive or operating officials of AGTI, Branson or their subsidiaries in
dealing with and obtaining authorization for any transaction involving a
Major Operating Decision. Such procedure shall not require any individual
to breach or otherwise violate any duty owed as an officer, director or
other official of an entity.
D. Separate Business Units. Subject always to their respective duties
as officers and/or directors of either AGTI and Branson or any subsidiary
of AGTI or Branson shall have reached a written understanding as to the
operation and conduct of the respective businesses of each of AGTI and
Branson after the Closing Date and the continuation (or future appointment)
of the directors and officers of Branson and its subsidiaries and their
day-to-day and general authority in respect of the Branson Business.
Section 7.5. Post-Closing Undertakings. In the event a Party shall
temporarily waive any condition or delivery which is a condition to such Party's
obligations to consummate the transactions contemplated by this Article VII at
the Closing, the Party required to fulfill such condition or make such delivery
shall fulfill such conditions or make such delivery promptly following the
Closing as the Parties shall agree, but in no event later than [forty-five (45)]
days following the Closing Date. The Parties shall make a written record as of
the Closing Date with respect to any such condition or delivery required to be
fulfilled on delivery following the Closing Date, and each Party (to the extent
required) shall use its reasonable best efforts to ensure that all such
conditions or deliveries are fulfilled or made timely thereafter.
ARTICLE VIII
TERMINATION
Section 8.1. Non-Performance. Branson on behalf of itself and the
Exchanging Shareholders (acting collectively) or AGTI shall have the right to
terminate this Agreement at or prior to Closing in the event that the other
party is in default in the performance of any of such party's material
obligations to be performed under this Agreement, or should any covenant,
warranty or representation made by the other party in this Agreement prove to be
incorrect or incomplete in any material sense, provided, however, that the party
against whom such termination is to be exercised shall have the right, for a
period of [five (5)] days following receipt of written notice from the other of
the alleged default, to correct or satisfy any such condition or covenant
necessary to the consummation of this Agreement. Nothing in this Agreement shall
be construed as relieving a party from liability for damages, including, but not
limited to, expenses reasonably
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incurred in the negotiation and preparation of this Agreement, to the other
party for breach of such party's obligations under or by reason of this
Agreement if this Agreement is terminated by the non-defaulting party under the
provisions of this Section 8.1. In addition to any other remedy for breach of
this Agreement, relief by way of specific performance shall be available to
either AGTI or Exchanging Shareholders (acting collectively) to enforce the
terms of this Agreement.
Section 8.2. Branson Risk of Loss. Any loss or damage, other than ordinary
wear and tear, to the Branson Business or the Branson Property prior to the
Closing by reason of fire, explosion, earthquake, windstorm, accident, flo d,
act of God, war, seizure or activities of the armed forces, nuclear attack, or
other casualty, shall, to the extent not covered by insurance, be the
responsibility of, and be borne by, Branson as to any of the Branson Property or
the Branson Business and Exchanging Shareholders as to the Branson Stock. If
such loss or damage is sufficiently substantial to preclude the resumption of
normal operations or a substantially complete restoration of any substantial
part of the Branson Business within [thirty (30)] days after it first occurs, or
if such loss or damage materially and adversely affects the value of the Branson
Business to the extent of more than [twenty percent (20%)] of its fair market
value, either Branson or the Exchanging Shareholders shall immediately notify
AGTI in writing. AGTI, at any time within [fifteen (15)] days after receipt of
such notice, may elect to either: (i) accept the indirect benefit of the
proceeds of any insurance coverage and consummate the transaction contemplated
by this Agreement, or (ii) terminate this Agreement. If AGTI elects to terminate
this Agreement, all Parties shall be fully released and discharged from any and
all obligations under this Agreement. If AGTI elect to consummate the
transactions contemplated by this Agreement, the Exchange Shares shall be
reduced in number to fairly compensate it for the amount of such loss or damage
to the extent the AGTI does not receive the benefit of compensatory insurance
proceeds through Branson on or before the Closing Date or there are no
arrangements in place to ensure that such benefit will be forthcoming after the
Closing Date or there are no arrangements in place to ensure that such benefit
will be forthcoming promptly after the Closing Date.
ARTICLE IX
POST-CLOSING OBLIGATIONS
Following the Closing Date, AGTI shall undertake the following issuances of
or transactions involving the common stock, $.005 par value, of AGTI:
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i) An offering of 1,000,000 shares of AGTI common stock at U.S. $1.25
per share, such offering to be consummated pursuant to Regulation S
promulgated under the Securities Act of 1933 within thirty (30) days
following the listing of AGTI on NASDAQ.
ii) A best efforts offering or offerings for AGTI common stock at an
aggregate offering price of not less than U.S. $4,000,000 and up to U.S.
$10,000,000 within sixty (60) days following AGTI becoming a listed company
on NASDAQ.
ARTICLE X
GENERAL PROVISIONS
Section 10.1. Statements Deemed Representations. All statements contained
in this Agreement and in any attachment, exhibit, schedule, certificate or other
ins rument or document attached to this Agreement or delivered by or on behalf
of AGTI, Branson or any Exchanging Shareholder to another Party in connection
with the transactions contemplated hereby shall be deemed representations and
warranties of the person making such statement.
Section 10.2. Survival. The covenants, representations, warranties and
agreements made by AGTI or Exchanging Shareholders in this Agreement, the
attachments, exhibits and schedules hereto, and in the agreements, certificates,
instruments and documents delivered in connection with the transactions
contemplated hereunder, shall survive the Closing.
Section 10.3. Exchanging Shareholders' Agreement to Indemnify.
A. Indemnification. Subject to the conditions and provisions set forth
herein, each Exchanging Shareholder, severally and not jointly, hereby
indemnifies and agrees to defend and hold harmless AGTI from and against
all claims, actions, losses, damages, liabilities, diminutions or
reductions in value, costs and expenses, including, without limitation,
reasonable attorneys' fees, and costs of litigation asserted against,
sustained or incurred by AGTI or Branson, which result from claims asserted
by third parties based on events or circumstances arising from the conduct
of the Branson Business prior to the Closing Date ("AGTI Damages").
