ASSET CONTRIBUTION AGREEMENT
by and between
CASINO JOURNAL PUBLISHING GROUP, INC.
CASINO PUBLICATIONS, INC.
GAMING ENTERTAINMENT EXPOSITIONS, INC.
CASINO JOURNAL OF NEVADA, INC.
(as Sellers)
and
GEM COMMUNICATIONS, LLC
(as Purchaser)
Dated as of January 1, 2001
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT is entered into as of January 1,
2001, by and among CASINO JOURNAL PUBLISHING GROUP, INC., a Nevada
corporation ("CJPG"), Casino Publications, Inc., a Nevada corporation
("Casino Publications"), Casino Journal of Nevada, Inc., a New Jersey
corporation ("CJ of Nevada"), Gaming Entertainment Expositions, Inc., a
Nevada corporation ("GEE" and together with CJPG, Casino Publications
and CJ of Nevada, "Sellers"), and GEM COMMUNICATIONS, LLC, a Delaware
limited liability company ("GEM").
R E C I T A L S
A. Sellers own and operate a business that publishes trade magazines
and newsletters and organizes trade shows for the gaming industry (the
"Business").
B. Effective as of January 1, 2001, GEM Holdings, LLC (f/k/a GEM
Communications, LLC) transferred to GEM its US-based business that
publishes trade magazines and newsletters and organizes trade shows for
the gaming industry (the "GEM Business").
▇. ▇▇▇▇▇▇▇ are willing to contribute to GEM and GEM is willing to
accept from Sellers substantially all of the assets of Sellers related
to the Business in exchange for $3 million in cash and 100,000 LLC
Units (as defined herein) of GEM, on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the Recitals and the mutual
covenants, conditions and agreements set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, it is hereby agreed as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Except as specified otherwise, when used in this
Agreement and any Exhibits or Schedules, the following terms shall have
the meanings specified:
"Accounts Receivable" shall mean all accounts receivable of Sellers
relating to the Business immediately prior to the Closing, as
determined in accordance with GAAP;
"Additional Purchase Price" shall mean the sum of money, if any,
payable to Sellers as additional purchase price, in accordance with
Section 2.2(b) hereof;
"Affiliate" as applied to any specified Person, means any other Person
that, directly or indirectly, controls, is controlled by or is under
common control with such specified Person. For purposes of the
foregoing, "control," when used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through
the ownership of voting securities, by contract or otherwise, and the
terms "controlled" and "controlling" shall have meanings correlative to
the foregoing. In the case of a Person who is an individual, the term
"Affiliate" shall include, with respect to such specified Person,
(i) members of such specified Person's immediate family (as defined in
Instruction 2 of Item 404(a) of Regulation S-K under the Securities
Act), and (ii) trusts, the trustee or the beneficiaries of which are
such specified Person or members of such Person's immediate family as
determined in accordance with the foregoing clause (i).
Notwithstanding the foregoing, GEM and its Affiliates shall not be
deemed Affiliates of Sellers for purposes of this Agreement;
"Agreement" shall mean this Asset Contribution Agreement, together with
the Schedules and Exhibits, as the same shall be amended from time to
time in accordance with the terms hereof;
"Applicable Laws" with respect to any Person, shall mean all provisions
of laws, statutes, ordinances, rules, regulations, permits,
certificates or orders of any Governmental Authority applicable to such
Person or any of its assets or property or to which such Person or any
of its assets or property is subject, and all judgments, injunctions,
orders and decrees of all courts and arbitrators in proceedings or
actions in which such Person is a party or by which it or any of its
assets or properties is or may be bound or subject;
"Assumed Liabilities" shall mean the obligations of Sellers under the
Contracts listed on Schedule 1.2, and Contracts, if any, entered into
after the date hereof and prior to the Closing Date in accordance with
this Agreement, in each case arising from and accruing with respect to
the operation of the Business after the Closing Date;
"Assumption Agreement" shall mean an instrument in the form of EXHIBIT
"B" attached hereto;
"Audit" shall mean any audit, assessment of Taxes, other examination by
any Tax Authority, proceeding or appeal of such proceeding relating to
Taxes;
"▇▇▇▇ of Sale and Assignment" shall mean the instrument in the form of
EXHIBIT "C" attached hereto;
"Business" shall have the meaning set forth in the Recitals;
"Cash" shall mean all moneys of Sellers, whether in the form of cash,
cash equivalents, marketable securities, short term investments or
deposits in bank or other financial institution accounts of any kind;
"Claim" shall mean any claim, demand, assessment, judgment, order,
decree, action, cause of action, litigation, suit, investigation or
other proceeding;
"Closing" shall mean the conference to be held at 10:00 a.m., New York
City time on the Closing Date at the New York offices of GEM, or at
such other time and place as the parties may mutually agree to in
writing, at which the transactions contemplated by this Agreement shall
be consummated;
"Closing Date" shall mean (i) the later of January 1, 2001, or as soon
as practicable thereafter as the conditions set forth in Section 7.11
and 8.8 have been satisfied or (ii) on such other date as the parties
may mutually agree. The Closing shall be deemed effective as of 12:01
a.m. on the Closing Date;
"Code" shall mean the Internal Revenue Code of 1986, as amended and the
rules and regulations promulgated thereunder;
"Contract Assignment" shall mean the Assignment and Assumption of
Contracts, in the form of EXHIBIT "C" attached hereto;
"Contracts" shall mean those agreements (other than those included in
the Retained Assets and other than the Leases) under which Sellers
conduct the Business, whether written, oral, or implied, including,
without limitation, those agreements listed on Schedule 1.2;
"Contributed Assets" shall mean: (a) the Accounts Receivable; (b) the
Contracts; (c) the Customer Lists; (d) the Equipment; (e) the
Intangible Property; (f) the Leases; (g) the Licenses; (h) the
Miscellaneous Assets; (i) the Records; (j) all prepaid assets relating
to the Contracts; (k) cash in an amount equal to all deferred
obligations assumed by GEM (including any deposits relating to the
Contracts as set forth on Schedule 1.3); and (l) the Equity Interests
in the assets as set forth on Schedule 1.4;
"Copyrights" shall mean all copyrights (including computer software,
data and documentation) and any registrations and applications to
register or renew the registration thereof owned, leased, licensed or
used by Sellers in connection with the Business including, without
limitation, those items listed on Schedule 1.5;
"Customer Lists" shall mean all lists, documents, information in
whatever form or media, including without limitation computer disks and
programs and other computer readable media used by, prepared for the
benefit of, or in the possession of Sellers concerning past, present
and potential customers, advertisers or vendors of the Business;
"Documents" shall mean this Agreement and the other documents,
agreements and certificates executed pursuant to or in connection with
this Agreement;
"Environmental Claim" shall mean with respect to a Person any claim,
action, cause of action, investigation of which such Person or any of
its Subsidiaries, including any of their management employees, are
aware, or written notice by any third party alleging potential
liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries or
penalties) arising out of, based on or resulting from (a) the presence,
or release into the environment, of any Material of Environmental
Concern at any location owned, leased, used or operated by such Person
or any of its Subsidiaries, or (b) circumstances forming the basis of
any violation, or alleged violation, of any Environmental Law;
"Environmental Laws" shall mean all Applicable Laws relating to
pollution or protection of human health or the environment (including,
without limitation, ambient air, surface water, ground water, land
surface or subsurface strata and natural resources), including, without
limitation, laws and regulations relating to emissions, discharges,
releases or threatened releases of Materials of Environmental Concern,
or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials
of Environmental Concern;
"Equipment" shall mean all of the machinery, computers, equipment,
furniture, fixtures, furnishings, parts, vehicles and other items of
tangible personal property owned or leased by Sellers and used in
connection with the operation of the Business, including, without
limitation, those items listed on Schedule 1.6 (other than those items
included in the Retained Assets);
"Equity Interest" shall mean (i)with respect to a corporation, any and
all issued and outstanding capital stock and warrants, options or other
rights to acquire capital stock or securities convertible into any form
of equity interest and (ii)with respect to a partnership, limited
liability company or similar Person, any and all units, interests, or
other equivalents thereof, or other ownership interests in any such
Person and warrants, options or other rights to acquire any such units
or interests or securities convertible into any form of equity
interest;
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended;
"Estimated Closing Balance Sheet" shall mean the estimated pro forma
balance sheet of the Business described in Section 4.09;
"Event of Loss" shall mean any loss, taking, condemnation, damage or
destruction of or to any of the Contributed Assets;
"GAAP" shall mean United States generally accepted accounting
principles consistently applied;
"GEM" shall mean GEM Communications, LLC, a Delaware limited liability
company;
"GEM's Closing Certificate" shall mean the certificate of an officer of
GEM in the form of EXHIBIT "D" attached hereto;
"GEM's Opinion of Counsel" shall mean the opinion of counsel of GEM in
the form of EXHIBIT "E" attached hereto;
"GEM's Performance Certificate" shall mean the certificate of GEM in
the form of EXHIBIT "F" hereto;
"Governmental Authority" shall mean any domestic or foreign government
or political subdivision thereof, whether on a federal, state or local
level and whether executive, legislative or judicial in nature,
including any agency, authority, board, bureau, commission, court,
department or other instrumentality thereof;
"Intangible Property" shall mean (a) the Copyrights; (b) the Trade
Secrets; (c) the Trademarks; (d) all similar intellectual property
rights; (e) all computer software used in the Business (other than
those items included in the Retained Assets), including, without
limitation, those items listed on Schedule 1.7 (including the object
code and the source code to the extent referenced on such Schedule and
all documentation with respect to such software), world wide web sites
and web pages; (f) licenses of any of the foregoing; and (g) all
goodwill associated therewith;
"IRS" shall mean the Internal Revenue Service;
"Leases" shall mean the leases and subleases of Equipment to which
Sellers are a party with respect to the Business, as listed on Schedule
1.8;
"Licenses" shall mean the licenses, permits and authorizations issued
by any Governmental Authority to Sellers for the operation of the
Business, as listed on Schedule 1.9;
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
security interest, encumbrance, claim, lien, lease (including any
capitalized lease) or charge of any kind, whether voluntarily incurred
or arising by operation of law or otherwise, including without
limitation any agreement to give or grant any of the foregoing, any
conditional sale or other title retention agreement and the filing of
or agreement to give any financing statement with respect to any of the
Contributed Assets under the Uniform Commercial Code of the State of
New Jersey, Nevada, or comparable law of any other jurisdiction;
"LLC Agreement" shall mean the Operating Agreement of GEM, to be dated
as of the Closing Date, in the form of Exhibit "G" hereto;
"LLC Units" shall mean the Class B limited liability company units in
GEM;
"Material Adverse Effect" shall mean with respect to a Person (a) a
material adverse effect upon the business, operations, properties,
assets, prospects or condition (financial or otherwise) of such Person
and its Subsidiaries, taken as a whole, or (b) a material adverse
effect on the ability of such Person to perform any material
obligations under this Agreement or any of the other Documents;
"Materials of Environmental Concern" shall mean chemicals, pollutants,
contaminants, industrial, toxic or hazardous wastes, substances or
constituents, petroleum and petroleum products (or any by-product or
constituent thereof), asbestos or asbestos-containing materials or
PCBs;
"Miscellaneous Assets" shall mean all tangible and intangible assets
used by Sellers in the operation of the Business on the date hereof and
as of the Closing Date and not otherwise specifically referred to in
this Agreement, including any warranties related to any of the
Contributed Assets, excepting therefrom only the Retained Assets;
"Order" shall mean any judgment, writ, decree, injunction, order,
stipulation, compliance agreement or settlement agreement issued or
imposed by, or entered into with, a Governmental Authority, whether or
not having the force of law;
"Patents" shall mean all of those foreign and United States patents
including registrations and applications to register patents, owned,
licensed, used or filed by Sellers with respect to the Business,
including, without limitation, those set forth on Schedule 1.10;
"Permitted Liens" shall mean solely with respect to Sellers, Liens
existing on the Closing Date to remain on the Contributed Assets after
the Closing Date as agreed to by GEM, and with respect to Sellers or
GEM, (a) Liens for Taxes not yet delinquent or subject to penalty; (b)
statutory Liens of landlords, carriers, warehousemen, mechanics,
materialmen and other Liens imposed by law created in the ordinary
course of business of Sellers consistent with past practices for
amounts not yet due; and (c) Liens (other than any Lien imposed by
ERISA) incurred or deposits made in the ordinary course of business of
Sellers consistent with past practices in connection with worker's
compensation, unemployment insurance or other types of social security;
"Person" shall mean any natural person, general or limited partnership,
corporation, association, limited liability company or other entity;
"Real Property" shall mean the real property leased by Seller in
connection with the Business, as described on Schedule 1.11, and all
buildings, improvements and fixtures thereon;
"Records" shall mean all files and records related to the Business,
including without limitation schematics, technical information and
engineering data, programming information, correspondence, books of
account, employment records, customer files, purchase and sales records
and correspondence, advertising records, files and literature and other
written materials of Sellers with respect to the Business other than
Records which are Retained Assets;
"Retained Assets" shall mean (a) the Cash (except to the extent
included in Contributed Assets and cash equal to all direct prepaid
expenses as recorded and included on Schedule 1.12 relating to the
Contracts); (b) any and all claims of Sellers with respect to the
Business relating to transactions prior to the Closing Date including,
without limitation, claims for tax refunds and refunds of License fees
except to the extent such claims relate to Assumed Liabilities or the
Contributed Assets; (c) all of those assets of Seller used in
connection with the Business that do not constitute Contributed Assets,
as listed on Schedule 1.13; (d) all assets related to Sellers' employee
benefit plans; (e) any real estate leases and (f) any assets relating
to barter transactions;
"Retained Liabilities" shall mean all obligations and liabilities of
Sellers whether now existing or previously or hereafter incurred, other
than the Assumed Liabilities, which Retained Liabilities shall include
but not be limited to (a) all Taxes that result from or have accrued in
connection with the operation of the Business which relate to periods
prior to the Closing Date; (b) liabilities, claims and obligations
arising under Contracts and Leases transferred to GEM in accordance
with this Agreement to the extent such liabilities, claims and
obligations arise during or relate to or have accrued in connection
with any period prior to the Closing; (c) all liabilities, claims and
obligations accruing with respect to or in connection with the
operation of the Business prior to the Closing (except as expressly
assumed as an Assumed Liability); (d) all liabilities related to
Sellers' employee benefit plans; (e) all liabilities related to any
severance pay required to be paid to Sellers' Employees in respect of
any period prior to the Closing Date; (f) all liabilities and
obligations of Sellers under this Agreement and any other agreement
entered into in connection herewith and (g) any liabilities relating to
barter transactions;
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder, all as the
same may from time to time be in effect;
"Sellers' Closing Certificate" shall mean the certificate of Sellers in
the form of EXHIBIT "H" attached hereto;
"Sellers' Employee" shall mean an employee of Sellers with respect to
the Business immediately prior to the termination thereof pursuant to
Section 9.1;
"Sellers' Opinion of Counsel" shall mean the legal opinion of counsel
to Sellers addressed to GEM in the form of EXHIBIT "I" attached hereto;
"Sellers' Performance Certificate" shall mean the certificate of the
Secretary of Sellers in the form of EXHIBIT "J" attached hereto;
"Subsidiary" shall mean with respect to any Person, any corporation,
partnership, limited liability company, joint venture or other legal
entity of which such Person, as the case may be (either alone or
through or together with any other Subsidiary) owns, directly or
indirectly, stock or other equity interests the holders of which are
generally entitled to more than 50% of the vote for the election of the
board of directors or other governing body of such corporation or other
legal entity;
"Tax" shall mean any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes
under Code Section 59A), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or
other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not;
"Tax Authority" shall mean the Internal Revenue Service and any other
domestic or foreign governmental authority responsible for the
administration of any Tax;
"Tax Returns" shall mean all Federal, state, local and foreign tax
returns, declarations, statements, reports, schedules, forms and
information returns and any amended Tax Return relating to Taxes;
"Trade Secrets" shall mean all proprietary information owned, leased,
licensed or used by Sellers relating to the Business in any form or
media, including without limitation trade secrets, ideas, confidential
business and technical information, inventions, designs, know-how,
processes and Customer Lists;
"Trademarks" shall mean all of those foreign, Internet and United
States trade names, trademarks, service marks, trade dress and domain
names, including registrations and applications to register or renew
the registrations of any of the foregoing, trademark and service ▇▇▇▇
registrations and trademark and service ▇▇▇▇ applications owned,
licensed, leased or used by Sellers with respect to the Business,
including, without limitation, those set forth on Schedule 1.14;
"Transferred Employee" shall mean a Sellers Employee who becomes an
employee of GEM pursuant to Section 9.1; and
1.2 Singular/Plural; Gender. Where the context so requires or
permits, the use of the singular form includes the plural, and the use
of the plural form includes the singular, and the use of any gender
includes any and all genders.
