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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): January 12, 2000
----------------
Wells-Gardner Electronics Corporation
---------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Illinois 1-8250 36-1944630
- ---------------------------- ------------ -------------------
(State or Other Jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2701 North Kildare Avenue, Chicago, IL 60639
-------------------------------------- -----
(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) On January 12, 2000, American Gaming & Electronics, Inc., a Nevada
corporation and wholly-owned subsidiary of Wells-Gardner
("AGE-Nevada"), purchased certain of the assets of each of American
Gaming & Electronics, Inc., a New Jersey corporation ("AGE-New
Jersey"), and American Gaming & Electronics of Florida, Inc., a Florida
corporation ("AGE-Florida"), and each of Ben Domenico, James Irvin,
Dave Mysel and Rocky D'Aquilante (collectively, the "Shareholders").
Such assets include goodwill and other assets used in connection with
the design, sale, marketing, manufacturing, distribution and service of
new and remanufactured gaming machines and parts for gaming machines
(the "Business"). The purchase price (as described below) was based on
arms' length negotiations between AGE-Nevada and AGE-New Jersey,
AGE-Florida and the Shareholders.
The acquisition of the assets (the "Acquisition") was completed
pursuant to an Asset Purchase Agreement between AGE-Nevada, AGE-New
Jersey, AGE-Florida and each of the Shareholders dated January 12, 2000
and a Shareholder Purchase Agreement between AGE-Nevada and the
Shareholders dated January 12, 2000 (the "Shareholders Purchase
Agreement").
Pursuant to such agreements, AGE-Nevada paid $780,714.75 to the
Shareholders and deposited an additional $619,385.25 of the purchase
price otherwise payable to the Shareholders into an escrow account to
be held pursuant to the terms of the Escrow Agreement between
AGE-Nevada, each of AGE-New Jersey and AGE-Florida, the Shareholders
and American National Bank and Trust Company of Chicago, as escrow
agent. In addition, pursuant to the terms of the Shareholder Purchase
Agreement, the Shareholders will be eligible to receive certain
contingent payments in the future from AGE-Nevada provided that
AGE-Nevada meets certain operating income targets.
Wells-Gardner funded the Acquisition with its general line of credit
pursuant to that certain Loan Agreement between Wells-Gardner and
American National Bank and Trust Company of Chicago dated June 5, 1998.
This Loan Agreement was filed as Exhibit 2.2 to the Current Report on
Form 8-K Wells-Gardner filed with the Securities and Exchange
Commission ("SEC") on June 16, 1998.
(b) Certain of the assets acquired pursuant to the Acquisition constitute
equipment or other physical property used by AGE-New Jersey and
AGE-Florida in the Business. AGE- Nevada will continue to use the
acquired assets for the same purposes.
Risks Associated with the Acquisition.
If Wells-Gardner is unable to successfully integrate the Business into
its operations, Wells- Gardner may not be able to realize expected operating
efficiencies, eliminate redundant costs or
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operate the Business profitably. The integration of the Business is subject to a
number of risks, including risks that:
- The Acquisition could divert management's attention from the
daily operations of Wells-Gardner and otherwise require
additional management, operational and financial resources;
- the acquisition of required gaming licenses may be impossible
or may take longer or cost more than expected;
- Wells-Gardner may be unable to retain customers or key
employees of AGE-New Jersey and/or AGE-Florida; and
- the Business might involve additional liabilities and problems
that Wells-Gardner did not anticipate at the time of the
Acquisition.
Forward Looking Statements.
Certain statements included in this Current Report on Form 8-K, other
than historical facts, are forward-looking statements (as such term is defined
in the Securities Exchange Act of 1934, and the regulations thereunder) which
are intended to be covered by the safe harbors created thereby.
Forward-looking statements include, without limitation, statements as
to Wells-Gardner's objective to grow through strategic acquisitions and internal
growth, the impact of acquisitions on Wells-Gardner's earnings, Wells-Gardner's
ability to realize operating efficiencies in the integration of its
acquisitions, trends in Wells-Gardner's future operating performance, the
effects of legal or governmental proceedings, the effects of changes in
accounting pronouncements and statements as to Wells-Gardner's or management's
beliefs, expectations or opinions. Forward-looking statements are subject to
risks and uncertainties and may be affected by various factors which may cause
actual results to differ materially from those in the forward-looking
statements. In addition to the factors discussed in this report, certain risks,
uncertainties and other factors, including, without limitation, the risk that
Wells-Gardner will not be able to realize operating efficiencies in the
integration of its acquisitions, risks associated with growth and future
acquisitions, fluctuations in quarterly operating results and the other risks
detailed from time to time in filings with the SEC can cause actual results and
developments to be materially different from those expressed or implied by such
forward-looking statements.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
Pursuant to Rule 3-05 of SEC Regulation S-X, Wells-Gardner is not
required to file financial statements of AGE-New Jersey or AGE-Florida.
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(b) Pro Forma Financial Information.
Pursuant to Rule 3-05 of SEC Regulation S-X, Wells-Gardner is not
required to file any pro forma financial information in connection with
the Acquisition.
(c) Exhibits.
2.1 Asset Purchase Agreement by and among AGE-Nevada, each of
AGE-New Jersey and AGE-Florida and the Shareholders, dated as
of January 12, 2000.
2.2 Shareholder Purchase Agreement by and among AGE-Nevada and the
Shareholders, dated as of January 12, 2000.
2.3 Escrow Agreement by and among AGE-Nevada, each of AGE-New
Jersey and AGE-Florida, the Shareholders and American National
Bank and Trust Company of Chicago, dated as of January 12,
2000.
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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: January 27, 2000 By: /s/ George B. Toma
--------------------------------
George B. Toma, CPA, CMA
Vice President of Finance, Chief
Financial Officer and Treasurer
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Exhibit Index
<TABLE>
<CAPTION>
Sequential
Page
Exhibit # Item Number
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<S> <C> <C>
2.1 Asset Purchase Agreement by and 7
among American Gaming & Electronics,
Inc., a Nevada corporation, each of
American Gaming & Electronics, Inc., a
New Jersey corporation and American
Gaming & Electronics of Florida, Inc.,
a Florida corporation, and each of Ben Domenico,
James Irvin, Dave Mysel and Rocky D'Aquilante, dated
as of January 12, 2000.
2.2 Shareholder Purchase Agreement by and 54
among American Gaming & Electronics,
Inc., a Nevada corporation, and each of
Ben Domenico, James Irvin, Dave
Mysel and Rocky D'Aquilante, dated as
of January 12, 2000.
2.3 Escrow Agreement by and among 89
American Gaming & Electronics, Inc., a
Nevada corporation, each of American
Gaming & Electronics, Inc., a New
Jersey corporation, and American
Gaming & Electronics of Florida, Inc.,
a Florida corporation, each of Ben Domenico, James
Irvin, Dave Mysel and Rocky D'Aquilante, and
American National Bank and Trust Company of Chicago,
dated as of January 12, 2000.
</TABLE>
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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
AMERICAN GAMING & ELECTRONICS, INC.,
A NEVADA CORPORATION,
AND
AMERICAN GAMING & ELECTRONICS, INC.,
A NEW JERSEY CORPORATION,
AND
AMERICAN GAMING & ELECTRONICS OF FLORIDA, INC.,
A FLORIDA CORPORATION,
AND
BEN DOMENICO AND JAMES IRVIN AND DAVE MYSEL AND
ROCKY D'AQUILANTE
DATED AS OF JANUARY 12, 2000
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TABLE OF CONTENTS
<TABLE>
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PAGE
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ARTICLE I
PURCHASE AND SALE OF ASSETS..............................................................................1
1.1 Assets.................................................................................1
1.2 Excluded Assets........................................................................1
1.3 Cooperation Following the Closing Date.................................................2
1.4 Regulatory Matters.....................................................................2
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT......................................................................2
2.1 Purchase Price.........................................................................2
2.1.1 Inventory Review......................................................2
2.1.2 At Closing............................................................2
2.1.3 Post-Closing..........................................................3
2.2 Adjustment.............................................................................3
2.2.1 Actual Net Tangible Assets Schedule...................................3
2.2.2 Protest Notice........................................................3
2.2.3 Resolution of the Sellers' Protest....................................3
2.3 Assumed Liabilities....................................................................4
2.4 No Expansion of Third Party Rights.....................................................4
2.5 Excluded Liabilities...................................................................4
2.6 Allocation of Purchase Price...........................................................4
2.7 Transferee Liability...................................................................5
2.8 Waiver of Resolutory Conditions........................................................5
2.9 Condition of Assets....................................................................5
2.10 Regulatory Expenses....................................................................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES...........................................................................5
3.1 Representations and Warranties of Sellers and the Shareholders.........................5
3.1.1 Organization Good Standing; Qualification.............................5
3.1.2 Authority.............................................................6
3.1.3 Subsidiaries..........................................................6
3.1.4 Articles of Incorporation, Bylaws, Officers and Directors ............6
3.1.5 Capital Stock.........................................................6
3.1.6 Assets................................................................6
3.1.7 No Consents...........................................................7
3.1.8 Absence of Undisclosed Liabilities....................................8
3.1.9 Taxes.................................................................8
3.1.10 Contracts.............................................................8
3.1.11 Real Property.........................................................8
3.1.12 Litigation............................................................9
</TABLE>
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<TABLE>
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3.1.13 Compliance with Laws.................................................10
3.1.14 Intellectual Property................................................10
3.1.15 Transactions Not a Breach............................................10
3.1.16 Conduct of the Business..............................................11
3.1.17 Insurance Policies...................................................11
3.1.18 Licenses.............................................................11
3.1.19 Employees............................................................11
3.1.20 Personnel Agreements and Labor Relations.............................12
3.1.21 Environmental Matters................................................13
3.1.22 Welfare and Benefit Plans............................................14
3.1.23 Customers............................................................15
3.1.24 Suppliers............................................................15
3.1.25 Interest of Sellers in Customers, Etc................................15
3.1.26 Affiliate Transactions...............................................15
3.1.27 Books and Records....................................................16
3.1.28 Product Liability....................................................16
3.1.29 Product Warranties...................................................16
3.1.30 Brokers..............................................................16
3.1.31 Gaming Regulatory Matters............................................16
3.1.32 Y2K..................................................................17
3.1.33 Customs..............................................................17
3.1.34 No Misrepresentation.................................................17
3.2 Representations and Warranties of Buyer...............................................18
3.2.1 Organization.........................................................18
3.2.2 Authority............................................................18
3.2.3 Transactions Not a Breach............................................18
3.2.4 Brokers..............................................................18
3.2.5 Due Diligence........................................................18
3.2.6 No Misrepresentation.................................................18
ARTICLE IV
CLOSING.................................................................................................19
4.1 Time and Place........................................................................19
4.2 Sellers Deliveries....................................................................19
4.2.1 Bill of Sale and Assignment and Assumption Agreement.................19
4.2.2 Employment Agreements................................................19
4.2.3 Corporate Documents..................................................19
4.2.4 Certificates of Good Standing........................................19
4.2.5 Shareholder Purchase Agreement.......................................19
4.2.6 Escrow Agreement.....................................................19
4.2.7 Consents.............................................................19
4.2.8 Opinion..............................................................19
4.2.9 Resolutions..........................................................20
4.2.10 Tax Clearance........................................................20
4.2.11 Lien Searches........................................................20
4.2.12 Transfer of Telephone Numbers........................................20
4.2.13 Incumbency Certificate...............................................20
</TABLE>
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<TABLE>
<S> <C>
4.2.14 Estoppel Certificates................................................20
4.2.15 Other Documents......................................................20
4.3 Buyer Deliveries......................................................................20
4.3.1 Purchase Price.......................................................20
4.3.2 Bill of Sale and Assignment and Assumption Agreement.................20
4.3.3 Employment Agreements................................................20
4.3.4 Shareholder Purchase Agreement.......................................21
4.3.5 Escrow Agreement.....................................................21
4.3.6 Resolutions..........................................................21
4.3.7 Opinion..............................................................21
4.3.8 Incumbency Certificate...............................................21
4.3.9 Guaranty Agreement...................................................21
4.3.10 Other Documents......................................................21
ARTICLE V
OTHER AGREEMENTS........................................................................................21
5.1 Books and Records.....................................................................21
5.2 Cooperation after Closing.............................................................21
5.3 Public Disclosure.....................................................................22
5.4 Mail..................................................................................22
5.5 Assumed Liabilities...................................................................22
5.6 Noncompetition and Confidentiality....................................................22
5.6.1 Noncompetition.......................................................22
5.6.2 Confidentiality......................................................23
5.6.3 Blue Pencil..........................................................23
5.6.4 Remedies.............................................................23
5.7 Taxes.................................................................................23
5.8 Transferee/Successor Liability........................................................23
5.9 American Gaming & Electronics Name....................................................24
5.10 Accounts Receivable Adjustment........................................................24
5.11 Buyer's 401(k) Plan...................................................................24
ARTICLE VI
INDEMNIFICATION.........................................................................................24
6.1 Indemnification by Sellers............................................................24
6.2 Escrow Account........................................................................25
6.3 Indemnification by Buyer..............................................................25
6.4 Indemnification Procedure for Third Party Claims......................................26
6.5 Direct Claims.........................................................................27
6.6 Right of Set-Off......................................................................27
6.7 Survival of Representations and Warranties of Sellers and the Shareholders;
Time Limits on Indemnification Obligations............................................28
6.8 Survival of Representations and Warranties of Buyer; Time Limits on
Indemnification Obligations...........................................................28
6.9 Certain Limitations...................................................................28
6.10 Materiality...........................................................................29
</TABLE>
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<TABLE>
<S> <C>
6.11 Appointment of Representative.........................................................29
ARTICLE VII
MISCELLANEOUS...........................................................................................29
7.1 Notice................................................................................29
7.1.1 If to Buyer..........................................................30
7.1.2 If to Sellers........................................................30
7.1.3 If to Shareholders:..................................................30
7.2 Severability..........................................................................31
7.3 Successors............................................................................31
7.4 Documents.............................................................................31
7.5 Counterparts..........................................................................31
7.6 Expenses..............................................................................31
7.7 Governing Law.........................................................................32
7.8 Headings..............................................................................32
7.9 Assignment............................................................................32
7.10 No Strict Construction................................................................32
7.11 Definitions...........................................................................32
7.12 Entire Agreement......................................................................34
7.13 Third Parties.........................................................................35
7.14 Interpretative Matters................................................................35
</TABLE>
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LIST OF EXHIBITS
EXHIBIT
- -------
Exhibit 2.1.1 Valuation of Net Tangible Assets
Exhibit 2.1.2 Form of Escrow Agreement
Exhibit 4.2.8 Form of Legal Opinion
Exhibit 4.3.9 Form of Guaranty Agreement
LIST OF SCHEDULES
SCHEDULE DESCRIPTION
- -------- -----------
Schedule 1.1 Assets
Schedule 1.2 Excluded Assets
Schedule 2.3 Assumed Liabilities
Schedule 2.6 Allocation of Purchase Price
Schedule 3.1.1 Foreign Qualification
Schedule 3.1.3 Subsidiaries
Schedule 3.1.4 Officers and Directors
Schedule 3.1.6 Condition of Assets
Schedule 3.1.7 Consents
Schedule 3.1.8 Undisclosed Liabilities
Schedule 3.1.10 Contracts
Schedule 3.1.11 Real Property
Schedule 3.1.12 Litigation
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Schedule 3.1.14 Intellectual Property
Schedule 3.1.16 Conduct of Business
Schedule 3.1.17 Insurance Policies
Schedule 3.1.18 Licenses
Schedule 3.1.19 Employees
Schedule 3.1.20 Personnel Agreements and Labor Relations
Schedule 3.1.22 Employee Benefit Plans
Schedule 3.1.25 Interest of Sellers in Customers, etc.
Schedule 3.1.26 Affiliate Transactions
Schedule 3.1.28 Product Liability
Schedule 3.1.29 Product Warranties
Schedule 3.1.31 Gaming Regulatory Matters
Schedule 3.1.32 Y2K
Schedule 3.1.33 Customs
Schedule 3.2.3 Buyer: Transactions Not A Breach
Schedule 6.1.5 Indemnification by Seller
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GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM SECTION REFERENCE
- ---- -----------------
<S> <C>
"Accounting Principles".....................................................................................3.1.6.2
"Accounts".....................................................................................................5.10
"Actual Net Tangible Assets"..................................................................................2.2.1
"Actual Net Tangible Assets Schedule".........................................................................2.2.1
"Adjustment Protest Notice"...................................................................................2.2.2
"Affiliate"....................................................................................................7.11
"Affiliate Transactions".....................................................................................3.1.26
"AGE"..................................................................................................Introduction
"AGE Florida"..........................................................................................Introduction
"Agreement"............................................................................................Introduction
"Assets"........................................................................................................1.1
"Assumed Liabilities"...........................................................................................2.3
"Business".............................................................................................Introduction
"Buyer Indemnified Party".......................................................................................6.1
"Buyer"................................................................................................Introduction
"Buyer's 401(k) Plan...........................................................................................5.11
"Buyer's Agreements"..........................................................................................3.2.2
"Calendar Day".................................................................................................7.11
"Cash Payment"................................................................................................2.1.2
"Claims"...................................................................................................3.1.12.1
"Closing".......................................................................................................4.1
"Closing Date"..................................................................................................4.1
</TABLE>
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<TABLE>
<CAPTION>
TERM SECTION REFERENCE
- ---- -----------------
<S> <C>
"COBRA"........................................................................................................7.11
"Code".........................................................................................................7.11
"Collection Period"............................................................................................5.10
"Consents"....................................................................................................3.1.7
"Continuing Employee"......................................................................................3.1.19.2
"Contracts"..................................................................................................3.1.10
"Defense Counsel"...............................................................................................6.4
"Defense Notice"................................................................................................6.4
"Direct Claim"..................................................................................................6.5
"Disputed Accounts"............................................................................................5.10
"Employee Benefit Plans".......................................................................................7.11
"Environmental Laws"...........................................................................................7.11
"ERISA"........................................................................................................7.11
"Escrow Account"..............................................................................................2.1.2
"Escrow Agreement"............................................................................................2.1.2
"Excluded Liabilities"..........................................................................................2.5
"Excluded Assets"...............................................................................................1.2
"Gaming Authorities".........................................................................................3.1.31
"Gaming Laws"................................................................................................3.1.31
"Gaming Licenses"............................................................................................3.1.31
"Governmental Entity"..........................................................................................7.11
"Hazardous Substances".........................................................................................7.11
"Indemnified Party".............................................................................................6.4
"Indemnifying Party"............................................................................................6.4
"Independent Auditor".........................................................................................2.2.3
</TABLE>
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<TABLE>
<CAPTION>
TERM SECTION REFERENCE
- ---- -----------------
<S> <C>
"Intellectual Property"........................................................................................7.11
"Inventory Review"............................................................................................2.1.1
"KPMG Statement"..............................................................................................2.1.1
"Law"..........................................................................................................7.11
"Licenses".....................................................................................................7.11
"Liens"........................................................................................................7.11
"Losses"........................................................................................................6.1
"Net Tangible Assets".........................................................................................2.1.1
"ordinary course of business"..................................................................................7.11
"Person".......................................................................................................7.11
"Plan Affiliate"...............................................................................................7.11
"Plans"......................................................................................................3.1.22
"Post Closing Payment" .......................................................................................2.1.3
"Proceeds"......................................................................................................6.9
"Proposed Net Tangible Assets"................................................................................2.1.1
"Purchase Price"................................................................................................2.1
"Real Property"..............................................................................................3.1.11
"Representative"...............................................................................................6.11
"Regulatory Matters" .....................................................................................1.4
"Seller Indemnified Party"......................................................................................6.3
"Sellers"..............................................................................................Introduction
"Sellers' Agreements".........................................................................................3.1.2
</TABLE>
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<TABLE>
<CAPTION>
TERM SECTION REFERENCE
- ---- -----------------
<S> <C>
"Shareholder Purchase Agreement".......................................................................Introduction
"Shareholders".........................................................................................Introduction
"Tax"..........................................................................................................7.11
"Term"........................................................................................................5.6.1
"Territory"...................................................................................................5.6.1
"Third Party Claim".............................................................................................6.4
"to Sellers' knowledge"........................................................................................7.11
"to the knowledge of Seller,"..................................................................................7.11
"Transaction Documents".........................................................................................2.5
"Wells-Gardner"........................................................................................Introduction
</TABLE>
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of this 12TH
day of January, 2000, by and among AMERICAN GAMING & ELECTRONICS, INC., a Nevada
corporation ("Buyer"), each of AMERICAN GAMING & ELECTRONICS, INC., a New Jersey
corporation, ("AGE"), and AMERICAN GAMING & ELECTRONICS OF FLORIDA, INC., a
Florida corporation ("AGE Florida" and collectively with AGE, the "Sellers"),
and each of Ben Domenico, James Irvin, Dave Mysel and Rocky D'Aquilante,
shareholders of Sellers (collectively "Shareholders"). Capitalized terms that
are not otherwise defined in this Agreement are defined in SECTION 7.11.
WHEREAS, AGE and AGE Florida are engaged in the business of the design,
sale, marketing, manufacturing, distribution and service of new and
remanufactured gaming machines and parts for gaming machines (the "Business")
and have principal offices located at 19 Tilton Street, Hammonton, New Jersey
08037; 6255 McLeod Drive, Suite 22, Las Vegas, Nevada 89120; and 2046 McKinley
Street, Hollywood, Florida 33020.
WHEREAS, Sellers desire to sell to Buyer and Buyer desires to purchase from
Sellers, certain of the assets of Sellers, which are used in or arise out of the
conduct of the Business, upon the terms and subject to the conditions
hereinafter set forth.
WHEREAS, concurrent with the execution of this Agreement, Buyer and
Shareholders are executing the Shareholder Purchase Agreement whereby Buyer will
agree to purchase certain assets owned by the Shareholders (the "Shareholder
Purchase Agreement").
WHEREAS, Buyer is a wholly-owned subsidiary of Wells-Gardner Electronics
Corporation, an Illinois corporation ("Wells-Gardner").
NOW, THEREFORE, in consideration of the mutual covenants of the parties set
forth in this Agreement and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Assets. On the terms and subject to the conditions hereinafter set
forth, at the Closing, Sellers shall sell, convey, transfer, assign and deliver
to Buyer, free and clear of all Liens, and Buyer shall purchase from Sellers,
all of Sellers' right, title and interest in and to certain property and assets
which are used in or arise out of the conduct of the Business or are considered
to be assets of Sellers in connection with the Business as of the Closing Date,
wherever located (collectively, the "Assets"). The Assets shall include only the
rights and assets set forth on Schedule 1.1 attached hereto.
1.2 Excluded Assets. Notwithstanding anything to the contrary contained
herein, the Assets do not include the rights or assets listed on Schedule 1.2
attached hereto or any other rights or assets not listed on Schedule 1.1
attached hereto (collectively, the "Excluded Assets").
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1.3 Cooperation Following the Closing Date. To the extent any Excluded
Asset may be, in the opinion of Buyer, necessary or appropriate to conduct the
Business, Sellers agree to provide Buyer with access to such Excluded Assets so
long as and to the extent that such Excluded Assets are necessary or appropriate
to conduct the Business following the Closing Date.
1.4 Regulatory Matters. Buyer, Sellers and Shareholders understand that as
of the Closing Date the State of New Jersey has not granted a transactional
waiver to Buyer to conduct gaming related business with casinos in New Jersey.
Accordingly, only non-gaming related products will be sold and distributed in
New Jersey and Connecticut until such time as the transactional waiver is
granted and becomes effective in New Jersey and an exemption is granted in
Connecticut. Furthermore, this Agreement and the transactions contemplated
hereby shall only be effective to the extent permissible in New Jersey until
such time as the transactional waiver is granted by the New Jersey Casino
Control Commission.
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
2.1 Purchase Price. The aggregate purchase price to be paid for the Assets
shall be an amount equal to the Net Tangible Assets (as defined below), plus
$360,000 (collectively, the "Purchase Price"); provided however that in no event
shall the Purchase Price exceed $1,400,000. The Purchase Price is payable by
Buyer to Sellers as follows:
2.1.1 Inventory Review. Prior to the Closing Date, Sellers shall cause
their representatives to undertake a joint physical count and review of the
Sellers' inventory as of the Closing Date (the "Inventory Review"). Buyer
and representatives of the Buyer's auditor, KPMG LLP ("KPMG"), will be
present during the Inventory Review. Based on the results of the Inventory
Review, Sellers will calculate the amount of the Net Tangible Assets. The
"Net Tangible Assets" shall be the sum of cash, accounts receivable,
inventory, net property, plant and equipment, and other assets, less the
sum of accounts payable, other current liabilities and other liabilities,
to the extent that such liabilities are deemed to have been incurred in the
ordinary course of business, and all such components of Net Tangible Assets
shall be evaluated and calculated in accordance with Exhibit 2.1.1 hereto
(the "Proposed Net Tangible Assets").
2.1.2 At Closing.
(a) Cash. On the Closing Date, Buyer shall pay to the Sellers
cash in an amount (the "Cash Payment") equal to the Proposed Net
Tangible Assets minus $619,385.25, which shall be deposited into the
Escrow Account (as defined below) in accordance with this SECTION 2.1.
The Cash Payment shall be made at Closing by wire transfer of
immediately available funds to an account of Sellers at a bank or
banks specified by Sellers in wire transfer instructions provided to
Buyer at least two (2) Calendar Days prior to the Closing Date.
