STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT is entered into as of the ____ day of
April, 1998 by and between MIKOHN GAMING CORPORATION ("MIKOHN"), a Nevada
corporation, and PROGRESSIVE GAMES, INC. ("PGI"), a Delaware corporation, and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇").
W I T N E S S E T H:
WHEREAS, ▇▇▇▇▇ is the legal and beneficial owner of all of the stock
in PGI (the "PGI Shares"); and
WHEREAS, PGI is engaged in the business of designing, developing,
fabricating, manufacturing, selling, leasing, installing, maintaining and
servicing various proprietary live table games and related products and
equipment (the "Business"); and
WHEREAS, PGI and/or ▇▇▇▇▇ is the legal and beneficial owner of all of
the Stock in two affiliated corporations being Progressive Games - Australia
Pty. Limited (Australian Company Number 061 162 847), an Australian corporation,
and Progressive Games de Argentina SA, an Argentine corporation (collectively
the "PGI Affiliates"); and
WHEREAS, PGI owns tangible and intangible assets used in the Business
which include, without limitation, leases, equipment and equipment leases,
contracts, permits, licenses, franchises, approvals and authorizations by
governmental or regulatory authorities or bodies, work in process, inventory,
supplies, tools, accounts receivable (including receivables from Casino
Technology, Inc. ("CTI") in respect to that certain Exclusive Irrevocable
License Respecting Caribbean Stud Video Games dated August 2, 1995 between CTI
and PGI and all of PGI's right, title and interest to any claims associated
therewith, as well as all of PGI's rights to other past and future payments and
claims under such License (the "CTI Receivable")), bank accounts, notes
receivable (including the following Promissory Notes: Note dated February 29,
1996 from ▇▇▇▇ ▇▇▇▇▇▇ in the principal amount of $26,989.07, Note dated January
6, 1996 from ▇▇▇▇▇ ▇▇▇▇▇▇▇ in the principal amount of $44,747.24, Note dated
January 12, 1997 from ▇▇▇▇▇ ▇▇▇▇▇ in the principal amount of $10,764.27, and
Note dated September 15, 1997 from August ▇. ▇▇▇▇▇▇▇▇▇ in the principal amount
of $31,000 (collectively the "Employee Notes")), prepaid expenses and deferred
expenses, telephone equipment and telephone numbers, computer hardware, software
and firmware, computer tapes, disks and codes, trademarks, service marks, trade
names, patents and/or patent applications and/or technology, ideas, designs,
concepts, inventions and processes which may or may not be patentable,
copyrights, licenses, trade secrets, know how, formulae, test information,
market surveys, customer lists,
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supplier lists, claims and rights against third parties, set-offs and credits,
manufacturing processes, business and marketing plans, good will, and
accounting, financial and business records, and shares in other corporations
(collectively the "PGI Assets") all as reflected in the audited financial
statements for the year ending December 31, 1997 attached as Exhibit A and the
unaudited financial statements for the two months ending February 28, 1998
attached as Exhibit B (collectively the "Financial Statements"); and
WHEREAS, MIKOHN is engaged in the business of designing, developing,
fabricating and manufacturing, marketing, distributing, selling, installing and
servicing progressive jackpot systems, associated gaming equipment, gaming
devices, associated gaming equipment and gaming displays and signage; and
WHEREAS, ▇▇▇▇▇ is desirous of selling and MIKOHN is desirous of
purchasing the PGI Shares on the terms set forth below.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and
conditions set forth herein and other good and valuable consideration, the
sufficiency and adequacy of which is hereby acknowledged by all parties, it is
agreed as follows:
1 PURCHASE. MIKOHN agrees to purchase and ▇▇▇▇▇ agrees to sell the
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PGI Shares on the specific terms and conditions set forth below.
2 PURCHASE PRICE. The purchase price ("Purchase Price") for the PGI
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Shares shall be as set forth in Section 4.5.1.
3 ▇▇▇▇▇▇▇ MONEY DEPOSIT. Six (6) business days after the execution
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of this Agreement, MIKOHN shall pay to the law firm of Cooper, Perskie, April,
Neidelman, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ("Escrow Holder") a good ▇▇▇▇▇ ▇▇▇▇▇▇▇ money
deposit of $1 million (the "▇▇▇▇▇▇▇ Money Deposit"). The Escrow Holder shall be
instructed to place the ▇▇▇▇▇▇▇ Money Deposit into an interest bearing account
with an institution acceptable to MIKOHN and ▇▇▇▇▇. The ▇▇▇▇▇▇▇ Money Deposit
and all accrued interest thereon shall be credited to the Purchase Price and
paid to ▇▇▇▇▇ at the Closing (defined below). In the event the transactions
contemplated by this Agreement do not close on the Closing Date (as defined
below) by reason of the failure of any of the conditions specified in Section 6
(the "Section 6 Conditions"), the ▇▇▇▇▇▇▇ Money Deposit and all accrued interest
thereon shall be paid to MIKOHN. In the event the transactions contemplated by
this Agreement do not close for any reason other than a failure of the Section 6
Conditions, and provided further that such reason is not the result of any
negligent or intentional act or omission on
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the part of PGI or ▇▇▇▇▇, or if this Agreement is terminated pursuant to Section
33.2.2, 33.2.3, 33.2.4 or 33.2.5, the ▇▇▇▇▇▇▇ Money Deposit and all accrued
interest thereon shall be paid to ▇▇▇▇▇. Except in the case of a distribution
described in the immediately preceding sentence, all interest earned on the
▇▇▇▇▇▇▇ Money Deposit shall be treated as interest income of MIKOHN for federal
and state income tax purposes. The terms of this Section 3 shall be set forth in
an escrow agreement mutually acceptable to MIKOHN and ▇▇▇▇▇.
4 CLOSING.
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4.1 TIME AND PLACE. The purchase and sale of the PGI Shares
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hereunder (the "Closing") shall occur at the offices of PGI within five (5)
business days after all of the third party consents described in Section 6.12
have been obtained and the financing described in Section 6.13 has closed, but
not later than August 31, 1998, or at such other time and date allowed under
Section 4.3 below or agreed to in a writing signed by MIKOHN and ▇▇▇▇▇ (the
"Closing Date").
4.2 HIGHLY CONFIDENT LETTER. On or before April 30, 1998, MIKOHN
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will provide ▇▇▇▇▇ with a letter from Canadian Imperial Bank Corporation
("CIBC") stating that CIBC is "highly confident" that it can raise the financing
necessary to consummate the transactions contemplated by this Agreement ("Highly
Confident Letter").
4.3 EXTENSION OF CLOSING DATE. If the Closing has not occurred
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by August 31, 1998 because MIKOHN has not secured financing pursuant to Section
6.13 and MIKOHN has otherwise satisfied all of the conditions precedent in
▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇▇ shall have the right to extend the Closing Date for an
additional thirty (30) days provided: [1] that MIKOHN gives ▇▇▇▇▇ reasonably
satisfactory evidence that the financing required under Section 6.13 is imminent
and [2] MIKOHN delivers to ▇▇▇▇▇ a new CIBC Highly Confident Letter.
4.4 DELIVERIES OF ▇▇▇▇▇. At the Closing, ▇▇▇▇▇ shall execute and
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deliver or cause to be executed and delivered to MIKOHN:
4.4.1 STOCK CERTIFICATES. Certificates representing the PGI
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Shares, endorsed over to MIKOHN or accompanied by duly executed stock powers;
4.4.2 CORPORATE DOCUMENTS. The Certificate of Incorporation
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of PGI including all amendments thereto, certified by the Secretary of State of
Delaware as of a recent date, and the Bylaws of PGI, certified by the Secretary
of PGI, as in effect at
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the Closing;
4.4.3 CERTIFICATES OF GOOD STANDING. Certificates of Good
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Standing, dated as of a recent date, with respect to PGI, issued by the
Secretary of State of each of the States listed in Schedule 4.4.3 hereto;
4.4.4 RESOLUTION. A copy of the resolution of the Board of
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Directors of PGI, certified by the Secretary of PGI as having been duly and
validly adopted and being in full force and effect, authorizing execution and
delivery of this Agreement and performance of the transactions contemplated
hereby by PGI;
4.4.5 BOOKS AND RECORDS. All of the minute books, stock
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ledgers and similar corporate records of PGI and the PGI Affiliates;
4.4.6 LIEN SEARCHES. Such Uniform Commercial Code lien
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searches, releases and such other instruments showing that there were no
material financing statements, judgments, tax or other material liens
outstanding against PGI or any of the PGI Assets as of the Closing Date or a
date that is not more than thirty (30) days prior to the Closing Date (except
for liens listed on Schedule 4.4.6 hereto, which liens shall be released at or
prior to the Closing unless otherwise noted on such Schedule);
4.4.7 CONSENTS. Evidence reasonably satisfactory to MIKOHN
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that all material consents, approvals or authorizations of or notifications to
any third parties required to be obtained by ▇▇▇▇▇ or PGI in order for ▇▇▇▇▇ to
sell and transfer the PGI Shares and to consummate the transactions contemplated
hereby have been obtained by ▇▇▇▇▇ or PGI; provided, that, with respect to
licensing consents, approvals or authorizations, evidence that PGI will be
permitted to conduct the Business in the jurisdiction following the Closing
shall constitute a satisfactory consent, approval or authorization;
4.4.8 RESIGNATIONS. Resignations from each member of the
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Board of Directors of PGI and from such other officers of PGI and other persons
set forth in Schedule 6.9. Such resignations shall be effective as of the
Closing Date and shall include or be accompanied by termination and release
agreements, in form and substance reasonably satisfactory to MIKOHN and its
counsel, effective to release MIKOHN and its stockholders and representatives
from all claims or liabilities they may have arising from or related to their
employment with or service to PGI or termination thereof except for claims or
liabilities arising under this Agreement and except for post-termination
obligations and benefits.
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4.4.9 TERMINATION OF EMPLOYMENT AGREEMENTS. Evidence of
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the termination of those employment agreements, if any, listed in Schedule
4.4.9;
4.4.10 OPINION OF COUNSEL. An opinion of counsel for ▇▇▇▇▇
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and PGI substantially in the form of Exhibit C attached hereto;
4.4.11 OFFICER'S CERTIFICATE. A certificate from ▇▇▇▇▇,
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dated the Closing Date, containing the information required pursuant to Section
6.4 and Section 6.7; and
4.4.12 OTHER DOCUMENTS. Such other documents and
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instruments as MIKOHN or its counsel reasonably shall deem necessary to
consummate the transactions contemplated hereby.
All documents delivered to MIKOHN shall be in a form and substance
reasonably satisfactory to MIKOHN.
4.5 DELIVERIES OF MIKOHN. At the Closing, MIKOHN will execute
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and deliver or cause to be executed and delivered to ▇▇▇▇▇ simultaneously with
delivery of the items referred to in Section 4.4 above:
4.5.1 CASH CONSIDERATION: The Purchase Price in cash in
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the amount of $35.135 million plus $45,000 per month or portion thereof prorated
through the Closing Date adjusted by the following:
4.5.1.1 less the principal amount of PGI's long
term debt to First Union National Bank and any other lender (the "Long Term
Debt") as of the Closing Date;
4.5.1.2 plus an amount equal to PGI's cash balances
on the Closing Date;
4.5.1.3 less an amount equal to any accounts
payable of PGI on the Closing Date (calculated consistently with those reflected
on the Financial Statements) in excess of $500,000;
4.5.1.4 less an amount equal to reduction in
shareholder equity as of the Closing Date from that which is warranted in
Section 11.4; and
4.5.1.5 less an amount equal to the unpaid
principal balance and accrued interest outstanding on the Employee Notes; and
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4.5.1.6 plus an amount equal to the royalties and
any other amounts (excluding amounts paid pursuant to Section 4.5.1) due to PGI
from MIKOHN that are accrued and unpaid as of the Closing Date.
The parties shall endeavor to make the adjustments contemplated by Sections
4.5.1.1, 4.5.1.2, 4.5.1.3 and 4.5.1.4 as of the Closing Date and reflect such
adjusted amount in the amount paid ▇▇▇▇▇ at Closing. At Closing, MIKOHN shall
deposit $1 million of the Purchase Price into an escrow account with the Escrow
Holder and pursuant to an escrow agreement mutually satisfactory to ▇▇▇▇▇ and
MIKOHN. Within thirty (30) days after the Closing, Rosenfarb and Company shall
deliver to the parties a report stating whether the adjustments made under
Sections 4.5.1.1, 4.5.1.2, 4.5.1.3 and 4.5.1.4 are correct and whether any
further adjustments are necessary. If either party disputes any such further
adjustments, (i) such party shall deliver written notice to the other party, the
escrow agent and to Rosenfarb and Company within ten (10) days specifying the
disputed adjustment and disputed amount, (ii) the escrow agent shall pay any
undisputed adjustments in favor of MIKOHN to MIKOHN and the balance, together
with interest thereon but less the disputed portion, to ▇▇▇▇▇, and (iii) the
parties shall seek to resolve such dispute. If no notice is given, the escrow
agent shall,within three (3) days, pay any adjustments in favor of MIKOHN to
MIKOHN and the balance, together with interest thereon, to ▇▇▇▇▇. Any such
dispute between the parties shall be resolved by a single arbitrator who is a
certified public accountant based in Dade County, Florida mutually acceptable to
the parties. The non-prevailing party shall bear all of the arbitrator's fee
and expenses. The escrow agent shall pay the disputed balance, together with
interest thereon, in accordance with the arbitrator's order, which shall be
final and binding on the parties.
