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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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) MAY 22, 1998
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PAN ENVIRONMENTAL CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
DELAWARE 0-19471 91-1632888
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
19239 AURORA AVENUE NORTH, SHORELINE, WASHINGTON 98133
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(Address of Principle Executive Offices) (Zip Code)
Registrant's telephone number, including area code (206) 546-9660
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 22, 1998, PAN Environmental Corporation, a Delaware Corporation
("PAN"), acquired all of the issued and outstanding capital stock of Whitfield
Holdings, Ltd., an Antigua, West Indies corporation ("Whitfield"), pursuant to
an Agreement and Plan of Business Combination, effective as of April 17, 1998,
in exchange for a maximum of 12,800,000 shares of common stock of PAN, subject
to earn-out provisions. The amount of common stock payable by PAN to Whitfield
is subject to earn-out provisions based on the achievement of certain betting
volume, resulting in licensing fees to Whitfield, over a one year period. The
amount and type of consideration was determined on the basis of negotiations
between PAN and Whitfield.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
It is not practicable to provide the required financial statements for
Whitfield at this time. The statements will be filed as an amendment to this
report on Form 8-K as soon as they are prepared and not later than 60 days after
the deadline for filing this Form 8-K.
(b) Pro Forma Financial Information.
It is not practicable to provide the required pro forma financial
statements for PAN at this time. The statements will be filed as an amendment to
this report on Form 8-K as soon as they are prepared and not later than 60 days
after the deadline for filing this Form 8-K.
(c) Exhibits.
10.1 Agreement and Plan of Business Combination by and between PAN and
Whitfield, dated as of April 17, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PAN Environmental Corporation
Date: June 4, 1998 By_______________________________
Jerry Cornwell, President
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EXHIBIT 10.1
AGREEMENT AND PLAN OF BUSINESS COMBINATION
THIS AGREEMENT, entered into this 17th day of April, 1998, by and
between the PAN Environmental Corporation, a Delaware corporation (hereinafter
"PAN"), as Acquiror, and the Whitfield Holdings, Ltd., an Antigua, West Indies
corporation (hereinafter "Whitfield"), as Acquiree:
WHEREAS, PAN desires to acquire all of the issued and outstanding common
stock of Whitfield incident to a tax-free exchange of capital stock of PAN for
all outstanding capital stock of Whitfield upon the terms and conditions
contained herein,
FURTHER WHEREAS, the shareholders of Whitfield desire to exchange their
100% ownership of Whitfield for common stock of PAN to be newly issued by PAN
upon the terms and conditions contained in this Agreement,
FURTHER WHEREAS, the shareholders of Whitfield desire to raise U.S.
$1,000,000 in bridge financing via a private placement of 333,333 shares at
$3.00 per share, and immediately thereafter U.S. $22,500,000 in PAN via a
private placement of 5,000,000 shares at $4.50 per share which is one of their
purposes for entering into this Agreement in addition to becoming a public
company,
NOW THEREFORE, for valuable consideration and upon the mutual
representations, warranties, covenants and agreements and other promises set
forth in writing herein, the parties hereto agree as follows:
1. Plan of Business Combination - It is the agreement and intention of
all parties hereto that all of the issued and outstanding capital stock of
Whitfield owned by any and all shareholders of Whitfield shall be acquired by
PAN hereby in exchange solely for common stock of PAN. It is particularly the
intention of all parties hereto that this transaction qualify as a tax-free
reorganization under Section 368(a)(1)(B) of the Internal Revenue Code of 1954,
as amended, and related sections thereunder.
2. Audits and Financial Statements - Both PAN and Whitfield recognize
the importance of obtaining certified audits of Whitfield Holdings, Ltd..
incident to this Agreement and Plan of Business Combination. These certified
audits will be prepared on a consolidated basis for the combined companies (PAN
and Whitfield) after consummation of this business combination. The officers and
directors of PAN and Whitfield shall take all necessary efforts in a diligent
manner to prepare financial and accounting materials and statements as necessary
to prepare for a consolidated financial statement of the combined operations so
as to position the combined companies to conduct a certified audit to satisfy
registration requirements of the SEC and relevant state security commissions for
a future public or private offering.
AGREEMENT AND PLAN OF
BUSINESS COMBINATION - PAN / Whitfield
Page 1 of 15
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3. Whitfield Acquisition of Gaming Systems - Whitfield has acquired the
gaming system from United, Inc. dba United Race and Sports Book for 10,000
common shares of Whitfield. The gaming system so acquired consists of computer
hardware, computer software, expertise and proprietary systems to operate race
and sports book operations, and telephone communications.
4. Whitfield License-Back of Gaming System Back to United - Whitfield
has licensed back to United the gaming system acquired in paragraph 3 above for
2.4% of the betting volume of United, which should allow United to run a
profitable race and sports book operation given the fact that the 1995 State of
Nevada Gaming Control Board Report entitled Fiscal Year Sports Book Breakdown
for the July 1 through June 30 fiscal years, 1985 through 1997, showed an
average net gaming revenue of 3.39% as an average for all Nevada race and sports
books. (A copy of the Gaming System License Agreement is attached hereto as
Exhibit A.)
5. Exchange of Shares - All parties hereto agree that all Whitfield
common stock presently outstanding shall be exchanged by the shareholders
thereof with PAN for common shares of PAN to be divided among the present
shareholders of Whitfield pro rata in proportion to their shareholdings in
Whitfield. This exchange shall be made on the basis of 12,800,000 PAN common
shares (3,200,000 shares to be issued immediately into Escrow and 9,600,000 to
be reserved for issuance based on performance in paragraph 6 below, upon PAN
Directors' Resolution) for all outstanding capital stock of Whitfield, including
all common shares pursuant to the terms and conditions of the Escrow Agreement
in paragraph 6 below.
6. Escrow Agreement - An Escrow will be set up to receive the PAN common
shares which provides that the Escrow Agent shall release to Stockholders one
share for each $24.9375 of betting volume placed with United resulting in
$0.6225 of license fees payable to Whitfield under paragraph 3 of the License
Agreement. Such betting volume will be jointly verified by PAN, Whitfield and
United. The release of shares will be done on a quarterly basis as defined in
paragraph 7 below and when an aggregate betting volume of eighty three million
dollars ($83,000,000) resulting in one million nine hundred ninety two thousand
dollars ($1,992,000) payable to Whitfield of first year license fees has been
met, the Escrow Agent will release the entire 3,200,000 shares or remainder
thereof. The first year is defined as the first full fiscal year beginning with
the first full calendar quarter following the effective date of the License
Agreement. In the event that the minimum betting volume and license fees are not
met by the end of the first full fiscal year, then the same formula will be
applied for one subsequent fiscal year to earn out any amount in excess of that
earned and paid in the first full fiscal year. Any shares not so earned shall be
returned to PAN. (A copy of the Escrow Agreement is attached as Exhibit B.)
7. Merger and Acquisition Consultant Agreement - Business Combination
Agreement - PAN and Whitfield have agreed to issue 800,000 restricted Rule 144
common shares to TCKTS, L.L.C. and have agreed to pay $50,000.00 in fees for
consulting services rendered incident to the negotiation and execution of this
Agreement. TCKTS, L.L.C. is owned fifty percent (50%) by Jerry Cornwell and
fifty percent (50%) by Clifford M. Johnston. (A copy of the Merger and
Acquisition Consultant Agreement is attached as Exhibit C.)
AGREEMENT AND PLAN OF
BUSINESS COMBINATION - PAN / Whitfield
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8. The $22,500,000 Financing - Because raising $22,500,000 to expand
Whitfield's operations is one of the reasons for Whitfield entering into this
agreement, PAN agrees, subject to the closing of this Agreement, to grant
Whitfield the guaranteed right to raise $22,500,000 in capital by offering
5,000,000 shares of PAN for sale at a guaranteed price for ninety (90) days at
$4.50 per share in a private placement. The shares to be issued in this offering
shall be restricted Rule 144 shares.
This guaranteed right to offer 5,000,000 PAN shares at $4.50 per
share shall expire three (3) months from the date of this Agreement, and the
$4.50 price per share will be guaranteed for the three (3) months.
