SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 10, 1996
North American Gaming and Entertainment Corporation
(Exact name of registrant as specified in its charter)
Delaware 0-5474 75-2571032
(State of Commission File (IRS Employer
incorporation) No.) Identification No.)
777 East 15th Street, Plano, Texas 75074
(Address of principal execute offices, including zip code)
(214) 423-9113
(Registrant's telephone number, including area code)
1<PAGE>
Item 1. Changes in Control of Registrant.
On June 10, 1996, North American Gaming and Entertainment
Corporation ("Registrant") issued 4,934,106 shares of its common
stock, par value $.01 per share ("Common Stock"), and 8,000,000
shares of a newly designated series of its preferred stock, par
value $.01 per share, designated as Series B Convertible
Preferred Stock ("Series B Preferred Stock"), to International
Tours, Inc. ("International") in consideration for 100% of the
stock of the two subsidiaries of International acquired by the
Registrant in the acquisition described in Item 2, below. The
8,000,000 shares of Series B Preferred Stock are entitled to one
vote for each share issued and they vote together with the Common
Stock as one class, and not as a separate class, and are
convertible into 8,000,000 shares of Common Stock. As a result
of the issuance of the 4,934,106 shares of Common Stock and
8,000,000 shares of Series B Preferred Stock to International,
International owns approximately 44% of the voting stock (Common
Stock and Series B Preferred Stock combined as one class) of
Registrant, which may be deemed to have resulted in a change of
control of Registrant.
Item 2. Acquisition or Disposition of Assets.
On June 10, 1996, Registrant acquired 100% of the issued and
outstanding capital stock of GalaxSea Cruises and Tours, Inc.
("GalaxSea") and 100% of the issued and outstanding capital stock
of I.T. Cruise, Inc. ("I.T. Cruise") from International. Both
corporations were wholly-owned subsidiaries of International.
GalaxSea was acquired by virtue of a merger with a newly
created wholly-owned subsidiary of Registrant under the terms of
which Registrant issued 4,934,106 shares of Common Stock and
8,000,000 shares of Series B Preferred Stock to International.
The 8,000,000 shares of Series B Preferred Stock are entitled to
one vote for each share issued and will vote together with the
Common Stock of Registrant as one class, and not as a separate
class. As a result, International is the largest shareholder of
Registrant, owning approximately 44% of the voting stock.
Simultaneously with the closing of the merger, Registrant also
restructured its existing, outstanding Class A Preferred Stock by
redeeming 313,000 of the 1,600,000 outstanding shares for a
$939,000 subordinated debenture, placing an agreed moratorium on
the accrual of dividends for two years and obtaining from the
holders of Class A Preferred stock the right to force conversion
of the remaining 1,287,000 shares of Class A Preferred Stock into
8,240,000 shares of Common Stock at any time within the next two
years. In the event of any such forced conversion, as part of
the merger transaction, International was granted anti-dilution
protection and will, upon the issuance of such shares of Common
Stock to the former holders of Class A Preferred Stock, be
2<PAGE>
entitled to an additional 5,452,854 shares of Common Stock
without further consideration, in order to maintain its
percentage ownership of voting stock at 44%. The $780,000 of
dividends on the Class A Preferred Stock accumulated and accrued
through May 31, 1996 will exist as accrued dividends payable.
I.T. Cruise was acquired in exchange for $100,000 cash and a
promissory note in the principal amount of $1,400,000 payable by
Registrant to International. The promissory note will bear
interest at nine percent per annum and is payable in 31 equal
monthly installments of $50,000 each and one final installment of
$27,414.22.
GalaxSea is an Oklahoma corporation that was formed in
September 1995. Effective October 1, 1995, GalaxSea acquired
substantially all of the operating assets of GalaxSea Associates,
Inc. ("GAI"), a Florida corporation. GAI had been in the
business of franchising cruise-only retail travel stores since
1988. The principal business of GalaxSea will continue to be the
granting of franchises for the operation of travel vacation
stores that specialize in the marketing and selling of cruise
travel, tours and related travel arrangements according to the
concept and business system developed by GalaxSea and GAI.
GalaxSea offers two types of franchises for sale. The first
is granted for the establishment and start-up of a new cruise
travel store that sells cruises and tours exclusively (a
"Start-up"). The second is granted to existing independent
cruise-only travel stores and existing full service retail travel
agencies which allow such stores and agencies to, respectively,
convert to (a "Conversion") or add on (an "Add-on") GalaxSea
travel vacation stores. Regardless of the type of franchise,
each GalaxSea store will be expected to closely adhere to the
GalaxSea system which focuses on creating a retail environment
and to participate in the national, regional and local marketing
promotions that GalaxSea provides for its franchisees.
GalaxSea currently has 23 franchisees in its system.
GalaxSea receives a franchise fee for each franchise sold. The
franchise fee for a Start-up is $25,000. The franchise fee for a
Conversion/Add-on is $5,000 subject to a discount based on
existing cruise sales volume. Each franchisee pays a monthly
license fee, rather than a royalty percentage based on that
agency's annual cruise sales volume. The maximum monthly license
for any GalaxSea agency is $750.00. In addition to franchise
fees and monthly license fees, GalaxSea has contracts with most
major cruise lines which provide for GalaxSea to receive override
payments based on the cruise sales of all GalaxSea franchisees.
The contracts also generally provide for favorable commission
structures for the franchisees.
3<PAGE>
As part of the acquisition of GalaxSea by Registrant,
GalaxSea and International entered into a long-term joint
marketing agreement, pursuant to which GalaxSea will have access
to market its Add-on franchises to International's network of
approximately 1,400 travel agency locations. Registrant's
primary goals with GalaxSea are to expand the system by adding
franchisees and to increase the cruise sales volume of all
stores. GalaxSea's competition will come from other cruise-only
franchise systems as well as full service retail travel agency
franchise systems, consortiums and other buying groups. The
travel industry is very competitive. However, GalaxSea believes
that its joint marketing agreement with International will enable
it to attract a certain number of agencies affiliated with
International to buy Add-on franchises. GalaxSea presently
employs 3 full time employees. In addition, GalaxSea expects
that it will utilize the talents of several employees of
International on a contract basis in order to carry out its
planned expansion. GalaxSea has also established a network of
regional directors through contract service agreements.
I.T. Cruise is an Oklahoma corporation that was formed in
1993. I.T. Cruise has served as the cruise marketing division of
International since that time. The principal business of I.T.
Cruise is to coordinate cruise marketing programs between the
various major cruise lines and International's network of
approximately 1,400 travel agency locations. I.T. Cruise enters
into contracts with the cruise lines that provide for favorable
commission structures and marketing support for the International
network. The contracts also provide for I.T. Cruise to receive
an override payment based on the cruise sales volume of the
International network. I.T. Cruise has a twenty year contract
with International pursuant to which International granted I.T.
Cruise the exclusive right to provide such services to
International's network of travel agency locations. The
contracts with the cruise lines generally are negotiated on an
annual basis. I.T. Cruise presently has no full time employees
but will initially utilize both GalaxSea and International
employees on a contract basis to fulfill its obligations to
International and the cruise lines.
Item 7. Financial Statements and Exhibits.
(a) and (b) The audited financial information and pro forma
financial information regarding GalaxSea and I.T.
Cruise required to be filed under Items 7(a) and
(b) are not available as of the date of this
Report. They will be filed under cover of an
amendment to this Report as soon as they are
available, but not later than 60 days after this
Report was required to be filed.
4<PAGE>
(c) Exhibits. The following exhibits are being filed herewith:
10.1.1 Agreement and Plan of Merger dated effective June
7, 1996, relating to the acquisition of GalaxSea
and I.T. Cruise creating the Series B Preferred
Stock.*
10.1.2 Form of Note dated June 10, 1996 in the original
principal amount of $1,400,000 payable by
Registrant to International relating to the
acquisition of I.T. Cruise creating the Series B
Preferred Stock.*
10.1.3 Form of Security Agreement dated effective June
10, 1996 between International and Registrant
securing repayment of the Note filed as Exhibit
10.1.2 creating the Series B Preferred Stock.*
10.1.4 Form of "Certificate of Designation, Preferences
and Rights of Series B Convertible Preferred
Stock" creating the Series B Preferred Stock.*
10.1.5 Form of GalaxSea Cruise Marketing Agreement dated
May 1, 1996 between International and GalaxSea.*
10.1.6 Form of Cruise Marketing Agreement dated May 1,
1996 between International and I.T. Cruise.*
10.1.7 Form of Assignment between International and I.T.
Cruise dated June 1, 1996.*
10.1.8 Form of Security Agreement dated June 10, 1996
between Registrant, Ozdon Investments, and Lamar
E. Ozley, Jr., as Trustee for the former
shareholders of Ozdon Investments, Inc.*
_______________
* Filed herewith
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
June 24, 1996
NORTH AMERICAN GAMING AND
ENTERTAINMENT CORPORATION
By: /s/ George J. Akmon
George J. Akmon,
Executive
Vice President
6<PAGE>
EXHIBIT 10.1.1
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of June 7, 1996,
among GALAXSEA CRUISES AND TOURS, INC., an Oklahoma corporation ("Company"),
IT CRUISE, INC., an Oklahoma corporation ("IT Cruise"), INTERNATIONAL TOURS,
INC., an Oklahoma corporation ("International"), NAMGC ACQUISITION
CORPORATION, an Oklahoma corporation and a wholly-owned Subsidiary of Parent
("Nonsurvivor"), and NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION, a
Delaware corporation ("Parent").
WHEREAS, the respective Boards of Directors of Parent, Nonsurvivor and
the Company, and the respective sole stockholders of Nonsurvivor and the
Company, have duly approved Parent's acquisition of the Company by means of a
merger pursuant to which Nonsurvivor shall merge with and into the Company in
accordance with the terms of this Agreement and in such a way as to qualify as
a non-taxable reorganization under Section 368(a)(1)(A) and Section
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the "Code");
and
WHEREAS, the Board of Directors of Parent, and the Board of Directors
and sole stockholder of IT Cruise, have duly approved the acquisition of IT
Cruise by Parent in exchange for a cash payment of $100,000 and a promissory
note of Parent in the original principal amount of $1,400,000 (the "IT Cruise
Note") payable to International by Parent.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants of the parties set forth herein, together with other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by all parties, the parties hereto agree as follows:
ARTICLE I.
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the relevant provisions of the General
Corporation Act of the State of Oklahoma (the "Act"), Nonsurvivor shall be
merged with and into the Company (the "Merger") as soon as practicable
following the satisfaction or waiver, if permissible, of the conditions set
forth in Article VI hereof. The Merger is intended to qualify under Sections
368(a)(1)(A) and 368(a)(2)(E) of the Code as a reverse triangular merger.
Following the Merger, the Company shall continue as the surviving corporation
(the "Surviving Corporation") and continue its existence under the laws of the
State of Oklahoma, and the separate corporate existence of Nonsurvivor shall
cease.
SECTION 1.2 Effective Time. The Merger shall be consummated by filing
with the Oklahoma Secretary of State the Certificate of Merger in the form
attached hereto as Exhibit "A" (the "Certificate of Merger") (the time of such
filing with the Oklahoma Secretary of State being the "Effective Time").
SECTION 1.3 Effects of the Merger. The Merger shall have the effect set
forth in the Act. As of the Effective Time, Nonsurvivor shall merge with and
into the Company, and the Company shall be a direct wholly-owned Subsidiary of
Parent.
SECTION 1.4 Certificate of Incorporation and By-Laws. The Certificate
of Incorporation of the Company, and the Bylaws of the Company, both as in
effect at the Effective Time, shall be the Certificate of Incorporation and
Bylaws of the Surviving Corporation.
SECTION 1.5 Officers and Directors of Parent. As of the Effective Time,
the persons presently constituting the Board of Directors and officers of
Parent shall continue to constitute the Board of Directors and officers of
Parent until their successors are duly elected and qualified or until their
earlier death, resignation or removal.
SECTION 1.6 Officers and Directors of the Company. As of the Effective
Time, the persons presently constituting the Board of Directors and officers
of the Company shall continue to constitute the Board of Directors and
officers of the Company until their successors are duly elected and qualified
or until their earlier death, resignation or removal.
SECTION 1.7 Conversion of Shares.
(a) The 1,000 outstanding shares of common stock, par value $.01
per share ("Company Common Shares"), of the Company issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive (i) 4,934,106 newly issued, fully paid, and non-assessable
shares of the common stock, par value $.01 per share, of the Parent ("Parent's
Common Stock") and (ii) 8,000,000 newly issued, fully paid, and non-assessable
shares of the preferred stock, par value $.01 per share, of Parent ("Parent's
Preferred Stock"), issuable to International, the sole stockholder of the
Company, upon surrender by International to Parent of the certificates
formerly representing Company Common Shares. The 8,000,000 shares of Parent's
Preferred Stock issuable to International shall be entitled to one vote for
each share issued and shall vote together with Parent's Common Stock as one
class, and not as separate classes, except as expressly mandated and required
by law; and shall share with Parent's Common Stock on a share-for-share basis
in any dividends or distributions made with respect to Parent's Common Stock,
and the outstanding shares of Parent's Common Stock shall share with Parent's
Preferred Stock on a share-for-share basis with regard to any dividends or
distributions on Parent's Preferred Stock, it being the intention that the
8,000,000 shares of Parent's Preferred Stock being issued to International
shall be treated equally with Parent's Common Stock, and vice versa. It is
hereby acknowledged and agreed that the 4,934,106 shares of Parent's Common
Stock to be issued to International reflect adjustments for 450,000 shares of
Parent's Common Stock to be issued to New Orleans Video Poker, Inc., and
International agrees that in the event said 450,000 shares are not issued as
part of the pending transaction with New Orleans Video Poker Company, Inc.,
then International shall return to Parent 353,572 shares of Parent's Common
Stock for cancellation by Parent.
(b) International shall have anti-dilution rights with regard to
the shares of Parent's Common Stock which may be issued in the future upon
exercise by Parent of the call conversion feature described in Section 1.9.
Upon exercise by Parent of such call conversion feature and the issuance of
8,240,000 shares of Parent's Common Stock in conversion of the 1,300,000
shares of Parent's Class A Preferred Stock converted therefor, Parent shall
issue an additional 5,452,854 shares of Parent's Common Stock to International
without further consideration as an anti-dilution adjustment in favor of
International.
(c) Except as provided in Section 1.7(b), International shall
not have any further anti-dilution rights with respect to future issuance of
any shares of Parent's Common Stock or Parent's Preferred Stock.
SECTION 1.8 Closing. Upon the terms and subject to the conditions
hereof, as soon as practicable after the satisfaction of all conditions
described in Article VI, the Company and Nonsurvivor shall execute in the
manner required by the Oklahoma Act and deliver to the Oklahoma Secretary of
State a duly executed and verified Certificate of Merger, and the parties
shall take such other and further actions as may be required by law to make
the Merger effective. Contemporaneous with the filings referred to in this
Section 1.8, a closing (the "Closing") will be held at the offices of Glast,
Phillips & Murray, P.C., 2200 One Galleria Tower, 13355 Noel Road, Dallas,
Texas 75240 (or such other place as the parties may agree) for the purpose of
implementing all transactions described in this Agreement.
SECTION 1.9 Recapitalization of Outstanding Class A Preferred Stock.
Parent hereby represents and warrants to International that Parent has entered
into binding agreements with Holders (herein so called) of at least 85% of the
1,600,000 issued and outstanding shares of Parent's Class A Preferred Stock,
par value $3.00 per share ("Parent's Class A Preferred Stock"), pursuant to
which Parent and each such Holder has agreed that contemporaneously with the
Closing of the Merger (but effective as of June 1, 1996), (i) Parent will
redeem 313,000 shares of Parent's Class A Preferred Stock, pro rata among the
Holders, in consideration for subordinated promissory notes in the aggregate
original principal amount of $939,000, subordinated to the "Senior Debt" (as
hereinafter defined) of Parent, bearing interest at 9% per annum, with
interest and principal payable as set forth on Exhibit 1.9; (ii) the dividends
accruing on the Parent's Class A Preferred Stock shall cease to accrue for a
period of two years following Closing (but effective as of June 1, 1996),
provided that the $780,000 of accumulated and accrued dividends through May
31, 1996 shall continue to be considered accumulated, accrued dividends and
shall be payable in accordance with the terms and conditions of Parent's
Certificate of Incorporation (provided, however, if the Class A Preferred
Stock is converted, the accrued dividends shall continue to exist as accrued
dividends); and (iii) each Holder grants to Parent the right at any time prior
to the expiration of two years following Closing to call the outstanding
Parent's Class A Preferred Stock and require conversion thereof by the Holders
into an aggregate of 8,240,000 shares of Parent's Common Stock, pro rata, at
which time the Parent's Class A Preferred Stock shall be cancelled and
retired. In the event Parent does not exercise the call conversion feature
provided for in Subsection (iii) prior to expiration of two years following
the Closing, then the 1,300,000 shares of Parent's Class A Preferred Stock
shall commence accruing dividends again effective on the date of expiration of
such two-year period, and the call conversion option in favor of Parent shall
automatically terminate.
As noted above, the $939,000 of Parent's subordinated debentures to be
issued to the Holders will be subordinated to Parent's "Senior Debt". For
this purpose, Senior Debt means any indebtedness previously incurred in
connection with equipment purchases, the indebtedness of Parent previously
incurred in connection with the acquisition of Ozdon Investments, Inc., the IT
Cruise Note, and any indebtedness owed from time to time by Parent to
Springhill Bank & Trust Co. (or any refinancing of any such indebtedness with
any other lender). The $939,000 of Parent's debentures payable to the Holders
shall be payable, in the aggregate, based on the following payment schedule:
(i) during months 1 through 12 following Closing, a monthly payment of
principal and interest of $11,250; (ii) during months 13 through 18 following
Closing, a monthly payment of principal and interest of $31,113.95; and (iii)
during months 19 through 72 following Closing, a monthly payment of principal
and interest of $16,669.51.
SECTION 1.10 Exchange of Shares. Promptly after the Effective
Time, Parent shall deliver to International, the sole stockholder of the
Company, a certificate representing the number of shares of Parent's Common
Stock and Parent's Preferred Stock to be delivered to International hereunder,
upon surrender to Parent by International of the certificate or certificates
representing 100% of the outstanding capital stock of the Company as of the
Effective Time. From and after the Effective Time, International shall cease
to have any rights as a stockholder of the Company.
ARTICLE II.
ACQUISITION OF IT CRUISE
SECTION 2.1 Acquisition of Shares. At the Closing of the Merger,
International shall also sell, deliver, assign, transfer and convey to Parent
good and marketable title to 100% of the issued and outstanding shares of
capital stock of IT Cruise in exchange for a cash payment of $100,000 (subject
to the offset provided in Section 5.8) and the IT Cruise Note in the form
attached hereto as Exhibit "B". International hereby represents and warrants
to Parent that it owns 100% of the issued and outstanding shares of capital
stock of IT Cruise free and clear of any and all liens, claims, encumbrances
or other restrictions on transfer and will deliver same to Parent at the
Closing free and clear of all such liens, claims, encumbrances and other
restrictions on transfer. The IT Cruise Note shall also be secured by a
collateral pledge of 100% of the outstanding capital stock of each of GalaxSea
and IT Cruise, and at Closing Parent shall execute a form of security and
pledge agreement acceptable to International effecting such pledge.
SECTION 2.2 Revenue Stream and Cruise Contracts. Prior to Closing,
International shall assign, transfer and convey to IT Cruise all of
International's contracts with cruise line companies together with the related
revenues and associated business and at Closing shall enter into agreements
acceptable to Parent binding International to deal exclusively with IT Cruise
for all of its cruise business and not to compete in the cruise business in
any manner except exclusively through IT Cruise or the Company. Further, at
Closing, International agrees to enter into agreements with the Company
acceptable to Parent allowing the Company access to the agents of
International for add-on franchising, franchising, joint marketing programs,
and joint participation and joint presentations at meetings scheduled by
International with existing agents, new agents and others with whom it enters
into business relationships. The form of these agreements shall be negotiated
and agreed upon prior to Closing and each party agrees to negotiate in good
faith with respect to such contracts.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF INTERNATIONAL
International hereby represents and warrants to Parent and Nonsurvivor
as of the date hereof and as of the date of Closing that:
SECTION 3.1 Organization and Qualification. Each of International, the
Company and IT Cruise is a corporation duly organized, validly existing and in
good standing under the laws of the State of Oklahoma. Neither the Company
nor IT Cruise has any subsidiaries. Each of International, the Company and IT
Cruise has all requisite power and authority to own or operate its properties
and conduct its business as it is now being conducted. Each of International,
the Company and IT Cruise is duly qualified and in good standing as a foreign
corporation or entity authorized to do business in each of the jurisdictions
in which the character of the properties owned or held under lease by it or
the nature of the business transacted by it makes such qualification
necessary, except where the failure to be so qualified and in good standing
would not have a Material Adverse Effect on either of International, the
Company or IT Cruise.
