<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
TRANS WORLD GAMING CORP.
(NAME OF ISSUER)
____________________
COMMON STOCK, $0.001 PAR VALUE
(Title of Class of Securities)
893375105
(CUSIP Number)
____________________
DOMINICK VALENZANO
ONE PENN PLAZA, SUITE 1503
NEW YORK, NEW YORK 10119
212-563-3355
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
____________________
March 5, 1997
(Date of Event Which Required Filing
of This Statement)
____________________
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box: [ ]
Check the following box if a fee is being paid with this statement: [ ]
<PAGE>
CUSIP NO.: 893375105
- -------------------------------------------------------------
1) NAME OF REPORTING PERSON AND S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE
PERSON
ANDREW TOTTENHAM CIK
CCC
- --------------------------------------------------------------------------------
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ x ]
- --------------------------------------------------------------------------------
3) SEC USE ONLY
- --------------------------------------------------------------------------------
4) SOURCE OF FUNDS
PF
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5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d)
OR 2(e)
[ ]
- --------------------------------------------------------------------------------
6) CITIZENSHIP OR PLACE OF ORGANIZATION
ENGLAND
- --------------------------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
623,000 SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE
---------------------------------------------------------
7) SOLE VOTING POWER
810,500 SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE*
---------------------------------------------------------
8) SHARED VOTING POWER
623,000 SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE
---------------------------------------------------------
9) SOLE DISPOSITIVE POWER
810,500 SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE*
----------------------------------------------------------
10) SHARED DISPOSITIVE POWER
- --------------------------------------------------------------------------------
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
623,000
- --------------------------------------------------------------------------------
12) CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
[ X ]
- --------------------------------------------------------------------------------
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Approximately 18% (.1795906)
- --------------------------------------------------------------------------------
14) TYPE OF REPORTING PERSON
IN
- ---------------------------------
* Includes 125,000 shares of Common Stock, and warrants for the purchase of
an additional 62,500 shares of Common Stock, held by Robin Tottenham,
spouse of the Reporting Person, as to which shares and warrants the
Reporting Person disclaims any beneficial ownership.
Page 2 of 8
<PAGE>
SCHEDULE 13D
Item 1. SECURITY AND ISSUER.
This Statement on Schedule 13D (the "Statement") relates to the Common
Stock, $.001 par value (the "Common Stock"), of Trans World Gaming Corp., a
Nevada corporation (the "Issuer"). The principal executive offices of the
Issuer are located at One Penn Plaza, Suite 1503, New York, NY 10119.
Item 2. IDENTITY AND BACKGROUND.
(a) Andrew Tottenham (the "Reporting Person")
(b) Tottenham & Co.
3 Garfield Mews
London, SW11 5PL
United Kingdom
(c) President and Chief Executive Officer
Trans World Gaming Corp.
One Penn Plaza, Suite 1503
New York, New York 10119
(d) During the last five years, the Reporting Person has not been convicted
in a criminal proceeding (excluding traffic violations and similar
misdemeanors).
(e) During the last five years, the Reporting Person has not been a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction whereby, as a result of such proceeding, the Reporting Person was
or is subject to a judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to federal or state
securities laws or finding any violation with respect to such laws.
(f) The Reporting Person is a citizen of England.
Page 3 of 8
<PAGE>
Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On March 5, 1997, the Issuer, the Reporting Person and the Reporting
Person's spouse, Mrs. Robin Tottenham, executed a stock purchase agreement dated
effective as of January 1, 1997 (the "Stock Purchase Agreement"). Pursuant to
the Stock Purchase Agreement, the Reporting Person purchased 375,000 shares of
the Issuer's common stock, par value $.001 per share (the "Common Stock"), as
well as warrants to purchase an additional 187,500 shares of Common Stock,
exercisable at $.5938 per share for a period of five (5) years and including
certain limited "piggyback" registration rights (the "Warrants"). Also pursuant
to the Stock Purchase Agreement, Robin Tottenham purchased 125,000 shares of the
Issuer's Common Stock and Warrants to purchase an additional 62,500 shares of
Common Stock, as to which Common Stock and Warrants the Reporting Person
disclaims any beneficial ownership. In consideration for the Common Stock, the
Warrants, and the Notes, as defined in Item 6 hereof, the Reporting Person and
his spouse transferred to the Issuer, in the aggregate, a 100% interest in Art
Marketing, Ltd. d/b/a Tottenham & Co., a United Kingdom corporation.
Item 4. PURPOSE OF TRANSACTION.
The Reporting Person, who is currently the President and Chief Executive
Officer of the Issuer, has acquired the Common Stock for the purpose of making
an investment in the Issuer. The Reporting Person intends to review, from time
to time, his investment in the Issuer on the basis of various factors, including
but not limited to the Issuer's business, financial condition, results of
operations and prospects, general economic and industry conditions, the
securities markets in general and those for the Issuer's securities in
particular, as well as other developments and other investment opportunities.
Based upon such review, the Reporting Person will take such actions in the
future as he may deem appropriate in light of the circumstances existing from
time to time. If the Reporting Person believes that further investment in the
Issuer is attractive, whether because of the market price of the Issuer's
securities or otherwise, he may acquire shares of the Common Stock or other
securities of the Issuer either in the open market or in privately negotiated
transactions. Similarly, depending on market conditions, compliance with
applicable securities laws and other factors, and the provisions of the Stock
Purchase Agreement, the Reporting Person may determine to dispose of some or all
of the securities currently owned by him or otherwise acquired by him either in
the open market or in privately negotiated transactions.
(a)-(j) Except as discussed in this Statement, the Reporting Person has
not formulated any plans or proposals which relate to or would result in:
(a) the acquisition by any person of additional securities of the Issuer, or
the disposition of securities of the Issuer; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Issuer or any of its subsidiaries; (c) a sale or transfer of a material
amount of the assets of the Issuer or any of its subsidiaries; (d) any change
in the present board of directors or management of the Issuer, including any
plans or proposals to change the number or term of directors or to fill any
existing vacancies on the board; (e) any material change in the present
capitalization or dividend policy of the Issuer; (f) any other material
change in the Issuer's business or corporate structure; (g) any change in the
Issuer's charter, or bylaws or other instrument corresponding thereto or
other action which may impede the acquisition of control of the Issuer by any
person; (h) causing a class of the securities of the Issuer to be
deregistered or delisted from a national securities exchange or to cease to
be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association; (i) a class of equity securities
of the Issuer becoming eligible for termination of registration pursuant to
Section 12(g)(4) of the Securities Exchange Act of 1934; or (j) any action
similar to any of those enumerated above.
Page 4 of 8
<PAGE>
Item 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) As a result of the Reporting Person's ownership of the Common Stock, as
well as his ownership of previously acquired shares of the Issuer's Common
Stock, the Reporting Person beneficially owns a total of 810,500 shares of
Common Stock of the Issuer, which includes the following: 375,000 shares of
Common Stock acquired under the Stock Purchase Agreement; 187,000 shares of
Common Stock that may be acquired upon the exercise of the Warrants; 58,500
shares of Common Stock previously acquired; 2,000 shares of Common Stock that
may be acquired within 60 days upon the exercise of certain non-statutory
options granted under the Issuer's 1993 Incentive Stock Option Plan; 125,000
shares of Common Stock acquired under the Stock purchase Agreement by the
Reporting Person's spouse, as to which shares the Reporting Person disclaims any
beneficial ownership; and 62,500 shares of Common Stock that may be acquired by
the Reporting Person's spouse upon the exercise of the Warrants, as to which
Warrants the Reporting Person disclaims any beneficial ownership. The total of
810,500 shares represents approximately 18% of the currently outstanding shares
of Common Stock of the Issuer (calculated on the basis of (i) the 2,719,000
shares of Common Stock outstanding as of March 1, 1997 and (ii) the issuance to
the Reporting Person and his spouse, pursuant to the Stock Purchase Agreement,
of the 500,000 shares of Common Stock and the 250,000 Warrants.)(1)
(b) The Reporting Person has sole power to vote or direct the vote, and
sole power to dispose or direct the disposition of 623,000 shares of Common
Stock, and has shared power to vote or direct the vote, and shared power to
dispose or direct the disposition of 810,500 shares of Common Stock.
(c) Except as described herein, the Reporting Person has not acquired or
disposed of any shares of the Issuer's Common Stock during the past sixty days.
(d)-(e) Items 5(d) and (e) are inapplicable to the Reporting Person.
Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
As described in Item 3, the Reporting Person acquired the Common Stock
pursuant to the Stock Purchase Agreement dated January 1, 1997. The Issuer's
Articles of Incorporation set forth the rights relating to the Common Stock.
The Reporting Person and his spouse are each the holder of a
Non-Negotiable Promissory Note dated January 1, 1997 (the "Notes") in the
principal amounts of $150,000 and $50,000, respectively. Beginning January 1,
1998, at the option of the Reporting Person and his spouse, the Notes will be
convertible into shares of Common Stock of the Issuer at a conversion price
of $1.00 per share. Such convertibility feature will vest at a rate of 20%
per year, unless the Issuer completes a registered public offering of the
Common Stock during the term of the Notes; in that case, the Notes will
immediately become 100% vested and fully convertible. To determine the
number of shares of Common Stock issuable as the Reporting Person's and his
spouse's interests in the convertibility feature of the Notes vest over time,
the principal amount plus any accrued interest then outstanding on
- ------------------------------
(1) For purposes of calculating the percent of class for each person or group,
all rights to require Common Stock within 60 days, whether by the exercise
of options or warrants, are deemed outstanding for each person or group.
Such rights to acquire Common Stock are not, however, deemed to be
outstanding for the purpose of computing the percentage of the class by any
other person or group.
Page 5 of 8
<PAGE>
the Notes will be divided by the conversion price in effect on the conversion
date. The Notes may not be prepaid, in whole or in part, by the Issuer at any
time.
