EXHIBIT 2.3
EXECUTION COPY
STOCK PURCHASE AGREEMENT
By and Between
XXXXXXXXX XXXXX LOUISIANA VIDEO POKER COMPANY, L.L.C.
(Purchaser)
And
XXXXXX X. XXXXXX
XXXXX XXXXXXXXX
T. XXXXX XXXXXX III
And
LOUISIANA VENTURES, INC.
(Sellers)
Dated as of October 14, 2004
EXECUTION COPY
TABLE OF CONTENTS
PAGE
RECITALS....................................................................1
DEFINITIONS.................................................................1
ARTICLE 1 SALE AND PURCHASE OF SHARES; CLOSING..............................4
Section 1.01 Sale of Stock.................................................4
Section 1.02 Purchase Price................................................4
Section 1.03 Reimbursements................................................4
Section 1.04 Closing.......................................................4
Section 1.05 Payment and Closing Deliveries................................5
Section 1.06 Dividends Prior To Closing....................................6
Section 1.07 Right to Revenues; Risk of Loss...............................7
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLERS.........................7
Section 2.01 Ownership.....................................................7
Section 2.02 Authority; Enforceability.....................................7
Section 2.03 Organization; Authority.......................................8
Section 2.04 Subsidiaries..................................................8
Section 2.05 Capital Stock.................................................8
Section 2.06 Title to Stock, Liens, Etc....................................9
Section 2.07 Consents and Approvals; Conflicts.............................9
Section 2.08 Financial Statements..........................................9
Section 2.09 Absence of Certain Changes....................................9
Section 2.10 Legal Proceedings; Etc........................................10
Section 2.11 Permits; Compliance With Laws.................................10
Section 2.12 Title to Property; Condition of Property;
Real Property Leases, Etc.....................................11
Section 2.13 Environmental Matters.........................................12
Section 2.14 Insurance.....................................................12
Section 2.15 Contracts.....................................................13
Section 2.16 Employees.....................................................14
Section 2.17 Employee Benefit Plans........................................14
Section 2.18 Labor Relations...............................................16
Section 2.19 Potential Conflicts of Interest...............................17
Section 2.20 Patents, Trademarks, Etc......................................17
Section 2.21 Accounts Receivable...........................................17
Section 2.22 Taxes.........................................................17
Section 2.23 Indebtedness..................................................19
Section 2.24 Officers and Directors, Bank Accounts,
Signing Authority, Powers of Attorney.........................19
Section 2.25 Minute Books, Etc.............................................19
Section 2.26 Broker........................................................20
Section 2.27 Accuracy of Representations and Warranties....................20
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EXECUTION COPY
Section 2.28 Effectiveness of Representations and Warranties...............20
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................20
Section 3.01 Organization of Purchaser.....................................20
Section 3.02 Authority; Enforceability.....................................20
Section 3.03 Consents and Approvals; Conflicts.............................20
Section 3.04 Investment Representation.....................................21
Section 3.05 No Representations and Warranties; Conduct of Due Diligence...21
Section 3.06 Brokerage Fees................................................21
Section 3.07 Securities Act Representations................................21
Section 3.08 Effectiveness of Representations and Warranties...............22
ARTICLE 4 PRE-CLOSING COVENANTS.............................................22
Section 4.01 Legal Requirements............................................22
Section 4.02 Access To Properties and Records..............................22
Section 4.03 Conduct of Business...........................................22
Section 4.04 Public Statements.............................................24
ARTICLE 5 CLOSING CONDITIONS................................................24
Section 5.01 Conditions Applicable To All Parties..........................24
Section 5.02 Conditions To Obligations of Purchaser........................24
Section 5.03 Conditions to Obligations of Sellers..........................26
ARTICLE 6 POST-CLOSING COVENANTS............................................27
Section 6.01 General.......................................................27
Section 6.02 Employee Retention............................................27
Section 6.03 Non-competition...............................................28
Section 6.04 Alliance Gaming Corporation 401K Profit Sharing Plan..........30
ARTICLE 7 TERMINATION AND AMENDMENT.........................................30
Section 7.01 Termination...................................................30
Section 7.02 Effect of Termination.........................................30
Section 7.03 Amendment.....................................................31
Section 7.04 Extension; Waiver.............................................31
ARTICLE 8 TAX MATTERS.......................................................31
Section 8.01 Additional Definitions........................................31
Section 8.02 Preparation and Filing of Tax Returns.........................31
Section 8.03 Sellers' Contest Rights.......................................32
Section 8.04 Purchaser's Contest Rights....................................32
Section 8.05 Notification Requirements.....................................33
Section 8.06 Cooperation...................................................33
Section 8.07 Retention of Data and Documentation...........................33
Section 8.08 Tax Audit Costs...............................................34
Section 8.09 Tax Sharing Agreements........................................34
Section 8.10 Returns for Periods Through the Closing Date..................34
Section 8.11 Carrybacks....................................................34
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EXECUTION COPY
Section 8.12 Retention of Carryovers.......................................34
ARTICLE 9 INDEMNIFICATION; REMEDIES.........................................34
Section 9.01 Indemnification By Sellers....................................34
Section 9.02 Indemnification By Purchaser..................................35
Section 9.03 Notice and Defense of Third Party Claims......................35
Section 9.04 Exclusive Remedy..............................................36
ARTICLE 10 MISCELLANEOUS....................................................36
Section 10.01 Confidentiality...............................................36
Section 10.02 Survival of Representations, Warranties and Agreements........37
Section 10.03 Notices.......................................................37
Section 10.04 Headings; Gender..............................................38
Section 10.05 Entire Agreement; No Third Party Beneficiaries................39
Section 10.06 Governing Law.................................................39
Section 10.07 Assignment....................................................39
Section 10.08 Severability..................................................39
Section 10.09 Counterparts..................................................39
Section 10.10 Expenses......................................................39
Section 10.11 Amendments and Waivers........................................39
Section 10.12 Construction..................................................40
Section 10.13 Understanding.................................................40
Section 10.14 Arbitration...................................................40
ARTICLE 11 INTERVENORS......................................................40
Section 11.01 Spousal Consent...............................................40
EXHIBIT INDEX
Exhibit A- Operating Agreement dated Xxxxx 0, 0000
Xxxxxxxx dated November 9, 1995
Second Addendum dated November 1, 2001
Third Addendum dated December 4, 2001
Fourth Addendum dated April 30, 2003
Exhibit B - Form of Escrow Agreement
Exhibit C - Xxxx and Xxxxx LLP Opinion
Exhibit D - LHBPA Release
Exhibit E - Xxxxxx Release
Exhibit F - Withdrawal of Objection to Assignment
Exhibit G - Spousal Consent
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into as
of the day of the 14th day of October, 2004 by and between Xxxxxxxxx Xxxxx
Louisiana Video Poker Company, L.L.C., a Louisiana limited liability company,
("Purchaser"); XXXXXX X. XXXXXX, XXXXX XXXXXXXXX and T. XXXXX XXXXXX III, all
Louisiana residents, and LOUISIANA VENTURES, INC., a Nevada corporation ("LVI")
(each a "Seller" and all collectively "Sellers").
RECITALS
WHEREAS, Sellers are the owners of all of the issued and outstanding
shares of all classes of common stock of Video Services, Inc., a Louisiana
corporation ("VSI");
WHEREAS, VSI is engaged in the business of selecting, owning,
installing, operating and maintaining video poker devices and other electronic
gaming machines at the Fair Grounds Race Course and at off-track betting parlors
operated in the greater New Orleans, Louisiana area, by or under the auspices of
the Fair Grounds Race Course (the "Business"); and
WHEREAS, Sellers desire to sell to Purchaser and Purchaser desires to
purchase from Sellers, all of the issued and outstanding shares of common stock
of VSI for the consideration and subject to the terms and conditions set forth
in this Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and agreements set forth herein, and in reliance upon the
representations and warranties contained herein, Purchaser and Sellers do now
agree as follows:
DEFINITIONS
In addition to the other defined terms used herein, as used in this
Agreement, the following terms when capitalized shall have the meanings
indicated herein. All defined terms shall include the singular and the plural.
(a) "AFFILIATE" shall mean with respect to any specified Person, any
other Person directly or indirectly controlling, controlled by or under direct
or indirect common control with such Person.
(b) "APPLICABLE LAW" shall mean any statute, law, rule or regulation or
any judgment, order, writ, injunction or decree of any Governmental Entity to
which a specified Person or its property is subject.
(c) "BANKROLL AMOUNT" shall mean $824,000 (representing the imprest
bank balances) plus the Undeposited Net Win as of 2:01 A.M. on the Closing Date.
(c) "CHANGE OF CONTROL" shall be deemed to have occurred upon (i) the
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consummation of a tender for or purchase of more than fifty percent (50%) of a
company's capital stock by a third party, (ii) a merger, consolidation or
recapitalization of a company such that the stockholders of the company
immediately prior to the consummation of such transaction possess less than
fifty percent (50%) of the voting securities of the surviving entity immediately
after the transaction (determined on a fully-diluted basis assuming the
conversion of all convertible securities of such Person), or (iii) the sale,
lease or other disposition of all or substantially all of the assets of a
company.
(d) "CLOSING" shall mean the consummation of the Purchase (as defined
in Section 1.01) and the other transactions contemplated by this Agreement.
(e) "CLOSING DATE" shall mean the date on which the Closing occurs.
