<PAGE>
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): August 1, 1997
GLOBAL CASINOS, INC.
---------------------
(Exact name of registrant as specified in its charter)
Utah 0-15415 87-0340206
- ------------------------ ---------------- ------------------
(State or other juris- (Commission file (IRS Employer
diction or incorporation number) Identification No.)
or organization)
4465 Northpark Drive, Colorado Springs, Colorado 80907
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 756-3777
-------------------------------------------------------------------
1777 South Harrison Street, Skydeck, Denver, Colorado 80210
------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
<PAGE>
ITEM 2: ACQUISITION
- ------------------------
On August 1, 1997, Global Casinos, Inc. (the "Company") consummated and
closed upon the purchase of 100% of the outstanding shares of capital stock of
Alaska Bingo Supply, Inc., an Alaska corporation ("ABS").
To consummate the acquisition, the Company formed and organized a new
wholly-owned subsidiary, Global Alaska Industries, Inc. ("GAI"). GAI was used
by the Company to purchase the shares of common stock of ABS and gave the
various undertakings described below in consideration of the ABS shares.
The purchase price for the shares of capital stock of ABS consisted of a
Fixed Amount and a Contingent Amount. The Fixed Amount was $4,400,000, of
which $400,000 was paid in cash, at closing. The balance of $4,000,000 was
paid by the execution and delivery by GAI of a convertible promissory note,
payable to the sole shareholder of ABS (the "Promissory Note"). The Promissory
Note is repayable, together with interest at the rate of eight percent per
annum, in monthly installments amortized over a term of seven years. The first
payment of $25,000 is due on October 15, 1997, with regular monthly
installments of principal and interest to begin November 15, 1997 and
continuing thereafter until the Promissory Note is paid in full. In addition
to the regular monthly installments, GAI agreed to prepay the principal balance
of the Promissory Note to the extent of and in an amount equal to 50% of GAI's
annual earnings before interest, taxes, depreciation and amortization
("EBITDA") in excess of $1,300,000 per year (the "Mandatory Prepayment").
In addition to the Fixed Amount of the purchase price, GAI agreed to pay
to the former owner of the ABS common stock a Contingent Amount equal to 50% of
GAI's EBITDA in excess of $1,025,000 per year during the term of the Promissory
Note, up to a maximum Contingent Amount of $100,000 per year. The obligation
of GAI to pay the Contingent Amount, if any, terminates upon the payment and
retirement in full of the Promissory Note.
Under the terms of the Promissory Note, the holder was granted the right
to convert up to $2,500,000 of outstanding principal balance due thereunder
into shares of Global Casinos, Inc. common stock at a conversion price of
$10.00 per share, subject to adjustment under certain circumstances.
Promissory Note is nonrecourse as to GAI or the Company; and the
obligation of GAI to pay the Promissory Note is secured by a stock pledge
agreement covering the shares of ABS purchased by GAI in the transaction. In
addition, GAI granted to the holder of the Promissory Note a general security
agreement covering the tangible and intangible assets of ABS. In the event of
a default by GAI under the Promissory Note, the sole recourse of the holder
shall be against the ABS shares and the ABS assets without corporate liability
for any deficiency being assessable against either GAI or the Company.
To secure the $400,000 cash portion of the purchase price, the Company
sold to selected accredited investors an aggregate of $425,000 in promissory
notes, which notes, together with interest at the rate of 12% per annum, are
repayable in four equal monthly installments due January 15, February 15,
March 15 and April 15, 1998. The Rockies Fund, Inc., a business development
company which Stephen G. Calandrella, the Company's President and Director,
also serves as President and Director, purchased $75,000 of these notes. In
addition to interest, holders of the notes totaling $275,000 are entitled to
payment of a monthly monitoring fee equal to one percent of the outstanding
principal balance due thereunder. Further, the Company issued to the holder of
a note in the amount of $150,000 a warrant exercisable for three years to
purchase 15,000 shares of the Company's Common Stock at a price of $3.00 per
share. The warrant was issued in lieu of the monitoring fee payable to the
other noteholders. To secure the repayment of these notes, the Company has
pledged as collateral its remaining rights under a promissory note made and
given by Morgro, Inc., a Utah corporation, and MDO, LLC, a Utah limited
liability company, in the original principal amount of $754,000 (the "Morgro
Note"). The Morgro Note was acquired by the Company when it sold its former
chemical and fertilizer business in 1994.
Founded in 1979, ABS is the oldest and believed to be the largest
distributor of pull-tabs, bingo supplies, coin boards and other gaming
materials to licensed vendors and qualified operators in the State of Alaska.
Under current law, games of chance and skill may only be offered in the State
of Alaska by municipalities and qualified organizations, the latter of which
may be bona fide civic or service organizations or bona fide religious,
charitable, fraternal, veterans, labor, political or educational organizations.
Further, the games which may be offered are limited to pull tabs, bingo, and to
a limited extent, raffles and lotteries. Alaska permits no casino gambling and
sponsors no state lottery. As a result, gaming activities within the State of
Alaska are limited to bingo, pull-tabs and other special event raffles and
lotteries sponsored by qualified organizations.
The Company through GAI intends to hold and operate ABS substantially in
the same manner as the company has been historically operated.
ITEM 5: OTHER EVENTS
- -------------------------
Effective August 11, 1997, the Company moved its principal executive
offices. The address of the Company's new executive offices is 4465 Northpark
Drive, Colorado Springs, Colorado 80907. The Company's telephone number at
that address remains the same.
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
- -----------------------------------------
(a) FINANCIAL STATEMENTS
--------------------
Pursuant to Item 7(a)(4), the Registrant declares that it is
impracticable to provide the required audited financial statements relative to
the acquired business at the time of this Report. Such audited financial
statements required by Item 7(a) shall be filed not later than sixty (60) days
after the filing of this Current Report on Form 8-K.
(b) PRO FORMA FINANCIAL INFORMATION
-------------------------------
Pursuant to Item 7(b) and Item 7(a)(4), the Registrant declares it is
impracticable to provide the required pro forma financial information relative
to the acquired business at the time of this Report. Such pro forma financial
information required by Item 7(b) shall be filed not later than sixty (60) days
after the filing of this Current Report on Form 8-K.
EXHIBITS
Item Title
---- -----
2.1 Stock Purchase and Sale Agreement dated August 1, 1997
10.1 Convertible Promissory Note dated August 1, 1997
10.2 Stock Pledge Agreement dated August 1, 1997
10.3 General Security Agreement dated August 1, 1997
10.4 Non-Competition Agreement dated August 1, 1997
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GLOBAL CASINOS, INC.
Date: 08/14/97 By: /s/ Stephen G. Calandrella
----------------- --------------------------------------
Stephen G. Calandrella, Interim President
<PAGE>
STOCK PURCHASE AND SALE AGREEMENT
Dated as of
August 1, 1997
between
ALASKA BINGO SUPPLY, INC.
GLOBAL ALASKA INDUSTRIES, INC.
and
MARK GRIFFIN
<PAGE>
<PAGE>
TABLE OF CONTENTS
SECTION 1: GENERAL DEFINITIONS . . . . . . . . . . . . . . . . . . . . -1-
1.1 BEST KNOWLEDGE. . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.2 CODE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.3 ERISA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.4 EXCHANGE ACT. . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.5 FISCAL YEAR.. . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.6 GOVERNMENTAL AUTHORITY. . . . . . . . . . . . . . . . . . . . . -2-
1.7 GOVERNMENTAL REQUIREMENT. . . . . . . . . . . . . . . . . . . . -2-
1.8 LEGAL REQUIREMENTS. . . . . . . . . . . . . . . . . . . . . . . -2-
1.9 IRS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.10 NET WORTH.. . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.11 OWNERSHIP INTEREST. . . . . . . . . . . . . . . . . . . . . . . -2-
1.12 PERSON. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.13 SECTION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.14 SECURITIES ACT. . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.15 TAXES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
SECTION 2: PURCHASE AND SALE OF STOCK. . . . . . . . . . . . . . . . . -3-
2.2 TAXES AND OTHER COSTS.. . . . . . . . . . . . . . . . . . . . . -3-
2.3 GOVERNMENTAL AND REGULATORY APPROVALS.. . . . . . . . . . . . . -3-
2.4 OTHER ASSIGNMENTS.. . . . . . . . . . . . . . . . . . . . . . . -3-
2.5 SG RESIGNATION AND NON-COMPETE. . . . . . . . . . . . . . . . . -3-
SECTION 3. PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . -3-
SECTION 4: CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
4.1 GENERAL PROCEDURE.. . . . . . . . . . . . . . . . . . . . . . . -5-
4.2 TIME AND PLACE. . . . . . . . . . . . . . . . . . . . . . . . . -5-
4.3 EFFECTIVE DATE OF CLOSING.. . . . . . . . . . . . . . . . . . . -5-
4.4 COVENANTS REGARDING CLOSING.. . . . . . . . . . . . . . . . . . -5-
4.5 CONDITIONS TO OBLIGATION OF GAI.. . . . . . . . . . . . . . . . -6-
4.6 CONDITIONS TO OBLIGATION OF ABS AND SHAREHOLDER . . . . . . . . -9-
4.7 SPECIFIC ITEMS TO BE DELIVERED AT THE CLOSING.. . . . . . . . .-10-
4.8 CONDITIONS SUBSEQUENT TO CLOSING. . . . . . . . . . . . . . . .-12-
SECTION 5: REPRESENTATIONS AND WARRANTIES BY ABS AND SHAREHOLDER
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-13-
5.1 ORGANIZATION AND STANDING.. . . . . . . . . . . . . . . . . . .-13-
5.2 SUBSIDIARIES, ETC.. . . . . . . . . . . . . . . . . . . . . . .-13-
5.3 QUALIFICATION . . . . . . . . . . . . . . . . . . . . . . . . .-13-
5.4 CORPORATE AUTHORITY.. . . . . . . . . . . . . . . . . . . . . .-13-
5.5 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . .-14-
5.6 CAPITALIZATION OF THE CORPORATION.. . . . . . . . . . . . . . .-14-
5.7 NO DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . .-14-
5.8 TAXES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-15-
5.9 NO ACTIONS, PROCEEDINGS, ETC. . . . . . . . . . . . . . . . . .-15-
5.10 POST BALANCE SHEET CHANGES. . . . . . . . . . . . . . . . . . .-15-
5.11 NO BREACHES.. . . . . . . . . . . . . . . . . . . . . . . . . .-15-
5.12 CONDITION OF THE CORPORATION'S ASSETS.. . . . . . . . . . . . .-16-
5.13 INVENTORY.. . . . . . . . . . . . . . . . . . . . . . . . . . .-16-
5.14 ACCOUNTS RECEIVABLE.. . . . . . . . . . . . . . . . . . . . . .-16-
5.15 CORPORATE ACTS AND PROCEEDINGS. . . . . . . . . . . . . . . . .-16-
5.16 REGISTERED RIGHTS AND PROPRIETARY INFORMATION.. . . . . . . . .-16-
5.17 CHANGES IN SUPPLIERS AND CUSTOMERS. . . . . . . . . . . . . . .-18-
5.18 NO LIENS OR ENCUMBRANCES. . . . . . . . . . . . . . . . . . . .-18-
5.19 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . .-18-
5.20 LEGAL PROCEEDINGS AND COMPLIANCE WITH LAW.. . . . . . . . . . .-18-
5.21 CONTRACT SCHEDULES. . . . . . . . . . . . . . . . . . . . . . .-19-
5.22 LABOR MATTERS.. . . . . . . . . . . . . . . . . . . . . . . . .-20-
5.23 INSURANCE.. . . . . . . . . . . . . . . . . . . . . . . . . . .-20-
5.24 ENVIRONMENTAL.. . . . . . . . . . . . . . . . . . . . . . . . .-20-
5.25 DISCLOSURE OF INFORMATION.. . . . . . . . . . . . . . . . . . .-21-
SECTION 6: COVENANTS OF ABS AND SHAREHOLDER. . . . . . . . . . . . . .-21-
6.1 PRESERVATION OF BUSINESS. . . . . . . . . . . . . . . . . . . .-21-
6.2 ORDINARY COURSE.. . . . . . . . . . . . . . . . . . . . . . . .-22-
6.3 NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . .-22-
6.4 ACCESS TO BOOKS AND RECORDS, PREMISES, ETC. . . . . . . . . . .-22-
6.5 COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . .-22-
6.6 NO SOLICITATION . . . . . . . . . . . . . . . . . . . . . . . .-23-
SECTION 7: REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER . . . . . . .-23-
7.1 SHARE OWNERSHIP.. . . . . . . . . . . . . . . . . . . . . . . .-23-
7.2 RIGHTS OWNERSHIP. . . . . . . . . . . . . . . . . . . . . . . .-24-
7.3 RESTRICTION ON FUTURE TRANSFER. . . . . . . . . . . . . . . . .-24-
SECTION 8: REPRESENTATIONS AND WARRANTIES OF GAI . . . . . . . . . . .-24-
8.1 ORGANIZATION AND STANDING.. . . . . . . . . . . . . . . . . . .-24-
8.2 CORPORATE ACTS AND PROCEEDINGS. . . . . . . . . . . . . . . . .-24-
SECTION 9: TERMINATION . . . . . . . . . . . . . . . . . . . . . . . .-24-
9.2 EFFECT OF TERMINATION.. . . . . . . . . . . . . . . . . . . . .-25-
SECTION 10: INDEMNIFICATION AND REMEDIES FOR BREACH . . . . . . . . . .-25-
10.1 INDEMNIFICATION BY GAI. . . . . . . . . . . . . . . . . . . . .-25-
10.2 INDEMNIFICATION BY ABS, SHAREHOLDER AND SG. . . . . . . . . . .-25-
10.3 ADDITIONAL NOTICE.. . . . . . . . . . . . . . . . . . . . . . .-26-
10.4 DETERMINATION OF DAMAGES AND RELATED MATTERS. . . . . . . . . .-26-
10.5 REMEDIES FOR BREACH.. . . . . . . . . . . . . . . . . . . . . .-27-
SECTION 11: NONDISCLOSURE OF CONFIDENTIAL INFORMATION . . . . . . . . .-27-
SECTION 12: EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . .-28-
SECTION 13: MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . .-28-
13.1 ATTORNEY'S FEES.. . . . . . . . . . . . . . . . . . . . . . . .-28-
13.2 SURVIVAL AND INCORPORATION OF REPRESENTATIONS.. . . . . . . . .-29-
13.3 INCORPORATION BY REFERENCE. . . . . . . . . . . . . . . . . . .-29-
13.4 PARTIES IN INTEREST.. . . . . . . . . . . . . . . . . . . . . .-29-
13.5 AMENDMENTS AND WAIVERS. . . . . . . . . . . . . . . . . . . . .-29-
13.6 WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-29-
13.7 GOVERNING LAW - CONSTRUCTION. . . . . . . . . . . . . . . . . .-29-
13.8 LIMITATION OF ACTIONS.. . . . . . . . . . . . . . . . . . . . .-29-
13.9 NOTICES.. . . . . . . . . . . . . . . . . . . . . . . . . . . .-30-
13.10 FAX/COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . .-30-
13.11 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .-31-
13.12 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . .-31-
13.13 JURISDICTION AND VENUE. . . . . . . . . . . . . . . . . . . . .-31-
13.14 GOOD FAITH COOPERATION AND ADDITIONAL DOCUMENTS.. . . . . . . .-31-
13.15 LEGAL COUNSEL.. . . . . . . . . . . . . . . . . . . . . . . . .-31-
13.16 SPECIFIC PERFORMANCE. . . . . . . . . . . . . . . . . . . . . .-31-
13.17 ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . .-31-
13.18 LIST OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . .-31-
13.19 ENTIRE AGREEMENT - AMENDMENT. . . . . . . . . . . . . . . . . .-32-
13.20 AUTHORITY TO SIGN.. . . . . . . . . . . . . . . . . . . . . . .-33-
13.21 EXECUTION OF DOCUMENTS. . . . . . . . . . . . . . . . . . . . .-33-
13.22 TIME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-33-
<PAGE>
<PAGE>
EXHIBITS
Exhibit 3.2(b ) Convertible Promissory Note
Exhibit 3.2(d)(1) Stock Pledge Agreement
Exhibit 3.2(d)(2) General Security Agreement
Exhibit 4.5(o) Non-Competition Agreements
Exhibit 4.5(v) Opinion of counsel for ABS, Laurel J. Petersen
Exhibit 4.7(b)(vi) Certificate of ABS certified independent accountant
Exhibit 5.2 ABS Ownership Interest in any corporation, partnership,
joint venture, association or other business
enterprise.
Exhibit 5.3 ABS Qualification to engage in business as a foreign
corporation in any state other than Alaska
Exhibit 5.4 Corporate Authority
Exhibit 5.5 Financial Statements
Exhibit 5.6 ABS record owner of its issued and outstanding Common
Stock
Exhibit 5.7 ABS Disclosure Schedule (Material Defaults)
Exhibit 5.8 ABS Exceptions to Timely Filing of Taxes; Tax Related
Disputes
Exhibit 5.9 ABS Pending or Threatened Actions or Proceedings
Exhibit 5.10 ABS Third Party Proprietary Interest in Intangible Shares
Exhibit 5.12 ABS Exceptions to Inventory Valuation, Condition and
Marketability
Exhibit 5.13 ABS unusable or unsalable inventories
Exhibit 5.14 ABS material counterclaim or set-off with respect to
accounts receivable
Exhibit 5.16 ABS Registered Rights
Exhibit 5.17 ABS Customer relations
Exhibit 5.18 ABS leased property and assets
Exhibit 5.19 ABS Employees and employee remuneration
Exhibit 5.20 ABS Pending or Threatened Legal, Administrative, or Other
Proceedings or Governmental Investigation, Exceptions
to Compliance with Laws, Ordinances, Requirements,
Regulations, or Orders
Exhibits 5.21(a)
to 5.21(e) ABS Contract Schedules
Exhibit 5.21(f) ABS Contract Defaults
Exhibit 5.24 ABS Environmental Concerns: Hazardous Waste Production,
Storage, etc.<PAGE>
<PAGE>
STOCK PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is made and entered into effective this _______ day of
July, 1997, between and among GLOBAL ALASKA INDUSTRIES, INC., an Alaska
corporation (the "Company" or "GAI"); ALASKA BINGO SUPPLY, INC., an Alaska
corporation ("ABS"); and MARK GRIFFIN, individually and in his capacity as the
sole shareholder of ABS ("MG" or "Shareholder").
