SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Confidential, for use of the Commission only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to 240.14a-11(c) or 240.14a-12
INTERACTIVE GAMING AND COMMUNICATIONS CORP.
(Name of Registrant as Specified In Its Charter)
_________________________________________________________________
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ ] No fee required.
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[X] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:
____________________________________________________________
(2) Aggregate number of securities to which transaction applies:
____________________________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
Based on aggregate Purchase Price of $5,000,000 for sale of
certain assets of the Registrant.
(4) Proposed maximum aggregate value of transaction:
$5,000,000
(5) Total fee paid:
$1,000
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount previously paid:
____________________________________________________________
(2) Form, Schedule or Registration Statement No.:
____________________________________________________________
(3) Filing party:
____________________________________________________________
(4) Date filed:
____________________________________________________________
<PAGE>
INTERACTIVE GAMING AND COMMUNICATION CORP.
4070 BUTLER PIKE, SUITE 300
PLYMOUTH MEETING, PENNSYLVANIA 19462-1510
(610) 941-0305
February 14, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting of
Shareholders (the "Special Meeting") of Interactive Gaming and
Communications Corp. (the "Company") to be held on Monday,
March 16, 1998 at 10:00 a.m., Eastern time, at the Company's
offices at 4070 Butler Pike, Suite 300, Plymouth Meeting,
Pennsylvania 19462-1510.
At the Special Meeting, you will be asked to consider and
vote upon a proposal (the "Proposal") to approve the sale (the
"Sale") of 100% of the stock of two of the Company's wholly-owned
subsidiaries, Sports International, Ltd. (Grenada) ("Sports") and
Global Casinos, Ltd. (Grenada) ("Global Casinos") to
International Gaming Corporation, a corporation organized under
the laws of British Columbia, Canada ("International Gaming").
Sports conducts an international Internet and telephonic sports
wagering business and Global Casinos is engaged in Internet
casino gaming.
THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED
THE PROPOSAL AND UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE
PROPOSAL.
The reasons that the Board of Directors has approved the
Proposal are described in full in the Proxy Statement that
accompanies this letter. In summary, the reasons are as follows:
- The Company has come under legal attack from certain
governmental authorities regarding gaming operations
conducted over the Internet The Company does not have the
financial resources necessary to defend its position for an
indefinite period of time, or to set the legal precedents
necessary to preclude future legal attacks from other
governmental authorities. Accordingly, the Board believes
it is necessary and prudent to sell its Internet gaming
business.
- After it exits the Internet gaming business, the Company
will be engaged principally in its gaming and entertainment
software development business. The Board of Directors
believes that such business has good future growth
potential. The Company intends to use some of the proceeds
from the sale to develop new interactive Internet casino
games. The Company believes that it can license the gaming
software to operating companies for attractive license and
royalty fees.
- When the sale is consummated, the Company will have
increased its tangible net book value from approximately
$1.5 million to approximately $5.8 million, or from
approximately $.11 per share to approximately $.42 per
share.
In the materials accompanying this letter, you will find a
Notice of Special Meeting of Shareholders and a Proxy Statement
relating to the actions to be taken by the Company's shareholders
at the Special Meeting. The Proxy Statement more fully describes
the Sale and includes important information concerning the
Company. A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1996 AND QUARTERLY REPORT ON
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997 ALSO ACCOMPANY
THIS LETTER.
Whether or not you plan to attend the Special Meeting,
please complete, sign and date the accompanying proxy card and
return it in the enclosed prepaid envelope. You may revoke your
proxy in the manner described in the accompanying Proxy Statement
at any time before it has been voted at the Special Meeting. If
you attend the Special Meeting, you may vote in person even if
you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
Sincerely,
Michael F. Simone
President and
Chief Executive Officer
<PAGE>
INTERACTIVE GAMING AND COMMUNICATIONS CORP.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 16, 1998
Notice is hereby given that a Special Meeting of
Shareholders (the "Special Meeting") of Interactive Gaming and
Communications Corp., a Delaware corporation (the "Company"),
will be held at the office of the Company at 4070 Butler Pike,
Suite 300, Plymouth Meeting, Pennsylvania 19462-1510, on Monday,
March 16, 1998 at 10:00 a.m., Eastern Time, for the following
purposes:
1. To approve the sale of 100% of the stock of its
subsidiaries Sports International, Ltd. (Grenada) and
Global Casinos, Ltd. (Grenada), which conduct the
Company's international Internet and telephonic sports
wagering and casino gaming businesses, respectively, to
International Gaming Corp., a British Columbia
corporation (the "Sale") on the terms contained in the
Stock Purchase Agreement dated November 6, 1997, which
is described in the accompanying Proxy Statement.
2. To act upon such other matters as may properly come
before the Special Meeting or any postponements or
adjournments thereof.
Each of the above proposals is more fully described in the
accompanying Proxy Statement.
Approval of the Sale will require the affirmative vote by
holders of a majority of the outstanding shares of the Company's
common stock, par value, $0.001 per share, entitled to vote at
the Special Meeting.
Only shareholders of record at the close of business on
February 12, 1998 shall be entitled to notice of and to vote at
the Special Meeting or any postponement or adjournments thereof.
All shareholders are cordially invited to attend the Special
Meeting in person.
Sincerely,
Michael F. Simone
President and
Chief Executive Officer
February 14, 1998
Blue Bell, Pennsylvania
IF YOU DO NOT EXPECT TO BE PRESENT AT THE SPECIAL MEETING AND
WISH YOUR SHARES OF COMMON STOCK TO BE VOTED, YOU ARE REQUESTED
TO SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY CARD WHICH IS BEING
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. A RETURN ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES IS
ENCLOSED FOR THAT PURPOSE.
<PAGE>
INTERACTIVE GAMING AND COMMUNICATIONS CORP.
---------------
PROXY STATEMENT
FOR
THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 16, 1998
_________________________________________________________________
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Interactive
Gaming and Communications Corp., a Delaware corporation (the
"Company"), for use at the Special Meeting of Shareholders (the
"Special Meeting") to be held on March 16, 1998, at 10:00 a.m.,
Eastern Time, at 4070 Butler Pike, Plymouth Meeting, Pennsylvania
19462-1510 and at any postponements or adjournments thereof.
The Company intends to mail this Proxy Statement, the Notice
of Special Meeting of Shareholders, and the accompanying proxy
card to shareholders entitled to vote at the Special Meeting on
or about February 14, 1998. A copy of the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 and
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997 also are being sent to such shareholders with the Proxy
Statement.
At the Special Meeting, holders of the Company's common
stock, par value $0.001 per share (the "Common Stock"), will be
asked to consider and vote upon the following proposal (the
"Proposal"): to approve the sale (the "Sale") of 100% of the
stock of two of the Company's wholly-owned subsidiaries, Sports
International, Ltd. (Grenada) ("Sports") and Global Casinos, Ltd.
(Grenada) ("Global Casinos"), which conduct an international
Internet and telephonic sports wagering and casino gaming
businesses, respectively (the "Internet Gaming Businesses"), to
International Gaming Corp., a corporation organized under the
laws of British Columbia, Canada ("International Gaming"),
substantially on the terms contained in the Stock Purchase
Agreement (defined herein).
RECORD DATE; VOTING
The Board of Directors of the Company (the "Board") has
fixed the close of business on February 12, 1998 as the record
date (the "Record Date") for the determination of holders of
Common Stock entitled to notice of and to vote at the Special
Meeting or any and all postponements or adjournments thereof. As
of the Record Date, there were 13,701,290 shares of Common Stock
issued and outstanding.
Each share of Common Stock is entitled to one vote on the
Proposal. The presence, whether in person or by proxy, of a
majority of the outstanding shares of Common Stock is necessary
to constitute a quorum at the Special Meeting. The affirmative
vote by holders of a majority of the outstanding shares of Common
Stock entitled to vote at the Special Meeting is required to
approve the Proposal. Abstentions from voting and broker non-
votes (which occur if a broker or other nominee does not have
discretionary authority and has not received voting instructions
from the beneficial owner with respect the Proposal) on the
Proposal will be counted for purposes of determining the presence
of a quorum but will not be counted as an affirmative or negative
vote on the Proposal. Accordingly, abstentions and broker non-
votes will have the same legal effect as a vote against the
Proposal.
As of the Record Date, the directors and executive officers
of the Company, together with their respective affiliates, held
4,470,280 shares of Common Stock, representing approximately 32.6
percent of the votes to be cast at the Special Meeting.
Michael F. Simone, a director and officer of the Company, has
informed the Company that he intends to vote his shares of Common
Stock FOR the Proposal. Further, Rina Moscariello, a former
director of the Company who is the Company's second-largest
shareholder, also has informed the Company that she intends to
vote FOR the Proposal. As of the Record Date, Mr. Simone and
Ms. Moscariello held, respectively, 4,268,280 and 3,700,000
shares of Common Stock or 31.2 percent and 27 percent of all
outstanding shares of Common Stock, for a combined total of
7,968,280 shares or 58.2 percent.
NO APPRAISAL RIGHTS
Under the Delaware General Corporation Law, shareholders of
the Company are not entitled to appraisal rights in connection
with the Sale.
REVOCABILITY OF PROXIES
If a person who has executed and returned a proxy is present
at the meeting and wishes to vote in person, such person may
elect to do so and thereby revoke the power of the proxy holders
to vote such proxy. A proxy also may be revoked before it is
exercised by filing with the secretary of the Company a duly
signed revocation or a proxy bearing a later date.
SOLICITATION
This solicitation is being made by the Company, and the
Company will bear the entire cost of the solicitation of proxies
from its shareholders, including preparation, assembly, printing
and mailing of this Proxy Statement, the proxy card and any
additional information furnished to shareholders. Copies of
solicitation materials will be furnished to banks, brokerage
houses, fiduciaries and custodians holding in their names shares
of Common Stock beneficially owned by others to forward to such
beneficial owners. Original solicitation of proxies by mail may
be supplemented by telephone, facsimile, telegram or personal
solicitation by directors, officers, regular employees and other
representatives of the Company. No additional compensation will
be paid to such persons for such services.
INDEPENDENT AUDITORS
Representatives of Parente, Randolph, Orlando, Carey &
Associates, the Company's independent auditors, are expected to
attend the Special Meeting and to be available to answer
appropriate questions. Such representatives will have the
opportunity to make a statement to the shareholders if they
desire to do so.
THE COMPANY
The Company is a holding company which engages in two lines
of business:
- sports wagering and casino gaming
- software development and licensing and web-site
advertising.
All of the Company's operations are conducted by its wholly-
owned subsidiaries. The gaming business is conducted through
Sports and Global Casinos. The software and web-site advertising
business is conducted through Intersphere Communications, Ltd.
(Grenada) ("Intersphere"). A fourth subsidiary, Global Gaming
Corp. (Grenada) ("Global Gaming"), holds a license from the
Country of Grenada permitting it to conduct gaming operations in
Grenada and to grant sublicenses to other entities to conduct
gaming operations in Grenada. As a holding company, the Company
is responsible for supplying its subsidiaries with administrative
and management assistance, accounting, consulting and necessary
funding to complete projects or initiate endeavors.
The Common Stock is publicly traded on the National
Association of Securities Dealers ("NASD") Automated Over the
Counter ("OTC") Market Bulletin Board under the trading symbol
"SBET."
THE COMPANY'S TELEPHONE AND INTERNET GAMING BUSINESS
Together, Sports and Global Casinos operate the Company's
telephone and Internet Gaming Business. Sports' emphasis is on
sports betting conducted by telephone and over the Internet,
while Global Casinos offers casino-type games over the Internet.
Sports operates an international Internet sports book.
Sports betting enthusiasts can establish an account with the
Sports and can place a wager either over the phone or the
Internet via a personal computer. Sports will accept wagers on
all major sporting events in the U.S. and Europe. Sports
operates its business under a gaming sublicense issued and
authorized by the government of Grenada, West Indies to Global
Gaming. Sports is the principal source of revenue for the
Company. It accounted for approximately 95% of the Company's net
revenues for the year ended December 31, 1996 and for 100% of the
Company's net revenue for 1995.
Global Casinos, which began operations in 1997, operates an
Internet Casino. Like Sports, it operates in Grenada under a
gaming sublicense granted by Global Gaming. Global Casinos
allows customers to play casino games (currently, blackjack, keno
and slot machines) and wager on the outcome all interactively
over the Internet. The casino gaming software has only recently
been developed and tested. Further, since Global Casinos has yet
to extensively market and advertise the new gaming product lines,
it represents only a small percentage of the Company's revenues.
Global Gaming is the exclusive principal international
gaming license holder in Grenada. Through this exclusive
licensing agreement with the government of Grenada, Global Gaming
has the right to operate international casinos or sports books
via the Internet or other telecommunications media, and to issue
sublicenses to qualified gaming companies. Global Gaming also
has the right to operate a casino on the island of Grenada.
Global Gaming does not conduct its own gaming operations. It has
granted licenses to both Sports and Global Casinos under which
each operates its gaming operations in Grenada.
The business of Sports, Global Gaming and Global Casinos are
licensed and regulated by the government of Grenada. Those
companies' customers reside around the world, including in the
United States. The governments outside of Grenada may attempt to
assert jurisdiction over the gaming activities and contend that
those activities are subject to their gaming and other laws. The
Company has become involved in two legal proceedings in the
United States in connection with the gaming activities of the
Company's gaming subsidiaries. See "GOVERNMENT REGULATION AND
LEGAL PROCEEDINGS" below. The Company is not involved in any
such legal proceedings outside of the United States.
THE COMPANY'S SOFTWARE AND MARKETING BUSINESS
Intersphere is a software development, marketing and
communications company specializing in the Internet market.
Intersphere developed a computer software package that it calls
the Wise Guy Sports Wagering System, which is presently used by
Sports. The Wise Guy Sports Wagering System provides the
necessary software for a sports book operator to take a wager
from a customer over the Internet. Intersphere has developed a
computer software product to permit interactive casino gaming
over the Internet. Interactive slot machines, blackjack and Keno
are fully developed and operating. Intersphere is currently in
the process of developing other interactive casino games.
Intersphere also engages in Web Page development and design.
GOVERNMENT REGULATION AND LEGAL PROCEEDINGS
The business of Sports, Global Gaming and Global Casinos are
licensed and regulated by the government of Grenada. Those
companies' customers reside around the world, including in the
United States. The governments outside of Grenada may attempt to
assert jurisdiction over the gaming activities and contend that
those activities are subject to their gaming and other laws.
In that regard, the Company is presently subject to several
material legal proceedings. First, on February 18, 1997, the
United States Attorney obtained a search warrant issued by the
United States District Court for the Eastern District of
Pennsylvania, authorizing the Federal Bureau of Investigation
("FBI") to search the Company's corporate headquarters in Blue
Bell, Pennsylvania. In seeking the warrant, it was the U.S.
Attorney's contention that there were violations of federal laws
and that an illegal gambling business was being conducted from
the Company's premises in Blue Bell, Pennsylvania. In May of
1997, the Company filed an amended motion to quash the subpoenas
issued from the United States District Court on the grounds that
the laws of Grenada pertaining to secrecy and confidentiality
could be violated by individual compliance. The Court denied the
motion, noting that the subpoenas were directed to the Company
and not to individuals. On July 30, 1997, the Company made a
good faith effort to comply with the subpoenas and delivered
relevant documents. Individuals from the Company under subpoena
have been advised that their scheduled appearances have been
continued indefinitely.
Second, in May of 1997, the Attorney General for the State
of Missouri obtained an indictment of the Company and its
President on the grounds that they were conducting an illegal
gambling business in Missouri based upon the activities of
Missouri residents in placing bets over the Internet with Sports.
The Missouri attorney general is seeking extradition of the
Company and its President and has obtained a favorable ruling
from the Court of Common Pleas of Montgomery County, Pennsylvania
granting extradition. The Company and its President have
appealed the ruling to the Superior Court of Pennsylvania, the
intermediate appellate court of the state, and that appeal is
pending.
Reference is made to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, and its Quarterly
Report on Form 10-Q for the quarter ended September 30, 1997,
each of which accompanies this Proxy Statement and is
incorporated herein by reference, for additional information
regarding the Company and its business.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Proxy Statement, as it may be amended or supplemented,
and certain documents incorporated by reference herein, contain
or may contain both statements of historical fact and
"forward-looking statements" within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended. In particular,
reference is made to the description of the Company's plans and
objectives for the conduct of its business following the Sale.