SECTION 3.2 Capitalization. The authorized capital stock of (a)
International consists of 5,000,000 shares of Common Stock, par value $0.01
per share ("International Common Shares"), and 5,000,000 shares of Preferred
Stock, par value $0.01 per share ("International Preferred Shares"); (b) the
Company consists of 200,000 shares of common stock, par value $0.01 per share
("Company Common Shares"); and (c) IT Cruise consists of 50,000 shares of
common stock par value $1.00 per share ("IT Cruise Common Shares"). As of May
20, 1996, 1,350,000 International Common Shares, 1,350,000 International
Preferred Shares, 1,000 Company Common Shares, and 500 IT Cruise Common Shares
were issued and outstanding. Since May 20, 1996, (a) International has not
issued any, nor has it repurchased or redeemed any, International Common
Shares or International Preferred Shares; (b) the Company has not issued any,
nor has it repurchased or redeemed any, Company Common Shares; and (c) IT
Cruise has not issued any, nor has it repurchased or redeemed any, IT Cruise
Common Shares. Neither the Company nor IT Cruise has any shares of its
capital stock reserved for issuance, and there are no outstanding options,
warrants, convertible debt or other instruments which are exercisable for,
convertible into or otherwise exchangeable or issuable for Company Common
Shares or IT Cruise Common Shares. All issued and outstanding Company Common
Shares and IT Cruise Common Shares are validly issued, fully paid, non-
assessable and free of preemptive rights. There is not now, and at the
Effective Time there will not be, any stockholder agreement, voting trust or
other agreement or understanding to which International, the Company or IT
Cruise is a party or bound relating to the voting of any shares of capital
stock of the Company or IT Cruise.
SECTION 3.3 Authority Relative to this Agreement. Each of
International, the Company and IT Cruise has all requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will be
duly and validly authorized by each of International, the Company and IT
Cruise and no other corporate proceedings on the part of International, the
Company or IT Cruise are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by each of International, the Company and IT
Cruise and, assuming this Agreement constitutes a valid and binding obligation
of each of Parent and Nonsurvivor, this Agreement constitutes a valid and
binding agreement of each of International, the Company and IT Cruise,
enforceable against each of International, the Company and IT Cruise in
accordance with its terms.
SECTION 3.4 Financial Statements. International shall cooperate fully
with Parent and Nonsurvivor and use its best efforts to enable Parent to
obtain audited financial statements to be prepared in accordance with SEC
Regulation S-B that will enable inclusion thereof in Parent's Form 8-K
reporting the Merger and the acquisition of IT Cruise by Parent. Such
financial statements shall include an audited balance sheet at December 31,
1995, and audited statements of income, cash flows and changes in
stockholders' equity for each of the fiscal years ended December 31, 1995 and
1994, together with unaudited interim financial statements for the fiscal
quarters ended March 31, 1996 and 1995. Such audited financial statements are
referred to herein as the "Company/IT Cruise Financial Statements". The
Company/IT Cruise Financial Statements shall be prepared in all material
respects in accordance with generally accepted accounting principles and in
accordance with all applicable rules and regulations (the "Accounting
Principles"), consistently applied and fairly represent the financial
condition of the Company and IT Cruise as of the date thereof or, as the case
may be, the results of operations for the periods covered thereby. Parent
will pay for the audit of the Company and International will pay for the audit
of IT Cruise.
The financial records, ledgers, accounts, books, and minute books of the
Company and IT Cruise have been kept in the ordinary course of business and
are true, complete and accurate in all material respects. The account books
of the Company and IT Cruise reflect in all material respects all transactions
relating to the Company and IT Cruise and all items of income and expense and
assets and liabilities and accruals required to be reflected therein in
accordance with the Accounting Principles.
Except as set forth in the Disclosure Schedule, neither the Company nor
IT Cruise has any material liability or is subject to any material contract or
obligation.
SECTION 3.5 Private Offering Materials. None of the information
relating to International, the Company or IT Cruise, supplied in writing by
International, the Company or IT Cruise for inclusion in the private offering
materials to be distributed by Parent to the Holders of Parent's Class A
Preferred Stock, or for inclusion in Parent's Form 8-K reporting the Merger
and acquisition of IT Cruise by Parent, shall, at the time the materials are
distributed to Holders of Parent's Class A Preferred Stock, or filing of the
Form 8-K with the SEC, respectively, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 3.6 Consents and Approvals; No Violation. Except as described
in the Disclosure Schedule, neither the execution and delivery of this
Agreement by International, the Company or IT Cruise, nor the consummation of
the transactions contemplated hereby by International, the Company or IT
Cruise, nor compliance by International, the Company or IT Cruise with any of
the provisions hereof will (i) conflict with or result in any breach of any
provision of the Articles of Incorporation, Bylaws or other organization
documents of International, the Company or IT Cruise, (ii) require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, except (A) pursuant to the Securities Act,
(B) the filing of the Certificate of Merger pursuant to the Oklahoma Act,
(C) such filings and approvals as may be required under the "blue sky",
takeover or securities laws of various states, or (D) where the failure to
obtain such consent, approval, authorization or permit, or to make such filing
or notification, would not in the aggregate have a Material Adverse Effect on
International, the Company or IT Cruise, (iii) result in a default (with or
without due notice or lapse of time or both) (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, Contract (as defined in
Section 8.10), license, franchise, cruise line agency or representation or
similar agreement, or any other agreement or instrument or obligation to which
International, the Company or IT Cruise is a party or by which International,
the Company or IT Cruise, or any of their respective assets, may be bound,
except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained,
(iv) result in the creation or imposition of any lien, charge or other
encumbrance on the assets of International, the Company or IT Cruise, or
(v) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to International, the Company, or IT Cruise, or any of their
respective assets.
SECTION 3.7 Litigation, etc. Except as described in the Disclosure
Schedule, (a) there is no action, claim, or proceeding pending or, to the
knowledge of International, the Company or IT Cruise, threatened, to which
International, the Company or IT Cruise, would be a party before any court or
Governmental Authority acting in an adjudicative capacity or any arbitrator or
arbitration tribunal with respect to which there is a reasonable likelihood of
a determination having, or which, insofar as reasonably can be foreseen, in
the future would have a Material Adverse Effect on International, the Company
or IT Cruise, (b) neither International, the Company or IT Cruise, is subject
to any outstanding order, writ, injunction or decree having, or which, insofar
as reasonably can be foreseen, in the future would have a Material Adverse
Effect on International, the Company or IT Cruise, and (c) since December 31,
1993, there have been no claims made or actions or proceedings brought against
any officer or director of International, the Company or IT Cruise, arising
out of or pertaining to any action or omission within the scope of his
employment or position with International, the Company or IT Cruise, which
claim, action or proceeding would involve a Material Adverse Effect on
International, the Company or IT Cruise. All litigation and other
administrative, judicial or quasi-judicial proceedings to which International,
the Company or IT Cruise, is a party or to which either has been threatened to
their knowledge to be made a party, are described in the Disclosure Schedule.
SECTION 3.8 Changes. Except as expressly contemplated by this Agreement
or as reflected in the Disclosure Schedule, since December 31, 1993,
International the Company and IT Cruise have conducted their respective
businesses only in the ordinary and usual course, and, except as set forth in
the Disclosure Schedule, none of the following has occurred:
(a) any material adverse change in the condition (financial or
other), results of operations, business, assets, customer, supplier and
employee relations of International, the Company or IT Cruise;
(b) any change in accounting methods, principles or practices by
International, the Company or IT Cruise having a Material Adverse Effect on
the Company or IT Cruise, as applicable, except insofar as may have been
required by a change in generally accepted accounting principles;
(c) any damage, destruction or loss, whether or not covered by
insurance, that has a Material Adverse Effect on International, the Company or
IT Cruise, as applicable;
(d) any declaration, setting aside or payment of dividends or
distributions in respect of the Company Common Shares or IT Cruise Common
Shares, as applicable, or any redemption, purchase or other acquisition of any
of their respective securities;
(e) any issuance by the Company or IT Cruise of, or commitment
of the Company to issue, any shares of capital stock or securities convertible
into or exchangeable or exercisable for shares of capital stock;
(f) any entry by International, the Company or IT Cruise into
any commitment or transaction material to the condition (financial or other),
business or operations of the Company or IT Cruise which is not in the
ordinary course of business and consistent with past practice;
(g) any revaluation by International, the Company or IT Cruise
of any of their respective assets, including without limitation, writing down
the value of assets or writing off notes or accounts receivables other than in
the ordinary course of business and consistent with past practice;
(h) any action taken by the Company or IT Cruise of the type
referred to in Section 5.1;
(i) any agreement by International, the Company or IT Cruise to
do any of the things described in the preceding clauses (a) through (h) other
than as expressly contemplated or provided for herein; or
(j) any waiver by International, the Company or IT Cruise of any
rights that, singularly or in the aggregate, are material to the business,
assets, financial condition, or results of operation of the Company or IT
Cruise.
SECTION 3.9 Property and Environmental Matters.
(a) Except as disclosed in the Disclosure Schedule, and except
for matters that singularly or in the aggregate would not have a Material
Adverse Effect on the business of the Company or IT Cruise, to the best
knowledge of International, the location, construction, occupancy, operation,
condition and use of the real property owned, leased by or in the possession
of the Company and IT Cruise (the "Company/IT Cruise Real Property"), the
facilities or improvements located thereon, the operations and practices of
the Company and IT Cruise are in substantial compliance with all Environmental
Laws (as defined in Section 8.10), and any restrictive covenant or deed
restriction (recorded or otherwise) affecting the Company/IT Cruise Real
Property, including, without limitation all applicable zoning ordinances and
building codes in effect at the time of improvement of such Company/IT Cruise
Real Property, flood disaster, and occupational health and safety laws.
(b) Neither the Company nor IT Cruise is subject to any material
liability or obligation, including investigatory or remedial obligations under
any Environmental Law or the common law with respect to Hazardous Materials
(as defined in Section 8.10), relating to (i) the environmental conditions on,
under or about the Company/IT Cruise Real Property, including, without
limitation, the air, soil, surface water and groundwater conditions at the
Company/IT Cruise Real Property, or (ii) the use, management, handling,
transport, treatment, generation, storage, disposal, release or discharge of
any Hazardous Materials.
(c) With the exception of those Hazardous Materials and
activities described in the Disclosure Schedule, and except for matters that
singularly or in the aggregate would not have a Material Adverse Effect on the
Company or IT Cruise, to the best knowledge of International, no portion of
the Company/IT Cruise Real Property is being used, nor, has been used by
International, the Company or IT Cruise at any previous time for the
generation, storage, treatment, processing, disposal or other handling of any
Hazardous Materials.
(d) Neither International, the Company nor IT Cruise has
received any notice or is aware of any existing condition (including the
condition of the Company/IT Cruise Real Property, whether or not caused by
International, the Company or IT Cruise) or the practice of the businesses
conducted by International, the Company or IT Cruise which forms or could form
the basis of any claim, action, suit, proceeding, administrative consent or
agreement, litigation or settlement, hearing or investigation, arising out of
the manufacture, processing, distribution, use, treatment, storage, spill,
disposal, transport, or handling, or the emission, discharge, release or
threatened release into the environment of any Hazardous Material which, if
decided against International, the Company or IT Cruise, would have a Material
Adverse Effect on the Company or IT Cruise.
(e) International, the Company and IT Cruise have listed and
described on the Disclosure Schedule (i) all treatment, storage and disposal
facilities, as defined in the Resource Conservation and Recovery Act of 1976,
42 U.S.C. sec 1601, et seq., as amended, or under similar Environmental Laws,
and all underground storage tanks, whether empty, filled, or partially filled
with any substance, that are located on the Company/IT Cruise Real Property;
(ii) the current and past Hazardous Material disposal practices of the
International, the Company and IT Cruise; and (iii) any environmental
assessment or environmental audit reports delivered to International, the
Company or IT Cruise, excepting, however, matters that singularly or in the
aggregate would not have a Material Adverse Effect on the business of the
Company or IT Cruise.
(f) To the best of International's knowledge, International, the
Company and IT Cruise have obtained or applied for all permits, licenses,
registrations, notifications and similar authorizations required under
Environmental Laws (collectively, "Environmental Permits") for the conduct of
the Company's and IT Cruise's business or relating to the Company/IT Cruise
Real Property, the facilities, improvements, or equipment located thereon.
The Disclosure Schedule includes a list of the Environmental Permits.
(g) Except as identified in the Disclosure Schedule,
International, the Company and IT Cruise are in substantial compliance with
all terms and conditions of the Environmental Permits and no proceeding is
pending for the revocation of any Environmental Permit.
(h) No portion of the Company/IT Cruise Real Property has been
designated as a covered facility under CERCLA or included on any similar
"superfund" list or registry or has been made subject to any environmental
lien pursuant to any Environmental Law or by any Governmental Authority.
SECTION 3.10 ERISA Matters. The Company and IT Cruise and all
Company and IT Cruise "Employee Benefit Plans" as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
that cover any of their respective employees (which Company and IT Cruise
Employee Benefit Plans are listed on the Disclosure Schedule), comply with all
laws, requirements and orders under ERISA and the Internal Revenue Code of
1986, as amended (the "Code"), the breach or violation of which would have a
Material Adverse Effect on the Company or IT Cruise; the present value of all
the assets of each Company and IT Cruise Employee Benefit Plan that it is
subject to Title IV of ERISA equals or exceeds the present value of all of the
benefits accrued under each such Employee Benefit Plan as of the end of most
recent plan year with respect to such plan ending prior to the date hereof,
calculated on the basis of the actuarial assumptions used in the last
actuarial evaluation for each such plan; none of the employees of the Company
or IT Cruise are covered by a collective bargaining agreement; the Company and
IT Cruise have never contributed to a "multiemployer plan" as defined in
Section 3(37) of ERISA; neither the Company Employee Benefit Plans nor the IT
Cruise Employee Benefit Plans, nor any fiduciary or administrator of any of
such Employee Benefit Plans has engaged in a "prohibited transaction" as
defined in Section 406 of ERISA or, where applicable, Section 4975 of the Code
for which no exemption is applicable, that may have any Material Adverse
Effect on the Company or IT Cruise, nor have there been any "reportable
events" as defined in Section 4043 of ERISA for which the thirty-day notice
has not been waived.
SECTION 3.11 Taxes, Tax Returns.
(a) Except as set forth on the Disclosure Schedule, each of the
Company and IT Cruise has duly and timely filed in correct form all federal,
state and local information returns and tax returns required to be filed by it
(all such returns to the best of knowledge of International being accurate and
complete in all material respects), there are no liens for taxes upon the
assets of the Company or IT Cruise, except liens for taxes not yet due, and,
to the best knowledge of International, has duly paid or made provision for
the payment of all taxes and other governmental charges which have been
incurred or are due or claimed to be due from them by any governmental
authority (including, without limitation, those due in respect of their
properties, income, business, capital stock, franchises, licenses, sales and
payrolls) other than taxes or other charges (i) which are not yet delinquent
or are being contested in good faith and set forth in the Disclosure Schedule
and (ii) have not been finally determined. The liabilities and reserves for
taxes for the Company and IT Cruise set forth in the Disclosure Schedule are
sufficient in the aggregate for the payment of all unpaid federal, state and
local taxes (including any interest or penalties thereon), whether or not
disputed or accrued, for the period ended December 31, 1995 or for any year or
period prior thereto, and for which the Company or IT Cruise may be liable in
its own right or as transferee of the assets of, or successor to, any
corporation, person, association, partnership, joint venture or other entity.
No amounts payable to any employee, independent contractor, officer, director,
or highly compensated individual will fail to be deductible for federal income
tax purposes by virtue of Code Section 280G.
(b) To the best knowledge of International, (i) proper and
accurate amounts have been withheld by the Company and IT Cruise from their
employees and others for all prior periods in compliance in all material
respects with the tax withholding provisions of applicable federal, state and
local laws and regulations, and proper due diligence steps have been taken in
connection with back-up withholding, (ii) federal, state and local returns
which are accurate and complete in all material respects have been filed by
the Company and IT Cruise for all periods for which returns were due with
respect to income tax withholding, Social Security and unemployment taxes and
(iii) the amounts shown on such returns to be due and payable have been paid
in full, or adequate provision therefor has been included by the Company and
IT Cruise in their respective books and accounts, in the amounts set forth on
the Disclosure Schedule.
SECTION 3.12 Tax Audits. Except as disclosed in the Disclosure
Schedule, (i) no audit or administrative procedure of any material federal,
state or local U.S. return of International, the Company or IT Cruise is
currently in progress, nor has International, the Company or IT Cruise been
notified that such an audit is contemplated by any taxing authority, (ii)
neither International, the Company nor IT Cruise has extended any statute of
limitations with respect to the period for assessment of any federal, state or
local U.S. tax, (iii) neither International, the Company nor IT Cruise
contemplates the filing of an amendment to any return, which amendment would
have a Material Adverse Effect on the Company or IT Cruise, and (iv) neither
International, the Company nor IT Cruise has any actual or potential material
liability for any tax obligation of any taxpayer (including, without
limitation, any affiliated group of corporations or other entities which
included the Company or IT Cruise during a prior period) other than the
Company or IT Cruise, as applicable. Except as disclosed in the Disclosure
Schedule, there are no material tax claims pending against International, the
Company or IT Cruise, there are no material tax claims threatened to be
asserted against International, the Company or IT Cruise, and there are no
material issues which have been raised in prior periods or audits which by
application of similar principles are expected to result in a material tax
claim for any other period. For purposes of this Section 3.12, "tax" and
"taxes" shall include all income, gross receipt, franchise, excise, real and
personal property, sales, ad valorem, employment, withholding and other taxes
imposed by any foreign, federal, state, municipal, local, or other
Governmental Authority including assessments in the nature of taxes.
SECTION 3.13 Undisclosed Liabilities. Neither the Company nor IT
Cruise is liable for or subject to any material Liabilities (as hereinafter
defined), except (a) Liabilities existing as of April 30, 1996 which are
disclosed on the Disclosure Schedule, or (b) Liabilities incurred, consistent
with past practice, in or as a result of the ordinary course of business of
the Company and IT Cruise, as applicable, and in accordance with this
Agreement, since April 30, 1996. As used in this Agreement, the term
"Liability" or "Liabilities" shall include any direct or indirect liability,
indebtedness, obligation, guarantee or endorsement (other than endorsements'
of notes, bills, and checks presented to banks for collection or deposit in
the ordinary course of business), whether known or unknown, accrued, absolute,
contingent or otherwise.
SECTION 3.14 No Default; Compliance.
(a) Except as set forth in the Disclosure Schedule, neither
International, the Company nor IT Cruise is in default under, and no condition
exists that with notice or lapse of time or both would constitute a default
under, (i) any mortgage, loan agreement, indenture, evidence of indebtedness
or other instrument evidencing borrowed money to which the Company or IT
Cruise is a party or by which the Company or IT Cruise or their respective
properties are bound, (ii) any judgment, order or injunction of any court,
arbitrator or governmental agency or (iii) any other agreement, contract,
lease, license, franchise, or other instrument, which default or potential
default might reasonably be expected to have a Material Adverse Effect on
International, the Company or IT Cruise, as applicable.
(b) Except as set forth in the Disclosure Schedule, to the best
knowledge of International, International, the Company and IT Cruise have
complied with all laws, regulations, orders, judgments or decrees of any
federal or state court or governmental authority applicable to their
respective businesses and operations, including, without limitation, all
federal and state franchising laws, non-compliance with which might reasonably
be expected to have a Material Adverse Effect on International, the Company or
IT Cruise.
SECTION 3.15 Representations and Warranties Continuing. The
representations and warranties set forth herein shall be true and correct on
the date hereof and at all times prior to the Effective Time as if made from
time to time, including, without limitation, at the Effective Time.
SECTION 3.16 Contracts and Commitments. Except as listed and
described in the Disclosure Schedule, neither the Company nor IT Cruise is a
party to, nor are their assets bound by, any written or oral Contract,
including the following:
(i) Contract with any present or former stockholder,
director, officer, employee or consultants;
(ii) Contract with any labor union or other representative
of employees;
(iii) Contract for the future purchase of, or payment for,
supplies or products, or for the performance of services by a
third party, involving payment or potential payment by the Company
or IT Cruise of $5,000 or more under any one Contract or series of
related Contracts;
(iv) any Contract, including, without limitation, any
outstanding quotations, bids or proposals, to sell goods or to
perform services in an aggregate amount in excess of $5,000;
(v) distributorship, representative or sales agency
agreement, contract or commitment;
(vi) conditional sale agreement or lease under which the
Company or IT Cruise is either the seller or purchaser, lessor or
lessee, involving annualized payments or potential payments by or
to the Company or IT Cruise that is in excess of $5,000;
(vii) Contract (including, without limitation, any note,
debenture, bond, conditional sale or equipment trust agreement,
letter of credit agreement or loan agreement) for the borrowing or
lending of money (including, without limitation, those to or from
officers, directors or shareholders of the Company or IT Cruise,
or any affiliates or members of their immediate families, for a
line of credit, or for a guarantee, security, indemnitee, pledge
or undertaking of the indebtedness or obligations of any other
person);
(viii) Contract for any charitable or political contribution;
(ix) Contract for any capital expenditure involving future
payments, which, together with future payments under all other
existing Contracts for the same capital project, are in excess of
$5,000;
(x) Contract limiting or restraining the Company or IT
Cruise, directly or indirectly, from engaging or competing in any
lines of business with any person, nor is any officer or employee
of the Company or IT Cruise, directly or indirectly, subject to
any such agreement, contract or commitment;
(xi) license, franchise, distributorship or other Contract
relating in whole or in part to any ideas, technical assistance or
other know-how of or used by the Company;
(xii) Contract which is expected to continue for more than
six months from the date hereof;
(xiii) Contract not made in the ordinary course of business;
or
(xiv) any guaranty, direct or indirect, of any person of any
contract, lease or agreement entered into by the Company;
Except as may be disclosed on the Disclosure Schedule, each of the
Contracts listed on the Disclosure Schedule is valid and enforceable in
accordance with its terms; the Company and IT Cruise and, to the best of
International's knowledge, the other parties thereto are in substantial
compliance with the provisions thereof; except as may be disclosed on
the Disclosure Schedule, neither the Company nor IT Cruise nor any other
party is (or by reason of the consummation of the transactions
contemplated by this Agreement, will be) in default in the performance,
observance or fulfillment of any obligation, covenant or condition
contained therein and no event has occurred or is anticipated to occur
(including the consummation of the transactions contemplated by this
Agreement) which with or without the giving of notice or lapse of time,
or both, would constitute a default or give the right of termination
thereunder; furthermore, except as may be disclosed on the Disclosure
Schedule, no such Contract contains any contractual requirement with
which there is a reasonable likelihood that either (i) the Company or IT
Cruise or any other party thereto will be unable to comply or (ii)
compliance therewith by the Company or IT Cruise will have a Material
Adverse Effect on the Company or IT Cruise.