4.5.2 RESOLUTION. A copy of the resolution of the Board of
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Directors of MIKOHN, certified by the Secretary of MIKOHN as having been duly
and validly adopted and being in full force and effect, authorizing execution
and delivery of this Agreement and performance of the transactions contemplated
hereby by MIKOHN;
4.5.3 CONSENTS. Evidence reasonably satisfactory to ▇▇▇▇▇
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that all material consents, approvals or authorizations of or notifications to
any third parties required to be obtained by MIKOHN in order to consummate the
transactions contemplated hereby have been obtained by MIKOHN;
4.5.4 OPINION OF COUNSEL. An opinion of Counsel for MIKOHN
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substantially in the form of Exhibit D attached hereto; and
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4.5.5 OTHER DOCUMENTS. Such other documents and
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instruments as ▇▇▇▇▇ or its counsel reasonably shall deem necessary to
consummate the transactions contemplated hereby.
All documents delivered to ▇▇▇▇▇ shall be in form and substance reasonably
satisfactory to ▇▇▇▇▇.
5 OBLIGATIONS OF PARTIES. At the Closing:
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5.1 By instruments in form satisfactory to MIKOHN, ▇▇▇▇▇ shall
▇▇▇▇▇, sell, transfer, assign, convey and deliver all of the PGI Shares to
MIKOHN free and clear of all pledges, liens and encumbrances of every nature.
5.2 MIKOHN shall cause ▇▇▇▇▇ and all other guarantors, if any,
to be released from their personal guarantees of the First Union National Bank
loan.
5.3 By instruments in form satisfactory to ▇▇▇▇▇, PGI shall
assign to ▇▇▇▇▇ all of PGI's rights, title and interest to the CTI Receivable,
the Employee Notes and the Gaming Tables referenced in Section 11.5.4.
6 CONDITIONS PRECEDENT TO OBLIGATION OF MIKOHN. The obligation of
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MIKOHN to consummate the transactions contemplated by this Agreement is subject
to the satisfaction, at or before the Closing, of all the following conditions,
unless waived in writing by MIKOHN.
6.1 CERTIFICATES FOR SHARES. MIKOHN shall have received
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certificates for the PGI Shares, which shall constitute all of the issued and
outstanding capital stock of PGI.
6.2 REPRESENTATIONS AND WARRANTIES TRUE. All representations and
-----------------------------------
warranties of ▇▇▇▇▇ in this Agreement or Schedules and Exhibits hereto, or in
any written statement or certificate required by this Agreement to be delivered
to MIKOHN by ▇▇▇▇▇ and PGI, shall be true and correct in all material respects
on and as of the Closing Date.
6.3 COVENANTS PERFORMED. ▇▇▇▇▇ shall have performed, satisfied,
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and complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by ▇▇▇▇▇ on or before the Closing
Date.
6.4 CERTIFICATE. MIKOHN shall have received from ▇▇▇▇▇ a
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certificate, dated the Closing Date, certifying, in such detail as MIKOHN and
its counsel may reasonably request, that the conditions specified in this
Section 6 (other than Section 6.13)
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have been satisfied.
6.5 OPINION OF COUNSEL. MIKOHN shall have received an opinion
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from counsel for ▇▇▇▇▇ and PGI, dated the Closing Date, substantially in the
form attached hereto as Exhibit C.
6.6 NO VIOLATIONS; NO ACTIONS. Consummation of the transactions
-------------------------
contemplated by this Agreement shall not violate any order, decree or judgment
of any court or governmental body having competent jurisdiction and no action or
proceeding shall have been instituted or threatened by any person, entity or
governmental agency in connection with consummation of the transactions
contemplated by this Agreement which, in any such case, in the reasonable
judgment of MIKOHN, has a reasonable probability of resulting in [1] the
obtaining of material damages from MIKOHN or PGI; or [2] an order, judgment or
decree restraining, prohibiting or rendering unlawful the consummation of the
transactions contemplated by this Agreement.
6.7 NO MATERIAL ADVERSE EFFECT. During the period from February
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28, 1998 to the Closing, there shall not have been any material adverse change
in the Business or the PGI Assets or the liabilities, obligations, prospects,
financial condition or results of operations of PGI from that disclosed in this
Agreement and the Exhibits and Schedules hereto (a "PGI Material Adverse
Effect"), and MIKOHN shall have received a certificate from ▇▇▇▇▇ dated the
Closing Date to the foregoing effect.
6.8 PROCEEDINGS AND DOCUMENTS. All corporate and other
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proceedings in connection with the transactions contemplated hereby and all
documents and instruments incident to such transactions shall be in form and
substance reasonably satisfactory to MIKOHN and its counsel, and MIKOHN shall
have received all such counterpart originals or certified or other copies of
such documents as it may reasonably request.
6.9 RESIGNATIONS. The directors, officers and certain management
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personnel of PGI whose names appear on Schedule 6.9 hereto, shall have submitted
their resignations in writing to PGI.
6.10 DELIVERY OF DOCUMENTS. MIKOHN shall have received all
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documents and other items to be delivered by ▇▇▇▇▇ under this Agreement.
6.11 SCHEDULES. ▇▇▇▇▇ and PGI shall have completed and attached
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thereto all Schedules required by this Agreement, and all such Schedules shall
have been reasonably acceptable to MIKOHN. Failure of MIKOHN to object within
five (5)
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business days of delivery of a Schedule to MIKOHN shall mean that such Schedule
is deemed acceptable to MIKOHN. If ▇▇▇▇▇ and PGI have provided a Schedule
pursuant to this Section 6.11, they may revise the Schedule to reflect changes
occurring subsequent to MIKOHN's acceptance of the Schedule and prior to
Closing.
6.12 REQUIRED CONSENTS AND APPROVALS. The waiting period under
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the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act, if applicable, shall have
expired and all other consents, approvals and authorizations required by Section
4.4.7 shall have been obtained.
6.13 FINANCING. MIKOHN shall have arranged for financing on terms
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and conditions reasonably satisfactory to MIKOHN which is sufficient to
consummate the transactions contemplated hereby.
6.14 SHARES IN PGI AFFILIATES. ▇▇▇▇▇ shall have caused the
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transfer of the stock of the PGI Affiliates to PGI and shall have provided
satisfactory evidence of such transfer to MIKOHN; provided, however, where
required by applicable law, a minority of shares in the PGI Affiliates may be
held by a resident national nominee of the country in which the PGI Affiliate is
incorporated so long as [1] the percentage ownership in the Affiliate
represented by shares so held is the minimum required by law and [2] PGI has the
right and power to designate a substitute resident national nominee to hold such
shares for a nominal fee.
7 CONDITIONS PRECEDENT TO OBLIGATION OF ▇▇▇▇▇. The obligation of
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▇▇▇▇▇ to consummate the transactions contemplated by this Agreement is subject
to the satisfaction, at or before the Closing, of all the following conditions,
unless waived in writing by ▇▇▇▇▇.
7.1 REPRESENTATIONS AND WARRANTIES TRUE. All representations and
-----------------------------------
warranties of MIKOHN in this Agreement, or in any written statement or
certificate required by this Agreement to be delivered to ▇▇▇▇▇ by MIKOHN, shall
be true and correct in all material respects on and as of the Closing Date.
7.2 COVENANTS PERFORMED. MIKOHN shall have performed, satisfied,
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and complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by MIKOHN on or before the Closing
Date.
7.3 CERTIFICATE. ▇▇▇▇▇ shall have received from MIKOHN a
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certificate, dated the Closing Date, certifying, in such detail as ▇▇▇▇▇ and its
counsel may reasonably request, that the conditions specified in this Section 7
have been satisfied.
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7.4 OPINION OF COUNSEL. ▇▇▇▇▇ shall have received an opinion
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from counsel for MIKOHN, dated the Closing Date, substantially in the form
attached hereto as Exhibit D.
7.5 NO VIOLATIONS; NO ACTIONS. Consummation of the transactions
-------------------------
contemplated by this Agreement shall not violate any order, decree or judgment
of any court or governmental body having competent jurisdiction and no action or
proceeding shall have been instituted or threatened by any person, entity or
governmental agency in connection with consummation of the transactions
contemplated by this Agreement which, in any such case, in the reasonable
judgment of ▇▇▇▇▇, has a reasonable probability of resulting in [1] the
obtaining of material damages from ▇▇▇▇▇; or [2] an order, judgment or decree
restraining, prohibiting or rendering unlawful the consummation of the
transactions contemplated by this Agreement.
7.6 PROCEEDINGS AND DOCUMENTS. All corporate and other
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proceedings in connection with the transactions contemplated hereby and all
documents and instruments incident to such transactions shall be in form and
substance reasonably satisfactory to ▇▇▇▇▇ and its counsel, and ▇▇▇▇▇ shall have
received all such counterpart originals or certified or other copies of such
documents as he may reasonably request.
7.7 DELIVERY OF DOCUMENTS. ▇▇▇▇▇ shall have received all
---------------------
documents and other items to be delivered by MIKOHN under this Agreement.
7.8 REQUIRED CONSENTS AND APPROVALS. The waiting period under
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the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act, if applicable, shall have
expired and all other consents, approvals and authorizations required by Section
4.5.3 shall have been obtained.
8 ADDITIONAL AGREEMENTS. The parties agree to execute any
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additional instruments or agreements necessary to effectuate the intent of this
Agreement.
9 RIGHT OF INSPECTION.
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9.1 ▇▇▇▇▇ shall cause PGI to give MIKOHN and its accountants,
legal counsel and other representatives full access, during normal business
hours throughout the period prior to the Closing, to all of the properties,
books, contracts, commitments and records relating to the business, assets and
liabilities of PGI, and will furnish MIKOHN, its accountants, legal counsel and
other representatives during such period all such information concerning its
affairs as MIKOHN may reasonably request; provided,
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that any furnishing of such information pursuant hereto or any investigation by
MIKOHN shall not affect MIKOHN's right to rely on the representations,
warranties and covenants made by ▇▇▇▇▇ in this Agreement. MIKOHN will hold in
confidence all information so obtained and will use such information only for
purposes related to the transactions contemplated hereby. MIKOHN further agrees
that it will not disclose or use, and will direct its advisors and
representatives and financing sources not to disclose or use, any such
information to any third party except upon the prior written consent of ▇▇▇▇▇,
or except as required by law or except to its advisors, representatives and
financing sources who reasonably need to know such information for purposes of
evaluating the transactions contemplated by this Agreement. If the transactions
contemplated hereby are not consummated, MIKOHN will return all data to ▇▇▇▇▇
and continue to honor the foregoing confidentiality and non-disclosure covenants
for a period of four (4) years. Such obligation of confidentiality shall not
extend to any information [1] that was previously known to MIKOHN prior to the
start of discussions leading to the execution of this Agreement; [2] obtained by
MIKOHN in good faith from third parties who are not obligated to maintain the
information confidential; or [3] that is or shall be public knowledge through no
act or omission of MIKOHN or any of its directors, officers, employees or
representatives in violation of this Agreement.
9.2 From the date hereof to the Closing Date, PGI will provide
MIKOHN with monthly financial statements (income statement and balance sheet and
statement of cash flow) on or before the 15th of each month for the previous
month.
10 ASSIGNABILITY. This Agreement is not assignable by any party
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without the written consent of all of the parties.
11 REPRESENTATIONS AND WARRANTIES OF PGI AND ▇▇▇▇▇. Effective on the
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date hereof and at the Closing, ▇▇▇▇▇ hereby represents and warrants to MIKOHN
as follows. Reference herein to the "knowledge" of ▇▇▇▇▇, to matters "known" to
▇▇▇▇▇ and similar references shall mean matters actually known to ▇▇▇▇▇ as well
as matters which, after reasonable inquiry, ▇▇▇▇▇ would have reason to know.
11.1 ORGANIZATION. PGI is duly organized and validly existing and
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in good standing under the laws of the state of Delaware. PGI is duly qualified
to do business and is in good standing in those states or other jurisdictions
where it owns or leases real property or otherwise where qualification is
required in connection with the conduct of the Business (all as set forth in
Schedule 4.4.3 hereto) except where failure to be so qualified would not have a
PGI Material Adverse Effect.