Any such statements are based on management's current
expectations and are subject to a number of factors and
uncertainties that could cause actual results to differ
materially from those described in the forward-looking
statements. Factors which could cause future results to differ
materially from those anticipated by management in the forward-
looking statements included herein are (a) recent operating
losses and cash flow deficiencies experienced by the Company,
(b) risks associated with the development and marketing of the
Company's new software products, (c) the highly competitive
environment in the software and Internet markets,
(d) uncertainties concerning the collectability of the Purchase
Money Note and the Royalties.
PROPOSAL 1
SALE OF THE INTERNET GAMING BUSINESS
The Company proposes to sell its Internet Gaming Business to
International Gaming by selling 100% of the stock of Sports and
Global Casinos (together, the "Internet Gaming Subsidiaries").
The Sale will be pursuant to a Stock Purchase Agreement, dated
November 6, 1997 (the "Purchase Agreement"), a copy of which is
attached to this Proxy Statement as Annex A.
The purchase price is $5 million. The purchase price will
be paid $10,000 in cash and the balance, being $4,990,000, with a
three-year promissory note from International Gaming bearing
interest at the prime rate (the "Purchase Money Note"), a copy of
which is attached to the Purchase Agreement.
Immediately following the sale of the Internet Gaming
Subsidiaries, the Company's remaining operations will be those
related to the software and web-site advertising operations
conducted through Intersphere. In addition, the Company will
maintain ownership of Global Gaming, which possesses gaming
licenses from Grenada. Global Gaming does not presently conduct
any gaming business.
NEGOTIATIONS RELATING TO THE SALE
As a result of the increasing United States governmental
scrutiny of the Company's Internet Gaming Business, as described
above under "GOVERNMENT REGULATION AND LEGAL PROCEEDINGS,"
management of the Company decided to explore methods to allow the
Company's gaming operations to continue free of legal threats
from governmental officials. Initially, the Company believed an
additional investment, together with a modification of the
Company's business plan might be sufficient. Eventually, it was
determined that a proposed sale of the Company's gaming
subsidiaries to a third party was a more beneficial method.
In October of 1996, the Company received an unsolicited
telephone call from Mr. Gary Newman, a principal of International
Gaming Corp. of Vancouver, British Columbia. Mr. Newman
indicated that International Gaming was interested in entering
the Internet casino business and had been investigating the
field. As part of that investigation, International Gaming had
learned of the Wiseguy Sports Wagering System developed by the
Company.
Following many months of discussions and negotiations,
International Gaming proposed making an investment in the
Company's Common Stock. The purpose of such a transaction would
have been to provide cash to the Company with which to continue
to develop its software business and to promote its gaming
business, while at the same time providing to International
Gaming an entrance into the Internet Gaming business.
On September 15, 1997, management of both companies signed a
form of agreement to accomplish that transaction. That agreement
was subject to the provision that closing on the transaction was
required to occur by September 15, 1997. Without fault by either
party, the transaction did not close by such date. The parties
did not renew or extend that agreement.
In late September of 1997, management met with it outside
legal counsel and its outside accountants to discuss the proposed
transaction with International Gaming. Management reviewed the
benefits and the drawbacks of having International Gaming make a
significant investment in the Company's Common Stock. Among
other things, management concluded that International Gaming's
investment in the Company, by itself, would not end the
governmental scrutiny by the United States and state authorities
relative to its Internet Gaming Business, and that other steps
would be required to achieve that purpose.
At that meeting, management and its advisors discussed
various possible transactions that might achieve that objective,
including a sale of the Internet Gaming Subsidiaries,
reincorporation of the Company to a jurisdiction other that
Delaware, and the relocation of the Company's offices outside the
United States. Management decided to propose an outright sale of
the stock of the Internet Gaming Subsidiaries to International
Gaming. Michael Simone telephoned Mr. Newman to propose the sale
of the Internet Gaming Subsidiaries to International Gaming.
International expressed a preliminary interest in such a
transaction, subject to further negotiations over the price and
the terms of such a sale.
Michael Simone and Fred Michini, the Company's Chief
Financial Officer, then held a telephone conference call with
Mr. Newman of International Gaming at which price and terms were
discussed. As a result, the parties agreed in principle on the
Sale.
The Company then prepared and delivered to International
Gaming form of Stock Purchase Agreement setting forth the
principal terms and conditions relating to the Sale. The parties
executed the Stock Purchase Agreement.
Management of the Company is not aware of any other
company's having expressed an interest in acquiring either Sports
or Global Casinos. The Company has not contacted any company or
person other than International Gaming regarding an acquisition
of either Sports or Global Casinos.
REASONS FOR THE SALE
The Board of Directors believes that the Sale of the
Internet Gaming Subsidiaries is in the best interest of the
Company and its shareholders and unanimously recommends that the
shareholders of the Company vote FOR approval of the Sale.
Prior to reaching its conclusions, the Board reviewed the
proposed Sale with the Company's management and its outside
accountants and legal advisors. The Company did not hire a
financial advisor in connection with the proposed Sale. The
following are the material factors considered by the Board in
reaching its conclusions:
(i) The Company has come under legal attack from two
separate governmental authorities. See "GOVERNMENT
REGULATION AND LEGAL PROCEEDINGS," above. The fact that
Sports and Global Casinos are engaged in the gaming business
over the Internet and the telephone from Grenada and with
licenses from that government have not been sufficient to
preclude those attacks, since the Company has its holding
company offices in the United States. The Company does not
have the financial resources necessary to defend its
position for an indefinite period of time, or to set the
legal precedents necessary to preclude future legal attacks
from other governmental authorities. Accordingly, the Board
believes it is necessary and prudent to sell the Internet
Gaming Business.
(ii) The Board has evaluated the price offered by
International Gaming, in light of the historical and
projected earnings of the Internet Gaming Business and the
estimated fair value of that business.
(iii) The Board evaluated the financial strength of
International Gaming as it pertains to International's
ability to pay the deferred purchase price pursuant to the
Purchase Money Note. International Gaming intends to add
new product lines and to expand the marketing of the
business throughout Canada, Hong Kong, Australia, Great
Britain and other countries; and accordingly it is expected
that International Gaming will repay the Purchase Money Note
from income generated by the current customer base of the
Internet Gaming Business and from new gaming customers.
Although the Company expects that the Purchase Money Note
will be fully paid when due, the Board recognized that there
is risk that the Purchase Money Note will not be paid.
(iv) After it exits the Internet Gaming Business, the
Company will be engaged principally in its gaming and
entertainment software development business. The Board of
Directors believes that such business has good future growth
potential. The Company intends to use some of the proceeds
from the sale to develop new interactive Internet casino
games. The Company believes that it can license the gaming
software to operating companies for attractive license and
royalty fees. See "DESCRIPTION OF THE COMPANY FOLLOWING THE
SALE," below.
(v) As a result of the Sale, the Company will be entitled
to receive royalties under the Software License with Sports
and Global Casinos equal to five percent of the net win for
the first two years and 10% of the net win for the balance
of the term, with a minimum royalty in the amount of $60,000
annually for 10 years.
(vi) The Board believes that the financial cost of
defending the Company from legal attacks will decrease the
value of the Company. International Gaming has offered what
the Board believes is a fair price for the Internet Gaming
Business. Awaiting or soliciting other offers, in the
opinion of the Board, will have little or no value to the
Company and, depending upon the results of the legal
proceedings, may actually result in a lower offering price.
(vii) When the Sale is consummated, the Company will have
increased its tangible net book value from approximately
$1.5 million to approximately $5.8 million, or from
approximately $.11 per share to approximately $.42 per
share.
In view of the wide variety of factors considered in
connection with its evaluation of the proposed Sale, the Board
did not find it practical to, and did not, quantify or otherwise
attempt to assign relative weights to specific factors considered
in reaching its determinations.
TERMS OF THE SALE
The following is a summary of the material provisions of the
Stock Purchase Agreement and the terms of the Purchase Money
Note. This Summary and all other discussions of the terms and
conditions of the Sale, the Stock Purchase Agreement, and the
Purchase Money Note included elsewhere in this Proxy Statement
are qualified in their entirety by reference to the Stock
Purchase Agreement and the Purchase Money Note, copies of which
are attached as Appendix A hereto and incorporated by reference
herein.
The Sale. On the terms and subject to the conditions
of the Stock Purchase Agreement, on the closing date, the Company
will sell and transfer to International Gaming 100% of the
outstanding capital stock of each of Sports and Global Casinos.
Purchase Price. At closing, International Gaming will
pay $10,000 in cash and will deliver the Purchase Money Note in
the principal amount of $4,990,000.
The Purchase Money Note. The Purchase Money Note will
obligate International Gaming to pay to the Company the principal
sum of $4,990,000. Interest accrues on the unpaid principal
amount of the Purchase Money Note at a rate equal to the prime
rate or other successor index rate published in the Wall Street
Journal, adjusting on a quarterly basis. For the first 18 months
of the Purchase Money Note, International Gaming will pay
interest only on a monthly basis. Beginning on the 19th month
following the Closing, principal will be repaid in monthly
installments of $27,722 per month, until the 37th month after the
closing, when the entire principal balance and all other sums due
under the Purchase Money Note are payable in full.
The obligations under the Purchase Money Note are
secured by a pledge of the stock in each of Sports and Global
Casinos.
There can be no assurances that International will not
default on its obligations under the Purchase Money Note. The
Company realizes that the Purchase Money Note will be a
substantial liability for International Gaming and that
International Gaming will rely on future earnings and cash flow
from its business to be able to repay the installments on the
Purchase Money Note.
Software License Agreement. The gaming computer
software utilized by both Sports and Global Casinos (the "Gaming
Software") will, at the time of Closing, be owned by Intersphere.
Concurrent with Closing, the Company will enter into a software
license agreement with each of Sports and Global Casinos (the
"Software License"). Under the Software License, the Company
will grant to Sports and Global Casinos a perpetual, non-
exclusive license to utilize the Gaming Software for internet
casino and sports book gaming. International Gaming will have no
right to sublicense the Gaming Software, except, with consent of
the Company, to other wholly-owned subsidiaries of International
Gaming. The Company will be entitled to a royalty fee of five
percent of the gross win for the first two years and ten percent
of the gross win thereafter (gross win being the gross amount
wagered less the amount paid to customers) payable monthly with a
minimum monthly payment of $2,500 from each of Sports and Global
Casinos. International's obligations under the Software License
will be cross defaulted and cross-collateralized with its
obligations under the Purchase Money Note.
Transfer of Certain Liabilities. Because International
Gaming is purchasing the stock of the Internet Gaming
Subsidiaries, International Gaming will not assume any
liabilities of the Company. However, all ordinary course
liabilities owed by either Sports or Global Casinos in existence
on the Closing Date will continue to be owed by those
corporations from and after the Closing Date, effectively meaning
that they will be discharged after the Closing Date by
International Gaming. As of September 30, 1997, the Company had
total consolidated liabilities of approximately $2,130,000, of
which approximately $1,541,000 were liabilities owed by Sports
and Global Casinos.
Transaction Costs. Each party has agreed to pay its
own transaction expenses. The Company estimates its transaction
expenses for the Sale will aggregate $50,000, which includes
financial advisor, consulting, legal and accounting fees, and
fees of preparing proxy solicitation materials.
Agreements Prior to Closing. The Company has agreed to
continue to operate the Internet Gaming Business in the ordinary
course of business consistent with past practices prior to the
closing with a view to the maintenance and preservation of the
assets and business thereof.
Conditions to Closing; Termination. Closing is
scheduled to occur upon approval of the Sale by shareholders of
the Company and satisfaction or waiver of each party's respective
closing conditions, which include the absence of a material
breach of the Stock Purchase Agreement by the other party and the
absence of any pending or threatened litigation existing at the
time of the closing that seeks to enjoin or prevent the Sale.
The transaction does not require any regulatory approvals which
have not yet been obtained.
If the transaction has not closed by November 30, 1997,
the parties may mutually agree to extend the closing for up to
30 days, or, absent such an agreement to extend, either party may
terminate the Stock Purchase Agreement. Further, either party
may terminate the Stock Purchase Agreement if the party's
conditions to closing are not satisfied, other then as a result
of such terminating party's breach of the Stock Purchase
Agreement.
Representations and Warranties. The Company has made
standard representations and warranties concerning its due
organization and corporate power, its authorization to enter into
the transaction, the absence of adverse changes and undisclosed
liabilities, title to and condition of its assets, certain tax
matters, litigation, environmental, regulatory and ERISA matters,
outstanding contracts and insurance coverage and intellectual
property matters.
FEDERAL INCOME TAX CONSEQUENCES
The Company estimates that it will recognize approximately
$5.8 million of income in connection with the Sale. Of that
total, the Company will recognize approximately $900,000 of
income as a consequence of Sports canceling $900,000 in
indebtedness owed by the Company to Sports, and approximately
$4.9 million of gain in the exchange of the stock of the Internet
Gaming Subsidiaries for the purchase price in the Sale.
The approximately $900,000 of cancellation of indebtedness
income will be recognized when the Closing occurs. The Company
intends to report the approximately $4.9 million of gain on the
Sale under the installment sale method for federal income tax
purposes. Accordingly, the Company will report portions of that
gain in proportion to the cash received by the Company in payment
of the purchase price, at first when the Company receives cash at
Closing and then as the Company receives principal payments under
the Purchase Money Note.
The Company has estimated that, as of December 31, 1997, it
is likely to have approximately $1.1 million in net operating
loss carryforwards for federal income tax purposes, which it
intends to utilize, as appropriate under the tax laws, to reduce
the income recognized in the transaction.
Consummation of the Sale will not be a taxable event for
income tax purposes for the Company's shareholders.
INFORMATION REGARDING INTERNATIONAL GAMING
International Gaming Corp. is a privately-held British
Columbia, Canada, corporation. The principals and managers and
affiliates of International Gaming are not associated or
affiliated with the Company, its officers and directors or any of
their respective affiliates. The information in this section was
provided to the Company by International Gaming Corp.
PRO FORMA FINANCIAL INFORMATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
The following unaudited pro forma condensed consolidated
statements of operations for the year ended December 31, 1996 and
for the nine months ended September 30, 1997, have been prepared
to reflect the proposed Sale of the Internet Gaming Subsidiaries
and assuming that such sale took place on January 1, 1996. The
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the period ending December 31,
1996 (the "1996 Annual Report") and the condensed consolidated
financial statements for the nine months ended September 30, 1997
and 1996 in the Company's Quarterly Report on Form 10-Q for the
quarter ending September 30, 1997, (the "September 1997 Quarterly
Report"), which reports are incorporated herein by reference.
The pro forma condensed consolidated statements of operations are
not necessarily indicative of the results of operations of the
Company as they may be in the future or as they might have been
had the Sale been effective January 1, 1996.
INTERACTIVE GAMING & COMMUNICATIONS CORP.
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PROFORMA
HISTORICAL ADJUSTMENTS PROFORMA
(AUDITED) (UNAUDITED)
<S> <C> <C> <C>
GROSS HANDLE $58,482,731 $(58,482,731)(1) $ -
LESS CUSTOMER WIN 55,730,479 (55,730,479)(1) -
NET WIN 2,752,252 (2,752,252)(1) -
OTHER REVENUES:
Licensing fees, net 70,000 - 70,000
Royalties - 137,613 (2) 137,613
Interest income 21,084 424,150 (3) 445,234
Membership fees 11,675 (11,675)(4) -
Other 43,484 - 43,484
Total other revenues 146,243 550,088 696,331
NET WIN AND OTHER REVENUES 2,898,495 (2,202,164) 696,331
EXPENSES:
Salaries 875,285 (447,732) 427,553
Telephone 520,311 (450,726) 69,585
Legal and professional 414,905 (122,694) 292,211
Advertising 353,431 (333,664) 19,767
Provision for doubtful
accounts 286,992 (286,992) -
Rent 238,799 (131,959) 106,840
Officers' salaries 193,267 (164,421) 28,846
Office 190,382 (122,979) 67,403
Travel and related expenses 157,885 (115,223) 42,662
Depreciation 88,882 (73,874) 15,008
Amortization 80,000 - 80,000
Auto 31,828 (12,558) 19,270
Insurance 28,590 (4,696) 23,894
Interest 22,839 (17,720) 5,119
Bank charges 22,035 (19,733) 2,302
Repairs and maintenance 21,598 (11,488) 10,110
Services and other fees 19,593 (17,999) 1,594
Other 47,793 (37,040) 10,753
Total expenses 3,594,415 (2,371,498)(5) 1,222,917
Income (loss) before proforma
sale of subsidiaries $ (695,920) $ 169,334 $ (526,586)
Proforma gain from sale of
gaming subsidiaries - 4,879,715 (6) 4,879,715
Expense of sale - (50,000) (50,000)
Deferred income tax expense
related to sale - (1,500,000)(7) (1,500,000)
Net (loss) income $ (695,920) $ 3,549,049 $ 2,853,129
(Loss) earnings per common
share $ (0.06) $ 0.31 $ 0.25
Weighted average common shares
outstanding 11,512,656 11,512,656 11,512,656
</TABLE>
(1) The Internet Gaming Subsidiaries accounted for 100% of the
Company's gaming revenue for the period. Gross Handle,
Customer Win, and Net Win are terms relating exclusively to
accounting for gaming operations. Sale of the Internet
Gaming Subsidiaries eliminates 100% of the Company's gaming
revenue for the period.
