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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): June 16, 1998
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Wells-Gardner Electronics Corporation
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(Exact Name of Registrant as Specified in Charter)
Illinois 1-8250 36-1944630
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
2701 North Kildare Avenue, Chicago, IL 60639
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (773)252-8220
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) Effective June 5, 1998, Registrant purchased certain of the assets of
Coin Controls, Inc. ("Coin Controls"), an Illinois corporation, and
Coin Controls Limited ("Limited"), a company organized under the laws
of the United Kingdom and sole shareholder of Coin Controls, for an
aggregate purchase price of $3.350 million, payable in cash.
The purchase price in this transaction was paid out of proceeds from
Registrant's Installment Note pursuant to the Loan Agreement by and
between Registrant and American National Bank and Trust Company of
Chicago dated June 5, 1998.
(b) Certain of the assets acquired pursuant to this transaction constitute
equipment or other physical property used by Coin Controls and Limited
in its business as designers and manufacturers of coin doors and
related mechanical mechanism products. The Registrant will continue to
use these assets for the same purpose.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
Audited financial statements of Coin Controls required pursuant to
Regulation S-X cannot be provided at this time, but shall be filed as
soon as practicable and in no event later than 60 days after the filing
date of this Report on Form 8-K.
(b) Pro Forma Financial Information.
The pro forma financial information required pursuant to Article 11 of
Regulation S-X cannot be provided at this time, but shall be filed as
soon as practicable and in no event later than 60 days after the filing
date of this Report on Form 8-K.
(c) Exhibits.
2.1 Asset Purchase Agreement by and among Wells-Gardner
Electronics Corporation, Coin Controls, Inc. and Coin
Controls Limited, dated as of June 5, 1998.
2.2 Loan Agreement by and between Wells-Gardner Electronics
Corporation and American National Bank and Trust Company of
Chicago, dated as of June 5, 1998.
2.3 London Interbank Offered Rate Agreement by and between
Wells-Gardner Electronics Corporation and American National
Bank and Trust Company of Chicago, dated as of June 5, 1998.
2.4 Installment Note by and between Wells-Gardner Electronics
Corporation and American National Bank and Trust Company of
Chicago, dated as of June 5, 1998.
2.5 Revolving Note by and between Wells-Gardner Electronics
Corporation and American National Bank and Trust Company of
Chicago, dated as of June 5, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WELLS-GARDNER
ELECTRONICS CORPORATION
Dated: June 16, 1998 By: /s/ George B. Toma
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George B. Toma
Vice President of Finance, Chief
Financial Officer & Treasurer
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Exhibit Index
Sequential
Page
Exhibit # Item Number
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2.1 Asset Purchase Agreement by and 5
among Wells-Gardner Electronics
Corporation, Coin Controls,
Inc. and Coin Controls Limited,
dated as of June 5, 1998.
2.2 Loan Agreement by and between 55
Wells-Gardner Electronics
Corporation and American
National Bank and Trust Company
of Chicago, dated as of June 5,
1998.
2.3 London Interbank Offered Rate 66
Agreement by and between Wells-
Gardner Electronics Corporation
and American National Bank and
Trust Company of Chicago, dated
as of June 5, 1998.
2.4 Installment Note by and between 70
Wells-Gardner Electronics
Corporation and American
National Bank and Trust Company
of Chicago, dated as of June 5,
1998.
2.5 Revolving Note by and between 73
Wells-Gardner Electronics
Corporation and American
National Bank and Trust Company
of Chicago, dated as of June 5,
1998.
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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
Between
WELLS-GARDNER ELECTRONICS CORPORATION
and
COIN CONTROLS, INC.
and
COIN CONTROLS LIMITED
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June 5, 1998
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TABLE OF CONTENTS
(Not a part of the Agreement)
<TABLE>
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Page
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I. TRANSFER OF ASSETS................................................................................. 1
1.1. Purchase and Sale Of Assets.......................................................... 1
1.1.1. Tangible Personal Property.......................................... 2
1.1.2. Inventories And Stores And Supplies................................. 2
1.1.3. Contract Rights..................................................... 3
1.1.4. Intellectual Property............................................... 3
1.2. Retained Assets...................................................................... 3
1.3. Nonassignable Contracts.............................................................. 3
1.3.1. Nonassignability.................................................... 3
1.3.2. Obligation Of Buyer To Perform...................................... 4
1.4. Access to Books and Records......................................... 4
II. ASSUMPTION OF LIABILITIES......................................................................... 4
2.1. Assumed Liabilities.................................................................. 4
2.2. Excluded Liabilities................................................................. 4
III. PURCHASE PRICE................................................................................... 5
3.1. Purchase Price....................................................................... 5
3.2. Payment.............................................................................. 5
3.3. Purchase Price Adjustment............................................................ 5
(a) Closing Statement........................................................... 5
(b) Cooperation................................................................. 6
(c) Review of Closing Statement................................................. 6
(d) Adjustment to Purchase Price................................................ 7
3.4. Payment Procedures................................................................... 8
3.5. Allocation of Purchase Price......................................................... 8
3.6. Waiver of Resolutory Conditions...................................................... 8
IV. CLOSING........................................................................................... 9
4.1. General.............................................................................. 9
4.2. Documents to be Delivered by Seller.................................................. 9
4.3. Documents to be Delivered by Buyer................................................... 11
V. REPRESENTATIONS AND WARRANTIES..................................................................... 12
5.1. Representations And Warranties Of Seller............................................. 12
5.1.1. Corporate Organization.............................................. 12
5.1.2. Authorization And Effect Of Agreement............................... 12
5.1.3. Acquired Assets..................................................... 13
5.1.4. Financial Statements................................................ 14
5.1.5. No Material Adverse Change.......................................... 15
5.1.6. Compliance with Laws................................................ 15
5.1.7. Litigation.......................................................... 16
5.1.8. Agreements.......................................................... 16
5.1.9. Intellectual Property............................................... 17
</TABLE>
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<TABLE>
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5.1.10. Compliance with Environmental Laws.................................. 18
5.1.11. Suppliers and Customers............................................. 18
5.1.12. ERISA............................................................... 19
5.1.13. Operations of Seller................................................ 20
5.1.14. Taxes............................................................... 21
5.1.15. Transactions Not a Breach........................................... 21
5.1.16. Employees........................................................... 22
5.1.17. Books and Records................................................... 23
5.1.18. Product Liability................................................... 23
5.1.19. Product Warranties.................................................. 23
5.1.20. Interest of Seller in Customers, Etc................................ 24
5.1.21. Affiliate Transactions.............................................. 24
5.1.22. No Misrepresentation................................................ 24
5.1.23. No Broker........................................................... 24
5.2. Representations And Warranties Of Buyer.............................................. 24
5.2.1. Corporate Organization...................................................... 24
5.2.2. Authorization And Effect Of Agreement....................................... 24
5.2.3. Conflicts; Defaults......................................................... 25
5.2.4. Brokers, Finders and Agents................................................. 25
VI. SURVIVAL AND INDEMNIFICATION...................................................................... 25
6.1. Survival Of Representations And Warranties........................................... 25
6.2. Indemnification...................................................................... 26
6.3. Defense Of Claims.................................................................... 27
VII. POST-CLOSING COVENANTS........................................................................... 30
7.1. Personnel Matters.................................................................... 30
7.1.1. Benefits Of Seller.................................................. 30
7.1.2. 401(k) Plan......................................................... 31
7.1.3. Employment By And Benefits Of Buyer................................. 31
7.1.4. Employee Information................................................ 32
7.2. General Post-Closing Matters......................................................... 32
7.2.1. Post-Closing Notifications.......................................... 32
7.2.2. Names, Trademarks................................................... 32
7.2.3. Access; Regulation S-X.............................................. 33
7.2.4. Technical Assistance................................................ 35
7.2.5. Supplier Contracts.................................................. 35
7.2.6. Supply of Components/Electronic Mechs/Series 1...................... 35
7.2.7. Non-Competition..................................................... 37
7.2.8 Customer Drawings................................................... 38
7.2.9 Warranty Claim...................................................... 38
7.2.5.1. MISCELLANEOUS PROVISIONS..................................................................... 38
7.3. Notices..................................................................... 38
7.4. Expenses.................................................................... 39
7.5. Successors And Assigns...................................................... 40
7.6. Waiver...................................................................... 40
</TABLE>
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<TABLE>
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7.7. Entire Agreement..................................................................... 40
7.8. Amendments, Supplements, Etc......................................................... 41
7.9. Rights Of The Parties................................................................ 41
7.10. Further Assurances................................................................... 41
7.11. Bulk Sales........................................................................... 41
7.12. Transfers............................................................................ 42
7.13. Applicable Law....................................................................... 42
7.14. Execution In Counterparts............................................................ 42
7.15. Titles And Headings.................................................................. 42
7.16. Passage Of Title And Risk Of Loss.................................................... 42
7.17. Certain Interpretive Matters And Definitions......................................... 42
7.18. Severability......................................................................... 43
7.19. Counterparts......................................................................... 43
</TABLE>
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TABLE OF SCHEDULES AND EXHIBITS
(Not a part of the Agreement)
<TABLE>
<CAPTION>
Schedule Page
<S> <C>
A Products..................................................................................1
1.1.1 Tangible Personal Property................................................................2
1.1.2 Inventories and Stores and Supplies.......................................................3
1.1.3 Contract Rights...........................................................................3
1.1.4 Intellectual Property.....................................................................3
1.2 Retained Assets ..........................................................................3
1.4 Access to Books and Records...............................................................4
2.1 Assumed Liabilities ......................................................................4
3.3(a) Accounting Principles ....................................................................6
3.5 Allocation of Purchase Price .............................................................8
5.1.3.3 Conditions ..............................................................................14
5.1.4(a) Asset List...............................................................................14
5.1.5 Material Adverse Change..................................................................15
5.1.6 Compliance With Laws.....................................................................15
5.1.7 Litigation...............................................................................16
5.1.8 Consents.................................................................................17
5.1.9 Liens on Intellectual Property...........................................................17
5.1.10 Environmental............................................................................18
5.1.11 Customers and Suppliers .................................................................18
5.1.12 Benefit Plans............................................................................19
5.1.13 Operations of Seller.....................................................................20
</TABLE>
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<TABLE>
<S> <C>
5.1.16(a) Employees ...............................................................................22
5.1.16(b) Employment Offers .......................................................................22
5.1.19 Product Warranty.........................................................................24
7.2.5 Supplier Contracts ......................................................................35
7.2.6 Supply of Components/Electronic Mechs/Series 1 ..........................................35
Exhibit
A Bill of Sale.............................................................................10
B Patent Assignment .......................................................................10
C Engagement Letter .......................................................................10
D International Programmer Agreement -- Hand Held Programmer ..............................11
E International Programmer Agreement -- Master Programmer................................. 11
</TABLE>
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into as of the 5th day of June, 1998, between Wells-Gardner Electronics
Corporation, an Illinois corporation ("BUYER"), and Coin Controls, Inc., a
Delaware corporation ("SELLER") and Coin Controls Limited, a company organized
under the laws of the United Kingdom and sole shareholder of Seller (the
"PARENT");
RECITALS:
A. Seller, presently conducts the business of designing,
manufacturing, selling and servicing coin door and mechanical mechanism products
(the "BUSINESS"), the products of which are listed on SCHEDULE A (collectively,
the "PRODUCTS"); and
B. Seller desires to transfer, convey, assign and deliver to
Buyer and Buyer desires to acquire and assume from Seller, certain of the assets
and liabilities of the Seller relating to the Business on the terms and subject
to the conditions set forth in this Agreement.
C. Parent desires to transfer, convey, assign and deliver to
Buyer and Buyer desires to acquire and assume from Parent, certain of the assets
of Parent relating to the Business on the terms and subject to the conditions
set forth in this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
I. TRANSFER OF ASSETS
1.1. Purchase and Sale Of Assets. On the terms and subject to the
conditions of this Agreement, at the Closing (as hereinafter defined) and
effective as of the Closing Date (as hereinafter defined), (i) Seller will
transfer to Buyer free and clear of any and all liens, equities, claims, prior
assignments, mortgages, charges, security interests, pledges, conditional sales
contracts, collateral security arrangements and other title retention
arrangements, restrictions or encumbrances whatsoever (collectively, "LIENS")
other than Permitted Liens (as hereinafter defined), and Buyer will acquire and
accept from Seller, the assets and rights of whatever kind
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and nature, real or personal, tangible or intangible, other than the Retained
Assets, owned by Seller as of the Closing and used or held for use primarily in
the Business as specifically identified on SCHEDULES 1.1.1, 1.1.2, 1.1.3 and
1.1.4 hereto and not further identified on SCHEDULES 1.1.1, 1.1.2 AND 1.1.4 as
Parent Assets (as hereinafter defined) (the "ACQUIRED ASSETS"), and (ii) Parent
will transfer to Buyer free and clear of any and all Liens other than Permitted
Liens, and Buyer will acquire and accept from Parent, the assets and rights
specifically identified on SCHEDULES 1.1.1, 1.1.2 AND 1.1.4 hereto as located in
the United Kingdom (the "PARENT ASSETS"). Acquired Assets and Parent Assets
shall include only the following:
1.1.1. Tangible Personal Property. All manufacturing, production,
maintenance, packaging and/or testing machinery and equipment, tools, dies,
molds, jigs, patterns, gauges, and other tangible personal property (together
with all spare and maintenance parts) owned by Seller as of the Closing which
are used primarily in the Business and are located on or at, the leased property
at 1850 Howard Street, Elk Grove Village, Illinois 60007-2450 (the "PREMISES")
or are owned by Seller or Parent as of the Closing but have been furnished to
any subcontractor or other bailee in connection with the manufacture, sale or
servicing of any Product or its components, which tangible personal property is
specifically listed or described (including, by location) on SCHEDULE 1.1.1
(collectively, the "TANGIBLE PERSONAL PROPERTY"); provided, however, that the
engineering p.c. and CADKEY software listed on SCHEDULE 1.1.1 shall be delivered
to Buyer on June 30, 1998.
1.1.2. Inventories And Stores And Supplies. All raw materials,
components, work-in-process, finished products, packaging materials and stores
and supplies, related to the Products or the Business, owned by Seller as of the
Closing which are located on or at, the Premises or are owned by Seller as of
the Closing but have been furnished to any subcontractor
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or other bailee in connection with the manufacture, sale or servicing of any
Product, which to the best of Seller's Knowledge are specifically listed or
described (including by location) on SCHEDULE 1.1.2 "CURRENT INVENTORY").
1.1.3. Contract Rights. Subject to Section 1.3, all rights and
incidents of interest of Seller as of the Closing in and to all leases,
agreements or other legally binding contracts, contractual rights, obligations
or offers of Seller specifically listed or described on SCHEDULE 1.1.3
(collectively, the "CONTRACTS").
1.1.4. Intellectual Property. Seller's or Parent's interest in the
patents, trademarks, trade names, service marks, copyrights and applications
therefor research and development, prototypes, drawings and any product
development related to the Products or the Business specifically listed or
described on SCHEDULE 1.1.4 (collectively, the "INTELLECTUAL PROPERTY RIGHTS").
It is the intent of the parties that Buyer acquire all Intellectual Property
Rights of the Seller or Parent which relate to the Products or Business
worldwide; provided, however, that Buyer's right to use the Seller's or Parent's
registered trademark or logo is limited as set forth in Section 7.2.2(b).
1.2. Retained Assets. Other than the Acquired Assets specifically
listed in the Schedules hereto, all other rights, properties and assets of the
Seller shall be retained by Seller including but not limited to those listed on
SCHEDULE 1.2 (the "RETAINED ASSETS").
1.3. Nonassignable Contracts.
1.3.1. Nonassignability. To the extent that any Contract to be
transferred pursuant to the terms of Section 1.1.3 is not capable of being
transferred without the consent, approval or waiver of a third person or entity
and such consent, approval or waive is not obtained as of the Closing or if such
transfer or attempted transfer would constitute a breach
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thereof or a violation of any Law (as hereinafter defined), nothing in this
Agreement will constitute a transfer or an attempted transfer thereof.
1.3.2. Obligation Of Buyer To Perform. Buyer will perform the
obligations of Seller under or in connection with any Contract referred to in
Section 1.3 for the benefit of the other party or parties thereto. If Buyer
fails so to perform such obligations, then, without limiting Seller's rights
under Section 6.2(b), Seller will have no obligation to Buyer hereunder to
perform such obligations unless and until such failure is cured.