B. Limitation of Liability. The Exchanging Shareholders, shall be
obligated to indemnify AGTI only for those AGTI's Damages to which AGTI has
given the Exchanging Shareholders written notice within the applicable
statute of limitations period. Any written notice delivered by AGTI
pursuant to this Subsection 10.3.B shall set forth the basis of the claim
for
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AGTI's Damages and a reasonable estimate of the amount if such an estimate
is reasonably possible at that time. The Exchanging Shareholders'
obligations to indemnify AGTI shall apply only to AGTI's Damages exceeding
in the aggregate [One Hundred Twenty-Five Thousand and 00/100 Dollars
($125,000.00)], and shall be limited to the aggregate number of AGTI
Exchange Shares received by Exchanging Shareholders pursuant to this
Agreement. The Exchanging Shareholders shall share in such indemnification
obligation on a pro rata basis determined by reference to such Exchanging
Shareholder's pro rata share of the AGTI Exchange Shares received at
Closing, unless the AGTI Damages shall relate solely to a breach by a
particular Exchanging Shareholder of such person's express and sole
undertaking, warranty, representation or covenant hereunder in which case
such Exchanging Shareholder shall be solely liable therefor to the extent
of the AGTI Exchange Shares received by such person. In no event shall any
Exchanging Shareholder by liable to AGTI in money for any AGTI Damages. If
an Exchanging Shareholder shall not have sufficient AGTI Exchange Shares to
enable such person to fulfill such person's indemnity obligation hereunder,
such Exchanging Shareholder (subject to an option to pay the amount thereof
in cash as provided below) shall undertake to acquire a sufficient number
of the issued and outstanding common stock of AGTI from third parties to
satisfy such obligation unless AGTI and such person shall otherwise agree.
The number of shares of AGTI Exchange Shares (or AGTI common stock
otherwise acquired) to be delivered in satisfaction of any claim for AGTI
Damages shall be the amount of such damages divided by the average of the
per share closing bid prices for AGTI common stock on each of the fifteen
(15) trading days for which such bid information is available immediately
prior to the date on which such person shall be finally determined to be
liable for such AGTI Damages. At the sole and exclusive option of the
person liable for such AGTI Damages, such person may pay the amount thereof
in good bank funds in lieu of transferring AGTI common stock in
satisfaction of such claim.
C. Conditions of Indemnification. The obligations and liabilities of
an Exchanging Shareholder under this Section 10.3 with respect to claims
for AGTI's Damages shall be subject to the following terms and conditions:
1. No later than thirty (30) days after discovery of the basis
for any claim for AGTI's Damages, AGTI will give prompt notice of
AGTI's claim for AGTI Damages, and with respect to any claims other
than claims joined with a claim for non-monetary relief which AGTI
elects to defend, the Exchanging Shareholders will undertake the
defense by representatives of their own choosing who are reasonably
satisfactory to AGTI.
2. In the event that Exchanging Shareholders fail to undertake
the defense within sixty (60) days after notice of any claim for
AGTI's Damages or in the event of claims joined with
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a claim for non-monetary relief, AGTI will have the right to undertake
the defense, compromise or settlement of those claims for the account
of the Exchanging Shareholders.
3. AGTI will give the Exchanging Shareholders prompt notice of
the commencement of any tax audit relating to Branson or the Branson
Business involving periods prior to the Closing Date.
D. Non-exclusivity. The Exchanging Shareholders' agreement to
indemnify AGTI in this Section 10.3 shall limit AGTI's claims for
any-Exchanging Shareholder's breach of this Agreement, and AGTI shall not
be entitled to any double recovery for any damage or injury suffered.
Section 10.4. AGTI's Agreement to Indemnify.
A. Indemnification. Subject to the conditions and provisions set forth
herein, AGTI, hereb indemnifies and agrees to defend and hold harmless the
Exchanging Shareholders from and against all demands, claims, actions,
losses, damages, liabilities, costs and expenses including, without
limitation, reasonable attorneys' fees, costs of litigation, asserted
against or incurred by the Exchanging Shareholders resulting from claims
arising out of a breach of AGTI's warranties, representations or covenants
under this Agreement or the operation and the conduct of the Branson
business after the Closing ("Exchanging Shareholders' Damages").
B. Limitation of iability. If the transactions provided for hereunder
proceed to Closing, AGTI shall be obligated to indemnify the Exchanging
Shareholders only for those Exchanging Shareholders' Damages of which the
Exchanging Shareholders have given AGTI written notice within the
applicable statute of limitations period. Any written notice delivered by
the Exchanging Shareholders to AGTI pursuant to this Subsection 10.4.B
shall set forth the basis of the claim for Exchanging Shareholders' Damages
and a reasonable estimate of the amount if such an estimate is reasonably
possible at that time.
C. Conditions of Indemnification. The obligations and liabilities of
AGTI under Section 10.4 with respect to claims for the Exchanging
Shareholders' Damages shall be subject to the following terms and
conditions:
1. No l ter than sixty (60) days after discovery of the basis for
any claim for Exchanging Shareholders' Damages, Exchanging
Shareholders will give AGTI prompt notice of the claim for Exchanging
Shareholders' Damages, and with respect to any claim other than claims
joined with a claim for non-monetary relief which the Exchanging
Shareholders elect to defend, AGTI
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will undertake the defense by representatives of its own choosing who
are satisfactory to the Exchanging Shareholders.
2. In the event that AGTI fails to undertake the defense within
thirty (30) days after notice of a claim for Exchanging Shareholders'
Damages or in the event of claims joined with a claim for non-monetary
relief, the Exchanging Shareholders will have the right to undertake
the defense, compromise or settlement of those claims for Exchanging
Shareholders, Damages for the account of AGTI.
D. Non-exclusivity. AGTI's agreement to indemnify the Exchanging
Shareholders in this Section 10.4 shall not limit the Exchanging
Shareholders' claims for AGTI's breach of this Agreement, but the
Exchanging Shareholders shall not be entitled to double recovery for any
damages or injury suffered.
E. Representative. Unless the claim for Exchanging Shareholders'
Damages shall be only a claim asserted by one Exchanging Shareholder, all
claims therefor shall be asserted through an authorized representative for
all Exchanging Shareholders as a class. Such representatives also shall be
responsible for and providing any waiver under the provisions of this
Agreement if required to be collectively provided by the Exchanging
Shareholders. The initial representative of the Exchanging Shareholders, as
a class, shall be Grady Sanders. The actions of such representative on
behalf of the Exchanging Shareholders, as a class, shall be binding on all
Exchanging Shareholders.