(2) These royalties consist of the pro forma royalties payable
by International Gaming under the Software License
Agreement.
(3) This increase in interest income consists of the pro forma
interest payable by International Gaming under the Purchase
Money Note.
(4) Membership fees are related exclusively to the Internet
Gaming Business. Sale of the Internet Gaming Subsidiaries
eliminates 100% of the Company's membership fees for the
period.
(5) Expenses directly relating to the operations of the
subsidiaries that will be sold and will be non recurring
subsequent to sale.
(6) Proceeds from sale $5,000,000
Less: Basis 120,285
Proforma gain $4,879,715
(7) Proforma gain $4,879,715
Cancellation of debt 900,000
Income before NOL $5,779,715
Less NOL 1,100,000
Taxable Income $4,679,715
Estimated Income Tax $1,500,000
<PAGE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PROFORMA
HISTORICAL ADJUSTMENTS PROFORMA
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
GROSS HANDLE $37,633,396 $(37,633,396)(1) $ -
LESS CUSTOMER WIN 36,430,490 (36,430,490)(1) -
NET WIN 1,202,906 (1,202,906)(1) -
OTHER REVENUES:
Licensing fees, net 334,824 - 334,824
Royalties - 60,145 (2) 60,145
Interest income 6,641 318,113 (3) 324,754
Membership fees 56,443 (56,443)(4) -
Other 117,208 - 117,208
Total other revenues 515,116 321,815 836,931
NET WIN AND OTHER REVENUES 1,718,022 (881,092) 836,931
EXPENSES:
Salaries 551,978 (215,543) 336,435
Telephone 281,303 (241,030) 40,273
Legal and professional 346,925 (85,815) 261,110
Advertising 128,551 (118,540) 10,011
Provision for doubtful
accounts 6,196 (6,196) -
Rent 163,142 (78,895) 84,247
Officers' salaries 55,615 (55,615) -
Office 100,040 (51,770) 48,270
Travel and related expenses 54,037 (33,434) 20,603
Depreciation 71,724 (49,095) 22,629
Amortization 209,523 - 209,523
Auto 24,324 (8,486) 15,838
Insurance 35,677 - 35,677
Interest 27,087 (12,068) 15,019
Bank charges 19,231 (10,360) 8,871
Repairs and maintenance 11,617 (5,219) 6,398
Services and other fees 15,250 (9,971) 5,279
Other 24,774 (10,462) 14,312
Total expenses 2,126,994 (992,499)(5) 1,134,495
Net (loss) income $ (408,972) $ 111,408 $ (297,565)
(Loss) earnings per common
share $ (0.03) $ 0.01 $ (0.02)
Weighted average common shares
outstanding 13,701,290 13,701,290 13,701,290
</TABLE>
(1) The Internet Gaming Subsidiaries accounted for 100% of the
Company's gaming revenue for the period. Gross Handle,
Customer Win, and Net Win are terms relating exclusively to
accounting for gaming operations. Sale of the Internet
Gaming Subsidiaries eliminates 100% of the Company's gaming
revenue for the period.
(2) These royalties consist of the pro forma royalties payable
by International Gaming under the Software License
Agreement.
(3) This increase in interest income consists of the pro forma
interest payable by International Gaming under the Purchase
Money Note.
(4) Membership fees are related exclusively to the Internet
Gaming Business. Sale of the Internet Gaming Subsidiaries
eliminates 100% of the Company's membership fees for the
period.
(5) All expenses directly relating to the operations of the
Internet Gaming Subsidiaries and which will not be incurred
by the Company after the sale have been eliminated.
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The following unaudited pro forma condensed consolidated
balance sheet at September 30, 1997, has been prepared to reflect
the proposed Sale of the Internet Gaming Subsidiaries based on
the assumption that the Sale was consummated at that date. The
pro forma condensed consolidated balance sheet should be read in
conjunction with the Company's consolidated financial statements
and notes thereto included in the Company's 1996 Annual Report
and the condensed consolidated financial statements of the
Company for the nine months ended September 30, 1997 and 1996
included in the Company's September 1997 Quarterly Report, which
reports are incorporated herein by reference.
<PAGE>
INTERACTIVE GAMING & COMMUNICATIONS CORP.
PROFORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PROFORMA
HISTORICAL ADJUSTMENTS(1) PROFORMA
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 70,173 (52,706) 17,467
Restricted cash 200,000 (200,000)(2) -
Accounts receivable, net of
allowance for doubtful
accounts 335,938 (203,995)(3) 131,943
Note receivable 57,663 (57,663)(3) -
Other 10,562 (8,472) 2,090
Total current assets 674,336 (522,836) 151,500
EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, Net 262,948 (156,362)(4) 106,586
INTANGIBLE ASSETS:
Gaming and software
licenses, Net of amortization 2,702,693 - 2,702,693
Gaming licenses, Net of
amortization 4,761 (4,761)(5) -
Total intangible assets 2,707,454 (4,761) 2,702,693
OTHER ASSETS 28,884 (27,766)(6) 1,118
NOTE RECEIVABLE, LONG TERM - 4,990,000 (7) 4,990,000
TOTAL $ 3,673,622 $ 4,278,275 $ 7,951,897
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 486,065 $ (200,000)(8) $ 286,065
Customers' credit balances 867,948 (867,948)(8) -
Customers' security deposits 200,075 (200,075)(8) -
Accounts payable and accrued
expenses 576,698 (272,918)(9) 303,780
Total current liabilities 2,130,786 (1,540,941) 589,845
DEFERRED TAX LIABILITIES - 1,600,000 1,600,000
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value,
25,000,000 shares authorized,
13,701,290 issued and
outstanding 13,701 - 13,701
Additional paid-in capital 2,676,296 - 2,676,296
Retained Earnings (Deficit) (1,147,161) 4,219,216 (10) 3,072,055
Total stockholders' equity 1,542,836 4,704,113 6,246,949
TOTAL $ 3,673,622 $ 4,278,275 $ 7,951,897
</TABLE>
_____________________________
(1) To eliminate the assets and liabilities of the Internet
Gaming Business to be sold to Buyer and to give effect to
the proposed Sale as of September 30, 1997.
(2) Restricted Cash in the amount of $200,000 represents a
certificate of deposit owned by Sports and held as security
by Madison Bank for the Note Payable of $200,000 listed in
footnote (8) below.
(3) Note Receivable in the amount of $57,663 consists of a note
due to Sports which is eliminated after the sale.
(4) Equipment and Leasehold Improvements in the amount of
$156,362 consist of equipment and leasehold improvements
owned by Sports and Global which are eliminated after the
sale.
(5) Unamortized Sublicense License amounting to $4,761 consists
of the remaining unamortized gaming license sublicense by
Sports and Global which are eliminated after the sale.
(6) Other Assets amounting to $27,766 consists of deposits owned
by Sports and Global which will be eliminated after the
sale.
(7) This is the Purchase Money Note.
(8) Note Payable amounting to $200,000 is owed by Sports to
Madison Bank and will be eliminated after the sale.
(9) Accounts payable and Accrued Expenses amounting to $272,918
are owed by Sports and Global and will be eliminated after
the sale.
(10) Retained Earnings adjustment amounting to $4,219,216
represents the change in net income from the beginning of
the year, January 1, 1997, through September 30, 1997 and
consists of the following components:
Proceeds from Sale $5,000,000
Basis of Stock (70,285)
Estimated expenses related to the Sale (50,000)
Cancellation of indebtedness 900,000
Deferred Income Tax relating to sale (1,500,000)
Net Income from Sale $4,279,715
Loss for nine month period ending 9/30/97 (60,499)
Net change to Retained Earnings $5,800,000
(11) The pro forma gain applicable to the above proposed Sale is
as follows:
Proceeds from Sale $5,000,000
Basis of Stock (50,000)
Estimated expenses related to the Sale (50,000)
Cancellation of indebtedness 900,000
Pro forma gain $5,800,000
DESCRIPTION OF THE COMPANY FOLLOWING THE SALE
If the Sale is consummated, the Company's principal
remaining operations will be those related to the Internet gaming
software and the other software and the web-site advertising
business conducted through Intersphere. Further, Global Gaming
will continue to hold a gaming license from the government of
Grenada. Although Global Gaming will not conduct any operations,
it may sublicense authority for other businesses to conduct
gaming in Grenada. It is possible that management of the Company
will utilize that license by entering the traditional casino
business in Grenada, or by sublicensing to a third party the
right to do so. For certain pro forma financial information
concerning the Company upon consummation of the Sale, see "Pro
Forma Financial Information" above.
USE OF PROCEEDS
The funds will be used primarily to support continued
development of Internet interactive gaming software and for
marketing the Company's software gaming products to other gaming
enterprises. The Company currently has developed three casino
games for the Internet: slot machine, blackjack and Keno. It is
currently developing roulette, video poker and baccarat.
MANAGEMENT AND EMPLOYEES
The Company will retain all employees currently engaged by
Intersphere. The employees who operate the telecommunications
and Internet gaming business conducted by Sports and Global
Casino will not remain employed by the Company and may or may not
be retained by the new owners. Michael Simone and Fred Michini
will remain as CEO and CFO, respectively, on generally the same
terms and conditions as exist at the closing of the Sale. The
number of employees remaining in the Company and all its
subsidiaries will be approximately 12.
FACILITIES
The Company will continue to maintain its corporate
headquarters in Blue Bell Pennsylvania, and Intersphere and
Global Gaming will continue to lease the premises they currently
lease in Grenada. The Company will have no involvement in the
premises occupied by Sports and Global Casinos.
PRINCIPAL SHAREHOLDERS
The following table sets forth information concerning
ownership of the Company's Common Stock as of the Record Date by:
(a) each director and executive officer of the Company; (b) each
person known to the Company to be the beneficial owner of more
than five percent of its Common Stock; and (c) all executive
officers and directors of the Company as a group.
Number
of Shares
Name and Address Beneficially Percent
of Beneficial Owner Owned (1) of Class
Michael F. Simone 4,268,280 31.2%
595 Skippack Pike
Suite 100
Blue Bell, PA 19422
Director and Executive Officer
Jeffrey Erb 100,000 1%
202 Monsignor Drive
Conshohocken, PA 19428
Director
Michael Oryl 100,000 1%
375 Allentown Road
Souderton, PA 18964
Director
Fred Michini 2,000 *
2005 North Wales Road
Lansdale, PA 19446
Executive Officer
Rina Moscariello 3,700,000 27%
994 Derring Lane
Bryn Mawr, PA 19110
Caribbean Communications, Ltd. 1,000,000 7.3%
Antigua, West Indies
Arthur Reynolds 1,100,000 8.0%
Antigua, West Indies
All Executive Officers
and Directors, as a
Group (4 Persons) 4,470,280 32.6%
___________________________________
* Less than 1%
<PAGE>
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with
the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934, as amended, (File No. 33-7764-C), are
hereby incorporated in this Proxy Statement by reference:
(a) the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, (b) the Company's Quarterly Report on
Form 10-Q for the quarter ending September 30, 1997 and (c) all
other reports filed by the Company pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, since
December 31, 1996. The Company hereby undertakes to provide
without charge to each person to whom this Proxy Statement is
delivered, upon written or oral request, a copy of any and all of
the information that has been incorporated by reference in this
Proxy Statement. Such request should be directed to the Company
at the Company's offices at 4070 Butler Pike, Suite 300, Plymouth
Meeting, Pennsylvania 19462-1510, telephone (610) 941-0305;
Attention: Michael F. Simone, President.
By order of the Board of Directors
/s/ Michael F. Simone
Michael F. Simone
President and
Chief Executive Officer
<PAGE>
ANNEX A
STOCK PURCHASE AGREEMENT
SEE ATTACHED
<PAGE>
STOCK PURCHASE AGREEMENT
between
INTERNATIONAL GAMING CORP.
and
INTERACTIVE GAMING & COMMUNICATIONS CORP.
FOR THE PURCHASE OF
ALL OF THE CAPITAL STOCK OF SPORTS INTERNATIONAL, LTD.
and
GLOBAL CASINOS, LTD.
<PAGE>
Table of Contents
BACKGROUND ................................................... 1
ARTICLE 1 - PURCHASE AND SALE OF PURCHASED SHARES............. 1
ARTICLE 2 - PURCHASE PRICE; PAYMENT........................... 1
2.1 Purchase of Shares of Sports....................... 1
2.3 Security........................................... 3
ARTICLE 3 - SOFTWARE AND GAMING LICENSES AGREEMENT ........... 3
ARTICLE 4 - CLOSING........................................... 4
4.1 Time and Place..................................... 4
4.2 Extension.......................................... 4
ARTICLE 5 - DOCUMENTS TO BE DELIVERED AT CLOSING.............. 4
5.1 Seller's Deliveries................................ 4
5.2 Buyer's Deliveries................................. 5
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF SELLER AND
GAMING COMPANIES.................................. 5
6.1 Organization, etc.................................. 6
6.2 Title to Purchased Shares.......................... 6
6.3 Capitalization of the Gaming Companies............. 6
6.4 Valid Issuance, etc................................ 6
6.5 Corporate Proceedings.............................. 6
6.6 Power and Authority................................ 7
6.7 Financial Statements............................... 7
6.8 Subsidiaries; Other Investments.................... 7
6.9 Conflicts, etc..................................... 8
6.10 Consents........................................... 8
6.11 Taxes.............................................. 8
6.12 Conduct of Business; Material Changes.............. 9
6.13 Leases ............................................ 9
6.14 Licenses, Permits, etc. ........................... 9
6.15 Compliance ........................................ 9
6.16 Labor and Employment............................... 10
6.17 Benefit Plans...................................... 10
6.18 Litigation......................................... 10
6.19 No Default......................................... 11
6.20 Insurance.......................................... 11
6.21 Representations as of Closing...................... 11
6.22 No Omissions....................................... 11
ARTICLE 7 - REPRESENTATIONS AND WARRANTIES OF THE BUYER 12
7.1 Organization, etc.................................. 12
7.2 Corporate Proceedings.............................. 12
7.3 Power and Authority................................ 12
7.4 Conflicts, etc..................................... 12
7.5 Consents........................................... 12
7.6 Investment Representations......................... 12
7.7 Insolvency......................................... 13
7.8 Representations as of Closing...................... 13
7.9 No Omissions....................................... 13
ARTICLE 8 - COVENANTS OF SELLER AND THE GAMING COMPANIES...... 13
8.1 Covenants Pending Closing.......................... 13
8.2 Supplemented or Corrected Information.............. 14
ARTICLE 9 - COVENANTS OF BUYER................................ 14
9.1 Approvals.......................................... 14
9.2 Conditions Precedent............................... 14
ARTICLE 10 - SELLER'S CONDITIONS PRECEDENT.................... 14
10.1 Accuracy of Representations........................ 14
10.2 Proceedings........................................ 15
10.3 Approvals.......................................... 15
10.4 Buyer's Deliveries................................. 15
ARTICLE 11 - BUYER'S CONDITIONS PRECEDENT..................... 15
11.1 Compliance......................................... 15
11.2 Proceedings........................................ 15
11.3 Obligation Absolute................................ 15
ARTICLE 12 - INDEMNIFICATION.................................. 16
12.1 Exclusive Remedy................................... 16
12.2 Indemnity by Seller................................ 16
12.3 Limitations on Seller Liability.................... 16
12.4 Time Limits for Claims against Seller.............. 17
12.5 Indemnity For Third Party Claims Against Buyer..... 17
12.6 Indemnity by Buyer................................. 18
12.7 Indemnity For Third Party Claims Against Seller.... 18
12.8 Dispute Resolution ................................ 19
12.9 Survival of Representations, etc................... 19
ARTICLE 13 - MISCELLANEOUS PROVISIONS......................... 19
13.1 Brokers............................................ 19
13.2 Entire Agreement................................... 19
13.3 Arbitration........................................ 20
13.4 Successors, etc.................................... 20
13.5 Further Assurances; Preservation of Records........ 20
13.6 Public Announcements............................... 20
13.7 Counterparts....................................... 20
13.8 Costs and Fees..................................... 20
13.9 Governing Law...................................... 21
13.10 Severability....................................... 21
13.11 Confidentiality.................................... 21
13.12 Background Incorporated............................ 21
13.13 General Definitions................................ 21
13.14 Jurisdiction....................................... 24
13.15 Notices............................................ 24
List of Exhibits and Schedules........................... 26
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement") dated November 6,
1997, by and among INTERNATIONAL GAMING CORP., a British Columbia
corporation (hereinafter referred to as "Gaming" or "Buyer"), and
INTERACTIVE GAMING & COMMUNICATIONS CORP., a Delaware corporation
(hereinafter, referred to as "IGC" or "Seller").
