AGREEMENT OF MERGER
AGREEMENT OF MERGER dated as of May 3, 2001 by and between
GameCom, Inc., a Texas corporation ("GAMZ"), and Xxxxxx
Productions, Inc., a Delaware corporation ("XXXXXX").
R E C I T A L S:
A. The Boards of Directors of GAMZ and XXXXXX xxxx it advisable and in
the best interests of GAMZ and XXXXXX, and their respective stockholders to
consummate, and have approved, including for purposes of Section 5.03 of the
Texas Law and of Section 251 of the Delaware Law, the business combination
transactions provided for herein, in which XXXXXX will merge with and into GAMZ
with GAMZ continuing as the surviving corporation ("Merger") and all of the
issued and outstanding XXXXXX Shares (as hereinafter defined) and all vested
XXXXXX Convertible Securities (as hereinafter defined) will be converted into
shares of common stock, par value $0.005 per share, of GAMZ, all as more fully
set forth below.
B. For Federal income tax purposes, it is intended that the Merger
shall qualify as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code") and the parties intend to
adopt this Agreement as a "plan of reorganization" under Section 368(a) of the
Code and the Treasury Regulations thereunder.
C. GAMZ and XXXXXX desire to make certain representations, warranties
and agreements in connection with the Merger and also to prescribe various
conditions to the Merger.
D. The Boards of Directors of GAMZ and XXXXXX have approved and adopted
this Agreement.
E. Capitalized terms that are not proper nouns are defined in Section
13.
Accordingly, the parties agree as follows:
1. The Merger.
1.1. The Merger and Its Effect. Subject to the terms and conditions of
this Agreement, at the Effective Time, XXXXXX shall be merged with and into
GAMZ, which shall be the surviving corporation (GAMZ, as the party to the Merger
surviving the Merger, is sometimes hereinafter referred to as the "Surviving
Corporation"), in accordance with this Agreement and which as of the Effective
Date shall be governed by Texas Law. Upon the effectiveness of the Merger: (a)
the separate corporate existence of XXXXXX shall cease; (b) the Surviving
Corporation shall possess all of the rights, privileges, powers, immunities,
purposes and franchises, both public and private of XXXXXX; (c) all real and
personal property, tangible and intangible, of every kind and description
belonging to XXXXXX shall be vested in the Surviving Corporation without further
act or deed, and the title to any real estate or any interest therein vested in
XXXXXX shall not revert or in any way be impaired by reason of the Merger; (d)
the Surviving Corporation shall be liable for all the obligations and
liabilities of XXXXXX and any claim existing or action or proceeding pending by
or against XXXXXX may be enforced against GAMZ; and (e) neither the rights of
creditors nor any Liens upon the property of XXXXXX shall be impaired by the
Merger.
1.2. Effective Time of the Merger. Upon the satisfaction or waiver of
the conditions set forth in Sections 8 and 9 and the Closing of the Merger in
accordance with Section 3, the parties shall cause Articles of Merger and a
Certificate of Merger meeting the requirements of Section 5.04 of the Texas Law
and Section 251 of the Delaware Law to be properly executed and filed in
accordance with the terms of this Agreement and the applicable provisions of the
Texas Law and Delaware Law. The Merger shall become effective at the time of the
filing of the last to be filed of the Articles of Merger and Certificate of
Merger as provided above, or at such later time as the parties have theretofore
agreed upon and designated in such filings as the effective time of the Merger
(the "Effective Time").
1.3. Articles of Incorporation and Bylaws of Surviving Corporation.
From and after the Effective Time, the Articles of Incorporation and Bylaws of
GAMZ as in effect immediately prior to the Effective Time, shall be the Articles
of Incorporation and Bylaws of the Surviving Corporation until further amended.
1.4. Directors of the Surviving Corporation. At the Effective Time, the
individuals listed on Schedule 1.4 shall serve as the sole directors of the
Surviving Corporation.
1.5. Officers of the Surviving Corporation. At the Effective Time, the
individuals listed on Schedule 1.5 shall serve as the sole officers of the
Surviving Corporation.
1.6. Fiscal Year. The fiscal year of the Surviving Corporation shall
end on the 31st day of December.
2. Conversion of Shares on the Merger; Effective Date.
2.1. Manner and Basis of Conversion. In the Merger, each outstanding
XXXXXX Share shall be changed into a number of shares of GAMZ determined by
dividing $10 million by the "Average Price" as defined below, and dividing the
quotient by the number of Xxxxxx Shares outstanding as of the Effective Date.
Not later than May 23, 2001, the parties shall issue a public announcement
indicating that both companies have satisfied their respective due diligence
inquiries, and stating whether as of that date both companies intend to close
the transaction. The Average Price means the average closing price for GAMZ
shares on the sixth through fifteenth trading days immediately following the
parties' public announcement, but under no circumstances shall the Average Price
be lower than $.25, or higher than that number which assures that Xxxxxx
shareholders will receive a majority of the GAMZ common shares outstanding
immediately following the Merger, provided, however, that if GAMZ has provided
the loan referred to in Section 7.2.5, then in computing the number constituting
a majority of the outstanding GAMZ common shares there shall be excluded any
GAMZ common shares issued, or issuable upon conversion or exercise of securities
issued, to raise the amount required for that loan.
As examples, if the Average Price is .20, the Xxxxxx shareholders would not
receive in the aggregate 50,000,000 shares of GAMZ stock, but rather would
receive 40,000,000 shares. If the Average Price is .50, the Xxxxxx shareholders
would receive 20,000,000 shares of GAMZ stock. If the Average Price is .75, the
Xxxxxx shareholders would receive 13,333,333 shares of GAMZ stock. If the
Average Price is .90, the Xxxxxx shareholders would not receive 11,111,111
shares of GAMZ stock, but rather would receive 13,281,341 shares of GAMZ stock,
which is one more share than GAMZ's current number of issued shares. [this
example assumes that all GAMZ' redeemable shares have in fact been redeemed.]
2
2.2. Convertible Securities. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof, the Convertible
Securities of XXXXXX which are set forth on Schedule 4.5 and remain outstanding
at the Effective Time shall, by virtue of the Merger, be changed into the right
to acquire such number of GAMZ Shares as such holder would have received in
accordance with Section 2.1 had such Convertible Securities of XXXXXX been
exercised or converted in full for XXXXXX Shares immediately prior to the
Effective Time. At the Effective Time, the per share exercise price or
conversion price, as the case may be, of each of such Convertible Securities of
XXXXXX shall be calculated by dividing the aggregate exercise or conversion
price for the XXXXXX Shares otherwise issuable pursuant to such Convertible
Securities by the number of full GAMZ Shares deemed issuable pursuant to such
XXXXXX Convertible Securities. Terms and conditions of such Convertible
Securities, other than the exercise price or conversion price and number of
shares issuable upon conversion or exercise (and terms and conditions determined
by reference to such matters), shall remain unchanged.
2.3. No Fractional Shares. No fractional GAMZ Shares shall be issued;
but rather, each fractional GAMZ Share that would otherwise be issuable by
virtue of the merger will be rounded up to a whole GAMZ Share. All of the GAMZ
Shares issuable pursuant to Section 2 and the GAMZ Shares issuable as a result
of rounding up GAMZ Shares are hereinafter referred to as the "GAMZ Merger
Shares."
2.4. Procedure for Conversion of XXXXXX Share Certificates. Each holder
of record of a stock certificate subject to conversion which prior to the
Effective Time represented XXXXXX Shares will be entitled to receive from GAMZ,
upon proper surrender of such stock certificate(s) to GAMZ or its transfer
agent, the GAMZ Merger Shares in accordance with Section 2.1.
2.5. No Further Transactions. The stock transfer books of XXXXXX shall
be closed as of the Effective Date and no further registrations of transfers
shall be made thereafter on the records of XXXXXX.
2.6. Rights of Holders of XXXXXX Shares. Each GAMZ Merger Share
delivered in accordance with the terms of Section 2.1 above, shall be deemed to
have been issued on the Effective Date. No dividends which shall accrue on any
such newly-issued GAMZ Merger Shares shall be paid until the certificates
representing the XXXXXX Shares which are being converted into GAMZ Shares shall
have been surrendered as required by Section 2.4 above.
3. Closing. The Merger shall be consummated at a closing (the "Closing") at the
offices of GAMZ, 000 Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxx 00000, or at such other
place as may be agreed by the parties. The Closing shall take place on the tenth
day following the meeting of the stockholders of GAMZ and XXXXXX specified in
Section 7.1.5 hereof, whichever is later, or such other later date as may be
agreed by the parties. At the Closing, the Articles of Merger and the
Certificate of Merger provided for by Section 1.2 shall be filed in the office
of the Secretary of State of Texas and in the office of the Secretary of State
of Delaware as specified in said Section.
4. Representations and Warranties of XXXXXX. XXXXXX, which for purposes of this
Section 4 shall be deemed to include all Subsidiaries of XXXXXX unless the
context indicates otherwise, represents and warrants to GAMZ that, except as
disclosed on any Schedule:
4.1. Existence; Good Standing; Corporate Authority. XXXXXX is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power and lawful authority to
own, lease and operate its assets, properties and business and to carry on its
business in all material respects as now conducted.
3
4.2. Qualification. XXXXXX is duly qualified as a foreign corporation
to transact business in the jurisdictions set forth in Schedule 4.2, which are
the only jurisdictions where the nature of its business or the ownership of its
assets makes such qualification necessary, except as set forth on Schedule 4.3
or where the failure to so qualify would not have a Material Adverse Effect on
XXXXXX.
4.3. Authority. XXXXXX has the requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement, every
other document or agreement to be executed by XXXXXX under this Agreement (each
a "XXXXXX Transaction Document") and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement by XXXXXX and
the performance by XXXXXX of its obligations hereunder, the execution and
delivery of each of the XXXXXX Transactions Documents by XXXXXX and the
performance of its obligations thereunder and the consummation of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of XXXXXX and all other necessary corporate action on the part of
XXXXXX, other than the adoption and approval of this Agreement by the
stockholders of XXXXXX, and no other corporate proceedings on the part of XXXXXX
are necessary to authorize this Agreement, the XXXXXX Transaction Documents and
the transactions contemplated hereby and thereby (assuming due authorization,
execution and delivery by the other party or parties thereto). The Board of
Directors of XXXXXX has approved the agreement of merger contained in this
Agreement and the Merger. This Agreement has been duly and validly executed and
delivered by XXXXXX and constitutes a legal, valid and binding obligation of
XXXXXX, enforceable against it in accordance with its terms, except to the
extent that such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally or by general principles of equity. Each XXXXXX
Transaction Document has been, or, as of the Effective Time, will have been,
duly and validly authorized, executed and delivered by XXXXXX, and constitutes
or will constitute as of such date a legally valid and binding obligation of
XXXXXX, enforceable against it in accordance with its terms, except to the
extent that such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally or by general principles of equity.
4.4. Capitalization. On the date hereof, XXXXXX'x authorized Capital
Stock consists of 10 million XXXXXX Shares, of which 2,658,000 XXXXXX Shares
were issued and outstanding as of the date hereof. No other class of Capital
Stock of XXXXXX is authorized or outstanding. All of the issued and outstanding
XXXXXX Shares (i) are owned by the persons listed on Schedule 4.4 and (ii) are
duly authorized and are legally and validly issued, fully paid and
nonassessable.
4.5. XXXXXX Convertible Securities. As of the date hereof, except as
set forth in Schedule 4.5, (a) there are no outstanding Convertible Securities
to acquire any Capital Stock of XXXXXX; (b) there are no shares of Capital Stock
of XXXXXX reserved or set aside as treasury shares for any purpose and no
stockholder of XXXXXX has preemptive rights; and (c) there are no voting trusts
or other agreements or understandings with respect to the voting of shares of
any class of Capital Stock of XXXXXX, except as contemplated by this Agreement.
4
4.6. Subsidiaries. Except as set forth in Schedule 4.6, XXXXXX has no
Subsidiaries and neither XXXXXX nor any of its Subsidiaries is a party to any
partnership or joint venture agreement or arrangement or owns any equity
interest in any other corporation, partnership or other entity. Except as set
forth in Schedule 4.6, each subsidiary of XXXXXX is a corporation duly
organized, validly existing and in good standing under the laws of the state or
other jurisdiction of incorporation set forth on Schedule 4.6 and is duly
qualified to do business as a foreign corporation, and in good standing in the
jurisdictions (listed in Schedule 4.6) in which it owns property of the nature,
or transacts business of the type, that would make such qualification necessary,
except where the failure to so qualify would not have a Material Adverse Effect.
Each Subsidiary of XXXXXX has the power and lawful authority to own, lease and
operate its assets, properties and business and to carry on its business in all
material respects as now conducted. XXXXXX owns of record, free and clear of all
Liens one hundred percent (100%) of the issued and outstanding Capital Stock of
its Subsidiaries.
4.7. Certificate of Incorporation and Bylaws. XXXXXX has made available
to GAMZ true, correct and complete copies of the Certificate of Incorporation
and Bylaws of XXXXXX, and all amendments thereto as of the date hereof.
4.8. No Conflicts. Except as disclosed in Schedule 4.8, neither the
execution and delivery of this Agreement and the XXXXXX Transaction Documents,
nor the performance by XXXXXX of its obligations hereunder and thereunder, nor
the consummation of the transactions contemplated hereby or thereby, will: (i)
conflict with XXXXXX'x Certificate of Incorporation or bylaws; (ii) violate any
material statute, law, ordinance, rule or regulation applicable to XXXXXX or any
of its Subsidiaries or any of their properties or assets; or (iii) violate,
breach, be in conflict with or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or permit
the termination of any provision of, or result in the termination of, the
acceleration of the maturity of, or the acceleration of the performance of any
obligation of XXXXXX or any of its Subsidiaries, or result in the creation or
imposition of any Lien upon any properties, assets or business of XXXXXX or any
of its Subsidiaries under, any note, bond, indenture, mortgage, deed of trust,
lease, franchise, permit, authorization, license, contract, instrument or other
agreement or commitment or any order, judgment or decree to which XXXXXX or any
of its Subsidiaries is a party or by which XXXXXX or any of its Subsidiaries or
any of their respective assets or properties is bound or encumbered, or give any
Person the right to require XXXXXX or any of its Subsidiaries to purchase or
repurchase any notes, bonds or instruments of any kind except, in each case, for
such violations, conflicts, defaults or other occurrences which would not have,
and would not reasonably be expected to have, a Material Adverse Effect.
