EXHIBIT 10.53
STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT is entered into as of the 9th day of April, 1998
by and between MIKOHN GAMING CORPORATION ("MIKOHN"), a Nevada corporation, and
PROGRESSIVE GAMES, INC. ("PGI"), a Delaware corporation, and XXXXXX X. XXXXX
("XXXXX").
W I T N E S S E T H:
WHEREAS, XXXXX is the legal and beneficial owner of all of the stock in PGI (the
"PGI Shares"); and
WHEREAS, PGI is engaged in the business of designing, developing, fabricating,
manufacturing, selling, leasing, installing, maintaining and servicing various
proprietary live table games and related products and equipment (the
"Business"); and
WHEREAS, PGI and/or XXXXX is the legal and beneficial owner of all of the
Stock in two affiliated corporations being Progressive Games - Australia Pty.
Limited (Australian Company Number 061 162 847), an Australian corporation, and
Progressive Games de Argentina SA, an Argentine corporation (collectively the
"PGI Affiliates"); and
WHEREAS, PGI owns tangible and intangible assets used in the Business which
include, without limitation, leases, equipment and equipment leases, contracts,
permits, licenses, franchises, approvals and authorizations by governmental or
regulatory authorities or bodies, work in process, inventory, supplies, tools,
accounts receivable (including receivables from Casino Technology, Inc. ("CTI")
in respect to that certain Exclusive Irrevocable License Respecting Caribbean
Stud Video Games dated August 2, 1995 between CTI and PGI and all of PGI's
right, title and interest to any claims associated therewith, as well as all of
PGI's rights to other past and future payments and claims under such License
(the "CTI Receivable")), bank accounts, notes receivable (including the
following Promissory Notes: Note dated February 29, 1996 from Xxxx Xxxxxx in the
principal amount of $26,989.07, Note dated January 6, 1996 from Xxxxx Xxxxxxx in
the principal amount of $44,747.24, Note dated January 12, 1997 from Xxxxx Xxxxx
in the principal amount of $10,764.27, and Note dated September 15, 1997 from
August X. Xxxxxxxxx in the principal amount of $31,000 (collectively the
"Employee Notes")), prepaid expenses and deferred expenses, telephone equipment
and telephone numbers, computer hardware, software and firmware, computer tapes,
disks and codes, trademarks, service marks, trade names, patents and/or patent
applications and/or technology, ideas, designs, concepts, inventions and
processes which may or may not be patentable, copyrights, licenses, trade
secrets, know how, formulae, test information, market surveys, customer lists,
supplier lists, claims and rights against third parties, set-offs and credits,
manufacturing processes, business and marketing plans, good will, and
accounting, financial and business
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records, and shares in other corporations (collectively the "PGI Assets") all as
reflected in the audited financial statements for the year ending December 31,
1997 attached as Exhibit A and the unaudited financial statements for the two
months ending February 28, 1998 attached as Exhibit B (collectively the
"Financial Statements"); and
WHEREAS, MIKOHN is engaged in the business of designing, developing,
fabricating and manufacturing, marketing, distributing, selling, installing and
servicing progressive jackpot systems, associated gaming equipment, gaming
devices, associated gaming equipment and gaming displays and signage; and
WHEREAS, XXXXX is desirous of selling and MIKOHN is desirous of purchasing the
PGI Shares on the terms set forth below.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and conditions set
forth herein and other good and valuable consideration, the sufficiency and
adequacy of which is hereby acknowledged by all parties, it is agreed as
follows:
1 PURCHASE. MIKOHN agrees to purchase and XXXXX agrees to sell the PGI
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Shares on the specific terms and conditions set forth below.
2 PURCHASE PRICE. The purchase price ("Purchase Price") for the PGI Shares
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shall be as set forth in Section 4.5.1.
3 XXXXXXX MONEY DEPOSIT. Six (6) business days after the execution of this
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Agreement, MIKOHN shall pay to the law firm of Cooper, Perskie, April,
Neidelman, Xxxxxxxxx & Xxxxxxxx ("Escrow Holder") a good xxxxx xxxxxxx money
deposit of $1 million (the "Xxxxxxx Money Deposit"). The Escrow Holder shall be
instructed to place the Xxxxxxx Money Deposit into an interest bearing account
with an institution acceptable to MIKOHN and XXXXX. The Xxxxxxx Money Deposit
and all accrued interest thereon shall be credited to the Purchase Price and
paid to XXXXX at the Closing (defined below). In the event the transactions
contemplated by this Agreement do not close on the Closing Date (as defined
below) by reason of the failure of any of the conditions specified in Section 6
(the "Section 6 Conditions"), the Xxxxxxx Money Deposit and all accrued interest
thereon shall be paid to MIKOHN. In the event the transactions contemplated by
this Agreement do not close for any reason other than a failure of the Section 6
Conditions, and provided further that such reason is not the result of any
negligent or intentional act or omission on the part of PGI or XXXXX, or if this
Agreement is terminated pursuant to Section 33.2.2, 33.2.3, 33.2.4 or 33.2.5,
the Xxxxxxx Money Deposit and all accrued interest thereon shall be paid to
XXXXX. Except in the case of a distribution described in the immediately
preceding sentence, all interest earned on the Xxxxxxx Money Deposit shall be
treated as interest income of MIKOHN for federal and state income tax purposes.
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The terms of this Section 3 shall be set forth in an escrow agreement mutually
acceptable to MIKOHN and XXXXX.
4 CLOSING.
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4.1 TIME AND PLACE. The purchase and sale of the PGI Shares hereunder
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(the "Closing") shall occur at the offices of PGI within five (5) business days
after all of the third party consents described in Section 6.12 have been
obtained and the financing described in Section 6.13 has closed, but not later
than August 31, 1998, or at such other time and date allowed under Section 4.3
below or agreed to in a writing signed by MIKOHN and XXXXX (the "Closing Date").
4.2 HIGHLY CONFIDENT LETTER. On or before April 30, 1998, MIKOHN will
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provide XXXXX with a letter from Canadian Imperial Bank Corporation ("CIBC")
stating that CIBC is "highly confident" that it can raise the financing
necessary to consummate the transactions contemplated by this Agreement ("Highly
Confident Letter").
4.3 EXTENSION OF CLOSING DATE. If the Closing has not occurred by August
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31, 1998 because MIKOHN has not secured financing pursuant to Section 6.13 and
MIKOHN has otherwise satisfied all of the conditions precedent in Xxxxxxx 0,
XXXXXX shall have the right to extend the Closing Date for an additional thirty
(30) days provided: [1] that MIKOHN gives XXXXX reasonably satisfactory evidence
that the financing required under Section 6.13 is imminent and [2] MIKOHN
delivers to XXXXX a new CIBC Highly Confident Letter.
4.4 DELIVERIES OF XXXXX. At the Closing, XXXXX shall execute and deliver
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or cause to be executed and delivered to MIKOHN:
4.4.1 STOCK CERTIFICATES. Certificates representing the PGI Shares,
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endorsed over to MIKOHN or accompanied by duly executed stock powers;
4.4.2 CORPORATE DOCUMENTS. The Certificate of Incorporation of PGI
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including all amendments thereto, certified by the Secretary of State of
Delaware as of a recent date, and the Bylaws of PGI, certified by the Secretary
of PGI, as in effect at the Closing;
4.4.3 CERTIFICATES OF GOOD STANDING. Certificates of Good Standing,
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dated as of a recent date, with respect to PGI, issued by the Secretary of State
of each of the States listed in Schedule 4.4.3 hereto;
4.4.4 RESOLUTION. A copy of the resolution of the Board of Directors
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of PGI, certified by the Secretary of PGI
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as having been duly and validly adopted and being in full force and effect,
authorizing execution and delivery of this Agreement and performance of the
transactions contemplated hereby by PGI;
4.4.5 BOOKS AND RECORDS. All of the minute books, stock ledgers and
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similar corporate records of PGI and the PGI Affiliates;
4.4.6 LIEN SEARCHES. Such Uniform Commercial Code lien searches,
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releases and such other instruments showing that there were no material
financing statements, judgments, tax or other material liens outstanding against
PGI or any of the PGI Assets as of the Closing Date or a date that is not more
than thirty (30) days prior to the Closing Date (except for liens listed on
Schedule 4.4.6 hereto, which liens shall be released at or prior to the Closing
unless otherwise noted on such Schedule);
4.4.7 CONSENTS. Evidence reasonably satisfactory to MIKOHN that all
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material consents, approvals or authorizations of or notifications to any third
parties required to be obtained by XXXXX or PGI in order for XXXXX to sell and
transfer the PGI Shares and to consummate the transactions contemplated hereby
have been obtained by XXXXX or PGI; provided, that, with respect to licensing
consents, approvals or authorizations, evidence that PGI will be permitted to
conduct the Business in the jurisdiction following the Closing shall constitute
a satisfactory consent, approval or authorization;
4.4.8 RESIGNATIONS. Resignations from each member of the Board of
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Directors of PGI and from such other officers of PGI and other persons set forth
in Schedule 6.9. Such resignations shall be effective as of the Closing Date and
shall include or be accompanied by termination and release agreements, in form
and substance reasonably satisfactory to MIKOHN and its counsel, effective to
release MIKOHN and its stockholders and representatives from all claims or
liabilities they may have arising from or related to their employment with or
service to PGI or termination thereof except for claims or liabilities arising
under this Agreement and except for post-termination obligations and benefits.
4.4.9 TERMINATION OF EMPLOYMENT AGREEMENTS. Evidence of the
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termination of those employment agreements, if any, listed in Schedule 4.4.9;
4.4.10 OPINION OF COUNSEL. An opinion of counsel for XXXXX and PGI
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substantially in the form of Exhibit C attached hereto;
4.4.11 OFFICER'S CERTIFICATE. A certificate from XXXXX, dated the
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Closing Date, containing the information required pursuant to Section 6.4 and
Section 6.7; and
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4.4.12 OTHER DOCUMENTS. Such other documents and instruments as
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MIKOHN or its counsel reasonably shall deem necessary to consummate the
transactions contemplated hereby.
All documents delivered to MIKOHN shall be in a form and substance
reasonably satisfactory to MIKOHN.
4.5 DELIVERIES OF MIKOHN. At the Closing, MIKOHN will execute and deliver
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or cause to be executed and delivered to XXXXX simultaneously with delivery of
the items referred to in Section 4.4 above:
4.5.1 CASH CONSIDERATION: The Purchase Price in cash in the amount
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of $35.135 million plus $45,000 per month or portion thereof prorated through
the Closing Date adjusted by the following:
4.5.1.1 less the principal amount of PGI's long term debt to
First Union National Bank and any other lender (the "Long Term Debt") as of the
Closing Date;
4.5.1.2 plus an amount equal to PGI's cash balances on the
Closing Date;
4.5.1.3 less an amount equal to any accounts payable of PGI on
the Closing Date (calculated consistently with those reflected on the Financial
Statements) in excess of $500,000;
4.5.1.4 less an amount equal to reduction in shareholder
equity as of the Closing Date from that which is warranted in Section 11.4; and
4.5.1.5 less an amount equal to the unpaid principal balance
and accrued interest outstanding on the Employee Notes; and
4.5.1.6 plus an amount equal to the royalties and any other
amounts (excluding amounts paid pursuant to Section 4.5.1) due to PGI from
MIKOHN that are accrued and unpaid as of the Closing Date.