ARTICLE II
CONTRIBUTION
2.1 Contribution. At the Closing on the Closing Date, and subject to
all of the terms and conditions of this Agreement, Sellers shall sell,
assign, convey, transfer and deliver to GEM, and GEM shall purchase all
of Sellers' right, title and interest, legal and equitable, in and to
the Contributed Assets, free and clear of all Liens except Permitted
Liens. Sellers shall not transfer, convey or assign to GEM, but shall
retain, all of their right, title and interest in and to the Retained
Assets.
2.2 Payment of Purchase Price and Issuance of LLC Units. (a) At the
Closing on the Closing Date, subject to all of the terms and conditions
of this Agreement, as consideration for the purchase of the Contributed
Assets, GEM shall pay to Sellers $2.5 million by wire transfer of
immediately available funds and issue to Sellers 100,000 LLC Units.
(b) With respect to the Southern Gaming Summit, the Northern
Gaming Summit and the UNLV Casino Ops Conference, if on or before
December 31, 2001, Seller has provided to GEM's counsel reasonably
satisfactory evidence of Sellers' equity ownership of such tradeshows
and conferences as set forth on Schedule 2.2(b), GEM shall pay to
Sellers, as Additional Purchase Price, the respective amounts set forth
on Schedule 2.2(b) for each such tradeshow and/or conference (for an
aggregate amount for all accounts of up to Five Hundred Thousand
Dollars ($500,000)).
2.3 Adjustments to Purchase Price
(a) Not later than 90 days after the Closing Date, GEM shall
prepare and deliver to the Sellers an audited balance sheet of the
business relating to the Contributed Assets as at the close of business
on the business day immediately preceding the Closing Date (the
"Closing Date Balance Sheet"). The Closing Date Balance Sheet shall be
prepared in conformity with GAAP, applied on a consistent basis.
(b) Unless Sellers, within 30 days following receipt of the
Closing Date Balance Sheet, gives GEM a notice objecting thereto and
specifying the basis for such objection and the amount in dispute
("Notice of Objection"), the Closing Date Balance Sheet shall be
considered accepted and binding upon GEM and Sellers. If within 30
days following the receipt of the Closing Date Balance Sheet, Sellers
give a Notice of Objection to GEM, Sellers and GEM shall negotiate in
good faith with a view to resolving any differences. If such
negotiations fail to resolve all disputed items within 30 days after
Notice of Objection was first given by Sellers, the remaining disputed
items may be submitted at the written request of either side to an
accounting firm agreed by the parties or, failing such agreement, a
firm designated by two separate accounting firms selected by each of
GEM and Sellers (the "Nonpartisan Accountants"), acting as experts and
not as arbitrators, for final resolution. After affording each of
Sellers and GEM and their respective representatives the opportunity to
present their positions as to the disputed items and their position on
the other's position (which opportunity, in total, shall not extend for
more than 30 days), the Nonpartisan Accountants shall resolve all
disputed items. Such resolution shall be final and binding upon the
parties (in the absence of manifest error) and shall be reflected in
any necessary revisions to the Closing Date Balance Sheet. The fees,
costs and expenses of the Nonpartisan Accountants shall be allocated
between GEM and Sellers by the Nonpartisan Accountants. In the absence
of any such allocation, such expenses shall be shared equally by the
Sellers and GEM. Upon Sellers' request, GEM shall make available to
Sellers the work papers and back-up material used by GEM in preparing
the Closing Date Balance Sheet. The parties shall cooperate with each
other in all respects to timely complete the process described in this
sub-Section.
(c) If the Working Capital as of the Closing Date as reflected
on the Closing Date Balance Sheet (as adjusted, if necessary, to
reflect the resolution of any disputed items pursuant to Section
2.3(b)) is less than $0.00, the Purchase Price shall be decreased by an
amount equal to such shortfall. If the Working Capital as of the
Closing Date as reflected on the Closing Date Balance Sheet (as
adjusted, if necessary, to reflect the resolution of any disputed items
pursuant to Section 2.3(b)) is more than $0.00, the Purchase Price
shall be increased by an amount equal to such overage. Any adjustments
to the Purchase Price shall be paid by GEM or Sellers, as the case may
be, by wire transfer of immediately available funds, as follows: (i)
if no Notice of Objection is delivered by Sellers, such amount shall be
paid within three (3) Business Days of the expiration of the 30-day
period for delivery of such Notice of Objection; or (ii) if a Notice of
Objection is delivered by Sellers, (x) any net undisputed amounts shall
be paid within five Business Days after delivery of such Notice of
Objection, and (y) the remaining amount, if any, shall be paid within
five Business Days after the date all disputed items are finally
resolved in accordance with Section 2.3(b) above. Any amounts not paid
when required pursuant to this Section 2.3(c) shall bear interest from
the required date of payment to the date of actual payment at the rate
of 4% over the Prime Rate of Interest, as set forth in the Wall Street
Journal on the date preceding the due date of such payment.
(d) For purposes of this Section 2.3, "Working Capital" shall
mean the current assets of the Business less the current liabilities
(specifically excluding prepaid expenses and deferred revenue relating
to the Contracts and any cash related to deferred revenue to the extent
included as Contributed Assets), determined on an accrual basis in
accordance with GAAP consistently applied. The Working Capital
calculation shall be made immediately prior to the capitalization of
intercompany payables.
2.4 Closing Date Deliveries. At the Closing on the Closing Date:
(a) Sellers shall deliver, or cause to be delivered, to GEM,
properly executed and dated as of the Closing Date: (i) the Assumption
Agreement; (ii) the ▇▇▇▇ of Sale and Assignment; (iii) the Contract
Assignment; (iv) Sellers' Closing Certificate; (v) Sellers' Opinion of
Counsel; (vi) Sellers' Performance Certificate; (vii) the LLC
Agreement; and (viii) such other documents as provided in Article VII
hereof or as GEM shall reasonably request; and
(b) GEM shall deliver, or cause to be delivered, to Sellers,
properly executed and dated as of the Closing Date: (i) the Assumption
Agreement; (ii) the ▇▇▇▇ of Sale and Assignment; (iii) the Contract
Assignment; (iv) GEM's Closing Certificate; (v) GEM's Opinion of
Counsel; (vi) GEM's Performance Certificate; (vii) certificates
representing 100,000 LLC Units registered in the name of Sellers;
(viii) the LLC Agreement; and (ix) such other documents as provided in
Article VIII hereof or as Sellers shall reasonably request.
2.5 Assumption of Liabilities. At the Closing, GEM shall assume and
agree to pay, perform and discharge the Assumed Liabilities. Except
for the Assumed Liabilities or such other charges as are specifically
allocated to GEM elsewhere in this Agreement, GEM does not and shall
not assume or become obligated to pay any debt, obligation or liability
of any kind or nature of Sellers or the Business, whether or not
incurred or accrued in connection with the operation of the Business.
2.6 Taxes. All Taxes applicable to, imposed upon or arising out of
the transfer to GEM of the Contributed Assets as contemplated by this
Agreement shall be paid by Sellers.
2.7 Risk of Loss. The risk of all Events of Loss prior to the
Closing shall be upon Sellers and the risk of all Events of Loss at or
subsequent to the Closing shall be upon GEM.
2.8. Allocation of Purchase Price. The Purchase Price shall be
allocated among the Contributed Assets and the noncompetition covenant
contained in Section 9.2 in the manner set forth on Schedule 2.8.
Sellers and GEM shall each prepare and file their own income tax
returns in a manner consistent with such allocation, except as may be
adjusted by subsequent agreement or by tax authority audit or by court
decision.
ARTICLE III
GOVERNMENTAL APPROVALS
3.1 Governmental Approvals. Promptly following the execution of this
Agreement, the parties shall proceed to prepare and file with the
appropriate governmental authorities any requests for approvals or
waivers that are required from any Governmental Authority in connection
with the Closing, and shall diligently and expeditiously prosecute, and
shall cooperate fully with each other in the prosecution of, such
requests for approvals or waivers and all proceedings necessary to
secure such approvals and waivers.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant, jointly and severally, to GEM, all of
which representations and warranties shall survive the Closing in
accordance with Section 11.4, the following:
4.1 Organization. Sellers are duly organized, validly existing and
in good standing under the laws of the jurisdiction of their formation.
Sellers have the power and authority to own, lease and operate the
Contributed Assets and to conduct the Business as it is now being
conducted. Except as set forth on Schedule 4.1, Sellers are not
required to be qualified as a foreign corporation to transact business
in any jurisdiction. Sellers have previously delivered to GEM complete
and correct copies of the corporate organizational documents of
Sellers, as in effect on the date hereof.
4.2 Authorization; Enforceability. The execution, delivery and
performance by Sellers of this Agreement and all of the Documents and
the consummation by Sellers of the transactions contemplated hereby and
thereby are within the power of Sellers and have been duly authorized
by all necessary action by Sellers, and no other corporate proceedings
or approvals are required on the part of Sellers to authorize this
Agreement or the Documents or to consummate the transactions
contemplated hereby or thereby. This Agreement is, and the Documents
will be, when executed and delivered by Sellers, the valid and binding
obligations of Sellers, enforceable against Sellers in accordance with
their respective terms subject only to bankruptcy, insolvency,
reorganization, moratorium or similar laws at the time in effect
affecting the enforceability or right of creditors generally and by
general equitable principles which may limit the right to obtain
equitable remedies and to the extent the indemnification provisions
contained herein and in the Documents may be limited by applicable
federal or state securities laws.
4.3 Absence of Conflicting Agreements. Except as set forth on
Schedule 4.3, neither the execution, delivery or performance of this
Agreement or the other Documents in accordance with their terms by
Sellers, nor the consummation of the sale and purchase of the
Contributed Assets or any other transaction as contemplated by this
Agreement does or will, after the giving of notice, or the lapse of
time or both, or otherwise:
(a) violate or conflict with, result in a breach of, or
constitute a default under, the articles of incorporation or bylaws or
other organizational documents of Sellers; violate or conflict in any
material respect with any Applicable Law; or violate, be in conflict
with, or constitute a breach or default (or any event which with the
passage of time or notice or both would become a default) under any
material Contract;
(b) result in the creation of any Lien upon any of the
Contributed Assets;
(c) terminate, amend or modify, or give any party the right to
terminate, amend, modify, abandon or refuse to perform, any material
Contract;
(d) accelerate or modify, or give any party the right to
accelerate or modify, the time within which, or the terms under which,
any duties or obligations are to be performed, or any rights or
benefits are to be received, under any material Contract; or
(e) require the consent, waiver, approval, permit, license,
clearance or authorization of, or any declaration or filing with, any
Governmental Authority or other Person.
4.4 Title to Contributed Assets; Liens and Encumbrances. (a) The
Contributed Assets include all of the assets and rights of every type,
real, personal and mixed, tangible and intangible that are necessary
for or used in the operation of the Business as currently conducted,
with the exception of the Retained Assets. Except as set forth on
Schedule 4.4(a), Sellers do not own any Subsidiaries with respect to
the Business. Except as set forth on Schedule 4.4(a), Sellers own good
and marketable title to, or have valid and enforceable license or
leasehold interests in, all of the Contributed Assets free and clear of
any and all Liens except Permitted Liens.
(b) The outstanding membership interests in American Gaming & Lodging
Summit, LLC ("AGS") are owned 49% by GEE (the "GEE Interest") and 51%
by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (the "▇▇▇▇▇▇▇▇▇▇ Interest" and, together with the
GEE Interest, the "LLC Interests"). GEE has good and valid title to
the AGS Interest with full lawful right, power, capacity and authority
to sell, assign, transfer and deliver the AGS Interest to GEM pursuant
to this Agreement and to consummate the transactions contemplated
hereby. At the Closing, GEM will receive good and valid title to the
AGS Interest, free and clear of all Liens. Seller has no knowledge of
any adverse claims of ownership. AGS has not authorized or issued any
securities which are currently outstanding other than the Interests and
no person, corporation, or other entity holds any option, warrant or
right to purchase or otherwise acquire any membership interests or
other equity interests in AGS. There are no outstanding contracts,
commitments, agreements, understandings or arrangements of any kind
relating to the issuance of any membership interests or other equity of
AGS, any such convertible or exchangeable securities or any such
options, warrants or rights or unit appreciation rights plans or other
"phantom" unit plans.