1.4. Access to Books and Records. Seller shall provide Buyer with
copies of the books and records listed on SCHEDULE 1.4. Seller shall provide
Buyer with access to all other books and records relating to the Acquired Assets
upon reasonable request.
II. ASSUMPTION OF LIABILITIES
2.1. Assumed Liabilities. As of the Closing, Buyer will assume and
thereafter in due course pay and fully satisfy, only those liabilities
specifically described on SCHEDULE 2.1 (the "ASSUMED LIABILITIES"), whether
primary or secondary, direct or indirect, or absolute or contingent.
2.2. Excluded Liabilities. Notwithstanding anything contained in this
Agreement or any agreement, document, certificate or instrument being delivered
pursuant to this Agreement (collectively, the "TRANSACTION DOCUMENTS") to the
contrary, and regardless of whether such liability is disclosed this Agreement
or any of the Transaction Documents or on any Schedule or Exhibit hereto or
thereto, other than the Assumed Liabilities specifically set forth in
Section 2.1, Buyer will not assume or otherwise become liable or responsible for
and Seller will retain and remain responsible for and pay, perform, satisfy and
discharge when due, all other liabilities and obligations of Seller or Parent of
whatever kind and nature, whether primary or
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secondary, direct or indirect, absolute or contingent, known or unknown,
whenever arising, whether or not accrued, that are described below (the
"EXCLUDED LIABILITIES"). Excluded Liabilities shall include, without limitation,
(i) any liabilities or obligations whatsoever relating, directly or indirectly,
to any Retained Assets, including, without limitation, any trade, creditors,
bank debt, payroll or payroll tax liabilities, payments or obligations due to
any current or former employee of Seller or Parent for amounts due under any
bonus plan, incentive arrangement or other understanding, income tax
liabilities, severance liabilities to any current or former employee of Seller
or Parent, or liabilities with respect to any vacation pay, profit sharing or
401(k) contribution of such employees, (ii) any environmental or product
liability claims arising out of or relating to the past, present or future
conduct of Seller and (iii) any contractual obligations or liabilities relating
to any existing facilities used in connection with the Business.
III. PURCHASE PRICE
3.1. Purchase Price. In consideration of the sale by the Seller and the
Parent to Buyer of the Acquired Assets and the Parent Assets, respectively,
subject to adjustments provided in Section 3.3, the Buyer agrees that Buyer will
deliver to Seller and the Parent on the Closing the sum of $3,350,000 (the
"PURCHASE PRICE").
3.2. Payment. At the Closing, Buyer shall pay to Seller and Parent the
Purchase Price in immediately available funds by wire transfer to an account
designated by Seller and Parent in wire transfer instructions to Buyer prior to
the Closing.
3.3. Purchase Price Adjustment.
(a) Closing Statement. As soon as practicable, but in no event
later than 30 calendar days after the date of the Closing (the "CLOSING
DATE"), Seller shall prepare and submit to Buyer a closing statement
audited by Price Waterhouse LLP (the "CLOSING
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STATEMENT")as of the Closing Date. The Closing Statement shall be
prepared from the books and records of the Business, in accordance with
the accounting principles set forth on SCHEDULE 3.3(A) (the "ACCOUNTING
PRINCIPLES") on a basis consistent with the Asset List (as hereinafter
defined) and the Balance Sheet (as hereinafter defined), reflecting a
physical inventory to be taken on May 28 and May 29 rolled forward to
the Closing Date and shall fairly present the Acquired Assets. If the
Closing Statement indicates that the book value of the sum of the
Acquired Assets and Parent Assets is less than $685,000, Seller shall
inform Buyer of the difference in book value of the Acquired Assets and
Parent Assets within 30 days of the Closing.
(b) Cooperation. Seller, Parent and Buyer shall cooperate
fully and completely in the taking of a physical inventory to be taken
on May 28 and May 29, 1998 which shall be conducted by Seller at
Seller's sole cost. Seller shall cooperate fully and completely in
responding to questions and requests for information submitted by Buyer
or its representatives in connection with the review of the Closing
Statement and shall, with reasonable prior notice, provide them with
full access to all books and records relating to the Business and to
all personnel who took part in preparing such books and records as well
as to the personnel and work papers of Seller's accountants, in any way
required in the review of the Closing Statement.
(c) Review of Closing Statement. Buyer shall have 30 days from
the date of the submission of the Closing Statement in which to review
the Closing Statement, and if, in its reasonable judgment, the Closing
Statement does not fairly present the book value of the Acquired Assets
and the Parent Assets as of the Closing in accordance with the
Accounting Principles applied on a basis consistent with the Asset List
and the Balance Sheet, Buyer shall have the right to propose any
adjustment thereto within such
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thirty-day period (the "ADJUSTMENT REQUEST"). The Adjustment Request
shall be submitted to Seller within the thirty-day period referred to
in the first sentence of this paragraph (c), and shall specify (i) the
amount of the proposed adjustment, (ii) the items to which such
proposed adjustment relates, and (iii) the facts and circumstances
supporting the reasonableness and propriety of such adjustment under
the standards set forth in this Section. Unless Buyer notifies Seller
within such fifteen-day period that it objects to the findings
contained in the Closing Statement, the Closing Statement shall be
binding upon Seller and Buyer. Buyer and Seller shall use their best
efforts for 10 days after the submission of any Adjustment Request to
agree upon any proposed adjustments to the Closing Statement. Any
dispute as to the content or preparation of the Closing Statement which
is not resolved by Buyer and Seller during such 10-day period shall be
submitted for resolution to a mutually acceptable independent public
accounting firm (except the Buyer's and Seller's accountants), whose
costs shall be borne by the losing party or, to the extent such party
prevails in part, each party shall pay such costs to the extent it is
the losing party, as determined by the independent public accounting
firm. The decision of such firm shall be final and binding on Buyer and
Seller.
(d) Adjustment to Purchase Price. If and to the extent that
the book value of the sum of the Acquired Assets and the Parent Assets
as of the Closing Date, as finally agreed to by Buyer and Seller or as
determined on the Closing Statement pursuant to paragraph (c) above, is
less than $685,000, the Purchase Price shall be adjusted down on a
dollar-for-dollar basis by the difference between $685,000 and the
finally agreed book value of the sum of the Acquired Assets and the
Parent Assets as of the Closing.
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The value of the Parent's Assets does not include stock relating to the
Series-10 coin door assemblies.
3.4. Payment Procedures. All payments required to be made under
Section 3.3(d) shall be made within five Business Days of the later of (i) the
expiration of the periods as described therein in which Buyer or Seller may
propose adjustments to the Closing Statement, (ii) the date on which the parties
agree on any such proposed adjustment, or (iii) the date on which the decision
of any independent accounting firm is rendered. All payments required to be made
by Buyer or Seller pursuant to Section 3.3(d) shall be paid to Buyer or Seller,
as the case may be, by wire transfer of immediately available funds to such bank
account as the recipient shall designate in writing, and shall effect an
increase or reduction, as the case may be, of the Purchase Price.
3.5. Allocation of Purchase Price. The Purchase Price shall be
allocated among the Acquired Assets and the Parent Assets as set forth on
SCHEDULE 3.5, which allocation shall be adjusted pursuant to the Closing
Statement and a post-Closing tooling adjustment to be agreed to by Buyer and
Parent. The parties agree to report on their respective tax returns, including a
Form 8594, the transactions which are the subject of this Agreement in a manner
consistent with the allocation set forth in SCHEDULE 3.5. Notwithstanding the
foregoing, Buyer, Parent and Seller hereby agree that $250,000 of the Purchase
Price shall be in consideration for Seller's and Parent's agreement not to
compete contained in Section 7.2.7 hereof.
3.6. Waiver of Resolutory Conditions. Seller and Parent agree and
acknowledge that upon effectuation of the Closing, the sale of the Acquired
Assets and the Parent Assets as described herein will be complete and final, and
the failure of Buyer to pay or perform any obligations hereunder, other than
payment of the Purchase Price described in Section 3.1, shall not be cause for
the resolution and/or rescission of the transfer of such assets, and Seller and
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Parent confirm that the sale of the Acquired Assets and the Parent Assets
contemplated by this Agreement shall contain no resolutory conditions
whatsoever. Seller and Parent also waive any and all rights to a vendor's lien
and privilege or any other Liens or privileges against, or rights in or to, the
Acquired Assets and the Parent Assets purchased hereunder.
IV. CLOSING
4.1. General. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Katten Muchin &
Zavis, 525 West Monroe Street, Suite 1600, Chicago, Illinois 60661 concurrently
with the execution of this Agreement and shall be deemed to be effective as of
12:01 a.m. on such date.
4.2. Documents to be Delivered by Seller. At the Closing, Seller and
Parent shall deliver to Buyer:
(a) Articles of Incorporation of Seller Certified by the
Secretary of State of Delaware, as of a date not earlier than May 8,
1998;
(b) Copies of (i) the resolutions of the Boards of Directors
of Seller authorizing and approving this Agreement and all other
transactions and agreements contemplated hereby, (ii) Seller's Articles
of Incorporation, and (iii) Seller's Bylaws, all of the foregoing
certified by the corporate Secretary or Assistant Secretary of Seller
to be true, correct, complete and in full force and effect and
unmodified as of the Closing Date;
(c) Copies of (i) the resolutions of the Boards of Directors
of Parent authorizing and approving this Agreement and all other
transactions and agreements contemplated hereby, (ii) Parent's
Certificate of Incorporation, and (iii) Parent's Articles of
Association, all of the foregoing certified by the corporate Secretary
or Assistant
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Secretary of Parent to be true, correct, complete and in full force and
effect and unmodified as of the Closing;
(d) A bill of sale, assignment and assumption executed by
Seller and Parent transferring the Acquired Assets and the Parent
Assets to Buyer, free and clear of any and all Liens, except for
Permitted Liens (if any), in substantially the form of EXHIBIT A
attached hereto (the "BILL OF SALE");
(e) To the extent obtained, copies of all consents to the
transfer or assignment to Buyer of the Acquired Assets and the Parent
Assets;
(f) Instruments of assignment to Buyer executed by Seller or
Parent, as appropriate of all trademarks, trade names, service marks
and patents (and all applications for, and extensions and reissuances
of, any of the foregoing and rights therein) and all other Intellectual
Property in substantially the form of EXHIBIT B, attached hereto;
(g) Good standing certificate for Seller from the State of
Delaware and by the Secretary of State of each jurisdiction in which
Seller is qualified to do Business as a foreign corporation and dated
no earlier than May 8, 1998;
(h) Such Uniform Commercial Code lien searches conducted in
the State of Illinois and such other instruments showing that there
were no financing statements, judgments, taxes or other Liens
outstanding against Seller or any of the Acquired Assets as of the
Closing or a date that is not more than ten (10) days prior to the
Closing.
(i) Incumbency and specimen signature certificates dated as of
the date hereof with respect to the officer of Seller and Parent
executing this Agreement and the Transaction Documents.
(j) Engagement Letter from Kristine E. Pantos on behalf of
Seller regarding the audits for periods prior to Closing, which
provides for an audit to be conduced by
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KPMG Peat Marwick, LLP at Buyer's expense substantially in the form
attached hereto as EXHIBIT C.
(k) Such other bills of sale, endorsements, assignments,
affidavits, and other good and sufficient instruments of sale,
assignment, conveyance and transfer in form and substance reasonably
satisfactory to Buyer and its counsel, as are required to effectively
vest in Buyer good and marketable title in and to all of the Acquired
Assets, free and clear of any and all Liens except Permitted Liens (if
any).
4.3. Documents to be Delivered by Buyer. At the Closing, Buyer shall
deliver to
Seller:
(a) A copy of (i) the resolutions of the Board of Directors of
Buyer authorizing and approving this Agreement and all other
transactions and agreements contemplated hereby, (ii) Buyer's Articles
of Incorporation, and (iii) Buyer's Bylaws Regulations, all certified
by the Secretary or an Assistant Secretary of Buyer to be true,
correct, complete and in full force and effect and unmodified as of the
Closing Date;
(b) Evidence of the payment of the Purchase Price in the
manner and the amount set forth in Section 3.2;
(c) Good standing certificates for Buyer from the Secretary of
State of Illinois, dated not more than five days prior to the Closing;
(d) A counterpart to the Bill of Sale executed by Seller; and
(e) Executed copies of Seller's International Programmer
Agreement with respect to (i) Hand Held Programmer (CHPI) Equipment and
(ii) Master Programmer II Equipment with respect to C220B, copies of
which are attached hereto as EXHIBITS D AND E.
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V. REPRESENTATIONS AND WARRANTIES
5.1. Representations And Warranties Of Seller. Seller represents and
warrants to Buyer as follows:
5.1.1. Corporate Organization. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own, lease or otherwise
hold the Acquired Assets and to carry on the Business as presently conducted.
Seller is duly qualified or otherwise authorized as a foreign entity to transact
business and is in good standing in each jurisdiction where the failure to so
qualify or to be authorized could reasonably be expected to have a material
adverse effect on the properties, liabilities, business, results of operations
or condition (financial or otherwise) of the Business taken as a whole (a
"MATERIAL ADVERSE EFFECT").
5.1.2. Authorization And Effect Of Agreement. Seller has all requisite
corporate power and authority to execute and deliver this Agreement and any
other document to be delivered by Seller at Closing (collectively, the "SELLER'S
AGREEMENTS") and to perform the transactions contemplated herein and therein to
be performed by it. The execution and delivery by Seller of this Agreement and
the performance by Seller of the transactions contemplated hereby to be
performed by Seller have been, and the Seller's Agreements once executed by
Seller will be, duly authorized by all necessary corporate action on the part of
Seller. This Agreement has been, and the Seller's Agreements once executed will
be, duly executed and delivered by Seller and will constitute the valid and
binding obligations of Seller enforceable against it in accordance with their
terms (except as the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally or by equitable principles).
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5.1.3. Acquired Assets.
5.1.3.1. Title. The Acquired Assets, all of which are
located within the State of Illinois, are owned by Seller.
Seller has the right to convey, and upon the consummation of
the transactions contemplated by this Agreement, Seller will
have conveyed, and Buyer will be vested with, good and
marketable title and interest in and to the Acquired Assets,
free and clear of all Liens, except for (a) Liens that are
listed or described on any Schedule hereto, (b) mechanics',
carriers', workmen's, repairmen's or other like Liens arising
or incurred, (c) Liens for taxes, assessments and other
governmental charges which are not due and payable or which
may thereafter be paid without penalty or which are being
contested in good faith and (d) other imperfections of title
or encumbrances, if any, which do not materially affect the
marketability of the property subject thereto and do not
materially impair the use of the property subject thereto in
the Business as presently conducted. (The Liens referred to in
the exception to the immediately preceding sentence are
hereinafter referred to as "Permitted Liens".)
5.1.3.2. Inventories. To Seller's knowledge, and
subject to reserves set forth in the Financial Statements and
the Interim Financial Statements, the Current Inventory of
Seller is (i) of good and standard quality, (ii) saleable in
the ordinary course of business, (iii) in the case of raw
materials, manufactured and purchased components, stores and
work-in-process, usable in the normal manufacturing process of
the finished products being manufactured on and after the
Closing, (iv) in the case of finished goods, fit for the
purpose for which they were made, (v) in the case of goods
covered by a customer purchase order, of such specification
and in quantities which correspond to the customer orders to
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which they relate and (vi) in compliance with all state,
federal and local regulations of the United States and any
foreign country concerning any country of origin, health and
safety or other required labeling. Such inventories are
recorded in accordance with the Accounting Principles,
consistently applied. All inventory consists of a quality and
quantity historically usable or saleable in the ordinary
course of business, subject to the reserve for obsolescence
set forth therein is adequate to provide for obsolete or
superseded items.