4.8.1. Except (i) for the filing of the articles of merger and
certificate of merger pursuant to Texas Law and Delaware Law, (ii) for the
XXXXXX stockholder approval (as set forth below) or (iii) with respect to
matters set forth in Schedule 4.8 of the Disclosure Schedule, no consent,
approval or authorization of, permit from, or declaration, filing or
registration with, any governmental or regulatory authority, or any other Person
is required to be made or obtained by XXXXXX or its Subsidiaries in connection
with the execution, delivery and performance of this Agreement, the XXXXXX
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby except where the failure to obtain such consent, approval,
authorization, permit or declaration or to make such filing or registration
would not have a Material Adverse Effect.
5
4.9. No Material Adverse Change. Except as set forth in Schedule 4.9,
since the XXXXXX Balance Sheet Date, XXXXXX has conducted its business in all
material respects only in the ordinary and usual course and except for XXXXXX
continuing to incur losses and depletion of its cash assets, there has been no
material adverse change in the assets, liabilities, properties, business or
condition, financial or otherwise, of XXXXXX, and no event or condition exists
or has occurred which would, so far as reasonably can be foreseen at this time,
have a Material Adverse Effect, nor has there been any damage, destruction or
loss materially affecting the assets, properties, business or condition of
XXXXXX, whether or not covered by insurance.
4.10. Tax Matters. Except as set forth in Schedule 4.10, the total
amounts accrued on the books and records of XXXXXX on both the XXXXXX Balance
Sheet Date and the Effective Date represent and will represent adequate
provisions, in accordance with GAAP, for the payment of all federal, state,
county, local, foreign and other income tax, excise tax, sales tax, use tax,
gross receipts tax, franchise tax, property tax, employment and payroll related
tax, and all other taxes and import duties, including any penalties or interest
thereon, whether or not measured in whole or in part by income, whether disputed
or not, which are hereafter found to be, or to have been, due with respect to
the conduct of the business of XXXXXX during all periods covered by the XXXXXX
Audited Financial Statement and during the period subsequent thereto and up to
and through the date of the Closing, respectively. Except as disclosed in
Schedule 4.10 or as would not have a Material Adverse Effect, XXXXXX has timely
filed, on or before the relevant due dates therefor (including any extensions of
time to file), all income tax, excise tax, sales tax, use tax, gross receipts
tax, franchise tax, employment and payroll related tax, property tax and all
other tax returns and reports which XXXXXX is required by law to file, all of
which were properly prepared on a reasonable basis. Except as disclosed in
Schedule 4.10, XXXXXX has paid or provided for all taxes shown to be due on such
returns and any amendments thereto. Except as disclosed in Schedule 4.10, there
are no unpaid deficiencies or other assessments of tax, interest or penalties
owed by XXXXXX.
4.11. Compliance with Laws. (a) Except as is set forth in Schedule
4.11, XXXXXX is in compliance with, and has not received notice from any
Governmental Authority alleging a violation by it of, any federal, state,
county, local or foreign, statute, law, ordinance, regulation or order (i)
applicable to it or its business, or (ii) which otherwise is applicable to it
involving the manufacture, production, storage, possession, sale, delivery or
distribution of any of its products or services; (b) XXXXXX has not received any
directives or orders from any Governmental Authority related to or affecting any
of its products or facilities; (c) XXXXXX has all licenses, permits, orders,
authorizations, notifications and approvals of any Governmental Authority
material to the conduct of its business as presently conducted (collectively,
the "XXXXXX Permits"); and (d) all material XXXXXX Permits, the loss of which
could have a Material Adverse Effect, are listed in Schedule 4.11 and are in
full force and effect, no violations are or have been recorded in respect of any
XXXXXX Permit which currently have or could have a Material Adverse Effect, and
no proceeding is pending, or, to the best knowledge of XXXXXX, threatened, to
revoke or limit any XXXXXX Permit, the loss of which could have a Material
Adverse Effect.
4.12. No Consents. Except for the approval of the Merger by the
stockholders of XXXXXX, and as disclosed in Schedule 4.12, no consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Authority or any other Person is required in connection with the
execution, delivery or performance of this Agreement by XXXXXX, the consummation
by XXXXXX of any of the transactions contemplated hereby or the receipt of the
GAMZ Merger Shares by the holders of the XXXXXX Shares pursuant to this
Agreement.
6
4.13. No Defaults Under Loan Agreements. Except as set forth in
Schedule 4.13, XXXXXX is not in default under any Contractual Obligation
relating to borrowed money to which it is a party or by which it or its material
assets or properties is bound, nor does any condition exist which with notice or
lapse of time or both would constitute such default, and each such contract or
other agreement relating to borrowed money is in full force and effect. Except
as set forth in Schedule 4.13, there is no agreement, contract or instrument to
which XXXXXX is a party and which evidences, individually or, in the case of
related transactions, collectively, indebtedness of XXXXXX for money borrowed.
4.14. Litigation. Except as set forth in Schedule 4.14, XXXXXX is not a
party to, nor, to its knowledge, threatened with, any litigation or judicial,
administrative or arbitration proceeding or investigation. Except as set forth
in Schedule 4.14, there is no dispute with any Person under contract with XXXXXX
which has a Material Adverse Effect on XXXXXX, or is reasonably likely to have a
Material Adverse Effect on XXXXXX, and there is no present or to XXXXXX'x
knowledge, threatened walkout, strike or any other similar occurrence.
4.15. Unaudited Financial Statements. XXXXXX has heretofore provided
GAMZ with preliminary drafts, prepared in consultation with XXXXXX'x auditors
but not yet audited, of the unaudited balance sheets of XXXXXX as at December
31, 2000, together with the related unaudited statements of income, for the year
then ended (the "XXXXXX Unaudited Financial Statement"). The XXXXXX Unaudited
Financial Statement was prepared in accordance with GAAP consistently applied
throughout the periods indicated and fairly presents the financial position,
results of operations, and changes in stockholders' equity of XXXXXX as at
December 31, 2000 and for the respective periods stated therein.
4.16. Agreements. Schedule 4.16 lists or refers to all of the following
types of contracts and other agreements (whether oral or written) that are not
otherwise disclosed herein and that provide for payments by or to XXXXXX in
excess of $10,000 (a) to which XXXXXX is a party or (b) by or to which XXXXXX or
its assets or properties are bound or subject: (i) contracts and other
agreements with any current or former officer, director, employee, consultant or
stockholder, including, without limitation, all non-competition agreements with
employees; (ii) contracts and other agreements for the sale of products or
services; (iii) contracts and other agreements for the purchase or acquisition
of products, materials, supplies, equipment, merchandise, or services; (iv)
joint venture agreements relating to its assets, properties or business or by or
to which it or its assets or properties are bound or subject; (v) warehousing,
distributorship, representative, management, marketing, sales agency or
advertising agreements; and (vi) any other material contract or other agreement
not made in the ordinary course of business (other than those reflected in any
other Schedule). All of the contracts and other agreements set forth in Schedule
4.16 are (except as set forth in said Schedule) in full force and effect in
accordance with their respective terms, and XXXXXX is not in default, nor does
any condition exist which with notice or lapse of time or both would constitute
a default by XXXXXX, in any material respect, under any of them, nor, to the
knowledge of XXXXXX, is any other party to any such contract or other agreement
in default in any material respect thereunder on the date hereof. On the date
hereof, XXXXXX is not a party to or bound by any contracts or other agreements
(other than those identified on a Schedule to this Agreement) which it believes
either individually or in the aggregate have or could have a Material Adverse
Effect on XXXXXX.
7
4.17. Real Estate. Except as set forth in Schedule 4.17, XXXXXX does
not own or lease any real property. Schedule 4.17 sets forth a list of: (i) all
leases, subleases or other agreements under which XXXXXX is lessor or lessee of
any real property. Schedule 4.17 includes, without limitation, the location of
the property, the names of the lessor and lessee, and any affiliation or other
association between XXXXXX and the lessor and lessee. Such leases, subleases and
other agreements are in full force and effect and, with respect to XXXXXX'x
performance thereunder, no default, or event which, with notice or lapse of time
or both, would constitute a default, in any material respect by XXXXXX, has
occurred thereunder.
The real estate owned or leased by XXXXXX is not subject in any
material respect to unlawful contamination from any substance or material
presently identified as toxic or hazardous by any Environmental Laws and XXXXXX
has not caused or suffered to occur a material spillage or other discharge of
any Hazardous Materials within the meaning of any Environmental Law or otherwise
conducted operations which could reasonably lead to the imposition of any Lien
upon any real property owned or leased by XXXXXX or any material fine upon
XXXXXX pursuant to any Environmental Law.
4.18. Officers, Directors and Employees. Schedule 4.18 sets forth as of
the date hereof the name and total annual compensation of each officer and
director of XXXXXX, and each employee and consultant of XXXXXX who is
compensated at a rate in excess of $60,000 per annum. Except for employment
agreements described in Schedule 4.16, XXXXXX is not a party to any Contractual
Obligation which could obligate XXXXXX to pay severance or other similar
compensation to an officer, director, employee or other Person solely as a
result of the Merger or other transactions contemplated hereunder.
4.19. Intellectual property.
4.19.1. Agreements--Schedule 4.19.1 contains a complete and
accurate list and summary description, including any royalties paid or received
by XXXXXX, of all contracts relating to the Intellectual Property Assets to
which XXXXXX is a party or by which XXXXXX is bound, except for any license
implied by the sale of a product and perpetual, paid-up licenses for commonly
available software programs with a value of less than $5,000 under which XXXXXX
is the licensee. There are no outstanding and, to XXXXXX'x knowledge, no
threatened, disputes or disagreements with respect to any such agreement.
4.19.2. Ownership of Intellectual Property Assets. Except as set
forth on Schedule 4.19.2:
4.19.2.1. XXXXXX is the owner of all right, title, and
interest in and to each of the Intellectual Property Assets, free and clear of
all liens, security interests, charges, encumbrances, equities, and other
adverse claims, and has the right to use without payment to a third party all of
the Intellectual Property Assets; and
4.19.2.2. all former and current employees of XXXXXX have
executed written contracts with XXXXXX that assign to XXXXXX all rights to any
inventions, improvements, discoveries, or information relating to the business
of XXXXXX. No employee of XXXXXX has entered into any contract that restricts or
limits in any way the scope or type of work in which the employee may be engaged
or requires the employee to transfer, assign, or disclose information concerning
his work to anyone other than XXXXXX.
4.19.3. Patents
4.19.3.1. Schedule 4.19.3 contains a complete and
accurate list and summary description of all Patents.
8
4.19.3.2. Except as set forth in Schedule 4.19.3, all of
the issued Patents are currently in compliance with formal legal requirements
(including payment of filing, examination, and maintenance fees and proofs of
working or use), and are not subject to any maintenance fees or taxes or actions
falling due within ninety days after the date of Closing.
4.19.3.3. Except as set forth in Schedule 4.19.3, no
Patent has been or is now involved in any interference, reissue, reexamination,
or opposition proceeding, and there is not to XXXXXX'x knowledge any potentially
interfering patent or patent application of any third party.
4.19.3.4. Except as set forth in Schedule 4.19.3, no
Patent is infringed or, to XXXXXX'x knowledge, has been challenged or threatened
in any way. Except as set forth in Schedule 4.19.3, none of the products
manufactured and sold, nor any process or know-how used, by XXXXXX infringes or
is alleged to infringe any patent or other proprietary right of any other
Person.
4.19.3.5. Except as set forth in Schedule 4.19.3, all
products made, used, or sold under the Patents have been marked with the proper
patent notice.
4.19.4. Trademarks
4.19.4.1. Schedule 4.19.4 contains a complete and
accurate list and summary description of all Marks registered with the United
States Patent and Trademark Office.
4.19.4.2. Except as set forth in Schedule 4.19.4, all
Marks that have been registered with the United States Patent and Trademark
Office are currently in compliance with all formal legal requirements (including
the timely post-registration filing of affidavits of use and incontestability
and renewal applications), are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety days after the
Closing.
4.19.4.3. Except as set forth in Schedule 4.19.3, no Xxxx
has been or is now involved in any opposition, invalidation, or cancellation
and, no such action is known by XXXXXX to be threatened with respect to any of
the Marks.
4.19.4.4. Except as set forth in Schedule 4.19.3, XXXXXX
does not know of any potentially interfering trademark or trademark application
of any third party.
4.19.4.5. Except as set forth in Schedule 4.19.3, no Xxxx
is infringed or, to XXXXXX'x knowledge, has been challenged or threatened in any
way. None of the Marks used by XXXXXX infringes or is alleged to infringe any
trade name, trademark, or service xxxx of any third party.
4.19.4.6. Except as set forth in Schedule 4.19.3, all
products and materials containing a Xxxx xxxx the proper federal registration
notice where permitted by law.
4.19.5. Copyrights
4.19.5.1. Schedule 4.19.5 contains a complete and
accurate list and summary description of all copyright registrations held by
XXXXXX.
4.19.5.2. Except as set forth in Schedule 4.19.5, all the
Copyrights which have been registered and are currently in compliance with
formal legal requirements, are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety days after the
date of Closing.
9
4.19.5.3. Except as set forth in Schedule 4.19.5, no
Copyright is infringed or, to XXXXXX'x knowledge, has been challenged or
threatened in any way. None of the subject matter of any of the Copyrights
infringes or is alleged to infringe any copyright of any third party or is a
derivative work based on the work of a third party.
4.19.6. Trade Secrets
4.19.6.1. Except as set forth in Schedule 4.19.6, with
respect to each Trade Secret, the documentation relating to such Trade Secret is
current, accurate, and sufficient in detail and content to identify and explain
it and to allow its full and proper use without reliance on the knowledge or
memory of any individual.
4.19.6.2. Except as set forth in Schedule 4.19.6, XXXXXX
has taken all reasonable precautions to protect the secrecy, confidentiality and
value of its Trade Secrets. XXXXXX has good title and an absolute (but not
necessarily exclusive) right to use the Trade Secrets. The Trade Secrets are not
part of the public knowledge or literature, and have not to XXXXXX'x knowledge
been used, divulged, or appropriated either for the benefit of any Person (other
than XXXXXX) or to XXXXXX'x detriment. No Trade Secret is subject to any adverse
claim or has been challenged or threatened in any way.