4.5 Equipment. Except as set forth on Schedule 4.5, each of the
items of Equipment is in good condition and repair, ordinary wear and
tear excepted. The list of Equipment on Schedule 1.6 is a true and
correct list of all items of tangible personal property having a book
value in excess of $500 necessary for or used in the operation of the
Business as currently conducted, other than the Retained Assets.
4.6 Contracts. Except as set forth on Schedule 4.6:
(a) Sellers has performed in all material respects each
material term, covenant and condition of each of the Contracts, and no
material default on the part of Sellers or, to the knowledge of the
officers of Sellers, any other party thereto, or any event which with
the passing of time or giving of notice would constitute a default on
the part of Sellers or, to the knowledge of the officers of Sellers,
any other party thereto, exists under any of the Contracts;
(b) each of the Contracts is in full force and effect and
constitutes the legal and binding obligation of Sellers and, to the
knowledge of the officers of Sellers, the other parties thereto, in
accordance with its terms;
(c) Sellers have furnished true and complete copies of all
Contracts, including all amendments, modifications and supplements
thereto, and Schedule 1.2 contains an accurate list of all Contracts
and summaries of all oral contracts; and
(d) each of the Contracts is fully assignable to GEM without
the consent, approval or waiver of any other Person.
4.7 Real Property. Sellers do not own any Real Property that is used
in the Business.
4.8 Intangible Property. Except as set forth on Schedule 4.8:
(a) there are no Claims instituted, pending or, to the
knowledge of the officers of Sellers, threatened by any Person
pertaining to or challenging the right of Sellers to use any of the
Intangible Property;
(b) to the knowledge of the officers of Sellers, the conduct of
the Business does not infringe or otherwise conflict with or infringe,
in any material respect, with any rights of any Person in respect of
any Intangible Property and to the knowledge of the officers of
Sellers, none of Sellers' Intangible Property is being infringed or is
otherwise available for use by any third party without a license or
permission from Sellers;
(c) to the knowledge of the officers of Sellers, Sellers own,
or are validly licensed or otherwise have the right to use or exploit,
as currently used or exploited, all Intangible Property material to the
Business, free of any obligation to make any payment (whether of a
royalty, license fee, compensation or otherwise); Sellers with respect
to the Business are not, nor will they be as a result of the execution
and delivery of this Agreement and the other Documents or the
performance of any obligations hereunder and thereunder, in breach of
any material license or other agreement relating to any of Sellers'
Intangible Property.
(d) all Copyrights, Trademarks and Patents are listed on
Schedules 1.5, 1.14 and 1.09, respectively;
(e) Sellers currently own, license, or otherwise have the legal
right to use, the computer software that is in included as Intangible
Property (including any upgrade, alteration or enhancement with respect
thereto), and all of such software is being used in compliance with any
applicable license or other agreement;
(f) set forth on Schedule 4.8(f) is a correct and complete
list, in all material respects, of all domain names (i) registered to
or used by Sellers in connection with the Business, (ii) the
registration fees for which are paid by Sellers in connection with the
Business or (iii) registered to any employee of Sellers in connection
with the Business and Sellers own and have registered, or are validly
licensed or otherwise have the right to use, all of such domain names;
(g) all former and current consultants or contractors of
Sellers in connection with the Business have executed and delivered
valid written instruments with Sellers that assign to Sellers all
rights to any inventions, improvements, discoveries or information
developed by them for Sellers; all employees of Sellers in connection
with the Business who participated in the creation or contributed to
the development of Sellers' Intangible Property were employees of
Sellers at the time of rendering such services and such services were
within the scope of their employment or such employees have otherwise
validly assigned such Intangible Property or Domain Names to Sellers;
and
(h) Sellers has taken reasonable security measures, including
entering into appropriate confidentiality and nondisclosure agreements
with all of their employees, consultants and contractors with respect
to the Business, and any other Persons with access to their trade
secrets or know how, to protect the secrecy, confidentiality and value
of all such trade secrets or know how and, to the knowledge of the
officers of Sellers, there has not been any breach by any party to any
such agreement.
4.9 Financial Statements. Sellers have made available to GEM true
and complete copies of (i) CJPG's audited financial statements for the
years ended December 31, 1998 and December 31, 1999, together with a
report thereon of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & Green LLP, its independent public
accountant; (ii) its unaudited pro forma financial statements of the
business relating to the Contributed Assets for the years ended
December 31, 1998 and December 31, 1999; (iii) its unaudited pro forma
financial statements including a balance sheet of the business relating
to the Contributed Assets at October 31, 2000, and (iv) an estimated
unaudited pro forma balance sheet of the business relating to the
Contributed Assets as of December 31, 2000 (the "Estimated Closing
Balance Sheet"), each as prepared by Sellers (collectively, the
"Sellers Financial Statements"). The Sellers Financial Statements are
attached hereto as Schedule 4.9. The Sellers Financial Statements have
been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby and present fairly in all
material respects the financial condition of the Business, as
applicable, as at the dates indicated and the results of its operations
and changes in cash flow for the periods then ended, except that the
unaudited Sellers Financial Statements do not contain all footnotes
required by GAAP.
4.10 No Material Adverse Change. Except as set forth on Schedule
4.10 or reflected in the Sellers Financial Statements, since December
31, 1999:
(a) Sellers, with respect to the Business, have not entered
into any transaction that was not in the ordinary course of business;
(b) there has been no sale, assignment, transfer, mortgage,
pledge, encumbrance or lease of any material Contributed Asset other
than with respect to a Permitted Lien;
(c) there has been no declaration, payment, or commitment for
the payment, by Sellers with respect to the Business of a bonus or
other additional salary, compensation, or benefit to any Sellers'
Employee that was not in the ordinary course of business, except for
normal year-end bonuses paid in the ordinary course of business;
(d) there has been no release, compromise, waiver or
cancellation of any material debt to or material claim by Sellers with
respect to the Business, or waiver of any valuable right of Sellers
with respect to the Business;
(e) there has been no change in accounting methods or practices
or revaluation of any asset of Sellers with respect to the Business or
write-off as uncollectible any Accounts Receivable, except in the
ordinary course of business, none of which individually or in the
aggregate is material;
(f) there has been no material damage or destruction to, or
loss (whether or not covered by insurance) adversely affecting any of
the Contributed Assets;
(g) there has been no loan or guaranty by Sellers of any loan
to any employee or consultant (or any member of their immediate
families) of Sellers with respect to the Business, or any agreement or
commitment therefor other than travel expense advances made by Sellers
in the ordinary course of business;
(h) Sellers, with respect to the Business, have not ceased to
transact business with any customer that, as of the date of such
cessation, represented more than 5% of the annual gross revenues of the
Business;
(i) there has been no termination or resignation of any key
employee or officer of Sellers with respect to the Business, and to the
knowledge of the officers of Sellers, no such termination or
resignation is threatened;
(j) there has been no material amendment or termination of any
material oral or written contract, agreement or license related to the
Business;
(k) Sellers, with respect to the Business, have not failed to
satisfy any of their debts, obligations or liabilities related to the
Business as the same become due and owing payable in accordance with
past practices and in the ordinary course of business;
(l) there has been no agreement or commitment by Sellers to do
any of the foregoing; and
(m) there has been no other event or condition of any character
pertaining to and materially and adversely affecting the assets,
business, operations or condition (financial or otherwise) of the
Business.
4.11 No Litigation; Compliance with Law. Except as set forth on
Schedule 4.11:
(a) there is no suit, action, claim, investigation or proceeding
pending or, to the knowledge of the officers of Sellers, threatened
against or affecting the Contributed Assets or the Business except for
such claims that would not reasonably be expected to have a Material
Adverse Effect on the Business, nor is there (i) any Order or Claim
outstanding against Sellers with respect to the Business or (ii) any
rule or regulation of any Governmental Authority that has had or would
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Business.
(b) Sellers own and operate, and have owned and operated, the
Business and the Contributed Assets and carry on and conduct, and have
carried on and conducted, the Business in material compliance with all
Applicable Laws and all Orders. Sellers hold all material Licenses
necessary to operate the Business as now conducted and such Licenses
are in full force and effect. Sellers are in material compliance with
all Licenses and all of the Licenses are fully assignable to GEM.
4.12 Taxes. Except as set forth on Schedule 4.12:
(a) Sellers have duly and timely filed all required Tax Returns
for all years and periods (and portions thereof) for which any such
returns, reports and estimates were due, and any and all amounts shown
on such returns and reports to be due and payable have been paid in
full except as may be contested in good faith. All of such Tax Returns
are true, accurate and complete in all material respects. Sellers
have, with respect to the Business, withheld all Tax required to be
withheld under applicable law and regulations, and such withholdings
have either been timely paid to the proper governmental agency or, if
not yet due to the governmental agency, set aside in accounts for such
purpose; and
(b) there are, and after the date of this Agreement will be, no
Tax deficiencies (including penalties and interest) or claims of any
kind assessed against or relating to Sellers or the Contributed Assets
with respect to any taxable periods ending on or before, or including,
the Closing Date of a character or nature that would result in Liens or
Claims on any of the Contributed Assets or on GEM's title or use of the
Contributed Assets or that would result in any claim against, or
liability or obligation of, GEM.
4.13 Accounts Receivables. All of the Accounts Receivables arose in
the ordinary course of business, in connection with bona fide
transactions completed in accordance with the terms and provisions of
any agreements or understandings related thereto and are collectible in
the ordinary course of business in the amounts set forth on the Sellers
Financial Statements. Sellers have previously provided GEM with a true
and complete aging report prepared as of November 30, 2000, which shows
the time elapsed since invoice date for all Accounts Receivable. There
are no setoffs, counterclaims or disputes with respect to the Accounts
Receivable that would result in claims in excess of the reserve for bad
debts set forth on the most recent Financial Statements
4.14 Insurance. Schedule 4.14 is a true and complete list of all
liability and casualty insurance, errors and omissions insurance and
worker's compensation insurance policies insuring the business,
properties and assets of Sellers with respect to the Business. All of
such policies are in full force and effect and are for such coverage
and in such amounts as is usual and customary for businesses similar to
that of the Business. Sellers are not in default with respect to such
insurance policies, nor have Sellers failed to give any notice or
present any claim under any policies in due and timely fashion.
4.15 Brokers. Except for Equity Securities Investments, Inc.
("Equity Securities"), no broker or finder is entitled to any broker's
or finder's fee in connection with the transactions contemplated hereby
based upon arrangements made by or on behalf of Sellers. The fees of
Equity Securities shall be paid and satisfied at Closing by Sellers.
4.16 Powers of Attorney. There are no Persons holding a power of
attorney on behalf of Sellers which would enable such Persons to sell
the Contributed Assets or take any other action which would result in
Liens or claims on any of the Contributed Assets or adversely effect
GEM's title or use of the Contributed Assets.
4.17 Employees.
(a) Schedule 4.17 is a true and complete list of all employees
of Sellers with respect to the Business, which list identifies the
name, position and date of hire of each such employee, and the
following compensation information for fiscal years 1999 and 2000: (i)
annual base salary, (ii) annual bonus, (iii) commissions, (iv)
perquisites, (v) severance, and (vi) all other items of compensation.
The consummation of the transactions contemplated under this Agreement
will not cause GEM to incur or suffer any liability relating to, or
obligation to pay, severance, termination, or other payments to any
Person. Schedule 4.17 includes all employees of Sellers with respect
to the Business who are on unpaid leave pursuant to the Family and
Medical Leave Act of 1993.
(b) Sellers, with respect to the Business, are not and have not
engaged in any unfair labor practice. There is (i) no unfair labor
practice charge or complaint pending or, to the knowledge of the
officers of Sellers, threatened against Sellers with respect to the
Business before the National Labor Relations Board or any corresponding
state, local or foreign agency, and no grievance or arbitration
proceeding arising out of or under any collective bargaining agreement
is so pending or threatened, (ii) no strike, labor dispute, slowdown or
stoppage pending or threatened against Sellers with respect to the
Business, and (iii) no union representation claim or question existing
with respect to the employees of Sellers with respect to the Business.
Sellers are not a party to any collective bargaining agreement with
respect to the Business and no representation campaign or election is now
in progress with respect to any employee of Sellers with respect to the
Business; and there are no labor disputes, grievances, controversies,
strikes or requests for union representation pending, or, to the knowledge
of the officers of Sellers, threatened, relating to or affecting the
Business and to the knowledge of the officers of Sellers, no event has
occurred that could give rise to any such dispute, controversy, strike or
request for representation.
(c) Except as disclosed on Schedule 4.17, Sellers have not violated
in any material respect any Applicable Laws relating to employment or
employment practices or the terms and conditions of employment,
including, without limitation, discrimination in the hiring, promotion
or pay of employees, wages, hours of work, plant closings and layoffs,
collective bargaining, immigration and occupational safety and health.
Except as disclosed on Schedule 4.17, to the knowledge of the officers
of Sellers, no charges with respect to employees of Sellers with
respect to the Business are pending before the Equal Employment
Opportunity Commission or any other corresponding state agency, and
Sellers have at all times been in material compliance with all
Applicable Laws prohibiting discrimination in the workplace including,
without limitation, Applicable Laws that prohibit discrimination and/or
harassment on account of race, national origin, religion, gender,
disability, age, immigration status, workers compensation status or
otherwise.
(d) Except as disclosed on Schedule 4.17, no employee of the Business
has any agreement or contract, written or verbal, regarding his
employment. Except as disclosed on Schedule 4.17, Sellers, with
respect to the Business, are not a party to or bound by any currently
effective employment contract, deferred compensation arrangement, bonus
plan, incentive plan, profit sharing plan, retirement agreement or
other employee compensation plan or agreement. To the knowledge of the
officers of Sellers, no employee of Sellers with respect to the
Business, nor any consultant with whom Sellers have contracted with
respect to the Business, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement
relating to the right of any such individual to be employed by, or to
contract with, Sellers because of the nature of the business to be
conducted by Sellers; and to the knowledge of the officers of Sellers
the continued employment by GEM of Sellers' Employees with respect to
the Business, and the performance of Sellers' contracts with its
independent contractors, will not result in any such violation.