Section 10.5. Additional Conveyances. Upon AGTI's request and at AGTI's
expense (except for the conveyances contemplated by Section 2.2.A) after the
Closing, the Exchanging Shareholders shall make, execute, and deliver to AGTI
additional assignments, and other instruments and agreements, including, without
limitation, transfer and conveyance documents, as may be reasonably necessary to
consummate the transactions contemplated by this Agreement. AGTI and the
Exchanging Shareholders agree to use their respective best efforts to take or
cause to be taken all such action and to do or cause to be done, all such things
as may be necessary or advisable or lawful and proper under all applicable laws,
to consummate and make effective the exchange of the Branson Stock for the AGTI
Exchange Shares and other transactions contemplated by this Agreement, and to
ensure that as of the Closing Date, each of them will be under no material,
individual, corporate, legal or contractual restrictions which would prohibit
the exchange of shares contemplated by this Agreement or be contravened by such
exchange.
Section 10.6. Notice. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been properly given when de-
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<PAGE>
livered in person to the person to whom the notice is directed, or three (3)
days after being deposited in the United States mail, certified mail, return
receipt requested, addressee only, first-class postage prepaid, with a postmark
no later than the day specified for such notice, to the parties addressed, or to
such other address or attention as the party to be given such notice may
designate by notice to the other party in the manner prescribed herein, as
follows:
A. If to the Exchanging Shareholders:
c/o Mid-Pacific Capital Insurance, Inc.
32 Sackville Street
Lower Ground Floor
London, England WIX IDD
B. If to AGTI:
1878-701 West Georgia Street
P.O. Box 10109, Pacific Center
Vancouver, British Columbia V74166
C. If to Branson:
c/o Edward A. Cerkovnik, Jr.
Pendleton, Friedberg, Wilson,
Hennessey & Meyer, P. C.
303 E. 17th Avenue, Suite 1000
Denver, CO 80203
Section 10.7. Assignment or Substitution. No Party shall transfer, assign,
pledge, hypothecate or otherwise, by operation of law or otherwise, dispose of
any of its interest in or to this Agreement without the prior written consent of
the other Parties. In the event that a Party attempts to assign this Agreement
or any of the rights or duties hereunder to any third party in violation of this
covenant, the non-assigning party or parties may immediately terminate this
Agreement.
Section 10.8. Several Obligations of Exchanging Shareholders. The
representations, warranties, covenants and agreements of an Exchanging
Shareholder in this Agreement is several and not joint.
Section 10.9. Applicable Law and Remedies. The terms, conditions and other
provisions of this Agreement shall be governed and construed according to the
internal laws of the State of Wyoming, excepting any that may require the
application of the laws of another jurisdiction. In addition to any other
remedies at law or in equity for breach of this Agreement, AGTI and the
Exchanging Shareholders (collectively) shall have the right to specifically
enforce this Agreement; provided that, such remedy
-44-
<PAGE>
shall not be in limitation of any other remedies at law, in equity, by statute
or otherwise, but rather shall be in addition thereto. All remedies at law, in
equity, by statute or otherwise shall be cumulative and may be enforced
concurrently or from time to time and the election of any remedy or remedies
shall not constitute a waiver of the right to pursue other available remedies.
Section 10.10. Taxes and Expenses. Each Party shall, subject to the terms
of this Agreement, bear such Party's own expenses and costs in connection with
the preparation, negotiation of, and such Party's performance and compliance
with this Agreement.
Section 10.11. Parties in Interest. Subject to Section 10.7 of this
Agreement, all agreements entered into in connection with the transactions
contemplated by this Agreement shall be binding upon and inure to the benefit of
the Parties and their respective heirs, ersonal representatives, successors or
assigns.
Section 10.12. Waiver. No waiver of any breach of any term, condition or
provision of this Agreement shall constitute a waiver of any other breach or any
other term, condition or provision, and no consent of a Party to any departure
therefrom by another Party shall be effective unless such waiver is in writing
and signed by a duly authorized representative of AGTI. Such waiver will be
effective only for the period, on the conditions and for the specific instances
and purposes specified. No notice to, or demand on Exchanging Shareholders shall
entitle a Party to any other or further notice or demand.
Section 10.13. Entire Agreement; Alteration or Amendment. This Agreement
merges all previous negotiations between the Parties, supersedes all prior
discussions and correspondence between the Parties, and constitutes the entire
agreement and understanding between the Parties with respect to the subject
matter of this Agreement. No alteration, modification, or change of this
Agreement shall be valid except by a written instrument executed by the party to
be charged.
Section 10.14. Captions. The captions and headings in th s Agreement are
for convenience only and shall not control or affect the meaning or construction
of any of the provisions of this Agreement.
Section 10.15. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, and such counterparts, when
taken together, shall constitute one and the same Agreement.
Section 10.16. Approval of Documents. The form and substance of all
agreements, instruments, documents, consents,
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<PAGE>
approvals, certificates and opinions to be made, obtained or delivered by or on
behalf of any party hereto in connection with the transactions contemplated by
this Agreement, including, without limitation, those to be obtained from third
parties and those to be delivered at Closing, shall be subject to prior approval
by the other party(ies). Each Party shall endeavor to furnish the others with
copies thereof at a reasonable time (i) in the case of instruments, consents or
approvals of or from third parties, prior to submission or delivery thereof to
any such third parties; and (ii) in the case of all such agreements,
instruments, documents, consents, approvals, certificates and opinions, prior to
the time required by this Agreement for delivery.
Section 10.17. Expenses of Enforcement. If any Party initiates an
action to enforce any provision of this Agreement or any agreement, instrument
or document made or delivered in connection herewith, or for damages by reason
of an alleged breach of any provision, the prevailing party shall be entitled to
receive from the other party(ies) all costs and expenses, including, without
limitation, reasonable attorneys' fees and costs, incurred in connection with
such action, in addition to any other award or relief.