(f) "DISCLOSURE LETTER" shall mean that certain Disclosure Letter
delivered to Purchaser by Sellers on or before October 14th, 2004, the purpose
of which is to disclose certain matters related to this Agreement.
(g) "ENCUMBRANCES" shall mean adverse claims, pledges, liens, defects,
leases, licenses, equities, conditional sales contracts, charges, claims,
encumbrances, security interests, easements, restrictions, chattel mortgages,
mortgages or deeds of trust, of any kind or nature whatsoever, and any
preferential arrangement or restriction of any kind, including, without
limitation, any restriction on the use, voting, transfer, receipt of income or
other exercise of any attribute of ownership.
(h) "GOVERNMENTAL ENTITY" shall mean any court or tribunal in any
jurisdiction or any public, governmental or regulatory body, agency, department,
commission, board, bureau or other authority or instrumentality.
(i) "INDEBTEDNESS" shall mean, as applied to any Person, (i) all
indebtedness of such Person for borrowed money, whether current or funded, or
secured or unsecured, (ii) all indebtedness of such Person for the deferred
purchase price of property or services represented by a note or other security,
(iii) all indebtedness of such Person created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale of
such property), (iv) all indebtedness of such Person secured by a purchase money
mortgage or other lien to secure all or part of the purchase price of property
subject to such mortgage or lien, (v) all pre-Closing obligations under leases
which shall have been or must be, in accordance with generally accepted
accounting principles, recorded as capital leases in respect of which such
Person is liable as lessee, (vi) any liability of such Person in respect of
banker's acceptances or letters of credit, (vii) any liability in respect of
interest, fees or other charges in respect of any indebtedness referred to a
clauses (i) through (vi) above, (viii) all indebtedness referred to in clauses
(i) through (vii) above which is directly or indirectly guaranteed by such
Person or which such Person has agreed (contingently or otherwise) to purchase
or otherwise acquire or in respect of which it has otherwise assured a creditor
against loss and (ix) all other accrued liabilities that appear on the Balance
Sheet.
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(j) "IRS" shall mean the United States Internal Revenue Service.
(k) "KNOWLEDGE" (including, without limitation, the terms "KNOW",
"KNOWING", "KNOWLEDGE", "BEST KNOWLEDGE", or "TO THE BEST KNOWLEDGE OF") shall
mean with respect to each Seller the actual knowledge of such Seller, or where
applicable, their officers or directors, without independent investigation.
(l) "LEASES" shall mean any executory lease to which VSI is subject,
having future rental payments of more than $5,000 in the aggregate and any
executory lease to which VSI is subject where the future rental payments under
such lease, when aggregated with the future rental payments under all other
executory leases to which VSI is a party, are more than $10,000 in the
aggregate, all shown on Section 2.12(d) of the Disclosure Letter.
(m) "MATERIAL ADVERSE EFFECT" shall mean any circumstance, change in,
or effect on the Business that, individually or in the aggregate with any other
circumstances, changes in, or effects on, the Business, is materially adverse to
the Business, operations, results of operations or financial condition of VSI
excluding from the foregoing any event, change or circumstance arising out of
(i) the compliance by VSI with the terms and conditions of this Agreement, (ii)
general economic or financial conditions which are not unique to VSI but also
affect other Persons who participate or are engaged in the lines of business in
which VSI participates or is engaged, or (iii) changes resulting from acts of
terrorism or acts of war or escalation of hostilities, whether occurring within
or outside the United States, or any effect of any such acts of hostilities on
general economic or other conditions.
(n) "OPERATING AGREEMENT" shall mean the agreement between VSI and Fair
Grounds Corporation, Xxxxxxxxx Xxxxx Corporation and Finish Line Management
Corporation dated March 9, 1992, as amended, attached as Exhibit "A", in globo.
(o) "PARTY" shall mean singularly one of the persons or plurally two or
more of the persons executing this Agreement.
(p) "PERSON" shall mean an individual, firm, corporation, general or
limited partnership, limited liability company, limited liability partnership,
joint venture, trust, governmental authority or body, association,
unincorporated organization or other entity.
(q) "PROCEEDINGS" shall mean any suit, action, proceeding, dispute or
claim before or investigation by any Governmental Entity.
(r) "STOCK" shall mean, collectively, all of the authorized, issued and
outstanding shares of Class A (non-voting) common stock, no par value per share,
and all of the authorized, issued and outstanding shares of Class B (voting)
common stock, no par value per share, of VSI representing 100% of the aggregate
authorized, issued and outstanding capital stock, voting and non-voting, of VSI.
(s) "TAX" shall mean any federal, state, local or foreign income, gross
receipt,
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license, net equity payroll, payroll, employment excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
ss. 59A), custom duties, capital stock, franchise, import and export, profits,
withholding, social security, unemployment, disability, real property, personal
property, intangible property, sales, use, transfer, registration, value added,
alternative, or add-on-minimum, estimated, or other government tax, duty, fee or
charge of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
(t) "UNDEPOSITED NET WIN" shall mean the amount of all of VSI's gross
deposits less all fully paid payouts, to the extent that such amount has not
been deposited in VSI's bank accounts as of 2:01 A.M. on the Closing Date.
(t) "VSI GROUP" shall mean VSI and all entities included in any
affiliated group with VSI for which consolidated or combined Tax Returns were
filed or are or were required to be filed.
ARTICLE 1
SALE AND PURCHASE OF SHARES; CLOSING
SECTION 1.01 SALE OF STOCK. Subject to the terms and conditions herein
stated, at the Closing Sellers shall sell, transfer, assign and deliver to
Purchaser, and Purchaser shall purchase from Sellers, all of the Stock, all with
full warranty of title and free and clear of all Encumbrances, in exchange for
the payment of the Purchase Price described below (the "PURCHASE").
SECTION 1.02 PURCHASE PRICE. Purchaser shall pay to Sellers, as the
purchase price for the Stock, an aggregate amount of Four Million Dollars
($4,000,000) (the "PURCHASE PRICE"), pursuant to the payment instructions,
percentages and wire instructions attached as Section 1.02 of the Disclosure
Letter.
SECTION 1.03 REIMBURSEMENTS. The Purchaser shall, at Closing, reimburse
Sellers as follows (collectively, the "REIMBURSEMENTS").
(a) Purchaser shall reimburse Sellers for the cost of all licenses and
permits paid by VSI for the year 2004-2005 as set forth on Section 1.03(a) of
the Disclosure Letter.
(b) Purchaser shall reimburse Sellers for the pro rata share of all
taxes or other fees paid by or on behalf of VSI prior to Closing as set forth on
Section 1.03(b) of the Disclosure Letter.
SECTION 1.04 CLOSING. Subject to satisfaction or waiver of the
conditions specified in Article 5 hereof, the Closing shall take place at 10:00
am. local time on October 14, 2004 at the law offices of Xxxxx & Xxxxxxxx, 21st
Floor, 000 Xxxxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxx 00000 or at such other time
and place as Purchaser and Sellers may agree.
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SECTION 1.05 PAYMENT AND CLOSING DELIVERIES.
At the Closing:
(a) Purchaser shall have caused to be delivered the
Purchase Price by wire transfer of immediately
available funds to Sellers in the percentage as set
forth in Section 1.02 of the Disclosure Letter;
(b) Purchaser shall have caused to be delivered the
amounts due as (i) Reimbursements by wire transfer of
immediately available funds pursuant to the
percentages and wire instructions attached as Section
1.02 of the Disclosure Letter hereto, and (ii) the
Bankroll Amount by wire transfer of immediately
available funds pursuant to the terms of Section
1.06;
(c) Sellers shall deliver to Purchaser (i) stock
certificates representing the Stock duly endorsed in
blank, or accompanied by stock powers duly executed
in blank, in a form satisfactory to Purchaser, which
shall transfer to Purchaser good title to the Stock
free and clear of any Encumbrance, and (ii) written
resignations of all officers and directors of VSI
other than Xxxx Xxxxxxxxx;
(d) Sellers shall have deposited into the sweep account
designated to the state police as the account from
which video poker taxes are to be paid, in
immediately available funds, a sum sufficient to pay
all video poker taxes due through the Closing Date;
(e) Sellers shall deliver the opinion of Xxxxx and Xxxxx
LLP in substantially the form attached as Exhibit "C"
hereto;
(f) Sellers shall and shall cause VSI to execute and
deliver to Purchaser a Mutual Release with the
Louisiana Horsemen's Benevolent and Protective
Association 1993, Inc. in substantially the form
attached as Exhibit "D" hereto (the "LHBPA RELEASE");
(g) Purchaser shall deliver to Sellers counterparts to
the LHBPA Release, executed by the Louisiana
Horsemen's Benevolent and Protective Association
1993, Inc.;
(h) Sellers shall and shall cause VSI to execute and
deliver to Purchaser a Mutual Release with Fair
Grounds Corporation, Xxxxx X. Xxxxxx, Xxxxxx Xxxxxx,
Family Racing Venture, L.L.C., Gentilly Gaming,
L.L.C., Finish Line Management Corp., Continental
Advertising, Inc., F.G. Staffing Services, Inc. and
Fair Grounds International Ventures, L.L.C.