9. Financial Consultant Agreement - $22,500,000 Financing - PAN has agreed as
of April 17, 1998 to retain Cheong Tat Corporation as its consultant to secure
additional financing for PAN's operations, including equity and/o debt
financing. In consideration of such consulting services, PAN has agreed to pay
Cheong Tat Corporation ten percent (10%) finder's fee or pro rata portion
thereof on a $1,000,000 private placement payable half in stock and half in
cash, and five percent (5%) finder's fee or pro rata portion thereof on a
$22,500,000 private placement payable half in stock and half in cash. (A copy
of the Financial Consulting Agreement is attached as Exhibit D.)
10. Investment Representation - Incident to their voting upon or
otherwise consenting to this business combination agreement, the shareholders of
Whitfield will be required to represent that they are acquiring these restricted
securities of PAN for investment and not with a present intention or view to
resell or redistribute any of them, absent future SEC and relevant state
registration or an appropriate exemption therefrom. The shareholders of
Whitfield also hereby acknowledge that the certificates for PAN common shares to
be issued to the shareholders of Whitfield incident to this business combination
will be legended with appropriate language evidencing such restrictions on
further transfer, sale or disposition thereof.
11. Delivery of Shares - Incident to the closing of this business
combination, the shareholders of Whitfield shall deliver to PAN appropriate
certificates representing all of their shares of Whitfield, which certificates
shall be properly endorsed, so as to make PAN the sole holder and owner of all
Whitfield shares, free and clear of all liens and encumbrances.
12. Closing Date - The Closing Date of this business combination shall
be on May 22, 1998 after final approval by the Board of Directors of the parties
hereto.
13. Representations of PAN- PAN hereby represents and warrants that
effective the date of this Agreement, and as of the Closing Date hereof, the
following statements are true and correct:
(a) As of the Closing Date of this business combination, all PAN
common shares outstanding will constitute validly and legally issued shares in
their entirety, as well as the common shares of PAN to be exchanged with the
shareholders of Whitfield in this business combination, and that all of such
shares shall be fully paid and nonassessable; and that the
AGREEMENT AND PLAN OF
BUSINESS COMBINATION - PAN / Whitfield
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common shares of PAN to the issued hereto will be in all respects equivalent to
the common stock of PAN issued and outstanding as of the date hereof;
(b) The officers of PAN who have executed this Agreement are duly
authorized to execute it on behalf of PAN, and they have taken all action
required by law and the Bylaws of PAN to properly and legally execute and
validate this Agreement;
(c) Any financial statements submitted by any party to this
Agreement, and any such statements to be submitted in the future incident
hereto, shall be complete and accurate for the dates and periods indicated
thereon and fairly present the financial condition of PAN and its operations for
the periods covered; and that there are no material liabilities, either fixed or
contingent, not reflected in such financial statements;
(d) All PAN common stock to be outstanding at the Closing Date
hereof shall not be in any greater amount than has already been disclosed to the
shareholders of Whitfield incident to entering into this Agreement;
(e) There have not been any material changes in the financial
position of PAN since the time that financial position statements have been
submitted in connection with this Agreement, unless they have already been
disclosed to the shareholders of Whitfield incident to negotiating or entering
into this Agreement;
(f) That from the date of this Agreement until the closing of
this business combination, there will not be any negative material change in the
position of PAN;
(g) That PAN is not involved in any pending or threatened
litigation or governmental proceeding or investigation unless reflected in its
financial statements or disclosed in writing to the shareholders of Whitfield;
and to the best knowledge of PAN and its officers, no material litigation,
claims, assessments or governmental investigation or proceeding is threatened
against PAN or any of its properties, or any of its directors or officers
incident to their roles with PAN;
(h) As of the Closing Date of this business combination, PAN will
be in good standing and qualified to conduct business in each state where such
qualification is required;
(i) PAN has paid any and all taxes or assessments due to any
governmental agency incident to its past operations to the date hereof except as
noted in PAN's financial statements;
(j) PAN has complied with all state and federal laws and
regulations regarding its incorporation and formation, past issuances of capital
stock and sale thereof, capitalization, business and operations; and no
contingent liabilities against PAN have been threatened, or claims made against
PAN, and no basis for the same exists, with respect to such incorporation,
formation, business operations, capitalizations, or sales and issuance of
securities;
AGREEMENT AND PLAN OF
BUSINESS COMBINATION - PAN / Whitfield
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(k) PAN has not breached any material agreement or contract to
which it is a party; and the execution of this Agreement will not violate or
breach any material agreement, contract or commitment to which PAN or its
shareholders are parties;
(l) PAN has no outstanding debt other than what has been
disclosed to the shareholders of Whitfield incident to the negotiation and
preparation of this Agreement;
(m) As of the date hereof, and at the Closing Date, PAN to the
best of its ability and knowledge, has disclosed all events, conditions, and
facts materially affecting the business and prospects of Whitfield; and PAN has
not now, and will not as of the Closing Date have, withheld knowledge of any
such events, conditions, and facts which it knows, or has reasonable grounds to
know, may materially affect the business, worth or prospects of Whitfield;
(n) All outstanding shares of capital stock of PAN has been duly
authorized, validly issued and are fully paid and nonassessable with no personal
liability attaching to the ownership thereof;
(o) PAN has not mortgaged, pledged any of its assets, whether
tangible or intangible;
(p) PAN has not sold, assigned or transferred any material
tangible or intangible assets or rights unless already disclosed to the
shareholders of Whitfield incident hereto; nor has it knowingly waived any
rights of material value;
(q) PAN does not have any outstanding warrants, options or other
rights to acquire equity shares or interests in capital stock of PAN;
(r) All corporation minute books and financial records in
existence will be made available to Whitfield for review prior to the closing of
this Agreement;
(s) The records of all issuances and transfers of record of the
common stock of PAN have been maintained by the transfer agent of PAN in good
and current order and accurately reflect the record ownership of all issued and
outstanding common stock of PAN;
(t) That any financial statements submitted by PAN, or to be
submitted by PAN, incident to this business combination have been prepared or
will be prepared, in accordance with generally accepted accounting principles
applied on a consistent basis;
(u) PAN has only one class of capital stock outstanding and all
outstanding common shares have been duly authorized; validly issued and are
fully paid and nonassessable with no personal liability attaching to the
ownership thereof;
(v) Capitalization - PAN has authorized capital stock of
40,000,000 common shares of $0.001 par value per share of which there are
3,218,163 shares currently outstanding and 10,000,000 preferred shares of $3.00
par value per share of which there are no shares currently outstanding.
AGREEMENT AND PLAN OF
BUSINESS COMBINATION - PAN / Whitfield
Page 5 of 15
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14. Representations of Whitfield and shareholders of Whitfield - As of
the date of this Agreement, and as of the Closing Date of this business
combination, Whitfield hereby represents and warrants the following:
(a) As of the Closing Date of this business combination, all
Whitfield common stock will constitute validly and legally issued shares in
their entirety, and that all such shares shall be fully paid and nonassessable;
(b) The officers of Whitfield executing this Agreement are duly
authorized to execute it on behalf of Whitfield, and they have taken all action
required by law and the Bylaws of Whitfield to properly and legally execute and
validate this Agreement;
(c) Any financial statements of Whitfield submitted incident to
this Agreement or in preparation for its closing, shall be complete and accurate
for the dates and periods indicated thereon and fairly present the financial
condition of Whitfield and its operations for the periods covered; and that
there are no material liabilities, either fixed or contingent, not reflected in
such financial statements;
(d) All Whitfield common stock to be outstanding at the Closing
Date hereof shall not be in any greater amount than has already been disclosed
to PAN;
(e) There are no material liabilities, either fixed or
contingent, not disclosed in such financial statements.