Section 10.18. Compliance with Conditions. Each of the Parties covenants
and agrees with the other to exercise such Party's best efforts and the utmost
good faith to perform, comply with and otherwise satisfy every condition to be
satisfied by such Party under this Agreement.
Section 10.19. Materiality. The Parties agree that for purposes of this
Agreement and documents made or delivered in connection herewith (i) a matter
shall be deemed "material" if it concerns something about which an average
prudent buyer ought to be reasonably informed, and (ii) a misrepresented,
untrue, incomplete or omitted fact shall be deemed material if there is a
substantial likelihood that an average prudent buyer would consider it important
in deciding whether to exchange Branson Stock for AGTI Exchange Shares or vice
versa.
Section 10.20. Pronouns and Terms. In this Agreement, the singular shall
include the plural, the plural the singular, and the use of any gender shall
include all gender forms.
Section 10.21. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffe tive only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provision of this Agreement unless the
consummation of the transaction contemplated hereby is adversely affected
thereby.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have made and delivered this
Agreement as of the day first above written.
AGTI:
Advanced Gaming T chnology, Inc.
By:______________________________
Its __________________________
BRANSON:
Branson Signature Resorts, Inc.
By:_____________________________
Its _________________________
EXCHANGING SHAREHOLDERS:
________________________________
________________________________
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EXHIBIT 6.7
Letter of Agreement
BETWEEN: Advanced Gaming Technology, of
PO Box 11610, Suite 2482-650 West Georgia Street
Vancouver, B.C., Canada V6B 4N9
hereinafter called AGT
AND: Y.K.L. Corporation of
801 Metropolitan Tower, Mabini Street
Malate, Manila, Philippines
hereinafter called YKL
WHEREAS AGT is the owner of certain slot machines manufactured by Unidesa
(Slots) and YKL operates a luxury ocean liner(s) and is desirous of having Slots
installed and operated on its ocean liner;
NOW, THEREFORE this Agreement witnesses that in consideration of the mutual
promises and performances of the parties, which are considered legal and
sufficient consideration by the parties, it is agreed:
1. AGT shall lease to YKL twenty five (25) Slots, more specifically described in
Exhibit 1, for an initial period of one hundred twenty (12) days (Term)
commencing from the date of installation.
2. YKL shall operate these slots on its luxury ocean liner.
3. AGT shall receive seventy percent (70%) of the gross revenues. Gross revenues
are defined as the amounts remaining after the payment of winnings.
4. YKL shall provide monthly statements by no later than the 10th day of each
month together with AGT's share of the revenue as calculated in 3. above.
5. YKL hereby agrees, acknowledges, and confirms that the Slots are the property
of AGT at all times and the same shall be returned to AGT at the end of the
Term.
6. YKL agrees to and warrants that it will carry adequate insurance against all
reasonable risks to ensure that the Slots are safe against all reasonable and
appropriate hazards and damage.
7. Upon termination of this Agreement, the parties may renegotiate the terms and
conditions of this Agreement or YKL shall return the Slots back to AGT at AGT's
expense in the condition they were delivered except for normal wear and tear.
IN WITNESS WHEREOF the parties hereto have entered into this Agreement on the
17th day of December, 1996.
ADVANCED GAMING TECH. INC. Y.K.L. CORPORATION
- --------------------------------- ---------------------------------
Ole Zupetz
Authorized Signatory Authorized Signatory
EXHIBIT 6.8
CONTRACT
Hai-Bo No. 9606
Party A: Hainan Bosun Tourism & Amusement Co. Ltd.
Party B: Palace Entertainment Limited
The following contract has been made through friendly consultation by Parties A
and B for the joint venture project of Shou Li Pok Kam Games City in Haikou,
Hainan Province, China in accordance with the principles of equality, mutual
benefit and sharing of risks.
I. Responsibilities of Party A:
1. Party A shall pay all rent for the first floor business area of the Shou Li
Building, including necessary security deposits and fixed payables.
2. Party A shall handle the required start-up procedures (including industrial
and business licenses, tax registration certificates, public security
permits, cultural market management registration certificates and other
documents required by the various departments), maintain a cordial
relationship with local authorities, and ensure the normal operation of the
business area.
3. Party A shall be responsible for decorating the business area (necessary
facilities for interior lighting, equipment wiring, ventilation and air
conditioning).
4. Party A shall be responsible for external relations and shall undertake the
expenses for such operations.
II. Responsibilities of Party B:
Party B is a company registered in the British Virgin Islands. All its interests
are managed and represented by AGTI of Canada.
1. Party B shall be responsible for the daily operation and management of the
machines it provides.
2. Party B shall provide a 23-seat Royal Ascot Horse Race Machine ("Royal
Ascot" Unit), the primary gaming machine for business use. It shall also
provide matching accessories for the machine.
3. Party B shall be responsible for the repair, maintenance and testing of the
machines to ensure their normal operation.
4. The cost of repair for the machines and purchase of spare parts shall be
undertaken by Party B.
5. Party B shall be responsible for the hiring of no more than the following
number of personnel to guarantee the operation and maintenance of the
machines: 1 manager, 15 machine attendants, 4 foremen, 1 technician, 3
security officers, 2 cleaning workers, 3 cashiers and 2 money exchangers.
Work lunches for machine attendants shall be based on the number
<PAGE>
signed for and received by the foremen. Party B shall have the right to
hire, dismiss and manage machine attendants.
6. Party B shall have the authority to increase the number of "Royal Ascot"
Units in response to market demands.
III. Rights and Obligations
1. Party A shall be responsible for the overall operation and management of
the Games City, however, Party B shall be exclusively responsible for the
management of the "Royal Ascot" Units. Party B shall have the authority to
send representatives to attend management committees, supervise and find
out about the operation of the Games City, intervene in the management,
supervise the financial affairs, and review the various expenses of the
"Royal Ascot" Unit.
2. Profit Distribution: Profit shall mean the revenue less the amounts paid
out to player as winnings, and those items identified in III.2.A and B
(Profit).
The two Parties shall verify the daily business reports every day. Profits
shall be calculated four times a month. The Profit of the previous week
shall be calculated on each Monday. Revenue may only be distributed after
the deduction of the following expenses and taxes.