(collectively, the "XXXXXX PARTIES") in substantially
the form attached as Exhibit "E" hereto (the "XXXXXX
RELEASE");
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(i) Purchaser shall deliver to Sellers counterparts to
the Xxxxxx Release, executed by the Xxxxxx Parties;
(j) Sellers shall deliver to Purchaser a Withdrawal of
Objection to Assignment and Assumption of Contract
and Waiver of Cure in substantially the form attached
as Exhibit "F" hereto; and
(k) Sellers and Purchaser shall (i) provide to the other
such certificates, agreements and instruments as are
required to be delivered under Article 5, (ii)
provide to the others proof or indication of the
satisfaction or waiver of the conditions set forth in
Article 5, and (iii) take such other action as is
required to consummate the transactions contemplated
by this Agreement.
SECTION 1.06 INDEBTEDNESS; DIVIDENDS PRIOR TO CLOSING; POST-CLOSING
PAYMENTS.
(a) Sellers shall cause VSI to discharge all Indebtedness outstanding
as of 10:00 A.M. on the Closing Date.
(b) Sellers shall retain as earned income all cash on hand, including
but not limited to cash in all bank accounts, cash in the change bank at each
location and other miscellaneous cash that is used in the daily operation of VSI
as of 2:01 A.M. on the Closing Date after the discharge of Indebtedness under
Section 1.06(a) (the "CASH ON HAND"). Sellers, with a representative of
Purchaser present, will count down the final Cash on Hand in the cage and count
rooms beginning at 8:00 A.M. on the Closing Date (the "FINAL CASH COUNT"). At
the Closing, in the form of a cash dividend, (i) VSI shall disburse all of the
available Cash on Hand MINUS $5,000 in xxxxx cash MINUS the Bankroll Amount, to
Sellers by immediately available funds pursuant to the terms of the Operating
Agreement of VSI and Article 4, Section 4.1(b) of the Articles of Incorporation
of VSI, all in the percentage allocation set forth on Section 1.06 of the
Disclosure Letter, and (ii) Purchaser shall pay to Sellers the Bankroll Amount
PLUS the Reimbursements plus $5,000 in xxxxx cash by (A) making wire transfers
of the Bankroll Amount minus the Undeposited Net Win PLUS the Reimbursements
PLUS $5,000 in xxxxx cash MINUS $500,000 as of the Closing to the Sellers in the
percentage allocation set forth on Section 1.06 of the Disclosure Letter, (B)
writing and delivering a check to each of the Sellers for the Seller's share of
the Undeposited Net Win in the percentage allocation set forth in Section 1.06
of the Disclosure Letter, and (C) making a wire transfer of $500,000 as of the
Closing to Xxxxx & Xxxxx, as escrow agent for the Sellers (the "ESCROW AGENT"),
to be held by the Escrow Agent pursuant to the terms of this Section 1.06
(collectively, the "DIVIDEND").
(c) The Escrow Agent shall retain the $500,000 for sixty days from the
Closing Date in order to discharge any Indebtedness that was outstanding as of
10:00 A.M. on the Closing Date that was not discharged as of the Closing Date.
LVI shall instruct the Escrow Agent, on the date that is sixty days from the
Closing Date, to disburse any funds remaining in the escrow account to the
Sellers by check or immediately available funds pursuant to the terms of the
Operating Agreement of VSI and Article 4, Section 4.1(b) of
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the Articles of Incorporation of VSI, all in the percentage allocation set forth
on Section 1.06 of the Disclosure Letter.
(d) In the event of any dispute between Sellers on the one hand and
Purchaser on the other as to how the funds deposited into escrow should be
disbursed, the Escrow Agent may retain all disputed funds until resolution of
the dispute by the Parties or pursuant to Section 10.14. Seller, Purchasers and
Escrow Agent will execute the Escrow Agreement substantially in the form
attached hereto as Exhibit "B".
SECTION 1.07 RIGHT TO REVENUES; RISK OF LOSS. Purchaser will be
entitled to all VSI collections and will be subject to all payment and
disbursement obligations and liabilities of VSI arising on and after 10:00 A.M.
on the Closing Date regardless of the actual time of the Closing.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each of the representations and warranties set forth herein shall be
separate and independent, and, except as expressly provided herein, shall not be
limited by reference to any other representation or warranty or anything else in
this Agreement. Sellers individually represent and warrant, as provided for
herein, to Purchaser as follows:
SECTION 2.01 OWNERSHIP. Each Seller is, and at the Closing Date will
be, the sole record and beneficial owner of the number of shares of the Stock,
which are represented by the certificates bearing the numbers shown opposite
their names in Section 2.05. Each Seller has and at the Closing Date will have
good and marketable title to the shares of Stock registered in his or its name
and the absolute right to deliver such shares of Stock in accordance with the
terms of this Agreement, free and clear of all Encumbrances. The Stock is duly
authorized, validly issued, fully paid and nonassessable, and was issued by VSI
in compliance with federal and state securities laws. The transfer of the Stock
to Purchaser in accordance with the terms of this Agreement will transfer good
and marketable title to the Stock to Purchaser free and clear of all
Encumbrances, restrictions, and claims of every kind.
SECTION 2.02 AUTHORITY; Enforceability. Each Seller has the full legal
right, power and authority to execute, deliver and perform this Agreement and
the other documents, instruments and agreements contemplated hereby
(collectively, the "TRANSACTION DOCUMENTS") to which any Seller is a party, to
perform Sellers' obligations, as applicable, hereunder and thereunder, each in
accordance with its respective terms, and to sell the Stock to Purchaser. Each
of the Transaction Documents to which any Seller is a party has been duly
authorized, executed and delivered by such Seller, or when executed will be duly
authorized, executed and delivered by such Seller and constitutes, or when
executed and delivered will constitute, a valid and legally binding obligation
of such Seller, enforceable against such Seller in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights generally and equitable principles which may limit the
availability of certain equitable
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remedies in certain instances.
SECTION 2.03 ORGANIZATION; AUTHORITY. VSI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Louisiana. VSI is duly qualified and in good standing as a foreign entity in all
jurisdictions in which the character of the properties owned or leased or the
nature of the activities conducted by it makes such qualification necessary.
Complete and correct copies of the Articles of Incorporation and By-Laws of VSI
and all amendments thereto are set forth on Section 2.03(a) of the Disclosure
Letter. VSI has all requisite power and authority to own or lease and operate
its properties and to carry on its business as such business is now conducted.
VSI was organized, incorporated and began conducting business in 1992, and,
except as disclosed on Section 2.03(b) of the Disclosure Letter, has been under
the same management and ownership since that time. Except as disclosed on
Section 2.03 of the Disclosure Letter, neither Sellers nor VSI has ever operated
the business conducted by VSI under a fictitious name.
SECTION 2.04 SUBSIDIARIES. VSI has no subsidiaries, owns or holds of
record and/or beneficially no shares of any class in the capital of any
corporations, and owns no legal and/or beneficial interests in any partnerships,
limited liability companies, business trusts or joint ventures or in any other
unincorporated trade or business enterprises.
SECTION 2.05 CAPITAL STOCK. The authorized capital stock of VSI
consists exclusively of five hundred ten (510) shares of Class A (non-voting)
common stock, no par value per share, and four hundred ninety (490) shares of
Class B (voting) common stock, no par value per share. All of the authorized
Stock has been issued, is outstanding and owned of record and beneficially by
Sellers in the following amounts:
SHAREHOLDER NO. OF SHARES CERTIFICATE NO.
----------- ------------- ---------------
Xxxxxx X. Xxxxxx 228.62 shares (Class A) 7
Xxxxx Xxxxxxxxx 140.69 shares (Class A) 5
T. Xxxxx Xxxxxx III 140.69 shares (Class A) 6
Louisiana Ventures, Inc. 490 shares (Class B) 2
All of the authorized Class B shares are issued and outstanding and are owned by
LVI which is a subsidiary of Foreign Gaming Ventures, Inc., a Nevada corporation
which is a subsidiary of Alliance Gaming Corporation ("Alliance"). LVI
represents and warrants that it has not created or granted, and there are no
existing Encumbrances, options, warrants, calls, purchase rights, contracts,
commitments, equities, claims, demands or other agreements or rights with
respect to the capital stock of VSI owned by LVI, except as disclosed on Section
2.05 of the Disclosure Letter and there are no convertible or exchangeable
securities of VSI outstanding which, upon conversion or exchange, would require
the issuance of any shares of capital stock or other securities of VSI. The
other Sellers represent and warrant that they have not created or granted, and
there are no existing Encumbrances, options, warrants, calls, purchase rights,
contracts, commitments, equities, claims, demands or other agreements or rights
with respect to the capital stock of VSI held by such Sellers.
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SECTION 2.06 TITLE TO STOCK, LIENS, ETC. Sellers have, and as of the
consummation of the Closing, Purchaser will have, sole record and beneficial
ownership of all of the Stock, free and clear of any mortgage, lien, pledge,
charge, security interest, Encumbrance, title retention agreement, option,
equity or other adverse claim thereto.