5.1.3.3. Condition. To Seller's knowledge, the
Acquired Assets are in good condition and repair, and are
useable in the ordinary course of business and Seller has
maintained the Acquired Assets pursuant to Seller's normal
maintenance procedures consistent with past practice and
custom. Except as disclosed to Buyer as a result of its
inspection of the tooling at suppliers locations and the
tooling audits furnished by Seller to Buyer (the "Tooling
Audits"), none of the Acquired Assets requires any repair or
replacement except for maintenance in the ordinary course of
business. Except as listed on SCHEDULE 5.1.3.3 none of the
Acquired Assets of Seller are held under any lease, security
agreement, conditional sales contract or other title retention
or security arrangement. Except for the set-up coins not being
transferred to Buyer, the Acquired Assets and Parent Assets
are the only assets necessary or useful to operate the
Business.
5.1.4. Financial Statements. (a) Attached as SCHEDULE 5.1.4(A)
is a true and correct copy of an asset list (the "ASSET LIST") of the Business
showing the book value and net book values of the Acquired Assets as of
March 31, 1998. As of March 31, 1998, the Acquired Assets had a minimum net book
value of $508,000, not including the agreed value of the packing materials and
tools.
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(b) The Seller has previously delivered to Buyer the unaudited
balance sheets of Seller as of September 30, 1995, September 30, 1996 and
September 30, 1997 and the related statements of operations and cash flows for
the years then ended (the "FINANCIAL STATEMENTS"). The Financial Statements are
complete and correct in all material respects, are consistent with Sellers books
and records and fairly present the position of Seller as of their respective
dates and the results of its operations for the years (or other periods) then
ended all in accordance with the Accounting Principles. The balance sheet
included in the Financial Statements for the year ended September 30, 1997 is
referred herein as the "BALANCE SHEET" and September 30, 1997 is sometimes
herein called the "BALANCE SHEET DATE."
(c) The unaudited balance sheet and the income statement dated
as of March 31, 1998, which have been delivered to the Buyer (the "INTERIM
FINANCIAL STATEMENTS") are complete and correct in all material respects, are
consistent with Seller's books and records and fairly present the financial
position of Seller as of such date and the results of its operations for the 6
months then ended in a manner consistent with Seller's past practices in
preparing interim financial statements, subject to normal year-end adjustment.
5.1.5. No Material Adverse Change. Except as disclosed on SCHEDULE
5.1.5, since the Balance Sheet Date, there has been no material adverse change
in the properties, liabilities, business, results of operations or condition
(financial or otherwise) of the Business, taken as a whole.
5.1.6. Compliance with Laws. Except as disclosed on SCHEDULE 5.1.6, and
as provided in Section 5.1.10, Seller has complied with all Laws (as defined
herein) applicable to it, the Business or the Acquired Assets and have all
licenses, permits, orders or approvals of any governmental or regulatory body
(collectively the "PERMITS") required for the conduct of the Business or
operation of the Acquired Assets, except where the failure to comply,
individually
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or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect. All Permits are listed on SCHEDULE 5.1.6. Seller is in compliance in all
respects with such Permits all of which are valid, binding, and in full force
and effect. Except as set forth on SCHEDULE 5.1.6, no consent or approval of any
person is needed in order that such Permits continue in full force and effect
following the consummation of the transactions contemplated by this Agreement,
except for consents and approvals, that if not obtained, could not reasonably be
expected to result in a Material Adverse Effect or prevent Seller from
consummating the transactions contemplated hereby. Except as set forth on
SCHEDULE 5.1.6, Seller has received no notice of any violation or liability or
any correspondence from any Governmental Authority (as defined herein) relating
to the violation of any law within the last five years.
5.1.7. Litigation. Except as set forth on SCHEDULE 5.1.7, Seller is not
a party to, or to the knowledge of Seller threatened with, any litigation or
judicial, administrative or arbitration proceeding related primarily to the
Business or the Acquired Assets which is reasonably likely to have a Material
Adverse Effect or prevent Seller from consummating the transactions contemplated
hereby. Except as set forth on SCHEDULE 5.1.7, Seller does not know of any
dispute under any contract with Seller which could reasonably be expected to
result in a Material Adverse Effect or prevent the Seller from consummating the
transactions contemplated hereby. Seller does not know of any present or
threatened walkout, strike or any other similar occurrence which could
reasonably be expected to result in a Material Adverse Effect or prevent the
Seller from consummating the transactions contemplated hereby.
5.1.8. Agreements. Seller has provided or made available to Buyer true
and complete copies of all of the Contracts set forth on SCHEDULE 1.1.3. All of
the Contracts set forth on SCHEDULE 1.1.3 are in full force and effect and
Seller has paid in full or accrued all material amounts due thereunder (except
for those contested in good faith) and has satisfied in
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full or provided for all of its liabilities and obligations thereunder, is not
in default under any of them, nor, to Seller's knowledge, is any other party to
any such contract or other agreement in default thereunder, nor does any
condition exist which with notice or lapse of time or both would constitute a
default by Seller thereunder, or which, to the knowledge of Seller, would
constitute a default by any other party thereunder except for defaults which
individually or in the aggregate could not reasonably be expected to result in a
Material Adverse Effect. Except as separately identified in SCHEDULE 5.1.8, no
approval or consent of any person is needed in order that the contracts or other
agreements set forth on SCHEDULE 1.1.3 and other Schedules hereto continue in
full force and effect following the consummation of the transactions
contemplated by this Agreement except for consents or approvals, that if not
obtained, could not reasonably be expected to result in a Material Adverse
Effect or prevent Seller from consummating the transactions contemplated hereby.
5.1.9. Intellectual Property. SCHEDULE 1.1.4 sets forth a true and
complete list or description of all patent, trademark and service mark
registrations, trade names, registered copyrights, and any pending registrations
and applications therefor, used primarily in the conduct of the Business (the
"INTELLECTUAL PROPERTY") and all licenses or other rights running to or from
Seller relating to any of the foregoing which may be material to the Business.
Except as set forth on SCHEDULE 5.1.9, Seller or Parent is the owner of all
right, title and interest in and to the Intellectual Property as used in
connection with the Business. Except as set forth on SCHEDULE 5.1.9, the rights
of Seller or Parent in the property set forth on SCHEDULE 1.1.4 are free and
clear of any Liens, other than Permitted Liens referred to in Section 5.1.9.
Except as set forth on SCHEDULE 5.1.9, Seller has no notice of any adversely
held Intellectual Property of any other person or notice of any adverse claim of
any other person relating to any of the
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Intellectual Property set forth on SCHEDULE 1.1.4, and Seller does not know of
any basis for any such charge or claim.
5.1.10. Compliance with Environmental Laws. Except as set forth on
SCHEDULE 5.1.10 and to the best of Seller's knowledge and except as would not
have a Material Adverse Effect:
(a) All of Seller's current operations relating primarily to
the Business are, and have been at all times, in compliance with any
environmental law, regulation, rule or ordinance of any governmental authority
at the federal, state or local level applicable to the Business which is
existing as of the date hereof (collectively "Environmental Law") and Seller has
received no notice or threat of any violation or alleged violation of any such
Environmental Laws. Seller has obtained all permits, licenses and authorizations
relating primarily to the Business which are required under applicable
Environmental Laws (collectively, "ENVIRONMENTAL PERMITS") and Seller's
operations relating primarily to the Business are in compliance with the terms
and conditions of any required Environmental Permits.
(b) There has not been a release or threatened release of, any
Hazardous Substances in, under, upon or from the Premises or Acquired Assets,
except in compliance with all applicable Environmental Laws.
5.1.11. Suppliers and Customers. An accurate and complete list of the
top 25 customers of the Business (by dollar volume of sales during 1997 and
through the date of this Agreement) is set forth on SCHEDULE 5.1.11. Except as
set forth on SCHEDULE 5.1.11, no Customer has canceled or otherwise terminated,
modified, or, to Seller's knowledge, threatened to cancel or otherwise
terminate, or to modify its relationship with the Business on account of the
transactions contemplated hereby or otherwise. An accurate and complete list of
the top 25 suppliers for the Business (by dollar volume of sales during 1997 and
through the date of this
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Agreement) is set forth on SCHEDULE 5.1.11. No supplier has canceled or
otherwise modified, terminated or, to Seller's knowledge, threatened to cancel
or otherwise terminate, or to modify, its relationship with the Business on
account of the transactions contemplated hereby or otherwise. Seller is not
involved in any material controversy with any of its material customers or
suppliers relating to the Business.
5.1.12. ERISA.
(i) SCHEDULE 5.1.12 lists all Benefit Plans as defined in
Section 7.1.1 which cover any Employees or Former Employees (as defined in
Section 7.1.1). With respect to each such plan, the Seller heretofore has
delivered to Buyer true, correct and complete copies of, to the extent
applicable, (a) all plan texts and agreements and related trust agreements or
annuity contracts; (b) the most recent summary plan description; (c) the most
recent annual report (including all schedules thereto); (d) the most recent
annual audited financial statement and opinion; and (e) if the plan is intended
to qualify under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "CODE"), the most recent determination letter received from the Internal
Revenue Service (the "IRS");
(ii) each Benefit Plan conforms in all respects to, and its
administration is in compliance with, all applicable laws and regulations,
except for such failures to conform or comply that, individually or in the
aggregate, could not reasonably be expected to result in liability to the Buyer;
(iii) except as set forth in SCHEDULE 5.1.12 or as
contemplated by this Agreement, the consummation of the transactions by this
Agreement will not (a) entitle any current or former employee to severance pay,
unemployment compensation or any similar payment; or (b) accelerate the time of
payment or vesting, or increase the amount of any compensation due to, any
current or former employee; and
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(iv) no Benefit Plan is or has ever been subject to Title IV
of ERISA.
5.1.13. Operations of Seller. Except as set forth on SCHEDULE 5.1.13,
from the Balance Sheet Date through the date hereof, with respect to the
Business, the Acquired Assets, the Assumed Liabilities or the Closing Employees,
the Seller has not:
(i) amended its By-laws or Certificate of Incorporation, as
the case may be, or merged with or into or consolidated with any other person,
or changed or agreed to change in any manner the character of its business;
(ii) entered into or amended any employment agreement or bonus
agreement, entered into any agreement with any labor union or association
representing any employee or entered into or amended any Benefit Plan;
(iii) waived any right of material value to the Business;
(iv) materially changed any of its business policies,
including, without limitation, advertising, marketing, circulation promotion,
pricing, purchasing, personnel, sales, returns, budget or product acquisition
policies;
(v) made any wage or salary increase or bonus, or increase in
any other direct or indirect compensation, for or to any officer, employee,
consultant or agent of the Seller, or any accrual for or commitment or agreement
to make or pay the same, except in the ordinary course of business;
(vi) except in the ordinary course of business: entered into
any lease (as lessor or lessee); sold, abandoned or made any other disposition
of any of its assets or properties; granted or suffered any Lien or other
encumbrance on any of its assets or properties; entered into or amended any
contract or other agreement to which it is a party or by or to which the
Acquired Assets are bound or subject or pursuant to which it agrees to indemnify
any party or refrain from competing with any party;
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(vii) except for inventory or equipment acquired in the
ordinary course of business, made any acquisition of all or any part of the
assets, properties, capital stock or business of any other person; or
(viii) except in the ordinary course of business and for this
Agreement, entered into any other material contract or other agreement or other
material transaction.
5.1.14. Taxes. Seller has paid all Taxes due and payable by it in
connection with the Acquired Assets or the operation of the Business as of the
Closing except for any taxes that may result from transactions contemplated by
this Agreement. Seller has timely filed all federal, state, county, local and
foreign tax returns which it is required to have filed, and such returns are
complete and correct. Any deficiencies proposed as a result of any governmental
audits have been paid or settled, and there are no present disputes as to Taxes
payable by Seller. There are no unexpired waivers by Seller of any statute of
limitations with respect to any Taxes, and Seller is not a party to any action
or proceedings by any Governmental Authority for the collection or assessment of
Taxes related to the Business.
5.1.15. Transactions Not a Breach. The execution, delivery, or
performance by Seller of this Agreement and the Seller's Agreements will not:
(a) violate, conflict with, or result in a breach of any
provision of any Law binding on Sellers with respect to the Business or
any of the Acquired Assets;
(b) violate or conflict with Seller's Articles of
Incorporation or bylaws or with any provision of any contract,
agreement, mortgage, note, bond, license, or other instrument or
obligation of any kind or nature to which Seller is a party or by which
Seller or any of the Acquired Assets may be bound or affected;
(c) constitute an event that would permit any party to
terminate any agreement, or accelerate the maturity of any indebtedness
or other obligation, to which
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Seller is a party or by which Seller is bound, and which is material to
the operation of the Business or the ownership of the Acquired Assets;
or
(d) result in the creation or imposition of any Lien upon the
Acquired Assets.
(e) have a material adverse effect on the Business or the
Acquired Assets other than any material adverse effect as a result of Buyer's
operation or failure to operate the Business.
5.1.16. Employees.
(a) Current Employees. Seller previously has
delivered to Buyer a correct and complete list setting forth
the name, job title, current salary or hourly compensation
rate, accrued vacation and years of employment for each
employee of Seller in connection with the Business. Except as
disclosed in SCHEDULE 5.1.16(A), to Seller's knowledge no
former or current employee or current or former officer or
director of Seller is a party to, or is otherwise bound by,
any agreement or arrangement, including any confidentiality,
non-competition, or proprietary rights agreement, between such
employee, officer or director and any other Person that in any
way adversely affected, affects, or will affect (x) the
performance of his or her duties as an employee, officer,
director, consultant or independent contractor of Buyer, or
(y) the ability of Buyer to operate the Acquired Assets
following the Closing.
(b) Employment Offers. It is Buyer's intention to
consider making an offer of employment to employees of Seller
listed on SCHEDULE 5.1.16(B) as of the Closing, and any such
employee who accepts such offer is hereinafter referred to as
a "Closing Employee." The parties hereto agree that Seller
shall be solely responsible for all liabilities with respect
to the employment with Seller
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and the termination of such employment that relate to any of
Seller's employees who do not accept Buyer's offer of
employment effective as of the Closing, if made by Buyer, and
Seller's employees who are not offered employment by Buyer,
including without limitation, liabilities involving severance
matters, accrued vacation time, COBRA, EEOC claims, workers'
compensation claims and any other liabilities relating to or
arising with respect to any Benefit Plans. Seller shall also
be responsible, as between Buyer and Seller, for any
employment-related claims filed by any Closing Employees which
were (i) filed prior to the Closing or (ii) filed after the
Closing but which existed predominantly from facts and
circumstances which arose prior to the Closing, and Buyer
shall be responsible, as between Buyer and Seller, for any
other employment related claims filed by any Closing Employee
which relate to events which existed predominantly from facts
and circumstances which arose on or after the Closing.
5.1.17. Books and Records. All the books, records and accounts of
Seller as they relate to the Business are in all material respects accurate and
complete, and in accordance with the Accounting Principles consistently applied,
and all laws, regulations and rules applicable to the Business, and accurately
present and reflect, in all material respects, all of the transactions described
therein.
5.1.18. Product Liability. No product liability or other tort claims
have been made, or to Seller's knowledge threatened, against Seller related to
products sold by Seller in connection with the Business in the past five years.
5.1.19. Product Warranties. Except as listed on SCHEDULE 5.1.19, no
product warranty claims have been made, or to Seller's knowledge threatened,
against Seller relating to the Business which remain unsatisfied and outstanding
as of the Closing.
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5.1.20. Interest of Seller in Customers, Etc. Except for James
Industries, neither Seller nor any of its Affiliates or any shareholder has any
direct or indirect interest in any competitor, supplier or customer of the
Business or in any Person from whom or to whom Seller leases any real or
personal property or in any other Person with whom Seller has any business
relationship in connection with the Business.
5.1.21. Affiliate Transactions. Except for purchasing goods, paying
dividends and management fees to Parent, and transactions which do not affect
the Business conducted with CAL, Inc. and Combined Optical Industries Limited,
Seller has not engaged in any transactions with any of its Affiliates.
5.1.22. No Misrepresentation. None of the representations and
warranties of Seller set forth in this Agreement or the Transaction Document
contains any untrue statement of material fact or omits to state a material fact
necessary to make the statements contained herein or therein not misleading.
5.1.23. No Broker. Other than Mr. John Ewing, whose fees are the sole
responsibility of Seller, no broker, finder, agent or similar intermediary has
acted for or on behalf of Seller in connection with this Agreement or the
transactions contemplated hereby.
5.2. Representations And Warranties Of Buyer. Buyer represents and
warrants to Seller as follows:
5.2.1. Corporate Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Illinois
and has all requisite corporate power and authority to own, lease or otherwise
hold the Acquired Assets.