4.20. Products. XXXXXX has furnished GAMZ with representative
information describing XXXXXX products and services.
4.21. Liens. XXXXXX owns outright and has good and marketable title to
all of its tangible property, including, without limitation, all of the tangible
property reflected on the XXXXXX Balance Sheet, in each case free and clear of
any Lien, except as set forth on Schedule 4.21 and except for: (i) immaterial
tangible property, (ii) assets and properties disposed of, or subject to
purchase or sales orders, in the ordinary course of business since the XXXXXX
Balance Sheet Date, (iii) Liens securing taxes, assessments, governmental
charges or levies, or the claims of materialmen, carriers, landlords and like
persons, which are not yet due and payable, (iv) minor Liens of a character
which do not substantially impair the assets or properties of XXXXXX or
materially detract from its business and (v) as will be reflected in the XXXXXX
Unaudited Financial Statements.
4.22. Liabilities. As at the date of this Agreement, XXXXXX did not
have any material direct or indirect indebtedness or uninsured liability
accrued, absolute, or contingent (and likely of occurring) or otherwise,
including, without limitation, liabilities on account of taxes, other
governmental charges or lawsuits brought, whether or not of a kind required by
GAAP to be set forth, accrued, reserved for or reflected in a financial
statement ("XXXXXX Liabilities"), which have not been adequately accrued,
reserved for or reflected in the XXXXXX Unaudited Financial Statements, except
XXXXXX Liabilities (i) incurred since the XXXXXX Balance Sheet Date in the
ordinary course of business, (ii) incurred in connection with this Agreement,
(iii) of the type expressly referred to elsewhere in this Agreement or (iv) has
disclosed in Schedule 4.22.
10
4.23. Employee Benefit Plans. Schedule 4.23 sets forth a true and
complete list of all written and oral pension, profit sharing, retirement,
deferred compensation, stock purchase, stock option, incentive compensation,
bonus, vacation, severance, sickness or disability, hospitalization, individual
and group health and accident insurance, individual and group life insurance and
other material employee benefit plans, programs, commitments or funding
arrangements maintained by XXXXXX, to which XXXXXX is a party, or under which
XXXXXX has any obligations, present or future (other than obligations to pay
current wages, salaries or sales commissions terminable on notice of 30 days or
less) in respect of, or which otherwise cover or benefit, any of the current or
former officers, employees or sales representatives (whether or not employees)
of XXXXXX, or their beneficiaries (hereinafter individually referred to as
"XXXXXX Employee Benefit Plan" and collectively referred to as "XXXXXX Employee
Benefit Plans"). XXXXXX has delivered or made available to GAMZ true and
complete copies of all documents, as they may have been amended to the date
hereof, embodying the terms of the XXXXXX Employee Benefit Plans.
Except for the XXXXXX Employee Benefit Plans identified in Schedule 4.23, there
is no "employee pension benefit plan", "employee welfare benefit plan" or
"employee benefit plan" within the meaning of Sections 3(1), 3(2) and 3(3) of
ERISA. No XXXXXX Employee Benefit Plan to which XXXXXX or any ERISA Affiliate
has maintained or contributed to is subject to Title IV of ERISA or Section 412
of the Code.
XXXXXX does not maintain and has not maintained a plan which meets the safe
harbor requirements of Section 414(n)(5) of the Code and XXXXXX has not made any
representations (including oral representations) with respect to the existence
of such a plan to any customers, clients, employees or any other person. XXXXXX
does not maintain and has not maintained any "voluntary employees' beneficiary
association" within the meaning of Section 501(c)(9) of the Code.
Except as set forth in Schedule 4.23, each XXXXXX Employee Benefit Plan
described in Schedule 4.23 is in full force and effect in accordance with its
terms and there are no material actions, suits or claims pending (other than
routine claims for benefits) or, to XXXXXX'x knowledge, threatened, against any
XXXXXX Employee Benefit Plan or any fiduciary thereof and XXXXXX has performed
all material obligations required to be performed by it under, and is not in
default under or in violation of, any XXXXXX Employee Benefit Plan, in any
material respect, and XXXXXX is in compliance in all material respects with the
requirements prescribed by all statutes, laws, ordinances, orders or
governmental rules or regulations applicable to the XXXXXX Employee Benefit
Plans, including, without limitation, ERISA and the Code. Neither XXXXXX nor any
other "party-in-interest," as defined in Section 3(14) of ERISA, has engaged in
any "prohibited transaction," as defined in Section 406 of ERISA, which could
subject any XXXXXX Employee Benefit Plan, XXXXXX or GAMZ or any officer,
director, partner or employee of XXXXXX or GAMZ or any fiduciary of any XXXXXX
Employee Benefit Plan to a material penalty or excise tax imposed under Section
502(i) of ERISA and Section 4975 of the Code.
4.24. Potential Conflicts of Interest. Except as disclosed in Schedule
4.24, no officer or director of XXXXXX: (i) owns, directly or indirectly, any
interest in (excepting not more than 5% stock holdings for investment purposes
in securities of publicly held and traded companies) or is an officer, director,
employee or consultant of any entity which is a competitor, lessor, lessee,
customer or supplier of XXXXXX; (ii) has any interest, direct or indirect, in
any material property or assets of XXXXXX (except in his capacity as a
stockholder of XXXXXX); (iii) owns directly or indirectly, in whole or in part,
any material copyright, trademark, trade name, service xxxx, franchise, patent,
invention, permit, license, secret or confidential information of the nature
requiring a license for use by XXXXXX which XXXXXX is using or the use of which
is necessary for the business of XXXXXX; or (iv) has any material cause of
action or other claim whatsoever against, or owes any material amount to,
XXXXXX, except for claims in the ordinary course of business (such as for
accrued vacation pay, accrued benefits under XXXXXX Employee Benefit Plans,
expense advances and similar matters).
11
4.25. Full Disclosure. None of the information supplied or to be
supplied by XXXXXX for inclusion in the documents to be prepared in connection
with the transactions contemplated by this Agreement including, without
limitation, (i) documents to be filed with the SEC, (ii) filings pursuant to any
state securities and blue sky laws, and (iii) filings made in connection with
obtaining the approvals of Governmental Authorities, contain or will contain, at
the time such documents are filed with any federal or state regulatory authority
and/or at the time they are distributed to the stockholders of GAMZ, any untrue
statements of a material fact or omit to state any material fact necessary in
order to make the statements therein not misleading.
4.26. Information in Proxy Statement. Information supplied by XXXXXX or
any of its Subsidiaries for inclusion or incorporation by reference in the Proxy
Statement, at the date mailed to GAMZ stockholders and at the time of the GAMZ
stockholders meeting contemplated hereby, will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
5. Representations and Warranties of GAMZ. GAMZ, which for purposes of this
Section 5 shall be deemed to include all Subsidiaries of GAMZ unless the context
indicates otherwise, represents and warrants to XXXXXX that, except as disclosed
on any Schedule:
5.1. Existence; Good Standing; Corporate Authority. GAMZ is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas and has the corporate power and lawful authority to own,
lease and operate its assets, properties and business and to carry on its
business in all material respects as now conducted.
5.2. Qualification. GAMZ is duly qualified as a foreign corporation to
transact business in the jurisdictions set forth in Schedule 5.2, which are the
only jurisdictions where the nature of its business or the ownership of its
assets makes such qualification necessary, except where the failure to so
qualify would not have a Material Adverse Effect on GAMZ.
5.3. Authority. GAMZ has the requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement, every other
document or agreement to be executed by GAMZ under this Agreement (each a "GAMZ
Transaction Document") and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement by GAMZ and the
performance by GAMZ of its obligations hereunder, the execution and delivery of
each of the GAMZ Transaction Documents by GAMZ and the performance of its
obligations thereunder and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by the Board of Directors of GAMZ
and all other necessary corporate action on the part of GAMZ, other than the
adoption and approval of this Agreement by the stockholders of GAMZ, and no
other corporate proceedings on the part of GAMZ are necessary to authorize this
Agreement, the GAMZ Transaction Documents and the transactions contemplated
hereby and thereby (assuming due authorization, execution and delivery by the
other party or parties thereto). The Board of Directors of GAMZ has approved the
agreement of merger contained in this Agreement and the Merger. This Agreement
has been duly and validly executed and delivered by GAMZ and constitutes a
legal, valid and binding obligation of GAMZ, enforceable against it in
accordance with its terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally or by
general principles of equity. Each GAMZ Transaction Document has been, or, as of
the Effective Time, will have been, duly and validly authorized, executed and
delivered by GAMZ, and constitutes or will constitute as of such time a legally
valid and binding obligation of GAMZ, enforceable against it in accordance with
its terms, except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally or by general
principles of equity.
12
5.4. Capitalization. On the date hereof, GAMZ's authorized Capital
Stock consists of 50,000,000 GAMZ Shares of which 13,281,341 shares are issued
and outstanding (after giving effect to redemptions of shares which have been
approved by GAMZ's Board of Directors and are reflected in GAMZ's financial
statements but not completed) as of the date hereof. No other class of Capital
Stock of GAMZ is authorized or outstanding. All of the issued and outstanding
GAMZ Shares are duly authorized and are legally and validly issued, fully paid
and nonassessable. Upon consummation of the transactions contemplated by this
Agreement and the issuance and delivery of certificates representing the GAMZ
Merger Shares as provided in this Agreement, such GAMZ Merger Shares will be
validly issued, fully paid, non-assessable shares free and clear of all Liens.
5.5. GAMZ Convertible Securities. As of the date hereof, except as set
forth in Schedule 5.5, (a) there are no outstanding Convertible Securities to
acquire any securities of GAMZ or its Subsidiaries from GAMZ or its Subsidiaries
except as contemplated by this Agreement in connection with the Merger; (b) no
stockholder of GAMZ has preemptive rights; and (c) there are no voting trusts or
other agreements or understandings with respect to the voting of shares of any
class of Capital Stock of GAMZ, except as contemplated by this Agreement.
5.6. Subsidiaries. Except as set forth in Schedule 5.6, GAMZ has no
Subsidiaries and neither GAMZ nor any of its Subsidiaries is a party to any
partnership or joint venture agreement or arrangement or owns any equity
interest in any other corporation, partnership or other entity. Each Subsidiary
of GAMZ is a corporation duly organized, validly existing and in good standing
under the laws of the state or other jurisdiction of incorporation set forth on
Schedule 5.6 and is duly qualified to do business as a foreign corporation, and
in good standing in the jurisdictions (listed in Schedule 5.6) in which it owns
property of the nature, or transacts business of the type that would make such
qualification necessary, except where the failure to so qualify would not have a
Material Adverse Effect. Each Subsidiary of GAMZ has the power and lawful
authority to own, lease and operate its assets, properties and business and to
carry on its business in all material respects as now conducted. GAMZ owns of
record, free and clear of all Liens, one hundred percent (100%) of the issued
and outstanding Capital Stock of its Subsidiaries.
5.7. Articles of Incorporation and Bylaws. GAMZ has made available to
XXXXXX true, correct and complete copies of the Articles of Incorporation and
Bylaws of GAMZ, and all amendments thereto as of the date hereof.
13
5.8. No Conflicts.
5.8.1. Except as set forth in Schedule 5.8, neither the execution
and delivery of this Agreement and the GAMZ Transaction Documents, nor the
performance by GAMZ of its obligations hereunder and thereunder, nor the
consummation of the transactions contemplated hereby or thereby, will: (i)
conflict with GAMZ's articles of incorporation or bylaws; (ii) violate any
material statute, law, ordinance, rule or regulation applicable to GAMZ or any
of its Subsidiaries or any of their properties or assets; or (iii) violate,
breach, be in conflict with or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or permit
the termination of any provision of, or result in the termination of, the
acceleration of the maturity of, or the acceleration of the performance of any
obligation of GAMZ or any of its Subsidiaries, or result in the creation or
imposition of any Lien upon any properties, assets or business of GAMZ or any of
its Subsidiaries under, any note, bond, indenture, mortgage, deed of trust,
lease, franchise, permit, authorization, license, contract, instrument or other
agreement or commitment or any order, judgment or decree to which GAMZ or any of
its Subsidiaries is a party or by which GAMZ or any of its Subsidiaries or any
of their respective assets or properties is bound or encumbered, or give any
Person the right to require GAMZ or any of its Subsidiaries to purchase or
repurchase any notes, bonds or instruments of any kind except, in each case, for
such violations, conflicts, defaults or other occurrences which would not have,
and would not reasonably be expected to have, a Material Adverse Effect.
5.8.2. Except (i) for applicable requirements, if any, of the
Exchange Act and the rules and regulations thereunder, the Securities Act and
the rules and regulations thereunder, and state securities or "blue sky" laws,
(ii) for the filing of articles or certificates of merger pursuant to the Texas
Business Corporation Law, (iii) for the GAMZ stockholder approvals or (iv) with
respect to matters set forth in Schedules 5.8 of the Disclosure Schedule, no
consent, approval or authorization of, permit from, or declaration, filing or
registration with, any governmental or regulatory authority, or any other Person
is required to be made or obtained by GAMZ or its Subsidiaries in connection
with the execution, delivery and performance of this Agreement, the GAMZ
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby except where the failure to obtain such consent, approval,
authorization, permit or declaration or to make such filing or registration
would not have a Material Adverse Effect.
5.9. No Material Adverse Change. Since the GAMZ Balance Sheet Date,
GAMZ has conducted its business in all material respects only in the ordinary
and usual course and except for GAMZ continuing to incur losses and depletion of
its cash assets there has been no material adverse change in the assets,
liabilities, properties, business or condition, financial or otherwise, of GAMZ,
and no event or condition exists or has occurred which would, so far as
reasonably can be foreseen at this time, have a Material Adverse Effect, nor has
there been any damage, destruction or loss materially affecting the assets,
properties, business or condition of GAMZ, whether or not covered by insurance.