(b) Escrow Account. On the Closing Date, Buyer shall deposit
$619,385.25 into a separate segregated interest bearing escrow account
(the "Escrow Account") to be held by Buyer in accordance with the
terms of an escrow
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agreement to be executed by Buyer, Sellers and Shareholders
simultaneously herewith in the form of Exhibit 2.1.2(b) (the "Escrow
Agreement") and drawn upon by Buyer in connection with any
indemnification obligations of Sellers and/or Shareholders pursuant to
the limitations set forth in SECTION 6.3 hereof and Section 6.2 of the
Shareholder Purchase Agreement. To the extent available, the cash in
the Escrow Account shall be released from the Escrow Account and
distributed to Sellers and Shareholders in accordance with the terms
and conditions set forth in the Escrow Agreement.
2.1.3 Post-Closing. On the date which is the earlier of one hundred
twenty (120) Calendar Days following Closing or thirty (30) Calendar Days
after the final determination of the Actual Net Tangible Asset Schedule (as
defined below) in accordance with SECTION 2.2 below, Buyer shall pay to
Sellers cash (the "Post Closing Payment") in an amount equal to the lesser
of (a) $1,400,000 less the Actual Net Tangible Assets, or (b) $360,000.
2.2 Adjustment. Notwithstanding anything to the contrary contained herein,
the Post Closing Payment shall be adjusted on a dollar for dollar basis, to the
extent that the Actual Net Tangible Assets (as defined below) is not equal to
the Proposed Net Tangible Assets determined as set forth below (provided,
however, that in no event shall the Purchase Price exceed $1,400,000):
2.2.1 Actual Net Tangible Assets Schedule. As soon as practicable
after the Closing Date, KPMG will at Sellers' cost prepare a statement of
net assets acquired as of the Closing Date (the "KPMG Statement"). Buyer
shall, within seven (7) Calendar Days of its receipt of the KPMG Statement
prepared in accordance with Exhibit 2.1.1, deliver to Sellers and
Shareholders a schedule setting forth the Actual Net Tangible Assets (the
"Actual Net Tangible Assets") as determined by the KPMG Statement (the
"Actual Net Tangible Assets Schedule").
2.2.2 Protest Notice. Within 20 Calendar Days of their receipt of the
Actual Net Tangible Assets Schedule, the Sellers may deliver written notice
(the "Adjustment Protest Notice") to the Buyer of any objections, and the
basis therefor, which Sellers may have to the Adjustment Schedule. The
failure of Sellers to deliver such Adjustment Protest Notice within the
prescribed time period will constitute acceptance of the Actual Net
Tangible Assets Schedule as proposed by Buyer as its final determination.
2.2.3 Resolution of the Sellers' Protest. If Sellers and Buyer are
unable to resolve any disagreement with respect to the Adjustment Schedule
within 10 Calendar Days following Buyer's receipt of the Adjustment Protest
Notice, then the items in dispute will be referred to an independent
accounting firm not regularly used, and selected jointly, by Sellers and
Buyer (the "Independent Auditor") for final determination within 30
Calendar Days after such referral, which determination shall be the Actual
Net Tangible Assets; provided however that neither party shall be precluded
from contesting the determination judicially. Buyer, Sellers and
Shareholders shall provide all information, cooperation and assistance
reasonably requested by the Independent Auditor in conducting such review.
The fees and expenses of the Independent Auditor shall be borne by the
losing party or, to the extent each party prevails in part, each party
shall pay the fees and expenses to the extent it is the losing party, as
determined by the Independent Auditor. In the event that the Independent
Auditor's determination is contested judicially, the losing party shall pay
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the fees and expenses, including reasonable attorneys' fees and costs,
incurred in connection with such litigation by the other party or parties
to such litigation.
2.3 Assumed Liabilities. From and after the Closing Date, Buyer will
assume and agree to pay, defend, discharge and perform when due only those
liabilities set forth on Schedule 2.3 (all such liabilities and obligations to
be so assumed by Buyer pursuant to this SECTION 2.3 being referred to
collectively as the "Assumed Liabilities").
2.4 No Expansion of Third Party Rights. The assumption by Buyer of the
Assumed Liabilities shall not expand the rights or remedies of any third party
against Buyer or Sellers as compared to the rights and remedies which such third
party would have had against Sellers had Buyer not assumed the Assumed
Liabilities. Without limiting the generality of the preceding sentence, the
assumption by Buyer of the Assumed Liabilities shall not create any third party
beneficiary rights.
2.5 Excluded Liabilities. Notwithstanding anything to the contrary
contained in this Agreement, the Shareholder Purchase Agreement or any
agreement, document, certificate or instrument being delivered pursuant to such
agreements (collectively, the "Transaction Documents"), and regardless of
whether such liability is disclosed in this Agreement or any of the Transaction
Documents or on any Schedule or Exhibit hereto or thereto, Buyer will not
assume, agree to pay, perform or discharge or in any way be responsible for any
Excluded Liabilities. As used herein, the term "Excluded Liabilities" means any
and all debts, liabilities or obligations of Sellers or any Employee Benefit
Plan, of any kind or nature whatsoever other than the Assumed Liabilities
(whether due or to become due, fixed or unfixed, choate or inchoate, secured or
unsecured, absolute or contingent, direct or indirect, asserted or unasserted,
known or unknown, and regardless of whether such debts, liabilities or
obligations relate to Sellers' Business). Unless such items are otherwise
specifically included in the Assumed Liabilities, the Excluded Liabilities shall
include, without limitation, (i) any liabilities or obligations whatsoever
relating, directly or indirectly, to any Excluded Assets, including, without
limitation, any trade creditors, bank debt, payroll or payroll tax liabilities,
payments due to any current or former employee of Sellers for amounts due under
any bonus plan or incentive arrangement, income tax liabilities, severance
liabilities to any current or former employee of Sellers, 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 Sellers, (iii) any
contractual obligations or liabilities relating to any existing facilities used
in connection with the Business, (iv) any liability of the Sellers or
Shareholders for taxes, costs, and expenses incurred in connection with this
Agreement and (v) the liability of Sellers or Shareholders under any "bulk
sales" or similar law or statute relating to the transfer of the Assets
hereunder.
2.6 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets and between the Sellers as set forth on Schedule 2.6. The
parties agree to report on their respective tax returns the transactions which
are the subject of this Agreement in a manner consistent with the allocation set
forth in Schedule 2.6. Notwithstanding the foregoing, Buyer and Sellers hereby
agree that $250,000 of the Purchase Price shall be in consideration for Sellers'
agreement not to compete contained in SECTION 5.6.1 hereof.
2.7 Transferee Liability. Prior to the Closing Date, Sellers agree to
notify the appropriate state taxing authority of the transfers contemplated
hereunder and obtain a certificate from such authority showing that all tax,
penalty and interest assessed against or due from Sellers
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has been paid, or a clearance certificate from such authority showing that no
tax, penalty or interest has been assessed against and is due and unpaid from
Sellers.
2.8 Waiver of Resolutory Conditions. Sellers agree and acknowledge that
upon effectuation of the Closing, the sale of the 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 in accordance
with SECTION 2.1 (subject to a right of set-off, if applicable), shall not be
cause for the resolution and/or rescission of the transfer of such Assets, and
Sellers confirm that the sale of the Assets contemplated by this Agreement shall
contain no resolutory conditions whatsoever. Sellers 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 Assets purchased hereunder.
2.9 Condition of Assets. Other than as described herein, Sellers and
Shareholders make no warranties, express or implied, to Buyer concerning the
Assets, including, but not limited to, the condition of the Assets, the
merchantability of the Assets, or the Assets' fitness for any purpose. Further,
Buyer acknowledges that the Assets are purchased AS IS and WITH ALL FAULTS.
Notwithstanding the above, Sellers and Shareholders shall transfer to Buyer all
warranties and guarantees with respect to the Assets they have received from
third parties (including but not limited to manufacturers and suppliers of the
Assets).
2.10 Regulatory Expenses. Buyer acknowledges that all or part of the
Business may be subject to the approval and licensing of federal, state, or
local authorities and that Buyer will assume all costs and responsibility of
complying with federal, state, and local regulatory and licensing requirements.
Notwithstanding the above, Sellers and Shareholders shall take any and all
actions Buyer, in good faith, deems reasonably necessary to comply with any
federal, state, or local regulatory or licensing requirements.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Sellers and the Shareholders.
Sellers and the Shareholders, jointly and severally, hereby represent and
warrant to Buyer as of the Closing Date as follows:
3.1.1 Organization Good Standing; Qualification. AGE is a corporation
duly organized, validly existing, and in good standing under the laws of
the State of New Jersey and has all requisite corporate power and authority
to conduct the Business as it is now being conducted and to own or hold
under lease the Assets. AGE Florida is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Florida and has all requisite corporate power and authority to conduct the
Business as it is now being conducted and to own or hold under lease the
Assets. Each of AGE and AGE Florida is qualified to do business as a
foreign corporation in the jurisdictions set forth on Schedule 3.1.1, which
constitutes all jurisdictions where the conduct of the Business requires
such qualification.
3.1.2 Authority. Each of the Sellers and the Shareholders have full
right, power, and authority to enter into and perform their obligations
under this Agreement, and all
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other agreements, documents, certificates and instruments delivered in
connection with the transactions contemplated hereby, to which either of
the Sellers or any of the Shareholders are a party and any other document
to be delivered by such Sellers or Shareholders, as the case may be at
Closing (collectively, the "Sellers' Agreements"). The execution and
performance of this Agreement and the Sellers' Agreements will be duly
authorized by all necessary corporate action on the part of Sellers. This
Agreement has been, and the Sellers' Agreements once executed will be, duly
and validly executed and delivered by each of the Sellers and each
Shareholder and will constitute the valid and binding obligations of each
of the Sellers and each Shareholder, enforceable against each of them in
accordance with their respective terms.
3.1.3 Subsidiaries. Except as scheduled on Schedule 3.1.3 hereto,
neither of the Sellers has directly or indirectly, any equity or ownership
interest in any Person.
3.1.4 Articles of Incorporation, Bylaws, Officers and Directors. Each
of the Sellers has previously delivered to Buyer true and complete copies
of its Articles of Incorporation and all amendments thereof to date,
certified by the appropriate Secretary of State, and its bylaws, as amended
to date, certified by an officer of such Seller. Schedule 3.1.4 is a true
and complete list of all of the officers and directors of each of the
Sellers.
3.1.5 Capital Stock. All shares of capital stock of each of the
Sellers are validly issued, fully paid and non-assessable and are owned,
beneficially and of record, by the Shareholders.
3.1.6 Assets.
3.1.6.1 Title. Except for the Assets purchased pursuant to the
Shareholder Purchase Agreement, the Assets and the Excluded Assets
constitute all of the property and assets which are considered part of
and used in the Business and all of the assets necessary or useful to
conduct the Business as presently conducted. Sellers have the right to
convey, and upon the consummation of the transactions contemplated by
this Agreement, Sellers will have conveyed, and Buyer will be vested
with, good and marketable title and interest in and to the Assets,
free and clear of all Liens.
3.1.6.2 Assumed Liabilities. To Sellers' and Shareholders'
knowledge, all Assumed Liabilities were and are recorded in accordance
with the Accounting Principles (as defined below), consistently
applied. Under the "Accounting Principles," accounting transactions,
and books and records are kept and reported in the ordinary course of
business on the actual basis of each transaction.
3.1.6.3 Inventories. To Sellers' and Shareholders' knowledge,
the inventory of Sellers listed as an Asset on Schedule 1.1 hereof is
(i) of good and standard quality, (ii) 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 Date, (iii) in the case of
finished goods, saleable in the ordinary course of business and in
compliance with all state, federal and local regulations of the United
States and
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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, and the reserve for
obsolescence set forth therein is adequate to provide for obsolete or
superseded items.
3.1.6.4 Condition. The Assets are useable in the ordinary course
of business and Sellers have maintained the Assets pursuant to
Sellers' normal maintenance procedures consistent with past practice
and custom. None of the Assets requires any repair or replacement
except for maintenance in the ordinary course of business and all
in-service equipment is in the condition customarily maintained by
Sellers. Except as set forth on Schedule 3.1.6, none of the personal
property of Sellers is held under any lease, security agreement,
conditional sales contract or other title retention or security
arrangement.
3.1.6.5 Accounts Receivable. Sellers' accounts receivable have
arisen in bona fide arm's-length transactions in the ordinary course
of business. Except to the extent of any reserves for bad debts set
forth on Schedule 3.1.6, all such receivables are valid and binding
obligations of the account debtors without any counterclaims, set-offs
or other defenses thereto and are collectable in the ordinary course
of business.
3.1.7 No Consents. Except as set forth on Schedule 3.1.7, each of the
Sellers and Shareholders have full right, power and authority to sell the
Assets to Buyer as provided in this Agreement without obtaining the consent
or approval of any Governmental Entity or other Person. The execution and
delivery by Sellers and the Shareholders of, and the performance by Sellers
and the Shareholders of their respective obligations under, the Sellers'
Agreements do not require Sellers or any Shareholder to obtain any consent,
approval or waiver of any acceleration, termination or other right or
remedy by, or to make any filing with or give any notice to, any other
Person (the "Consents"), except as set forth in Schedule 3.1.7. Other than
the Consents set forth in Schedule 3.1.7, no consents or approvals are
necessary for the consummation of the transactions contemplated hereby in
order to prevent a breach of, or default under, or modification or
termination of any contract to which Sellers, the Business or any of the
Assets are subject.
3.1.8 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 3.1.8, Sellers have no liabilities or obligations of any nature
with respect to the Business (whether absolute, accrued, contingent or
otherwise) other than obligations under the Contracts that are set forth in
Schedule 3.1.10 or that are required to be so set forth and which
obligations are to be performed in the ordinary course of business, which
obligations are apparent from the plain reading of such Contracts and (iv)
those liabilities which relate to the Claims specifically disclosed in
Schedule 3.1.12. None of the liabilities or obligations described in the
preceding sentence and on the related schedules are the result of a breach
of contract, breach of warranty, tort, infringement or lawsuit.
3.1.9 Taxes. Sellers have paid all Taxes due and payable in connection
with the Assets, and the operation of the Business as of the Closing.
Sellers have timely filed all federal, state, county, local and foreign tax
returns which they are required to have filed,
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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 Sellers. There are no unexpired
waivers by Sellers of any statute of limitations with respect to any Taxes,
and none of the Sellers or Shareholders are parties to any action or
proceedings by any Governmental Entity for the collection or assessment of
Taxes.
3.1.10 Contracts. Attached hereto as Schedule 3.1.10 is a list of all
contracts, agreements, licenses, sublicenses, understandings, instruments,
obligations, relationships and commitments, oral or written, to which
either Seller is a party or by which either Seller is bound or subject that
relate, directly or indirectly, to the Business or the Assets (the
"Contracts"), correct and complete copies of written Contracts and
summaries of all oral Contracts which have been previously furnished to
Buyer. Except as set forth on Schedule 3.1.10, all of the Contracts are in
full force and effect and may be assigned to Buyer without the consent,
approval, novation, waiver or notification of any Person. Except as noted
in Schedule 3.1.10, Sellers are not in breach or default, and no event has
occurred which the giving of notice or the passage of time or both would
constitute a breach or default, under any Contract or any other obligation
owed by Sellers, and, to the knowledge of Sellers and Shareholders, no
event has occurred which with the giving of notice or the passage of time
or both would constitute a breach or default by any other party to any such
Contract or obligation.
3.1.11 Real Property. To the knowledge of Sellers and Shareholders,
Sellers have valid leasehold interests in all of the real property which it
holds under the leases described in Schedule 3.1.11 (collectively, the
"Real Property"), in each case free and clear of all Liens, except for
those Liens described on Schedule 3.1.11. The Real Property constitutes all
real properties used or occupied by Sellers in connection with the Business
during the period beginning on January 1, 1999 and ending on the Closing
Date. Schedule 3.1.11 also includes a correct and complete list, and a
brief description of all real estate leased to and leased by Sellers, and
all improvements thereon, with respect to the Business. With respect to the
Real Property:
3.1.11.1 Easements. To the knowledge of Sellers and
Shareholders, Sellers have all easements and rights necessary to
conduct the Business;
3.1.11.2 Condemnation. To the knowledge of Sellers and
Shareholders, no portion thereof is subject to any pending or
threatened condemnation proceeding or proceeding by any public
authority;
3.1.11.3 Condition. To the knowledge of Sellers and
Shareholders, the buildings, plants, structures and fixtures located
on the Real Property and owned, leased or used by Sellers, including
without limitation, heating, ventilation and air conditioning systems,
roof, foundation and floors, are in reasonably good condition and
repair for their present use in Sellers' operations (subject to normal
wear and tear or repairs), and are not in violation of any zoning or
other ordinances, codes or regulations; nor has any written notice or
any other notice of any claimed violation of any such ordinance been
served on Sellers;
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3.1.11.4 Subleases. Except for the encumbrances described in
Schedule 3.1.11, there are no leases, subleases, licenses, concessions
or other agreements, written or oral, granting to any party or parties
the right of use or occupancy of any portion of any parcel of Real
Property;
3.1.11.5 Options. To the knowledge of Sellers and Shareholders,
except as set forth in Schedule 3.1.11, there are no outstanding
options or rights of first refusal to purchase any parcel of Real
Property, or any portion thereof or interest therein;
3.1.11.6 Possession. Except as set forth in Schedule 3.1.11,
there are no parties (other than Sellers) in possession of any parcel
of Real Property, and Sellers enjoy peaceful and undisturbed
possession under all leases to which either of them is a party for
Real Property;
3.1.11.7 Utilities. To the knowledge of Sellers and
Shareholders, all facilities located on each parcel of Real Property
are supplied with utilities and other services necessary for the
operation of such facilities, including gas, electricity, water and
telephone, all of which services are adequate for the operation of the
Business at such facilities as presently conducted or presently
proposed by Sellers to be conducted in accordance with all applicable
laws, ordinances, rules and regulations and are provided via public
roads or via permanent, irrevocable, appurtenant easements benefitting
the parcel of Real Property; and
3.1.11.8 Access. To the knowledge of Sellers and Shareholders,
each parcel of Real Property abuts on and has direct vehicular access
to a public road or access to a public road via a permanent,
irrevocable, appurtenant easement benefitting the parcel of Real
Property.
3.1.12 Litigation. Except as set forth in Schedule 3.1.12 (which
discloses the parties to, nature of, and relief sought for each matter to
be disclosed):
3.1.12.1 Claims. There is no suit, action, proceeding,
investigation, arbitration, mediation, claim or order pending or, to
the knowledge of Sellers and Shareholders, threatened against Sellers
or Shareholders (or pending or, to the knowledge of Sellers and
Shareholders, threatened against any of the officers, directors or
employees of Sellers with respect to the Business), or to which,
either of Sellers is otherwise a party before any court or any other
Governmental Entity which if adversely determined would adversely
affect the Assets or the Business (collectively, "Claims"); and, to
the knowledge of Sellers and Shareholders, there is no basis for any
other such Claim.
3.1.12.2 Orders. Sellers are not subject to or bound by any
judgment, order or decree of any court or any other Governmental
Entity. Sellers has not received any opinion or memorandum from legal
counsel to the effect that it is exposed to any liability or
disadvantage that may be material to the Business, and neither of the
Sellers is engaged in any legal action to recover monies due it or for
damages sustained by it.
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3.1.13 Compliance with Laws. The Business, as conducted by Sellers,
and the Assets are in compliance with, and do not violate in any respect,
any applicable Law (including, but not limited to building and zoning
ordinances, occupational health and safety laws and Environmental Laws, and
any other statutes, ordinances or regulations). Except as set forth on
Schedule 3.1.13, neither of Sellers nor any Shareholder has received any
written or oral notice of or communication regarding any such violation or
liability or any correspondence from any Governmental Entity relating
thereto.
3.1.14 Intellectual Property. Schedule 3.1.14 contains a complete and
accurate description of all Intellectual Property of Sellers, including
information regarding Sellers' ownership of such Intellectual Property and
licenses, rights, or immunities in such Intellectual Property and the
registration of such Intellectual Property. Sellers own all of the
Intellectual Property, and all of the Intellectual Property is valid and in
good standing, free and clear of any Liens, and to the knowledge of Sellers
and Shareholders, is not being challenged in any way. Sellers have taken
reasonable security measures to protect the secrecy, confidentiality and
value of all trade secrets of Sellers used by Sellers in connection with
the Business, including supplier and customer lists, business and marketing
plans and studies and other technical data relating to the Business. To the
knowledge of Sellers and Shareholders, Sellers have not infringed and are
not now infringing on any copyright, trademark, service mark or trade name
of, or belonging to, any Person and no Person has asserted any such claim.
3.1.15 Transactions Not a Breach. The execution, delivery, or
performance by Sellers and the Shareholders of this Agreement and the
Sellers' Agreements will not:
(a) to the knowledge of Sellers and Shareholders, violate,
conflict with, or result in a breach of any provision of any Law
binding on Sellers and/or the Shareholders with respect to the
Business or any of the Assets;
(b) violate or conflict with either Sellers' 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 either Seller or any of the
Shareholders is a party or by which either Seller, the Shareholders or
any of the 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 either of Sellers or any of
the Shareholders is a party or by which either of Sellers and/or any
of the Shareholders is bound, and which is material to the operation
of the Business or the ownership of the Assets;
(d) result in the creation or imposition of any Lien, security
interest, charge, or encumbrance upon the Business or the Assets; or
(e) have a material adverse effect on the Business or the
Assets.
3.1.16 Conduct of the Business. Except as set forth in Schedule
3.1.16, since July 1, 1999, Sellers have conducted their businesses with
respect to the Assets only in the ordinary course of business, and have
incurred no liabilities in connection with the Assets
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other than in the ordinary course of business, and there has been no
material adverse change in the assets, condition (financial or otherwise),
operating results, employee or customer relations, business activities or
prospects involving the Assets as of such date.
3.1.17 Insurance Policies. Schedule 3.1.17 contains a complete and
accurate list and description of all insurance policies (including
"self-insurance" programs) now maintained by Sellers and all general
liability policies maintained by Sellers during the past two years with
respect to the Business and the Assets. Such policies are in full force and
effect, Sellers are not in default under any of them, and no claim for
coverage under any such policy has been denied.
3.1.18 Licenses. Schedule 3.1.18 is a complete and accurate list of
all of the Licenses and applications for licenses not yet issued which are
held by Sellers or submitted by Sellers to any Governmental Entity in
connection with the Business. Sellers are in compliance in all material
respects with such Licenses all of which are, to the knowledge of Sellers
and Shareholders, valid, binding, and in full force and effect. Except as
disclosed in Schedule 3.1.18, each of the Licenses is freely transferable
and will constitute part of the Assets.
3.1.19 Employees.
3.1.19.1 Current Employees. Sellers previously have delivered
to Buyer a correct and complete list setting forth (a) the name, job
title, current salary or hourly compensation rate, accrued vacation
and years of employment for each employee of Sellers in connection
with the Business, and (b) the names and total annual compensation for
all independent contractors and sales representatives who render
services on a regular basis to Sellers in connection with the
Business. Except as disclosed in Schedule 3.1.19, no such employee,
sales representatives or independent contractor of Sellers has
received any bonus or increase in compensation and there has been no
general increase in the compensation or rate of compensation payable
to any employees, sales representatives or independent contractors of
Sellers since July 1, 1999, nor has there been any change in any
Employee Benefit Plan or any promise by Sellers to employees or
independent contractors orally or in writing of any bonus or increase
in compensation or a general increase or change in any Employee
Benefit Plan, whether or not legally binding. Except as disclosed in
Schedule 3.1.19, to the knowledge of Sellers and Shareholders, no
former or current employee or current or former officer or director of
Sellers 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, sales representatives or
independent contractor of Buyer, or (y) the ability of Buyer to
conduct the Business following the Closing Date.
3.1.19.2 Employment Offers. It is Buyer's intention to consider
making an offer of employment to certain employees of Sellers (if
employed by Buyer following the Closing Date, a "Continuing Employee")
as of the Closing Date. Such employment shall not create any
continuing right to employment for such
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individuals. The parties hereto agree that Sellers shall be solely
responsible for all liabilities relating to or arising with respect
to, directly or indirectly, any of Sellers' employees who do not
accept Buyer's offer of employment, if made by Buyer, including
without limitation, liabilities involving severance matters, COBRA,
EEOC claims, workers' compensation claims and any other liabilities
relating to or arising with respect to any Employee Benefit Plans.
Sellers shall also be responsible, as between Buyer and Sellers, for
any employment-related claims filed by any employees of Sellers
(including the Continuing Employees) which were (i) filed prior to the
Closing Date, (ii) filed after the Closing Date but which existed from
facts and circumstances which arose prior to the Closing Date, or
(iii) filed after the Closing Date but arose from the transactions
contemplated in this Agreement.
3.1.20 Personnel Agreements and Labor Relations. Except as indicated
on Schedule 3.1.20, Sellers are not a party to or obligated in connection
with the Business with respect to any (a) outstanding contracts with
current or former employees, agents, consultants, advisers, salesmen, sales
representatives, distributors, sales agents, independent contractors or
dealers, or (b) collective bargaining agreements or contracts with any
labor union or other representative of employees or any employee benefits
provided by any such agreement. No strike, union organizational activity,
allegation, charge or complaint of employment discrimination or other
similar occurrence in connection with the Business has occurred or is
pending or, to the knowledge of Sellers and Shareholders is, threatened
against Sellers or Shareholders; nor do Sellers or Shareholders have
knowledge of any basis for any such allegation, charge or complaint. To the
knowledge of Sellers and Shareholders, Sellers have complied in all
material respects with all applicable laws relating to the employment of
labor, including provisions thereof relating to wages, hours, equal
opportunity, collective bargaining and the payment of social security and
other taxes. There are no administrative charges or court complaints
pending or, to the knowledge of Sellers and Shareholders, threatened
against Sellers or Shareholders in connection with the Business before the
U.S. Equal Employment Opportunity Commission or any state or federal court
or agency concerning alleged employment discrimination or any other matters
relating to the employment of labor in connection with the Business; there
is no unfair labor practice charge or complaint pending or threatened
against Sellers or Shareholders before the National Labor Relations Board
or any similar state or local body in connection with the Business; and no
such charges or complaints have been brought against Sellers or
Shareholders during the operation of the Business.