5.2.2. Authorization And Effect Of Agreement. Buyer has all requisite
corporate power and authority to execute and deliver this Agreement and any
other document to be delivered by Buyer at Closing (collectively, the "BUYER'S
AGREEMENTS") and to perform the transactions
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contemplated herein and therein to be performed by it. The execution and
delivery by Buyer of this Agreement and the performance by Buyer of the
transactions contemplated hereby to be performed by it have been and the Buyer's
Agreements once executed by Buyer will be, duly authorized by all necessary
corporate action on the part of Buyer. This Agreement has been, and the
Transaction Documents once executed will be, duly executed and delivered by
Buyer and will constitute the valid and binding obligation of Buyer enforceable
against it in accordance with their terms (except as the enforceability thereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally or by equitable
principles).
5.2.3. Conflicts; Defaults. Neither the execution and delivery of this
Agreement and the Buyer's Agreements by Buyer, nor the performance of its
obligations hereunder, will conflict with or constitute a default under any of
the terms of Buyer's Articles of Incorporation, as amended, or By-Laws.
5.2.4. Brokers, Finders and Agents. Buyer is not directly or indirectly
obligated to anyone as a broker, finder or in any other similar capacity in
connection with this Agreement or the transactions contemplated hereby.
VI. SURVIVAL AND INDEMNIFICATION
6.1. Survival Of Representations And Warranties. The representations,
warranties, covenants and agreements contained in Section 5.1.3.1 shall survive
indefinitely. The representations, warranties and covenants and agreements
contained in Sections 5.1.10 and 5.1.14 shall survive until the earlier of seven
years after the date hereof or the applicable statute of limitations. The
representations, warranties, covenants and agreements contained in Section 7.2.7
shall survive for five years after the date hereof. All other representations,
warranties,
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covenants and agreements contained in this Agreement shall survive the execution
and delivery of this Agreement and shall continue in full force and effect for a
period of one year after the date hereof.
6.2. Indemnification. (a)Subject to Section 6.1, Seller and Parent,
jointly and severally, will indemnify, defend and hold harmless Buyer and its
Affiliates and their respective directors, officers, agents and representatives
(each a "BUYER INDEMNIFIED PARTY") from and against any and all claims, demands
or suits (by any person or entity, including without limitation any Governmental
Authority), losses, liabilities, actual or punitive damages, fines, penalties,
obligations, payments, costs and expenses, paid or incurred, whether or not
relating to, resulting from or arising out of any Third Party Claim (as
hereinafter defined), including without limitation the costs and expenses of any
and all actions, suits, proceedings, demands, assessments, judgments,
settlements and compromises relating thereto and reasonable attorneys' fees in
connection therewith (individually and collectively, "INDEMNIFIABLE LOSSES")
relating to, resulting from or arising out of or otherwise by virtue of any of
the following:
(i) any breach of any covenant, agreement, representation or warranty
of Seller under this Agreement or any of the Transaction Documents, including,
without limitation, the noncompetition provisions contained in Section 7.2.7
hereof;
(ii) the operation of the Business prior to the Closing or any
liabilities, actions or omissions of Seller (except for the Assumed
Liabilities), including, without limiting the generality of the foregoing,
losses relating, directly or indirectly, to (a) taxes, (b) wages, salaries and
accrued vacation compensation (c) rents and any other operating or non-operating
expenses of liabilities, (d) violations or obligations under Environmental Laws,
(e) COBRA, (f) Employee Benefit Plans, and (g) Permitted Liens, it being
understood and agreed that Buyer is not to assume any liabilities of Seller of
any kind or character, contingent or otherwise, except for the
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Assumed Liabilities, product warranty claims in connection with products
manufactured prior to the date hereof, regardless of the date of sale of such
product;
(iii) any assertion by against any Buyer Indemnified Party with respect
to the Excluded Liabilities; and
(iv) any failure by Seller to comply with the laws of the State of
Illinois relating to bulk transfers which may be applicable in connection with
the transfer of the Acquired Assets to Buyer.
The rights of Buyer and obligations of Seller under clauses (i), (ii),
(iii) and (iv) of this Section 6.2(a) are cumulative.
(b) Subject to Section 6.1, Buyer will indemnify, defend and hold
harmless Seller, its respective Affiliates, directors, officers, agents and
representatives (each a "SELLER INDEMNIFIED PARTY") from and against any and all
Indemnifiable Losses relating to, resulting from or arising out of any of the
following:
(i) Any breach of any covenant, agreement, representation or
warranty of Buyer under this Agreement or any of the Transaction
Documents;
(ii) breach by Buyer of any of its obligations with respect to
any Assumed Liability; and
(iii) the ownership of any of the Acquired Assets after the
Closing.
The rights of Seller and obligations of Buyer under clauses (i), (ii) and (iii)
of this Section 6.2(b) are cumulative.
6.3. Defense Of Claims. (a) If any Indemnitee receives notice of the
assertion of any claim or of the commencement of any action or proceeding by any
entity who is not a party to this Agreement or an Affiliate of such a party (a
"THIRD PARTY CLAIM") against such Indemnitee, with respect to which an
Indemnifying Party is obligated to provide indemnification under this
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Agreement, the Indemnitee will give such Indemnifying Party reasonably prompt
written notice thereof, but in any event not later than 60 calendar days after
receipt of such notice of such Third Party Claim. Such notice will describe the
Third Party Claim in reasonable detail, and will indicate the estimated amount,
if reasonably practicable, of the Indemnifiable Loss that has been or may be
sustained by the Indemnitee. The Indemnifying Party will have the right to
participate in or, by giving written notice to the Indemnitee, to elect to
assume the defense of any Third Party Claim at such Indemnifying Party's own
expense and by such Indemnifying Party's own counsel (reasonably satisfactory to
the Indemnitee), and the Indemnitee will cooperate in good faith in such
defense.
(b) If, within 10 calendar days after giving notice of a Third Party
Claim to an Indemnifying Party pursuant to Section 6.3(a), an Indemnitee
receives written notice from the Indemnifying Party that the Indemnifying Party
has elected to assume the defense of such Third Party Claim as provided in the
last sentence of Section 6.3(a), the Indemnifying Party will not be liable for
any legal expenses subsequently incurred by the Indemnitee in connection with
the defense thereof; provided, however, that if the Indemnifying Party fails to
take reasonable steps necessary to defend diligently such Third Party Claim
within 10 calendar days after receiving written notice from the Indemnitee that
the Indemnitee believes the Indemnifying Party has failed to take such steps or
if the Indemnifying Party has not undertaken fully to indemnify the Indemnitee
in respect of the Indemnifiable Losses relating to the matter, the Indemnitee
may assume its own defense, and the Indemnifying Party will be liable for all
reasonable costs or expenses paid or incurred in connection therewith. Without
the prior written consent of the Indemnitee, the Indemnifying Party will not
enter into any settlement of any Third Party Claim which would lead to liability
or create any financial or other obligation on the part of the Indemnitee for
which the Indemnitee is not entitled to indemnification hereunder. If a firm
offer
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is made to settle a Third Party Claim without leading to liability or the
creation of a financial or other obligation on the part of the Indemnitee for
which the Indemnitee is not entitled to indemnification hereunder and the
Indemnifying Party desires to accept and agree to such offer, the Indemnifying
Party will give written notice to the Indemnitee to that effect. If the
Indemnitee fails to consent to such firm offer within 10 calendar days after its
receipt of such notice, the Indemnitee may continue to contest or defend such
Third Party Claim and, in such event, the maximum liability of the Indemnifying
Party as to such Third Party Claim will not exceed the amount of such settlement
offer, plus costs and expenses paid or incurred by the Indemnitee through the
end of such ten-day period.
(c) Any claim by an Indemnitee on account of an Indemnifiable Loss
which does not result from a Third Party Claim (a "DIRECT CLAIM") will be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, but in any event not later than 30 calendar days after the Indemnitee
becomes aware of such Direct Claim, and the Indemnifying Party will have a
period of 30 calendar days within which to respond in writing to such Direct
Claim. If the Indemnifying Party does not so respond within such 30 calendar day
period, the Indemnifying Party will be deemed to have rejected such claim, in
which event the Indemnitee will be free to pursue such remedies as may be
available to the Indemnitee on the terms and subject to the provisions of this
Article VI.
(d) A failure to give timely notice or to include any specified
information in any notice as provided in this Section 6.2(d) will not affect the
rights or obligations of any party hereunder except, and only to the extent,
that, as a result of such failure, any party which was entitled to receive such
notice was deprived of its right to recover any payment under its applicable
insurance coverage or was otherwise damaged as a result of such failure.
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(e) If the amount of any Indemnifiable Loss, at any time subsequent to
the making of an Indemnity Payment, is reduced by recovery, settlement or
otherwise under or pursuant to any insurance coverage, or pursuant to any claim,
recovery, settlement or payment by or against any other person or entity, the
amount of such reduction, less any costs, expenses, premiums or taxes incurred
in connection therewith, will promptly be repaid by the Indemnitee to the
Indemnifying Party. Upon making any Indemnity Payment the Indemnifying Party
will, to the extent of such Indemnity Payment, be subrogated to all rights of
the Indemnitee against any third party that is not an Affiliate of the
Indemnitee in respect of the Indemnifiable Loss to which the Indemnity Payment
relates; provided, however, that (i) the Indemnifying Party shall then be in
compliance with its obligations under this Agreement in respect of such
Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of its
Indemnifiable Loss, any and all claims of the Indemnifying Party against any
such third party on account of said Indemnity Payment will be subrogated and
subordinated in right of payment to the Indemnitee's rights against such third
party. Without limiting the generality or effect of any other provision hereof,
each such Indemnitee and Indemnifying Party will duly execute upon request all
instruments reasonably necessary to evidence and perfect the above-described
subrogation and subordination rights.
VII. POST-CLOSING COVENANTS
7.1. Personnel Matters.
7.1.1. Benefits Of Seller. As of the Closing, the Closing Employees
will cease to participate in or be covered under Seller's Benefit Plans except
as otherwise provided in any such plan or arrangement or by Law. Seller shall
retain all liability and obligations arising under Seller's Benefit Plans. For
purposes of this Agreement, the term "BENEFIT PLAN" means each employee bonus,
retirement, pension, profit sharing, stock option, stock appreciation, stock
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purchase, incentive, deferred compensation, hospitalization, medical, dental,
vision, life and other health and disability (whether provided by insurance or
otherwise), severance, termination and other plan, program, arrangement, policy
or payroll practice (excluding any employee plan or benefit mandated by Law)
providing employee benefits, including without limitation each employee benefit
plan as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), maintained by Seller or to which Seller
contributes, has contributed or is obligated to contribute and under which any
person (or dependent or beneficiary of any such person) presently employed by
Seller in the conduct of Business (an "EMPLOYEE") or formerly so employed by
Seller or its respective predecessor (a "FORMER EMPLOYEE") participates or has
accrued any rights or under which Seller is liable.
7.1.2. 401(k) Plan. Buyer will establish or otherwise permit Closing
Employees who currently participate in Seller's Savings Plan (as defined below)
to participate in, effective as of the Closing Date, a qualified defined
contribution 401(k) savings plan maintained by Buyer or an affiliate that is
intended to qualify under Sections 401(a) and 401(k) of the Code ("Buyer's
Savings Plan"). Buyer agrees to notify Seller promptly in writing upon the
termination of service of any such employees. Buyer's Savings Plan will provide
each Closing Employee with vesting and eligibility service credit for
corresponding service credited under Seller's Savings Plan.
7.1.3. Employment By And Benefits Of Buyer. Subject to the provisions
of Section 7.1.2, with respect to the Closing Employees, such Closing Employees
will, upon commencement of employment with Buyer, be eligible to be covered
under the benefit programs of Buyer pursuant to the terms of such programs,
except that (i) for purposes of determining eligibility and vesting under any
such benefit program, Closing Employees shall be credited, to the extent
permitted by law and the Plan, with any period of service with Seller recognized
by
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Seller for such purposes under its corresponding Benefit Plan, and (ii) as of
the Closing Date Buyer shall enroll all Closing Employees who were enrolled in,
or covered under, Seller's group health plans immediately prior to the Closing
Date in Buyer's group health plans without a waiting period and shall not limit
or exclude coverage of any condition merely because it is a pre-existing
condition. Seller will not be liable for any liability or obligation that may
arise from employment with or termination by Buyer at or after the Closing, from
Closing Employees' participation in Buyer's benefit programs, or from the
amendment or termination by Buyer of any benefit program established or
maintained or contributed to by Buyer, such liabilities and obligations being
the sole responsibility of Buyer.
7.1.4. Employee Information. Seller and Buyer will each provide the
other, in a timely manner, any information with respect to any Closing
Employee's employment with and compensation from Seller or from Buyer, as the
case may be, or rights or benefits under any employee benefit plan which either
party may reasonably request.
7.2. General Post-Closing Matters.
7.2.1. Post-Closing Notifications. Buyer will, and will cause its
Affiliates to, comply with any applicable post-Closing notification or other
requirements of any antitrust, trade competition, investment or control, export
or other Law of any Governmental Authority having jurisdiction over the
Business.
7.2.2. Names, Trademarks. (a) After the Closing Date, Seller will not
have the right to use any of the Intellectual Property Rights described on
SCHEDULE 1.1.4, or to use any trademarks, service marks, trade names or
copyrights imitative thereof, but nothing herein or otherwise will restrict
Seller's rights in respect of generally available technical know-how or any
technical know-how acquired by Seller after the Closing.
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(b) Notwithstanding anything contained in this Agreement to the
contrary, Buyer will have the right for a period of 12 months after the Closing
Date to use the phrase "FORMERLY A COIN CONTROLS PRODUCT" on the labels for
Products that are sold by Buyer. In addition, for a period of three months
following the Closing Date, Buyer may use existing labels which contain the
names Coin Controls, Inc. or Coin Controls Limited or the micrometer logo (the
"EXISTING LABELS"); provided however that in addition to the Existing Labels,
Buyer shall place a label on the Products indicating that the Products are now
manufactured by Buyer.
7.2.3. Access; Regulation S-X. (a) On the Closing or as soon thereafter
as practicable, but in no event later than 75 calendar days after the Closing,
Seller will deliver or cause to be delivered to Buyer all original agreements,
documents, books, records and files in the possession of Seller and its
Affiliates relating to the Business or the Acquired Assets to the extent not
then in the possession of Buyer (collectively, "RECORDS"), subject to the
following exceptions:
(i) Buyer recognizes that certain Records may contain only
incidental information relating to the Business or may primarily relate to
Seller or the businesses of Seller other than the Business and that Seller may
retain such records and Seller may deliver appropriately excised copies of such
Records; and
(ii) Seller may retain copies of any tax returns and reports.
After the Closing, Buyer will retain all Records (except those Records referred
to in Section 7.2.3(a)(i)) required to be retained pursuant to obligations
imposed under any Government Contract or Law.
(b) After the Closing, upon reasonable notice, each of Seller and Buyer
will give, or cause to be given, to the representatives, employees, counsel and
accountants of the other, access, during normal business hours, to Records
relating to periods prior to the Closing, and
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will permit such persons to examine and copy such Records to the extent
reasonably requested by the other party in connection with the preparation of
tax and financial reporting matters (including without limitation any return or
report relating to state or local real property transfer or gains taxes),
audits, legal proceedings, governmental investigations and other business
purposes; provided, however, that nothing herein will obligate any party to take
actions that would unreasonably disrupt the normal course of its business,
violate the terms of any Law or any Contract to which it is a party or to which
it or any of its assets is subject or grant access to any of its proprietary,
confidential or classified information. Seller and Buyer will cooperate with
each other in the conduct of any tax audit or similar proceedings involving or
otherwise relating to any of the Acquired Assets or the Business (or the income
therefrom or assets thereof) with respect to any tax and each will execute and
deliver such powers of attorney and other documents as are necessary to carry
out the intent of this Section 7.2.3(b).
(c) Seller shall allow access to Buyer's accountants to review and
discuss the workpapers of Seller with Seller's accountants to ascertain a
reasonable basis for Buyer to prepare financial statements required under SEC
Regulation S-X and Form 8-K.