5.10. Tax Matters. Except as set forth in Schedule 5.10, the total
amounts accrued on the books and records of GAMZ on both the GAMZ Balance Sheet
Date and the Effective Date represent and will represent adequate provisions, in
accordance with GAAP, for the payment of all federal, state, county, local,
foreign and other income tax, excise tax, sales tax, use tax, gross receipts
tax, franchise tax, property tax, employment and payroll related tax, and all
other taxes and import duties, including any penalties or interest thereon,
whether or not measured in whole or in part by income, whether disputed or not,
which are hereafter found to be, or to have been, due with respect to the
conduct of the business of GAMZ during all periods covered by the GAMZ Audited
Financial Statement and during the period subsequent thereto and up to and
through the date of the Closing, respectively. Except as disclosed in Schedule
5.10 or as would not have a Material Adverse Effect, GAMZ has timely filed, on
or before the relevant due dates therefor (including any extensions of time to
file), all income tax, excise tax, sales tax, use tax, gross receipts tax,
franchise tax, employment and payroll related tax, property tax and all other
tax returns and reports which GAMZ is required by law to file, all of which were
properly prepared on a reasonable basis. Except as disclosed in Schedule 5.10,
GAMZ has paid or provided for all taxes shown to be due on such returns and any
amendments thereto. Except as disclosed in Schedule 5.10, there are no unpaid
deficiencies or other assessments of tax, interest or penalties owed by GAMZ.
14
5.11. Compliance with Laws. (a) GAMZ is in compliance with, and has not
received notice from any Governmental Authority alleging a violation by it of,
any federal, state, county, local or foreign, statute, law, ordinance,
regulation or order (i) applicable to it or its business, or (ii) which
otherwise is applicable to it involving the manufacture, production, storage,
possession, sale, delivery or distribution of any of its products or services;
(b) GAMZ has not received any directives or orders from any Governmental
Authority related to or affecting any of its products or facilities; (c) GAMZ
has all licenses, permits, orders, authorizations, notifications and approvals
of any Governmental Authority material to the conduct of its business as
presently conducted (collectively, the "GAMZ Permits"); and (d) all material
GAMZ Permits, the loss of which could have a Material Adverse Effect, are listed
in Schedule 5.11 and are in full force and effect, no violations are or have
been recorded in respect of any GAMZ Permit which currently have or could have a
Material Adverse Effect, and no proceeding is pending, or, to the best knowledge
of GAMZ, threatened, to revoke or limit any GAMZ Permit, the loss of which could
have a Material Adverse Effect.
5.12. No Consents. Except for applicable requirements of the Texas
Business Corporation Act, the Securities Act, the Exchange Act, and state
securities or blue sky laws for which GAMZ is responsible, and except for the
approval of the stockholders of GAMZ, no consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Authority or any other Person is required in connection with the execution,
delivery or performance of this Agreement by GAMZ or the consummation by GAMZ of
any of the transactions contemplated hereby.
5.13. No Defaults Under Loan Agreements. Except as indicated in its
filings under the Securities Exchange Act of 1934, GAMZ is not in default under
any Contractual Obligation relating to borrowed money to which it is a party or
by which it or its material assets or properties is bound, nor does any
condition exist which with notice or lapse of time or both would constitute such
default, and each such contract or other agreement relating to borrowed money is
in full force and effect. Except as set forth in Schedule 5.13, there is no
agreement, contract or instrument to which GAMZ is a party and which evidences,
individually or, in the case of related transactions, collectively, indebtedness
of GAMZ for money borrowed.
5.14. Litigation. Except as set forth in Schedule 5.14, neither GAMZ
nor any of its Subsidiaries is a party to, or, to its knowledge, threatened
with, any material litigation or judicial, administrative or arbitration
proceeding or investigation. Except as set forth in Schedule 5.14, there is no
dispute with any Person under contract with GAMZ which has a Material Adverse
Effect on GAMZ, or is reasonably likely to have a Material Adverse Effect on
GAMZ, and there is no present or to GAMZ's knowledge, threatened walkout, strike
or any other similar occurrence.
15
5.15. Public Reporting Company. The GAMZ Shares are registered under
Section 12(g) of the Exchange Act, are quoted on the OTC Bulletin Board, and are
currently subject to the periodic reporting requirements of Section 13 or
Section 15(d) of the Exchange Act. GAMZ has filed all reports required to be
filed by it pursuant to the Exchange Act and the regulations promulgated
thereunder through the date hereof. GAMZ has heretofore delivered to XXXXXX a
copy of its Annual Reports on Form 10-KSB pursuant to Sections 13 or 15(d) of
the Exchange Act for the fiscal year ended December 31, 2000, and all other
registration statements and reports required to be or otherwise filed by it
since December 31, 2000 with the SEC pursuant to the Securities Act or the
Exchange Act (collectively, the "GAMZ Reports"). None of the GAMZ Reports
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading (in each case as of the date hereof). Included
or incorporated by reference in the GAMZ Reports are, without limitation, the
consolidated balance sheets of GAMZ as at December 31, 2000 and December 31,
1999 and the related statements of income, cash flows, and changes in
stockholders' equity, and the notes thereto, for each of the two fiscal years
then ended, audited by Xxxxxx X. Xxxxxx & Associates, P.C., Certified Public
Accountant, whose report thereon is included therewith (the "GAMZ Audited
Financial Statements"). The GAMZ Audited Financial Statements were prepared in
accordance with GAAP consistently applied throughout the periods indicated and
fairly present the consolidated financial position, results of operations, cash
flows, and changes in stockholders' equity of GAMZ and its consolidated
Subsidiaries as at the respective dates and for the respective periods stated
therein in each case in accordance with GAAP consistently applied.
5.16. Agreements. Schedule 5.16 lists or refers to all of the following
types of contracts and other agreements (whether oral or written) that are not
otherwise disclosed herein and that provide for payments by or to GAMZ in excess
of $5,000 (a) to which GAMZ is a party, or (b) by or to which GAMZ or its assets
or properties are bound or subject: (i) contracts and other agreements with any
current or former officer, director, employee, consultant or stockholder,
including, without limitation, all non-competition agreements with employees;
(ii) contracts and other agreements for the sale of products or services; (iii)
contracts and other agreements for the purchase or acquisition of products,
materials, supplies, equipment, merchandise, or services; (iv) joint venture
agreements relating to its assets, properties or business or by or to which it
or its assets or properties are bound or subject; (v) warehousing,
distributorship, representative, management, marketing, sales agency or
advertising agreements; and (vi) any other material contract or other agreement
not made in the ordinary course of business (other than those reflected in any
other Schedule). All of the contracts and other agreements set forth in Schedule
5.16 are (except as set forth in said Schedule) in full force and effect in
accordance with their terms, and GAMZ is not in default, nor does any condition
exist which with notice or lapse of time or both would constitute a default by
GAMZ, in any material respect, under any of them, nor, to the knowledge of GAMZ,
is any other party to any such contract or other agreement in default in any
material respect thereunder on the date hereof. On the date hereof, GAMZ is not
a party to or bound by any contracts or other agreements (other than those
identified on a Schedule to this Agreement) which it believes either
individually or in the aggregate have or could have a Material Adverse Effect on
GAMZ.
5.17. Real Estate. Except as set forth in Schedule 5.17, GAMZ does not
lease any real property. Schedule 5.17 sets forth a list of: (i) all leases,
subleases or other agreements under which GAMZ is lessor or lessee of any real
property. Schedule 5.17 includes, without limitation, the location of the
property, the names of the lessor and lessee, and any affiliation or other
association between GAMZ and the lessor and lessee. Such leases, subleases and
other agreements are in full force and effect and, with respect to GAMZ's
performance thereunder, no default, or event which, with notice or lapse of time
or both, would constitute a default, in any material respect by GAMZ, has
occurred thereunder.
16
The real estate leased by GAMZ is not subject in any material respect to any
unlawful contamination from any substance or material presently identified as
toxic or hazardous by any Environmental Laws and GAMZ has not caused or suffered
to occur a material spillage or other discharge of any Hazardous Materials
within the meaning of any Environmental Law or otherwise conducted operations
which could reasonably lead to the imposition of any Lien upon any real property
owned or leased by GAMZ or any material fine upon GAMZ pursuant to any
Environmental Law.
5.18. Officers, Directors and Employees. Schedule 5.18 sets forth as of
the date hereof the name and total annual compensation of each officer and
director of GAMZ, and each employee and consultant of GAMZ who is compensated at
a rate in excess of $60,000 per annum. Except for employment agreements
described in Schedule 5.18, GAMZ is not a party to any Contractual Obligation
which could obligate GAMZ to pay severance or other similar compensation to an
officer, director, employee or other Person solely as a result of the Merger or
other transactions contemplated hereunder.
5.19. Intellectual property.
5.19.1. Agreements. Schedule 5.19.1 contains a complete and
accurate list and summary description, including any royalties paid or received
by the GAMZ, of all contracts relating to the Intellectual Property Assets to
which GAMZ is a party or by which GAMZ is bound, except for any license implied
by the sale of a product and perpetual, paid-up licenses for commonly available
software programs with a value of less than $5,000 under which GAMZ is the
licensee. There are no outstanding and, to GAMZ's knowledge, no threatened,
disputes or disagreements with respect to any such agreement.
5.19.2. Ownership of Intellectual Property
5.19.2.1. GAMZ is the owner of all right, title, and
interest in and to each of the Intellectual Property Assets, free and clear of
all liens, security interests, charges, encumbrances, equities, and other
adverse claims, and has the right to use without payment to a third party all of
the Intellectual Property Assets.
5.19.2.2. Except as set forth in Schedule 4.19.2, all
former and current employees of GAMZ have executed written contracts with GAMZ
that assign to GAMZ all rights to any inventions, improvements, discoveries, or
information relating to the business of GAMZ. No employee of GAMZ has entered
into any contract that restricts or limits in any way the scope or type of work
in which the employee may be engaged or requires the employee to transfer,
assign, or disclose information concerning his work to anyone other than GAMZ.
5.19.3. Patents
5.19.3.1. Schedule 5.19.3 contains a complete and
accurate list and summary description of all Patents.
5.19.3.2. All of the issued Patents are currently in
compliance with formal legal requirements (including payment of filing,
examination, and maintenance fees and proofs of working or use), are not subject
to any maintenance fees or taxes or actions falling due within ninety days after
the date of Closing.
17
5.19.3.3. No Patent has been or is now involved in any
interference, reissue, reexamination, or opposition proceeding. There is not to
GAMZ's knowledge any potentially interfering patent or patent application of any
third party.
5.19.3.4. No Patent is infringed or, to GAMZ's knowledge,
has been challenged or threatened in any way. None of the products manufactured
and sold, nor any process or know-how used, by GAMZ infringes or is alleged to
infringe any patent or other proprietary right of any other Person.
5.19.3.5. All products made, used, or sold under the
Patents have been marked with the proper patent notice.
5.19.4. Trademarks
5.19.4.1. Schedule 5.19.4 contains a complete and
accurate list and summary description of all Marks registered with the United
States Patent and Trademark Office.
5.19.4.2. All Marks that have been registered with the
United States Patent and Trademark Office are currently in compliance with all
formal legal requirements (including the timely post-registration filing of
affidavits of use and incontestability and renewal applications), are valid and
enforceable, and are not subject to any maintenance fees or taxes or actions
falling due within ninety days after the Closing.
5.19.4.3. Except as set forth in Schedule 5.19.4, no Xxxx
has been or is now involved in any opposition, invalidation, or cancellation
and, no such action is known by GAMZ to be threatened with respect to any of the
Marks.
5.19.4.4. GAMZ does not know of any potentially
interfering trademark or trademark application of any third party.
5.19.4.5. No Xxxx is infringed or, to GAMZ's knowledge,
has been challenged or threatened in any way. None of the Marks used by GAMZ
infringes or is alleged to infringe any trade name, trademark, or service xxxx
of any third party.
5.19.4.6. All products and materials containing a Xxxx
xxxx the proper federal registration notice where permitted by law.
5.19.5. Copyrights
5.19.5.1. Schedule 5.19.5 contains a complete and
accurate list and summary description of all copyright registrations held by
GAMZ.
5.19.5.2. All the Copyrights which have been registered
and are currently in compliance with formal legal requirements, are valid and
enforceable, and are not subject to any maintenance fees or taxes or actions
falling due within ninety days after the date of Closing.
5.19.5.3. No Copyright is infringed or, to GAMZ's
knowledge, has been challenged or threatened in any way. None of the subject
matter of any of the Copyrights infringes or is alleged to infringe any
copyright of any third party or is a derivative work based on the work of a
third party.
18
5.19.6. Trade Secrets
5.19.6.1. With respect to each Trade Secret, the
documentation relating to such Trade Secret is current, accurate, and sufficient
in detail and content to identify and explain it and to allow its full and
proper use without reliance on the knowledge or memory of any individual.
5.19.6.2. GAMZ has taken all reasonable precautions to
protect the secrecy, confidentiality, and value of its Trade Secrets. GAMZ has
good title and an absolute (but not necessarily exclusive) right to use the
Trade Secrets. The Trade Secrets are not part of the public knowledge or
literature, and have not to GAMZ's knowledge been used, divulged, or
appropriated either for the benefit of any Person (other than GAMZ) or to GAMZ's
detriment. No Trade Secret is subject to any adverse claim or has been
challenged or threatened in any way.
5.20. Products. GAMZ has furnished XXXXXX with representative
information describing GAMZ products and services.
5.21. Liens. GAMZ owns outright and has good and marketable title to
all of its tangible property, including, without limitation, all of the tangible
property reflected on the GAMZ Balance Sheet, in each case free and clear of any
Lien, except as set forth on Schedule 5.21 and except for: (i) immaterial
tangible property, (ii) assets and properties disposed of, or subject to
purchase or sales orders, in the ordinary course of business since the GAMZ
Balance Sheet Date, (iii) Liens securing taxes, assessments, governmental
charges or levies, or the claims of materialmen, carriers, landlords and like
persons, which are not yet due and payable, (iv) minor Liens of a character
which do not substantially impair the assets or properties of GAMZ or materially
detract from its business and (v) as reflected in the GAMZ Audited Financial
Statements.