The parties shall endeavor to make the adjustments contemplated by Sections
4.5.1.1, 4.5.1.2, 4.5.1.3 and 4.5.1.4 as of the Closing Date and reflect such
adjusted amount in the amount paid XXXXX at Closing. At Closing, MIKOHN shall
deposit $1 million of the Purchase Price into an escrow account with the Escrow
Holder and pursuant to an escrow agreement mutually satisfactory to XXXXX and
MIKOHN. Within thirty (30) days after the Closing, Rosenfarb and Company shall
deliver to the parties a report stating whether the adjustments made under
Sections 4.5.1.1, 4.5.1.2, 4.5.1.3 and 4.5.1.4 are correct and whether any
further adjustments are
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necessary. If either party disputes any such further adjustments, (i) such party
shall deliver written notice to the other party, the escrow agent and to
Rosenfarb and Company within ten (10) days specifying the disputed adjustment
and disputed amount, (ii) the escrow agent shall pay any undisputed adjustments
in favor of MIKOHN to MIKOHN and the balance, together with interest thereon but
less the disputed portion, to XXXXX, and (iii) the parties shall seek to resolve
such dispute. If no notice is given, the escrow agent shall,within three (3)
days, pay any adjustments in favor of MIKOHN to MIKOHN and the balance, together
with interest thereon, to XXXXX. Any such dispute between the parties shall be
resolved by a single arbitrator who is a certified public accountant based in
Dade County, Florida mutually acceptable to the parties. The non-prevailing
party shall bear all of the arbitrator's fee and expenses. The escrow agent
shall pay the disputed balance, together with interest thereon, in accordance
with the arbitrator's order, which shall be final and binding on the parties.
4.5.2 RESOLUTION. A copy of the resolution of the Board of Directors
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of MIKOHN, certified by the Secretary of MIKOHN as having been duly and validly
adopted and being in full force and effect, authorizing execution and delivery
of this Agreement and performance of the transactions contemplated hereby by
MIKOHN;
4.5.3 CONSENTS. Evidence reasonably satisfactory to XXXXX that all
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material consents, approvals or authorizations of or notifications to any third
parties required to be obtained by MIKOHN in order to consummate the
transactions contemplated hereby have been obtained by MIKOHN;
4.5.4 OPINION OF COUNSEL. An opinion of Counsel for MIKOHN
substantially in the form of Exhibit D attached hereto; and
4.5.5 OTHER DOCUMENTS. Such other documents and instruments as XXXXX
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or its counsel reasonably shall deem necessary to consummate the transactions
contemplated hereby.
All documents delivered to XXXXX shall be in form and substance reasonably
satisfactory to XXXXX.
5 OBLIGATIONS OF PARTIES. At the Closing:
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5.1 By instruments in form satisfactory to MIKOHN, XXXXX shall xxxxx,
sell, transfer, assign, convey and deliver all of the PGI Shares to MIKOHN free
and clear of all pledges, liens and encumbrances of every nature.
5.2 MIKOHN shall cause XXXXX and all other guarantors, if any, to be
released from their personal guarantees of the First Union National Bank loan.
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5.3 By instruments in form satisfactory to XXXXX, PGI shall assign to
XXXXX all of PGI's rights, title and interest to the CTI Receivable, the
Employee Notes and the Gaming Tables referenced in Section 11.5.4.
6 CONDITIONS PRECEDENT TO OBLIGATION OF MIKOHN. The obligation of MIKOHN to
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consummate the transactions contemplated by this Agreement is subject to the
satisfaction, at or before the Closing, of all the following conditions, unless
waived in writing by MIKOHN.
6.1 CERTIFICATES FOR SHARES. MIKOHN shall have received certificates for
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the PGI Shares, which shall constitute all of the issued and outstanding capital
stock of PGI.
6.2 REPRESENTATIONS AND WARRANTIES TRUE. All representations and
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warranties of XXXXX in this Agreement or Schedules and Exhibits hereto, or in
any written statement or certificate required by this Agreement to be delivered
to MIKOHN by XXXXX and PGI, shall be true and correct in all material respects
on and as of the Closing Date.
6.3 COVENANTS PERFORMED. XXXXX shall have performed, satisfied, and
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complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by XXXXX on or before the Closing
Date.
6.4 CERTIFICATE. MIKOHN shall have received from XXXXX a certificate,
dated the Closing Date, certifying, in such detail as MIKOHN and its counsel may
reasonably request, that the conditions specified in this Section 6 (other than
Section 6.13) have been satisfied.
6.5 OPINION OF COUNSEL. MIKOHN shall have received an opinion from
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counsel for XXXXX and PGI, dated the Closing Date, substantially in the form
attached hereto as Exhibit C.
6.6 NO VIOLATIONS; NO ACTIONS. Consummation of the transactions
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contemplated by this Agreement shall not violate any order, decree or judgment
of any court or governmental body having competent jurisdiction and no action or
proceeding shall have been instituted or threatened by any person, entity or
governmental agency in connection with consummation of the transactions
contemplated by this Agreement which, in any such case, in the reasonable
judgment of MIKOHN, has a reasonable probability of resulting in [1] the
obtaining of material damages from MIKOHN or PGI; or [2] an order, judgment or
decree restraining, prohibiting or rendering unlawful the consummation of the
transactions contemplated by this Agreement.
6.7 NO MATERIAL ADVERSE EFFECT. During the period from February 28, 1998
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to the Closing, there shall not have been any
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material adverse change in the Business or the PGI Assets or the liabilities,
obligations, prospects, financial condition or results of operations of PGI from
that disclosed in this Agreement and the Exhibits and Schedules hereto (a "PGI
Material Adverse Effect"), and MIKOHN shall have received a certificate from
XXXXX dated the Closing Date to the foregoing effect.
6.8 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
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connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be in form and substance
reasonably satisfactory to MIKOHN and its counsel, and MIKOHN shall have
received all such counterpart originals or certified or other copies of such
documents as it may reasonably request.
6.9 RESIGNATIONS. The directors, officers and certain management
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personnel of PGI whose names appear on Schedule 6.9 hereto, shall have submitted
their resignations in writing to PGI.
6.10 DELIVERY OF DOCUMENTS. MIKOHN shall have received all documents and
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other items to be delivered by XXXXX under this Agreement.
6.11 SCHEDULES. XXXXX and PGI shall have completed and attached thereto
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all Schedules required by this Agreement, and all such Schedules shall have been
reasonably acceptable to MIKOHN. Failure of MIKOHN to object within five (5)
business days of delivery of a Schedule to MIKOHN shall mean that such Schedule
is deemed acceptable to MIKOHN. If XXXXX and PGI have provided a Schedule
pursuant to this Section 6.11, they may revise the Schedule to reflect changes
occurring subsequent to MIKOHN's acceptance of the Schedule and prior to
Closing.
6.12 REQUIRED CONSENTS AND APPROVALS. The waiting period under the Xxxx-
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Xxxxx-Xxxxxx Antitrust Improvements Act, if applicable, shall have expired and
all other consents, approvals and authorizations required by Section 4.4.7 shall
have been obtained.
6.13 FINANCING. MIKOHN shall have arranged for financing on terms and
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conditions reasonably satisfactory to MIKOHN which is sufficient to consummate
the transactions contemplated hereby.
6.14 SHARES IN PGI AFFILIATES. XXXXX shall have caused the transfer of the
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stock of the PGI Affiliates to PGI and shall have provided satisfactory evidence
of such transfer to MIKOHN; provided, however, where required by applicable law,
a minority of shares in the PGI Affiliates may be held by a resident national
nominee of the country in which the PGI Affiliate is incorporated so long as [1]
the percentage ownership in the Affiliate represented by shares so held is the
minimum required by
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law and [2] PGI has the right and power to designate a substitute resident
national nominee to hold such shares for a nominal fee.
7 CONDITIONS PRECEDENT TO OBLIGATION OF XXXXX. The obligation of XXXXX to
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consummate the transactions contemplated by this Agreement is subject to the
satisfaction, at or before the Closing, of all the following conditions, unless
waived in writing by XXXXX.
7.1 REPRESENTATIONS AND WARRANTIES TRUE. All representations and
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warranties of MIKOHN in this Agreement, or in any written statement or
certificate required by this Agreement to be delivered to XXXXX by MIKOHN, shall
be true and correct in all material respects on and as of the Closing Date.
7.2 COVENANTS PERFORMED. MIKOHN shall have performed, satisfied, and
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complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by MIKOHN on or before the Closing
Date.
7.3 CERTIFICATE. XXXXX shall have received from MIKOHN a certificate,
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dated the Closing Date, certifying, in such detail as XXXXX and its counsel may
reasonably request, that the conditions specified in this Section 7 have been
satisfied.
7.4 OPINION OF COUNSEL. XXXXX shall have received an opinion from counsel
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for MIKOHN, dated the Closing Date, substantially in the form attached hereto as
Exhibit D.
7.5 NO VIOLATIONS; NO ACTIONS. Consummation of the transactions
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contemplated by this Agreement shall not violate any order, decree or judgment
of any court or governmental body having competent jurisdiction and no action or
proceeding shall have been instituted or threatened by any person, entity or
governmental agency in connection with consummation of the transactions
contemplated by this Agreement which, in any such case, in the reasonable
judgment of XXXXX, has a reasonable probability of resulting in [1] the
obtaining of material damages from XXXXX; or [2] an order, judgment or decree
restraining, prohibiting or rendering unlawful the consummation of the
transactions contemplated by this Agreement.
7.6 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
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connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be in form and substance
reasonably satisfactory to XXXXX and its counsel, and XXXXX shall have received
all such counterpart originals or certified or other copies of such documents as
he may reasonably request.
7.7 DELIVERY OF DOCUMENTS. XXXXX shall have received all documents and
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other items to be delivered by MIKOHN
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under this Agreement.
7.8 REQUIRED CONSENTS AND APPROVALS. The waiting period under the Xxxx-
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Xxxxx-Xxxxxx Antitrust Improvements Act, if applicable, shall have expired and
all other consents, approvals and authorizations required by Section 4.5.3 shall
have been obtained.
8 ADDITIONAL AGREEMENTS. The parties agree to execute any additional
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instruments or agreements necessary to effectuate the intent of this Agreement.
9 RIGHT OF INSPECTION.
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9.1 XXXXX shall cause PGI to give MIKOHN and its accountants, legal
counsel and other representatives full access, during normal business hours
throughout the period prior to the Closing, to all of the properties, books,
contracts, commitments and records relating to the business, assets and
liabilities of PGI, and will furnish MIKOHN, its accountants, legal counsel and
other representatives during such period all such information concerning its
affairs as MIKOHN may reasonably request; provided, that any furnishing of such
information pursuant hereto or any investigation by MIKOHN shall not affect
MIKOHN's right to rely on the representations, warranties and covenants made by
XXXXX in this Agreement. MIKOHN will hold in confidence all information so
obtained and will use such information only for purposes related to the
transactions contemplated hereby. MIKOHN further agrees that it will not
disclose or use, and will direct its advisors and representatives and financing
sources not to disclose or use, any such information to any third party except
upon the prior written consent of XXXXX, or except as required by law or except
to its advisors, representatives and financing sources who reasonably need to
know such information for purposes of evaluating the transactions contemplated
by this Agreement. If the transactions contemplated hereby are not consummated,
MIKOHN will return all data to XXXXX and continue to honor the foregoing
confidentiality and non-disclosure covenants for a period of four (4) years.
Such obligation of confidentiality shall not extend to any information [1] that
was previously known to MIKOHN prior to the start of discussions leading to the
execution of this Agreement; [2] obtained by MIKOHN in good faith from third
parties who are not obligated to maintain the information confidential; or [3]
that is or shall be public knowledge through no act or omission of MIKOHN or any
of its directors, officers, employees or representatives in violation of this
Agreement.
9.2 From the date hereof to the Closing Date, PGI will provide MIKOHN with
monthly financial statements (income statement and balance sheet and statement
of cash flow) on or before the 15th of each month for the previous month.
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10 ASSIGNABILITY. This Agreement is not assignable by any party without the
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written consent of all of the parties.