Sellers have not received any notice alleging that any such violation
has occurred. Except as provided in the contracts listed in Schedule
4.17, no employee of Sellers has been granted the right to continued
employment by Sellers or to any material compensation following
termination of employment with Sellers. Sellers are not aware that any
officer or key employee, or that any group of key employees, intends to
terminate his, her or their employment with Sellers or with GEM after
the Closing, nor do Sellers have a present intention to terminate the
employment of any officer, key employee or group of key employees.
4.18 Employee Benefit Plans/Labor Relations.
(a) Except as disclosed in Schedule 4.18, there are no employee
benefit plans, agreements or arrangements maintained by Sellers with
respect to the Business, including (i) "employee benefit plans" within
the meaning of Section 3(3) of ERISA; (ii) current or deferred
compensation, pension, profit sharing, vacation or severance plans or
programs; or (iii) medical, hospital, accident, disability or death
benefit plans (all of the foregoing, collectively, "Sellers Benefit
Plans"). All Sellers Benefit Plans are and have been administered in
accordance with, and are in material compliance with, all Applicable
Laws. No default exists with respect to the obligations of Sellers
under any Sellers Benefit Plan.
(b) All Sellers Benefit Plans that are subject to ERISA have
been administered in accordance with, and are in material compliance
with, the applicable provisions of ERISA. Each of the Sellers Benefit
Plans that is intended to meet the requirements of Section 401(a) of
the Code has been determined by the Internal Revenue Service to meet
such requirements within the meaning of such provision. No Sellers
Benefit Plan is subject to Title IV of ERISA or Section 412 of the
Code. Sellers have not engaged in any nonexempt "prohibited
transactions," as such term is defined in Section 4975 of the Code or
Section 406 of ERISA, involving Sellers Benefit Plans that would
subject Sellers to the penalty or tax imposed under Section 502(i) of
ERISA or Section 4975 of the Code. Neither Sellers nor any subsidiary
has engaged in any transaction described in Section 4069 of ERISA
within the last five years. Except as disclosed in Schedule 4.18 or
pursuant to the terms of the Sellers Benefit Plans, neither the
execution and delivery hereof nor the consummation of the transactions
contemplated hereby will (i) result in any payment (including
severance, unemployment compensation or golden parachute) becoming due
to any director or other employee of Sellers with respect to the
Business, (ii) increase any benefit otherwise payable under any Sellers
Benefit Plan or (iii) result in the acceleration of the time of payment
or vesting of any such benefit to any extent.
(c) No notice of a "reportable event," within the meaning of
Section 4043 of ERISA, for which the 30-day reporting requirement has
not been waived, has been required to be filed for any Sellers Benefit
Plan that is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA and that is intended to meet the requirements of
Section 401(a) of the Code, or by any entity that is considered one
employer with Sellers under Section 4001 of ERISA or Section 414 of the
Code, within the 12-month period ending on the Closing Date. Neither
Sellers nor any subsidiary has incurred any liability to the Pension
Benefit Guaranty Corporation in respect of any Sellers Benefit Plan
that remains unpaid.
4.19 Environmental Compliance. Except as set forth on Schedule
4.19:
(a) Sellers with respect to the Business are and have been in material
compliance with all Environmental Laws, and Sellers have not received
any written communication that alleges that Sellers with respect to the
Business are not in compliance with any Environmental Laws, and there
are no circumstances that may prevent or interfere with such compliance
in the future.
(b) There is no Environmental Claim pending or to the knowledge of
the officers of Sellers threatened against Sellers with respect to the
Business, or against any Person whose liability for any Environmental
Claim Sellers, with respect to the Business, have retained or assumed
either contractually or by operation of law.
(c) To the knowledge of the officers of Sellers, there are no past or
present actions, activities, circumstances, conditions, events or
incidents, including, without limitation, the release, emission,
discharge, presence or disposal of any Material of Environmental
Concern, that could form the basis of any Environmental Claim against
Sellers with respect to the Business, or against any Person whose
liability for any Environmental Claim Sellers, with respect to the
Business, have retained or assumed either contractually or by operation
of law.
(d) Without in any way limiting the generality of the foregoing,
Schedule 4.19 sets forth (i) all permits, licenses and other
governmental authorizations held by Sellers with respect to the
Business, or required for the operation of the Business, under any
Environmental Law, including the current status of each such permit,
license and authorization, (ii) all on-site and to the knowledge of the
officers of Sellers off-site locations where Sellers with respect to
the Business has stored, disposed or arranged for the disposal of
Materials of Environmental Concern, (iii) to the knowledge of the
officers of Sellers, all underground storage tanks, and the capacity
and contents of such tanks, located on property owned, leased or
controlled by Sellers with respect to the Business, (iv) to the
knowledge of the officers of Sellers, the location and condition of any
asbestos or lead (including furnishings or lead-based paints) contained
in or forming part of any building, building component, structure or
office space owned, leased or controlled by Sellers, and (v) to the
knowledge of the officers of Sellers, all PCBs or PCB-containing items
that are used or stored at any property owned, leased or controlled by
Sellers with respect to the Business.
4.20 Interest in Customers, Suppliers and Competitors. Except as
provided in Schedule 4.20 hereto, no officer, director, stockholder or
employee of Sellers, and no family member of any of the foregoing, has
any direct or indirect interest in any customer, supplier, advertiser
or competitor of Sellers with respect to the Business, or in any Person
with whom Sellers, with respect to the Business, are doing business,
whether in existence as of the date hereof or proposed, other than the
ownership of stock of publicly traded corporations that does not exceed
1% of the issued and outstanding stock of such corporation.
4.21 Proper Business Practices. Neither Sellers nor any of its
officers, directors, employees, agents and representatives have, to
obtain or retain business, directly or indirectly, offered, paid or
promised to pay, or authorized the payment of any money or thing of
value, or any commission payment to (i) any person who is an official,
officer, agent, employee or representative of any governmental body or
of any existing or prospective customer, (ii) any political party or
official thereof, (iii) any candidate for political or political party
office, or (iv) any other individual or entity while knowing or having
reason to believe that all or any portion of such money or thing of
value would be offered to any such person or entity referred to in
clause (i), (ii) or (iii) above. Except as set forth on Schedule 4.21,
Sellers have made all material payments to third parties by check, by
credit card or by wire transfer. Each transaction is properly and
accurately recorded on the books and records of Sellers, and each
document on which entries in Sellers' books and records are based is
complete and accurate in all material respects. Sellers maintain a
system of internal accounting controls adequate to insure that Sellers
maintain no off-the-books accounts and that their assets are used only
in accordance with Sellers' management directives.
4.22 Investment Intent. Sellers are purchasing the LLC Units solely
for their own account and not as nominee or agent for any other Person
and not with a view to, or for offer or sale in connection with, any
current distribution thereof (within the meaning of the Securities Act)
that would cause the original purchase of the LLC Units to be in
violation of the securities laws of the United States or any state
thereof, without prejudice, however, to its right at all times to sell
or otherwise dispose of all or any part of such LLC Units pursuant to a
registration statement under the Securities Act or pursuant to an
exemption from the registration requirements of the Securities Act, and
subject, nevertheless, to the disposition of its property being at all
times within its control.
4.23 Accredited Investor. Sellers are knowledgeable, sophisticated
and experienced in business and financial matters and in investing in
privately held business enterprises and are capable of evaluating the
risks of investment in the LLC Units; they have previously invested in
securities similar to the LLC Units and they acknowledge that the LLC
Units have not been registered under the Securities Act and understand
that the LLC Units must be held indefinitely unless they are
subsequently registered under the Securities Act or such sale is
permitted pursuant to an available exemption from such registration
requirement; they are able to bear the economic risk of their
investment in the LLC Units and are presently able to afford the
complete loss of such investment; and they are "accredited investors"
as defined in Regulation D promulgated under the Securities Act.
4.24 Related Party Transactions. Except as set forth on Schedule
4.24, no director, officer, partner, employee, affiliate or associate
of Sellers (a) has borrowed money from or has outstanding any
indebtedness or other similar obligations to Sellers, (b) to the best
knowledge of Sellers, owns any direct or indirect interest of any kind
in, or is a director, officer, employee, party, affiliate or associate
of, or consultant or lender to, or borrower from, or has the right to
participate in the management, operations or profits of, any person or
entity which is (i) a competitor, supplier, customer, distributor,
lessor, tenant, creditor or debtor of Sellers, (ii) engaged in a
business related to the business of Sellers or (iii) participating in
any transaction to which Sellers is a party, (c) is otherwise a party
to any contract, arrangement or understanding with Sellers or (d) has
any claim adverse to, or is a party in a proceeding adverse to,
Sellers.
4.25 No Vote Required. No vote of the shareholders of CJPG is
required to approve this Agreement or the transactions contemplated
hereby.
4.26 State Takeover Statutes. No state takeover statute or similar
statue, rule or regulation of the State of Nevada, and, to the
knowledge of Sellers after due inquiry, of any other state or
jurisdiction, applies or purports to apply to this Agreement, or any of
the transactions contemplated hereby.
4.27 Disclosure of Information. Sellers represent they have received
all the information they consider necessary or appropriate for deciding
whether to purchase the LLC Units. Sellers further represent that they
have had an opportunity to ask questions and receive answers from GEM
regarding the terms and conditions of the LLC Units and the business,
properties, prospects and financial condition of GEM. The foregoing,
however, does not limit or modify the representations and warranties of
GEM in Article V of this Agreement or the right of Sellers to rely
thereon.
4.28 Disclosure. No statement by Sellers contained in this Agreement
and no written statement furnished or to be furnished by Sellers to GEM
pursuant to or in connection with this Agreement contains or will
contain any untrue statement of a material fact or omits or will omit
to state a material fact necessary in order to make the statements
herein or therein contained not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF GEM
GEM represents and warrants to Sellers, which representations and
warranties shall survive the Closing in accordance with Section 11.4,
as follows:
5.1 Organization. GEM is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
Delaware. GEM is duly qualified to do business in each jurisdiction
where the character of its properties owned or held under lease or the
nature of its activities makes such qualification required. GEM has
full power to purchase the Contributed Assets pursuant to this
Agreement. GEM has previously delivered to Sellers complete and
correct copies of its certificate of formation, as in effect on the
date hereof.
5.2 Authorization; Enforceability. The execution, delivery and
performance by GEM of this Agreement and all of the Documents and the
consummation by GEM of the transactions contemplated hereby and thereby
are within the power of GEM and have been duly authorized by all
necessary action by GEM and no other proceedings or approvals are
required on the part of GEM to authorize this Agreement or the
Documents or to consummate the transactions contemplated hereby or
thereby. This Agreement is, and the other Documents will be, when
executed and delivered by GEM, the valid and binding obligations of
GEM, enforceable against GEM in accordance with their respective terms,
subject only to bankruptcy, insolvency, reorganization, moratorium or
similar laws at the time in effect affecting the enforceability or
right of creditors generally and by general equitable principles which
may limit the right to obtain equitable remedies and to the extent the
indemnification provisions contained herein and in the Documents may be
limited by applicable federal or state securities laws.
5.3 Authorization of LLC Units. The issuance of the LLC Units to
Sellers has been duly authorized by GEM, and the LLC Units when issued
to Sellers pursuant hereto will be fully paid and non-assessable, free
of restrictions on transfer other than under this Agreement, the LLC
Agreement and applicable state and federal securities laws.
5.4 GEM's Capitalization.
(a) As of the Closing Date, after giving effect to the
transactions contemplated by this Agreement, there will be issued and
outstanding 1 million LLC Units, consisting of 900,000 Class A LLC
Units and 100,000 Class B LLC Units. Except as set forth above and on
Schedule 5.4 hereto, as of the date hereof, after giving effect to the
transactions contemplated by this Agreement and the other Documents, no
Equity Interests of GEM will be issued or outstanding and there are
not, and as of the date hereof there will not be, any options,
agreements, instruments or securities relating to the issued or
unissued Equity Interests of GEM or any Subsidiary of GEM, or
obligating GEM or any Subsidiary of GEM to issue, transfer, grant or
sell any Equity Interests in GEM or any Subsidiary of GEM.
(b) GEM has complied with all federal and state securities laws in
connection with the issuance of all outstanding Equity Interests,
except where such failure would not have a Material Adverse Effect on
GEM.
(c) Except as listed on Schedule 5.4, and except as contemplated by
the LLC Agreement, there are no preemptive rights, voting agreements,
transfer restrictions (except those imposed by applicable federal and
state securities laws) or registration rights affecting the Equity
Interests in GEM.
5.5 Absence of Conflicting Laws and Agreements. Except as set forth
on Schedule 5.5, neither the execution, delivery or performance of this
Agreement or the other Documents in accordance with their terms by GEM,
nor the consummation of the sale and purchase of the Contributed Assets
or any other transaction contemplated by this Agreement, does or will,
after the giving of notice, or the lapse of time or both or otherwise:
(a) violate, conflict with, result in a breach of, or
constitute a default under, the certificate of formation or other
organizational documents of GEM; violate or conflict in any material
respect with any Applicable Law; or violate, conflict with, result in a
breach of, or constitute a default (or any event which with the passage
of time or notice or both would become a default) under any material
contract to which GEM is a party or by which any of its assets are
bound;
(b) terminate, amend or modify, or give any party the right to
terminate, amend, modify, abandon or refuse to perform, any material
contract to which GEM is a party or by which any of its assets are
bound;
(c) accelerate or modify, or give any party the right to
accelerate or modify, the time within which, or the terms under which,
any duties or obligations are to be performed, or any rights or
benefits are to be received, under any material contract to which GEM
is a party or by which any of its assets are bound; or
(d) require the consent, waiver, approval, permit, license,
clearance or authorization of, or any declaration or filing with, any
Governmental Authority except for, (i) required filings under the
Securities Act or state "blue sky" laws as a result of the issuance of
the Common Stock pursuant hereto or the exercise of rights under the
Registration Rights Agreement, or (ii) where the failure to obtain such
consents, approvals, authorizations or permits or to make such filings
or notifications, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on GEM or
prevent or delay in any material respect consummation of the
transactions contemplated hereby, or otherwise prevent GEM from
performing its obligations under this Agreement or the other Documents.
5.6 Subsidiaries. Schedule 5.6 hereto sets forth a list of all
Subsidiaries of GEM and the respective state or jurisdiction of
incorporation or organization. Except as set forth on Schedule 5.6,
all of the issued and outstanding Equity Interests of such Subsidiaries
have been duly and validly issued and are fully paid and nonassessable
and are owned, directly or indirectly, by GEM. Each Subsidiary of GEM
is duly incorporated or organized and is in good standing in its
respective state or jurisdiction of incorporation and has the corporate
authority to own, lease or operate its properties and to conduct its
business as currently conducted and as proposed to be conducted. Each
Subsidiary of GEM is duly qualified to transact business and is in good
standing as a foreign entity in each state or jurisdiction in which
such qualification is required.