3.1.21 Environmental Matters.
3.1.21.1 Compliance with Environmental Laws. To the knowledge
of Sellers and Shareholders, Sellers are in compliance with all
Environmental Laws. Sellers have not received notice of any violation
or alleged violation of any such Environmental Laws. Sellers possess
all required Licenses relating to health, safety or protection of the
environment which, if not possessed, could result or has resulted in
adverse consequences for the Business, the Assets, or a violation of
any applicable Environmental Laws.
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3.1.21.2 No Hazardous Substances. Sellers have never generated,
transported, treated, stored, disposed of or otherwise handled, nor
has there been a release or threatened release of, any Hazardous
Substances in, under, upon or from any Real Property, equipment or
other personal property now or heretofore owned, leased, used or
operated by Sellers in connection with the Business or the Assets,
except in compliance with all applicable Environmental Laws. To the
knowledge of Sellers and Shareholders, there are no underground
storage tanks under or upon any Real Property now or heretofore owned,
leased, used or operated by Sellers in connection with the Business.
3.1.21.3 No Actions or Proceedings. Sellers have not, have not
been subject to and have not received any notice of, any private,
administrative or judicial inquiry, investigation, order or action, or
notice of any intended private, administrative, or judicial action,
relating to the presence or alleged presence of Hazardous Substances
in, under or upon any Real Property, equipment or other personal
property now or heretofore owned, leased, used or operated by Sellers
in connection with the Business or any property, whether or not it was
owned, leased, used or operated by Sellers, which was used by Sellers
for the storage of inventory or production of finished goods or for
the storage, treatment or disposal of any waste, product or by-product
and to the knowledge of Sellers and Shareholders, there is no basis
for any such inquiry, investigation, order, notice or action. There
are no pending or, to Sellers' or Shareholders' knowledge, threatened
actions or proceedings or notices of potential actions or proceedings
from any Government Entity or any other Person against Sellers
regarding any matter relating to any Environmental Law in connection
with the Business, the Real Property or any property formerly owned or
operated by Sellers in connection with the Business.
3.1.21.4 Continued Compliance. Without limiting any of the
other representations or warranties of Sellers herein, to the
knowledge of Sellers and Shareholders, there are and have been no past
or present events, conditions, circumstances, activities, practices,
incidents or actions which could be expected to interfere with or
prevent continued compliance with any Environmental Law or license
relating to the health, safety or protection of the environment or
which may give rise to any legal liability or otherwise form the basis
of any claim, action, suit, proceeding, hearing or investigation
against Sellers or involving any Real Property or other property
formerly owned, leased, used or operated by Sellers in connection with
the Business, or the Assets, based on any condition, release,
violation or alleged violation of any Environmental Law relating to
health, safety or protection of the environment, including, without
limitation, liability for clean- up costs, personal injury or property
damage.
3.1.22 Welfare and Benefit Plans. Schedule 3.1.22 is a list of all
severance pay, vacation, sick leave, fringe benefit, medical, dental, life
insurance, disability or other welfare plans, savings, profit sharing or
other retirement plans and all bonus or other incentive plans, contracts,
arrangements or practices (collectively, the "Plans") maintained or
contributed to by the Sellers and in which any one or more of the current
or former employees of the Sellers (including beneficiaries of employees or
former employees) participates, is eligible to participate or has
participated within the immediately preceding six years. Sellers have
furnished Buyer with true and complete copies of all Plans that
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have been reduced to writing, and written summaries of the material terms
of all unwritten Plans. All Plans are in compliance with all applicable
provisions of ERISA, as well as with all other applicable federal, state
and local statutes, ordinances and regulations. All material reports or
other documents required by law or contract to be filed with any
Governmental Entity, or distributed to Plan participants or beneficiaries,
with respect to the Plans have been timely filed or distributed. Neither
the Sellers nor any Plan Affiliates (as hereinafter defined) nor any
trustee or any other fiduciary of any of the Plans have engaged in any
prohibited transaction within the meaning of sections 406 and 407 of ERISA
or section 4975 of the Code with respect to any of the Plans that has
occurred during the six-year period preceding the date of this Agreement.
Except as disclosed in Schedule 3.1.22, no Seller or any current or former
Plan Affiliates has, during the past six years, maintained, or been
obligated to contribute to, or incurred any liability with respect to, a
Plan that is subject to the provisions of Title IV of ERISA, and neither of
Sellers nor any Plan Affiliate has incurred any liability under section
4201 of ERISA with respect to any "multi-employer plan" (as such term is
defined in section 4001(a)(3) of ERISA) or any other plan subject to Title
IV of ERISA, and the consummation of the transactions contemplated by this
Agreement will not constitute a complete or partial withdrawal from or with
respect to any such "multi-employer plan" or other plan subject to Title IV
of ERISA or any collective bargaining agreement to which either of Sellers
is a party or by which the Seller is bound or otherwise give rise to any
liability of either of Sellers in connection therewith. Each of the Plans
maintained by either of Sellers which is intended to be "qualified" within
the meaning of section 401(a) of the Code and any trust maintained in
connection with any of the Plans which trust is intended to be so exempt
under section 501(a) of the Code has been determined by the IRS to be so
qualified and exempt, as the case may be, and such determinations have not
been modified, revoked or limited and nothing has occurred (or failed to
occur) since the receipt of such determination letters that would adversely
affect any such Plan's qualification or any such trust's exempt status.
Neither of Sellers maintains nor is obligated to provide benefits under any
life, medical or health plan that provides benefits to retirees or other
terminated employees other than COBRA and benefits under insured plans
maintained by the Seller provided in the event an employee is disabled at
the time of termination of the employee's employment with either of Sellers
and the conversion privileges provided under such insured plans. Each of
Sellers has complied with all of its obligations under COBRA, and will not
incur any liability in connection with the benefit continuation rights
under COBRA with respect to its employees or any other employees. No Plan
is a multiple employer welfare arrangement. Any Plan that is funded through
a "welfare benefit fund" as defined in section 419(e) of the Code has
complied and continues to comply with all requirements of section 419 and
419A of the Code and regulations thereunder. Neither of Sellers maintains
any unfunded deferred compensation arrangement with respect to any employee
or former employee. All wages, salaries or other compensation payable
pursuant to any Plan or other compensation arrangement has been paid or
will be paid in full prior to the Closing and no amounts will be due and
owing to any person, other than routine payments in the ordinary course.
3.1.23 Customers. An accurate and complete list of the customers of
the Business (by dollar volume of sales during 1998 and through the date of
this Agreement) has been provided to Buyer. Except as reflected on such
list, no customer who accounted for more than five percent (5%) of Sellers'
gross sales during the years 1998 or 1999 has cancelled or otherwise
terminated, modified, or, to Sellers' or Shareholders' knowledge,
threatened
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to cancel or otherwise terminate, or to modify, its relationship with the
Business on account of the transaction contemplated hereby or otherwise.
3.1.24 Suppliers. An accurate and complete list of suppliers for the
Business (by dollar volume of sales during 1998 and through the date of
this Agreement) has been provided to Buyer. Except as reflected on such
list, no supplier whose parts or products are related to more than five
percent (5%) of the Sellers' gross sales during the years 1998 and 1999 has
canceled or otherwise terminated, modified or, to Sellers' or Shareholders'
knowledge, threatened to cancel or otherwise terminate, or to modify, its
relationship with the Business on account of the transaction contemplated
hereby or otherwise.
3.1.25 Interest of Sellers in Customers, Etc. Except as set forth in
Schedule 3.1.25, each of Sellers, their Affiliates, and the Shareholders do
not have any direct or indirect interest in any competitor, supplier or
customer of the Business or in any Person from whom or to whom Sellers
lease any real or personal property or in any other Person with whom
Sellers have any business relationship in connection with the Business.
3.1.26 Affiliate Transactions. Schedule 3.1.26 contains a complete and
accurate list of the parties to and the date, nature and amount of each
transaction involving the transfer of any cash, property or rights to or
from Sellers from, to, or for the benefit of any Affiliate or former
Affiliate of Sellers other than compensation and distributions reflected in
any financial records previously provided to Buyer ("Affiliate
Transactions") within the two years preceding the date of this Agreement
and any existing commitments of Sellers to engage in the future in any
Affiliate Transactions. Except as noted in Schedule 3.1.26, each Affiliate
Transaction was effected on terms substantially equivalent to those that
would have been established in an arms-length negotiation.
3.1.27 Books and Records. Since January 1, 1998, all the books,
records and accounts of Sellers as they relate to the Business have been in
all respects accurate and complete, and in accordance with the Accounting
Principles (as defined in SECTION 3.1.6.2), 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.
3.1.28 Product Liability. Except as listed on Schedule 3.1.28, no
product liability or other tort claims have been made, or to Sellers' or
Shareholders' knowledge threatened, against Sellers related to products
sold by Sellers in connection with the Business in the past five years. To
the knowledge of Sellers and Shareholders, there are no defects in the
design or manufacture of products sold by Sellers in connection with the
Business which could form the basis for a cause of action for product
liability against Sellers.
3.1.29 Product Warranties. Except as listed on Schedule 3.1.29, no
product warranty claims have been made, or to Sellers' or Shareholders'
knowledge threatened, against Sellers relating to the Business which remain
unsatisfied and outstanding as of the Closing Date.
3.1.30 Brokers. Sellers have not incurred any liability to any broker,
finder, or agent, and there are no claims for any brokerage fees, finder's
fees, or commissions in connection with the transactions contemplated
hereby.
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3.1.31 Gaming Regulatory Matters. Sellers and/or Shareholders (as
indicated) are the holders of the Licenses from the Governmental Entities
with jurisdiction over the gaming activities of the Company (the "Gaming
Authorities") as set forth on Schedule 3.1.31 (the "Gaming Licenses"). All
of the Gaming Licenses are in full force and effect and are valid and
enforceable in all respects in accordance with their respective terms. The
Gaming Licenses constitute all of the Licenses required in connection with
gaming for the operation of the Business and the Assets. Neither Sellers
nor Shareholders are using the Assets or conducting the Business in
connection with gaming in any jurisdiction in which gaming is not legally
recognized, or where there are no gaming statutes, regulations, notices,
orders or other legal requirements (the "Gaming Laws"). Each Seller has
filed with the Gaming Authorities all applications, reports and other
documents required by the Gaming Authorities in connection with the Gaming
Licenses. There is no pending, or to the knowledge of Sellers or
Shareholders, threatened, petition, complaint, objection, investigation or
other action before any Gaming Authority or court to revoke, cancel, modify
or fail to renew any Gaming License. Except as set forth on Schedule
3.1.31, Sellers, Shareholders and the Assets are in full compliance with
all other Gaming Laws promulgated by the Gaming Authorities that is or was
applicable to it or to the conduct or operation of the Business or the
ownership or use of any of the Assets. Specifically, but not by way of
limitation, if required, the Assets have been approved for use in gaming by
the applicable Gaming Authorities. Neither Sellers nor Shareholders have
received any notice or other communication (whether oral or written) from
any Gaming Authority regarding: (i) any actual, alleged, possible or
potential violation of, or failure to comply with, any legal requirement;
or (ii) any actual, alleged, possible or potential obligation on the part
of the Company to undertake, or to bear all or any portion of the cost of,
any remedial action of any nature.
3.1.32 Y2K. Except as identified on Schedule 3.1.32, neither the
computer software programs and information systems used by the Sellers, nor
the products sold by Sellers, had or has characteristics or qualities that
caused or may cause it to fail to (i) operate and produce data on or after
January 1, 2000 (including taking into effect that such year is a leap
year), (ii) use data based on time periods on or after January 1, 2000
(including taking into effect that such year is a leap year) accurately and
without delay, interruption or error relating to the fact that the time at
which and the date on which such software was or is operating was or is
after 12:00 a.m. on January 1, 2000 (including taking into effect that such
year is a leap year) or (iii) accept, calculate, process, maintain, store
and output, accurately and without delay, interruption or error, at all
times or dates, or both, whether before, on or after 12:00 a.m. January 1,
2000 (including taking into effect that such year is a leap year), and any
time periods determined or to be determined based on such times or date or
both. Sellers have no obligations under warranty agreements, service
agreements or otherwise to rectify a Year 2000 defect.
3.1.33 Customs. Each of Sellers and Shareholders has not violated the
United States Foreign Corrupt Practices Act, which is enforced by the U.S.
Justice Department and the U.S. Securities Exchange Commission. Each of
Sellers and Shareholders, except as specified on Schedule 3.1.33, has
complied with all United States laws and regulations governing the
importation and exportation of products, parts, components, commodities,
software and technology, including without limitation the laws and
regulations administered by the following agencies: (1) the U.S. Customs
Service of the U.S. Treasury Department; (2) the Office of Foreign Assets
Control of the U.S. Treasury Department;
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(3) the Bureau of Export Administration of the U.S. Commerce Department;
and (4) the Office of Defense Trade Controls of the U.S. State Department.
Each of Sellers and Shareholders has complied fully with all United States
laws and regulations prohibiting participation in the Arab League boycott
of Israel, including without limitation all boycott reporting requirements
administered by the Bureau of Export Administration of the U.S. Commerce
Department and all boycott reporting requirements administered by the
Internal Revenue Service of the U.S. Treasury Department. Each of Sellers
and Shareholders is presently under no disability to engage in
international business transactions by order of any agency of the United
States Government, and that it or he has not been named at any time in the
Denied Persons List or the Entity List published by the Bureau of Export
Administration of the U.S. Commerce Department, or named as a Specially
Designated National, Terrorist, Foreign Terrorist Organization, Narcotics
Trafficker, Blocked Person or Vessel by the Office of Foreign Assets
Control of the U.S. Treasury Department, or named in the Debarred Parties
List published by the Office of Defense Trade Controls of the U.S. State
Department. Each of Sellers and Shareholders shall notify Buyer immediately
any time it and/or he is so named by one or more of the above agencies.
3.1.34 No Misrepresentation. None of the information contained in the
representations and warranties of Sellers and Shareholders set forth in
this Agreement or in any of the Sellers' Agreements contain any untrue
statement of a material fact, or omits to state a material fact necessary
to make the statements contained herein or therein not misleading.
3.2 Representations and Warranties of Buyer. Buyer hereby represents and
warrants to Sellers and the Shareholders as of the Closing Date as follows:
3.2.1 Organization. Buyer is a corporation duly organized, existing,
and in good standing under the laws of the State of Nevada.
3.2.2 Authority. Buyer has full corporate power and authority to
enter into and perform its obligations under this Agreement, and all other
agreements, documents, certificates and instruments delivered in connection
with the transactions contemplated hereby to which it is a party, and any
other documents to be delivered by it at Closing (collectively, the
"Buyer's Agreements") and to perform its obligations under this Agreement
and the Buyer's Agreements. The execution and performance of this Agreement
and the Buyer's Agreements will be duly authorized by all necessary
corporate action on the part of Buyer, in accordance with Law and with
Buyer's articles of incorporation and bylaws. This Agreement has been, and
the Buyer's Agreements once executed will be, duly and validly executed and
delivered by Buyer and will constitute the valid and binding obligations of
Buyer, enforceable against Buyer in accordance with their respective terms.
3.2.3 Transactions Not a Breach. Except as listed on Schedule 3.2.3
hereto, Buyer's execution and performance of this Agreement and the Buyer's
Agreements will not materially violate, conflict with, or result in a
material breach of any provision of any Law binding on Buyer or conflict
with or result in the breach of any of the terms, conditions, or provisions
of the Buyer's Articles of Incorporation or bylaws or of any contract,
agreement, mortgage, or other instrument or obligation of any nature to
which Buyer is a party or by which Buyer is bound.
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3.2.4 Brokers. With the exception of Mesirow Financial whose fees will
be paid by Buyer, Buyer has not incurred any liability to any broker,
finder, or agent, and there are no claims for any brokerage fees, finder's
fees, or commissions in connection with the transactions contemplated
hereby.
3.2.5 Due Diligence. Buyer has had the opportunity to review certain
of the records of Sellers including the due diligence submissions of Sterns
& Weinroth and, based on such review, Buyer has no knowledge of any untrue
representation or warranty of Sellers or Shareholders. Notwithstanding the
foregoing, no due diligence investigation by Buyer or its representatives
shall offset or limit the scope of Sellers' or Shareholders'
representations, warranties or covenants in this Agreement or the
Shareholder Purchase Agreement or any ancillary documents hereto or thereto
or limit Sellers' or Shareholders' liability for breach thereof.
3.2.6 No Misrepresentation. None of the information contained in the
representations and warranties of Buyer set forth in this Agreement or in
any of the Buyer's Agreements contain any untrue statement of a material
fact, or omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
ARTICLE IV
CLOSING
4.1 Time and Place. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of James, Driggs,
Walch, Santoro, Kearney, Johnson & Thompson in Las Vegas, Nevada on January 11,
2000 at 10:00 a.m. Pacific Time or at such other time, date and location as the
parties may agree to in writing (the "Closing Date").
4.2 Sellers Deliveries. Sellers shall, at their sole cost and expense,
execute and deliver or cause to be executed and delivered to Buyer:
4.2.1 Bill of Sale and Assignment and Assumption Agreement. A Bill of
Sale, Assignment and Assumption Agreement duly executed by Sellers, in form
and substance reasonably satisfactory to Buyer.
4.2.2 Employment Agreements. Employment Agreements between Buyer and
each of Ben Domenico, James Irvin, Dave Mysel and Mark Nocco, in form and
substance reasonably satisfactory to Buyer.
4.2.3 Corporate Documents. The Articles of Incorporation of each of
AGE and AGE Florida, certified by the Secretaries of State of New Jersey
and Florida respectively, as of a date not more than 10 Calendar Days prior
to the Closing Date, and the bylaws of each of AGE and AGE Florida,
certified by the Secretary of each of AGE and AGE Florida respectively, as
in effect at the Closing.
4.2.4 Certificates of Good Standing. Certificates of Good Standing,
dated not more than five (5) Calendar Days prior to the Closing, with
respect to each of AGE and AGE Florida issued by the Secretaries of State
of New Jersey and Florida respectively and
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by the Secretary of State of each jurisdiction in which either AGE or AGE
Florida is qualified to do business as a foreign corporation.
4.2.5 Shareholder Purchase Agreement. The Shareholder Purchase
Agreement, in form and substance reasonably satisfactory to Buyer.
4.2.6 Escrow Agreement. The Escrow Agreement, in the form attached
hereto as Exhibit 2.1.2.
4.2.7 Consents. Any required Consents and certificates of assignment
required of Sellers to transfer the Assets, Assumed Liabilities and the
Contracts, and otherwise consummate the transactions contemplated hereby.
4.2.8 Opinion. An opinion of James, Driggs, Walch, Santoro, Kearney,
Johnson & Thompson, counsel for Sellers, dated as of the Closing Date, in
the form attached hereto as Exhibit 4.2.8.
4.2.9 Resolutions. Copies of resolutions of the Board of Directors
and Shareholders of each of AGE and AGE Florida, certified by the Secretary
of each of AGE and AGE Florida respectively, as having been duly and
validly adopted and in full force and effect, authorizing the execution and
delivery of this Agreement and the Sellers' Agreements and the performance
of Sellers' obligations under this Agreement and the Sellers' Agreements
and approval of the consummation of the transactions contemplated hereby.
4.2.10 Tax Clearance. Tax clearance certificates or similar documents
required by any state taxing authority in order to relieve Buyer of any
obligation to withhold any portion of the Purchase Price, if previously
obtained.
4.2.11 Lien Searches. Such Uniform Commercial Code lien searches and
such other instruments showing that there were no financing statements,
judgments, taxes or other Liens outstanding against Sellers or any of the
Assets as of the Closing Date or a date that is not more than ten (10)
Calendar Days prior to the Closing Date.
4.2.12 Transfer of Telephone Numbers. Evidence of transfer to Buyer of
all telephone and facsimile numbers of the Business.
4.2.13 Incumbency Certificate. Incumbency and specimen signature
certificates dated as of the date hereof with respect to the officer of
each of AGE and AGE Florida executing this Agreement and the Sellers'
Agreements.
4.2.14 Estoppel Certificates. Estoppel Certificates executed by the
landlord of each parcel of Real Property, in form and substance reasonably
satisfactory to Buyer.
4.2.15 Other Documents. Such other documents and instruments as Buyer
or its counsel may reasonably request.
All documents delivered to Buyer shall be in form and substance reasonably
satisfactory to Katten Muchin Zavis, counsel for Buyer. In addition to the above
deliveries, Sellers shall take
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all steps and actions as Buyer may reasonably request or as may otherwise be
necessary to put Buyer in possession or control of the Assets or to consummate
the transactions contemplated hereby.
4.3 Buyer Deliveries. Buyer shall execute and deliver or cause to be
executed and delivered to Sellers simultaneously with delivery of the items
referred to in SECTION 4.2 above:
4.3.1 Purchase Price. A wire transfer of funds to Sellers and the
Escrow Account in an amount equal to that required under SECTION 2.1.1.
4.3.2 Bill of Sale and Assignment and Assumption Agreement. A
counterpart of the Bill of Sale and Assignment and Assumption Agreement,
referred to in SECTION 4.2.1, executed by Buyer.
4.3.3 Employment Agreements. A counterpart of the Employment
Agreements referred to in SECTION 4.2.2.
4.3.4 Shareholder Purchase Agreement. A counterpart of the
Shareholder Purchase Agreement referred to in SECTION 4.2.5.
4.3.5 Escrow Agreement. A counterpart of the Escrow Agreement
referred to in SECTION 4.2.6.
4.3.6 Resolutions. Copies of resolutions of the Board of Directors of
Buyer, certified by the secretary of Buyer as having been duly and validly
adopted and in full force and effect, authorizing the execution and
delivery of this Agreement and the Buyer's Agreements and the performance
of Buyer's obligations under this Agreement and the Buyer's Agreements and
approving the consummation of the transactions contemplated hereby;
4.3.7 Opinion. An opinion of Katten Muchin Zavis, counsel for the
Buyer, dated as of the Closing Date, in form and substance reasonably
satisfactory to Sellers.
4.3.8 Incumbency Certificate. Incumbency and specimen signature
certificates dated as of the date hereof with respect to the officer of
Buyer executing this Agreement and the Buyer's Agreements.
4.3.9 Guaranty Agreement. The Guaranty Agreement, in the form
attached hereto as Exhibit 4.3.9.
4.3.10 Other Documents. Such other documents and instruments as
Sellers or their counsel may reasonably request.
All documents delivered to Sellers shall be in form and substance
reasonably satisfactory to James, Driggs, Walch, Santoro, Kearney, Johnson &
Thompson.
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ARTICLE V
OTHER AGREEMENTS
5.1 Books and Records. After the Closing, no party hereto shall destroy
(or permit the destruction of) any of the books and records pertaining to the
Assets or the Business in such party's possession that may be required by the
other party in connection with any tax audit, examination or other proceeding
without first offering them to the other party in writing at least thirty (30)
Calendar Days prior to the date of their proposed destruction. After the Closing
Date, any party may inspect and make copies from such books and records in the
possession of another party on reasonable notice and at reasonable times.
5.2 Cooperation after Closing. From time to time after the Closing, at
Buyer's request and without further consideration, Sellers will execute and
deliver such other instruments of sale, transfer, conveyance and assignment and
take such action (including assistance in the preparation of financial
statements in connection with the Business) as Buyer may reasonably deem
necessary in order more effectively to transfer, convey and assign to Buyer, and
to confirm Buyer's title to the Assets.
5.3 Public Disclosure. Buyer and Sellers shall consult with each other
before issuing any press release or otherwise making any public statement with
respect to this Agreement or the transactions contemplated hereby and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by law.
5.4 Mail. All mail relating to the Assets that is delivered to Sellers or
any of the Shareholders after the Closing Date shall forthwith be delivered to
Buyer. All mail delivered after the Closing Date to Buyer which is addressed to
Sellers or Shareholders and unrelated to the Assets or the Business shall
promptly be forwarded to the addressee.
5.5 Assumed Liabilities. Buyer agrees to discharge, as and when due, the
Assumed Liabilities.
5.6 Noncompetition and Confidentiality.
5.6.1 Noncompetition. In furtherance of the sale of the Assets and the
Business to Buyer hereunder by virtue of the transactions contemplated
hereby and the Shareholder Purchase Agreement, and to more effectively
protect the value of the Assets and the Businesses so sold, each of the
Sellers and Shareholders covenants and agrees that, for a period ending on
the later to occur of: the fourth anniversary of the Closing Date or the
period ending on any date specified in any employment agreement between
Buyer and any Shareholder regarding a similar covenant (the "Term"),
Sellers and Shareholders will not (a) engage, directly or indirectly, in
the Business anywhere within the United States and its territories and
protectorates (the "Territory"); (b) solicit any Person who is or was a
customer or supplier of Sellers or Shareholders during the two-year period
immediately preceding the Closing Date, or who becomes a customer or
supplier of Buyer at any time during the Term, for the purpose of engaging
in, or assisting any Person in engaging in, any business which competes
directly or indirectly with the Business; or (c) solicit for employment any
Continuing Employee or any other Person who was, during the two-year period
immediately preceding the Closing Date, or who becomes, at any time during
the
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Term, an employee of Buyer. Notwithstanding the foregoing, nothing
contained in this SECTION 5.6 shall prohibit Sellers or Shareholders from
owning (in the aggregate) not more than five percent (5%) of any class of
stock listed on a national securities exchange or traded in the
over-the-counter market or continuing to own any interest in any
noncompetitive business owned by Sellers or Shareholders as of the Closing
Date. Notwithstanding the foregoing, nothing contained in this SECTION 5.6
shall prohibit any Shareholder from accepting employment with a company
(other than either of Sellers) engaged in the Business, provided that (i)
the Business constitutes less than fifteen percent (15%) of such company's
total assets, revenue or net income; (ii) the Shareholder's employment with
such company is unrelated to the Business; and (iii) the Shareholder is not
employed by Buyer or one of its Affiliates at the time he accepts such
employment. Notwithstanding the foregoing, the purposes of this SECTION
5.6.1 and Rocky D'Aquilante only, the Business as applied to Rocky
D'Aquilante shall mean only the distribution of gaming parts for other than
an original equipment manufacturer or other business in which sales of
gaming parts are less than 20% revenues and SUBSECTION 5.6.1 (B) shall only
apply to the extent Rocky D'Aquilante has used Confidential Information as
defined in SECTION 5.6.2 in such solicitation.