SECTION 3.17 Compliance with Law and Permits. Except as set forth
in the Disclosure Schedule, to the best of International's knowledge,
International, the Company and IT Cruise have owned and operated their
properties and assets in substantial compliance with the provisions and
requirements of all laws, orders, regulations, rules and ordinances issued or
promulgated by all Governmental Authorities having jurisdiction with respect
thereto, except where the failure to own and operate such properties and
assets in compliance with such provisions and requirements would not
reasonably be expected to have a Material Adverse Effect on the Company or IT
Cruise. To the best knowledge of International, all necessary governmental
certificates, consents, permits, licenses or other authorizations with regard
to the ownership or operation by International, the Company and IT Cruise of
their respective properties and assets have been obtained and no violation
exists in respect of such licenses, permits or authorizations, except where
the failure to obtain and hold such permits, or any violation thereof by
International, the Company or IT Cruise would not reasonably be expected to
have a Material Adverse Effect on the Company or IT Cruise. None of the
documents and materials filed with or furnished to any Governmental Authority
with respect to the properties, assets or businesses of the Company contains
any untrue statement of a material fact or fails to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
SECTION 3.18 Title to Property. Except as disclosed on the
Disclosure Schedule, the Company and IT Cruise have good and marketable title
to all of their properties subject, however, to the matters shown in the
Disclosure Schedule.
SECTION 3.19 Insurance. The Disclosure Schedule sets forth a
complete and accurate list and description of all insurance policies in force
naming the Company or IT Cruise, or any employees of the Company or IT Cruise
as an insured or beneficiary or as a loss payable payee for which
International, the Company or IT Cruise has paid or is obligated to pay all or
part of the premiums. Neither International, the Company nor IT Cruise has
received notice of any pending or threatened termination or retroactive
premium increase with respect thereto, and International, the Company and IT
Cruise are in compliance with all conditions contained therein, the
noncompliance with which could result in termination of insurance coverage or
increased premiums for prior or future periods. There are no pending material
claims against such insurance by International, the Company or IT Cruise as to
which insurers have denied liability, no defenses provided by insurers under
reservations of rights, and no material claim under such insurance that has
not been properly filed by International, the Company or IT Cruise.
SECTION 3.20 Full Disclosure. The information furnished by
International, the Company or IT Cruise, or by any of their respective
directors, officers, employees, agents, accountants or representatives, to
Parent pursuant to this Agreement (whether furnished prior to, at, or
subsequent to the date hereof), the information contained in the exhibits and
Schedules referred to in this Agreement, and the other information furnished
to Parent by International, the Company or IT Cruise, or by any of their
respective directors, officers, employees, agents, accountants or
representatives at any time prior to the Effective Date (pursuant to the
request of Parent or otherwise), does not and will not contain any untrue
statement of a material fact and does not and will not omit to state any
material fact necessary to make all such information, in the light of the
circumstances under which they were made, not misleading.
SECTION 3.21 Equipment. Except as set forth in the Disclosure
Schedule, each of the Company and IT Cruise owns all equipment used or
necessary for use in its trade or business, and all such equipment is in
generally good operating condition and free from any material defect.
SECTION 3.22 Labor Relations. Each of the Company and IT Cruise
has good relations with its employees, and does not have any reason to believe
that this situation will change or that any collective representation of the
employees has been or is being considered by such employees.
SECTION 3.23 Nonregistration Pursuant to the Securities Act of
1933, as amended, and State Securities Laws. International is aware that the
shares of Parent's Common Stock and Parent's Preferred Stock to be issued to
International pursuant to this Agreement (collectively referred to herein as
the "Shares") have not been registered pursuant to either the Securities Act
of 1933, as amended (the "1933 Act"), or the applicable securities acts,
rules, or regulations of any state (the "Blue Sky Laws"), on the ground that
the issuance and delivery thereof are exempt from such registration under
certain exemptions contained in the 1933 Act and applicable Blue Sky Laws. In
order to assure the availability and applicability of such exemptions,
International hereby represents and warrants to, and covenants and agrees
with, Parent that:
(i) International is acquiring the Shares for
International's own account for investment and not with a view to
any sale or distribution of all or any part thereof.
(ii) International will hold the Shares subject to all the
applicable provisions of the 1933 Act and the rules and
regulations promulgated thereunder by the Securities and Exchange
Commission ("Commission") and all applicable provisions of the
Blue Sky Laws and will not at any time make any sale, transfer, or
other disposition of the Shares in contravention of the provisions
of the 1933 Act or the Blue Sky Laws.
(iii) In order to permit International to evaluate the risks
of and to make an informed investment decision with respect to the
acquisition of the Shares, Parent has furnished and/or made
available to International (a) information regarding Parent, and
its business, properties and financial position deemed necessary
by International to make an informed investment decision, (b) such
other information as International has deemed necessary in order
to verify the information furnished and/or made available, and (c)
the opportunity to ask questions of, and receive answers from,
Parent or persons acting on its behalf concerning Parent and the
terms and conditions of International's acquisition of the Shares.
(iv) International is an "accredited investor" as such term
is defined in Regulation D promulgated by the Commission and has
such knowledge and experience in financial and business matters
that International is capable of and has utilized the information
described in subpart (iii) of this paragraph in evaluating the
risks and in making an informed investment decision in connection
with International's acquisition of the Shares.
(v) International is able to bear the economic risks of
International's investment in the Shares for an indefinite period
of time.
(vi) International will not make any sale, assignment,
transfer, or other disposition of the Shares unless and until
International has given Parent written notice of the proposed
disposition and the circumstances relating thereto and either (a)
the Shares shall have been registered pursuant to the 1933 Act and
the Blue Sky Laws or (b) counsel for Parent, or counsel
satisfactory to Parent, shall have rendered a written opinion
satisfactory to Parent that such registration is not required.
(vii) A legend in substantially the following form, in
addition to any legend required by law or agreement to be noted
thereon, may be noted conspicuously on the certificate or
certificates evidencing the Shares:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
THE SECURITIES LAWS OF ANY STATE. THESE SHARES MAY
NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF
UNLESS THEY ARE FIRST REGISTERED UNDER SUCH ACTS OR
UNLESS COUNSEL FOR THE COMPANY OR OTHER COUNSEL
SATISFACTORY TO THE COMPANY SHALL HAVE RENDERED AN
OPINION SATISFACTORY TO THE COMPANY TO THE EFFECT THAT
SUCH REGISTRATION IS NOT REQUIRED."
(viii) Stop transfer instructions may be issued to the
transfer agent of Parent or a notation may be made in the
appropriate records of Parent with respect to the Shares.
(ix) International further acknowledges its understanding
that, if Rule 144 under the 1933 Act ("Rule 144") is available
with regard to the Shares, any sales pursuant to Rule 144 can only
be made in full compliance with all of the provisions of Rule 144,
including among other things, the following:
(a) Parent must be providing adequate public
information with respect to Parent during a specified
time period immediately prior to the sale;
(b) a two-year holding period must be
satisfied;
(c) the amount sold in each 90-day period must
not exceed one percent (1%) of the outstanding shares
of Parent's Common Stock or Parent's Preferred Stock,
as applicable;
(d) the sales must be made in ordinary
broker's transactions as defined in Rule 144; and
(e) the seller must file a notice of sale with
the Commission concurrently with placing the order to
sell.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF PARENT AND NONSURVIVOR
Parent and Nonsurvivor, jointly and severally, hereby represent and
warrant to International as of the date hereof and as of the date of Closing
that:
SECTION 4.1 Organization and Qualification. Each of Parent and
Nonsurvivor is a corporation duly organized, validly existing and in good
standing under the laws of the States of Delaware and Oklahoma, respectively.
All Subsidiaries of the Parent are legal entities that are duly organized,
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation. Each of the Parent and its Subsidiaries has
all requisite power and authority to own or operate its properties and conduct
its business as it is now being conducted. The Parent and each of its
Subsidiaries is duly qualified and in good standing as a foreign corporation
or entity authorized to do business in each of the jurisdictions in which the
character of the properties owned or held under lease by it or the nature of
the business transacted by it makes such qualification necessary, except where
the failure to be so qualified and in good standing would not have a Material
Adverse Effect on the Parent or such Subsidiary taken as a whole.
SECTION 4.2 Capitalization; Subsidiaries. (a) The authorized capital
stock of the Parent consists of 25,000,000 shares of Parent's Common Stock,
par value $0.01 per share; 10,000,000 shares of Parent's Preferred Stock, par
value $0.01 per share; and 1,600,000 shares of Parent's Class A Preferred
Stock, par value $3.00 per share. As of April 30, 1996, 14,711,589 shares of
Parent's Common Stock, no shares of Parent's Preferred Stock and 1,600,000
shares of Parent's Class A Preferred Stock were issued and outstanding.
Except as provided in Section 1.9, or as described in the Disclosure Schedule,
since April 30, 1996, Parent has not issued any shares of capital stock nor
entered into any agreement to issue or redeem its capital stock, and has not
repurchased or redeemed any shares of its capital stock. Neither the Parent
nor any Subsidiary has any shares of its capital stock reserved for issuance,
except for 1,660,000 shares issuable pursuant to various outstanding
subscriptions, options or warrants, as set forth in the Disclosure Schedule.
No other options, warrants or other securities convertible into Parent's
Common Stock are outstanding. All issued and outstanding shares of capital
stock of Parent are validly issued, fully paid, non-assessable and free of
preemptive rights. There is not now, and at the Effective Time there will not
be, any stockholder agreement, voting trust or other agreement or
understanding to which the Parent is a party or bound relating to the voting
of any shares of capital stock of the Parent.
(b) The Disclosure Schedule sets forth the name, the number of
shares of authorized capital stock and the number of issued and outstanding
shares of capital stock or other indicia of ownership of each direct or
indirect Subsidiary of the Parent. Except as set forth in such schedule, all
of the outstanding shares of capital stock of each of such Subsidiaries are
owned, directly or indirectly, by the Parent, beneficially and of record. All
of such shares of capital stock of the Subsidiaries are owned free and clear
of all liens, charges, encumbrances, rights of others, mortgages, pledges or
security interests, and are not subject to any agreements or understandings
among any persons with respect to the voting or transfer of such shares.
There are no outstanding subscriptions, options, convertible securities,
warrants or claims of any kind issued or granted by or binding on the Parent
and Nonsurvivor to purchase or otherwise acquire any security of or equity
interest in any of such Subsidiaries. All of the outstanding shares of
capital stock of each such Subsidiary have been duly authorized and validly
issued and are fully paid and non-assessable, and none has been issued in
violation of the pre-emptive rights of any stockholder.
SECTION 4.3 Authority Relative to this Agreement. Parent and
Nonsurvivor have all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
sole shareholder of Nonsurvivor and the Boards of Directors of Parent and
Nonsurvivor, and no other corporate proceedings on the part of Parent and
Nonsurvivor are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly
executed and delivered by Parent and Nonsurvivor and, assuming this Agreement
constitutes a valid and binding obligation of International, the Company and
IT Cruise, this Agreement constitutes a valid and binding agreement of Parent
and Nonsurvivor, enforceable against Parent and Nonsurvivor in accordance with
its terms.
SECTION 4.4 SEC Reports. Since December 31, 1994, Parent has filed all
required forms, reports and documents with the SEC ("Parent SEC Reports")
required to be filed by it pursuant to the federal securities laws and the SEC
rules and regulations thereunder, all of which have complied in all material
respects with all applicable requirements of the Securities Act and the
Exchange Act, and the rules and interpretive releases promulgated thereunder.
None of such Parent SEC Reports, including without limitation any financial
statements, notes, or schedules included therein, at the time filed, contained
any untrue statement of a material fact, or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
Each of the balance sheets in the Parent SEC Reports fairly presents the
financial position of the entity or entities to which it relates as of its
date, and each of the related statements of operations and retained earnings
and cash flows or equivalent statements in the Parent SEC Reports (including
any related notes and schedules) fairly presents the results of operations,
retained earnings and cash flows, as the case may be, of the entity or
entities to which it relates for the period set forth therein (subject in the
case of unaudited interim statements, to normal year-end audit adjustments) in
each case in accordance with generally-accepted accounting principles
applicable to the particular entity consistently applied throughout the
periods involved, except as may be noted therein; and independent certified
public accountants for the Parent have rendered an unqualified opinion with
respect to each audited financial statement included in the Parent SEC Reports
or, if qualified, such qualification is reasonably satisfactory to the
Company. The consolidated financial statements included in the Parent SEC
Reports are hereinafter sometimes collectively referred to as the "Parent
Financial Statements."
The financial records, ledgers, account books, and minute books of
Parent have been kept in the ordinary course of business and are true,
complete and accurate in all material respects. The account books of Parent
reflect in all material respects all transactions relating to Parent and all
items of income and expense and assets and liabilities and accruals required
to be reflected therein in accordance with the Accounting Principles.
Since the date of the most recent of the Parent Financial Statements,
Parent has not incurred, except as set forth in this Agreement or in the
Disclosure Schedule, any material liability or entered into any transaction
not in the ordinary course of business.
SECTION 4.5 Intentionally Omitted.
SECTION 4.6 Consents and Approvals; No Violation. Except as described
in the Disclosure Schedule, neither the execution and delivery of this
Agreement by the Parent and Nonsurvivor nor the consummation of the
transactions contemplated hereby by the Parent and the Nonsurvivor nor
compliance by the Parent and Nonsurvivor with any of the provisions hereof
will (i) conflict with or result in any breach of any provision of the
Articles of Incorporation or Bylaws of the Parent, or Nonsurvivor or any
Subsidiary, (ii) require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Authority, except
(A) pursuant to the Securities Act, (B) the filing of the Certificate of
Merger pursuant to the Act, (C) such filings and approvals as may be required
under the "blue sky", takeover or securities laws of various states, (D)
filings necessary with regard to gaming or establishment licenses held by
Parent or a direct or indirect Subsidiary, or (E) where the failure to obtain
such consent, approval, authorization or permit, or to make such filing or
notification, would not in the aggregate have a Material Adverse Effect on the
Parent and Nonsurvivor, (iii) result in a default (with or without due notice
or lapse of time or both) (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, Contract, license, agreement or other
instrument or obligation to which the Parent or any of its Subsidiaries is a
party or by which the Parent, any of its Subsidiaries or any of their
respective assets may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained or which, in the aggregate, would not have a
Material Adverse Effect on the Parent and Nonsurvivor, (iv) result in the
creation or imposition of any lien, charge or other encumbrance on the assets
of the Parent or any of its Subsidiaries, or (v) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Parent, any
of its Subsidiaries or any of their respective assets, except for violations
which would not in the aggregate have a Material Adverse Effect on the Parent
and Nonsurvivor.
SECTION 4.7 Litigation, etc. Except as described in the Disclosure
Schedule, (a) there is no action, claim, or proceeding pending or, to the
knowledge of the Parent and Nonsurvivor, threatened, to which the Parent or
any of its Subsidiaries is or would be a party before any court or
Governmental Authority acting in an adjudicative capacity or any arbitrator or
arbitration tribunal with respect to which there is a reasonable likelihood of
a determination having, or which, insofar as reasonably can be foreseen, in
the future would have a Material Adverse Effect on the Parent and Nonsurvivor,
(b) neither the Parent nor any of its Subsidiaries is subject to any
outstanding order, writ, injunction or decree having, or which, insofar as
reasonably can be foreseen, in the future would have a Material Adverse Effect
on the Parent and Nonsurvivor, and (c) since December 31, 1993, there have
been no claims made or actions or proceedings brought against any officer or
director of the Parent and Nonsurvivor arising out of or pertaining to any
action or omission within the scope of his employment or position with the
Parent and Nonsurvivor, which claim, action or proceeding would involve a
Material Adverse Effect on the Parent and Nonsurvivor taken as a whole. All
litigation and other administrative, judicial or quasi-judicial proceedings to
which the Parent and Nonsurvivor is a party or to which it has been threatened
to the Parent's knowledge to be made a party, are described in the Disclosure
Schedule.
SECTION 4.8 Changes. Except as expressly contemplated by this Agreement
or as reflected in the Disclosure Schedule or in the Parent SEC Reports, since
December 31, 1993, the Parent and its Subsidiaries have conducted their
business only in the ordinary and usual course, and, except as set forth in
the Disclosure Schedule or in the Parent SEC Reports, none of the following
has occurred:
(a) any material adverse change in the condition (financial or
other), results of operations, business, assets, customer, supplier and
employee relations of the Parent and its Subsidiaries, taken as a whole;
(b) any change in accounting methods, principles or practices by
the Parent that has a Material Adverse Effect on Parent and its Subsidiaries,
taken as a whole, except insofar as may have been required by a change in
generally accepted accounting principles;
(c) any damage, destruction or loss, whether or not covered by
insurance, that has a Material Adverse Effect on the Parent and its
Subsidiaries, taken as a whole;
(d) any declaration, setting aside or payment of dividends or
distributions in respect of the Parent Common Stock, or any redemption,
purchase or other acquisition of any of its securities;
(e) any issuance by the Parent and Nonsurvivor of, or commitment
of the Parent and Nonsurvivor to issue, any shares of capital stock or
securities convertible into or exchangeable or exercisable for shares of
capital stock;
(f) any entry by the Parent and Nonsurvivor or any of its
Subsidiaries into any commitment or transaction material to the condition
(financial or other), business or operations of the Parent and its
Subsidiaries, taken as a whole, which is not in the ordinary course of
business and consistent with past practice;
(g) any revaluation by the Parent or any of its Subsidiaries of
any of their respective assets, including without limitation, writing down the
value of assets or writing off notes or accounts receivables other than in the
ordinary course of business and consistent with past practice;
(h) any action taken by the Parent or any of its Subsidiaries of
the type referred to in Section 5.1;
(i) any agreement by the Parent and Nonsurvivor to do any of the
things described in the preceding clauses (a) through (h) other than as
expressly contemplated or provided for herein; or
(j) any waiver by the Parent or any of its Subsidiaries of any
rights that, singularly or in the aggregate, are material to the business,
assets, financial condition, or results of operation of the Parent and its
Subsidiaries, taken as a whole;
SECTION 4.9 Property and Environmental Matters.
(a) Except as disclosed in the Disclosure Schedule, and except
for matters that singularly or in the aggregate would not have a Material
Adverse Effect on the business of Parent and its Subsidiaries, taken as a
whole, to the best knowledge of the Parent and Nonsurvivor, the location,
construction, occupancy, operation, condition and use of the real property now
or previously owned, leased by or in the possession of the Parent or its
Subsidiaries (the "Parent Real Property"), the facilities or improvements
located thereon, the operations and practices of the Parent and its
Subsidiaries are in substantial compliance with all Environmental Laws (as
defined in Section 8.10), and any restrictive covenant or deed restriction
(recorded or otherwise) affecting the Parent Real Property, including, without
limitation all applicable zoning ordinances and building codes in effect at
the time of improvements to such Parent Real Property, flood disaster, and
occupational health and safety laws.
(b) Neither the Parent nor any of its Subsidiaries is subject to
any material liability or obligation, including investigatory or remedial
obligations under any Environmental Law or the common law with respect to
Hazardous Materials (as defined in Section 8.10), relating to (i) the
environmental conditions on, under or about the Parent Real Property,
including, without limitation, the air, soil, surface water and groundwater
conditions at the Parent Real Property, or (ii) the use, management, handling,
transport, treatment, generation, storage, disposal, release or discharge of
any Hazardous Materials.
(c) With the exception of those Hazardous Materials and
activities described in the Disclosure Schedule, and except for matters that
singularly or in the aggregate would not have a Material Adverse Effect on the
Parent and its Subsidiaries, taken as a whole, to the best knowledge of the
Parent and Nonsurvivor, no portion of the Parent Real Property is being used,
nor, has been used by the Parent or its Subsidiaries at any previous time for
the generation, storage, treatment, processing, disposal or other handling of
any Hazardous Materials.
(d) Neither the Parent nor any of its Subsidiaries has received
any notice or is aware of any existing condition (including the condition of
the Parent Real Property, whether or not caused by the Parent or any
Subsidiary) or the practice of the businesses conducted by the Parent or its
Subsidiaries which forms or could form the basis of any claim, action, suit,
proceeding, administrative consent or agreement, litigation or settlement,
hearing or investigation, arising out of the manufacture, processing,
distribution, use, treatment, storage, spill, disposal, transport, or
handling, or the emission, discharge, release or threatened release into the
environment of any Hazardous Material which, if decided against the Parent or
its Subsidiaries, would have a Material Adverse Effect on the Parent and its
Subsidiaries, taken as a whole.