5.7 Financial Statements.
(a) GEM has made available to Sellers GEM's unaudited pro forma
financial statements for the year ended December 31, 1999, and its
unaudited pro forma financial statements including balance sheet at
October 31, 2000 (collectively, "GEM's Internal Historical Financial
Statements"). GEM's Internal Historical Financial Statements are
attached hereto as Schedule 5.7. GEM's Internal Historical Financial
Statements have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods indicated, except that the
unaudited Financial Statements do not contain all footnotes required by
GAAP and contain certain intercompany assets and liability accounts
consistent with consolidated entity accounting. Prior to the Closing
Date, GEM shall deliver to Sellers an unaudited pro forma Estimated
Closing Balance Sheet of the GEM US Business at December 31, 2000,
after giving effect to the transfer of the international portion of the
GEM Business to an affiliate and the distribution to its members all of
its cash and intercompany assets effective as of December 31, 2000 (the
"Pro Forma 2000 Estimated Closing Balance Sheet" and together with
GEM's Internal Historical Financial Statements, the "GEM Financial
Statements"). The GEM Financial Statements fairly present in all
material respects the financial condition and operating results of GEM
as of the dates, and for the periods, indicated therein on a pro forma
basis.
(b) Except as set forth on Schedule 5.7 hereto or reflected in the
GEM Financial Statements, subsequent to December 31, 1999, there has
not been (i) any material adverse change in the properties, business,
operations, assets or condition (financial or otherwise) of GEM and its
Subsidiaries taken as a whole, (ii) any incurrence, satisfaction or
discharge of any Lien on any asset or property of GEM, other than with
respect to a Permitted Lien, (iii) any waiver or compromise of any
valuable right of GEM, or the cancellation of any material debt or
material claim held by GEM or any Subsidiary, (iv) any payment of
dividends on, or other distributions with respect to, or any direct or
indirect redemption or acquisition of, any equity interest in GEM, or
any agreement or commitment therefor, (v) any mortgage, pledge, sale,
assignment or transfer of any material tangible or intangible assets of
GEM, except in the ordinary course of business, (vi) any loan or
guaranty by GEM or any Subsidiary of GEM to or for the benefit of any
officer, director, employee, consultant or stockholder, or any member
of their immediate families, or any agreement or commitment therefor,
other than travel expense advances made by GEM to its officers,
directors, employees, consultants or stockholders in the ordinary
course of business, (vii) any material damage, destruction or loss
(whether or not covered by insurance) affecting the assets of GEM or
any Subsidiary or GEM, (viii) any increase, direct or indirect, in the
compensation (including salary, bonus, insurance or pension benefits)
paid or payable to or for the benefit of any officer, director,
employee or consultant of GEM or any Subsidiary of GEM other than in
the ordinary course of business, (ix) any material change to a material
contract or agreement by which GEM or any of its assets is bound or
subject, or (x) any sale, assignment or transfer of any intellectual
property rights or any other material intangible or tangible assets of
GEM or any Subsidiary of GEM, other than in the ordinary course of
business.
(c) Except as set forth on Schedule 5.7 since December 31, 1999 or
reflected in the GEM Financial Statements, neither GEM nor any of its
Subsidiaries has incurred any liabilities or obligations (whether
absolute, accrued, fixed, contingent, liquidated, unliquidated or
otherwise and whether due or to become due) of any nature, except for
liabilities, obligations or contingencies (i) which are reflected in
the unaudited balance sheet of GEM at December 31, 1999, (ii) which
were incurred in the ordinary course of business after December 31,
1999, and consistent with past practices, (iii) which would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on GEM or (iv) which arise as a result of this
Agreement. Since December 31, 1999, there has been no change in any
significant accounting (including tax accounting) policies, practices
or procedures of GEM or its Subsidiaries.
5.8 Ownership of Properties. Except as set forth on Schedule 5.8,
GEM possesses good, valid and marketable title to, and owns its
property and assets free and clear of all Liens other than Permitted
Liens. With respect to the property and assets it leases, GEM is in
compliance with such leases and, to the knowledge of the officers of
GEM, holds a valid leasehold interest free of any Liens other than
Permitted Liens. Such properties, assets and leasehold interests are
all of the assets that are necessary to conduct the business of GEM as
presently conducted.
5.9 Registration Rights and Voting Rights. Except as contemplated in
the LLC Agreement, GEM has not granted or agreed to grant any
registration rights, including piggyback rights, to any Person. To the
best of the knowledge of the officers of GEM, except as contemplated in
the LLC Agreement, no member of GEM has entered into any agreements
with respect to the voting of LLC Units.
5.10 Private Offering. Assuming the accuracy of the representations
and warranties set forth in Sections 4.22, 4.23 and 4.24, the offer and
sale of the LLC Units to Sellers hereunder is exempt from the
registration delivery requirements of the Securities Act.
5.11 No Brokers. Except for Veronis, Suhler & Associates LLC
("VS&A"), no broker or finder is entitled to any broker's or finder's
fee in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of GEM. The fees of VS&A shall be
paid and satisfied at Closing by GEM.
5.12 Litigation
(a) Except as set forth on Schedule 5.12, there is no proceeding,
suit, action, claim or investigation whether commenced, or to the
knowledge of the officers of GEM, threatened against or affecting GEM
or any of its Subsidiaries or any of their respective properties or
assets, except for such proceedings that would not reasonably be
expected to have, singly or in the aggregate, a Material Adverse Effect
on GEM, and there is no proceeding seeking to restrain, enjoin, prevent
the consummation of or otherwise challenge this Agreement or any of the
other Documents.
(b) Except as set forth on Schedule 5.12, neither GEM nor any of its
Subsidiaries is subject to (i) any Claim, (ii) any Order or (iii) any
rule or regulation of any Governmental Authority that has had a
Material Adverse Effect on GEM or that would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on
GEM.
5.13 Employees, Labor Relations, Labor Agreement.
(a) Neither GEM nor any of its Subsidiaries, nor any Person for whom
GEM or any of its Subsidiaries is or may be responsible by law or
contract, is engaged in any unfair labor practice that would reasonably
be expected to have, singly or in the aggregate, a Material Adverse
Effect on GEM. There is (i) no unfair labor practice charge or
complaint pending or, to the knowledge of the officers of GEM,
threatened against GEM or any of its Subsidiaries, or any Person for
whom GEM or any of its Subsidiaries is or may be responsible by law or
contract, before the National Labor Relations Board or any
corresponding state, local or foreign agency, and no grievance or
arbitration proceeding arising out of or under any collective
bargaining agreement is so pending or threatened, (ii) no strike, labor
dispute, slowdown or stoppage pending or threatened against GEM or any
of its Subsidiaries, or any Person for whom either GEM or any of its
Subsidiaries is or may be responsible by law or contract, and (iii) no
union representation claim or question existing with respect to the
employees of GEM or any of its Subsidiaries, or any Person for whom
either GEM or any of its Subsidiaries is or may be responsible by law
or contract, and no union organizing activities taking place. Neither
GEM nor any of its Subsidiaries, nor any Person for whom GEM or any of
its Subsidiaries is or may be responsible by law or contract, is a
party to any collective bargaining agreement.
(b) Except as disclosed on Schedule 5.13, neither GEM nor any of its
Subsidiaries has violated in any material respect any Applicable Laws
relating to employment or employment practices or the terms and
conditions of employment, including, without limitation, discrimination
in the hiring, promotion or pay of employees, wages, hours of work,
plant closings and layoffs, collective bargaining, immigration and
occupational safety and health. Except as disclosed on Schedule 5.13,
to the knowledge of the officers of GEM or any of its Subsidiaries, no
charges with respect to or relating to GEM or any of its Subsidiaries
are pending before the Equal Employment Opportunity Commission or any
other corresponding state agency, and GEM and each of its Subsidiaries
have at all times been in material compliance with all Applicable Laws
prohibiting discrimination in the workplace including, without
limitation, Applicable Laws that prohibit discrimination and/or
harassment on account of race, national origin, religion, gender,
disability, age, immigration status, workers compensation status or
otherwise.
5.14 Taxes
Except as otherwise disclosed in Schedule 5.14:
(a) GEM and its Subsidiaries have timely filed or will timely file or
cause to be timely filed, all material Tax Returns (or extensions)
required by Applicable Laws to be filed by any of it prior to or as of
the Closing Date. All such Tax Returns and amendments thereto are or
will be true, complete and correct in all material respects.
(b) GEM and its Subsidiaries have paid, or where payment is not yet
due, have established, or will establish or cause to be established on
or before the Closing Date, an adequate accrual for the payment of, all
material Taxes due with respect to any period ending prior to or as of
the Closing Date.
(c) To the knowledge of the officers of GEM, no Audit by a Tax
Authority is pending or threatened with respect to any Tax Returns
filed by, or Taxes due from, GEM or its Subsidiaries. No issue has
been raised by any Tax Authority in any Audit of GEM or its
Subsidiaries that if raised with respect to any other period not so
audited would reasonably be expected to result in a material proposed
deficiency for any period not so audited. No deficiency or adjustment
for any Taxes has been threatened, proposed, asserted or assessed
against GEM or its Subsidiaries. There are no Liens for Taxes upon the
assets of GEM or its Subsidiaries, except Liens for current Taxes not
yet due.
(d) Neither GEM nor its Subsidiaries have given or been requested to
give any waiver of statutes of limitations relating to the payment of
Taxes or has executed powers of attorney with respect to Tax matters,
which will be outstanding as of the Closing Date.
(e) Neither GEM nor its Subsidiaries are a party to, or are bound by
any tax sharing, cost sharing or similar agreement or policy relating
to Taxes.
(f) Neither GEM nor its Subsidiaries have entered into agreements
that would result in the disallowance of any tax deductions pursuant to
Section 280G of the Code. No "consent" within the meaning of Section
341(f) of the Code has been filed with respect to GEM or its
Subsidiaries.
(g) GEM has not made any elections pursuant to the Code (other than
elections that relate solely to methods of accounting, depreciation or
amortization) that would have, individually or in the aggregate, a
Material Adverse Effect on GEM.
(h) GEM has withheld or collected from each payment made to each of
its employees, the amount of Taxes required to be withheld or collected
therefrom, and has paid the same to the proper Tax Authorities or
authorized Tax depositaries.
5.15 Environmental Matters.
(a) Each of GEM and its Subsidiaries is in material compliance with
all Environmental Laws, and neither GEM nor any of its Subsidiaries has
received any written communication that alleges that GEM or its
Subsidiaries is not in compliance with any Environmental Laws, and
there are no circumstances that may prevent or interfere with such
compliance in the future.
(b) There is no Environmental Claim pending or to the knowledge of
the officers of GEM threatened against GEM or any of its Subsidiaries
with respect to the operations or business of GEM or its Subsidiaries,
or against any Person whose liability for any Environmental Claim GEM
or its Subsidiaries has retained or assumed either contractually or by
operation of law.
(c) To the knowledge of the officers of GEM, there are no past or
present actions, activities, circumstances, conditions, events or
incidents, including, without limitation, the release, emission,
discharge, presence or disposal of any Material of Environmental
Concern, that could form the basis of any material Environmental Claim
against GEM or its Subsidiaries, or against any Person whose liability
for any Environmental Claim GEM or its Subsidiaries has retained or
assumed either contractually or by operation of law.
5.16 ERISA.
(a) All GEM Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with,
the applicable provisions of ERISA. Each of the GEM Benefit Plans that
is intended to meet the requirements of Section 401(a) of the Code has
been determined by the Internal Revenue Service to meet such
requirements within the meaning of such provision. No GEM Benefit Plan
is subject to Title IV of ERISA or Section 412 of the Code. GEM has
not engaged in any nonexempt "prohibited transactions," as such term is
defined in Section 4975 of the Code or Section 406 of ERISA, involving
GEM Benefit Plans that would subject GEM to the penalty or tax imposed
under Section 502(i) of ERISA or Section 4975 of the Code. Neither GEM
nor any subsidiary has engaged in any transaction described in Section
4069 of ERISA within the last five years.
(b) No notice of a "reportable event," within the meaning of
Section 4043 of ERISA, for which the 30-day reporting requirement has
not been waived, has been required to be filed for any GEM Benefit Plan
that is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA and that is intended to meet the requirements of
Section 401(a) of the Code, or by any entity that is considered one
employer with GEM under Section 4001 of ERISA or Section 414 of the
Code, within the 12-month period ending on the Closing Date. Neither
GEM nor any subsidiary has incurred any liability to the Pension
Benefit Guaranty Corporation in respect of any GEM Benefit Plan that
remains unpaid.
5.17 Intellectual Property Rights. Each of GEM and its Subsidiaries
owns or possesses adequate licenses or other rights to use all
intellectual property rights (including without limitation, patents,
trademarks, trade names, service marks, copyrights and applications for
any of the foregoing, know-how, trade secrets, proprietary processes,
and other confidential information) (collectively, "Intellectual
Property Rights") material to its business as currently conducted and
as proposed to be conducted, and neither GEM nor any of its
Subsidiaries has received any written notice of infringement of or
conflict with asserted rights of others with respect to the use of
Intellectual Property Rights other than as disclosed on Schedule 5.17.
To the knowledge of the officers of GEM, all Intellectual Property
Rights material to its business as currently conducted and as proposed
to be conducted are valid and enforceable and GEM has performed all
acts and has paid all required fees and taxes to maintain all
registrations and applications of such Intellectual Property Rights in
full force and effect. To the knowledge of the officers of GEM,
neither GEM nor any of its Subsidiaries, in the conduct of their
business as now conducted or as proposed to be conducted, infringes or
conflicts with any material right of any third party, known to GEM.
Neither GEM nor any of its Subsidiaries is, nor will it be as a result
of the execution and delivery of this Agreement and the other Documents
or the performance of any obligations hereunder and thereunder, in
breach of any material license or other agreement relating to any
Intellectual Property Rights. To the knowledge of the officers of GEM,
no third party is infringing or has infringed any Intellectual Property
Rights of GEM or its Subsidiaries.