(f) There have not been any material changes in the financial
position of Whitfield since the time of executing this Agreement, unless they
have already been disclosed to PAN prior to the Closing Date of this business
combination;
(g) That from the date of this Agreement until the closing of
this business combination, there will not be any negative material change in the
position of Whitfield;
(h) That Whitfield is not involved in any pending or threatened
litigation or governmental proceeding or investigation unless reflected in its
financial statements or otherwise disclosed in writing to PAN; and to the best
knowledge of Whitfield and its officers, no material litigation, claims,
assessments or governmental investigation or proceedings are threatened against
Whitfield or any of its properties, or any of its directors or officers incident
to their roles with Whitfield;
(i) Whitfield has not breached any material agreement or contract
to which it is a party;
(j) All corporate minutes books and financial records in
existence regarding Whitfield and its business will be made available to PAN for
review prior to the closing of this Agreement;
AGREEMENT AND PLAN OF
BUSINESS COMBINATION - PAN / Whitfield
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(k) The execution of this Agreement will not violate or breach
any material agreement, contract or commitment to which Whitfield or its
shareholders or officers are party;
(l) The records of all issuances and transfers of records of the
capital stock of Whitfield have been maintained by Whitfield as its own transfer
agent in good and current order and accurately reflect the record ownership of
all issued common stock of Whitfield;
(m) Whitfield has not sold, assigned or transferred any tangible
or intangible assets unless disclosed to PAN prior hereto; nor has it knowingly
waived any rights of material value;
(n) Whitfield is not subject to any bankruptcy proceeding or
insolvency action;
(o) As of the Closing Date of this business combination,
Whitfield will be in good standing and qualified to conduct business in each
jurisdiction where such qualification is required;
(p) Unless otherwise disclosed in the financial statements
submitted by Whitfield incident to this Agreement, Whitfield has paid any and
all taxes or assessments due to any governmental agency incident to its past
operations to the date hereof and also has filed whatever income tax and other
returns, federal, state or other jurisdiction, which are required to the date
hereof;
(q) Whitfield has complied with all state, federal and other
jurisdiction's laws and regulations regarding its incorporation and formation,
past issuances of capital stock and sale thereof, capitalization, business and
operations; and no contingent liabilities against Whitfield have been
threatened, or claims made against Whitfield, with respect to such
incorporation, formation, business operations, capitalizations, or sales and
issuance of securities unless already disclosed by Whitfield in the financial
statements;
(r) Whitfield has no outstanding debt other than what has been
disclosed to PAN incident to the negotiation and preparation of this Agreement;
(s) As of the date hereof, and at the Closing Date, Whitfield to
the best of its ability and knowledge, has disclosed all events, conditions, and
facts materially affecting the business and prospects of PAN; and Whitfield has
not now, and will not as of the Closing Date have, withheld knowledge of any
such events, conditions, and facts which its knows, or has reasonable grounds to
know, may materially affect the business, worth or prospects of PAN;
(t) All outstanding common shares of Whitfield have been duly
authorized, validly issued and are fully paid and nonassessable with no personal
liability attaching to the ownership thereof;
AGREEMENT AND PLAN OF
BUSINESS COMBINATION - PAN / Whitfield
Page 7 of 15
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(u) Whitfield has not mortgaged, pledged any of its assets,
whether tangible or intangible, other than already disclosed to Whitfield;
(v) Whitfield has not sold, assigned or transferred any material
tangible or intangible assets or rights unless already disclosed to PAN incident
hereto;
(w) Any outstanding warrants, options or other rights to acquire
equity shares or interests in capital stock of Whitfield have been disclosed in
full to PAN incident to entering into this Agreement;
(x) Capitalization. Whitfield has authorized capital stock of
10,000 common shares of no par value of which 10,000 shares are currently issued
and outstanding.
(z) Conduct of Business. Since the date of this Agreement, unless
already disclosed in writing to PAN, there has not been and, between the date of
this Agreement and the Closing Date, there will not be:
i) Any material increase in the encumbrances against any
assets of Whitfield or transfer of any such assets
unless in the ordinary course of business;
ii) Any change in the accounting methods or practices
followed by Whitfield;
iii) Any termination, changes or violations of any leases,
contracts, licenses, commitments or other arrangement or
agreements of Whitfield having a material adverse effect
on the business or assets of Whitfield;
iv) Any material new borrowing or increased borrowing not in
the ordinary course of business, nor any material new
contracts or commitments for the purchase or sale of
services, merchandise or supplies except in the ordinary
course of business;
v) Any material increase in the compensation of any
director, officer or key employee of Whitfield, or any
new material employment agreements;
vi) Any stock or cash dividend or distribution of common
stock for services, unless approved in writing by PAN;
vii) Any violation of any permit, license, law or regulation
materially adversely affecting any assets or business of
Whitfield;
viii) Any loan or other material transaction with any officer
or director or shareholder of Whitfield unless consented
to by PAN; and
ix) Any authorization, issuance, sale or other disposition
of any common shares, or rights thereto, of Whitfield
except with the written consent of PAN.
15. Covenants of Both Parties - PAN and Whitfield both hereby agree and
covenant
AGREEMENT AND PLAN OF
BUSINESS COMBINATION - PAN / Whitfield
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as follows that during the period from the date hereof to the Closing Date,
unless express written consent is obtained from the other party, each party
hereto shall:
(a) Conduct its business and operations solely in the usual,
normal and ordinary course of business;
(b) Issue no stock or stock rights or other equity rights which
were not expressly contemplated by the parties to the information already
disclosed and developed incident to the negotiations and preparation of this
Agreement;
(c) make no distribution to shareholders, or any other party of
any assets or properties by way of dividend, purchase of shares, redemption,
liquidation or otherwise;
(d) Pay no salaries, bonuses or other compensation to officers,
principal shareholders, directors or other affiliates, except as finders fees
paid incident to this Agreement or incident to moneys raised, other than the
usual and ordinary course of business or pursuant to employment terms already
established and already disclosed to the other party;
(e) Not sell, dispose of, or transfer any material assets or
rights, tangible or intangible, except under current contract arrangements
already disclosed to the other party or except in the ordinary course of
business;
(f) Make no purchase or acquisitions of real property or material
amounts of personal property except in the ordinary course of business or with
the consent of the other party to this Agreement;
(g) Not subject any property or rights to liens, mortgages,
pledges or other encumbrances of any kind or manner except for a full and fair
consideration in the ordinary course of business;
(h) Not borrow any money except for operations in the ordinary
course of business or with the consent of the other parties to this Agreement;
(i) Not make any loans or advances or extend any credit terms
except in the ordinary course of business;
(j) Not amend any bylaws, articles of incorporation, or make any
material changes in accounting or operational practice and policies;
(k) Maintain and cause to be maintained current and accurate
records of all issuances of common stock of the respective parties;
(l) Each party to this Agreement shall furnish the other parties
reasonable access to properties, premises, books and records, and any financial
and operating data and information regarding the business operations of all the
parties, as each party hereto may from
AGREEMENT AND PLAN OF
BUSINESS COMBINATION - PAN / Whitfield
Page 9 of 15
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time to time reasonably request of the other party. Each party shall take
diligent and secure efforts to keep all of such information and data
confidential at all times, and shall execute whatever confidentiality agreements
are required by the other party;
(m) Each party shall take its best efforts to retain all present
employees, and do nothing to undermine or diminish the goodwill of suppliers,
prospective customers, current customers, marketing or sales representatives or
any others having business relationships with either party;
(n) Until the termination of this Agreement or the successful
closing of this business combination, neither party shall contemplate or
negotiate or enter into, any other business combination or similar arrangement
or merger with a third party, or offer any of their assets or capital stock to
third party unless with the written consent of the other parties hereto;
(o) Each party hereby warrants and represents that any
information or data supplied to the other party for purposes of being included
in information sent to PAN shareholders shall not contain any statement which at
the time and in the light of the circumstances under which it is made, is false
or misleading with respect to any material fact and shall contain all
information required to make the supplied information not materially misleading
or incomplete. As of the Closing Date, such distributed information will contain
all material statements and information required to be included therein with
respect to each party hereto and will not include any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not materially misleading;
(p) Upon the Closing Date hereof, PAN's existing Directors will
first appoint _________________________, _________________________, and
______________________ as Directors of PAN and then resign as Directors. Each
party hereto shall take whatever actions are needed to nominate and submit to
the shareholders of PAN at its upcoming shareholders' meeting the following
persons to be elected to the Board of Directors of PAN: ______________
___________, _________________________, and _________________________.
(q) Not make any press release or form of public communication
concerning this business combination without the prior approval and consent of
the other party;
(r) Not commit any violation of any permit, license, law or
regulation materially adversely affecting any assets or business of any party
hereto; and
(s) Not enter into any material new borrowing or increased
borrowing without the written consent of the other party hereto; nor enter into
any material new contracts or commitments for the purchase or sale of
merchandise or services except in the ordinary course of business or with the
written consent of the other party.