SECTION 2.07 CONSENTS AND APPROVALS; CONFLICTS. Except as set forth in
Section 2.07 of the Disclosure Letter, no filing with or notice to, and no
permit, authorization, consent or approval of, any Governmental Entity is
necessary for the execution and delivery by Sellers of the Transaction Documents
or the consummation by Sellers of the transactions contemplated hereby. The
execution and delivery of the Transaction Documents by Sellers and the
consummation of the transactions contemplated hereby and thereby will not (a)
violate or conflict with any provision of the Articles of Incorporation or
By-Laws of VSI, each as amended to date; or (b) constitute a violation of, or be
in conflict with, or constitute or create a default under, give rise to a right
of termination of, or accelerate the performance required by, or result in the
creation or imposition of any Encumbrance upon any property of VSI pursuant to
(i) any agreement or instrument to which VSI is a party or by which any of its
properties is bound, or (ii) any statute, judgment, decree, order, regulation or
rule of any court or governmental or regulatory authority. Neither the execution
and delivery of this Agreement by Sellers, nor the consummation of the
transactions contemplated hereby, will conflict with or result in a breach of,
or give rise to a right of termination of, or accelerate the performance
required by, any terms of any court order, consent decree, note, bond, mortgage,
indenture, deed of trust, Lease, license, loan agreement, the articles of
incorporation or bylaws of LVI or other instrument or obligation binding on
Sellers or VSI or to which any Seller or VSI is subject or a party, or
constitute a default thereunder, or result in the creation of any Encumbrance
upon any of the assets of Sellers or VSI, except for any such conflict, breach,
termination, acceleration, default or Encumbrance which would not have a
Material Adverse Effect on (a) the business, assets or financial condition of
VSI or (b) Sellers' ability to consummate any of the transactions contemplated
hereby.
SECTION 2.08 FINANCIAL STATEMENTS. LVI will deliver the following
financial statements (the "FINANCIAL STATEMENTS") to Purchaser, and there are
attached as Section 2.08 of the Disclosure Letter the audited balance sheets of
VSI as of June 30, 2004 (such balance sheet as of being referred to herein as
the "BALANCE SHEET"), and the unaudited balance sheet of VSI as of August 31,
2004 (such balance sheet as of being referred to herein as the "INTERIM BALANCE
SHEET"), the related audited statements of income and cash flows of VSI for the
fiscal year ended June 30, 2004 and the unaudited statements of income and cash
flows for the period ended August 31, 2004. LVI represents and warrants that
each of the Financial Statements has been prepared in accordance with GAAP,
consistently applied, is true and correct and has been prepared consistently
with VSI's past practices; each such balance sheet fairly and accurately
presents the financial condition of VSI as of its respective date; and such
statements of income and cash flows fairly and accurately present the results of
operations for the periods covered thereby.
SECTION 2.09 ABSENCE OF CERTAIN CHANGES. LVI represents and warrants
that
9
except as set forth on Section 2.09 of the Disclosure Letter, since August 31,
2004, VSI has carried on its business only in the ordinary course, and there has
not been (a) any change in the assets, liabilities, sales, income or business of
VSI or in its relationships with suppliers, customers or lessors, other than
changes which were both in the ordinary course of business and have not been,
either in any case or in the aggregate, materially adverse; (b) any capital
expenditure, capital improvement or capital addition by VSI which in the
aggregate exceeds $25,000, or any other acquisition or disposition by VSI of any
asset or property other than in the ordinary course of business; (c) any damage,
destruction or loss, whether or not covered by insurance, materially and
adversely affecting, either in any case or in the aggregate, the property or
business of VSI; (d) any declaration, setting aside or payment of any dividend
or any other distributions in respect of the shares of the capital stock of VSI;
(e) any issuance of any shares or option or right to acquire shares of capital
stock of VSI or any direct or indirect redemption, purchase or other acquisition
of any of the Stock; (f) any increase in the compensation, pension or other
benefits payable or to become payable by VSI to any of its officers or
employees, or any bonus payments or arrangements made to or with any of them
(other than pursuant to the terms of any existing written agreement or plan of
which the Purchaser has been supplied complete and correct copies); (g) any
forgiveness or cancellation of any debt or claim by VSI or any waiver of any
right of material value other than compromises of accounts receivable in the
ordinary course of business; (h) any entry by VSI into any contract or
transaction other than in the ordinary course of business; (i) any incurrence by
VSI of any obligations or liabilities, whether absolute, accrued, contingent or
otherwise (including, without limitation, liabilities as guarantor or otherwise
with respect to obligations of others), other than obligations and liabilities
incurred in the ordinary course of business; (j) any mortgage, pledge, lien,
lease, security interest or other charge or encumbrance on any of the assets,
tangible or intangible, of VSI; (k) any discharge or satisfaction by VSI of any
lien or encumbrance, or payment by VSI of any obligation or liability (fixed or
contingent) other than (i) current liabilities included in the Balance Sheet and
(ii) current liabilities incurred since the date of the Balance Sheet in the
ordinary course of business, or (l) any amendment to VSI's articles of
incorporation or bylaws.
SECTION 2.10 LEGAL PROCEEDINGS; ETC. LVI represents and warrants that
except as set forth in Section 2.10 of the Disclosure Letter, no action, suit,
proceeding or investigation is pending or, to LVI's Knowledge, threatened
against VSI or any Seller, nor is there any basis therefor known to LVI. The
other Sellers represent, to such Seller's Knowledge, there is no action, suit,
proceeding or investigation pending or threatened against any Seller, nor is
there any basis therefor known to such Sellers.
SECTION 2.11 PERMITS; COMPLIANCE WITH LAWS. To the Knowledge of each
Seller, (a) VSI has all necessary permits, licenses and governmental
authorizations (collectively the "LICENSES") for the lease, ownership, use or
operations of its properties and assets and the carrying on of the business of
VSI as presently conducted, (b) VSI has conducted its business in substantial
compliance with and is in substantial compliance with all Applicable Laws,
regulations, orders, permits, judgments, ordinances or decrees of all
Governmental Entities having jurisdiction over VSI and/or its business
operations, (c) there are no inquiries, pending or threatened, by any
Governmental Entity
10
that would have a Material Adverse Effect, (d) there will be no Material Adverse
Effect as a result of the transactions hereunder or contemplated hereby, and (e)
true and complete copies of such licenses have previously been delivered to
Purchaser.
SECTION 2.12 TITLE TO PROPERTY; CONDITION OF PROPERTY; REAL PROPERTY
LEASES, ETC. LVI represents and warrants that:
(a) Except as set forth in Section 2.12(a) of the Disclosure Letter,
VSI has good and marketable title to all of its properties and assets,
including, without limitation, all those reflected in the Balance Sheet (except
for properties or assets sold or otherwise disposed of in the ordinary course of
business since the date of the Balance Sheet), all free and clear of all liens,
pledges, charges, security interests, Encumbrances or title retention agreements
of any kind or nature.
(b) Section 2.12(b) of the Disclosure Letter sets forth a complete and
correct list of the following personal property of VSI: machinery, tools,
computers and related software, office equipment, furnishings, vehicles,
inventory, spare parts, any fixtures attached to real property leased to VSI,
and any other tangible personal property (collectively, the "TANGIBLE ASSETs").
All of the Tangible Assets are available for use in VSI's business except for
those items being serviced in the ordinary course of business. All of the
Tangible Assets and the state of maintenance thereof are in compliance with all
Applicable Laws, statutes, ordinances, rules and regulations. The Tangible
Assets include all assets and properties that are necessary to conduct VSI's
business as it is now being conducted. The spare parts are usable in the
ordinary course of business and the value of the spare parts included in the
Tangible Assets at the close of business on the Closing Date shall be at least
as much as the value of the spare parts shown on Section 2.12(b) of the
Disclosure Letter.
(c) Section 2.12(c) of the Disclosure Letter sets forth by location a
complete listing by serial number of all video poker gaming devices owned by VSI
(the "Devices"). All of the Devices are owned by VSI free and clear of any
Encumbrance, and are duly licensed and registered with the State of Louisiana.
(d) Section 2.12(d) of the Disclosure Letter sets forth a complete and
correct description of all Leases, including but not limited to, all real
property leased to VSI and all leases of real property to which VSI is a party.
Complete and correct copies of all such Leases have been delivered to Purchaser.
Each such Lease is valid and subsisting and no event or condition exists which
constitutes, or after notice or lapse of time or both would constitute, a
default thereunder. The leasehold interests of VSI are subject to no lien or
other encumbrance, and VSI is in quiet possession of the properties covered by
such Leases. Neither any Seller nor VSI has received any notice that either the
whole or any portion of such leased real property is to be condemned,
requisitioned or otherwise taken by any public authority. Neither any Seller nor
VSI has any Knowledge of any public improvements that may result in special
assessments against or otherwise affect any of such leased real property. VSI
does not presently own and has never owned any real property.