The Reporting Person entered into an Employment Contract with the Issuer,
dated as of December 26, 1996, pursuant to which the Reporting Person will
serve as President and Chief Executive Officer of the Issuer for a term of
five years. As part of his compensation under the Employment Contract, the
Reporting Person will be eligible for participation in the Issuer's 1993
Incentive Stock Option Plan as a salaried employee. To date, no incentive
stock options have been granted to him under the plan. The 2,000 options to
purchase the Issuer's Common Stock which the Reporting Person currently owns
pursuant to the plan were granted to him as non-statutory options for his
services as an outside director of the Issuer prior to 1997. These
non-statutory options have a ten-year term, have an exercise price per share
equal to the fair market value of a share of the Common Stock on the date of
grant, and become fully exercisable on the date of grant.
Page 6 of 8
<PAGE>
Item 7. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION METHOD OF FILING
- ------- ----------- ----------------
<S> <C> <C>
1 Stock Purchase Agreement, dated as of January 1, 1997. Filed herewith.
2 Form of Warrant for Purchase of Shares of Common Stock of Trans Filed herewith.
World Gaming Corp., dated as of January 1, 1997.
3 Form of Non-Negotiable Promissory Note, dated January 1, 1997. Filed herewith.
</TABLE>
Page 7 of 8
<PAGE>
SIGNATURES
After reasonable inquiry and to the best knowledge and belief of the
undersigned, the undersigned certifies that the information set forth in this
Statement is true, complete and correct.
Dated: March 5, 1997
ANDREW TOTTENHAM
/s/ Andrew Tottenham
--------------------------------
Page 8 of 8
<PAGE>
STOCK PURCHASE AGREEMENT
Dated as of January 1, 1997
Between
TRANS WORLD GAMING CORP.
and
the Shareholders of
ART MARKETING, LTD.
<PAGE>
LIST OF EXHIBITS
NAME OF EXHIBIT NUMBER OF EXHIBIT
- --------------- -----------------
Warrant Exhibit 1.2(a)
Note Exhibit 1.2(b)
Disclosure Schedule Exhibit 2.1
List of Defined Terms Exhibit 6.13
<PAGE>
TABLE OF CONTENTS
PAGE NO.
--------
ARTICLE 1. EXCHANGE OF STOCK.................................................1
1.1. Shares to be Acquired..............................................1
1.2. Acquisition Price..................................................1
ARTICLE 2. REPRESENTATIONS AND WARRANTIES
OF COMPANY AND SHAREHOLDERS.......................................2
2.1. Disclosure Schedule................................................2
2.2. Corporate Organization.............................................2
2.3. Capitalization.....................................................3
2.4. Authorization......................................................3
2.5. Non-Contravention..................................................3
2.6. Consents and Approvals.............................................4
2.7. Financial Statements...............................................4
2.8. Loss Contingencies; Other Non-Accrued Liabilities..................4
2.9. Absence of Certain Changes.........................................4
2.10. Real Properties....................................................5
2.11. Machinery, Equipment, Vehicles and Personal Property...............5
2.12. Receivables and Payables...........................................6
2.13. Intellectual Property Rights.......................................6
2.14. Litigation.........................................................7
2.15. Tax Matters........................................................7
2.16. Insurance..........................................................8
2.17. Benefit Plans......................................................8
2.18. Bank Accounts; Powers of Attorney..................................9
2.19. Contracts and Commitments; No Default..............................9
2.20. Orders, Commitments and Returns...................................10
2.21. Labor and Employment Matters......................................10
2.22. Dealers and Suppliers.............................................10
2.23. Permits and Other Operating Rights................................11
2.24. Compliance with Law...............................................11
2.25. Assets of Business................................................11
2.26. Business Generally................................................11
2.27. Brokers...........................................................11
2.28. Shareholders Representations......................................11
2.29. Accuracy of Information...........................................13
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER......................13
3.1. Corporate Organization............................................13
3.2. Authorization.....................................................13
3.3. Non-Contravention.................................................13
3.4. Disclosure........................................................14
3.5. Consents and Approvals............................................14
3.6. Brokers...........................................................14
3.7. Information Furnished.............................................14
i
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ARTICLE 4. COVENANTS........................................................15
4.1. Full Access to Purchaser..........................................15
4.2. Confidentiality...................................................15
4.3. Further Assurances; Cooperation; Notification.....................16
ARTICLE 5. SURVIVAL AND INDEMNIFICATION.....................................16
5.1. Survival..........................................................16
5.2. Indemnification by Purchaser......................................16
5.3. Indemnification by the Shareholders--Untrue Representation or
Breach of Warranty................................................16
5.4. Indemnification by the Shareholders -- Other......................17
5.5. Basket Amount.....................................................17
5.6. Claims for Indemnification........................................17
ARTICLE 6. MISCELLANEOUS PROVISIONS.........................................18
6.1. Expenses..........................................................18
6.2. Amendment and Modification........................................18
6.3. Waiver of Compliance; Consents....................................18
6.4. No Third Party Beneficiaries......................................18
6.5. Notices...........................................................18
6.6. Assignment........................................................19
6.7. Governing Law.....................................................19
6.8. Counterparts......................................................20
6.9. Headings..........................................................20
6.10. Entire Agreement..................................................20
6.11. Injunctive Relief.................................................20
6.12. Arbitration.......................................................20
6.13. List of Defined Terms.............................................21
ii
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of January 1, 1997, is by and among
Trans World Gaming Corp., a Nevada corporation ("Purchaser"), and Andrew
Tottenham and Robin Tottenham, the shareholders (collectively, the
"Shareholders") of Art Marketing, Ltd. d/b/a Tottenham & Co., a United Kingdom
corporation ("Company").
A. The parties hereto wish to provide for the terms and conditions upon which
Purchaser will acquire all of the issued and outstanding shares of capital
stock of the Company, which are owned 75% by Andrew Tottenham and 25% by
Robin Tottenham, each in exchange, in like proportion, for shares of
Purchaser, certain warrants therefor, and a note.
B. The parties hereto wish to make certain representations, warranties,
covenants and agreements in connection with such acquisition of stock and
also to prescribe various conditions to such transaction.
Accordingly, and in consideration of the representations, warranties, covenants,
agreements and conditions herein contained, the parties hereto agree as follows:
ARTICLE
1.
EXCHANGE OF STOCK
1.1. SHARES TO BE ACQUIRED.
The Shareholders hereby sell, transfer, assign and deliver to
Purchaser, and Purchaser acquires from Shareholders, all of the 100
outstanding shares of common stock, par value L1 per share, of
Company, free and clear of any Encumbrances (as defined herein) (the
"Shares").
1.2. ACQUISITION PRICE.
In exchange for the Shares to be acquired from the Shareholders
pursuant to this Agreement, Purchaser will pay consideration
consisting of (i) an aggregate of 500,000 shares of common stock of
Purchaser, par value $.001 per share (the "Purchaser Shares"), all of
which shares will be "restricted" as defined under the rules
promulgated under the Securities Act of 1933, as amended, (ii)
warrants to purchase, in the aggregate, 250,000 additional shares of
Purchaser common stock, which warrants shall be exercisable for a
period of five (5) years at a price of $.5938 per share, and which
shall have seven (7)-year piggy back registration rights, as provided
herein (the "Warrants"), and shall be in the form of Exhibit 1.2(a)
attached hereto, to be granted to the Shareholders by Purchaser, and
(iii) two unsecured promissory notes in the aggregate principal amount
of $200,000 due January 1, 2002, plus interest as provided in each
case therein, which notes, beginning January 1, 1998, shall be
convertible into common stock of the Purchaser at a price of $1.00 per
share (each a Note and collectively, the "Notes") and which shall each
be in the form of Exhibit 1.2(b) hereto. The Notes shall be made by
Purchaser and payable to each of the Shareholders in accordance with
their respective terms (such consideration collectively, the
"Acquisition Price"). The total Acquisition Price shall be allocated
between the Shareholders as follows:
<PAGE>
(a) 375,000 Purchaser Shares to Andrew Tottenham; 125,000
Purchaser Shares to Robin Tottenham;
(b) Warrants for an additional 187,500 Purchaser Shares to
Andrew Tottenham; Warrants for an additional 62,500
Purchaser Shares to Robin Tottenham; and
(c) A Note in the principal amount of $150,000 to Andrew
Tottenham; a Note in the principal amount of $50,000 to
Robin Tottenham.
At the Closing, (i) each of the Shareholders will endorse a
certificate representing his or her Shares to the order of Purchaser,
and will deliver such certificate to Purchaser, and (ii) Purchaser
will deliver the certificate evidencing the Purchaser Shares, and will
execute and deliver the Warrants and the Notes.
ARTICLE
2.
REPRESENTATIONS AND WARRANTIES
OF SHAREHOLDERS
The Shareholders hereby, jointly and severally, represent and warrant to
Purchaser as of the date hereof as follows:
2.1. DISCLOSURE SCHEDULE.
The disclosure schedule marked as Exhibit 2.1 hereto (the "Disclosure
Schedule") is divided into sections which correspond to the
subsections of this Section 2. The Disclosure Schedule is accurate
and complete and the disclosures in any subsection thereof shall
constitute disclosure for purposes of any other subsection and any
other section or subsection of this Agreement or any exhibit to or
other writing which is designated herein as being part of this
Agreement.
2.2. CORPORATE ORGANIZATION.
Company is a corporation duly organized, validly existing and in good
standing under the law of the United Kingdom, has full corporate power
and authority to carry on its business as it is now being conducted
and to own, lease and operate its properties and assets, is duly
qualified or licensed to do business as a foreign corporation in good
standing in every other jurisdiction in which the character or
location of the properties and assets owned, leased or operated by it
or the conduct of its business requires such qualification or
licensing, except in such jurisdictions in which the failure to be so
qualified or licensed and in good standing would not, individually or
in the aggregate, have a material adverse effect on its condition
(financial or otherwise), working capital, assets, properties,
liabilities, obligations, reserves, businesses, prospects, goodwill or
going concern value; and has heretofore delivered to Purchaser
complete and correct copies of its articles or certificate of
incorporation and bylaws, or equivalent documents, as presently in
effect. The Disclosure Schedule contains a list of all jurisdictions
in which Company is qualified or licensed to do business. Company
does not own (and has not at any time during the preceding five (5)
years owned) of record or beneficially more than five percent (5%) of
the outstanding equity securities having ordinary voting rights or
power of any corporation or partnership or other legal entity.