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11.2 AUTHORITY, BINDING EFFECT. ▇▇▇▇▇ has all requisite power and
-------------------------
authority to execute, deliver and perform this Agreement, and the other
instruments and documents required or contemplated herein. Such execution,
delivery and performance have been duly authorized by all necessary action and,
except as set forth in Schedule 11.2, do not and will not result in a breach of,
or entitle any party (with due notice or lapse of time or both) to terminate,
accelerate or call a default with respect to, or result in the creation or
imposition of any lien, charge, encumbrance or claim of any nature whatsoever
upon PGI or any of the PGI Assets pursuant to any agreement or instrument to
which PGI is a party or by which PGI or any of the PGI Assets are bound. To
▇▇▇▇▇' knowledge, the execution, delivery and performance of this Agreement will
not result in any violation by ▇▇▇▇▇ of any law, rule or regulation applicable
to ▇▇▇▇▇, the PGI Assets, or the Business. ▇▇▇▇▇ is not a party to, or subject
to or bound by, any judgment, injunction or decree of any court or governmental
authority which restricts or interferes with the performance of this Agreement.
This Agreement is a valid and binding obligation of ▇▇▇▇▇ and is enforceable
against ▇▇▇▇▇ in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
moratorium or other similar laws now or hereafter in effect relating to or
affecting the rights of creditors generally and general equitable principles
regardless of whether enforcement is considered in proceedings at law or in
equity.
11.3 FINANCIAL INFORMATION; ABSENCE OF MATERIAL ADVERSE CHANGES.
----------------------------------------------------------
▇▇▇▇▇ has delivered to MIKOHN the Financial Statements consisting of balance
sheets, income statements and statements of cash flows for the twelve months
ended as of December 31, 1997 and the two months ended as of February 28, 1998.
The Financial Statements, with the notes thereto, are in accordance with the
books and records of PGI, are correct and complete and present fairly in all
material respects the financial position, results of operations and changes in
financial condition of PGI and the Business as of the dates and for the periods
indicated, in conformity with generally accepted accounting principles applied
on a consistent basis throughout the periods specified and in accordance with
past practice. To ▇▇▇▇▇' knowledge, the books and accounts for the periods
contained in the Financial Statements are complete and correct in all material
respects, do not contain any information which is materially false or misleading
and fully, accurately and fairly reflect the financial condition and
transactions of the Business. The statements of income for the periods contained
in the Financial Statements do not contain or reflect any items of special non-
recurring income or expense, except as expressly specified therein, and the
balance sheets do not reflect any write-up or revaluation increasing the book
value of any PGI Asset except as
12
required by generally accepted accounting principles and disclosed in the
Financial Statements and notes thereto. Except as set forth in the Schedules
attached hereto, there is no material liability or obligation, fixed or
contingent, including, without limitation, any unfunded obligation under any
pension plan, relating to the Business that is not reflected or reserved against
in the Financial Statements or otherwise disclosed in the notes thereto, other
than liabilities incurred in the ordinary course of business after the date
thereof which in the aggregate do not have a PGI Material Adverse Effect.
11.3.1 Since February 28, 1998, there has been no PGI
Material Adverse Effect.
11.3.2 Except as set forth in the Schedules, ▇▇▇▇▇ has no
knowledge of any present condition or contingency (other than matters of public
knowledge or which are generally applicable to the industries in which the
Business is conducted) which ▇▇▇▇▇ reasonably expects will have a PGI Material
Adverse Effect.
11.3.3 Since February 28, 1998 and except as set forth in
the Schedules hereto or as contemplated by this Agreement: [1] ▇▇▇▇▇ has engaged
in no material transactions involving the transfer of any assets to or from PGI,
except transactions in the ordinary course of business on terms no less
favorable than could have been obtained in transactions with unaffiliated third
parties; [2] there have been no employment contracts or compensation
arrangements entered into by PGI with, and no increase in the compensation
payable to directors, officers, employees or agents of PGI except as set forth
on Schedule 11.3.3 attached hereto; [3] PGI has not made or agreed to, and there
has not become effective, any approval, adoption, modification or amendment of
any pension, retirement or other benefit plan or arrangement, relating to the
Business; [4] other than commitments incurred in the ordinary course of
business, there have been no material commitments for capital expenditures
relating to the Business; [5] there have been no material contracts, obligations
or commitments relating to the Business undertaken or amended and no material
liabilities or indebtedness relating to the Business incurred or guaranteed; [6]
PGI has not created any material lien upon, granted any security interest in or
otherwise encumbered, any of the PGI Assets; [7] there has been no write-up,
write-down or write-off of any PGI Asset; [8] PGI has not waived any rights or
released any claims material to the Business; [9] there has occurred no split-up
or other recapitalization in respect of the capital stock of PGI or any direct
or indirect redemption, purchase or other acquisition of any such capital stock
or any agreement to do any of the foregoing; [10] no indebtedness has been
incurred by PGI, except such as may have been incurred or entered into in the
ordinary
13
course of Business; [11] no change has occurred in the accounting methods,
practices or policies followed by PGI from those in effect during the past three
(3) fiscal years; [12] there has occurred no change in or amendment to the
Certificate of Incorporation or Bylaws of PGI; [13] except as set forth in
Schedule 11.3.3[13], there has occurred no issuance, transfer, sale or pledge by
PGI of any shares of its capital stock or other securities or of any commitment,
option, right or privilege under which PGI is or may become obligated to issue
any share of its capital stock or other securities; and [14] in general, the
Business has been conducted in all respects only in the ordinary course.
11.3.4 As of December 31, 1997, PGI had placed on lease,
either directly or through sublicensees, not fewer than 935 tables of Caribbean
Stud, Caribbean Draw or other game using patents owned or held by PGI ("Gaming
Tables") which are obligated to generate revenue for PGI through recurring
rental and license fees as reflected on the Financial Statements.
11.4 SHAREHOLDER EQUITY. On March 1, 1998, PGI shareholder equity
------------------
was not less than $3.8 million, after giving effect to a $1.5 million dividend
payable in April 1998 and shall increase at a minimum of $350,000 per month
thereafter until the Closing Date, less any write off of assets requested in
writing by MIKOHN.
11.5 THE PGI ASSETS. The PGI Assets constitute all the material
--------------
assets, real and personal, tangible and intangible, that are owned, used or held
for use in connection with or otherwise relate to the Business and, except for
contemplated additions in the ordinary course of business that are not material
in the aggregate, include all assets the use of which is necessary for the
conduct of the Business as now conducted by PGI.
11.5.1 TITLE. Except as disclosed in the Schedules hereto,
-----
PGI has as of the date hereof, and on the Closing will have, good and marketable
title to all the PGI Assets (including at Closing stock in the PGI Affiliates as
provided in Section 6.14), subject to no mortgage, security interest, pledge,
lien, conditional sales agreement, claim, restriction, reservation, covenant,
encumbrance, charge, restraint on transfer, or any title defect of any nature
whatsoever, other than those reflected on the Financial Statements and defects
that do not have a PGI Material Adverse Effect and no other person has any right
to the use or possession of any of the PGI Assets. Except as reflected on
Schedule 4.4.6, no financing statement under the Uniform Commercial Code with
respect to any of the PGI Assets has been filed in any jurisdiction and PGI has
not signed any such
14
financing statement or any security agreement authorizing any secured party
thereunder to file any such financing statement, except as reflected in the
Financial Statements.
11.5.2 MACHINERY, TOOLS AND EQUIPMENT. Schedule 11.5.2
------------------------------
hereto contains a list of all material machinery, tools and equipment wherever
located, used or held for use in the conduct of the Business.
11.5.3 INSURANCE. There is set forth in Schedule 11.5.3
---------
hereto a complete and accurate list and summary of all policies of insurance of
any nature whatsoever maintained by ▇▇▇▇▇ or PGI pertaining to the business of
PGI, showing, among other things, the amount of coverage, the company issuing
the policy and the expiration date of each policy. To ▇▇▇▇▇' knowledge, PGI has
adequately insured the PGI Assets that are of insurable character with reputable
insurance companies against loss or damage by fire and other risks to the extent
and in the manner customary for companies engaged in businesses similar to the
Business or owning assets similar to the PGI Assets. During the past three
years, no application by PGI for insurance with respect to the PGI Assets has
been denied for any reason. All such policies are in full force and effect and
will remain in full force and effect until the Closing and PGI has not received
any notice of cancellation with respect thereto. Since February 28, 1998, no
event has occurred which has resulted in material damage to any of the PGI
Assets or which has materially impaired the use of any of the PGI Assets whether
or not such event has been insured against.
11.5.4 INVENTORIES. To ▇▇▇▇▇' knowledge, all inventories
-----------
reflected on the February 28, 1998 Balance Sheet are, and all inventories to be
transferred to MIKOHN at the Closing will be, in good and usable condition, and
are saleable by PGI in the ordinary course of business after the Closing. The
values at which such inventories are carried on the December 31, 1997 Balance
Sheet reflect the normal inventory valuation policies of the Business and are in
accordance with generally accepted accounting principles, consistently applied.
The foregoing notwithstanding, prior to the Closing, PGI may transfer to ▇▇▇▇▇
twenty (20) Gaming Tables, including all electronics and layouts and two (2)
complete sets of spare parts, at no charge to ▇▇▇▇▇ for ▇▇▇▇▇'▇ use in any legal
casino in which ▇▇▇▇▇ holds a 50% or greater interest; provided, however, ▇▇▇▇▇
shall not displace any Gaming Tables under license from PGI in operation at such
casino before ▇▇▇▇▇ acquired a 50% interest therein. Unless prohibited by law or
regulatory authority having jurisdiction, PGI shall agree to provide ▇▇▇▇▇ with
spare parts for such tables at a price of PGI's cost plus 15% and access to all
improvements and upgrades.
15
11.5.5 ACCOUNTS AND NOTES RECEIVABLE. Schedule 11.5.5
-----------------------------
hereto contains a complete and accurate list of all material accounts and notes
receivable of PGI as of the date of February 28, 1998 and an aging schedule of
such accounts and notes receivable. Such accounts and notes receivable arose in
bona-fide arms length transactions in the ordinary course of business of PGI.
11.5.6 PERMITS. Except as set forth in the Schedules, PGI
-------
has all material permits and licenses which are necessary for the conduct of the
Business as now conducted and at the Closing PGI will have all such permits and
licenses except gaming licenses the loss of which will not have a PGI Material
Adverse Effect. There is set forth in Schedule 11.5.6 hereto a complete and
accurate list of each material permit, license and certificate or authorization
issued to PGI by any third party.
11.5.7 TAXES. To ▇▇▇▇▇ knowledge, PGI has filed all
-----
necessary federal, state, local and foreign income, property and franchise tax
returns and paid all taxes shown as due thereon; all tax liabilities are
adequately provided for on the books of PGI and ▇▇▇▇▇ has no knowledge of any
tax deficiency of PGI or any tax proceeding or action pending or threatened
against PGI which would have a PGI Material Adverse Effect. To ▇▇▇▇▇' knowledge,
all federal, state, local and foreign income, property and franchise tax returns
filed by or on behalf of PGI are complete and accurate in all material respects
in accordance with all legal requirements applicable thereto. PGI is not a party
to or bound by any tax indemnity, tax sharing or tax allocation agreement. ▇▇▇▇▇
shall indemnify MIKOHN and PGI against any tax liabilities imposed on PGI as a
result of any non-payment or underpayment of taxes owed with respect to periods
prior to the Closing. PGI and MIKOHN shall promptly remit to ▇▇▇▇▇ any tax
refunds received after the Closing as a result of any over payment of taxes of
PGI paid with respect to periods prior to the Closing. MIKOHN will promptly
provide ▇▇▇▇▇ with copies of all correspondence or other information from taxing
authorities with respect to any assessment or proposed assessment of, or any
inquiry or examination by such taxing authorities in connection with, taxes of
PGI covered by the foregoing indemnity. ▇▇▇▇▇ shall have the right to take any
actions he deems necessary and appropriate in connection with the matters
covered by the foregoing indemnity, including contesting, defending and settling
any assessment of taxes or proposed assessment of taxes. MIKOHN will give ▇▇▇▇▇
a power of attorney to act on PGI's behalf in handling all matters covered by
the foregoing indemnity and shall provide ▇▇▇▇▇ with access to all books and
records reasonably requested by ▇▇▇▇▇ in connection with the foregoing
indemnity. In no event ▇▇▇▇ ▇▇▇▇▇ be liable for any tax incurred by PGI as a
16
result of an election made by MIKOHN for PGI under Section 338 of the Internal
Revenue Code of 1986, as amended, and MIKOHN agrees to defend, indemnify and
hold harmless ▇▇▇▇▇ from and against any such tax.