11
SECTION 2.13 ENVIRONMENTAL MATTERS. LVI and, to their Knowledge, other
Sellers represent and warrant that except as set forth on Section 2.13 of the
Disclosure Letter:
(a) VSI is not in violation of nor is there any alleged violation of
any judgment, decree, order, law, license, rule or regulation pertaining to
environmental matters, including without limitation those arising under any
federal, state or local statute, regulation, ordinance, order or decree relating
to health, safety or the environment (hereinafter "ENVIRONMENTAL LAWS");
(b) Neither Sellers nor VSI has received notice from any third party,
including without limitation any federal, state or local governmental authority,
(i) that VSI has been identified by the United States Environmental Protection
Agency as a potentially responsible party under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as amended (CERCLA), with
respect to a site listed on the National Priorities List, 40 C.F.R. Part 000
Xxxxxxxx X (1986); (ii) that any hazardous waste, as defined by 42 U.S.C.
ss.6903(5), any hazardous substance as defined by 42 U.S.C. ss.9601(14), any
pollutant or contaminant as defined by 42 U.S.C. ss.9601(33) or any toxic
substance, oil or hazardous material or other chemical or substance (including,
without limitation, asbestos in any form, urea formaldehyde or polychlorinated
biphenyls) regulated by any Environmental Laws ("HAZARDOUS SUBSTANCES") which
VSI has generated, transported or disposed of has been found at any site at
which a federal, state or local agency or other third party has conducted or has
ordered that VSI conduct a remedial investigation, removal or other response
action pursuant to any Environmental Law; or (iii) that VSI is or shall be a
named party to any claim, action, cause of action, complaint, (contingent or
otherwise) legal or administrative proceeding arising out of any third party's
incurrence of costs, expenses, losses or damages of any kind whatsoever in
connection with the release of Hazardous Substances;
(c) (i) No portion of any real property, leased or operated by VSI has
been used by VSI for the handling, manufacturing, processing, storage or
disposal of Hazardous Substances except in accordance with applicable
Environmental Laws; (ii) in the course of any activities conducted by VSI, no
Hazardous Substances have been generated or are being used on any real property
leased or operated by VSI except in accordance with applicable Environmental
Laws; (iii) all real properties leased or operated by VSI are free from
contamination of every kind through activities of VSI, including without
limitation, groundwater, surface water, soil, sediment and air contamination,
and such properties do not contain any Hazardous Substances; and (iv) there have
been no releases (i.e., any past or present releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
disposing or dumping) or threatened releases of Hazardous Substances on, upon,
into or from any real property leased or operated by VSI except in accordance
with applicable Environmental Laws.
SECTION 2.14 INSURANCE. LVI represents and warrants that Section 2.14
of the Disclosure Letter lists all policies of fire, liability, workmen's
compensation, life, property and casualty and other insurance owned or held by
VSI. Such policies of insurance are maintained, to the best of Sellers'
Knowledge, with financially sound and reputable
12
insurance companies, funds or underwriters, and are of the kinds and cover such
risks and are in such amounts and with such deductibles and exclusions as are
consistent with prudent business practice. All such policies (a) are in full
force and effect, (b) are sufficient for compliance by VSI with all requirements
of law and all agreements to which VSI is a party, (c) provide that they will
remain in full force and effect until the Closing Date. VSI is not in default
with respect to its obligations under any of such insurance policies and has not
received any notification of cancellation of any such insurance policies. No
insurance carrier has denied coverage for any claim asserted by VSI in the past
five years, nor has any insurance carrier declined to provide any coverage to
VSI in the past five years.
SECTION 2.15 CONTRACTS. LVI represents and warrants that Section 2.15
of the Disclosure Letter sets forth a complete and accurate list of (i) all
material lease, maintenance, repair and service contracts and agreements of VSI
with customers (collectively, the "CUSTOMER CONTRACTS"), and (ii) all other
contracts to which VSI is a party or by or to which it or any of its assets or
properties is bound or subject (collectively, the "OTHER CONTRACTS" and,
collectively with the Customer Contracts, the "CONTRACTS"). As used in this
Section 2.15, the word "CONTRACT" means and includes every material agreement or
understanding of any kind, written or oral, which is legally enforceable by or
against VSI, and specifically includes (a) equipment leases; (b) telephone book
listing agreements; (c) non-competition, non-solicitation or non-disclosure
agreements; (d) manufacturers' warranties on tangible property; (e) cost sheets
and bills of materials; (f) contracts and other agreements with any current or
former officer, director, employee, consultant or shareholder or any
partnership, corporation, joint venture or any other entity in which any such
Person has an interest; (g) bonds or other security agreements provided by any
party in connection with the business of VSI; (h) contracts and other agreements
for the sale of any assets or properties of VSI other than in the ordinary
course of business or for the grant to any Person of any preferential rights to
purchase any of such assets or properties; (i) contracts or other agreements
under which VSI agrees to indemnify any Person or to share Tax liability of any
Person; (j) any contracts or other agreements with regard to Indebtedness; (k)
contract to provide vision and dental coverage for employees of VSI; or (l) any
other contract or other agreement whether or not made in the ordinary course of
business. Sellers have delivered to Purchaser true, correct and complete copies
of all of the Contracts, together with all modifications and supplements
thereto. Each of the contracts listed on Section 2.15 of the Disclosure Letter
or any of the other Sections of the Disclosure Letter is in full force and
effect, VSI is not in breach of any of the provisions of any such contract, and,
to the Knowledge of Sellers, no other party to any such contract is in default
thereunder, nor does any event or condition exist which with notice or the
passage of time or both would constitute a default thereunder. VSI has in all
material respects performed all obligations required to be performed by it to
date under each such contract. No approval or consent of any Person is needed in
order that the contracts listed on Section 2.15 of the Disclosure Letter and
other Sections of the Disclosure Letter continue in full force and effect
following the consummation of the transactions contemplated by this Agreement,
and no such contract includes any provision the effect of which may be to
enlarge or accelerate any obligations of VSI thereunder or give additional
rights to any other party thereto or will in any other
13
way be affected by, or terminate or lapse by reason of, the transactions
contemplated by this Agreement. VSI is not a party to any franchise, license,
distributor or other similar type of contract or agreement. VSI is not party to
any contract or instrument nor subject to any restriction which now has or, to
the best of Sellers' Knowledge may have, an adverse effect, financial or
otherwise, upon VSI or its assets.
SECTION 2.16 EMPLOYEES. LVI represents and warrants that Section 2.16
of the Disclosure Letter sets forth the name, title and current annual salary
and other compensation payable by VSI to each employee of VSI.
SECTION 2.17 EMPLOYEE BENEFIT PLANS. LVI represents and warrants that:
(a) except for the arrangements set forth on Section 2.17(a) of the
Disclosure Letter, VSI does not now maintain or contribute to, and has not in
the current or preceding six (6) calendar years maintained or contributed to,
any employee benefit plan or pension, profit-sharing, deferred compensation,
bonus, stock option, share appreciation right, severance, group or individual
health, dental, medical, life insurance, survivor benefit, or similar plan,
agreement, understanding, practice, policy or arrangement, whether formal or
informal, for the benefit of any director, officer, consultant or employee,
whether active or terminated, of VSI. Each of the arrangements set forth on
Section 2.17(a) of the Disclosure Letter is hereinafter referred to as an
"EMPLOYEE BENEFIT PLAN", except that any such arrangement which is a
multi-employer plan shall be treated as an Employee Benefit Plan only for
purposes of Sections 2.17(d)(iv), (vi) and (viii) and 2.17(g) below.
(b) LVI has heretofore delivered to Purchaser true, correct and
complete copies of each Employee Benefit Plan of VSI, and with respect to each
such Employee Benefit Plan (i) any associated trust, custodial, insurance or
service agreements, (ii) any annual report, actuarial report, or disclosure
materials (including specifically any summary plan descriptions) submitted to
any governmental agency or distributed to participants or beneficiaries
thereunder in the current or any of the six (6) preceding calendar years and
(iii) the most recently received IRS determination letters and any governmental
advisory opinions or rulings.
(c) Each Employee Benefit Plan is and has heretofore been maintained
and operated in substantial compliance with the terms of such Employee Benefit
Plan and with the requirements prescribed (whether as a matter of substantive
law or as necessary to secure favorable tax treatment) by any and all statutes,
governmental or court orders, or governmental rules or regulations in effect
from time to time, including but not limited to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and the Internal Revenue Code of
1986, as amended ("CODE") and applicable to such Employee Benefit Plan. Each
Employee Benefit Plan which is intended to qualify under Section 401(a) of the
Code has received a favorable determination letter from the IRS and nothing has
occurred since the date of the last such determination which has resulted or is
likely to result in the revocation of such determination. VSI is in compliance
with the continuation coverage provisions of Part 6 of Title I of ERISA and
Section 4980B of the Code.
14
(d) Except as set forth on Section 2.17(d) of the Disclosure Letter,
(i) there is no pending or threatened legal action,
proceeding or investigation, other than routine
claims for benefits, concerning any Employee Benefit
Plan or, to the best Knowledge of Sellers, any
fiduciary or service provider thereof and, to the
best Knowledge of Sellers, there is no basis for any
such legal action, proceeding or investigation;
(ii) no liability (contingent or otherwise) to the Pension
Benefit Guaranty Corporation ("PBGC") or any
multi-employer plan has been incurred by either VSI
or any affiliate thereof;
(iii) no reportable event, or event or condition which
presents a material risk of termination by the PBGC,
has occurred with respect to any Employee Benefit
Plan, or any retirement Employee Benefit Plan of an
affiliate of VSI, which is subject to Title IV of
ERISA;
(iv) no Employee Benefit Plan, nor to the best Knowledge
of LVI, any party in interest or fiduciary with
respect thereof, has engaged in a prohibited
transaction which could subject VSI directly or
indirectly to any material liability under Section
409 or 502(i) of ERISA or Section 4975 of the Code;
(v) no communication, report or disclosure has been made
which, at the time made, did not accurately reflect
the terms and operations of any Employee Benefit
Plan;
(vi) no Employee Benefit Plan provides welfare benefits
subsequent to termination of employment to employees
or their beneficiaries (except to the extent required
by applicable state insurance laws and Title I, Part
6 of ERISA) except as required to obtain favorable
tax treatment therefor; provided, however, that any
contribution required for such favorable tax
treatment for any period through the Closing Date
shall be considered part of the Indebtedness of VSI
as of the Closing which Purchasers are obligated to
discharge;
(vii) no benefits due under any Employee Benefit Plan have
been forfeited subject to the possibility of
reinstatement (which possibility would still exist at
or after Closing) except to the extent of immaterial
amounts as may be required under Section 411(a)(7)(C)
of the Code; and
(viii) VSI has not undertaken to maintain any Employee
Benefit Plan for any period of time and each such
Employee Benefit Plan is terminable with respect to
employees of VSI at the sole discretion of VSI
without vesting or acceleration of any benefits,
except vesting
15
required under Section 411(a)(3) of the Code.