2
<PAGE>
2.3. CAPITALIZATION.
The authorized capital stock of Company is set forth on the Disclosure
Schedule. The number of shares of capital stock of Company
outstanding and the number of shares of capital stock of Company held
in treasury as of the date of this Agreement are set forth on the
Disclosure Schedule. All issued and outstanding shares of capital
stock of Company are duly authorized, validly issued, fully paid,
nonassessable and are without, and were not issued in violation of,
preemptive rights. Except as set forth on the Disclosure Schedule:
(i) there are no shares of capital stock or other equity securities of
Company outstanding or any securities convertible into or exchangeable
for such shares, securities or rights; (ii) there are no outstanding
options, warrants, conversion privileges or other rights to purchase
or acquire any capital stock or other equity securities of Company or
any securities convertible into or exchangeable for such shares,
securities or rights; and (iii) there are no contracts, commitments,
understandings, arrangements or restrictions by which Company is bound
to issue or acquire any additional shares of its capital stock or
other equity securities or any options, warrants, conversion
privileges or other rights to purchase or acquire any capital stock or
other equity securities of Company or any securities convertible into
or exchangeable for such shares, securities or rights.
2.4. AUTHORIZATION.
Each of the Shareholders has the legal capacity to execute, deliver
and perform this Agreement and to carry out the transactions
contemplated herein. This Agreement has been duly and validly
executed by each of the Shareholders and is the valid and binding
legal obligation of the Shareholders, enforceable against each of the
Shareholders in accordance with its terms.
2.5. NON-CONTRAVENTION.
Except as set forth in the Disclosure Schedule, neither the execution,
delivery and performance of this Agreement nor the consummation of the
transactions contemplated herein will: (i) violate or be in conflict
with any provision of the articles or certificate of incorporation or
bylaws of Company; or (ii) be in conflict with, or constitute a
default, however defined (or an event which, with the giving of due
notice or lapse of time, or both, would constitute such a default),
under, or cause or permit the acceleration of the maturity of, or give
rise to any right of termination, cancellation, imposition of fees or
penalties under, any debt, note, bond, lease, mortgage, indenture,
license, obligation, contract, commitment, franchise, permit,
instrument or other agreement or obligation to which Company or either
of the Shareholders is a party or by which Company or the Shareholders
or any of its or Shareholders' properties or assets are or may be
bound (unless with respect to which defaults or other rights,
requisite waivers or consents shall have been obtained at or prior to
the Closing) or result in the creation or imposition of any mortgage,
pledge, lien, security interest, encumbrance, restriction, adverse
claim or charge of any kind, upon any property or assets of Company or
the Shareholders under any debt, obligation, contract, agreement or
commitment to which Company or either of the Shareholders is a party
or by which Company or the Shareholders or any of its or Shareholders'
assets or properties are or may be bound; or (iii) violate any
statute, treaty, law, judgment, writ, injunction, decision, decree,
order, regulation, ordinance or other similar authoritative matters of
any foreign, federal, state or local governmental or
quasi-governmental, administrative, regulatory or judicial court,
department, commission, agency, board, bureau, instrumentality or
other authority (hereinafter sometimes separately referred to as an
"Authority" and sometimes
3
<PAGE>
collectively as "Authorities") (sometimes hereinafter separately
referred to as a "Law" and sometimes collectively as "Laws").
2.6. CONSENTS AND APPROVALS.
Except as set forth in the Disclosure Schedule, with respect to
Company and the Shareholders, no consent, approval, order or
authorization of or from, or registration, notification, declaration
or filing with (hereinafter sometimes separately referred to as a
"Consent" and sometimes collectively as "Consents") any individual or
entity, including without limitation any Authority, is required in
connection with the execution, delivery or performance of this
Agreement by the Shareholders or the consummation by the Shareholders
of the transactions contemplated herein.
2.7. FINANCIAL STATEMENTS.
The Shareholders have furnished to Purchaser the balance sheets and
statements of operations (or income or loss), changes in shareholders'
equity and changes in cash flow (or financial position) and the
reports of independent public accountants described on the Disclosure
Schedule (the "Interim Financial Statements"). The Shareholders have
also undertaken to furnish to Purchaser an audited balance sheet to be
dated as of April 30, 1997 which will be referred to herein as the
"Final Balance Sheet." Except as disclosed therein, the aforesaid
Interim Financial Statements and the Final Balance Sheet (i) are or
will be, as the case may be, in accordance with the books and records
of Company and have been, or will be, as the case may be, prepared in
conformity with generally accepted accounting principles consistently
applied for all periods, and (ii) fairly present and will fairly
present, as the case may be, the financial position of Company as of
the respective dates thereof, and the results of operations (or income
or loss), changes in shareholders' equity and changes in cash flow (or
financial position) for the periods then ended, all in accordance with
generally accepted accounting principles consistently applied for all
periods.
2.8. LOSS CONTINGENCIES; OTHER NON-ACCRUED LIABILITIES.
Except as described in the Disclosure Schedule or as will be disclosed
in the footnotes to the Final Balance Sheet, Company does not have
(i) any loss contingencies which are not required by generally
accepted accounting principles to be accrued; (ii) any loss
contingencies involving an unasserted claim or assessment which are
not required by generally accepted accounting principles to be
disclosed because the potential claimants have not manifested to
Company an awareness of a possible claim or assessment; or (iii) any
categories of known liabilities or obligations (other than non-pension
post-retirement medical care, dental care, life insurance or other
benefits) which are not required by generally accepted accounting
principles to be accrued. For purposes of this Agreement, "Loss
Contingency" shall have the meaning accorded to it by generally
accepted accounting principles.
2.9. ABSENCE OF CERTAIN CHANGES.
Except as set forth in the Disclosure Schedule, since the date of the
latest of the Interim Financial Statements, Company has owned and
operated its assets, properties and businesses in the ordinary course
of business and consistent with past practice; without limiting the
generality of the foregoing, Company has not, subject to the aforesaid
exceptions:
4
<PAGE>
(a) suffered any adverse change in its condition (financial or
otherwise), working capital, assets, properties, liabilities,
obligations, reserves, businesses, prospects, goodwill or going
concern value or experienced any event or failed to take any
action which event or failure reasonably could be expected to
result in such an adverse change;
(b) suffered any loss, damage, destruction or other casualty (whether
or not covered by insurance) or suffered any loss of officers,
employees, dealers, distributors, independent contractors,
customers, or suppliers or other favorable business
relationships;
(c) declared, set aside, made or paid any dividend or other
distribution in respect of its capital stock; or purchased or
redeemed any shares of its capital stock;
(d) issued or sold any shares of its capital stock, or any options,
warrants, conversion, exchange or other rights to purchase or
acquire any such shares or any securities convertible into or
exchangeable for such shares;
(e) incurred any indebtedness for borrowed money;
(f) mortgaged, pledged, or subjected to any lien, lease, security
interest or other charge or encumbrance any of its properties or
assets, tangible or intangible;
(g) acquired or disposed of any assets or properties;
(h) forgiven or canceled any debts or claims, or waived any rights;
(i) entered into any material transaction;
(j) granted to any officer or salaried employee or any other employee
any increase in compensation in any form or paid any severance or
termination pay;
(k) entered into any commitment for capital expenditures for
additions to plant, property or equipment; or
(l) agreed, whether in writing or otherwise, to take any action
described in this subsection.
2.10. REAL PROPERTIES.
The Company does not own any real property. The Company leases
certain real property, as described in the Disclosure Schedule, but,
except as set forth in the Disclosure Schedule, there are no facts
known to the Shareholders that could impose liability on the Purchaser
in connection with the leasing of such real estate (other than the
payment of rent in connection with such lease).
2.11. MACHINERY, EQUIPMENT, VEHICLES AND PERSONAL PROPERTY.
Except as set forth in the Disclosure Schedule, Company has good and
merchantable right, title and interest in and to, or a leasehold
interest in and to, all its equipment, vehicles and other personal
property which was purchased or otherwise acquired since the date of
the latest of the Interim Financial Statements (except for such items
sold or leased in the ordinary course of business since such date).
Except as set forth in the Disclosure Schedule, all of such leasehold
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interests relating to equipment, vehicles and other personal property
are valid and in full force and effect and enforceable in accordance
with their terms and there does not exist any violation, breach or
default thereof or thereunder. Except as set forth in the Disclosure
Schedule, none of such equipment, vehicles or other personal property
owned by Company is subject to any mortgage, pledge, lien or security
interest of any kind or nature (whether or not of record) except (i)
liens securing specified liabilities or obligations shown on the
Interim Financial Statements and which will be shown on the Final
Balance Sheet with respect to which no breach, violation or default
exists or shall exist; (ii) mechanics', carriers', workers' and other
similar liens arising in the ordinary course of business; (iii) minor
imperfections of title which do not impair the existing use of such
real property assets or fixtures; and (iv) liens for current taxes not
yet due and payable or being contested in good faith by appropriate
proceedings (herein called "Permitted Liens"). Except as set forth in
the Disclosure Schedule, the equipment, vehicles and other personal
property of Company which are necessary to the conduct of its business
are in good operating condition and repair and fit for the intended
purposes thereof and no material maintenance, replacement or repair
has been deferred or neglected.