5.22. Liabilities. As at the date of this Agreement, GAMZ did not have
any material direct or indirect indebtedness or uninsured liability accrued,
absolute, or contingent (and likely of occurring) or otherwise, including,
without limitation, liabilities on account of taxes, other governmental charges
or lawsuits brought, whether or not of a kind required by GAAP to be set forth,
accrued, reserved for or reflected in a financial statement ("GAMZ
Liabilities"), which have not been adequately accrued, reserved for or reflected
in the GAMZ Audited Financial Statements, except GAMZ Liabilities (i) incurred
since the GAMZ Balance Sheet Date in the ordinary course of business, (ii)
incurred in connection with this Agreement, or (iii) of the type expressly
referred to elsewhere in this Agreement.
5.23. Employee Benefit Plans. Schedule 5.23 sets forth a true and
complete list of all written and oral pension, profit sharing, retirement,
deferred compensation, stock purchase, stock option, incentive compensation,
bonus, vacation, severance, sickness or disability, hospitalization, individual
and group health and accident insurance, individual and group life insurance and
other material employee benefit plans, programs, commitments or funding
arrangements maintained by GAMZ, to which GAMZ is a party, or under which GAMZ
has any obligations, present or future (other than obligations to pay current
wages, salaries or sales commissions terminable on notice of 30 days or less) in
respect of, or which otherwise cover or benefit, any of the current or former
officers, employees or sales representatives (whether or not employees) of GAMZ,
or their beneficiaries (hereinafter individually referred to as "GAMZ Employee
Benefit Plan" and collectively referred to as "GAMZ Employee Benefit Plans").
GAMZ has delivered or made available to XXXXXX true and complete copies of all
documents, as they may have been amended to the date hereof, embodying the terms
of the GAMZ Employee Benefit Plans.
19
Except for the GAMZ Employee Benefit Plans identified in Schedule 5.23, there is
no "employee pension benefit plan," "employee welfare benefit plan" or "employee
benefit plan" within the meaning of Sections 3(1), 3(2) and 3(3) of ERISA. No
GAMZ Employee Benefit Plan to which GAMZ or any ERISA Affiliate has maintained
or contributed to is subject to Title IV of ERISA or Section 412 of the Code.
GAMZ does not maintain and has not maintained a plan which meets the safe harbor
requirements of Section 414(n)(5) of the Code and GAMZ has not made any
representations (including oral representations) with respect to the existence
of such a plan to any customers, clients, employees or any other person. GAMZ
does not maintain and has not maintained any "voluntary employees' beneficiary
association" within the meaning of Section 501(c)(9) of the Code.
Except as set forth in Schedule 5.23, each GAMZ Employee Benefit Plan described
in Schedule 5.23 is in full force and effect in accordance with its terms and
there are no material actions, suits or claims pending (other than routine
claims for benefits) or, to GAMZ's knowledge, threatened, against any GAMZ
Employee Benefit Plan or any fiduciary thereof and GAMZ has performed all
material obligations required to be performed by it under, and is not in default
under or in violation of, any GAMZ Employee Benefit Plan, in any material
respect, and GAMZ is in compliance in all material respects with the
requirements prescribed by all statutes, laws, ordinances, orders or
governmental rules or regulations applicable to the GAMZ Employee Benefit Plans,
including, without limitation, ERISA and the Code. Neither GAMZ nor any other
"party-in-interest," as defined in Section 3(14) of ERISA, has engaged in any
"prohibited transaction," as defined in Section 406 of ERISA, which could
subject any GAMZ Employee Benefit Plan, GAMZ or XXXXXX or any officer, director,
partner or employee of GAMZ or XXXXXX or any fiduciary of any GAMZ Employee
Benefit Plan to a material penalty or excise tax imposed under Section 502(i) of
ERISA and Section 4975 of the Code.
5.24. Potential Conflicts of Interest. Except as disclosed in Schedule
5.24, no officer or director of GAMZ: (i) owns, directly or indirectly, any
interest in (excepting not more than 5% stock holdings for investment purposes
in securities of publicly held and traded companies) or is an officer, director,
employee or consultant of any entity which is a competitor, lessor, lessee,
customer or supplier of GAMZ; (ii) has any interest, direct or indirect, in any
material property or assets of GAMZ (except in his capacity as a stockholder of
GAMZ); (iii) owns directly or indirectly, in whole or in part, any material
copyright, trademark, trade name, service xxxx, franchise, patent, invention,
permit, license, secret or confidential information of the nature requiring a
license for use by GAMZ which GAMZ is using or the use of which is necessary for
the business of GAMZ; or (iv) has any material cause of action or other claim
whatsoever against, or owes any material amount to, GAMZ, except for claims in
the ordinary course of business (such as for accrued vacation pay, accrued
benefits under GAMZ Employee Benefit Plans, expense advances and similar
matters).
5.25. Full Disclosure. None of the information supplied or to be
supplied by GAMZ for inclusion in the documents to be prepared in connection
with the transactions contemplated by this Agreement including, without
limitation, (i) documents to be filed with the SEC, (ii) filings pursuant to any
state securities and blue sky laws, and (iii) filings made in connection with
obtaining the approvals of Governmental Authorities, at the time such documents
are filed with any federal or state regulatory authority and/or at the time they
are distributed to stockholders of GAMZ, contain or will contain any untrue
statements of a material fact or omit to state any material fact necessary in
order to make the statements therein not misleading.
20
5.26. Information in Proxy Statement. Information supplied by GAMZ or
any of its Subsidiaries for inclusion or incorporation by reference in (i) the
Proxy Statement (or any amendment thereof or supplement thereto), at the date
mailed to GAMZ stockholders and at the time of the GAMZ stockholders meeting
contemplated hereby, will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.
5.27. Xxxxxx Equipment Leaseback Arrangements. GAMZ understands that
following the Closing directors designated by XXXXXX will constitute a majority
of the Board of Directors of GAMZ, and that it is contemplated that a high
priority will be placed upon satisfying all currently outstanding leaseback
arrangements for XXXXXX equipment promptly and in any event by November 30,
2001, and upon obtaining funds sufficient for that purpose.
5.28. GAMZ Merger Shares. The GAMZ Merger Shares and any Convertible
Securities issued to holders of XXXXXX Capital Stock or XXXXXX Convertible Stock
shall have been issued in compliance with all federal and state securities laws.
6. Incorporation of Schedules. The parties recognize that there may be some
overlapping in the disclosure required pursuant to a number of the
representations and Schedules set forth above. Failure of disclosure in response
to one item shall not be deemed a default so long as disclosure is fairly
contained in the Schedules and, in the case of GAMZ, the GAMZ Reports, taken as
a whole. All Schedules are being delivered in preliminary form, with final
Schedules to follow in accordance with Section 7.1.1. All references to the
Schedules in this Agreement shall be deemed to refer to the final Schedules
except in connection with the rights of a party to terminate this Agreement in
accordance with Sections 8.12 or 9.11.
7. Covenants and Agreements. The parties covenant and agree as follows
(references to XXXXXX and GAMZ shall be deemed to include their respective
Subsidiaries unless the context otherwise requires):
7.1. Covenants of Each of GAMZ and XXXXXX.
7.1.1. Delivery of Final Schedules. Each of GAMZ and XXXXXX shall
deliver to the other, not later than May 14, 2001, final versions of the
Schedules to this Agreement.
7.1.2. Conduct of Business by GAMZ or XXXXXX. Commencing the date
after the date hereof and at all times prior to the Effective Time or the date,
if any, on which this Agreement is earlier terminated pursuant to Article 12
hereof, and except as may be required pursuant to this Agreement, or as
disclosed or contemplated in the Disclosure Schedule (including the agreements
and contemplated agreements referred to therein, and the consummation of the
transactions contemplated by such agreements) or as may be consented to in
writing by the other, GAMZ and XXXXXX:
7.1.2.1. shall conduct their respective operations
according to their ordinary and usual course of business.
21
7.1.2.2. shall use their best efforts to preserve intact
their respective business organizations and good will in all material respects,
keep available the services of their respective partners, officers and employees
as a group and maintain satisfactory relations with lessees, suppliers,
distributors, customers, banks and others having business relationships with
them;
7.1.2.3. shall confer on a regular and frequent basis
with one or more representatives of the other to report operational matters of a
material nature and the general status of ongoing operations, subject to
compliance with applicable law;
7.1.2.4. shall notify the other of any emergency or other
change in the normal course of their respective businesses or in the operation
of their properties and of any governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated) if
such emergency, change, complaint, investigation or hearing or the effect
thereof would be material to the business, operations or financial condition of
either GAMZ or XXXXXX, as the case may be, taken as a whole;
7.1.3. Litigation. GAMZ and XXXXXX shall promptly notify each
other of any lawsuit, claims, proceedings or investigations which after the date
hereof are threatened or commenced against it or against any officer, director,
employee, affiliate or consultant of it, with respect to the transactions
contemplated hereby or which reasonably could be expected to have a Material
Adverse Effect.
7.1.4. Corporate Examination and Investigations. Each party has
afforded and shall continue to afford to the other party, through its employees
and representatives, the opportunity to make such reasonable investigation of
the property and plant of such party as are reasonable and appropriate for
transactions of the nature contemplated hereby. In order that the parties may
have full opportunity to make such business, accounting, regulatory and legal
review, examination or investigation, each party shall furnish the
representatives of the other during such period with all such information as
such representatives may reasonably request and cause its officers, employees,
consultants, accountants and attorneys to cooperate fully with such
representatives in connection with such review and examination and to make full
disclosure of all material facts affecting such party's financial condition,
regulatory affairs and business operations.
7.1.5. Meeting of Stockholders. Each of GAMZ and XXXXXX will take
all action necessary in accordance with applicable law and its organizational
documents to convene a meeting of its stockholders as promptly as practicable to
consider and vote upon the adoption of this Agreement and the transactions
contemplated hereby, as required by applicable law. The Boards of Directors of
GAMZ and XXXXXX will recommend that their respective stockholders vote in favor
of such adoption, and GAMZ and XXXXXX will each take all lawful action to
solicit such approval, including, without limitation, timely mailing the Proxy
Statement/; provided, however, that nothing contained in this Section 7.1.5
shall prohibit either GAMZ or XXXXXX from taking and disclosing to its
stockholders a position with respect to any tender offer from a third party as
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to, or having any communication with, their respective
22
stockholders if, in the good faith judgment of the Board of Directors of GAMZ or
XXXXXX, as applicable, after consultation with outside counsel, failure so to
disclose or communicate would be inconsistent with its fiduciary duties under
applicable law. The meetings of the stockholders of GAMZ and XXXXXX shall be
held as soon as practicable and in any event (to the extent permissible under
applicable law) within 30 days after the date upon which the Proxy Statement
shall have been cleared for release to the stockholders of GAMZ by the SEC;
provided, however, that notwithstanding anything to the contrary contained in
this Agreement, GAMZ may adjourn or postpone its meetings of stockholder to the
extent necessary, in the opinion of its counsel, to supplement or amend the
Proxy Statement in advance of a vote on this Agreement and the Merger. GAMZ and
XXXXXX shall coordinate and cooperate with respect to the timing of such
meetings and shall endeavor to hold such meetings on the same day.
7.1.6. Cooperation in Preparing Applications. Each of the parties
shall assist and cooperate fully with the other in the prompt preparation and
filing of any applications, approvals, consents or similar documents necessary
or advisable in connection with the transactions contemplated hereunder or under
any qualifications under state securities laws, which counsel for XXXXXX and
counsel for GAMZ shall agree are required for the proper and effective
consummation of the transactions provided for in this Agreement.
7.1.7. Confidentiality. XXXXXX and GAMZ each will, and will each
cause its officers, directors, employees, auditors, attorneys, financial
advisors and other consultants to, hold in confidence all information furnished
to it by the other in connection with the transactions contemplated by this
Agreement and will not release or disclose such information to any other person,
except to its officers, directors, employees, auditors, attorneys, financial
advisors and other consultants who require such information in connection with
the transactions contemplated hereby and who have been informed by it of the
confidential nature of such information and directed by it to treat such
information confidentially, unless, in any such case, (i) disclosure is
compelled by judicial or administrative process or (ii) in the opinion of its
counsel, taking into account the requirements of law, disclosure should be made.
It is understood that each of XXXXXX and GAMZ shall be deemed to have satisfied
its obligations to hold such information confidential if it exercises the same
care as it takes to preserve confidentiality for its own similar information. If
this Agreement is terminated in accordance with Section 11 hereof, such
confidence shall be maintained, and each of XXXXXX and GAMZ will promptly return
to the other or destroy all documents (including all copies thereof) received by
it containing such information. The foregoing provisions of this Section 7.1.7
shall not apply to any information held or obtained by either XXXXXX or GAMZ
that is (i) obtained from public or published information, (ii) received from a
third party not known to it to be under an obligation to the other to keep such
information confidential, (iii) which is or becomes known to the public (other
than through a breach of this Agreement), or (iv) which was independently
developed by it.
7.1.8. Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any Governmental Authority or other Person
is commenced which questions the validity or legality of the proposed Merger, or
any of the other transactions contemplated hereby or seeks damages in connection
therewith, the parties shall cooperate and use their best efforts to defend
against such claim, action, suit, investigation or other proceeding and, if an
injunction or other order of the type referred to in Sections 8.2 and 9.2 hereof
is issued in any such action, suit or other proceeding, shall use their best
efforts to have such injunction or other order lifted.
23
7.1.9. No Disclosure. Unless and until this Agreement shall have
been terminated by either XXXXXX or GAMZ pursuant to Section 11 hereof, neither
GAMZ nor XXXXXX, nor their respective officers or directors will, except for
such disclosure as GAMZ or XXXXXX shall make in good faith pursuant to the
Exchange Act or as may be required by court order, disclose to any Person any
proprietary, financial or other information concerning the other party or its
operations or business, or other transactions contemplated hereunder, not
generally available to the public.
7.1.10. Further Assurances. Subject to the terms and conditions
herein provided, GAMZ and XXXXXX shall use all reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement and shall cooperate
with each other in connection therewith, (a) to obtain all necessary waivers,
consents and approvals from other parties to material loan agreements, leases
and other contracts (provided that neither GAMZ nor XXXXXX shall agree to any
substantial modification to any such agreement, lease or contract or to any
payment of funds in order to obtain such waiver, consent or approval without the
prior written consent of the other), (b) to defend any lawsuits or other legal
proceedings challenging this Agreement or the consummation of the transactions
contemplated hereby, (c) to lift or rescind any injunction or restraining order
or other order adversely affecting the ability of the parties to consummate the
transactions contemplated thereby, (d) to effect all necessary registrations and
filings, and (e) to fulfill all conditions to this Agreement.