(e) With respect to each Employee Benefit Plan for which a separate
fund of assets is maintained, full payment has been made of all amounts that VSI
is required, under the terms of each such Employee Benefit Plan, to have paid as
contributions to that Employee Benefit Plan as of the end of the most recently
ended plan year or plan quarter, if applicable, of that Employee Benefit Plan,
and no accumulated funding deficiency (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, exists with respect to any such
Employee Benefit Plan. Except as shown on Section 2.17(e) of the Disclosure
Letter, the current value of the assets of each such funded Employee Benefit
Plan, as of the end of the most recently ended plan year of that Employee
Benefit Plan equaled or exceeded the current value of all accrued benefits under
that Employee Benefit Plan; PROVIDED, HOWEVER, that any employer contributions
shown on Section 2.17(e) of the Disclosure Letter or otherwise required in order
to maintain the favorable tax qualification of such Employee Benefit Plan for
any plan year ending on or before the Closing Date or, in the case of a plan
year ending after the Closing Date, that portion of the plan year through the
Closing Date shall be considered part of the Indebtedness of VSI as of the
Closing which Purchasers are obligated to discharge unless such amounts have
been paid as of the Closing Date;
(f) The execution of this Agreement and the consummation of the
transactions contemplated hereby will not result in any payment (whether of
severance pay or otherwise) becoming due from any Employee Benefit Plan to any
current or former director, officer, consultant or employee of VSI or result in
the vesting (except as may be required by Section 411 of the Code), acceleration
of payment or increases in the amount of any benefit payable to or in respect of
any such current or former director, officer, consultant or employee.
(g) No Employee Benefit Plan is a multi-employer plan, and no Employee
Benefit Plan is subject to any funding standard under Section 302 of ERISA or
Section 412 of the Code.
(h) For purposes of this Section 2.17, "employee benefit plan",
"multi-employer plan", "party in interest", "fiduciary", "current value",
"accrued benefit", "reportable event" and "benefit liability" have the same
meaning assigned such terms under Sections 3, 4043(b) or 4001(a) of ERISA, and
"affiliate" means any entity which under Section 414 of the Code is treated as a
single employer with VSI or any entity which under Section 4001(a)(14) of ERISA
is treated as under common control with VSI.
SECTION 2.18 LABOR RELATIONS. LVI represents and warrants that, (a) VSI
is in compliance in all material respects, with all federal and state laws
respecting employment and employment practices, terms and conditions of
employment, wages and hours and nondiscrimination in employment, and is not
engaged in any unfair labor practice, (b) there is no charge pending or, to
LVI's Knowledge, threatened against VSI alleging unlawful discrimination in
employment practices before any court or agency and there is no charge of or
proceeding with regard to any unfair labor practice against VSI pending
16
before the National Labor Relations Board, (c) there is no labor strike,
dispute, slow-down or work stoppage actually pending or to LVI's Knowledge
threatened against or involving VSI, (d) none of the employees of VSI is covered
by any collective bargaining agreement, and no collective bargaining agreement
is currently being negotiated by VSI and (e) VSI has not experienced any work
stoppage during the last five years.
SECTION 2.19 POTENTIAL CONFLICTS OF INTEREST. Except as set forth on
Section 2.19 of the Disclosure Letter, no officer, director or stockholder of
VSI (a) owns, directly or indirectly, any interest in (excepting not more than
5% stock holdings for investment purposes in securities of publicly held and
traded companies) or is an officer, director, employee or consultant of any
Person which is a competitor, lessor, lessee, customer or supplier of VSI; (b)
owns, directly or indirectly, in whole or in part, any tangible or intangible
property which VSI is using or the use of which is necessary for the business of
VSI; or (c) has any cause of action or other claim whatsoever against, or owes
any amount to, VSI, except for claims in the ordinary course of business, such
as for accrued vacation pay, accrued benefits under Employee Benefit Plans and
similar matters and agreements.
SECTION 2.20 PATENTS, TRADEMARKS, ETC. LVI represents and warrants that
Section 2.20 of the Disclosure Letter hereto sets forth a complete and accurate
list of (a) all patents, trademarks, trade names and copyrights registered in
the name of VSI or used or proposed to be used by VSI, all applications
therefor, and all licenses (as licensee or licensor) and other agreements
relating thereto, and (b) all material written agreements relating to other
technology, know-how and processes which VSI is licensed or authorized by others
to use or which VSI has licensed or authorized for use by others. Except to the
extent set forth in Section 2.20 of the Disclosure Letter, VSI owns or has the
right to use all patents, trademarks, trade names and copyrights, and has the
right to use all technology, know-how and processes, used or necessary for the
ordinary course of business as presently conducted or proposed to be conducted,
and the consummation of the transactions contemplated hereby will not alter or
impair any such right. To LVI's Knowledge, (a) no claims have been asserted, and
no claims are pending, by any Person regarding the use of any such patents,
trademarks, trade names, copyrights, technology, know-how or processes, or
challenging or questioning the validity or effectiveness of any license or
agreement, and there is no basis for such claim and (b) the use by VSI of such
patents, trademarks, trade names, copyrights, technology, know-how or processes
in the ordinary course of business does not infringe on the rights of any
Person.
SECTION 2.21 ACCOUNTS RECEIVABLE. LVI represents and warrants that all
accounts and notes receivable reflected on the Interim Balance Sheet have arisen
in the ordinary course of business, represent valid obligations owing to VSI and
have been collected or are in line for collection the aggregate recorded amounts
thereof in accordance with their terms, net of the reserve for uncollected
accounts set forth on the Interim Balance Sheet.
SECTION 2.22 TAXES.
17
(a) VSI and VSI Group have filed all Tax Returns that they were
required to file. All such Tax Returns are true, correct and complete in all
material respects. All Taxes owed by VSI and/or the VSI Group (whether or not
shown on any Tax Return) have been paid. Neither VSI nor the VSI Group are
currently the beneficiaries of any extension of time within which to file any
Tax Return. No claims have ever been made by an authority in a jurisdiction
where VSI and or the VSI Group has not or does not file Tax Returns that they
may be subject to taxation by that jurisdiction. There are no security interests
or liens on any of the assets of either VSI or any member of the VSI Group that
arose in connections with the failure (or alleged failure) to pay any Tax.
(b) VSI and the VSI Group have withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.
(c) No director or officer (or employee responsible for Tax matters) of
any of VSI and the VSI Group expect any authority to assess any additional Taxes
for any period for which Tax Returns have been filed. There is no dispute or
claim concerning any Tax liability of VSI or the VSI Group either (A) claimed or
raised by any authority in writing or (b) as to which any of the directors and
officers (and employees responsible for Tax matters) of VSI or the VSI Group had
knowledge based upon personal contact with any agent of such authority. Section
2.22(c) of the Disclosure Letter lists all federal, state, local, and foreign
income Tax Returns filed with respect to VSI and the VSI Group for taxable
periods ended on or after January 1, 1998, indicates those Tax Returns that have
been audited, and indicates those Tax Returns that are the subject of audit.
Sellers have delivered to Buyer correct and complete copies of all federal
income Tax Returns, examination reports, and statements of deficiencies assessed
against or agreed to by any of VSI and the VSI Group since January 1, 1998.
(d) None of VSI and the VSI Group has waived any statues of limitations
in respect of Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency.
(e) Neither VSI nor the VSI Group has made any payments, if obligated
to make any payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be deductible
under Code ss. 280G. Neither VSI nor the VSI Group has been a United States real
property holding corporation within the meaning of Code ss. 897(c)(2) during the
applicable period specified in Code ss. 897(c)(1)(A)(ii). VSI and the VSI Group
have disclosed on their Federal Tax Return all positions taken therein that
could give rise to a substantial understatement of federal income Tax within the
meaning of Code ss. 6666. Neither VSI nor the VSI Group is a party to any Tax
allocation or sharing agreement. Neither VSI nor the VSI Group (i) has been a
member of an affiliated group filing a consolidated federal income Tax Return
(other than a group the common parent of which was the parent of the VSI Group)
or (ii) has any liability for the
18
Taxes of any person or entity (other than under Reg ss. 1.1502-6 or any similar
provision of state, local or foreign law), as transferee or successor, by
contract, or otherwise.
(f) Section 2.22(f) of the Disclosure Letter sets forth the following
information (with respect to each as of the most recent practicable date): (i)
the basis of each of VSI's assets; (ii) the amount of any net operating loss,
net capital loss, unused investment or other credit, unused foreign tax, or
excess charitable contribution allocable to VSI; and (iii) the amount of any
deferred gain or loss allocable to VSI or any member of the VSI Group arising
out of any deferred intercompany transactions.
(g) The unpaid Taxes of VSI and the VSI Group (i) did not, as of the
most recent fiscal month end, exceed the reserve for Tax liability (other than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the most recent balance sheet
(rather than in any notes thereto) and (ii) do not exceed that reserve as
adjusted for the passage of time through the Closing date in accordance with the
past custom and practice of VSI and the VSI Group.