A. The wages, bonuses and meal expenses of "Royal Ascot" Unit attendants.
B. Taxes paid for the start-up of the "Royal Ascot" Units.
The Profit distribution ratio of the two Parties shall be 40% for Party A,
60% for Party B, to be distributed once a week. Party B shall not be
responsible for any other expenses. The two Parties shall undertake any
losses according to the Profit distribution ratio. (Party A shall undertake
40% of the total losses, while Party B shall undertake 60%.) Both Parties
shall have the right to terminate the Contract if such losses continue for
more than two weeks or if Party B incur losses greater than its share of
revenue.
3. Daily business reports of the machines listing daily expenses, revenue and
Profit shall be submitted to Party A and B.
4. A copy of the financial report of the Joint Venture shall be submitted to
both Party A and B once a month.
IV. Duration, Termination and Settlement of the Contract
1. The period of consultation and cooperation shall be three years, calculated
from the day on which the Contract is executed. When the period expires,
the Parties may determine whether the project is to be continued or
terminated according to the business condition of the enterprise.
2. During the period of the joint venture, the contract may be terminated
before its expiry if the Royal Ascot operation is closed more than 60 days
due to (or caused by) force majeure reasons or influences of government
policies, and if both parties believe that the termination of the Contract
is beneficial to both Parties. (A settlement shall be conducted by both
Parties in accordance with the provisions of the Contract within 15 days of
the termination. Party B shall
<PAGE>
remove all machinery equipment.) If both Parties agree to wait for
reopening, all expenses incurred during the waiting period shall be shared
according to the original distribution ratio.
3. Both Parties shall have the right to terminate the Contract if the Profit
of the "Royal Ascot" Unit has not reached USD $75 per seat per day within
six months starting from the first day of operation.
4. If the "Royal Ascot" Unit is closed down or confiscated by the government,
Party A shall compensate Party B for the replacement cost of the "Royal
Ascot" Unit.
5. Party B shall at all times be considered the owner of the "Royal Ascot"
Units.
V. Others
1. Both Parties shall adhere to the laws, rules and regulations made by the
Chinese local government.
2. All disputes arising out of the fulfillment of the Contract shall be
properly resolved by the two Parties through friendly consultation. If the
dispute cannot be resolved, it shall be submitted to the "International
Trade Arbitration Commission" of China for arbitration, the result of which
shall be final and binding to both Parties.
3. Party A shall state herein that the "Royal Ascot" Unit(s) shall at any time
be considered the sole property of Party B. If the Contract is terminated,
the aforesaid machine(s) shall be removed and returned to Party B.
This Contract is executed in six duplicates. Each Party shall keep three
originals. These originals are equally authentic and shall come into effect on
the day they are executed.
The Contract is written in English and Chinese, both versions possess equal
legal effectiveness. If any variance occurs, the Chinese version shall take
precedence.
Dated this _____ day of ____________________, 1996.
PARTY A PARTY B
- --------------------------------- ---------------------------------
Representative Representative
EXHIBIT 6.9
AGREEMENT
Between:
HAINAN XIN DAO TRADING LIMITED
(Party A)
And
SCOTT CHEN as the legal representative on behalf of
ADVANCED GAMING TECHNOLOGY INC.
1818 701 West Georgia Vancouver B.C. V7Y 1C6
WHEREAS
A. Party A is a legally registered company in Haikou City Hainan, PRC that is
engaged in a trading business.
B. Scott Chen (Chen) is a citizen of China and a permanent resident of the
United States;
C. Party B is a company duly incorporated under the laws of Wyoming USA and has
its international headquarters in Vancouver British Columbia Canada.
D. The parties have agreed to establish a cooperative enterprise in Haikou to
own and operate an entertainment and amusement business in accordance with the
terms of this agreement.
THEREFORE in consideration of the recitals, the following agreements made by
each party to the other the parties agree on the following terms:
Principle
1. The parties according to the relevant laws and policies of the People's
Republic of China, based on the principles of equality, honesty, mutual benefit
and mutual sharing of risks and after friendly discussions, agree to enter into
this contract to establish a co-operative enterprise to operate a specialized
entertainment business (Business) in Haikou City at 1st fl Hainan Yifeng Chung
17 Lonkun Road North (Location).
Duties of parties
2. Party A and Party B are responsible to complete their duties as follows:
<PAGE>
Party A
o to secure all regulatory approvals (Licences) necessary to operate the
Business at the Location;
o to provide all security for the Business;
o to incorporate a Chinese company with its shares being held by Chen on
behalf of Party B and by Party A in the same proportion as the division of
profits;
o to issue the Licences to the Company;
o to assist in the hiring and managing of the Business;
o co-operate with Party B in all related matters business matters;
Party B
o to provide all capital required to purchase the equipment, make leasehold
improvements, and provide working capital for the Business;
o to provide all management for the Business;
o cooperate with Party A in other business matters;
Management of the Business
3. A management committee will be formed to operate the Business which will
have 5 members which Party A has 2 representatives AND Party B three members.
The Chairman of the Company will be appointed by Party B and the General Manager
will be appointed by the Management committee.
4. The fiscal year for the Company is from January 1 to December 31 each year.
All accounting records, invoices, financial statements and books should be
written in Chinese.
5. It is necessary to appoint a China registered accountant to supervise and
audit the financial statements of the Company. Results have to be reported to
the Management Committee.
Profit Sharing
6. The net profits of the Company which Party A will have 68% and Party B will
have 32%.
Co-operation Time Limit
7. For as long the Business continues.
Amendments, Changes & Termination of Contract
8. Any changes to this contract or its appendices have to be agreed and signed
by Party A and Party B in writing to be effective.
<PAGE>
9. If one party fails to carry out this contract or is in serious breach of
contract and cause the Business to fail that party is deemed to terminate this
contract without just cause. The other party is entitled to claim damages for
their losses and to terminate this contract according to the provisions in this
contract.
10. When natural disasters like earthquakes, storms, flooding, fire, war or
other unpredictable conditions strike including changed government policies
which directly affect the carrying out of the Business according to its terms
and conditions, either parties can decide whether to terminate this contract, or
to delete part of the contract duties, or to suspend the Business.
Settlement of Disputes
11. Any disputes of this contract or matters relating to this contract should be
settled by a friendly discussion by the two parties. If disputes remain
unsolved, it will be sent to arbitration. Arbitration should take place in by
the China International Economy & Trade Committee according to its arbitration
regulations.