BACKGROUND
IGC owns all of the issued and outstanding capital stock of
both Sports International, LTD., a Grenada corporation
(hereinafter "Sports") and Global Casinos, Ltd., a Grenada
corporation (hereinafter "Global"). Sports is an Internet and
telecommunications gaming company focusing primarily on sports
book gaming. Global is an Internet gaming company focusing
primarily on interactive casino gaming. Sports and Global are
hereinafter referred to collectively as the "Gaming Companies."
The Buyer desires to purchase the business operated by the Gaming
Companies and, accordingly, the Buyer desires to purchase from
the Seller, and the Seller desires to sell to the Buyer, all of
the issued and outstanding capital stock of both Sports and
Global, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises
contained herein and intending to be legally bound, the parties
hereto covenant and agree as follows:
ARTICLE 1 - PURCHASE AND SALE OF PURCHASED SHARES
On the terms and conditions set forth in this Agreement, at
the Closing (as defined in Section 4.1), the Buyer agrees to
purchase and accept delivery from the Seller of, and the Seller
agrees to sell, assign, transfer and deliver to the Buyer, all of
the issued and outstanding shares of capital stock of Sports and
Global (collectively, the "Purchased Shares").
ARTICLE 2 - PURCHASE PRICE; PAYMENT
2.1 Purchase of Shares of Sports. In consideration for the
sale of all of the capital stock of the Gaming Companies, the
Buyer shall pay to the Seller the sum of U.S. $5,000,000 (the
"Purchase Price") as follows:
(a) a deposit of U.S. $1,000 paid upon execution of
this agreement by the Buyer to Seller, receipt of which is hereby
acknowledged;
(b) a payment of U.S. $9,000 at Closing; and
(c) the delivery of a note (the "Note") at Closing in
the amount of U.S. $4,990,000 under the terms and conditions set
forth in Section 2.2, below and in the form set forth on
Exhibit "A" attached hereto.
2.2 Deferred Payments. The balance of the Purchase Price
shall be payable by the Buyer's execution and delivery to the
Seller of the Note at Closing in the principal amount of U.S.
$4,990,000 which shall provide, among other terms, that
(i) The principal balance shall bear interest at
a floating rate of interest equal to prime rate or other
successor index rate (the "Prime Rate") published in the
Wall Street Journal;
(ii) The interest rate shall be changed each
quarter and shall be equal to the Prime Rate reported by the
Wall Street Journal on the first publication date of each
calendar quarter (for January, April, July and October of
each year) (the "Interest Rate"). The initial Interest Rate
shall be the Prime Rate published on the date of Closing.
(iii) For the initial 18 months following Closing
plus the number of days for the partial month between
Closing and the end of the calendar month in which Closing
occurred, Buyer shall pay Seller interest only on Seller's
Note with the payment due on the first day of each month for
interest which accrued on the unpaid principal balance on
Seller's Note for the previous month;
(iv) Beginning on the 19th full month following
Closing, Seller shall pay Buyer principal of U.S. $27,725
per month on the Note plus interest on the unpaid principal
balance on the Note;
(v) On the 37th full month following Closing,
Seller shall pay Buyer all accrued interest and the entire
principal balance due on the Note;
(vi) the Buyer shall have the right to prepay the
principal balance thereof without premium or penalty;
(vii) the repayment of principal and interest
shall be secured by a pledge of the stock of the Gaming
Companies as provided in Section 2.3 hereof;
(viii) Buyer shall be granted a 15-day grace
period within which to make each payment due to Seller
without breach or default and there shall be no breach or
default for a period of 45 days following notice from Seller
to Buyer within which Buyer shall have a right to cure the
default; and
(ix) In the event of a default or breach, Seller
shall be entitled to a late charge of five percent of the
Note payment per month for each month a payment is more than
45 days in arrears and the entire amount of principal,
interest and late charges shall accelerate and be due 60
days following written notice of default or breach; and
(x) Seller shall have the right to prior approval
of any independent management company engaged by Buyer to
operate the Gaming Companies and of the terms of such
engagement provided however that such approval will not be
unreasonably withheld.
\LT Security. The obligations of the Buyer under the Note
shall be assured by a collateral pledge of all the capital stock
of each of Sports and Global (the "Stock Pledge") in the form of
Exhibit "B" attached hereto by Buyer with respect to all of the
Purchased Shares.
ARTICLE 3 - SOFTWARE AND GAMING LICENSES AGREEMENT
3.1 Software License Agreements.
(a) Grant of Software License. The gaming computer
software (the "Software") utilized by both Sports and Global was
developed and is owned by Intersphere Communications, Ltd., a
Grenada corporation ("Intersphere"), which is a wholly-owned
subsidiary of IGC. Intersphere has entered into a license
agreement with IGC granting IGC the right to market and
sublicense the Software to gaming and entertainment operating
companies. As a material part of this Agreement and concurrent
with Closing, IGC agrees to enter into a software license
agreement with each of Sports and Global in the form and under
the terms and conditions of the software license agreement
("Software Agreement") attached hereto as Exhibit "C",
respectively.
(b) General Terms and Conditions. Provided that the
Gaming Companies are in compliance with the terms of the Software
Agreements and Gaming is in all respects in compliance with the
terms of the Note, IGC agrees to:
(i) grant a perpetual, non-exclusive license to
utilize software for internet casino and sports book gaming;
provided that the Gaming Companies limit use of the Software
for their own purposes with no right to sublicense the
software, except with the prior written consent of IGC, to
other wholly owned subsidiaries of Buyer;
(ii) a royalty fee for each software license to
Sports and Global plus five percent of the gross win (the
gross amount wagered less the amount paid to customers) each
month for the first two years and 10% of the gross win for
balance of the term of the Software Agreement with a minimum
monthly royalty of $5,000;
(iii) royalty fees being due and payable by the
10th day of each month for the previous month's fee; and
(iv) providing that a breach or default by Sports
or Global of the Software Agreements shall be a breach or
default of the Note between Gaming and IGC and IGC shall
have all rights and remedies available under the Note.
3.2 Grant of Gaming License. Grenada has issued to Global
Gaming, Ltd. ("Global Gaming"), a Grenada Corporation and a
wholly-owned subsidiary of IGC, a license to conduct sports and
casino gaming business located in Grenada over telecommunications
lines and through the Internet. The license permits Global
Gaming to issue sublicenses to other businesses and enterprises
and, in this regard, Global Gaming has granted a sublicense to
both Sports and Global to operate telecommunications and Internet
gaming in Grenada. Global Gaming will, as part of this
Agreement, grant a sublicense to Sports and Global under the
terms and conditions of the license agreement ("Global Gaming
License") attached hereto as Exhibit "D" and made part hereof.
ARTICLE 4 - CLOSING
4.1 Time and Place. The closing of the purchase and sale
transactions hereunder (the "Closing") shall take place at the
offices of the Stevens & Lee and at the offices of Buyer by using
facsimile transmission of documents and signature pages with
facsimile copies of signatures being treated as originals as
evidence of closing of the transaction at _____ a.m. E.D.T., on
the date (the "Closing Date") that is the later of
(a) November 15, 1998 or (b) two business days following the
approval by the Shareholders of Seller of this transaction.
4.2 Extension. The parties' respective obligations to
close hereunder shall be specifically enforceable. If, however,
all conditions to Closing are not satisfied by November 30, 1998
through no fault of any party, this Agreement shall either be
extended for a period of time agreeable to all parties hereto
(not to exceed 30 days) or shall automatically terminate and
become void, and no party shall have any further obligations
hereunder.
ARTICLE 5 - DOCUMENTS TO BE DELIVERED AT CLOSING
5.1 Seller's Deliveries. At the Closing, the Seller shall
deliver or cause to be delivered to the Buyer:
(a) Authorizing Resolutions. A certified copy of
resolutions adopted or consented to by the directors and
shareholders of the Seller and the Gaming Companies, authorizing
its execution, delivery, performance and consummation of this
Agreement and all documents required of the Seller and the Gaming
Companies in connection herewith and with the consummation of the
transactions contemplated hereby.
(b) Transfer Documents. Stock certificates for the
Purchased Shares, accompanied by duly executed notarized stock
powers endorsed to Buyer, and any other instruments of transfer
necessary to effect the sales provided for hereunder.
(c) Software Agreement. Software Agreement by and
between Intersphere and Sports and Global, in the form attached
hereto as Exhibit "C".
(d) Resignations. The written resignations of all
officers and directors of the Gaming Companies.
(e) Good Standing. A good standing certification from
the State of Delaware as of a date no sooner than 10 days prior
to Closing and a certificate, if available, from Grenada to
evidence the good standing or subsistence of the Gaming
Companies.
(f) Other Deliveries. Any and all other deliveries
required to be made by Seller pursuant to the terms hereof.
5.2 Buyer's Deliveries. At the Closing, the Buyer shall
deliver or cause to be delivered to the Seller:
(a) Authorizing Resolutions. A certified copy of
resolutions adopted or consented to by the directors of the
Buyer, authorizing its execution, delivery, performance and
consummation of this Agreement and all documents required of the
Buyer in connection herewith and with the consummation of the
transactions contemplated hereby.
(b) Note and Stock Pledge. The Note (Exhibit "A") and
the Stock Pledge (Exhibit "B").
(c) Software Agreement. The Software Agreement
executed by the Seller and the Gaming Companies (Exhibits "C").
(d) Good Standing. A good standing or subsistence
certification from British Columbia, Canada, if available, as of
a date no sooner than 10 days prior to Closing.
PPS Other Deliveries. Any and all other deliveries
required to be made by Buyer pursuant to the terms hereof.
This Agreement, the Note, the Stock Pledge Agreement, the
Software Agreement, all documents of transfer, all Exhibits and
Schedules hereto or thereto, and all other documents, instruments
and writings executed in connection with the sale of the
Purchased Shares will be referred to collectively as the
"Acquisition Documents."
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES
OF SELLER AND GAMING COMPANIES
To induce the Buyer to enter into this Agreement and
consummate the transactions contemplated herein, and intending
the Buyer to rely thereupon, the Seller and the Gaming Companies
jointly and severally represent and warrant to the Buyer as
follows:
6.1 Organization, etc.
(a) Incorporation, etc. The Seller is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware and has full power and authority to
own its properties and is duly qualified to carry on its business
as now conducted in the Commonwealth of Pennsylvania. Sports and
Global are corporations duly organized and validly existing and
in good standing under the laws of Grenada and have full power
and authority to own their properties and to carry on their
business as now conducted in Grenada.
(b) Documents. Schedule 6.1 consists of (i) a true
and correct copy of the Articles of Incorporation of Seller and
each of the Gaming Companies as now in effect and (ii) copies of
the bylaws of the Seller and the Gaming Companies.
(c) Books and Records. The books of account, minute
books, stock record books, and other records of Sellers and the
Gaming Companies, all of which have been made available to Buyer,
are complete and correct and have been maintained in accordance
with sound business practices.
6.2 Title to Purchased Shares. Seller owns fee title to
all of the Purchased Shares, free and clear of all liens, claims,
options and encumbrances, and Seller has complete and
unrestricted power to sell, assign and deliver to the Buyer
unencumbered marketable title to the Purchased Shares owned by
Seller. Following the transfer of the Purchased Shares to the
Buyer hereunder, the Buyer shall own the Purchased Shares, free
and clear of all liens, charges, options, agreements,
encumbrances and claims.
6.3 Capitalization of the Gaming Companies. The authorized
capitalization of each Gaming Company is as follows: the
authorized capitalization of Sports consists of one bearer share
of common stock having no par value which is issued, outstanding
and validly owned by the Seller; and the authorized
capitalization of Global consists of one bearer share of common
stock having no par value which is issued, outstanding and
validly owned by Seller. The Purchased Shares constitute all of
the outstanding shares of capital stock of the Gaming Companies.
6.4 Valid Issuance, etc. All of the Purchased Shares are
validly issued, fully paid and nonassessable and there are no
options, calls, warrants, or any other securities, rights or
common share equivalents outstanding, which are convertible into,
exercisable for or relate to, any shares of capital stock of the
Company.
6.5 Corporate Proceedings. All corporate actions of the
Seller and the Gaming Companies relating to the present
transaction have been duly authorized and adopted in accordance
with applicable law and the by-laws and articles of incorporation
of the respective corporations and are appropriately reflected in
the minute books of the respective corporations. True and
correct copies of all minute books of the Gaming Companies have
been made available to the Buyer and its representatives for
inspection.
6.6 Power and Authority. The Seller and the Gaming
Companies have full power, authority and the legal capacity to
enter into this Agreement and to consummate the transactions
contemplated herein, and this Agreement has been duly executed
and delivered by Seller and each of the Gaming Companies and is a
valid and legally binding obligation of Seller and each of the
Gaming Companies in accordance with its terms.
6.7 Financial Statements.
(a) General. Seller has provided to Buyer its Form
10-K for the period ending December 31, 1996 filed with the
Securities and Exchange Commission ("SEC") together with its
Form 10-Q for March 31, 1997 and June 30, 1997, each of which
contains the consolidated financial statements of the Seller and
its subsidiaries for the periods stated therein and all of which
include the notes (if any) and supplementary information thereto
(collectively, the "Financial Statements"). The Financial
Statements are to the knowledge of the Seller, true, correct and
accurate in all material respects, and fairly present the
Seller's properties, assets, liabilities, financial position and
results of its operations and the operations of its subsidiaries
including Sports and Global as of the respective dates and for
the respective periods stated above and (except as expressly
stated on Schedule 6.7) have been prepared pursuant to and in
accordance with GAAP in effect at their respective dates of
preparation, applied on a consistent basis with respect to each
and all of the Financial Statements.
(b) Off-Balance Sheet Liabilities. Schedule 6.7(b)
sets forth a true and correct list and description (including the
nature and amount thereof) of each and every liability of the
Seller known to the Seller, including obligations under tort or
contractual claims or otherwise, that is not reflected in the
Financial Statements or the footnotes thereto or the Form 10-K or
Form 10-Qs, whether current, long-term, fixed, contingent, or
otherwise, regardless whether it is required to be reflected or
disclosed (under FASB 5) in accordance with GAAP.
6.8 Subsidiaries; Other Investments.
(a) The Gaming Companies have no subsidiaries and own
no interest or investment in any corporation, partnership, joint
venture, limited liability company, trust or other business
organization, whether in the form of equity, debt or any
combination thereof. Intersphere Communications, Ltd., a Grenada
corporation, is a wholly-owned subsidiary of Seller.
(b) Except as otherwise expressly stated or to the
extent the context otherwise requires, all representations and
warranties in this agreement with respect to the Seller shall
also be deemed made with respect to all Subsidiaries.
6.9 Conflicts, etc. Neither the execution of this
Agreement by the Seller or the Gaming Companies, nor the
consummation of the sale and other transactions contemplated
herein, will
(a) Laws, Charter, etc. constitute or cause a
violation of any applicable law, rule, decree, judgment or order
binding on Seller or the Gaming Companies or of their respective
charter or by-laws.