(d) To the extent that the Buyer requires the assistance of warehouse
personnel after the Closing, Seller will make available its warehouse personnel
as reasonably requested by Buyer for the purpose of shipping Products. The
expenses of providing warehouse personnel to Buyer shall be offset by Buyer
making available to Seller the services of a purchaser who is a Closing Employee
to the extent reasonably requested by Seller until such time as Seller hires a
new purchaser.
(e) Additional Assistance. For a period beginning in the date hereof
and ending on August 15, 1998, Seller agrees to provide the Buyer with space at
Seller's Premises in order to assemble and ship Products and perform office
services. Such space and warehouse services
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shall be provided by Seller without charge, other than reimbursement of its
reasonable out-of-pocket expenses in connection with such services, such as
mailing, telephone, telecopy or similar expenses. After the expiration of such
period, at Buyer's request, Seller shall continue to make such space and
warehouse services available to Buyer for up to an additional sixty days at fees
to be mutually agreed upon but which shall not be less than $15,000 per month.
Except as required under applicable law, Seller agrees to maintain, and cause
its employees to maintain, as confidential, and not disclose to any third party,
all information provided to it or otherwise obtained by it from the Buyer in the
performance of Seller's covenants under this Section 7.2.3(e).
7.2.4. Technical Assistance. Seller shall provide to Buyer, at Seller's
cost, for an aggregate of 42 working days during the period beginning on the
date hereof and ending on the eight-month anniversary of the date hereof, the
services of Mr. Peter Crossan for general engineering services as required by
Buyer. In the event that Buyer requires additional technical assistance, Seller
shall provide to Buyer, at Buyer's cost, the services of an engineer for an
additional 42 working days.
7.2.5. Supplier Contracts. Seller shall use its best efforts to
cooperate with Buyer and Seller's suppliers listed on SCHEDULE 7.2.5 who hold
tooling included as part of the Acquired Assets in developing supply contracts
between each such supplier and Buyer.
7.2.6. Supply of Components/Electronic Mechs/Series 1.
(a) Parent shall supply to Buyer, the plastic parts used in the
manufacture of the Products described on SCHEDULE 7.2.6. (the
"COMPONENTS"). The price of the Components shall be guaranteed for
three years and shall be as set forth on SCHEDULE 7.2.6, subject to
Seller's standard terms and conditions; provided, however,
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that the prices set forth on SCHEDULE 7.2.6 for SUH/001 shall be
guaranteed for only twelve months and shall thereafter be mutually
agreed upon by Buyer and Parent.
(b) Seller shall also supply to Buyer electronic
mechs relating to the C-120 and C-220 coin control products including
any upgrades thereto (the "ELECTRONIC MECHS"). The Pricing for the
Electronic Mechs shall be at the current dollar rate for door packages
sold to existing customers as set forth on SCHEDULE 7.2.6 and shall be
subject to negotiation by Buyer and Seller for door products sold to
future customers. Prices shall be guaranteed for a period of three
years subject to renegotiation to reflect any significant movement of
the $/Pound exchange rate from the exchange rate on the Closing Date or
significant change in component prices.
(c) Buyer shall also supply to Seller, at prices
mutually agreed upon, Series 7 kit parts and front plates assemblies
for use in C-120, C-220 and Condors front plate for sales made by
Seller, including any upgrades thereto.
(d) Parent shall supply to Buyer Series 1 coin door
assemblies and related mechs, including any upgrades thereto ("SERIES
1") at prices as set forth on Schedule 7.2.6. Buyer shall have the
exclusive right to sell the Series 1 Mech in North America, Central
America and South America. The price of Series 1 shall be based on
Parent's standard terms and conditions and shall be guaranteed for
three years.
(e) Parent shall supply to Buyer Series 10 door
mechanisms for a period of approximately six months after the Closing
Date at prices as set forth on SCHEDULE 7.2.6. Any inventory relating
to the Series 10 mechanism that remains with Parent after such
six-month period shall be purchased by Buyer at book value up to
$100,000 less any reserves for inventory which is more than six months
old. The
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transfer of such inventory and the payment therefor by Buyer shall
occur simultaneously with the termination of Parent's supply of Series
10 products.
7.2.7. Non-Competition.
(a) Period and Conduct. As further consideration for
the purchase and sale of the Acquired Assets and the Parent Assets and
the transactions contemplated by this Agreement, during the period
commencing on the Closing, and ending on the date which is five (5)
years thereafter (the "TERM"), (i) Seller and Parent and their
Affiliates shall not:
(x) compete with Buyer, directly or indirectly, in
the Business;
(y) solicit, or accept orders or business of any
kind relating to the Business from any customer or active
prospect of Buyer, or any former customer of Seller; or
(z) solicit for employment any Person who was,
during the two-year period immediately preceding the Closing,
or who becomes, at any time during the Term, an employee of
Buyer.
(b) Territory. Seller and its Affiliates shall
refrain from engaging in the activities described in this
Section 7.2.7 during the Term anywhere in the world;
(c) Definition. Seller shall be deemed to be
competing with Buyer if Seller or its Affiliates are engaged
or participate in any activity or activities described in
subsection (a) of this Section 7.9, directly or indirectly,
whether for their own account or for that of any other person,
firm or corporation, and whether as a shareholder, partner or
investor controlling any such entity or as principal, agent,
representative, proprietor, or partner, or in any other
capacity, but Seller and its Affiliates shall not be deemed to
be engaged in any such activity if such activity is carried on
by any direct or
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indirect shareholder of Parent or any Affiliate of such shareholder,
even if such shareholder is an officer or director of Seller or Parent.
(d) Blue Pencil. If any court of competent
jurisdiction shall at any time deem any particular term, restriction,
covenant or promise (including the Term and the Territory) contained in
this SECTION 7.2.7 to be unreasonable and for that reason
unenforceable, then such term, restriction, covenant or promise shall
be deemed modified to the extent necessary to make it enforceable by
such court or agency.
(e) Remedies. Without limiting the right of Buyer to
pursue all other legal and equitable rights available to it due to a
violation of this SECTION 7.2.7 by Seller or the Parent, it is agreed
that other remedies cannot fully compensate Buyer for such a violation
and that Buyer shall be entitled to injunctive relief (without the
necessity of posting a bond) to prevent violation or continuing
violation thereof.
7.2.8 Customer Drawings. Seller shall use reasonable efforts to obtain
consent from its customers to transfer to Buyer such customer's drawings
relating to product specifications.
7.2.9 Warranty Claim. Pursuant to instructions from Seller, Buyer will
rework, scrap or otherwise replace in the most expedient manner the meters
subject to the warranty claim described on SCHEDULE 5.1.19 and Seller will
reimburse Buyer at its costs and expenses for complying with this Section 7.2.9
upon presentation of reasonable documentation.
7.2.5.1. MISCELLANEOUS PROVISIONS
7.3. Notices. All notices and other communications required or
permitted hereunder will be in writing and, unless otherwise provided in this
Agreement, will be deemed to have been duly given when delivered in person or
one business day after when dispatched by electronic facsimile transfer
(confirmed in writing by mail simultaneously dispatched) or one
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business day after having been dispatched by a nationally recognized overnight
courier service to the appropriate party at the address specified below:
(a) If to Buyer, to:
Wells-Gardner Electronics Corporation
2701 N. Kildare Avenue
Chicago, Illinois 60639-2014
Facsimile No.: (773) 252-8072
Attention: President
With a copy to:
Katten Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661-3693
Facsimile No.: (312) 902-1061
Attention: David J. Kaufman, Esq.
(b) If to Seller, to:
Coin Controls Limited
Coin House
New Coin Street
Royton, Oldham,
Lancashire 0L2 6JZ
England
Facsimile No.: 0161-628-2189
Attention: Company Secretary
With a copy to:
Jones, Day, Reavis & Pogue
77 West Wacker Drive, Suite 3500
Chicago, Illinois 60601-1692
Facsimile No.: (312) 782-8585
Attention: Robert H. Baker, Esq.
or to such other address or addresses as any such party may from time to time
designate as to itself by like notice.
7.4. Expenses. Except as otherwise expressly provided herein, Seller
will pay any expenses incurred by it incident to this Agreement and in preparing
to consummate and
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consummating the transactions provided for herein. Buyer will pay any expenses
incurred by it incident to this Agreement and in preparing to consummate and
consummating the transactions provided for herein.
7.5. Successors And Assigns. This Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, but will not be assignable or delegable by any party without
the prior written consent of the other parties; provided, however that nothing
in this Agreement will limit Buyer's ability to assign its rights or delegate
its responsibilities, liabilities and obligations under this Agreement to an
Affiliate at any time without the consent of the other Parties.
7.6. Waiver. Seller and Buyer, by written notice to the other, may
(a) extend the time for performance of any of the obligations or other actions
of the other under this Agreement, (b) waive any inaccuracies in the
representations or warranties of the other contained in this Agreement or any
Closing Document, (c) waive compliance with any of the conditions or covenants
of the other contained in this Agreement, or (d) waive or modify performance of
any of the obligations of the other under this Agreement; provided, however,
that no such party may, without the prior written consent of such other party,
make or grant such extension of time, waiver of inaccuracies or compliance or
waiver or modification of performance with respect to its own obligations,
representations, warranties, conditions or covenants hereunder. Except as
provided in the immediately preceding sentence, no action taken pursuant to this
Agreement will be deemed to constitute a waiver of compliance with any
representations, warranties, covenants or agreements contained in this Agreement
and no such action will operate or be construed as a waiver of any subsequent
breach, whether of a similar or dissimilar nature.
7.7. Entire Agreement. This Agreement, the Transaction Documents and
(together with the Schedules and Exhibits hereto and thereto) supersedes any
other agreement, whether
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written or oral, that may have been made or entered into by Buyer or Seller (or
by any director, officer or representative thereof) relating to the matters
contemplated hereby. This Agreement and the Schedules hereto constitute the
entire agreement by and among the parties and there are no agreements or
commitments by or among such parties or their Affiliates except as expressly set
forth herein.
7.8. Amendments, Supplements, Etc. This Agreement may be amended or
supplemented at any time by additional written agreements, as may mutually be
determined by the parties hereto to be necessary, desirable or expedient to
further the purposes of this Agreement, or to clarify the intention of the
parties hereto.
7.9. Rights Of The Parties. Except as provided in Articles II, VI
and VII, nothing expressed or implied in this Agreement is intended or will be
construed to confer upon or give any person or entity other than the parties
hereto and their respective Affiliates any rights or remedies under or by reason
of this Agreement or any transaction contemplated hereby.
7.10. Further Assurances. (a) After the Closing, Seller will from time
to time, at Buyer's request and without further cost or expense to Buyer,
execute and deliver to Buyer such other instruments of conveyance and transfer
as Buyer may reasonably request so as more effectively to transfer the Acquired
Assets to Buyer free of Liens other than Liens permitted pursuant to this
Agreement.
(b) After the Closing, Buyer will from time to time, at Seller's
request and without further cost or expense to Seller, execute and deliver to
Seller such other instruments of assumption as Seller may reasonably request so
as more effectively to assume the Assumed Liabilities.
7.11. Bulk Sales. Buyer waives compliance by Seller with the provisions
of the so-called bulk sales law of any jurisdiction.
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7.12. Transfers. Buyer and Seller will cooperate and take such action
as may be reasonably requested by the other in order to effect an orderly
transfer of the Assets and the Business with a minimum of disruption to the
operations and employees of the businesses of Seller.
7.13. Applicable Law. This Agreement and the legal relations among the
parties hereto will be governed by and construed in accordance with the
substantive Laws of the State of Illinois, without giving effect to the
principles of conflict of laws thereof.
7.14. Execution In Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
7.15. Titles And Headings. Titles and headings to Sections and Articles
herein are inserted for convenience of reference only, and are not intended to
be a part of or to affect the meaning or interpretation of this Agreement.
7.16. Passage Of Title And Risk Of Loss. Legal title, equitable title
and risk of loss with respect to the Acquired Assets will not pass to Buyer
until such Assets are transferred at the Closing, which transfer, once it has
occurred, will be deemed effective for tax, accounting and other computational
purposes as of 12:01 a.m. (Eastern Time) on the Closing.
7.17. Certain Interpretive Matters And Definitions. (a) Unless the
context otherwise requires, (i) all references to Sections, Articles or
Schedules are to Sections, Articles or Schedules of or to this Agreement,
(ii) each term defined in this Agreement has the meaning assigned to it,
(iii) each accounting term not otherwise defined in this Agreement has the
meaning assigned to it in accordance with Accounting Principles, (iv) "OR" is
disjunctive but not necessarily exclusive, and (v) words in the singular include
the plural and vice versa.
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(b) No provision of this Agreement will be interpreted in favor of, or
against, any of the parties hereto by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof
or thereof.
(c) As used in this Agreement, (i) the phrases "primarily in the
Business," "primarily of the Business" or "primarily relating to the Business"
refer to assets or rights of Seller predominantly pertaining to the Business and
are meant to exclude assets or rights owned, held or acquired for use in any
business other than the Business; (ii) the term "AFFILIATE" has the meaning
given to that term in Rule 1-02 of Regulation S-X under the Securities Act of
1933, as amended (the "SECURITIES ACT"); (iii) the term Governmental Authority
means any domestic or foreign court, government, governmental agency, authority
or instrumentality; (iv) the term Law means any domestic or foreign statute, law
ordinance, rule, regulation, or common law obligation; (v) the phrases to the
"BEST OF SELLER'S KNOWLEDGE" "SELLER'S KNOWLEDGE" or "KNOWLEDGE OF THE COMPANY"
refers to information actually known by Ronald W. Rollins and Kristine E.
Pantos.
7.18. Severability. The unenforceability or invalidity of any provision
of this Agreement will not affect the enforceability or validity of any other
provision.
7.19. Counterparts. This Agreement may be executed simultaneously in
one or more counterparts, each of which will be deemed an original but all of
which together will constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
COIN CONTROLS, INC.
By: /s/ Peter Clarkson
-----------------------------
COIN CONTROLS LIMITED
By: /s/ Peter Clarkson
-----------------------------
WELLS-GARDNER ELECTRONICS CORPORATION
By: /s/ George B. Toma
-----------------------------
44
<PAGE> 1
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is made and entered into as of the 5th
day of June, 1998, by and between AMERICAN NATIONAL BANK AND TRUST COMPANY OF
CHICAGO ("Bank"), a national banking association with its principal place of
business at 120 South LaSalle Street, Chicago, Illinois 60603, and
WELLS-GARDNER ELECTRONICS CORPORATION, ("Borrower"), an Illinois corporation
with its principal place of business at 2701 North Kildare Avenue, Chicago,
Illinois 60639.
RECITALS
Pursuant to Borrower's request, Bank now and from time to time hereafter
may loan or advance monies, extend credit and/or extend other financial
accommodations to or for the benefit of Borrower.
NOW THEREFORE, in consideration of the terms and conditions set forth
herein and of any loans or extensions of credit now or hereafter made to or for
the benefit of Borrower by Bank, the parties hereto agree as follows:
1. DEFINITIONS AND TERMS
1.1 When used herein, the words, terms and/or phrases set forth below
shall have the following meanings:
A. BORROWER'S LIABILITIES: all obligations and liabilities of
Borrower to Bank (including, without limitation, all debts, claims,
indebtedness and attorneys' fees and expenses as provided for in
Paragraph 7.10) whether primary, secondary, direct, contingent,
fixed or otherwise, including Rate Hedging Obligations (as defined
in subparagraph H herein), heretofore, now and/or from time to time
hereafter owing, due or payable, however evidenced, created,
incurred, acquired or owing and however arising, whether under this
Agreement or the "Other Agreements" (hereinafter defined) or by
operation of law or otherwise.
B. INDEBTEDNESS: (i) indebtedness for borrowed money or for the
deferred purchase price of property or services; (ii) obligations as
lessee under leases which shall have been or should be, in
accordance with generally accepted accounting principles, recorded
as capital leases; (iii) obligations under direct or indirect
guaranties in respect of, and obligations (contingent or otherwise)
to purchase or otherwise acquire, or otherwise to assure a creditor
against loss in respect of, indebtedness or obligations of others of
the kinds referred to in clauses (i) or (ii) above; and (iv)
liabilities with respect to unfunded vested benefits under plans
covered by Title IV of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and in effect from time to time.