12. In the process of arbitration, except the part that is in dispute under
arbitration, the other parts of the contract should be carried out.
Assets upon disposal
13. Both parties agree that upon termination of the Business and the Company
that the profits then remaining will be divided in accordance with the profit
participation and if a loss that Party B will be responsible provided however
that the equipment in the Location will be the sole property of Party B.
Language
14. This contract is written in both Chinese and English.
This contract is signed by authorized representatives from both parties in
Haikou China on January 22nd, 1996.
Signed by:
Party B: ADVANCED GAMING TECHNOLOGY INC.
Legal Representative: Scott Chen /s/ Scott Chen
Party A: HAINAN XIN DAO TRADING LIMITED
Legal Representative: He LinBuo /s/ He LinBuo
EXHIBIT 6.12
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 15th day of February 1994.
BETWEEN:
ADVANCED GAMING TECHNOLOGY INC., a body corporate under the laws of
Wyoming, U.S.A. and having an office in Canada at #1818 - 701 W. Georgia
Street, Vancouver, B.C. V7Y 1C6
(the "Employer")
AND:
ROB SILZER JR., businessman of 8482 214th Street, Langley, B.C. V1M 2G3
(the "Employee")
WHEREAS:
A. The Employer is in the business of developing and distributing advanced
electronic gaming devices ("Business");
B. The Employer is a non-reporting company that trades on the NASDQ Bulletin
Board;
C. Employee has considerable expertise in businesses related to the Business;
and
D. Employer and Employee desire to enter into an agreement to provide for the
employment of Employee pursuant to the terms and conditions of this
Agreement.
NOW THEREFORE, in consideration of the covenants, conditions, undertakings
and promises contained herein the sufficiency of which is fully acknowledged,
Employer and Employee agree as follows:
EMPLOYMENT AND DUTIES
Employment Duties
1.0 The Employer hereby employs Employee as V.P. of Operations of the Employer.
In such position, the Employee shall perform such duties as are or may be
assigned to the Employee by the Employer's Board of Directors from time to
time consistent with the
<PAGE>
-Page 2-
Employee's position as a senior executive of the Employer. The Employee
shall primarily devote his working time, attention, energies, skill and
best efforts to the performance of his duties and to the business and
affairs of the Employer.
1.1 The Employee shall devote such additional working time, attention,
energies, skills and best efforts to the performance of his duties and to
the business and affairs of any affiliated companies of the Employer as the
Board of Directors shall request.
1.2 The Employee shall not during the term of this Agreement be engaged in any
other business activity whether or not such activity is pursued for gain,
profit or other pecuniary advantage, except that the Employee, on his own
time, may manage his own investments, and those of his immediate family, so
long as such activity does not, in the reasonable judgement of Employer's
Board of Directors, adversely affect the performance of his duties
hereunder, Employer agrees that the activities set forth in Schedule A
attached hereto are permitted activities which may be continued by Employee
without constituting a breach of this Agreement.
TERM
2.0 The term of Employee's employment hereunder shall commence on the date
hereof and, except as otherwise provided in this Agreement, shall be for a
term of five years ("Term") unless terminated earlier in accordance with
the terms of the agreement.
Notice to Employee
2.1 On or before expiration of the Term the Employer shall notify the Employee
whether it intends to offer employment to the Employee after the Term.
Except for the giving of such notice, neither the Employer nor the Employee
shall incur any obligation whatsoever with respect to employment beyond
this Term.
COMPENSATION
Base Salary
3.0 For all services to be rendered by Employee under this Agreement, including
services as an officer, director and member of any committee, and such
other duties as the respective Board of Directors may assign to him in
accordance with Section 1.1 hereof, Employer agrees to pay Employee a base
salary, payable at such times as is customary for employees of Employer and
in accordance with the normal payroll practices of Employer, in the amount
of $49,500 (U.S.) per annum less any source deductions that are required to
be made payable monthly for the first year and $55,000 during the second
year of the Term
<PAGE>
-Page 3-
and thereafter as may be agreed but not less than the said $55,000 per
annum, adjusted accordingly based on sales, growth and profitability.
Expenses
3.1 In addition to base salary, Employer shall reimburse Employee, in
accordance with Employer policy and procedure in effect from time to time,
for all reasonable and necessary business expenses actually incurred by him
in the performance of his duties, including, without limitation, expenses
for travel, meals, entertainment and other miscellaneous business expenses.
Employee shall submit to Employer written, itemized expense accounts and
such additional substantiation and justification as Employer may reasonably
request.
Options
3.2 The Employer has agreed to grant the Employee options ("Options") to
purchase shares in the capital of the Employer as described in Schedule B
hereto.
Bonus
3.3 The Employer agrees that upon executing this agreement the Employer shall
issue to the Employee 25,000 of its shares as a bonus for entering this
agreement.
Regulators
3.5 The parties understand and agree that any of the Employer shares ("Shares")
that are issued or optioned to the Employee hereunder are subject to the
rules of Securities and Exchange Act of 1934 and the rules of the
Securities and Exchange Commission and in particular Rule 144 as well as
certain local State rules and the parties agree that notwithstanding
anything to the contrary herein this Agreement is subject to such rules and
regulations PROVIDED that the Employer covenants and agrees that as soon as
it becomes a reporting company under the Securities Act of 1934 that it
shall take all steps that it is able, to have the Shares made free form any
trading restrictions.
Pooling
3.6 The Employee agrees that if he elects to exercise the Options and becomes a
shareholder of the Employer that he will pool such shares with all shares
held by the executive members of the Employer ("Pool") so that no more than
one quarter of the shares can be sold from the Pool in any three month
period and that the proceeds from any sale of shares from the Pool will be
shared pro rata in proportion to the number of shares held by the Employee
over the number of shares held in the Pool.
<PAGE>
-Page 4-
EMPLOYEE BENEFITS
Employer Provided Benefits
4.0 During the term of this Agreement, Employee shall be eligible to receive
such time off with pay for a minimum of 4 weeks annual vacation, life
insurance, medical insurance, and other similar benefits in effect from
time to time, according to the Employer's policies and procedures and
according to the terms and conditions of the plan(s)) governing such
benefits.