11.6 CONTRACTS. Except as set forth in the Schedules, PGI has not
---------
received notice of any default or claim of default under any provision of any
material contract to which PGI is a party and, to ▇▇▇▇▇' knowledge, no event has
occurred which, with the passage of time or the giving of notice (or both),
would constitute a default by PGI (or, to ▇▇▇▇▇' knowledge, any other party
thereto) under any provision thereof, or would permit modification, acceleration
or termination of any contract by any other party thereto or by PGI. There is
set forth in Schedule 11.6 hereto a complete and accurate list of all Gaming
Table leases and Gaming Table license agreements and all other material
contracts, whether written or oral, between PGI and any party who is obligated
to make payments or provide services to PGI or to whom PGI is obligated to make
payments or provide service in an amount exceeding $10,000 per year.
11.7 LITIGATION; COMPLIANCE WITH LAW. Except as set forth in
-------------------------------
Schedule 11.7 and except for gaming investigations conducted in the ordinary
course of the Business, no material investigation or review by any governmental
entity with respect to PGI is pending or, to ▇▇▇▇▇' knowledge, threatened, nor
has any governmental entity indicated to PGI an intention to conduct the same;
and there is no action, suit or proceeding pending or, to ▇▇▇▇▇' knowledge,
threatened against or affecting PGI at law or in equity, or before any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, which either singly or in the aggregate would, if
adversely determined, have a PGI Material Adverse Effect, or which would impair
▇▇▇▇▇' and PGI's ability to perform this Agreement. Except as set forth in
Schedule 11.7, to ▇▇▇▇▇' knowledge, the Business is not being conducted in
violation of any applicable law, ordinance, regulation, decree or order of any
court or governmental entity which could have a PGI Material Adverse Effect and
▇▇▇▇▇ has no knowledge of any pending or proposed laws, ordinances or
regulations which, if enacted or adopted, could have a PGI Material Adverse
Effect (other than matters of public knowledge or which are generally applicable
to the industries in which the Business is conducted).
11.8 LABOR RELATIONS; EMPLOYEES. Except as set forth in the
--------------------------
Schedule 11.8, as of the date hereof and the Closing, PGI has paid or made
provision for the payment of all salaries and wages (including without
limitation, bonuses, sick and vacation pay, commissions to salesmen, etc.)
accrued through the date hereof to or for the benefit of employees of the
Business and has
17
complied in all material respects with all applicable laws, rules and
regulations relating to the employment of labor, including those relating to
wages, hours, collective bargaining and the payment and withholding of taxes,
and has withheld and paid to the appropriate governmental authority, or is
holding for payment not yet due to such authority, all amounts required by law
or agreement to be withheld from the wages or salaries of such employees. Since
February 28, 1998, there has been no material adverse change in the relationship
of PGI with its respective employees (including any threatened union
organization or renegotiation of any union contract) nor any strike or labor
disturbance by any such employees or any other employees of PGI performing
services in connection with the Business, and ▇▇▇▇▇ is not aware of any
indication that such a change, strike or labor disturbance is likely.
11.9 EMPLOYEE BENEFIT PLANS. PGI does not have any pension,
----------------------
profit sharing, savings, bonus, incentive, insurance, welfare, stock option,
severance or vacation or other employee benefit plans, whether written or oral
(including, without limitation, any such plans within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) in which any employees of the Business participate ("Benefit Plans"),
except as disclosed in Schedule 11.9. With respect to each Benefit Plan, PGI has
delivered to MIKOHN complete and correct copies of (a) the Benefit Plan (or a
written summary of any unwritten Benefit Plan); (b) any related trust agreement,
insurance contract or other funding vehicle; (c) the last three annual reports
on IRS Form 5500; (d) the latest actuarial valuation report; and (e) any summary
plan description or employee handbook. Those Benefit Plans within the meaning of
Sections 3(2) and 3(37)(A) of ERISA are hereinafter referred to as "Multi-
employer Qualified Plans" or "Multi-employer Plans", and all other Benefit Plans
within the meaning of Section 3(2) of ERISA are hereinafter referred to as
"Single Employer Qualified Plans" or "SEQ Plans."
11.9.1 With Respect to the SEQ Plans:
11.9.1.1 Each SEQ Plan and related trust has
received a favorable determination letter from the Internal Revenue Service with
respect to its qualified status under Sections 401(a) and 501(a) of ERISA and,
to the knowledge of PGI, nothing has occurred since the date of such letter
which would adversely affect its validity.
11.9.1.2 All data submitted by PGI to the actuary
for use in the actuarial valuations for all plan years of each SEQ Plan prepared
as of the date hereof was accurate and complete in all material respects, and
each such valuation fairly
18
presents the actuarial position of the respective plan covered thereby as of
such date in accordance with generally accepted actuarial principles.
11.9.1.3 Since the effective date of ERISA, no SEQ
Plan or related trust has incurred an "accumulated funding deficiency" (whether
or not waived) as such term is defined in ERISA or in the Code.
11.9.2 With respect to the Multi-employer Plans:
11.9.2.1 PGI has not received notice, or has any
reason to believe, that any other Multi-employer Plan has not received such a
favorable determination letter or any other development since such date which
would cause the loss of such qualified status.
11.9.2.2 All data submitted by PGI to any sponsor
of a Multi-employer Plan with respect to the Multi-employer Plans fairly present
the employee data requested by such sponsors.
11.9.2.3 With respect to each Multi-employer Plan,
PGI has previously disclosed in writing (i) PGI's contribution rate and number
of contribution base units for each of the last three years; and (ii) the
liability which PGI would incur on a "complete withdrawal", within the meaning
of Section 4203 of ERISA, as of the Closing Date without regard to any
limitation, reduction or adjustment of liability under Title IV of ERISA or the
provisions of the plan. With respect to any Benefit Plan or any plan which is
contributed to by any entity treated as a single employer with PGI under Section
414(b), (c), (m) or (o) of the code ("ERISA Affiliate") and which is a multi-
employer plan within the meaning of Section 3(37) of ERISA; (iii) neither PGI
nor any ERISA Affiliate has incurred any withdrawal liability under Section 4201
et seq. of ERISA which had not been satisfied or received notice of any claim or
-- ---
demand for withdrawal liability; (iv) PGI and its ERISA Affiliates have timely
made contributions required by the terms of the plan or any collective
bargaining agreement; and (v) to the knowledge of PGI and its ERISA Affiliates,
no such plan is in reorganization, within the meaning of Section 4241 of ERISA,
or is or may become insolvent, within the meaning of Section 4245 of ERISA, and
no such plan is a party to any pending merger or transfer of assets and
liabilities. Neither PGI nor any ERISA Affiliate has incurred any withdrawal
liability under Section 4063 or 4064 of ERISA.
11.9.2.4 PGI has not received notice that any
collective bargaining agent with respect to, or sponsor of, a Multi-employer
Plan has terminated, caused the termination
19
of, or intends to terminate, coverage under any Multi-employer Plan of employees
of any facility or business to be acquired by MIKOHN hereunder, or the coverage
of any other participants therein so as to constitute a termination of any
Multi-employer Plan.
11.9.3 Each Benefit Plan and each funding medium which may
be attendant thereto, including group annuity contracts, have been in all
material respects operated and administered in accordance with their provisions
and applicable law. On or prior to the date hereof PGI has contributed to each
SEQ Plan not less than the amounts accrued for such Plan for all plan years
prior to the current plan year and on or prior to the Closing will have
contributed to such plan not less than the amounts required for such plan for
the current fiscal year of the plan prorated for the elapsed portion of such
fiscal year to the Closing. As to any other Benefit Plan or union contract to be
assumed by MIKOHN, PGI has made or will have made prior to the Closing all other
contributions or payments required to be paid or accrued with respect to such
Plan. Other than routine claims for benefits under the Benefit Plans in the
ordinary course of business, there are no actions, suits or claims pending or,
to the knowledge of PGI, threatened against any Benefit Plan or any of its
assets, and PGI has no knowledge of any facts which could give rise to any such
actions, suits or claims. No Benefit Plan is currently under investigation or
audit by a governmental agency and, to PGI's knowledge, no such investigation or
audit is contemplated or under consideration.
11.9.4 PGI has paid all required premium payments to the
Pension Benefit Guaranty Corporation ("PBGC") with respect to the Benefit Plans
and has not incurred any other liability to the PBGC with respect to any plan
currently or formerly contributed to or maintained by PGI or any ERISA
Affiliate. PGI has timely paid all contributions to any SEQ Plan subject to
Title IV of ERISA. No proceedings have been undertaken by PGI or the PBGC to
terminate any SEQ Plan subject to Title IV of ERISA and there has been no
"reportable event" within the meaning of Section 4043 of ERISA with respect to
any such plan (for which the 30-day notice requirement has not been waived)
within the last 6 years.
11.9.5 Neither PGI nor any of its subsidiaries, nor any of
its affiliates, directors, officers or employees has, with respect to the
Benefit Plans, engaged in any "prohibited transaction," as such term is defined
in the Code or ERISA, nor have any such Plans, the related trusts or any
trustee, administrator or other "party-in-interest" (as defined in ERISA)
engaged in any such prohibited transaction, which could subject PGI or MIKOHN,
or any of their directors, officers or employees to any sanctions, taxes or
penalties on or with respect to prohibited
20
transactions which may be imposed under the Code, ERISA or any other applicable
law.
11.9.6 To ▇▇▇▇▇' knowledge, neither PGI nor any of its
subsidiaries, nor any of its or their directors, officers or employees, nor to
PGI's knowledge, any other "fiduciary" (as defined in ERISA), has, with respect
to any Benefit Plan, committed any breach of fiduciary responsibility imposed by
ERISA or any other applicable law which could subject PGI or MIKOHN or any of
their directors, officers, employees or persons to liability under ERISA or any
other applicable law.
11.9.7 Each Benefit Plan covers only present or former
employees of PGI. No Benefit Plan provides life or health benefits to former
employees of PGI, other than continuation coverage required by Section 4980B of
the Code and provided at the expense of the former employee.
11.9.8 PGI has no plan or commitment, whether legally
binding or not, to create any additional Benefit Plan or to modify any existing
Benefit Plan except with respect to changes required by applicable law or as
expressly provided for in this Agreement. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
(i) result in any payment becoming due to any current or former employee of PGI,
(ii) increase any benefits otherwise payable under any Benefit Plan, or (iii)
result in the acceleration of the time of payment or vesting of any such
benefits.
11.10 INTELLECTUAL PROPERTY. Except as set forth in Schedule
---------------------
11.10, to ▇▇▇▇▇' knowledge, the Business as now conducted by PGI does not
infringe any patent, trademark, trade name, trade secret or copyright held by
others or any license, authorization or permit held by PGI, in any manner which
may have a PGI Material Adverse Effect.
11.10.1 Schedule 11.10.1 hereto lists all patents, patent
applications, inventions, trade names, trademarks, service marks, brand names,
copyrights and registrations and applications therefor, owned by or used in the
Business as now conducted by PGI (the "Intellectual Property"). To ▇▇▇▇▇'
knowledge, PGI owns the Intellectual Property, the authorship add inventorship
identified in Schedule 11.10.1 is accurate and the Intellectual Property (except
for patent claims currently under rejection in re-examination proceedings) is
not invalid and is enforceable.
11.10.2 Neither ▇▇▇▇▇ nor PGI has granted any licenses or
other rights and has no obligations to grant
21
licenses or other rights to any Intellectual Property other than the licenses
and rights disclosed on Schedule 11.10.2 hereto.
11.10.3 Neither ▇▇▇▇▇ nor PGI has made any claim of any
violation or infringement by others of its rights to or in connection with the
Intellectual Property or technology used or held for use in the Business, and
neither ▇▇▇▇▇ nor PGI know of any basis for making any such claim except those
claims disclosed on Schedule 11.10.3.
11.10.4 There are no interferences or other contested
proceedings or reexamination proceedings, either pending or, to the knowledge of
▇▇▇▇▇ or PGI, threatened, in the United States Copyright Office, the United
States Patent and Trademark Office or any federal, state or local court or
before any other governmental agency or tribunal, relating to any pending
application with respect to the Intellectual Property except those proceedings
disclosed in Schedule 11.10.4.
11.11 YEAR 2000 ISSUE. ▇▇▇▇▇ and PGI acknowledge that the approach
---------------
of the year 2000 has become a potential problem for businesses utilizing
computers in their operations since many computer programs are date sensitive
and will only recognize the last two digits of the year, thereby recognizing the
year 2000 as the year 1900 or not at all (the "Year 2000 Issue"). To ▇▇▇▇▇'
knowledge, except as disclosed in Schedule 11.11, all software programs
developed by PGI and included in the PGI Assets are Year 2000 compliant, that
is, the operation and functionality of such software programs will not be
materially adversely affected by the Year 2000 Issue.