WITNESSETH
WHEREAS, Shareholder is the record and beneficial owner of shares
constituting 100% of the issued and outstanding shares of common stock of ABS
(the "Shares"); and
WHEREAS, GAI desires to acquire all the issued and outstanding shares of
common stock of ABS owned by Shareholder, as well as any and all other equity
rights, options, warrants and the like ("Rights") owned by Shareholder subject
to the terms and conditions set forth in this Agreement; and
WHEREAS, Shareholder desires to sell all of his shares of common stock
and other rights in ABS, subject to the terms and conditions hereinafter set
forth; and
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, and other good and
valuable consideration, the receipt and adequacy whereof is hereby
acknowledged, the parties agree as follows:
SECTION 1: GENERAL DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings set forth below:
1.1 BEST KNOWLEDGE. "Best Knowledge" shall mean both what a Person
knew as well as what the Person should have known had the Person exercised
reasonable diligence. When used with respect to a Person other than a natural
person, the term "Best Knowledge" shall include matters that are known to the
current directors, officers, partners, trustees, administrators, executors,
managers, employees, consultants and agents of the Person, as well as past
directors, officers, partners, managers and employees of the Person.
1.2 CODE. "Code" means the Internal Revenue Code of 1986, as amended.
1.3 ERISA. "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
1.4 EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
1.5 FISCAL YEAR. "Fiscal Year" shall mean a twelve-month period
beginning July 1;
1.6 GOVERNMENTAL AUTHORITY. "Governmental Authority" shall mean any
and all foreign, federal, state or local governments, governmental
institutions, public authorities and governmental entities of any nature
whatsoever, and any subdivisions or instrumentalities thereof, including, but
not limited to, departments, boards, bureaus, commissions, agencies, courts,
administrations and panels, and any division or instrumentalities thereof,
whether permanent or ad hoc and whether now or hereafter constituted or
existing.
1.7 GOVERNMENTAL REQUIREMENT. "Governmental Requirement" shall mean
any and all laws (including, but not limited to, applicable common law
principles), statutes, ordinances, codes, rules, regulations, interpretations,
guidelines, directions, orders, judgments, writs, injunctions, decrees,
decisions or similar items or pronouncements, promulgated, issued, passed or
set forth by any Governmental Authority.
1.8 LEGAL REQUIREMENTS. "Legal Requirements" means applicable common
law and any statute, ordinance, code or other laws, rule, regulation, order,
technical or other standard, requirement, judgment, or procedure enacted,
adopted, promulgated, applied or followed by any governmental authority,
including, without limitation, any order, decree, award, verdict, findings of
fact, conclusions of law, decision or judgment, whether or not final or
appealable, of any court, arbitrator, arbitration board or administrative
agency.
1.9 IRS. "IRS" means the Internal Revenue Service.
1.10 NET WORTH. "Net Worth" shall mean the Shares of a Person minus
the liabilities of the Person, as of a given date as determined in accordance
with generally accepted accounting principles.
1.11 OWNERSHIP INTEREST. "Ownership Interest" shall mean any form of
direct or indirect interest in the ownership, equity or profits of GAI or
Shareholder, whether certificated or non-certificated, issued or unissued,
contingent or otherwise, including, without limitation, the following:
Shares, or the right thereto, executory rights to receive Shares, options,
warrants, instruments or obligations convertible into Shares or profit
interests.
1.12 PERSON. "Person" shall mean any natural person, any Governmental
Authority and any entity the separate existence of which is recognized by any
Governmental Authority or Governmental Requirement, including, but not limited
to, corporations, partnerships, joint ventures, joint stock companies, trusts,
estates, companies and associations, whether organized for profit or
otherwise.
1.13 SECTION. Unless otherwise stated herein, the term "Section" when
used in this Agreement shall refer to the Sections of this Agreement.
1.14 SECURITIES ACT. "Securities Act" shall mean the Securities Act of
1933, as amended.
1.15 TAXES. "Tax" and "Taxes" shall mean any and all income, excise,
franchise or other taxes and all other charges or fees imposed or collected by
any Governmental Authority or pursuant to any Governmental Requirement, and
shall also include any and all penalties, interest, deficiencies, assessments
and other charges with respect thereto.
SECTION 2: PURCHASE AND SALE OF STOCK
On the terms and subject to the conditions of this Agreement, and
in reliance upon the representations and warranties of the parties contained
in this Agreement:
2.1 PURCHASE AND SALE OF STOCK. Subject to the terms and conditions
hereinafter set forth, on the Closing Date, Shareholder shall tender and
deliver to GAI in such form to be acceptable for transfer, against tender and
delivery of the Purchase Price as defined herein, certificates representing
100% of the outstanding shares of capital stock and Rights of ABS.
2.2 TAXES AND OTHER COSTS. All transfer and conveyance taxes related
to the sale of the Shares shall be payable by Shareholder at Closing, except
to the extent incurred solely by GAI.
2.3 GOVERNMENTAL AND REGULATORY APPROVALS. Prior to the Closing Date,
Shareholder shall have obtained the consent and approval of all governmental
and regulatory authorities necessary to transfer the shares to GAI.
2.4 OTHER ASSIGNMENTS. On the Closing Date, Shareholder shall
transfer and assign to GAI, or to such party designated by GAI, any and all
other contract rights, agreements, leases, licenses and other tangible and
intangible assets utilized by Shareholder and ABS in and necessary for the
conduct of its business in accordance with past practices. Shareholder and
ABS agree to execute and deliver such assignments as GAI may reasonably
request in order to effect the purposes and intent of the foregoing provision.
2.6 LABOR MATTERS. Prior to Closing, Shareholder and GAI shall
mutually agree upon the terms and conditions of the continuing employment of
key employees of ABS following the Closing Date. In addition, GAI shall agree
to continue the retention of mutually acceptable existent lobbyist engaged by
ABS for the charitable gaming industry for at least three year following the
Closing Date.
SECTION 3. PURCHASE PRICE.
3.1 The Purchase Price for the Shares, the covenant not to compete and
the other assignments and covenants herein described shall consist of a fixed
amount (the "Fixed Amount") and a contingent amount (the "Contingent Amount").
3.2 The Fixed Amount of the Purchase Price shall be the sum of Four
Million Four Hundred Dollars ($4,400,000), payable as follows:
(a) The sum of Four Hundred Thousand Dollars ($400,000) shall
be payable in cash, certified funds or wire transfer of
immediately available funds at the time of Closing. Such funds
shall be nonrefundable unless it is determined that the audited
financial statements of ABS more fully described in Section 4.5(q)
hereof cannot be prepared due to an inability of ABS to satisfy
all applicable auditing standards, policies and procedures, and
GAI elects to rescind the purchase and sale of the common stock
provided for herein;
(b) The balance of the Fixed Amount of the Purchase Price of
Four Million Dollars ($4,000,000) shall be evidenced by GAI's
convertible promissory note (the "Promissory Note") payable to the
order of Shareholder ("Holder"), which shall be repayable,
together with interest at the rate of eight percent (8%) per
annum, in monthly installments amortized over a term of seven (7)
years. The first payment of $25,000 shall be due on October 15,
1997, with regular monthly installments of principal and interest
to begin November 15, 1997 and continuing thereafter until the
Promissory Note is paid in full. Interest shall be computed from
the date of Closing and interest accrued for the period between
the Closing Date and the first installment payment shall be
amortized over the term of the Promissory Note. In addition to
the regular monthly installments, GAI shall be obligated to prepay
the principal balance of the Promissory Note to the extent of and
in an amount equal to fifty percent (50%) of GAI's annual earnings
before interest, taxes, depreciation and amortization ("EBITDA")
in excess of $1,300,000 per year (the "Mandatory Prepayment"). In
addition, GAI shall have the right, but not the obligation to
prepay all or any portion of the principal balance and any accrued
and unpaid interest in excess of the Mandatory Prepayment amount
at any time without penalty. The Promissory Note shall be
substantially in the form of Exhibit 3.2(b) hereto.
(c) The Promissory Note shall grant the Holders thereof the
right to convert up to $2,500,000 of outstanding principal
balance due on the Promissory Note into shares of common stock of
GLOBAL CASINOS, INC., a Utah corporation, at a conversion price of
$10.00 per share, subject to adjustment under certain
circumstances. Such conversion option may be exercised by the
Holders at any time commencing one year after the date of the
Promissory Note and ending the date next preceding the maturity
date of the Promissory Note or the date of its prepayment,
whichever is first to occur. In the event that GAI intends to
prepay the Promissory Note prior to the maturity date, GAI shall
give the Holders thirty (30) days' prior written notice of such
prepayment; whereupon the Holders shall have the option to
exercise the conversion right granted herein until the date next
preceding the date of such prepayment. In the event Holders
exercise the right of conversion granted in the Promissory Note,
they shall be granted a one-time demand registration right on
Form S-3 to have registered for resale under the Securities Act
the shares of common stock ("Conversion Stock") issuable upon such
conversion.
(d) The Promissory Note shall be non-recourse as to GAI and shall be
secured by a Stock Pledge Agreement covering the Shares by GAI in favor of
Shareholder by GAI in favor of Shareholder and by General Security Agreement
and Financing Statement covering all of the tangible and intangible assets of
ABS (the "Collateral"), substantially in the form of Exhibits 3.2(d)(1) and
(2), respectively. In the event of a default by GAI under the Promissory
Note, the sole recourse of Holders shall be against the Shares and Collateral
without any corporate liability for any deficiency assessable against GAI.
3.3 In addition to the Fixed Amount, GAI shall pay to the Holders a
Contingent Amount equal to fifty percent (50%) of GAI's EBITDA in excess of
$1,025,000 per year during the term of the Promissory Note; provided, however,
that the Contingent Amount shall in no event exceed the sum of $100,000 per
year. The obligation of GAI to pay the Contingent Amount shall terminate upon
payment in full and retirement of the Promissory Note. Payment of the
Contingent Amount, if any, will be made no later than 105 days after the end
of GAI's fiscal year which is expected to be June 30.
SECTION 4: CLOSING
4.1 GENERAL PROCEDURE. At the Closing each party shall deliver such
documents, instruments and materials as may be reasonably required in order to
effectuate the intent and provisions of this Agreement, and all such
documents, instruments and materials shall be satisfactory in form and
substance to counsel for the other parties.
4.2 TIME AND PLACE. The Closing shall take place in the offices of
LAUREL J. PETERSEN, 805 West Third Avenue, Suite 200, Anchorage, Alaska,
99501, as soon as practicable but in no event later than (i) July 31, 1997 or
(ii) five (5) business days from the date of the satisfaction or waiver of all
conditions precedent set forth in Sections 4.5 and 4.6, whichever occurs first
(the "Closing Date").
4.3 EFFECTIVE DATE OF CLOSING. Notwithstanding the actual time and
place of Closing, the parties stipulate and agree that the effective date of
Closing and the effective date of the sale and purchase of the Shares shall be
August 1, 1997.
4.4 COVENANTS REGARDING CLOSING. The parties hereby covenant and
agree that they shall (i) use reasonable efforts to cause each of their
respective Exhibits to be prepared and exchanged with the other party, and its
legal counsel, within ten (10) business days following the execution of this
Agreement, except to the extent the express terms of this Agreement provide
for a different time period for such delivery to be accomplished, (ii) use
reasonable efforts to cause all of their respective representations and
warranties set forth in this Agreement, and Exhibits hereto, to be true on and
as of the Closing Date, (iii) use reasonable efforts to cause all of their
respective obligations that are to be filled on or prior to the Closing Date
to be so fulfilled, (iv) use reasonable efforts to cause all conditions to the
Closing set forth in this Agreement to be satisfied on or prior to the Closing
Date, and (v) use reasonable efforts to deliver to each other at the Closing
the certificates, updated lists, notices, consents, authorizations, approvals,
agreements, transfer documents, receipts and amendments contemplated hereby
(with such additions or exceptions to such items as are necessary to make the
statements set forth in such items accurate and acceptable, provided that if
any such additions or exceptions cause any of the conditions to the parties'
obligations hereunder as set forth hereinbelow not to be fulfilled, such
additions and exceptions shall in no way limit the rights of the parties
hereunder to terminate this Agreement or refuse to consummate the transactions
contemplated hereby).
4.5 CONDITIONS TO OBLIGATION OF GAI. The obligation of GAI to
complete the purchase of the Shares on the Closing date on the terms set forth
in this Agreement is, at the option of GAI, subject to the satisfaction or
waiver by GAI of each of the following conditions:
(a) Accuracy of Representations And Warranties. The
representations and warranties made by Shareholder in this Agreement
shall be correct in all material respects on and as of the Closing date
with the same force and effect as though such representations and
warranties had been made on the Closing date.
(b) Compliance with Covenants. All covenants which
Shareholder is required to perform or comply with on or before the
Closing date shall have been fully complied with or performed in all
material respects.
(c) Corporate Approvals. The Shareholder shall have approved
and ratified this Agreement and shall have authorized the appropriate
officers of ABS to execute same and fully perform its terms.
(d) Consents and Approvals. To the extent that any material
lease, mortgage, deed of trust, contract or agreement to which ABS or
Shareholder is a party shall require the consent of any person to the
purchase and sale of the Shares or any other transaction provided for
herein, such consent shall have been obtained; provided, however, that
the ABS and Shareholder shall not make, as a condition for the obtaining
of any such consent, any agreements or undertakings not approved in
writing by GAI to the extent that such condition otherwise has an effect
on GAI.
(e) Review and Due Diligence. GAI, its investment bankers,
legal counsel and/or auditors shall have had the opportunity to complete,
and shall have completed, a satisfactory due diligence investigation of
the ABS, together with a satisfactory review of the marketability of
title to the ABS's property.
(f) No Governmental Actions. No action or proceeding before
any governmental authority shall have been instituted or threatened to
restrain or prohibit the transactions contemplated by this Agreement, and
the parties shall have delivered to each other certificates dated as of
the Closing Date and executed by such parties, stating that to their Best
Knowledge, no such items exist. No governmental authority shall have
taken any other action as a result of which the management of any of the
parties, in their sole discretion, reasonably deems it inadvisable to
proceed with the transactions contemplated by this Agreement.
(g) No Litigation, Etc. No action, investigation, litigation
or arbitration or proceeding by or before any Governmental Authority, or
before any arbitral, mediation panel or tribunal of any kind shall have
been instituted or threatened (i) to restrain or prohibit the
transactions contemplated by this Agreement, or (ii) to claim that the
consummation of any such transaction is illegal or (iii) which, if
determined adversely, would effect adversely GAI or ABS or Shareholder
following consummation of the transactions contemplated hereby and ABS
and Shareholder shall have delivered to GAI a certificate dated as of the
Closing Date and executed by ABS and Shareholder, stating that to its
Best Knowledge, no such items exist. No governmental authority or
arbitral, mediation panel or tribunal of any kind shall have taken any
other action as a result of which the management of GAI, in its sole
discretion, reasonably deems it inadvisable to proceed with the
transactions contemplated by this Agreement.
(h) No Material Adverse Change. No material adverse change in
the property of ABS shall have occurred, and no loss or damage to any of
ABS assets or operations, whether or not covered by insurance, has
occurred, and the Shareholder and ABS shall have delivered to GAI a
certificate dated as of the Closing Date and executed by ABS and
Shareholder to all such effects.
(i) Update of Contracts. ABS shall have delivered to GAI an
accurate list, as of the Closing Date, showing (i) all agreements,
contracts and commitments of the type listed on Exhibit 5.21 entered into
since the date of this Agreement; and (ii) all other agreements,
contracts and commitments related to the businesses or the assets of ABS
entered into since the date of this Agreement, together with true,
complete and accurate copies of all such documents (the "ABS New
Contracts"). GAI shall have had the opportunity to review and approve
the ABS New Contracts of the other, and any of the Companies shall have
the right to delay the Closing for up to ten (10) days if it in its sole
discretion deems such delay necessary to enable it to adequately review
the ABS New Contracts.
(j) Approval of Counsel. All actions, proceedings,
instruments and documents required or incidental to carry out this
Agreement, including all schedules and exhibits thereto, and all other
related legal matters shall have been approved by NEUMAN & DRENNEN, LLC,
counsel to GAI, and LAUREL J. PETERSEN, counsel to ABS.
(k) No Adverse Information. The investigations with respect
to ABS or its Assets performed by GAI's professional advisors and other
representatives shall not have revealed any information concerning ABS or
its Assets that has not been made known to GAI, in writing prior to the
date of this Agreement and that, in the opinion of such party and its
advisors, materially and adversely affects the assets of the other party
or the viability of the transaction contemplated by this Agreement.
(l) Ordinary Course of Business. During the period from the
date of this Agreement until the Closing Date, ABS shall have carried on
its business in the ordinary and usual course, and shall have delivered
to GAI a certificate to that effect.
(m) Liens. ABS shall have delivered to GAI a reasonably
current lien and judgment search (both state and county levels in each
jurisdiction where the party is qualified to or is doing business or owns
material assets) confirming the absence of any judicial liens, tax liens
and similar such liens affecting any of its business or assets. Each and
every lien or encumbrance of any nature, if any, relating to ABS, except
for those liens set forth on Exhibit 4.5(m) hereto, shall have been
terminated and released, and proof thereof delivered to the GAI.
(n) Other Documents. ABS, Shareholder shall have delivered or
caused to be delivered all documents, agreements, resolutions,
certificates or declarations as GAI or its attorneys may have reasonably
requested.
(o) Non-Competition Agreements. At Closing, Shareholder shall
execute and deliver to GAI their respective Non-Competition Agreements
substantially in the form of Exhibits 4.5(o) and 2.5, respectively
hereto.
(p) Resignation.
(q) Audited Financial Statements. At Closing, ABS shall
deliver to GAI the written certification of its independent accountant
confirming that all necessary information, documentation, observation,
confirmation and the like are available to permit the preparation of
audited financial statements and report of independent certified public
accountants of ABS containing an audited balance sheet of ABS for a
minimum of one (1) fiscal year, or until inception, whichever is shorter,
together with statements of operations, cash flows and stockholders'
equity for ABS for a minimum of two (2) fiscal years, or to date of
inception, whichever is shorter, which financial statements and report of
auditors shall be in such form as to fully comply with all requirements
of Regulation SB under the Securities Act and any other applicable
securities laws; and Shareholder and ABS shall provide their joint and
several undertaking to cooperate with GAI to complete such audited
financial statements, the cost and expense of which will be shared
equally by Shareholder and GAI, not later than sixty (60) days following
the Closing Date, which audited financial statements and report of
auditors shall in all respects conform with the requirements of
Regulation SB and be satisfactory to GAI and its legal counsel.
(r) Regulatory Approvals. GAI shall have received the
approval of all required regulatory authority to the conduct of business
substantially in the same manner as conducted by ABS and MG.
(s) ABS Financial Condition and Results of Operations. ABS
shall demonstrate 1996 recast EBIT of not less than $950,000. Further,
the net current assets of ABS shall be not less than $400,000 as of the
Closing Date. For purposes of this Agreement, net current assets shall
mean the sum of cash, accounts receivable, inventory, prepaid expenses
and other current assets less accounts payable, the ABS line of credit,
the current portion of long-term obligation and other current
liabilities. Any net current assets of ABS in excess of $400,000 shall
be payable to Shareholder in four (4) equal monthly installments
commencing September 30, 1997 and thereafter on or before the last day of
each month until December 31, 1997.