Management Control Group Status
4.1 During the term of this Agreement, Employee will be included within the
Executive Management group and, as such, will be eligible for participation
in the executive bonus plan, which will distribute 10% of the Net Sales
(Pre tax profits) for each previous quarter and distributions under such
plans and the terms thereof will be subject to discretion of those
responsible for administration of said plans.
RESTRICTION
Non-Competition
5.0 During the Term and for a period of four years (1 yr.-18 months maximum)
thereafter the Employee covenants and agrees that he will not directly or
indirectly, whether as owner, shareholder, director, agent, officer,
employee, consultant, independent contractor, or in any other capacity
whatsoever, of a corporation, partnership or proprietorship, compete with
the business of the employer or any of their affiliates in the business of
providing any services or advise to any person involved in the Business or
related businesses. The Employee further covenants and agrees that he will
not compete with the Employer or their affiliates in any business which is
in any respect competitively similar to any business engaged by the
Employer or their affiliates in the areas such business is conducted by
such parties subsequent to the date of this Agreement. The foregoing
provisions notwithstanding, if this Agreement has been terminated nothing
herein shall prohibit the Employee form providing services, either as an
independent consultant on his own behalf or an employee to any business
which is not in competition with the Employer or its affiliates.
Confidentiality
5.1 Except as may be required by law, the Employee will not use directly or
indirectly, for his own account or for the account of any person, firm,
corporation or other entity or disclose to any person, firm or corporation
or other entity, the Employer's or its affiliates proprietary information
disclosed or entrusted to him or developed or generated by him in
<PAGE>
-Page 5-
the performance of his duties hereunder, including, but not limited to,
information relating to the Employer's or its affiliates' organizational
structure, operations, business plans, technical projects, pricing data,
production costs, research data or results, inventions, trade secrets,
customer lists or other work product developed by or for Employer or its
affiliates, whether on the premises of Employer or elsewhere.
5.2 The provisions of this Sections shall not apply to any proprietary,
confidential or secret information which is, at commencement of the Term or
at some later date, publicly known under circumstances involving no breach
of this Agreement or is lawfully and in good faith made available to the
employee without restrictions as to disclosure by a third party.
5.3 Any idea, concept, device, program, pant, data, invention, discovery,
improvement, writing, design or business method conceived or made by
Employee, individually or jointly, during any past or future period of
employment with Employer or any affiliate thereof relating to the business
of Employer or such affiliate, whether patentable or unpatentable, or
registrable or copyrighted material or trademarks, shall be promptly and
fully disclosed to the Employer or such affiliate. In confirmation thereof,
the Employee will, upon reasonable request, execute and deliver to the
Employer assignments of any such idea, concept, device, program, plan,
data, invention, discover, writing, improvement, design or business method.
5.4 The Employee will reasonable assist the Employer in every way, at the
Employer's sole expense, both during the course of and after termination of
his employment, in the procurement, maintenance and enforcement, for the
Employer's benefit, of patents on such inventions or discoveries and
registrations on such copyrighted material, trademarks or business methods
in any and all countries.
5.5 So long as the Employee is employed by the Employer, the Employee shall
maintain proper files and records relating to work performed by him in
accordance with past practices or as otherwise reasonably specified by the
Employer from time to time. All such files and records are to be kept in
the Employer's custody and subject to its control and to be the exclusive
property of the Employer. Upon termination of the Employee's employment
with the Employer or any affiliate thereof, the Employee shall deliver to
the Employer all files and records of any nature which are in the
Employee's possession or control and which relate in any manner to his
employment or to the activities of the Employer or any affiliate thereof.
Injunctive Relief
5.6 The Employee acknowledges that the restrictions contained in this agreement
are reasonable in view of the nature of the business in which the Employer
is engaged and his knowledge of the Business.
<PAGE>
-Page 6-
5.7 The Employer and the Employee mutually agree that the Employee's
obligations under this agreement are of a special and unique character
which gives than a peculiar value, and the Employer cannot be reasonably or
adequately compensated in damages in an action at law in the event the
Employee breaches such obligations. The Employee therefore expressly agrees
that, in addition to any other rights or remedies which the Employer may
possess, the Employer shall be entitled to injunctive and other equitable
relief to prevent a breach of this Article by the Employee, including a
temporary restraining order or temporary injunction from any court of
competent jurisdiction restraining any threatened or actual violation, and
each party hereby consents to the entry of such an order and injunctive
relief and waives the making of a bond as a condition for obtaining such
relief. Such rights shall be cumulative and in addition to any other legal
or equitable rights and remedies the Employer may have.
Survival and Enforceability
5.8 It is expressly agreed by the parties hereto that the provisions of this
clause shall survive the termination of this Agreement.
5.9 If any one or more of the provisions contained in this clause shall for any
reason in any jurisdiction be held to be excessively broad as to time,
duration, geographical scope, activity or subject, it shall be construed
with respect to such jurisdiction, by limited or reducing it, so as to be
enforceable to the extent compatible with the applicable law of such
jurisdiction as it shall then appear.
DEATH, DISABILITY
Death
6.0 If the Employee dies while employed under this Agreement, this Agreement
shall terminate immediately. The Employer will pay to the Employee's estate
his base salary under Section 3 through the last day of the calendar month
in which he dies, will pay on a monthly basis on the last day of each
calendar month for the period from the date of his death to 90 days
following the date of this Agreement a monthly amount or pro-rata portion
thereof for partial months equal to 6 months and such death benefits, if
any, as the Company may have in place.
Disability
6.1 If the Employee fails to perform his duties under this Agreement due to
"Disability", as defined herein, the Employer may terminate this Agreement
upon 30 days written notice to him and in that event the Employer shall pay
the Employee his base salary under Section 3 through the date of
termination and shall pay thereafter on a monthly basis on
<PAGE>
-Page 7-
the last day of each calendar month for the period during which such
Disability termination is effective, such period to end no later than 90
days from the date of signing.
6.2 If Employer gives notice of termination under this Section and, before the
termination date stated in the notice, the Employee's Disability
permanently ceases and he takes up and resumes performance of his duties
under this Agreement, the notice of termination shall be void and of no
effect, and this Agreement shall continue in effect as though such notice
had not been given.