11 REPRESENTATIONS AND WARRANTIES OF PGI AND XXXXX. Effective on the date
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hereof and at the Closing, XXXXX hereby represents and warrants to MIKOHN as
follows. Reference herein to the "knowledge" of XXXXX, to matters "known" to
XXXXX and similar references shall mean matters actually known to XXXXX as well
as matters which, after reasonable inquiry, XXXXX would have reason to know.
11.1 ORGANIZATION. PGI is duly organized and validly existing and in good
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standing under the laws of the state of Delaware. PGI is duly qualified to do
business and is in good standing in those states or other jurisdictions where it
owns or leases real property or otherwise where qualification is required in
connection with the conduct of the Business (all as set forth in Schedule 4.4.3
hereto) except where failure to be so qualified would not have a PGI Material
Adverse Effect.
11.2 AUTHORITY, BINDING EFFECT. XXXXX has all requisite power and
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authority to execute, deliver and perform this Agreement, and the other
instruments and documents required or contemplated herein. Such execution,
delivery and performance have been duly authorized by all necessary action and,
except as set forth in Schedule 11.2, do not and will not result in a breach of,
or entitle any party (with due notice or lapse of time or both) to terminate,
accelerate or call a default with respect to, or result in the creation or
imposition of any lien, charge, encumbrance or claim of any nature whatsoever
upon PGI or any of the PGI Assets pursuant to any agreement or instrument to
which PGI is a party or by which PGI or any of the PGI Assets are bound. To
XXXXX' knowledge, the execution, delivery and performance of this Agreement will
not result in any violation by XXXXX of any law, rule or regulation applicable
to XXXXX, the PGI Assets, or the Business. XXXXX is not a party to, or subject
to or bound by, any judgment, injunction or decree of any court or governmental
authority which restricts or interferes with the performance of this Agreement.
This Agreement is a valid and binding obligation of XXXXX and is enforceable
against XXXXX in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
moratorium or other similar laws now or hereafter in effect relating to or
affecting the rights of creditors generally and general equitable principles
regardless of whether enforcement is considered in proceedings at law or in
equity.
11.3 FINANCIAL INFORMATION; ABSENCE OF MATERIAL ADVERSE CHANGES. XXXXX
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has delivered to MIKOHN the Financial Statements consisting of balance sheets,
income statements and statements of cash flows for the twelve months ended as of
December 31, 1997 and the two months ended as of February 28, 1998. The
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Financial Statements, with the notes thereto, are in accordance with the books
and records of PGI, are correct and complete and present fairly in all material
respects the financial position, results of operations and changes in financial
condition of PGI and the Business as of the dates and for the periods indicated,
in conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods specified and in accordance with past
practice. To XXXXX' knowledge, the books and accounts for the periods contained
in the Financial Statements are complete and correct in all material respects,
do not contain any information which is materially false or misleading and
fully, accurately and fairly reflect the financial condition and transactions of
the Business. The statements of income for the periods contained in the
Financial Statements do not contain or reflect any items of special non-
recurring income or expense, except as expressly specified therein, and the
balance sheets do not reflect any write-up or revaluation increasing the book
value of any PGI Asset except as required by generally accepted accounting
principles and disclosed in the Financial Statements and notes thereto. Except
as set forth in the Schedules attached hereto, there is no material liability or
obligation, fixed or contingent, including, without limitation, any unfunded
obligation under any pension plan, relating to the Business that is not
reflected or reserved against in the Financial Statements or otherwise disclosed
in the notes thereto, other than liabilities incurred in the ordinary course of
business after the date thereof which in the aggregate do not have a PGI
Material Adverse Effect.
11.3.1 Since February 28, 1998, there has been no PGI Material
Adverse Effect.
11.3.2 Except as set forth in the Schedules, XXXXX has no knowledge
of any present condition or contingency (other than matters of public knowledge
or which are generally applicable to the industries in which the Business is
conducted) which XXXXX reasonably expects will have a PGI Material Adverse
Effect.
11.3.3 Since February 28, 1998 and except as set forth in the
Schedules hereto or as contemplated by this Agreement: [1] XXXXX has engaged in
no material transactions involving the transfer of any assets to or from PGI,
except transactions in the ordinary course of business on terms no less
favorable than could have been obtained in transactions with unaffiliated third
parties; [2] there have been no employment contracts or compensation
arrangements entered into by PGI with, and no increase in the compensation
payable to directors, officers, employees or agents of PGI except as set forth
on Schedule 11.3.3 attached hereto; [3] PGI has not made or agreed to, and there
has not become effective, any approval, adoption, modification or amendment of
any pension, retirement or other benefit plan or arrangement, relating to the
Business; [4] other than commitments
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incurred in the ordinary course of business, there have been no material
commitments for capital expenditures relating to the Business; [5] there have
been no material contracts, obligations or commitments relating to the Business
undertaken or amended and no material liabilities or indebtedness relating to
the Business incurred or guaranteed; [6] PGI has not created any material lien
upon, granted any security interest in or otherwise encumbered, any of the PGI
Assets; [7] there has been no write-up, write-down or write-off of any PGI
Asset; [8] PGI has not waived any rights or released any claims material to the
Business; [9] there has occurred no split-up or other recapitalization in
respect of the capital stock of PGI or any direct or indirect redemption,
purchase or other acquisition of any such capital stock or any agreement to do
any of the foregoing; [10] no indebtedness has been incurred by PGI, except such
as may have been incurred or entered into in the ordinary course of Business;
[11] no change has occurred in the accounting methods, practices or policies
followed by PGI from those in effect during the past three (3) fiscal years;
[12] there has occurred no change in or amendment to the Certificate of
Incorporation or Bylaws of PGI; [13] except as set forth in Schedule 11.3.3[13],
there has occurred no issuance, transfer, sale or pledge by PGI of any shares of
its capital stock or other securities or of any commitment, option, right or
privilege under which PGI is or may become obligated to issue any share of its
capital stock or other securities; and [14] in general, the Business has been
conducted in all respects only in the ordinary course.
11.3.4 As of December 31, 1997, PGI had placed on lease, either
directly or through sublicensees, not fewer than 935 tables of Caribbean Stud,
Caribbean Draw or other game using patents owned or held by PGI ("Gaming
Tables") which are obligated to generate revenue for PGI through recurring
rental and license fees as reflected on the Financial Statements.
11.4 SHAREHOLDER EQUITY. On March 1, 1998, PGI shareholder equity was not
------------------
less than $3.8 million, after giving effect to a $1.5 million dividend payable
in April 1998 and shall increase at a minimum of $350,000 per month thereafter
until the Closing Date, less any write off of assets requested in writing by
MIKOHN.
11.5 THE PGI ASSETS. The PGI Assets constitute all the material assets,
--------------
real and personal, tangible and intangible, that are owned, used or held for use
in connection with or otherwise relate to the Business and, except for
contemplated additions in the ordinary course of business that are not material
in the aggregate, include all assets the use of which is necessary for the
conduct of the Business as now conducted by PGI.
11.5.1 TITLE. Except as disclosed in the Schedules hereto, PGI has
-----
as of the date hereof, and on the Closing will have, good and marketable title
to all the PGI Assets
13
(including at Closing stock in the PGI Affiliates as provided in Section 6.14),
subject to no mortgage, security interest, pledge, lien, conditional sales
agreement, claim, restriction, reservation, covenant, encumbrance, charge,
restraint on transfer, or any title defect of any nature whatsoever, other than
those reflected on the Financial Statements and defects that do not have a PGI
Material Adverse Effect and no other person has any right to the use or
possession of any of the PGI Assets. Except as reflected on Schedule 4.4.6, no
financing statement under the Uniform Commercial Code with respect to any of the
PGI Assets has been filed in any jurisdiction and PGI has not signed any such
financing statement or any security agreement authorizing any secured party
thereunder to file any such financing statement, except as reflected in the
Financial Statements.
11.5.2 MACHINERY, TOOLS AND EQUIPMENT. Schedule 11.5.2 hereto
------------------------------
contains a list of all material machinery, tools and equipment wherever located,
used or held for use in the conduct of the Business.
11.5.3 INSURANCE. There is set forth in Schedule 11.5.3 hereto a
---------
complete and accurate list and summary of all policies of insurance of any
nature whatsoever maintained by XXXXX or PGI pertaining to the business of PGI,
showing, among other things, the amount of coverage, the company issuing the
policy and the expiration date of each policy. To XXXXX' knowledge, PGI has
adequately insured the PGI Assets that are of insurable character with reputable
insurance companies against loss or damage by fire and other risks to the extent
and in the manner customary for companies engaged in businesses similar to the
Business or owning assets similar to the PGI Assets. During the past three
years, no application by PGI for insurance with respect to the PGI Assets has
been denied for any reason. All such policies are in full force and effect and
will remain in full force and effect until the Closing and PGI has not received
any notice of cancellation with respect thereto. Since February 28, 1998, no
event has occurred which has resulted in material damage to any of the PGI
Assets or which has materially impaired the use of any of the PGI Assets whether
or not such event has been insured against.
11.5.4 INVENTORIES. To XXXXX' knowledge, all inventories reflected
-----------
on the February 28, 1998 Balance Sheet are, and all inventories to be
transferred to MIKOHN at the Closing will be, in good and usable condition, and
are saleable by PGI in the ordinary course of business after the Closing. The
values at which such inventories are carried on the December 31, 1997 Balance
Sheet reflect the normal inventory valuation policies of the Business and are in
accordance with generally accepted accounting principles, consistently applied.
The foregoing notwithstanding, prior to the Closing, PGI may transfer to XXXXX
twenty (20) Gaming Tables, including all electronics and layouts and two (2)
complete sets of spare parts, at no charge to XXXXX for XXXXX'x use in any legal
14
casino in which XXXXX holds a 50% or greater interest; provided, however, XXXXX
shall not displace any Gaming Tables under license from PGI in operation at such
casino before XXXXX acquired a 50% interest therein. Unless prohibited by law or
regulatory authority having jurisdiction, PGI shall agree to provide XXXXX with
spare parts for such tables at a price of PGI's cost plus 15% and access to all
improvements and upgrades.
11.5.5 ACCOUNTS AND NOTES RECEIVABLE. Schedule 11.5.5 hereto
-----------------------------
contains a complete and accurate list of all material accounts and notes
receivable of PGI as of the date of February 28, 1998 and an aging schedule of
such accounts and notes receivable. Such accounts and notes receivable arose in
bona-fide arms length transactions in the ordinary course of business of PGI.
11.5.6 PERMITS. Except as set forth in the Schedules, PGI has all
-------
material permits and licenses which are necessary for the conduct of the
Business as now conducted and at the Closing PGI will have all such permits and
licenses except gaming licenses the loss of which will not have a PGI Material
Adverse Effect. There is set forth in Schedule 11.5.6 hereto a complete and
accurate list of each material permit, license and certificate or authorization
issued to PGI by any third party.