(b) Liens. cause a lien or other encumbrance to
attach to any of their respective properties or the Purchased
Shares,
(c) Defaults. constitute or cause a default under or
the acceleration of or the right to accelerate any obligation
under or the termination of or the right to terminate any
contract, license, franchise, lease, permit, approval or
agreement to which the Seller or the Gaming Companies is a party.
6.10 Consents. Except the requirement that Seller obtain
direction and shareholder approval of the transaction, no consent
of, notice to, or filing or registration with any governmental
agency, lender or other person is required for the sale of the
Purchased Shares and other transactions contemplated herein and
the documents executed in connection herewith to be valid, legal
binding obligations of Seller and the Gaming Companies, which has
not been obtained.
6.11 Taxes.
(a) Tax Returns; Payments. The Seller has filed all
Federal, State, local and foreign tax reports, returns and forms
in the manner and within the time required by law, with respect
to all income, profits, capital gains, franchise, sales, use,
occupation, property, school district, excise, payroll,
withholding and other taxes and assessments (collectively,
"Taxes"). Except as disclosed on Schedule 6.11, all Taxes (and
any interest and penalties thereon) payable by or with respect to
the Gaming Companies (including any Taxes on the Gaming
Companies' shareholder on account of share of income of the
Gaming Companies) for all periods before, up to and including the
date hereof and the Closing Date have been fully paid or are
adequately provided for in the Financial Statements or disclosed
separately in Schedule 6.11.
(b) Audits; Notices. No audit or examination by any
Tax authority is pending with respect to or relating to the
Seller or the Gaming Companies or any report, return or other
form filed by or with respect to the Seller or the Gaming
Companies, and neither the Gaming Companies nor the Seller have
received any notice from any Tax authority of (i) any pending or
threatened claim for any Tax deficiency, (ii) intention to
examine or audit any Tax return for any period, (iii) intention
to reassess any properties of the Company,
(c) Tax Liens. No federal or state Tax liens exist
with respect to the Seller or the Gaming Companies or any of
their assets and no Taxes remain unpaid which could give rise to
any such liens nor are any claims being asserted with respect to
such taxes.
6.12 Conduct of Business; Material Changes. Except as
described in Schedule 6.12, since June 30, 1997:
(a) Ordinary Course. the business affairs of the
Gaming Companies have been conducted in the usual and ordinary
course of business and no transaction has taken place or material
contract entered into other than in the usual and ordinary course
of business as heretofore conducted; and
(b) Adverse Changes. there has not been any material
adverse change, either individually or in the aggregate and
either present or prospective, in the general affairs, condition,
business, properties, prospects, assets, financial position,
results of operation or net worth of the Gaming Companies that
were not set forth in the Financial Statements or disclosed to
Buyer by Seller's representatives; and Seller does not have any
knowledge of any events, transactions or other facts which,
either individually or in the aggregate, could be reasonably
likely to have a material adverse effect on the general affairs,
business, conditions, properties, prospects, assets, financial
position, results of operations or net worth of the Gaming
Companies.
6.13 Leases. Attached hereto as Schedule 6.13 is an
accurate and complete list of all leases and agreements (whether
written or oral) under which the Gaming Companies are the lessee
or hold, use or operate any property, real or personal, owned by
any third party along with copies of all such leases and
agreements.
6.14 Licenses, Permits, etc. Except as otherwise described
in Schedule 6.14 with respect to conducting gaming activities in
the country of Grenada, the Seller and the Gaming Companies are
not required to own or hold any license, permit, or similar
authorization under applicable law in order to conduct its
business in the manner heretofore conducted, and all such
required licenses, permits and authorizations have been validly
issued to and are held by the Gaming Companies, and are in full
force and effect and will not lapse or expire by their terms or
otherwise prior to the Closing.
6.15 Compliance. Except as set forth on Schedule 6.15,
(a) the Gaming Companies, their business, assets and,
business practices, have complied in all respects with all
applicable laws, rules, regulations, and other requirements of
governmental authorities, and has since the date of its formation
complied in all respects with any and all requirements of
insurance carriers;
(b) other than disclosed to Buyer by Seller's
representatives and as described in the Financial Statements, no
investigation, governmental or administrative proceeding or other
litigation of any kind or nature to which it may be a party is
now pending or threatened; and
(c) other than disclosed to Buyer by Seller's
representatives and as described in the Financial Statements, no
facts, circumstances or conditions exist which might reasonably
give rise to such claims, investigations, proceedings or
litigation. There are no threatened or pending third party
claims (including related claims for punitive damages), of which
the Seller have knowledge, against the Gaming Companies or the
Seller.
6.16 Labor and Employment. No employees of the Gaming
Companies are represented by any union or other labor
organization, there are no labor disputes to which the Gaming
Companies are a party, and the Gaming Companies have not received
notice from any union or employees demanding representation,
elections or present or future changes in wages, terms of
employment or working conditions. Further, all employees of the
Gaming Companies are at-will employees who may be maintained or
terminated at the discretion of management of the Gaming
Companies.
APPS Benefit Plans. The only employee pension benefit plans
(as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), welfare benefit
plans (as defined in Section 3(1) of ERISA), bonus, stock
purchase, stock ownership, stock option, deferred compensation,
incentive, severance, termination or other compensation plan
arrangement, and other material employee fringe benefit plans
presently maintained by, or contributed to by the Gaming
Companies for the benefit of any employee of the Gaming
Companies, are those listed in Schedule 6.17 ("Benefit Plans").
6.18 Litigation. Except as disclosed on Schedule 6.18
attached hereto,
(a) Actions against Gaming Companies, Seller. no
action, suit or proceeding before any court or governmental
department or agency (whether or not purportedly on behalf of the
Borrower) is pending or, to the knowledge of the Gaming Companies
or Seller, threatened by or against the Gaming Companies or
Seller or any of their respective properties or assets seeking to
restrain or prevent the sale of the Purchased Shares or any other
transaction related hereto or that, if adversely determined,
could reasonably be expected to have a material adverse effect
upon the Gaming Companies, their properties or assets, or the
ability of the Seller or the Gaming Companies ability to
consummate the sale or perform any of their obligations under
this Agreement;
(b) Actions Against Officers, etc. Except as
described in Form 10-K and the Form 10-Qs filed with the SEC and
the Financial Statements or as previously disclosed to Buyer by
Seller, neither Seller nor any officer, director or employee of
the Seller or the Gaming Companies is currently charged with or
to the knowledge of the Seller is under investigation with
respect to any violation of any Federal, State, local or foreign
law or regulation relating the Gaming Companies's business; and
(c) Orders, etc. Except as previously disclosed,
neither the Gaming Companies, Seller nor any of their respective
properties or assets is a party to or bound by any judgment,
decree, injunction, ruling, award or condition of any court,
arbitrator, government agency, commission or other person which
individually or in the aggregate may materially adversely affect
the financial condition, operations or business of the Gaming
Companies.
6.19 No Default. The Company is not in default with respect
to any of its material liabilities or obligations.
6.20 Insurance. Schedule 6.20 consists of a list (together
with copies) of any and all insurance policies presently
maintained by the Gaming Companies, including, without
limitation, all property, casualty, liability, "key man,"
directors' and officers and errors and omissions policies,
together with a description of any and all claims made under or
in connection therewith (whether or not any sums were actually
paid or awards granted as a result thereof).
6.21 Representations as of Closing. The representations and
warranties made by Seller set forth in this Agreement or in any
written document delivered to Buyer pursuant hereto shall be
deemed to be made again by Seller as of the date of Closing and
shall survive the Closing. The Schedules referred to herein and
the documents and schedules delivered pursuant hereto by Seller
shall be deemed to be delivered again by Seller at the Closing.
6.22 No Omissions.
(a) Neither this Agreement, the Schedules, nor any
documents required to be delivered by Seller to Buyer pursuant to
the terms hereof contains or will contain any untrue statement of
material fact or omit or will omit to state a material fact
required to be stated in order to make such statement, document
or other instrument not misleading.
(b) Copies of all documents furnished by or on behalf
of the Seller to the Buyer are complete and accurate in all
material respects.
ARTICLE 7 - REPRESENTATIONS AND WARRANTIES OF THE BUYER
To induce the Seller and the Gaming Companies to enter into
this Agreement and consummate the transactions contemplated
herein, and intending the Seller and the Gaming Companies to rely
thereupon, the Buyer represents and warrants to the Seller as
follows:
7.1 Organization, etc. The Buyer is a corporation duly
organized and validly existing and in good standing under the
laws of the Province of British Columbia, Canada, and has full
power and authority to own its properties and to carry on its
business as now conducted in the Province of British Columbia and
is in good standing and duly qualified to conduct business as a
foreign corporation in each of the jurisdictions in which the
conduct of its business requires such qualification.
7.2 Corporate Proceedings. The execution and delivery of
this Agreement by Buyer, the consummation of the transactions
contemplated hereby, and the performance by the Buyer of its
obligations hereunder have been duly authorized by all necessary
corporate action.
7.3 Power and Authority. The Buyer has, on the date
hereof, full power and authority to purchase the Purchased Shares
pursuant to this Agreement and to do and perform all acts and
things required to be done by it under this Agreement.
7.4 Conflicts, etc. Neither the execution of this
Agreement by the Buyer nor the consummation of the sale of the
Purchased Shares and other transactions contemplated herein, will
(a) Laws, Charter, etc. constitute or cause a
violation of any applicable law, rule, decree, judgment or order
binding on the Buyer or of the charter, by-laws or of the Buyer,
(b) Liens. except for the Note and Stock Pledge
Agreement, cause a lien or other encumbrance to attach to any of
Buyer's properties or other assets,
(c) Defaults. constitute or cause a default under or
the acceleration of or the right to accelerate any obligation
under or the termination of or the right to terminate any
contract, license, franchise, lease, permit, approval or
agreement to which the Buyer is a party.
7.5 Consents. No consent of, notice to, or filing or
registration with any governmental agency, lender or other person
is required for the sale and other transactions contemplated
herein and the documents executed in connection herewith to be
valid, legal binding obligations of the Buyer, which has not been
obtained.
7.6 Investment Representations. The Buyer is acquiring the
Purchased Shares as an investment, and not with a view to, or
for, sale or transfer in connection with any distribution
thereof, or for any sale or transfer which does not comply with
applicable securities laws and regulations.
7.7 Insolvency. The Buyer is not now and will not on the
Closing Date by insolvency within the meaning of Section 548 of
the Bankruptcy Code and consummation of the sale and other
transactions contemplated herein (i) will not cause the fair,
salable value of the Buyer's assets, as of the Closing, to be
less than the amount required to pay its probable liabilities as
they become absolute and matured, (ii) will not impair the
Buyer's ability to pay its present and future debts as and when
they become due, and (iii) is not made with the intent to hinder
or defraud any creditor.
7.8 Representations as of Closing. The representations and
warranties made by the Buyer set forth in this Agreement or in
any written document delivered by the Buyer pursuant hereto shall
be deemed to be made again by the Buyer as of the date of Closing
and shall survive the Closing.
7.9 No Omissions. Neither this Agreement nor any document
required to be delivered by Buyer to Seller pursuant to the terms
hereof contains or will contain any untrue statement of material
fact or omit or will omit to state a material fact required to be
stated in order to make such statement, document, or instrument
not misleading.
ARTICLE 8 - COVENANTS OF SELLER AND THE GAMING COMPANIES
8.1 Covenants Pending Closing. The Seller and the Gaming
Companies jointly and severally covenant and agree that from the
date hereof until the Closing, except as consented to by the
Buyer in writing or as otherwise provided in this Agreement:
(a) Corporate Existence, Operation, etc. The Gaming
Companies shall maintain their existence, in good standing, shall
carry on its business and operations in a good and diligent
manner in the ordinary course of business, and shall not engage
in any merger, consolidation, recapitalization, reorganization or
other similar transaction or make any commitment or incur any
obligation outside the ordinary course of business. Without
limiting the foregoing, the Gaming Companies shall not cause or
permit any change to its Articles of Incorporation, Bylaws or its
authorized, issued or outstanding capital stock.
(b) No Distributions, Increases in Compensation, etc.
The Gaming Companies shall not (i) declare, authorize or pay any
distribution or dividend to shareholders or others, (ii) redeem,
repurchase or otherwise acquire any shares of its stock,
(iii) issue any shares, warrants, securities or other rights to
anyone, (iv) pay any bonuses to any employees or raise any wage
levels, or (v) agree or commit to do any of the foregoing;
(c) Insurance. The Gaming Companies shall maintain
all of its existing insurance coverage;
(d) Assets. The Gaming Companies shall not obligate
themselves to sell or otherwise dispose of or pledge or otherwise
encumber any of their assets and shall maintain all of their
assets and properties in good operating condition and repair,
subject only to ordinary wear and tear;
(e) Payment of Liabilities. The Gaming Companies shall
pay their liabilities in the ordinary course, including, without
limitation, winnings to customers and taxes; and
(f) Conditions Precedent. The Gaming Companies and
the Seller will use best efforts to cause the satisfaction of all
of the conditions precedent to the respective parties'
obligations hereunder.
8.2 Supplemented or Corrected Information. The Seller and
the Gaming Companies shall promptly correct and supplement any
information furnished to the Buyer hereunder so that such
information shall be correct and complete in all material
respects at all times, and shall include all facts necessary to
make such information correct, complete and not misleading in any
respect.
ARTICLE 9 - COVENANTS OF BUYER
9.1 Approvals. The Buyer shall use its best efforts to
expeditiously obtain such approval or consent of all regulatory
authorities, and other parties which Buyer is required to obtain
to permit the consummation of the transactions contemplated
herein and shall use its best efforts to assist the Seller in
obtaining such approvals or consents which Seller is required to
obtain to permit consummation of the transactions contemplated
herein.
9.2 Conditions Precedent. The Buyer shall use its best
efforts to cause the satisfaction of all of the conditions
precedent to the respective parties' obligations hereunder.
ARTICLE 10 - SELLER'S CONDITIONS PRECEDENT
All of the following shall be conditions precedent to Seller
obligations to consummate the transactions contemplated for each
of them by this Agreement:
\EDG Accuracy of Representations. The representations and
warranties made by the Buyer herein shall be accurate and correct
in all respects on and as of the date of Closing as if made on
and as of that date and the Buyer shall have performed and
complied in all respects with all the terms, provisions,
covenants, and conditions of this Agreement to be performed and
complied with by the Buyer at or before the Closing.
10.2 Proceedings. Except for pending proceedings disclosed,
no action or proceeding in the United States or Canada, judicial
or administrative, federal, provincial, state or local is pending
or threatened against the Buyer, the Seller or the Gaming
Companies which, if adversely determined, would impair the
ability of the Seller, the Gaming Companies or the Buyer to
carry out its obligations under this Agreement.
10.3 Approvals. The approval or consent of the appropriate
governmental regulatory authorities shall have been obtained and
evidence thereof provided to the Seller.
10.4 Buyer's Deliveries. Buyer shall have made all
deliveries required under Section 5.2 and performed all
obligations required of Buyer prior to Closing under Article 9
and the other provisions hereof and all of the Buyer's
representations and warranties shall be true and correct in all
material respects.
ARTICLE 11 - BUYER'S CONDITIONS PRECEDENT
All of the following shall be conditions precedent to the
Buyer's obligations to consummate the transactions contemplated
by this Agreement:
11.1 Compliance. The representations and warranties made by
the Seller and the Gaming Companies herein shall be accurate and
correct in all respects on and as of the date of Closing as if
made on and as of that date and the Schedules referred to herein
and the documents delivered pursuant hereto shall likewise be
accurate and correct in all respects on and as of the date of
Closing as if prepared on and as of that date.
11.2 Proceedings. Except for pending proceedings disclosed,
no action or proceeding in the United States or Canada, judicial
or administrative, federal, provincial, state or local, shall be
pending or threatened against the Gaming Companies, Seller or the
Buyer, which if adversely determined, would impair the ability of
Seller, the Gaming Companies or the Buyer to carry out their
obligations under this Agreement or have a material adverse
effect on the Gaming Companies or its business, financial
condition, results of operations, assets, liabilities or
prospects.