SECTION 2.23 INDEBTEDNESS. LVI represents and warrants that (a) Section
2.23(a) of the Disclosure Letter sets forth a true, complete and correct list of
each of the creditors of VSI as of the date hereof and the amount due from VSI
to each creditor, (b) except for Indebtedness described on Section 2.23(a) of
the Disclosure Letter, VSI has no Indebtedness outstanding at the date hereof,
(c) VSI is not in material default with respect to any outstanding Indebtedness
or any instrument relating thereto and no such Indebtedness or any instrument or
agreement relating thereto purports to limit the issuance of any securities by
VSI or the operation of the business of VSI and (d) VSI will have no
Indebtedness outstanding as of 10:00 A.M. on the Closing Date. Complete and
correct copies of all instruments (including all amendments, supplements,
waivers and consents) relating to any Indebtedness of VSI have been furnished to
Purchaser by LVI.
SECTION 2.24 OFFICERS AND DIRECTORS, BANK ACCOUNTS, SIGNING AUTHORITY,
POWERS OF ATTORNEY. LVI represents and warrants that except as set forth on
Section 2.24(a) of the Disclosure Letter, VSI has no accounts or safe deposit
boxes in any bank and no Person has any power, whether singly or jointly, to
sign any checks on behalf of VSI, to withdraw any money or other property from
any bank, brokerage or other account of VSI or to act under any power of
attorney granted by VSI at any time for any purpose. LVI represents and warrants
that Section 2.24(b) of the Disclosure Letter also sets forth the names of (a)
all incumbent officers and directors of VSI, (b) all persons authorized to
borrow money or sign notes on behalf of VSI and (c) all persons holding credit
cards of VSI (and specifying the issuer of the card and the card number).
SECTION 2.25 MINUTE BOOKS, ETC. LVI represents and warrants that except
as set forth on Section 2.25 of the Disclosure Letter, the minute books of VSI
made available to
19
Purchaser for inspection accurately record therein all actions taken by the
Board of Directors and shareholders of VSI. The stock books of VSI made
available to Purchaser or inspection are true, correct and complete.
SECTION 2.26 BROKER. Sellers have not retained, utilized or been
represented by any broker, agent, finder or intermediary in connection with the
negotiation or consummation of the transactions contemplated by this Agreement.
SECTION 2.27 ACCURACY OF REPRESENTATIONS AND WARRANTIES. No
representation or warranty by Sellers in this Agreement or in any exhibit or
section to the Disclosure Letter contains or will contain any untrue statement
of a material fact.
SECTION 2.28 EFFECTIVENESS OF REPRESENTATIONS AND WARRANTIES. All of
the representations and warranties of Sellers in this Agreement shall be true in
all material respects at Closing Date and shall be deemed to have been made
again by Sellers on and as of the Closing Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Sellers that the statements in
this Article 3 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date.
SECTION 3.01 ORGANIZATION OF PURCHASER. Purchaser is a limited
liability company, validly existing and in good standing under the laws of the
State of Louisiana, having all requisite powers and authority to own its
property and to carry on its business as it is now being conducted.
SECTION 3.02 AUTHORITY; ENFORCEABILITY. Purchaser has the full legal
right, power and authority to execute, deliver and perform this Agreement and
the Transaction Documents to which Purchaser is a party, to perform all of
Purchaser's obligations hereunder and thereunder, each in accordance with its
respective terms. Each of the Transaction Documents to which Purchaser is a
party has been duly executed and delivered by Purchaser, or when executed will
be duly executed and delivered by Purchaser and constitutes, or when executed
and delivered will constitute a valid and legally binding obligation of
Purchaser, enforceable against Purchaser in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights generally and equitable principles which may limit the available of
certain equitable remedies in certain instances.
SECTION 3.03 CONSENTS AND APPROVALS; CONFLICTS. No filing with or
notice to, and no permit, authorization, consent or approval of, any
Governmental Entity is necessary for the execution and delivery by Purchaser of
this Agreement or the consummation by Purchaser of the transactions contemplated
hereby. Neither the execution and delivery of this Agreement by Purchaser, nor
the consummation of the
20
transactions contemplated hereby, will violate any of the provisions of the
Articles of Organization or Operating Agreement of Purchaser; or conflict with
or result in a breach of, or give rise to a right of termination of, or
accelerate the performance required by, any terms of any court order, consent
decree, note, bond, mortgage, indenture, deed of trust, Lease, license, loan
agreement or other instrument or obligation binding on Purchaser or to which
Purchaser is subject or a party, or constitute a default thereunder, or result
in the creation of any Encumbrance upon any of the assets of Purchaser, except
for any such conflict, breach, termination, acceleration, default or Encumbrance
which would not have a Material Adverse Effect on (a) the business, assets or
financial condition of Purchaser or (b) Purchaser's ability to consummate any of
the transactions contemplated hereby.
SECTION 3.04 INVESTMENT REPRESENTATION. Purchaser, together with its
attorneys, accountants and other advisors, possess such Knowledge and experience
in financial matters and in matters pertaining to video poker gaming as to be
able to evaluate the merits and risks of the purchase of the Stock from Sellers.
SECTION 3.05 NO REPRESENTATIONS AND WARRANTIES; CONDUCT OF DUE
DILIGENCE. Other than the express representations and warranties, covenants and
agreements made by Sellers in this Agreement and any of the exhibits and
schedules hereto, none of the Sellers, nor any person or entity acting by or on
behalf of any of the Sellers has made any representation, warranty, inducement,
promise, agreement, assurance or statement, oral or written, of any kind to
Purchaser in this Agreement or elsewhere, upon which Purchaser is relying in
entering into this Agreement and the transactions contemplated hereby. Purchaser
has conducted such investigation and inspection of the business, operations,
assets and liabilities, results of operations and financial condition of VSI as
Purchaser may have deemed necessary or appropriate for the purpose of entering
into this Agreement and the transactions contemplated hereby. In executing this
Agreement, Purchaser is relying only on its own investigation of VSI and the
accuracy of the express representations and warranties, covenants and agreements
made by Sellers in the Transaction Documents, and not on any other
representations, warranties, inducements, promises, agreements, assurances,
omissions or statements of any kind or nature.
SECTION 3.06 BROKERAGE FEES. No Person is entitled to any brokerage or
finder's fee or other commission from Purchaser in respect of this Agreement or
the transactions contemplated hereby.
SECTION 3.07 SECURITIES ACT REPRESENTATIONS. Purchaser is acquiring the
Stock for investment for its own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof in violation of
the Securities Act of 1933, as amended (the "SECURITIES ACT"). Purchaser does
not have any present intention of selling, granting any participation in, or
otherwise distributing any of the Stock otherwise than pursuant to an effective
registration statement under the Securities Act or in a transaction exempt from
the registration requirements under the Securities Act and applicable state
securities laws. Purchaser does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Stock.
21
SECTION 3.08 EFFECTIVENESS OF REPRESENTATIONS AND WARRANTIES. All of
the representations and warranties of Purchaser in this Agreement shall be true
in all respects on the Closing Date and shall be deemed to have been made again
by Purchaser on and as of the Closing Date.
ARTICLE 4
PRE-CLOSING COVENANTS
SECTION 4.01 LEGAL REQUIREMENTS. Subject to the conditions set forth in
Article 5 and to the other terms and provisions of this Agreement, each of the
Parties to this Agreement agrees to take, or cause to be taken, all reasonable
actions necessary to comply promptly with all legal requirements applicable to
it with respect to the transactions contemplated by this Agreement and will
promptly cooperate with and furnish information to each other in connection with
any such requirements imposed upon any of them. Purchaser and Sellers will take
all reasonable actions necessary to obtain, and will cooperate with each other
in obtaining, any consent, authorization, order or approval of, or any exemption
by, any Governmental Entity or other public or private party, required to be
obtained or made by it or the taking of any action contemplated by this
Agreement.
SECTION 4.02 ACCESS TO PROPERTIES AND RECORDS. Until the Closing Date,
Sellers shall cause VSI to allow Purchaser and its authorized representatives
reasonable access, during normal business hours and on reasonable notice, to
VSI's properties, offices, vehicles, equipment, inventory and other assets,
documents, files, books and records, contracts and other documents in order to
allow Purchaser a full opportunity to make such investigation and inspection as
it desires of VSI's business and assets. Sellers shall further cause VSI to use
reasonable efforts to cause the employees, counsel and regular independent
certified public accountants of VSI to be available upon reasonable notice to
answer questions of VSI's representatives concerning the business and affairs of
VSI, and shall further use reasonable efforts to cause them to make available
all relevant books and records in connection with such inspection and
examination, including without limitation, work papers for all audits and
reviews of financial statements of VSI. Purchaser shall be subject to
confidentiality provisions of Article 9.
SECTION 4.03 CONDUCT OF BUSINESS. LVI covenants and agrees that, from
and after the date of this Agreement and until the Closing, except as otherwise
specifically consented to or approved by Purchaser in writing:
(a) Carry on in Regular Course. Sellers shall cause VSI to maintain its
owned and leased properties in good operating condition and repair, and to make
all necessary renewals, additions and replacements thereto, to carry on its
business diligently and substantially in the same manner as heretofore and not
make or institute any unusual or novel methods of manufacture, purchase, sale,
lease, management, accounting or operation, and to maintain its net working
capital and stockholders' equity in a manner consistent with its operations
during the twelve-month period prior to the date hereof.