11.5.7 TAXES. To XXXXX knowledge, PGI has filed all necessary
-----
federal, state, local and foreign income, property and franchise tax returns and
paid all taxes shown as due thereon; all tax liabilities are adequately provided
for on the books of PGI and XXXXX has no knowledge of any tax deficiency of PGI
or any tax proceeding or action pending or threatened against PGI which would
have a PGI Material Adverse Effect. To XXXXX' knowledge, all federal, state,
local and foreign income, property and franchise tax returns filed by or on
behalf of PGI are complete and accurate in all material respects in accordance
with all legal requirements applicable thereto. PGI is not a party to or bound
by any tax indemnity, tax sharing or tax allocation agreement. XXXXX shall
indemnify MIKOHN and PGI against any tax liabilities imposed on PGI as a result
of any non-payment or underpayment of taxes owed with respect to periods prior
to the Closing. PGI and MIKOHN shall promptly remit to XXXXX any tax refunds
received after the Closing as a result of any over payment of taxes of PGI paid
with respect to periods prior to the Closing. MIKOHN will promptly provide XXXXX
with copies of all correspondence or other information from taxing authorities
with respect to any assessment or proposed assessment of, or any inquiry or
examination by such taxing authorities in connection with, taxes of PGI covered
by the foregoing indemnity. XXXXX shall have the right to take any actions he
deems necessary and appropriate in connection with the matters covered by the
foregoing indemnity, including contesting, defending and settling any assessment
of taxes or proposed assessment of taxes. MIKOHN will give XXXXX a power of
attorney to act on PGI's behalf in handling all matters covered by the foregoing
indemnity and shall
15
provide XXXXX with access to all books and records reasonably requested by XXXXX
in connection with the foregoing indemnity. In no event xxxx XXXXX be liable for
any tax incurred by PGI as a result of an election made by MIKOHN for PGI under
Section 338 of the Internal Revenue Code of 1986, as amended, and MIKOHN agrees
to defend, indemnify and hold harmless XXXXX from and against any such tax.
11.6 CONTRACTS. Except as set forth in the Schedules, PGI has not
---------
received notice of any default or claim of default under any provision of any
material contract to which PGI is a party and, to XXXXX' knowledge, no event has
occurred which, with the passage of time or the giving of notice (or both),
would constitute a default by PGI (or, to XXXXX' knowledge, any other party
thereto) under any provision thereof, or would permit modification, acceleration
or termination of any contract by any other party thereto or by PGI. There is
set forth in Schedule 11.6 hereto a complete and accurate list of all Gaming
Table leases and Gaming Table license agreements and all other material
contracts, whether written or oral, between PGI and any party who is obligated
to make payments or provide services to PGI or to whom PGI is obligated to make
payments or provide service in an amount exceeding $10,000 per year.
11.7 LITIGATION; COMPLIANCE WITH LAW. Except as set forth in Schedule
-------------------------------
11.7 and except for gaming investigations conducted in the ordinary course of
the Business, no material investigation or review by any governmental entity
with respect to PGI is pending or, to XXXXX' knowledge, threatened, nor has any
governmental entity indicated to PGI an intention to conduct the same; and there
is no action, suit or proceeding pending or, to XXXXX' knowledge, threatened
against or affecting PGI at law or in equity, or before any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, which either singly or in the aggregate would, if adversely
determined, have a PGI Material Adverse Effect, or which would impair XXXXX' and
PGI's ability to perform this Agreement. Except as set forth in Schedule 11.7,
to XXXXX' knowledge, the Business is not being conducted in violation of any
applicable law, ordinance, regulation, decree or order of any court or
governmental entity which could have a PGI Material Adverse Effect and XXXXX has
no knowledge of any pending or proposed laws, ordinances or regulations which,
if enacted or adopted, could have a PGI Material Adverse Effect (other than
matters of public knowledge or which are generally applicable to the industries
in which the Business is conducted).
11.8 LABOR RELATIONS; EMPLOYEES. Except as set forth in the Schedule
--------------------------
11.8, as of the date hereof and the Closing, PGI has paid or made provision for
the payment of all salaries and wages (including without limitation, bonuses,
sick and vacation pay, commissions to salesmen, etc.) accrued through the date
hereof to or
16
for the benefit of employees of the Business and has complied in all material
respects with all applicable laws, rules and regulations relating to the
employment of labor, including those relating to wages, hours, collective
bargaining and the payment and withholding of taxes, and has withheld and paid
to the appropriate governmental authority, or is holding for payment not yet due
to such authority, all amounts required by law or agreement to be withheld from
the wages or salaries of such employees. Since February 28, 1998, there has been
no material adverse change in the relationship of PGI with its respective
employees (including any threatened union organization or renegotiation of any
union contract) nor any strike or labor disturbance by any such employees or any
other employees of PGI performing services in connection with the Business, and
XXXXX is not aware of any indication that such a change, strike or labor
disturbance is likely.
11.9 EMPLOYEE BENEFIT PLANS. PGI does not have any pension, profit
----------------------
sharing, savings, bonus, incentive, insurance, welfare, stock option, severance
or vacation or other employee benefit plans, whether written or oral (including,
without limitation, any such plans within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) in which
any employees of the Business participate ("Benefit Plans"), except as disclosed
in Schedule 11.9. With respect to each Benefit Plan, PGI has delivered to MIKOHN
complete and correct copies of (a) the Benefit Plan (or a written summary of any
unwritten Benefit Plan); (b) any related trust agreement, insurance contract or
other funding vehicle; (c) the last three annual reports on IRS Form 5500; (d)
the latest actuarial valuation report; and (e) any summary plan description or
employee handbook. Those Benefit Plans within the meaning of Sections 3(2) and
3(37)(A) of ERISA are hereinafter referred to as "Multi-employer Qualified
Plans" or "Multi-employer Plans", and all other Benefit Plans within the meaning
of Section 3(2) of ERISA are hereinafter referred to as "Single Employer
Qualified Plans" or "SEQ Plans."
11.9.1 With Respect to the SEQ Plans:
11.9.1.1 Each SEQ Plan and related trust has received a
favorable determination letter from the Internal Revenue Service with respect to
its qualified status under Sections 401(a) and 501(a) of ERISA and, to the
knowledge of PGI, nothing has occurred since the date of such letter which would
adversely affect its validity.
11.9.1.2 All data submitted by PGI to the actuary for use
in the actuarial valuations for all plan years of each SEQ Plan prepared as of
the date hereof was accurate and complete in all material respects, and each
such valuation fairly presents the actuarial position of the respective plan
covered thereby as of such date in accordance with generally accepted actuarial
principles.
17
11.9.1.3 Since the effective date of ERISA, no SEQ Plan or
related trust has incurred an "accumulated funding deficiency" (whether or not
waived) as such term is defined in ERISA or in the Code.
11.9.2 With respect to the Multi-employer Plans:
11.9.2.1 PGI has not received notice, or has any reason to
believe, that any other Multi-employer Plan has not received such a favorable
determination letter or any other development since such date which would cause
the loss of such qualified status.
11.9.2.2 All data submitted by PGI to any sponsor of a
Multi-employer Plan with respect to the Multi-employer Plans fairly present the
employee data requested by such sponsors.
11.9.2.3 With respect to each Multi-employer Plan, PGI has
previously disclosed in writing (i) PGI's contribution rate and number of
contribution base units for each of the last three years; and (ii) the liability
which PGI would incur on a "complete withdrawal", within the meaning of Section
4203 of ERISA, as of the Closing Date without regard to any limitation,
reduction or adjustment of liability under Title IV of ERISA or the provisions
of the plan. With respect to any Benefit Plan or any plan which is contributed
to by any entity treated as a single employer with PGI under Section 414(b),
(c), (m) or (o) of the code ("ERISA Affiliate") and which is a multi-employer
plan within the meaning of Section 3(37) of ERISA; (iii) neither PGI nor any
ERISA Affiliate has incurred any withdrawal liability under Section 4201 et seq.
-- ---
of ERISA which had not been satisfied or received notice of any claim or demand
for withdrawal liability; (iv) PGI and its ERISA Affiliates have timely made
contributions required by the terms of the plan or any collective bargaining
agreement; and (v) to the knowledge of PGI and its ERISA Affiliates, no such
plan is in reorganization, within the meaning of Section 4241 of ERISA, or is or
may become insolvent, within the meaning of Section 4245 of ERISA, and no such
plan is a party to any pending merger or transfer of assets and liabilities.
Neither PGI nor any ERISA Affiliate has incurred any withdrawal liability under
Section 4063 or 4064 of ERISA.
11.9.2.4 PGI has not received notice that any collective
bargaining agent with respect to, or sponsor of, a Multi-employer Plan has
terminated, caused the termination of, or intends to terminate, coverage under
any Multi-employer Plan of employees of any facility or business to be acquired
by MIKOHN hereunder, or the coverage of any other participants therein so as to
constitute a termination of any Multi-employer Plan.
11.9.3 Each Benefit Plan and each funding
18
medium which may be attendant thereto, including group annuity contracts, have
been in all material respects operated and administered in accordance with their
provisions and applicable law. On or prior to the date hereof PGI has
contributed to each SEQ Plan not less than the amounts accrued for such Plan for
all plan years prior to the current plan year and on or prior to the Closing
will have contributed to such plan not less than the amounts required for such
plan for the current fiscal year of the plan prorated for the elapsed portion of
such fiscal year to the Closing. As to any other Benefit Plan or union contract
to be assumed by MIKOHN, PGI has made or will have made prior to the Closing all
other contributions or payments required to be paid or accrued with respect to
such Plan. Other than routine claims for benefits under the Benefit Plans in the
ordinary course of business, there are no actions, suits or claims pending or,
to the knowledge of PGI, threatened against any Benefit Plan or any of its
assets, and PGI has no knowledge of any facts which could give rise to any such
actions, suits or claims. No Benefit Plan is currently under investigation or
audit by a governmental agency and, to PGI's knowledge, no such investigation or
audit is contemplated or under consideration.
11.9.4 PGI has paid all required premium payments to the Pension
Benefit Guaranty Corporation ("PBGC") with respect to the Benefit Plans and has
not incurred any other liability to the PBGC with respect to any plan currently
or formerly contributed to or maintained by PGI or any ERISA Affiliate. PGI has
timely paid all contributions to any SEQ Plan subject to Title IV of ERISA. No
proceedings have been undertaken by PGI or the PBGC to terminate any SEQ Plan
subject to Title IV of ERISA and there has been no "reportable event" within the
meaning of Section 4043 of ERISA with respect to any such plan (for which the
30-day notice requirement has not been waived) within the last 6 years.
11.9.5 Neither PGI nor any of its subsidiaries, nor any of its
affiliates, directors, officers or employees has, with respect to the Benefit
Plans, engaged in any "prohibited transaction," as such term is defined in the
Code or ERISA, nor have any such Plans, the related trusts or any trustee,
administrator or other "party-in-interest" (as defined in ERISA) engaged in any
such prohibited transaction, which could subject PGI or MIKOHN, or any of their
directors, officers or employees to any sanctions, taxes or penalties on or with
respect to prohibited transactions which may be imposed under the Code, ERISA or
any other applicable law.
11.9.6 To XXXXX' knowledge, neither PGI nor any of its
subsidiaries, nor any of its or their directors, officers or employees, nor to
PGI's knowledge, any other "fiduciary" (as defined in ERISA), has, with respect
to any Benefit Plan, committed any breach of fiduciary responsibility imposed by
ERISA or any other applicable law which could subject PGI or MIKOHN or any of
their directors, officers, employees or persons to liability under ERISA
19
or any other applicable law.
11.9.7 Each Benefit Plan covers only present or former employees of
PGI. No Benefit Plan provides life or health benefits to former employees of
PGI, other than continuation coverage required by Section 4980B of the Code and
provided at the expense of the former employee.
11.9.8 PGI has no plan or commitment, whether legally binding or
not, to create any additional Benefit Plan or to modify any existing Benefit
Plan except with respect to changes required by applicable law or as expressly
provided for in this Agreement. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment becoming due to any current or former employee of PGI,
(ii) increase any benefits otherwise payable under any Benefit Plan, or (iii)
result in the acceleration of the time of payment or vesting of any such
benefits.
11.10 INTELLECTUAL PROPERTY. Except as set forth in Schedule 11.10, to
---------------------
XXXXX' knowledge, the Business as now conducted by PGI does not infringe any
patent, trademark, trade name, trade secret or copyright held by others or any
license, authorization or permit held by PGI, in any manner which may have a PGI
Material Adverse Effect.