(t) Not dilute the shareholdings of either the original PAN
shareholders or the
AGREEMENT AND PLAN OF
BUSINESS COMBINATION - PAN / Whitfield
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newly issued shares to Whitfield shareholders for at least 270 days following
the Effective Date of this Agreement and Plan of Business Combination other than
what has been disclosed to both parties incident to the negotiation and
preparation of this Agreement, i.e., and agreement to issue 333,333 shares at
$3.00 per share for a $1,000,000 bridge financing and an agreement to issue
5,000,000 shares at a guaranteed (for 90 days) price of $4.50 per share pursuant
to a $22,500,000 private placement.
16. Closing Conditions - Unless otherwise waived expressly in writing by
the other party, all obligations of PAN and Whitfield under this Agreement are
subject to the fulfillment of the following conditions prior to closing:
(a) The representations and warranties by or on behalf of either
party hereto contained in this Agreement or in any document or certificate
delivered to the other party incident to this Agreement or its closing shall be
true and correct in all material respects at and as of the time of closing as
though such representations and warranties were made at and as of such time;
(b) All parties hereto have performed and complied with all
covenants, agreements and conditions required by this Agreement to be performed
or complied with by or prior to the closing of this business combination;
(c) This Agreement must be duly authorized, executed and
delivered by the respective and appropriate officers and/or directors of all
parties hereto;
(d) Any filings or notices to state, federal or other
jurisdiction's regulatory authorities or corporation commissions or secretaries
of state required by this Agreement and its closing must have been completed,
including anything necessary to constitute this business combination as a valid
exemption from registration under state and federal securities laws and
regulations;
(e) PAN shall have received the appropriate investment
representation from the Whitfield shareholders whereby they represent that the
securities being delivered by PAN in this business combination are being
purchased for investment and not with a view toward further distribution or sale
thereof, and that they understand such securities are "restricted securities" as
defined by federal and state securities laws and accordingly may not be
transferred or resold without a current registration or the availability of an
appropriate exemption from such registration;
(f) The securities to be issued incident to this business
combination shall be issued pursuant to all necessary corporate action being
legally taken prior to their issuance, and shall be fully paid and nonassessable
when issued to the shareholders of Whitfield, and certificates therefor shall be
in proper form and carry the required restrictive legend thereon;
(g) No material claim, action, suit or proceeding, whether
private or public or governmental, shall be pending or threatened against PAN or
Whitfield, or the officers or
AGREEMENT AND PLAN OF
BUSINESS COMBINATION - PAN / Whitfield
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directors of these corporations incident to their roles with such corporations,
which if adversely determined, would prevent or hinder materially the
consummation of the transactions in this Agreement or result in the payment of
substantial damages as a result of such transaction and action or proceeding;
(h) All actions, proceedings, instruments and documents required
to carry out and effectuate this business combination or incidental hereto, and
any other related legal matters, shall have been approved by respective legal
counsels of the parties hereto;
(i) No material adverse events affecting any party hereto shall
have occurred prior to the closing of this business combination;
(j) There shall have been no material misrepresentation or
omission to state any material fact by either party in connection with the
information provided relative to this business combination and its closing;
(k) Both parties and their legal or accounting representatives,
as the case may be, shall be satisfied that this business combination may be
consummated as a tax-free reorganization;
(l) As of the Closing Date, there shall be no outstanding equity
securities of Whitfield other than those being exchanged in this business
combination and also there shall be no outstanding warrants, options or other
conversion rights to acquire any equity securities of Whitfield or PAN;
(m) Between the date hereof and the Closing Date, both parties
hereto shall not issue any shares of their common stock, or any warrants or
options or other stock rights; and
(n) All parties hereto shall have completed their respective due
diligence reviews of the business and records of the other parties.
17. Survival of Representations - All representations, warranties and
covenants contained herein by any party hereto shall survive the closing of this
business combination and the consummation of the transactions called for hereby
for two years from the date hereof; provided, however, that all parties hereto
hereby agree that no officer, director or shareholder of PAN or
Whitfield shall be personally liable for any damages, liability or expense
resulting from the inaccuracy or incompleteness of any representation or
warranty contained herein.
18. Termination of Agreement - This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing Date:
(a) By written consent of all parties hereto; or
(b) By any party hereto, if there has been a material
misrepresentation or breach of the representations or warranties herein by the
other party, provided, however, that if
AGREEMENT AND PLAN OF
BUSINESS COMBINATION - PAN / Whitfield
Page 12 of 15
<PAGE> 13
the breach can and is cured within 10 days following notification thereof, it
shall not constitute grounds for termination; or
(c) By any party hereto if the Closing Date of this business
combination has not taken place by November 1, 1998.
19. Closing Action - Upon the Closing Date hereof, the following actions
shall be taken, and all of such actions shall be deemed to be simultaneous as of
such Closing Date:
(a) PAN shall have delivered certificates into Escrow for the
shareholders of Whitfield representing the PAN common shares required by the
exchange set forth in this business combination; and
(b) The Whitfield shareholders shall have delivered all common
shares of Whitfield to PAN legally endorsed for cancellation; and
(c) All corporate, financial and title document books, records
and certificates, as the case may be, of Whitfield shall be delivered to the
possession of PAN; and
(d) Any tangible or intangible assets, properties and rights
owned by Whitfield shall be placed in the control and possession of PAN along
with the rights, books and records of Whitfield; and
(e) Each party should provide the other parties with whatever
certificates or copies of directors' or shareholders' meetings or actions or
resolutions as required to establish evidence of completion of corporate action
required to consummate this business combination; and
(f) Each parties hereto shall furnish the other parties with such
other instruments and documents as are required to be delivered pursuant to the
provisions of this Agreement, or which may be reasonably requested in
furtherance of the intent and purposes of this Agreement.
20. General Matters -
(a) Notices. Any and all notices provided for in this Agreement
shall be in writing and hand delivered or sent by certified mail, directed as
follows:
<TABLE>
<S> <C>
To PAN: To Whitfield:
Attn: Jerry Cornwell, President Attn: Timothy S. Shiah, President
19239 Aurora Avenue North 4420 South Arville, Suite 20
Shoreline, WA 98133-3930 Las Vegas, NV 89103
</TABLE>
(b) Parties in Interest. This Agreement shall inure to the
benefit of and bind
AGREEMENT AND PLAN OF
BUSINESS COMBINATION - PAN / Whitfield
Page 13 of 15
<PAGE> 14
the parties hereto, and their respective representatives, heirs, successors and
assigns, as the case may be.
(c) Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
(d) Waiver. Any failure on the part of any party hereto to comply
with any of the obligations and conditions of this Agreement may be waived in
writing by any other parties.
(e) Additional Documents. At any time, and from time to time
after the closing of this Agreement, each party hereto will execute and deliver
to the other party such additional documents and instruments, and take such
additional action, as may reasonably be requested by the other party, to confirm
or perfect title to any property or right transferred hereunder or otherwise to
carry out the intents and purposes of this Agreement.
(f) Severability. If any part of this Agreement is deemed to be
unenforceable, the balance of this Agreement shall remain in full force and
effect.
(g) Entire Agreement and Benefit. This Agreement is the entire
agreement of the parties hereto covering everything agreed upon or understood in
this transaction and in the negotiations and preparation of this business
combination. There are no oral promises or agreements or conditions precedent,
representations or understandings between any of the parties hereto of any kind
or nature other than those expressly contained in this Agreement. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any persons any rights hereunder or hereto other than the actual parties to this
Agreement.
(h) Tax and Legal Implications. None of the parties to this
Agreement warrant any tax or legal aspects of this transaction to another party;
and nothing herein, or any further information or documents to be furnished in
connection with this business combination shall be construed as business, tax or
legal advice to any person or shareholder. Every party or person involved in
this business combination is urged to consult their own tax or legal advisors as
to the tax and legal implications of this transaction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the year and day first above written.