(t) Liabilities to Shareholder. Prior to Closing, Shareholder
shall have contributed to the capital of ABS the entire outstanding
balance of principal together with accrued and unpaid interest, which may
have been due and owing by ABS to Shareholder as a result of any fact,
transaction or occurrence prior to the Closing Date, and ABS shall have
been released and forever discharged from any past, current or future to
Shareholder or SG of whatsoever kind or description.
(u) Financial Advisory Fees. At or prior to Closing, all
obligations or commitments of ABS to its financial advisors and
investment bankers shall have been paid or otherwise satisfied, and GAI
shall have delivered and received such written consents, approvals,
estoppel certificates or other instruments or undertakings from ABS as it
may deem reasonable, necessary or advisable.
(v) Opinion of Counsel. GAI shall have received an opinion of
LAUREL J. PETERSEN, counsel for ABS, dated as of the Closing Date,
substantially in the form of Exhibit 4.5(v) hereto.
4.6 CONDITIONS TO OBLIGATION OF ABS AND SHAREHOLDER. The obligations
of ABS and Shareholder to complete the transactions described herein on the
Closing Date on the terms set forth in this Agreement is, at the option of ABS
and Shareholder subject to the satisfaction or waiver by ABS and Shareholder
of each of the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties made by GAI in this Agreement shall be
correct in all material respects on and as of the Closing date with the
same force and effect as though such representations and warranties had
been made on the Closing date.
(b) Compliance with Covenants. All covenants which GAI is
required to perform or comply with on or before the Closing date shall
have been fully complied with or performed in all material respects.
(c) Corporate Approvals. GAI shall have approved and ratified
this Agreement and shall have authorized the appropriate parties to
execute same and fully perform its terms.
(d) Consents and Approvals. To the extent that any material
lease, mortgage, deed of trust, contract or agreement to which such party
or any statute, rule or regulation shall require the consent of any
person to the transactions provided for herein, such consent shall have
been obtained; provided, however, that such party shall not make, as a
condition for the obtaining of any such consent, any agreements or
undertakings not approved in writing by GAI to the extent that such
condition otherwise has an effect on GAI.
(e) Approval of Counsel. All actions, proceedings,
instruments and documents required or incidental to carry out this
Agreement, including all schedules and exhibits thereto, and all other
related legal matters shall have been approved as to substance and form
by LAUREL J. PETERSEN, counsel to Seller.
(f) Delivery of Documents. GAI shall have delivered or caused
to be delivered all documents agreements, resolutions, certificates or
declarations as ABS and Shareholder, or their attorneys, may have
reasonably requested.
4.7 SPECIFIC ITEMS TO BE DELIVERED AT THE CLOSING. The parties shall
deliver the following items to the appropriate party at the Closing of the
transactions contemplated by this Agreement.
(a) To be delivered by GAI:
(i) Cash or certified funds payable to Shareholder in the
amount of $400,000;
(ii) Promissory Note substantially in the form of Exhibit
3.2(b) hereto;
(iii) Stock Pledge Agreement substantially in the form of
Exhibit 3.2(d)(1) hereto;
(iv) General Security Agreement substantially in the form
of Exhibit 3.2(d)(2) hereof;
(v) Copy of corporate resolution authorizing the
execution of this Agreement and the consummation by
GAI of the transactions contemplated by this
Agreement;
(vi) A certificate of the President of GAI stating that
the representations and warranties of GAI set forth
in this Agreement are true and correct. Said
certificate shall further verify and affirm that all
consents or waivers, if any, which may be necessary
to execute and deliver this Agreement have been
obtained and are in full force and effect;
(vii) A certificate dated the Closing Date, signed by the
Chief Executive Officer and the Chief Financial
Officer of GAI, in form and substance satisfactory to
the other party and its legal counsel, certifying
that all conditions precedent set forth in this
Agreement to the obligations of GAI to close, have
been fulfilled, and that no event of default
hereunder and no event which, with the giving of
notice or passage of time, or both, would be an event
of default, has occurred as of such date.
(viii) Certificates dated the Closing Date, signed by the
Secretary of GAI, (i) certifying resolutions duly
adopted by the Board of Directors of GAI, authorizing
the execution of this Agreement and all of the other
transactions to be consummated pursuant thereto; (ii)
certifying the names and incumbency of the officers
of GAI who are empowered to execute the foregoing
documents for and on behalf of such company; (iii)
certifying the authenticity of copies of the Articles
of Incorporation and Bylaws of GAI; and (iv)
certifying the authenticity of a reasonably current
Certificate of Good Standing, from all relevant
jurisdictions in which the Company is qualified to
conduct business.
(b) To be delivered by ABS:
(i) Copy of corporate resolutions authorizing the
execution of this Agreement, and the consummation by
ABS of the transactions contemplated by this
Agreement.
(ii) A certificate of the President of ABS stating that
the representations and warranties of ABS set forth
in this Agreement are true and correct. Said
certificate shall further verify and affirm that all
consents or waivers, if any, which may be necessary
to execute and deliver this Agreement have been
obtained and are in full force and effect.
(iii) A certificate dated the Closing Date, in form and
substance satisfactory to the other party and its
legal counsel, certifying that all conditions
precedent set forth in this Agreement to the
obligations of ABS to close, have been fulfilled, and
that no event of default hereunder and no event
which, with the giving of notice or passage of time,
or both, would be an event of default, has occurred
as of such date.
(iv) Certificates dated the Closing Date, signed by the
Secretary of ABS, (i) certifying resolutions duly
adopted by the Board of Directors and Shareholders of
ABS, authorizing the execution of this Agreement and
all of the other transactions to be consummated
pursuant thereto; (ii) certifying the names and
incumbency of the officers of ABS who are empowered
to execute the foregoing documents for and on behalf
of such company; (iii) certifying the authenticity of
copies of the Articles of Incorporation and Bylaws of
ABS; and (iv) certifying the authenticity of a
reasonably current Certificate of Good Standing, from
all jurisdictions in which the company is qualified
to conduct business.
(v) Resignations of all ABS officers and directors, to be
effective as of the Closing Date.
(vi) Certificate of the certified independent accountant
of ABS substantially in the form of
Exhibit 4.7(b)(vi), hereto.
(vii) Undertaking of ABS with respect to the preparation,
completion and delivery of audited financial
statements more fully described in Section 4.5(q)
hereof and substantially in the form of
Exhibit 4.7(b)(vii), hereto.
(viii) Opinion of LAUREL J. PETERSEN, counsel to ABS,
substantially in the form of Exhibit 4.5(v).
(c) To be delivered by Shareholder:
(i) Certificate or certificates representing 100% of the
issued and outstanding common shares of ABS, which
stock certificates shall be endorsed in favor of GAI.
(ii) Assignments, if any, with unconditional warranties of
title, duly executed by Shareholder, assigning to GAI
any and all equity rights, including, but not limited
to, options, warrants, puts and so forth, which
Shareholder may own in ABS at the time of Closing.
(iii) Certificate of Shareholder in which he states that he
owns the Shares and other Rights of ABS free and
clear of all liens, encumbrances, security interests
and limitations on transfer whatsoever.
(iv) Certificate of Shareholder confirming the accuracy,
as of the Closing date, of the representations and
warranties of Shareholder set forth in this
Agreement.
(v) Non-Competition Agreement substantially in the form
of Exhibit 4.5(o).
4.8 CONDITIONS SUBSEQUENT TO CLOSING. Following Closing, GAI shall
retain an independent certified public accountant to undertaken an audit of
the financial statements of ABS as of and for the two-year period ending
June 30, 1997 (the "ABS Audit"). The ABS Audit shall comply in form and
substance with all requirements of Regulation SB under the Securities Act and
such ABS Audit, together with the report of auditors, shall in all respects
conform with the requirements of Regulation SB and be satisfactory to GAI and
its legal counsel. The ABS Audit shall be completed not later than sixty (60)
days following the Closing Date, and Shareholder agrees to cooperate in all
material respects with GAI and its auditor in the preparation of such ABS
Audit. All costs and expenses incurred in connection with the preparation of
the ABS Audit shall be shared equally by GAI and Shareholder. In the event
that it is determined the the ABS Audit cannot be completed within sixty (60)
days following the Closing Date or, if it is determined that the ABS Audit can
be completed in a timely fashion but cannot be completed in conformity with
the requirements of Regulation SB under the Securities Act, then GAI shall
have the right and option for a period of commencing 61 days following the
Closing Date and ending 120 days following the Closing Date to elect to
rescind the transaction provided for in this Agreement. In the event GAI
elects to rescind the sale and purchase of the Shares, each party shall return
to the other each of the deliverables identified in Section 10 of this
Agreement within thirty (30) days of GAI's election to so rescind. In such
event, all certificates, assignments, and ancillary agreements executed and
delivered by the parties in connection with the Closing shall be deemed null
and void, all outstanding shares of ABS common stock, and all certificates
representing same, shall be returned to Shareholder and all payments made by
GAI to Shareholder under this Agreement or under the Promissory Note shall be
refunded in full, without interest or deduction. Further, in the event of
such rescission all operations of ABS commencing on the Closing Date and
ending on the date of rescission shall inure to the benefit of Shareholder,
including all net profit earned during the period. Upon such rescission, each
party shall be deemed released and forever discharged from any liability to
the other by virtue of this Agreement, the ancillary agreements provided for
herein and all acts and omissions of the parties undertaken in reliance upon
the provisions hereof.
SECTION 5: REPRESENTATIONS AND WARRANTIES BY ABS AND SHAREHOLDER
As a material inducement to GAI to enter into this Agreement and with the
understanding and expectations that GAI will be relying thereon in
consummating the stock purchase contemplated hereunder, ABS and Shareholder,
jointly and severally (hereinafter referred to as the "Corporation" or "ABS "
for the purposes of this Section 5 only) represent and warrant as follows:
5.1 ORGANIZATION AND STANDING. ABS is a corporation duly organized,
validly existing and in good standing under the laws of the State of Alaska
and has all requisite corporate power and authority to own its assets and
properties and to carry on its business as it is now being conducted.
5.2 SUBSIDIARIES, ETC. Except as set forth on Exhibit 5.2, the
Corporation does not have any direct or indirect Ownership Interest in any
corporation, partnership, joint venture, association or other business
enterprise.
5.3 QUALIFICATION. Except as set forth on Exhibit 5.3 and for any
jurisdiction where the failure to be qualified to engage in business as a
foreign corporation would not have a material adverse affect on the
Corporation, the Corporation is not qualified to engage in business as a
foreign corporation in any state other than Alaska and there is no other
jurisdiction wherein the character of the properties presently owned by the
Corporation or the nature of the activities presently conducted by the
Corporation makes necessary the qualification, licensing or domestication of
the Corporation as a foreign corporation.
5.4 CORPORATE AUTHORITY. Except as set forth on Exhibit 5.4 hereto,
neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby nor compliance by the Corporation with
any on the provisions hereof will
(a) conflict with or result in a breach of any provision of
its Articles of Incorporation or By-Laws;
(b) result in a default (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, license, agreement or
other instrument or obligation to which the Corporation is a party, or by
which any of its properties or assets may be bound except for such default (or
right of termination, cancellation, or acceleration) as to which requisite
waivers or consents shall either have been obtained by the Corporation prior
to the Closing Date or the obtaining of which shall have been waived by GAI;
or any default which would not have a material adverse effect on ABS, its
business, assets and financial condition.
(c) violate any order, writ, injunction, decree or, to the
Corporation's Best Knowledge, any statute, rule or regulation applicable to
the Corporation or any of its properties or assets, which violation would not
have a material adverse effect on ABS, its business, assets and financial
condition. No consent or approval by any Governmental Authority is required
in connection with the execution and delivery by the Corporation of this
Agreement or the consummation by the Corporation of the transactions
contemplated hereby.
5.5 FINANCIAL STATEMENTS. The following statements are attached to
this Agreement as Exhibit 5.5:
(a) Unaudited financial statements of the Corporation for the
period ending March 31, 1997 (the "Financial Statements");
To the Best Knowledge of ABS, such financial statements,
together with and subject to the disclosures and notes thereto, if any, (i)
are in accordance with the books and records of the Corporation; (ii) present
fairly the financial condition of the Corporation as of March 31, 1997; (iii)
present fairly the results of operations for the periods covered by such
statements; and (iv) have been prepared in accordance with generally-accepted
accounting principles consistently applied and contain all adjustments,
consisting of normal accruals, necessary to present fairly the financial
position and results of operations of the Corporation for the period covered
by such financial statements.
As of Closing, except as disclosed on Exhibit 5.5(a), the
Corporation does not have any liabilities or payables (absolute or contingent,
known or unknown) except for liabilities or payables set forth on the
foregoing financial statements; which have been incurred in the ordinary
course of business since such date or which have not otherwise been disclosed
in writing to GAI on or prior to the Closing Date.
5.6 CAPITALIZATION OF THE CORPORATION. The authorized capital stock
of ABS consists of: (i) 1,000 shares of Common Stock, $2.00 par value, of
which 500 shares of Common Stock are issued and outstanding and will be
outstanding as of the Closing Date. The names of the record owners of the
issued and outstanding Common Stock are set forth on Exhibit 5.6 hereto. All
issued and outstanding shares of ABS Common Stock have been duly authorized
and validly issued and are fully paid and non-assessable. There are no
outstanding rights, options, warrants, subscriptions, calls, convertible
securities or agreement of any character or nature under which the Company is
or may become obligated to issue any shares of its capital stock of any kind,
other than those shares indicated in this Section as presently outstanding and
shares issuable in accordance with the terms of this Agreement.
5.7 NO DEFAULT. Except as set forth on Exhibit 5.7, each of the
leases, contracts, agreements and insurance policies to which ABS is a party
is in full force and effect as of the date hereof with no material defaults
existing thereunder.
5.8 TAXES. Except as set forth in Exhibit 5.8, the Corporation has
filed (or has obtained extensions for filing) all income, excise, sales,
corporate franchise, property, payroll and other tax returns or reports
required to be filed by it, as of the date hereof by the United States of
America, any state or other political subdivision thereof or any foreign
country and has paid all Taxes or assessments shown to be due on such returns
or reports. To the Best Knowledge of the Corporation, except as set forth in
Exhibit 5.8, the amounts set up as provisions for Taxes in the Latest
Financial Statements are sufficient for the payment of all unpaid federal,
foreign, state or local Taxes of the Corporation accrued for or applicable to
all periods ended on or prior to the date of this Agreement, or which may
subsequently be determined to be owing by the Corporation with respect to all
periods ending on or prior to the Closing Date, subject to normal year-end
adjustments, which will not be material. There are no present disputes as to
Taxes of any nature payable by the Corporation.
5.9 NO ACTIONS, PROCEEDINGS, ETC. Except as listed on the attached
Exhibit 5.9, there is no action or proceeding (whether or not purportedly on
behalf of the Corporation) pending or to its knowledge threatened by or
against the Corporation which might result in any material adverse change in
the condition, financial or otherwise, of the Corporation's business or
assets. No order, writ or injunction or decree has been issued by, or
requested of any court or Governmental Agency which does nor may result in any
material adverse change in the Corporation's assets or properties or in the
financial condition or the business of the Corporation. Except for
liabilities referred to in attached Exhibit 5.9, the Corporation is not liable
for damages to any employee or former employee as a result of any violation of
any state, federal or foreign laws directly or indirectly relating to such
employee or former employee.
5.10 POST BALANCE SHEET CHANGES. Except as set forth on the attached
Exhibit 5.10 and as contemplated by this Agreement, since March 31, 1997, the
Corporation has not (a) issued, bought, redeemed or entered into any
agreements, commitments or obligations to sell, buy or redeem any shares of
its capital stock; (b) incurred any obligation or liability (absolute or
contingent), other than current liabilities incurred, and obligations under
contracts entered into, in the ordinary course of business; (c) discharged or
satisfied any lien or encumbrance or paid any obligation or liability
(absolute or contingent), other than current liabilities incurred in the
ordinary course of business; (d) mortgaged, pledged or subjected to lien
charges, or other encumbrance any of its assets, other than the lien of
current or real property taxes not yet due and payable otherwise than in the
ordinary course of business; (e) waived any rights of substantial value,
whether or not in the ordinary course of business; (f) suffered any damage,
destruction or loss, whether or not covered by insurance, materially and
adversely affecting its assets or its business; (g) made or suffered any
amendment or termination of any material contract or any agreement which
materially adversely affects its business; (h) received notice or had
knowledge of any labor trouble other than routine grievance matters, none of
which is material; (i) increased the salaries or other compensation of any of
its directors, officers or employees or made any increase in other benefits to
which employees may be entitled, other than employee salary increases made in
the ordinary course of business and reflected on an Exhibit hereto; (j) sold,
transferred or otherwise disposed of any of its assets, other than in the
ordinary course of business; (k) declared or made any distribution or payments
to any of its shareholders, officers or employees, other than wages and
salaries made to employees in the ordinary course of business; (l) revalued
any of its assets; or (m) entered into any transactions not in the ordinary
course of business.
5.11 NO BREACHES. The Corporation is not in violation of, and the
consummation of the transactions contemplated hereby do not and will not
result in any material breach of, any of the terms or conditions of any
mortgage, bond, indenture, agreement, contract, license or other instrument or
obligation to which the Corporation is a party or by which its assets are
bound which, in the aggregate, would have a material adverse effect upon the
corporation, its business, assets or financial condition; nor will the
consummation of the transactions contemplated hereby cause ABS to violate any
statute, regulation, judgment, writ, injunction or decree of any court,
threatened or entered in a proceeding or action in which the Corporation is,
was or may be bound or to which any of the Corporation's assets are subject.
5.12 CONDITION OF THE CORPORATION'S ASSETS. Except as set forth on
Exhibit 5.12 all of ABS's assets are currently in good and usable condition
and there are no defects or other conditions which, in the aggregate,
materially and adversely affect the operation or values of such assets taken
as a whole. Except as disclosed on Exhibit 5.12, no person other than ABS
(including any officer or employee of the Corporation) has any proprietary
interest in any know-how or other intangible assets used by the Corporation in
the conduct of its business. All product which is currently being marketed by
the Corporation is operable for its intended purposes in accordance with its
written specifications and trade representations.
5.13 INVENTORY. Except as otherwise set forth on Exhibit 5.13, all
inventories reflected in the Corporation's March 31, 1997 financial statements
in excess of the reserves for excess or obsolete inventories are stated at the
lowest of cost, replacement cost or market, and, as so stated, are in good
condition and usable or salable in the category in which they are inventoried,
in the ordinary course of business of the Corporation, without discounts other
than normal trade discounts regularly offered by the Corporation, for prompt
payment or quantity purchase.