11.10.1 Schedule 11.10.1 hereto lists all patents, patent
applications, inventions, trade names, trademarks, service marks, brand names,
copyrights and registrations and applications therefor, owned by or used in the
Business as now conducted by PGI (the "Intellectual Property"). To XXXXX'
knowledge, PGI owns the Intellectual Property, the authorship add inventorship
identified in Schedule 11.10.1 is accurate and the Intellectual Property (except
for patent claims currently under rejection in re-examination proceedings) is
not invalid and is enforceable.
11.10.2 Neither XXXXX nor PGI has granted any licenses or other
rights and has no obligations to grant licenses or other rights to any
Intellectual Property other than the licenses and rights disclosed on Schedule
11.10.2 hereto.
11.10.3 Neither XXXXX nor PGI has made any claim of any violation or
infringement by others of its rights to or in connection with the Intellectual
Property or technology used or held for use in the Business, and neither XXXXX
nor PGI know of any basis for making any such claim except those claims
disclosed on Schedule 11.10.3.
11.10.4 There are no interferences or other contested proceedings or
reexamination proceedings, either pending or, to the knowledge of XXXXX or PGI,
threatened, in the United
00
Xxxxxx Xxxxxxxxx Xxxxxx, xxx Xxxxxx Xxxxxx Patent and Trademark Office or any
federal, state or local court or before any other governmental agency or
tribunal, relating to any pending application with respect to the Intellectual
Property except those proceedings disclosed in Schedule 11.10.4.
11.11 YEAR 2000 ISSUE. XXXXX and PGI acknowledge that the approach of the
---------------
year 2000 has become a potential problem for businesses utilizing computers in
their operations since many computer programs are date sensitive and will only
recognize the last two digits of the year, thereby recognizing the year 2000 as
the year 1900 or not at all (the "Year 2000 Issue"). To XXXXX' knowledge,
except as disclosed in Schedule 11.11, all software programs developed by PGI
and included in the PGI Assets are Year 2000 compliant, that is, the operation
and functionality of such software programs will not be materially adversely
affected by the Year 2000 Issue.
11.12 CUSTOMERS AND SUPPLIERS. Except as disclosed in the Schedules,
-----------------------
neither XXXXX nor PGI has received any notice of, and XXXXX knows of no
reasonable basis for, any matter involving PGI's arrangements with PGI's
customers and suppliers of the Business that would have a PGI Material Adverse
Effect.
11.13 DISCLOSURE OF ALL MATERIAL FACTS. No representation or warranty by
--------------------------------
XXXXX in this Agreement (including all Exhibits and Schedules attached hereto)
or in any certificate furnished to MIKOHN in connection with the Closing of the
transactions contemplated hereby contains, or will at Closing contain, any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
11.14 CAPITALIZATION. The authorized capital stock of PGI consists of
--------------
3,000 shares, $.01 par value, of which 2,700 shares are issued and outstanding.
All of the PGI Shares are owned, beneficially and of record, only by XXXXX and,
at the time they are delivered to MIKOHN at the Closing, will be free from any
charge, lien, encumbrance or adverse claim of any kind whatsoever. At the
Closing, XXXXX will have the absolute unrestricted right, power, authority and
capacity to transfer the PGI Shares to MIKOHN and upon the Closing, without
exception, MIKOHN will acquire from XXXXX legal and beneficial ownership of,
good and valid title to, and all rights to vote, the PGI Shares, free from any
charge, lien, encumbrance or adverse claim of any kind whatsoever. All of the
PGI Shares have been duly authorized and validly issued and are fully paid and
nonassessable. There are no options, warrants, conversion rights, rights of
exchange, or other rights, plans, agreements or commitments of any nature
whatsoever (including, without limitation, conversion or preemptive rights)
providing for the purchase, issuance or sale of any shares of PGI's capital
stock or any
21
securities convertible into or exchangeable for any shares of PGI's capital
stock.
11.15 SUBSIDIARIES AND AFFILIATES. Except for the PGI Affiliates or as
---------------------------
disclosed in the Schedules, PGI does not presently own, directly or indirectly,
any interest in any other corporation, association, joint venture or other
business entity. At the Closing, PGI will own all of the issued and outstanding
capital stock of the PGI Affiliates ("Affiliate Shares"), except as may be
provided in Section 6.14, which will then be subsidiaries of PGI. At the
Closing, except as may be provided in Section 6.14, the Affiliate Shares will be
owned, beneficially and of record, by PGI and, will be free from any charge,
lien, encumbrance or adverse claim of any kind whatsoever. As of the Closing,
PGI will have legal and beneficial ownership of, good and valid title to, and
all rights to vote, the Affiliate Shares, free from any charge, lien,
encumbrance or adverse claim of any kind whatsoever. All of the Affiliate
Shares have been duly authorized and validly issued and are fully paid and
nonassessable. There are no options, warrants, conversion rights, rights of
exchange, or other rights, plans, agreements or commitments of any nature
whatsoever (including, without limitation, conversion or preemptive rights)
providing for the purchase, issuance or sale of any Affiliate Shares or any
securities convertible into or exchangeable for any shares of Affiliate Shares.
11.16 PROPERTIES. PGI does not own or hold title to any real property.
----------
With respect to the property and assets it leases, PGI is in compliance in all
material respects with such leases and holds a valid leasehold interest free of
any material liens, claims or encumbrances of any kind whatsoever except as
disclosed in the Schedules. There is set forth in Schedules 11.16[1] and
11.16[2] hereto: [1] a list of all leases or rental contracts under which PGI is
a lessee, lessor, sublessee or sublessor and [2] a list of all equipment used by
PGI in the operation of its business which is owned or leased by PGI and which
had an original cost of $15,000 or more.
11.17 INDEBTEDNESS. Schedule 11.17 hereto contains a complete list of each
------------
and every agreement or other instrument under or pursuant to which PGI has
outstanding indebtedness for borrowed money. XXXXX has furnished MIKOHN with
true and correct copies of each such agreement and instrument, including all
amendments with respect thereto through the date of this Agreement, PGI (and
XXXXX to the extent responsible for the payment of the obligations thereunder)
is not in default in any material respect under any such agreement or instrument
and, to XXXXX' knowledge, no other party to any such agreement or instrument is
in default in any material respect under any such agreement or instrument.
11.18 DIRECTORS, OFFICERS AND EMPLOYEES.
---------------------------------
22
Schedule 11.18 hereto sets forth a true and complete list of the names and
current salaries of all management employees of PGI who earned $50,000 or more
for the fiscal year of PGI ended December 31, 1997, or who will, at their
present salaries earn $50,000 or more for the fiscal year ending December 31,
1998.
11.19 POWERS OF ATTORNEY; BANK ACCOUNTS. Schedule 11.19[1] and Schedule
---------------------------------
11.19[2] hereto list, respectively, [1] the names and addresses of all persons
or entities holding a power of attorney on behalf of PGI other than attorneys at
law who are authorized to prosecute intellectual property matters or litigation,
on behalf of PGI, and [2] the names and addresses of all banks or other
financial institutions in which PGI has an account, deposit or safe-deposit box,
with the number and a description of the account and the names of all persons
authorized to draw on such account or deposit or to have access to such boxes.
11.20 GOOD AND MARKETABLE TITLE TO SHARES. XXXXX has, and will have on
-----------------------------------
the Closing Date, full right, power and authority to sell, transfer and deliver
the PGI Shares to MIKOHN as provided in this Agreement.
11.21 ENVIRONMENTAL MATTERS.
---------------------
11.21.1 For the purposes of this Agreement, the term "Environmental
Laws" shall mean all federal, state and local environmental protection,
occupational, health and safety or similar laws, ordinances, restrictions,
licenses, rules, regulations and permit conditions, including, without
limitation, the Federal Water Pollution Control Act, Resource Conservation &
Recovery Act, Clean Air Act, Compensation and Liability Act, Emergency Planning
and Community Right to Know, Occupational Safety and Health Act and other
federal, state or local laws of similar effect, each as amended, and the term
"Hazardous Materials" shall mean any hazardous or toxic substances, wastes or
materials, defined as such or governed by any applicable Environmental Law.
11.21.2 [1] Neither PGI nor XXXXX has received any notice,
directive, violation report, action or claim form or by (i) any federal, state
or local governmental agency concerning PGI and any Environmental Laws, or (ii)
any person or entity alleging that, in connection with Hazardous Materials,
conditions at any real properties leased by PGI have resulted in or caused or
threatened to result in or cause injury or death to any person or entity damages
to any property, including, without limitation, damage to natural resources, and
to XXXXX' knowledge, no such notice, directive, violation report, action, claim,
assessment or allegation exists; [2] to XXXXX' knowledge, PGI does not currently
lease, operate or own any real properties that are listed or are threatened to
be listed on a "Superfund" list or with respect to which there is any pending
proceeding or investigation under any Environmental Law, and, to XXXXX'
knowledge, no such proceeding or investigation is
23
threatened; [3] to XXXXX' knowledge, throughout the period of operation of any
real properties by PGI, PGI has operated and continues to operate such real
properties in compliance with all Environmental Laws; [4] to XXXXX'x knowledge,
no underground storage tanks either are or, to XXXXX' knowledge, have been
located on any of such real properties; [5] to XXXXX' knowledge, there has been
no spill, discharge, release, contamination or cleanup of or by any Hazardous
Materials used, generated, treated, stored, disposed of or handled by PGI at
such real properties and to XXXXX' knowledge, no spill, discharge or release or
contamination or cleanup of Hazardous Materials has occurred on or to such real
properties by any third party; [6] to XXXXX' knowledge, PGI has not used,
generated, treated, stored, disposed of, handled, transported or released any
Hazardous Materials in a manner which would give rise to any liability under any
Environmental Laws; [7] XXXXX is not aware of any facts, events or conditions
(including, without limitation, the generation, treatment, transport, storage,
emission, disposal, release or other placement, deposit or location of any
substance) which materially interfere with or prevent continued compliance by
PGI with, or give rise to any present or potential liability (including with
respect to past activities) under any Environmental Laws; and [8] to XXXXX'
knowledge, PGI has not released any other person or entity from any claim under
any Environmental Laws, nor waived any rights or defenses concerning any
environmental conditions.
11.22 AFFILIATE RELATIONSHIPS. Except as set forth on Schedule 11.22
-----------------------
hereto, PGI and XXXXX do not have any material financial interest, direct or
indirect, in any supplier or service provider to, or customer of, PGI or other
party to any contract or other arrangement which is material to PGI. For
purposes of this Section 11.22, the terms "subsidiary" and "XXXXX" shall be
deemed to include PGI, the PGI Affiliates, XXXXX and any person or entity which,
directly or indirectly, alone or together with others, controls, is controlled
by or is under common control with PGI or XXXXX.
11.23 CONSENTS OF THIRD PARTIES. Except as set forth in Schedule 11.23
-------------------------
hereto, no consent, waiver or approval of any third party is necessary for the
consummation by XXXXX and PGI of the transactions contemplated hereby.
11.24 SURVIVAL. All representations and warranties of XXXXX herein shall
--------
survive the Closing. Except for tax and environmental matters which shall
survive for as long as the longest applicable statute of limitations, such
survival shall be limited to a period of one (1) year.
12 REPRESENTATIONS AND WARRANTIES OF MIKOHN. Effective as of the date of
----------------------------------------
this Agreement and the Closing, MIKOHN hereby represents and warrants to XXXXX
that:
24
12.1 CORPORATE STATUS. MIKOHN is a corporation duly formed and organized
----------------
under the laws of the State of Nevada.
12.2 CORPORATE AUTHORITY. MIKOHN has the corporate power and authority to
-------------------
acquire the PGI Shares and operate the PGI Assets and the Business now owned and
operated by PGI.