5.6.2 Confidentiality. After the Closing, Sellers and Shareholders
shall, and shall cause their shareholders, officers, employees, agents and
Affiliates to, maintain the confidentiality of all information, documents
and materials relating to the Business, the Assets or the transactions
contemplated by this Agreement which remain in their possession, except to
the extent disclosure of any such information is required by law or
authorized by Buyer or reasonably occurs in connection with disputes over
the terms of this Agreement. In the event that any of the Sellers or
Shareholders reasonably believes after consultation with counsel that they
are required by law to disclose any such confidential information described
in this SECTION 5.6.2, Sellers and/or Shareholders will (a) provide Buyer
with prompt notice before such disclosure in order that Buyer may attempt
to obtain a protective order or other assurance that confidential treatment
will be accorded to confidential information, and (b) cooperate with Buyer
in attempting to obtain such order or assurance. The provisions of this
SECTION 5.6.2 shall not apply to any information, documents or materials
which are in the public domain or shall come into the public domain, other
than by reason of default by Sellers or any Shareholder of any obligation
under this Agreement or the Sellers' Agreements.
5.6.3 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 5.6 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.
5.6.4 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 5.6 by Sellers or the Shareholders, it is agreed that other
remedies cannot fully compensate Buyer for such a violation and that Buyer
shall be entitled to injunctive relief to prevent violation or continuing
violation thereof.
5.7 Taxes. Sellers shall be liable for paying all Taxes (whether assessed
or unassessed) applicable to the Assets and the Business, in each case
attributable to periods (or portions thereof)
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ending on or prior to the Closing Date. Buyer shall be liable for paying all
Taxes (whether assessed or unassessed) applicable to the Assets and the Business
attributable to periods (or portions thereof) beginning after the Closing Date.
For purposes of this SECTION 5.7, any period beginning before and ending after
the Closing Date shall be treated as two partial periods, one ending on the
Closing Date and the other beginning after the Closing Date. Buyer and Sellers
agree to timely sign and deliver such certificates or forms as may be necessary
or appropriate to establish an exemption from (or otherwise reduce) or make a
report with respect to, such taxes, including filings required under Section
1060 of the Code or any successor statute thereof.
5.8 Transferee/Successor Liability. The parties agree that Buyer will not,
by virtue of the transactions contemplated hereby, assume any liabilities or
obligations of Sellers other than the Assumed Liabilities and, accordingly,
Sellers agree to take all necessary actions to fully protect Buyer from and
against any and all transferee or successor liability (other than with respect
to the Assumed Liabilities) arising out of the transactions contemplated hereby,
including, without limitation, any and all liabilities relating to COBRA, Taxes,
Environmental Laws and Employee Benefit Plans.
5.9 American Gaming & Electronics Name. Sellers and Shareholders
acknowledge and agree that all of their rights in and to, and ownership of, the
name "American Gaming & Electronics" and any similar name thereto shall be
considered an Asset and be transferred hereunder to Buyer effective at the time
of Closing. From and after the Closing, Sellers and Shareholders shall be
prohibited from using the American Gaming & Electronics name; provided, however,
that each of AGE and AGE Florida shall have five (5) Calendar Days from Closing
to file corporate name changes in the jurisdictions where they are incorporated
and qualified to do business and shall promptly provide Buyer with evidence of
such changes.
5.10 Accounts Receivable Adjustment. Upon expiration of the one hundred
twenty (120) Calendar Day period commencing with the Closing (the "Collection
Period"), in the event that Buyer shall have collected on the accounts
receivable to Sellers as of the Closing Date (the "Accounts") an amount less
than (i) the total accounts receivable (less any reserve for doubtful accounts)
reflected in the final determination of the Actual Net Tangible Assets plus (ii)
any collections on Accounts previously written off, Buyer may, at its sole
option, on or before the tenth Calendar Day after expiration of the Collection
Period assign to Sellers, and Sellers shall accept such assignment of, the
uncollected portion of the Accounts and Sellers shall pay Buyer in cash in
immediately available funds on said date, against such assignment, an amount
equal to such uncollected portion. Collections from each customer will be
applied against the oldest portion of the accounts receivable due from such
customer to Buyer. Further, with respect to those Accounts as to which the
customer has asserted some defense, setoff or other claim that the Account is
not due and payable ("Disputed Accounts"), Buyer shall not be obligated to apply
payments received from such customer against the Disputed Account. Buyer shall
collect the Accounts in accordance with customary procedure and applicable Law.
Buyer shall not compromise or settle accounts receivable which were less than
one hundred twenty (120) Calendar Days old as of the Closing Date without the
consent of the appropriate Seller, which consent will not be unreasonably
withheld.
5.11 Buyer's 401(k) Plan. Buyer agrees that each of its employees as of
April 1, 2000 shall be eligible as of such date to participate in any 401(k)
plan maintained by Wells-Gardner on such terms as are available to Wells-Gardner
employees in the ordinary course of business.
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ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by Sellers. From and after the Closing, Sellers and
the Shareholders, on behalf of themselves and their respective heirs, successors
and assigns, hereby agree, jointly and severally, to indemnify, defend and save
Buyer and its Affiliates, and each of their respective officers, directors,
employees, agents and shareholders (each a "Buyer Indemnified Party"), forever
harmless from and against, and to promptly pay to a Buyer Indemnified Party or
reimburse a Buyer Indemnified Party for, any and all liabilities (whether
contingent, fixed or unfixed, liquidated or unliquidated or otherwise),
obligations, deficiencies, demands, claims, suits, actions, causes of action,
assessments, losses, costs, expenses, interest, fines, penalties, actual or
punitive damages or costs or expenses of any and all investigations,
proceedings, judgments, environmental analyses, remediations, settlements and
compromises (including reasonable fees and expenses of attorneys, accountants
and other experts) (collectively, the "Losses") sustained or incurred by any
Buyer Indemnified Party relating to, resulting from, arising out of or otherwise
by virtue of any of the following:
6.1.1 any breach of any covenant, agreement, representation or
warranty of Sellers or the Shareholders under this Agreement or any of the
Sellers' Agreements, including, without limitation, the noncompetition and
confidentiality provisions contained in SECTION 5.6 hereof;
6.1.2 the operation of the Business on or prior to the Closing Date or
any liabilities, actions or omissions of Sellers or the Shareholders,
whether known or unknown as of the Closing Date, (except for the Assumed
Liabilities), including, without limiting the generality of the foregoing,
Losses relating, directly or indirectly, to (i) Taxes, (ii) wages and
salaries, (iii) rents and any other operating or non-operating expenses or
liabilities, (iv) violations or obligations under Environmental Laws, (v)
COBRA and (vi) Employee Benefit Plans, it being understood and agreed that
Buyer is not to assume any liabilities of Sellers of any kind or character,
contingent or otherwise, except for the Assumed Liabilities;
6.1.3 any assertion against any Buyer Indemnified Party with respect
to the Excluded Liabilities;
6.1.4 any assertion or recovery against Buyer of any liability under
any "bulk sales" or similar law or statute relating to the transfer of
Assets hereunder; and
6.1.5 any of the items listed on Schedule 6.1.5 hereto.
6.2 Escrow Account. In the event that Sellers or Shareholders are
obligated to indemnify Buyer pursuant to this ARTICLE VI, Buyer may draw funds
in the amount equal to such obligation from the Escrow Account provided for in
SECTION 2.1 hereof.
6.3 Indemnification by Buyer. From and after the Closing, Buyer, on behalf
of itself and its respective successors and assigns, hereby agrees to indemnify,
defend and save Sellers and its Affiliates, and each of their respective
officers, directors, employees and agents and the Shareholders, their heirs and
representatives (each a "Seller Indemnified Party") forever harmless
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from and against, and to promptly pay to a Seller Indemnified Party or reimburse
a Seller Indemnified Party for, any and all Losses sustained or incurred by any
Seller Indemnified Party related to, resulting from, arising out of or otherwise
by virtue of any of the following:
6.3.1 the operation of the Business after the Closing Date or any
liabilities, actions or omissions of Buyer after the Closing Date, except
to the extent that any Losses are related to any condition existing prior
to or on the Closing Date or any action or omission of Seller or
Shareholder;
6.3.2 any breach of any covenant, agreement, representation or
warranty of Buyer under this Agreement or any of the Buyer's Agreements;
and
6.3.3 breach by Buyer of any of its obligations with respect to the
Assumed Liabilities.
6.4 Indemnification Procedure for Third Party Claims. In the event that
subsequent to the Closing any Person entitled to indemnification under this
Agreement (an "Indemnified Party") asserts a claim for indemnification or
receives notice of the assertion of any claim or of the commencement of any
action or proceeding by any Person who is not a party to this Agreement or an
Affiliate of a party to this Agreement (including, but not limited to any
domestic or foreign court or Governmental Entity) (a "Third Party Claim")
against such Indemnified Party, against which a party to this Agreement is
required to provide indemnification under this Agreement (an "Indemnifying
Party"), the Indemnified Party shall give written notice together with a
statement of any available information (other than privileged information)
regarding such claim to the Indemnifying Party within thirty (30) Calendar Days
after learning of such claim (or within such shorter time as may be necessary to
give the Indemnifying Party a reasonable opportunity to respond to such claim).
The Indemnifying Party shall have the right, upon written notice to the
Indemnified Party (the "Defense Notice") within fifteen (15) Calendar Days after
receipt from the Indemnified Party of notice of such claim, which notice by the
Indemnifying Party shall specify the counsel it will appoint to defend such
claim ("Defense Counsel"), to conduct at its expense, the defense against such
claim in its own name, or, if necessary, in the name of the Indemnified Party;
provided, however, that the Indemnified Party shall have the right to approve
the Defense Counsel, which approval shall not be unreasonably withheld, and in
the event the Indemnifying Party and the Indemnified Party cannot agree upon
such counsel within ten (10) Calendar Days after the Defense Notice is provided,
then the Indemnifying Party shall propose an alternate Defense Counsel, which
shall be subject again to the Indemnified Party's approval which approval shall
not be unreasonably withheld. If the parties still fail to agree on the Defense
Counsel, then, at such time, they shall mutually agree in good faith on a
procedure to determine the Defense Counsel. In the event that, in the opinion of
legal counsel to the Indemnified Party, there is a conflict of interest inherent
in the appointment of Defense Counsel by the Indemnifying Party, then the
Indemnified Party shall have the right to appoint separate Defense Counsel,
which shall be paid for by the Indemnifying Party.
(a) In the event that the Indemnifying Party shall fail to give the
Defense Notice within said 15 Calendar Day period, it shall be deemed to
have elected not to conduct the defense of the Third Party Claim, and in
such event the Indemnified Party shall have the right to conduct the
defense in good faith and to compromise and settle the claim in good faith
without prior consent of the Indemnifying Party, and the Indemnifying Party
will be
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liable for all reasonable costs, expenses, settlement amounts or other
Losses paid or incurred in connection therewith.
(b) In the event that the Indemnifying Party does deliver a Defense
Notice and thereby elects to conduct the defense of the Third Party Claim,
the Indemnifying Party shall be entitled to have the exclusive control over
said defense settlement of the subject claim and the Indemnified Party will
cooperate with and make available to the Indemnifying Party such assistance
and materials as it may reasonably request, all at the expense of the
Indemnifying Party, and the Indemnified Party shall have the right at its
expense to participate in the defense assisted by counsel of its own
choosing. In such an event, the Indemnifying Party will not settle the
subject claim without the prior written consent of the Indemnified Party,
which consent will not be unreasonably withheld.
(c) Without the prior written consent of the Indemnified Party, the
Indemnifying Party will not enter into any settlement of any Third Party
Claim or cease to defend against such claim, if, pursuant to or as a result
of such settlement or cessation, (i) injunctive relief or specific
performance would be imposed against the Indemnified Party, or (ii) such
settlement or cessation would lead to liability or create any financial or
other obligation on the part of the Indemnified Party for which the
Indemnified Party is not entitled to indemnification hereunder.
(d) Notwithstanding paragraph (b) above, the Indemnifying Party shall
not be entitled to control, but may participate in, and the Indemnified
Party shall be entitled to have sole control over, the defense or
settlement of any claim (i) that seeks a temporary restraining order, a
preliminary or permanent injunction or specific performance against the
Indemnified Party, (ii) to the extent such claim involves criminal
allegations against the Indemnified Party, (iii) that if unsuccessful,
would set a precedent that would materially interfere with, or have a
material adverse effect on, the business or financial condition of the
Indemnified Party, or (iv) to the extent such claim imposes liability on
the part of the Indemnified Party for which the Indemnified Party is not
entitled to indemnification hereunder. In such an event, the Indemnifying
Party will still have all of its obligations hereunder provided that the
Indemnified Party will not settle the subject claim without the prior
written consent of the Indemnifying Party, which consent will not be
unreasonably withheld.
(e) Any final judgment entered or settlement agreed upon in the manner
provided herein shall be binding upon the Indemnifying Party, and shall
conclusively be deemed to be an obligation with respect to which the
Indemnified Party is entitled to prompt indemnification hereunder.
(f) A failure by an Indemnified Party to give timely, complete or
accurate notice as provided in this SECTION 6.4 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 entitled to receive such notice was
deprived of its right to recover any payment under its applicable insurance
coverage or was otherwise directly and materially damaged as a result of
such failure to give timely notice.
6.5 Direct Claims. It is the intent of the parties hereto that all direct
claims by an Indemnified Party against a party hereto not arising out of Third
Party Claims shall be subject to
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and benefit from the terms of this ARTICLE VI. Any claim under this ARTICLE VI
by an Indemnified Party for indemnification other than indemnification against a
Third Party Claim, (a "Direct Claim") will be asserted by giving the
Indemnifying Party reasonably prompt written notice thereof, and the
Indemnifying Party will have a period of 30 Calendar Days within which to
satisfy 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 Indemnified Party will be free to pursue
such remedies as may be available to the Indemnified Party under this ARTICLE VI
or otherwise.
6.6 Right of Set-Off. Upon written notice to Sellers and Shareholders
specifying in reasonable detail the basis for such set-off, Buyer may set-off
from any amounts due to Sellers or Shareholders (with the exception of any
amounts due to Sellers, James Irvin, Dave Mysel or Rocky D'Aquilante) solely in
connection with the New Jersey Claim (as defined in the Escrow Agreement)
pursuant to the Shareholder Purchase Agreement or any amount to which it or any
Buyer Indemnified Party may be entitled pursuant to this ARTICLE VI. The
exercise of such right of set-off by Buyer in good faith, whether or not
ultimately determined to be justified, will not constitute an event of default
under the Shareholder Purchase Agreement. Neither the exercise of nor the
failure to exercise such right of set-off will constitute an election of
remedies or limit Buyer in any manner in the enforcement of other remedies that
might be available to it.
6.7 Survival of Representations and Warranties of Sellers and the
Shareholders; Time Limits on Indemnification Obligations. Notwithstanding any
right of Buyer to investigate fully the affairs of Sellers with respect to the
Business, and notwithstanding any knowledge of facts determined or determinable
by Buyer pursuant to such investigation or right of investigation, Buyer has the
right to rely fully upon the representations, warranties, covenants and
agreements of Sellers contained in this Agreement or in any Transaction Document
delivered pursuant hereto. The representations, warranties, covenants and
agreements contained in SECTIONS 3.1.1, 3.1.2, 3.1.6, 3.1.9, 3.1.15, 3.1.21,
3.1.22 and 5.7 and this ARTICLE VI shall survive indefinitely. The
representations, warranties, covenants and agreements in SECTION 5.6 shall
survive the execution and delivery of this Agreement and the Closing hereunder
and shall continue in full force and effect for a period of four (4) years after
the Closing Date. All other representations, warranties, covenants and
agreements contained in this Agreement shall survive the execution and delivery
of this Agreement and the Closing hereunder and shall continue in full force and
effect for a period of two (2) years after the Closing Date.
6.8 Survival of Representations and Warranties of Buyer; Time Limits on
Indemnification Obligations. Sellers and Shareholders have the right to rely
fully upon representations, warranties, covenants and agreements of Buyer
contained in this Agreement or in any Transaction Document delivered pursuant
hereto. The covenants and agreements contained in SECTION 5.7 and this ARTICLE
VI shall survive indefinitely. All other representations, warranties, covenants
and agreements of Buyer contained in this Agreement shall survive the execution
and delivery of this Agreement and the Closing hereunder and shall continue in
full force and effect for a period of two (2) years after the Closing Date.
6.9 Certain Limitations. Notwithstanding anything to the contrary set
forth in this Agreement (but subject to the terms of this SECTION 6.9),
indemnification under this ARTICLE VI and under SECTION 6.9 of the Shareholder
Purchase Agreement will be limited as follows:
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(a) the aggregate amount of indemnification provided to Buyer by
Sellers and the Shareholders under this Agreement and the Shareholder
Purchase Agreement shall not exceed an amount equal to the Proceeds (as
defined in this SECTION 6.9 below); and
(b) the aggregate amount of indemnification provided to Sellers and
Shareholders by Buyer under this Agreement and the Shareholder Purchase
Agreement shall not exceed $100,000; and
(c) the indemnification from the Sellers, James Irvin, Dave Mysel and
Rocky D'Aquilante for any Losses arising out of or relating to the New
Jersey Claim shall be limited to the amounts in the Escrow Account.
However, this SECTION 6.9 will not apply to any fraud or intentional
breach by any party hereto of any representations or warranties and such
party shall be liable for all such Losses with respect to such breaches.
"Proceeds" means the amount equal to the Purchase Price plus the maximum
aggregate amount payable to the Shareholders pursuant to the Shareholder
Purchase Agreement.
6.10 Materiality. In this Article 6, for purposes of determining the
existence of any misrepresentation or breach of any representation or warranty
of the Sellers or Shareholders contained in this Agreement, any standard,
qualification or requirement in any of the representations or warranties that an
event or fact be material or have a material adverse effect in order for such
event or fact to constitute a misrepresentation or breach of a representation or
warranty shall be disregarded.
6.11 Appointment of Representative. Each of the Shareholders hereby
appoints James Irvin as such Shareholder's exclusive agent to act on such
Shareholder's behalf with respect to any and all claims arising under this
Agreement. In such representative capacity, James Irvin or any person who shall
succeed him in such representative capacity is sometimes referred to in this
Agreement as the "Representative." The Representative shall take, and the
Shareholders agree that the Representative shall take, any and all actions which
such Representative believes are necessary or appropriate under this Agreement
for and on behalf of the Shareholders, as fully as if the Shareholders were
acting on their own behalf, including, without limitation, defending, consenting
to, compromising or settling any claims against any or all of the Shareholders
under this Agreement or otherwise, conducting negotiations with Buyer and its
representatives regarding such claims, taking any and all actions specified in
or contemplated by ARTICLE VI of this Agreement and engaging counsel,
accountants or other representatives in connection with the foregoing matters
provided however, on any matter for which a Shareholder is solely liable, such
as a breach of ARTICLE V, such Shareholder may elect to represent himself alone,
outside this SECTION 6.11. Buyer shall have the right to rely upon all actions
taken or omitted to be taken by the Representative pursuant to this Agreement,
all of which actions or omissions shall be legally binding upon each of the
Shareholders.
ARTICLE VII
MISCELLANEOUS
7.1 Notice. Any notices, consents or other communication required to be
sent or given by any of the parties shall in every case be in writing and will
be deemed properly served if (a)
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delivered personally, (b) sent by Certified U.S. mail, return receipt requested,
(c) sent by a recognized overnight courier service, or (d) sent by telecopier
(with acknowledgment of complete transmission), provided that a copy is also
mailed by Certified U.S. mail, return receipt requested, in each case, to the
parties at the addresses and telecopier numbers as set forth below or at such
other addresses and facsimile numbers as may be furnished to the other parties
in writing.
7.1.1 If to Buyer:
American Gaming & Electronics, Inc.
c/o Wells-Gardner Electronic Corporation
2701 North Kildare Avenue
Chicago, Illinois 60639-2014
Attention: President
Facsimile No.: (773) 292-5677
with a copy to:
Katten Muchin Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: David J. Kaufman
Facsimile No.: (312) 577-8648
7.1.2 If to Sellers:
American Gaming & Electronics, Inc.
6255 McLeod Drive
Suite 22
Las Vegas, Nevada 89120
Attention: Ben Domenico and James Irvin
Facsimile No.: (702) 798-5762
American Gaming & Electronics of Florida, Inc.
2046 McKinley Street
Hollywood, Florida 33020
Attention: Dave Mysel
Facsimile No.: (954) 922-1855
with a copy to:
James, Driggs, Walch, Santoro, Kearney, Johnson &
Thompson
3773 Howard Hughes Parkway
Suite 290N
Las Vegas, Nevada 89109
Attention: Doug Driggs
Facsimile No.: (702) 791-1912
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7.1.3 If to Shareholders:
Ben Domenico
811 Adagio Street
Henderson, Nevada 89052
James Irvin
842 Sandhill Sage Street
Henderson, Nevada 89052
Dave Mysel
2600 South Ocean Drive
Apt. 103
Hollywood, Florida 33019
Rocky D'Aquilante
900 Elwood Road
Hammonton, New Jersey 08037
with a copy to:
James, Driggs, Walch, Santoro, Kearney, Johnson &
Thompson
3770 Howard Hughes Parkway, #290N
Las Vegas, Nevada 89109
Attention: J. Douglas Driggs, Jr., Esq.
Facsimile No.: (702) 791-0308
Date of service of such notice will be (i) the date such notice is personally
delivered, (ii) three Calendar Days after the date of mailing if sent by
certified or registered mail, (iii) one Calendar Day after delivery to the
overnight courier, or (iv) the date such notice is sent by telecopier in
accordance with this SECTION 7.1.
7.2 Severability. The unenforceability or invalidity of any provision of
this Agreement will not affect the enforceability or validity of any other
provision.
7.3 Successors. This Agreement will be binding upon and inure to the
benefit of the parties and their respective successors, permitted assigns, heirs
and personal representatives.
7.4 Documents. At and after the Closing, each party will execute all
documents and take such other actions as the other parties may reasonably
request in order to consummate the purchase of Assets and to accomplish the
purposes of this Agreement.
7.5 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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7.6 Expenses. Except as otherwise specifically provided herein, each of
the parties shall pay all costs and expenses incurred or to be incurred by it in
negotiating and preparing this Agreement and in consummating purchase of the
Assets.
7.7 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Illinois, without giving effect to
principles of conflicts of law.
7.8 Headings. The subject headings of Articles and Sections of this
Agreement are included for purposes of convenience only and will not affect the
construction or interpretation of any of its provisions.
7.9 Assignment. This Agreement 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 any Person at any time without the consent of the other parties.
7.10 No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction will be applied against any party.
7.11 Definitions. As used in this Agreement,
(a) "Affiliate" means an affiliate as defined in Rule 405 under the
Securities Act of 1933, as amended, and includes any past and present Affiliate
of a Person.
(b) "Calendar Day" means any calendar day; provided that any Calendar
Day which is the end of a time period specified in this Agreement which is a
Saturday, a Sunday or a day on which federally chartered commercial banks are
required or authorized by applicable law or executive order to close shall be
deemed to fall on the next business day.
(c) "COBRA" means the limited continued medical benefit coverage
required to be provided under Section 4980B of the Code or state continuation
coverage laws.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Employee Benefit Plans" means any Employee Pension Benefit Plan
as defined in Section 3(2) of ERISA, "Employee Welfare Benefit Plan" (as defined
in Section 3(1) of ERISA), "multi-employer plan" (as defined in Section 3(37) of
ERISA), plan of deferred compensation, medical plan, life insurance plan,
long-term disability plan, dental plan or other plan providing for the welfare
of any of Sellers' or any Plan Affiliate's employees or former employees or
beneficiaries thereof, personnel policy (including but not limited to vacation
time, holiday pay, bonus programs, moving expense reimbursement programs and
sick leave), excess benefit plan, bonus or incentive plan (including but not
limited to stock options, restricted stock, stock bonus and deferred bonus
plans), salary reduction agreement, change-of-control agreement, employment
agreement, consulting agreement or any other benefit, program or contract.
(f) "Environmental Laws" means existing federal, state and local laws,
rules, regulations, ordinances, order, statutes, actions, codes, standards,
permits, licenses, policies and
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requirements relating to public health and safety, worker health and safety and
pollution and protection, preservation or conservation of the environment,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C.ss.9601 et seq., the
Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C.ss.6901 et
seq., the Emergency Planning and Community Right-to-Know Act ("Right-to-Know
Act"), 42 U.S.C.ss.11001 et seq., the Clean Air Act ("CAA"), 42 U.S.C.ss.7401 et
seq., the Federal Water Pollution Control Act ("Clean Water Act"), 33
U.S.C.ss.1251 et seq., the Toxic Substances Control Act ("TSCA"), 15
U.S.C.ss.2601 et seq., the Safe Drinking Water Act, 42 U.S.C.ss.300f et seq.,
the Occupational Safety and Health Act, 42 U.S.C.ss.651 et seq., and the
Hazardous Materials Transportation Act, 49 U.S.C.ss.1801, all as amended, and
any regulations, rules, ordinances adopted or publications promulgated pursuant
thereto.