2.12. RECEIVABLES AND PAYABLES.
(a) Except as set forth on the Disclosure Schedule, (i) Company has
good right, title and interest in and to all its accounts and
notes receivable and trade notes and trade accounts as reflected
on the Interim Financial Statements and as will be reflected in
the Final Balance Sheet; (ii) none of such accounts and notes
receivable and trade notes and trade accounts is or will be
subject to any mortgage, pledge, lien or security interest of any
kind or nature (whether or not of record); (iii) except to the
extent of applicable reserves shown on the Interim Financial
Statements and which will be shown in the Final Balance Sheet,
all of the accounts and notes receivable, trade notes and trade
accounts owing to Company constitute valid and enforceable claims
arising from bona fide transactions in the ordinary course of
business, and there are no claims, refusals to pay or other
rights of set-off against any thereof; (iv) no account or note
debtor whose account or note balance exceeds the amount set forth
in the Disclosure Schedule at the date set forth therein was
delinquent in payment by more than ninety days; and (v) there is
no reason why any account or note receivable or trade note or
trade account will not be collected in accordance with its terms,
other than for such accounts and notes which are not in excess of
the reserves established therefor and reflected on the Disclosure
Schedule.
(b) All accounts payable and notes payable by Company arose in bona
fide transactions in the ordinary course of business and no such
account payable or note payable is delinquent by more than ninety
days in its payment.
2.13. INTELLECTUAL PROPERTY RIGHTS.
Company owns the industrial and intellectual property rights,
including without limitation the patents, patent applications, patent
rights, trademarks, trademark applications, trade names, service
marks, service mark applications, copyrights, computer programs and
other computer software, inventions, know-how, trade secrets,
technology, proprietary processes and formulae (collectively,
"Intellectual Property Rights") described on the Disclosure Schedule.
Except as set forth on the Disclosure Schedule, the use of all
Intellectual Property Rights necessary or required for the conduct of
the businesses of Company as presently conducted and as proposed to be
conducted does not and will not infringe or violate or allegedly
infringe or violate the
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intellectual property rights of any person or entity. Except as
described on the Disclosure Schedule, Company does not own or use any
Intellectual Property Rights pursuant to any written license agreement
and has not granted any person or entity any rights, pursuant to
written license agreement or otherwise, to use the Intellectual
Property Rights.
2.14. LITIGATION.
Except as set forth in the Disclosure Schedule, there is no legal,
administrative, arbitration, or other proceeding, suit, claim or
action of any nature or investigation, review or audit of any kind
(including without limitation a proceeding, suit, claim or action, or
an investigation, review or audit, involving any environmental Law or
matter), judgment, decree, decision, injunction, writ or order
pending, noticed, scheduled or, to the knowledge of Company,
threatened or contemplated by or against or involving Company, its
assets, properties or businesses or its directors, officers, agents or
employees (but only in their capacity as such), whether at law or in
equity, before or by any person or entity or Authority, or which
questions or challenges the validity of this Agreement or any action
taken or to be taken by the parties hereto pursuant to this Agreement
or in connection with the transactions contemplated herein.
2.15. TAX MATTERS.
For purposes of this Agreement, the term "Taxes" means all federal,
state, local, foreign and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits,
license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, real or
personal property, windfall profits, customs, duties or other taxes,
fees, assessments, charges or levies of any kind whatever, together
with any interest and any penalties, additions to tax or additional
amounts with respect thereto, and the term "Tax" means any one of the
foregoing Taxes. In addition, the term "Tax Returns" means all
returns, declarations, reports, statements and other documents
required to be filed with any Authority in respect of Taxes, and the
term "Tax Return" means any one of the foregoing Tax Returns. Except
as set forth in the Disclosure Schedule, the Shareholders, jointly and
severally, hereby represent and warrant the following with respect to
the Company:
(a) FILING OF TAX RETURNS. There have been properly completed and
duly filed on a timely basis and in correct form all Tax Returns
required to be filed on or prior to the date hereof by the
Company. As of the time of filing, the foregoing Tax Returns
correctly reflected the facts regarding the income, business,
assets, operations, activities, status or other matters of the
Company or any other information required to be shown thereon.
There is no material omission, deficiency, error, misstatement or
misrepresentation, whether innocent, intentional or fraudulent,
in any Tax Return filed by the Company for any period. Any Tax
Returns filed after the date hereof, but on or before the Closing
Date, will conform with the provisions of this subsection 2.15.
(b) PAYMENT OF TAXES. With respect to all amounts in respect of
Taxes imposed upon the Company, or for which the Company is or
could be liable, whether to taxing Authorities (as, for example,
under Law) or to other persons or entities (as, for example,
under tax allocation agreements), with respect to all taxable
periods or portions of periods ending on or before the Closing
Date, all applicable Tax Laws and agreements have been or will be
fully complied with, and all such amounts of Taxes required to be
paid by the Company to taxing Authorities or others on or before
the date hereof have been duly
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<PAGE>
paid or will be paid on or before the Closing Date or adequate
provision has been made or will have been made therefor in the
Final Balance Sheet; the reserves for all such Taxes reflected in
the Final Balance Sheet are, or will be, adequate and there are
no liens for such Taxes upon any property or assets of the
Company. The Company has withheld and remitted all amounts
required to be withheld and remitted by it in respect of Taxes.
(c) AUDITS AND EXTENSIONS. Except as set forth in the Disclosure
Schedule, none of the Tax Returns of the Company has been
examined by the Internal Revenue Service or any similar
Authority, and, except to the extent shown in such Disclosure
Schedule, all deficiencies asserted as a result of such
examinations have been paid or finally settled and no issue has
been raised by the Internal Revenue Service or any similar
Authority in any such examination which, by application of
similar principles, reasonably could be expected to result in a
proposed deficiency for any other period not so examined. Except
as set forth in the Disclosure Schedule, all deficiencies and
assessments of Taxes of the Company resulting from an examination
of any Tax Returns by any Authority have been paid and there are
no pending examinations currently being made by any Authority nor
has there been any written or oral notification to the Company or
either of the Shareholders of any intention to make an
examination of any Taxes by any Authority. Except as set forth
in the Disclosure Schedule, there are no outstanding agreements
or waivers extending the statutory period of limitations
applicable to any Tax Return for any period.
(d) INDEPENDENT CONTRACTORS AND EMPLOYEES. For purposes of computing
Taxes and the filing of Tax Returns, to the best of the
Shareholders' knowledge, the Company has not failed to treat as
"employees" any individual providing services to the Company who
would be classified as an "employee" under the applicable rules
or regulations of any Authority with respect to such
classification.
2.16. INSURANCE.
The Disclosure Schedule contains an accurate and complete list of all
policies of fire and other casualty, general liability, theft, life,
workers' compensation, health, directors and officers, business
interruption and other forms of insurance owned or held by Company,
specifying the insurer, the policy number, the term of the coverage
and, in the case of any "claims made" coverage, the same information
as to predecessor policies for the previous five years. All present
policies are in full force and effect and all premiums with respect
thereto have been paid. Company has not been denied any form of
insurance and no policy of insurance has been revoked or rescinded
during the past five years, except as described on the Disclosure
Schedule.
2.17. BENEFIT PLANS.
Except as set forth in the Disclosure Schedule, to the Shareholders'
knowledge, there are no facts or circumstances which could, directly
or indirectly, subject Purchaser or any of its affiliates to any
Liability of any nature with respect to any pension, welfare,
incentive, perquisite, paid time off, severance or other benefit plan,
policy, practice or agreement sponsored, maintained or contributed to
by Company or any affiliate, to which Company or any affiliate is a
party or with respect to which Company or any affiliate could have any
liability.
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2.18 BANK ACCOUNTS; POWERS OF ATTORNEY.
The Disclosure Schedule sets forth: (i) the names of all financial
institutions, investment banking and brokerage houses, and other
similar institutions at which the Company maintains accounts,
deposits, safe deposit boxes of any nature, and the names of all
persons authorized to draw thereon or make withdrawals therefrom;
(ii) the terms and conditions thereof and any limitations or
restrictions as to use, withdrawal or otherwise; and (iii) the names
of all persons or entities holding general or special powers of
attorney from Company and a summary of the terms thereof.
2.19. CONTRACTS AND COMMITMENTS; NO DEFAULT.
(a) Except as set forth in the Disclosure Schedule, Company:
(i) has no written contract, commitment, agreement or
arrangement with any person or, to Company's knowledge,
any oral contract, commitment, agreement or arrangement
which (A) requires payments individually in excess of
$10,000 annually or in excess of $50,000 over its term
(including without limitation periods covered by any
option to extend or renew by either party) and (B) is
not terminable on thirty (30) days' or less notice
without cost or other Liability;
(ii) does not pay any person or entity cash remuneration at
the annual rate (including without limitation
guaranteed bonuses) of more than $50,000 for services
rendered;
(iii) is not restricted by agreement from carrying on its
businesses or any part thereof anywhere in the world or
from competing in any line of business with any person
or entity;
(iv) is not subject to any obligation or requirement to
provide funds to or make any investment (in the form of
a loan, capital contribution or otherwise) in any
person or entity;
(v) is not party to any agreement, contract, commitment or
loan to which any of its directors, officers or
shareholders or any affiliate or associate (or former
affiliate or associate) thereof is a party;
(vi) is not subject to any outstanding sales or purchase
contracts, commitments or proposals which will result
in any loss upon completion or performance thereof;
(vii) is not party to any purchase or sale contract or
agreement that calls for aggregate purchases or sales
in excess over the course of such contract or agreement
of $25,000 or which continues for a period of more than
twelve months (including without limitation periods
covered by any option to renew or extend by either
party) which is not terminable on sixty (60) days' or
less notice without cost or other Liability at or any
time after the Closing; and
(viii) has no distributorship, dealer, manufacturer's
representative, franchise or similar sales contract
relating to the payment of a commission.
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(b) True and complete copies (or summaries, in the case of oral
items) of all items disclosed pursuant to subsection 2.19(a) have
been made available to Purchaser for review. Except as set forth
in the Disclosure Schedule, all such items are valid and
enforceable by and against Company in accordance with their
respective terms; Company is not in breach, violation or default,
however defined, in the performance of any of its obligations
thereunder, and no facts and circumstances exist which, whether
with the giving of due notice, lapse of time, or both, would
constitute such a breach, violation or default thereunder or
thereof; and, to Company's knowledge, no other parties thereto
are in a breach, violation or default, however defined,
thereunder or thereof, and no facts or circumstances exist which,
whether with the giving of due notice, lapse of time, or both,
would constitute such a breach, violation or default thereunder
or thereof.