<PAGE> 2
C. LIBOR: the London Interbank Offered Rate, at any time and
from time to time.
D. LIBOR AGREEMENT: the LIBOR Borrowing Agreement dated June 5,
1998, by and between Bank and Borrower.
E. OTHER AGREEMENTS: all agreements, instruments and documents,
including, without limitation, guaranties, mortgages, deeds of
trust, notes, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, leases, subordination
agreements, financing statements and all other written matter
heretofore, now and/or from time to time hereafter executed by
and/or on behalf of Borrower and delivered to Bank.
F. PERSONS: any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, entity, party
or government (whether national, federal, state, county, city,
municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
G. PRIME RATE: the rate, at any time and from time to time,
most recently published or announced by Bank as its prime rate, it
being understood that such rate may not be Bank's lowest rate or
most favorable rate of interest at any one time.
H. RATE HEDGING OBLIGATIONS: any and all obligations of the
Borrower, whether absolute or contingent, and howsoever and
whensoever created, arising, evidenced or acquired (including all
renewals, extensions and modifications thereof and substitutions
therefor), under (i) any and all agreements designed to protect the
Borrower from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or
exchange transactions, including, but not limited to: interest rate
swap agreements, dollar-denominated or cross-currency interest rate
exchange agreements, forward currency exchange agreements, interest
rate cap, floor or collar agreements, forward rate currency
agreements or agreements relating to interest rate options, puts and
warrants, and (ii) any and all agreements relating to cancellations,
buy backs, reversals, terminations or assignments of any of the
foregoing.
1.2 Except as otherwise defined in this Agreement or the Other
Agreements, all words, terms and/or phrases used herein and therein shall be
defined by the applicable definition therefor (if any) in the Illinois Uniform
Commercial Code.
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<PAGE> 3
2. LOANS
2.1 Subject to all of the terms and conditions hereinafter contained, Bank
agrees to make available to Borrower a revolving line of credit (the "Revolving
Credit") with a maximum aggregate principal amount at any one time outstanding
of $8,000,000. Advances under the Revolving Credit shall be made against and
evidenced by a revolving note of Borrower (the "Revolving Note") and all such
advances shall mature as therein provided. All advances under the Revolving
Credit shall bear interest (computed for the actual number of days elapsed on
the basis of a 360-day year) until maturity (whether by lapse of time,
acceleration or otherwise) at the Prime Rate from time to time in effect or, at
Borrower's option exercised in accordance with the LIBOR Agreement, the rate
determined by adding 1.75% to LIBOR determined in accordance with the LIBOR
Agreement. Interest on advances under the Revolving Credit shall be payable on
the first day of each month during the term of the Revolving Credit commencing
July 1, 1998. All outstanding principal and all accrued and unpaid interest on
the Revolving Note shall be due and payable on May 31, 2001.
(A). The Revolving Credit shall be subject to all of the terms hereof,
may be availed of by Borrower from time to time, may be repaid by
Borrower and availed of by Borrower again. All loan requests under the
Revolving Credit shall be in multiples of $5,000.00 and in the minimum
amount of $5,000.00. Any change in the interest rate on advances under
the Revolving Credit resulting from a change in the Prime Rate shall be
and become effective as of and on the date of the relevant change in the
Prime Rate.
(B). The amount and date of each advance made under the Revolving Credit
and the amount and date of each payment of principal and interest thereon
shall be recorded by Bank on its books and records and the amount of
principal and interest shown on the Bank's books and records as owing on
the Revolving Note from time to time shall be prima facie evidence of the
amount so owing. The failure to so record any amount or any error in so
recording any such amount, however, shall not limit or otherwise affect
Borrower's obligations hereunder or under the Revolving Note to repay the
principal amount of the Revolving Credit together with all accrued
interest thereon.
(C). Borrower shall give Bank irrevocable telephonic notice prior to 1:00
p.m. (Chicago time) on the date it requests that any advance be made to
it under the Revolving Credit. Each notice shall be effective upon
receipt by Bank and shall specify the amount and date of such advance.
The proceeds of each advance under the Revolving Credit shall be made
available to Borrower at the principal office of Bank. Borrower does
hereby irrevocably confirm, ratify and approve all such advances by Bank
and does hereby indemnify Bank against losses, liabilities and expenses
(including court costs and attorneys' fees) and shall hold Bank harmless
3
<PAGE> 4
with respect thereto.
2.2 Subject to all of the terms and conditions hereinafter contained, Bank
agrees to loan to Borrower $3,350,000 (the "Term Loan") evidenced by an
installment note of Borrower (the "Installment Note"). Principal under the
Installment Note shall bear interest (computed for the actual number of days
elapsed on the basis of a 360-day year) until maturity (whether by lapse of
time, acceleration or otherwise) at the Prime Rate from time to time in effect
or, at Borrower's option exercised in accordance with the LIBOR Agreement, the
rate determined by adding 2.25% to LIBOR from time to time determined in
accordance with the LIBOR Agreement. Interest shall be paid on the first day
of each month commencing on July 1, 1998. Interest and $55,833 in principal
shall be paid on the first day of each month, in accordance with a five year
amortization, commencing on February 1, 1999. All outstanding principal and
all accrued and unpaid interest on the Installment Note shall be due and
payable May 31, 2003. Any change in the interest rate under the Installment
Note resulting from a change in the Prime Rate shall be and become effective as
of and on the date of the relevant change in the Prime Rate.
2.3 Loans made by Bank to Borrower pursuant to this Agreement shall be
evidenced by notes or other instruments issued or made by Borrower to Bank.
Except as otherwise provided in this Agreement or in any notes executed and
delivered by Borrower to Bank in connection herewith, the principal portion of
Borrower's Liabilities shall be payable by Borrower to Bank on the maturity
date(s) described in any such note(s) (as the same may be amended or renewed).
Borrower may prepay any loan before its maturity date without penalty, except
for prepayment of any LIBOR Loan, which shall not be prepaid on a date other
than the last day of its Interest Period. All costs, fees and expenses payable
hereunder or under the Other Agreements shall be payable by Borrower to Bank on
demand, in either case at Bank's principal place of business or such other
place as Bank shall specify in writing to Borrower.
2.4 Each loan made by Bank to Borrower pursuant to this Agreement or the
Other Agreements shall constitute an automatic warranty and representation by
Borrower to Bank that there does not then exist an "Event of Default" (as
hereinafter defined) or any event or condition which with notice, lapse of time
and/or the making of such loan would constitute an Event of Default.
3. COMMITMENT FEE
3.1 Borrower shall pay to Bank a commitment fee at the rate of 1/4% per
annum on the average daily unused portion of the Revolving Credit available
hereunder, such fee to be payable on September 1, 1998, and on the fifteenth
day of each calendar quarter thereafter with respect to the period ending on
the last day of the immediately preceding month.
4. NEGATIVE PLEDGE
4.1 Borrower shall not, and shall not permit any of its subsidiaries to
create, incur, permit, or suffer to exist any lien upon any of its property or
assets, now owned or hereafter
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<PAGE> 5
acquired, except for the following permitted liens: (a) pledges or deposits
made to secure payment of worker's compensation insurance; (b) liens imposed by
mandatory provisions of law, such as for materials, mechanics, warehouses and
other liens arising in the ordinary course of business; (c) liens for taxes,
assessments and governmental charges of levies imposed upon the Borrower's
income or profits or property, if the same are not yet due and payable or if
the same are being contested in good faith and as to which adequate cash
reserves have been provided; (d) liens arising out of good faith deposits in
connection with tenders, leases, real estate bids or contracts (other than
contracts involving the borrowing of money), pledges, or deposits to secure (or
in lieu of) surety, stay, appeal or customs bonds and deposits to secure the
payment of taxes, assessments, customs duties or similar charges; and (e)
encumbrances consisting of zoning restrictions, easements, or other
restrictions on the use of real property, provided that such items do not
impair the use of such property for the purposes intended, and none of which is
violated by existing or proposed structures or land use.
5. WARRANTIES, REPRESENTATIONS AND COVENANTS
5.1 Borrower warrants and represents to and covenants with Bank that: (a)
Borrower has the right, power and capacity and is duly authorized and empowered
to enter into, execute, deliver and perform this Agreement and the Other
Agreements; (b) the execution, delivery and/or performance by Borrower of this
Agreement and the Other Agreements shall not, by the lapse of time, the giving
of notice or otherwise, constitute a violation of any applicable law or a
breach of any provision contained in Borrower's Articles of Incorporation,
By-Laws or similar document, or contained in any agreement, instrument or
document to which Borrower is now or hereafter a party or by which it is or may
be bound; (c) Borrower is now, and at all times hereafter shall be, solvent and
generally paying its debts as they mature and Borrower now owns and shall at
all times hereafter own property which, at a fair valuation, is greater than
the sum of its debts; (d) Borrower is not and will not be, during the term
hereof, in violation of any applicable federal, state or local statute,
regulation or ordinance that in any respect materially and adversely affects
its business, property, assets, operations or condition, financial or
otherwise; (e) Borrower is not in default with respect to any indenture, loan
agreement, mortgage, deed or other similar agreement relating to the borrowing
of monies to which it is a party or by which it is bound; and (f) since
December 31, 1997, there has been no material adverse change in the financial
condition of Borrower and no change to the information reported in Part I, Item
3 of Borrower's Form 10-K for December 31, 1997, year end.
5.2 Borrower warrants and represents to and covenants with Bank that
Borrower shall not, without Bank's prior written consent thereto: (a) enter
into any transaction not in the ordinary course of business which materially
and adversely affects Borrower's ability to repay Borrower's Liabilities or any
other obligations and liabilities of Borrower; (b) other than as specifically
permitted in or contemplated by this Agreement or the Other Agreements,
encumber, pledge, mortgage, sell, lease or otherwise dispose of or transfer,
whether by sale, loan, distribution, merger, consolidation or otherwise, any of
Borrower's
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<PAGE> 6
assets; and (c) incur Indebtedness except for (i) renewals or extensions of
existing Indebtedness and interest thereon, (ii) Indebtedness that is
unsecured, in an amount approved by Bank and to Persons who execute and deliver
to Bank, in form and substance acceptable to Bank and its counsel,
subordination agreements subordinating their claims against Borrower therefor
to the payment of Borrower's Liabilities, and (iii) leases of new personal
property which are for less than one year, or which are for more than one year
provided that all such leases do not exceed, in the aggregate, $500,000.00 in
outstanding total payments to maturity.
5.3 Borrower warrants and represents to and covenants with Bank that
Borrower shall furnish to Bank: (a) as soon as available but not later than
ninety (90) days after the close of each fiscal year of Borrower, financial
statements, which shall include, but not be limited to, balance sheets, income
statements and statements of cash flow of Borrower prepared in accordance with
generally accepted accounting principles, consistently applied, audited by a
firm of independent certified public accountants selected by Borrower and
acceptable to Bank; (b) as soon as available but not later than forty-five (45)
days after the end of each quarterly fiscal period of Borrower, financial
statements of Borrower, certified by Borrower to be prepared in accordance with
generally accepted accounting principles, consistently applied, and to fairly
present the financial position and results of operations of Borrower for such
period (the "Quarterly Financial Statements"); (c) copies on the date of filing
of all reports by Borrower to the Securities and Exchange Commission, including
without limitation, all forms 8-K, 10-Q, 10-K, proxy statements and
registration statements, and (d) such other data and information (financial and
otherwise) as Bank, from time to time, may reasonably request.
5.4 Borrower warrants and represents to and covenants with Bank that
Borrower shall at all times maintain a "Tangible Net Worth" (as hereinafter
defined) in excess of $8,000,000 plus 50% of "Net Income" (as hereinafter
defined) earned during each year after 1998. Tangible Net Worth shall mean the
book value of the tangible assets of Borrower as determined in accordance with
the generally accepted accounting principles after subtracting therefrom the
aggregate book value of any intangible assets of Borrower included on its
balance sheet, including without limitation, prepaid expenses, goodwill and any
other assets reasonably deemed intangible by Bank, minus the aggregate of all
contingent and non-contingent liabilities of Borrower determined in accordance
with generally accepted accounting principles, consistently applied. Net
Income shall mean the income after taxes of Borrower as reported each year in
its audited financial statements.
5.5 Borrower warrants and represents to and covenants with Bank that
Borrower shall at all times maintain a ratio of the total liabilities of
Borrower to Tangible Net Worth below 2 to 1, a ratio of current assets of
Borrower to current liabilities of Borrower above 1.5 to 1 and a ratio of "Cash
Flow Coverage" (as hereinafter defined) greater than 1.2 to 1 on a rolling four
quarter basis. Cash Flow Coverage shall mean earnings before interest, taxes,
depreciation and amortization (EBITDA) less net capital expenditures, dividends
and taxes plus or minus the change in deferred taxes, divided by the total of
all debt service, including capital leases.
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<PAGE> 7
5.6 Borrower covenants and agrees to use Bank as its primary depository
and disbursement point, maintaining demand deposit balances sufficient to cover
the cost of non-credit services in accordance with Bank's determination.
Borrower shall not maintain any depository accounts in the United States at any
bank or financial institution other than Bank, except petty cash accounts
located in cities other than Chicago and located in the same city with an
office or factory operated by Borrower. Any such petty cash accounts at banks
in cities in which Bank or other subsidiaries of Bank's shareholder operates a
bank or branch shall be maintained at such bank or branch.
5.7 Borrower warrants and represents to and covenants with Bank that the
proceeds from the Revolving Credit shall be used for the working capital and
general business needs of Borrower and the proceeds from the Term Loan shall be
used for the acquisition of the coin door assets of Coin Controls, Inc.
6. DEFAULT
6.1 The occurrence of any one of the following events shall constitute a
default by the Borrower ("Event of Default") under this Agreement: (a) if
Borrower fails to pay any scheduled principal or interest payment or fails,
after ten days' written notice, to pay any other of Borrower's Liabilities when
due and payable or declared due and payable (whether by scheduled maturity,
required payment, acceleration, demand or otherwise); (b) if Borrower fails or
neglects to perform, keep or observe any term, provision, condition, covenant,
warranty or representation contained in this Agreement or any of the Other
Agreements and such failure continues for thirty (30) days after notice
thereof, except default under Sections 4 and 5 which shall become Events of
Default if not cured within ten (10) days of their occurrence, without notice;
(c) occurrence of a default or Event of Default under any of the Other
Agreements heretofore, now or at any time hereafter delivered by or on behalf
of Borrower to Bank; (d) occurrence of a default or an event of default under
any agreement, instrument or document heretofore, now or at any time hereafter
delivered to Bank by any guarantor of Borrower's Liabilities or by any Person
which has granted to Bank a security interest or lien in and to some or all of
such Person's real or personal property to secure the payment of Borrower's
Liabilities after the expiration of any applicable cure period therein; (e) if
any of Borrower's assets are attached, seized, subjected to a writ, or are
levied upon or become subject to any lien, or come within the possession of any
receiver, trustee, custodian or assignee for the benefit of creditors provided
that in the case of any such condition existing as to assets which, in the
aggregate, are not material in value to the Borrower's business, such condition
shall not become an Event of Default unless such condition continues for thirty
days; (f) if a notice of lien, levy or assessment is filed of record or given
to Borrower with respect to all or any of Borrower's assets by any federal,
state, local department or agency unless Borrower is contesting the liability
for which such lien relates in good faith with adequate reserves; (g) if
Borrower or any guarantor of Borrower's Liabilities becomes insolvent or
generally fails to pay or admits in writing its inability to pay debts as they
become due, if a petition under Title 11 of the United States Code or any
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<PAGE> 8
similar law or regulation is filed by or against Borrower or any such
guarantor, if Borrower or any such guarantor shall make an assignment for the
benefit of creditors, if any case or proceeding is filed by or against Borrower
or any such guarantor for its dissolution or liquidation, or if Borrower or any
such guarantor is enjoined, restrained or in any way prevented by court order
from conducting all or any material part of its business affairs; (h) the
dissolution of Borrower, or the death or incompetency of any Guarantor of
Borrower's Liabilities; (i) the revocation, termination, or cancellation of any
guaranty of Borrower's Liabilities without written consent of Bank; (j) if a
contribution failure occurs with respect to any pension plan maintained by
Borrower or any corporation, trade or business that is, along with Borrower, a
member of a controlled group of corporations or controlled group of trades or
businesses (as described in Sections 414(b) and (c) of the Internal Revenue
Code of 1986 or Section 4001 of ERISA) sufficient to give rise to a lien under
Section 302(f) of ERISA; (k) if Borrower or any guarantor of Borrower's
Liabilities is in default in the payment of any obligations, indebtedness or
other liabilities to any third party and such default is declared and is not
cured within the time, if any, specified therefor in any agreement governing
the same; or (l) if any material statement, report or certificate made or
delivered by Borrower, any of Borrower's partners, officers, employees or
agents or any guarantor of Borrower's Liabilities is not true and correct.