PAN ENVIRONMENTAL WHITFIELD HOLDINGS, LTD.,
CORPORATION, as Acquiror as Acquiree
By_______________________ By_______________________
Its____________________ Its____________________
AGREEMENT AND PLAN OF
BUSINESS COMBINATION - PAN / Whitfield
Page 14 of 15
<PAGE> 15
And______________________ And______________________
Its____________________ Its____________________
SELLING SHAREHOLDERS:
By_______________________ By_______________________
By_______________________ By_______________________
AGREEMENT AND PLAN OF
BUSINESS COMBINATION - PAN / Whitfield
Page 15 of 15
<PAGE> 16
EXHIBIT A
GAMING SYSTEM LICENSE AGREEMENT
THIS AGREEMENT made this 17th day of April, 1998 by and between PAN
Environmental Corporation, a Delaware corporation ("PAN"), Whitfield Holdings,
Ltd., an Antigua corporation ("Whitfield"), United, Inc. dba United Race &
Sports Book, an Antigua corporation ("United"), and the stockholders of
Whitfield Holdings, Ltd. ("Stockholders").
WHEREAS, United has acquired and/or developed, and will continue to
augment and improve, various procedures and systems, including computer hardware
and software, telephone systems and equipment, accounting, recordkeeping, and
all other proprietary procedures, systems and standards as may now or in the
future be necessary or appropriate to carry out United's race and sports book
betting business (which equipment, software, systems and procedures as now or
hereafter used by United in its race and sports book business are collectively
referred to hereinafter as the "Gaming System"); and
WHEREAS, the parties are mutually desirous of United's selling the
Gaming System to Whitfield, and of Whitfield's licensing the Gaming System for
use by United in its race and sports book betting business, as provided by the
terms of this Agreement; and
WHEREAS, PAN desires to acquire one hundred percent (100%) of Whitfield
and the Stockholders of Whitfield desire to exchange their 100% ownership of
Whitfield for common stock of PAN;
NOW THEREFORE, in consideration of the mutual promises, covenants and
conditions provided by this Agreement, the legal sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. SALE AND PURCHASE OF GAMING SYSTEM. United shall sell, convey and
transfer to Whitfield, and Whitfield shall purchase from United, the Gaming
System as hereinafter defined, in consideration for the transfer to United of
10,000 shares of Whitfield (100% of the issued and outstanding stock of
Whitfield). PAN shall then acquire Whitfield pursuant to an Agreement and Plan
of Business Combination (hereinafter called the "Agreement") to which this
Gaming System License Agreement is attached. The Agreement provides that the
Stockholders of Whitfield (hereinafter called the "Stockholders") will exchange
their 10,000 shares of Whitfield (100% of the issued and outstanding common
stock of Whitfield) for up to 12,800,000 common shares of PAN (3,200,000 shares
to be issued immediately into Escrow to be released pursuant to the terms
as described later in this paragraph 1 and 9,600,000 shares reserved for
issuance by PAN to be
GAMING SYSTEM LICENSE AGREEMENT
Page 1 of 6
<PAGE> 17
released pursuant to the terms as described in paragraph 6 of this License
Agreement). PAN shall deposit into Escrow with such escrow agent as Stockholders
and PAN may jointly designate, certificates for 3,200,000 PAN shares with
instructions to deliver to Stockholders on a quarterly basis, one such share for
each $25.9375 of betting volume placed with United resulting in $0.6225 of
license fees payable to Whitfield under paragraph 3 of this License Agreement.
Such betting volume will be jointly verified by PAN, Whitfield and United. When
an aggregate betting volume of eighty three million dollars ($83,000,000)
resulting in one million nine hundred thousand ninety two dollars ($1,992,000)
payable to Whitfield of first year license fees has been met, the Escrow Agent
will release the entire 3,200,000 shares. The first year is defined as the first
full fiscal year beginning with the first full calendar quarter following the
effective date of this License Agreement. In the event that the minimum betting
volume and license fees are not met by the end of the first full fiscal year,
then the same formula will be applied for one subsequent fiscal year to earn out
any amount in excess of that earned and paid in the first full fiscal year. Any
shares not so earned shall be returned to PAN.
2. ELEMENTS OF GAMING SYSTEM. The Gaming System includes all procedures
and systems, including computer hardware and software, telephone systems and
equipment, accounting, recordkeeping, customer service, and all other
proprietary procedures and systems as now or may in the future be used by United
to conduct its race and sports book business. The term "Gaming System" shall be
interpreted liberally, in order to effectuate the purposes of this Agreement, as
including all systems and procedures, and tangible or intangible assets used as
constituent features thereof, used in United's race and sports book operations
and production of revenues; provided that it shall not include United's
furniture, furnishings, fixtures, real property or leaseholds, customer lists or
accounts, goodwill, cash reserves or accounts, governmental licenses or
certificates of authority to engage in the race and sports book betting
business, or any activities or arrangements unauthorized by governmental
licenses or certificates of authority or otherwise in violation of applicable
laws.
3. LICENSE OF GAMING SYSTEM, LICENSE FEE. Whitfield shall license the
Gaming System to United, and United shall license said system from Whitfield,
for use in United's race and sports book betting business. In consideration of
such license, United shall pay Whitfield a license fee equal to two and four
tenths percent (2.4 %) of the gross dollar volume of all wagers placed with or
through United during the term of this Agreement, with a minimum license fee of
One Million Dollars ($1,000,000.00) per year. The license fee shall be payable
quarterly, for quarters ending on the last day of February, May, August and
November, by bank certified draft due on or before the fifteenth day of the
calendar month next following the close of each quarter. Each license fee
payment shall be accompanied by United's full and accurate accounting of gross
betting volume for the applicable quarter. In the event that the aggregate of
license fees paid over the first four full quarters shall be less than the
minimum annual $1,000,000.00 license fee, then the unpaid balance of such
minimum annual license fee shall be paid along with the quarterly license fee
installment due for the next quarter.
4. AUDIT. PAN and Whitfield shall be entitled to conduct both routine
and ongoing audits and special audits of United's business for the purposes of
examining the condition of the Gaming System, and proper reporting and payment
of license fees. United shall provide PAN
GAMING SYSTEM LICENSE AGREEMENT
Page 2 of 6
<PAGE> 18
and Whitfield with suitable on-site office space and facilities for those
purposes, and prompt and full cooperation in the disclosure of all pertinent
information and records relating to such audits. Audit costs shall be borne by
PAN and Whitfield; provided that in the event any such audit discloses
significant operational flaws in the Gaming System, or any underreporting and/or
underpayment of license fees, then United shall, in addition to promptly making
necessary corrections to the Gaming System, and/or properly reporting and paying
any delinquent license fees, reimburse PAN and Whitfield for all costs of audit
relating to discovery of the Gaming System flaw or improper reporting or paying
of license fees. In the event any such audit discloses any pattern or practice
of intentional or grossly negligent improper reporting of betting volume and
license fees, then United shall be liable, in addition to its obligation to pay
all underreported license fees due, a penalty equal to one-half of such
underreported fees.
5. LATE PAYMENT CHARGE. Time is of the essence of United's obligation
for timely payment of license fee installments. For each day's delinquency in
reporting and/or paying any such installment, or the balance of any minimum
annual license fee, United shall pay Whitfield a late charge equal to one
percent (1%) of the unpaid portion of such license fee, up to a maximum total
late charge, for any such late payment or reporting, equal to twenty five
percent (25%) of the unpaid amount.
6. ADDITIONAL STOCK PREMIUM TO UNITED. The parties recognize that
increases in United's annual race and sports book betting volume, above the $83
million maximum level on which United is to receive up to 3.2 million shares of
PAN Environmental, Inc. common stock under paragraph 1, will also increase
license fees payable to Whitfield. In recognition thereof, PAN agrees to issue
one (1) additional share of PAN common stock, up to a maximum of 9,600,000
million additional shares which have been reserved for issuance by PAN, for each
$38,333 of United's annual betting volume in excess of $83,000,000 at the end of
the first full fiscal year of United or at the end of either each subsequent two
full fiscal years. These additional shares for the three years shall be issued
only for excess betting volume over any previous year's betting volume.