(g) "ERISA" means the Employment Retirement Income Security Act of
1974, as amended.
(h) "Governmental Entity" means any foreign, federal, state or local
governmental or regulatory body, including any instrumentality, division, agency
or department of such a body.
(i) "Hazardous Substances" means any pollutant or contaminant (as that
term is defined in 42 U.S.C. ss.9601(33)), toxic pollutant (as that term is
defined in 33 U.S.C. ss.1362(13)), hazardous substance (as that term is defined
in 42 U.S.C. ss.ss.9601 et seq. and the regulations promulgated thereunder),
hazardous chemical (as that term is defined by 29 C.F.R. ss.1910.1200(c)),
hazardous waste (as that term is defined in 42 U.S.C. ss.6903(5)), radioactive
material, including, without limitation, any naturally occurring radioactive
material, any source, special nuclear or by-product material as defined in 42
U.S.C. ss.ss.2011 et seq., friable asbestos and asbestos containing material,
regulated levels of polychlorinated biphenyls, petroleum and petroleum waste,
including crude oil or any petroleum derived substance, waste or breakdown or
decomposition product thereof, or any constituent of any such petroleum
substance or waste, or any substance or material which because of its toxicity,
corrosiveness, ignitability, reactivity or infectious characteristics may pose a
threat to human health or the environment and which is subject to any
Environmental and Safety Requirements.
(j) "Intellectual Property" means all worldwide proprietary
information of Sellers used in connection with the Business including, but not
limited to, the rights, if any, to the American Gaming & Electronics name and
assumed names wherever used, all patents, patent applications, patent
disclosures and inventions (whether or not patentable and whether or not reduced
to practice); all trademarks, service marks, trade dress, trade names and
corporate names; all registered and unregistered statutory and common law
copyrights; all registrations, applications, extensions and renewals for any of
the foregoing; all trade secrets, confidential information, ideas, formulae,
compositions, know-how, research and development information drawings,
specifications, designs, plans, improvements, proposals, technical and computer
data, documentation and software, financial, business and marketing plans, and
customer and supplier lists and related information and all other proprietary
rights relating to the sale or service of products by, and the conduct of, the
Business.
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(k) "Law" means any law, ordinance or regulation of any federal,
state, local or foreign Government Entity (including, but not limited to,
building and zoning ordinances, occupational health and safety laws and
regulations and Environmental Laws, statutes and ordinances).
(l) "Licenses" means all licenses, permits, franchises, approaches and
authorizations by or of any Governmental Entity or other person required for the
conduct of the Business or in connection with ownership, occupancy or operation
of the Assets.
(m) "Lien" means any claims, liens, privileges, pledges, collateral
assignments, bonds for deed, charges, restrictions, options, preemptive rights,
mortgages, hypothecations, assessments, pledges, encumbrances or security
interests of any kind or nature whatsoever.
(n) "ordinary course of business" means an action taken by a Person
will be deemed to have been taken in the ordinary course of Sellers' business if
(i) such action is consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of such Person;
(ii) such action is not required to be authorized by the board of directors of
such Person (or by any Person or group of Persons exercising similar authority)
and does not require any other separate or special authorization of any nature;
and (iii) such action is similar in nature and magnitude to actions customarily
taken without any separate or special authorization, in the ordinary course of
the normal day-to-day operations of other Persons that are in the same line of
business as such Person.
(o) "Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated association, corporation, entity or
Government Body.
(p) "Plan Affiliate" means any Person or entity with which Sellers
constitutes all or part of a controlled group of corporations, a group of trades
or businesses under common control or an affiliated service group, as each of
those terms are defined in Section 414 of the Code.
(q) "Tax" means any federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, registration, value added, excise, natural resources, severance,
stamp, occupation, premium, windfall profit, environmental, customs, duties,
real property, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee or other withholding, or other tax, of
any kind whatsoever, including any interest, penalties or additions to tax or
additional amounts in respect of the foregoing; the foregoing shall include any
transferee or secondary liability for a Tax and any liability assumed by
agreement or arising as a result of being (or ceasing to be) a member of any
Affiliated Group, as defined in Section 1504 of the Code, (or being included (or
required to be included) in any tax return relating thereto).
(r) "to the knowledge of Sellers," "to Sellers' knowledge" or any
similar term means knowledge possessed, or which should have been possessed
after due inquiry in connection therewith, by the officers of Sellers or any
Shareholder.
7.12 Entire Agreement. This Agreement, the Transaction Documents and all
Schedules and Exhibits attached hereto or thereto (which will be deemed
incorporated in this Agreement and
50
<PAGE> 45
made a part of this Agreement) set forth the entire understanding of the parties
and may be modified only by instruments signed by all of the parties.
7.13 Third Parties. Nothing expressed or implied in this Agreement is
intended or will be construed to confer upon or give to any person, other than
the parties to this Agreement, any rights or remedies under or by reason of this
Agreement.
7.14 Interpretative Matters. Unless the context otherwise requires, (i) all
references to Articles, Sections, Schedules or Exhibits are to Articles,
Sections, Schedules or Exhibits in this Agreement, (ii) words in the singular or
plural include the singular and plural and pronouns stated in either the
masculine, feminine or neuter gender will include the masculine, feminine and
neuter and (iii) the term "including" shall mean by way of example and not by
way of limitation.
[SIGNATURE PAGE FOLLOWS]
51
<PAGE> 46
IN WITNESS WHEREOF, the parties have executed this Agreement of the date
first above written.
BUYER:
AMERICAN GAMING & ELECTRONICS, INC.,
a Nevada corporation
By: /s/ Mark E. Komorowski
------------------------------------
Name: Mark E. Komorowski
----------------------------------
Its: President
-----------------------------------
SELLERS:
AMERICAN GAMING & ELECTRONICS, INC.,
a New Jersey corporation
By: /s/ Ben Domenico
------------------------------------
Name: Ben Domenico
----------------------------------
Its: President
-----------------------------------
AMERICAN GAMING & ELECTRONICS,
OF FLORIDA, INC., a Florida corporation
By: /s/ Dave Mysel
------------------------------------
Name: Dave Mysel
----------------------------------
Its: President
-----------------------------------
52
<PAGE> 47
SHAREHOLDERS:
/s/ Ben Domenico
---------------------------------------
Ben Domenico
/s/ James Irvin
---------------------------------------
James Irvin
/s/ Dave Mysel
---------------------------------------
Dave Mysel
/s/ Rocky D'Aquilante
---------------------------------------
Rocky D'Aquilante
53
<PAGE> 1
EXHIBIT 2.2
SHAREHOLDER PURCHASE AGREEMENT
BY AND AMONG
AMERICAN GAMING & ELECTRONICS, INC.,
A NEVADA CORPORATION,
AND
BEN DOMENICO AND JAMES IRVIN AND DAVE MYSEL AND
ROCKY D'AQUILANTE
DATED AS OF JANUARY 12, 2000
54
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
ARTICLE I
<S> <C> <C> <C>
PURCHASE AND SALE OF ASSETS..............................................................................1
1.1 Assets........................................................................1
1.2 Excluded Assets...............................................................2
1.3 Cooperation Following the Closing Date........................................2
1.4 Regulatory Matters............................................................2
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT......................................................................2
2.1 Purchase Price................................................................2
2.2 Contingent Payments...........................................................2
2.2.1 Definitions...........................................................2
2.2.2 Current Operations Contingent Payment.................................4
2.2.3 Proposed Operations Contingent Payment................................5
2.2.4 Calculation of Contingent Payments....................................6
2.2.5 Payment of Contingent Payments........................................6
2.3 Assumed Liabilities...........................................................8
2.4 No Expansion of Third Party Rights............................................8
2.5 Excluded Liabilities..........................................................8
2.6 Allocation of Purchase Price..................................................8
2.7 Transferee Liability..........................................................9
2.8 Waiver of Resolutory Conditions...............................................9
ARTICLE III
REPRESENTATIONS AND WARRANTIES...........................................................................9
3.1 Representations and Warranties of Sellers.....................................9
3.1.1 Authority.....................................................................9
3.1.2 Assets................................................................9
3.1.3 No Consents..........................................................10
3.1.4 Absence of Undisclosed Liabilities...................................10
3.1.5 Taxes................................................................10
3.1.6 Contracts............................................................10
3.1.7 Real Property........................................................11
3.1.8 Litigation...........................................................11
3.1.9 Compliance with Laws.................................................11
3.1.10 Intellectual Property................................................11
3.1.11 Transactions Not a Breach............................................12
3.1.12 Conduct of the Business..............................................12
3.1.13 Insurance Policies...................................................12
3.1.14 Licenses.............................................................12
3.1.15 Employees............................................................13
3.1.16 Interest of Sellers in Customers, Etc................................13
</TABLE>
55
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
3.1.17 Affiliate Transactions...............................................13
3.1.18 Books and Records....................................................13
3.1.19 Brokers..............................................................13
3.1.20 No Misrepresentation.................................................13
3.2 Representations and Warranties of Buyer......................................13
3.2.1 Organization.........................................................13
3.2.2 Authority............................................................14
3.2.3 Transactions Not a Breach............................................14
3.2.4 Brokers..............................................................14
3.2.5 No Misrepresentation.................................................14
ARTICLE IV
CLOSING.................................................................................................14
4.1 Time and Place...............................................................14
4.2 Sellers Deliveries...........................................................15
4.2.1 AGE Purchase Agreement...............................................15
4.2.2 Bill of Sale and Assignment Agreement................................15
4.2.3 Consents.............................................................15
4.2.4 Tax Clearance........................................................15
4.2.5 Lien Searches........................................................15
4.2.6 Employment Agreements................................................15
4.2.7 Other Documents......................................................15
4.3 Buyer Deliveries.............................................................15
4.3.1 Purchase Price.......................................................15
4.3.2 Bill of Sale and Assignment Agreement................................16
4.3.3 AGE Purchase Agreement...............................................16
4.3.4 Employment Agreements................................................16
4.3.5 Guaranty Agreement. ................................................16
4.3.6 Other Documents......................................................16
ARTICLE V
OTHER AGREEMENTS........................................................................................16
5.1 Books and Records............................................................16
5.2 Cooperation after Closing....................................................16
5.3 Public Disclosure............................................................16
5.4 Mail.........................................................................17
5.5 Assumed Liabilities..........................................................17
5.6 Taxes........................................................................17
5.7 Transferee/Successor Liability...............................................17
ARTICLE VI
INDEMNIFICATION.........................................................................................17
6.1 Indemnification by Sellers...................................................17
6.2 Escrow Account...............................................................18
6.3 Indemnification by Buyer.....................................................18
6.4 Indemnification Procedure for Third Party Claims.............................18
</TABLE>
56
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
6.5 Direct Claims................................................................20
6.6 Right of Set-Off.............................................................21
6.7 Survival of Representations and Warranties of Sellers; Time Limits
on Indemnification Obligations...............................................21
6.8 Survival of Representations and Warranties of Buyer; Time Limits
on Indemnification Obligations...............................................21
6.9 Certain Limitations..........................................................21
6.10 Materiality..................................................................22
6.11 Appointment of Representative................................................22
ARTICLE VII
MISCELLANEOUS...........................................................................................23
7.1 Notice.......................................................................23
7.1.1 If to Buyer..........................................................23
7.1.2 If to Sellers........................................................23
7.2 Severability.................................................................24
7.3 Successors...................................................................24
7.4 Documents....................................................................24
7.5 Counterparts.................................................................24
7.6 Expenses.....................................................................24
7.7 Governing Law................................................................24
7.8 Headings.....................................................................25
7.9 Assignment...................................................................25
7.10 No Strict Construction.......................................................25
7.11 Definitions..................................................................25
7.12 Entire Agreement.............................................................27
7.13 Third Parties................................................................27
7.14 Interpretative Matters.......................................................27
</TABLE>
57
<PAGE> 5
LIST OF SCHEDULES
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
- -------- -----------
<S> <C>
Schedule 1.1 Assets
Schedule 1.2 Excluded Assets
Schedule 2.2.2 Current Operations Contingent Payment
Schedule 2.2.3 Proposed Operations Contingent Payment
Schedule 2.3 Assumed Liabilities
Schedule 2.5 Excluded Liabilities
Schedule 2.6 Allocation of Purchase Price
Schedule 3.1.2 Condition of Assets
Schedule 3.1.3 Consents
Schedule 3.1.4 Undisclosed Liabilities
Schedule 3.1.6 Contracts
Schedule 3.1.8 Litigation
Schedule 3.1.10 Intellectual Property
Schedule 3.1.12 Conduct of Business
Schedule 3.1.14 Licenses
Schedule 3.1.16 Interest of Sellers in Customers, etc.
Schedule 3.1.17 Affiliate Transactions
Schedule 3.2.3 Buyer: Transactions Not A Breach
Schedule 6.1.5 Indemnification by Sellers
</TABLE>
58
<PAGE> 6
<TABLE>
<CAPTION>
GLOSSARY OF DEFINED TERMS
TERM SECTION REFERENCE
- ---- -----------------
<S> <C>
"Affiliate".................................................................7.11
"Affiliate Transactions"..................................................3.1.17
"AGE" ..............................................................Introduction
"AGE Florida".......................................................Introduction
"AGE Purchase Agreement"............................................Introduction
"AGE Transaction"...................................................Introduction
"Agreement".........................................................Introduction
"Assets".....................................................................1.1
"Assumed Liabilities"........................................................2.3
"Base Contingent Payment"..................................................2.2.1
"Business"..........................................................Introduction
"Buyer Indemnified Party"....................................................6.1
"Buyer".............................................................Introduction
"Buyer's Agreements".......................................................3.2.2
"Calendar Day"..............................................................7.11
"Claims".................................................................3.1.8.1
"Closing"....................................................................4.1
"Closing Date"...............................................................4.1
"Code"......................................................................7.11
"Common Stock".............................................................2.2.5
</TABLE>
59
<PAGE> 7
<TABLE>
<CAPTION>
TERM SECTION REFERENCE
TERM SECTION REFERENCE
- ---- -----------------
<S> <C>
"Company"...........................................................Introduction
"Consents".................................................................3.1.3
"Contingent Dates".........................................................2.2.1
"Contingent Payments"......................................................2.2.1
"Continuing Employee".......................................................7.11
"Contracts"................................................................3.1.6
"Current Operations".......................................................2.2.1
"Current Operations Contingent Payment"....................................2.2.1
"Defense Counsel"............................................................6.4
"Defense Notice".............................................................6.4
"Direct Claim"...............................................................6.5
"Excluded Liabilities".......................................................2.5
"Excluded Assets"............................................................1.2
"GAAP"......................................................................7.11
"Governmental Entity".......................................................7.11
"Indemnified Party"..........................................................6.4
"Indemnifying Party".........................................................6.4
"Independent Accountants"..................................................2.2.1
"Intellectual Property".....................................................7.11
"Law".......................................................................7.11
</TABLE>
60
<PAGE> 8
<TABLE>
<CAPTION>
TERM SECTION REFERENCE
- ---- -----------------
<S> <C>
"Licenses"..................................................................7.11
"Liens".....................................................................7.11
"Losses".....................................................................6.1
"Maximum Contingent Payment"...............................................2.2.1
"Minimum Operating Income".................................................2.2.1
"Operating Income".........................................................2.2.1
"Operating Income Payment Cap".............................................2.2.1
"Operating Income Target"..................................................2.2.1
"Ordinary course of business"...............................................7.11
"Person"....................................................................7.11
"Principal Offices".................................................Introduction
"Proposed Operations"......................................................2.2.1
"Proposed Operations Contingent Payment"...................................2.2.1
"Proceeds"...................................................................6.9
"Purchase Price".............................................................2.1
"Representative"............................................................6.11
"Regulatory Matters".........................................................1.4
"Seller Indemnified Party"...................................................6.3
"Sellers"...........................................................Introduction
"Sellers' Agreements"......................................................3.1.1
</TABLE>
61
<PAGE> 9
<TABLE>
<CAPTION>
TERM SECTION REFERENCE
- ---- -----------------
<S> <C>
"Tax".......................................................................7.11
"Term".....................................................................5.6.1
"Territory"................................................................5.6.1
"Third Party Claim"..........................................................6.4
"Threshold Contingent Payment".............................................2.2.1
"To Sellers' Knowledge".....................................................7.11
"To the Knowledge of Seller,"...............................................7.11
"Transaction Documents"......................................................2.5
"Wells-Gardner".....................................................Introduction
</TABLE>
62
<PAGE> 10
SHAREHOLDER PURCHASE AGREEMENT
THIS SHAREHOLDER PURCHASE AGREEMENT (this "Agreement") is made as of
this 12th day of January, 2000, by and among AMERICAN GAMING & ELECTRONICS,
INC., a Nevada corporation ("Buyer" or "Company"), and each of Ben Domenico,
James Irvin, Dave Mysel and Rocky D'Aquilante (collectively "Sellers").
Capitalized terms that are not otherwise defined in this Agreement are defined
in SECTION 7.11.
WHEREAS, Buyer is a wholly-owned subsidiary of Wells-Gardner
Electronics Corporation, an Illinois corporation ("Wells-Gardner").
WHEREAS, concurrent with the execution of this Agreement, Buyer,
American Gaming & Electronics, Inc., a New Jersey corporation ("AGE"), American
Gaming & Electronics of Florida, Inc., a Florida corporation ("AGE Florida"),
and Sellers are executing an Asset Purchase Agreement (the "AGE Purchase
Agreement") whereby Buyer will agree to purchase certain assets of AGE and AGE
Florida (the "AGE Transaction").
WHEREAS, Sellers are engaged in the business of the design, sale,
marketing, manufacturing, distribution and service of new and remanufactured
gaming machines and parts for gaming machines (the "Business") and have
principal offices located at: 19 Tilton Street, Hammonton, New Jersey 08037;
6255 McLeod Drive, Suite 22, Las Vegas, Nevada 89120; and 2046 McKinley Street,
Hollywood, Florida 33020 (the "Principal Offices").
WHEREAS, Sellers desire to sell to Buyer and Buyer desires to purchase
from Sellers, certain of the assets of Sellers, which are used in or arise out
of the conduct of the Business, upon the terms and subject to the conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants of the parties
set forth in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Assets. On the terms and subject to the conditions hereinafter set
forth, at the Closing, Sellers shall sell, convey, transfer, assign and deliver
to Buyer, free and clear of all Liens, and Buyer shall purchase from Sellers,
all of Sellers' right, title and interest in and to certain property and assets
which are used in or arise out of the conduct of the Business or are considered
to be assets of Sellers in connection with the Business as of the Closing Date,
wherever located (collectively, the "Assets"). The Assets shall include only the
rights and assets set forth on Schedule 1.1 attached hereto.
63
<PAGE> 11
1.2 Excluded Assets. Notwithstanding anything to the contrary contained
herein, the Assets do not include the rights or assets listed on Schedule 1.2
attached hereto or any other rights or assets not listed on Schedule 1.1
attached hereto (collectively, the "Excluded Assets").
1.3 Cooperation Following the Closing Date. To the extent any Excluded
Asset may be, in the opinion of Buyer, necessary or appropriate to conduct the
Business, Sellers agree to provide Buyer with access to such Excluded Assets so
long as and to the extent that such Excluded Assets are necessary or appropriate
to conduct the Business following the Closing Date.
1.4 Regulatory Matters. Buyer, Sellers and Shareholders understand that
as of the Closing Date the State of New Jersey has not granted a transactional
waiver to Buyer to conduct gaming related business with casinos in New Jersey.
Accordingly, only non-gaming related products will be sold and distributed in
New Jersey and Connecticut until such time as the transactional waiver is
granted and becomes effective in New Jersey and an exemption is granted in
Connecticut. Furthermore, this Agreement and the transactions contemplated
hereby shall only be effective to the extent permissible in New Jersey until
such time as the transactional waiver is granted by the New Jersey Casino
Control Commission.
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
2.1 Purchase Price. The aggregate purchase price to be paid by Buyer to
Sellers for the Assets shall be one hundred dollars ($100) (the "Purchase
Price") payable by check or wire transfer on the Closing Date.
2.2 Contingent Payments. In addition to the Purchase Price, Buyer will
pay to Sellers certain contingent payments only if certain future financial
targets are achieved as set forth in this SECTION 2.2.
2.2.1 Definitions.
(a) "Base Contingent Payment" shall, for each
Contingent Date, refer to the Contingent Payment amount listed
on Schedule 2.2.2 hereto with regard to the Current Operations
and Schedule 2.2.3 hereto with regard to the Proposed
Operations.
(b) "Contingent Dates" shall refer collectively to
each of December 31, 2000, December 31, 2001, December 21,
2002 and December 31, 2003.
(c) "Contingent Payments" shall refer collectively
to each of the Current Operations Contingent Payment and the
Proposed Operations Contingent Payment as each such term is
defined below.
64
<PAGE> 12
(d) "Current Operations" shall refer to the
Operating Income arising from operations in connection with
the conduct of the Business at the Principal Offices.
(e) "Current Operations Contingent Payment" shall
refer to the payment based on Operating Income from Current
Operations with respect to each of the Contingent Dates, as
calculated for the applicable date under SECTION 2.2.4.
(f) "Independent Accountants" shall refer to an
independent accounting firm not regularly used, and selected
jointly, by Buyer and Sellers.
(g) "Maximum Contingent Payment" shall, for each
Contingent Date, refer to the Contingent Payment amount listed
on Schedule 2.2.2 hereto with regard to the Current Operations
and Schedule 2.2.3 hereto with regard to the Proposed
Operations
(h) "Minimum Operating Income" shall, for each
Contingent Date, refer to the amount of Operating Income
listed on Schedule 2.2.2 hereto with regard to the Current
Operations and Schedule 2.2.3 hereto with regard to the
Proposed Operations.
(i) "Operating Expenses" shall be limited to those
expenses that directly relate to the operation of Current
Operations and Proposed Operations in the ordinary course of
business that are, in good faith, made by Buyer.
Notwithstanding the above, Operating Expenses shall not
include (1) any overhead allocation that is attributable to
Wells-Gardner or any other subsidiary of Wells- Gardner, (ii)
payments not related to Buyer's legitimate business
transactions in the ordinary course, (iii) any transaction
between Buyer and an Affiliate thereof where the terms thereof
are less favorable than would have been obtained in a
transaction with an unrelated third party and (iv) any portion
of an advance payment that is not related to the current
period.
(j) "Operating Income" shall refer to net sales less
cost of goods sold and Operating Expenses in accordance with
GAAP (as defined in SECTION 7.11), but shall exclude any
deduction for the amortization of goodwill or payment of any
Contingent Purchase Price made in connection with the AGE
Transaction or the fulfillment of this Agreement or the AGE
Purchase Agreement.
(k) "Operating Income Payment Cap" shall, for each
Contingent Date, refer to the amount of Operating Income
listed on Schedule 2.2.2 hereto with regard to the Current
Operations and Schedule 2.2.3 hereto with regard to the
Proposed Operations.
(l) "Operating Income Target" shall, for each
Contingent Date, refer to the amount of Operating Income
listed on Schedule 2.2.2 hereto with regard to
65
<PAGE> 13
the Current Operations and Schedule 2.2.3 hereto with regard
to the Proposed Operations.
(m) "Proposed Operations" shall refer to Operating
Income arising from any operations which are not included in
or covered by the definition of Current Operations.
(n) "Proposed Operations Contingent Payment" shall
refer to the payment based on Operating Income from Proposed
Operations with respect to each of the Contingent Dates, as
calculated for the applicable date under SECTION 2.2.3.
(o) "Threshold Contingent Payment" shall, for each
Contingent Date, refer to the Contingent Payment amount listed
on Schedule 2.2.2 hereto with regard to the Current Operations
and Schedule 2.2.3 hereto with regard to the Proposed
Operations.
2.2.2 Current Operations Contingent Payment. The Company shall
pay Sellers, according to the procedure set forth in this SECTION 2,
the Current Operations Contingent Payment calculated for the applicable
Contingent Date as follows. For each fiscal year ending on each
Contingent Date, the Current Operations Contingent Payment shall be
equal to (but never less than zero dollars):
(a) zero dollars if the Current Operations are less
than the Minimum Operating Income;
(b) the Threshold Contingent Payment if the Current
Operations are equal to the Minimum Operating Income;
(c) the product of (i) the Base Contingent Payment
and (ii) the quotient of (A) the Current Operations divided by
(B) the Operating Income Target, if the Current Operations are
greater than the Minimum Operating Income but less than the
Operating Income Target;
(d) the Base Contingent Payment if the Current
Operations are equal to the Operating Income Target;
(e) the Base Contingent Payment, plus fifty percent
(50%) of the amount by which the Current Operations exceed the
Operating Income Target, if the Current Operations are greater
than the Operating Income Target but less than the Operating
Income Payment Cap; and
(f) the Maximum Contingent Payment if the Current
Operations are equal to or greater than the Operating Income
Payment Cap.
66
<PAGE> 14
2.2.3 Proposed Operations Contingent Payment. The Company
shall pay Sellers, according to the procedure set forth in this SECTION
2, the Proposed Operations Contingent Payment calculated for the
applicable Contingent Date as follows. For each fiscal year ending on
each Contingent Date, the Proposed Operations Contingent Payment shall
be equal to (but never less than zero dollars):
(a) zero dollars if the Proposed Operations are less
than the Minimum Operating Income;
(b) the Threshold Contingent Payment if the Proposed
Operations are equal to the Minimum Operating Income;
(c) for the year ending:
(i) December 31, 2000, the amount equal to:
the product of (A) Base Contingent Payment
and (B) one plus the quotient of (I) the
Proposed Operations divided by (II)
60,000, or
(ii) December 31, 2001, December 31, 2002 and
December 31, 2003, the amount equal to:
the product of (A) the Base Contingent
Payment and (B) the quotient of the (I)
the Proposed Operations divided by (II)
the Operating Income Target,
if the Proposed Operations are greater than the Minimum
Operating Income but less than the Operating Income Target;
(d) the Base Contingent Payment if the Proposed
Operations are equal to the Operating Income Target;
(e) the Base Contingent Payment, plus fifty percent
(50%) of the amount by which the Proposed Operations exceed
the Operating Income Target, if the Proposed Operations are
greater than the Operating Income Target but less than the
Operating Income Payment Cap; and
(f) the Maximum Contingent Payment if the Proposed
Operations are equal to or greater than the Operating Income
Payment Cap.