5.18 Compliance with Laws. Each of GEM and its Subsidiaries has
obtained and has maintained in good standing any material licenses,
permits, consents and authorizations required to be obtained by it
under all Applicable Laws relating to its business, and any such
licenses, permits, consents and authorizations remain in full force and
effect. Each of GEM and its Subsidiaries is in compliance, in all
material respects, with all Applicable Laws.
5.19 Disclosure. No statement of fact by GEM contained herein and no
written statement of fact furnished or to be furnished by GEM to
Sellers in connection herewith contains or will contain any untrue
statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements herein or therein
contained, in light of the circumstances in which they were made, not
misleading.
5.20 Related Party Transactions. Except as set forth on Schedule
5.20, no director, officer, partner, employee, affiliate or associate
of GEM (a) has borrowed money from or has outstanding any indebtedness
or other similar obligations to GEM, (b) to the best knowledge of GEM,
owns any direct or indirect interest of any kind in, or is a director,
officer, employee, party, affiliate or associate of, or consultant or
lender to, or borrower from, or has the right to participate in the
management, operations or profits of, any person or entity which is (i)
a competitor, supplier, customer, distributor, lessor, tenant, creditor
or debtor of GEM, (ii) engaged in a business related to the business of
GEM or (iii) participating in any transaction to which GEM is a party,
(c) is otherwise a party to any contract, arrangement or understanding
with GEM or (d) has any claim adverse to, or is a party in a proceeding
adverse to, GEM.
ARTICLE VI
CERTAIN MATTERS PENDING THE CLOSING
From and after the date of this Agreement and until the Closing,
Sellers and GEM, as applicable, shall comply with the following
provisions:
6.1 Access and Inspection Period. Each of Sellers and GEM and their
respective authorized agents, officers and representatives shall have
reasonable access to the other party (and, in the case of GEM, to the
Contributed Assets) to conduct such examination and investigation of
the other party (and, in the case of GEM, to the Business and the
Contributed Assets) as it deems reasonably necessary, provided that
such examinations shall be during normal business hours and shall not
unreasonably interfere with either party's normal operations and
activities.
6.2 Notice of Adverse Changes. Pending the Closing, each of Sellers
and GEM shall give the other party prompt written notice of the
occurrence of any of the following:
(a) an Event of Loss with respect to the Business or event of
loss with respect to GEM's assets, as applicable, that involves or
would reasonably be expected to involve more than $50,000.00;
(b) the commencement or filing of any decree, judgment, order,
proceeding or litigation at law or in equity, arbitration or other
proceeding before any commission, agency or administrative or
regulatory body or authority which could have a Material Adverse Effect
on the Business or the Contributed Assets or GEM, as applicable;
(c) any material labor grievance, strike, request for union
representation, controversy or dispute affecting the business or
operations of the Business or GEM's employees, as applicable;
(d) any violation by Sellers (with respect to the Business) or
GEM, or written notice of any alleged violation, of any federal, state
or local law, statute, ordinance, rule or regulation;
(e) any event or occurrence which would cause any of such
party's representations and warranties to become incomplete, misleading
or inaccurate;
(f) any notice of breach, default, claimed default or
termination of any material Contract or material Lease or material
agreement of GEM other than any termination of such Contract or Lease
pursuant to its terms; or
(g) any other material adverse developments with respect to the
Business or GEM, as applicable.
6.3 Operations of the Business Pending Closing. Except as otherwise
consented to in writing by GEM, after the date hereof and prior to the
Closing, Sellers shall:
(a) operate the Business in the ordinary course of business in
accordance with past practices;
(b) operate the Business in accordance with applicable
governmental requirements, rules and regulations;
(c) maintain the Equipment in good working order, ordinary wear
and tear excepted, and replace any of the Equipment which shall be worn
out, broken, lost, stolen or destroyed, which Equipment would have been
replaced in the ordinary course of business in accordance with past
practices;
(d) not sell, lease, mortgage, pledge or otherwise dispose of
any of the Contributed Assets, except for transactions in the ordinary
and regular course of the operation of the Business;
(e) not enter into any "golden parachute" or other severance
arrangement with any employee, or increase or otherwise change the rate
or nature of the compensation (including wages, salaries and bonuses)
which is paid or payable to any Sellers' Employee, except pursuant to
existing compensation and fringe benefit plans, practices and
arrangements which have been disclosed to GEM; not enter into, renew or
allow the renewal of, any employment or consulting agreement or other
contract or arrangement with respect to the performance of personal
services with respect to the Business;
(f) with respect to the Business, not enter into, or become
obligated under, any agreement or commitment on behalf of Sellers
except for: (i) agreements entered into in the ordinary and regular
course of the operation of the Business; or (ii) those other agreements
or commitments otherwise permitted under this Section 6.3; or change,
amend, terminate or otherwise modify any Contract or Lease except for
those which terminate or expire by their own terms;
(g) maintain in full force and effect policies of liability and
casualty insurance and workers compensation insurance of substantially
the same type, character and coverage as the policies currently carried
with respect to the Business;
(h) not adopt, or commit to adopt, any employee benefit plan or
arrangement or other pension, profit sharing, deferred compensation or
similar plan, program or trust on behalf of personnel of Sellers with
respect to the Business;
(i) not enter into any collective bargaining agreement
applicable to any employees of Sellers with respect to the Business;
(j) follow the usual and customary policy of Sellers with
respect to the Business with respect to collecting Accounts Receivable;
(k) make reasonable commercial efforts to promote and advertise
the Business and make expenditures therefor consistent with past
practices and protect the business, business prospects and market share
of the Business;
(l) not acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by
any other manner, any business or any Person or division thereof or any
assets that are material, individually or in the aggregate, to the
Business;
(m) not compromise or settle any litigation to which Sellers
are a party, if such settlement or compromise will materially adversely
affect the Contributed Assets or Business;
(n) perform all Contracts and Leases in accordance with their
terms and pay all accounts payable, liabilities and all other
obligations of Sellers with respect to the Business when due;
(o) maintain the books, records and accounts of Sellers with
respect to the Business in the ordinary course of business consistent
with past practice; and
(p) not take or agree to take any action inconsistent with the
representations and warranties of Sellers contained herein or the
consummation of the Closing as contemplated by this Agreement.
6.4 Operations of GEM Pending Closing. Except as otherwise consented
to in writing by Sellers, after the date hereof and prior to the
Closing, GEM shall:
(a) operate its business in the ordinary course of business in
accordance with past practices;
(b) operate its business in accordance with applicable
governmental requirements, rules and regulations;
(c) not sell, lease, mortgage, pledge or otherwise dispose of a
material amount of its assets, except for transactions in the ordinary
and regular course of the operation of its business;
(d) not merge GEM or consolidate GEM with any business or any
Person or division thereof or agree to do either of the foregoing; and
(e) not take or agree to take any action inconsistent with the
representations and warranties of GEM contained herein or the
consummation of the Closing as contemplated by this Agreement.
6.5 Consents. Sellers will use their commercially reasonable efforts
to obtain all consents and approvals from third Persons whose consent
or approval is required pursuant to any Contract or Lease prior to the
Closing Date.
6.6 Cooperation. GEM and Sellers will cooperate in all respects in
connection with:
(a) securing any nongovernmental approvals, consents, and
waivers of third parties listed in Schedule 4.3; and
(b) giving notices to any Governmental Authority, or securing
the permission, approval, determination, consent or waiver of any
Governmental Authority, required by law in connection with the transfer
of the Contributed Assets from Sellers to GEM.
6.7 Exclusivity. Sellers shall not, and Sellers shall ensure that
none of their affiliates, officers, directors, employees,
representatives or agents shall, after the date hereof, directly or
indirectly, solicit or engage in negotiations with, or provide any
information to, or otherwise cooperate with, any person or entity that
seeks to acquire or expresses an interest in acquiring all or any
substantial part of the Business, or for the purpose of otherwise
effecting any transaction or business combination inconsistent with the
transactions contemplated hereby, and Sellers shall not, and Sellers
shall ensure that none of its affiliates, officers, directors,
employees, representatives or agents shall, enter into any agreement
with or grant any proxy, option or other similar right to any third
person or entity in connection with any transaction or business
combination inconsistent with the with the transactions contemplated
hereby; provided, however, that (i) the filing of reports and other
information with the SEC and the distribution of reports and other
information to stockholders shall be deemed not to violate this Section
6.7 and (ii) nothing contained in this Section 6.7 or elsewhere herein
shall prohibit the Boards of Directors of Sellers from furnishing
information to, or entering into discussions or negotiations with, any
person or entity that makes an unsolicited bona fide proposal in
writing to acquire the Business, whether by merger, consolidation, or
stock acquisition, or acquisition of substantially all of the assets of
Sellers, on terms which, in the exercise of their fiduciary duty after
the consideration of advice from Sellers' legal and financial advisors,
a majority of Sellers' directors determines is likely to be more
beneficial to each of the stockholders than the transactions
contemplated hereby, and provided, further, that Sellers' legal and
financial advisors may engage in discussions regarding such written
offer to clarify the terms of such offer for the purpose of rendering
the advice referred to above to the Boards of Directors of Sellers, in
each case, provided that, Sellers and its advisors, prior to furnishing
such information to, or entering into discussions or negotiations with,
such a person or entity, shall provide written notice to GEM to the
effect that Sellers are furnishing information to, or entering into
discussions with, such a person or entity, and shall keep GEM informed
of the status (including the identity of such person or entity and the
terms of any proposal) of such discussions or negotiations. Nothing in
this Section 6.7 shall (A) permit Sellers to terminate this Agreement,
(B) permit Sellers to enter into any agreement with respect to an
Alternate Transaction (as defined in Section 11.6(b)) prior to the
termination of this Agreement in accordance with its terms or (C)
affect any other obligation of any party under the Agreement.
6.8 Release of Liens. At or prior to the Closing, Sellers shall
obtain the release of all Liens disclosed in the Schedules hereto and
any other Liens (other than Permitted Liens) on the Contributed Assets
and shall duly file releases or terminations of all such Liens in each
Governmental Agency or office in which any such Lien or evidence
thereof shall have been previously filed such that Sellers shall
transfer the Contributed Assets to GEM free and clear of all Liens
(other than Permitted Liens).
6.9 Tax Returns and Payments.
(a) All Tax returns, estimates and reports required to be filed
by Sellers (with respect to the Business) and GEM prior to the Closing
Date or relating to periods prior to the Closing Date will be timely
filed when due with the appropriate governmental agencies or extensions
will have been granted; and
(b) all Taxes payable by GEM or by Sellers (pertaining to
ownership of the Contributed Assets or operation of the Business) prior
to the Closing Date will be paid by GEM or Sellers, as applicable, when
due and payable unless protested in good faith.
6.10 Public Announcement. No party hereto shall issue any press
release or public announcement or otherwise divulge the existence of
this Agreement or the transactions contemplated hereby without prior
approval of the other parties hereto which shall not be unreasonably
withheld, except as and to the extent that such party shall be
obligated by law or regulation, in which case the other party shall be
so advised and the parties shall use their best efforts to cause a
mutually agreeable release or announcement to be issued.
6.11 Best Efforts Without limiting the specific obligations of any
party hereto under any agreement or covenant hereunder, each party
hereto shall use its commercially reasonable efforts to take all action
and do all things necessary in order to consummate the transactions
contemplated by this Agreement, including, without limitation,
satisfaction, but not waiver, of the closing conditions set forth in
Article VII and Article VIII.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF GEM
Each and every obligation of GEM to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the
following express conditions precedent:
7.1 Compliance with Agreement. Sellers shall have performed and
complied in all material respects with each of its obligations under
this Agreement which are to be performed or complied with by it prior
to or at the Closing.
7.2 Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, required to be taken by Sellers in connection with
the performance of this Agreement, and all documents incident thereto,
shall be complete in all material respects to the reasonable
satisfaction of GEM, and Sellers shall have made available to GEM for
examination the originals or true and correct copies of all documents
which GEM may reasonably request in connection with the transactions
contemplated by this Agreement.
7.3 Representations and Warranties. The representations and
warranties made by Sellers in this Agreement which are qualified in any
respect as to materiality or Material Adverse Effect shall be true and
correct as of the Closing Date with the same force and effect as though
such representations and warranties had been made on the Closing Date
(except for representations and warranties made as of a specified date,
which need only be true as of such date); all other representations and
warranties made by Sellers in this Agreement shall be true and correct
in all material respects as of the Closing Date with the same force and
effect as though such representations and warranties had been made on
the Closing Date (except for representations and warranties made as of
a specified date, which need only be true as of such date).
7.4 No Material Adverse Change. Between the date of this Agreement
and the Closing, there shall have been no material adverse change in
the financial condition or results of operation of Sellers, with
respect to, or affecting, the Business, nor any material adverse change
in the condition of the Contributed Assets.
7.5 Event of Loss. Between the date of this Agreement and the
Closing, Sellers shall not have sustained an Event of Loss which
individually or in the aggregate would cost in excess of Fifty Thousand
Dollars ($50,000) to repair and which repair shall not have been
completed on or prior to the Closing Date to GEM's reasonable
satisfaction; provided, however, Sellers may elect to extend the
Closing for a reasonable period of time not to exceed sixty (60) days
to complete such repairs.
7.6 Deliveries at Closing. Sellers shall have delivered or caused to
be delivered to GEM the documents, each properly executed and dated as
of the Closing Date, required pursuant to Section 2.3(a).
7.7 Other Documents. Sellers shall have delivered to GEM such
certificates and documents of officers of Sellers and public officials
as shall be reasonably requested by GEM's counsel to establish the good
standing of Sellers, and the due authorization of this Agreement and
the transactions contemplated hereby by Sellers.
7.8 Possession; Instruments of Conveyance and Transfer. Sellers
shall have delivered to GEM at the Closing such other documents as
shall be effective to vest in GEM good title to the Contributed Assets
as contemplated by this Agreement.
7.9 Approvals and Consents. There shall have been secured such
permissions, approvals, determinations, consents and waivers as listed
on Schedule 7.9.
7.10 Absence of Investigations and Proceedings. There shall be no
decree, judgment, order, or litigation at law or in equity, no
arbitration proceedings, and no proceeding before or by any commission,
agency or other administrative or regulatory body or authority pending
to which Sellers are a party with respect to the Business or the
Contributed Assets, which would materially adversely affect the ability
of GEM to operate the Business or to use the Contributed Assets in the
same manner as operated and used by Sellers. Without limiting the
generality of the foregoing, no action or proceeding or formal
investigation by any Person or governmental agency shall be pending
with the object of challenging or preventing the Closing and no other
proceedings shall be pending with such object or to collect damages
from GEM or Sellers on account thereof and for which GEM is not
indemnified hereunder.