11.12 CUSTOMERS AND SUPPLIERS. Except as disclosed in the
-----------------------
Schedules, neither ▇▇▇▇▇ nor PGI has received any notice of, and ▇▇▇▇▇ knows of
no reasonable basis for, any matter involving PGI's arrangements with PGI's
customers and suppliers of the Business that would have a PGI Material Adverse
Effect.
11.13 DISCLOSURE OF ALL MATERIAL FACTS. No representation or
--------------------------------
warranty by ▇▇▇▇▇ in this Agreement (including all Exhibits and Schedules
attached hereto) or in any certificate furnished to MIKOHN in connection with
the Closing of the transactions contemplated hereby contains, or will at Closing
contain, any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances under which they were made, not misleading.
11.14 CAPITALIZATION. The authorized capital stock of PGI consists
--------------
of 3,000 shares, $.01 par value, of which 2,700 shares are issued and
outstanding. All of the PGI Shares are
22
owned, beneficially and of record, only by ▇▇▇▇▇ and, at the time they are
delivered to MIKOHN at the Closing, will be free from any charge, lien,
encumbrance or adverse claim of any kind whatsoever. At the Closing, ▇▇▇▇▇ will
have the absolute unrestricted right, power, authority and capacity to transfer
the PGI Shares to MIKOHN and upon the Closing, without exception, MIKOHN will
acquire from ▇▇▇▇▇ legal and beneficial ownership of, good and valid title to,
and all rights to vote, the PGI Shares, free from any charge, lien, encumbrance
or adverse claim of any kind whatsoever. All of the PGI Shares have been duly
authorized and validly issued and are fully paid and nonassessable. There are no
options, warrants, conversion rights, rights of exchange, or other rights,
plans, agreements or commitments of any nature whatsoever (including, without
limitation, conversion or preemptive rights) providing for the purchase,
issuance or sale of any shares of PGI's capital stock or any securities
convertible into or exchangeable for any shares of PGI's capital stock.
11.15 SUBSIDIARIES AND AFFILIATES. Except for the PGI Affiliates
---------------------------
or as disclosed in the Schedules, PGI does not presently own, directly or
indirectly, any interest in any other corporation, association, joint venture or
other business entity. At the Closing, PGI will own all of the issued and
outstanding capital stock of the PGI Affiliates ("Affiliate Shares"), except as
may be provided in Section 6.14, which will then be subsidiaries of PGI. At the
Closing, except as may be provided in Section 6.14, the Affiliate Shares will be
owned, beneficially and of record, by PGI and, will be free from any charge,
lien, encumbrance or adverse claim of any kind whatsoever. As of the Closing,
PGI will have legal and beneficial ownership of, good and valid title to, and
all rights to vote, the Affiliate Shares, free from any charge, lien,
encumbrance or adverse claim of any kind whatsoever. All of the Affiliate Shares
have been duly authorized and validly issued and are fully paid and
nonassessable. There are no options, warrants, conversion rights, rights of
exchange, or other rights, plans, agreements or commitments of any nature
whatsoever (including, without limitation, conversion or preemptive rights)
providing for the purchase, issuance or sale of any Affiliate Shares or any
securities convertible into or exchangeable for any shares of Affiliate Shares.
11.16 PROPERTIES. PGI does not own or hold title to any real
----------
property. With respect to the property and assets it leases, PGI is in
compliance in all material respects with such leases and holds a valid leasehold
interest free of any material liens, claims or encumbrances of any kind
whatsoever except as disclosed in the Schedules. There is set forth in Schedules
11.16[1] and 11.16[2] hereto: [1] a list of all leases or rental contracts under
which PGI is a lessee, lessor, sublessee or sublessor and [2] a list of all
equipment used by PGI in the
23
operation of its business which is owned or leased by PGI and which had an
original cost of $15,000 or more.
11.17 INDEBTEDNESS. Schedule 11.17 hereto contains a complete list
------------
of each and every agreement or other instrument under or pursuant to which PGI
has outstanding indebtedness for borrowed money. ▇▇▇▇▇ has furnished MIKOHN with
true and correct copies of each such agreement and instrument, including all
amendments with respect thereto through the date of this Agreement, PGI (and
▇▇▇▇▇ to the extent responsible for the payment of the obligations thereunder)
is not in default in any material respect under any such agreement or instrument
and, to ▇▇▇▇▇' knowledge, no other party to any such agreement or instrument is
in default in any material respect under any such agreement or instrument.
11.18 DIRECTORS, OFFICERS AND EMPLOYEES. Schedule 11.18 hereto
---------------------------------
sets forth a true and complete list of the names and current salaries of all
management employees of PGI who earned $50,000 or more for the fiscal year of
PGI ended December 31, 1997, or who will, at their present salaries earn $50,000
or more for the fiscal year ending December 31, 1998.
11.19 POWERS OF ATTORNEY; BANK ACCOUNTS. Schedule 11.19[1] and
---------------------------------
Schedule 11.19[2] hereto list, respectively, [1] the names and addresses of all
persons or entities holding a power of attorney on behalf of PGI other than
attorneys at law who are authorized to prosecute intellectual property matters
or litigation, on behalf of PGI, and [2] the names and addresses of all banks or
other financial institutions in which PGI has an account, deposit or safe-
deposit box, with the number and a description of the account and the names of
all persons authorized to draw on such account or deposit or to have access to
such boxes.
11.20 GOOD AND MARKETABLE TITLE TO SHARES. ▇▇▇▇▇ has, and will
-----------------------------------
have on the Closing Date, full right, power and authority to sell, transfer and
deliver the PGI Shares to MIKOHN as provided in this Agreement.
11.21 ENVIRONMENTAL MATTERS.
---------------------
11.21.1 For the purposes of this Agreement, the term
"Environmental Laws" shall mean all federal, state and local environmental
protection, occupational, health and safety or similar laws, ordinances,
restrictions, licenses, rules, regulations and permit conditions, including,
without limitation, the Federal Water Pollution Control Act, Resource
Conservation & Recovery Act, Clean Air Act, Compensation and Liability Act,
Emergency Planning and Community Right to Know, Occupational
24
Safety and Health Act and other federal, state or local laws of similar effect,
each as amended, and the term "Hazardous Materials" shall mean any hazardous or
toxic substances, wastes or materials, defined as such or governed by any
applicable Environmental Law.
11.21.2 [1] Neither PGI nor ▇▇▇▇▇ has received any notice,
directive, violation report, action or claim form or by (i) any federal, state
or local governmental agency concerning PGI and any Environmental Laws, or (ii)
any person or entity alleging that, in connection with Hazardous Materials,
conditions at any real properties leased by PGI have resulted in or caused or
threatened to result in or cause injury or death to any person or entity damages
to any property, including, without limitation, damage to natural resources, and
to ▇▇▇▇▇' knowledge, no such notice, directive, violation report, action, claim,
assessment or allegation exists; [2] to ▇▇▇▇▇' knowledge, PGI does not currently
lease, operate or own any real properties that are listed or are threatened to
be listed on a "Superfund" list or with respect to which there is any pending
proceeding or investigation under any Environmental Law, and, to ▇▇▇▇▇'
knowledge, no such proceeding or investigation is threatened; [3] to ▇▇▇▇▇'
knowledge, throughout the period of operation of any real properties by PGI, PGI
has operated and continues to operate such real properties in compliance with
all Environmental Laws; [4] to ▇▇▇▇▇'▇ knowledge, no underground storage tanks
either are or, to ▇▇▇▇▇' knowledge, have been located on any of such real
properties; [5] to ▇▇▇▇▇' knowledge, there has been no spill, discharge,
release, contamination or cleanup of or by any Hazardous Materials used,
generated, treated, stored, disposed of or handled by PGI at such real
properties and to ▇▇▇▇▇' knowledge, no spill, discharge or release or
contamination or cleanup of Hazardous Materials has occurred on or to such real
properties by any third party; [6] to ▇▇▇▇▇' knowledge, PGI has not used,
generated, treated, stored, disposed of, handled, transported or released any
Hazardous Materials in a manner which would give rise to any liability under any
Environmental Laws; [7] ▇▇▇▇▇ is not aware of any facts, events or conditions
(including, without limitation, the generation, treatment, transport, storage,
emission, disposal, release or other placement, deposit or location of any
substance) which materially interfere with or prevent continued compliance by
PGI with, or give rise to any present or potential liability (including with
respect to past activities) under any Environmental Laws; and [8] to ▇▇▇▇▇'
knowledge, PGI has not released any other person or entity from any claim under
any Environmental Laws, nor waived any rights or defenses concerning any
environmental conditions.
11.22 AFFILIATE RELATIONSHIPS. Except as set forth on Schedule
-----------------------
11.22 hereto, PGI and ▇▇▇▇▇ do not have any material
25
financial interest, direct or indirect, in any supplier or service provider to,
or customer of, PGI or other party to any contract or other arrangement which is
material to PGI. For purposes of this Section 11.22, the terms "subsidiary" and
"▇▇▇▇▇" shall be deemed to include PGI, the PGI Affiliates, ▇▇▇▇▇ and any person
or entity which, directly or indirectly, alone or together with others,
controls, is controlled by or is under common control with PGI or ▇▇▇▇▇.
11.23 CONSENTS OF THIRD PARTIES. Except as set forth in Schedule
-------------------------
11.23 hereto, no consent, waiver or approval of any third party is necessary for
the consummation by ▇▇▇▇▇ and PGI of the transactions contemplated hereby.
11.24 SURVIVAL. All representations and warranties of ▇▇▇▇▇
--------
herein shall survive the Closing. Except for tax and environmental matters which
shall survive for as long as the longest applicable statute of limitations, such
survival shall be limited to a period of one (1) year.
12 REPRESENTATIONS AND WARRANTIES OF MIKOHN. Effective as of the
----------------------------------------
date of this Agreement and the Closing, MIKOHN hereby represents and warrants to
▇▇▇▇▇ that:
12.1 CORPORATE STATUS. MIKOHN is a corporation duly formed and
----------------
organized under the laws of the State of Nevada.
12.2 CORPORATE AUTHORITY. MIKOHN has the corporate power and
-------------------
authority to acquire the PGI Shares and operate the PGI Assets and the Business
now owned and operated by PGI.
12.3 BINDING EFFECT. MIKOHN has the corporate power and
--------------
authority to execute, deliver and perform this Agreement, and the other
instruments and documents required or contemplated herein. Such execution,
delivery and performance have been duly authorized by all necessary action on
the part of MIKOHN, do not and will not require the approval of the shareholders
of MIKOHN and do not and will not contravene the Certificate of Incorporation or
By-Laws of MIKOHN or conflict with, result in a breach of, or entitle any party
(with due notice or lapse of time or both) to terminate, accelerate or call a
default with respect to, or result in the creation or imposition of any lien,
charge, encumbrance or claim of any nature whatsoever upon any of the PGI Assets
pursuant to, any agreement or instrument to which MIKOHN is a party or by which
MIKOHN is bound. The execution, delivery and performance of this Agreement by
MIKOHN will not result in any violation by MIKOHN of any law, rule or regulation
applicable to MIKOHN. MIKOHN is not a party to, or subject to or bound by, any
judgment, injunction or decree of any
26
court or governmental authority which may restrict or interfere with the
performance of this Agreement. This Agreement is a valid and binding obligation
of MIKOHN enforceable in accordance with its terms.
12.4 LAWSUITS AND CLAIMS. MIKOHN is not a party to or threatened
-------------------
by any litigation, proceeding, or controversy before any court or administrative
agency which might materially adversely affect the transactions contemplated by
this Agreement or the satisfaction of the conditions set forth in Section 6.13
or Section 7.
12.5 NO MIKOHN ADVERSE MATERIAL EFFECT. Since December 31, 1997,
---------------------------------
there has not been any change in the financial condition or results of
operations of MIKOHN that would materially adversely affect MIKOHN's ability to
satisfy the conditions set forth in Section 6.13 or Section 7 of this Agreement
or otherwise to consummate the transactions contemplated by this Agreement, and
MIKOHN has no knowledge of any present condition or contingency (other than
matters of public knowledge or which are generally applicable to the industries
in which MIKOHN conducts its business) which MIKOHN reasonably expects would
have such effect.
12.6 SURVIVAL. The representations and warranties of MIKOHN
--------
herein shall survive the Closing for a period of one (1) year.