2.2.4 Calculation of Contingent Payments. Within ninety (90)
Calendar Days following each Contingent Date, Buyer shall cause the
Company to prepare and issue to Sellers a determination of the
Contingent Payments, if any, to be paid for such Contingent Date.
Thereafter, Sellers and their representatives shall be provided
reasonable access during regular business hours to, and afforded the
opportunity to review, the Company's determination of the Contingent
Payments, and the books and records of the Company and all workpapers
relating thereto. If Sellers shall not object to the Company's
determination
67
<PAGE> 15
of Contingent Payments, in a writing delivered to Buyer on or before
thirty (30) Calendar Days after delivery to Sellers of such
determination, then the Company's determination of the Contingent
Payments shall be final, conclusive and binding upon Sellers. If,
however, Sellers shall deliver such a written objection, Buyer and
Sellers shall attempt to reconcile their differences, and any
resolution by them as to any disputed amounts shall be final,
conclusive and binding on the parties hereto. If Buyer and Sellers are
unable to resolve any such dispute within fifteen (15) Calendar Days of
the delivery by Sellers of their written objection, the dispute shall
be submitted to the Independent Accountants to review the Company's
determination of the Contingent Payments, and the Sellers' objections
thereto in accordance with this SECTION 2.2.4 as soon as is reasonably
practicable thereafter but in no case later than thirty (30) Calendar
Days after the date of delivery of the written objection. Buyer,
Sellers and the Company shall provide all information, cooperation and
assistance reasonably requested by the Independent Accountants in
conducting such review and determining the Contingent Payments. The
Independent Accountants shall issue and deliver simultaneously to
Sellers and Buyer their determination of the Contingent Payments, which
shall be final, conclusive and binding upon Sellers and Buyer. The fees
and expenses of the Independent Accountants shall be borne by the
losing party or, to the extent each party prevails in part, each party
shall pay the fees and expenses to the extent it is the losing party,
as determined by the Independent Accountants.
2.2.5 Payment of Contingent Payments.
(a) Distribution to Sellers. Any Contingent Payment
to be made to Sellers shall be distributed in accordance with
Schedule 2.2.5. To the extent that any payment made to Buyer
out of the Escrow Account (as defined in the AGE Purchase
Agreement) in connection with a New Jersey Claim (as defined
in the side letter of even date herewith between Buyers,
Sellers and AGE and AGE Florida) exceeds $397,000.00, such
amount which shall be subtracted from the portion of the
Contingent Payment payable to Ben Domenico and paid to the
other Sellers in accordance with the following percentages:
James Irvin (44.19%), Dave Mysel (33.33%) and Rocky
D'Aquilante (22.48%) rather than in accordance with Schedule
2.2.5; provided however that Wells-Gardner shall have a right
of set-off against such amount.
(b) Form of Payment. At the sole discretion of the
Company, up to sixty percent (60%) of the aggregate amount of
any Contingent Payments payable by the Company to Sellers can
be paid with the common stock of Wells-Gardner (the "Common
Stock"), so long as the Common stock continues to be listed on
a national securities exchange (such as, but not limited to,
the American Stock Exchange) or automated quotation system and
trading of the Common Stock on such exchange has not been
suspended. For purposes of computing the portion of any
Contingent Payments to be paid with Common Stock, the Common
Stock shall be valued at ten percent (10%) below the average
market value of the Common Stock for the thirty (30) trading
days immediately prior to the issuance of the Common Stock to
Sellers. Sellers hereby agree not to sell, contract to sell,
pledge
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or otherwise dispose of, directly or indirectly, any Common
Stock received as part of any Contingent Payments for a period
of one year from the date such Common Stock is issued to
Sellers; provided that twenty five percent (25%) of the shares
issued on such dates shall become exempt from such
restrictions on each of the dates which are three, six, nine
and twelve months from the date of issuance. The Company
agrees to cause Wells-Gardner to make any filings with the
Securities and Exchange Commission which are, in the
reasonable opinion of counsel to Wells- Gardner, necessary so
that Sellers may dispose of any Common Stock they receive in
accordance with this SECTION 2.2.
(c) Contingent Payment Settlement. Upon the final
determination of the Contingent Payments for each Contingent
Date under the procedure set forth in SECTION 2.2.4 and in no
event later than seven (7) Calendar Days following the earlier
of: (i) the expiration of the thirty (30) Calendar Day period
during which Sellers may contest Buyer's determination of the
Contingent Payments, or (ii) the delivery of the Independent
Accountants' final determination of the Contingent Payments,
the Buyer shall pay the Contingent Payments to Sellers in cash
or a combination of cash and Common Stock as set forth in this
SECTION 2.2.5.
2.2.6 Continued Conduct of Business. The Company agrees that,
so long as it continues to own the Assets, it will operate and conduct
the Current Operations and Proposed Operations in good faith, in a
reasonable and prudent manner, and use its reasonable efforts to
achieve or exceed the income targets set forth on Schedules 2.2.2 and
2.2.3. The Company shall, in addition to other reasonable and prudent
conduct, (a) adequately staff and furnish the Company; (b) provide
adequate working capital and financing; (c) provide adequate facilities
and equipment; and (d) maintain appropriate levels of inventory and
parts.
2.3 Assumed Liabilities. From and after the Closing Date, Buyer will
assume and agree to pay, defend, discharge and perform when due only those
liabilities set forth on Schedule 2.3 (all such liabilities and obligations to
be so assumed by Buyer pursuant to this SECTION 2.3 being referred to
collectively as the "Assumed Liabilities").
2.4 No Expansion of Third Party Rights. The assumption by Buyer of the
Assumed Liabilities shall not expand the rights or remedies of any third party
against Buyer or Sellers as compared to the rights and remedies which such third
party would have had against Sellers had Buyer not assumed the Assumed
Liabilities. Without limiting the generality of the preceding sentence, the
assumption by Buyer of the Assumed Liabilities shall not create any third party
beneficiary rights.
2.5 Excluded Liabilities. Notwithstanding anything to the contrary
contained in this Agreement, the AGE Purchase Agreement or any agreement,
document, certificate or instrument being delivered pursuant to such agreements
(collectively, the "Transaction Documents"), and regardless of whether such
liability is disclosed in this Agreement or any of the Transaction Documents or
on any Schedule or Exhibit hereto or thereto, Buyer will not assume, agree to
pay,
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perform or discharge or in any way be responsible for any Excluded Liabilities.
As used herein, the term "Excluded Liabilities" means any and all debts,
liabilities or obligations of Sellers of any kind or nature whatsoever other
than the Assumed Liabilities (whether due or to become due, fixed or unfixed,
choate or inchoate, secured or unsecured, absolute or contingent, direct or
indirect, asserted or unasserted, known or unknown, and regardless of whether
such debts, liabilities or obligations relate to Sellers' Business). The
Excluded Liabilities shall include, without limitation, (i) any liabilities or
obligations whatsoever relating, directly or indirectly, to any Excluded Assets,
including, without limitation, any trade creditors, bank debt, payroll or
payroll tax liabilities, payments due to any current or former employee of
Sellers for amounts due under any bonus plan or incentive arrangement, income
tax liabilities, severance liabilities to any current or former employee of
Sellers, 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 Sellers, (iii) any contractual obligations or liabilities relating to
any existing facilities used in connection with the Business, (iv) any liability
of the Sellers for taxes, costs, and expenses incurred in connection with this
Agreement, and (v) the liability of Sellers under any "bulk sales" or similar
law or statute relating to the transfer of the Assets hereunder.
2.6 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets as set forth on Schedule 2.6. The parties agree to report on
their respective tax returns the transactions which are the subject of this
Agreement in a manner consistent with the allocation set forth in Schedule 2.6.
2.7 Transferee Liability. Prior to the Closing Date, Sellers agree to
notify the appropriate state taxing authority of the transfers contemplated
hereunder and obtain a certificate from such authority showing that all tax,
penalty and interest assessed against or due from Sellers has been paid, or a
clearance certificate from such authority showing that no tax, penalty or
interest has been assessed against and is due and unpaid from Sellers.
2.8 Waiver of Resolutory Conditions. Sellers agree and acknowledge that
upon effectuation of the Closing, the sale of the 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 in accordance
with SECTION 2.1 (subject to a right of set-off, if applicable), shall not be
cause for the resolution and/or rescission of the transfer of such Assets, and
Sellers confirm that the sale of the Assets contemplated by this Agreement shall
contain no resolutory conditions whatsoever. Sellers 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 Assets purchased hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Sellers. Sellers, jointly and
severally, hereby represent and warrant to Buyer as of the Closing Date as
follows:
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3.1.1 Authority. Each of the Sellers has full right, power and
authority to enter into and perform their obligations under this
Agreement, and all other agreements, documents, certificates and
instruments delivered in connection with the transactions contemplated
hereby and thereby, to which any of the Sellers is a party and any
other document to be delivered by such Sellers, as the case may be at
Closing (collectively, the "Sellers' Agreements"). This Agreement has
been, and the Sellers' Agreements once executed will be, duly and
validly executed and delivered by each of the Sellers and will
constitute the valid and binding obligations of each of the Sellers,
enforceable against each of them in accordance with their respective
terms.
3.1.2 Assets. Except for the Assets purchased pursuant to the
AGE Purchase Agreement, the Assets and the Excluded Assets constitute
all of the property and assets which are considered part of the
Business, or useful in operation of the Business and all of the assets
necessary or useful to conduct the Business as presently conducted.
Sellers have the right to convey, and upon the consummation of the
transactions contemplated by this Agreement, Sellers will have
conveyed, and Buyer will be vested with, good and marketable title and
interest in and to the Assets, free and clear of all Liens. Neither AGE
nor AGE Florida have any ownership interest in the Assets.
3.1.3 No Consents. Each of the Sellers has full right, power
and authority to sell the Assets to Buyer as provided in this Agreement
without obtaining the consent or approval of any Governmental Entity or
other Person. The execution and delivery by Sellers of, and the
performance by Sellers of their obligations under, the Sellers'
Agreements do not require Sellers to obtain any consent, approval or
waiver of any acceleration, termination or other right or remedy by, or
to make any filing with or give any notice to, any other Person (the
"Consents"), except as set forth in Schedule 3.1.3. No consents or
approvals are necessary for the consummation of the transactions
contemplated hereby in order to prevent a breach of, or default under,
or modification or termination of any contract to which Sellers, the
Business or any of the Assets are subject.
3.1.4 Absence of Undisclosed Liabilities. Except as set forth
in Schedule 3.1.4, Sellers have no liabilities or obligations of any
nature with respect to the Assets (whether absolute, accrued,
contingent or otherwise) other than obligations under the Contracts
that are set forth in Schedule 3.1.6 or that are required to be so set
forth and which obligations are to be performed in the ordinary course
of business, which obligations are apparent from the plain reading of
such Contracts and those liabilities which relate to the Claims
specifically disclosed in Schedule 3.1.8. None of the liabilities or
obligations described in the preceding sentence and on the related
schedules are the result of a breach of contract, breach of warranty,
tort, infringement or lawsuit.
3.1.5 Taxes. Sellers have paid all Taxes due and payable in
connection with the Assets as of the Closing. Sellers have timely filed
all federal, state, county, local and foreign tax returns which they
are required to have filed, and such returns are complete and correct.
Any deficiencies proposed as a result of any governmental audits have
been
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paid or settled, and there are no present disputes as to Taxes payable
by Sellers. There are no unexpired waivers by Sellers of any statute of
limitations with respect to any Taxes, and none of the Sellers is a
party to any action or proceedings by any Governmental Entity for the
collection or assessment of Taxes.
3.1.6 Contracts. Attached hereto as Schedule 3.1.6 is a list
of all contracts, agreements, licenses, sublicenses, understandings,
instruments, obligations, relationships and commitments, oral or
written, to which any Seller is a party or by any either Seller is
bound or subject that relate, directly or indirectly, to the Business
or the Assets (the "Contracts"), correct and complete copies of written
Contracts and summaries of all oral Contracts which have been
previously furnished to Buyer. Except as set forth on Schedule 3.1.6,
all of the Contracts are in full force and effect and may be assigned
to Buyer without the consent, approval, novation, waiver or
notification of any Person. Except as noted in Schedule 3.1.6, Sellers
are not in breach or default, and no event has occurred which the
giving of notice or the passage of time or both would constitute a
breach or default, under any Contract or any other obligation owed by
Sellers, and, to the knowledge of Sellers, no event has occurred which
with the giving of notice or the passage of time or both would
constitute a breach or default by any other party to any such Contract
or obligation.
3.1.7 Real Property. The Assets do not include any real or
leased property and no real or leased property is necessary or useful
in connection with the Assets.
3.1.8 Litigation. Except as set forth in Schedule 3.1.8 (which
discloses the parties to, nature of, and relief sought for each matter
to be disclosed):
3.1.8.1 Claims. There is no suit, action,
proceeding, investigation, arbitration, mediation, claim or
order pending or, to the knowledge of Sellers, threatened
against Sellers (or pending or, to the knowledge of Sellers,
threatened against any of the officers, directors or employees
of Sellers with respect to the Assets), or to which, any of
Sellers is otherwise a party before any court or any other
Governmental Entity which if adversely determined would
adversely affect Sellers or the Assets (collectively,
"Claims"); and, to the knowledge of Sellers, there is no basis
for any other such Claim.
3.1.8.2 Orders. Sellers are not subject to or bound
by any judgment, order or decree of any court or any other
Governmental Entity. Sellers have not received any opinion or
memorandum from legal counsel to the effect that they are
exposed to any liability or disadvantage that may be material
to the Assets, and none of the Sellers is engaged in any legal
action to recover monies due it or for damages sustained by
it.
3.1.9 Compliance with Laws. The Business, as conducted by
Sellers, and the Assets are in compliance with, and do not violate in
any respect, any applicable Law (including any statutes, ordinances or
regulations). None of the Sellers has received notice
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of any such violation or liability or any correspondence from any
Governmental Entity relating thereto.
3.1.10 Intellectual Property. Schedule 3.1.10 contains a
complete and accurate description of all Intellectual Property of
Sellers with respect to the Assets, including information regarding
Sellers' ownership of such Intellectual Property and licenses, rights
or immunities in such Intellectual Property and the registration of
such Intellectual Property. Sellers own all of the Intellectual
Property, and all of the Intellectual Property is valid and in good
standing, free and clear of any Liens, and is not being challenged in
any way. Sellers have taken reasonable security measures to protect the
secrecy, confidentiality and value of all trade secrets of Sellers used
by Sellers in connection with the Assets, including supplier and
customer lists, business and marketing plans and studies and other
technical data relating to the Assets. To the knowledge of Sellers,
Sellers have not infringed and are not now infringing on any copyright,
trademark, service mark or trade name of, or belonging to, any Person
and no Person has asserted any such claim.
3.1.11 Transactions Not a Breach. The execution, delivery or
performance by Sellers of this Agreement and the Sellers' Agreements
will not:
(a) violate, conflict with, or result in a breach of
any provision of any
Law binding on Sellers with respect to any of the Assets;
(b) violate or conflict with any provision of any
contract, agreement, mortgage, note, bond, license, or other
instrument or obligation of any kind or nature to which any of
Sellers is a party or by which any of Sellers or any of the
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 any of Sellers is a
party or by which any of Sellers is bound, and which is
material to the ownership of the Assets;
(d) result in the creation or imposition of any
Lien, security interest, charge, or encumbrance upon the
Assets; or
(e) have a material adverse effect on the Assets.
3.1.12 Conduct of the Business. Except as set forth in
Schedule 3.1.12, since July 1, 1999, Sellers have conducted their
businesses with respect to the Assets only in the ordinary course of
business, and have incurred no liabilities in connection with the
Assets other than in the ordinary course of business, and there has
been no material adverse change in the assets, condition (financial or
otherwise), operating results, employee or customer relations, business
activities or prospects involving the Assets as of such date.
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3.1.13 Insurance Policies. There are no insurance policies
(including "self- insurance" programs and general liabilities policies)
maintained by any of Sellers with respect to the Business or the
Assets; nor have any of Sellers maintained any such insurance policies
with respect to the Business or the Assets during the past two years.
3.1.14 Licenses. Schedule 3.1.14 is a complete and accurate
list of all of the Licenses and applications for Licenses not yet
issued which are held by Sellers or submitted by Sellers to any
Governmental Entity in connection with the Assets. Sellers are in
compliance in all material respects with such Licenses all of which are
valid, binding and in full force and effect. Except as disclosed in
Schedule 3.1.14, each of the Licenses is freely transferable and will
constitute part of the Assets.
3.1.15 Employees. There are no employees, independent
contractors or sales representatives who render services to Sellers in
connection with the Business or the Assets.
3.1.16 Interest of Sellers in Customers, Etc. Except as set
forth in Schedule 3.1.16, none of Sellers have any direct or indirect
interest in any competitor, supplier or customer of the Business or in
any Person from whom or to whom Sellers lease any real or personal
property or in any other Person with whom Sellers have any business
relationship in connection with the Business.
3.1.17 Affiliate Transactions. Schedule 3.1.17 contains a
complete and accurate list of the parties to and the date, nature and
amount of each transaction involving the transfer of any cash, property
or rights to or from Sellers from, to, or for the benefit of any
Affiliate or former Affiliate of Sellers ("Affiliate Transactions")
within the two years preceding the date of this Agreement and any
existing commitments of Sellers to engage in the future in any
Affiliate Transactions. Except as noted in Schedule 3.1.17, each
Affiliate Transaction was effected on terms equivalent to those that
would have been established in an arms-length negotiation.
3.1.18 Books and Records. All the books, records and accounts
of Sellers as they relate to the Assets are in all respects accurate
and complete, and all laws, regulations and rules applicable to the
Assets, and accurately present and reflect, in all material respects,
all of the transactions described therein.
3.1.19 Brokers. Sellers have not incurred any liability to any
broker, finder, or agent, and there are no claims for any brokerage
fees, finder's fees, or commissions in connection with the transactions
contemplated hereby.
3.1.20 No Misrepresentation. None of the information contained
in the representations and warranties of Sellers set forth in this
Agreement or in any of the Sellers' Agreements contain any untrue
statement of a material fact, or omits to state a material fact
necessary to make the statements contained herein or therein not
misleading.
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3.2 Representations and Warranties of Buyer. Buyer hereby represents
and warrants to Sellers as of the Closing Date as follows:
3.2.1 Organization. Buyer is a corporation duly organized,
existing, and in good standing under the laws of the State of Nevada.
3.2.2 Authority. Buyer has full corporate power and authority
to enter into and perform its obligations under this Agreement, and
all other agreements, documents, certificates and instruments
delivered in connection with the transactions contemplated hereby to
which it is a party, and any other documents to be delivered by it at
Closing (collectively, the "Buyer's Agreements") and to perform its
obligations under this Agreement and the Buyer's Agreements. The
execution and performance of this Agreement and the Buyer's Agreements
will be duly authorized by all necessary corporate action on the part
of Buyer, in accordance with Law and with Buyer's articles of
incorporation and bylaws. This Agreement has been, and the Buyer's
Agreements once executed will be, duly and validly executed and
delivered by Buyer and will constitute the valid and binding
obligations of Buyer, enforceable against Buyer in accordance with
their respective terms.
3.2.3 Transactions Not a Breach. Except as listed on Schedule
3.2.3 hereto, Buyer's execution and performance of this Agreement and
the Buyer's Agreements will not materially violate, conflict with, or
result in a material breach of any provision of any Law binding on
Buyer or conflict with or result in the breach of any of the terms,
conditions or provisions of the Buyer's Articles of Incorporation or
bylaws or of any contract, agreement, mortgage, or other instrument or
obligation of any nature to which Buyer is a party or by which Buyer
is bound.
3.2.4 Brokers. With the exception of Mesirow Financial whose
fees will be paid by Buyer, Buyer has not incurred any liability to
any broker, finder or agent, and there are no claims for any brokerage
fees, finder's fees or commissions in connection with the transactions
contemplated hereby.
3.2.5 No Misrepresentation. None of the information contained
in the representations and warranties of Buyer set forth in this
Agreement or in any of the Buyer's Agreements contain any untrue
statement of a material fact, or omit to state a material fact
necessary to make the statements contained herein or therein not
misleading.
ARTICLE IV
CLOSING
4.1 Time and Place. The closing of the transactions contemplated by
this Agreement (the "Closing") will take place at the offices of James, Driggs,
Walch, Santoro, Kearney, Johnson
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& Thompson in Las Vegas, Nevada on January 11, 2000 at 10:00 a.m. Pacific Time
or at such other time, date and location as the parties may agree to in writing
(the "Closing Date").
4.2 Sellers Deliveries. Sellers shall, at their sole cost and expense,
execute and deliver or cause to be executed and delivered to Buyer:
4.2.1 AGE Purchase Agreement. The AGE Purchase Agreement, in
form and substance reasonably satisfactory to Buyer.
4.2.2 Bill of Sale and Assignment Agreement. A Bill of Sale
and Assignment Agreement duly executed by Sellers, in form and
substance reasonably satisfactory to Buyer.
4.2.3 Consents. Any required Consents and certificates of
assignment required of Sellers to transfer the Assets and otherwise
consummate the transactions contemplated hereby.
4.2.4 Tax Clearance. Tax clearance certificates or similar
documents required by any state taxing authority in order to relieve
Buyer of any obligation to withhold any portion of the Purchase Price,
if previously obtained.
4.2.5 Lien Searches. Such Uniform Commercial Code lien
searches and such other instruments showing that there were no
financing statements, judgments, taxes or other Liens outstanding
against Sellers or any of the Assets as of the Closing Date or a date
that is not more than ten (10) Calendar Days prior to the Closing Date.
4.2.6 Employment Agreements. Employment Agreements between the
Company and each of Ben Domenico, James Irvin, Dave Mysel and Mark
Nocco, in form and substance reasonably satisfactory to Buyer.
4.2.7 Other Documents. Such other documents and instruments as
Buyer or its counsel may reasonably request.
All documents delivered to Buyer shall be in form and substance
reasonably satisfactory to Katten Muchin Zavis, counsel for Buyer. In addition
to the above deliveries, Sellers shall take all steps and actions as Buyer may
reasonably request or as may otherwise be necessary to put Buyer in possession
or control of the Assets or to consummate the transactions contemplated hereby.
4.3 Buyer Deliveries. Buyer shall execute and deliver or cause to be
executed and delivered to Sellers simultaneously with delivery of the items
referred to in SECTION 4.2 above:
4.3.1 Purchase Price. A wire transfer of funds to Sellers in
an amount equal to that required under SECTION 2.1.1.
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4.3.2 Bill of Sale and Assignment Agreement. A counterpart of
the Bill of Sale and Assignment Agreement, referred to in SECTION
4.2.2, executed by Buyer.
4.3.3 AGE Purchase Agreement. A counterpart of the AGE
Purchase Agreement referred to in SECTION 4.2.1.
4.3.4 Employment Agreements. A counterpart of the Employment
Agreements referred to in SECTION 4.2.6.
4.3.5 Guaranty Agreement. A Guaranty Agreement in the form
attached to the AGE Purchase Agreement as Exhibit 4.3.9.
4.3.6 Other Documents. Such other documents and instruments as
Sellers or their counsel may reasonably request.
All documents delivered to Sellers shall be in form and substance
reasonably satisfactory to James, Driggs, Walch, Santoro, Kearney, Johnson &
Thompson.
ARTICLE V
OTHER AGREEMENTS
5.1 Books and Records. After the Closing, no party hereto shall destroy
(or permit the destruction of) any of the books and records pertaining to the
Assets or the Business in such party's possession that may be required by the
other party in connection with any tax audit, examination or other proceeding
without first offering them to the other party in writing at least thirty (30)
Calendar Days prior to the date of their proposed destruction. After the Closing
Date, any party may inspect and make copies from such books and records in the
possession of another party on reasonable notice and at reasonable times.
5.2 Cooperation after Closing. From time to time after the Closing, at
Buyer's request and without further consideration, Sellers will execute and
deliver such other instruments of sale, transfer, conveyance and assignment and
take such action (including assistance in the preparation of financial
statements in connection with the Business) as Buyer may reasonably deem
necessary in order more effectively to transfer, convey and assign to Buyer, and
to confirm Buyer's title to the Assets.
5.3 Public Disclosure. Buyer and Sellers shall consult with each other
before issuing any press release or otherwise making any public statement with
respect to this Agreement or the transactions contemplated hereby and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by law.
5.4 Mail. All mail relating to the Assets that is delivered to any of
Sellers after the Closing Date shall forthwith be delivered to Buyer.
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5.5 Assumed Liabilities. Buyer agrees to discharge, as and when due,
the Assumed Liabilities.
5.6 Taxes. Sellers shall be liable for paying all Taxes (whether
assessed or unassessed) applicable to the Assets and the Business, in each case
attributable to periods (or portions thereof) ending on or prior to the Closing
Date. Buyer shall be liable for paying all Taxes (whether assessed or
unassessed) applicable to the Assets and the Business attributable to periods
(or portions thereof) beginning after the Closing Date. For purposes of this
SECTION 5.6, any period beginning before and ending after the Closing Date shall
be treated as two partial periods, one ending on the Closing Date and the other
beginning after the Closing Date. Buyer and Sellers agree to timely sign and
deliver such certificates or forms as may be necessary or appropriate to
establish an exemption from (or otherwise reduce) or make a report with respect
to, such taxes, including filings required under Section 1060 of the Code or any
successor statute thereof.