2.20. ORDERS, COMMITMENTS AND RETURNS.
Except as set forth in the Disclosure Schedule, all accepted and
unfulfilled orders for the performance of services entered into by
Company and all outstanding contracts or commitments for the purchase
of supplies, materials and services were made in bona fide
transactions in the ordinary course of business. Except as set forth
in the Disclosure Schedule, there are no claims against Company.
2.21. LABOR AND EMPLOYMENT MATTERS.
Except as set forth in the Disclosure Schedule: (i) Company is and
has been in compliance with all applicable Laws respecting employment
and employment practices, terms and conditions of employment and wages
and hours, including without limitation any such Laws respecting
employment discrimination and occupational safety and health
requirements, and has not and is not engaged in any unfair labor
practice; (ii) there is no unfair labor practice or similar complaint
against the Company pending or, to the Shareholders' knowledge,
threatened before any Authority; (iii) no labor representation
question exists respecting the employees of Company and there is not
pending or, to the Shareholders' knowledge, threatened any activity
intended or likely to result in a labor representation vote respecting
the employees of the Company; (iv) no collective bargaining agreement
is binding and in force against Company or currently being negotiated
by Company; (v) Company is not delinquent in payments to any persons
for any wages, salaries, commissions, bonuses or other direct or
indirect compensation for any services performed by them or amounts
required to be reimbursed to such persons; (vi) upon termination of
the employment of any person, neither Company, Purchaser or any
subsidiary of Purchaser will, by reason of anything done at or prior
to or as of the Closing Date, be liable to any of such persons for
so-called "severance pay" or any other payments; and (vii) within the
twelve month period prior to the date hereof there has not been any
expression of intention to Company by any officer or key employee to
terminate such employment.
2.22. DEALERS AND SUPPLIERS.
Except as set forth in the Disclosure Schedule, there has not been in
the twelve month period prior to the date hereof any adverse change in
the business relationship of Company with any dealer or supplier to
Company.
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2.23. PERMITS AND OTHER OPERATING RIGHTS.
Except as set forth in the Disclosure Schedule, Company does not
require the Consent of any Authority to permit it to operate in the
manner in which it presently is being operated, and possesses all
permits and other authorizations from all Authorities presently
required necessary to permit it to operate it businesses in the manner
in which they presently are conducted.
2.24. COMPLIANCE WITH LAW.
Except as set forth in the Disclosure Schedule, and without limiting
the scope of any other representations or warranties contained in this
Agreement, but without intending to duplicate the scope of such other
representations and warranties, the assets, properties, businesses and
operations of Company are and have been in compliance with all Laws
applicable to the ownership and conduct of their assets, properties,
businesses and operations. There are no outstanding and unsatisfied
deficiency reports, plans of correction, notices of noncompliance or
work orders relating to any such Authorities, and no such discussions
with any such Authorities are scheduled or pending.
2.25. ASSETS OF BUSINESS.
The assets owned or leased by Company constitute all of the assets
held for use or used primarily in connection with its business and are
adequate to carry on such business as presently conducted and as
contemplated by Company to be conducted.
2.26. BUSINESS GENERALLY.
To Company's knowledge, except as set forth in the Disclosure
Schedule, there has been no event, transaction or information which
has come to the attention of Company which, as it relates directly to
the business of Company, could, individually or in the aggregate,
reasonably be expected to have a material adverse effect on such
business.
2.27. BROKERS.
Except as set forth in the Disclosure Schedule, neither Company nor
any of its directors, officers or employees has employed any broker,
finder, or financial advisor or incurred any liability for any
brokerage fee or commission, finder's fee or financial advisory fee,
in connection with the transactions contemplated hereby, nor is there
any basis known to Company for any such fee or commission to be
claimed by any person or entity.
2.28. SHAREHOLDERS REPRESENTATIONS.
(a) Each of the Shareholders has full legal right, power and
authority to sell, transfer, assign and deliver his or her Shares
to Purchaser at Closing and delivery of the Shares at Closing
will transfer to Purchaser valid legal and beneficial ownership
thereof free and clear of all claims, security interests, liens,
charges and encumbrances of any kind or nature whatsoever
(collectively, "Encumbrances").
(b) Each of the Shareholders, prior to execution of this Agreement,
became familiar with the material business and financial affairs
of Purchaser and its subsidiaries (if any) and was given access
to such information regarding such business and financial affairs
as the
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Shareholders deemed necessary to enable them to make an informed
investment decision with respect to the Purchaser Shares to be
issued in connection with this Agreement. In particular, the
Shareholders received the following documents and information and
had sufficient time to review and consider such documents and
information: Purchaser's most recently issued annual report to
shareholders; Purchaser's proxy statement for the most recent
annual meeting of its shareholders; Purchaser's Form 10-KSB most
recently required to be filed with the Securities and Exchange
Commission; Purchaser's Form 10-QSB's required to be filed with
the Securities and Exchange Commission for fiscal quarters ended
after the fiscal year covered by the aforesaid Form 10-KSB; a
statement by Purchaser describing the Purchaser Shares; a
statement by Purchaser that there were no material changes in the
affairs of Purchaser and its subsidiaries (if any) that were not
disclosed in the aforesaid documents and statement; a statement
by Purchaser that there are no undisclosed agreements,
arrangements or understandings which benefit or relate to the
Shareholders in connection with the transactions contemplated
hereby, and, if either of the Shareholders is not an "accredited
investor" as defined in Rule 501(a) of the rules and regulations
of the Securities and Exchange Commission under the Securities
Act of 1933 (the "Rules"), copies to such Shareholder of all
material written information which would be furnished to an
"accredited investor."
(c) Each of the Shareholders either (i) is an "accredited investor"
(as defined in Rule 501(a) of the Rules) because such Shareholder
is a director or executive officer (defined to be the president,
a vice president in charge of a principal business unit, division
or function, or any other officer or person who performs a
policy-making function) of Company or because such Shareholder
has presented to Purchaser evidence, including without limitation
a copy of such Shareholder's income tax returns for the last two
calendar years, of compliance with the requirements of
Rule 501(a)(5) or Rule 501(a)(6) of the Rules, or (ii) has
retained a "purchaser representative" as defined in Rule 501(h)
of the Rules, has furnished to Purchaser all documentation
establishing that the terms of Rule 501(h) of the Rules have been
satisfied by such Shareholder and such purchaser representative,
and has furnished to Purchaser all documentation requested by
Purchaser to establish that such Shareholder, together with such
purchaser representative, has such knowledge and experience in
financial and business matters that they are capable of
evaluating the merits and risks of the investment in the
Purchaser Shares to be issued in connection with this Agreement.
(d) Each of the Shareholders is acquiring the Purchaser Shares to be
acquired pursuant to this Agreement for his or her own account
(and such Shareholder will be the sole beneficial owner thereof)
for the purpose of investment and not with a view to distribution
thereof within the meaning of the Securities Act of 1933 and the
Rules, nor with any present intention of distribution or selling
such Purchaser Shares, and the Shareholders understand that such
shares have not been registered under the Securities Act of 1933
and therefore cannot be resold unless they are registered under
the Securities Act of 1933 or unless an exemption from
registration is available.
(e) The Shareholders have been afforded an opportunity to ask
questions and receive answers concerning the terms and conditions
of the transactions contemplated by this Agreement and to obtain
any additional information as Shareholders deem necessary to
verify the accuracy of documents and statements identified in
subsection (b) and copies of any exhibits identified in such
documents.
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<PAGE>
(f) The Shareholders have consented to the placing of the following
legend on the certificate for the Purchaser Shares to be issued
to each Shareholder in connection with this Agreement:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY BE SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED ONLY IF A
REGISTRATION STATEMENT DESCRIBING SUCH PROPOSED
TRANSACTION IS IN EFFECT PURSUANT TO THE PROVISIONS OF
THAT ACT OR IF, IN THE OPINION OF COUNSEL, WHICH
OPINION AND COUNSEL SHALL BE SATISFACTORY TO THE ISSUER
OF THESE SHARES AND ITS COUNSEL, AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THAT ACT IS AVAILABLE.
2.29. ACCURACY OF INFORMATION.
No representation or warranty by the Shareholders in this Agreement
contains or will contain any untrue statement of material fact or
omits or will omit to state any material fact necessary in order to
make the statements herein or therein, in light of the circumstances
under which they were made, not misleading as of the date of the
representation or warranty.
ARTICLE
3.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Shareholders as of the date
hereof as follows:
3.1. CORPORATE ORGANIZATION.
Purchaser is a corporation duly organized, validly existing and in
good standing under the law of the State of Nevada.
3.2. AUTHORIZATION.
Purchaser has full corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated herein. The
Board of Directors of Purchaser has taken all action required by law,
its articles or certificate of incorporation and bylaws or otherwise
to authorize the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated herein. This
Agreement is the valid and binding legal obligation of Purchaser
enforceable against it in accordance with its terms except as
enforceability may be limited by applicable Nevada law.
3.3. NON-CONTRAVENTION.
Neither the execution, delivery and performance of this Agreement nor
the consummation of the transactions contemplated herein will:
(i) violate any provision of the articles or certificates of
incorporation or bylaws of Purchaser or any subsidiary of Purchaser;
or (ii) except for such
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violations, conflicts, defaults, accelerations, terminations,
cancellations, impositions of fees or penalties, mortgages, pledges,
liens, security interests, encumbrances, restrictions and charges
which would not, individually or in the aggregate, have a material
adverse affect on the business of Purchaser and its subsidiaries taken
as a whole, (A) violate, be in conflict with, or constitute a default,
however defined (or an event which, with the giving of due notice or
lapse of time, or both, would constitute such a default), under, or
cause or permit the acceleration of the maturity of, or give rise to,
any right of termination, cancellation, imposition of fees or
penalties under, any debt, note, bond, lease, mortgage, indenture,
license, obligation, contract, commitment, franchise, permit,
instrument or other agreement or obligation to which Purchaser or any
subsidiary of Purchaser is a party or by which they or any of their
properties or assets is or may be bound (unless with respect to which
defaults or other rights, requisite waivers or consents shall have
been obtained at or prior to the Closing) or (B) result in the
creation or imposition of any mortgage, pledge, lien, security
interest, encumbrance, restriction or charge of any kind, upon any
property or assets of Purchaser or any subsidiary of Purchaser under
any debt, obligation, contract, agreement or commitment to which
Purchaser or any subsidiary of Purchaser is a party or by which
Purchaser or any subsidiary of Purchaser or any of their assets or
properties is or may be bound; or (iii) to the knowledge of Purchaser
violate any Law.