(e) The Parent and its Subsidiaries have listed and described on
the Disclosure Schedule (i) all treatment, storage and disposal facilities, as
defined in the Resource Conservation and Recovery Act of 1976, 42 U.S.C. sec
1601, et seq., as amended, or under similar Environmental Laws, and all
underground storage tanks, whether empty, filled, or partially filled with any
substance, that are located on the Parent Real Property; (ii) the current and
past Hazardous Material disposal practices of the Parent and its Subsidiaries;
and (iii) any environmental assessment or environmental audit reports
delivered to the Parent or its Subsidiaries, and except for matters that
singularly or in the aggregate would not have a Material Adverse Effect on the
Parent and its Subsidiaries, taken as a whole.
(f) To the best of their knowledge, the Parent and its
Subsidiaries have obtained or applied for all permits, licenses,
registrations, notifications and similar authorizations required under
Environmental Laws for the conduct of the Parent's or its Subsidiaries'
business or relating to the Parent Real Property, the facilities,
improvements, or equipment located thereon, excepting, however, matters that
singularly or in the aggregate would not have a Material Adverse Effect on the
Parent and its Subsidiaries, taken as a whole. The Disclosure Schedule
includes a list of the Environmental Permits.
(g) Except as identified in the Disclosure Schedule, and except,
however, for matters that singularly or in the aggregate would not have a
Material Adverse Effect on the business of the Parent and its Subsidiaries,
taken as a whole, the Parent and its Subsidiaries are in substantial
compliance with all terms and conditions of the Environmental Permits and no
proceeding is pending for the revocation of any Environmental Permit.
(h) No portion of the Parent Real Property has been designated
as a covered facility under CERCLA or included on any similar "superfund" list
or registry or has been made subject to any environmental lien pursuant to any
Environmental Law or by any Governmental Authority.
SECTION 4.10 Compliance with ERISA. Parent, each of its
Subsidiaries and all Parent Employee Benefit Plans, that cover any of its or
their employees (which Parent Employee Benefit Plans are listed on the
Disclosure Schedule), comply with all laws, requirements and orders under
ERISA and the Code, the breach or violation of which would have a Material
Adverse Effect on the Parent and its Subsidiaries, taken as a whole; the
present value of all of the assets of each of its Parent Employee Benefit
Plans that is subject to Title VI of ERISA equals or exceeds the present value
of all of the benefits accrued under each such Parent Employee Benefit Plan as
of the end of the most recent plan year with respect to such plan ending prior
to the date hereof, calculated on the basis of the actuarial assumptions used
in the last actuarial evaluation for each such plan; none of the employees of
the Parent or any of its Subsidiaries is covered by a collective bargaining
agreement; neither the Parent nor any of its Subsidiaries has ever contributed
to a "multiemployer plan" as defined in Section 3(37) of ERISA; neither the
Parent Employee Benefit Plans nor any fiduciary or administrator thereof has
engaged in a "prohibited transaction" as defined in Section 406 of ERISA or,
where applicable, Section 4975 of the Code for which no exemption is
applicable, that may have any Material Adverse Effect on the Parent and its
Subsidiaries, taken as a whole, nor have there been any "reportable events" as
defined in Section 4043 of ERISA for which the thirty-day notice has not been
waived.
SECTION 4.11 Taxes, Tax Returns.
(a) Parent will, within three days prior to Closing, deliver to
International copies of the federal income tax returns of the Parent for each
of the last three fiscal years and all schedules and exhibits thereto. Except
as set forth on the Disclosure Schedule, each of the Parent and its
Subsidiaries has duly and timely filed in correct form all federal, state and
local information returns and tax returns required to be filed by it and its
Subsidiaries (all such returns to the best knowledge of Parent being accurate
and complete in all material respects), there are no liens for taxes upon the
assets of Parent or its Subsidiaries, except liens for taxes not yet due, and,
to the best knowledge of the Parent, has duly paid or made provision for the
payment of all taxes and other governmental charges which have been incurred
or are due or claimed to be due from them by any governmental authority
(including, without limitation, those due in respect of their properties,
income, business, capital stock, franchises, licenses, sales and payrolls)
other than taxes or other charges (i) which are not yet delinquent or are
being contested in good faith and set forth in the Disclosure Schedule and
(ii) have not been finally determined. The liabilities and reserves for taxes
in the Parent Financial Statements are sufficient in the aggregate for the
payment of all unpaid federal, state and local taxes (including any interest
or penalties thereon), whether or not disputed or accrued, for the period
ended December 31, 1995 or for any year or period prior thereto, and for which
the Parent or any of its Subsidiaries may be liable in its own right or as
transferee of the assets of, or successor to, any corporation, person,
association, partnership, joint venture or other entity. No amounts payable
to any employee, independent contractor, officer, director, or highly
compensated individual will fail to be deductible for federal income tax
purposes by virtue of Code Section 280G.
(b) To the best knowledge of the Parent, (i) proper and accurate
amounts have been withheld by the Parent and its Subsidiaries from their
employees and others for all prior periods in compliance in all material
respects with the tax withholding provisions of applicable federal, state or
local laws and regulations, and proper due diligence steps have been taken in
connection with back-up withholding, (ii) federal, state and local returns
which are accurate and complete in all material respects have been filed by
the Parent and each of its Subsidiaries for all periods for which returns were
due with respect to income tax withholding, Social Security and unemployment
taxes and (iii) the amounts shown on such returns to be due and payable have
been paid in full, or adequate provision therefore has been included by the
Parent in the most recent Parent Financial Statements.
SECTION 4.12 Tax Audits. Except as disclosed in the Parent SEC
Reports or in the Disclosure Schedule, (i) no audit or administrative
procedure of any material federal, state or local U.S. return of the Parent or
any Subsidiary is currently in progress, nor has the Parent or any Subsidiary
been notified that such an audit is contemplated by any taxing authority, (ii)
neither the Parent nor any Subsidiary has extended any statute of limitations
with respect to the period for assessment of any federal, state or local U.S.
tax, (iii) neither the Parent nor any Subsidiary contemplates the filing of an
amendment to any return, which amendment would have a Material Adverse Effect
on the Parent and its Subsidiary, taken as a whole, and (iv) neither the
Parent nor any Subsidiary has any actual or potential material liability for
any tax obligation of any taxpayer (including, without limitation, any
affiliated group of corporations or other entities which included the Parent
or any Subsidiary during a prior period) other than the Parent or its
Subsidiaries. Except as disclosed in the Parent SEC Reports or the Disclosure
Schedule, there are no material tax claims pending against the Parent or any
Subsidiary, there are no material tax claims threatened to be asserted against
the Parent or any Subsidiary, and there are no material issues which have been
raised in prior periods or audits which by application of similar principles
are expected to result in a material tax claim for any other period. For
purposes of this Section 4.12, "tax" and "taxes" shall include all income,
gross receipt, franchise, excise, real and personal property, sales, ad
valorem, employment, withholding and other taxes imposed by any foreign,
federal, state, municipal, local, or other Governmental Authority including
assessments in the nature of taxes.
SECTION 4.13 Undisclosed Liabilities. The Parent and its
Subsidiaries are not liable for or subject to any material Liabilities, except
(a) Liabilities adequately disclosed or reserved for in the most recent Parent
Financial Statements and not heretofore paid or discharged, (b) Liabilities
under any contract, commitment or agreement specifically disclosed on the
Disclosure Schedule none of which Liabilities under any such contract,
commitment or agreement were required under generally accepted accounting
principles consistently applied to have been adequately and specifically
disclosed or reserved for in the most recent Parent Financial Statements, or
(c) Liabilities incurred, consistent with past practice, in or as a result of
the ordinary course of business of the Parent, and in accordance with this
Agreement, since the date of the most recent Parent Financial Statements.
SECTION 4.14 No Default; Compliance.
(a) Except as set forth in the Disclosure Schedule, neither the
Parent nor any of its Subsidiaries is in default under, and no condition
exists that with notice or lapse of time or both would constitute a default
under, (i) any mortgage, loan agreement, indenture, evidence of indebtedness
or other instrument evidencing borrowed money to which either the Parent or
any of its Subsidiaries is a party or by which either the Parent or any of its
Subsidiaries or its properties is bound, (ii) any judgment, order or
injunction of any court, arbitrator or governmental agency or (iii) any other
agreement, contract, lease, license or other instrument, which default or
potential default might reasonably be expected to have a Material Adverse
Effect on the Parent and its Subsidiaries, taken as a whole.
(b) Except as set forth in the Disclosure Schedule, to the best
knowledge of Parent, the Parent and each of its Subsidiaries have complied
with all laws, regulations, orders, judgments or decrees of any federal or
state court or governmental authority applicable to their respective
businesses and operations, non-compliance with which might reasonably be
expected to have a Material Adverse Effect on the Parent and its Subsidiaries,
taken as a whole.
SECTION 4.15 Representations and Warranties Continuing. The
representations and warranties set forth herein shall be true and correct on
the date hereof and at all times prior to the Effective Time as if made from
time to time, including, without limitation, at the Effective Time.
SECTION 4.16 Contracts and Commitments. Except as listed and
described in the Disclosure Schedule, neither the Parent nor any of its
Subsidiaries is a party to, nor are they or their assets bound by any written
or oral Contract, including the following:
(i) Contract with any present or former stockholder,
director, officer, employee or consultants;
(ii) Contract with any labor union or other representative
of employees;
(iii) Contract for the future purchase of, or payment for,
supplies or products, or for the performance of services by a
third party, involving payment or potential payment by the Parent
of $25,000 or more under any one Contract or series of related
Contracts;
(iv) any Contract, including, without limitation, any
outstanding quotations, bids or proposals, to sell goods or to
perform services in an aggregate amount in excess of $25,000;
(v) distributorship, representative or sales agency
agreement, contract or commitment;
(vi) conditional sale agreement or lease under which the
Parent is either the seller or purchaser, lessor or lessee,
involving annualized payments or potential payments by or to the
Parent that is in excess of $25,000;
(vii) Contract (including, without limitation, any note,
debenture, bond, conditional sale or equipment trust agreement,
letter of credit agreement or loan agreement) for the borrowing or
lending of money (including, without limitation, those to or from
officers, directors or shareholders of the Parent, or any
affiliates or members of their immediate families, for a line of
credit, or for a guarantee, security, indemnitee, pledge or
undertaking of the indebtedness or obligations of any other
person);
(viii) Contract for any charitable or political contribution;
(ix) Contract for any capital expenditure involving future
payments, which, together with future payments under all other
existing Contracts for the same capital project, are in excess of
$25,000;
(x) Contract limiting or restraining the Parent from
engaging or competing in any lines of business with any person,
nor is any officer or employee of the Parent subject to any such
agreement, contract or commitment;
(xi) license, franchise, distributorship or other Contract
relating in whole or in part to any ideas, technical assistance or
other know-how of or used by the Parent;
(xii) Contract which is expected to continue for more than
six months from the date hereof;
(xiii) Contract not made in the ordinary course of business;
or
(xiv) any guaranty, direct or indirect, of any person of any
contract, lease or agreement entered into by the Parent or any of
its Subsidiaries;
Except as may be disclosed on the Disclosure Schedule, each of the
Contracts listed on the Disclosure Schedule is valid and enforceable in
accordance with its terms; the Parent and, to the best of the Parent's
knowledge, the other parties thereto are in substantial compliance with
the provisions thereof; except as may be disclosed on the Disclosure
Schedule, neither the Parent nor any other party is (or by reason of the
consummation of the transactions contemplated by this Agreement, will
be) in default in the performance, observance or fulfillment of any
obligation, covenant or condition contained therein and no event has
occurred or is anticipated to occur (including the consummation of the
transactions contemplated by this Agreement) which with or without the
giving of notice or lapse of time, or both, would constitute a default
or give the right of termination thereunder; furthermore, except as may
be disclosed on the Disclosure Schedule, no such Contract contains any
contractual requirement with which there is a reasonable likelihood that
either (i) the Parent or any other party thereto will be unable to
comply or (ii) compliance therewith by the Parent will have a Material
Adverse Effect on the Parent and its Subsidiaries taken as a whole.
SECTION 4.17 Compliance with Law and Permits. Except as set forth
in the Disclosure Schedule, to the best of its knowledge, the Parent and its
Subsidiaries have owned and operated their properties and assets in
substantial compliance with the provisions and requirements of all laws,
orders, regulations, rules and ordinances issued or promulgated by all
Governmental Authorities having jurisdiction with respect thereto, except
where the failure to own and operate such properties and assets in compliance
with such provisions and requirements would not reasonably be expected to have
a Material Adverse Effect on Parent and its Subsidiaries, taken as a whole.
To the best knowledge of Parent, all necessary governmental certificates,
consents, permits, licenses or other authorizations with regard to the
ownership or operation by the Parent or its Subsidiaries of their respective
properties and assets have been obtained and no violation exists in respect of
such licenses, permits or authorizations, except where the failure to obtain
and hold such permits, or any violation thereby by the Company or its
Subsidiaries, would not reasonably be expected to have a Material Adverse
Effect on Parent and its Subsidiaries, taken as a whole. None of the
documents and materials filed with or furnished to any Governmental Authority
with respect to the properties, assets or businesses of the Parent or its
Subsidiaries contains any untrue statement of a material fact or fails to
state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
SECTION 4.18 Title to Property. Except as disclosed in the
Disclosure Schedule or Parent SEC Reports, Parent or its Subsidiaries
(including indirect Subsidiaries) has good and marketable title to all
material properties subject, however, to the matters shown in the Disclosure
Schedule, or the Parent SEC Reports.
SECTION 4.19 Insurance. The Disclosure Schedule sets forth a
complete and accurate list and description of all insurance policies in force
naming the Parent, any of its Subsidiaries or any employees of any of them as
an insured or beneficiary or as a loss payable payee for which the Parent or
any of its Subsidiaries has paid or is obligated to pay all or part of the
premiums. Neither the Parent nor its Subsidiaries have received notice of any
pending or threatened termination or retroactive premium increase with respect
thereto, and the Parent and its Subsidiaries are in compliance with all
conditions contained therein, the noncompliance with which could result in
termination of insurance coverage or increased premiums for prior or future
periods. There are no pending material claims against such insurance by the
Parent or any of its Subsidiaries as to which insurers have denied liability,
no defenses provided by insurers under reservations of rights, and no material
claim under such insurance that has not been properly filed by the Parent or
its Subsidiaries.
SECTION 4.20 Parent's Common Stock and Preferred Stock. The shares
of Parent's Common Stock and Parent's Preferred Stock to be issued in the
Merger have been duly authorized and, when issued in accordance with the terms
of the Certificate of Merger and this Agreement, will be validly authorized
and issued and fully paid and nonassessable, and no shareholder of Parent will
have any preemptive rights with respect thereto.
SECTION 4.21 Intentionally Omitted.
SECTION 4.22 Full Disclosure. The information furnished by Parent,
or by any of the directors, officers, employees, agents, accountants or
representatives of Parent, to International pursuant to this Agreement
(whether furnished prior to, at, or subsequent to the date hereof), the
information contained in the exhibits and Schedules referred to in this
Agreement, and the other information furnished to International by Parent, or
by any of the directors, officers, employees, agents, accountants or
representatives of Parent at any time prior to the Effective Date (pursuant to
the request of International or otherwise), does not and will not contain any
untrue statement of a material fact and does not and will not omit to state
any material fact necessary to make all such information, in the light of the
circumstances under which they were made, not misleading.
SECTION 4.23 Equipment. Except as set forth in the Disclosure
Schedule or Parent SEC Reports, Parent or its Subsidiaries (including indirect
Subsidiaries) owns or has adequate rights to all equipment used or necessary
for use in its trade or business, and all such equipment is in generally good
operating condition and free from any material defect.
SECTION 4.24 Labor Relations. Parent has good relations with its
employees, and does not have any reason to believe that this situation will
change or that any collective representation of the employees has been or is
being considered by such employees.
ARTICLE V.
COVENANTS
SECTION 5.1 Conduct of Business of International, the Company, IT Cruise
and Parent. Except as contemplated by this Agreement or disclosed in the
Disclosure Schedule, during the period from the date of this Agreement to the
Effective Time, International, the Company, IT Cruise and the Parent and their
respective Subsidiaries will each conduct their operations according to their
ordinary and usual course of business and consistent with past practice.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement or disclosed in the Disclosure Schedule,
neither International, the Company, IT Cruise nor the Parent or any of their
respective Subsidiaries will, prior to the Effective Time, without the prior
written consent of International and Parent (i) issue, sell or pledge, or
authorize or propose the issuance, sale or pledge of (A) additional shares of
capital stock of any class, or securities convertible into any such shares, or
any rights, warrants or options to acquire any such shares or other
convertible securities, other than pursuant to commitments outstanding at the
date hereof and referred to in Section 1.9, 3.2 or 4.2, or (B) any other
securities in respect of, in lieu of or in substitution for, capital stock
outstanding on the date hereof, (ii) purchase or otherwise acquire, or propose
to purchase or otherwise acquire, any outstanding securities, (iii) declare or
pay any dividend or distribution on any shares of its capital stock,
(iv) authorize, recommend, propose or announce an intention to authorize,
recommend or propose, or enter into an agreement in principle or an agreement
with respect to, any merger, consolidation or business combination (other than
the Merger or the acquisition of IT Cruise by Parent), or the acquisition of
IT Cruise by Parent, any acquisition of a material amount of assets or
securities, any disposition of a material amount of assets or securities or
any material change in its capitalization, or any entry into a material
contract or any release or relinquishment of any material contract rights, not
in the ordinary course of business, (v) propose or adopt any amendments to its
charter or by-laws, (vi) enter into, assign or terminate, or amend in any
material respect, any Contract, (vii) acquire, dispose of, encumber or
relinquish any material asset (other than sale of real properties at prices
equal to or greater than their carrying values), (viii) waive, compromise or
settle any right or claim that would adversely affect the ownership, operation
or value of any asset, (ix) make any capital expenditures other than pursuant
to existing capital expenditure programs that are disclosed in the Disclosure
Schedule, (x) allow or permit the expiration, termination or cancellation at
any time prior to the Effective Time of any of the insurance policies or
coverages or surety bonds currently maintained by or on behalf of the Parent
or International, the Company or IT Cruise unless replaced with a policy,
coverage or bond having substantially the same coverage and similar terms and
conditions, (xi) increase, directly or indirectly, the salary or other
compensation of any officer or member of management, enter into any employment
agreement with any person or pay or enter into any agreement to pay any
bonuses or other extraordinary compensation to any officer of the Parent or
International, the Company or IT Cruise or their respective Subsidiaries or to
any member of management or other employees, or institute any general increase
in rates of compensation for its employees, or increase, directly or
indirectly, any provisions or other benefits of any of such persons,
(xii) waive, settle or compromise any material litigation or other claim on a
basis materially adverse to International, the Company or IT Cruise or the
Parent or their respective Subsidiaries, or (xiii) agree in writing or
otherwise to take any of the foregoing actions or any action which would make
any representation or warranty in this Agreement untrue or incorrect.
SECTION 5.2 No Solicitations. Neither the Parent, International, the
Company or IT Cruise nor any of their Subsidiaries shall, and they shall use
their best efforts to ensure that none of their respective affiliates,
officers, directors, representatives or agents shall, directly or indirectly,
solicit, initiate or encourage (including by way of furnishing information)
any corporation, partnership, person, entity or group concerning any merger,
sale of substantial assets (except as permitted by Section 5.1(vii)) outside
the ordinary course of business, sale of shares of capital stock or similar
transaction involving International, the Company or IT Cruise or the Parent
(except as permitted by Section 5.1(i)(A)) or any of their Subsidiaries or
divisions (other than the transactions contemplated by this Agreement).
International, the Company and IT Cruise and Parent will immediately cease and
cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing.
The parties will promptly communicate to the other the terms of any proposal
or inquiry, oral or written, which may be received in respect of any such
transaction, and will inform the other prior to the time that it furnishes any
information to, or engages in negotiations or discussions with, any third
party with respect to the acquisition of either party.
SECTION 5.3 Access to Information.
(a) Between the date of this Agreement and the Effective Time,
the parties will afford to each other and their authorized representatives
reasonable access to the plants, offices, warehouses or other facilities and
properties and to the books and records of such party and its Subsidiaries,
will permit the parties and their representatives to make such reasonable
inspections as they may require and will cause their officers and those of
their Subsidiaries to furnish the parties and their representatives with such
financial and operating data, environmental assessments and other information
with respect to the business and the properties of the parties and their
Subsidiaries as they and their representatives may from time to time
reasonably request. No inspection or examination by either party will
constitute a waiver of any claim against the other party for misrepresentation
or breach of this Agreement.
(b) The parties will hold and will cause their representatives
to hold in strict confidence, unless compelled to disclose by judicial or
administrative process, or, in the opinion of counsel, by other requirements
of law, all documents and information concerning the parties furnished to them
and their representatives in connection with the transactions contemplated by
this Agreement (except to the extent that such information can be shown to
have been (i) in the public domain through no fault of the parties or their
representatives, or (ii) later lawfully acquired by the parties or their
representatives from other sources unless they or their representatives know
that such other sources are not entitled to disclose such information) and
will not release or disclose such information to any other person, except
their auditors, attorneys, financial advisors and other consultants and
advisors in connection with this Agreement, provided that such person shall
have first been advised of the confidentiality provision of this Section 5.3.