7.11 Governmental Consents. All authorizations, consents or
approvals of any and all governmental regulatory authorities necessary
in connection with the consummation of the transactions contemplated by
this Agreement shall have been obtained and be in full force and
effect.
7.12 No Liens. On the Closing Date and simultaneously with the
Closing, there shall not be any Liens on the Contributed Assets except
Permitted Liens.
7.13 Employees. ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ shall have accepted
GEM's offer of employment upon terms and conditions acceptable to GEM.
7.14 Consulting Agreements. ▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇ shall have
entered into Consulting Agreements upon terms and conditions acceptable
to GEM.
7.15 Transitional Service Agreement. CJPG shall have entered into a
transitional service agreement upon terms and conditions acceptable to
GEM.
Notwithstanding the above, if any of the conditions set forth in this
Article VII have not been satisfied, GEM may in its sole discretion
elect to proceed with the consummation of the transactions contemplated
hereby.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
Each and every obligation of Sellers to be performed on the Closing
Date shall be subject to the satisfaction prior to or at the Closing of
the following express conditions precedent:
8.1 Compliance with Agreement. GEM shall have performed and complied
in all material respects with all of its obligations under this
Agreement which are to be performed or complied with by it prior to or
at the Closing.
8. 2 Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, required to be taken by GEM in connection with the
performance of this Agreement, and all documents incident thereto,
shall be complete to the reasonable satisfaction of Sellers, and GEM
shall have made available to Sellers for examination the originals or
true and correct copies of all documents which Sellers may reasonably
request in connection with the transactions contemplated by this
Agreement.
8.3 Representations and Warranties. The representations and
warranties made by GEM in this Agreement which are qualified in any
respect as to materiality or Material Adverse Effect shall be true and
correct as of the closing Date with the same force and effect as though
such representations and warranties had been made on the Closing Date
(except for representations and warranties made as of a specified date,
which need only be true as of such date); all other representations and
warranties made by GEM in this Agreement shall be true and correct in
all material respects as of the Closing Date with the same force and
effect as though such representations and warranties had been made on
the Closing Date (except for representations and warranties made as of
a specified date, which need only be true as of such date).
8.4 No Material Adverse Change. Between the date of this Agreement
and the Closing, there shall have been no material adverse change in
the financial condition or results of operation of GEM and its
Subsidiaries, taken as a whole.
8.5 Deliveries at Closing. GEM shall have delivered or caused to be
delivered to Sellers the documents, each properly executed and dated as
of the Closing Date required pursuant to Section 2.3(b).
8.6 Other Documents. GEM shall have delivered to Sellers such
certificates and documents of officers of GEM and of public officials
as shall be reasonably requested by Sellers' counsel to establish the
existence and good standing of GEM and the due authorization of this
Agreement and the transactions contemplated hereby by GEM.
8.7 Absence of Investigations and Proceedings. There shall be no
decree, judgment, order, or litigation at law or in equity, no
arbitration proceedings, and no proceeding before or by any commission,
agency or other administrative or regulatory body or authority pending
to which GEM is a party, which would materially adversely affect the
ability of GEM to operate its business and no other proceeding or
formal investigation by any Person or Governmental Authority shall be
pending with the object of challenging or preventing the Closing.
Without limiting the generality of the foregoing, no action or
proceeding or formal investigation by any Person or Governmental
Authority shall be pending with the object of challenging or preventing
the Closing and no other proceedings shall be pending with such object
or to collect damages from GEM or Sellers on account thereof and for
which Sellers are not indemnified hereunder.
8.8 Governmental Consents. All other material authorizations,
consents or approvals of any and all Governmental Authorities shall
have been obtained and be in full force and effect.
8.9 Event of Loss. Between the date of this Agreement and the
Closing, GEM shall not have sustained an Event of Loss which
individually or in the aggregate would cost in excess of Fifty Thousand
Dollars ($50,000) to repair and which repair shall not have been
completed on or prior to the Closing Date to Sellers' reasonable
satisfaction; provided, however, GEM may elect to extend the Closing
for a reasonable period of time not to exceed sixty (60) days to
complete such repairs.
8.10 Possession; Purchase Price. GEM shall have delivered to Sellers
at the Closing the cash portion of the purchase price, the LLC Units to
which Sellers are entitled and such other documents as are required by
this Agreement.
8.11 Employees. ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ shall have accepted
GEM's offer of employment upon terms and conditions acceptable to such
employees.
Notwithstanding the above, if any of the conditions set forth in this
Article VIII have not been satisfied, Sellers may nevertheless elect to
proceed with the consummation of the transactions contemplated hereby.
ARTICLE IX
FURTHER AGREEMENTS
9.1 Sellers Employees.
(a) GEM may at any time after the date of this Agreement
approach Sellers' Employees and make arrangements or enter into
agreements with such employees concerning becoming employees of GEM
although GEM assumes by this Agreement no obligation to employ or
continue the employment of any Person for any period of time after the
Closing. All such offers of employment shall be expressly conditioned
upon the consummation of the Closing. Any Sellers Employee who thereby
becomes employed by GEM shall constitute a Transferred Employee.
Sellers agrees to fully cooperate with GEM in connection with its offer
to hire any Sellers Employees and will not take any action, directly or
indirectly, to prevent any Sellers Employee from becoming employed by
GEM from and after the Closing.
(b) Sellers shall be solely responsible for and shall pay all
salaries and other compensation (including, but not limited to, any
deferred or incentive compensation, accrued vacation leave and any
severance pay) which will or may become payable at any time in the
future to any Transferred Employee in respect of any period of
employment with Sellers prior to the later of the Closing Date, or the
date a Transferred Employee becomes employed by GEM.
(c) With respect to each Transferred Employee (including any
beneficiary or dependent thereof), Sellers shall be responsible for and
shall defend, indemnify and hold GEM harmless from and against all
liabilities and obligations relating to claims, expenses, illnesses,
injuries and any other occurrences and for periods prior to the Closing
Date which arise from, or relate to such Transferred Employee's
employment by Sellers.
(d) With respect to each Transferred Employee (including any
beneficiary or dependent thereof), GEM shall be responsible for and
shall defend, indemnify and hold Sellers harmless from and against all
liabilities and obligations relating to claims, expenses, illnesses,
injuries and any other occurrences and for periods on or after the
Closing Date which arise from, or relate to such Transferred Employee's
employment by GEM.
(e) No provision of this Agreement shall create any third party
beneficiary or other rights in any employee or former employee
(including any beneficiary or dependent thereof) of Sellers in respect
of continued employment (or resumed employment) with either GEM or
Sellers or any of their Affiliates, and no provision of this Agreement
shall create any such rights in any such employee or former employee in
respect of any benefits that may be provided, directly or indirectly,
under any existing benefit plan or any plan or arrangement which may be
established by GEM or Sellers. No provision of this Agreement shall
constitute a limitation on rights to amend, modify or terminate after
the Closing Date any such plans or arrangements of Sellers, GEM or any
of their respective affiliates.
9.2. Agreement Not to Compete. For a period of four (4) years after
the Closing Date, each of Sellers and ▇▇▇▇ ▇▇▇▇▇▇▇ , ▇▇▇ ▇▇▇▇▇▇▇▇▇▇-
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇ (the "Principal Stockholders") agree
not to, directly or indirectly, own, manage, operate, control or engage
or participate in the ownership, management, operation or control of,
or be connected as a stockholder, agent, partner, joint venture,
employee, officer, director, consultant or otherwise with, any business
or organization any part of which engages in a business which is
competitive with that of the Business on the Closing Date (a
"Competitive Action"). Sellers and the Principal Stockholders shall
not be in breach of their obligations hereunder by reason of (i) their
ownership of less than one percent (1%) of the outstanding debt or
equity of any publicly traded company, regardless of whether such
publicly traded company competes with the Business or with GEM, or (ii)
their publication, in whatever format or media, of any magazine,
newsletter or other periodical substantially similar to any Retained
Asset. During the Restricted Period, none of Sellers, the Principal
Stockholders nor any affiliate thereof, directly or indirectly, will
solicit, or in any manner attempt to induce, any officer, executive
employee, research and development employee, sales employee or sales
agent of GEM to leave the employ of GEM or to work for Sellers or any
of their affiliates. During the Restricted Period, none of Sellers,
the Principal Stockholders or any Affiliate thereof, directly or
indirectly, will solicit, raid, entice, induce or contact, or attempt
to solicit, raid entice, induce or contact, any Person that is a
customer, supplier or distributor of the Business to terminate such
Person's contractual or business relationship with GEM or the Business
or directly or indirectly solicit or attempt to solicit the business
of, enter into any written or oral agreement with, or otherwise deal
with any customers of GEM, except in regard to businesses outside the
scope of the Business on the Closing Date. In the event that GEM
ascertains the start of a Competitive Action on the part of any such
Persons, GEM shall be entitled to seek injunctive relief. Any business
or property acquired by Sellers or the Principal Stockholders, or any
of their respective Affiliates, after the Closing Date shall be subject
to the foregoing restrictions. It is specifically understood and
agreed that the obligations of Sellers and the Principal Stockholders
hereunder are several, and that a violation of this Section 9.2 by any
one of them shall in no way constitute a violation by any of the others
unless such person or entity is an affiliate of such other person at
the time of such violation. Because the breach or threatened breach of
the covenants contained in this Section 9.2 would result in irreparable
injury to GEM for which GEM will not have an adequate remedy at law,
GEM will be entitled to equitable remedies, including a decree of
specific performance and temporary and permanent injunctive relief, to
enforce the covenants contained in this Section 9.2, as well as any and
all other remedies to which GEM may be entitled at law. The parties
further agree that, if a court of competent jurisdiction determines
that this covenant is unenforceable in any respect, the remainder of
this covenant shall not thereby be affected and shall be given full
effect, without regard to any invalid portions, and this covenant may
be modified by such court in any necessary respect in order to render
it enforceable in its least reduced form. If the courts of any one or
more jurisdictions determine that this covenant is unenforceable, it is
the intention of GEM, on the one hand, and Sellers and the Principal
Stockholders, on the other hand, that such determination not bar or in
any way affect GEM's right to the relief provided above in the courts
of any other jurisdiction as to breaches of this covenant in such other
respective jurisdiction, it being the intention of GEM, on the one
hand, and Sellers and the Principal Stockholders, on the other hand,
that this covenant be considered a separate and independent covenant
insofar as it relates to each such jurisdiction. Each of the Principal
Stockholders acknowledges that he or she will derive substantial
benefit from the transactions contemplated by this Agreement and that a
material condition of GEM's willingness to enter into this Agreement is
the agreement of the Principal Stockholders to be bound by the terms of
this Section 9.2.
ARTICLE X:
INDEMNIFICATION
10.1 Indemnification by Sellers
(a) Sellers, jointly and severally, shall indemnify and hold
GEM and GEM's officers, directors, managers, members and employees
(collectively, the "GEM Indemnified Parties") harmless from and
against, and agree promptly to defend each of the GEM Indemnified
Parties from and reimburse each of the Purchaser Indemnified Parties
for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including, without limitation,
reasonable attorney fees and other legal costs and expenses)
(collectively, "Losses") that any of the GEM Indemnified Parties may at
any time suffer or incur, or become subject to, as a result of or in
connection with: (i) any breach or inaccuracy of any of the
representations and warranties made by Sellers in or pursuant to this
Agreement; (ii) any failure by Sellers to carry out, perform, satisfy
or discharge any covenants, agreements, undertakings or liabilities or
obligations under this Agreement or under any of the documents
delivered by Sellers pursuant to this Agreement; or (iii) the Retained
Liabilities.
(b) Notwithstanding any other provision to the contrary,
Sellers shall not have any liability under Section 10.1(a)(i) above
unless a claim has been asserted with respect to the matters set forth
in Section 10.1(a)(i) within two years of the Closing Date except with
respect to matters arising under Sections 4.4(a), 4.12, 4.18 and 4.19,
in which event GEM must have asserted a claim within the applicable
statute of limitations; provided, however, that an claim under Section
4.4(b) shall survive indefinitely. Notwithstanding any provision set
forth in this Agreement to the contrary, for purposes of determining
whether any Losses have occurred or the amount of any such Losses, the
representations and warranties of Sellers hereunder shall be considered
without regard to any materiality or knowledge qualifications set forth
therein.
10.2 Indemnification by GEM
(a) GEM shall indemnify and hold Sellers and their respective
directors, officers and employees (collectively, the "Sellers
Indemnified Parties") harmless from and against, and agree to promptly
defend each of the Sellers Indemnified Parties from and reimburse each
of the Sellers Indemnified Parties for, any and all Losses that any of
the Sellers Indemnified Parties may at any time suffer or incur, or
become subject to, as a result of or in connection with: (i) any breach
or inaccuracy of any representations and warranties made by GEM in or
pursuant to this Agreement; (ii) any failure by GEM to carry out,
perform, satisfy or discharge any covenants, agreements, undertakings
or liabilities or obligations under this Agreement or under any of the
documents delivered by GEM pursuant to this Agreement; or (iii) the
Assumed Liabilities; or (iv) GEM's operation of the Business from and
after the Closing Date.
(b) Notwithstanding any other provision to the contrary GEM
shall not have any liability under Section 10.2(a)(i) above unless a
claim has been asserted with respect to the matters set forth in
Section 10.2(a)(i) within two years of the Closing Date except with
respect to matters arising under Sections 5.4, 5.13, 5.14, and 5.15, in
which event Sellers must have asserted a claim within the applicable
statute of limitations. Notwithstanding any provision set forth in this
Agreement to the contrary, for purposes of determining whether any
Losses have occurred or the amount of any such Losses, the
representations and warranties of GEM hereunder shall be considered
without regard to any materiality or knowledge qualifications set forth
therein. Notwithstanding any implication to the contrary contained
herein, the parties acknowledge and agree that a decrease in the value
of the LLC Units would not, by itself, constitute a Sellers Indemnified
Parties' Loss, unless and to the extent a decrease in the value of the
LLC Units has been demonstrated to be as a result of any event
described in Sections 10.2(a)(i), (ii) or (iii) above.