5.7 Transferee/Successor Liability. The parties agree that Buyer will
not, by virtue of the transactions contemplated hereby, assume any liabilities
or obligations of Sellers other than the Assumed Liabilities and, accordingly,
Sellers agree to take all necessary actions to fully protect Buyer from and
against any and all transferee or successor liability (other than with respect
to the Assumed Liabilities) arising out of the transactions contemplated hereby.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by Sellers. From and after the Closing, Sellers, on
behalf of themselves and their respective heirs, hereby agree, jointly and
severally, to indemnify, defend and save Buyer and its Affiliates, and each of
their respective officers, directors, employees, agents and shareholders (each a
"Buyer Indemnified Party"), forever harmless from and against, and to promptly
pay to a Buyer Indemnified Party or reimburse a Buyer Indemnified Party for, any
and all liabilities (whether contingent, fixed or unfixed, liquidated or
unliquidated or otherwise), obligations, deficiencies, demands, claims, suits,
actions, causes of action, assessments, losses, costs, expenses, interest,
fines, penalties, actual or punitive damages or costs or expenses of any and all
investigations, proceedings, judgments, environmental analyses, remediations,
settlements and compromises (including reasonable fees and expenses of
attorneys, accountants and other experts) (collectively, the "Losses") sustained
or incurred by any Buyer Indemnified Party relating to, resulting from, arising
out of or otherwise by virtue of any of the following:
6.1.1 any breach of any covenant, agreement, representation or
warranty of Sellers under this Agreement or any of the Sellers'
Agreements;
6.1.2 the operation of the Business prior to the Closing Date
or any liabilities, actions or omissions of Sellers, whether known or
unknown as of the Closing Date, (except for the Assumed Liabilities),
it being understood and agreed that Buyer is not to assume
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any liabilities of Sellers of any kind or character, contingent or
otherwise, except for the Assumed Liabilities;
6.1.3 any assertion against any Buyer Indemnified Party with
respect to the Excluded Liabilities;
6.1.4 any assertion or recovery against Buyer of any liability
under any "bulk sales" or similar law or statute relating to the
transfer of Assets hereunder; and
6.1.5 any of the items listed on Schedule 6.1.5 hereto.
6.2 Escrow Account. In the event that Sellers are obligated to
indemnify Buyer pursuant to this ARTICLE VI, Buyer may draw funds in the amount
equal to such obligation from the Escrow Account provided for in SECTION 2.1 of
the AGE Purchase Agreement.
6.3 Indemnification by Buyer. From and after the Closing, Buyer, on
behalf of itself and its respective successors and assigns, hereby agrees to
indemnify, defend and save Sellers and each of their respective heirs and
representatives (each a "Seller Indemnified Party") forever harmless from and
against, and to promptly pay to a Seller Indemnified Party or reimburse a Seller
Indemnified Party for, any and all Losses sustained or incurred by any Seller
Indemnified Party related to, resulting from, arising out of or otherwise by
virtue of any of the following:
6.3.1 any breach of any covenant, agreement, representation or
warranty of Buyer under this Agreement or any of the Buyer's
Agreements; and
6.3.2 breach by Buyer of any of its obligations with respect
to the Assumed Liabilities.
6.4 Indemnification Procedure for Third Party Claims. In the event that
subsequent to the Closing any Person entitled to indemnification under this
Agreement (an "Indemnified Party") asserts a claim for indemnification or
receives notice of the assertion of any claim or of the commencement of any
action or proceeding by any Person who is not a party to this Agreement or an
Affiliate of a party to this Agreement (including, but not limited to any
domestic or foreign court or Governmental Entity) (a "Third Party Claim")
against such Indemnified Party, against which a party to this Agreement is
required to provide indemnification under this Agreement (an "Indemnifying
Party"), the Indemnified Party shall give written notice together with a
statement of any available information (other than privileged information)
regarding such claim to the Indemnifying Party within thirty (30) Calendar Days
after learning of such claim (or within such shorter time as may be necessary to
give the Indemnifying Party a reasonable opportunity to respond to such claim).
The Indemnifying Party shall have the right, upon written notice to the
Indemnified Party (the "Defense Notice") within fifteen (15) Calendar Days after
receipt from the Indemnified Party of notice of such claim, which notice by the
Indemnifying Party shall specify the counsel it will appoint to defend such
claim ("Defense Counsel"), to conduct at its expense, the defense against such
claim in its own name, or, if necessary, in the name of the Indemnified Party;
provided, however, that the Indemnified Party shall have the right to approve
the Defense
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Counsel, which approval shall not be unreasonably withheld, and in the event the
Indemnifying Party and the Indemnified Party cannot agree upon such counsel
within ten (10) Calendar Days after the Defense Notice is provided, then the
Indemnifying Party shall propose an alternate Defense Counsel, which shall be
subject again to the Indemnified Party's approval which approval shall not be
unreasonably withheld. If the parties still fail to agree on the Defense
Counsel, then, at such time, they shall mutually agree in good faith on a
procedure to determine the Defense Counsel. In the event that, in the opinion of
legal counsel to the Indemnified Party, there is a conflict of interest inherent
in the appointment of Defense Counsel by the Indemnifying Party, then the
Indemnified Party shall have the right to appoint separate Defense Counsel,
which shall be paid for by the Indemnifying Party.
(a) In the event that the Indemnifying Party shall fail to
give the Defense Notice within said 15 Calendar Day period, it shall be
deemed to have elected not to conduct the defense of the Third Party
Claim, and in such event the Indemnified Party shall have the right to
conduct the defense in good faith and to compromise and settle the
claim in good faith without prior consent of the Indemnifying Party,
and the Indemnifying Party will be liable for all reasonable costs,
expenses, settlement amounts or other Losses paid or incurred in
connection therewith.
(b) In the event that the Indemnifying Party does deliver a
Defense Notice and thereby elects to conduct the defense of the Third
Party Claim, the Indemnifying Party shall be entitled to have the
exclusive control over said defense settlement of the subject claim and
the Indemnified Party will cooperate with and make available to the
Indemnifying Party such assistance and materials as it may reasonably
request, all at the expense of the Indemnifying Party, and the
Indemnified Party shall have the right at its expense to participate in
the defense assisted by counsel of its own choosing. In such an event,
the Indemnifying Party will not settle the subject claim without the
prior written consent of the Indemnified Party, which consent will not
be unreasonably withheld.
(c) Without the prior written consent of the Indemnified
Party, the Indemnifying Party will not enter into any settlement of any
Third Party Claim or cease to defend against such claim, if, pursuant
to or as a result of such settlement or cessation, (i) injunctive
relief or specific performance would be imposed against the Indemnified
Party, or (ii) such settlement or cessation would lead to liability or
create any financial or other obligation on the part of the Indemnified
Party for which the Indemnified Party is not entitled to
indemnification hereunder.
(d) Notwithstanding paragraph (b) above, the Indemnifying
Party shall not be entitled to control, but may participate in, and the
Indemnified Party shall be entitled to have sole control over, the
defense or settlement of any claim (i) that seeks a temporary
restraining order, a preliminary or permanent injunction or specific
performance against the Indemnified Party, (ii) to the extent such
claim involves criminal allegations against the Indemnified Party,
(iii) that if unsuccessful, would set a precedent that would materially
interfere with, or have a material adverse effect on, the business or
financial condition of the Indemnified Party, or (iv) to the extent
such claim imposes liability on the part of the
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Indemnified Party for which the Indemnified Party is not entitled to
indemnification hereunder. In such an event, the Indemnifying Party
will still have all of its obligations hereunder provided that the
Indemnified Party will not settle the subject claim without the prior
written consent of the Indemnifying Party, which consent will not be
unreasonably withheld.
(e) Any final judgment entered or settlement agreed upon in
the manner provided herein shall be binding upon the Indemnifying
Party, and shall conclusively be deemed to be an obligation with
respect to which the Indemnified Party is entitled to prompt
indemnification hereunder.
(f) A failure by an Indemnified Party to give timely, complete
or accurate notice as provided in this SECTION 6.4 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 entitled to receive
such notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise directly and materially
damaged as a result of such failure to give timely notice.
6.5 Direct Claims. It is the intent of the parties hereto that all
direct claims by an Indemnified Party against a party hereto not arising out of
Third Party Claims shall be subject to and benefit from the terms of this
ARTICLE VI. Any claim under this ARTICLE VI by an Indemnified Party for
indemnification other than indemnification against a Third Party Claim, (a
"Direct Claim") will be asserted by giving the Indemnifying Party reasonably
prompt written notice thereof, and the Indemnifying Party will have a period of
30 Calendar Days within which to satisfy 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 Indemnified
Party will be free to pursue such remedies as may be available to the
Indemnified Party under this ARTICLE VI or otherwise.
6.6 Right of Set-Off. Upon written notice to Sellers and Shareholders
specifying in reasonable detail the basis for such set-off, Buyer may set-off
from any amounts due to Sellers (with the exception of any amounts due to James
Irvin, Dave Mysel or Rocky D'Aquilante solely in connection with the New Jersey
Claim as defined in the Escrow Agreement) pursuant to this Agreement, including,
without limitation, any amount to which it or any Buyer Indemnified Party may be
entitled pursuant to this ARTICLE VI, the AGE Purchase Agreement or any
employment agreement entered into by Buyer and any of Sellers. The exercise of
such right of set-off by Buyer in good faith, whether or not ultimately
determined to be justified, will not constitute an event of default under this
Agreement, the AGE Purchase Agreement, or any such employment agreement. Neither
the exercise of nor the failure to exercise such right of set-off will
constitute an election of remedies or limit Buyer in any manner in the
enforcement of other remedies that might be available to it.
6.7 Survival of Representations and Warranties of Sellers; Time Limits
on Indemnification Obligations. Notwithstanding any right of Buyer to
investigate fully the affairs of Sellers with respect to the Business, and
notwithstanding any knowledge of facts determined
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or determinable by Buyer pursuant to such investigation or right of
investigation, Buyer has the right to rely fully upon the representations,
warranties, covenants and agreements of Sellers contained in this Agreement or
in any Transaction Document delivered pursuant hereto. the representations,
warranties, covenants and agreements contained in SECTIONS 3.1.1, 3.1.2, 3.1.5,
3.1.11 and 5.7 and this ARTICLE VI shall survive indefinitely. All other
representations, warranties, covenants and agreements contained in this
Agreement shall survive the execution and delivery of this Agreement and the
Closing hereunder and shall continue in full force and effect for a period of
two (2) years after the Closing Date.
6.8 Survival of Representations and Warranties of Buyer; Time Limits on
Indemnification Obligations. Sellers have the right to rely fully upon
representations, warranties, covenants and agreements of Buyer contained in this
Agreement or in any Transaction Document delivered pursuant hereto. The
covenants and agreements contained in SECTION 5.7 and this ARTICLE VI shall
survive indefinitely. All other representations, warranties, covenants and
agreements of Buyer contained in this Agreement shall survive the execution and
delivery of this Agreement and the Closing hereunder and shall continue in full
force and effect for a period of two (2) years after the Closing Date.
6.9 Certain Limitations. Notwithstanding anything to the contrary set
forth in this Agreement (but subject to the terms of this SECTION 6.9),
indemnification under this ARTICLE VI and under SECTION 6.9 of the AGE Purchase
Agreement will be limited as follows:
(a) the aggregate amount of indemnification provided to Buyer
by Sellers, AGE and AGE Florida shall not exceed the Proceeds (as
defined in this SECTION 6.9 below); and
(b) the aggregate amount of indemnification provided to
Sellers, AGE and AGE Florida by Buyer shall not exceed $100,000; and
(c) the indemnification from James Irvin, Dave Mysel and Rocky
D'Aquilante for any Losses arising out of or relating to the New Jersey
Claim shall be limited to the amounts in the Escrow Account.
However, this SECTION 6.9 will not apply to any fraud or intentional
breach by any party hereto of any representations or warranties and such party
shall be liable for all such Losses with respect to such breaches. "Proceeds"
means the amount equal to the Purchase Price as defined in the AGE Purchase
Agreement plus the maximum aggregate amount payable to the Sellers pursuant to
this Agreement.
6.10 Materiality. In this Article 6, for purposes of determining the
existence of any misrepresentation or breach of any representation or warranty
of the Sellers contained in this Agreement, any standard, qualification or
requirement in any of the representations or warranties that an event or fact be
material or have a material adverse effect in order for such event or fact to
constitute a misrepresentation or breach of a representation or warranty shall
be disregarded.
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6.11 Appointment of Representative. Each of the Shareholders hereby
appoints James Irvin as such Shareholder's exclusive agent to act on such
Shareholder's behalf with respect to any and all claims arising under this
Agreement. In such representative capacity, James Irvin or any person who shall
succeed him in such representative capacity is sometimes referred to in this
Agreement as the "Representative." The Representative shall take, and the
Shareholders agree that the Representative shall take, any and all actions which
such Representative believes are necessary or appropriate under this Agreement
for and on behalf of the Shareholders, as fully as if the Shareholders were
acting on their own behalf, including, without limitation, defending, consenting
to, compromising or settling any claims against any or all of the Shareholders
under this Agreement or otherwise, conducting negotiations with Buyer and its
representatives regarding such claims, taking any and all actions specified in
or contemplated by ARTICLE VI of this Agreement and engaging counsel,
accountants or other representatives in connection with the foregoing matters
provided however, on any matter for which a Shareholder is solely liable, such
Shareholder may elect to represent himself alone, outside this SECTION 6.11.
Buyer shall have the right to rely upon all actions taken or omitted to be taken
by the Representative pursuant to this Agreement, all of which actions or
omissions shall be legally binding upon each of the Shareholders.
ARTICLE VII
MISCELLANEOUS
7.1 Notice. Any notices, consents or other communication required to be
sent or given by any of the parties shall in every case be in writing and will
be deemed properly served if (a) delivered personally, (b) sent by Certified
U.S. mail, return receipt requested, (c) sent by a recognized overnight courier
service, or (d) sent by telecopier (with acknowledgment of complete
transmission), provided that a copy is also mailed by Certified U.S. mail,
return receipt requested, in each case, to the parties at the addresses and
telecopier numbers as set forth below or at such other addresses and facsimile
numbers as may be furnished to the other parties in writing.
7.1.1 If to Buyer:
American Gaming & Electronics, Inc.
c/o Wells-Gardner Electronic Corporation
2701 North Kildare Avenue
Chicago, Illinois 60639-2014
Attention: President
Facsimile No.: (773) 292-5677
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with a copy to:
Katten Muchin Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: David J. Kaufman
Facsimile No.: (312) 577-8648
7.1.2 If to Sellers:
Ben Domenico
811 Adagio Street
Henderson, Nevada 89052
James Irvin
842 Sandhill Sage Street
Henderson, Nevada 89052
Dave Mysel
2600 South Ocean Drive, Apt. 103
Hollywood, Florida 33019
Rocky D'Aquilante
900 Elwood Road
Hammonton, New Jersey 08037
with a copy to:
James, Driggs, Walch, Santoro, Kearney,
Johnson & Thompson
3770 Howard Hughes Parkway, #290N
Las Vegas, Nevada 89109
Attention: J. Douglas Driggs, Jr., Esq.
Facsimile No.: (702) 791-1912
Date of service of such notice will be (i) the date such notice is personally
delivered, (ii) three Calendar Days after the date of mailing if sent by
certified or registered mail, (iii) one Calendar Day after delivery to the
overnight courier, or (iv) the date such notice is sent by telecopier in
accordance with this SECTION 7.1.
7.2 Severability. The unenforceability or invalidity of any
provision of this Agreement will not affect the enforceability or validity of
any other provision.
7.3 Successors. This Agreement will be binding upon and inure to the
benefit of the parties and their respective successors, permitted assigns, heirs
and personal representatives.
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7.4 Documents. At and after the Closing, each party will execute all
documents and take such other actions as the other parties may reasonably
request in order to consummate the purchase of Assets and to accomplish the
purposes of this Agreement.
7.5 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.
7.6 Expenses. Except as otherwise specifically provided herein, each of
the parties shall pay all costs and expenses incurred or to be incurred by it in
negotiating and preparing this Agreement and in consummating purchase of the
Assets.
7.7 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Illinois, without giving effect to
principles of conflicts of law.
7.8 Headings. The subject headings of Articles and Sections of this
Agreement are included for purposes of convenience only and will not affect the
construction or interpretation of any of its provisions.
7.9 Assignment. This Agreement 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 any Person at any time without the consent of the other parties.
7.10 No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction will be applied against any party.
7.11 Definitions. As used in this Agreement,
(a) "Affiliate" means an affiliate as defined in Rule 405
under the Securities Act of 1933, as amended, and includes any past and present
Affiliate of a Person.
(b) "Calendar Day" means any calendar day; provided that any
calendar day which is the end of a time period specified in this Agreement which
is a Saturday, a Sunday or a day on which federally chartered commercial banks
are required or authorized by applicable law or executive order to close shall
be deemed to fall on the next business day.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Continuing Employee" has the meaning ascribed to
such term in the AGE Purchase Agreement.
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(e) "GAAP" means generally accepted accounting principals set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession which are applicable to the circumstances from time to
time.
(f) "Governmental Entity" means any foreign, federal, state or
local governmental or regulatory body, including any instrumentality, division,
agency or department of such a body.
(g) "Intellectual Property" means all worldwide proprietary
information of Sellers used in connection with the Business including, but not
limited to, the rights, if any, to the American Gaming & Electronics name and
assumed names wherever used, all patents, patent applications, patent
disclosures and inventions (whether or not patentable and whether or not reduced
to practice); all trademarks, service marks, trade dress, trade names and
corporate names; all registered and unregistered statutory and common law
copyrights; all registrations, applications, extensions and renewals for any of
the foregoing; all trade secrets, confidential information, ideas, formulae,
compositions, know-how, research and development information drawings,
specifications, designs, plans, improvements, proposals, technical and computer
data, documentation and software, financial, business and marketing plans, and
customer and supplier lists and related information and all other proprietary
rights relating to the sale or service of products by, and the conduct of, the
Business.
(h) "Law" means any law, ordinance or regulation of any
federal, state, local --- or foreign Government Entity.
(i) "Licenses" means all licenses, permits, franchises,
approaches and authorizations by or of any Governmental Entity or other person
required for the conduct of the Business or in connection with ownership,
occupancy or operation of the Assets.
(j) "Liens" mean any claims, liens, privileges, pledges,
collateral assignments, bonds for deed, charges, restrictions, options,
preemptive rights, mortgages, hypothecations, assessments, pledges, encumbrances
or security interests of any kind or nature whatsoever.
(k) "ordinary course of business" means an action taken by a
Person will be deemed to have been taken in the ordinary course of Sellers'
business if (i) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person; (ii) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority) and does not require any other separate or special
authorization of any nature; and (iii) such action is similar in nature and
magnitude to actions customarily taken without any separate or special
authorization, in the ordinary course of the normal day-to-day operations of
other Persons that are in the same line of business as such Person.
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(l) "Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated association, corporation,
entity or Government Body.
(m) "Tax" means any federal, state, local or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, natural resources,
severance, stamp, occupation, premium, windfall profit, environmental, customs,
duties, real property, personal property, capital stock, social security,
unemployment, disability, payroll, license, employee or other withholding, or
other tax, of any kind whatsoever, including any interest, penalties or
additions to tax or additional amounts in respect of the foregoing; the
foregoing shall include any transferee or secondary liability for a Tax and any
liability assumed by agreement or arising as a result of being (or ceasing to
be) a member of any Affiliated Group, as defined in Section 1504 of the Code,
(or being included (or required to be included) in any tax return relating
thereto).
(n) "to the knowledge of Sellers," "to Sellers' knowledge" or
any similar term means knowledge possessed, or which should have been possessed
after due inquiry in connection therewith, by the officers of Sellers.
7.12 Entire Agreement. This Agreement, the Transaction Documents and
all Schedules and Exhibits attached hereto or thereto (which will be deemed
incorporated in this Agreement and made a part of this Agreement) set forth the
entire understanding of the parties and may be modified only by instruments
signed by all of the parties.
7.13 Third Parties. Nothing expressed or implied in this Agreement is
intended or will be construed to confer upon or give to any person, other than
the parties to this Agreement, any rights or remedies under or by reason of this
Agreement.
7.14 Interpretative Matters. Unless the context otherwise requires, (i)
all references to Articles, Sections, Schedules or Exhibits are to Articles,
Sections, Schedules or Exhibits in this Agreement, (ii) words in the singular or
plural include the singular and plural and pronouns stated in either the
masculine, feminine or neuter gender will include the masculine, feminine and
neuter and (iii) the term "including" shall mean by way of example and not by
way of limitation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement of the
date first above written.
BUYER:
AMERICAN GAMING & ELECTRONICS,
INC., a Nevada corporation
/s/ Mark E. Komorowski
------------------------------------
By: Mark E. Komorowski
------------------------------------
Its: President
------------------------------------
SELLERS:
/s/ Ben Domenico
------------------------------------
Ben Domenico
/s/ James Irvin
------------------------------------
James Irvin
/s/ Dave Mysel
------------------------------------
Dave Mysel
/s/ Rocky D'Aquilante
------------------------------------
Rocky D'Aquilante
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EXHIBIT 2.3
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "AGREEMENT") is made and entered into
effective as of this 12th day of January, 2000 ("EFFECTIVE DATE"), by and among
American Gaming & Electronics, Inc., a Nevada corporation ("BUYER") and each of
American Gaming & Electronics, Inc., a New Jersey corporation, and American
Gaming & Electronics of Florida, Inc., a Florida corporation (collectively
"SELLERS") and Ben Domenico, James Irvin, Dave Mysel and Rocky D'Aquilante
(collectively, "SHAREHOLDERS") and American National Bank and Trust Company of
Chicago, a national banking association, as escrow agent ("ESCROW AGENT").
RECITALS
A. Buyer and Sellers and/or Shareholders have entered into the
transaction agreements described in Exhibit A (collectively, the "TRANSACTION
AGREEMENTS").
B. As a condition to Buyer entering into the Transaction Agreements,
Buyer requires Sellers and Shareholders to enter into this Agreement and
$619,385.25 (the "ESCROW CASH") of the consideration payable by Buyer to Sellers
under the Asset Agreement to be placed in an escrow account (the "ESCROW
ACCOUNT") with the Escrow Agent.
C. Buyer is a wholly-owned subsidiary of Wells-Gardner Electronics
Corporation, an Illinois corporation ("WELLS-GARDNER").
D. The parties hereto desire to establish the terms and conditions upon
which the Escrow Cash will be deposited, held in and disbursed from the Escrow
Account.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Escrow and Indemnification
(a) Escrow. This Agreement has been executed and the deposit of the
Escrow Cash hereunder will be made in accordance with SECTION 2(A) hereof for
the purpose of securing certain indemnification and performance obligations of
the Sellers and Shareholders pursuant to the Transaction Agreements including,
but not limited to:
(i) the indemnification obligations of the Sellers and
Shareholders pursuant to ARTICLE VI of the Asset Agreement and the Shareholder
Agreement; and
(ii) the performance obligations of Sellers and Shareholders
pursuant to the Transaction Agreements.
Escrow Agent agrees to accept delivery of the Escrow Cash and to hold such
Escrow Cash on behalf of Buyer in escrow subject to the terms and conditions of
and for the purposes recited in this Agreement. The parties hereto acknowledge
and agree that Wells-Gardner, as the parent company of Buyer, shall have the
power and
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<PAGE> 2
authority to pursue any claims on behalf of Buyer arising under the Transaction
Agreements and, accordingly, shall have the right to seek recovery on any such
claims in accordance with the terms and conditions of this Agreement.
(b) Indemnification and Performance Obligations of Sellers and
Shareholders. Subject to the terms and conditions hereof, the Escrow Cash will
serve as security for the obligations of Sellers and Shareholders under the
Transaction Agreements as set forth in SECTION 1(A) of this Agreement. In the
event Buyer desires to seek recovery pursuant to the Transaction Agreements
against any of Sellers and Shareholders by realizing the value of the Escrow
Cash, then Buyer will give Sellers, Shareholders and Escrow Agent written notice
of the basis for such recovery in accordance with SECTION 3 hereof. To the
extent that any such claim is made in connection with or related to the matter
referenced in the side letter of even date herewith between Buyer, Sellers and
Shareholders, such claim shall be referred to herein as a "NEW JERSEY CLAIM." To
the extent that any claim is not a New Jersey Claim, it shall be referred to
herein as an "OTHER CLAIM." New Jersey Claims and Other Claims are collectively
referred to herein as "CLAIMS". In the event Buyer desires to seek recovery for
a Claim against any of Sellers and Shareholders, Sellers and Shareholders,
jointly and severally, hereby covenant and agree to the resolution and payment
of Claims in accordance with this Agreement and the Transaction Agreements.
(c) Term of Escrow. The term of this Agreement shall be for the
period commencing on the Effective Date and ending on the later to occur of the
Fourth Release Date as defined below and the Termination Date as defined below
(the "ESCROW TERM"). The "TERMINATION DATE" will be the date on which Buyer
notifies Escrow Agent, Sellers and Shareholders in writing that Buyer does not,
in the reasonable opinion of Wells Gardner's Board of Directors, with the advise
of its counsel, anticipate making a New Jersey Claim at any time.
(d) Amount of Escrow Cash. Subject to the terms and conditions
herein, cash in the amount equal to $619,385.25, plus interest earned, will be
held in the Escrow Account in accordance with the terms and conditions of this
Agreement.
2. Deposit of Escrow Cash: Release from Escrow.
(a) Delivery of Escrow Cash. As soon as practicable after the
consummation of the transactions contemplated by the Transaction Agreements,
Buyer will deliver the Escrow Cash to the Escrow Agent by wire transfer of
immediately available funds in accordance with the wire instructions attached
hereto as Exhibit B.