13 NO SHOP. Prior to the Closing or termination of this Agreement,
-------
▇▇▇▇▇ and PGI shall not, nor shall they permit any affiliate of ▇▇▇▇▇ or PGI, or
any of ▇▇▇▇▇'▇ or PGI's representatives (including, without limitation, any
investment banker, broker, attorney or accountant retained by it) to initiate,
solicit or facilitate, directly or indirectly any inquiries or the making of any
proposal with respect to the sale, lease or other disposition of the stock or
assets of PGI ("Other Transaction"), engage in any discussions or negotiations
concerning, or provide to any person or entity any information or data relating
to PGI, for the purpose of, or otherwise cooperate in any way with or assist or
participate in, or facilitate any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, a proposal to seek or
effect any Other Transaction, or agree to or endorse any Other Transaction. PGI
shall promptly advise MIKOHN of, and communicate the material terms of, any
proposal it may receive, or any inquiries it receives which may reasonably be
expected to lead to such a proposal relating to an Other Transaction and the
identity of the person or entity making it. PGI shall further advise MIKOHN of
the status and changes in the material terms of any such proposal or inquiry (or
amendment to any of them). During the term of this Agreement, PGI shall not
enter into any agreement,
27
oral or written, and whether or not legally binding, with any person or entity
that provides for or in any way facilitates an Other Transaction or materially
and adversely affects any obligation of PGI under this Agreement.
14 COOPERATION. ▇▇▇▇▇, PGI and MIKOHN agree to cooperate fully in
-----------
accomplishing the transactions contemplated by this Agreement. Time is of the
essence of this Agreement. MIKOHN agrees to promptly take all actions necessary
to satisfy the conditions under Section 6.13 and Section 7 including without
limitation preparation of the documentation necessary to obtain the financing
described in Section 6.13 and MIKOHN shall not take any action that would
materially adversely affect the ability of the parties to close the transactions
contemplated by this Agreement on or before the Closing Date.
15 NO TRANSFER. ▇▇▇▇▇ agrees not to sell, assign or transfer any of
-----------
the PGI Shares to anyone other than MIKOHN. PGI shall close its transfer books
against any attempt to sell, assign or transfer any PGI Shares in violation of
the foregoing sentence.
16 PGI PAYABLES TO ▇▇▇▇▇. Effective upon the Closing, ▇▇▇▇▇ shall
---------------------
release and absolutely discharge PGI from any and all liabilities for
intercompany payables and any other amounts owing from PGI to ▇▇▇▇▇ except as
contemplated by this Agreement.
17 AMENDMENTS. This Agreement may not be amended or revised except
----------
by a writing executed by all of the parties hereto.
18 NO WAIVER. The failure of any party to insist, in any one or more
---------
instances, upon performance of any of the provisions of this Agreement or to
take advantage of any of its rights hereunder shall not operate as a waiver
thereof or preclude any other or further exercise thereof or the exercise of any
other right or power.
19 FLORIDA LAW. This Agreement shall be governed by, and interpreted
-----------
in accordance with, the laws of the State of Florida.
20 JURISDICTION AND VENUE. The parties acknowledge and agree that
----------------------
this Agreement has been entered into in Broward County, Florida, and that
jurisdiction over the parties in any action arising out of or in any way
connected with this Agreement is properly in any court of competent jurisdiction
within Broward or Dade County, Florida.
21 ATTORNEYS' FEES. In the event any action is commenced by a party
---------------
hereto against another party arising out of
28
or in any way connected with this Agreement, the prevailing party shall be
entitled to have and recover from the losing party reasonable attorneys' fees
and costs incurred in connection with such action and in preparation for such
action.
22 CONDUCT OF BUSINESS PENDING CLOSING. Prior to the Closing,
-----------------------------------
without the prior written consent of MIKOHN which shall not be unreasonably
withheld or delayed, ▇▇▇▇▇ covenants that, except in connection with matters
disclosed in this Agreement or the Schedules hereto or as otherwise permitted
under this Agreement:
22.1 PGI shall operate the Business only in the ordinary course;
provided that PGI shall be entitled to pay cash dividends to ▇▇▇▇▇.
22.2 Except in the ordinary course of business, PGI shall not
enter into any contract or lease or modify, extend or terminate any existing
contract with respect to the Business. All insurance policies with respect to
the Business shall be maintained in full force and effect except that if MIKOHN
does not elect to assume the same they may be terminated at the Closing.
22.3 Except for the CTI Receivable, PGI will not sell or
otherwise dispose of any asset which constitutes a portion of the PGI Assets
except in the ordinary course of business.
22.4 PGI will not enter into any agreement providing for [1] the
sale of any Gaming Table for any sum on any terms or [2] the rental or licensing
of any Table Games on terms less favorable to PGI than offered prior to March 1,
1998.
22.5 Except as otherwise requested by MIKOHN and without making
any commitment on its behalf, PGI shall use its best efforts to preserve the PGI
Assets and maintain them in substantially the same condition as of the date of
this Agreement, reasonable wear and tear excepted; provided, however, that the
foregoing exception shall not relieve PGI from the obligation to make repairs
and otherwise maintain the PGI Assets in accordance with good management
practice. PGI shall also keep its business organizations at the Business
substantially intact, shall use its best efforts to keep available to MIKOHN the
services of present employees at the Business and shall use its best efforts to
preserve the good will of suppliers, customers and others having business
relations with PGI.
22.6 No new bonus or pension plan or other similar contract or
commitment or any wage or salary increases in excess of $20,000 in the aggregate
or any collective bargaining agreement which relates to the Business shall be
entered into.
29
22.7 PGI and ▇▇▇▇▇ will not take any action or fail to take any
action as may be required under any applicable law for the valid and effective
consummation of the transactions provided for in this Agreement; provided,
however, that the foregoing shall not require PGI or ▇▇▇▇▇ to agree to
conditions or requirements of gaming authorities that materially eliminate,
alter, suspend or otherwise modify the terms of this Agreement.
22.8 No change will be made affecting the banking and safe
deposit box arrangements of the Business.
22.9 No indebtedness shall be incurred with respect to the PGI
Assets or the Business other than in the ordinary course of business and in no
event shall any indebtedness in excess of $50,000 in the aggregate be incurred.
22.10 The Business shall remain open and shall be conducted in
the same manner as it is currently conducted.
22.11 PGI shall not issue, redeem or purchase any of PGI's
capital stock or securities convertible into its capital stock or grant or issue
any options, warrants or rights to subscribe for its capital stock or securities
convertible into its capital stock or commit to do any of the foregoing.
22.12 PGI shall not enter into any employment contract or
agreement with any existing or prospective employee which is not terminable at
will.
22.13 Except in the ordinary course of Business, PGI shall not
pay any obligations or liability, fixed or contingent, other than current
liabilities.
22.14 Except for the CTI Receivable, PGI shall not cancel,
without full payment, any note, loan or other obligations owing to PGI.
22.15 PGI shall not create or suffer to be imposed any new lien,
mortgage, security interest or other charge on or against its properties or
assets.
22.16 PGI shall not make or adopt any change in its Certificate
of Incorporation or Bylaws as in force and effect on the date hereof.
22.17 Neither ▇▇▇▇▇ nor PGI will take any action, or omit to take
any action, within their control, that would cause, and shall promptly notify
MIKOHN in writing of any event or occurrence which causes, any of the
representations and warranties set forth in Section 11 hereof to become untrue,
incomplete or
30
inaccurate in any material respect as of or prior to the Closing Date.
23 COMPLETE AGREEMENT. This Agreement contains the complete
------------------
agreement of the parties, and supersedes any and all prior contemporaneous
agreements or understandings, written or oral.
24 COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be an original but
all such counterparts shall constitute one and the same agreement. Any
signature page of this Agreement may be detached from any counterpart without
impairing the legal effect of any signatures thereof, and may be attached to
another counterpart, identical in form thereto, but having attached to it one or
more additional signature pages.
25 INDEMNITY.
---------
25.1 INDEMNITY BY ▇▇▇▇▇. From and after Closing, ▇▇▇▇▇ covenants
------------------
and agrees to indemnify and hold MIKOHN and its affiliates (which shall include
PGI; each a "Purchaser Indemnitee") harmless in respect of any Damages imposed
upon or sustained by a Purchaser Indemnitee by reason of:
25.1.1 any misrepresentation, breach of warranty or
nonfulfillment of any agreement on the part of ▇▇▇▇▇ under this Agreement, or in
any certificate or other instruments described and referred to in this
Agreement, or in the Exhibits and Schedules attached hereto, or to be furnished
to MIKOHN hereunder, unless the Purchaser Indemnitee knew or had reason to know
of any such misrepresentation, breach or nonfulfillment prior to Closing;
25.1.2 any claim or cause of action brought against PGI by
any former employee of PGI relating to or arising from the employment
relationship or termination thereof prior to the Closing unless the Purchaser
Indemnitee knew or had reason to know of any such claim or cause of action;
25.1.3 any claim or cause of action brought by Par-4, Inc.
or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ relating to that certain License Agreement dated September
21, 1993 by and between PGI and MIKOHN; and
25.1.4 any claim or cause of action brought by August
▇▇▇▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇▇ arising from their employment relationship with PGI
or termination thereof.
25.1.5 For purposes of this Agreement,
31
"Damages" means all damages, assessments, taxes, judgments, costs and expenses
incident to any of the foregoing, including, but not limited to, attorneys'
fees.
26 INDEMNITY BY MIKOHN. From and after Closing, MIKOHN agrees to
-------------------
indemnify ▇▇▇▇▇ and his heirs, successors, personal representatives, devisees
and assigns (each a "Stockholder Indemnitee") and hold them harmless in respect
of any Damages imposed upon or sustained by a Stockholder Indemnitee by reason
of any misrepresentation, breach of warranty or nonfulfillment of any agreement
on the part of MIKOHN under this Agreement, or in any certificate or other
instruments described and referred to in this Agreement to be furnished to ▇▇▇▇▇
hereunder, unless the Stockholder Indemnitee knew or had reason to know of any
such misrepresentation, breach or nonfulfillment at the time of Closing.
27 PROCEDURES FOR THIRD-PARTY CLAIMS.
---------------------------------
27.1 If a Purchaser Indemnitee or a Stockholder Indemnitee (an
"Indemnitee") receives written notice of the assertion of any claim or of the
commencement of any action or proceeding by any entity who is not a party to
this Agreement (a "Third Party Claim") against or affecting such Indemnitee, and
if such assertion were presumed to be true (regardless of the actual outcome)
and a party (the "Indemnifying Party") could be obligated to provide
indemnification under this Agreement as a result of or in connection with such
claim, action or proceeding, such Indemnitee will give such Indemnifying Party
reasonably prompt written notice thereof, but in any event no later than thirty
(30) calendar days after receipt of such written notice of such Third Party
Claim; provided however, that failure to give notice as provided in this Section
27.1 shall not relieve the Indemnifying Party of its indemnification obligations
under Section 25 or Section 26 except to the extent that such Indemnifying Party
is actually prejudiced by such failure. Said written notice to the Indemnifying
Party shall set forth the basis of the Third Party Claim in reasonable detail
and include copies of all pertinent correspondence relating to such Third Party
Claim. The Indemnifying Party will have the right to assume and control the
defense of any Third Party Claim at such Indemnifying Party's sole expense and
by such Indemnifying Party's own counsel (which counsel must be reasonably
satisfactory to the Indemnitee), by giving written notice to the Indemnitee (the
"Notice of Defense") no later than thirty (30) calendar days after receipt of
the above-described notice of such Third Party Claim. The Indemnitee also will
have the right to participate in the defense of any Third Party Claim assisted
by counsel of its own choosing, but all fees and expenses of such counsel shall
be paid by the Indemnitee. The Indemnifying Party and the Indemnitee will
cooperate with
32
each other in good faith in such defense and make available all employees and
books and records in its control as reasonably deemed necessary with respect to
such defense (but not to the extent that would require waiver of any privilege).
If the Indemnitee does not receive from the Indemnifying Party a Notice of
Defense with respect to a Third Party Claim within the thirty (30) day period
described above, the Indemnitee may, at its option, elect to solely defend the
Third Party Claim assisted by counsel of its own choosing, and the Indemnifying
Party will be liable for all reasonable costs and expenses, and all settlement
amounts (subject to and in accordance with Section 27.3) or other liabilities,
losses, damages and injuries paid or incurred in connection therewith to the
extent such claim is or would have been indemnifiable under this Agreement if
such claim is or had been proved.
27.2 If, within the thirty (30) day period set forth in Section
27.2, an Indemnitee receives a Notice of Defense from an Indemnifying Party with
respect to any Third Party Claim, the Indemnifying Party will not be liable for
any legal expenses of the Indemnitee incurred after receipt by the Indemnitee of
such Notice of Defense.