7. COVENANTS BY UNITED. United warrants, represents, covenants and
agrees that: (a) United owns and is entitled to use the Gaming System; (b)
United and its principals have superior knowledge as to the nature, extent,
efficacy and value of said System, which combined with United's expertise in
race and sports book operations and reasonable and conservative expectations of
future betting volumes and operating margins from use of said System, are
sufficient to yield initial annual betting volume of approximately $83 million;
and (c) at all times during the term of this Agreement, United will maintain a
valid license or certificate of authority from the government of Antigua and/or
other jurisdictions to engage in race and sports book operations, and that it
will engage in that business exclusively, in accordance with said licenses or
certificated of authority and in compliance with all applicable laws
8. AGREEMENT NOT SUBJECT TO CANCELLATION, UNITED'S RIGHTS AND
OBLIGATIONS NOT ASSIGNABLE OR DELEGABLE. The parties acknowledge that the value
of the Gaming System to PAN and Whitfield would be substantially reduced if that
System were not to remain continuously licensed to United; and that the
substantial price for PAN's and Whitfield's purchase of the Gaming System should
be deemed to couple PAN's and Whitfield's interest in
GAMING SYSTEM LICENSE AGREEMENT
Page 3 of 6
<PAGE> 19
this Gaming System License Agreement with an interest. Accordingly this
Agreement shall not be revocable by United for any reason, nor shall United be
entitled to assign any of its rights to use of the Gaming System, nor to
delegate any of its obligations to report and pay license fees under this
Agreement without PAN's and Whitfield's express prior written consent..
9. CONFIDENTIALITY, COOPERATION, DUTY TO MAINTAIN GAMING SYSTEM. United
shall keep the Gaming System as a trade secret, and shall not disclose it to
anyone other than authorized representatives of United, PAN, Whitfield, and
agents of the government of Antigua acting within the scope of their supervisory
duties. United shall maintain and upgrade the Gaming System as necessary and
appropriate for it to remain in first class condition, for the conduct of an
efficient, competitive and successful race and sports book enterprise, in
compliance with all applicable laws. The parties shall consult and cooperate as
from time to time may be appropriate for that purpose. No material change to the
Gaming System shall be made by United unilaterally, without PAN's and
Whitfield's prior written consent. Costs of routine maintenance and upgrades to
the Gaming System shall be borne solely by United; provided that costs of
substantial computer system or other such system upgrades shall be shared
equally by the parties, or as otherwise agreed on a case by case basis.
10. NONCOMPETITION. United and each of its principals signatory hereto
agree not to directly or indirectly promote or participate in any race and
sports enterprise, except for United's, nor to engage in the development or
promotion of any procedures or systems for race and sports book operations
except for the exclusive use of United.
11. EFFECTIVE DATE, TERM, OPTION TO RENEW. The effective date of this
Agreement shall be May 22, 1998. The term of this Agreement shall be 49 years,
or such lesser period as may be prescribed by Antigua law as the maximum
duration of such license agreements. Whitfield shall be entitled to renew this
Agreement for an additional 49 years, or other maximum term under Antigua law,
by written notice of such election to United given at any time within the final
year of the original term.
12. RELATIONSHIP. Nothing in this Agreement shall be construed to make
PAN or Whitfield a co-venturer in United's race and sports book business, nor to
give PAN or Whitfield any interest in any betting gains, or subject it to any
betting losses as might be realized or sustained by United in the conduct of its
business.
13. WAIVER. Neither party's waiver of any breach or default of this
Agreement by the other party, nor delay or failure to exercise any right upon a
breach or default, nor acceptance of any payment subsequent thereto, shall be
deemed a waiver of rights relating to any other breach or default.
14. PARTIES. Each of the undersigned principals of United individually
jointly and severally guaranty performance of all of United's obligations under
this Agreement. By its execution of this Agreement, PAN Environmental
Corporation agrees to issue and provide all of the PAN shares of common capital
stock provided and subject to the terms of paragraphs 1 and 6 of this Agreement.
15. SEVERABILITY. If any provision of this Agreement is deemed to be
invalid or
GAMING SYSTEM LICENSE AGREEMENT
Page 4 of 6
<PAGE> 20
inoperative for any reason, such provision shall be deemed modified as and to
the extent necessary to make it valid and operative; or if such provision cannot
be so modified, then it shall be severed from this Agreement, and the remainder
of this Agreement shall remain in full force and effect so long as the parties'
essential purposes under this Agreement can be fulfilled under the Agreement as
so modified.
16. INDEMNITY: United agrees to fully indemnify Whitfield and hold
Whitfield harmless from the assertion, imposition or incursion of any claim,
liability, cost or expense, including court costs or attorney's fees, relating
to the use of the Gaming System or any other activities of United in the conduct
of its race and sports book operations.
17. ARBITRATION. Any dispute over this License Agreement shall be
submitted to, and settled by, arbitration. Such arbitration shall be effected by
the arbitrators selected as hereinafter provided and shall be conducted in
accordance with the Rules existing at the date thereof, of the American
Arbitration Association. The dispute shall be submitted to three arbitrators,
one arbitrator being selected by PAN, as one party to the dispute, one
arbitrator being selected by Timothy S. Shiah on behalf of the Stockholders, as
the other party to the dispute, and the third arbitrator being selected by the
two so selected by the parties, or, if they cannot agree on a third, by the
American Arbitration Association. In the event that either party, within one
month after any notification made to it of the demand for arbitration by the
other party, shall not have selected its arbitrator and given notice thereof by
registered mail to the other party, such arbitrator shall be selected by the
American Arbitration Association. The meetings of the arbitrators shall be held
in such place or places as may be agreed upon by the arbitrators. The expenses
of any such arbitration shall be borne one-half by PAN and one-half by the
respective Stockholders payable from the Escrow Fund.
18. APPLICABLE LAW. This Agreement shall be construed in accordance with
the laws of Antigua. Jurisdiction to resolve any dispute arising under this
Agreement shall be vested in the courts of Antigua.
IN WITNESS WHEREOF, the parties hereto have executed this Gaming System
License Agreement as of the year and date first written above.
WHITFIELD HOLDINGS, LTD. PAN ENVIRONMENTAL CORPORATION
By___________________________ By___________________________
President President
By___________________________ By___________________________
Secretary Secretary
GAMING SYSTEM LICENSE AGREEMENT
Page 5 of 6
<PAGE> 21
UNITED, INC. DBA
UNITED RACE & SPORTS BOOK
By__________________________
President
By__________________________
Secretary
- ------------------------------------ ------------------------------------
as personal guarantor of obligations as personal guarantor of obligations
of United, Inc. dba United Race & of United, Inc. dba United Race &
Sports Book Sports Book
- ------------------------------------
as personal guarantor of obligations
of United, Inc. dba United Race &
Sports Book
GAMING SYSTEM LICENSE AGREEMENT
Page 6 of 6
<PAGE> 22
EXHIBIT B
ESCROW AGREEMENT
FOR ACQUISITION OF WHITFIELD HOLDINGS, LTD.
BY PAN ENVIRONMENTAL CORPORATION
ESCROW AGREEMENT dated April 17, 1998 among certain stockholders of
Whitfield Holdings, Ltd. (hereinafter collectively called the "Stockholders"),
PAN Environmental Corporation, a Delaware corporation (hereinafter called
"PAN"), and ______________________ (hereinafter called the "Escrow Agent").