If the transactions contemplated by this Agreement are not consummated, such
confidence shall be maintained except to the extent such information can be
shown to have been (i) in the public domain through no fault of International,
the Company, IT Cruise, Parent, Nonsurvivor or their representatives, or (ii)
later lawfully acquired by the parties or representatives from other sources,
and, if requested by the either party will, and will cause its agents,
auditors, consultants, representatives and advisors to, return to the other or
destroy all copies of written information furnished.
SECTION 5.4 Best Efforts. Subject to the terms and conditions herein
provided, and to the fiduciary duties of the Board of Directors of the parties
under applicable law, each of the parties hereto agrees to use its best
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each party to this Agreement shall take
all such necessary action.
SECTION 5.5 Consents. Parent and International, the Company and IT
Cruise each will use its best efforts to obtain such consents of third parties
to agreements which would otherwise be violated by any provisions hereof, to
take all actions necessary to effect the transactions contemplated hereby, and
to make such filings with Governmental Authorities necessary to consummate the
transactions contemplated by this Agreement including, without limitation,
(i) the vigorous defense of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement or the consummation of
the transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or Governmental Authority
vacated or reviewed, and (ii) the execution and delivery of any additional
instruments (including any required supplemental indentures) necessary to
consummate the transactions contemplated by this Agreement.
SECTION 5.6 Public Announcements. Parent and International will consult
with each other before issuing any press release or otherwise making any
public statements with respect to the existence of this Agreement or the
Merger and shall not issue any such press release or make any such public
statement without the consent of the other party, provided, however, if such
consent has not been given and counsel has advised the disclosing party that a
press release is required by law or by the Commission, then the disclosing
party may issue the required press release.
SECTION 5.7 Indemnification. If the Merger occurs, then from and after
its Effective Time Parent shall indemnify each person who becomes an employee,
agent, officer or director of the Parent to the fullest extent permitted by
the Certificate of Incorporation and Bylaws of the Parent and permitted by law
in respect of any claim arising after the Effective Time. Further, Parent's
indemnification of employees, agents, officers or directors of Parent for acts
or omissions occurring prior to the Effective Time of the Merger shall be
limited to the assets of Parent existing prior to the Effective Time. In
addition, International shall indemnify to the full extent of its assets and
to the fullest extent permitted by its Certificate of Incorporation and Bylaws
and permitted by law, each person who held positions with the Company or IT
Cruise prior to the Effective Time as an employee, agent, officer or director
in respect of any claim arising in connection with such person's service. All
persons indemnified hereunder are referred to as "Indemnified Parties". All
such indemnification provided for herein shall be to the fullest extent
authorized by law as now in effect or as hereafter amended against any losses,
claims, damages, liabilities, costs, expenses (including legal fees and
disbursements of counsel), penalties, judgments and amounts paid in settlement
("Damages"), including but not limited to those based in contract, tort,
negligence, strict liability, or any theory or recovery, arising out of or
relating to any act, omission, transaction, cause of action, liability, debt
or obligation pertaining to (i) the fact that the Indemnified Party was an
officer, director, employee or agent of the Company, IT Cruise or the Parent
or a Subsidiary of either or (ii) this Agreement or any of the transactions
contemplated hereby; provided, however, that (i) Parent and International as
appropriate will be entitled to participate in and, to the extent that they
may wish, to assume the defense of any action, with counsel reasonably
satisfactory to the Indemnified Party but if any Indemnified Party (or group
thereof) believes that, by reason of an actual or potential conflict of
interest, it is advisable for such Indemnified Party (or group thereof) to be
represented by separate counsel, such Indemnified Party (or group thereof) may
retain counsel reasonably satisfactory to Parent and International, as
applicable, who will represent such Indemnified Party (or group thereof) and
Parent and International, as applicable, shall pay all reasonable fees and
disbursements of such counsel promptly as statements therefor are received,
(ii) the Indemnified Party and Parent and International, as applicable, will
cooperate with each other, and use their respective best efforts to assist, in
the vigorous defense of any such matter, and (iii) Parent and International,
as applicable, shall not be liable for any settlement effected without its
written consent, which consent, however, shall not be unreasonably withheld.
SECTION 5.8 Earned Revenues Previously Distributed. International and
Parent hereby agree that the cash generated from revenues earned from cruise
lines since January 1, 1996 is to remain in GalaxSea and IT Cruise,
respectively, and not be distributed to International. International and
Parent hereby agree that a total of $47,094.78 of such revenues has been
distributed to International and International agrees to pay to Parent at
Closing this amount for redistribution to GalaxSea and IT Cruise; or,
alternatively, International hereby grants to Parent the authority to withhold
$47,094.78 of the $100,000 payment required to be made by it under Section 2.1
in satisfaction of this amount.
ARTICLE VI.
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 6.1 Certificates. Immediately prior to the Effective Time,
International and the Parent shall cause to be delivered to each other or to
have received a certificate, dated the date of the Effective Time, as the case
may be, of the chief executive and chief financial officer certifying that all
representations and warranties made by the corporation for which he serves in
such capacity herein are true and correct as of the date made and as of the
Effective Time and that all agreements or other actions required to be
performed by the corporation for which he serves in such capacity prior to the
Effective Time as a condition to consummating the Merger and consummating the
acquisition of IT Cruise by Parent have been performed or taken and such
conditions satisfied in accordance with the terms of this Agreement.
SECTION 6.2 Other Conditions. The respective obligations of each party
to effect the Merger and the acquisition of IT Cruise by Parent are subject to
the satisfaction or waiver, where permissible, prior to the Effective Time of
the following conditions:
(a) No statute, rule, regulation, executive order, decree, or
injunction shall have been enacted, entered, promulgated or enforced by any
court of competent jurisdiction in the United States or domestic governmental
authority which prohibits or restricts the consummation of the Merger and the
acquisition of IT Cruise by Parent;
(b) The Company, IT Cruise and International shall have entered
into the binding agreements contemplated by Section 2.2, in form acceptable to
Parent.
(c) Unless waived by the appropriate party, there shall have
been no Material Adverse Effect to the other party to this Agreement.
(d) Unless waived by the appropriate party, the other party
shall have delivered all documents and taken all other actions required by
this Agreement.
(e) Unless waived by Parent and International, Holders of at
least 85% of Parent's Class A Preferred Stock shall have entered into binding
agreements to effect the recapitalization of Parent's Class A Preferred Stock
as contemplated by Section 1.9.
(f) Unless waived by the appropriate party, all representations
and warranties of the other party shall be true and effective as of the
Closing.
(g) Unless waived by Parent, Ron Blaylock shall have entered
into an Employment Agreement acceptable to Parent agreeing to serve as
President of the Company and IT Cruise following the Closing.
(h) International, the Company, IT Cruise and Parent, as
applicable, shall have obtained the consent or approval of each person whose
consent or approval shall be required in connection with the transactions
contemplated hereby, under any franchise, license, agency agreement,
representative agreement, cruise line agreement, loan or credit agreement,
note, mortgage, indenture, lease, or other agreement or instrument, except
those for which failure to obtain such consents and approvals would not,
individually or in the aggregate, have a Material Adverse Effect (i) on the
Company or IT Cruise, on the one hand, and which Parent agrees to forego, or
(ii) on Parent, on the other hand, and which International agrees to forego.
(i) No temporary restraining order, preliminary or permanent
injunction or other order or decree by any court of competent jurisdiction
which prevents the consummation of the Merger and the acquisition of IT Cruise
by Parent or imposes material conditions with respect thereto shall have been
issued and remain in effect.
(j) Unless waived by Parent, Parent shall have granted to the
holders of promissory notes who were formerly stockholders of Ozdon
Investments, Inc. a security interest in the income stream generated from the
Gold Rush Casino, subordinate only to the indebtedness of Springhill Bank &
Trust Co.
(k) Unless waived by Parent, Ron Blaylock and Ed Hawes shall
have entered into three-year noncompete agreements with Parent, which
International hereby acknowledges and agrees is a condition precedent to, and
an inducement for, Parent to enter into this Agreement and consummate the
transactions contemplated hereby.
ARTICLE VII.
TERMINATION; AMENDMENTS; WAIVER
SECTION 7.1 Termination. This Agreement may be terminated and the
Merger and the acquisition of IT Cruise by Parent contemplated hereby may be
abandoned at any time prior to the Effective Time:
(a) by mutual written consent duly authorized by the Boards of
Directors of International and Parent;
(b) by Parent or International, acting through their respective
Boards of Directors, if the Effective Time shall not have occurred on or
before June 15, 1996;
(c) by Parent or International, acting through their respective
Boards of Directors, if any court of competent jurisdiction or other
Governmental Authority shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting
the Merger and the acquisition of IT Cruise by Parent or if litigation
or proceedings shall be pending that are reasonably likely to result in
any of the foregoing;
(d) by International, acting through its Board of Directors, if
Parent or Nonsurvivor shall not have performed all obligations required
to be performed by them under this Agreement, except where any failures
to perform would, in the aggregate, not materially impair or delay the
ability of Parent, Nonsurvivor and the Company to effect the Merger or
the ability of Parent and International to effect the acquisition of IT
Cruise by Parent hereunder;
(e) by Parent and Nonsurvivor, acting through their respective
Boards of Directors, if International, the Company or IT Cruise shall
not have performed all obligations required to be performed by them
under this Agreement, except where any failures to perform would, in the
aggregate, not materially impair or delay the ability of Parent,
Nonsurvivor and the Company to effect the Merger or the ability of
Parent and International to effect the acquisition of IT Cruise by
Parent hereunder;
(f) by International or Parent, acting through their respective
Boards of Directors, if there shall have been a breach by the other
party of any of the covenants contained herein or if any representation
or warranty made by any other party is untrue in any material respect;
or
(g) by International or Parent, acting through their respective
Boards of Directors, on or before Closing, in the event that either
party is not reasonably satisfied with the Disclosure Schedule of the
other party or the results of the due diligence examination of the other
party and its properties, assets, financial statements, books and
records.
SECTION 7.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 7.1 subsections (a), (b),
(c) or (g), this Agreement shall forthwith become void and have no effect,
without any liability on the part of any party or its directors, officers, or
shareholders, other than the provisions of Sections 5.3(b), 7.5 and 8.9.
SECTION 7.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of all the parties.
SECTION 7.4 Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken by or on behalf of the respective Boards
of Directors of International and Parent, may (i) extend the time for the
performance of any of the obligations or other acts of any other applicable
party hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein by any other applicable party or in any document,
certificate or writing delivered pursuant hereto by an other applicable party,
or (iii) subject to the proviso contained in Section 7.3, waive compliance
with any of the agreements of any other applicable party or with any
conditions to its own obligations. Any agreement on the part of any other
applicable party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
SECTION 7.5 Effect of Certain Events of Termination. In the event that
either Parent or International terminates this Agreement pursuant to the
provision of Section 7.1(d), (e) or (f) hereof, the terminating party may
pursue such remedies that may be available to it at law or in equity; and the
limitation of Section 7.2 shall not apply to a termination under Sections
7.1(d), (e) or (f).
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.1 Survival of Representations and Warranties. The
representations, warranties, covenants and agreements of the parties contained
herein shall survive the Closing and shall not be deemed to be merged into the
Closing.
SECTION 8.2 Brokerage Fees and Commissions. International hereby
represents and warrants to Parent with respect to itself, the Company and IT
Cruise, and Parent hereby represents and warrants to International with
respect to Parent and Nonsurvivor, that no person or entity is entitled to
receive from International, the Company or IT Cruise, or Parent or
Nonsurvivor, respectively, any investment banking, brokerage or finder's fee
or fees for financial consulting or advisory services in connection with this
Agreement or the transactions contemplated hereby.
SECTION 8.3 Entire Agreement; Assignment. This Agreement (a)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings,
both written and oral, among the parties or any of them with respect to the
subject matter hereof and (b) may not be assigned by operation of law or
otherwise.
SECTION 8.4 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, each of which shall remain in full
force and effect.
SECTION 8.5 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by facsimile, telegram or telex, or by
registered or certified mail (postage prepaid, return receipt requested) to
the respective parties as follows:
If to International, the Company or IT Cruise:
c/o International Tours, Inc.
5810 E. Skelly Drive
Suite 1800
Tulsa, OK 74135
Phone: (918) 665-2300
Fax: (918) 665-6644
Attention: Ed Hawes
If to Parent or Nonsurvivor:
c/o North American Gaming and Entertainment Corporation
777 East 15th Street
Plano, Texas 75074
Phone: (214) 423-9113
Fax: (214) 423-0303
Attention: Lamar E. Ozley, Jr.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 8.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, REGARDLESS OF THE
LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF
LAWS THEREOF.
SECTION 8.7 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning of interpretation of this Agreement.
SECTION 8.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
SECTION 8.9 Expenses. Except as otherwise provided herein, each of the
parties shall bear and pay all costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial or other consultants, investment
bankers, accountants and counsel.
SECTION 8.10 Certain Definitions.
(a) "Act" shall have the meaning set forth in Section 1.1.
(b) "Closing" shall have the meaning set forth in Section 1.8.
(c) "Company" means GalaxSea Cruises and Tours, Inc.
(d) "Company/IT Cruise Financial Statements" shall have the meaning
set forth in Section 3.4.
(e) "Company/IT Cruise Real Property" shall have the meaning set forth
in Section 3.9(a).
(f) "Contract" shall mean any written or oral contract, agreement,
lease, plan, instrument or other document, commitment, arrangement,
undertaking, practice or authorization that is or may be binding on any person
or its property under applicable law.
(g) "Disclosure Schedule" shall mean the schedule of additional
information and disclosures to be attached to this Agreement by International,
the Company and IT Cruise, on the one hand, and the Parent and Nonsurvivor, on
the other hand.
(h) "Effective Time" shall have the meaning set forth in Section 1.2.
(i) "Employee Benefit Plans" shall have the meaning set forth in
Section 3.10.
(j) "Environmental Laws" shall mean any and all laws, subsequent
enactments, modifications, and amendments, including, without limitation, any
foreign, federal, state and local laws, statutes, ordinances, rules,
regulations, permits, licenses, approvals, administrative consent orders or
agreements, interpretations, orders and decrees of courts or Governmental
Authorities relating to the protection of human health or the environment,
including, but not limited to, requirements pertaining to the manufacture,
processing, distribution, use, treatment, storage, disposal, transportation,
handling, reporting, licensing, permitting, investigation or remediation of
Hazardous Materials. Environmental Laws include, for example and without
limitation, the Resource Conservation and Recovery Act of 1976; the
Comprehensive Environmental Response, Cleanup and Liability Act of 1980; the
Hazardous Materials Transportation Act; the Clean Water Act; the Federal Water
Pollution Control Act; the Toxic Substances Control Act; the Safe Drinking
Water Act; the Emergency Planning and Release Notification; Community Right-
to-Know Act; the United States' Environmental Agency's Underground Storage
Tank Regulations; all as amended and modified, occupational health and safety,
flood control and sanitation laws.
(k) "Environmental Permits" shall have the meaning set forth in
Section 3.9(f).
(l) "ERISA" shall have the meaning set forth in Section 3.10.
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(n) "Governmental Authority" shall mean the United States, any foreign
country, state, county, city or other political subdivision, agency or
instrumentality exercising executive, legislative, judicial, regulatory or
administration jurisdiction over the Parent, Nonsurvivor, Company,
International, IT Cruise and their respective Subsidiaries.
(o) "Hazardous Material" shall mean any substance or material (i)
which is or becomes defined as a hazardous waste, hazardous substance,
pollutant, contaminant or toxic substance or water under any Environmental
Law; (ii) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, mutagenic or otherwise hazardous and is or becomes regulated by
any Governmental Authority; (iii) the presence of which requires investigation
or remediation under any Environmental Law or common law; or (iv) the presence
of which is deemed to constitute a nuisance, trespass or pose a health or
safety hazard to persons or neighboring properties.
(p) "Holder(s)" shall have the meaning set forth in Section 1.9.
(q) "International" means International Tours, Inc.
(r) "International Common Shares" shall have the meaning set forth in
Section 3.2.
(s) "International Preferred Shares" shall have the meaning set forth
in Section 3.2.
(t) "IT Cruise" means IT Cruise, Inc.
(u) "IT Cruise Common Shares" shall have the meaning set forth in
Section 3.2.
(v) "IT Cruise Note" shall mean the note in the form attached hereto
as Exhibit "B" and incorporated herein for all purposes by this reference.
(w) "Liability" or "Liabilities" shall have the meaning(s) set forth
in Section 3.13.
(x) "Material Adverse Effect" shall mean any adverse change in the
condition (financial or otherwise), assets, business or operations of any
party and its Subsidiaries which is material to such party taken as a whole.
For this purpose, "material" shall mean $25,000 or more.
(y) "Nonsurvivor" means NAMGC Acquisition Corporation.
(z) "Parent" means North American Gaming and Entertainment
Corporation.
(aa) "Parent Financial Statements" shall have the meaning set forth in
Section 4.4.
(bb) "Parent Real Property" shall have the meaning set forth in Section
4.9.
(cc) "Parent SEC Reports" shall have the meaning set forth in Section
4.4.
(dd) "Parent's Common Stock" shall have the meaning set forth in
Section 1.7(a).
(ee) "Parent's Class A Preferred Stock" shall have the meaning set
forth in Section 1.9.
(ff) "Parent's Preferred Stock" shall have the meaning set forth in
Section 1.7(a).
(gg) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(hh) "Senior Debt" shall have the meaning set forth in Section 1.9
(ii) "Subsidiary" shall mean, when used with reference to an entity,
any corporation, a majority of the outstanding voting securities of which are
owned directly or indirectly by such entity. Such term shall also refer to
any partnership, limited liability company, limited partnership, joint
venture, trust, or other business entity in which a party hereto owns a
material interest.
SECTION 8.11 Performance by Nonsurvivor. Parent agrees to cause
Nonsurvivor to comply with its obligations hereunder and to cause Nonsurvivor
to consummate the Merger as contemplated herein.
SECTION 8.12 Disclosure Schedule. Within three (3) days after the
execution hereof, International and the Parent shall deliver the Disclosure
Schedule to each other. If the Disclosure Schedule becomes misleading in any
respect, International and the Parent shall notify the other, in writing, of
any facts making the Disclosure Schedule misleading; provided, however, that
no such notice shall be deemed to amend or modify the representations and
warranties herein.
SECTION 8.13 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person or persons any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
SECTION 8.14 Validity. The invalidity or unenforceability of any
provisions of this Agreement shall not affect the validity or enforceability
of any other provisions hereof.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of
the day and year set forth above.
NORTH AMERICAN GAMING AND
ENTERTAINMENT CORPORATION
By: /s/ George J. Akmon
George J. Akmon, Executive
Vice President
NAMGC ACQUISITION CORPORATION
By: /s/ George J. Akmon
George J. Akmon,
Executive Vice
President
INTERNATIONAL TOURS, INC.
By: /s/ Bill Morris
Vice President
GALAXSEA CRUISE AND TOURS, INC.
By: /s/ Bill Morris
Vice President
IT CRUISE, INC.
By: /s/ Bill Morris
Vice President
<PAGE>
EXHIBIT "A"
CERTIFICATE OF MERGER OF NAMGC ACQUISITION CORPORATION
INTO GALAXSEA CRUISE AND TOURS, INC.
Attached is the form of Certificate of Merger.