5.14 ACCOUNTS RECEIVABLE. The accounts receivable of the Corporation
as set forth on the line item therefor in its March 31, 1997 unaudited
financial statements set forth on Exhibit 5.5 represent valid and enforceable
obligations due to the Corporation, and, except to the extent of the reserve
reflected in the latest financial statements, shall be collectible by the
Corporation in the ordinary course of business. Except as set forth on the
attached Exhibit 5.14, the Corporation has not received any notice of any
material counterclaim or set-off with respect to such accounts receivable.
5.15 CORPORATE ACTS AND PROCEEDINGS. This Agreement has been duly
authorized by all necessary corporate action on behalf of ABS, has been duly
executed and delivered by an authorized officer of ABS, and is a valid and
binding Agreement on the part of ABS that is enforceable against ABS in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, moratorium, fraudulent transfers, reorganization or
other similar laws affecting the enforcement of creditors' rights generally
and to judicial limitations on the enforcement of the remedy of specific
performance and other equitable remedies.
5.16 REGISTERED RIGHTS AND PROPRIETARY INFORMATION.
(a) Exhibit 5.16 hereto contains a true and complete list of
all patents, letters patent and patent applications, service marks, trademark
and service mark registrations and applications, copyright, copyright
registrations and applications, grants of licenses and rights to the
Corporation with respect to the foregoing, both domestic and foreign, claimed
by the Corporation or used or proposed to be used by the Corporation in the
conduct of its business (collectively herein, "ABS Registered Rights").
Exhibit 5.16 hereto also contains a true and complete list of all and every
trade secret, know-how, process, formula, discovery, development, research,
design, technique, customer and supplier list, contracts, product development
plans, product development concepts, marketing and purchasing strategy,
invention, and any other matter required for, incident to, or related to the
conduct of its business (hereafter collectively the "ABS Proprietary
Information"). Except as described in Exhibit 5.16 hereto, the Corporation is
not obligated or under any liability whatever to make any payments by way of
royalties, fees or otherwise to any owner or licensor of, or other claimant
to, any ABS Registered Right or ABS Proprietary Information with respect to
the use thereof in the conduct of its business or otherwise.
(b) Except as described in Exhibit 5.16 hereto, to the
Corporation's Best Knowledge, the Corporation owns and has the unrestricted
right to use the ABS Registered Rights and ABS Proprietary Information
required for or incident to the design, development, manufacture, operation,
sale and use of all products and services sold or rendered or proposed to be
sold or rendered by the Corporation or relating to the conduct or proposed
conduct of its business free and clear of any right, title, interest, equity
or claim of others. As soon as practicable following the execution of this
Agreement, and except as described in Exhibit 5.16 hereto, the Corporation
agrees to take all necessary steps (including without limitation entering into
appropriate confidentiality, assignment of rights and non-competition
agreements with all officers, directors, employees and consultants of the
Corporation and others with access to or knowledge of the ABS Proprietary
Information) to safeguard and maintain the secrecy and confidentiality of, and
its proprietary rights in, the ABS Proprietary Information and all related
documentation and intellectual property rights therein necessary for the
conduct or proposed conduct of its business.
(c) Except as described in Exhibit 5.16 hereto, the
Corporation has not sold, transferred, assigned, licensed or subjected to any
right, lien, encumbrance or claim of others, any ABS Proprietary Information,
including without limitation any ABS Registered Right, or any interest
therein, related to or required for the design, development, manufacture,
operation, sale or use of any product or service currently under development
or manufactured, or proposed to be developed, sold or manufactured, by it.
Exhibit 5.16 contains a true and complete list and description of all licenses
of ABS Proprietary Information granted to the Corporation by others or to
others by the Corporation. Except as described in Exhibit 5.16 hereto, there
are no claims or demands of any person pertaining to, or any proceedings that
are pending or threatened, which challenge the rights of the Corporation in
respect of any ABS Proprietary Information used in the conduct of its
business.
(d) Except as described in Exhibit 5.16 hereto, the
Corporation owns and on the Closing Date shall own, has and shall have, holds
and shall hold, exclusively all right, title and interest in the ABS
Registered Rights, free and clear of all liens, encumbrances, restrictions,
claims and equities of any kind whatsoever, has and shall have the exclusive
right to use, sell, license or dispose of, and has and shall have the
exclusive right to bring action for the infringement of the ABS Registered
Rights and the ABS Proprietary Information. To the Best Knowledge of
Corporation, the marketing, promotion, distribution or sale by the Corporation
of any products or interests subject to the ABS Registered Rights or making
use of ABS Proprietary Information shall not constitute an infringement of any
patent, copyright, trademark, service mark or misappropriation or violation of
any other party's proprietary rights or a violation of any license or
agreement by the Corporation. Except as described in Exhibit 5.16 hereto, to
the knowledge of the Corporation after due inquiry no facts or circumstances
exist that could result in the invalidation of any of the ABS Registered
Rights.
5.17 CHANGES IN SUPPLIERS AND CUSTOMERS. Except as disclosed on
Exhibit 5.17, the Corporation is not aware of any fact which indicates that
any of the suppliers supplying products, components or materials to the
Corporation intends to cease selling such products to the Corporation nor is
the Corporation aware of any fact which indicates that any major customer of
the Corporation intends to terminate its business relations with the
Corporation.
5.18 NO LIENS OR ENCUMBRANCES. The Corporation has good and marketable
title to all of the property and assets, tangible and intangible, employed in
the operations of its business, free of any material mortgages, security
interests, pledges, easements or encumbrances of any kind whatsoever except as
set forth on the attached Exhibit 5.18 and except for such property and assets
as may be leased by ABS, and except for any property which is the subject of
Sections 5.13, 5.14 or 5.16.
5.19 EMPLOYEE MATTERS. Exhibit 5.19 attached hereto contains a true,
complete and accurate list of all employees of the Corporation and the
remuneration of each (including wages, salaries and fringe benefits). The
Corporation has no information or facts indicating that any employee listed on
Exhibit 5.19 intends to terminate his/her employment relationship with the
Corporation prior or subsequent to the Closing Date, except as may be required
by this Agreement. Except as specifically described on Exhibit 5.19, the
Corporation has no employee benefit plans (including, but not limited to,
pension plans and health or welfare plans), arrangements or understandings,
whether formal or informal. The Corporation does not now and has never
contributed to a "multi-employer plan" as defined in Section 400(a)(3) of the
ERISA. The Corporation has complied with all applicable provisions of ERISA
and all rules and regulations promulgated thereunder, and neither the
Corporation nor any trustee, administrator, fiduciary, agent or employee
thereof has at any time been involved in a transaction that would constitute a
"prohibited transaction" within the meaning of Section 406 of ERISA as to any
covered plan of the Corporation. The Corporation is not a party to any
collective bargaining or other union agreement. The Corporation has not,
within the past five (5) years had, or been threatened with, any union
activities, work stoppages or other labor trouble with respect to its
employees which had a material adverse effect on the Corporation, its business
or assets. Except as set forth in Exhibit 5.10, since December 31, 1996, the
Corporation has not made any commitment or agreements to increase the wages or
modify the conditions or terms of employment of any of the employees of the
Corporation used in connection with its business, and between the date of this
Agreement and the Closing Date, the Corporation will not make any agreement to
increase the wages or modify the conditions or terms of employment of any of
the employees of the Corporation used in the conduct of its business, without
the prior written consent of all parties hereto.
5.20 LEGAL PROCEEDINGS AND COMPLIANCE WITH LAW. Except as set forth in
Exhibit 5.20, ABS has not received notice of any legal, administrative,
arbitration or other proceeding or governmental investigation pending or
threatened (including those relating to the health, safety, employment of
labor, or protection of the environment) pertaining to ABS which might result
in the aggregate in money damages payable by ABS in excess of insurance
coverage or which might result in a permanent injunction against ABS or which
would have a material adverse effect on ABS, its business, assets or financial
condition. Except as set forth in such Exhibit, ABS has substantially
complied with, and is not in default in any respect under any laws,
ordinances, requirements, regulations, or orders applicable to the business of
ABS, the violation of which might materially and adversely affect it. Except
as set forth in such Exhibit, ABS is not a party to any agreement or
instrument, nor is it subject to any charter or other corporate restriction or
any judgment, order, writ, injunction, decree, rule, regulation, code or
ordinance which materially and adversely affects, or might reasonably be
expected materially and adversely to affect the business, operations,
prospects, property, assets or condition, financial or otherwise, of ABS.
5.21 CONTRACT SCHEDULES. Attached as Exhibits 5.21(a) to 5.21(e)
hereto are an accurate list of the following:
(a) All contracts, leases, agreements, covenants, licenses,
instruments or commitments of ABS pertaining to the business of ABS calling
for the payment of $5,000 or more or which is otherwise material to the
business of ABS, including, without limitation, the following:
(i) Executory contracts for the sale of products and
services;
(ii) Executory contracts for the purchase, sale or lease
of any assets;
(iii) Management or consulting contracts;
(iv) Patent, trademark and copyright applications,
registrations or licenses, and know-how, intellectual
property and trade secret agreements or other
licenses;
(v) Note agreements, loan agreements, indentures and the
like, other than those entered into and executed in
the ordinary course of business;
(vi) All sales, agency, distributorship or franchise
agreements; and
(vii) Any other contracts not in the ordinary course of
business.
(b) All labor contracts, employment agreements and collective
bargaining agreements to which ABS is a party.
(c) All instruments evidencing any liens or security interest
securing any indebtedness of ABS covering any asset of ABS.
(d) All profit sharing, pension, stock option, severance pay,
retirement, bonus, deferred compensation, group life and health insurance or
other employee benefit plans, agreements, arrangements or commitments of any
nature whatsoever, whether or not legally binding, and all agreements with any
present or former officer, director or shareholder of the Corporation.
(e) Any and all documents, instruments and other writings not
listed in any other schedule hereto which are material to the business
operations of ABS.
Except as set forth in Exhibit 5.21(f), all of such contracts,
agreements, leases, licenses, plans, arrangements and commitments and all
other such items set forth above are valid, binding and in full force and
effect in accordance with their terms and conditions, except as the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
fraudulent transfer, reorganization or other similar laws affecting the
enforcement of contracts generally, and there is no existing material default
thereunder or breach thereof by the Corporation, or to ABS's knowledge by any
party to such contracts, or any conditions which, with the passage of time or
the giving of notice or both, might constitute such a default by the
Corporation or by any other party to the contracts.
5.22 LABOR MATTERS. There are no strikes, slowdowns, stoppages,
organizational efforts, discrimination charges or other labor disputes pending
or, to the knowledge of ABS or any of its agent or employees, threatened
against ABS.
5.23 INSURANCE. ABS maintains in full force and effect insurance
coverage on its assets and business in such amounts and against such risks and
losses as set forth in Exhibit 5.23.
5.24 ENVIRONMENTAL. Except as disclosed on Exhibit 5.24:
(a) no real property (or the subsurface soil and the ground
water thereunder) now or previously owned or leased by ABS (the "Premises")
either contains any Hazardous Substance (as hereinafter defined) or has
underneath it any underground fuel or liquid storage tanks;
(b) there has been no generation, transportation, storage,
treatment or disposal of any Hazardous Substance on or beneath the Premises,
now or in the past;
(c) there is no pending or threatened litigation or
proceedings before any court or administrative agency in which any person
alleges, or threatens to allege, the presence, release, threat of release,
placement on or in the Premises, or the generation, transportation, storage,
treatment or disposal at the Premises, of any Hazardous Substance;
(d) ABS has not received any notice and has no knowledge that
any Governmental Authority or any employee or agent thereof has determined or
alleged, or is investigating the possibility, that there is or has been any
presence, release, threat of release, placement on or in the Premises, or any
generation, transportation, storage, treatment or disposal at the Premises, of
any Hazardous Substance;
(e) there have been no communications or agreements with any
Governmental Authority or agency (federal, state, or local) or any private
person or entity (including, without limitation, any prior owner of the
Premises and any present or former occupant or tenant of the Premises)
relating in any way to the presence, release, threat of release, placement on
or in the Premises, or any generation, transportation, storage, treatment or
disposal at the Premises, of any Hazardous Substance. ABS further agrees and
covenants that ABS will not store or deposit on, otherwise release or bring
onto or beneath, the Premises any Hazardous Substance prior to the Closing
Date; and
(f) there is no litigation, proceeding, citizen's suit or
governmental or other investigation pending, or, threatened, against ABS, and
ABS knows of no facts or circumstances which might give rise to any future
litigation, proceeding, citizen's suit or governmental or other investigation,
which relate to ABS's compliance with environmental laws, regulations, rules,
guidelines and ordinances.
For purposes of this Section 5.24, "Hazardous Substance" shall
mean and include (1) a hazardous substance as defined in 42 U.S.C. Section
9601(14), the Regulations at 40 C.F.R. Part 302, (2) any substance regulated
under the Emergency Planning and Community Right to Know Act (including
without limitation any extremely hazardous substances listed at 40 C.F.R. Part
355 and any toxic chemical listed at 40 C.F.R. Part 372), (3) hazardous wastes
and hazardous substances as specified under any New York state or local
Governmental Requirement governing water pollution, groundwater protection,
air pollution, solid wastes, hazardous wastes, spills and other releases of
toxic or hazardous substances, transportation of hazardous substances,
materials and wastes and occupational or employee health and safety, and (4)
any other material, gas or substance known or suspected to be toxic or
hazardous (including, without limitation, any radioactive substance, methane
gas, volatile hydrocarbon, industrial solvent, and asbestos) or which could
cause a material detriment to, or materially impair the beneficial use of, the
Leased Premises, or constitute a material health, safety or environmental risk
to any person exposed thereto or in contact therewith. For purposes of this
Section 5.24, "Hazardous Substance" shall not mean and shall not include the
following, to the extent used normally and required for everyday uses or
normal housekeeping or maintenance: (A) fuel oil and natural gas for heating,
(B) lubricating, cleaning, coolant and other compounds customarily used in
building maintenance, (C) materials routinely used in the day-to-day
operations of an office, such as copier toner, (D) consumer products, (E)
material reasonably necessary and customarily used in construction and repair
of an office project, and (F) fertilizers, pesticides and herbicides commonly
used for routine office landscaping.
5.25 DISCLOSURE OF INFORMATION. The Corporation represents and
warrants that all statements, data and other written information provided by
it to any party hereto as well as their respective consultants and
representatives have been accurate copies or true originals. The Corporation
represents and warrants that, to its Best Knowledge, (i) there exists no
material information concerning the Corporation which has been requested but
not been disclosed to or made available to the other parties and their
representatives or consultants and which would be material to a decision to
consummate the transactions provided for in this Agreement and (ii) in the
aggregate, such information does not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made in them, in light of the circumstances under which they are
made, not misleading.
SECTION 6: COVENANTS OF ABS AND SHAREHOLDER
6.1 PRESERVATION OF BUSINESS. Until Closing, ABS and Shareholder
shall:
(a) preserve intact the present business organization of ABS;
(b) maintain its property and assets in its present state of
repair, order and condition, reasonable wear and tear excepted;
(c) preserve and protect the goodwill and advantageous
relationships of ABS with its customers and all other persons having
business dealings with ABS;
(d) preserve and maintain in force all licenses, permits,
registrations, franchises, patents, trademarks, tradenames, trade
secrets, service marks, copyrights, bonds and other similar rights of
ABS; and
(e) comply with all laws applicable to the conduct of its
business
6.2 ORDINARY COURSE. ABS and Shareholder shall conduct its business
only in the usual, regular and ordinary course, in substantially the same
manner as previously, and shall not make any substantial change to its methods
of management or operation in respect of such business or property. Without
limiting the foregoing, ABS shall not, with respect to ABS:
ILI sell, mortgage, pledge or encumber or agree to sell,
mortgage, pledge or encumber, any of its property or assets, other than in the
ordinary course of business;
(b) incur any obligation (contingent or otherwise) or
purchase, acquire, transfer, or convey, any material assets or property or
enter into any contract or commitment, except in the ordinary course of
business.
6.3 NEGATIVE COVENANTS. Except as contemplated by this Agreement or
disclosed in Exhibits to this Agreement, from the date hereof until the
Closing Date, unless and until GAI otherwise consents in writing, ABS and
Shareholder will not (a) change or alter the physical contents or character of
the inventories of its business, if any, so as to materially affect the nature
of ABS's business or materially and adversely change the total dollar
valuation of such inventories from that reflected on its March 31, 1997
financial statements referred to in Section 5.5 other than in the ordinary
course of business; (b) incur any obligations or liabilities (absolute or
contingent) other than current liabilities incurred and obligations under
contracts entered into in the ordinary course of business; (c) mortgage,
pledge or voluntarily subject to lien, charge or other encumbrance any assets,
tangible or intangible, other than the lien of current property taxes not due
and payable; (d) sell, assign or transfer any of its assets or cancel any
debts or claims, other than in the ordinary course of business; (e) waive any
right of any substantial value; (f) declare or make any payment or
distribution to Shareholders or issue, purchase or redeem any shares of its
capital stock or other equity securities or issue or sell any rights to
acquire the same; (g) grant any increase in the salary or other compensation
of any of its directors, officers, or employees or make any increase in any
benefits to which such employees might be entitled; (h) institute any bonus,
benefit, profit sharing, stock option, pension, retirement plan or similar
arrangement, or make any changes in any such plans or arrangements presently
existing; or (i) enter into any material transactions or series of
transactions other than in the ordinary course of business, other than as
disclosed in or contemplated by this Agreement.
6.4 ACCESS TO BOOKS AND RECORDS, PREMISES, ETC. From the date of this
Agreement through the Closing Date, ABS and Shareholder will grant GAI and its
authorized representatives reasonable access to its books and records,
premises, products, employees and customers and other parties with whom it has
contractual relations during reasonable business hours and in a manner not to
disrupt or interfere with ABS's business relationships for purposes of
enabling GAI to fully investigate the business of ABS. ABS will also provide
GAI with such updated financial information as GAI may reasonably request.
6.5 COMPENSATION. ABS shall not enter into or agree to enter into any
employment contract or agreement for consulting, professional, or other
services which will adversely and materially affect the operation of ABS prior
to the Closing Date, except for any extensions of said contracts or agreements
on substantially the same terms and conditions as were previously in effect.