27.3 In the event there is a dispute between the Indemnifying
Party and Indemnitee concerning whether a Third Party Claim should be contested,
settled or compromised, it shall be settled, compromised or contested in
accordance with the next succeeding sentences; provided, however, that the
-------- -------
Indemnitee, or its respective successors or assigns, shall neither be required
to refrain from paying or satisfying any claim which has matured by court
judgment or decree, unless appeal is taken thereafter and proper appeal bond
posted by the Indemnifying Party, nor shall the Indemnitee be required to
refrain from paying or satisfying any Third Party Claim after and to the extend
that such Third Party Claim has resulted in an unstayed injunction. The
Indemnifying Party shall not, without the Indemnitee's prior written consent
which is not to be unreasonably withheld, settle or compromise any action or
claim or consent to the entry of any judgment with respect to any action, claim
or proceeding for anything other than money damages paid by the Indemnifying
Party unless the settlement does not involve the imposition of any liability or
obligation on the Indemnitee or any restriction on its activities. The
Indemnifying Party may, without the Indemnitee's written consent, settle or
compromise any such action or claim or consent to entry of any judgment with
respect to any such action or claim which requires solely the payment of money
damages by the Indemnifying Party. Subject to the foregoing, in the event that
the Indemnifying Party, on the one hand, or the Indemnitee, on the other hand,
has reached a good faith, bona fide settlement, agreement or compromise, subject
to approval hereunder, with any claimant regarding a matter which may be the
subject of
33
indemnification hereunder, and desires to settle on the basis of such agreement
or compromise, such party who desires to so settle or compromise shall notify
the other party in writing of its desire setting forth the terms of such
settlement or compromise (the "Notice of Settlement"). The Third Party Claim may
be settled or compromised on such basis unless within twenty (20) days of the
receipt of the Notice of Settlement the party who issued the Notice of
Settlement receives a notice from the other party of its desire to continue to
contest the matter (the "Notice to Contest") and, in such case:
27.3.1 Should the Indemnitee deliver a Notice to Contest, the
claim shall be so contested and the liability of the Indemnifying Party shall be
limited as provided in Clause 27.3.3 below:
27.3.2 If the settlement or compromise could result in a further
claim for indemnification being made against the Indemnifying Party and if the
Indemnifying Party delivers the Notice to Contest, the claim shall be so
contested and the liability of the Indemnitee shall be limited as provided in
clause 27.3.3 below ; and
27.3.3 If a matter is contested as provided in Sections 27.3.1 or
27.3.2 above and is later adjudicated, settled, compromised or otherwise
disposed of and such adjudication, compromise, settlement or disposition results
in a liability, loss, damage or injury in excess of the amount for which one
party desired previously to settle the matter, then the liability of such party
shall be limited to such lesser proposed settlement amount (plus attorney's fees
and expenses to the date of the proposed but unapproved settlement to the extent
provided for in Section 27.3 above) and the party contesting the matter shall be
solely responsible for any additional amount.
28 LIMITATIONS OF INDEMNIFICATION OBLIGATIONS. The Purchaser
------------------------------------------
Indemnitee shall not have any right to indemnification under this Agreement
until the aggregate of all Damages Claimed by all Purchaser Indemnitees exceeds
$250,000, and in such event the indemnification obligations of the Stockholder
Indemnitee hereunder shall apply to all Damages in excess of such amount until
such Damages aggregate $2,500,000, from which point the Stockholder Indemnitee
shall have no obligation to indemnify the Purchaser Indemnitees against further
Damages.
29 LOSSES NET OF INSURANCE, ETC. The amount of any Damages suffered as
----------------------------
a result of an injury to an Indemnitee for which indemnification is available
hereunder, shall be net of any insurance proceeds, if any, actually received by
the Indemnitee in respect of such injury and (i) increased to take account of
any
34
net tax cost incurred by the Indemnitee arising from the receipt of indemnity
payments hereunder (grossed up for such increase an any tax consequences
resulting from any payments pursuant to this Section 29 and (ii) reduced to take
account of any net tax benefit realized by the Indemnitee arising from the
incurrence or payment of any such Damages. In computing the amount of any such
tax cost or tax benefit, the Indemnitee shall be deemed to recognize all other
items of income, gain, loss, deduction or credit before recognizing any item
arising from the receipt of any indemnity payment hereunder or the incurrence or
payment of any indemnified Damages. Any indemnity payment under this Agreement
shall be treated as an adjustment to the Purchase Price for tax purposes, unless
a final determination (which shall include the execution of a Form 870-AD or
successor form) with respect to the Indemnitee causes any such payment not to be
treated as an adjustment to the Purchase Price for Federal tax purposes. The
purpose of this Section 29 is to put the Indemnitee in such a position as if the
event for which indemnification is provided hereunder and Damages awarded had
not occurred.
30 REMEDIES.
--------
30.1 NO LIMITATION OF REMEDIES PRIOR TO CLOSING. Prior to the
------------------------------------------
Closing, no rights and remedies expressed hereunder are intended to be exclusive
of any other right or remedy, but every such right or remedy shall be cumulative
and shall be in addition to all other rights and remedies herein conferred or
hereafter existing at law or in equity or by statute, including without
limitation the right to specific performance.
30.2 LIMITATION OF REMEDIES AFTER CLOSING. Except for claims
------------------------------------
based on fraud or intentional misrepresentation or concealment, the parties
acknowledge and agree that the indemnities set forth in Sections 25 and 26 shall
be the sole and exclusive remedy after the Closing for breach, default,
inaccuracy or failure of any of the warranties, representations, conditions,
covenants or agreements contained in this Agreement and in any certificates or
documents delivered pursuant hereto.
30.3 NO LOST PROFITS. Notwithstanding anything to the contrary in
---------------
this Agreement, except for claims based on fraud or intentional
misrepresentation or concealment, in no event will any party hereto have any
liability under this Agreement to any other party hereto for consequential,
indirect or incidental damages of any kind or nature or lost profits.
31 COVENANT NO TO COMPETE.
----------------------
31.1 ▇▇▇▇▇ expressly agrees that for a period of four (4)
years commencing on the date of the Closing, he shall not
35
directly or indirectly own, manage, control or participate in the ownership,
management or control of or become affiliated or associated as a consultant,
principal, agent, stockholder, partner, investor, lender or otherwise with any
firm, association or other business entity, or otherwise engage in any business
enterprise that competes with the businesses of PGI or MIKOHN, including without
limitation the following: [1] the development, manufacture, sale, lease or
distribution of displays and signage which include electronic components that
connect to slot machines, live table games or other gaming devices; [2] the
development, manufacture, sale, lease or distribution of computer hardware,
software and firmware for accounting and player tracking systems for gaming
devices and live table games; [3] the development, manufacture, sale, lease or
distribution of progressive jackpot or other bonusing systems for slot machines,
live table games or other gaming devices; [4] the development, manufacture,
sale, lease or distribution of surveillance systems and equipment to the gaming
industry; or [5] the development, manufacture, sale, lease or distribution of
slot machines, live table games or other gaming devices or associated equipment.
The foregoing notwithstanding, nothing herein shall be construed to prevent
▇▇▇▇▇ from purchasing a Non-controlling Interest in any publicly traded company;
owning or operating a casino; or collecting or taking any actions in connection
with collecting the CTI Receivable.
31.2 The geographic scope of this covenant not to compete is
worldwide.
31.3 If, at the time of enforcement of any provision of this
covenant, a court shall hold that the period, scope or area restrictions are
unreasonable under the circumstances then existing, the parties agree that the
maximum period, scope or area adjudged reasonable under such circumstances shall
be substituted for the stated period, scope or area.
31.4 MIKOHN, PGI and ▇▇▇▇▇ agree that all of the
consideration payable to ▇▇▇▇▇ pursuant to this Agreement is allocable to the
PGI Shares and that no part of the consideration payable to ▇▇▇▇▇ pursuant to
this Agreement is allocable to this covenant. The parties agree that all filings
that they make with federal and state taxing authorities will be consistent with
this Section 31.4.
32 STANDSTILL.
----------
32.1 MIKOHN and PGI agree that all pending lawsuits and
arbitration proceedings between MIKOHN and PGI shall be stayed during the term
of this Agreement, and neither party shall take any further action against the
other in such proceedings through discovery, motion, order to show cause or
36
otherwise. The parties will stipulate to such orders as may be necessary to
effect the intent of this standstill provision. Each party shall agree to extend
any time period applicable to the other which elapses during the period any
proceedings are stayed by a period equal to the length of time this Agreement is
in effect and has not been terminated.
32.2 Notwithstanding the foregoing, this standstill
provision shall not apply to any claims or causes of action arising from
activities subsequent to the date this Agreement is signed by all parties and
shall not apply to activities reasonably necessary to avoid dismissal for
failure to prosecute or similar events that might jeopardize a party's claims or
defenses.
32.3 So long as this Agreement is in effect and has not
been terminated, MIKOHN shall continue to make royalty payments to PGI in the
same manner such royalty payments were made in January, February and March,
1998.
32.4 This Agreement is made without prejudice to any rights
or claims now held by either party against the other and shall not be deemed a
release, waiver, compromise or other resolution of any such rights or claims;
all such rights and claims are expressly reserved and shall be wholly unaffected
by this Agreement in the event this Agreement [1] is terminated for any reason
prior to the Closing or [2] expires by its terms.
33 TERMINATION.
-----------
33.1 TERMINATION BY MUTUAL CONSENT. At any time prior to
-----------------------------
the Closing, this Agreement may be terminated by written consent of MIKOHN and
▇▇▇▇▇.
33.2 TERMINATION BY ▇▇▇▇▇.
--------------------
33.2.1 If the Closing has not occurred by the latest date
provided in Section 4 because the condition contained in Section 6.12 or Section
6.13 is or has not been satisfied, ▇▇▇▇▇ may terminate this Agreement at any
time by delivery of written notice to MIKOHN and the ▇▇▇▇▇▇▇ Money Deposit,
together with interest thereon, shall be paid to MIKOHN.
33.2.2 If ▇▇▇▇▇ is not provided the CIBC Highly Confident
Letter on or before April 30, 1998, ▇▇▇▇▇ may terminate this Agreement at any
time by delivery of written notice to MIKOHN and the ▇▇▇▇▇▇▇ Money Deposit,
together with interest thereon, shall be paid to ▇▇▇▇▇.
33.2.3 If financing described in Section
37
6.13 cannot be obtained by MIKOHN because of a material adverse change in the
financial condition or results of operations of MIKOHN, ▇▇▇▇▇ may terminate this
Agreement and the ▇▇▇▇▇▇▇ Money Deposit together with interest thereon shall be
paid to ▇▇▇▇▇.
33.2.4 If it appears reasonably probable that a consent
required by ▇▇▇▇▇ under Section 4.4.7 or by MIKOHN under Section 4.5.3 cannot be
obtained by the Closing Date, and provided further that the inability to obtain
such consent is the result of a claim or assertion by a regulatory agency that
MIKOHN is not a suitable party to own or hold the PGI Shares or otherwise due to
a fact or circumstance within the control of MIKOHN, MIKOHN shall give ▇▇▇▇▇
prompt notice of such fact. ▇▇▇▇▇ shall have the right to terminate this
Agreement after providing MIKOHN with written notice and a thirty (30) day
notice to cure. If this event is not cured within said thirty (30) day period,
the ▇▇▇▇▇▇▇ Money Deposit, together with interest thereon, shall be paid to
▇▇▇▇▇.
33.2.5 If MIKOHN breaches this Agreement and such
breach is not cured by MIKOHN within thirty (30) days of notice from ▇▇▇▇▇,
▇▇▇▇▇ may terminate this Agreement and the ▇▇▇▇▇▇▇ Money Deposit, together with
interest thereon, shall be paid to ▇▇▇▇▇.
33.3 EFFECT OF TERMINATION. In the event of termination as
---------------------
provided above, this Agreement shall become of no further force or effect and
all parties hereto shall bear their own costs associated with this Agreement and
all transactions contemplated hereby; provided, however, such termination shall
not relieve any person or entity of liability for breach of or interference with
this Agreement.
33.4 FINAL TERMINATION DATE. This Agreement shall
----------------------
automatically terminate without further action of the parties if the Closing has
not occurred by September 30, 1998.
34 EACH PARTY TO BEAR OWN COSTS. Each of the parties shall
----------------------------
pay all costs and expenses incurred or to be incurred by it in negotiating and
preparing this Agreement and in closing and carrying out the transactions
contemplated by this Agreement. ▇▇▇▇▇ shall bear all such costs incurred by PGI
including, without limitation, all fees and charges of any agent used by ▇▇▇▇▇
and/or PGI in respect to the transactions contemplated by this Agreement
including, without limitation, Ladenburg ▇▇▇▇▇▇▇▇ & Co. Inc.
35 HEADINGS. The subject headings of the Articles and Sections
--------
of this Agreement are included for purposes of convenience only, and shall not
affect the construction or interpretation of any of its provisions.
38
36 THIRD PARTIES. Nothing in this Agreement, whether express or
-------------
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons or entities other than the parties to it and their
respective successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third party to any party
to this Agreement, nor shall any provision give any third party any right of
subrogation or action over or against any party to this Agreement.
37 SUCCESSORS AND ASSIGNS. This Agreement shall be binding on,
----------------------
and shall inure to the benefit of, the parties and their respective heirs, legal
representatives, successors and assigns.