11.3 Obligation Absolute. Upon satisfaction of the
conditions set forth in Article 2 hereof, Buyer's obligation to
close under this Agreement shall be absolute and unconditional
except that if there is a material breach of any warranty of
Seller or the Gaming Companies contained in this Agreement or a
material misrepresentation herein or a failure of Seller or the
Gaming Companies to perform any material covenant or to satisfy
any of the material conditions contained in this Agreement, and
such material breach, misrepresentation or failure is not
remedied by Seller within 10 days of receipt of written notice
thereof, then, except as set forth below, Buyer may terminate
this Agreement prior to Closing by written notice to Seller.
ARTICLE 12 - INDEMNIFICATION
12.1 Exclusive Remedy. The exclusive remedy for all claims
by parties hereto (whether or not related to claims by third
parties) relating to breaches of warranties, representations and
covenants in any Acquisition Document, except for breach of
Buyer's obligations to pay under Seller's Notes and Gaming
Companies' obligations and duties under the Software Agreement,
or any other matter otherwise directly or indirectly relating to
the sale of stock shall be an action for indemnity which shall be
governed and limited by this Article regardless whether such
claim arises under contract, breach of warranty, tort or under
any other legal theory.
12.2 Indemnity by Seller. Subject to this Article, Seller
agrees to indemnify, defend and hold the Gaming Companies and
Buyer harmless, from, against and with respect to each and every
claim, liability, obligation, loss, damage, deficiency,
assessment, encumbrance, judgment, cost, expense (including,
without limitation, attorneys' fees and costs and other expenses
incurred in investigating, preparing, defending against or
prosecuting any litigation or claim, action, suit, proceeding or
demand), of any kind or character, arising out of or in any
manner incident, arising from or relating or attributable to
(a) Breaches. any breach of any representation,
warranty, covenant, agreement or certification made by or on
behalf of Seller or the Gaming Companies in any Acquisition
Document, except as limited in Section 12.1 above, or otherwise
made or given in connection with the sale of stock; or
(b) Undisclosed Liabilities. without limiting the
generality of any other provision of this Article, any liability,
obligation or loss contingency of the Gaming Companies which are
not disclosed or reflected in the Financial Statements or
Schedules and which the Gaming Companies is not permitted to
incur between the date hereof and the Closing Date; or
(c) Conduct Before Closing. the conduct by the Gaming
Companies, the Seller, or any person or entity acting or
purporting to act with authority on their behalf, before the
Closing.
12.3 Limitations on Seller Liability. Seller shall have no
obligation with respect to any claim for indemnity for any claim,
liability or matter under this Article to the extent
(a) Deductible. such claim for indemnity does not
exceed $25,000 and if all such claims exceed $25,000 in the
aggregate, Seller shall be liable only for such excess amount
above $25,000, subject to the other limitations set forth in this
Section;
(b) Insurance. the loss, event, liability or matter
giving rise thereto is covered by insurance proceeds actually
received by the Gaming Companies on account of the event that
gave rise to the claim;
(c) Tax Benefit. the event, liability or matter
giving rise thereto provides the Buyer or the Gaming Companies
with any tax benefit; or
(d) Disclosed Matters. the event, liability or matter
giving rise thereto was disclosed in this Agreement or the
Schedules thereto or otherwise known to the Buyer.
12.4 Time Limits for Claims against Seller. Seller shall
have no obligation with respect to any claim for indemnity under
this Article of which Buyer or the Gaming Companies do not
provide written notice to the Seller pursuant to this Article
within one year after the Closing Date.
12.5 Indemnity For Third Party Claims Against Buyer. If any
suit, investigation, claim or other proceeding is commenced
against Buyer or the Gaming Companies for which they would be
entitled to defense and indemnity under Section 12.2, Buyer shall
give written notice to Seller thereof as promptly as practicable.
Such notice shall set forth, in reasonable detail, the specific
facts and circumstances then known by the Buyer pertaining to
such matters. Thereafter, the Buyer shall inform the Seller with
respect to any significant developments with respect to such
claim, suit, action, or investigation, and shall answer any
questions the Seller or their representatives may have from time
to time with respect thereto. In connection with the foregoing,
the Buyer shall, at its election, either
(a) Defense. defend any such suit, investigation,
claim or other proceeding by such means as Buyer elects, in
Buyer's sole discretion, and Seller shall have the right (but not
the obligation) to participate in the defense thereof by counsel
of Seller's choice at Seller's expense, but Buyer shall retain
full control of such litigation or procedure, shall have final
authority to determine all matters in connection therewith; or
(b) Settlement. pay, compromise, or settle such suit,
investigation, claim or other proceeding after advising Seller
thereof, provided that Buyer shall have full authority to settle,
and no obligation to contest, any such matter; or
(c) Turn-Over. turn such contest over to Seller who
shall, at Seller's own expense, assume such contest and the Buyer
shall have the right (but not the obligation) to participate, at
its own expense, in the defense thereof by counsel of its own
choice, and shall cooperate with and assist the Seller as
reasonably requested by Seller in connection with such defense or
contest, but Seller shall retain control thereof and have final
authority to determine all matters in connection therewith).
Notwithstanding the foregoing the Seller shall have the right to
control the defense, litigation and settlement of such action
only if Seller has agreed in writing to be responsible for all
costs, expenses, judgments and liabilities connected with such
claim and provided the Buyer with a bond, letter of credit or
other evidence satisfactory to the Buyer, in its sole discretion,
of the Seller's ability to satisfy the same.
12.6 Indemnity by Buyer. Subject to this Article, the Buyer
agrees to indemnify, defend and hold Seller harmless from,
against and with respect to any claim, liability, obligation,
loss, damage, deficiency, assessment, encumbrance, judgment,
cost, expense (including, without limitation, attorneys' fees and
costs and expenses incurred in investigating, preparing,
defending against or prosecuting any litigation or claim, action,
suit, proceeding or demand), of any kind or character, arising
from or relating or attributable to any breach of any
representation, warranty or agreement of Buyer contained in any
Acquisition Document or otherwise made or given in connection
with the sale of the Purchased Shares.
12.7 Indemnity For Third Party Claims Against Seller. If a
suit, action, investigation, claim or other proceeding is
commenced against Seller for which Seller would be entitled by
defense and indemnity under Section 12.6, Seller shall give
written notice to Buyer and to the Gaming Companies thereof as
promptly as practicable. Such notice shall set forth in
reasonable detail the specific facts and circumstances then known
by the Seller pertaining to such matters. Thereafter, the Seller
shall inform the Buyer with respect to any significant
developments with respect to such claim, suit, action, or
investigation, and shall answer any questions the Buyer or its
representatives may have from time to time with respect thereto.
In connection with the foregoing, the Seller shall, at their
election, either
(a) Defense. defend any such suit, investigation,
claim or other proceeding by such means as Seller elects, in
Seller's sole discretion, and the Buyer shall have the right, but
not the obligation, to participate, at its own expense, in the
defense thereof by counsel of its own choice, but Seller shall
retain full control of such litigation or procedure and have
final authority to determine all matters in connection therewith;
(b) Settlement. pay, compromise, or settle such
claim, suit, action, investigation, after advising Buyer thereof,
provided that Seller shall have full authority to settle, and no
obligation to contest, any such matter; or
(c) Turn-Over. turn such defense or contest over to
the Buyer which shall, at its own cost and expense, assume such
defense or contest, and Seller shall have the right, (but not the
obligation) to participate, at Seller's own expense, in the
defense thereof by counsel of Seller's own choice, and shall
cooperate with and assist the Buyer as reasonably requested by
Buyer in connection with such defense or contest, but Buyer shall
retain control thereof and have final authority to determine all
matters in connection therewith).
12.8 Dispute Resolution. After any party gives notice of a
claim for indemnity (that party being the "Claimant") hereunder
the party from whom indemnity is claimed (the "Indemnitor") shall
have fifteen (15) days after receipt of such notice in which to
notify the Claimant party as to whether the Indemnitor intends to
(a) satisfy the liability or claim asserted or otherwise defend
and indemnify the Claimant as requested or (b) contest the claim
for indemnity. If the Indemnitor elects option (b) in the
preceding sentence, or does not notify the other within such time
that the Indemnitor has elected option (a) in the preceding
sentence, the parties shall discuss and attempt to resolve such
claim or matter for a period of thirty (30) days after such
Claimant's original notice to the Indemnitor. Upon failure of
the parties to agree within such thirty (30) day period any party
to such dispute may submit the matter to binding arbitration
under Section 13.3 hereof. If no party submits the matter to
arbitration within such thirty (30) days, each party may pursue
any remedy available to it under then existing law, subject to
the limitations set forth in this Article.
12.9 Survival of Representations, etc. The representations,
warranties, agreements and covenants of Seller and Buyer herein
contained shall survive the Closing.
ARTICLE 13 - MISCELLANEOUS PROVISIONS
13.1 Brokers. Seller and Buyer represent and warrant to
each other that the services of a broker or finder have not been
used in connection with the Sale and that no broker's or finder's
fee will become payable by reason of the execution of this
Agreement or the consummation of the Sale. Seller shall hold
harmless and indemnify Buyer, from and against any claim for
broker's, finder's or financial advisor's fees, including any
cost or expense incurred in connection with the defense of any
suit claiming such fees, or in any other manner pertaining to
claims for such fees, which may become payable by reason of the
acts or omissions of Seller or Gaming Companies. Buyer shall
hold harmless and indemnify Seller from and against any claim for
broker's, finder's or financial advisor's fees, including any
cost or expense incurred in connection with the defense of any
suit claiming such fees, or in any other manner pertaining to
claims for such fees, which may become payable by reason of the
acts or omissions of Buyer.
13.2 Entire Agreement. This Agreement (including the
Schedules referred to herein) constitutes the entire agreement
among the parties pertaining to the subject matter hereof. No
amendment, supplement, waiver or termination of this Agreement
shall be implied or be binding unless in writing and signed by
the party against which such amendment, supplement, waiver or
termination is asserted. No waiver of any provision of this
Agreement shall waive any other provision hereof nor shall such
waiver constitute a continuing waiver unless otherwise expressly
therein provided.
13.3 Arbitration. Except for enforcement by Seller of the
Note, the Stock Pledge Agreement and the Software Agreement, any
controversy or claim arising out of or relating to this
Agreement, or the breach thereof, whether before or after
Closing, and including but not limited to a claim arising under
Article 12 hereof, shall, if elected by either party under
Section 12.8 hereof, be settled by arbitration in accordance with
the rules of the American Arbitration Association upon request by
any party to this Agreement by an arbitration panel of three (3)
in number selected in accord with the rules of the American
Arbitration Association. Such request shall be made in writing
within thirty (30) days after the expiration of the thirty (30)
day period referred to in Section 12.8 hereof, and such
arbitration shall be conducted in [Philadelphia], as soon as
possible thereafter. The written decision of the arbitrators
shall be dated and shall be signed by a majority of the
arbitrators. Such decision shall be final and binding upon the
parties hereto, their respective shareholders, successors and
assigns. Judgment upon the award granted by the arbitrators may
be entered in any court having jurisdiction thereof, or
application may be made to such court for judicial acceptance of
award and an order of enforcement, as the case may be.
13.4 Successors, etc. All of the terms and provisions of
this Agreement by or for the benefit of the parties shall be
binding upon and inure to the benefit of their respective
successors, assigns, heirs and personal representatives;
provided, however, neither party hereto may assign any of its
duties or obligations hereunder without the written consent of
the other party.
13.5 Further Assurances; Preservation of Records. The
Seller, the Buyer, and the Gaming Companies covenant and agree to
deliver, or cause to be delivered, to each other on the Closing
Date and at such other times thereafter as shall be reasonably
agreed any such additional instrument as any of them may
reasonably request for the purposes of carrying out the
transactions contemplated by this Agreement.
13.6 Public Announcements. Any and all public announcements
or releases related to the transactions hereunder shall be
approved by Buyer and Seller prior to dissemination.
13.7 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto on
separate counterpart signature pages, with the same effect as if
all the signatures thereto and hereto were upon the same
instrument, but all such counterparts taken together shall
constitute one and the same document.
13.8 Costs and Fees. Each party hereto assumes the payment
of its own costs (including any legal and/or accounting fees)
resulting from this Agreement and the transactions contemplated
hereby, subject, however, to the provisions of Article 12 hereof.
Notwithstanding the foregoing, the Seller shall, collectively, be
responsible for 50% of any applicable sales or use tax that may
become due on account of the sale of the Assets, and the Buyer
shall be responsible for the remaining 50%.
13.9 Governing Law. This Agreement shall be construed and
governed under the domestic, internal law (but not the conflict
of laws) of the Commonwealth of Pennsylvania. To the extent it
may be applicable, United Nations Convention of the International
Sale of Goods will not apply.
13.10 Severability. Should any part of this Agreement
be held or declared to be void or illegal for any reason, all
other parts of this Agreement which can be effective without such
illegal part shall, nevertheless, remain in full force and
effect.
13.11 Confidentiality.
(a) Transaction. Neither the form, substance nor
existence of this Agreement shall be revealed to any person other
than the parties hereto and their respective advisors in this
transaction, except (i) as may be required by federal securities
laws, (ii) to fulfill any of the obligation provided for herein
or (iii) or by public statement, announcement or release approved
by both Buyer and Seller.
(b) Information. Buyer shall treat all information
relating to the Gaming Companies, Seller and the other matters
set forth in this Agreement, the Schedules, Exhibits or otherwise
obtained by the Buyer in connection with the transactions
contemplated by this Agreement as confidential through the
Closing Date. If for any reason the Closing hereunder is not
held, Buyer shall continue to treat all such information as
"confidential" and shall return to the Gaming Companies or to
Seller, as appropriate, any such information which is in written
or other tangible form.
13.12 Background Incorporated. The background
provisions of this Agreement set forth above (including, without
limitation, any defined terms set forth therein) are hereby
incorporated herein and made a part hereof as if set forth in
their entirety.
13.13 General Definitions. Unless expressly provided
otherwise in this Agreement or in the Acquisition Documents, or
unless the context requires otherwise:
(a) Accounting Terms. All accounting terms used in
this Agreement and in the Acquisition Documents shall have the
meanings given to them in accordance with GAAP.
(b) Capitalized Terms. All capitalized terms defined
in this Agreement shall have the defined meanings when used in
the Acquisition Documents.
(c) Singular, Plural, etc. The singular shall mean
the plural, the plural shall mean the singular, and the use of
any gender shall include all genders. All references to any
particular party defined herein shall be deemed to refer to each
and every person defined herein as such party individually, and
to all of them, collectively, jointly and severally, as though
each were named wherever the applicable defined term is used.
(d) Sections, etc. All references to "Articles,"
"Sections," "Subsections," "Paragraphs" and "Subparagraphs" shall
refer to provisions of this Agreement.
(e) Time. All references to time herein shall mean
Eastern Standard Time or Eastern Daylight Time, as then in
effect.
(f) Statutes, etc. All references to sections,
subsections, paragraphs or other provisions of statutes or
regulations shall be deemed to include successor, amended,
renumbered and replacement provisions.
(g) Specific Terms. Whether or not capitalized, the
following terms shall have the following meanings as used in this
Agreement:
"Breach" - A "Breach" of a representation,
warranty, covenant, obligation or other provision of this
Agreement or any Related Agreement will be deemed to have
occurred if there is or has been (a) any inaccuracy in or
breach of, or any failure to perform or comply with, such
representation, warranty, covenants, obligation or other
provision, or (b) any claim or other occurrence or
circumstance that is or was inconsistent with such
representation, warranty, covenant, obligation or other
provision, and the term "Breach" means any such inaccuracy,
breach, failure, claim, occurrence, or circumstance.
"Contract" - Any agreement, contract, obligation,
promise, or undertaking (whether written or oral and whether
express or implied) that is legally binding.
"Knowledge" - An individual will be deemed to have
"Knowledge" of a particular fact or matter if:
such individual is actually aware of such
fact or other matter; or
a prudent individual could be expected to
discover or otherwise become aware of such fact or
other matter in the course of conducting a reasonably
comprehensive investigation concerning the existence of
such fact or other matter.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any
individual who is serving, or who has at any time served, as
a director, officer, partner, or trustee of such Person (or
in any similar capacity) has, or at any time had, Knowledge
of such fact or other matter.
"Liabilities" - Any debts, obligations, duties or
liabilities of any nature (including any unknown,
undisclosed, unmatured, unaccrued, unasserted, contingent,
conditional, implied, or secondary liability) regardless of
whether such debts, obligations, duties or obligations would
be required to be disclosed on a balance sheet prepared in
accordance with GAAP.