<PAGE>
EXHIBIT "B"
IT CRUISE NOTE
Attached hereto is a form of the IT Cruise Note.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I.THE MERGER . . . . . . . . . . . . . . . . . . . . . .1
SECTION 1.1 The Merger. . . . . . . . . . . . . . . . . . .1
SECTION 1.2 Effective Time. . . . . . . . . . . . . . . . .1
SECTION 1.3 Effects of the Merger . . . . . . . . . . . . .1
SECTION 1.4 Certificate of Incorporation and By-Laws. . . .1
SECTION 1.5 Officers and Directors of Parent. . . . . . . .1
SECTION 1.6 Officers and Directors of the Company . . . . .2
SECTION 1.7 Conversion of Shares. . . . . . . . . . . . . .2
SECTION 1.8 Closing . . . . . . . . . . . . . . . . . . . .2
SECTION 1.9 Recapitalization of Outstanding Class A Preferred Stock.2
SECTION 1.10 Exchange of Shares . . . . . . . . . . . . .3
ARTICLE III.REPRESENTATIONS AND WARRANTIES OF INTERNATIONAL . .4
SECTION 3.1 Organization and Qualification. . . . . . . . .4
SECTION 3.2 Capitalization. . . . . . . . . . . . . . . . .4
SECTION 3.3 Authority Relative to this Agreement. . . . . .4
SECTION 3.4 Financial Statements. . . . . . . . . . . . . .4
SECTION 3.5 Private Offering Materials. . . . . . . . . . .5
SECTION 3.6 Consents and Approvals; No Violation. . . . . .5
SECTION 3.7 Litigation, etc.. . . . . . . . . . . . . . . .5
SECTION 3.8 Changes . . . . . . . . . . . . . . . . . . . .6
SECTION 3.9 Property and Environmental Matters. . . . . . .7
SECTION 3.10 ERISA Matters. . . . . . . . . . . . . . . .8
SECTION 3.11 Taxes, Tax Returns . . . . . . . . . . . . .8
SECTION 3.12 Tax Audits . . . . . . . . . . . . . . . . .8
SECTION 3.13 Undisclosed Liabilities. . . . . . . . . . .9
SECTION 3.14 No Default; Compliance . . . . . . . . . . .9
SECTION 3.15 Representations and Warranties Continuing. .9
SECTION 3.16 Contracts and Commitments. . . . . . . . . .9
SECTION 3.17 Compliance with Law and Permits. . . . . . 10
SECTION 3.18 Title to Property. . . . . . . . . . . . . 11
SECTION 3.19 Insurance. . . . . . . . . . . . . . . . . 11
SECTION 3.20 Full Disclosure. . . . . . . . . . . . . . 11
SECTION 3.21 Equipment. . . . . . . . . . . . . . . . . 11
SECTION 3.22 Labor Relations. . . . . . . . . . . . . . 11
ARTICLE IV.REPRESENTATIONS AND WARRANTIESOF PARENT AND NONSURVIVOR13
SECTION 4.1 Organization and Qualification. . . . . . . . 13
SECTION 4.2 Capitalization; Subsidiaries. . . . . . . . . 13
SECTION 4.3 Authority Relative to this Agreement. . . . . 14
SECTION 4.4 SEC Reports . . . . . . . . . . . . . . . . . 14
SECTION 4.5 . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.6 Consents and Approvals; No Violation. . . . . 14
SECTION 4.7 Litigation, etc.. . . . . . . . . . . . . . . 15
SECTION 4.8 Changes . . . . . . . . . . . . . . . . . . . 15
SECTION 4.9 Property and Environmental Matters. . . . . . 16
SECTION 4.10 Compliance with ERISA. . . . . . . . . . . 17
SECTION 4.11 Taxes, Tax Returns . . . . . . . . . . . . 17
SECTION 4.12 Tax Audits . . . . . . . . . . . . . . . . 18
SECTION 4.13 Undisclosed Liabilities. . . . . . . . . . 18
SECTION 4.14 No Default; Compliance . . . . . . . . . . 18
SECTION 4.15 Representations and Warranties Continuing. 19
SECTION 4.16 Contracts and Commitments. . . . . . . . . 19
SECTION 4.17 Compliance with Law and Permits. . . . . . 20
SECTION 4.18 Title to Property. . . . . . . . . . . . . 20
SECTION 4.19 Insurance. . . . . . . . . . . . . . . . . 20
SECTION 4.20 Parent's Common Stock and Preferred Stock. 20
SECTION 4.21 . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.22 Full Disclosure. . . . . . . . . . . . . . 21
SECTION 4.23 Equipment. . . . . . . . . . . . . . . . . 21
SECTION 4.24 Labor Relations. . . . . . . . . . . . . . 21
ARTICLE V.COVENANTS. . . . . . . . . . . . . . . . . . . . . . 21
SECTION 5.1 Conduct of Business of International, the Company, IT Cruise
and Parent . . . . . . . . . . . . . . . . . . . . . 21
SECTION 5.2 No Solicitations. . . . . . . . . . . . . . . 22
SECTION 5.3 Access to Information . . . . . . . . . . . . 22
SECTION 5.4 Best Efforts. . . . . . . . . . . . . . . . . 22
SECTION 5.5 Consents. . . . . . . . . . . . . . . . . . . 22
SECTION 5.6 Public Announcements. . . . . . . . . . . . . 23
SECTION 5.7 Indemnification . . . . . . . . . . . . . . . 23
SECTION 5.8 Earned Revenues Previously Distributed. . . . 23
ARTICLE VI.CONDITIONS TO CONSUMMATION OF THE MERGER. . . . . . 24
SECTION 6.1 Certificates. . . . . . . . . . . . . . . . 24
SECTION 6.2 Other Conditions. . . . . . . . . . . . . . . 24
ARTICLE VII.TERMINATION; AMENDMENTS; WAIVER. . . . . . . . . . 25
SECTION 7.1 Termination . . . . . . . . . . . . . . . . . 25
SECTION 7.2 Effect of Termination . . . . . . . . . . . . 25
SECTION 7.3 Amendment . . . . . . . . . . . . . . . . . . 25
SECTION 7.4 Extension; Waiver . . . . . . . . . . . . . . 25
SECTION 7.5 Effect of Certain Events of Termination.. . . 26
ARTICLE VIII.MISCELLANEOUS . . . . . . . . . . . . . . . . . . 26
SECTION 8.1 Survival of Representations and Warranties. . 26
SECTION 8.2 Brokerage Fees and Commissions. . . . . . . . 26
SECTION 8.3 Entire Agreement; Assignment. . . . . . . . . 26
SECTION 8.4 Validity. . . . . . . . . . . . . . . . . . . 26
SECTION 8.5 Notices . . . . . . . . . . . . . . . . . . . 26
SECTION 8.6 GOVERNING LAW . . . . . . . . . . . . . . . . 27
SECTION 8.7 Descriptive Headings. . . . . . . . . . . . . 27
SECTION 8.8 Counterparts. . . . . . . . . . . . . . . . . 27
SECTION 8.9 Expenses. . . . . . . . . . . . . . . . . . . 27
SECTION 8.10 Certain Definitions. . . . . . . . . . . . 27
SECTION 8.11 Performance by Nonsurvivor . . . . . . . . 29
SECTION 8.12 Disclosure Schedule. . . . . . . . . . . . 29
SECTION 8.13 Parties in Interest. . . . . . . . . . . . 29
SECTION 8.14 Validity . . . . . . . . . . . . . . . . . 29
EXHIBIT "A" Certificate of Merger of NAMGC Acquisition Corporation
into GalaxSea Cruise and Tours, Inc. . . . . . . . . 30
EXHIBIT "B" Form of IT Cruise Note. . . . . . . . . . . . . 31
EXHIBIT 10.1.2<PAGE>
NOTE
1,400,000 June 10, 1996
FOR VALUE RECEIVED, the undersigned, NORTH AMERICAN GAMING
AND ENTERTAINMENT CORPORATION (the "Maker"), hereby promises to
pay to the order of INTERNATIONAL TOURS, INC. (the "Payee") the
principal amount of One Million Four Hundred Thousand and No/100
Dollars ($1,400,000.00), together with interest at a rate per
annum equal to nine percent (9%), commencing effective as of June
1, 1996. Interest payable under this Note shall be computed on
the basis of a 365-day year and actual days elapsed.
This Note will be paid in thirty-one (31) equal monthly
installments of principal and interest of Fifty Thousand and
No/100 Dollars ($50,000.00) each, commencing on July 1, 1996 and
continuing thereafter on the first day of each succeeding
calendar month, and (ii) one final installment of $27,414.22 to
be made on February 1, 1999 equal to the remaining unpaid
principal and accrued interest hereunder.
This Note is the IT Cruise Note referenced in that certain
Agreement and Plan of Merger (the "Agreement") entered into
effective June 7, 1996, by and between Maker, Payee and various
other parties relating to the purchase and sale of all of the
issued and outstanding shares of common stock of IT Cruise, Inc.
by Maker from Payee.
This Note is secured by and entitled to the benefits of that
certain Security Agreement (herein so called) entered into of
even date herewith by Maker and Payee.
Except as otherwise expressly provided herein, Maker and
each surety, endorser, and guarantor of this Note hereby
severally waives demand and presentation for payment, notice of
non-payment, protest and notice of protest, and the diligence of
bringing suit against any party hereto and consents that time of
payment may be extended from time to time without notice thereof
to him, her or it.
All amounts payable hereunder by Maker shall be payable to
the Payee at the address set forth below or at such other place
as Payee or the holder hereof may, from time to time, indicate in
writing to Maker, and shall be made by Maker in lawful money of
the United States by check or in cash at such place of payment.
This Note may be prepaid in whole or in part at any time and
from time to time without premium or penalty. Any partial
prepayments shall be applied first to any overdue interest and
then to the outstanding principal installments in inverse order
of maturity.
If any payment required to be made hereunder becomes due and
payable on a non-business day, the maturity thereof shall extend
to the next business day and interest shall be payable at the
rate applicable thereto during such extension. The term
"business day" shall mean a calendar day excluding Saturdays,
Sundays or other days on which banks in the State of Texas are
required or authorized to remain closed.
If this Note is placed in the hands of an attorney for
collection, Maker agrees to pay reasonable attorneys' fees and
costs and expenses of collection, including but not limited to
court costs.
Upon the failure of prompt and timely payment when due of
any installment of principal or interest under this Note, such
failure continuing for fifteen (15) calendar days after notice
thereof from Payee to Maker, then Payee, at its option, may
declare the entire unpaid balance of principal and accrued
interest hereunder to be immediately due and payable.
This Note shall be governed by and construed in accordance
with the laws of the State of Texas and applicable laws of the
United States.
In no contingency or event whatsoever shall the amount paid
or agreed to be paid by Maker, received by Payee, or requested or
demanded to be paid by Maker exceed the maximum amount permitted
by applicable law. In the event any such sums paid to Payee by
Maker would exceed the maximum amount permitted by applicable
law, Payee shall automatically apply such excess to the unpaid
principal amount of this Note or, if the amount of such excess
exceeds the unpaid principal amount of this Note, such excess
automatically shall be applied by Payee to the unpaid principal
amount of other indebtedness, if any, owed by Maker to Payee, or
if there be no such other indebtedness, such excess shall be paid
to Maker. All sums paid or agreed to be paid by Maker, received
by Payee, or requested or demanded to be paid by Maker which are
or hereafter may be construed to be or in respect of compensation
for the use, forbearance, or detention of money shall, to the
extent permitted by applicable law, be amortized, prorated,
spread and allocated throughout the full term of all indebtedness
of Maker to Payee, to the end that the actual rate of interest
hereon shall never exceed the maximum rate of interest permitted
from time to time by applicable law.
EXECUTED as of the date first above written.
Address of Payee: NORTH AMERICAN GAMING AND
ENTERTAINMENT CORPORATION
International Tours, Inc.
5810 E. Skelly Drive
Suite 1800 By: ______________________
Tulsa, OK 74135 Its: _________________
EXHIBIT 10.1.3<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is made, executed
and entered into this 10th day of June, 1996, between and among
INTERNATIONAL TOURS, INC. ("Secured Party") and NORTH AMERICAN
GAMING AND ENTERTAINMENT CORPORATION ("Pledgor").
W I T N E S S E T H:
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
SECURITY INTEREST
Pledgor hereby creates and grants to the Secured Party a
security interest in the property described in Article II hereof
to secure the payment and performance of the obligations of
Pledgor to the Secured Party set forth in Article III hereof.
ARTICLE II
COLLATERAL
The property in which the security interest is created is
all of Pledgor's right, title and interest in and to (i) 1,000
shares of common stock, par value $0.01 per share, of GalaxSea
Cruises and Tours, Inc., an Oklahoma corporation, and (ii) 500
shares of common stock, $1.00 per share, of IT Cruise, Inc., an
Oklahoma corporation (hereinafter referred to as the
"Collateral").
ARTICLE III
OBLIGATION SECURED
This Agreement shall secure the payment and performance of
the Obligation of Pledgor to Secured Party. The term
"Obligation", as used herein, means:
(i) all principal and interest accruing under that certain
Note (herein so called) executed of even date herewith in the
original principal amount of $1,400,000 payable to Secured Party
by Pledgor, including interest, collection and attorneys' fees as
therein provided;
(ii) all loans and advances which Secured Party may
hereafter make to Pledgor but insofar and only insofar as same
relate to this Agreement or the Note payable to Secured Party;
(iii) all indebtedness and liabilities of Pledgor to
Secured Party at any time arising under the terms thereof and all
renewals and extensions thereof, or any part thereof;
(iv) performance and discharge of each and every obligation,
covenant and agreement of Pledgor herein contained; and
(v) any and all renewals or extensions of any of the
foregoing debts, obligations and liabilities or any part thereof.
ARTICLE IV
WARRANTY AND REPRESENTATION OF PLEDGOR
Pledgor represents and warrants that:
(i) Pledgor has full authority and capacity to execute and
deliver this Agreement;
(ii) no financing statement covering the Collateral, or any
part thereof, has been filed with any filing officer;
(iii) no other security agreement covering the
Collateral, or any part thereof, has been made and no security
interest, other than the one herein created, has attached or been
perfected in the Collateral or in any part thereof;
(iv) no dispute, right of setoff, counter-claim or defense
exists with respect to all or any part of the Collateral;
(v) except for matters arising by reason of state or
federal securities laws, there are no restrictions upon the
transfer of any of the Collateral;
(vi) Pledgor has the right to transfer the Collateral free
of any liens, claims or encumbrances and without obtaining the
consent of any other party which has not already been obtained,
and the transfer of the Collateral will not result in a default
under any agreement to which Pledgor is a party; and
(vii) Pledgor is the owner of the Collateral.
ARTICLE V
COVENANTS AND OBLIGATIONS OF PLEDGOR
Pledgor covenants and agrees to:
(i) deliver to the Secured Party the original stock
certificates which represent the Collateral, together with a
stock power endorsing the Collateral to Secured Party in the form
attached hereto as Exhibit "A";
(ii) from time to time promptly execute and deliver to
Secured Party all such other assignments, certificates,
supplemental writings, financing statements and continuation
statements, and do all other acts or things, as Secured Party may
reasonably request in order to more fully evidence and perfect
the security interest herein created;
(iii) promptly furnish Secured Party with any
information which Secured Party may reasonably request concerning
the Collateral;
(iv) allow Secured Party to inspect all records of Pledgor
relating to the Collateral, and to make and take away copies of
such records;
(v) promptly notify Secured Party of any change in any fact
or circumstance warranted or represented by the Pledgor in this
Agreement or in any other writing furnished by Pledgor to Secured
Party in connection with the Collateral;
(vi) promptly notify Secured Party of any claim, action or
proceeding affecting title to the Collateral, or any part
thereof, or the security interest therein, and at the request of
Secured Party, appear in and defend, at Pledgor's expense, any
such action or proceeding; and
(vii) promptly notify Secured Party of any change of
address of Pledgor.
Pledgor further covenants and agrees that, without the prior
written consent of Secured Party, Pledgor will not: (a) sell,
assign or transfer any of Pledgor's rights in the Collateral; or
(b) create any other security interest in, or otherwise encumber,
the Collateral, or any part thereof, or permit the same to be or
become subject to any lien, attachment, execution, sequestration,
other legal or equitable process, or any encumbrance or security
agreement of any kind or character.
Should the Collateral, or any part thereof, ever be in any
manner converted by the issuer thereof into another type of
property or any money or other proceeds ever be paid or delivered
to Pledgor as a result of Pledgor's rights in the Collateral,
then, in any such event, all such property, money and other
proceeds shall become part of the Collateral, shall be held by
Pledgor in trust for the benefit of Secured Party, and Pledgor
covenants to forthwith pay or deliver to Secured Party all of the
same and, at the same time, if Secured Party deems it necessary
and so requests, Pledgor will properly endorse or assign the
same. With respect to any of such property of a kind requiring
an additional security agreement, financing statement or other
writing to perfect a security interest therein in favor of
Secured Party, Pledgor will forthwith execute and deliver to
Secured Party whatever the Secured Party shall reasonably deem
necessary or proper for such purpose. Should any covenant or
agreement of Pledgor fail to be performed in accordance with its
terms, Secured Party may, but never shall be obligated to,
perform or attempt to perform such covenant or agreement on
behalf of Pledgor and Pledgor agrees to pay to Secured Party any
such amount reasonably expended by Secured Party in such
performance or attempted performance, together with interest
thereon at the rate specified in the Note.
ARTICLE VI
EVENTS OF DEFAULT; RIGHTS OF SECURED PARTY UPON DEFAULT
The term "default", as used herein, means the occurrence of
any of the following events:
(i) the failure of Pledgor to pay (a) any installment of
principal or interest under the Note or (b) any other portion of
the Obligation, which failure continues for fifteen (15) calendar
days after notice thereof from Secured Party to Pledgor; or
(ii) the failure of Pledgor to punctually and properly
perform any material covenant or agreement contained herein or in
the Note, which failure continues for thirty (30) calendar days
after notice thereof from Secured Party to Pledgor.
Upon the occurrence of a default, in addition to any and all
other rights and remedies which Secured Party may then have
hereunder, or under the Texas Uniform Commercial Code (the
"Code"), or otherwise, Secured Party, at Secured Party's option,
may:
(i) declare the entire unpaid balance of principal of and
all accrued interest on the Obligation immediately due and
payable, without notice, demand, protest or presentment;
(ii) reduce any claim against Pledgor to judgment and
otherwise enforce collection of the same;
(iii) foreclose or otherwise enforce its security
interest in all or any part of the Collateral by any available
judicial procedure;
(iv) after notification, if any, as provided for herein,
sell or otherwise dispose of, at such location chosen by Secured
Party, all or any part of the Collateral, and any such sale or
other disposition may be as a unit or in parcels, by public or
private proceedings, and for cash or upon credit or otherwise as
Secured Party may reasonably determine, and by way of one or more
contracts (it being agreed that the sale of any part of the
Collateral, shall not exhaust Secured Party's power of sale, but
sales may be made from time to time until all of the Collateral
has been sold or until the Obligation has been paid in full), and
at any such sale it shall not be necessary to exhibit the
Collateral;
(v) apply by appropriate judicial proceedings for
appointment of a receiver for the Collateral, or any part
thereof, and Pledgor hereby consents to any such appointment;
(vi) buy the Collateral at any public sale;
(vii) buy the Collateral at any private sale if the
Collateral is of a type customarily sold in a recognized market
or is a type which is the subject of widely distributed standard
price quotations; and
(viii) without notice to Pledgor, either have the
Collateral registered in Secured Party's name, or in the name of
a nominee, and, with or without such registration, (a) exercise
as to such Collateral all the rights, powers and remedies of an
owner, including the right and power to vote, (b) enter into any
extension, reorganization, merger or consolidation agreement, or
any other agreement in any way relating to or affecting the
Collateral, and in connection therewith may deposit or surrender
control of the Collateral and accept other property in exchange
therefor, and (c) demand of the issuer of the Collateral to
receive any and all dividends and other distributions payable in
respect thereof, regardless of the medium in which paid and
whether they be ordinary or extraordinary, and the issuer of the
Collateral, in making payment to Secured Party hereunder, shall
be fully protected in relying on the written statement of Secured
Party that Secured Party then holds a security interest which
entitles it to receive such payment, and the receipt of Secured
Party for such payment shall be full acquittance therefor to the
issuer of the Collateral and the issuer of the Collateral shall
not be required to see the application of such payment; provided,
however, Secured Party shall have no duty to exercise any of the
foregoing rights, privileges or options and shall not be
responsible for any delay or failure to do so.
Secured Party shall have no duty to fix or preserve the
rights against any other party having an interest in the
Collateral, and shall never be liable for its failure to use
diligence to collect any amount payable in respect to the
Collateral, but shall be liable only to account to Pledgor for
what Secured Party may actually collect or receive thereon.
Pledgor agrees that the Secured Party shall have no
responsibility for ascertaining any maturities, calls,
conversions, exchanges, offers, tenders or similar matters
relating to any of the Collateral, nor for informing Pledgor with
respect to any thereof.
Secured Party shall be entitled to apply the proceeds of any
sale or other disposition of the Collateral in the following
order: first, to the payment of all of Secured Party's reasonable
expenses, including, without limitation, attorneys' fees and
other legal expenses, incurred in holding and preparing the
Collateral, or any part thereof, for sale or other disposition,
in arranging for such sale or other disposition, and in actually
selling the same; and next, toward payment of the balance of the
Obligation in such order and manner as Secured Party, in its
discretion, may deem advisable. Secured Party shall account to
Pledgor for any surplus after making the foregoing application
and, if any Collateral remains unsold, shall return such
Collateral to Pledgor. If the proceeds are not sufficient to pay
the Obligation in full, Pledgor shall be liable for any
deficiency and shall be required to pay the same to Secured
Party.
ARTICLE VII
RIGHTS OF PLEDGOR
Unless and until occurrence of an event of "default" as
herein defined, Pledgor shall have the right to vote the
Collateral. If requested by Pledgor, Secured Party shall execute
and deliver to Pledgor such proxies and authorizations as are
reasonably required to confirm the voting rights of Pledgor.
ARTICLE VIII
SECURITIES LAW
The Secured Party is authorized, at any sale, if it deems it
desirable so to do, to restrict the prospective bidders or
purchasers to persons who will represent and agree that they are
purchasing for their own account, for investment, and not with a
view to distribution or sale of any of the Collateral.
If any default shall have occurred and if Secured Party
determines to exercise its rights to sell all or any of the
Collateral, upon request the Pledgor shall from time to time
furnish to Secured Party all such information as Secured Party
may request in order to determine the number of shares included
in the Collateral which may be sold by Pledgor in exempt
transactions under Section 4(1) of the Securities Act of 1933, as
amended, and Rule 144 of the Securities and Exchange Commission
thereunder (or any statutory provisions or rules in effect in
lieu thereof), as the same are from time to time in effect.
Pledgor recognizes and acknowledges that Secured Party may
be unable to effect a public sale of all or a part of the
Collateral (time being of the essence) and may elect to resort to
one or more private sales to purchasers who will be obligated to
agree, among other things, to acquire the Collateral for their
own account, for investment, and not with a view to the
distribution or resale thereof. Pledgor acknowledges that any
such private sales may be at prices and on terms less favorable
to Secured Party than those of public sales, provided such
private sales shall be made in a commercially reasonable manner.