6.2 All of Bank's rights and remedies under this Agreement and the Other
Agreements are cumulative and non-exclusive.
6.3 Upon an Event of Default or the occurrence of any one of the events
described in Paragraph 6.1, without notice by Bank to or demand by Bank of
Borrower, Bank shall have no further obligation to and may then forthwith cease
advancing monies or extending credit to or for the benefit of Borrower under
this Agreement and the Other Agreements. Upon an Event of Default, without
notice by Bank to Borrower, Borrower's Liabilities shall be due and payable,
forthwith.
7. GENERAL
7.1 Borrower waives the right to direct the application of any and all
payments at any time or times hereafter received by Bank on account of
Borrower's Liabilities, and Borrower agrees that Bank shall have the continuing
exclusive right to apply and re-apply any and all such payments in such manner
as Bank may deem advisable, notwithstanding any entry by Bank upon any of its
books and records.
7.2 This Agreement and the Other Agreements shall be binding upon and
inure to the benefit of the heirs, representatives, successors and assigns of
Borrower and Bank.
7.3 Bank's failure to require strict performance by Borrower of any
provision of this Agreement shall not waive, affect or diminish any right of
Bank thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by Bank of an Event of Default by Borrower under this
Agreement or the Other Agreements shall not
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<PAGE> 9
suspend, waive or affect any other Event of Default by Borrower under this
Agreement or the Other Agreements, whether the same is prior or subsequent
thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants and representations of Borrower
contained in this Agreement or the Other Agreements and no Event of Default by
Borrower under this Agreement or the Other Agreements shall be deemed to have
been suspended or waived by Bank unless such suspension or waiver is by an
instrument in writing, signed by an officer of Bank and directed to Borrower
specifying such suspension or waiver.
7.4 If any provision of this Agreement or the Other Agreements or the
application thereof to any person, entity or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the Other Agreements and the
application of such provision to other Persons, or circumstances will not be
affected thereby and the provisions of this Agreement and the Other Agreements
shall be severable in any such instance.
7.5 Borrower hereby appoints Bank as Borrower's agent and attorney-in-fact
for the purpose of carrying out the provisions of this Agreement and taking any
action and executing any agreement, instrument or document which Bank may
reasonably deem necessary or advisable to accomplish the purposes hereof, which
appointment is irrevocable and coupled with an interest. All monies paid for
the purposes herein, and all costs, fees and expenses paid or incurred in
connection therewith, shall be part of Borrower's Liabilities, payable by
Borrower to Bank on demand.
7.6 Except as otherwise specifically provided in this Agreement, Borrower
waives any and all notice or demand which Borrower might be entitled to receive
by virtue of any applicable statute or law, and waives presentment, demand and
protest and notice of presentment, protest, default, dishonor, non-payment,
maturity, release, compromise, settlement, extension or renewal of any and all
agreements, instruments or documents at any time held by Bank on which Borrower
may in any way be liable.
7.7 Except as otherwise provided in the Other Agreements, if any provision
contained in this Agreement is in conflict with, or inconsistent with any
provision in the Other Agreements, the provision of this Agreement shall
control.
7.8 The terms and provisions of this Agreement and the Other Agreements
shall supersede any prior agreement or understanding of the parties hereto, and
contain the entire agreement of the parties hereto with respect to the matters
covered herein. This Agreement and the Other Agreements may not be modified,
altered, or amended except by an agreement in writing signed by Borrower and
Bank. This Agreement shall continue in full force and effect so long as any
portion or component of Borrower's Liabilities shall be outstanding. All of
Borrower's warranties, representations, undertakings, and covenants contained
in this Agreement or the Other Agreements shall survive the termination or
cancellation of the same. Should a claim ("Recovery Claim") be made upon the
Bank at any time for recovery of any amount received by the Bank in payment of
Borrower's Liabilities (whether received from Borrower or otherwise) and should
the Bank repay all or part of said amount by reason
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<PAGE> 10
of (1) any judgment, decree or order of any court or administrative body having
jurisdiction over Bank or any of its property; (2) any settlement or compromise
of any such Recovery Claim effected by the Bank with the claimant (including
Borrower), this Agreement and the security interests granted Bank hereunder
shall continue in effect with respect to the amount so repaid to the same
extent as if such amount had never originally been received by the Bank,
notwithstanding any prior termination of this Agreement, the return of this
Agreement to Borrower, or the cancellation of any note or other instrument
evidencing Borrower's Liabilities.
7.9 This Agreement and the Other Agreements shall be governed and
controlled by the internal laws of the State of Illinois applicable to
contracts made and performed entirely in Illinois, without regard to the law of
conflicts of laws.
7.10 If at any time or times hereafter, whether or not Borrower's
Liabilities are outstanding at such time, Bank: (a) employs counsel for advice
or other representation, (i) to represent Bank in any litigation, arbitration
contest, dispute, suit or proceeding or to commence, defend or intervene or to
take any other action in or with respect to any litigation contest, dispute,
suit or proceeding (whether instituted by Bank, Borrower or any other Person)
in any way or respect relating to this Agreement, the Other Agreements, or
Borrower's affairs, or (ii) consideration of or attempts to enforce any rights
of Bank against Borrower or any other Person which may be obligated to Bank by
virtue of this Agreement or the Other Agreements; (b) takes any action with
respect to administration of Borrower's Liabilities; and/or (c) attempts to or
enforces any of Bank's rights or remedies under this Agreement or the Other
Agreements, the reasonable costs, fees and expenses incurred by Bank with
respect to the foregoing, shall be part of Borrower's Liabilities, payable by
Borrower to Bank on demand.
7.11 BORROWER IRREVOCABLY AGREES THAT, SUBJECT TO BANK'S SOLE AND ABSOLUTE
ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT
OF OR FROM OR RELATED TO THIS AGREEMENT OR THE OTHER AGREEMENTS SHALL BE
LITIGATED ONLY IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF
ILLINOIS, AND BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY
LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE. BORROWER
HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY
LITIGATION BROUGHT AGAINST BORROWER BY BANK IN ACCORDANCE WITH THIS PARAGRAPH.
7.12 BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT, COUNTERCLAIM OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS
UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE OTHER AGREEMENTS, OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (II) ARISING FROM
ANY DISPUTE OR CONTROVERSY ARISING IN CONNECTION WITH OR RELATED TO THIS
AGREEMENT, THE OTHER AGREEMENTS OR ANY SUCH AMENDMENT,
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INSTRUMENT, DOCUMENT OR AGREEMENT, AND AGREES THAT ANY SUCH ACTION, SUIT,
COUNTERCLAIM OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year specified at the beginning hereof.
BORROWER:
WELLS-GARDNER ELECTRONICS CORPORATION
By: /s/ George B. Toma
--------------------------------------------
Print or Type Name: George B. Toma
----------------------------
Its: Vice President of Finance, CFO & Treasurer
--------------------------------------------
(If not signing as an individual)
Accepted this 5th day of June, 1998, in the City of Chicago, State of
Illinois.
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
By: /s/ Darren M. Snyder
--------------------------------------------
Print or Type Name: Darren M. Snyder
----------------------------
Its: Vice President
--------------------------------------------
11
<PAGE> 1
EXHIBIT 2.3
LONDON INTERBANK OFFERED RATE BORROWING AGREEMENT
THIS LONDON INTERBANK OFFERED RATE ("LIBOR") BORROWING AGREEMENT (the
"LIBOR Agreement") is made and entered into as of the 5th day of June, 1998 by
and between AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO ("Bank"), a
national banking association with its principal place of business at 120 South
LaSalle Street, 2nd Floor, Chicago, Illinois 60603, and WELLS-GARDNER
ELECTRONICS CORPORATION ("Borrower").
A. Borrower has requested and Bank has agreed to extend
interest rate options based on LIBOR; and
B. Borrower has executed in favor of Bank, on June 5, 1998, a
Loan Agreement (the "Loan Agreement"), a Revolving Note in the
amount of $8,000,000 (the "Revolving Note"), and an Installment Note
in the amount of $3,350,000 (the "Installment Note" and
collectively, the "Notes") which reflect the LIBOR option.
NOW, THEREFORE, in consideration of any loan, advance, extension of credit
and/or other financial accommodation at any time made by Bank to or for the
benefit of Borrower, and of the promises set forth herein, the parties hereto
agree as follows:
1. DEFINITIONS AND TERMS
1.1 The following words, terms and/or phrases shall have the meanings set
forth thereafter and such meanings shall be applicable to the singular and
plural form thereof; whenever the context so requires, and the use of "it" in
reference to Borrower shall mean Borrower as identified at the beginning of
this Agreement:
(a) Amortization Date: the dates specified in the
Notes when principal payments are due.
(b) Borrowing: any portion of Borrower's liabilities
bearing interest at LIBOR.
(c) Business Day: any day on which Bank is open for
regular business.
(d) Event of Default: the definition ascribed to
this term in the Loan Agreement and the Notes.
(e) Interest Period: the period commencing on the
date a LIBOR Loan is made and ending, as the Borrower may
select, 7, 30, 60, 90, 120 or 180 days thereafter, or 12
months for the Installment Note.
<PAGE> 2
(f) LIBOR Loans: any principal portion of Borrower's
liabilities bearing interest at LIBOR.
(g) LIBOR Margin: 1.75% on the Revolving Note and
2.25% on the Installment Note.
(h) Maturity Date: the dates specified in the Notes
upon which the Borrower's liabilities are due and payable in
full.
1.2 Any terms or phrases not specifically defined in this Agreement shall
have meanings ascribed to them in the Notes.
2. MANNER OF LIBOR ELECTION
2.1 Borrower may elect to cause all or a portion of the principal
outstanding on the Notes to bear interest at a daily rate equal to the daily
rate equivalent of 1.75% in excess of LIBOR on the Revolving Note and 2.25% in
excess of LIBOR on the Installment Note, subject to the following conditions:
(a) Not more than five (5) nor less than two (2) Business Days
prior to the requested date of any LIBOR Borrowing, Borrower shall
deliver to Bank an irrevocable written or telephonic notice setting
forth the requested date and amount of such Borrowing (which amount
shall not be less than $100,000.00 and, if in excess of $100,000.00,
shall be in integral multiples of $1,000.00) and the requested
Interest Period of such Borrowing;
(b) The LIBOR used in computing the interest rate applicable to
such Borrowing shall be the LIBOR as quoted by Bank to Borrower as
being in effect for the date of such Borrowing plus the LIBOR
Margin, computed on the basis of a 360-day year and actual days
elapsed, and shall be fixed for the requested period of such
Borrowing;
(c) Such Borrowing may not be prepaid prior to the expiration of
the requested Interest Period of such Borrowing and shall be repaid
in full or reborrowed on the last day of the requested Interest
Period of such Borrowing;
(d) With respect to any Borrowing of LIBOR Loans, Borrower may
not select an Interest Period that extends beyond the respective
Maturity Dates of the Notes; and
(e) With respect to any Borrowing of LIBOR Loans under each of
the Notes, Borrower may not select an Interest Period that extends
beyond any Amortization Date unless, after giving effect to such
requested Borrowing, the aggregate unpaid principal amount of such
Loans having Maturity Dates after such Amortization Date does not
exceed the aggregate principal amount of the Note scheduled to be
outstanding after such Amortization Date.
2
<PAGE> 3
2.2 In the event Borrower fails to give notice pursuant to Section 2.1(a)
above of the re-borrowing of the principal amount of any maturing LIBOR
Borrowing and has not notified the Bank by 10:00 a.m. (Chicago time) on the day
such Borrowing matures that it intends to renew such Borrowing, then Borrower
shall be deemed to have requested a borrowing of loans at Prime Rate (as
defined in the Loan Agreement) on such day in the amount of the maturing
Borrowing.
3. GENERAL PROVISIONS
3.1 FUNDING INDEMNITY. In the event Bank shall incur any loss, cost or
expense (including, without limitation, any loss of profit, and any loss, cost
or expense incurred by reason of the liquidation or re-employment of deposits
or other funds acquired by such Bank to fund or maintain any LIBOR Loan or the
re-lending or reinvesting of such deposits or amounts paid or prepaid to such
Bank) as a result of:
(a) any payment or prepayment of a LIBOR Loan on a date other
than the last day of its Interest Period,
(b) any failure by Borrower to borrow a LIBOR Loan on the date
specified in a notice given pursuant to Section 2.1 hereof,
(c) any failure by Borrower to make any payment of principal on
any LIBOR Loan when due (whether by acceleration or otherwise), or
(d) any acceleration of the maturity of a LIBOR Loan as a result
of the occurrence of any Event of Default,
then, upon the demand of Bank, Borrower shall pay to Bank such amount as will
reimburse Bank for such loss, cost or expense. If Bank makes such a claim for
compensation, it shall provide to Borrower a certificate executed by an officer
of Bank setting forth the amount of such loss, cost or expense in reasonable
detail (including an explanation of the basis for the computation of such loss,
cost or expense) and the amounts shown on such certificate if reasonably
calculated shall be conclusive.
3.2 AVAILABILITY OF LIBOR LOANS. If Bank determines that
maintenance of its Loans would violate any applicable law, rule,
regulation, or directive, whether or not having the force of law, or
if Bank determines that deposits of a type and maturity appropriate
to match fund LIBOR Loans are not available to it then Bank shall
forthwith give notice thereof to Borrower, whereupon, until Bank
notifies Borrower that the circumstances giving rise to such
suspension no longer exist, the obligations of the Bank to make
LIBOR Loans shall be suspended.
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<PAGE> 4
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year specified at the beginning hereof.
WELLS-GARDNER ELECTRONICS CORPORATION
By: George B. Toma
---------------------------------
Its: VP of Finance, CFO & Treasurer
---------------------------------
Accepted this 5th day of June, 1998, in the City of Chicago, State of
Illinois.
AMERICAN NATIONAL BANK
AND TRUST COMPANY OF CHICAGO
By: Darren M. Synder
----------------------------
Its: Vice President
----------------------------
4
<PAGE> 1
EXHIBIT 2.4
AMERICAN NATIONAL BANK
AND TRUST COMPANY OF
CHICAGO
INSTALLMENT NOTE (UNSECURED)
$3,350,000
CHICAGO, ILLINOIS JUNE 5, 1998
DUE MAY 31, 2001
FOR VALUE RECEIVED, the undersigned ("Borrower"), promises to pay to the
order of AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO ("Bank"), at its
principal place of business in Chicago, Illinois or such other place as Bank
may designate from time to time hereafter, the principal sum of THREE MILLION
THREE HUNDRED AND FIFTY THOUSAND AND 00/100 Dollars, which sum shall be due on
May 31, 2003, and shall be payable in successive installments as follows :
monthly installments of accrued interest as hereinafter provided below
commencing July 1, 1998 and monthly installments of principal in the amount of
$55,833 plus accrued interest as hereinafter provided below commencing February
1, 1999; with the final installment equal to the balance of all amounts due
hereunder. Successive installments shall be paid on the same day of each
month thereafter until paid. Borrower's obligations and liabilities to Bank
under this Note shall be defined and referred to herein as "Borrower's
Liabilities."
The unpaid principal balance of Borrower's Liabilities due hereunder shall
bear interest from the date of disbursement until paid at the rate of interest
announced or published publicly from time to time by Bank as its prime or base
rate of interest (the "Base Rate") per annum (computed on the basis of a 360
day year and actual days elapsed), or at Borrower's option exercised in
accordance with and subject to the terms of the LIBOR Agreement dated June 5,
1998, by and between Bank and Borrower, the rate per annum determined by adding
2.25% to LIBOR from time to time in effect
The rate of interest to be charged by Bank to Borrower shall fluctuate
hereafter from time to time concurrently with, and in an amount equal to, each
increase or decrease in the Base Rate or with increases and decreases in LIBOR
under the LIBOR Agreement, whichever is applicable.