"Ordinary Course of Business" - An action taken by
a Person will be deemed to have been taken in the "Ordinary
Course of Business" only if:
such action is consistent with the past
practices of such Person and is taken in the ordinary
course of the normal day-to-day operations of such
Person;
such action is not required to be authorized
by the board of directors of such Person (or by any
person or group of persons exercising similar
authority), and does not require any other separate or
special authorization; and
such action is similar in nature and
magnitude to actions customarily taken, without any
separate or special authorization, in the ordinary
course of the day-to-day operations of other Persons
that are in the same line to business as such Person.
"Proceeding" - Any action, arbitration, audit,
hearing, investigation, litigation, or suit (whether civil,
criminal, administrative, investigative or informal)
commenced, brought, conducted, or heard by or before, or
otherwise involving, any Governmental Body or arbitrator.
"Threatened" - A Proceeding, claim, dispute or
other matter will be deemed to have been "Threatened" if any
demand or statement has been made (orally or in writing) or
any notice has been given (orally or in writing), or if any
other event has occurred or any other circumstances exist,
that would lead a prudent Person to conclude that such a
Proceeding, claim, dispute or other matter is likely to be
asserted, taken or otherwise pursued in the future.
13.14 Jurisdiction. Subject to the requirements of
arbitration pursuant to Section 13.3, the parties irrevocably
(i) agree that any suit, action or proceeding for the enforcement
of this Agreement shall be brought only in the courts of the
Commonwealth of Pennsylvania, County of Montgomery or in the
United States District Court for the Eastern District of
Pennsylvania, (ii) consent to the jurisdiction of each such
court, (iii) and irrevocably waive any objection to the laying of
the venue of any such suit, action or legal proceeding in any
such court.
13.15 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed
to have been duly given (a) when delivered, if delivered by hand
and receipted for by the party to whom said notice or other
communication shall have been directed, (b) three business days
after mailing, if mailed by certified or registered mail with
postage prepaid, (c) one the next business day after dispatch,
if delivered by Federal Express or other reputable overnight mail
service, or (d) on the date transmitted (if transmitted before
5:00 p.m., prevailing time at the recipient's location, otherwise
on the next business day), if telecopied and followed by written
confirmation thereof:
If to Buyer to:
International Gaming Corp.
_________________________
Vancouver, B.C.
Telecopy No. ____________
Attention: Gary Newman, President
With a copy to:
__________________________
__________________________
__________________________
Telecopy No. _____________
Attention: _______________________
If to Seller or to the Gaming Companies to:
Interactive Gaming & Communications Corp.
595 Skippack Pike, Suite 100
Blue Bell, Pennsylvania 19422
Telecopy No. (215) 540-8186
Attention: Michael Simone, President
With a copy to:
Stevens & Lee
One Glenhardie Corporate Center
Suite 202
Wayne, Pennsylvania 19087-0236
Telecopy No. (610) 687-1384
Attention: Stephen F. Ritner, Esquire
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
INTERACTIVE GAMING & COMMUNICATIONS
CORP., a Delaware corporation
By/s/ Michael Simone
Michael Simone, President
Attest:/s/ Jeffrey Erb
Secretary
SPORTS INTERNATIONAL, LTD., a
Grenada corporation
By/s/ Andre Levoie
_________________, President
Attest:/s/ Samantha Ince
Secretary
GLOBAL CASINOS, LTD., a Grenada
corporation
By/s/ Andre Levoie
_________________, President
Attest:/s/ Samantha Ince
Secretary
"Seller"
INTERNATIONAL GAMING CORP., a
British Columbia corporation
By/s/ Gary Newman
Gary Newman, President
Attest:/s/ Joanne Vaughn
Secretary
<PAGE>
List of Exhibits and Schedules
Exhibits
"A" - Form of Seller's Note
"B" - Form of Stock Pledge
"C" - Form of Software Agreement - Intersphere/Sports
"D" - Form of Software Agreement - Intersphere/Global
Schedule List
6.1 Articles of Incorporation; Bylaws of IGC; Sports; Global
6.7 Liabilities, Material Changes to Financial Statements, if
any
6.11 Taxes (unpaid, due, liens, audits)
6.12 Conduct of Business; Material Changes (if any)
6.13 Leases (list)
6.14 Licenses, Permits, etc. (list)
6.15 Compliance (exceptions)
6.17 Benefit Plans (list, if any)
6.18 Litigation (disclosure)
6.20 Insurance (list)
<PAGE>
EXHIBIT "A"
TO
STOCK PURCHASE AGREEMENT
See Attached
<PAGE>
EXHIBIT "A"
FORM OF NOTE
PROMISSORY NOTE
U.S. $4,990,000 November __, 1997
FOR VALUE RECEIVED, INTERNATIONAL GAMING CORP., a
Canadian corporation organized and existing under the law of the
Province of British Columbia (the "Maker"), promises to pay to
the order of INTERACTIVE GAMING AND COMMUNICATIONS, INC., a
Delaware corporation (the "Payee") the principal sum of Four
Million Nine Hundred Ninety Thousand United States Dollars (U.S.
$4,990,000) at 595 Skippack Pike, Suite 100, Blue Bell,
Pennsylvania 17422 or such other address of which Payee shall
notify Maker in writing, with interest from the date hereof,
payable at the times set forth herein.
This Note is issued pursuant to and in accordance with
the terms and conditions of the Stock Purchase Agreement dated
October __, 1997 ("Purchase Agreement") by and between Maker,
Payee, Sports International, Ltd. ("Sports") and Global Casinos,
Ltd. ("Global") in connection with the sale of all the capital
stock of Sports and Global to Maker. As described below,
payments of interest only shall be made during the first
18 months and ____ days following the date hereof, and payments
of principal and interest shall be made during the subsequent
18 months with the balance of principal and interest due on
________________________.
For the purposes of this Note, "Interest" shall be
defined as an annual rate equal the prime rate or successor index
rate published by the Wall Street Journal on the date of this
Note and adjusted quarterly on the first publication date of each
quarter thereafter beginning January __, 1998 and each April,
July, October and January thereafter (the "Interest Rate").
A late charge of 5% shall be due and payable by Maker
on any payment not received by Payee within 15 days of the
payment due date.
Upon sale or transfer of substantially all the assets
of Maker, Sports or Global or transfer of a beneficial interest
in capital stock of Maker, Sports or Global or a Controlling
Interest (as defined below) of Maker, Sports or Global is sold or
transferred during the term hereof, Payee will be entitled to
immediate payment in full of all sums due under this Note. For
the purposes of this Note, the term "Controlling Interest" shall
mean the sale or transfer of greater than 50% of the voting stock
in Maker, Sports or Global.
During the initial 18 months plus ___ days period
commencing on the date hereof, an amount equal to the Interest on
the unpaid principal shall be due and payable yearly on the first
day of each month commencing on [December 1,] 1997. No payments
of principal shall be made during this period.
During the subsequent 18 month period commencing
18 months and ____ days from the date hereof, an amount equal to
Interest on the unpaid principal shall be due and payable with
payments of principal in 18 consecutive monthly installments of
Twenty-Seven Thousand Seven Hundred Twenty-One United States
Dollars ($27,725).
For the purposes of this Note, "Note Payment" shall be
defined as any monthly payment hereunder, whether payments of
interest only or of both principal and interest.
Maker may prepay all or any portion of the unpaid
principal balance at any time in whole or in part without
penalty.
This Note is secured by, and entitled to all of the
benefits of a Stock Pledge Agreement whereby Payee has granted
Maker a security interest in Maker's assets and the capital stock
of Sports and Global.
The occurrence of anyone or more of the following
events with respect to Maker shall constitute an "Event of
Default": (1) the non-payment of any amount payable hereunder
when due and the continuance of such failure for a period of
forty-five (45) days after written notice thereof; (2) the filing
by or against Maker, Sports or Global of a petition for relief
under any chapter of the United States Bankruptcy Code or
commencement of state reorganization, arrangement or liquidation
proceedings under the laws of any state of the United States,
Canada, any province of Canada or Grenada, of the inability of
Maker, Sports or Global to pay its debts as they mature or
Maker's, Sports' or Global's making of a mortgage or an
assignment for the benefit of its creditors or the appointment of
a receiver, trustee or conservator to manage Maker's, Sports' or
Global's affairs, except that if any such petition for relief or
appointment is not filed or made by Maker, Sports or Global or at
their request, only if such petition or appointment is not
dismissed or removed within sixty (60) days; (3) the liquidation
or dissolution of Maker, Sports or Global; (4) the non-payment of
any royalty, license or other fees under the Software License
Agreement ("Software Agreement") between Intersphere
Communications, Ltd. (a wholly-owned subsidiary of Payee) and
Sports and Global; (5) a material breach of the Software
Agreement by Sports or Global or (6) a material breach by Maker,
Sports or Global of any of the terms, conditions, representations
or warranties of the Stock Purchase Agreement.
In the event of such default hereunder, the entire
unpaid amount due hereunder together with all accrued interest
shall, at Payee's option, become immediately due and payable in
full without further notice to or demand on Maker of any kind and
without presentment, demand or protest, all of which are hereby
waived.
Any failure of Payee to exercise any right hereunder
shall not be construed as a waiver of the right to exercise the
same or any other right at any other time.
The Maker shall pay, on demand, all of the costs and
expenses of collection of amounts due hereunder.
All rights and remedies of Payee under this Note and
any applicable law are separate and cumulative. No waiver with
respect to this Note shall be enforceable, and no amendment or
modification of this Note shall be effective, unless in writing
and signed by Payee. No failure to exercise, delay in
exercising, or single or partial exercise of any right, power or
remedy by Payee, and no course of dealing between the parties,
shall constitute a waiver of, or shall limit or preclude any
other or further exercise of, any right, power or remedy by
Payee. Any such written waiver shall apply only to the
particular instance specified therein and shall not impair the
further exercise of any right, power or remedy.
This Note is made under, and shall be construe and
enforced in accordance with, the laws of the Commonwealth of
Pennsylvania applicable to agreements made and to be performed
solely therein. The parties hereto agree that any action brought
to enforce any obligation set forth herein may be brought in a
court of appropriate jurisdiction in the Commonwealth of
Pennsylvania.
IN WITNESS WHEREOF, Maker has executed this instrument,
on the date first set forth above.
Attest:___________________ MAKER:
INTERNATIONAL GAMING CORP.
By_________________________________
Name: Gary Newman
Title: President
<PAGE>
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF BERKS :
On this _______ day of ____________, 1997, before me, a
notary public, the undersigned officer, personally appeared
___________________, who acknowledged himself to be the President
of INTERNATIONAL GAMING CORP., a Canadian corporation
incorporated under the laws of the Province of British Columbia,
and that he as such officer, being authorized to do so, executed
the foregoing instrument for the purposes therein contained by
signing the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and
official seal.
___________________________________
Notary Public
<PAGE>
EXHIBIT "B"
TO
STOCK PURCHASE AGREEMENT
See Attached
<PAGE>
EXHIBIT "B"
FORM OF STOCK PLEDGE
COLLATERAL PLEDGE OF STOCK AGREEMENT
COLLATERAL PLEDGE OF STOCK AGREEMENT, made the ____ day
of November, 1997, by and between International Gaming Corp. (the
"Pledgor") and Interactive Gaming & Communications Corp. (the
"Pledgee").
BACKGROUND
On the date hereof, the Pledgor executed a Note to
Pledgee agreeing to pay U.S. $4,990,000 portion of the purchase
price for the capital stock of Sports International, Ltd.
("Sports") and Global Casinos, Ltd. ("Global") purchased from
Pledgee under the terms of a Stock Purchase Agreement dated
October ___, 1997 (the "Stock Purchase Agreement").
The Pledgor has agreed to secure the Pledgor's
obligations and liabilities under the Note and Stock Purchase
Agreement by pledging to Pledgee all of the shares of capital
stock of both Sports and Global owned by Pledgor.
AGREEMENT
NOW, THEREFORE, the parties hereto, intending to be
legally bound, agree as follows:
1. Definitions.
(a) "Event of Default" shall mean an Event of
Default as defined in the Note.
(b) "Obligations" shall mean all of the
liabilities and obligations of the Pledgor to Pledgee under the
Stock Purchase Agreement and the Note whether now or hereafter
created or existing and the liabilities and obligations of Sports
and Global to Intersphere Communications, Ltd., a wholly-owned
subsidiary of Pledgee, under a Software License Agreement (the
"Software Agreement") dated even date herewith.
(c) "Pledged Stock" shall mean the shares of
capital stock of the Sports and Global described on Exhibit "A"
attached hereto and made a part hereof, together with all
certificates, options, rights, or other distributions issued as
an addition to, in substitution or in exchange for, or on account
of any such shares, and all proceeds of the foregoing, now or
hereafter owned or acquired by the Pledgor.
2. Pledge and Grant of Security Interest.
(a) As security for the prompt satisfaction of
the Obligations, the Pledgor hereby pledges to the Pledgee and
grants to the Pledgee a lien on and security interest in the
Pledged Stock.
(b) If the Pledgor shall become entitled to
receive or shall receive, in connection with any of the Pledged
Stock, any:
(i) Stock certificate, including, but
without limitation, any certificate issued in connection
with a stock dividend, an increase or reduction of capital,
a reclassification, a merger, a consolidation, a sale of
assets, a combination of shares, a stock split, a spin-off
or split-off;
(ii) Option, warrant or right, whether as an
addition to or in substitution or in exchange for any of the
Pledged Stock, or otherwise;
(iii) Dividend or distribution payable in
property, including securities issued by other than the
issuer of any of the Pledged Stock; or
(iv) Dividends or distributions of any sort;
then: the Pledgor shall accept the same as the Pledgee's agent,
in trust for the Pledgee, and shall deliver them forthwith to the
Pledgee in the exact form received with, as applicable, the
Pledgor's endorsement when necessary, or appropriate stock powers
duly executed in blank, to be held by the Pledgee, subject to the
terms hereof, as part of the Pledged Stock.
(c) Pledgor herewith delivers the Pledged Stock
to Pledgee represented by certificates duly endorsed in blank, or
accompanied by appropriate stock powers duly endorsed in blank
with signatures guaranteed and Pledgee acknowledges receipt
thereof.
(d) At any time Pledgee, at its option, may have
any or all of the Pledged Stock registered in its name or that of
its nominee, and the Pledgor hereby covenants that, upon the
Pledgee's request, the Pledgor will cause Sports and Global to
effect such registration on its Shareholders ledger and to issue
stock in the name of Pledgee. If that shall be done prior to the
occurrence of an Event of Default, the Pledgor shall nevertheless
retain all voting rights with respect to the Pledged Stock and,
for that purpose, the Pledgee shall execute and deliver to the
Pledgor all necessary proxies. Immediately and without further
notice, upon the occurrence of an Event of Default, whether or
not the Pledged Stock shall have been registered in the name of
the Pledgee or its nominee, the Pledgee or its nominee shall
have, with respect to the Pledged Stock, the right to exercise
all voting rights as to all of the shares of the Pledged Stock
and all other corporate rights and all conversion, exchange,
subscription or other rights, privileges or options pertaining
thereto as if it were the absolute owner thereof, including,
without limitation, the right to exchange any or all of the
Pledged Stock upon the merger, consolidation, reorganization,
recapitalization or other readjustment of Sports, Global, or both
or upon the exercise by Sports, Global, or both of any right,
privilege, or option pertaining to any of the Pledged Stock and,
in connection therewith, to deliver any of the Pledged Stock to
any committee, depository, transfer agent, registrar or other
designated agency upon such terms and conditions as it may
determine, all without liability except to account for property
actually received by it; but the Pledgee shall have no duty to
exercise any of the aforesaid rights, privileges or options and
shall not be responsible for any failure to do so or delay in so
doing.
(e) Unless an Event of Default shall have
occurred and be continuing, the Pledgor shall be entitled to
receive for the Pledgor's own use cash dividends on the Pledged
Stock paid out of earned surplus. Upon the occurrence of an
Event of Default, the Pledgee may require any such cash dividends
to be delivered to the Pledgee as additional security hereunder
or applied toward the satisfaction of the Obligations.