3.4. DISCLOSURE.
No representation or warranty by Purchaser in this Agreement contains
or will contain any untrue statement of material fact or omits or will
omit to state any material fact necessary in order to make the
statements herein or therein, in light of the circumstances under
which made, not misleading as of the date of the representation or
warranty.
3.5. CONSENTS AND APPROVALS.
No Consent is required by any person or entity, including without
limitation any Authority, in connection with the execution, delivery
and performance by Purchaser of this Agreement, or the consummation of
the transactions contemplated herein, other than any Consent which, if
not made or obtained, will not, individually or in the aggregate, have
a material adverse effect on the business of Purchaser and its
subsidiaries taken as a whole.
3.6. BROKERS.
Neither Purchaser nor any of its directors, officers or key employees
have employed any broker, finder or financial advisor, or incurred any
liability for any brokerage fee or commission, finder's fee or
financial advisory fee, in connection with the transactions
contemplated hereby, nor is there any basis known to Purchaser for any
such fee or commission to be claimed by any person or entity.
3.7. INFORMATION FURNISHED.
Purchaser has furnished to the Shareholders the information described
in subsection 2.28(b); none of such information contained any untrue
statements of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
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ARTICLE
4.
COVENANTS
4.1. FULL ACCESS TO PURCHASER.
The Shareholders shall cause Company to afford to Purchaser and its
directors, officers, employees, counsel, accountants, investment
advisors and other authorized representatives and agents free and full
access to the facilities, properties, books and records of Company in
order that Purchaser may have full opportunity to make such
investigations as it shall desire to make of the affairs of Company;
PROVIDED, HOWEVER, that any such investigation shall be conducted in
such a manner as not to interfere unreasonably with business
operations; and the Shareholders shall cause Company to furnish such
additional financial and operating data and other information as
Purchaser shall, from time to time, reasonably request, including
without limitation access to the working papers of their independent
certified public accountants; and, provided, further, that any such
investigation shall not affect or otherwise diminish or obviate in any
respect any of the representations and warranties of the Shareholders
herein.
4.2. CONFIDENTIALITY.
Each of the parties hereto agrees that it will not use, or permit the
use of, any of the information relating to any other party hereto
furnished to it in connection with the transactions contemplated
herein ("Information") in a manner or for a purpose detrimental to
such other party or otherwise than in connection with the transaction,
and that they will not disclose, divulge, provide or make accessible
(collectively, "Disclose"), or permit the Disclosure of, any of the
Information to any person or entity, other than their responsible
directors, officers, employees, investment advisors, accountants,
counsel and other authorized representatives and agents, except as may
be required by judicial or administrative process or, in the opinion
of such party's regular counsel, by other requirements of Law;
PROVIDED, HOWEVER, that prior to any Disclosure of any Information
permitted hereunder, the disclosing party shall first obtain the
recipients' undertaking to comply with the provisions of this
subsection with respect to such information. The term "Information"
as used herein shall not include any information relating to a party
which the party disclosing such information can show: (i) to have
been in its possession prior to its receipt from another party hereto;
(ii) to be now or to later become generally available to the public
through no fault of the disclosing party; (iii) to have been available
to the public at the time of its receipt by the disclosing party;
(iv) to have been received separately by the disclosing party in an
unrestricted manner from a person entitled to disclose such
information; or (v) to have been developed independently by the
disclosing party without regard to any information received in
connection with this transaction. Each party hereto also agrees to
promptly return to the party from whom originally received all
original and duplicate copies of written materials containing
Information should the transactions contemplated herein not occur. A
party hereto shall be deemed to have satisfied its obligations to hold
the Information confidential if it exercises the same care as it takes
with respect to its own similar information.
4.3. FURTHER ASSURANCES; COOPERATION; NOTIFICATION.
(a) Each party hereto shall, before, at and after Closing, execute
and deliver such instruments and take such other actions as the
other party or parties, as the case may be, may reasonably
require in order to carry out the intent of this Agreement.
15
<PAGE>
(b) The Shareholders shall cause Company to cooperate with Purchaser
to promptly develop plans for the management of the business
after the Closing, including without limitation plans relating to
productivity, marketing, operations and improvements, and to
further cooperate with Purchaser to provide for the
implementation of such plans as soon as practicable after the
Closing. Subject to applicable Law, the Shareholders shall cause
Company to confer on a regular and reasonable basis with one or
more representatives of Purchaser to report on material
operational matters and the general status of ongoing operations.
(c) At all times from the date hereof until the Closing, each party
shall promptly notify the other in writing of the occurrence of
any event which it reasonably believes will or may result in a
breach of this Agreement.
ARTICLE
5.
SURVIVAL AND INDEMNIFICATION
5.1. SURVIVAL.
The representations and warranties of each of the parties hereto shall
survive the Closing for a period of one year after the date of
Closing.
5.2. INDEMNIFICATION BY PURCHASER.
Purchaser agrees to indemnify the Shareholders from and against any
and all loss, liability or damage suffered or incurred by it by reason
of (i) any untrue representation of, or breach of warranty by,
Purchaser in any part of this Agreement, provided, however, that no
claim for indemnity may be made pursuant to this subsection after the
first anniversary of the Closing Date; and (ii) any nonfulfillment of
any covenant, agreement or undertaking of Purchaser in any part of
this Agreement which by its terms is to remain in effect after the
Closing and has not been specifically waived in writing at the Closing
by the party or parties hereof entitled to the benefits thereof.
5.3. INDEMNIFICATION BY THE SHAREHOLDERS--UNTRUE REPRESENTATION OR BREACH
OF WARRANTY.
Each of the Shareholders, jointly and severally, agrees to indemnify
Purchaser from and against any and all loss, liability or damage
suffered or incurred by it by reason of any untrue representation of,
or breach of warranty by the Shareholders in this Agreement, provided,
however, that no claim for indemnity may be made pursuant to this
subsection after the third anniversary of the Closing Date.
Notwithstanding anything to the contrary in this subsection, no claim
may be made under this subsection if it (or the principal facts with
respect to it) were known or reasonably should have been known and the
claim could have been asserted at a time when it would have resulted
in a required adjustment which would be reflected in the Audited
Closing Balance Sheet.
5.4. INDEMNIFICATION BY THE SHAREHOLDERS -- OTHER.
Each of the Shareholders, jointly and severally, agrees to indemnify
Purchaser from and against: (i) any and all loss, liability or damage
suffered or incurred by it by reason of any nonfulfillment
16
<PAGE>
of any covenant, agreement or undertaking of the Shareholders in this
Agreement which by its terms is to remain in effect after the Closing
and has not been specifically waived in writing at the Closing by the
party or parties hereto entitled to the benefits thereof; and (ii) any
and all costs and expenses, including without limitation legal fees
and expenses, in connection with enforcing the indemnification rights
of Purchaser pursuant to subsections 5.3 and 5.5.
5.5. BASKET AMOUNT.
Notwithstanding anything in subsections 5.3 and 5.4 to the contrary,
Purchaser shall not be entitled to any indemnification under such
subsections if the aggregate amount of all claims thereunder is less
than $10,000 (the "Exception Amount"), but if the aggregate amount of
all claims equals or exceeds the Exception Amount, then Purchaser
shall be entitled to full indemnification of all claims and there
shall be no Exception Amount. The parties hereto do not intend that
the Exception Amount be deemed to be a definition of what is
"material" for any purpose in this Agreement.
5.6. CLAIMS FOR INDEMNIFICATION.
The parties intend that all indemnification claims hereunder be made
as promptly as practicable by the party seeking indemnification (the
"Indemnified Party") and that in the case of Purchaser all such claims
be made pursuant to the terms and provisions of the Escrow Agreement
until and including the Termination Date, as defined in the Escrow
Agreement. After the Termination Date all such claims of Purchaser,
including without limitation pre-Termination Date claims which, on or
prior to the Termination Date, were admitted as valid pursuant to
Escrow Agreement procedures or are or become the subject of an
arbitration award in favor of the Indemnified Party but which are not
satisfied pursuant to the Escrow Agreement, shall be presented to the
Shareholders, and, in the case of all other claims, shall proceed
according to the remaining terms and provisions of this subsection.
Whenever any claim shall arise for indemnification hereunder (other
than a claim to be submitted pursuant to aforesaid terms and
provisions), the Indemnified Party shall promptly notify the party
from whom indemnification is sought (the "Indemnifying Party") of the
claim and, when known, the facts constituting the basis for such
claim. In the case of any such claim for indemnification hereunder
resulting from or in connection with any claim or legal proceedings of
a third party, the notice to the Indemnifying Party shall specify, if
known, the amount or an estimate of the amount of the liability
arising therefrom. The Indemnified Party shall not settle or
compromise any claim by a third party for which it is entitled to
indemnification hereunder without the prior written consent of the
Indemnifying Party, which shall not be unreasonably withheld. If the
Indemnifying Party is of the opinion that the Indemnified Party is not
entitled to indemnification, or is not entitled to indemnification in
the amount claimed in such notice, it shall deliver, within ten (10)
business days after the receipt of such notice, a written objection to
such claim and written specifications in reasonable detail of the
aspects or details objected to, and the grounds for such objection.