12.3 BINDING EFFECT. MIKOHN has the corporate power and authority to
--------------
execute, deliver and perform this Agreement, and the other instruments and
documents required or contemplated herein. Such execution, delivery and
performance have been duly authorized by all necessary action on the part of
MIKOHN, do not and will not require the approval of the shareholders of MIKOHN
and do not and will not contravene the Certificate of Incorporation or By-Laws
of MIKOHN or conflict with, result in a breach of, or entitle any party (with
due notice or lapse of time or both) to terminate, accelerate or call a default
with respect to, or result in the creation or imposition of any lien, charge,
encumbrance or claim of any nature whatsoever upon any of the PGI Assets
pursuant to, any agreement or instrument to which MIKOHN is a party or by which
MIKOHN is bound. The execution, delivery and performance of this Agreement by
MIKOHN will not result in any violation by MIKOHN of any law, rule or regulation
applicable to MIKOHN. MIKOHN is not a party to, or subject to or bound by, any
judgment, injunction or decree of any court or governmental authority which may
restrict or interfere with the performance of this Agreement. This Agreement is
a valid and binding obligation of MIKOHN enforceable in accordance with its
terms.
12.4 LAWSUITS AND CLAIMS. MIKOHN is not a party to or threatened by any
-------------------
litigation, proceeding, or controversy before any court or administrative agency
which might materially adversely affect the transactions contemplated by this
Agreement or the satisfaction of the conditions set forth in Section 6.13 or
Section 7.
12.5 NO MIKOHN ADVERSE MATERIAL EFFECT. Since December 31, 1997, there
---------------------------------
has not been any change in the financial condition or results of operations of
MIKOHN that would materially adversely affect MIKOHN's ability to satisfy the
conditions set forth in Section 6.13 or Section 7 of this Agreement or otherwise
to consummate the transactions contemplated by this Agreement, and MIKOHN has no
knowledge of any present condition or contingency (other than matters of public
knowledge or which are generally applicable to the industries in which MIKOHN
conducts its business) which MIKOHN reasonably expects would have such effect.
12.6 SURVIVAL. The representations and warranties of MIKOHN herein shall
--------
survive the Closing for a period of one (1) year.
13 NO SHOP. Prior to the Closing or termination of this
-------
25
Agreement, XXXXX and PGI shall not, nor shall they permit any affiliate of XXXXX
or PGI, or any of XXXXX'x or PGI's representatives (including, without
limitation, any investment banker, broker, attorney or accountant retained by
it) to initiate, solicit or facilitate, directly or indirectly any inquiries or
the making of any proposal with respect to the sale, lease or other disposition
of the stock or assets of PGI ("Other Transaction"), engage in any discussions
or negotiations concerning, or provide to any person or entity any information
or data relating to PGI, for the purpose of, or otherwise cooperate in any way
with or assist or participate in, or facilitate any inquiries or the making of
any proposal which constitutes, or may reasonably be expected to lead to, a
proposal to seek or effect any Other Transaction, or agree to or endorse any
Other Transaction. PGI shall promptly advise MIKOHN of, and communicate the
material terms of, any proposal it may receive, or any inquiries it receives
which may reasonably be expected to lead to such a proposal relating to an Other
Transaction and the identity of the person or entity making it. PGI shall
further advise MIKOHN of the status and changes in the material terms of any
such proposal or inquiry (or amendment to any of them). During the term of this
Agreement, PGI shall not enter into any agreement, oral or written, and whether
or not legally binding, with any person or entity that provides for or in any
way facilitates an Other Transaction or materially and adversely affects any
obligation of PGI under this Agreement.
14 COOPERATION. XXXXX, PGI and MIKOHN agree to cooperate fully in
-----------
accomplishing the transactions contemplated by this Agreement. Time is of the
essence of this Agreement. MIKOHN agrees to promptly take all actions necessary
to satisfy the conditions under Section 6.13 and Section 7 including without
limitation preparation of the documentation necessary to obtain the financing
described in Section 6.13 and MIKOHN shall not take any action that would
materially adversely affect the ability of the parties to close the transactions
contemplated by this Agreement on or before the Closing Date.
15 NO TRANSFER. XXXXX agrees not to sell, assign or transfer any of the PGI
-----------
Shares to anyone other than MIKOHN. PGI shall close its transfer books against
any attempt to sell, assign or transfer any PGI Shares in violation of the
foregoing sentence.
16 PGI PAYABLES TO XXXXX. Effective upon the Closing, XXXXX shall release
---------------------
and absolutely discharge PGI from any and all liabilities for intercompany
payables and any other amounts owing from PGI to XXXXX except as contemplated by
this Agreement.
17 AMENDMENTS. This Agreement may not be amended or revised except by a
----------
writing executed by all of the parties hereto.
18 NO WAIVER. The failure of any party to insist, in any one or more
---------
instances, upon performance of any of the provisions
26
of this Agreement or to take advantage of any of its rights hereunder shall not
operate as a waiver thereof or preclude any other or further exercise thereof or
the exercise of any other right or power.
19 FLORIDA LAW. This Agreement shall be governed by, and interpreted in
-----------
accordance with, the laws of the State of Florida.
20 JURISDICTION AND VENUE. The parties acknowledge and agree that this
----------------------
Agreement has been entered into in Broward County, Florida, and that
jurisdiction over the parties in any action arising out of or in any way
connected with this Agreement is properly in any court of competent jurisdiction
within Broward or Dade County, Florida.
21 ATTORNEYS' FEES. In the event any action is commenced by a party hereto
---------------
against another party arising out of or in any way connected with this
Agreement, the prevailing party shall be entitled to have and recover from the
losing party reasonable attorneys' fees and costs incurred in connection with
such action and in preparation for such action.
22 CONDUCT OF BUSINESS PENDING CLOSING. Prior to the Closing, without the
-----------------------------------
prior written consent of MIKOHN which shall not be unreasonably withheld or
delayed, XXXXX covenants that, except in connection with matters disclosed in
this Agreement or the Schedules hereto or as otherwise permitted under this
Agreement:
22.1 PGI shall operate the Business only in the ordinary course; provided
that PGI shall be entitled to pay cash dividends to XXXXX.
22.2 Except in the ordinary course of business, PGI shall not enter into
any contract or lease or modify, extend or terminate any existing contract with
respect to the Business. All insurance policies with respect to the Business
shall be maintained in full force and effect except that if MIKOHN does not
elect to assume the same they may be terminated at the Closing.
22.3 Except for the CTI Receivable, PGI will not sell or otherwise dispose
of any asset which constitutes a portion of the PGI Assets except in the
ordinary course of business.
22.4 PGI will not enter into any agreement providing for [1] the sale of
any Gaming Table for any sum on any terms or [2] the rental or licensing of any
Table Games on terms less favorable to PGI than offered prior to March 1, 1998.
22.5 Except as otherwise requested by MIKOHN and without making any
commitment on its behalf, PGI shall use its best efforts to preserve the PGI
Assets and maintain them in
27
substantially the same condition as of the date of this Agreement, reasonable
wear and tear excepted; provided, however, that the foregoing exception shall
not relieve PGI from the obligation to make repairs and otherwise maintain the
PGI Assets in accordance with good management practice. PGI shall also keep its
business organizations at the Business substantially intact, shall use its best
efforts to keep available to MIKOHN the services of present employees at the
Business and shall use its best efforts to preserve the good will of suppliers,
customers and others having business relations with PGI.
22.6 No new bonus or pension plan or other similar contract or commitment
or any wage or salary increases in excess of $20,000 in the aggregate or any
collective bargaining agreement which relates to the Business shall be entered
into.
22.7 PGI and XXXXX will not take any action or fail to take any action as
may be required under any applicable law for the valid and effective
consummation of the transactions provided for in this Agreement; provided,
however, that the foregoing shall not require PGI or XXXXX to agree to
conditions or requirements of gaming authorities that materially eliminate,
alter, suspend or otherwise modify the terms of this Agreement.
22.8 No change will be made affecting the banking and safe deposit box
arrangements of the Business.
22.9 No indebtedness shall be incurred with respect to the PGI Assets or
the Business other than in the ordinary course of business and in no event shall
any indebtedness in excess of $50,000 in the aggregate be incurred.
22.10 The Business shall remain open and shall be conducted in the same
manner as it is currently conducted.
22.11 PGI shall not issue, redeem or purchase any of PGI's capital stock or
securities convertible into its capital stock or grant or issue any options,
warrants or rights to subscribe for its capital stock or securities convertible
into its capital stock or commit to do any of the foregoing.
22.12 PGI shall not enter into any employment contract or agreement with
any existing or prospective employee which is not terminable at will.
22.13 Except in the ordinary course of Business, PGI shall not pay any
obligations or liability, fixed or contingent, other than current liabilities.
22.14 Except for the CTI Receivable, PGI shall not cancel, without full
payment, any note, loan or other obligations owing to PGI.
28
22.15 PGI shall not create or suffer to be imposed any new lien, mortgage,
security interest or other charge on or against its properties or assets.
22.16 PGI shall not make or adopt any change in its Certificate of
Incorporation or Bylaws as in force and effect on the date hereof.
22.17 Neither XXXXX nor PGI will take any action, or omit to take any
action, within their control, that would cause, and shall promptly notify MIKOHN
in writing of any event or occurrence which causes, any of the representations
and warranties set forth in Section 11 hereof to become untrue, incomplete or
inaccurate in any material respect as of or prior to the Closing Date.
23 COMPLETE AGREEMENT. This Agreement contains the complete agreement of the
------------------
parties, and supersedes any and all prior contemporaneous agreements or
understandings, written or oral.
24 COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be an original but
all such counterparts shall constitute one and the same agreement. Any
signature page of this Agreement may be detached from any counterpart without
impairing the legal effect of any signatures thereof, and may be attached to
another counterpart, identical in form thereto, but having attached to it one or
more additional signature pages.
25 INDEMNITY.
---------
25.1 INDEMNITY BY XXXXX. From and after Closing, XXXXX covenants and
------------------
agrees to indemnify and hold MIKOHN and its affiliates (which shall include PGI;
each a "Purchaser Indemnitee") harmless in respect of any Damages imposed upon
or sustained by a Purchaser Indemnitee by reason of:
25.1.1 any misrepresentation, breach of warranty or nonfulfillment
of any agreement on the part of XXXXX under this Agreement, or in any
certificate or other instruments described and referred to in this Agreement, or
in the Exhibits and Schedules attached hereto, or to be furnished to MIKOHN
hereunder, unless the Purchaser Indemnitee knew or had reason to know of any
such misrepresentation, breach or nonfulfillment prior to Closing;
25.1.2 any claim or cause of action brought against PGI by any
former employee of PGI relating to or arising from the employment relationship
or termination thereof prior to the Closing unless the Purchaser Indemnitee knew
or had reason to know of any such claim or cause of action;
25.1.3 any claim or cause of action brought
29
by Par-4, Inc. or Xxxxxxx Xxxxxxxxx relating to that certain License Agreement
dated September 21, 1993 by and between PGI and MIKOHN; and
25.1.4 any claim or cause of action brought by August Xxxxxxxxx or
Xxxx Xxxxxxxx arising from their employment relationship with PGI or termination
thereof.
25.1.5 For purposes of this Agreement, "Damages" means all damages,
assessments, taxes, judgments, costs and expenses incident to any of the
foregoing, including, but not limited to, attorneys' fees.
26 INDEMNITY BY MIKOHN. From and after Closing, MIKOHN agrees to indemnify
-------------------
XXXXX and his heirs, successors, personal representatives, devisees and assigns
(each a "Stockholder Indemnitee") and hold them harmless in respect of any
Damages imposed upon or sustained by a Stockholder Indemnitee by reason of any
misrepresentation, breach of warranty or nonfulfillment of any agreement on the
part of MIKOHN under this Agreement, or in any certificate or other instruments
described and referred to in this Agreement to be furnished to XXXXX hereunder,
unless the Stockholder Indemnitee knew or had reason to know of any such
misrepresentation, breach or nonfulfillment at the time of Closing.