38 NOTICES. All notices, requests, demands and other
-------
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if served personally on the party to
which notice is to be given, or on the third day after mailing if mailed to the
party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed as follows:
To ▇▇▇▇▇ at: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copies to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Parcel, Mauro & ▇▇▇▇▇▇▇▇▇, P.C.
Suite 3600
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
To PGI: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chairman
Progressive Games, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
39
With a copies to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Parcel, Mauro & ▇▇▇▇▇▇▇▇▇, P.C.
Suite 3600
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
To MIKOHN at: MIKOHN GAMING CORPORATION
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
With a copy to: MIKOHN GAMING CORPORATION
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Any party may change its address for purposes of this Section by giving notice
of the new address to each of the other parties in the manner set forth above.
39 PRESS RELEASES. Each party agrees to provide to the other drafts
--------------
of proposed press releases which discuss this transaction for review and comment
before they are publicly issued.
IN WITNESS WHEREOF, the parties hereto have read, understood, and
voluntarily executed this Agreement as of the day and year first above written.
"PGI" "▇▇▇▇▇"
PROGRESSIVE GAMES, INC.
By _____________________ _________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its ____________________
"MIKOHN"
40
MIKOHN GAMING CORPORATION
By ____________________
Its ____________________
41
EXHIBITS AND SCHEDULES TO STOCK PURCHASE AGREEMENT
EXHIBITS
--------
EXHIBIT A PGI audited financial statements for the year ending
December 31, 1997.
EXHIBIT B Unaudited financial statements for the two months ending
February 28, 1998.
EXHIBIT C Form of legal opinion from counsel for ▇▇▇▇▇ and PGI to
MIKOHN.
EXHIBIT D Form of legal opinion from counsel for MIKOHN to ▇▇▇▇▇ and
PGI.
SCHEDULES
---------
SCHEDULE 4.4.3 List of all States where PGI is qualified to do business.
SCHEDULE 4.4.6 List of all liens against PGI or the PGI Assets showing
those liens, if any, that will not be released at Closing.
SCHEDULE 4.4.9 List of all employment agreements, if any.
SCHEDULE 6.9 List of all directors, officers and management personnel
of PGI and PGI Affiliates whose resignations will be
required at Closing.
SCHEDULE 11.3.3 List of employment contracts or compensation arrangements
entered into by PGI since December 31, 1997.
SCHEDULE 11.3.3[13] List of all issues, transfers, sales or pledges by PGI
or PGI Affiliates of any shares of their capital stock or
other securities or of any commitment, option, right or
privilege under which PGI or any PGI Affiliate is or may
become obligated to issue any shares of their capital
stock or other securities.
SCHEDULE 11.5.2 List of all machinery and equipment wherever located, used
or held for use in the conduct of the Business including
[1] a description of each item (or category of items,
where individual items are less than $100 in
42
undepreciated book value) and [2] a statement of the
location, date of acquisition, original cost, book value,
description of method of valuation, and book accumulated
depreciation through December 31, 1997 of each such item
or category of items.
SCHEDULE 11.5.3 List and summary of all policies of insurance of any
nature whatsoever maintained by ▇▇▇▇▇ or PGI pertaining to
the business of PGI showing, among other things, the
amount of coverage, the company issuing the policy and the
expiration date of each policy.
SCHEDULE 11.5.5 List of the accounts and notes receivable of PGI as of the
date of this Agreement, and a complete and accurate aging
of such accounts and notes receivable.
SCHEDULE 11.5.6 List of each permit, license and certificate or
authorization issued to PGI by any third party material to
the Business.
SCHEDULE 11.6 List of each contract whether written or oral, between PGI
and any party who is obligated to make payments or provide
services to PGI or to whom PGI is obligated to make
payments or provide services.
SCHEDULE 11.7 List of material lawsuits, asserted and unasserted claims,
pending and threatened investigations.
SCHEDULE 11.8 List of exceptions to the payment of all salaries and
wages (including without limitation, bonuses, sick and
vacation pay, commissions to salesmen, etc.) accrued prior
to Closing.
SCHEDULE 11.9 List of all Employee Benefit Plans.
SCHEDULE 11.10 Description of any PGI infringement of any patent,
trademark, trade name, trade secret or copyright held by
others.
SCHEDULE 11.10.1 List of all patents, patent applications, inventions,
trade names, trademarks, service marks, brand names,
copyrights and registrations and applications therefor,
owned by or used in the Business.
43
SCHEDULE 11.10.2 List of all licenses and other rights granted by PGI
and/or ▇▇▇▇▇ in intellectual property included in the PGI
Assets.
SCHEDULE 11.10.3 List of claims of any violation or infringement by others
of PGI's rights to or in connection with its Intellectual
Property or technology used or held for use in the
Business.
SCHEDULE 11.10.4 List of interferences or other contested proceedings or
reexamination proceedings, either pending or, to the
knowledge of ▇▇▇▇▇ or PGI, threatened, in the United
States Copyright Office, the United States Patent and
Trademark Office or any federal, state or local court or
before any other governmental agency or tribunal, relating
to any pending application with respect to the
Intellectual Property.
SCHEDULE 11.16[1] List of all leases or rental contracts under which PGI
is a lessee, lessor, sublessee or sublessor.
SCHEDULE 11.16[2] List of all equipment used by PGI in the operation of
its business which is owned or leased by PGI and which had
an original cost of $15,000 or more.
SCHEDULE 11.17 List of each and every agreement or other instrument under
or pursuant to which PGI has outstanding indebtedness for
borrowed money.
SCHEDULE 11.18 List of the names and current salaries of all management
employees of PGI who earned $50,000 or more for the fiscal
year of PGI ended December 31, 1997, or who will, at their
present salaries earn $50,000 or more for the fiscal year
ending December 31, 1998.
SCHEDULE 11.19[1] List of the names and addresses of all persons or
entities holding a power of attorney on behalf of PGI.
SCHEDULE 11.19[2] List of the names and addresses of all banks or other
financial institutions in which PGI has an account,
deposit or safe-deposit box, with the number and a
description of the account and the names of all persons
authorized to draw on such account or deposit
44
or have access to such boxes.
SCHEDULE 11.22 List of all suppliers or service providers to, or
customers of, PGI, or other party to any contract or other
arrangement which is material to PGI, in which PGI and/or
▇▇▇▇▇ has a direct or indirect material financial
interest, in any.
SCHEDULE 11.24 List of all consents, waivers or approvals of any third
parties necessary for the consummation by ▇▇▇▇▇ and PGI of
the transactions contemplated by this Agreement.
45
[LETTERHEAD OF MIKOHN GAMING CORPORATION APPEARS HERE]
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Executive Vice President
& General Counsel
June 24, 1998
TO FACSIMILE NO. ▇▇▇-▇▇▇-▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Parcel, Mauro & ▇▇▇▇▇▇▇▇▇, P.C.
Suite 3600
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: First Amendment to Stock Purchase Agreement dated April 9, 1998 (the
"Agreement") among Mikohn Gaming Corporation ("Mikohn"), Progressive
Games, Inc. ("PGI") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇")
Dear ▇▇▇▇:
This letter shall constitute the First Amendment to the Agreement.
The following language from Section 11.5.4 of the Agreement shall be
deleted in its entirety:
The foregoing notwithstanding, prior to the Closing, PGI may
transfer to ▇▇▇▇▇ twenty (20) Gaming Tables, including all
electronics and layouts and two (2) complete sets of spare
parts, at no charge to ▇▇▇▇▇ for ▇▇▇▇▇'▇ use in any legal
casino in which ▇▇▇▇▇ holds a 50% or greater interest;
provided, however, ▇▇▇▇▇ shall not displace any Gaming Tables
under license from PGI in operation at such casino before
▇▇▇▇▇ acquired a 50% interest therein. Unless prohibited by
law or regulatory authority having jurisdiction, PGI shall
agree to provide ▇▇▇▇▇ with spare parts for such tables at
a price of PGI's cost plus 15% and access to all improvements
and upgrades.
In place of the foregoing language deleted from Section 11.5.4, the
following shall be inserted:
[LETTERHEAD OF MIKOHN GAMING CORPORATION]
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
June 24, 1998
Page 2
The foregoing notwithstanding, at the Closing, PGI shall
transfer to ▇▇▇▇▇ the Corvette and BMW automobiles owned and
leased, respectively, by PGI and the office furniture and
related items located in the office of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ at
PGI's corporate office. PGI shall transfer the automobiles
subject to all liens and encumbrances (including leases)
which ▇▇▇▇▇ shall assume. At the Closing, ▇▇▇▇▇ shall
provide MIKOHN with evidence reasonably satisfactory to it
that PGI will be released from all liability in respect to
such liens and encumbrances. In consideration of the
foregoing, the Purchase Price shall be increased in an
amount equal the cost to extinguish all such liens and
encumbrances but not in excess of $60,000.
Very truly yours,
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
ACCEPTED AND AGREED.
PROGRESSIVE GAMES, INC.
By /s/ ▇▇▇ ▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------ --------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its Chairman
-------------------------
"MIKOHN"
MIKOHN GAMING CORPORATION
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
---------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Its Executive Vice President
and General Counsel
CHMc:cm
[LETTERHEAD OF MIKOHN GAMING CORPORATION APPEARS HERE]
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Executive Vice President
& General Counsel
May 28, 1998
TO FACSIMILE NO. ▇▇▇-▇▇▇-▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Parcel, Mauro & ▇▇▇▇▇▇▇▇▇, P.C.
Suite 3600
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Second Amendment to Stock Purchase Agreement dated April 9, 1998
(the "Agreement") among Mikohn Gaming Corporation ("Mikohn"),
Progressive Games, Inc. ("PGI") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇")
Dear ▇▇▇▇:
This letter shall constitute the Second Amendment to the Agreement.
Section 4.5.1.3 shall be deleted in its entirety and replaced with:
less an amount equal to any accounts payable of PGI on the
Closing Date (calculated consistently with those reflected on the
Financial Statements) in excess of $250,000;
This amendment shall become effective only upon the execution of a
definitive agreement prior to the Closing (as defined in the Agreement) by which
Mikohn will acquire all of the common stock of P&S Leasing Corporation, Inc., a
Mississippi corporation, and P&S Leasing,
[LETTERHEAD OF MIKOHN GAMING CORPORATION]
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
May 28, 1998
Page 2
L.L.C., a Louisiana limited liability corporation and thereby accede to all
rights granted to ▇▇▇▇▇▇▇▇ ▇▇▇▇ by PGI under that certain License Agreement
dated September 3, 1993, as amended.
Very truly yours,
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
ACCEPTED AND AGREED.
PROGRESSIVE GAMES, INC.
By ▇▇▇ ▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------- -------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its Chairman
------------------------
"MIKOHN"
MIKOHN GAMING CORPORATION
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
--------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Its Executive Vice President
and General Counsel
CHMc:cm
[LETTERHEAD OF MIKOHN GAMING CORPORATION APPEARS HERE]
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Executive Vice President
& General Counsel
June 24, 1998
TO FACSIMILE NO. ▇▇▇-▇▇▇-▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Parcel, Mauro & ▇▇▇▇▇▇▇▇▇, P.C.
Suite 3600
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Third Amendment to Stock Purchase Agreement dated April 9, 1998 (the
"Agreement") among Mikohn Gaming Corporation ("Mikohn"), Progressive
Games, Inc. ("PGI") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇")
Dear ▇▇▇▇:
This letter shall constitute the Third Amendment to the Agreement.
1. MIKOHN hereby agrees that prior to the Closing (as defined in the
Agreement) PGI may sell to ▇▇▇▇▇ the Note dated September 15, 1997 from August
▇. ▇▇▇▇▇▇▇▇▇ in the principal amount of $31,000 for cash in the amount of
$31,000 plus accrued interest on such note through the date of sale. Upon the
sale, such note shall cease to be an "Employee Note" as such term is defined in
the Agreement.
2. MIKOHN agrees that immediately prior to Closing, PGI may distribute
all or part of PGI's cash balances to ▇▇▇▇▇ so long as immediately prior to such
distribution PGI has satisfied Section 11.4 of the Agreement. Such distribution
shall not cause PGI or ▇▇▇▇▇ to be in breach of Section 11.4 of the Agreement.
The amount of such distribution shall not be included in PGI's cash balances on
the Closing Date reflected in Section 4.5.1.2.
Very truly yours,
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
[LETTERHEAD OF MIKOHN GAMING CORPORATION]
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
June 24, 1998
Page 2
ACCEPTED AND AGREED.
PROGRESSIVE GAMES, INC.
By ▇▇▇ ▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------- -------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its Chairman
---------------------
"MIKOHN"
MIKOHN GAMING CORPORATION
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
--------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Its Executive Vice President
and General Counsel
CHMc:cm