If the Indemnifying Party shall file timely written notice of
objection to any claim for indemnification, the validity and amount of
such claim shall be determined by arbitration pursuant to
subsection 6.12 hereof. If timely notice of objection is not
delivered or if a claim by an Indemnified Party is admitted in writing
by an Indemnifying Party or if an arbitration award is made in favor
of an Indemnified Party, the Indemnified Party, as a non-exclusive
remedy, shall have the right to set-off the amount of such claim or
award against any amount yet owed, whether due or to become due, by
the Indemnified Party or any subsidiary thereof to any
17
<PAGE>
Indemnifying Party by reason of this Agreement or any agreement or
arrangement or contract to be entered into at the Closing.
ARTICLE
6.
MISCELLANEOUS PROVISIONS
6.1. EXPENSES.
Each of the parties hereto shall bear its own costs, fees and expenses
in connection with the negotiation, preparation, execution, delivery
and performance of this Agreement and the consummation of the
transactions contemplated hereby, including without limitation fees,
commissions and expenses payable to brokers, finders, investment
bankers, consultants, exchange or transfer agents, attorneys,
accountants and other professionals, whether or not the transactions
contemplated herein is consummated; PROVIDED, HOWEVER, that Purchaser
on the one hand, and the Shareholders, on the other, shall each bear
one-half (1/2) of all fees and expenses of the Escrow Agent.
6.2. AMENDMENT AND MODIFICATION.
Subject to applicable Law, this Agreement may be amended or modified
by the parties hereto at any time prior to the Closing with respect to
any of the terms contained herein.
6.3. WAIVER OF COMPLIANCE; CONSENTS.
Any failure of a party to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by
the party entitled hereby to such compliance, but such waiver or
failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure. No single
or partial exercise of a right or remedy shall preclude any other or
further exercise thereof or of any other right or remedy hereunder.
Whenever this Agreement requires or permits the consent by or on
behalf of a party, such consent shall be given in writing in the same
manner as for waivers of compliance.
6.4. NO THIRD PARTY BENEFICIARIES.
Nothing in this Agreement shall entitle any person or entity (other
than a party hereto and his, her or its respective successors and
assigns permitted hereby) to any claim, cause of action, remedy or
right of any kind.
6.5. NOTICES.
All notices, requests, demands and other communications required or
permitted hereunder shall be made in writing and shall be deemed to
have been duly given and effective: (i) on the date of delivery, if
delivered personally; (ii) on the earlier of the fourth (4th) day
after mailing or the date of the return receipt acknowledgment, if
mailed, postage prepaid, by certified or registered mail, return
receipt requested; or (iii) on the date of transmission, if sent by
facsimile, telecopy, telegraph, telex or other similar telegraphic
communications equipment:
18
<PAGE>
If to Purchaser:
To: Trans World Gaming Corp.
One Penn Plaza, Suite 1503
New York, NY 10119
Attn: Mr. Dominick Valenzano
Fax: (212) 563-3380
With a copy to:
Oppenheimer Wolff & Donnelly
45 South Seventh Street
Suite 3400
Minneapolis, MN 55402
Attn: Thomas R. Marek, Esq.
Fax: (612) 344-9376
or to such other person or address as Purchaser shall furnish to the
other parties hereto in writing in accordance with this subsection.
If to the Shareholders:
To: Art Marketing, Ltd.
d/b/a Tottenham & Co.
3 Garfield Mews
London, SW11 5PL
United Kingdom
Attn: Mr. Andrew Tottenham
With a copy to such other person or address as the Shareholders may
furnish to Purchaser from time to time in accordance with this
subsection.
6.6. ASSIGNMENT.
This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned
(whether voluntarily, involuntarily, by operation of law or otherwise)
by any of the parties hereto without the prior written consent of the
other parties, PROVIDED, HOWEVER, that Purchaser may assign this
Agreement, in whole or in any part, and from time to time, to a
wholly-owned, direct or indirect, subsidiary of Purchaser, if
Purchaser remains bound hereby).
6.7. GOVERNING LAW.
This Agreement and the legal relations among the parties hereto shall
be governed by and construed in accordance with the internal
substantive laws of the State of New York (without regard to the laws
of conflict that might otherwise apply) as to all matters, including
without limitation matters of validity, construction, effect,
performance and remedies.
19
<PAGE>
6.8. COUNTERPARTS.
This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
6.9. HEADINGS.
The table of contents and the headings of the sections and subsections
of this Agreement are inserted for convenience only and shall not
constitute a part hereof.
6.10. ENTIRE AGREEMENT.
The Disclosure Schedule and the exhibits and other writings referred
to in this Agreement or in the Disclosure Schedule or any such exhibit
or other writing are part of this Agreement, together they embody the
entire agreement and understanding of the parties hereto in respect of
the transactions contemplated by this Agreement and together they are
referred to as "this Agreement" or the "Agreement". There are no
restrictions, promises, warranties, agreements, covenants or
undertakings, other than those expressly set forth or referred to in
this Agreement. This Agreement supersedes all prior agreements and
understandings between the parties with respect to the transaction or
transactions contemplated by this Agreement (including without
limitation the letter of intent dated November 13, 1996, between
Purchaser and Company and all amendments and extensions thereof).
Provisions of this Agreement shall be interpreted to be valid and
enforceable under applicable Law to the extent that such
interpretation does not materially alter this Agreement; provided,
however, that if any such provision shall become invalid or
unenforceable under applicable Law such provision shall be stricken to
the extent necessary and the remainder of such provisions and the
remainder of this Agreement shall continue in full force and effect.
6.11. INJUNCTIVE RELIEF.
It is expressly agreed among the parties hereto that monetary damages
would be inadequate to compensate a party hereto for any breach by any
other party of its covenants and agreements in subsections 4(c) and
4(e) hereof. Accordingly, the parties agree and acknowledge that any
such violation or threatened violation will cause irreparable injury
to the other and that, in addition to any other remedies which may be
available, such party shall be entitled to injunctive relief against
the threatened breach of subsections 4(c) and 4(e) hereof or the
continuation of any such breach without the necessity or roving actual
damages and may seek to specifically enforce the terms thereof.
6.12. ARBITRATION.
With the sole exception of the injunctive relief contemplated by
subsection 9(k), any controversy or claim arising out of or relating
to this Agreement, or the making, performance or interpretation
thereof, including without limitation alleged fraudulent inducement
thereof, shall be settled by binding arbitration in New York, New York
by a panel of three arbitrators in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. Judgment
upon any arbitration award may be entered in any court having
jurisdiction thereof and the parties consent to the jurisdiction of
the courts of the State of New York for this purpose.
20
<PAGE>
6.13. LIST OF DEFINED TERMS.
Reference is made to Exhibit 6.13 for a listing and location of terms
defined in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
TRANS WORLD GAMING CORP.
Attested by: /s/ Maureen C. Weppler By: /s/ Dominick Valenzano
---------------------- ----------------------
Dominick Valenzano
Chief Financial Officer
ANDREW TOTTENHAM
/s/ Andrew Tottenham
---------------------------
ROBIN TOTTENHAM
/s/ Robin Tottenham
---------------------------
21
<PAGE>
EXHIBIT 6.13
LIST OF DEFINED TERMS
TERM PAGE
---- ----
Acquisition Price 1
Agreement 20
Audited Closing Balance Sheet 16
Authorities 4
Authority 3
Company 1
Consent 4
Consents 4
Disclose 15
Disclosure Schedule 2
Encumbrances 11
Exception Amount 17
Final Balance Sheet 4
Indemnified Party 17
Indemnifying Party 17
Information 15
Intellectual Property Rights 6
Interim Financial Statements 4
Law 4
Laws 4
Loss Contingency 4
Notes 4
Permitted Liens 6
Purchaser 1
Purchaser Shares 1
Rules 12
Shareholders 1
Shares 1
Tax 15
Tax Return 15
Tax Returns 15
Taxes 15
Warrants 1
22
<PAGE>
WARRANT FOR PURCHASE OF SHARES OF
COMMON STOCK
OF
TRANS WORLD GAMING CORP.
January 1, 1997
For value received, Andrew Tottenham, or his registered assigns (the
"Holder"), is entitled to purchase from Trans World Gaming Corp., a Nevada
corporation (the "Company"), at any time during the five (5) year period
commencing on the date hereof and in accordance with the terms hereof, 187,500
fully paid and nonassessable shares of the Company's Common Stock, par value
$.001 per share, which Common Stock is unregistered but has certain "piggyback"
registration rights as set forth herein (such class of stock being hereinafter
referred to as the "Common Stock" and such Common Stock as may be acquired upon
exercise hereof being hereinafter referred to as the "Warrant Stock"), at the
price of $.5938 per share.
This Warrant is subject to the following provisions, terms and conditions:
1. The rights represented by this Warrant may be exercised by the Holder,
in whole or in part (but not as to a fractional share of Common Stock), by
written notice of exercise delivered to the Company accompanied by the surrender
of this Warrant (properly endorsed if required) at the principal office of the
Company and upon payment to it, by cash, certified check or bank draft, of the
warrant exercise price for such shares. The Company agrees that the Warrant
Stock so purchased shall be and is deemed to be issued as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for such Warrant Stock as aforesaid. Certificates for the shares
of Warrant Stock so purchased shall be delivered to the Holder within 15 days
after the rights represented by this Warrant shall have been so exercised, and,
unless this Warrant has expired, a new Warrant representing the number of shares
of Warrant Stock, if any, with respect to which this Warrant has not been
exercised shall also be delivered to the Holder within such time.
Notwithstanding the foregoing, however, the Company shall not be required to
deliver any certificates for shares of Warrant Stock, except in accordance with
the provisions and subject to the limitations of Section 4 below.
2. The Company covenants and agrees that all shares of Warrant Stock that
may be issued upon the exercise of this Warrant will, upon issuance, be duly
authorized and issued, fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issuance thereof. The Company further
covenants and agrees that until expiration of this Warrant, the Company will at
all times have authorized, and reserved for the purpose of issuance or transfer
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
<PAGE>
3. The foregoing provisions are, however, subject to the following:
(a) The Warrant exercise price may be subject to adjustment from time
to time as hereinafter provided. Upon each adjustment of the Warrant exercise
price, the Holder of this Warrant shall thereafter be entitled to purchase, at
the Warrant exercise price resulting from such adjustment, the number of shares
obtained by multiplying the Warrant exercise price in effect immediately prior
to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment and dividing the product thereof by the
Warrant exercise price resulting from such adjustment.