(f) Upon the occurrence of an Event of Default,
and at any time thereafter, the Pledgee shall have and may
exercise with reference to the Pledged Stock any or all of the
rights and remedies of a secured party (i) under the Pennsylvania
Uniform Commercial Code, (ii) under any other applicable law, or
(iii) under this agreement, including without limitation and
without demand of performance or other demand, advertisement, or
notice of any kind (except the notice specified below of time and
place of public or private sale) to or upon the Pledgor or any
other person (all of which are, to the extent permitted by law,
hereby expressly waived), the right to forthwith realize upon the
Pledged Stock or any part thereof, the right to have the Pledged
Stock registered in the name of Pledgee and to retain and
maintain ownership of the Pledged Stock and the right to sell or
otherwise dispose of and deliver the Pledged Stock or any part
thereof or interest therein, in one or more parcels at public or
private sale or sales, at any exchange, broker's board or at any
of the Pledgee's offices or elsewhere, at such prices and on such
terms (including, but without limitation, a requirement that any
purchaser of all or any part of the Pledged Stock purchase the
shares constituting the Pledged Stock for investment and without
any intention to make a distribution thereof) as it may deem
best, for cash or on credit, or for future delivery without
assumption of any credit risk, with the right to the Pledgee or
any purchaser to purchase upon any such sale the whole or any
part of the Pledged Stock free of any right or equity of
redemption in the Pledgor, which right or equity is hereby
expressly waived and released.
(g) The proceeds of any such disposition or other
action by the Pledgee shall be applied as follows:
(i) First, to the costs and expenses
incurred in connection therewith or incidental thereto or to
the care or safekeeping of any of the Pledged Stock or in
any way relating to the rights of the Pledgee hereunder,
including reasonable attorneys' fees and legal expenses;
(ii) Second, to the satisfaction of the
Obligations;
(iii) Third, to the payment of any other
amounts required by applicable law (including, without
limitation, Section 9-504(a) of the Pennsylvania Uniform
Commercial Code); and
(iv) Fourth, to the Pledgor to the extent of
any surplus proceeds.
(h) The Pledgee need not give more than five
days' notice of the time and place of any public sale or of the
time after which a private sale may take place, which notice the
Pledgor hereby deems reasonable.
(i) If an Event of Default shall have occurred
and be continuing, the Pledgee shall not be required to marshal
any present or future security for the Note or to resort to any
such security or guarantee in any particular order and the
Pledgor waives, to the fullest extent that the Pledgor lawfully
can, any right the Pledgor might have to require the Pledgee to
pursue any particular remedy before proceeding against him.
3. Representations and Warranties. The Pledgor
represents and warrants that:
(a) The Pledgor has, and has duly exercised, all
requisite power and authority to enter into this Agreement, to
pledge the Pledged Stock for the purposes described in
Paragraph 2(a), and to carry out the transactions contemplated by
this Agreement;
(b) The Pledgor is the legal and beneficial owner
of all of the Pledged Stock;
(c) The shares of the Pledged Stock constitute
all of the shares of Sports and Global and all shares are owned
by Pledgor;
(d) All of the shares of the Pledged Stock have
been duly and validly issued, are fully paid and nonassessable,
and are owned by the Pledgor free of any pledge, mortgage,
hypothecation, lien, charge, encumbrance, restriction or security
interest in such shares or the proceeds thereof, except for that
granted hereunder;
(e) The execution and delivery of this Agreement,
and the performance of its terms, will not result in any
violation of any provision of the certificate of incorporation or
by-laws, or violate or constitute a default under the terms of
any agreement, indenture or other instrument, license, judgment,
decree, order, law, statute, ordinance or other governmental rule
or regulation, applicable to the Issuer or the Pledgor or any of
its or the Pledgor's property; and
(f) Upon delivery of the Pledged Stock to the
Pledgee or its agent, this Agreement shall create a valid first
lien upon and perfected security interest in the Pledged Stock
and the proceeds thereof, subject to no prior security interest,
lien, charge or encumbrance, or agreement purporting to grant to
any third party a security interest in the property or assets of
the Pledgor which would include the Pledged Stock.
4. Covenants.
(a) The Pledgor hereby covenants that, until all
of the Obligations have been satisfied in full, the Pledgor will
not:
(i) Sell, convey, or otherwise dispose of
any of the Pledged Stock or any interest therein or create,
incur, or permit to exist any pledge, mortgage, lien,
charge, encumbrance or any security interest whatsoever in
or with respect to any of the Pledged Stock or the proceeds
thereof, other than that created hereby; or
(ii) Consent to or approve the issuance of
any additional shares of any class of capital stock of
Sports; or any securities convertible voluntarily by the
holder thereof or automatically upon the occurrence or
non-occurrence of any event or condition into, or
exchangeable for, any such shares; or any warrants, options,
rights, or other commitments entitling any person to
purchase or otherwise acquire any such shares.
(b) The Pledgor warrants and will, at the
Pledgor's own expense, defend the Pledgee's right, title, special
property and security interest in and to the Pledged Stock
against the claims of any person, firm, corporation or other
entity.
5. Additional Rights. Notwithstanding the foregoing,
the Pledgor acknowledges and agrees that the Pledgee may, in
addition to any other right provided hereunder or under
applicable law,
(a) sell the Pledged Stock at one or more private
sales to a restricted group of purchasers agreeing to hold the
Pledged Stock for their own account for investment and not with a
view to distribution or resale, or
(b) sell the Pledged Stock in one or more
transactions on any recognized market on which securities are
regularly traded, without any duty to make any effort to obtain
any "control premium" or other premium over the offering price on
any public market as of the time of such sale, and Pledgee shall
have no liability to the Pledgor or anyone else for any effect
such disposition may have on the price of the Issuer's securities
on any public or private market.
6. Public Sales. The Pledgor further agrees that if
the Pledgee either sells the Pledged Stock in the usual manner on
any recognized market therefor, or sells the Pledged Stock at the
price current in such market at the time of the sale, or if the
Pledgee has otherwise sold the Pledged Stock in conformity with
practices among dealers in securities, whether in one or more
public or private sales, the Pledgee shall be conclusively
presumed to have sold the Pledged Stock in a commercially
reasonable manner, and shall have no liability to the Pledgor on
account of such sale or sales.
7. Notices. The Pledgor will promptly deliver to the
Pledgee all written notices, and will promptly give the Pledgee
written notice of any other notices, received by him with respect
to Pledged Stock, and the Pledgee will promptly give like notice
to the Pledgor of any such notices received by it or its nominee.
8. Additional Documentation. The Pledgor shall at
any time, and from time to time, upon the written request of the
Pledgee, execute and deliver such further documents and do such
further acts and things as the Pledgee may reasonably request to
effect the purposes of this Agreement, including, without
limitation, delivering to the Pledgee upon the occurrence of an
Event of Default irrevocable proxies with respect to the Pledged
Stock in form satisfactory to the Pledgee. Until receipt
thereof, this Agreement shall constitute the Pledgor's proxy to
the Pledgee or its nominee to vote all shares of Pledged Stock
(other than that issued by a Borrower) then registered in the
Pledgor's name.
9. Termination. Upon the satisfaction in full of all
Obligations and the satisfaction of all additional costs and
expenses of the Pledgee as provided herein, this Agreement shall
terminate and the Pledgee shall deliver to the Pledgor, at the
Pledgor's expense, such of the Pledged Stock as shall not have
been sold or otherwise applied pursuant to this Agreement.
10. No Liability. Beyond the exercise of reasonable
care to assure the safe custody of the Pledged Stock while held
hereunder, the Pledgee shall have no duty or liability to
preserve rights pertaining thereto and shall be relieved of all
responsibility for the Pledged Stock upon surrendering it or
tendering surrender of it to the Pledgor.
11. No Waiver. No course of dealing between the
Pledgor and the Pledgee, nor any failure to exercise, nor any
delay in exercising, any right, power or privilege of the Pledgee
hereunder or under the Note or the Stock Purchase Agreement shall
operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or thereunder
preclude any other or further exercise thereof or the exercise of
any other right, power or privilege.
12. Rights and Remedies Cumulative. The rights and
remedies provided herein and in the Note or the Stock Purchase
Agreement and in all other agreements, instruments, and documents
delivered pursuant to or in connection with the Note or the Stock
Purchase Agreement are cumulative and are in addition to and not
exclusive of any rights or remedies provided by law, including,
but without limitation, the rights and remedies of a secured
party under the Pennsylvania Uniform Commercial Code.
13. Severability; Invalidity. The provisions of this
Agreement are severable, and if any clause or provision shall be
held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall
affect only such clause or provision or part thereof in such
jurisdiction and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or
provision in this Agreement in any jurisdiction.
14. Immunity; Submission to Jurisdiction. The Pledgor
hereby irrevocably and unconditionally waives any right to claim
immunity in respect of himself or any of the Pledged Stock,
including immunity from jurisdiction, immunity from attachment
prior to judgment, immunity from attachment in aid of execution
of judgment, and immunity from execution or judgment, all in
respect of any legal suit, action or proceeding arising out of or
relating to this Agreement. In addition, the Pledgor agrees that
any such suit, action or proceeding may be instituted in the
courts of the Commonwealth of Pennsylvania or the United States
District Court for the Eastern District of Pennsylvania, and
irrevocably submits to the jurisdiction of any such court for any
such purpose.
15. Successors and Assigns. This Agreement shall
inure to the benefit of and shall be binding upon the successors
and assigns of the parties hereto.
16. Choice of Law. This Agreement shall be construed
in accordance with the domestic, internal law of the Commonwealth
of Pennsylvania without regard to principles of conflicts of law
and is intended to take effect as an instrument under seal.
17. Construction. Whenever the context hereof
requires, the singular shall mean the plural, the plural shall
mean the singular, the masculine gender shall mean the neuter
gender or the feminine gender or the neuter gender shall mean the
masculine gender or the feminine gender.
IN WITNESS WHEREOF, the parties have hereunto set their
hands and seals the day and year first above written.
INTERNATIONAL GAMING CORP.
By:__________________________(SEAL)
Gary Newman, President
Attest:____________________________
Secretary
"Pledgor"
INTERACTIVE GAMING &
COMMUNICATIONS, INC.
By_________________________________
President
Attest:____________________________
Secretary
"Pledgee"
<PAGE>
EXHIBIT "A"
Pledged Stock
Issuer Certificate No. of Registered
No. Shares Owner
Sports International, Ltd. International
Gaming Corp.
Global Casinos, Ltd. International
Gaming Corp.
<PAGE>
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF ______________ :
On this ____ day of November, 1997, before me, a notary
public, the undersigned officer, personally appeared __________,
who acknowledged himself to be the President of International
Gaming Corp., a Canadian corporation organized under the laws of
the Providence of British Columbia, and that he as such officer,
being authorized to do so, executed the foregoing instrument for
the purposes therein contained by signing the name of the
corporation by himself as President.
IN WITNESS WHEREOF, I have hereunto set my hand and
official seal.
___________________________________
Notary Public
<PAGE>
EXHIBIT "C" AND "D"
TO
STOCK PURCHASE AGREEMENT
See Attached
<PAGE>
EXHIBIT "C" AND "D"
TERMS OF SOFTWARE AGREEMENTS
LICENSE AGREEMENT
TERMS AND CONDITIONS
(a) Definitions
(i) licensed program - software developed by
Intersphere for inactive casino gaming and for
Sports book gaming
(ii) licensed documentation - provide such
documentation as required to operate licensed
program
(iii) site - for use only at the offices of Sports and
Global in Grenada or at such other offices as
approved by IGC
(iv) CPU - compatible with current CPUs owned and
operated by Global and Sports
(v) use - for use only by Sports and Global for
internet gaming, no sublicense rights
(vi) gross handle - total revenues from bets placed by
customers
(vii) payoffs - payments to customers
(viii) net win or net winnings - net amount of income
before ordinary and necessary expenses (gross
handle less pay offs)
(ix) enhancement - upgrades and modifications to
licensed program
(b) Grant of Use
(i) use program in object code only form
(ii) on designated CPU at a certain site for certain
internal purposes
(iii) nonexclusive, nontransferable, personal use
(iv) use documentation
(v) use by a specific, limited number of users
(vi) make one backup copy for archival purposes
(vii) restrictions
no reverse engineering, decompiling, disassembly,
sell, lease, license, rent etc.
no service bureau, timeshare or facility
management
(viii) designated term - three years, with successive
three year options
(c) Royalties, Payments & Associated Schedules - a fixed monthly
royalty of $5,000 per month ($2,500 each from Sports and
Global) plus a percentage of net win
(d) Additional Modules; New Licensed Software - unless otherwise
agreed, the terms and conditions of this agreement will
govern additional licensed programs and additional modules
for the current programs. A Supplement to the Agreement
will set forth a description of the licensed program or
module and any additional fees and costs attributed thereto
(e) Miscellaneous - other general terms and conditions may
include:
(i) warranty of title by Intersphere providing that it has
good title to the licensed program
(ii) confidentiality - both parties as to licensed Software
and financial information
(iii) enforcement against infringers
(iv) limited warranties; disclaimer/exclusion of warranties;
limitation of liability/remedies
(v) maintenance - Intersphere to provide maintenance and
support of licensed software as necessary
(vi) termination - on breach of Software Agreement, non-
payment of Note from International Gaming to IGC
(vii) international issues - these need to be resolved,
especially governing law, ownership and license
issues
A formal License Agreement will be drafted incorporating the
foregoing terms and conditions.
<PAGE>
SCHEDULE 6.1
TO
STOCK PURCHASE AGREEMENT
Articles, Etc.
To Be Provided At Closing
As Agreed By The Parties
<PAGE>
SCHEDULE 6.7
TO
STOCK PURCHASE AGREEMENT
Liabilities, Etc.
(a) None
(b) None
<PAGE>
SCHEDULE 6.11
TO
STOCK PURCHASE AGREEMENT
Taxes
NONE
<PAGE>
SCHEDULE 6.12
TO
STOCK PURCHASE AGREEMENT
Conduct of Business, Etc.
NONE
<PAGE>
SCHEDULE 6.13
TO
STOCK PURCHASE AGREEMENT
Leases (list)
Office Lease: Clico Building,
St. Georges, Grenada
Rent: $5,000 (US) per month
Term: 3 years
Landlord: Colonial Life Insurance Co., Trinidad
Tenant: Sports International, Inc.
<PAGE>
SCHEDULE 6.14
TO
STOCK PURCHASE AGREEMENT
Licenses (list)
A Gaming License granted by the Country of Grenada to
Global Gaming, Ltd. (Grenada) with the right to sublease Global
Gaming has sublicensed the right to operate Internet gaming in
Grenada to both Sports International, Ltd. and Global Casinos,
Ltd.
<PAGE>
SCHEDULE 6.15
TO
STOCK PURCHASE AGREEMENT
Compliances, Etc.
NONE
<PAGE>
SCHEDULE 6.17
TO
STOCK PURCHASE AGREEMENT
Benefit Plans
NONE
<PAGE>
SCHEDULE 6.18
TO
STOCK PURCHASE AGREEMENT
Litigation
Other than investigation by U.S. Department of Justice
and injunction and indictment by the Attorney General of
Missouri, both of which have been fully disclosed to Buyer, there
are no claims, other investigations or litigation known to Buyer.
<PAGE>
SCHEDULE 6.20
TO
STOCK PURCHASE AGREEMENT
Insurance
NONE
<PAGE>
PROXY INTERACTIVE GAMING AND COMMUNICATIONS, CORP. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Michael F. Simone and Fred
Michini, or either of them, with power of substitution, as
proxies, to appear and vote, as designated below, all the shares
of Common Stock of Interactive Gaming and Communications Corp.
(the "Company"), held of record by the undersigned on
____________________, 1998 at the Special Meeting of Shareholders
to be held on ____________________, 1998 and any adjournments or
postponements thereof.
1. To approve the sale to International Gaming Corp. of
all of the capital stock of Sports International, Ltd.
(Grenada) and Global Casinos, Ltd. (Grenada) on the
terms contained in the Stock Purchase Agreement dated
November 6, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS
DIRECTED. IF NO DIRECTION IS INDICATED, THE PROXY WILL
BE VOTED "FOR" THE ABOVE PROPOSAL.
In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
Dated: _____________________, 1998
___________________________________
Signature
___________________________________
Signature
IMPORTANT: Please sign exactly as
your name or names appear hereon.
Joint owners should each sign. If
you sign as agent or in any other
representative capacity in which
you sign.