ARTICLE IX
NOTIFICATION OF SALE
Reasonable notification of the time and place of any public
sale of the Collateral, or reasonable notification of the time
after which any private sale or other intended disposition of the
Collateral is to be made, shall be sent to Pledgor at the address
set forth on the signature page hereof, and to any other person
entitled under the Code to notice.
ARTICLE X
FINANCING STATEMENT
Secured Party shall have the right at any time to file this
Agreement, or a photographic or other reproduction hereof, as a
financing statement, and to attach to the same a description of
all Collateral at the time subject to this Agreement, but the
failure of Secured Party to do so shall not impair the validity
or enforceability of this Agreement.
ARTICLE XI
REMEDIES CUMULATIVE
All rights and remedies of Secured Party hereunder are
cumulative of each other and of every other right or remedy which
Secured Party may otherwise have at law or in equity or under any
other contract or other writing for the enforcement of the
security interest herein or the collection of the Obligation, and
the exercise of one or more rights or remedies shall not
prejudice or impair the concurrent or subsequent exercise by
Secured Party of other rights or remedies.
ARTICLE XII
TRANSFER AND ASSIGNMENT BY SECURED PARTY
The rights, powers and interests held by Secured Party
hereunder, together with the Collateral, may be transferred and
assigned by Secured Party, in whole or in part, at such time and
upon such terms as he may deem advisable to any person who shall
acquire any part of the Obligation, and upon any such transfer or
assignment, the transferee or assignee shall succeed to all the
rights and powers of, and be subject to the duties and
obligations of, Secured Party hereunder to the extent of any such
transfer and assignment.
ARTICLE XIII
NO WAIVER OF RIGHTS OR REMEDIES
Should any part of the Obligation be payable in
installments, the acceptance by Secured Party at any time and
from time to time of part payment of the aggregate amount of all
installments then matured shall not be deemed to be a waiver of
the default, if any, then existing. No waiver by Secured Party
of any default shall be deemed to be a wavier of any other
subsequent default, nor shall any such waiver by Secured Party be
deemed to be a continuing waiver. No modification or waiver of
any provision of this agreement or of any promissory note or
other security agreement, mortgage, deed of trust, assignment or
contract of any kind evidencing or securing payment of the
Obligation, or any part thereof, shall be effective unless the
same shall be in writing and signed by Secured Party. No delay
or omission by Secured Party in exercising any right or power
hereunder, or under any other writings executed by Pledgor as
security for or in connection with the Obligation, shall impair
any such right or power or be construed as a waiver thereof or
any acquiescence therein, nor shall any single or partial
exercise of any such right or power preclude other or further
exercise thereof, or the exercise of any other right or power of
Secured Party hereunder or under such other writings.
ARTICLE XIV
BINDING EFFECT
This Agreement shall be binding on Pledgor and Pledgor's
successors and assigns and shall inure to the benefit of Secured
Party and Secured Party's successors and assigns.
ARTICLE XV
LAW GOVERNING
All obligations of Pledgor under this Agreement are
performable in Collin County, Texas. This Agreement shall be
deemed made in Collin County, Texas and shall be governed by, and
construed in accordance with, the laws of the State of Texas.
ARTICLE XVI
HEADINGS
All headings set forth in this Agreement are intended for
convenience only and shall not control or affect the meaning,
construction or effect of this Agreement or any of the provisions
hereof.
ARTICLE XVII
SEVERABILITY
All agreements and covenants contained herein are severable
and in the event that any of them shall be held to be invalid by
any court of competent jurisdiction, this Agreement shall be
interpreted as if such invalid agreements or covenants were not
contained herein.
ARTICLE XVIII
TERMINATION OF SECURITY AGREEMENT
Upon the payment by Pledgor of all principal and accrued
interest due pursuant to the terms of the Note and payment by
Pledgor of the remainder of the Obligation, if any, this
Agreement shall terminate. Upon such termination, Secured Party
shall promptly return to Pledgor the stock certificates
representing the Collateral, together with the stock power
executed by Pledgor in favor of Secured Party.
ARTICLE XIX
NOTICES
Any notice shall be conclusively deemed to have been
received by a party hereto and to be effective on the day on
which delivered to such party at the address set forth below
beside each party's signature hereto (or at such other address as
such party shall specify to the other parties in writing), or if
sent by registered mail, on the third business day after the day
on which mailed, addressed to such party at the same address.
ARTICLE XX
ENTIRE AGREEMENT
This Agreement supersedes any and all other agreements, either
oral or in writing, between the parties hereto with respect to the
subject matter hereof and contains all of the covenants and
agreements between the parties with respect to the subject matter
hereof.
ARTICLE XXI
WAIVERS AND AMENDMENTS
No term or condition of this Agreement shall be deemed to have
been waived nor shall there be any estoppel to enforce any
provision of this Agreement except by written instrument of the
party charged with such waiver or estoppel. No amendment or
modification of this Agreement shall be deemed effective unless and
until executed in writing by the parties hereto.
ARTICLE XXII
MULTIPLE COUNTERPARTS
This Agreement may be executed in two (2) or more
counterparts, each of which shall constitute an original, but all
of which when taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement
by signing any such counterpart.
EXECUTED by Pledgor and Secured Party effective the date and
year first above written.
ADDRESS AND TELECOPY NUMBER PLEDGOR:
FOR NOTICES TO PLEDGOR:
NORTH AMERICAN GAMING AND
ENTERTAINMENT CORPORATION
777 East 15th Street
Plano, Texas 75074
Fax: (214) 423-0303 By: /s/ George J. Akmon
Executive Vice President
ADDRESS AND TELECOPY NUMBER SECURED PARTY:
FOR NOTICES TO SECURED PARTY:
5810 E. Skelly Drive INTERNATIONAL TOURS, INC.
Suite 1800
Tulsa, OK 74135
Fax: (918) 665-6644 By: /s/ Bill Morris
Vice President
<PAGE>
Exhibit "A"
to
Security Agreement
STOCK POWER
FOR VALUE RECEIVED, NORTH AMERICAN GAMING AND ENTERTAINMENT
CORPORATION hereby sells, assigns and transfers unto INTERNATIONAL
TOURS, INC. (i) 1,000 shares of common stock, par value $0.01 per
share of GalaxSea Cruises and Tours, Inc., an Oklahoma corporation,
and (ii) 500 shares of common stock, par value $1.00 per share, of
IT Cruise, Inc., an Oklahoma corporation, in the name of North
American Gaming and Entertainment Corporation on the books of said
GalaxSea Cruises and Tours, Inc. and IT Cruise, Inc. represented by
Certificate Nos. _______ and ______, respectively, and hereby
irrevocably constitutes and appoints International Tours, Inc.,
attorney to transfer the said stock on the books of GalaxSea
Cruises and Tours, Inc. and IT Cruise, Inc. with full power of
substitution in the premises.
DATED: June ____, 1996.
NORTH AMERICAN GAMING AND
ENTERTAINMENT CORPORATION
By: _______________________
Its: ____________________
EXHIBIT 10.1.4<PAGE>
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES B CONVERTIBLE PREFERRED STOCK
OF
NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION
Pursuant to Section 151 of the General Corporation Law of the
State of Delaware
I, George J. Akmon, Executive Vice President of North American
Gaming and Entertainment Corporation, a corporation organized and
existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103 thereof,
DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation of the said
Corporation, the said Board of Directors, effective June 5, 1996,
adopted the following resolution creating a series of 8,000,000
shares of Preferred Stock designated as Series B Convertible
Preferred Stock.
RESOLVED, that pursuant to the authority vested in the
Board of Directors of this Corporation in accordance
with the provisions of its Certificate of
Incorporation, a series of 8,000,000 shares of
Preferred Stock, par value one cent ($0.01) per share,
of the Corporation is hereby created (subject to
increase or decrease by the Board of Directors pursuant
to Section 141(g) of the General Corporation Law of the
State of Delaware), and that the designation and amount
thereof and the voting powers, preferences and
relative, participating, optional and other special
rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are
as follows:
1. Definitions. For purposes of this Certificate, the
following definitions shall apply:
(a) "Board" shall mean the Board of Directors of
the Company.
(b) "Company" shall mean this Corporation.
(c) "Series B Preferred Stock" shall mean the
Series B Convertible Preferred Stock consisting of
8,000,000 shares (subject to increase or decrease by
the Board of Directors pursuant to Section 141(g) of
the General Corporation Law of the State of Delaware).
2. Dividends.
(a) The holders of the then outstanding Series B
Preferred Stock shall be entitled to receive, when and
as declared by the Board of Directors, dividends and
distributions on a share-for-share basis equal to
dividends and distributions received by holders of
Common Stock; and the holders of the then outstanding
Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, dividends and
distributions on a share-for-share basis equal to
dividends and distributions received by holders of
Series B Preferred Stock.
(b) No dividend whatsoever shall be paid or
declared, and no distribution (of securities of the
Company or any other property) shall be made, on any of
the Common Stock unless an equivalent dividend on a
share-for-share basis is paid or declared, or an
equivalent distribution on a share-for-share basis is
made, as the case may be, with respect to the Series B
Preferred Stock; and no dividend whatsoever shall be
paid or declared, and no distribution (of securities of
the Company or any other property) shall be made, on
any of the Series B Preferred Stock unless an
equivalent dividend on a share-for-share basis is paid
or declared, or an equivalent distribution on a share-for-
share basis is made, as the case may be, with
respect to the Common Stock.
(c) It is intended that the Series B Preferred
Stock and Common Stock be treated equally on a share-
for-share basis as though the combined outstanding
shares were one class of capital stock of the Company.
3. Liquidation Rights.
(a) In the event of any liquidation, dissolution
or winding up of the Company, whether voluntary or
involuntary, the holders of the Common Stock and Series
B Preferred Stock then outstanding shall participate
equally as one class on a share-for-share basis, and
shall together be entitled to receive ratably the
remaining assets of the Company after payment or
provision for all indebtedness and other obligations of
the Company, based on the number of shares held by each
holder.
(b) A consolidation or merger of the Company with
or into any other corporation or corporations shall not
be deemed to be a liquidation, dissolution or winding
up of the Company as those terms are used in this
paragraph 3.
4. Voting Rights. Each holder of any share of Series B
Preferred Stock shall be entitled to vote on all matters and
shall be entitled to one vote for each share of Series B
Preferred Stock held. Each holder of shares of any of the Common
Stock shall be entitled to one vote on all matters and shall be
entitled to one vote for each share of Common Stock held. Except
as otherwise expressly provided herein or as mandated by law, the
holders of shares of Common Stock and Series B Preferred Stock
shall vote together and not as separate classes.
5. Conversion. If, at any time, the Certificate of
Incorporation of the Company provides for a sufficient number of
shares of Common Stock to allow conversion of the Series B
Preferred Stock into Common Stock, the Company may require
holders of Series B Preferred Stock to convert, or holders of
Series B Preferred Stock may elect to convert, each outstanding
share of Series B Preferred Stock into one nonassessable share of
Common Stock.
(a) Forced Conversion by Company. If the Company
elects to cause conversion, it shall send written
notice to each holder of Series B Preferred Stock at
the address of such holder on the books of the Company
ten (10) days prior to the effective date of such
conversion, and upon such effective date, the
outstanding shares of Series B Preferred Stock shall be
converted automatically without any further action by
the holders of such shares and whether or not the
certificates representing such shares are surrendered
to the Company or its transfer agent; provided,
however, that the Company shall not be obligated to
issue to any such holder certificates evidencing the
shares of Common Stock issuable upon such conversion
unless certificates evidencing such shares of Series B
Preferred Stock are either delivered to the Company or
any transfer agent of the Company, or the holder
notifies the Company or any transfer agent that such
certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Company to
indemnify the Company from any loss incurred by it in
connection therewith. Upon the occurrence of such
automatic conversion of the Series B Preferred Stock,
the holders of the Series B Preferred Stock shall
surrender the certificates representing such shares at
the office of the Company or of any transfer agent for
the Series B Preferred Stock or Common Stock.
Thereupon, there shall be issued and delivered to such
holder, promptly at such office and in its, his or her
name as shown on such surrendered certificate or
certificates, a certificate or certificates for the
number of shares of Common Stock into which the shares
of Series B Preferred Stock surrendered were
convertible on the date on which such automatic
conversion occurred.
(c) Election to Convert by Holders of Series B
Preferred Stock. Before any holder of Series B
Preferred Stock shall be entitled to convert the same
into shares of Common Stock, he, she or it shall
surrender the certificate or certificates therefor,
duly endorsed, at the office of the Company or of any
transfer agent for the Series B Preferred Stock or
Common Stock, and shall give written notice to the
Company at such office that he, she or it elects to
convert the same and shall state therein the number of
shares of Series B Preferred Stock being converted.
Thereupon, the Company shall promptly issue and deliver
at such office to such holder of Series B Preferred
Stock a certificate or certificates for the number of
shares of Common Stock to which he shall be entitled as
aforesaid. Such conversion shall be deemed to have
been made immediately prior to the close of business on
the date of such surrender of the shares of Series B
Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares
of Common Stock on such date.
(d) Notices. Any notice required by the
provisions of this paragraph 5 to be given to the
holders of shares of Series B Preferred Stock shall be
deemed given five business days after the same has been
deposited in the United States mail, certified or
registered mail, return receipt requested, postage
prepaid, and addressed to each holder of record at his,
her or its address appearing on the books of the
Company.
(e) Payment of Taxes. The Company will pay all
taxes and other governmental charges, other than
income, estate or gift taxes, that may be imposed in
respect of the issue or delivery of shares of Common
Stock upon conversion of shares of Series B Preferred
Stock, including without limitation any tax or other
charge imposed in connection with any transfer involved
in the issue and delivery of shares of Common Stock in
a name other than that in which the shares of Series B
Preferred Stock so converted were registered.
6. Restrictions and Limitations. The Company shall not
without the vote or written consent by the holders of shares of
Series B Preferred Stock representing at least a majority of the
votes entitled to be cast by the holders of Series B Preferred
Stock, voting as a separate class, amend the Certificate of
Incorporation of the Company so as to alter or change the powers,
preferences or special rights provided herein for the benefit of
the shares of Series B Preferred Stock so as to adversely affect
the holders of Series B Preferred Stock. The designation by the
Board of Directors of one or more additional series of preferred
stock of the Company with dividend, liquidation, voting or
conversion rights having priority over or having greater or more
beneficial rights per share than the Series B Preferred Stock
shall not constitute an amendment to the Certification of
Incorporation of the Company for which the holders of shares of
Series B Preferred Stock are entitled to vote hereunder as a
class or otherwise.
Except as otherwise expressly provided in this paragraph 6,
any changes or amendments to the Certificate of Incorporation of
the Company may be made in accordance with applicable law.
7. No Reissuance of Series B Preferred Stock. No share or
shares of Series B Preferred Stock acquired by the Company by
reason of redemption, purchase, conversion or otherwise shall be
reissued as such, and all such shares shall be returned to
authorized but unissued shares of the Preferred Stock, par value
$0.01 per share, of the Company and may be issued or further
designated, as determined by the Board of Directors in accordance
with the Certificate of Incorporation and applicable law.
IN WITNESS WHEREOF, the undersigned, on behalf of the
Corporation as its act and deed, have executed and subscribed
this Certificate as their act and deed, and, under penalties of
perjury, do affirm the foregoing as true and correct and do
further affirm that no shares of the Series B Preferred Stock
have been issued as of the date hereof, the _______ day of June,
1996.
NORTH AMERICAN GAMING AND
ENTERTAINMENT CORPORATION
By: /s/ George J. Akmon
George J. Akmon,
Executive
Vice President
EXHIBIT 10.1.5<PAGE>
GalaxSea Cruise Marketing Agreement
This Agreement (the "Agreement") is entered into this 1st day of
May, 1996 by and between International Tours, Inc. ("IT"), an
Oklahoma corporation, and GalaxSea Cruises and Tours, Inc.
("GCT"), an Oklahoma corporation.
WHEREAS, IT represents a travel network (the "IT Network")
pursuant to which travel agency locations, including satellite
ticket printers, are and in the future may be, affiliated with IT
pursuant to either franchise agreements, associate agreements,
service agreements or under business alliance agreements IT has
with other travel companies; and
WHEREAS, IT desires to provide opportunities in the
expanding cruise segment of the travel industry for those
locations presently or in the future in the IT Network that
desire to emphasize and increase their cruise sales; and
WHEREAS, GCT is in the business of franchising add-on cruise
travel vacation stores which grants to existing full service
retail travel agencies the right to operate a Cruise Corner or
Cruise Division within their agency pursuant to the GalaxSea
system; and
WHEREAS, IT and GCT desire to enter into an agreement that
provides agencies presently or in the future in the IT Network
the opportunity to become GCT add-on franchisees;
NOW, THEREFORE, the parties hereto, in consideration of the
mutual covenants contained herein, agree as follows:
1. IT hereby agrees that it will provide GCT with the on-going
opportunity to market GCT franchises to all agencies in the
IT Network. In addition, IT agrees that it will endorse the
GCT system to the IT Network and will assist GCT in the
marketing of GCT franchises to the IT Network.
2. With regard to the marketing of GCT franchises, IT agrees
that it will do the following:
(a) IT will provide GCT with listings of all agencies and
locations in the IT Network, including contact names,
agency addresses, agency phone numbers and agency fax
numbers;
(b) IT will transmit on a regular basis information
supplied by GCT in IT's In Touch fax broadcasts;
(c) IT will allow participation by GCT in all IT Network
national or regional trade shows or meetings, including
IT's annual preferred supplier meeting and IT's annual
owners' conference; and
(d) IT will work with and assist GCT in creating and
implementing marketing programs and sales presentations
to the IT Network.
3. A. GCT agrees that, in exchange for the access to the IT
Network provided for herein, GCT will allow any
qualifying IT Network agency to acquire an add-on
GalaxSea franchise at the following special IT Network
discount on or before June 30, 1996. If such agency is
an IT franchisee, the initial franchisee fee will be
waived completely and all monthly license fees will be
waived for 8 months. If such agency is an IT
associate, the initial franchise fee will be reduced to
$1,000 (subject to the cruise sales volume discount
given to all GalaxSea franchisees) and all monthly
license fees will be waived for 6 months. All such
participation agencies, however, will be required to
pay the $695.00 cost of CruisExcel training.
B. GCT will also provide IT with the on-going opportunity
to market IT's preferred supplier program (exclusive of
any cruise line vendors) to all GCT franchisees; in
addition, GCT agrees to endorse the IT program, assist
IT in marketing the program to GCT franchisee and allow
IT participation, with regard to the program, in all
national and/or regional GCT meetings. GCT will not
enter into any business alliance or agreement that
provides any competing preferred tour supplier program
similar access to its franchisees during the term
hereof. IT shall be entitled to charge a reasonable
fee to GCT franchisees and the program will be subject
to certain territorial rights that existing IT
franchisees may have.
4. GCT further agrees that during the term hereof it will do
the following:
(a) Attend all IT Network national and regional meetings
and tradeshows in order to make available to the IT
Network all information regarding the GalaxSea system;
(b) Develop and implement marketing programs, campaigns ad
promotions that can be coordinated with those developed
and operated by I.T. Cruise, Inc. for IT Network
agencies that do not acquire a GalaxSea franchise and
work jointly with I.T. Cruise, Inc. in the promotion of
the cruise sales throughout the IT Network;
(c) Make available, at a reasonable cost, to all IT Network
agencies (whether or not they acquire a GalaxSea
franchise) all GCT training and educational programs.
5. The term of this Agreement shall be for a period commencing
on the date first written above and ending on December 31,
2015. At the end of such period, the Agreement shall be
extended for an additional 5 year term, unless either party
notifies the other no less than 90 days, prior to such date
in writing of its intent not to extend the Agreement.
6. IT agrees that during the term hereof it will not compete in
any manner with GCT regarding the cruise industry, except
with regard to IT's existing basic cruise marketing program
that is provided by I.T. Cruise, Inc. pursuant to a cruise
marketing agreement of even date herewith which agreement
will remain in force and effect. GCT and I.T. Cruise, whose
consent to this Agreement is set forth below, both agree
that all IT Network agencies shall have the choice of which
cruise marketing program it will joint.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
International Tours, Inc.
By: /s/ Ron Blaylock
Ron Blaylock, President
GalaxSea Cruises and Tours,
Inc.
By: /s/ Bill Morris
Bill Morris, Vice
President
ACCEPTED and CONSENTED TO
this 1st day of May, 1996
I.T. Cruise, Inc.
By: /S/ Bill Morris
Bill Morris, Vice President
EXHIBIT 10.1.6<PAGE>
Cruise Marketing Agreement
This Agreement (the "Agreement") is entered into this 1st
day of May, 1996 by and between International Tours, Inc. ("IT"),
an Oklahoma corporation, and I.T. Cruise, Inc. ("IT Cruise"), an
Oklahoma corporation.