27 PROCEDURES FOR THIRD-PARTY CLAIMS.
---------------------------------
27.1 If a Purchaser Indemnitee or a Stockholder Indemnitee (an
"Indemnitee") receives written notice of the assertion of any claim or of the
commencement of any action or proceeding by any entity who is not a party to
this Agreement (a "Third Party Claim") against or affecting such Indemnitee, and
if such assertion were presumed to be true (regardless of the actual outcome)
and a party (the "Indemnifying Party") could be obligated to provide
indemnification under this Agreement as a result of or in connection with such
claim, action or proceeding, such Indemnitee will give such Indemnifying Party
reasonably prompt written notice thereof, but in any event no later than thirty
(30) calendar days after receipt of such written notice of such Third Party
Claim; provided however, that failure to give notice as provided in this Section
27.1 shall not relieve the Indemnifying Party of its indemnification obligations
under Section 25 or Section 26 except to the extent that such Indemnifying Party
is actually prejudiced by such failure. Said written notice to the Indemnifying
Party shall set forth the basis of the Third Party Claim in reasonable detail
and include copies of all pertinent correspondence relating to such Third Party
Claim. The Indemnifying Party will have the right to assume and control the
defense of any Third Party Claim at such Indemnifying Party's sole expense and
by such Indemnifying Party's own counsel (which counsel must be reasonably
satisfactory to the Indemnitee), by giving written notice to the Indemnitee (the
"Notice of Defense") no later than thirty (30) calendar days after receipt
30
of the above-described notice of such Third Party Claim. The Indemnitee also
will have the right to participate in the defense of any Third Party Claim
assisted by counsel of its own choosing, but all fees and expenses of such
counsel shall be paid by the Indemnitee. The Indemnifying Party and the
Indemnitee will cooperate with each other in good faith in such defense and make
available all employees and books and records in its control as reasonably
deemed necessary with respect to such defense (but not to the extent that would
require waiver of any privilege). If the Indemnitee does not receive from the
Indemnifying Party a Notice of Defense with respect to a Third Party Claim
within the thirty (30) day period described above, the Indemnitee may, at its
option, elect to solely defend the Third Party Claim assisted by counsel of its
own choosing, and the Indemnifying Party will be liable for all reasonable costs
and expenses, and all settlement amounts (subject to and in accordance with
Section 27.3) or other liabilities, losses, damages and injuries paid or
incurred in connection therewith to the extent such claim is or would have been
indemnifiable under this Agreement if such claim is or had been proved.
27.2 If, within the thirty (30) day period set forth in Section 27.2, an
Indemnitee receives a Notice of Defense from an Indemnifying Party with respect
to any Third Party Claim, the Indemnifying Party will not be liable for any
legal expenses of the Indemnitee incurred after receipt by the Indemnitee of
such Notice of Defense.
27.3 In the event there is a dispute between the Indemnifying Party and
Indemnitee concerning whether a Third Party Claim should be contested, settled
or compromised, it shall be settled, compromised or contested in accordance with
the next succeeding sentences; provided, however, that the Indemnitee, or its
-------- -------
respective successors or assigns, shall neither be required to refrain from
paying or satisfying any claim which has matured by court judgment or decree,
unless appeal is taken thereafter and proper appeal bond posted by the
Indemnifying Party, nor shall the Indemnitee be required to refrain from paying
or satisfying any Third Party Claim after and to the extend that such Third
Party Claim has resulted in an unstayed injunction. The Indemnifying Party
shall not, without the Indemnitee's prior written consent which is not to be
unreasonably withheld, settle or compromise any action or claim or consent to
the entry of any judgment with respect to any action, claim or proceeding for
anything other than money damages paid by the Indemnifying Party unless the
settlement does not involve the imposition of any liability or obligation on the
Indemnitee or any restriction on its activities. The Indemnifying Party may,
without the Indemnitee's written consent, settle or compromise any such action
or claim or consent to entry of any judgment with respect to any such action or
claim which requires solely the payment of money damages by the Indemnifying
Party. Subject to the foregoing, in the event that the Indemnifying Party,
31
on the one hand, or the Indemnitee, on the other hand, has reached a good faith,
bona fide settlement, agreement or compromise, subject to approval hereunder,
with any claimant regarding a matter which may be the subject of indemnification
hereunder, and desires to settle on the basis of such agreement or compromise,
such party who desires to so settle or compromise shall notify the other party
in writing of its desire setting forth the terms of such settlement or
compromise (the "Notice of Settlement"). The Third Party Claim may be settled or
compromised on such basis unless within twenty (20) days of the receipt of the
Notice of Settlement the party who issued the Notice of Settlement receives a
notice from the other party of its desire to continue to contest the matter (the
"Notice to Contest") and, in such case:
27.3.1 Should the Indemnitee deliver a Notice to Contest, the claim
shall be so contested and the liability of the Indemnifying Party shall be
limited as provided in Clause 27.3.3 below:
27.3.2 If the settlement or compromise could result in a further
claim for indemnification being made against the Indemnifying Party and if the
Indemnifying Party delivers the Notice to Contest, the claim shall be so
contested and the liability of the Indemnitee shall be limited as provided in
clause 27.3.3 below ; and
27.3.3 If a matter is contested as provided in Sections 27.3.1 or
27.3.2 above and is later adjudicated, settled, compromised or otherwise
disposed of and such adjudication, compromise, settlement or disposition results
in a liability, loss, damage or injury in excess of the amount for which one
party desired previously to settle the matter, then the liability of such party
shall be limited to such lesser proposed settlement amount (plus attorney's fees
and expenses to the date of the proposed but unapproved settlement to the extent
provided for in Section 27.3 above) and the party contesting the matter shall be
solely responsible for any additional amount.
28 LIMITATIONS OF INDEMNIFICATION OBLIGATIONS. The Purchaser Indemnitee
------------------------------------------
shall not have any right to indemnification under this Agreement until the
aggregate of all Damages Claimed by all Purchaser Indemnitees exceeds $250,000,
and in such event the indemnification obligations of the Stockholder Indemnitee
hereunder shall apply to all Damages in excess of such amount until such Damages
aggregate $2,500,000, from which point the Stockholder Indemnitee shall have no
obligation to indemnify the Purchaser Indemnitees against further Damages.
29 LOSSES NET OF INSURANCE, ETC. The amount of any Damages suffered as a
-----------------------------
result of an injury to an Indemnitee for which indemnification is available
hereunder, shall be net of any insurance proceeds, if any, actually received by
the Indemnitee in
32
respect of such injury and (i) increased to take account of any net tax cost
incurred by the Indemnitee arising from the receipt of indemnity payments
hereunder (grossed up for such increase an any tax consequences resulting from
any payments pursuant to this Section 29 and (ii) reduced to take account of any
net tax benefit realized by the Indemnitee arising from the incurrence or
payment of any such Damages. In computing the amount of any such tax cost or tax
benefit, the Indemnitee shall be deemed to recognize all other items of income,
gain, loss, deduction or credit before recognizing any item arising from the
receipt of any indemnity payment hereunder or the incurrence or payment of any
indemnified Damages. Any indemnity payment under this Agreement shall be treated
as an adjustment to the Purchase Price for tax purposes, unless a final
determination (which shall include the execution of a Form 870-AD or successor
form) with respect to the Indemnitee causes any such payment not to be treated
as an adjustment to the Purchase Price for Federal tax purposes. The purpose of
this Section 29 is to put the Indemnitee in such a position as if the event for
which indemnification is provided hereunder and Damages awarded had not
occurred.
30 REMEDIES.
--------
30.1 NO LIMITATION OF REMEDIES PRIOR TO CLOSING. Prior to the Closing, no
------------------------------------------
rights and remedies expressed hereunder are intended to be exclusive of any
other right or remedy, but every such right or remedy shall be cumulative and
shall be in addition to all other rights and remedies herein conferred or
hereafter existing at law or in equity or by statute, including without
limitation the right to specific performance.
30.2 LIMITATION OF REMEDIES AFTER CLOSING. Except for claims based on
------------------------------------
fraud or intentional misrepresentation or concealment, the parties acknowledge
and agree that the indemnities set forth in Sections 25 and 26 shall be the sole
and exclusive remedy after the Closing for breach, default, inaccuracy or
failure of any of the warranties, representations, conditions, covenants or
agreements contained in this Agreement and in any certificates or documents
delivered pursuant hereto.
30.3 NO LOST PROFITS. Notwithstanding anything to the contrary in this
---------------
Agreement, except for claims based on fraud or intentional misrepresentation or
concealment, in no event will any party hereto have any liability under this
Agreement to any other party hereto for consequential, indirect or incidental
damages of any kind or nature or lost profits.
31 COVENANT NOT TO COMPETE.
-----------------------
31.1 XXXXX expressly agrees that for a period of four (4) years commencing
on the date of the Closing, he shall not directly or indirectly own, manage,
control or participate in the
33
ownership, management or control of or become affiliated or associated as a
consultant, principal, agent, stockholder, partner, investor, lender or
otherwise with any firm, association or other business entity, or otherwise
engage in any business enterprise that competes with the businesses of PGI or
MIKOHN, including without limitation the following: [1] the development,
manufacture, sale, lease or distribution of displays and signage which include
electronic components that connect to slot machines, live table games or other
gaming devices; [2] the development, manufacture, sale, lease or distribution of
computer hardware, software and firmware for accounting and player tracking
systems for gaming devices and live table games; [3] the development,
manufacture, sale, lease or distribution of progressive jackpot or other
bonusing systems for slot machines, live table games or other gaming devices;
[4] the development, manufacture, sale, lease or distribution of surveillance
systems and equipment to the gaming industry; or [5] the development,
manufacture, sale, lease or distribution of slot machines, live table games or
other gaming devices or associated equipment. The foregoing notwithstanding,
nothing herein shall be construed to prevent XXXXX from purchasing a Non-
controlling Interest in any publicly traded company; owning or operating a
casino; or collecting or taking any actions in connection with collecting the
CTI Receivable.
31.2 The geographic scope of this covenant not to compete is worldwide.
31.3 If, at the time of enforcement of any provision of this covenant, a
court shall hold that the period, scope or area restrictions are unreasonable
under the circumstances then existing, the parties agree that the maximum
period, scope or area adjudged reasonable under such circumstances shall be
substituted for the stated period, scope or area.
31.4 MIKOHN, PGI and XXXXX agree that all of the consideration payable to
XXXXX pursuant to this Agreement is allocable to the PGI Shares and that no part
of the consideration payable to XXXXX pursuant to this Agreement is allocable to
this covenant. The parties agree that all filings that they make with federal
and state taxing authorities will be consistent with this Section 31.4.
32 STANDSTILL.
----------
32.1 MIKOHN and PGI agree that all pending lawsuits and arbitration
proceedings between MIKOHN and PGI shall be stayed during the term of this
Agreement, and neither party shall take any further action against the other in
such proceedings through discovery, motion, order to show cause or otherwise.
The parties will stipulate to such orders as may be necessary to effect the
intent of this standstill provision. Each party shall agree to extend any time
period applicable to the other which elapses during
34
the period any proceedings are stayed by a period equal to the length of time
this Agreement is in effect and has not been terminated.
32.2 Notwithstanding the foregoing, this standstill provision shall not
apply to any claims or causes of action arising from activities subsequent to
the date this Agreement is signed by all parties and shall not apply to
activities reasonably necessary to avoid dismissal for failure to prosecute or
similar events that might jeopardize a party's claims or defenses.