6.6 NO SOLICITATION.
(a) Except in connection with the transactions contemplated by
this Agreement, ABS shall not, nor shall it permit any of its subsidiaries to,
nor shall it authorize or permit any officer, director or employee of or any
investment banker, attorney or other advisor or representative of, ABS or any
of its subsidiaries to, (i) solicit, initiate or encourage the submission of,
any takeover proposal, (ii) enter into any agreement with respect to any
takeover proposal or (iii) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take
any other action to facilitate any inquiries or the making of any proposal
that constitutes, or may reasonably be expected to lead to, any takeover
proposal. Without limiting the foregoing, it is understood that any violation
of the restrictions set forth in the preceding sentence by any executive
officer of ABS or any of its subsidiaries or any investment banker, attorney
or other advisor or representatives of ABS or any of its subsidiaries or
otherwise, shall be deemed to be a breach of this Section by ABS. For
purposes of this Agreement, "takeover proposal" means any proposal for a
merger, consolidation or reorganization or other business combination
involving ABS or any of its subsidiaries or any proposal or offer to acquire
in any manner, directly or indirectly, an equity interest in, any voting
securities of, or options, rights, warrants or other interests convertible or
exercisable for or into such voting securities, or a substantial or material
portion of the assets or business of ABS or any of its subsidiaries, other
than the transactions contemplated by this Agreement.
(b) Except upon a material breach of this Agreement by GAI or
following termination hereof, except for action permitted or contemplated by
this Agreement, including a party's right to terminate this Agreement under
certain circumstances, neither the Board of Directors of ABS nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to GAI, the approval or recommendation by such Board of
Directors of any such committee of this Agreement or the Exchange or
(ii) approve or recommend, or propose to approve or recommend, any takeover
proposal.
(c) ABS promptly shall advise GAI orally and in writing of any
takeover proposal or any inquiry with respect to or which could lead to any
takeover proposal and the identity of the person making any such takeover
proposal or inquiry. ABS will keep GAI fully informed of the status and
details of any such takeover proposal or inquiry.
(d) The provisions of this Section 6.6 shall not be construed
to prevent any investment banker, attorney or other advisor or representative
of ABS to engage in discussions with third parties in the ordinary course of
business with respect to transactions not involving the parties to this
Agreement.
SECTION 7: REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
Shareholder represents and warrants to GAI that, as of the date of this
Agreement, and as of the date of Closing, the following are true and accurate:
7.1 SHARE OWNERSHIP. Each Shareholder owns the number of shares of
the common stock of ABS, an Alaska corporation, set forth in Section 7.1
hereof, which shares are fully paid, nonassessable, represent 100% of the
issued and outstanding shares of capital stock and equity securities of ABS,
and will be transferred and assigned to GAI free and clear of any claims,
liens, and encumbrances or other restrictions which would in any way impair
their right to effectively sell or transfer such shares.
7.2 RIGHTS OWNERSHIP. Each Shareholder is the beneficial owner of the
equity rights, including, but not limited to, options, warrants, puts and the
like, in ABS, as are set forth on Exhibit 7.2 hereto, and there are no other
Rights issued and outstanding. The rights set forth on Exhibit 7.2 are owned
by Shareholders and will be assigned to GAI free and clear of any claims,
liens, and encumbrances or other restrictions which would in any way impair
the entitlements represented thereby.
7.3 RESTRICTION ON FUTURE TRANSFER. There are no restrictions on the
transferability of the shares of ABS common stock being transferred to GAI
imposed by or pursuant to the company's Articles of Incorporation, Bylaws or
by any other agreements to which Shareholders or ABS are a party, except for
restrictions imposed by or on account of federal and state securities laws.
SECTION 8: REPRESENTATIONS AND WARRANTIES OF GAI
8.1 ORGANIZATION AND STANDING. GAI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Alaska
and has all requisite corporate power and authority to own its Shares and
properties and to carry on its business as it is now being conducted.
8.2 CORPORATE ACTS AND PROCEEDINGS. This Agreement has been duly
authorized by all necessary corporate action on behalf of GAI, has been duly
executed and delivered by authorized officers of GAI, and is a valid and
binding Agreement on the part of GAI that is enforceable against GAI in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and to judicial
limitations on the enforcement of the remedy of specific performance and other
equitable remedies.
SECTION 9: TERMINATION
9.1 This Agreement may be terminated and abandoned solely as follows:
(a) At any time until the Closing Date by the mutual agreement
of the parties.
(b) By either GAI or ABS, if for any reason the parties have
failed to close this Agreement on or before August 1, 1997, provided that
neither GAI nor Shareholder is then in default thereunder.
(c) By any party hereof, if the other party shall have
breached any representation, warranty or covenant contained in this Agreement
and shall have failed to cure such breach within ten (10) days following
written notice thereof by the party seeking termination.
(d) By any party hereof within ten (10) days of the date of
this Agreement if the results of the due diligence investigation of the other
shall not be satisfactory to such party in its sole discretion.
In the event of any termination pursuant to this Section 9.1
(other than pursuant to subparagraph 9.1(a)), written notice setting forth the
reasons therefor shall forthwith be given by Shareholder, if it is the
terminating party, to GAI, or by GAI, if it is the terminating party, to the
Shareholder.
9.2 EFFECT OF TERMINATION. If the sale and purchase of Shares is
terminated and abandoned as provided for in this Section, this Agreement shall
forthwith become wholly void and of no effect without liability to any party
to this Agreement except for breach of this Agreement.
SECTION 10: INDEMNIFICATION AND REMEDIES FOR BREACH
10.1 INDEMNIFICATION BY GAI.
(a) GAI shall defend, indemnify and hold ABS, Shareholder
harmless against and in respect of any damage, loss, liability, cost or
expense, including expert witness fees and reasonable attorneys' fees, whether
or not recoverable under applicable state law, resulting or arising from or
incurred in connection with:
(i) any misrepresentation, breach of warranty, or
nonfulfillment or nonperformance of any agreement on
the part of GAI under this Agreement, or any
misrepresentation or omission from any exhibit,
schedule, list, certificate or other instrument
furnished or to be furnished by it under this
Agreement, or any noncompliance on the part of GAI
with applicable law.
(ii) any and all liabilities of GAI of any nature
whatsoever, whether accrued, absolute, contingent or
otherwise and whether known or unknown, except to the
extent that any such liability arises from ABS,
Shareholder failure to perform or discharge, when
due, ABS, Shareholder future obligations; and
(iii) any actions, suits, proceedings, damages,
assessments, judgments, costs or expenses incident to
any of the foregoing.
(b) Promptly after the receipt by ABS, Shareholder of notice
of any claim asserted by a third party that may give rise to GAI's liability
to ABS, Shareholder under this Section, ABS, Shareholder shall give to GAI
written notice of such claim, and GAI shall be entitled to participate at its
own expense in the defense of any such claim. ABS, Shareholder shall not pay,
acknowledge, compromise or settle any such claim without the written consent
of GAI, unless such payment, acknowledgment, compromise or settlement results
in a full and complete release and discharge of GAI from any liability.
10.2 INDEMNIFICATION BY ABS, SHAREHOLDER.
(a) ABS, Shareholder shall defend, indemnify and hold GAI
harmless against and in respect of any damage, loss, liability, cost or
expense, including expert witness fees and reasonable attorneys' fees, whether
or not recoverable under applicable state law, resulting or arising from or
incurred in connection with:
(i) any misrepresentation, breach of warranty, or
nonfulfillment or nonperformance of any agreement on
the part of ABS, Shareholder under this Agreement, or
any misrepresentation or omission from any exhibit,
schedule, list, certificate or other instrument
furnished or to be furnished by them under this
Agreement.
(ii) any and all liabilities of ABS, Shareholder of any
nature whatsoever, whether accrued, absolute,
contingent or otherwise and whether known or unknown,
except to the extent that any such liability arises
from GAI's failure to perform or discharge, when due,
GAI's future obligations;
(iii) any actions, suits, proceedings, damages,
assessments, judgments, costs or expenses incident to
any of the foregoing.
(b) Promptly after the receipt by GAI of notice of any claim
asserted by a third party that may give rise to ABS, Shareholder's liability
to GAI under this Section, GAI shall give to ABS, Shareholder written notice
of such claim, and ABS, Shareholder shall be entitled to participate at its
own expense in the defense of any such claim. GAI shall not pay, acknowledge,
compromise or settle any such claim without the written consent of ABS,
Shareholder, unless such payment, acknowledgment, compromise or settlement
results in a full and complete release and discharge of ABS, Shareholder from
any liability.
10.3 ADDITIONAL NOTICE. Notwithstanding the provisions of Sections
10.1 or 10.2 above, promptly after the receipt by any party hereto of notice
of any claim asserted by a third party that may give rise to the liability of
any party for which the right to indemnification may be claimed under this
Section, such party shall give to each other party written notice of such
claim as soon as practicable. The provisions of this Section 10.3 in addition
to and not in lieu of the covenants of the parties contained in Sections 10.1
or 10.2 above.
10.4 DETERMINATION OF DAMAGES AND RELATED MATTERS.
(a) Upon the occurrence of any event which would give rise to
a claim by GAI against, or to a right of defense and indemnity against ABS,
Shareholder pursuant to this Section 10, or in the event that any suit,
action, investigation, claim or proceeding is begun, made or instituted as a
result of which ABS, Shareholder may become obligated to GAI hereunder, GAI
shall give notice to ABS, Shareholder of the occurrence of such event and
shall identify GAI's choice of counsel to represent such investigation, claim
or proceedings, provided that the failure of GAI to give notice shall not
affect the indemnification obligations of ABS, Shareholder hereunder. GAI (i)
shall have the exclusive right to so defend, contest or protect against such
matter utilizing the counsel of GAI's choice (who shall be reasonably
acceptable to a representative of ABS, Shareholder), and (ii). ABS,
Shareholder shall have the right, but not the obligation, to participate, at
its own expense, in the defense thereof by counsel of its choice.
(b) As GAI incurs expenses for which indemnification hereunder
is provided and after any final judgment or award shall have been rendered by
a court, arbitration board or administrative agency of competent jurisdiction,
and the expiration of the time in which to appeal therefrom, or a settlement
shall have been consummated, GAI shall forward to ABS, Shareholder notice of
any sums due and owing by it pursuant to this Agreement with respect to such
matter and it shall be required to pay all of the sums so due and owing to GAI
by certified or bank cashier's check within ten (10) days of such notice.
(c) Upon the occurrence of any event which would give rise to
a claim by ABS, Shareholder against, or to a right of defense and indemnity
against GAI pursuant to this Section 10, or in the event that any suit,
action, investigation, claim or proceeding is begun, made or instituted as a
result of which GAI may become obligated to ABS, Shareholder hereunder, ABS,
Shareholder shall give notice to GAI of the occurrence of such event and shall
identify its choice of counsel to represent such investigation, claim or
proceedings, provided that the failure of ABS, Shareholder or SG to give
notice shall not affect the indemnification obligations of GAI hereunder.
ABS, Shareholder and SG (i) shall have the exclusive right to so defend,
contest or protect against such matter utilizing the counsel of its choice
(who shall be reasonably acceptable to a representative of GAI). GAI shall
have the right, but not the obligation, to participate, at its own expense, in
the defense thereof by counsel of its choice.
(d) As ABS, Shareholder incurs expenses for which
indemnification hereunder is provided and after any final judgment or award
shall have been rendered by a court, arbitration board or administrative
agency of competent jurisdiction, and the expiration of the time in which to
appeal therefrom, or a settlement shall have been consummated, ABS,
Shareholder shall forward to GAI notice of any sums due and owing by it
pursuant to this Agreement with respect to such matter, and GAI shall be
required to pay all of the sums so due and owing to ABS, Shareholder by
certified or bank cashier's check within ten (10) days of such notice.
10.5 REMEDIES FOR BREACH. In the event of any breach of any of the
provisions of this Agreement, including but not limited to any breach of any
covenant, warranty or representation made by any party hereto, the breaching
or defaulting party shall be liable pursuant to the provisions of Sections
10.1 or 10.2 above. In the event of any material breach by any party of any
provision under this Agreement, either party may file suit. Nothing contained
in this Agreement shall be deemed to preclude a party to sue for or seek
specific performance of the provisions of this Agreement in the appropriate
circumstance.
SECTION 11: NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Each of the parties recognizes and acknowledges that it has and will have
access to certain non-public information of the others which shall be deemed
the confidential information of the other parties that is included in the
Shares (including, but not limited to, business plans, costs, trade secrets,
licenses, research projects, profits, markets, sales, customer lists,
strategies, plans for future development, financial information and any other
information of a similar nature) that after the consummation of the
transactions contemplated hereby will be valuable, special and unique property
of the parties. Information shall not be deemed Confidential Information and
afforded the protections of this Section 11 if, on the Closing Date, such
information has been (i) developed by the receiving party independently of the
disclosing party, (ii) rightfully obtained without restriction by the
receiving party from a third party, provided that the third party had full
legal authority to possess and disclose such information, (iii) publicly
available other than through the fault or negligence of the receiving party,
(iv) released without restriction by the disclosing party to anyone, including
the United States government, or (v) properly and lawfully known to the
receiving party at the time of its disclosure, as evidenced by written
documentation conclusively established to have been in the possession of the
receiving party on the date of such disclosure. Each of the parties agrees
that they will not disclose, and that they will use their best efforts to
prevent disclosure by any other Person of, any such confidential information
to any Person for any purpose or reason whatsoever, except to authorized
representatives of the parties. Notwithstanding, a party may use and disclose
any such confidential information to the extent that a party may become
compelled by Legal Requirements to disclose any such information; provided,
however, that such party shall use all reasonable efforts and shall have
afforded the other parties the opportunity to obtain an appropriate protective
order or other satisfactory assurance of confidential treatment for any such
information compelled to be disclosed. In the event of termination of this
Agreement, each party shall use all reasonable efforts to cause to be
delivered to the other parties, and to retain no copies of, any documents,
work papers and other materials obtained by such party or on such party's
behalf during the conduct of the matters provided for in this Agreement,
whether so obtained before or after the execution hereof. Each of the parties
recognizes and agrees that violation of any of the agreements contained in
this Section 11 will cause irreparable damage or injury to the parties, the
exact amount of which may be impossible to ascertain, and that, for such
reason, among others, the parties shall be entitled to an injunction, without
the necessity of posting bond therefor, restraining any further violation of
such agreements. Such rights to any injunction shall be in addition to, and
not in limitation of, any other rights and remedies the parties may have
against each other.
SECTION 12: EXPENSES
Each of the parties will pay all costs and expenses of its or his
performance and compliance with this Agreement. Notwithstanding the
foregoing, if the Agreement is not consummated by reason of a default of one
of the parties, then the expenses of each of the parties in connection with
the transaction contemplated herein shall be paid by such defaulting Company.
SECTION 13: MISCELLANEOUS
13.1 ATTORNEY'S FEES. In any action at law or in equity or in any
arbitration proceeding, for declaratory relief or to enforce any of the
provisions or rights or obligations under this Agreement, the unsuccessful
party to such proceeding, shall pay the successful party or parties all
statutorily recoverable costs, expenses and reasonable attorneys' fees
incurred by the successful party or parties including without limitation
costs, expenses, and fees on any appeals and the enforcement of any award,
judgment or settlement obtained, such costs, expenses and attorneys' fees
shall be included as part of the judgment. The successful party shall be that
party who obtained substantially the relief or remedy sought, whether by
judgment, compromise, settlement or otherwise.
13.2 SURVIVAL AND INCORPORATION OF REPRESENTATIONS. The
representations, warranties, covenants and agreements made herein or in any
certificates or documents executed in connection herewith shall survive the
execution and delivery thereof, and all statements contained in any
certificate or other document delivered by any party hereunder or in
connection herewith shall be deemed to constitute representations and
warranties made by that party to this Agreement.
13.3 INCORPORATION BY REFERENCE. All appendices to this Agreement and
all documents delivered pursuant to or referred to in this Agreement are
herein incorporated by reference and made a part hereof.
13.4 PARTIES IN INTEREST. Nothing in this Agreement, whether express
or implied, is intended to, or shall, confer any rights or remedies under, or
by reason of, this Agreement, on any person other than the parties hereto and
their respective and proper successors and assigns. Nor shall anything in
this Agreement act to relieve or discharge the obligation or liability of any
third persons to any party to this Agreement.
13.5 AMENDMENTS AND WAIVERS. This Agreement may not be amended, nor
may compliance with any term, covenant, agreement, condition or provision set
forth herein be waived (either generally or in a particular instance and
either retroactively or prospectively) unless such amendment or waiver is
agreed to in writing by all parties hereto.
13.6 WAIVER. No waiver of any breach of any one of the agreements,
terms, conditions, or covenants of this Agreement by the parties shall be
deemed to imply or constitute a waiver of any other agreement, term,
condition, or covenant of this Agreement. The failure of any party to insist
on strict performance of any agreement, term, condition, or covenant, herein
set forth, shall not constitute or be construed as a waiver of the rights of
either or the other thereafter to enforce any other default of such agreement,
term, condition, or covenant; neither shall such failure to insist upon strict
performance be deemed sufficient grounds to enable either party hereto to
forego or subvert or otherwise disregard any other agreement, term, condition,
or covenants of this Agreement.
13.7 GOVERNING LAW - CONSTRUCTION. This Agreement, and the rights and
obligations of the respective parties, shall be governed by and construed in
accordance with the laws of the State of Alaska, excluding conflict of law
provisions which would act to apply the laws of another state.
Notwithstanding the preceding sentence, it is acknowledged that each party
hereto is being represented by, or has waived the right to be represented by,
independent counsel. Accordingly, the parties expressly agree that no
provision of this Agreement shall be construed against any party on the ground
that the party or its counsel drafted the provision. Nor may any provision of
this Agreement be construed against any party on the grounds that party caused
the provision to be present.
13.8 LIMITATION OF ACTIONS. No action may be brought by any party to
this Agreement to enforce any covenant made by any party hereto or to seek
damages or equitable relief arising from any claimed breach or nonperformance
of a covenant, representation, warranty or other performance provided for
herein unless such action is commenced within three (3) years of the date of
Closing. The parties hereto agree to be bound by the aforesaid limitation of
actions notwithstanding the provisions of any applicable statutory limitation
of actions to the contrary. This limitation shall not serve to restrict or
limit any statutory limitation period pertaining to any default under the
Promissory Note obligation described in this Agreement, but rather, any such
action shall be limited by the statutory provisions as governed in the State
of Alaska, from time to time.
13.9 NOTICES. Any notice, communication, offer, acceptance, request,
consent, reply, or advice (herein severally and collectively, for convenience,
called "Notice"), in this Agreement provided or permitted to be given, served,
made, or accepted by any party or person to any other party or parties, person
or persons, hereunder must be in writing, addressed to the party to be
notified at the address set forth below, or such other address as to which one
party notifies the other in writing pursuant to the terms of this Section, and
must be served by (1) telefax or other similar electronic method, or
(2) depositing the same in the United States mail, certified, return receipt
requested and postage paid to the party or parties, person or persons to be
notified or entitled to receive same, or (3) delivering the same in person to
such party.