10.3 Notification of Claims; Election to Defend
(a) A party entitled to be indemnified pursuant to Section 10.1
or 10.2 hereof, as the case may be (the "Indemnified Party"), shall
notify the party liable for such indemnification (the "Indemnifying
Party") in writing of any claim or demand (a "Claim") that the
Indemnified Party has determined has given or could give rise to a
right of indemnification under this Agreement. Subject to the
Indemnifying Party's right to defend in good faith third party Claims
as hereinafter provided, the Indemnifying Party shall satisfy its
obligations under this Article X within 30 days after the receipt of
written notice thereof from the Indemnified Party. Any amounts paid
thereafter shall include interest thereon for the period commencing at
the later of (i) the end of such 30-day period and (ii) the date the
Claim is paid by the Indemnified Party and ending on the actual date of
payment, at a rate of 15% per annum, or, if lower, at the highest rate
of interest permitted by applicable law at the time of such payment.
(b) If the Indemnified Party shall notify the Indemnifying
Party of any Claim pursuant to Section 10.3(a) hereof, and if such
Claim relates to a Claim asserted by a third party against the
Indemnified Party that the Indemnifying Party acknowledges is a Claim
for which it must indemnify or hold harmless the Indemnified Party
under Section 10.1 or 10.2 hereof, as the case may be, the Indemnifying
Party shall have the right, at its sole cost and expense, to employ
counsel of its own choosing to defend any such Claim asserted against
the Indemnified Party; provided, however, that if the Indemnified Party
(i) reasonably believes that its interests with respect to a Claim (or
any material portion thereof) are in conflict with the interests of the
Indemnifying Party with respect to such Claim (or portion thereof), and
(ii) promptly notifies the Indemnifying Party, in writing, of the
nature of such conflict, then the Indemnified Party shall be entitled
to choose, at the sole cost and expense of the Indemnifying Party,
independent counsel to defend such Claim (or the conflicting portion
thereof). The Indemnified Party shall have the right to participate in
the defense of any such Claim at its own expense (except to the extent
provided in the foregoing sentence), but the Indemnifying Party shall
retain control over such litigation (except as provided in the
foregoing sentence). The Indemnifying Party shall notify the
Indemnified Party in writing, as promptly as possible (but in any case
before the due date for the answer or response to a claim) after the
date of the notice of claim given by the Indemnified Party to the
Indemnifying Party under Section 10.3(a) hereof of its election to
defend in good faith any such third party Claim. So long as the
Indemnifying Party is defending in good faith any such Claim asserted
by a third party against the Indemnified Party (or has been relieved of
the obligation to defend such Claim in accordance with this Section
10.3(b) as a result of a conflict of interest between the Indemnified
Party and the Indemnifying Party), the Indemnified Party shall not
settle or compromise such Claim without the prior written consent of
the Indemnifying Party. The Indemnified Party shall cooperate with the
Indemnifying Party in connection with any such defense and shall make
available to the Indemnifying Party or its agents all records and other
materials in the Indemnified Party's possession reasonably required by
it for its use in contesting any third party Claim; provided, however,
that the Indemnifying Party shall have agreed, in writing, to keep such
records and other materials confidential except to the extent required
for defense of the relevant Claim. Whether or not the Indemnifying
Party elects to defend any such Claim, the Indemnified Party shall have
no obligations to do so. Within 30 days after a final determination
(including, without limitation, a settlement) has been reached with
respect to any Claim contested pursuant to this Section 10.3(b), the
Indemnifying Party shall satisfy its obligations with respect thereto.
Any amounts paid thereafter shall include interest thereon for the
period commencing at the later of (i) the end of such 30-day period and
(ii) if the Claim is payable to a third party, the date the Claim is
paid by the Indemnified Party and ending on the actual date of payment,
at a rate of 15% per annum, or, if lower, at the highest rate of
interest permitted by applicable law at the time of such payment
10.4 Limits for Recovery of Losses
Neither party shall be liable as the Indemnifying Party for any Claims
under Section 10(a) or 10(b) unless and until the aggregate amount of
all Claims of the Indemnified Parties under such Sections equals or
exceeds $75,000, in which case the Indemnifying Party shall be liable
for all Claims of the Indemnified Parties under such Sections without
regard to such $75,000 limitation; provided, however, this limitation
shall not apply to any Claim with respect to Section 4.4(b). In all
cases, and notwithstanding anything herein to the contrary, GEM shall
be subject to a maximum aggregate limit of all Claims against it equal
to $5 million, and Sellers shall be subject to a maximum aggregate
limit of all Claims against it equal to the cash portion of the
purchase price and the fair market value of the Sellers' LLC Units at
the time of the determination of the amount of such Claims; provided,
however, this limitation shall not apply to any Claim with respect to
Section 4.4(b).
ARTICLE XI
TERMINATION; MISCELLANEOUS
11.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to
the Closing Date, as follows:
(a) by mutual written agreement of Sellers and GEM;
(b) by GEM, upon a material breach hereof by Sellers which has
not been cured within 20 days after Sellers' receipt of written notice
from GEM notifying it of such default which would cause any of the
conditions set forth in Article VII of this Agreement not to have been
fulfilled by January 1, 2001;
(c) by Sellers, upon a material breach hereof by GEM which has
not been cured within 20 days after GEM's receipt of written notice
from Sellers notifying it of such default which would cause any of the
conditions set forth in Article VIII of this Agreement not to have been
fulfilled by January 1, 2001; and
(d) by GEM or Sellers if the Closing has not occurred on or
before January 10, 2001 (the "Drop Dead Date"), provided that the party
seeking to terminate this Agreement shall not then be in material
breach of this Agreement.
11.2 Rights on Termination. If this Agreement is terminated because
of a willful and material breach hereof by either party, the
nonbreaching party shall be entitled to pursue all legal and equitable
remedies against the breaching party for such breach including specific
performance.
11.3 Further Assurances. From time to time after the Closing Date,
upon the reasonable request of any party hereto, the other party or
parties hereto shall execute and deliver or cause to be executed and
delivered such further instruments of conveyance, assignment and
transfer and take such further action as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions of this Agreement.
11.4 Survival. The representations and warranties of GEM and Sellers
in this Agreement shall survive the Closing until the date that is two
years from the Closing Date except with respect to the representations
and warranties set forth in Sections 4.4(a), 4.12, 4.18, 4.19, 5.4,
5.13, 5.14 and 5.15 which shall survive the Closing for the applicable
statute of limitations and the representations and warranties set forth
in Sections 4.4(b) shall survive indefinitely. The agreements of GEM
and Sellers set forth in Articles IX, X and XI in this Agreement shall
survive the Closing indefinitely.
11.5 Entire Agreement; Amendment; and Waivers. This Agreement and
the agreements required to be delivered pursuant hereto constitute the
entire agreement between the parties pertaining to the subject matter
hereof, and supersede all prior and contemporaneous agreements,
understandings, negotiations and discussions of the parties, whether
oral or written, and there are no warranties, representations or other
agreements between the parties in connection with the subject matter
hereof, except as specifically set forth herein. No amendment,
supplement, modification, waiver or termination of this Agreement shall
be binding unless executed in writing by the party to be bound thereby.
No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision of this Agreement,
whether or not similar, unless otherwise expressly provided. Time is
of the essence of this Agreement. All remedies, either under this
Agreement or by law or otherwise afforded to any party, shall be
cumulative and not alternative.
11.6 Expenses. (a) Except as otherwise specifically provided herein,
whether or not the transactions contemplated by this Agreement are
consummated, each of the parties shall pay the fees and expenses of its
respective counsel, accountants and other experts incident to the
negotiation, drafting and execution of this Agreement and consummation
of the transactions contemplated hereby.
(b) Notwithstanding Section 11.6(a), if (i) any Triggering Event (as
defined below) occurs prior to the termination of this Agreement in
accordance with its terms or (ii) any Alternate Transaction (as defined
below) is consummated during the 180-day period immediately following
the later of (A) the Drop Dead Date and (B) the termination of this
Agreement in accordance with its terms (the later of (A) and (B) being
the "Termination Date"), the Company shall pay to GEM within two
business days after such event, an amount in immediately available
funds equal to the documented fees and expenses incurred by GEM in
connection with the due diligence, preparation and negotiation of legal
documents, and preparation of financial statements of GEM related to
the acquisition (including legal, tax and accounting fees and
disbursements). The Triggering Events are as follows:
(1) any Seller shall have entered into, or shall have publicly
announced its intention to enter into, an agreement in principle,
letter of intent, definitive agreement or other similar arrangement,
whether binding or non-binding, with any person other than GEM and its
affiliates with respect to any sale, merger, consolidation or other
similar transaction involving the Business, any class of its equity
securities or securities convertible into equity securities or all or
substantially all of its assets; or
(2) the Board of Directors of CJPG shall (A) recommend or have
recommended that stockholders of CJPG sell shares of any class of
equity securities or securities convertible into equity securities of
the Company to another person or group or recommend or approve any sale
of all or substantially all of the Company's assets to another person
or group, (B) recommend or have recommended to stockholders of the
Company any Alternate Transaction involving such person or group or (C)
shall withdraw or have withdrawn or modify or have modified in a manner
adverse to GEM (including by no longer taking any position with respect
to the transactions contemplated hereby), its support for the
transactions contemplated hereby (the transactions contemplated in
subparagraphs (b)(1), (b)(2)(A) and (b)(2)(B) being referred to herein
as "Alternate Transactions").
The Company shall advise GEM of the receipt of any proposal for an
Alternate Transaction and the details thereof within 48 hours of the
receipt thereof, and the Board of Directors of the Company shall not
act with respect to any such proposal for three business days after the
delivery of such notice to GEM. Nothing in Sections 11.6(b) or 11.7
shall be deemed to limit in any way any claims GEM may have at law or
equity with respect to any breach by Sellers of any of their
obligations under this Agreement.
11.7 Break-up Fee. In addition to any amounts payable pursuant to
Section 11.6(b), if Sellers shall consummate any Alternate Transaction
at any time prior to the Termination Date or during the 180-day period
immediately following the Termination Date, Sellers shall pay to GEM
upon the date of consummation of such Alternate Transaction a break-up
fee equal to $1 million.
11.8 Benefit; Assignment. This Agreement shall be binding upon and
shall inure to the benefit of and shall be enforceable by GEM and
Sellers and their respective proper successors and assigns. This
Agreement (and any rights, obligation or liabilities hereunder) may not
be assigned or delegated in whole or in part by any party without the
prior written consent of the other parties; provided, however, that GEM
may assign in whole or in part its rights, obligations or liabilities
hereunder to an Affiliate of GEM or to any Person who purchases all or
substantially all of the assets or stock of GEM whether by merger or
otherwise, and GEM may collaterally assign this Agreement to any lender
of GEM or such Affiliate.
11.8 Notices. All notices and other communications delivered
hereunder (whether or not required to be delivered hereunder) shall be
deemed to be sufficient and duly given if contained in a written
instrument (a) personally delivered, (b) sent by telecopier, (c) sent
by nationally recognized overnight courier guaranteeing next Business
Day delivery or (d) sent by first class registered or certified mail,
postage prepaid, return receipt requested, in each case addressed as
follows:
if to Sellers:
Casino Journal Publishing Group, Inc.
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Attention: ▇▇▇▇▇ ▇▇▇▇, CEO
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to GEM:
GEM Communications, LLC
c/o The Official Information Company
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Attn: ▇▇▇ ▇▇▇▇▇▇, President and CEO
Telecopier number: (▇▇▇) ▇▇▇-▇▇▇▇
11.9 Counterparts; Headings. This Agreement may be executed in
several counterparts, each of which shall be deemed an original, but
such counterparts shall together constitute but one and the same
Agreement. Facsimile counterpart signatures to this Agreement shall be
acceptable and binding. The Table of Contents and Article and Section
headings in this Agreement are inserted for convenience of reference
only and shall not constitute a part hereof.
11.10 Severability. If any provision, clause or part of this
Agreement or the application thereof under certain circumstances is
held invalid or unenforceable, the remainder of this Agreement, or the
application of such provision, clause or part under other
circumstances, shall not be affected thereby.
11.11 No Reliance. Except for any assignees permitted by Section
11.7 of this Agreement:
(a) no third party is entitled to rely on any of the
representations, warranties and agreements of GEM or Sellers contained
in this Agreement; and
(b) GEM and Sellers assume no liability to any third party
because of any reliance on the representations, warranties and
agreements of GEM or Sellers contained in this Agreement.
11.12 Judicial Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree
that the court interpreting or construing the same shall not apply a
presumption that the terms hereof shall be more strictly construed
against one party by reason of the rule of construction that a document
is to be construed more strictly against the party which itself or
through its agent prepared the same, it being agreed that the agents of
each party have participated in the preparation hereof.
11.13 Saturdays, Sundays and Legal Holidays. If the time period by
which any acts or payments required hereunder must be performed or paid
expires on a Saturday, Sunday or legal holiday, then such time period
shall be automatically extended to the close of business on the next
regularly scheduled business day.
11.14 Governing Law; Waiver of Jury Trial. THIS AGREEMENT SHALL BE
CONSTRUED AND INTERPRETED ACCORDING TO THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
EACH OF THE PARTIES HERETO HEREBY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS, OR ANY DEALINGS BETWEEN
THEM RELATING TO THE SUBJECT MATTER OF SELLERS' INVESTMENT IN GEM
CONTEMPLATED HEREBY. THE SCOPE OF THIS JURY TRIAL WAIVER SHALL BE
LIMITED TO DISPUTES BETWEEN GEM AND SELLERS AND SHALL NOT EXTENT TO
DISPUTES BETWEEN GEM AND ANY OTHER PERSON.
11.15 Income Tax Position Neither GEM nor Sellers shall take a
position for income tax purposes which is inconsistent with this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Asset Contribution
Agreement as of the day and year first above written.
GEM COMMUNICATIONS, LLC
By:
Name:
Title:
CASINO JOURNAL PUBLISHING GROUP, INC.
By:
Name:
Title:
CASINO PUBLICATIONS, INC.
By:
Name:
Title:
GAMING ENTERTAINMENT EXPOSITIONS, INC.
By:
Name:
Title:
CASINO JOURNAL OF NEVADA, INC.
By:
Name:
Title:
JOINDER TO ASSET CONTRIBUTION AGREEMENT
The undersigned have executed this Joinder to Asset Contribution
Agreement to evidence their agreement to be bound by the terms of
Section 9.2 of the Asset Contribution Agreement.
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SCHEDULE 1.4
Equity Interests
SCHEDULE 2.2(b)
Equity Interests
Tradeshow/Conference Sellers' Equity % Additional Purchase Price
Southern Gaming Summit 50% $250,000
Northern Gaming Summit 100% $125,000
UNLV Casino Ops Conference 75% $125,000