(b) In case the Company shall at any time subdivide the outstanding
Common Stock into a greater number of shares or declare a dividend payable in
Common Stock, the Warrant exercise price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding Common Stock shall be combined into a smaller number of shares, the
Warrant exercise price in effect immediately prior to such combination shall be
proportionately increased.
(c) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets ("substituted property") with
respect to or in exchange for such Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, the Holder
shall have the right to purchase and receive upon the basis and upon the terms
and conditions specified in this Warrant and in lieu of the Common Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby, such substituted property as would have been
issued or delivered to the Holder if he had exercised this Warrant and had
received upon exercise of this Warrant the Common Stock prior to such
reorganization, reclassification, consolidation, merger or sale. The Company
shall not effect any such consolidation, merger or sale, unless prior to the
consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume by written instrument executed and mailed to the Holder at
the last address of the Holder appearing on the books of the Company, the
obligation to deliver to the Holder such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the Holder may be entitled to
purchase.
(d) Upon any adjustment of the Warrant exercise price, the Company
shall give written notice thereof, by first-class mail, postage prepaid,
addressed to the Holder at the address of the Holder as shown on the books of
the Company, which notice shall state the Warrant exercise price resulting from
such adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
(e) No fractional shares of Common Stock shall be issued upon the
exercise of this Warrant, but, instead of any fraction of a share which would
otherwise be issuable, the
2
<PAGE>
Company shall pay a cash adjustment (which may be effected as a reduction of the
amount to be paid by the Holder hereof upon such exercise) in respect of such
fraction in an amount equal to the same fraction of the $.5938 price per share
(as adjusted, if applicable) of Common Stock as of the date of the written
notice of exercise required by paragraph 1 above.
4. If at any time commencing on the date hereof and ending on the seventh
anniversary hereof the Company shall determine to proceed with the actual
preparation and filing of a registration statement under the Securities Act of
1933 (the "Act") which (x) covers only shares of Common Stock to be sold by
shareholders of the Company and does not include any shares to be sold by the
Company, and (y) is not distributed by or through an underwriter, the Company
will send to the Holder of this Warrant or of Warrant Stock written notice of
such determination and shall use its best efforts to effect the registration
under the Act, if such registration is permissible, of such shares of Warrant
Stock as may be specified by written notice from the Holder delivered to the
Company within 15 days after such notice is given (which notice shall be deemed
to have been given upon the deposit thereof in first-class U.S. mail, postage
pre-paid, addressed to the Holder at the address of the Holder as shown on the
books of the Company); provided, however that: (i) the Company shall not be
required to include any such shares of Warrant Stock in any such registration
for any Holder who is able to sell the Warrant Stock owned by such Holder during
a three-month period beginning on the date such notice is received by such
holder, pursuant to Rule 144 under the Securities Act of 1933 (or any similar
rule or regulation); (ii) the Company shall not be required to give such notice
with respect to, or to include such Warrant Stock in, any such registration
where any holder or holders of its securities whose securities will be covered
by the registration statement have contractual rights to exclude any other
shareholder of the Company from participating as a selling shareholder in the
offering covered by the registration statement; (iii) the Company shall not be
required to include in any such registration any shares of Common Stock
previously duly registered under the Act; and (iv) the Company may, in its sole
discretion, withdraw any such registration statement and abandon the proposed
offering in which such Holder had requested to participate. The Holder shall
only be entitled to notice of and participate in one registration statement
pursuant to this Section 4. The costs and expenses of such offering, including
but not limited to legal fees, special audit fees, printing expenses, filing
fees, fees and expenses relating to qualifications under state securities or
blue sky laws and the premiums for insurance, if any, incurred by the Company in
connection with any registration made pursuant to this Section 4 shall be borne
entirely by the Company; provided, however, that any Holders participating in
such registration shall bear the fees and expenses of their own counsel or
accountants in connection with any such registration. Upon the exercise of
registration rights pursuant to this Section 4, the Holder agrees to supply the
Company with such information as may be required by the Company to register or
qualify such shares of Common Stock as is set forth in this Section 4.
5. This Warrant shall not entitle the Holder to any voting rights or
other rights as a shareholder of the Company.
6. The Holder, by acceptance hereof, represents and warrants that (a) he
is acquiring this Warrant for his own account for investment purposes only and
not with a view to its resale or distribution and (b) he has no present
intention to resell or otherwise dispose of all or any part of this Warrant.
Other than pursuant to registration under federal and state securities laws or
an
3
<PAGE>
exemption from such registration, the availability of which the Company shall
determine in its sole discretion, and subject to this Section 6, (y) the Company
will not accept the exercise of this Warrant or issue certificates for shares of
Warrant Stock and (z) neither this Warrant nor any shares of Warrant Stock may
be sold, pledged, assigned or otherwise disposed of (whether voluntarily or
involuntarily). The Company may condition such issuance or sale, pledge,
assignment or other disposition on the receipt from the party to whom this
Warrant is to be so transferred or to whom Warrant Stock is to be issued or so
transferred of any representations and agreements requested by the Company in
order to permit such issuance or transfer to be made pursuant to exemptions from
registration under federal and applicable state securities laws. Each
certificate representing the Warrant (or any part thereof) and any shares of
Warrant Stock shall be stamped with appropriate legends setting forth these
restrictions on transferability. The Holder, by acceptance hereof, agrees to
give written notice to the Company before exercising or transferring this
Warrant or transferring any shares of Warrant Stock of the Holder's intention to
do so, describing briefly the manner of any proposed exercise or transfer.
Within thirty (30) days after receiving such written notice, the Company shall
notify the Holder as to whether such exercise or transfer may be effected.
7. This Warrant shall be transferable only on the books of the Company by
the Holder in person, or by duly authorized attorney, on surrender of the
Warrant, properly assigned.
8. Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated orally but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer and to be dated as of the date set forth above.
TRANS WORLD GAMING CORP.
By: /s/ Dominick Valenzano
-------------------------
Dominick Valenzano
Chief Financial Officer
RESTRICTION ON TRANSFER
THIS WARRANT OR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF MAY NOT
BE RESOLD OR TRANSFERRED UNLESS SUCH RESALE OR TRANSFER IS EXEMPTED FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND ANY APPLICABLE STATE SECURITIES LAWS ("LAWS"), AND THE
COMPANY RECEIVES, PRIOR TO RESALE OR TRANSFER, WRITTEN REPRESENTATIONS OF THE
HOLDER AND PROPOSED TRANSFEREE SATISFACTORY TO THE COMPANY REGARDING SUCH
TRANSFER OR, AT THE ELECTION OF THE COMPANY, AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT THE PROPOSED TRANSFER OF THIS
WARRANT OR OF SUCH SHARES MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OR QUALIFICATION
4
<PAGE>
UNDER THE LAWS, OR THE RESALE OR TRANSFER OF THIS WARRANT OR OF SUCH SHARES IS
REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE LAWS.
5
<PAGE>
NON-NEGOTIABLE
PROMISSORY NOTE
---------------
$150,000.00 January 1, 1997
New York, New York
FOR VALUE RECEIVED, the undersigned, TRANS WORLD GAMING CORP. ("Maker"),
agrees and promises to pay to the order of ANDREW TOTTENHAM ("Holder") at 3
Garfield Mews, London SW11 5PL, United Kingdom, or at such place as Holder may
from time to time hereafter designate in writing, the sum of One Hundred Fifty
Thousand and No/100 Dollars ($150,000.00), with interest at the rate of 10% per
annum payable on January 1, 2002.
At the option of Holder, interest may be payable in cash on July 1 and
January 1 of each year or added to principal in the event that Holder determines
to exercise the right of conversion as provided below. Holder shall provide
written notice at least 30 days prior to each such interest due date if he
elects to make such interest payment.
Beginning January 1, 1998, at the option of Holder, this Note shall be
convertible into shares of common stock of Maker, par value $.001 per share, at
a conversion price of $1.00 per share. Such convertibility feature will vest at
a rate of 20% per year for each year after the date of this Note; provided,
however, that if Maker completes a registered public offering of its common
stock during the term of this Note, this Note shall immediately become 100%
vested and fully convertible. To determine the number of shares issuable as
Holder's interest in the convertibility feature of this Note vests over time,
the principal amount plus any accrued interest to date to be converted will be
divided by the conversion price in effect on the conversion date. Upon
conversion, no payment or adjustment for interest will be made. Maker will
deliver a check to Holder for any fractional share. To convert this Note into
shares of Maker's $.001 par value common stock, Holder must (1) complete and
sign a conversion notice substantially in the form attached hereto, (2)
surrender this Note to Maker, and (3) pay any transfer or similar tax if
required. Upon surrender of this Note (or any Subsequent Note, as hereinafter
defined) by Holder to Maker in connection with the exercise of Holder's
conversion rights hereunder, Maker shall execute and deliver a replacement note
(a "Subsequent Note") setting forth the new principal amount, if any,
outstanding after such conversion.
Maker shall have no privilege to prepay this Note, in full or in part, at
any time.
The undersigned severally waives presentment for payment, notice of
nonpayment and of protest, and agrees to any extension of time of payment and
partial payments before, at or after maturity, and if this Note or interest
thereon is not paid when due or suit is brought, agrees to pay all reasonable
costs of collection, including attorneys' fees, and also waives all exemptions
in case suit is filed.
This Note shall be governed by, and construed in accordance with the laws
of the State of New York. The parties irrevocably submit to the exclusive
jurisdiction of any state or federal court located in New York County, New York.
TRANS WORLD GAMING CORP.
By: /s/ Dominick J. Valenzano
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Name: Dominick J. Valenzano
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Title: Chief Financial Officer
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