7.1.11. Tax Treatment. XXXXXX and GAMZ shall: (i) report the
Merger on their respective tax returns and tax filings as a reorganization
described in Section 368(a) of the Code; (ii) keep their records and file in
connection with their tax returns all such information as may be required by
Section 1.368-3 of the Treasury Regulations (and corresponding state rules and
regulations) with respect to the Merger; (iii) refrain from taking any position
in connection with their tax returns, or taking any other action, that would be
inconsistent with the qualification of the Merger as a reorganization under
Section 368(a) of the Code; and (iv) comply in all respects with the
requirements of Section 368(a) of the Code and Treasury Regulations, rulings and
administrative positions of the IRS thereunder applicable to the Merger.
7.1.12. No Solicitation. Each of XXXXXX and GAMZ agrees that
except as may be required by court order, from and after the date hereof until
the earlier to occur of the Closing hereunder or the termination of this
Agreement, none of its directors, officers, shareholders, agents, investment
bankers, or other representatives, shall, directly or indirectly, (a) solicit,
initiate or encourage submission of proposals or offers from any person relating
to, or negotiate with any person or enter into any agreement, contract or
understanding with respect to, any acquisition or purchase of all or a material
part of the stock or assets of, or a merger, consolidation or business
combination with XXXXXX or GAMZ, or agreement to sell shares of Capital Stock of
XXXXXX or GAMZ, other than as contemplated by this Agreement (an "Acquisition
Proposal") or (b) participate in any discussions or negotiations regarding or
furnish to any other person any information with respect to or otherwise
cooperate in any way, assist, facilitate or encourage any Acquisition Proposal
by any other person. If XXXXXX or GAMZ shall receive any Acquisition Proposal or
any inquiry regarding any such proposal from a third party, such party agrees to
promptly notify the other party of such Acquisition Proposal or inquiry, and
that, without the prior written consent of the other party, it will not discuss
directly or indirectly, any such Acquisition Proposal or inquiry (other than
with the other party).
24
7.1.13. Proxy Statement. GAMZ, with the cooperation of XXXXXX,
will promptly prepare and file with the SEC as soon as practicable a proxy
statement and necessary forms of proxy in connection with the vote of GAMZ's
stockholders with respect to the Merger (the "Proxy Statement"). No amendment or
supplement to the Proxy Statement will be made by GAMZ without the approval of
XXXXXX, such approval not to be unreasonably withheld or delayed. Each of XXXXXX
and GAMZ shall use reasonable efforts to cause the Proxy Statement to be mailed
to GAMZ's stockholders as soon as practicable after the date hereof.
7.1.14. Further Action. Each of GAMZ and XXXXXX will, subject to
the other terms and conditions set forth herein and to the fulfillment at or
before the Effective Time of each of the conditions of performance set forth
herein or the waiver thereof, perform such further acts and execute such
documents as may be reasonably required to effect the Merger. Each of GAMZ and
XXXXXX will permit the other and its authorized representatives full access to
all of its and its Subsidiaries premises, properties, personnel, books, records,
contracts and documents, and each party will use commercially reasonable efforts
to cause its representatives to furnish to the other party and its authorized
representatives such additional financial and operating data and other
information concerning its businesses and properties (and those of its
Subsidiaries) as the other or its duly authorized representatives may from time
to time reasonably request.
7.1.15. Expenses. If the Merger is not consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby will be paid by the party incurring such expenses except as
expressly provided herein, except that the agreed post-due diligence expenses
incurred in connection with the preparation, printing and mailing of the Proxy
Statement, will be paid 50% by GAMZ and 50% by XXXXXX. The provisions of this
Section 7.1.16 will survive the termination of this Agreement.
7.1.16. Notice of Change in Representations and Warranties. GAMZ
and XXXXXX will each give prompt notice to the other of (i) any change in its
condition or any event causing a breach of any of its representations and
warranties, (ii) the occurrence or non-occurrence of any event which would, or
which would be reasonably likely to, cause any conditions to their obligations
to effect the Merger and other transactions contemplated hereby not to be
satisfied in any material respect, and (iii) their failure to satisfy in any
material respect any covenant or condition to be complied with by them pursuant
to this Agreement.
7.1.17. Consents. GAMZ and XXXXXX will use all reasonable efforts
to obtain each of the consents required to carry on the transactions
contemplated by this Agreement.
7.2. Additional Covenants of GAMZ.
7.2.1. Operations of GAMZ. Except as set forth in Schedule 7.2.1,
from the GAMZ Balance Sheet Date through the Closing hereof, GAMZ will not
(except as contemplated by, or disclosed in, this Agreement):
7.2.1.1. amend its Articles of Incorporation or Bylaws or
merge with or into or consolidate with any other Person, subdivide or in any way
reclassify any shares of its Capital Stock or change or agree to change in any
manner the rights of its outstanding Capital Stock or, in any material manner,
the character of its business;
7.2.1.2. issue or sell or purchase any Convertible
Securities of GAMZ or enter into any contracts or commitments to issue or sell
or purchase, any shares of its Capital Stock;
25
7.2.1.3. enter into or amend any material employment
agreement, enter into any agreement with any labor union or association
representing any material employee or enter into or amend any material GAMZ
Employee Benefit Plan;
7.2.1.4. incur any indebtedness for borrowed money;
7.2.1.5. declare or pay any dividends or declare or make
any distributions of any kind in respect of shares of its Capital Stock;
7.2.1.6. waive any right of material value of its
business other than in the ordinary course of its business;
7.2.1.7. make any significant change in its accounting
methods or practices from those reflected in the GAMZ Audited Financial
Statements;
7.2.1.8. make any wage or salary increase or bonus, or
increase in any other direct or indirect compensation, for or to any of GAMZ's
officers, directors, or employees in excess of 5% in the aggregate or any
accrual for or commitment or agreement to make or pay the same;
7.2.1.9. make any loan or advance to any of GAMZ's
officers, directors, or employees in excess of $2,500 individually or $10,000 in
the aggregate, other than travel and xxxxx cash advances made in the ordinary
course of business;
7.2.1.10. make any payment or commitment to pay any
severance or termination pay to any of its officers, directors, or Significant
Employees;
7.2.1.11. enter into any lease (as lessor or lessee) or
sell, abandon or make any other disposition of any of its material assets or
properties, or grant or suffer any Lien on any of its material assets or
properties;
7.2.1.12. enter into or amend any written contract or
other agreement pursuant to which it agrees to indemnify any party or to refrain
from competing with any party;
7.2.1.13. except for inventory, supplies or equipment
acquired in the ordinary course of business, make any acquisition of all or any
part of the assets, properties, capital stock or business of any other entity
which is material to GAMZ;
7.2.1.14. enter into any transaction other than in the
ordinary course of business; or
7.2.1.15. sell, transfer, assign or otherwise dispose of
any assets, property or portion of its business which is material to GAMZ.
7.2.2. Filing of Exchange Act Reports. GAMZ will file all
reports required to be filed by it pursuant to the Exchange Act and the
regulations promulgated thereunder and, if at any time the GAMZ is not required
to file such reports, it will, upon the request of any holder of the GAMZ to be
issued pursuant to this Agreement, make publicly available other information so
long as necessary to permit sales of its securities pursuant to Rule 144. No
such reports filed by GAMZ after the date hereof will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading (in each case as of the date filed). RULE 144. Upon the request of
any such holder, GAMZ shall deliver to such holder a written certification of a
duly authorized officer as to whether it has complied with such requirements.
26
7.2.3. Tax Returns. GAMZ will file when due all tax returns which
are required to be filed by it on or before the date of the Closing. Such
returns shall be properly prepared on a reasonable basis and in a manner
consistent with prior returns.
7.2.4. D&O Insurance. Insurance. As of the Effective Time, GAMZ
will have a binding commitment from an insurance company reasonably acceptable
to XXXXXX for officers and directors liability insurance providing coverage of
an aggregate of at least $4,000,000 for the persons who will be Officers and
Directors of GAMZ after the Effective Time.
7.2.5. Loan Agreement. On or before May 31, 2001, if the Closing
has not previously occurred, GAMZ shall provide to XXXXXX a loan in the amount
of Five Hundred Thousand Dollars ($500,000). Such loan shall bear interest at
the rate of 10% per annum and be paid within twelve (12) months from the date of
the loan.
7.2.6. Agreements of Affiliates; Lockup Agreements. GAMZ shall
deliver or cause to be delivered to XXXXXX, prior to the Closing, from each of
its directors, officers, and other persons who will, following the Merger, be
"affiliates" of GAMZ within the meaning of Rule 145 of the rules and regulations
promulgated under the Securities Act, a written lockup agreement, in a form
reasonably satisfactory to counsel to XXXXXX, pursuant to which each such person
will agree not to sell, pledge, transfer or otherwise dispose (without the prior
written consent of the Board of Directors of GAMZ, which consent may be withheld
in the sole discretion of the Board of Directors) any GAMZ Shares for a period
of one year after the Merger. Attached as Schedule 7.2.6 is a list of all such
directors, officers and other affiliates. GAMZ will be entitled, to the extent
it is so required by applicable law (as advised by outside counsel experienced
in such matters) to place legends as specified in such Lockup Agreements on the
certificates evidencing any GAMZ Shares held such affiliates pursuant to the
terms of this Agreement, and to issue appropriate stop-transfer instructions to
the transfer agent for the GAMZ Shares, consistent with the terms of such Lockup
Agreements. 110,000 GAMZ Shares purchased by Xxxxx Xxxxxxx will not be included
in the Lockup Agreements.
7.2.7. XXXXXX Options. GAMZ shall deliver or cause to be
delivered to XXXXXX, prior to the Closing, an equal number of non-qualified
incentive options, on terms and conditions substantially similar to those
existing conditional options presently held by GAMZ' directors, to those
individuals to be designated by XXXXXX.
7.3. Additional Covenants of XXXXXX.
7.3.1. Operations of XXXXXX. Except as set forth in Schedule
7.3.1, from the XXXXXX Balance Sheet Date through the Closing, XXXXXX will not
(except as contemplated by, or disclosed in, this Agreement or, in the case of
Section 7.3.1, to the extent necessary to insure that its corporate documents
conform to the representations made in this Agreement):
7.3.1.1. amend its Certificate of Incorporation or Bylaws
or merge with or into or consolidate with any other Person, subdivide or in any
way reclassify any shares of its Capital Stock or change or agree to change in
any manner the rights of its outstanding Capital Stock or, in any material
manner, the character of its business; issue or sell or purchase any Convertible
Securities of XXXXXX or enter into any contracts or commitments to issue or sell
or purchase, any shares of its Capital Stock;
27
7.3.1.2. enter into or amend any material employment
agreement, enter into any agreement with any labor union or association
representing any material employee or enter into or amend any material XXXXXX
Employee Benefit Plan;
7.3.1.3. incur any indebtedness for borrowed money;
7.3.1.4. declare or pay any dividends or declare or make
any distributions of any kind in respect of shares of its Capital Stock;
7.3.1.5. waive any right of material value of its
business other than in the ordinary course of its business;
7.3.1.6. make any significant change in its accounting
methods or practices from those reflected in the XXXXXX Unaudited Financial
Statements;
7.3.1.7. make any wage or salary increase or bonus, or
increase in any other direct or indirect compensation, for or to any of XXXXXX'x
officers, directors, or employees in excess of 5% in the aggregate or any
accrual for or commitment or agreement to make or pay the same;
7.3.1.8. make any loan or advance to any of XXXXXX'x
officers, or directors, or employees in excess of $2,500 individually or $10,000
in the aggregate, other than travel and xxxxx cash advances made in the ordinary
course of business;
7.3.1.9. make any payment or commitment to pay any
severance or termination pay to any of its officers, or directors, or employees;
7.3.1.10. enter into any lease (as lessor or lessee) or
sell, abandon or make any other disposition of any of its material assets or
properties, or grant or suffer any Lien on any of its material assets or
properties;
7.3.1.11. enter into or amend any written contract or
other agreement pursuant to which it agrees to indemnify any party or to refrain
from competing with any party;
7.3.1.12. except for inventory, supplies or equipment
acquired in the ordinary course of business, make any acquisition of all or any
part of the assets, properties, capital stock or business of any other entity,
which is material to XXXXXX;
7.3.1.13. enter into any transaction other than in the
ordinary course of business; or
7.3.1.14. sell, transfer, assign or otherwise dispose of
any assets, property or portion of its business, which is material to XXXXXX.
7.3.2. Tax Returns. XXXXXX will file when due all tax returns
which are required to be filed by it on or before the date of the Closing. Such
returns shall be properly prepared on a reasonable basis and in a manner
consistent with prior returns.
7.3.3. Audited Financial Statements. By May 11, 2001, XXXXXX
will provide GAMZ with a true, correct and complete copy of the balance sheets
of XXXXXX as at December 31, 2000, together with the related statements of
income, cash flows, and changes in stockholders' equity, and the notes thereto,
for the years then ended, audited by its current independent public accountants,
whose opinion will be included therewith (the "XXXXXX Audited Financial
Statement"). The XXXXXX Audited Financial Statement will have been prepared in
accordance with GAAP consistently applied throughout the periods indicated and
will fairly present the financial position, results of operations, cash flows
and changes in stockholders' equity of XXXXXX as at December 31, 2000 and for
the respective periods stated therein.
28
7.3.4. Filing Tax Returns. XXXXXX will file when due all tax
returns which are required to be filed by it on or before the date of the
Closing. Such returns shall be properly prepared on a reasonable basis and in a
manner consistent with prior returns.
8. Conditions Precedent to the Obligation of XXXXXX to Close. The obligation of
XXXXXX to consummate the Merger is subject to the satisfaction, on or prior to
the Closing, of the following conditions, any one or more of which may be waived
by XXXXXX in writing:
8.1. Representations and Covenants. The representations and warranties
of GAMZ contained in this Agreement shall be true and complete in all material
respects, except for changes in the ordinary course of business and as
contemplated by this Agreement, on and as of the Closing with the same force and
effect as though made on and as of such date. GAMZ shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by GAMZ on or prior to such
date. GAMZ shall have delivered to XXXXXX a certificate, executed by its
principal executive officer and principal financial officer, and dated such date
to the foregoing effect.