Borrower warrants and represents to Bank that Borrower shall use the
proceeds represented by this Note solely for proper business purposes and
consistently with all applicable laws and statutes.
Any deposits or other sums at any time credited by or payable or due from
Bank to Borrower, or any monies, cash, cash equivalents, securities,
instruments, documents or other assets of Borrower in the possession or control
of Bank or its bailee for any purpose, may be reduced to cash and applied by
Bank to or setoff by Bank against Borrower's Liabilities.
The occurrence of any one of the following events shall constitute a
default by the Borrower ("Event of Default") under this Note: (a) if Borrower
fails to pay any scheduled principal or interest payment or fails, after ten
days' written notice, to pay any other of Borrower's Liabilities when due and
payable or declared due and payable (whether by scheduled maturity, required
payment, acceleration, demand or otherwise); (b) if Borrower or any guarantor
of any of Borrower's Liabilities fails or neglects to perform, keep or observe
any term, provision, condition, covenant, warranty or representation contained
in this Note and such failure continues for thirty (30) days after notice
thereof, except default under Sections 4 and 5 of the Loan Agreement, which
shall become Events of Default if not cured within ten (10) days of their
occurrence, without notice; (c) occurrence of a default or an event of default
under any agreement, instrument or document heretofore, now or at any time
hereafter delivered by or on behalf of Borrower to
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<PAGE> 2
Bank; (d) occurrence of a default or an event of default under any agreement,
instrument or document heretofore, now or at any time hereafter delivered to
Bank by any guarantor of Borrower's Liabilities or by any person or entity
which has granted to Bank a security interest or lien in and to some or all of
such person's or entity's real or personal property to secure the payment of
Borrower's Liabilities; (e) if any of Borrower's assets are attached, seized,
subjected to a writ, or are levied upon or become subject to any lien, or come
within the possession of any receiver, trustee, custodian or assignee for the
benefit of creditors provided that in the case of any such condition existing
as to assets which, in the aggregate, are not material in value to the
Borrower's business, such condition shall not become an Event of Default unless
such condition continues for thirty days; (f) if a notice of lien, levy or
assessment is filed of record or given to Borrower with respect to all or any
of Borrower's assets by any federal, state, local department or agency unless
Borrower is contesting the liability for which such lien relates in good faith
with adequate reserves; (g) if Borrower or any guarantor of Borrower's
Liabilities becomes insolvent or generally fails to pay or admits in writing
its inability to pay debts as they become due, if a petition under Title 11 of
the United States Code or any similar law or regulation is filed by or against
Borrower or any such guarantor, if Borrower or any such guarantor shall make an
assignment for the benefit of creditors, if any case or proceeding is filed by
or against Borrower or any such guarantor for its dissolution or liquidation,
or if Borrower is enjoined, restrained or in any way prevented by court order
from conducting all or any material part of its business affairs; (h) the death
or incompetency of Borrower or any guarantor of Borrower's Liabilities, or the
appointment of a conservator for all or any portion of Borrower's assets; (i)
the revocation, termination or cancellation of any guaranty of Borrower's
Liabilities without written consent of Bank; (j) if a contribution failure
occurs with respect to any pension plan maintained by Borrower or any
corporation, trade or business that is, along with Borrower, a member of a
controlled group of corporations or a controlled group of trades or businesses
(as described in Sections 414(b) and (c) of the Internal Revenue Code of 1986
or Section 4001 of the Employee Retirement Income Security Act of 1974, as
amended, "ERISA") sufficient to give rise to a lien under Section 302(f) of
ERISA; (k) if Borrower or any guarantor of Borrower's Liabilities is in default
in the payment of any obligations, indebtedness or other liabilities to any
third party and such default is declared and is not cured within the time, if
any, specified therefor in any agreement governing the same; (l) if any
material statement, report or certificate made or delivered by Borrower, any of
Borrower's partners, officers, employees or agents or any guarantor of
Borrower's Liabilities is not true and correct; or (m) if Bank is reasonably
insecure.
Upon the occurrence of an Event of Default, at Bank's option, without
notice by Bank to or demand by Bank of Borrower, all of Borrower's Liabilities
shall be immediately due and payable.
All of Bank's rights and remedies under this Note are cumulative and
non-exclusive. The acceptance by Bank of any partial payment made hereunder
after the time when any of Borrower's Liabilities become due and payable will
not establish a custom or waive any rights of Bank to enforce prompt payment
hereof. Bank's failure to require strict performance by Borrower of any
provision of this Note shall not waive, affect or diminish any right of Bank
thereafter to demand strict compliance and performance therewith. Any waiver
of an Event of Default hereunder shall not suspend, waive or affect any other
Event of Default hereunder. Borrower and every endorser waive presentment,
demand and protest and notice of presentment, protest, default, non-payment,
maturity, release, compromise, settlement, extension or renewal of this Note,
and hereby ratify and confirm whatever Bank may do in this regard. Borrower
further waives any and all notice or demand to which Borrower might be entitled
with respect to this Note by virtue of any applicable statute or law (to the
extent permitted by law).
Borrower agrees to pay, immediately upon demand by Bank, any and all
costs, fees and expenses (including reasonable attorneys' fees, costs and
expenses) incurred by Bank (i) in enforcing any of Bank's rights hereunder, and
(ii) in representing Bank in any litigation, contest, suit or dispute, or to
commence, defend or intervene or to take any action with respect to any
litigation, contest, suit or dispute (whether instituted by Bank, Borrower or
any other person) in any way relating to this Note or Borrower's Liabilities,
and to the extent not paid the same shall become part of Borrower's
Liabilities.
This Note shall be deemed to have been submitted by Borrower to Bank and
to have been made at
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<PAGE> 3
Bank's principal place of business. This Note shall be governed and controlled
by the internal laws of the State of Illinois and not the law of conflicts.
TO INDUCE BANK TO ACCEPT THIS NOTE, BORROWER IRREVOCABLY AGREES THAT,
SUBJECT TO BANK'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY
WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS NOTE SHALL BE
LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS.
BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE
OR FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE. BORROWER HEREBY WAIVES
ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT
AGAINST BORROWER BY BANK IN ACCORDANCE WITH THIS PARAGRAPH.
BORROWER IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, COUNTERCLAIM OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR
IN CONNECTION WITH THIS NOTE OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH, OR (II) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR
RELATED TO THIS NOTE OR ANY SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT,
AND AGREES THAT ANY SUCH ACTION, SUIT, COUNTERCLAIM OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.
WELLS-GARDNER ELECTRONIC CORPORATION
BY: George B. Toma
--------------------------------
PRINT OR TYPE NAME: George B. Toma
----------------
ITS: VP of Finance, CFO & Treasurer
-------------------------------
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<PAGE> 1
EXHIBIT 2.5
AMERICAN NATIONAL BANK
AND TRUST COMPANY OF
CHICAGO
REVOLVING NOTE (UNSECURED)
$8,000,000
CHICAGO, ILLINOIS JUNE 5, 1998
DUE MAY 31, 2001
FOR VALUE RECEIVED, the undersigned ("Borrower"), promises to pay to the
order of AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO ("Bank"), at its
principal place of business in Chicago, Illinois, or such other place as Bank
may designate from time to time hereafter, the principal sum of EIGHT MILLION
AND 00/100 Dollars, or such lesser principal sum as may then be owed by
Borrower to Bank hereunder.
Borrower's obligations and liabilities to Bank under this Note
("Borrower's Liabilities") shall be due and payable on May 31, 2001.
The unpaid principal balance of Borrower's Liabilities due hereunder shall
bear interest from the date of disbursement until paid at the rate of interest
announced or published publicly from time to time by Bank as its prime or base
rate of interest (the "Base Rate") per annum (computed on the basis of a 360
day year and actual days elapsed), or at Borrower's option exercised in
accordance with and subject to the terms of the LIBOR Agreement dated June 5,
1998, by and between Bank and Borrower, the rate per annum determined by adding
1.75% to LIBOR from time to time in effect.
The rate of interest to be charged by Bank to Borrower shall fluctuate
hereafter from time to time concurrently with, and in an amount equal to, each
increase or decrease in the Base Rate or with increases and decreases in LIBOR
under the LIBOR Agreement, whichever is applicable.
Accrued interest shall be payable by Borrower to Bank on the same day of
each month and at maturity, commencing with the 1st day of July, 1998, or as
billed by Bank to Borrower, at Bank's principal place of business, or at such
other place as Bank may designate from time to time hereafter. After maturity,
accrued interest on all of Borrower's Liabilities shall be payable on demand.
Borrower warrants and represents to Bank that Borrower shall use the
proceeds represented by this Note solely for proper business purposes and
consistently with all applicable laws and statutes.
Any deposits or other sums at any time credited by or payable or due from
Bank to Borrower, or any monies, cash, cash equivalents, securities,
instruments, documents or other assets of Borrower in the possession or control
of Bank or its bailee for any purpose, may be reduced to cash and applied by
Bank to or setoff by Bank against Borrower's Liabilities.
The occurrence of any one of the following events shall constitute a
default by the Borrower ("Event of Default") under this Note: (a) if Borrower
fails to pay any scheduled principal or interest payment or fails, after ten
days' written notice, to pay any other of Borrower's Liabilities when due and
payable or declared due and payable (whether by scheduled maturity, required
payment, acceleration, demand or otherwise); (b) if Borrower or any guarantor
of any of Borrower's Liabilities fails or neglects to perform, keep or observe
any term, provision, condition, covenant, warranty or representation contained
in this Note and such failure continues for thirty (30) days after notice
thereof, except default under Sections 4 and 5 of the Loan Agreement, which
shall become Events of Default if not cured within ten (10) days of their
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<PAGE> 2
occurrence, without notice; (c) occurrence of a default or an event of default
under any agreement, instrument or document heretofore, now or at any time
hereafter delivered by or on behalf of Borrower to Bank; (d) occurrence of a
default or an event of default under any agreement, instrument or document
heretofore, now or at any time hereafter delivered to Bank by any guarantor of
Borrower's Liabilities or by any person or entity which has granted to Bank a
security interest or lien in and to some or all of such person's or entity's
real or personal property to secure the payment of Borrower's Liabilities; (e)
if any of Borrower's assets are attached, seized, subjected to a writ, or are
levied upon or become subject to any lien, or come within the possession of any
receiver, trustee, custodian or assignee for the benefit of creditors provided
that in the case of any such condition existing as to assets which, in the
aggregate, are not material in value to the Borrower's business, such condition
shall not become an Event of Default unless such condition continues for thirty
days; (f) if a notice of lien, levy or assessment is filed of record or given
to Borrower with respect to all or any of Borrower's assets by any federal,
state, local department or agency unless Borrower is contesting the liability
for which such lien relates in good faith with adequate reserves; (g) if
Borrower or any guarantor of Borrower's Liabilities becomes insolvent or
generally fails to pay or admits in writing its inability to pay debts as they
become due, if a petition under Title 11 of the United States Code or any
similar law or regulation is filed by or against Borrower or any such
guarantor, if Borrower or any such guarantor shall make an assignment for the
benefit of creditors, if any case or proceeding is filed by or against Borrower
or any such guarantor for its dissolution or liquidation, or if Borrower is
enjoined, restrained or in any way prevented by court order from conducting all
or any material part of its business affairs; (h) the death or incompetency of
Borrower or any guarantor of Borrower's Liabilities, or the appointment of a
conservator for all or any portion of Borrower's assets; (i) the revocation,
termination or cancellation of any guaranty of Borrower's Liabilities without
written consent of Bank; (j) if a contribution failure occurs with respect to
any pension plan maintained by Borrower or any corporation, trade or business
that is, along with Borrower, a member of a controlled group of corporations or
a controlled group of trades or businesses (as described in Sections 414(b) and
(c) of the Internal Revenue Code of 1986 or Section 4001 of the Employee
Retirement Income Security Act of 1974, as amended, "ERISA") sufficient to give
rise to a lien under Section 302(f) of ERISA; (k) if Borrower or any guarantor
of Borrower's Liabilities is in default in the payment of any obligations,
indebtedness or other liabilities to any third party and such default is
declared and is not cured within the time, if any, specified therefor in any
agreement governing the same; (l) if any material statement, report or
certificate made or delivered by Borrower, any of Borrower's partners,
officers, employees or agents or any guarantor of Borrower's Liabilities is not
true and correct; or (m) if Bank is reasonably insecure.
Upon the occurrence of an Event of Default, at Bank's option, without
notice by Bank to or demand by Bank of Borrower, all of Borrower's Liabilities
shall be immediately due and payable.
All of Bank's rights and remedies under this Note are cumulative and
non-exclusive. The acceptance by Bank of any partial payment made hereunder
after the time when any of Borrower's Liabilities become due and payable will
not establish a custom or waive any rights of Bank to enforce prompt payment
hereof. Bank's failure to require strict performance by Borrower of any
provision of this Note shall not waive, affect or diminish any right of Bank
thereafter to demand strict compliance and performance therewith. Any waiver
of an Event of Default hereunder shall not suspend, waive or affect any other
Event of Default hereunder. Borrower and every endorser waive presentment,
demand and protest and notice of presentment, protest, default, non-payment,
maturity, release, compromise, settlement, extension or renewal of this Note,
and hereby ratify and confirm whatever Bank may do in this regard. Borrower
further waives any and all notice or demand to which Borrower might be entitled
with respect to this Note by virtue of any applicable statute or law (to the
extent permitted by law).
Borrower agrees to pay, immediately upon demand by Bank, any and all
costs, fees and expenses (including reasonable attorneys' fees, costs and
expenses) incurred by Bank (i) in enforcing any of Bank's rights hereunder, and
(ii) in representing Bank in any litigation, contest, suit or dispute, or to
commence, defend or intervene or to take any action with respect to any
litigation, contest, suit or dispute (whether instituted by Bank, Borrower or
any other person) in any way relating to this Note or Borrower's Liabilities,
and to the extent not paid the same shall become part of Borrower's
Liabilities.
Page 2 of 3
<PAGE> 3
This Note shall be deemed to have been submitted by Borrower to Bank and
to have been made at Bank's principal place of business. This Note shall be
governed and controlled by the internal laws of the State of Illinois and not
the law of conflicts.
This Note is executed pursuant to a revolving line of credit under which
Borrower is indebted to Bank and evidences the aggregate unpaid principal
amount of all advances made or to be made by Bank to Borrower under the Note.
All advances and repayments hereunder shall be evidenced by entries on the
books and records of Bank which shall be presumptive evidence of the principal
amount and interest owing and unpaid on this Note, or any renewal or extension
thereof. The failure to so record any such amount or any error so recording
any such amount shall not, however, limit or otherwise affect the obligations
of Borrower hereunder or under any note to repay the principal amount of
Borrower's Liabilities together with all interest accruing thereon.
Advances under this Note may be made by Bank upon oral or written request
of any person authorized to make such requests on behalf of Borrower
("Authorized Person"). Borrower agrees that Bank may act on requests which
Bank in good faith believes to be made by an Authorized Person, regardless of
whether such requests are in fact made by an Authorized Person. Any such
advance shall be conclusively presumed to have been made by Bank to or for the
benefit of Borrower. Borrower does hereby irrevocably confirm, ratify and
approve all such advances by Bank and agrees to indemnify Bank against any and
all losses, liabilities and expenses (including reasonable attorneys' fees) and
shall hold Bank harmless with respect thereto.
TO INDUCE BANK TO ACCEPT THIS NOTE, BORROWER IRREVOCABLY AGREES THAT,
SUBJECT TO BANK'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY
WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS NOTE SHALL BE
LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS.
BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE
OR FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE. BORROWER HEREBY WAIVES
ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT
AGAINST BORROWER BY BANK IN ACCORDANCE WITH THIS PARAGRAPH.
BORROWER IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, COUNTERCLAIM OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR
IN CONNECTION WITH THIS NOTE OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH, OR (II) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR
RELATED TO THIS NOTE OR ANY SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT,
AND AGREES THAT ANY SUCH ACTION, SUIT, COUNTERCLAIM OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.
WELLS-GARDNER ELECTRONIC CORPORATION
BY: George B. Toma
---------------------------------
PRINT OR TYPE NAME: George B. Toma
------------------
ITS: VP Finance, CFO & Treasurer
--------------------------------
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