Notice shall be deemed to have been given immediately when sent by
telefax or other electronic method and seventy-two hours after being deposited
in the United States mail, or when personally delivered in the manner
hereinabove described. Notice provided in any manner not specified above
shall be effective only if and when received by the party or parties, person
or persons to be, or provided to be notified.
All notices, requests, demands and other communications required
or permitted under this Agreement shall be addressed as set forth below:
If GAI, to: Stephen G. Calandrella, President
GLOBAL ALASKA INDUSTRIES, INC.
4465 Northpark Drive #400
Colorado Springs, Colorado 80907
With copy to: Clifford L. Neuman, Esq.
NEUMAN & DRENNEN, LLC
1507 Pine Street
Boulder, Colorado 80302
If Seller, to: Mark Griffin
3707 Woodland Drive, #4
Anchorage, Alaska 99517
With copy to: LAUREL J. PETERSEN
805 West Third Avenue, Suite 200
Anchorage, Alaska 99501
Any party receiving a facsimile transmission shall be entitled to rely upon a
facsimile transmission to the same extent as if it were an original. Any
party may alter the address to which communications or copies are to be sent
by giving notice of such change of address in conformity with the provisions
of this Section for the giving of notice.
13.10 FAX/COUNTERPARTS. This Agreement may be executed by telex,
telecopy or other facsimile transmission, and such facsimile transmission
shall be valid and binding to the same extent as if it were an original.
Further, this Agreement may be signed in one or more counterparts, all of
which when taken together shall constitute the same documents. For all
evidentiary purposes, any one complete counter set of this Agreement shall be
considered an original.
13.11 CAPTIONS. The caption and heading of various sections and
paragraphs of this Agreement are for convenience only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
13.12 SEVERABILITY. Wherever there is any conflict between any
provision of this Agreement and any statute, law, regulation or judicial
precedent, the latter shall prevail, but in such event the provisions of this
Agreement thus affected shall be curtailed and limited only to the extent
necessary to bring it within the requirement of the law. In the event that
any part, section, paragraph or clause of this Agreement shall be held by a
court of proper jurisdiction to be invalid or unenforceable, the entire
Agreement shall not fail on account thereof, but the balance of the Agreement
shall continue in full force and effect unless such construction would clearly
be contrary to the intention of the parties or would result in unconscionable
injustice.
13.13 JURISDICTION AND VENUE. Jurisdiction over any action, proceeding
or arbitration shall be proper only if filed and maintained in Alaska, and
venue shall be proper therein.
13.14 GOOD FAITH COOPERATION AND ADDITIONAL DOCUMENTS. The parties
shall use their best good faith efforts to fulfill all of the conditions set
forth in this Agreement over which it has control or influence. Each party
covenants and agrees to cooperate in good faith and to enter into and deliver
such other documents and papers as the other party reasonably shall require in
order to consummate the transactions contemplated hereby, provided in each
instance, any such document is in form and substance approved by the parties
and their respective legal counsel.
13.15 LEGAL COUNSEL. Each of the parties are being represented by
independent counsel; GAI acknowledges that it is being represented by Clifford
L. Neuman of NEUMAN & DRENNEN, LLC; and Shareholder by Laurel J. Petersen.
13.16 SPECIFIC PERFORMANCE. The obligations of the parties under
Section 11 are unique. If either party should default in its obligations
under said section(s), the parties each acknowledge that it would be extremely
difficult and impracticable to measure the resulting damages; accordingly, the
non-defaulting party, in addition to any other available rights and remedies,
may sue in equity for injunction (mandatory or prohibitive) or specific
performance (all without the need to post a bond or undertaking of any
nature), and the parties each expressly waive the defense that a remedy at law
in damages is adequate.
13.17 ASSIGNMENT. Neither party may directly or indirectly assign or
delegate, by operation of law or otherwise, all or any portion of
its/their/his rights, obligations or liabilities under this Agreement without
the prior written consent of all other parties, which consent may be withheld
in their respective sole and absolute discretion.
13.18 LIST OF EXHIBITS. The following Exhibits are attached to this
Agreement:
Exhibit 3.2(b ) Convertible Promissory Note
Exhibit 3.2(d)(1) Stock Pledge Agreement
Exhibit 3.2(d)(2) General Security Agreement
Exhibit 4.5(o) Non-Competition Agreements
Exhibit 4.5(v) Opinion of counsel for ABS, Laurel J. Petersen
Exhibit 4.7(b)(vi) Certificate of ABS certified independent
accountant
Exhibit 5.2 ABS Ownership Interest in any corporation,
partnership, joint venture, association or
other business enterprise.
Exhibit 5.3 ABS Qualification to engage in business as a
foreign corporation in any state other than
Alaska
Exhibit 5.4 Corporate Authority
Exhibit 5.5 Financial Statements
Exhibit 5.6 ABS record owner of its issued and outstanding
Common Stock
Exhibit 5.7 ABS Disclosure Schedule (Material Defaults)
Exhibit 5.8 ABS Exceptions to Timely Filing of Taxes; Tax
Related Disputes
Exhibit 5.9 ABS Pending or Threatened Actions or Proceedings
Exhibit 5.10 ABS Third Party Proprietary Interest in
Intangible Shares
Exhibit 5.12 ABS Exceptions to Inventory Valuation, Condition
and Marketability
Exhibit 5.13 ABS unusable or unsalable inventories
Exhibit 5.14 ABS material counterclaim or set-off with
respect to accounts receivable
Exhibit 5.16 ABS Registered Rights
Exhibit 5.17 ABS Customer relations
Exhibit 5.18 ABS leased property and assets
Exhibit 5.19 ABS Employees and employee remuneration
Exhibit 5.20 ABS Pending or Threatened Legal, Administrative,
or Other Proceedings or Governmental
Investigation, Exceptions to Compliance
with Laws, Ordinances, Requirements,
Regulations, or Orders
Exhibits 5.21(a)
to 5.21(e) ABS Contract Schedules
Exhibit 5.21(f) ABS Contract Defaults
Exhibit 5.24 ABS Environmental Concerns: Hazardous Waste
Production, Storage, etc.
13.19 ENTIRE AGREEMENT - AMENDMENT. For purposes of this Section,
the term "Agreement" shall include this Agreement and the Exhibits and other
documents attached hereto or described in Section 13.18. This Agreement, and
other documents delivered pursuant to this Agreement, contain all of the terms
and conditions agreed upon by the parties relating to the subject matter of
this Agreement and supersede all prior and contemporaneous agreements, letters
of intent, representations, warranties, disclosures, negotiations,
correspondence, undertakings and communications of the parties, oral or
written, respecting that subject matter.
13.20 AUTHORITY TO SIGN. Each of the persons signing below on behalf
of any party hereby represents and warrants that s/he or it is signing with
full and complete authority to bind the party on whose behalf of whom s/he or
it is signing, to each and every term of this Agreement.
13.21 EXECUTION OF DOCUMENTS. The parties hereto agree to execute
and deliver any and all other documents necessary and convenient to effectuate
the exchange of stock herein provided for, and Shareholder as an inducing
condition, represent that it has the authority to enter into this Agreement
and to make the foregoing commitments for itself.
13.22 TIME. Time is of the essence of this Agreement and each of its
provisions.
IN WITNESS WHEREOF, the parties have signed the Agreement the date and
year first above written.
GLOBAL ALASKA INDUSTRIES, INC.,
ATTEST: An Alaska corporation
/s/ Stephen A. Crisham By: /s/ Stephen G. Calandrella
- ------------------------- ------------------------------------------
Stephen A. Crisham Stephen G. Calandrella, President
ALASKA BINGO SUPPLY, INC.,
ATTEST: An Alaska corporation
/s/ Stephen A. Crisham By: /s/ Mark Griffin
- ------------------------- ------------------------------------------
Mark Griffin, President
SHAREHOLDER:
/s/ Mark Griffin
------------------------------------------
MARK GRIFFIN, individually
D:\GLOBAL\DOCUMENT\GAI!SP&S.ABS
<PAGE>
The Securities in the form of the Convertible Promissory Note of GLOBAL ALASKA
INDUSTRIES, INC. have not been registered under the Securities Act of 1933, as
amended, or under any state securities laws. Such securities cannot be sold,
transferred, assigned or otherwise disposed, except in accordance with the
Securities Act of 1933, as amended, and applicable state securities laws.
CONVERTIBLE PROMISSORY NOTE
$4,000,000 Anchorage, Alaska
August 1, 1997
FOR VALUE RECEIVED, GLOBAL ALASKA INDUSTRIES, INC., an Alaskan
corporation, and its successors and assign, (the "Maker") promises to pay to
the order of MARK GRIFFIN at 3707 Woodland Drive, #4, Anchorage, Alaska 99517,
or at such other place as Holder may from time to time designate in writing,
the principal sum of Four Million Dollars ($4,000,000.00) in lawful money of
the United States of America, together with interest on so such thereof as is
from time to time outstanding at the rate hereinafter provided, and payable as
hereinafter provided.
1. INTEREST RATE.
-------------
The unpaid principal balance of this Note shall bear interest
commencing on the date of this Note as the rate eight percent (8%) per annum,
simple interest.
2. PAYMENT.
-------
Principal and interest due under this Note shall be payable as
follows:
a. The sum of Twenty-Five Thousand Dollars ($25,000.00)
shall be due on or before October 15, 1997;
b. Commencing on or before November 15, 1997 and
continuing thereafter until the Note is paid in full, the
principal and accrued interest shall be payable in equal
monthly installments of $63,383.72 each. Interest shall
be calculated from the date hereof and interest accrued
for the period commencing the date hereof and ending
November 15, 1997 shall be amortized under the term of the
Note.
c. In addition to the regular monthly installments
provided for herein, Maker shall be obligated to prepay
the principal balance of the Note to the extent of and in
an amount equal to fifty percent (50%) of Maker's annual
earnings before interest, taxes, depreciation and
amortization ("EBITDA"), in excess of $1,800,000 per year
(the "Mandatory Prepayment").
3. MATURITY DATE.
-------------
The total outstanding principal balance hereof, together
with accrued and unpaid interest, shall be due and payable in full
seven (7) years from the date hereof.
4. DEFAULT INTEREST AND ATTORNEY FEES.
----------------------------------
Any default in the provisions of that certain Stock
Purchase and Sales Agreement executed and entered into
contemporaneous with this Convertible Promissory Note for which
consideration is being given, shall be deemed a breach of and
default in the terms and conditions of this Note. Said Stock
Purchase and Sale Agreement is hereby incorporated herein by
reference as stating Maker's obligations and continuing
responsibility during the term of this Promissory Note, in addition
to the specific terms and provisions stated herein.
Default shall include, but not be limited to, non-payment
of any respective installment and/or applicable late payment penalty
within ten (10) days of the due date thereof. In the event that any
installment and/or applicable late payment penalties have not been
paid to and erceived by the Holder within ten (10) days of date due,
Holder may declare a default and may further declare the entire then
outstanding balance due and owing; fully accelerating total payments
of all principal, penalties, and interest thereon.
In the event any payment due hereunder shall not have been
paid to and received by the Holder hereof within seven (7) business
days of the due date of such payment, a late payment penalty of Ten
Thousand Dollars ($10,000.00) shall immediately become due and owing
in addition to the payment, or payments then overdue.
Upon default hereunder, the balance of the principal
remaining unpaid, interest accrued thereon, and all other costs and
fees shall bear interest at the rate of Twelve percent (12%) per
annum from the date of default, or the date of advance, as
applicable. Holder shall have the right to immediately seize, and
take possession thereof, of any and all collateral, inventory,
furniture, fixtures and equipment, as well as accounts receivables
and assets given as security for this sale and purchase evidenced by
the terms of this Promissory Note and the attendant Stock Purchase
and Sales Agreement incorporated herein. In the event of default,
the Maker and all other parties liable hereon agree to pay all costs
of collection, seizure of security interest given, including
reasonable attorney's fees.
5. ESCROW.
------
All original documents executed herewith, to include Stock
Purchase and Sales Agreement, this Promissory Note, and the original
executed stock in Alaska Bingo Supply, Inc. shall be placed in
escrow with the First National Bank of Anchorage, Main Branch, with
all payments made pursuant to the agreement of the parties being
paid and recorded through said escrow.
6. CONVERSION.
----------
a. OPTIONAL CONVERSION RIGHT.
-------------------------
Subject to and in compliance with the provisions of
this paragraph 6, up to $2,500,000 of the principal amount
outstanding on the Note may, at the option of the holder thereof, be
converted into fully-paid and non-assessable shares of common stock
of the Company's parent corporation, GLOBAL CASINOS, INC., a Utah
corporation ("Common Stock"), $.05 par value.
b. TIME OF OPTIONAL CONVERSION.
---------------------------
The date upon which the holder may convert the Note
to common stock shall be any time commencing the earlier of (i) one
year from the date hereof or (ii) the effective date of a
registration statement registering for sale under the Securities Act
of 1933, as amended, the issuance of the Common Stock upon
conversion, through and including the Maturity Date or the Notes
prior prepayment, whichever occurs first.
c. APPLICABLE CONVERSION VALUE.
---------------------------
Subject to the adjustments provided for herein, the
price per share at which the Note may be converted into common stock
(the "Applicable Conversion Value") shall be ten dollars ($10.00)
per share of Common Stock.
d. ADJUSTMENT FOR CAPITAL REORGANIZATION,
RECLASSIFICATION OR TRANSFER OF ASSETS.
--------------------------------------
In the event the Common Stock issuable upon
conversion of the Note shall be changed into the same or different
number of shares of any class or classes of stock, whether by
capital reorganization, reclassification or otherwise, or in the
event the Company shall at any time issue Common Stock by way of
dividend or other distribution on any stock of the Company, or
subdivide or combine the outstanding shares of Common Stock, then in
each such event the noteholder shall have the right thereafter to
exercise such Note and receive the kind and amount of shares of
stock and other securities and property receivable upon such
reorganization, reclassification or other change by holders of the
number of shares of Common Stock into which such Note might have
been exercised immediately prior to such reorganization,
reclassification or change. In the case of any such reorganization,
reclassification or change, the Conversion Value shall also be
appropriately adjusted so as to maintain the aggregate Conversion
Value. Further, in case of any consolidation or merger of the
Company with or into another corporation in which consolidation or
merger the Company is not the continuing corporation, or in case of
any sale or conveyance to another corporation of the property of the
Company as an entirety, or substantially as an entirety, the Company
shall cause effective provision to be made so that the noteholder
shall have the right thereafter, by converting the Note, to purchase
the kind and amount of shares of stock and other securities and
property receivable upon such consolidation, merger, sale or
conveyance by holders of the number of shares of Common Stock into
which such Note might have been exercised immediately prior to such
consolidation, merger, sale or conveyance, which provision shall
provide for adjustments which shall be as nearly equivalent as may
be practicable to the adjustments provided for Agreement. The
foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or
conveyances. Notwithstanding the foregoing, no adjustment of the
Conversion Value shall be made as a result of or in connection with
(1) the issuance of Common Stock of the Company pursuant to options,
warrants and share purchase agreements now in effect or hereafter
outstanding or created, (2) the establishment of option plans of the
Company, the modification, renewal or extension of any plan now in
effect or hereafter created, or the issuance of Common Stock upon
exercise of any options pursuant to such plans, (3) the issuance of
Common Stock in connection with an acquisition, consolidation or
merger of any type in which the Company is the continuing
corporation, or (4) the issuance of Common Stock in consideration of
such cash, property or service as may be approved by the Board of
Directors of the Company and permitted by applicable law.
e. CONTINUATION OF TERMS.
---------------------
Upon any reorganization, consolidation or merger
referred to in this paragraph 6, the Note shall continue in full
force and effect until conversion by the holder thereof and the
terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the conversion of any Note
after the consummation of such reorganization, consolidation, merger
or any similar event and shall be binding upon the issuer of any
such stock or other securities, including, in the case of any such
transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person
shall have expressly assumed the terms of the Note.
f. EXERCISE OF CONVERSION PRIVILEGE.
--------------------------------
To exercise its conversion privilege or in the event
of the automatic conversion of the Note, the holder of the Note
shall surrender such Note being converted to the Company at its
principal office, and shall give written notice to the Company at
that office that such holder is delivering the Note for conversion.
Such notice shall also state the name or names (with address or
addresses) in which the certificate or certificates for shares of
common stock issuable upon such conversion shall be issued. The
Note surrendered for conversion shall be accompanied by proper
assignment thereof to the Company or in blank.
g. NOTICE OF RECORD DATE.
---------------------
In the event of:
(1) any taking by the Company of a record of the
holders of any class of securities for the purpose of
determining the holders thereof who are entitled to
receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other
securities or property, or to receive any other
right, or
(2) any capital reorganization of the Company, any
reclassification or recapitalization of the capital
stock of the Company, any merger or consolidating of
the Company, or a transfer of all or substantially
all of the assets of the Company to any other
corporation, or any other entity or person, or
(3) any voluntary or involuntary dissolution,
liquidation or winding up of the Company,
then and in each such event the Company shall mail or cause to be
mailed to the holder a notice specifying (i) the date on which any
such record is to be taken for the purpose of such dividend,
distribution or right and a description of such dividend,
distribution or right, (ii) the date on which any such
reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up is
expected to become effective and (iii) the time, if any, that is to
be fixed, as to when the holders of record of common stock (or other
securities) shall be entitled to exchange their shares of common
stock (or other securities) for securities or other property
deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution,
liquidation or winding up. Such notice shall be mailed at least
thirty (30) days prior to the date specified in such notice on which
such action is to be taken.
h. In the event Holder exercises the right of conversion
granted herein, if the underlying shares of common stock (the
"Conversion Shares") are not eligible to be resold in market
transactions in reliance upon Rule 144, or a successor rule, under
the Securities Act of 1933, as amended (the "Securities Act"), then
Holder shall have a one-time demand registration right on Form S-3
to have registered for resale under the Securities Act the
Conversion Shares of common stock issuable upon such conversion.
7. INTEREST CALCULATION.
--------------------
Daily interest shall be calculated on a 365-day year and
the actual number of days in each month.
8. PREPAYMENT.
----------
In addition to the Mandatory Prepayment provided for
herein, this Note may be prepaid, in whole or in part, at any time
without premium or penalty. The Company may exercise its right to
prepay all or a portion of the outstanding principal balance by
sending to Holder thirty (30) days' prior written notice of such
prepayment; whereupon a Holder may elect, pursuant to the Agreement,
to convert all or a portion of the principal balance called for
prepayment at any time prior to the date next preceding the
prepayment date, at the conversion value then in effect.