32.3 So long as this Agreement is in effect and has not been terminated,
MIKOHN shall continue to make royalty payments to PGI in the same manner such
royalty payments were made in January, February and March, 1998.
32.4 This Agreement is made without prejudice to any rights or claims now
held by either party against the other and shall not be deemed a release,
waiver, compromise or other resolution of any such rights or claims; all such
rights and claims are expressly reserved and shall be wholly unaffected by this
Agreement in the event this Agreement [1] is terminated for any reason prior to
the Closing or [2] expires by its terms.
33 TERMINATION.
-----------
33.1 TERMINATION BY MUTUAL CONSENT. At any time prior to the Closing,
-----------------------------
this Agreement may be terminated by written consent of MIKOHN and XXXXX.
33.2 TERMINATION BY XXXXX.
--------------------
33.2.1 If the Closing has not occurred by the latest date provided
in Section 4 because the condition contained in Section 6.12 or Section 6.13 is
or has not been satisfied, XXXXX may terminate this Agreement at any time by
delivery of written notice to MIKOHN and the Xxxxxxx Money Deposit, together
with interest thereon, shall be paid to MIKOHN.
33.2.2 If XXXXX is not provided the CIBC Highly Confident Letter on
or before April 30, 1998, XXXXX may terminate this Agreement at any time by
delivery of written notice to MIKOHN and the Xxxxxxx Money Deposit, together
with interest thereon, shall be paid to XXXXX.
33.2.3 If financing described in Section 6.13 cannot be obtained by
MIKOHN because of a material adverse change in the financial condition or
results of operations of MIKOHN, XXXXX may terminate this Agreement and the
Xxxxxxx Money Deposit together with interest thereon shall be paid to XXXXX.
33.2.4 If it appears reasonably probable that
35
a consent required by XXXXX under Section 4.4.7 or by MIKOHN under Section 4.5.3
cannot be obtained by the Closing Date, and provided further that the inability
to obtain such consent is the result of a claim or assertion by a regulatory
agency that MIKOHN is not a suitable party to own or hold the PGI Shares or
otherwise due to a fact or circumstance within the control of MIKOHN, MIKOHN
shall give XXXXX prompt notice of such fact. XXXXX shall have the right to
terminate this Agreement after providing MIKOHN with written notice and a thirty
(30) day notice to cure. If this event is not cured within said thirty (30) day
period, the Xxxxxxx Money Deposit, together with interest thereon, shall be paid
to XXXXX.
33.2.5 If MIKOHN breaches this Agreement and such breach is not
cured by MIKOHN within thirty (30) days of notice from XXXXX, XXXXX may
terminate this Agreement and the Xxxxxxx Money Deposit, together with interest
thereon, shall be paid to XXXXX.
33.3 EFFECT OF TERMINATION. In the event of termination as provided
---------------------
above, this Agreement shall become of no further force or effect and all parties
hereto shall bear their own costs associated with this Agreement and all
transactions contemplated hereby; provided, however, such termination shall not
relieve any person or entity of liability for breach of or interference with
this Agreement.
33.4 FINAL TERMINATION DATE. This Agreement shall automatically terminate
----------------------
without further action of the parties if the Closing has not occurred by
September 30, 1998.
34 EACH PARTY TO BEAR OWN COSTS. Each of the parties shall pay all costs and
----------------------------
expenses incurred or to be incurred by it in negotiating and preparing this
Agreement and in closing and carrying out the transactions contemplated by this
Agreement. XXXXX shall bear all such costs incurred by PGI including, without
limitation, all fees and charges of any agent used by XXXXX and/or PGI in
respect to the transactions contemplated by this Agreement including, without
limitation, Ladenburg Xxxxxxxx & Co. Inc.
35 HEADINGS. The subject headings of the Articles and Sections of this
--------
Agreement are included for purposes of convenience only, and shall not affect
the construction or interpretation of any of its provisions.
36 THIRD PARTIES. Nothing in this Agreement, whether express or implied, is
-------------
intended to confer any rights or remedies under or by reason of this Agreement
on any persons or entities other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third party to any party to this
Agreement, nor shall any provision give any third party any right of subrogation
or action over or against any party to this Agreement.
36
37 SUCCESSORS AND ASSIGNS. This Agreement shall be binding on, and shall
----------------------
inure to the benefit of, the parties and their respective heirs, legal
representatives, successors and assigns.
38 NOTICES. All notices, requests, demands and other communications under
-------
this Agreement shall be in writing and shall be deemed to have been duly given
on the date of service if served personally on the party to which notice is to
be given, or on the third day after mailing if mailed to the party to whom
notice is to be given, by first class mail, registered or certified, postage
prepaid, and properly addressed as follows:
To XXXXX at: Xxxxxx X. Xxxxx
0000 Xxxx Xxxxxxxxxx Xxxx.
Xxxxx 000
Xx. Xxxxxxxxxx, Xxxxxxx 00000
With a copies to: Xxxxxxx X. Xxxxxx
Parcel, Mauro & Xxxxxxxxx, P.C.
Suite 3600
0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
and
Xxxxxx X. Xxxxxxx, Esq.
Xxxxxx, Xxxxxxx & Xxxxx
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
To PGI: Xxxxxx X. Xxxxx
Chairman
Progressive Games, Inc.
0000 Xxxx Xxxxxxxxxx Xxxx.
Xxxxx 000
Xx. Xxxxxxxxxx, Xxxxxxx 00000
With a copies to: Xxxxxxx X. Xxxxxx
Parcel, Mauro & Xxxxxxxxx, P.C.
Suite 3600
0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
and
Xxxxxx X. Xxxxxxx, Esq.
Xxxxxx, Xxxxxxx & Xxxxx
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
37
To MIKOHN at: MIKOHN GAMING CORPORATION
0000 Xxxxx Xxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Attention: President
With a copy to: MIKOHN GAMING CORPORATION
0000 Xxxxx Xxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Attention: General Counsel
Any party may change its address for purposes of this Section by giving notice
of the new address to each of the other parties in the manner set forth above.
39 PRESS RELEASES. Each party agrees to provide to the other drafts of
--------------
proposed press releases which discuss this transaction for review and comment
before they are publicly issued.
IN WITNESS WHEREOF, the parties hereto have read, understood, and voluntarily
executed this Agreement as of the day and year first above written.
"PGI" "XXXXX"
PROGRESSIVE GAMES, INC.
By /s/ Xxx Xxxxx /s/ Xxxxxx Xxxxx Xxxxx
----------------------- -------------------------
XXXXXX X. XXXXX
Its Chairman
-----------------------
"MIKOHN"
MIKOHN GAMING CORPORATION
By /s/ Xxxxx X. Xxxxxxxx
------------------------
Its CEO
--------------------
38
EXHIBITS AND SCHEDULES TO STOCK PURCHASE AGREEMENT
EXHIBITS
--------
EXHIBIT A PGI audited financial statements for the year ending
December 31, 1997.
EXHIBIT B Unaudited financial statements for the two months ending
February 28, 1998.
EXHIBIT C Form of legal opinion from counsel for XXXXX and PGI to
MIKOHN.
EXHIBIT D Form of legal opinion from counsel for MIKOHN to XXXXX and
PGI.
SCHEDULES
---------
SCHEDULE 4.4.3 List of all States where PGI is qualified to do business.
SCHEDULE 4.4.6 List of all liens against PGI or the PGI Assets showing
those liens, if any, that will not be released at Closing.
SCHEDULE 4.4.9 List of all employment agreements, if any.
SCHEDULE 6.9 List of all directors, officers and management personnel
of PGI and PGI Affiliates whose resignations will be
required at Closing.
SCHEDULE 11.3.3 List of employment contracts or compensation arrangements
entered into by PGI since December 31, 1997.
SCHEDULE 11.3.3[13] List of all issues, transfers, sales or pledges by PGI or
PGI Affiliates of any shares of their capital stock or other
securities or of any commitment, option, right or privilege
under which PGI or any PGI Affiliate is or may become
obligated to issue any shares of their capital stock or
other securities.
SCHEDULE 11.5.2 List of all machinery and equipment wherever located, used
or held for use in the conduct of the Business including [1]
a description of each item (or category of items, where
individual items are less than $100 in undepreciated book
value) and [2] a statement of the location, date of
acquisition, original cost, book value, description of
method of
39
valuation, and book accumulated depreciation through
December 31, 1997 of each such item or category of items.
SCHEDULE 11.5.3 List and summary of all policies of insurance of any nature
whatsoever maintained by XXXXX or PGI pertaining to the
business of PGI showing, among other things, the amount of
coverage, the company issuing the policy and the expiration
date of each policy.
SCHEDULE 11.5.5 List of the accounts and notes receivable of PGI as of the
date of this Agreement, and a complete and accurate aging of
such accounts and notes receivable.
SCHEDULE 11.5.6 List of each permit, license and certificate or
authorization issued to PGI by any third party material to
the Business.
SCHEDULE 11.6 List of each contract whether written or oral, between PGI
and any party who is obligated to make payments or provide
services to PGI or to whom PGI is obligated to make payments
or provide services.
SCHEDULE 11.7 List of material lawsuits, asserted and unasserted claims,
pending and threatened investigations.
SCHEDULE 11.8 List of exceptions to the payment of all salaries and wages
(including without limitation, bonuses, sick and vacation
pay, commissions to salesmen, etc.) accrued prior to
Closing.
SCHEDULE 11.9 List of all Employee Benefit Plans.
SCHEDULE 11.10 Description of any PGI infringement of any patent,
trademark, trade name, trade secret or copyright held by
others.
SCHEDULE 11.10.1 List of all patents, patent applications, inventions, trade
names, trademarks, service marks, brand names, copyrights
and registrations and applications therefor, owned by or
used in the Business.
SCHEDULE 11.10.2 List of all licenses and other rights granted by PGI and/or
XXXXX in intellectual property included in the PGI Assets.
40
SCHEDULE 11.10.3 List of claims of any violation or infringement by others of
PGI's rights to or in connection with its Intellectual
Property or technology used or held for use in the Business.
SCHEDULE 11.10.4 List of interferences or other contested proceedings or
reexamination proceedings, either pending or, to the
knowledge of XXXXX or PGI, threatened, in the United States
Copyright Office, the United States Patent and Trademark
Office or any federal, state or local court or before any
other governmental agency or tribunal, relating to any
pending application with respect to the Intellectual
Property.
SCHEDULE 11.16[1] List of all leases or rental contracts under which PGI is
a lessee, lessor, sublessee or sublessor.
SCHEDULE 11.16[2] List of all equipment used by PGI in the operation of its
business which is owned or leased by PGI and which had an
original cost of $15,000 or more.
SCHEDULE 11.17 List of each and every agreement or other instrument under
or pursuant to which PGI has outstanding indebtedness for
borrowed money.
SCHEDULE 11.18 List of the names and current salaries of all management
employees of PGI who earned $50,000 or more for the fiscal
year of PGI ended December 31, 1997, or who will, at their
present salaries earn $50,000 or more for the fiscal year
ending December 31, 1998.
SCHEDULE 11.19[1] List of the names and addresses of all persons or entities
holding a power of attorney on behalf of PGI.
SCHEDULE 11.19[2] List of the names and addresses of all banks or other
financial institutions in which PGI has an account, deposit
or safe-deposit box, with the number and a description of
the account and the names of all persons authorized to draw
on such account or deposit or have access to such boxes.
SCHEDULE 11.22 List of all suppliers or service providers to, or customers
of, PGI, or other party to any contract or other arrangement
which is material to PGI, in which PGI and/or XXXXX has a
direct or indirect material financial interest, in any.
41
SCHEDULE 11.24 List of all consents, waivers or approvals of any third
parties necessary for the consummation by XXXXX and PGI of
the transactions contemplated by this Agreement.
42