8.2. Litigation. No action, suit or proceeding shall have been
instituted or threatened by any Governmental Authority, except for such matters
set forth in the Disclosure Schedules, and no order or award shall have been
entered (and not removed or stayed) by any court or Governmental Authority, in
either case to restrain or prevent the carrying out of the Merger, or to seek
damages in connection with any of the transactions provided for herein or which
has or may have, in the reasonable opinion of XXXXXX, a Material Adverse Effect
on GAMZ, XXXXXX or the merged entity.
8.3. Approval of Counsel to XXXXXX. All actions and proceedings
hereunder and all documents or other papers required to be delivered by GAMZ
hereunder or in connection with the consummation of the transactions
contemplated hereby and all other related matters shall have been reasonably
approved in all material respects by XXXXXX'x attorneys as to their form.
8.4. Approval by XXXXXX Stockholders. This Agreement, the Merger, and
an amended certificate of incorporation in such form as has been supplied by
XXXXXX to GAMZ, shall have been approved by the XXXXXX stockholders in
accordance with Section 251 of the Delaware Law.
8.5. Absence of Certain Changes. GAMZ shall not, in XXXXXX'x reasonable
judgment, have shown losses or deterioration in its cash position as described
in Section 5.9 in excess of that which might reasonably be expected in view of
its history of operations to date.
8.6. Board of Directors. GAMZ shall have taken all necessary actions
and obtained stockholders approval to insure that its board of directors after
the Closing consists of the directors specified in Section 1.4.
8.7. Aproval by GAMZ Stockholders. GAMZ stockholders' approval shall
have been obtained to approve this Agreement and the Merger in accordance with
Section 5.03 of the Texas Law and to amend GAMZ's articles of incorporation to
increase the authorized Capital Stock of GAMZ by an additional 50,000,000 shares
of common stock to a total of 100,000,000 shares of authorized Capital Stock.
29
8.8. Increase in Authorized Shares Under Stock Option Plan. GAMZ's
stockholders' approval shall have been obtained to increase the number of shares
which may be issued under its incentive stock option plan to 6 million.
8.9. Opinion of Counsel. XXXXXX shall have received, on behalf of
itself and the XXXXXX shareholders, the opinion of Xxxxx Xxxxxx Xxxxx & Xxxxxxxx
LLP, counsel to GAMZ, dated the Closing, in form and substance to be agreed upon
not later than 10 days from the date of this Agreement.
8.10. Appraisal Rights. The holders of less than 5% of the XXXXXX
Shares shall have exercised their appraisal rights as provided in Section 262 of
the DGCL. For purposes of this Section, holders who are officers, directors or
controlling stockholders of XXXXXX will be deemed not to have exercised their
appraisal rights, whether or not they in fact do exercise such rights.
8.11. Tax Matters. XXXXXX shall be reasonably satisfied that the Merger
will qualify as a reorganization under Section 368(a) of the Code.
8.12. Content of Final Schedules. The final schedules to be delivered
by GAMZ in accordance with Section 7.1.1 shall not, in XXXXXX'x reasonable
judgment, demonstrate a material adverse change in the financial position,
results of operations or business of GAMZ as compared to the Schedules attached
to this Agreement at the time of execution.
8.13. Third Party Consents. All consents and approvals from parties to
any material contracts or agreement with GAMZ which may be required in
connection with the performance by GAMZ of its obligations under this Agreement
shall have been obtained.
8.14. Governmental Permits and Approvals. Any and all permits, licenses
and approvals from any Governmental Authority required for the lawful
consummation of the Merger and the issuance of the GAMZ Merger Shares shall have
been obtained.
8.15. Employment Agreements. Employment agreements with GAMZ in form
agreed upon not later than May 23, 2001 shall have been executed by the
individuals identified in Schedule 8.15. Such employment agreements shall
include, as appropriate, covenants not to compete following termination of
applicable employment and severance packages.
8.16. Securities Opinion. GAMZ shall have received the opinion of Xxxxx
Xxxxxx Xxxxx & Xxxxxxxx LLP, its counsel, to the effect that the issuance of the
GAMZ Merger Shares does not require registration under the Securities Act of
1933.
9. Conditions Precedent to the Obligation of GAMZ to Close. The obligation of
GAMZ to consummate the Merger is subject to the satisfaction, on or prior to the
Closing, of the following conditions, any one or more of which may be waived in
writing by GAMZ:
9.1. Representations and Covenants. The representations and warranties
of XXXXXX contained in this Agreement shall be true and complete in all material
respects, except for changes in the ordinary course of business and as
contemplated by this Agreement, on and as of the Closing with the same force and
effect as though made on and as of such date. XXXXXX shall have performed and
complied with all covenants and agreements required by this Agreement to be
performed or complied with by it on or prior to such date. XXXXXX shall have
delivered to GAMZ a certificate, executed by its principal executive officer and
principal financial officer, and dated such date to the foregoing effect.
30
9.2. Litigation. No action, suit or proceeding shall have been
instituted or threatened by any Governmental Authority, except for such matters
set forth in the Disclosure Schedules, and no order or award shall have been
entered (and not removed or stayed), by any court or Governmental Authority, in
either case to restrain or prevent the carrying out of the Merger or to seek
damages in connection with any of the transactions provided for herein or which
has or may have, in the reasonable opinion of GAMZ, a Material Adverse Effect on
XXXXXX.
9.3. Approval of Counsel to GAMZ. All actions and proceedings hereunder
and all documents or other papers required to be delivered by XXXXXX hereunder
or in connection with the consummation of the transactions contemplated hereby
and all other related matters shall have been reasonably approved in all
material respects by GAMZ's attorneys as to their form.
9.4. Approval by GAMZ Stockholders. GAMZ stockholders' approval shall
have been obtained to approve this Agreement and the Merger in accordance with
Section 5.03 of the Texas Law and to amend GAMZ's articles of incorporation to
increase the authorized Capital Stock of GAMZ by an additional 50,000,000 shares
of common stock to a total of 100,000,000 shares of authorized Capital Stock.
9.5. Governmental Permits and Approvals. Any and all permits, licenses
and approvals from any Governmental Authority required for the lawful
consummation of the Merger shall have been obtained.
9.6. Third Party Consents. All consents and approvals from parties to
any material contract or agreement with XXXXXX which may be required in
connection with the performance by XXXXXX of its obligations under this
Agreement shall have been obtained.
9.7. Audited Financial Statements. The XXXXXX Audited Financial
Statements shall not show that the financial position and results of operations
of XXXXXX reported therein are, in GAMZ's reasonable judgment, materially less
favorable than the financial position and results of operations reported in the
XXXXXX Unaudited Financial Statements.
9.8. Absence of Certain Changes. XXXXXX shall not, in GAMZ's reasonable
judgment, have shown losses or deterioration in its cash position as described
in Section 4.8.1 in excess of that which might reasonably be expected in view of
its history of operations to date.
9.9. Opinion of Counsel. GAMZ shall have received, on behalf of itself
and the GAMZ shareholders, the opinion of Xxxxx, Xxxxxxxxx & Xxxxx, P.C.,
counsel to XXXXXX, dated the Closing, in form and substance to be agreed upon
not later than 10 days from the date of this Agreement.
9.10. Securities Opinion. GAMZ shall have received the opinion of Xxxxx
Xxxxxx Xxxxx & Xxxxxxxx LLP, its counsel, to the effect that the issuance of the
GAMZ Merger Shares does not require registration under the Securities Act of
1933.
9.11. Appraisal Rights. The holders of less than 5% of the XXXXXX
Shares shall have exercised their appraisal rights as provided in Section 262 of
the DGCL.
31
9.12. Content of Final Schedules. The final schedules 4.8, 4.10, 4.11,
4.13, 4.14 and 4.21 to be delivered by XXXXXX in accordance with Section 7.1.1
shall not, in GAMZ's reasonable judgment, demonstrate a state of facts
indicating a material adverse change in the financial position, results of
operations or business of XXXXXX as compared to the Schedules attached to this
Agreement at the time of execution. This condition shall be deemed satisfied
unless GAMZ shall have notified XXXXXX in writing not later than the 7th
calendar day after receipt of the last of such schedules that it has elected to
terminate this Agreement for failure to satisfy this condition.
9.13. Questionnaires and other Securities Law Matters. GAMZ shall have
received from each holder of the XXXXXX Shares a completed questionnaire in the
form of Schedule 9.12 confirming that he is acquiring the GAMZ Shares to be
issued hereunder for investment, and not with a view to distribution, containing
such additional information as may reasonably be required to determine his
status as an accredited investor, and acknowledging that the GAMZ Shares to be
issued pursuant to this Agreement will bear an appropriate legend referring to
the restrictions on sale imposed by the Securities Act of 1933 and the
securities laws of the various states. Each holder of XXXXXX Shares who is not
an accredited investor shall have appointed a qualified offeree representative
to advise and assist him in evaluating the GAMZ Shares, and GAMZ shall have
received from each such offeree representative an appropriate questionnaire
containing such information as may reasonably be requested to evaluate the
qualifications of the offeree representative.
10. Survival of Representations and Warranties. The representations and
warranties set forth in this Agreement shall survive the Closing of the Merger
for a period of 12 months.
11. Termination of Agreement.
11.1. Prior to Closing. This Agreement may be terminated as follows:
11.1.1. at any time prior to the Closing by mutual agreement of
XXXXXX and GAMZ.
11.1.2. at any time prior to the Effective Time by XXXXXX if any
representation or warranty of GAMZ contained in this Agreement (and the final
schedules) is or becomes untrue or breached in any material respect or if GAMZ
fails to comply in any material respect with any covenant contained herein, and
any such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within ten (10) days following written notice thereof.
11.1.3. at any time prior to the Effective Time by GAMZ, if any
representation or warranty of XXXXXX contained in this Agreement (and the final
schedules) is or becomes untrue or breached in any material respect or if XXXXXX
fails to comply in any material respect with any covenant contained herein, and
any such misrepresentations, noncompliance or breach is not cured, waived or
eliminated within 10 days following written notice thereof.
11.1.4. by XXXXXX if the conditions stated in Section 8 have not
been satisfied or waived in writing by XXXXXX prior to July 15, 2001.
11.1.5. by GAMZ if the conditions stated in Section 9 have not
been satisfied or waived in writing by GAMZ prior to July 15, 2001.
11.1.6. by GAMZ or XXXXXX if the Merger is not consummated on or
before August 1, 2001
32
11.2. Effect of Termination. In the event this Agreement is terminated
pursuant to Section 11.1.1, or pursuant to Sections 11.1.4 or 11.1.5 , each
party shall be fully released and discharged from any and all obligations under
this Agreement. In the event this Agreement is terminated pursuant to
subparagraph 11.1.2 or 11.1.3, then the nonbreaching party shall be entitled to
pursue, exercise and enforce any and all remedies, rights, powers and privileges
available at law or in equity; provided that
11.2.1. the nonbreaching party shall take all reasonable efforts
to mitigate its damages upon its discovery of such breach, and
11.2.2. monetary damages shall not be available unless, in the
case of a breach of a representation or warranty, the misstatement in the
representation or warranty was deliberately made or, in the case of failure to
comply with any covenant, such failure was deliberate
Notwithstanding the foregoing, the provisions of Section 7.1.7 shall survive
such termination.
12. Indemnification.
12.1.1. From and after the Effective Time, GAMZ shall indemnify,
defend and hold harmless the present and former directors, officers and
employees of GAMZ and XXXXXX and their respective Subsidiaries (each, an
"Indemnified Party") against all costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of actions or omissions as directors or officers of GAMZ or XXXXXX and their
respective Subsidiaries occurring at or prior to the Effective Time, including,
without limitation, the transactions contemplated by this Agreement, to the
fullest extent that such persons are indemnified under the laws of the States of
Delaware or Texas and the organizational documents, as in effect on the date
hereof, of GAMZ and XXXXXX and their respective Subsidiaries or any existing
indemnification agreement with either GAMZ or XXXXXX (and during such period
GAMZ shall also advance expenses as incurred to the fullest extent permitted
under applicable law, provided that the Person to whom expenses are advanced
provides a written affirmation of his or her good faith that the standard of
conduct necessary for indemnification has been met and an undertaking to repay
such advances if it is ultimately determined that such Person is not entitled to
indemnification with no bond or security to be required); provided that any
determination required to be made with respect to whether an officer's or
director's conduct complies with the standards set forth under applicable law
and any such organizational documents shall be made by independent counsel
selected by GAMZ and reasonably acceptable to such officer or director; and
provided, further, that in the absence of applicable judicial precedent to the
contrary, such counsel, in making such determination, shall presume such
officer's or director's conduct complied with such standard and GAMZ shall have
the burden to demonstrate that such officer's or director's conduct failed to
comply with such standard.
12.1.2. For a period of not less than six years after the
Effective Time, GAMZ will maintain officers' and directors' liability insurance
in an amount of no less than $4,000,000 covering the Indemnified Parties who are
currently covered, in their capacities as current or former officers and
directors of GAMZ and covering similarly situated Indemnified Parties of XXXXXX,
by existing officers' and directors' liability insurance policy on terms
substantially no less advantageous to the Indemnified Parties than such
insurance.
33
12.1.3. Any Indemnified Party wishing to claim indemnification
under Section 12.1.1 upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly notify GAMZ thereof; provided that
the failure so to notify shall not affect the obligations of GAMZ under Section
12.1.1 unless and to the extent such failure materially increases GAMZ's
liability under such subsection 12.1.1.
12.1.4. If GAMZ or any of its successors or assigns shall
consolidate with or merge with any other entity and shall not be the continuing
or surviving entity of such consolidation or merger or shall transfer all or
substantially all of its assets to any Person, then and in each case, proper
provision shall be made so that the successors and assigns of GAMZ or any of its
Subsidiaries shall assume the obligations set forth in this Section 12.
12.1.5. GAMZ shall pay all reasonable costs, including attorneys'
fees, that may be incurred by any Indemnified Party in enforcing the indemnity
and other obligations provided for in this Section 12. The rights of each
Indemnified Party hereunder shall be in addition to any other rights such
Indemnified Party may have under applicable law.