9. NONRECOURSE OBLIGATION.
----------------------
The obligation of Maker to pay all sums of principal,
interest and other amounts due and owing under this Note is secured
by (i) a Stock Pledge Agreement of even date herewith covering one
hundred percent (100%) of the issued and outstanding shares of
common stock of ALASKA BINGO SUPPLY, INC., an Alaskan corporation
("ABS"); and (ii) a General Security Agreement and Financing
Statement covering all of the tangible and intangible assets of ABS.
This Note and Maker's obligation hereunder shall be deemed to be
nonrecourse as to Maker; and in the event of Maker's default
hereunder, Holder's sole and exclusive remedies shall be to exercise
its rights under the Stock Pledge Agreement and General Security
Agreement, and under no circumstances shall Maker have any liability
for any deficiency which may result following Holder's exhaustion of
such remedies.
Upon default of any provision referenced herein, Holder
may immediately retake all documents held in escrow, with or without
notice, seize and take possession of all collateral and assets given
as security for and in consideration of the terms and conditions of
this Promissory Note.
10. COSTS OF COLLECTION.
-------------------
Maker agrees that if, and as often as, this Note is placed
in the hands of an attorney for collection or to defend or enforce
any of Holder's rights hereunder or under any instrument securing
payment of this Note, Maker shall pay to Holder its reasonable
attorneys' fees and all court costs and other expenses incurred in
connection therewith, regardless of whether a lawsuit is ever
commenced or whether, if commenced, the same proceeds to judgment or
not. Such costs and expenses shall include, without limitation, all
costs, reasonable attorneys' fees, and expenses incurred by Holder
in connection with any insolvency, bankruptcy, reorganization,
foreclosure, deed in lieu of foreclosure or similar proceedings
involving Maker or any endorser, surety, guarantor, or other person
liable for this Note which in any way affect the exercise by Holder
of its rights and remedies under this Note, or any other document or
instrument securing, evidencing, or relating to the indebtedness
evidenced by this Note.
11. APPLICATION OF PAYMENTS.
-----------------------
Any payment made against the indebtedness evidenced by
this Note shall be applied against the following items in the
following order: (1) costs of collection, including reasonable
attorney's fees incurred or paid and all costs, expenses, default
interest, late charges and other expenses incurred by Holder and
reimbursable to Holder pursuant to this Note (as described herein);
(2) default interest accrued to the date of said payment; (3)
ordinary interest accrued to the date of said payment; and (4)
finally, outstanding principal.
12. ASSIGNMENT OF NOTE.
------------------
This Note may be assigned by Maker to any entity that
acquires Maker or substantially all of Maker's assets.
13. NON-WAIVER.
----------
No delay or omission on the part of Holder in exercising
any rights or remedy hereunder shall operate as a waiver of such
right or remedy or of any other right or remedy under this Note. A
waiver on any one or more occasion shall not be construed as a bar
to or waiver of any such right and/or remedy on any future occasion.
14. MAXIMUM INTEREST.
----------------
In no event whatsoever shall the amount paid, or agreed to
be paid, to Holder for the use, forbearance, or retention of the
money to be loaned hereunder ("Interest") exceed the maximum amount
permissible under applicable law. If the performance or fulfillment
of any provision hereof, or any agreement between Maker and Holder
shall result in Interest exceeding the limit for Interest prescribed
by law, then the amount of such Interest shall be reduced to such
limit. If, from any circumstance whatsoever, Holder should receive
as Interest an amount which would exceed the highest lawful rate,
the amount which would be excessive Interest shall be applied to the
reduction of the principal balance owing hereunder (or, at the
option of Holder, be paid over to Maker) and not to the payment of
Interest.
15. PURPOSE.
-------
Maker certifies that the loan evidenced by this Note is
obtained for business or commercial purposes and that the proceeds
thereof will not be used primarily for personal, family, household,
or agricultural purposes.
16. WAIVER OF PRESENTMENT.
---------------------
Maker and the endorsers, sureties, guarantors and all
persons who may become liable for all or any part of this obligation
shall be jointly and severally liable for such obligation and hereby
jointly and severally waive presentment and demand for payment,
notice of dishonor, protest and notice of protest, and any and all
lack of diligence or delays in collection or enforcement hereof.
17. GOVERNING LAW.
-------------
As an additional consideration for the extension of
credit, Maker and each endorser, surety, guarantor, and any other
person who may become liable for all or any part of this obligation
understand and agree that the loan evidenced by this Note is made in
the State of Alaska and the provisions hereof will be construed in
accordance with the laws of the State of Alaska, and such parties
further agree that in the event of default this Note may be enforced
in any court of competent jurisdiction in the State of Alaska, and
they do hereby submit to the jurisdiction of such court regardless
of their residence or where this Note or any endorsement hereof may
be executed.
18. BINDING EFFECT.
--------------
The term "Maker" as used herein shall include the original
Maker of this Note and any party who may subsequently become liable
for the payment hereof as an assumer with the consent of the Holder,
provided that Holder may, at its option, consider the original Maker
of this Note alone as Maker unless Holder has consented in writing
to the substitution of another party as Maker. The term "Holder" as
used herein shall mean Holder or, if this Note is transferred, the
then Holder of this Note.
19. RELATIONSHIP OF PARTIES.
-----------------------
Nothing herein contained shall create or be deemed or
construed to create a joint venture or partnership between Maker and
Holder, Holder is acting hereunder as a lender only.
20. SEVERABILITY.
------------
Invalidation of any of the provisions of this Note or of
any paragraph, sentence, clause, phrase, or word herein, or the
application thereof in any given circumstance, shall not affect the
validity of the remainder of this Note.
21. AMENDMENT.
---------
This Note may not be amended, modified, or changed, except
only by an instrument in writing signed by both of the parties.
22. TIME OF THE ESSENCE.
-------------------
Time is of the essence for the performance of each and
every obligation of Maker hereunder.
IN WITNESS WHEREOF, the undersigned has executed this Note this
1st day of August, 1997.
GLOBAL ALASKA INDUSTRIES, INC.,
an Alaskan corporation
/s/ Stephen A. Crisham By: /s/ Stephen G. Calandrella
- ---------------------- -------------------------------
Witness Stephen G. Calandrella
President
<PAGE>
STOCK PLEDGE AGREEMENT
THIS AGREEMENT made and entered into this 1st day of August, 1997, by and
between GLOBAL ALASKA INDUSTRIES, INC., an Alaska corporation, hereafter
referred to as "Pledgor," and MARK GRIFFIN, hereinafter referred to as
"Pledgee."
WITNESSETH
WHEREAS, Pledgor is indebted to Pledgee in the principal amount of Four
Million Dollars ($4,000,000.00) pursuant to a promissory note of even date
herewith (the "Promissory Note"); and
WHEREAS, the Pledgor has agreed to pledge certain stock with the Pledgee
as security for the repayment of the Promissory Note;
NOW, THEREFORE, in consideration of the mutual covenants hereinbelow set
forth, the parties agree as follows:
1. PLEDGE.
------
In consideration of the indebtedness set forth in the Promissory
Note, the Pledgor hereby grants a security interest to the Pledgee in the
following shares (the "Shares") of the capital stock of ALASKA BINGO SUPPLY,
INC., an Alaska corporation ("ABS" or the "Corporation"), as evidenced by
instruments of the following description:
<TABLE>
<CAPTION>
Certificate Shares of
Name Number Capital Stock
---- ----------- --------------
<S> <C> <C>
ALASKA BINGO SUPPLY, Inc. 1 500
</TABLE>
herewith delivered to the Pledgee. The Pledgee shall hold the pledged shares
as collateral security for the repayment of the indebtedness of Pledgor to the
Pledgee pursuant to the Promissory Note. The Pledgee shall hold the pledged
shares as security and shall not encumber or dispose of said shares except in
accordance with the provisions of this Agreement.
2. DIVIDENDS.
---------
During the term of this pledge, and for so long as the Promissory
Note is not in default, all dividends and other amounts received by the
Pledgor as a result of his record ownership of the pledged shares shall be the
sole and separate property of Pledgor; and Pledgee shall not have any right,
title, or interest therein.
3. VOTING RIGHTS.
-------------
During the term of this pledge, and so long as Pledgor is not in
default in the performance of any of the terms of this Agreement or in the
payment of any principal or interest under the Promissory Note the Pledgor
shall have the right to vote the pledged shares on all corporate questions.
4. REPRESENTATIONS.
---------------
The Pledgor warrants and represents that there are no restrictions
upon the transfer of any of the pledged shares, other than may appear on the
face of the certificates, and other than on account of federal and state
securities laws. Except the foregoing, Pledgor is the true and lawful
beneficial owner of the Shares, free of any claims, liens, or encumbrances,
and Pledgor has the right to transfer such shares except as may hereinabove be
expressly provided.
5. ADJUSTMENTS.
-----------
In the event that, during the term of this pledge, any share
dividend, reclassification, readjustment, or other change is declared or made
in the capital structure of the Corporation which has issued the pledged
shares, all new, substituted additional shares or other securities, issued by
reason of any such change shall be held by the Pledgee under the terms of this
Agreement in the same manner as the shares originally pledged hereunder.
6. TERMINATION.
-----------
This Pledge Agreement shall terminate upon the full and satisfactory
discharge by the Pledgor of the Promissory Note. So long as there may exist
any indebtedness or obligation under the Promissory Note this Agreement shall
remain in full force and effect. Upon the termination of this Agreement, the
Pledgee shall return to the Pledgor all of the shares then remaining covered
by this pledge and all rights received by the Pledgee as a result of this
Agreement shall terminate.
7. DEFAULT.
-------
Default of this Agreement shall be deemed to have occurred in the
event that there is a default under the terms of the Promissory Note.
8. REMEDIES UPON DEFAULT.
---------------------
IN WITNESS WHEREOF, the parties have signed the Agreement the date and
year first above written.
PLEDGOR:
GLOBAL ALASKA INDUSTRIES, INC.,
an Alaska corporation
Attest:
/s/ Stephen A. Crisham /s/ Stephen G. Calandrella
- ------------------------ ---------------------------
PLEDGEE:
MARK GRIFFIN
/s/ Mark Griffin
--------------------------
<PAGE>
GENERAL SECURITY AGREEMENT
1. DEBTOR: GLOBAL ALASKA INDUSTRIES, INC.
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
Address of Debtor's chief executive office (if different):
---------------------------------------------------
---------------------------------------------------
2. CREDITOR: MARK GRIFFIN
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
Individually and as Agent for the below - described Creditor:
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
(collectively, the "Creditor")
3. COLLATERAL:
A. TYPE (Indicate which types of collateral are being pledged.)
X EQUIPMENT:
- -------- ---------
All Equipment of Debtor now owned or hereafter acquired including
but in no way limited to furniture or machinery of all sorts,
fixtures and the property described on the attached list,
accessories, accessions, replacements and substitutions
therefore, together with all attachments thereto.
(FIXTURES TO BE FILED IN REAL ESTATE RECORDS)
----- -------------------------------------------
X INVENTORY:
- -------- ---------
All Inventory of Debtor, now owned or hereafter acquired wherever
located. All goods of like kind or type hereafter acquired by
Debtor in substitution or replacement thereof now owned or
hereafter acquired;
X ACCOUNTS:
- -------- --------
All Accounts of Debtor, now existing or hereafter created.
Accounts means all accounts receivable, created from the sale of
goods and instruments relating to any such accounts, all
guaranties and other collateral held by Debtor as security for or
with respect to any of the foregoing and proceeds thereto, all
indebtedness and all obligations, whether now existing or
hereafter arising, due or to become due Debtor, and all rights to
payment, whether now existing or hereafter arising, and proceeds
thereof, whether or not earned, for or on account of Debtor sold
or to be sold or for or on account of services rendered or to be
rendered by Debtor and all invoices, contracts, claims,
instruments, agreements, accounts, whether now existing or
hereafter arising and proceeds thereof, whether or not earned,
for or on account of Debtor sold or to be sold evidencing or
representing any such indebtedness, obligations or rights and all
amendments, modifications and supplements to any such invoice,
contract, claim, instrument, agreement or account; and all
guaranties and other collateral held by Debtor as security for
or with respect to any of the foregoing; and other property,
rights or interests of Debtors, which shall at any time come into
the possession, custody or control of the Creditor for any
purposes and in any manner; and the proceeds, products, additions
and accessions of and to any of the foregoing;
X GENERAL INTANGIBLES:
- -------- -------------------
All intangible personal property of the Debtor now owned or
hereafter acquired including but in no way limited to contracts,
claims, credits, choses in action, insurance claims, licenses,
license royalties, leases, permits, trademarks, patents, patent
rights, copyrights, customer lists, computer software, interests
in partnership and joint ventures, tax refunds, bank accounts,
lawsuits, amounts due or to become due, all rights to payment of
any type whether in kind or in cash and any other benefits under
any current or future governmental program; and
AGRICULTURAL PRODUCTS:
- -------- ---------------------
All crops, livestock and other agricultural goods and farm
products described below whether now owed or hereafter acquired:
B. OTHER PROPERTY:
--------------
Any other property, rights or interest of Debtor which shall at any
time come into the possession, custody, or control of Creditor for
any purpose or in any manner and all property similar to that
described above now owned or hereafter acquired by the Debtor
including, but not limited to additions, substitutions,
replacements, progeny of livestock and the product, proceeds,
additions and accessions of and to any of the foregoing.
C. LOCATION:
--------
Wherever located and including but not limited to collateral located
as follows (need legal description if fixtures is checked).
Description of Property Location
----------------------- --------
<PAGE>
4. OBLIGATIONS:
(a) All indebtedness evidenced and created by the following described
promissory Note (the "Note") payable to the order of Creditor, and
all refinancings, renewals, restatements, and extensions thereof,
and all amendments and modifications thereto and all promissory
notes issued in substitution therefor:
<TABLE>
<CAPTION>
Date Amount Maturity Date Maker
(if other than
Debtor)
<S> <C> <C> <C>
A. August _______, $4,000,000 August _______,
1997 2004
</TABLE>
and
(b) All indebtedness or obligations of Debtor to the Creditor, direct or
indirect, absolute or contingent, now existing or hereafter arising,
including, but not limited to, the performance and observance of any
term or condition of this Agreement, and
(c) All expenditures made or incurred by the Creditor to protect and
maintain the Collateral and to enforce its rights under the Note and
this Agreement, as more fully set forth herein.
5. SECURITY INTEREST: Debtor hereby grants to the Creditor a security
interest in the Collateral. The security interest is given to secure the
payment and performance of the Obligations. Unless the context otherwise
indicates, the terms "General Intangibles," "Equipment,"
"Inventory,""Fixtures," "Furniture," or "Account" or "Accounts" in this
Agreement refers to that part of the Collateral consisting of such
property. Inventory shall include goods of Debtor in the hands of
manufacturers or suppliers or in the process of delivery to Debtor or any
agent or representative of Debtor.
Where permitted under applicable law, Creditor hereby acquires a
purchase money security interest in the Collateral.
7. WARRANTIES AND REPRESENTATIONS: Debtor warrants and represents to the
Creditor:
(a) Except for the security interest created by this Agreement, and
except for the security interest held by MARK GRIFFIN securing the
repayment of that certain promissory note in the principal amount of
$4,000,000, Debtor is the owner of all the Collateral or will be at
the time such Collateral is created or acquired, free and clear of
all liens, security interests and encumbrances;
(b) Except as otherwise indicated by Debtor to the Creditor in writing,
at the time any property of any type becomes subject to the security
interest granted in this Agreement Debtor will be the owner of such
property with the absolute right to transfer any interest therein,
and if the property is on Account, the Account will be a valid
obligation of the Account debtor, enforceable in accordance with its
terms and to the best of Debtor's knowledge and belief, free and
clear of all liens, security interests, restrictions, setoffs,
adverse claims, assessments, defaults, prepayments, defenses and
conditions precedent other than the security interest created by
this Agreement;
(c) The unpaid amount and all other information shown relating to all
Accounts in Debtor's books and on any schedule, certificate or
report at any time given by Debtor to the Creditor is and will be
true and correct as of the date indicated;
(d) All chattel paper, documents and instruments which are part of the
Collateral are valid and genuine and comply with applicable laws
concerning form, content and manner of preparation and execution,
and all persons appearing to be obligated thereon have authority and
capacity to contract and are bound as they appear to be;
(e) No financing statement covering any of the Collateral is on file in
any public office other than those which reflect the security
interest created by this Agreement;
(f) If Debtor is a corporation or partnership, its articles of
incorporation or certificate and bylaws or its partnership agreement
do not prohibit any term or condition of this Agreement;
(g) The execution and delivery of this Agreement will not violate any
laws or agreement governing Debtor or to which Debtor is a party;
and
(h) All information and statements in this Agreement are and will
continue to be true and correct.