The Stockholders are the owners of all the outstanding shares of capital
stock of Whitfield Holdings, Ltd., an Antigua, West Indies corporation
(hereinafter called "Whitfield"). Pursuant to an Agreement and Plan of Business
Combination (hereinafter called the "Agreement") and the Gaming System License
Agreement (hereinafter called "License Agreement") dated the same date as this
Escrow Agreement and entered into simultaneously herewith, PAN has agreed to
acquire from the Stockholders, all such shares of Whitfield in exchange for
stock of PAN provided for therein, including the delivery of 3,200,000 common
shares of PAN common stock (hereinafter called "PAN Shares") to the Escrow Agent
to be held and disposed of by it on the terms and conditions set forth in this
Escrow Agreement. PAN and the Stockholders desire the Escrow Agent to so hold
and dispose of the Escrow Fund, and the Escrow Agent is willing to do so on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the transactions contemplated by the
Agreement, and of the mutual agreements hereinafter set forth, the parties agree
as follows:
1. Establishment of the Escrow Fund: In accordance with the terms of the
Agreement, PAN will on the Closing Date (as defined in the Agreement)
deposit with the Escrow Agent 3,200,000 shares of PAN common stock to be
held and disposed of as provided in this Escrow Agreement. The PAN
Shares to be held by the Escrow Agent hereunder are collectively called
the "Escrow Fund".
2. Maximum Liquidated Damages and Sole Remedy in the Event of Breach by
Stockholders: In the event that any representation or warranty by the
Stockholders as set forth in the Agreement or License Agreement, or on
the Closing Date as required thereunder, shall be determined to have
been breached there shall be returned to PAN upon demand, out of the
Escrow Fund, to the extent said Escrow Fund shall be sufficient for the
purpose, in an amount, or to a value equal to the damage occasioned to
PAN by
such breach. The value of such PAN Shares shall be determined by the bid
price obtained
Escrow Agreement -
Whitfield/PAN
Page 1 of 5
<PAGE> 23
in the over-the-counter market quoted on NASD's Electronic Bulletin
Board for shares of PAN on the date a claim for payment is made. PAN's
sole remedy with respect to any breach of the aforementioned
representations and warranties shall be to receive payment of PAN shares
out of the Escrow Fund as herein provided, and PAN shall not have any
right of recourse against any of the Stockholders personally with
respect to such breach of representations and warranties.
3. Naming of Stockholders' Representative: Each of the Stockholders hereby
authorizes Timothy S. Shiah to determine the existence of any right of
PAN to receive any payment of PAN shares out of the Escrow Fund, as
provided for in this Escrow Agreement, and to settle the amount of such
payment or payments of PAN shares. Neither Whitfield or PAN nor the
Stockholders nor any of them will, without his consent in writing on
behalf of the Stockholders voluntarily settle or adjust any claim with
respect to which PAN would be entitled to receive any part of the Escrow
Fund.
4. When and How Payment made to Acquiring Corporation in the Event of
Breach by Stockholders: Whenever there shall be delivered to the Escrow
Agent a determination, in one of the forms hereinafter described, that
PAN is entitled to receive payment of PAN Shares out of the Escrow Fund
in accordance with this Escrow Agreement, which determination shall
specify the amount of PAN shares to which PAN is so entitled, the Escrow
Agent shall, to the extent that the Escrow Fund shall be sufficient for
the purpose, pay to PAN the amount of PAN Shares specified in such
determination. Such determination may be in the form of either (i) a
certificate signed by PAN and Timothy S. Shiah on behalf of the
Stockholders, or (ii) a certified copy of an award of the arbitrator
referred to in paragraph 7 hereof, or (iii) a certified copy of a final
judgment of a court of competent jurisdiction.
5. Voting and Distributions During Escrow Period: During the period that
the Escrow Agent shall hold the PAN Shares in the Escrow Fund, the
following provisions shall apply:
(a) Each Stockholder shall have the right to vote the number of PAN
Shares, which, on the date of such vote, he/she would be entitled
without dispute to receive from the Escrow Agent under this
Escrow Agreement, if the Escrow Fund were to be paid out to the
Stockholders on such date.
(b) All distributions, whether in cash or stock or other property,
made in respect to the PAN Shares will be paid to the Escrow
Agent, and will constitute part of the Escrow Fund hereunder.
6. Release of Shares to Acquired Corporation's Stockholders: The Escrow
Agent shall release to Stockholders one share for each $24.9375 of
betting volume placed with United
Escrow Agreement -
Whitfield/PAN
Page 2 of 5
<PAGE> 24
resulting in $0.6225 of license fees payable to Whitfield under
paragraph 3 of the License Agreement. Such betting volume will be
jointly verified by PAN, Whitfield and United. The release of shares
will be done on a quarterly basis as defined in paragraph 7 below and
when an aggregate betting volume of eighty three million dollars
($83,000,000) resulting in one million nine hundred ninety two thousand
dollars ($1,992,000) payable to Whitfield of first year license fees has
been paid, the Escrow Agent will release the entire 3,200,000 shares or
remainder thereof. The first year is defined as the first full fiscal
year beginning with the first full calendar quarter following the
effective date of the License Agreement. In the event that the minimum
betting volume and license fees are not met by the end of the first full
fiscal year, then the same formula will be applied for one subsequent
fiscal year to earn out any amount in excess of that earned and paid in
the first full fiscal year. Any shares no so earned shall be returned to
PAN.
7. When and How Payments Made to Acquired Corporation's Stockholders: The
Escrow Agent shall, on a quarterly basis, on the first full quarter
after the Closing Date (a quarter being defined as the periods ending
February 28, May 31, August 31 and November 30 of each year) deliver or
cause to be delivered to the Stockholders, free and clear of this Escrow
Agreement, in respective amounts and proportions to the respective
number of shares of Whitfield Shares set opposite their signatures at
the foot hereof (being the number of Whitfield Shares to be transferred
by the respective shareholders to PAN under the Agreement), the PAN
Shares earned under the Agreement; provided, however, that if PAN shall
have asserted a claim or claims that it is entitled to receive a payment
under this Escrow Agreement by delivering copies of such claims in
writing to Timothy S. Shiah and to the Escrow Agent, the amount of PAN
Shares shall not be so delivered until such claim or claims have been
disposed of. The value of the PAN Shares for the purposes of this
paragraph shall be determined by the bid price obtained in the
over-the-counter market quoted on the NASD's Electronic Bulletin Board
for shares of PAN on the date such claim or claims are made.
8. Arbitration: Any dispute as to whether PAN is entitled to receive a
payment out of the Escrow Fund as provided in this Escrow Agreement, or
as to the amount thereof, or as to the right of PAN or the Stockholders
to receive all or any part of the Shares and cash or any other property
held by the Escrow Agent hereunder, shall be submitted to, and settled
by, arbitration. Such arbitration shall be effected by the arbitrators
selected as hereinafter provided and shall be conducted in accordance
with the Rules existing at the date thereof, of the American Arbitration
Association. The dispute shall be submitted to three arbitrators, one
arbitrator being selected by PAN, as one party to the dispute, one
arbitrator being selected by Timothy S. Shiah on behalf of the
Stockholders, as the other party to the dispute, and the third
arbitrator being selected by the two so selected by the parties, or, if
they cannot agree on a third, by the American Arbitration Association.
In the event that either party, within one month after any notification
made to it of the demand for arbitration by the other party, shall not
have selected its arbitrator and given notice thereof by registered mail
to the other party, such arbitrator shall be selected by the American
Arbitration Association. The meetings of the arbitrators shall be held
in such place or places as may be agreed upon by the arbitrators. The
expenses of any such
Escrow Agreement -
Whitfield/PAN
Page 3 of 5
<PAGE> 25
arbitration shall be borne one-half by PAN and one-half by the
respective Stockholders payable from the Escrow Fund.
9. Notices, Jurisdiction and Appointing Attorney for Process: Any and all
notices or other instruments or papers to be sent to any party hereto by
any other party hereto pursuant to this Escrow Agreement shall be in
writing and delivered personally or sent by Registered Mail, postage
prepaid, if to the Stockholders, or any of them, addressed in care of
Timothy S. Shiah, 4420 South Arville, Suite 20, Las Vegas, NV 89103; if
to PAN, attention of President, at 19239 Aurora Avenue North, Shoreline,
WA 98133-3930; and if to the Escrow Agent, addressed to the Escrow
Agent, at ________________________ ____________. Each of the
Stockholders hereby appoints Timothy S. Shiah, his true and lawful
attorney upon whom may be served all summonses, complaints, processes,
pleadings, orders and notices in any civil action or proceeding against
him arising out of this Escrow Agreement, and hereby consents to the
jurisdiction of any court in said state based on such service.