12.1.6. GAMZ will keep in effect provisions in XXXXXX and GAMZ
subsidiaries' organizational documents providing for exculpation of director and
officer liability and its indemnification of the Indemnified Parties to the
fullest extent permitted under the DGCL or the Texas Business Corporation Act,
as applicable, which provisions will not be amended except as required by
applicable law or except to make changes permitted by law that would enlarge the
Indemnified Parties' right of indemnification.
12.1.7. In any proceeding for which indemnification is sought
under this Section 12, GAMZ will be entitled to participate in such proceeding
and, to the extent that it wishes (unless GAMZ is also a party to such
proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate), to assume the defense of such proceeding
with counsel satisfactory to GAMZ and, after notice from GAMZ to the indemnified
party of its election to assume the defense of such proceeding, GAMZ will not,
as long as it diligently conducts such defense, be liable to the indemnified
party under this Section for any fees of other counsel or any other expenses
with respect to the defense of such proceeding subsequently incurred by the
indemnified party in connection with the defense of such proceeding, other than
reasonable costs of investigation.
12.1.8. The provisions of this Section 12 will survive the
consummation of the Merger and expressly are intended to benefit each
Indemnified Party.
13. Definitions.
13.1. Defined Terms. As used in this Agreement, the following terms
have the following meanings:
13.1.1. "Acquisition Proposal": has the meaning set forth in
Section 7.1.13.
13.1.2. "Affiliate": shall mean, with respect to any Person, any
other Person that directly, or through one or more intermediaries, controls or
is controlled by or is under common control with such Person.
13.1.3. "Agreement": this Agreement of Merger, as amended,
supplemented or otherwise modified from time to time.
34
13.1.4. "Capital Stock": any and all shares, interests,
participations or other equivalents (however designated) of capital stock of a
corporation, and any and all equivalent ownership interests in a partnership or
other Person (other than a corporation).
13.1.5. "Certificate of Merger": has the meaning set forth in
Section 1.2.
13.1.6. "Closing": has the meaning set forth in Section 3.
13.1.7. "Code": has the meaning set forth in Recital B.
13.1.8. "Contractual Obligation": as to any Person, any provision
of any agreement, instrument or other undertaking to which such Person is a
party or by which it or any of its property is bound.
13.1.9. "Convertible Securities": options, warrants,
subscriptions or other commitments or rights of any nature to purchase, or
securities convertible into or exchangeable for, Capital Stock.
13.1.10. "Delaware Law": the General Corporation Law of the State
of Delaware, as amended from time to time.
13.1.11. "Disclosure Schedule": means the schedules dated as of
the date hereof and delivered by or on behalf of each party to the other party
in connection with this Agreement and which set forth exceptions to the
representations and warranties contained herein and certain other information
called for by other provisions of this Agreement.
13.1.12. "Effective Date": the date upon which the Effective Time
occurs.
13.1.13. "Effective Time": has the meaning set forth in Section
1.2.
13.1.14. "Environmental Laws": any and all federal, state, local
or municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees or requirements of any Governmental Authority regulating, relating to or
imposing liability or standards of conduct concerning environmental protection
matters, including without limitation, Hazardous Materials, as currently in
effect.
13.1.15. "ERISA": the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations and rulings issued
thereunder.
13.1.16. "ERISA Affiliate": of any Person shall mean any trade or
business (whether or not incorporated) which is under common control with that
Person, within the meaning of Sections 414(b) and 414(c) of the Code or the
regulations promulgated thereunder.
13.1.17. "Exchange Act": the Securities Exchange Act of 1934, as
amended from time to time, and the regulations and rulings issued thereunder.
13.1.18. "Fully Diluted Shares" means, with respect to any Person
the number of shares of that Person's common stock which would at the time of
reference be issued and outstanding if all shares of common stock issuable upon
exercise or conversion of that person's Convertible Securities had been
exercised or converted in full as of that time, excluding, however, in the case
of GAMZ common shares issuable to its directors under performance-based
incentive stock options.
13.1.19. "GAAP": generally accepted accounting principles in the
United States of America, in effect from time to time.
35
13.1.20. "GAMZ Audited Financial Statements": has the meaning set
forth in Section 5.15.
13.1.21. "GAMZ Balance Sheet": the audited balance sheet of GAMZ
as of December 31, 2000, a copy of which has been delivered to XXXXXX.
13.1.22. "GAMZ Balance Sheet Date": December 31, 2000.
13.1.23. "GAMZ Merger Shares": has the meaning set forth in
Section 2.3.
13.1.24. "GAMZ Reports": has the meaning set forth in Section
5.15.
13.1.25. "GAMZ Shares": shares of Common Stock, par value $0.005
per share, of GAMZ.
13.1.26. "GAMZ Transaction Document": has the meaning set forth
in Section 5.3.
13.1.27. "Governmental Authority": any nation or government, any
state or other political subdivision thereof and any federal, state, county,
local or foreign entity or body exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
13.1.28. "XXXXXX Audited Financial Statement": has the meaning
set forth in Section 7.3.3.
13.1.29. "XXXXXX Balance Sheet": the unaudited balance sheet of
XXXXXX as of December 31, 2000.
13.1.30. "XXXXXX Balance Sheet Date": December 31, 2000.
13.1.31. "XXXXXX Shares": shares of common stock, par value
$0.01(????) per share, of XXXXXX.
13.1.32. "XXXXXX Transaction Document": has the meaning set forth
in Section 4.3.
13.1.33. "XXXXXX Unaudited Financial Statement": has the meaning
set forth in Section 4.15.
13.1.34. "Hazardous Materials": any (i) "hazardous substance,"
"pollutant," or "contaminant" (as defined in Sections 101(14), (33) of the
Comprehensive Environmental Response Compensation Liability Act ("CERCLA") or
the regulations designated pursuant to Section 102 of CERCLA and found at 40
C.F.R. ss.302), including any element, compound, mixture, solution, or substance
that is designated pursuant to Section 102 of CERCLA; (ii) substance that is
designated pursuant to Section 311(b)(2)(A) of the Federal Water Pollution
Control Act, as amended (33 U.S.C. ss.ss.1251, 1321(b)(2)(A)) ("FWPCA"); (iii)
hazardous waste having the characteristics identified under or listed pursuant
to Section 3001 of the Resource Conservation and Recovery Act, as amended (42
U.S.C. xx.xx. 6901, 6921) ("RCRA"); (iv) substance containing petroleum, as that
term is defined in Section 9001(8) of RCRA; (v) toxic pollutant that is listed
under Section 307(a) of FWPCA; (vi) hazardous air pollutant that is listed under
Section 112 of the Clean Air Act, as amended (42 U.S.C. xx.xx. 7401, 7412);
(vii) asbestos, asbestos-containing material, or urea formaldehyde or material
that contains it; and (viii) waste oil and other petroleum products.
36
13.1.35. "Intellectual Property Assets": of a Person means all
that person's
13.1.35.1. corporate, partnership or other business
names, all fictional business names, trading names, registered and unregistered
trademarks, service marks, and applications (collectively, "Marks");
13.1.35.2. patents, patent applications, and inventions
and discoveries that may be patentable (collectively, "Patents");
13.1.35.3. copyrights in both published works and
unpublished works (collectively, "Copyrights");
13.1.35.4. rights in mask works; and
13.1.35.5. know-how, trade secrets, confidential
information, customer lists, software, technical information, data, process
technology, plans, drawings, and blue prints (collectively, "Trade Secrets"),
owned, used, or licensed as licensee or licensor.
13.1.36. "Lien": any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security interest or agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction in respect of any of the foregoing).
13.1.37. "Material Adverse Effect": a material adverse effect on
(a) the business, operations, property, condition (financial or otherwise) or
prospects of the specified party and its Subsidiaries taken as a whole, (b) the
ability of the party to perform its obligations under this Agreement, or (c) the
validity or enforceability of this Agreement or the rights or remedies of the
other party or parties hereunder or thereunder.
13.1.38. "Merger": has the meaning set forth in Recital A.
13.1.39. "Person": an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or other
entity of whatever nature.
13.1.40. "Proxy Statement": has the meaning set forth in Section
7.1.14.
13.1.41. "Rule 144": Rule 144 promulgated by the SEC pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC having substantially the
same effect as such Rule.
13.1.42. "SEC": the Securities and Exchange Commission.
13.1.43. "Securities Act": the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
13.1.44. "Significant Employee": as to any Person, "significant
employees" of such Person as that term is defined in Regulation S-K of the
Securities Act.
37
13.1.45. "Subsidiary": as to any Person, a corporation,
partnership or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock having such power only
by reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or other entity are
at the time owned, or the management of which is otherwise controlled, directly
or indirectly through one or more intermediaries, or both, by such Person. A
Subsidiary, as to any Person, shall include a partnership, which has such Person
or a Subsidiary of such Person as a general partner of such partnership.
13.1.46. "Surviving Corporation": has the meaning set forth in
Section 1.1.
13.1.47. "Texas Law": the Texas Business Corporation Act of the
State of Texas, as amended from time to time.
13.2. Other Definitional Provisions; Interpretation.
13.2.1. Unless otherwise specified therein, all terms defined in
this Agreement shall have the defined meanings when used in any certificate or
other agreement, instrument or document made or delivered pursuant hereto.
13.2.2. The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section and
Schedule references are to this Agreement unless otherwise specified.
13.2.3. The headings in this Agreement are included for
convenience of reference only and shall not in any way affect the meaning or
interpretation of this Agreement.
13.2.4. The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
14. Miscellaneous.
14.1. Broker. Each of the parties represents and warrants to the other
that no broker, finder or other financial consultant, has acted on its behalf in
connection with the negotiation and execution of this Agreement. Each such party
agrees to indemnify and save the other harmless from any claim or demand for
commission or other compensation by any broker, finder, financial consultant or
similar agent not so disclosed claiming to have been employed by or on behalf of
such party, and to bear the cost of legal expenses incurred in defending against
any such claim.
14.2. Schedules. The Schedules to this Agreement are a part of this
Agreement as if set forth in full herein.
14.3. Publicity. No publicity release or announcement concerning this
Agreement or the transactions contemplated hereby shall be issued without
advance approval of the form and substance thereof by XXXXXX and GAMZ subject to
GAMZ's right to make any such publicity release or announcement reasonably
required to comply with its obligations as a public company including, without
limitation, under the Exchange Act, the Securities Act or the rules and
regulations of the National Association of Securities Dealers, Inc.
38
14.4. Notices. Any notice or other communication required or which may
be given hereunder shall be in writing and shall be delivered personally,
telegraphed or telecopied, or sent by FedEx, Express Mail or certified or
registered mail, postage prepaid, and shall be deemed given when so delivered
personally, telegraphed or telecopied or if sent by FedEx or Express Mail, one
business day after the date of sending, or if sent by certified or registered
mail, four business days after the date of mailing, as follows (or to such other
address as any party may from time to time specify in writing pursuant to the
notice provisions hereof):
If to XXXXXX to:
Xxxxxx Productions, Inc.
0000 Xxxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: President
With a copy to:
Xxxxx, Bruechner & Xxxxx
0000 X. Xxxxxxxxxx Xxxx, Xxxxx X-000
Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx, Esq.
If to GAMZ, to:
GAMZ, Inc.
GameCom Inc.
000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Chief Executive Officer
With a copy to:
Xxxxx Xxxxxx Xxxxx & Xxxxxxxx LLP
000 Xxxxxxx Xxx., 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
14.5. Entire Agreement. This Agreement (including all Schedules and
Exhibits hereto and all agreements or covenants contained therein) contains the
entire agreement among the parties with respect to the Merger, and all
transactions related thereto, and supersedes all prior agreements or
understandings, written or oral, with respect thereto.
14.6. Waivers and Amendments. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, signed by the party waiving compliance. No delay on the part
of any party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder, preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies that any party may otherwise have at law or in equity.
39
14.7. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas, without giving effect to the
choice of law principles thereof.
14.8. No Assignment. This Agreement is not assignable except by
operation of law.
14.9. Variations in Pronouns. All pronouns and any variations thereof
refer to the masculine, feminine or neither singular or plural, as the identity
of the person or persons may require.
14.10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
14.11. Severability. If any one or more of the provisions of this
Agreement is held invalid, illegal or unenforceable, the remaining provisions of
this Agreement shall be unimpaired, and the invalid, illegal or unenforceable
provision shall be replaced by a mutually acceptable valid, legal and
enforceable provision, which comes closest to the intent of the parties.
14.12. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and legal
representatives and permitted assigns.
14.13. Legal Fees. In any legal action, arbitration (if any) or other
proceeding brought to enforce this Agreement or in any other way arising out of
or in relation to this Agreement, the court or arbitrator(s) shall award
reasonable attorneys' fees and costs to the prevailing party, which amount shall
be included in any judgment recovered.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties on the date first above written.
GAMECOM, INC.
By: ___________________________________
___________________________________
Chief Executive Officer
XXXXXX PRODUCTIONS, INC.
By: ___________________________________
Xxx Xxxxxx,
President
40
SCHEDULES
XXXXXX
1.4 Directors of Surviving Corporation
1.5 Officers of Surviving Corporation
2.6 Rights of Holders of XXXXXX Shares
4.2 XXXXXX Qualification as Foreign Corporation
4.4 XXXXXX Capital Stock
4.5 XXXXXX Convertible Securities
4.6 Subsidiaries
4.8 Conflicts
4.9 Material Adverse Changes
4.10 XXXXXX Tax Matters
4.11 Compliance with Law
4.12 Required Consents
4.13 Loan Agreements
4.14 Litigation
4.15 Agreements
4.17 Real Estate
4.18 XXXXXX Officers and Directors Compensation
4.19 Intellectual Property
4.21 Liens
4.22 Liabilities
4.23 Employee Benefit Plans
7.3.1 Operations of FERRIS
GAMZ
5.2 GAMZ Qualification as a Foreign Corporation
5.6 Subsidiaries
5.8 Conflicts
5.10 Tax Matters
5.11 Compliance with Law
5.13 Loan Agreements
5.14 Litigation
5.16 Agreements
41
5.17 Real Estate
5.18 Officers, Directors, Employees Compensation
5.19 Intellectual Property
5.21 Liens
5.23 Employee Benefit Plans
5.24 Potential Conflicts of Interest
7.2.1 Operations
9.13 Form of Questionnaire
42