WHEREAS, IT represents a travel network (the "IT Network")
pursuant to which travel agency locations, including satellite
ticket printers, are and in the future may be, affiliated with IT
pursuant to either franchise agreements, associate agreements,
service agreements or under business alliance agreements IT has
with other travel companies; and
WHEREAS, a majority of these locations have designated IT as
their primary cruise affiliation giving IT the right to negotiate
sales and other agreements on their behalf with the various
cruise lines and to establish and implement cruise marketing
programs for the IT Network; and
WHEREAS, to better serve these agencies and take advantage
of the expanded business opportunities in the cruise segment of
the travel industry it is in the best interests of IT to revise
its cruise marketing program; and
WHEREAS, IT Cruise was formed for the purpose of marketing
and promoting cruise travel which includes negotiating sales and
override agreements with cruise lines, designing and coordinating
cruise sales marketing programs, arranging for and/or presenting
training seminars and educational programs and coordinating
various types of cruise conferences; and
WHEREAS, IT desires to designate IT Cruise as its exclusive
cruise marketing representative and to contract with IT Cruise
whereby IT Cruise will design, establish and implement a cruise
marketing program for the IT Network.
NOW, THEREFORE, the parties hereto, in consideration of the
mutual covenants contained herein, agree as follows:
1. IT hereby designates IT Cruise as the exclusive cruise
marketing representative for the IT Network and grants to IT
Cruise the exclusive right to establish and implement a
cruise marketing program for the IT Network for the purpose
of promoting the sale of cruise travel. In connection
therewith, IT Cruise agrees that it will perform, or cause
to be performed, the following:
(a) Negotiating of sales and override agreements with
mutually agreed upon cruise lines that provide up-front
overrides for participating IT Network locations and
marketing support for such agencies and/or for the IT
Network as a whole;
(b) Developing cruise sales marketing programs and
promotions for the IT Network, including the design of
promotional pieces and other collateral, bonus
commissions, agent incentives and client incentives;
(c) Arranging for training programs for owners, managers
and sales agents at reasonable rates, including
Seminars at Sea, Ship Inspections, regional workshops
and other types of training and educational programs
and seminars as may be mutually agreed to by IT and IT
Cruise;
(d) Providing regular communications regarding the cruise
industry, special promotions and similar cruise-related
information to IT for distribution to the IT Network;
(e) Providing qualified personnel to serve as consultants
for on-site agency visits at a reasonable cost to the
IT Network;
(f) Consulting with IT regarding the cruise marketing
program on a regular basis in order to assure the
maximum results for the IT Network;
(g) Arranging for participation in IT Network national
meetings by all cruise lines with which IT Cruise has
entered into contracts on behalf of the IT Network; and
(h) Maintain good relations and regular contact with the
participating cruise lines, including the coordination
of prompt updates regarding cruise line records of
additions, deletions and changes to the IT Network
listings.
2. The parties hereby agree that the grant set forth in
Paragraph 1 hereof conveys to IT Cruise all rights of IT,
and IT hereby designates and appoints IT Cruise as its
agent, to negotiate and enter into sales and override
agreements with any cruise lines regarding the IT Networks,
including the right to any back-end override or bonus
commissions on sales by the IT Network that are normally or
historically retained by IT. In connection therewith, IT
hereby agrees to assign to IT Cruise, subject to receiving
any necessary cruise line consents, all cruise line
agreements to which IT is currently a party. A schedule of
such agreements is attached hereto as Exhibit A.
3. The term of this Contract shall be for a term commencing
upon the date first written above and ending on December 31,
2015. Upon such date, however, this Agreement shall be
extended for an additional 5 year term unless either party
notifies the other party no more than 180 days and no less
than 90 days prior to such date in writing of its intent to
not extend the Agreement.
4. IT Cruise agrees that the terms of all cruise line contracts
that it enters into on behalf of the IT Network shall be
subject to the reasonable approval of IT. In addition, all
promotions, marketing campaigns, promotional collateral and
other such items shall be subject to the approval of IT. IT
agrees that, with regard to the IT Network, it will not
enter into any supplier agreement with any cruise line and
will not enter into any cruise marketing agreement with any
other party during the term hereof, without the written
consent of IT Cruise, which may be withheld by IT Cruise in
its sole discretion. In addition, IT agrees that it will
not implement its own cruise marketing program with regard
to the IT Network and will not in any manner compete with IT
Cruise during the term hereof.
5. The parties agrees that IT Cruise is currently the owner of
the rights to the name "CruiseAhoy" and its associated
logos. IT Cruise agrees that it will assign to IT all
rights IT Cruise may have to such name and associated logos
upon execution of this Agreement. IT, however, agrees to
grant to IT Cruise a license for the right to the use of
such name and logos solely for the use by IT Cruise in the
cruise marketing program contemplated hereunder during the
term hereof.
6. All information to be supplied hereunder to the other party
shall be held in strict confidence by such party and shall
not be disclosed to any third party without the consent of
the other party.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
International Tours, Inc.
By: /S/ Ron Blaylock
Ron Blaylock, President
I.T. Cruise, Inc.
By: /s/ Bill Morris
Bill Morris, Vice
President
EXHIBIT 10.1.7<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, INTERNATIONAL TOURS, INC. hereby sells,
assigns and transfers unto I.T. CRUISES, INC. all of its right,
title and interest in and to the agreements (the "Cruise
Agreements") described on Exhibit "A" hereto, including all rights
to any and all revenue earned, but not received, by International
Tours, Inc. after January 1, 1996 and prior to May 31, 1996
pursuant to the Cruise Agreements.
This Assignment is made effective the 1st day of June, 1996.
INTERNATIONAL TOURS, INC.
By: /s/ Bill Morris
Bill Morris,
Vice President
EXHIBIT 10.1.8<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is made, executed
and entered into this 10th day of June, 1996, between and among
LAMAR E. OZLEY, JR., as Trustee for the former shareholders of
Ozdon Investments, Inc. listed on Exhibit "A" ("Secured Party"),
and NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION and OZDON
INVESTMENTS, INC. (collectively referred to herein as "Pledgor").
W I T N E S S E T H:
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
SECURITY INTEREST
Pledgor hereby creates and grants to the Secured Party a
security interest in the property described in Article II hereof
to secure the payment and performance of the obligations of
Pledgor to the Secured Party set forth in Article III hereof.
ARTICLE II
COLLATERAL
The property in which the security interest is created is
all of Pledgor's right, title and interest in and to the net cash
flow generated from the Gold Rush Casino now owned by Pledgor,
subject, however, to any prior claims by Springhill Bank & Trust
Co. (hereinafter referred to as the "Collateral").
ARTICLE III
OBLIGATION SECURED
This Agreement shall secure the payment and performance of
the Obligation of Pledgor to Secured Party. The term
"Obligation", as used herein, means:
(i) all principal and interest accruing under those certain
notes payable to the former shareholders of Ozdon Investments,
Inc. in the original principal amounts set forth on Exhibit "A"
(such notes hereinafter individually and collectively referred to
as the "Note"), including interest, collection and attorneys'
fees as therein provided;
(ii) all loans and advances which Secured Party may
hereafter make to Pledgor but insofar and only insofar as same
relate to this Agreement or the Note payable to Secured Party;
(iii) all indebtedness and liabilities of Pledgor to
Secured Party at any time arising under the terms thereof and all
renewals and extensions thereof, or any part thereof;
(iv) performance and discharge of each and every obligation,
covenant and agreement of Pledgor herein contained; and
(v) any and all renewals or extensions of any of the
foregoing debts, obligations and liabilities or any part thereof.
ARTICLE IV
WARRANTY AND REPRESENTATION OF PLEDGOR
Pledgor represents and warrants that:
(i) Pledgor has full authority and capacity to execute and
deliver this Agreement;
(ii) no financing statement covering the Collateral, or any
part thereof, has been filed with any filing officer;
(iii) no other security agreement covering the
Collateral, or any part thereof, has been made and no security
interest, other than the one herein created, has attached or been
perfected in the Collateral or in any part thereof;
(iv) no dispute, right of setoff, counter-claim or defense
exists with respect to all or any part of the Collateral;
(v) except for matters arising by reason of state or
federal securities laws, there are no restrictions upon the
transfer of any of the Collateral;
(vi) Pledgor has the right to transfer the Collateral free
of any liens, claims or encumbrances and without obtaining the
consent of any other party which has not already been obtained,
and the transfer of the Collateral will not result in a default
under any agreement to which Pledgor is a party; and
(vii) Pledgor is the owner of the Collateral.
ARTICLE V
COVENANTS AND OBLIGATIONS OF PLEDGOR
Pledgor covenants and agrees to:
(i) Intentionally left blank;
(ii) from time to time promptly execute and deliver to
Secured Party all such other assignments, certificates,
supplemental writings, financing statements and continuation
statements, and do all other acts or things, as Secured Party may
reasonably request in order to more fully evidence and perfect
the security interest herein created;
(iii) promptly furnish Secured Party with any
information which Secured Party may reasonably request concerning
the Collateral;
(iv) allow Secured Party to inspect all records of Pledgor
relating to the Collateral, and to make and take away copies of
such records;
(v) promptly notify Secured Party of any change in any fact
or circumstance warranted or represented by the Pledgor in this
Agreement or in any other writing furnished by Pledgor to Secured
Party in connection with the Collateral;
(vi) promptly notify Secured Party of any claim, action or
proceeding affecting title to the Collateral, or any part
thereof, or the security interest therein, and at the request of
Secured Party, appear in and defend, at Pledgor's expense, any
such action or proceeding; and
(vii) promptly notify Secured Party of any change of
address of Pledgor.
Pledgor further covenants and agrees that, without the prior
written consent of Secured Party, Pledgor will not: (a) sell,
assign or transfer any of Pledgor's rights in the Collateral; or
(b) create any other security interest in, or otherwise encumber,
the Collateral, or any part thereof, or permit the same to be or
become subject to any lien, attachment, execution, sequestration,
other legal or equitable process, or any encumbrance or security
agreement of any kind or character.
Should the Collateral, or any part thereof, ever be in any
manner converted by the Company into another type of property or
any money or other proceeds ever be paid or delivered to Pledgor
as a result of Pledgor's rights in the Collateral, then, in any
such event, all such property, money and other proceeds shall
become part of the Collateral, shall be held by Pledgor in trust
for the benefit of Secured Party, and Pledgor covenants to
forthwith pay or deliver to Secured Party all of the same and, at
the same time, if Secured Party deems it necessary and so
requests, Pledgor will properly endorse or assign the same. With
respect to any of such property of a kind requiring an additional
security agreement, financing statement or other writing to
perfect a security interest therein in favor of Secured Party,
Pledgor will forthwith execute and deliver to Secured Party
whatever the Secured Party shall reasonably deem necessary or
proper for such purpose. Should any covenant or agreement of
Pledgor fail to be performed in accordance with its terms,
Secured Party may, but never shall be obligated to, perform or
attempt to perform such covenant or agreement on behalf of
Pledgor and Pledgor agrees to pay to Secured Party any such
amount reasonably expended by Secured Party in such performance
or attempted performance, together with interest thereon at the
rate specified in the Note.
ARTICLE VI
EVENTS OF DEFAULT; RIGHTS OF SECURED PARTY UPON DEFAULT
The term "default", as used herein, means the occurrence of
any of the following events:
(i) the failure of Pledgor to pay (a) any installment of
principal or interest under the Note or (b) any other portion of
the Obligation, which failure continues for thirty (30) calendar
days after notice thereof from Secured Party to Pledgor.
(ii) the failure of Pledgor to punctually and properly
perform any material covenant or agreement contained herein or in
the Note, which failure continues for thirty (30) calendar days
after notice thereof from Secured Party to Pledgor.
Upon the occurrence of a default, in addition to any and all
other rights and remedies which Secured Party may then have
hereunder, or under the Texas Uniform Commercial Code (the
"Code"), or otherwise, Secured Party, at his option, may:
(i) declare the entire unpaid balance of principal of and
all accrued interest on the Obligation immediately due and
payable, without notice, demand, protest or presentment;
(ii) reduce any claim against Pledgor to judgment and
otherwise enforce collection of the same;
(iii) foreclose or otherwise enforce his security
interest in all or any part of the Collateral by any available
judicial procedure;
(iv) after notification, if any, as provided for herein,
sell or otherwise dispose of, at such location chosen by Secured
Party, all or any part of the Collateral, and any such sale or
other disposition may be as a unit or in parcels, by public or
private proceedings, and for cash or upon credit or otherwise as
Secured Party may reasonably determine, and by way of one or more
contracts (it being agreed that the sale of any part of the
Collateral, shall not exhaust Secured Party's power of sale, but
sales may be made from time to time until all of the Collateral
has been sold or until the Obligation has been paid in full), and
at any such sale it shall not be necessary to exhibit the
Collateral;
(v) apply by appropriate judicial proceedings for
appointment of a receiver for the Collateral, or any part
thereof, and Pledgor hereby consents to any such appointment;
(vi) buy the Collateral at any public sale; and
(vii) buy the Collateral at any private sale if the
Collateral is of a type customarily sold in a recognized market
or is a type which is the subject of widely distributed standard
price quotations.
Secured Party shall have no duty to fix or preserve the
rights against any other party having an interest in the
Collateral, and shall never be liable for his failure to use
diligence to collect any amount payable in respect to the
Collateral, but shall be liable only to account to Pledgor for
what Secured Party may actually collect or receive thereon.
Pledgor agrees that the Secured Party shall have no
responsibility for ascertaining any maturities, calls,
conversions, exchanges, offers, tenders or similar matters
relating to any of the Collateral, nor for informing Pledgor with
respect to any thereof.
Secured Party shall be entitled to apply the proceeds of any
sale or other disposition of the Collateral in the following
order: first, to the payment of all of Secured Party's reasonable
expenses, including, without limitation, attorneys' fees and
other legal expenses, incurred in holding and preparing the
Collateral, or any part thereof, for sale or other disposition,
in arranging for such sale or other disposition, and in actually
selling the same; and next, toward payment of the balance of the
Obligation in such order and manner as Secured Party, in his
discretion, may deem advisable. Secured Party shall account to
Pledgor for any surplus after making the foregoing application
and, if any Collateral remains unsold, shall return such
Collateral to Pledgor. If the proceeds are not sufficient to pay
the Obligation in full, Pledgor shall be liable for any
deficiency and shall be required to pay the same to Secured
Party.
ARTICLE VII
RIGHTS OF PLEDGOR
Unless and until occurrence of an event of "default" as
herein defined, Pledgor shall have the right to use the
Collateral in the business operations of Pledgor.
ARTICLE VIII
ACKNOWLEDGMENT OF TRUSTEE'S RIGHTS
Pledgor hereby acknowledges that Trustee is acting on behalf
of the persons listed on Exhibit "A", jointly and severally, and
shall have the right as against Pledgor to enforce each and every
right and benefit of each of such persons against Pledgor under
this Agreement.
ARTICLE IX
NOTIFICATION OF SALE
Reasonable notification of the time and place of any public
sale of the Collateral, or reasonable notification of the time
after which any private sale or other intended disposition of the
Collateral is to be made, shall be sent to Pledgor at the address
set forth on the signature page hereof, and to any other person
entitled under the Code to notice.
ARTICLE X
FINANCING STATEMENT
Secured Party shall have the right at any time to file this
Agreement, or a photographic or other reproduction hereof, as a
financing statement, and to attach to the same a description of
all Collateral at the time subject to this Agreement, but the
failure of Secured Party to do so shall not impair the validity
or enforceability of this Agreement.
ARTICLE XI
REMEDIES CUMULATIVE
All rights and remedies of Secured Party hereunder are
cumulative of each other and of every other right or remedy which
Secured Party may otherwise have at law or in equity or under any
other contract or other writing for the enforcement of the
security interest herein or the collection of the Obligation, and
the exercise of one or more rights or remedies shall not
prejudice or impair the concurrent or subsequent exercise by
Secured Party of other rights or remedies.
ARTICLE XII
TRANSFER AND ASSIGNMENT BY SECURED PARTY
The rights, powers and interests held by Secured Party
hereunder, together with the Collateral, may be transferred and
assigned by Secured Party, in whole or in part, at such time and
upon such terms as he may deem advisable to any person who shall
acquire any part of the Obligation, and upon any such transfer or
assignment, the transferee or assignee shall succeed to all the
rights and powers of, and be subject to the duties and
obligations of, Secured Party hereunder to the extent of any such
transfer and assignment.
ARTICLE XIII
NO WAIVER OF RIGHTS OR REMEDIES
Should any part of the Obligation be payable in
installments, the acceptance by Secured Party at any time and
from time to time of part payment of the aggregate amount of all
installments then matured shall not be deemed to be a waiver of
the default, if any, then existing. No waiver by Secured Party
of any default shall be deemed to be a wavier of any other
subsequent default, nor shall any such waiver by Secured Party be
deemed to be a continuing waiver. No modification or waiver of
any provision of this agreement or of any promissory note or
other security agreement, mortgage, deed of trust, assignment or
contract of any kind evidencing or securing payment of the
Obligation, or any part thereof, shall be effective unless the
same shall be in writing and signed by Secured Party. No delay
or omission by Secured Party in exercising any right or power
hereunder, or under any other writings executed by Pledgor as
security for or in connection with the Obligation, shall impair
any such right or power or be construed as a waiver thereof or
any acquiescence therein, nor shall any single or partial
exercise of any such right or power preclude other or further
exercise thereof, or the exercise of any other right or power of
Secured Party hereunder or under such other writings.
ARTICLE XIV
BINDING EFFECT
This Agreement shall be binding on Pledgor and Pledgor's
successors and assigns and shall inure to the benefit of Secured
Party and Secured Party's successors and assigns.
ARTICLE XV
LAW GOVERNING
All obligations of Pledgor under this Agreement are
performable in Collin County, Texas. This Agreement shall be
deemed made in Collin County, Texas and shall be governed by, and
construed in accordance with, the laws of the State of Texas.
ARTICLE XVI
HEADINGS
All headings set forth in this Agreement are intended for
convenience only and shall not control or affect the meaning,
construction or effect of this Agreement or any of the provisions
hereof.
ARTICLE XVII
SEVERABILITY
All agreements and covenants contained herein are severable
and in the event that any of them shall be held to be invalid by
any court of competent jurisdiction, this Agreement shall be
interpreted as if such invalid agreements or covenants were not
contained herein.
ARTICLE XVIII
TERMINATION OF SECURITY AGREEMENT
Upon the payment by Pledgor of all principal and accrued
interest due pursuant to the terms of the Note and payment by
Pledgor of the remainder of the Obligation, if any, this
Agreement shall terminate.
ARTICLE XIX
NOTICES
Any notice shall be conclusively deemed to have been
received by a party hereto and to be effective on the day on
which delivered to such party at the address set forth below
beside each party's signature hereto (or at such other address as
such party shall specify to the other parties in writing), or if
sent by registered mail, on the third business day after the day
on which mailed, addressed to such party at the same address.
ARTICLE XX
ENTIRE AGREEMENT
This Agreement supersedes any and all other agreements, either
oral or in writing, between the parties hereto with respect to the
subject matter hereof and contains all of the covenants and
agreements between the parties with respect to the subject matter
hereof.
ARTICLE XXI
WAIVERS AND AMENDMENTS
No term or condition of this Agreement shall be deemed to have
been waived nor shall there by any estoppel to enforce any
provision of this Agreement except by written instrument of the
party charged with such waiver or estoppel. No amendment or
modification of this Agreement shall be deemed effective unless and
until executed in writing by the parties hereto.
ARTICLE XXII
MULTIPLE COUNTERPARTS
This Agreement may be executed in two (2) or more
counterparts, each of which shall constitute an original, but all
of which when taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement
by signing any such counterpart.
EXECUTED by Pledgor and Secured Party effective the date and
year first above written.
ADDRESS AND TELECOPY NUMBER PLEDGOR:
FOR NOTICES TO PLEDGOR:
Address of Payee: NORTH AMERICAN GAMING AND
ENTERTAINMENT CORPORATION
777 East 15th Street
Plano, Texas 75074
Fax: (214) 423-0303 By: /s/ George J. Akmon
George J. Akmon, Executive
Vice President
Address of Payee: OZDON INVESTMENTS, INC.
777 East 15th Street
Plano, Texas 75074 By: /s/ George J. Akmon
Fax: (214) 423-0303 George J. Akmon, President
ADDRESS AND TELECOPY NUMBER SECURED PARTY:
FOR NOTICES TO SECURED PARTY:
777 East 15th Street ______________________________
Plano, Texas 75074 Lamar E. Ozley, Jr., Trustee
Fax: (214) 423-0303<PAGE>
Exhibit "A"
to
Security Agreement
Listed below is the name, address and original principal
amount of the Note payable to each of the following former
shareholders of Ozdon Investments, Inc.:
Original Principal
Amount
Name Address of Note
P & J Williams, LLC 903 E. Main
New Roads, LA 70760 $465,000.00
Lamar E. Ozley, Jr. 6306 Mill Point Cir.
Dallas, TX 75248 465,000.00
Chris Ozley 6306 Mill Point Cir.
Dallas, TX 75248 20,000.00
Jennie Ozley 6306 Mill Point Cir.
Dallas, TX 75248 7,500.00
J. Larry Jordon c/o Homer Memorial
Hospital 20,000.00
PERSONAL AND CONFIDENTIAL
620 East College
Homer, LA 71040
E. Roy Jones c/o Bonnie & Clyde Trade
Days 17,500.00
P. O. Box 243
Arcadia, LA 71001
Ed Jones c/o Bonnie & Clyde Trade
Days 2,500.00
P. O. Box 243
Arcadia, LA 71001
J.R. Barnes P. O. Box 875
Georgetown, TX 78627 2,500.00