8. COVENANTS OF DEBTOR: Unless and until the Creditor expressly consents to
another course of action:
(a) Debtor shall, at such intervals and in such form and manner as the
Creditor may require, execute, deliver and otherwise provide the
Creditor with schedules confirming or assigning to the Creditor the
Accounts or other Collateral herein described and intended to be
covered by this Agreement and copies of invoices, evidences of
shipment or delivery and such other information, including aging and
reconciliation reports, as the Creditor may deem necessary or
advisable. Additionally, Debtor shall from time to time execute
financing statements and other documents in form satisfactory to the
Creditor (and pay the cost of filing or recording them in whatever
public offices the Creditor deems necessary or advisable) and
perform such other acts as the Creditor may request to perfect and
maintain a valid properly perfected security interest in the
Collateral;
(b) At the Creditor's request Debtor shall mark or stamp each of its
individual ledger sheets or cards pertaining to Accounts with the
legend "For value received, this Account has been assigned to the
Creditor," and shall stamp or otherwise mark and keep its books and
records relating to the Collateral in such manner as the Creditor
may deem necessary or advisable;
(c) Debtor shall (i) keep such books and records pertaining to the
Collateral, and at such office or offices of Debtor, as may be
satisfactory to the Creditor, (ii) permit representatives of the
Creditor at all reasonable times to inspect the Collateral, and to
inspect and make abstracts from Debtor's books and records
pertaining or relating to the Collateral, and (iii) from time to
time prepare or cause to be prepared and deliver to the Creditor all
financial statements, reports and data requested by the Creditor, at
such times and in such form as may be satisfactory to the Creditor;
(d) Debtor shall give such written notice to Account debtors as the
Creditor may at time request. The Creditor may at any time, whether
or not an Event of Default exists under this Agreement, (i) notify
any Account debtor of the Creditor's interest in the Collateral,
(ii) request information as to the Collateral from any Account
debtor, and (iii) notify an Account debtor to make all payments with
respect to the Collateral directly to the Creditor or in any other
manner directed by the Creditor;
(e) Debtor shall (i) not sell, transfer, lease, abandon, assign or
otherwise dispose of any of the Collateral or any interest therein
(except that Inventory may be sold in the ordinary course of
business) or any other material asset of the Debtor; (ii) not permit
the Collateral to become a part of or to be affixed to any real or
personal property without first making arrangements satisfactory to
the Creditor to protect the Creditor's security interest therein;
(iii) promptly notify the Creditor of any Event of Default or any
event which with the giving of notice of passage of time a failure
to cure could become an Event of Default, as defined in
paragraph 12; (iv) defend the Collateral against the claims and
demands of all persons; and (v) pay promptly all taxes and
assessments with respect to the Collateral;
(f) Debtor shall carry such insurance on the Collateral as may be
satisfactory to and may be requested by the Creditor. If requested
by the Creditor all insurance policies shall be written for the
benefit of Debtor and the Creditor as their interests may appear,
shall provide for 30 days' written notice to the Creditor prior to
cancellation and shall be deposited with the Creditor. The Creditor
may act as attorney for Debtor in making adjusting and settling
claims under or cancelling such insurance and endorsing Debtor's
name on any draft relating thereto. The Creditor in its sole
discretion may apply any proceeds of insurance towards payment of
the Obligations, whether or not due, in any order of priority;
(g) Debtor shall duly pay and discharge all taxes, assessments, and
governmental charges prior to the date on which penalties are
attached thereto unless and to the extent only that the same shall
be contested in good faith and by appropriate proceedings, and
promptly pay all bills, immediately notifying Creditor of inability
to do so;
(h) At its option, the Creditor may discharge taxes, liens, security
interests and other encumbrances against the Collateral and may pay
for the repair of any damage to the Collateral, the maintenance and
preservation thereof and insurance thereon. Debtor shall reimburse
the Creditor on demand for any payments so made, plus interest of
such payment. Any such payments by the Creditor shall be a fixed
indebtedness of Debtor to the Creditor, secured by the Collateral
even if such payments cause the total outstanding indebtedness of
Debtor to exceed Debtor's loan limit;
(i) Debtor shall not incur or permit to be outstanding any indebtedness
for borrowed money except (i) indebtedness to the Creditor,
(ii) current obligations incurred in the ordinary course of business
and (iii) other indebtedness for which the Creditor has given or may
in the future give its express consent;
(j) Debtor shall not pledge, mortgage or otherwise encumber, or create
or permit a security interest to exist in any of the Collateral or
any other asset of the Debtor, to or in favor of anyone other than
the Creditor, and shall keep the Collateral in good condition and
repair;
(k) Except for temporary processing or storage, all Collateral,
including without limitation Inventory, shall be kept at Debtor's
address or addresses listed on the first page of this Agreement or
at such other location as shall be satisfactory to the Creditor;
(l) Debtor shall report to Creditor any change in the location of any
portion of the Collateral;
(m) If Debtor is a partnership or corporation it shall not change its
name, the name under which it is doing business or corporate
structure without providing prior notice thereof to the Creditor;
(n) A carbon, photographic, or other reproduction of this Security
Agreement, or any Financing Statement executed in connection
herewith, is sufficient as a Financing Statement and may be filed or
recorded as such in any office where a Financing Statement on the
Collateral described herein may be filed;
(o) Debtor hereby expressly grants Secured Party a power of attorney,
and appoints and constitutes Secured Party as Debtor's agent, for
the purpose and with the power to sign on behalf of Debtor and in
Debtor's name, one or more Financing Statements covering any of the
Collateral described herein; and
(p) These covenants are hereby supplemented by those set forth in the
Loan Agreement, if executed and delivered in connection herewith.
9. COLLECTION OF ACCOUNTS: Until revocation of this authority, Debtor, as
agent of the Creditor and at the expense of Debtor:
(a) shall endeavor to collect all amounts due and owing on the Accounts,
including the taking of such action to repossess goods, impose liens
or enforce payment as the Creditor or Debtor may deem proper;
(b) shall receive in trust for the account of the Creditor such goods as
may be returned or rejected by or repossessed from Account debtors,
and hold such goods and the proceeds thereof separate as the
Creditor's property, without commingling them with Debtor's
property, and remit promptly any proceeds of sale or lease of such
goods in the manner described in paragraph 10 below; and
(c) may in the ordinary course of business grant to Account debtors any
rebate, refund or allowance to which they are entitled provided that
Debtor shall not compromise any claims after the occurrence of an
Event of Default or an event which with the giving of notice, the
passage of time or failure to cure would become an Event of Default.
10. PAYMENTS OF PROCEEDS TO CREDITOR:
(a) Debtor shall receive all payments with respect to the Collateral in
trust for the Creditor, without commingling them with any other
funds or property of Debtor, and upon the occurrence of an Event of
Default (until such authority is revoked or different instructions
are given by the Creditor) shall immediately deliver them to the
Creditor in the exact form received, bearing Debtor's full-recourse
endorsement or assignment when necessary, for application to the
Obligations in any order of priority determined by the Creditor.
Debtor shall have the liability of a general endorser with respect
to such payments and hereby waives presentment, notice of dishonor,
protest, demand and all other notices with respect thereto, whether
or not Debtor endorses the instruments or other evidences of payment
and regardless of the form of payment or of Debtor's endorsement or
assignment thereon.
(b) At the election of the Creditor, which may be indicated on an
addendum, all payments described in the preceding subparagraph 10.a
shall be deposited in a separate bank account maintained by the
Creditor (the "Pledge Account"), from which Debtor shall have no
right to withdraw funds and from which Debtor agrees to make
available funds to the Creditor if the Creditor specifically
requests same for payment of the Obligations. All instruments
evidencing payments shall be deposited in the Pledge Account subject
to final payments, and all deposits therein shall be held as
security for the Obligations. From time to time in its discretion
the Creditor may apply all or any of the balance in the Pledge
Account to payment of the Obligations in any order of priority
determined by the Creditor. Additionally, the Creditor in its
discretion may release all or any of the balance in the Pledge
Account to Debtor.
11. RIGHTS OF THE CREDITOR:
(a) The Creditor shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral if it takes such
action for that purpose as Debtor shall request, but failure to
honor any such request shall not of itself be deemed a failure to
exercise reasonable care. The Creditor shall not be required to
take any steps necessary to preserve any rights in the Collateral
against parties claiming an interest in the property prior in right
to the Creditor's interest nor to protect, preserve or maintain any
security interest given to secure nor to protect, preserve or
maintain any security interest given to secure any of the
Collateral.
(b) Debtor hereby irrevocably appoints the Creditor as the attorney of
the Debtor, with full powers of substitution and at the cost and
expense of Debtor, to exercise any of the following powers with
respect to any of the Accounts: (i) demand, sue for, collect and
give receipts for any payments due thereon or by virtue thereof;
(ii) receive, take, endorse, assign and deliver chattel paper,
documents, instruments and all other property taken or received by
the Creditor in connection therewith including the right of Creditor
to open mail of the Debtor to obtain checks, instruments and other
payments made on accounts; (iii) settle, compromise, compound,
prosecute or defend any action or proceeding with respect thereto;
(iv) sell, transfer, assign or otherwise deal therein or therewith
as fully and effectually as if the Creditor were the absolute owner
thereof, and (v) extend the time of payment thereof and make
allowances and other adjustments with reference thereto. In
exercising any power herein granted the Creditor may act in its name
or the name of Debtor.
(c) The Creditor shall be under no duty to exercise or to withhold the
exercise of any of the rights, powers, privileges and options
expressly or implicitly granted to the Creditor in this Agreement,
and shall not be responsible for any failure to do so or delay in so
doing.
12. EVENTS OF DEFAULT: Debtor shall be in default under this Agreement upon
the happening of any of the following events or conditions ("Events of
Default"):
(a) Default in the due payment, performance or observance of any of the
Obligations unless cured within any applicable grace period;
(b) Any warranty, representation or statement of Debtor in this
Agreement, or otherwise made or furnished to the Creditor or on
behalf of Debtor, proves to have been false in any material respect
when made or furnished;
(c) Any event which results in the acceleration or maturity of the
obligations indebtedness of Debtor to the Creditor or indebtedness
to any other person under any security or loan agreement, indenture,
note or other undertaking;
(d) Loss, theft or destruction of or substantial damage to any of the
Collateral or the seizure or taking of any of the Collateral by any
government or similar authority, or the issuance of a writ, order of
attachment or garnishment with respect thereto;
(e) Death, dissolution, insolvency (however expressed or indicated),
termination of existence of, appointment of a receiver of any part
of the property of, assignment for the benefits of creditors by, or
the commencement of any proceeding under any bankruptcy,
reorganization, arrangement, insolvency or other law relating to the
relief of debtors by or against, Debtor or any guarantor or surety
for Debtor under any of the Obligations; or
(f) Good faith belief by the Creditor that the Obligations are
inadequately secured or that the prospect of payment, performance or
observance of any of the Obligations is impaired. If the security
interest created by this Agreement is given to secure the
Obligations of a person other than Debtor, an additional Event of
Default shall be the happening of any of the above events or
conditions to, by or with respect to such other person.
13. REMEDIES:
(a) Upon the occurrence of any Event of Default, the Creditor may,
without notice or demand, declare any of the Obligations immediately
due and payable and this Agreement in default, and thereafter the
Creditor shall, inter alia, have the remedies of a secured party
under the Uniform Commercial Code as then in effect in Alaska,
including, without limitation, the right (i) to take possession of
the Collateral not then in its possession and (ii) to have Debtor
assemble such Collateral and make it available to the Creditor at a
place to be designated by the Creditor which is reasonably
convenient to both parties. To take possession, the Creditor may
enter upon any premises and remove the Collateral therefrom. If
notice is required by law, five days prior to notice of the time and
place of any public sale or of the time after which any private sale
or any other intended disposition thereof is to be made shall be
deemed reasonable notice to Debtor.
(b)
(c) As a supplemental or additional remedy, the Creditor shall also be
entitled, without notice or demand and to the extent permitted by
law, (i) to hold, use, operate, manage and control all or any part
of the Collateral; (ii) to demand, collect and retain all earnings,
proceeds and other sums due or to become due with respect to the
Collateral, accounting only for the net earnings arising from such
use and charging against receipts from such use all other costs,
expenses, charges, damage or loss by reason of such use, and
(iii) to exercise or continue to exercise all of the rights granted
to the Creditor in paragraph 11. Notwithstanding the foregoing, the
Creditor shall also be entitled without notice or demand and to the
extent permitted by law, to have a receiver appointed to take charge
of all or any part of the Collateral, exercising all of the rights
granted to the Creditor in this paragraph.
14. GENERAL:
(a) No default shall be waived by the Creditor except in writing and no
waiver of any payment or other right under this Agreement shall
operate as a waiver of any payment or other right under this
Agreement shall operate as a waiver of any other payments or right.
(b) Without affecting any obligations of Debtor under this Agreement
without notice or demand, the Creditor may renew, extend, or
otherwise change the terms and conditions of any of the Obligations,
take or release any other Collateral as security for any of the
Obligations, and add or release any guarantor, endorser, surety or
other party to any of the Obligations.
(c) The Creditor may assign, transfer or deliver any of the Collateral
to any transferee of any of the Obligations, and thereafter shall be
fully discharged from all responsibility with respect to such
Collateral, but the Creditor shall retain all powers and rights
hereunder with respect to any of the Collateral remaining.
(d) This Agreement may be terminated by either party upon ten days'
prior written notice to the other but such termination shall be
effective only as to new Obligations of Debtor subsequently
incurred; as to transactions entered into, rights or interests
created or Obligations created or arising (and refinancings,
renewals, modifications, amendments and extensions thereof, if any),
prior to such termination, this Agreement shall remain fully
effective as if such termination had not occurred.
(e) Any consent of the Creditor and any notice or other communication
from Debtor required or contemplated by this Agreement shall be in
writing. Any written notice intended for Debtor shall be deemed
given if mailed, postage prepaid to Debtor at the address given on
the first page of this Agreement or at such other address given by
notice as herein provided. If intended for the Creditor, notice
shall be deemed given only if actually received by the Creditor.
(f) If there is more than one Debtor, all of the terms and conditions of
this Agreement shall apply to each and every one of them. Delivery
by the Creditor to any Debtor of any of the Collateral shall
discharge the Creditor from any further liability or responsibility
therefor.
(g) This Agreement shall be construed under and governed by the
substantive laws of Alaska without reference to choice of law rules,
including Alaska's, and Debtor hereby consents to personal
jurisdiction in and agrees that any litigation in any way related to
this Agreement shall be brought and prosecuted in a court of
competent jurisdiction sitting in the Anchorage, Alaska and no where
else.
(h) Except as modified by this Agreement and unless the context
otherwise requires, all terms used herein which are defined in the
Uniform Commercial Code as in effect in Alaska shall have the
meanings therein stated.
(i) All of the rights of the Creditor under this Agreement shall be
cumulative and shall inure to the benefit of its successors and
assigns. All obligations of Debtor hereunder shall be binding upon
the heirs, legal representatives, successors and assigns of Debtor.
Dated: August 1, 1997 /s/ Stephen G. Calandrella
----------------------- ---------------------------------
N/A By: President
----------------------------
Secretary, if a Corporate Debtor Title:
[SEAL] ---------------------------------
<PAGE>
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT is made and entered into effective as of
the 1st day of August, 1997, by and between MARK GRIFFIN ("Covenantor") and
GLOBAL CASINOS, INC., a Utah corporation, and its subsidiaries ("Global");
WITNESSETH:
WHEREAS, Covenantor and GLOBAL ALASKA INDUSTRIES, INC., an Alaska
corporation ("GAI"), a wholly-owned subsidiary of Global, have of even date
herewith consummated a Stock Purchase and Sale Agreement dated as of August 1,
1997(the "Agreement"), pursuant to which GAI acquired from Covenantor one
hundred percent (100%) of the issued and outstanding shares of common stock of
ALASKA BINGO SUPPLY, INC., an Alaska corporation ("ABS"); and
WHEREAS, it is understood that GAI intends to hold and operate ABS as a
wholly-owned subsidiary; and
WHEREAS, the parties recognize that Covenantor has expertise in the
business conducted by ABS, the technology to compete in this industry, and the
economic resources to compete in this industry. Therefore, both parties agree
a non-competition agreement is necessary, prudent, and has been bargained for
in respect to the asset purchase;
WHEREAS, in connection with said Agreement, Covenantor has undertaken and
delivered to Global this non-competition agreement; and
WHEREAS, both parties agree the value of such non-competition is
$100,000.00, which is based on an estimate of the loss of earnings that would
occur if Covenantor was in direct competition with ABS;
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
of the parties contained in the Agreement, and for such other good and
valuable consideration, the receipt whereof being hereby acknowledged,
Covenantor covenants and agrees as follows:
1. Except for matters expressly provided for in or contemplated by the
Agreement, and except for the ownership of equity securities of Global,
Covenantor, for herself covenants to and with Global, its subsidiaries,
successors and assigns, that for a period of five (5) years from the date of
this Agreement, it will not without the prior written consent of GAI or
Global, directly or indirectly, either as principal, agent, manager, owner,
partner (dominant or otherwise), stockholder, creditor, consultant or
otherwise solicit, attempt to obtain or assist any other person or entity
other than Global, its subsidiaries, successors in interest and assigns, in
soliciting or attempting to obtain or accept any business or engage or become
interested financially or otherwise, in any business, agency, trade or
occupation similar to or in competition with Global or its subsidiaries; nor
shall Covenantor, for a period of five (5) years from the date of this
Agreement, consult provided services to or enter into any agreement or
arrangement with any other person, firm, corporation or entity that engages in
any business trade, occupation or activity similar to or in competition with
any services or products offered or sold by Global, or its subsidiaries,
without first having obtained Global's express written consent thereto.
Notwithstanding the restrictions set forth in this Agreement, Global consents
to Covenantor's continued participation in the ACGA substantially in the
manner heretofore conducted as well as the continuation by Covenantor of his
current business activities unrelated to the activities of ABS to the extent
that they may involve the sale of pull-tabs for the benefit of third-party
permitees; provided, however, that such sale of pull-tabs may be made only to
the extent that such pull-tabs are purchased by Covenantor from ABS in the
ordinary course of business. Because of the nature of the business, the
parties agree that it is reasonable for the covenant to apply to the entire
geographic area of the State of Alaska. If the geographic area is determined
by a court to be overly broad in scope, it shall be modified only to the
extent necessary to bring it within the requirements of the law and
interpreted to give Global the broadest protection allowed by law.
2. Covenantor further covenants with Global that all information
concerning the customers, clients, contracts, and business of ABS, as well as
the information set forth in Exhibit 5.16 of the Agreement, is confidential
information and will be treated by it as such, and that it will not hereafter,
directly or indirectly, make use of such information or divulge any such
information nor reveal any customer lists or other confidential information to
any other person. The foregoing restrictions on disclosure of information
shall not include (i) information that has properly come into the public
domain, (ii) information learned by Covenantor from a third party without an
obligation of confidentiality, (iii) information gained or learned by
Covenantor independent of and subsequent to the closing of the transactions
covered by the Agreement, (iv) information otherwise protected by applicable
law, such as the information pertaining to patents or copyrights.
3. Covenantor further covenants with Global that it will not directly
or indirectly or permit or encourage others to directly or indirectly, (i)
interfere in any manner whatsoever with Global's contractual or other
relations with any or all of its customers, clients, employees, or
consultants, or (ii) induce or attempt to induce any client, customer,
employee or consultant of Global to cease doing business with Global.
4. Global shall be entitled to confirm that Covenantor is honoring this
agreement and shall have the right to receive a written confirmation from
Covenantor each year that they have not entered into competition with Global.
5. In the event of a breach or threatened breach by Covenantor of any
provisions of this Agreement, Global shall be entitled to an injunction
restraining Covenantor from the commission of such breach. Nothing herein
contained shall be construed as prohibiting Global from pursuing any other
remedies available to it for such breach or threatened breach, including the
recovery of money damages. The covenants contained in this Agreement shall be
construed as independent of any other provisions of the Agreement; and the
existence of any claim or cause of action of Covenantor against Global,
whether predicated on the Agreement or otherwise, shall not constitute a
defense to the enforcement by Global of said covenants.
6. The covenants contained in this Agreement shall terminate, and, upon
termination, shall be unenforceable and of no further legal force and effect
in the event (i) Global breaches the Agreement or ancillary agreements
provided for therein; (ii) Global or any successor to Global, becomes
insolvent; (iii) or ceases for any reason to conduct business operations for a
continuous period of at least ninety (90) days.
7. Global shall have the right to assign the aforesaid covenants; and
Covenantor agrees to remain bound by the terms of the covenants to any and all
subsequent purchasers and assignees of the assets and business of Global.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
MARK GRIFFIN
/s/ Mark Griffin
-----------------------------------------
GLOBAL CASINOS, INC., a Utah corporation
Attest:
/s/ Stephen A. Crisham /s/ Stephen G. Calandrella
- ------------------------- -----------------------------------------
Stephen G. Calandrella, President