6.3 The term "Disability" shall mean the inability of the Employee to perform
for the Employer the duties specified in Section 1.1 by reason of any
medically determinable physical or mental impairment for a period of six
consecutive months or for shorter periods aggregating six months in any 12
month period. The determination of whether the Employee is Disabled or
whether such disability has permanently ceased shall be made by the Board
of Directors to the Employer on the basis of written medical evidence
reasonably satisfactory to it.
TERMINATION
Termination by Employer for Cause
7.0 The Employer may terminate this Agreement for cause by giving notice to the
Employee specifying the grounds for termination. For purposes of this
Section, "Cause" shall mean a material breach by the Employee of the terms
of this Agreement or a breach of the common or statutory law of Wyoming
respecting employment and termination of employment justifying termination
for cause, where the Employee files a petition for bankruptcy or for a
rearrangement pursuant to applicable bankruptcy law or commits an offence
that otherwise disqualifies the Employee as a director of any Company
whether or not the Employee is a director of the Employer.
7.1 In the event of termination for Cause the Employer shall pay to the
Employee his base salary under Section 3 and legislated payment due through
the date of termination and no more.
7.2 In the event of termination for any reason other than death any Option that
has not been exercised shall terminate. Upon the date of termination, and
in the event of death, the estate of the Employee may excise any option
then exercisable within sixty (60) days of the death of the Employee.
<PAGE>
-Page 8-
MISCELLANEOUS
Entire Agreement
8.0 This Agreement contains the entire understanding and agreement between the
Employer and the Employee and supersedes in its entirety all previous
understanding or agreements of any nature whatsoever regarding Employee's
employment by Employer including those regarding notice upon termination of
employment. This Agreement cannot be amended, modified or supplemented in
any respect, except by subsequent written agreement entered into by both
parties.
Successors of the Employer
8.1 This Agreement shall enure to the benefit of and be binding upon the
Employer, its successors and assigns, including, without limitation, any
affiliate of Employer which may acquire all or substantially all of the
Employer's assets and business, or with or into which the Employer may be
consolidated or amalgamated, and this provision shall apply in the event of
any such amalgamation, consolidation or transfer. In every respect, this
Agreement shall enure to the benefit of and be binding upon Employee, his
heirs, executors and personal representatives and, being personal in
nature, shall not be assignable by the Employee.
Effect of Waiver
8.2 The waiver by either party of a breach of any provision of this Agreement
shall not operate as or be construed as a waiver of any subsequent breach.
Notices
8.3 Any notice, request, demand or other communication in connection with this
Agreement must be in writing and shall be deemed to have been given and
received three days after a certified or registered letter containing such
notice, properly addressed, with postage prepaid, is deposited in the mail.
It shall not be deemed to have been given until actually delivered to and
received by the party to whom it is addressed.
8.4 Notice to the Employer shall be given at its principal mailing address,
hereinbefore given which at the time of execution of this Agreement is or
at such other address as it may designate.
8.5 Notice to the Employee shall be given at his home address, which at the
time of execution of this Agreement is the address set forth in the heading
of this Agreement or at such other address as he may designate in writing.
<PAGE>
-Page 9-
Counterparts
8.6 This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one
and the same instrument.
Severability
8.7 If in any jurisdiction, any provisions of this Agreement or its application
to any party or circumstance is restricted, prohibited or unenforceable,
such provision shall, as to such jurisdiction, be ineffective only to the
extent of such restriction, prohibition or unenforceability without
invalidating the remaining provisions hereof and without affecting the
validity or enforceability of such provisions in any other jurisdiction or
is application to other parties or circumstances.
Survival
8.8 Each of the terms and provisions of this Agreement which are expressly or
impliedly so intended shall survive the termination of this Agreement.
Applicable Law
8.9 This Agreement shall be governed by and construed according to the laws of
Wyoming.
Definitions
8.10 When used in this Agreement, "affiliate" or "affiliates" of any person or
entity shall mean any other person or entity which controls such person
entity or is under common control
<PAGE>
-Page 10-
with such person or entity. "Control" means the power, direct or indirect,
to direct or cause the direction of the management policies of a person or
entity through voting securities or otherwise.
IN WITNESS WHEREOF the parties hereto have hereunto duly executed this Agreement
as of the day and year first above written.
THE COMMON SEAL of )
ADVANCED GAMING TECHNOLOGY INC. )
was hereunto affixed in the )
presence of )
)
/s/ )
- ------------------------------- ) c/s
Authorized Signatory )
SIGNED SEALED AND DELIVERED )
by ROB SILZER JR. )
---------------------------- )
)
in the presence of )
E. GREG McCARTNEY )
- ------------------------------- )
Name )
)
1055-163A St. )
- ------------------------------- ) /s/ Rob Silzer Jr.
Address ) -------------------------------
) **
White Rock, B.C. )
- ------------------------------- )
EXHIBIT 8.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the inclusion in the Amendment to Form 10-SB of our report
dated January 27, 1997 on our audit of the financial statements of Advanced
Gaming Technology, Inc.
/S/ ROBISON, HILL & CO.
----------------------------
Certified Public Accountants
Salt Lake City, Utah
May 2, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF ADVANCED GAMING TECHNOLOGY, INC. AS OF DECEMBER 31, 1996 AND THE
RELATED STATEMENTS OF OPERATIONS, EQUITY AND CASH FLOWS FOR THE YEAR THEN ENDED
AND IS QUALIFIED IN ITS ENTIRETY BY SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 77
<SECURITIES> 0
<RECEIVABLES> 142
<ALLOWANCES> 86
<INVENTORY> 43
<CURRENT-ASSETS> 436
<PP&E> 2553
<DEPRECIATION> 583
<TOTAL-ASSETS> 9446
<CURRENT-LIABILITIES> 10696
<BONDS> 0
0
0
<COMMON> 211
<OTHER-SE> (3373)
<TOTAL-LIABILITY-AND-EQUITY> 9446
<SALES> 1155
<TOTAL-REVENUES> 1155
<CGS> 283
<TOTAL-COSTS> 4202
<OTHER-EXPENSES> 2301
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1223
<INCOME-PRETAX> (5630)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5630)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5630)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> 0
</TABLE>