10. The Escrow Agent may act upon any instrument or other writing believed
by it in good faith to be genuine, and to be signed or presented by the
proper person, and shall not be liable in connection with the
performance by it of its duties pursuant to the provisions of this
Escrow Agreement, except for its own willful default or gross
negligence.
11. The Escrow Agent shall be paid reasonable compensation for its services
hereunder and reimbursed for al expenses, including counsel fees,
reasonably incurred by it in connection with the performance of its
duties and obligations under this Escrow Agreement. Such compensation
and reimbursement shall be paid one-half by PAN and one-half by the
respective Stockholders payable from the Escrow Fund.
12. In accordance with its terms, this Escrow Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns
of PAN and the Escrow Agent and upon the heirs, executors,
administrators and legal representatives of the Stockholders.
13. The Escrow Agreement shall be governed by and construed in accordance
with the laws of the State of Nevada, U.S.A.
14. _______________________________, hereby agrees to act as Escrow Agent
under this Escrow Agreement.
15. This Escrow Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement
to be
Escrow Agreement -
Whitfield/PAN
Page 4 of 5
<PAGE> 26
signed as of the day and year first above written.
STOCKHOLDERS OF PAN ENVIRONMENTAL
WHITFIELD HOLDINGS, LTD. CORPORATION
By
- --------------------------------- -----------------------------------
President
ESCROW AGENT to be named
- ---------------------------------
- --------------------------------- -----------------------------------
Escrow Agent
- ---------------------------------
Escrow Agreement -
Whitfield/PAN
Page 5 of 5
<PAGE> 27
EXHIBIT C
MERGER AND ACQUISITION
CONSULTING AGREEMENT
THIS AGREEMENT, entered into the 17th day of April, 1998 by and between
PAN Environmental Corporation, a Delaware corporation (hereinafter "PAN") and
TCKTS, L.L.C. dba Bristol Media, Ltd., a Washington limited liability company
(hereinafter "Bristol").
WHEREAS, Bristol originally had a consulting agreement with Cheong Tat
Corporation which had an agreement with Winner's Way, a company which is now
defunct, and
WHEREAS, Winner's Way had a preliminary agreement to be acquired by PAN
until Winner's Way went defunct, and
WHEREAS, United, Inc. dba United Race and Sports Book, an Antigua
corporation (hereinafter "United"), has taken over the betting accounts
previously operated by Winner's Way, and
WHEREAS, Whitfield Holdings, Ltd. (hereinafter "Whitfield") has agreed
to purchase the Gaming System owned by United for one hundred percent (100%) of
the stock in Whitfield and to license back the Gaming System to United for 2.4%
of United's annual betting volume as a license fee, and
WHEREAS, PAN has agreed to acquire one hundred percent (100%) of the
issued and outstanding stock of Whitfield from the shareholders of Whitfield for
12,800,000 common shares of PAN (3,200,000 of which are to be issued into Escrow
to be released upon certain performance criteria and 9,600,000 of which are
reserved for issuance upon additional performance criteria), and
WHEREAS, PAN desires that Whitfield act as its exclusive consultant for
the above corporate acquisition and Bristol desires to act as PAN's exclusive
consultant for the above corporate acquisition,
NOW, THEREFORE, in consideration of the mutual undertakings provided
under this Agreement, the parties agree as follows:
1. Engagement: Effective the date hereof, PAN hereby engages Bristol to
consult in regard to the structuring and acquisition of the PAN
acquisition of Whitfield and Whitfield's acquisition of Gaming Systems
from United and other race and sports books for a one hundred fifty
(150) day period from the date hereof.
2. Duties Consultant will:
MERGER AND ACQUISITION
CONSULTING AGREEMENT
PAN / BRISTOL
Page 1 of 2
<PAGE> 28
a. Prepare Agreement and Plan of Business Combination, Gaming
System License Agreement, Escrow Agreement, Financial Consultant
Agreement, this Merger and Acquisition Consulting Agreement, and
a Private Placement Offering Memorandum, plus all related and
collateral material for final legal review.
b. Negotiate with all parties including United, Whitfield and the
shareholders thereof and PAN to finalize interests of all
parties in the acquisition.
c. Assist in money-raising activities on behalf of PAN and
Whitfield.
3. Compensation: PAN will issue 800,000 shares of restricted Rule 144
common shares and will pay $50,000 in fees for consulting services
rendered incident to the negotiation and execution of the Agreement and
Plan of Business Combination.
4. Expenses: All travel, postage and delivery expense spent on behalf of
PAN on a pre-approved written basis will be reimbursed by PAN upon
presentation of invoices.
IN WITNESS WHEREOF, the parties have executed this Merger and
Acquisition Consulting Agreement on April 17, 1998.
PAN ENVIRONMENTAL TCKTS, L.L.C. dba
CORPORATION BRISTOL MEDIA, LTD.
By____________________________ By________________________________
President Managing Member
MERGER AND ACQUISITION
CONSULTING AGREEMENT
PAN / BRISTOL
Page 2 of 2
<PAGE> 29
EXHIBIT D
FINANCIAL CONSULTING AGREEMENT
THIS AGREEMENT, entered into the 17th day of April, 1998, by and between
PAN Environmental corporation, a Delaware corporation (hereinafter "PAN") and
Cheong Tat Corporation, a Nevada corporation (hereinafter "Consultant").
WHEREAS, Consultant originally had a consulting agreement with Winner's
Way which has since gone defunct, and
WHEREAS, Winner's Way had a preliminary agreement to be acquired by PAN
until it went defunct, and
WHEREAS, United, Inc. dba United Race and Sports Book, an Antigua
corporation (hereinafter "United") has taken over the betting accounts
previously operated by Winner's Way, and
WHEREAS, Whitfield Holdings, Ltd. (hereinafter "Whitfield") has agreed
to purchase the Gaming System owned by United for 100% of the stock in Whitfield
and to license back the Gaming System to United for 2.4% of United's annual
betting volume as a license fee, and
WHEREAS, PAN has agreed to acquire one hundred percent (100%) of the
issued and outstanding stock of Whitfield from the shareholders of Whitfield for
12,800,000 common shares of PAN (3,200,000 of which are to be issued into Escrow
to be released upon certain performance criteria and 9,600,000 of which are
reserved for issuance upon additional performance criteria), and
WHEREAS, PAN desires to raise $1,000,000 over the next ten (10) days and
an additional $22,500,000 over the next one hundred twenty (120) days, and
WHEREAS, Consultant desires to raise such funds for PAN and PAN desires
Consultant to raise such funds;
NOW, THEREFORE, in consideration of the mutual undertakings provided
under this Agreement, the parties agree as follows:
1. Engagement: Effective the date hereof PAN hereby engages Consultant to
raise funds and Consultant agrees to use its best efforts to raise such
funds for a one hundred twenty day (120) period from the date hereof.
2. Duties: Consultant will:
Financial Consulting Agreement
PAN / Cheong Tat Corporation
Page 1 of 2
<PAGE> 30
a. Identify and solicit prospective lenders and financiers.
b. Conduct negotiations with such prospects on behalf of PAN.
c. Assist in closing such prospects in providing funding for PAN.
3. Compensation:
a. $1,000,000 or pro rata portion thereof PAN Private Placement to
be closed over the next 10 days - ten percent (10%) commission
payable:
- one-half (1/2) in restricted Rule 144 common stock at ten
percent (10%) below the five-day average bid price of PAN
stock before closing;
- one-half (1/2) in cash.
b. $22,500,000 or pro rata portion thereof PAN Private Placement to
be closed over the next 120 days - five percent (5%) commission
payable:
- one-half (1/2) in restricted Rule 144 common stock at same
price as Private Placement;
- one-half (1/2) in cash.
4. Expenses: All travel, postage and delivery expense spend on behalf of
the Company on a pre-approved written basis will be reimbursed by PAN
upon presentation of invoices.
IN WITNESS WHEREOF the parties have executed this Financial Consulting
Agreement on April 17, 1998.
PAN ENVIRONMENTAL CORPORATION CHEONG TAT CORPORATION
By_________________________ By__________________________
President President
Financial Consulting Agreement
PAN / Cheong Tat Corporation
Page 2 of 2