(b) Distribution to Shareholders.
(i) Subject to the terms of SECTION 2(D) hereof and provided
that the Fourth Release Date (as defined below) has not occurred, within three
(3) business days following the Termination Date, Escrow Agent will disburse
from the Escrow Account to Ben Domenico a portion of the Escrow Cash equal to
$326,000.00 provided that such amount is available in the Escrow Account, less
(i) any Escrow Cash delivered to Buyer in accordance with SECTION 4 hereof in
satisfaction of resolved New Jersey Claims and (ii) any Escrow Cash being held
in accordance with SECTION 4 hereof with respect to any then pending but
unresolved New Jersey Claims. Any Escrow Cash being so held will be released to
Ben Domenico or Buyer, as appropriate, promptly upon resolution of each specific
New Jersey Claim with respect to which the Escrow Cash is then being held.
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(ii) Subject to the terms of SECTION 2(D) hereof and provided
that the Fourth Release Date (as defined below) has occurred, within three (3)
business days following the Termination Date, Escrow Agent will, in accordance
with the guidelines set forth on Exhibit C, disburse from the Escrow Account to
Shareholder all Escrow Cash remaining in the Escrow Account, less any Escrow
Cash being held in accordance with SECTION 4 hereof with respect to any then
pending but unresolved Claims. Any Escrow Cash being so held will be released to
Sellers and Shareholders or Buyer, as appropriate, promptly upon resolution of
each specific Claim with respect to which the Escrow Cash is then being held.
(iii) Subject to the terms of SECTION 2(D) hereof and provided
that the Termination Date has occurred, within three (3) business days following
each of the release dates set forth on Exhibit C hereto (collectively, the
"RELEASE DATES"), Escrow Agent will, in accordance with the guidelines set forth
on Exhibit C, disburse from the Escrow Account to Shareholders a portion of the
Escrow Cash equal to $50,000, provided that such amount is available in the
Escrow Account, less (i) any Escrow Cash delivered to Buyer in accordance with
SECTION 4 hereof in satisfaction of resolved Claims and (ii) any Escrow Cash
being held in accordance with SECTION 4 hereof with respect to any then pending
but unresolved Other Claims. Any Escrow Cash held as a result of clause (ii)
will be released to Sellers and Shareholders or Buyer, as appropriate, promptly
upon resolution of each specific Claim with respect to which the Escrow Cash is
then being held.
(c) Interest and Proceeds. Any interest and proceeds derived from
the Permitted Investments (as defined below) shall be distributed directly to
Shareholders on the later to occur of the Fourth Release Date and the
Termination Date in accordance with Exhibit C.
(d) No Encumbrance. Except as otherwise expressly provided in this
SECTION 2(D), no Escrow Cash or any beneficial interest therein may be pledged,
sold, assigned or transferred (including by operation of law) by Sellers or
Shareholders or may be taken or reached by any legal or equitable process in
satisfaction of any debt or other liability of any Seller or Shareholder prior
to the delivery to the Sellers and Shareholders of the Escrow Cash by Escrow
Agent.
(e) Power of Escrow Agent to Transfer Escrow Cash. Escrow Agent is
hereby granted the power to effect any transfer of Escrow Cash contemplated by
this Agreement upon joint written instruction of such transfer by Buyer and the
Representative (as defined in SECTION 7).
(f) Management and Investment of Cash and Escrow Cash. The Escrow
Cash shall be held in the Escrow Account and the Representative (as defined in
SECTION 7) shall direct Escrow Agent, in writing, to invest such cash in the
following types of investments: money market accounts, certificates of deposit
or United States Treasury securities (collectively, the "PERMITTED
INVESTMENTS"). The parties acknowledge that Escrow Agent shall not be
responsible for any diminution in any of the accounts due to losses resulting
from Permitted Investments. Escrow Agent may use its own bond department or
investment department or the bond department or investment department of any
affiliate in executing purchases and sales of Permitted Investments. If the
Representative does not direct the Escrow Agent in writing with respect to the
investment of moneys hereunder, the Escrow Agent shall invest such moneys in One
Group Prime Money Market Fund, Class A. The Escrow Agent shall send statements
to each of the other parties hereto on a monthly basis reflecting activity in
the Escrow Account for the preceding month. Although each of the other parties
recognizes that it may obtain a broker confirmation or written statement
containing comparable information at no additional cost, such parties hereby
agree that confirmations of investments are not required to be issued by the
Escrow Agent for each month
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in which a monthly statement is rendered. However, no statement need be rendered
for the Escrow Account if no activity occurred for such month.
3. Notice of Claim.
(a) Each notice of a Claim (the "NOTICE OF CLAIM") will be in
writing and delivered to Escrow Agent, Sellers and Shareholders pursuant to
SECTION 6 hereof on or before the end of the Escrow Term. The Notice of Claim
will contain the following information:
(i) Buyer's good faith estimate of the reasonably foreseeable
maximum amount of the alleged damages or its calculation of liquidated
damages, as appropriate (which amount may be revised by Buyer at any
time prior to the end of the Escrow Term provided that Buyer gives
written notice of such revision to Escrow Agent);
(ii) A brief description in reasonable detail of the facts,
circumstances or events giving rise to the alleged damages based on
Buyer's good faith belief thereof, including, without limitation, the
identity and address of any third-party claimant (to the extent
reasonably available to Buyer) and copies of any formal demand or
complaint; and
(iii) A certification by Buyer in writing to the Escrow Agent
that Buyer is entitled to payment under SECTION 6 of the Asset
Agreement or Shareholder Agreement.
(b) Escrow Agent will not transfer any of the Escrow Cash held in
the Escrow Account to Buyer pursuant to a Notice of Claim until the Claim to
which such notice pertains has been resolved in accordance with SECTION 4 below.
4. Resolution of Claims and Transfer of Escrow Cash. A Claim as to
which a Notice of Claim has been received by Sellers and Shareholders and Escrow
Agent pursuant to SECTION 3 above will be resolved as follows:
(a) Uncontested Claims. If within thirty (30) calendar days after a
Notice of Claim is delivered to Escrow Agent pursuant to SECTIONS 3 and 6
hereof, no Seller or Shareholder either (i) contests such Claim in writing to
Escrow Agent, Buyer and the other Sellers and Shareholders, or (ii) pays the
amount demanded on the 31st calendar day, then Escrow Agent will on the next
business day thereafter promptly transfer to Buyer the amount of Escrow Cash as
directed in writing by Buyer, having a value (determined pursuant to SECTION
4(C) hereof) equal to the amount of damages specified in the Notice of Claim
which has not been paid by Seller and Shareholder and will provide Sellers and
Shareholders with written notice of such transfer within five (5) business days
of such transfer.
(b) Contested Claims. In the event that any Seller or Shareholder
gives written notice contesting all or a portion of a Claim to Buyer and Escrow
Agent (a "CONTESTED CLAIM") within the 30-day period provided above, the
following procedures shall apply: (i) Claims that are the result of third-party
claims asserted against Buyer will await the final decision, award or settlement
of such third-party claim; provided that any such asserted third-party claim
will be deemed resolved in favor of Buyer if, within twelve (12) months
following the End of the Escrow Term, such asserted third-party claim does not
result in the actual commencement of, or
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written correspondence threatening the commencement of, any litigation,
arbitration or other proceedings by the third-party claimant, provided, however,
that Buyer shall not lose its right to make a Claim with respect thereto, if
such third-party claim is once again asserted against Buyer prior to expiration
of the twelve-month period following the End of the Escrow Term; and/or (ii)
Claims by Buyer for breaches of representations, warranties, agreements and
covenants by any of Sellers or Shareholders under the Transaction Agreements
that do not include claims asserted by third parties, will be settled as
provided for in the relevant Transaction Agreement under which the Claims arose,
as will Claims based on third-party claims successfully asserted under clause
(i), but which any Seller or Shareholder asserts do not result in an
indemnification obligation under any Transaction Agreement in favor of Buyer.
Any portion of a Claim that is not contested will be considered resolved and
Escrow Agent shall be instructed in writing by Buyer as to any disbursement to
make as set forth above in SECTION 4(A). If any Contested Claim which is a
third-party claim asserted against Buyer under clause (i) is resolved against
Buyer and as to which no Seller or Shareholder disputes the indemnification
obligation, then such Contested Claim will be considered resolved and Escrow
Agent will promptly transfer to Buyer the amount of Escrow Cash as directed in
writing by Buyer, having a value (determined pursuant to SECTION 4(C) hereof)
equal to the amount of damages specified in the Notice of Claim which has not
been paid by end of the Escrow Term and will notify Sellers and Shareholders of
such transfer in writing within five (5) business days of such transfer. After
receipt of notice that a Claim has been contested, Escrow Agent will continue to
hold in the Escrow Account the amount of Escrow Cash as directed in writing by
Buyer sufficient to cover such Contested Claim (notwithstanding the expiration
of the Escrow Term) until (i) execution of a settlement agreement by Buyer and
the subject Seller or Shareholder setting forth a resolution of the Claim, or
(ii) receipt of a copy of the final award of the arbitrator or court, as
applicable. The final decision of the arbitrator or court, as applicable will be
furnished to each of Sellers and Shareholders and Buyer in writing and will
constitute a conclusive determination of the issue in question, binding upon the
parties. In acting under this Agreement the Escrow Agent shall be entitled to
receive and may conclusively rely on a certificate of the presenting party to
the effect that a true and correct copy of the final decision of the arbitrator
or court is attached and that such decision is final, binding and
non-appealable.
(c) Determination of Amount of Claims. Any amount which Escrow Agent
is required to pay or deliver to Buyer pursuant to this Agreement, to the extent
not paid in cash by any Seller or Shareholder, will be immediately payable to
Buyer out of the Escrow Cash. Buyer shall give Escrow Agent written notice of
any payment in cash by Seller. In the absence of such notice of payment, Escrow
Agent shall be entitled to assume that no such payment has been made and to act
accordingly.
5. Limitation of Escrow Agent's Liability.
(a) Escrow Agent will incur no liability with respect to any action
taken or suffered by it in reliance upon any notice, direction, instruction,
consent, statement or other document believed by it to be genuine and duly
authorized, nor for any other action or inaction, except its own willful
misconduct or gross negligence. Escrow Agent will not be responsible for the
validity or sufficiency of this Agreement. Escrow Agent undertakes to perform
such duties as are specifically set forth in this Agreement, and no implied
covenants or obligations shall be read into the Agreement against the Escrow
Agent. In all questions arising under this Agreement, Escrow Agent may rely on
the advice of counsel, and for anything done, omitted or suffered in good faith
by Escrow Agent based on such advice, Escrow Agent will not be liable to anyone.
Escrow Agent will not be required to take any action hereunder involving any
expense unless the payment of such expense is made or provided for in a manner
satisfactory to it. Escrow Agent shall not be responsible for determining the
amount of Escrow Cash to be transferred, disbursed or held, and may rely upon,
and shall be fully protected in relying
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<PAGE> 6
upon, any written direction from Buyers, Sellers and Shareholders. Attached
hereto as Exhibit D are the names, titles and specimen signatures of each of the
persons who are authorized, on behalf of the parties hereto, to execute and
deliver written notices and directions to Escrow Agent.
(b) In the event conflicting demands are made or conflicting notices
are served upon Escrow Agent with respect to the Escrow Account, Escrow Agent
will have the absolute right, but no absolute duty or obligation, at Escrow
Agent's election, to do either or both of the following: (i) resign so a
successor can be appointed pursuant to SECTION 10 hereof or (ii) file a suit in
interpleader and obtain an order from a court of competent jurisdiction
requiring the parties to interplead and litigate in such court their several
claims and rights among themselves. In the event such interpleader suit is
brought, Escrow Agent will thereby be fully released and discharged from all
further obligations imposed upon it under this Agreement, and Buyer will pay
Escrow Agent (subject to reimbursement from Sellers and Shareholders in the
amount determined pursuant to SECTION 9 hereof) all costs, expenses and
reasonable attorneys' fees expended or incurred by Escrow Agent pursuant to the
exercise of Escrow Agent's rights under this SECTION 5 hereof (such costs, fees
and expenses will be treated as extraordinary fees and expenses for the purposes
of SECTION 9 hereof).
(c) Each other party hereto, jointly and severally (each an
"INDEMNIFYING PARTY" and together the "INDEMNIFYING PARTIES"), hereby covenants
and agrees to reimburse, indemnify and hold harmless Escrow Agent, Escrow
Agent's employees and agents (severally and collectively, "ESCROW AGENT'S
INDEMNIFIED PARTIES"), from and against any loss, damage, liability or loss
suffered, incurred by, or asserted against Escrow Agent's Indemnified Parties
(including amounts paid in settlement of any action, suit, proceeding, or claim
brought or threatened to be brought and including reasonable expenses of legal
counsel) arising out of, in connection with or based upon any act or omission by
Escrow Agent relating in any way to this Agreement or Escrow Agent's services
hereunder. This indemnity shall exclude negligence, gross negligence or willful
misconduct on Escrow Agent's part. This right of indemnification shall survive
the termination of this Agreement, and the resignation or removal of Escrow
Agent. The costs and expenses of enforcing this right of indemnification shall
also be paid by the Indemnifying Parties.
6. Notices. All notices, instructions and other communications required
or permitted to be given hereunder or necessary or convenient in connection
herewith must be in writing and will be deemed delivered (i) the business day
when personally served or when delivered by facsimile, provided written
confirmation thereof is delivered by hand or deposited in the United States
mail, postage prepaid, registered or certified mail, on or before two (2)
business days after its delivery by facsimile, (ii) the first business day
following the date of deposit with an overnight courier service for next day
delivery, charges prepaid, or (iii) on the earlier of actual receipt or the
third business day following the date on which the notice is deposited in the
United States mail, first class certified, postage prepaid, addressed as
follows:
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If to Escrow Agent:
American National Bank and Trust Company of Chicago
120 South LaSalle Street, 4th Floor
Mail Suite IL1-1250
Chicago, Illinois 60603
Attention: Brian Terwilliger
Telephone: (312) 661-6952
Facsimile: (312) 661-6491
If to Buyer:
American Gaming & Electronics, Inc.
c/o Wells-Gardner Electronics Corporation
2701 North Kildare Avenue
Chicago, Illinois 60639
Attention: George B. Toma
Telephone: (773) 292-5650
Facsimile: (773) 292-5677
With a copy to:
Katten Muchin Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661
Attention: David J. Kaufman
Telephone: (312) 902-5564
Facsimile: (312) 577-8648
If to Sellers and Shareholders:
American Gaming & Electronics, Inc.
6255 McLeod Drive, Suite 22
Las Vegas, Nevada 89120
Attention: Ben Domenico and James Irvin
Facsimile No.: (702) 798-5762
American Gaming & Electronics of Florida, Inc.
2046 McKinley Street
Hollywood, Florida 33020
Attention: Dave Mysel
Facsimile No.: (954) 922-1855
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<PAGE> 8
with a copy to:
James, Driggs, Walch, Santoro, Kearney, Johnson & Thompson
3773 Howard Hughes Parkway, Suite 290N
Las Vegas, Nevada 89109
Attention: Doug Driggs
Facsimile No.: (702) 791-1912
Ben Domenico
811 Adagio Street
Henderson, Nevada 89052
James Irvin
842 Sandhill Sage Street
Henderson, Nevada 89052
Dave Mysel
2600 South Ocean Drive
Apt. 103
Hollywood, Florida 33019
Rocky D'Aquilante
900 Elwood Road
Hammonton, New Jersey 08037
with a copy to:
James, Driggs, Walch, Santoro, Kearney, Johnson & Thompson
3773 Howard Hughes Parkway, Suite 290N
Las Vegas, Nevada 89109
Attention: Doug Driggs
Facsimile No.: (702) 791-1912
or to such other address as any party hereto designates in a writing delivered
to each of the other parties hereto. With respect to the Escrow Agent, notices
shall not be deemed given until actually received.
7. Appointment of Representative. Each of the Shareholders hereby
appoints James Irvin as such Shareholder's exclusive agent to act on such
Shareholder's behalf with respect to this Agreement. In such representative
capacity, James Irvin or any person who shall succeed him in such representative
capacity is sometimes referred to in this Agreement as the "REPRESENTATIVE." The
Representative shall take, and the Shareholders agree that the Representative
shall take, any and all actions which such Representative believes are necessary
or appropriate under this Agreement for and on behalf of the Shareholders, as
fully as if the Shareholders were acting on their own behalf, including, without
limitation, defending, consenting to, compromising or settling any Claims
against any or all of the Shareholders. Buyer and Escrow Agent shall have the
right to rely upon all actions taken or omitted to be taken by the
Representative pursuant to this Agreement, all of which actions or omissions
shall be legally binding upon each of the Shareholders.
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8. General.
(a) Governing Law; Assigns. This Agreement will be governed by and
construed in accordance with the internal laws of the State of Illinois without
regard to conflicts-of-law principles and will be binding upon, and inure to the
benefit of, the parties hereto and their respective successors and permitted
assigns.
(b) Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(c) Entire Agreement. Except as otherwise set forth in the
Transaction Agreements, this Agreement constitutes the entire understanding and
agreement of the parties with respect to the subject matter of this Agreement
and supersedes all prior agreements or understandings, written or oral, between
the parties with respect to the subject matter hereof.
(d) Waivers. No waiver by any party hereto of any condition or of
any breach of any provision of this Agreement will be effective unless in
writing. No waiver by any party of any such condition or breach, in any one
instance, will be deemed to be a further or continuing waiver of any such
condition or breach or a waiver of any other condition or breach of any other
provision contained herein.
9. Expenses. Buyer agrees to pay the Annual Fee of Escrow Agent in the
amount of $2,000 as set forth in Exhibit E of this Agreement. Such fees are
payable in advance as compensation for the ordinary administrative services to
be rendered hereunder by Escrow Agent. Subject to SECTION 5(B) hereof, it is the
intention of Buyer and Sellers and Shareholders that any extraordinary activity
fees and expenses as defined in Exhibit E, or expenses incurred by Escrow Agent
in connection with a dispute over the distribution of Escrow Cash or the
validity of a Notice of Claim, will be paid by the non-prevailing party.
Notwithstanding anything to the contrary contained herein, Sellers and
Shareholders shall be solely responsible (to the exclusion of Buyer) for any
fees and expenses of Escrow Agent which are incurred as a result of any transfer
of Escrow Cash, the investment of any cash held in the Escrow Account, or any
other Permitted Investments contemplated by SECTION 2 hereof.
10. Successor Escrow Agent. In the event Escrow Agent becomes
unavailable or unwilling to continue in its capacity hereunder, Escrow Agent may
resign and be discharged from its duties or obligations hereunder by giving
resignation to the parties to this Agreement, specifying a date not less than
ten (10) days following such notice date of when such resignation will take
effect. Buyer will designate a successor escrow agent prior to the expiration of
such ten-day period by giving written notice to Escrow Agent and Sellers and
Shareholders, subject to the approval of Sellers and Shareholders which will not
be unreasonably withheld. Buyer may appoint a successor escrow agent without the
consent of Sellers and Shareholders so long as such successor is a bank with
assets of at least $500 million, and may appoint any other successor escrow
agent with the consent of Sellers and Shareholders, which will not be
unreasonably withheld. Upon receipt of an instrument of acceptance by a
successor escrow agent, Escrow Agent will promptly transfer the Escrow Cash to
such designated successor. If the other parties hereto have failed to appoint a
successor escrow agent prior to the expiration of ten (10) calendar days
following receipt of the notice of resignation or removal, the Escrow Agent may
appoint a successor or petition a court of competent jurisdiction for the
appointment of a successor escrow agent or for other appropriate relief, and any
such resulting appointment shall be binding upon all of the parties hereto.
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<PAGE> 10
11. Limitations of Responsibility. Escrow Agent's duties are limited to
those set forth in this Agreement, and Escrow Agent, acting as such under this
Agreement, is not charged with knowledge of or any duties or responsibilities
under any other document or agreement, including without limitation the
Transaction Agreements. Escrow Agent may execute any of its powers or
responsibilities hereunder and exercise any rights hereunder either directly or
by or through its agents or attorneys. Escrow Agent shall not be responsible for
and shall not be under a duty to examine into or pass upon the validity, binding
effect, execution or sufficiency of this Escrow Agreement or of any agreement
amendatory or supplemental hereto. The Escrow Agent shall not be liable for any
action taken or omitted under this Agreement so long as it shall have acted in
good faith and without gross negligence. The Escrow Agent shall be entitled to
deem the signatories of any documents or instruments submitted to it hereunder
as being those purported to be authorized to sign such documents or instruments
on behalf of the parties hereto, and shall be entitled to rely upon the
genuineness of the signatures of such signatories without inquiry and without
requiring substantiating evidence of any kind. The Escrow Agent shall be
entitled to refrain from taking any action contemplated by this Agreement in the
event that it becomes aware of any disagreement between the parties hereto as to
any facts or as to the happening of any contemplated event precedent to such
action unless such disagreement can be resolved in accordance with SECTION 4. No
assignment of the interest of any of the parties hereto shall be binding upon
the Escrow Agent unless and until written evidence of such assignment in form
satisfactory to the Escrow Agent shall be filed with and accepted by the Escrow
Agent. IN NO EVENT SHALL THE ESCROW AGENT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR
ANY (i) DAMAGES OR EXPENSES ARISING OUT OF THE SERVICES PROVIDED HEREUNDER,
OTHER THAN DAMAGES WHICH RESULT FROM THE ESCROW AGENT'S FAILURE TO ACT IN
ACCORDANCE WITH THE REASONABLE COMMERCIAL STANDARDS OF THE BANKING BUSINESS, OR
(ii) SPECIAL OR CONSEQUENTIAL DAMAGES, EVEN IF THE ESCROW AGENT HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES.
12. Amendment. This Agreement may be amended by the written agreement
of Buyer, Escrow Agent and Sellers and Shareholders, provided that, if Escrow
Agent does not agree to an amendment agreed upon by Buyer and the Sellers and
Shareholders, Escrow Agent will resign and Buyer will appoint a successor Escrow
Agent in accordance with Section 10 above.
13. Further Assurances. The parties hereto shall execute such further
documents, and perform such further acts, as may be reasonably necessary to
comply with the purpose and intent of this Agreement, and to otherwise comply
with the terms of this Agreement and consummate the transactions contemplated
hereby.
14. Successor Trustee. Any banking association or corporation into
which the Escrow Agent may be merged, converted or with which the Escrow Agent
may be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Escrow Agent shall be a party, or any banking
association or corporation to which all or substantially all of the corporate
trust business of the Escrow Agent shall be transferred, shall succeed to all
the Escrow Agent's rights, obligations and immunities hereunder without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
15. Compliance With Legal Orders. In the event that any escrow property
shall be attached, garnished or levied upon by any court order, or the delivery
thereof shall be stayed or enjoined by an order of a court, or any order,
judgment or decree shall be made or entered by any court order affecting the
property deposited under this Agreement, the Escrow Agent is hereby expressly
authorized, in its sole discretion, to obey and comply with all writs, orders or
decrees so entered or issued, which it is advised by legal counsel of its own
choosing is binding upon it, whether with or without jurisdiction, and in the
event that the Escrow Agent obeys or complies
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with any such writ, order or decree it shall not be liable to any of the parties
hereto or to any other person, firm or corporation, by reason of such compliance
notwithstanding such writ, order or decree be subsequently reversed, modified,
annulled, set side or vacated.
16. Tax Matters. The Escrow Agent shall be under no obligation to
invest the deposited funds or the income generated thereby until it has received
a Form W-9 or W-8, as applicable, from the Sellers and the Shareholders,
regardless of whether such party is exempt from reporting or withholding
requirements under the Internal Revenue Code of 1986, as amended. The Escrow
Agent shall report to the Internal Revenue Service, as of each calendar
year-end, all income earned from the investment of any sum held in the Escrow
Account against Sellers and Shareholders, whether or not said income has been
distributed during such year, as and to the extent required by law. Any tax
returns required to be prepared and filed will be prepared and filed by Sellers
and Shareholders with the Internal Revenue Service in all years income is
earned, whether or not income is received or distributed in any particular tax
year, and Escrow Agent shall have no responsibility for the preparation and/or
filing of any tax return with respect to any income earned by the Escrow
Account. Any taxes payable on income earned from the investment of any sums held
in the Escrow Account shall be paid by Sellers and Shareholders, whether or not
the income was distributed by the Escrow Agent during any particular year. The
Escrow Agent shall have no obligation to pay any taxes or estimated taxes.
SIGNATURES ON THE FOLLOWING PAGE
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IN WITNESS WHEREOF, the parties have duly executed this Agreement of
the date first above written.
BUYER:
AMERICAN GAMING & ELECTRONICS,
INC., a Nevada corporation
/s/ Mark E. Komorowski
--------------------------------------
By: Mark E. Komorowski
-----------------------------------
Its: President
----------------------------------
SELLERS:
AMERICAN GAMING & ELECTRONICS,
INC., a New Jersey corporation
/s/ Ben Domenico
--------------------------------------
By: Ben Domenico
-----------------------------------
Its: President
----------------------------------
AMERICAN GAMING & ELECTRONICS,
OF FLORIDA, INC., a Florida
corporation
/s/ Dave Mysel
--------------------------------------
By: Dave Mysel
-----------------------------------
Its: President
----------------------------------
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SHAREHOLDERS:
/s/ Ben Domenico
--------------------------------------
Ben Domenico
/s/ James Irvin
--------------------------------------
James Irvin
/s/ Dave Mysel
--------------------------------------
Dave Mysel
/s/ Rocky D'Aquilante
--------------------------------------
Rocky D'Aquilante
ESCROW AGENT:
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO, as Escrow Agent
/s/ Brian E. Terwilliger
--------------------------------------
By: Brian E. Terwilliger
----------------------------------
Its: Vice President
----------------------------------
101