(b) No General Increases. Other than raises or bonuses granted to
employees
22
in connection with annual reviews conducted in accordance with past company
practices, Sellers shall not permit VSI to grant any general or uniform increase
in the rates of pay of employees of VSI, nor grant any general or uniform
increase in the benefits under any bonus or pension plan or other contract or
commitment to, for or with any employees; and VSI shall not increase the
compensation payable or to become payable to officers, key salaried employees or
agents, or increase any bonus, insurance, pension or other benefit plan, payment
or arrangement made to, for or with any such officers, key salaried employees or
agents.
(c) No Dividends, Issuances, Repurchases, etc. Except as set forth on
Section 4.03(c) of the Disclosure Letter or as otherwise expressly provided in
this Agreement or the Disclosure Letter hereto, Sellers shall not permit VSI to
declare or pay any dividends (whether in cash, shares of stock or otherwise) on,
or make any other distribution in respect of, any shares of its capital stock,
or issue, purchase, redeem or acquire for value any shares of its capital stock
or any options or other rights related thereto.
(d) Contracts and Commitments. Sellers shall not permit VSI to enter
into any contract or commitment or engage in any transaction not in the usual
and ordinary course of business or not consistent with the customary business
practices of VSI.
(e) Purchase and Sale of Assets. Sellers shall not permit VSI to
purchase any capital asset with a market value in excess of $5,000, or any
capital assets of market value aggregating in excess of $10,000 unless done so
in the ordinary course of business. Sellers shall not permit VSI to sell or
otherwise dispose of any capital asset.
(f) Insurance. Sellers shall cause VSI, to the best Knowledge of
Sellers, to maintain up until the Closing Date with financially sound and
reputable insurance companies, funds or underwriters, adequate insurance
(including without limitation the insurance described on Section 2.14 of the
Disclosure Letter) of the kinds, covering such risks and in such amounts and
with such deductibles and exclusions as are consistent with prudent business
practice.
(g) Preservation of Organization. Sellers shall cause VSI to use all
reasonable efforts to preserve its business organization intact, and to preserve
for Purchaser the present relationships of VSI's suppliers and customers and
others having business relations with VSI.
(h) No Default. Sellers shall not permit VSI to do any act or omit to
do any act, or permit any act or omission to act, which will cause a material
breach of any contract, commitment or obligation of VSI or which might
jeopardize any of the Licenses.
(i) Compliance with Laws. Sellers shall cause VSI to comply with all
laws, regulations and orders applicable with respect to its business.
(j) Advice of Change. Sellers will promptly advise Purchaser in writing
of any Material Adverse Effect.
23
(k) No Shopping. Sellers will not, prior to the Closing Date or
Termination of this Agreement pursuant to Section 7.01, and will not permit any
of their respective Affiliates or VSI to, negotiate for, solicit or enter into
any agreement with respect to the sale or transfer of any shares of Stock or any
substantial portion of the assets of VSI or any merger or other business
combination of VSI to or with any Person other than Purchaser.
SECTION 4.04 PUBLIC STATEMENTS. Prior to the Closing Date, none of the
Parties to this Agreement shall, and each party shall use all reasonable efforts
so that none of its or his advisors, officers, directors or employees shall,
except with the prior written consent of the other Parties, publicize, announce
or describe to any third person, except their respective advisors and employees,
the execution or terms of this Agreement, the Parties hereto or the transactions
contemplated hereby, except as required by law, applicable gaming authorities,
the rules of the New York Stock Exchange, the Nasdaq Stock Market, the rules and
regulations of the SEC, or as required pursuant to this Agreement to obtain the
consent of such third person.
ARTICLE 5
CLOSING CONDITIONS
SECTION 5.01 CONDITIONS APPLICABLE TO ALL PARTIES. The respective
obligations of each party to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction or, where permissible, waiver by
such party of the following conditions at or prior to the Closing Date:
(a) No statute, rule, regulation, executive order, decree, preliminary
or permanent injunction or restraining order shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or other
Governmental Entity which prohibits or restricts the consummation of the
transactions contemplated by this Agreement, and no action, suit, claim or
proceeding by a state or federal Governmental Entity before any court or other
Governmental Entity shall have been commenced and be pending which seeks to
prohibit or restrict the consummation of the transactions contemplated by this
Agreement.
(b) The transactions under the Asset Purchase Agreement entered into
August 31, 2004 between Xxxxxxxxx Xxxxx Incorporated and Fair Grounds
Corporation, as amended, shall have closed; provided, however, that the
obligations of Purchaser to consummate the transaction contemplated by this
Agreement shall not be subject to this condition to the extent that such
transaction does not close based on any action of Purchaser which constitutes a
breach of that agreement.
(c) The Parties shall have agreed upon and executed a Flow of Funds
Memorandum that details the payment instructions and wiring information for all
of the payments due pursuant to Section 1.03 and Section 1.06.
SECTION 5.02 CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations of
Purchaser to consummate the transactions contemplated by this Agreement are
subject
24
to the satisfaction of the following conditions unless waived by Purchaser:
(a) The representations and warranties of Sellers, as set forth in this
Agreement, shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though made on and as of the
Closing Date, except as otherwise contemplated by this Agreement, and Sellers
shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date,
including the delivery of all closing items for the benefit of Purchaser.
(b) All consents and approvals of third parties necessary for the
consummation of the transactions contemplated by this Agreement shall have been
obtained on reasonable commercial terms and conditions. Sellers shall obtain all
necessary permits, authorizations, consents and approvals required by
Governmental Entities prior to the Closing Date, other than permits, authorized
consents and approvals, the lack of which will not have a Material Adverse
Effect.
(c) There shall not have been any material damage to or loss or
destruction of any properties or assets owned or leased by VSI that would cause
a Material Adverse Effect.
(d) There shall be no mortgages, unsatisfied judgments, or pending
litigation with any claim for injunctive relief or for damages in excess of
$10,000 filed against VSI and there shall be no mortgages or liens against the
Stock.
(e) LVI shall have delivered to Purchaser an accurate, complete and
up-to-date aging of all of the accounts receivable of VSI which existed as of a
date that is not more than two days prior to the Closing Date.
(f) All corporate and other approvals required to be obtained by
Sellers in connection with the transactions contemplated by the Transaction
Documents and the form and substance of all certificates and other documents
delivered hereunder shall be reasonably satisfactory in form and substance to
Purchaser.
(g) All of the directors and officers of VSI shall have resigned their
positions with VSI effective as of the Closing other than Xxxx Xxxxxxxxx, and
prior thereto shall have executed appropriate releases of VSI and such
appropriate documents with respect to the transfer or establishment of bank
accounts, signing authority, etc., as Purchaser shall have reasonably requested.
(h) Sellers shall have delivered to Purchaser:
(i) a Certificate of Good Standing, issued by the
Secretary of State of the State of Louisiana
evidencing VSI's corporate good standing in such
state;
(ii) a copy of the Articles of Incorporation and By-laws
of VSI (each as
25
amended to date) and an incumbency certificate
listing the officers and directors of VSI, each duly
certified by an officer of VSI;
(iii) the minute books, stock certificate and transfer
books, corporate seal and other corporate records of
VSI;
(iv) a consent from the spouse of each individual Seller,
duly executed and in the form of Exhibit "G" (the
"SPOUSAL CONSENT");
(v) all keys and authorizations for transfer of VSI's
post office boxes;
(vi) all funds required to be delivered or paid by Sellers
at the Closing; and
(vii) a certificate of a duly authorized officer of LVI,
dated as of the Closing Date, certifying as to the
incumbency of any person executing this Agreement or
any certificate or other document delivered in
connection with this Agreement on behalf of LVI and
certifying such other matters as Purchaser reasonably
requests.
(i) Sellers shall have delivered to Purchaser in writing, at and as of
the Closing, a certificate duly executed by Sellers, in form and substance
reasonably satisfactory to Purchaser and Purchaser's counsel, certifying that
the conditions in each of Sections 5.02(a) - (h) have been satisfied.
SECTION 5.03 CONDITIONS TO OBLIGATIONS OF SELLERS. The obligations of
Sellers to consummate the transactions contemplated by this Agreement are
subject to the satisfaction of the following conditions unless waived by all
Sellers:
(a) The representations and warranties of Purchaser as set forth in
this Agreement shall be true and correct in all material respects as of the date
of this Agreement and as of the Closing Date as though made on and as of the
Closing Date, except as otherwise contemplated by this Agreement, and Purchaser
shall have performed in all material respects all obligations required to be
performed by it in this Agreement at or prior to the Closing Date, including the
delivery of all closing items for the benefit of Sellers.
(b) Sellers shall have received a certificate of a duly authorized
officer of Purchaser, dated as of the Closing Date, certifying as to the
incumbency of any person executing this Agreement or any certificate or other
document delivered in connection with this Agreement and certifying such other
matters as Sellers shall reasonably request.
(c) Purchaser shall have paid (i) the Sellers the Purchase Price
pursuant to the percentages and wire instructions set forth on Section 1.02 of
the Disclosure Letter, (ii) the Sellers the Bankroll Amount PLUS the
Reimbursements PLUS $5,000 in xxxxx cash by (A) making wire transfers of the
Bankroll Amount MINUS the Undeposited Net Win PLUS the Reimbursements PLUS
$5,000 in xxxxx cash MINUS $500,000 as of the Closing to the
26
Sellers in the percentage allocation set forth on Section 1.06 of the Disclosure
Letter, (B) writing and delivering a check to each of the Sellers for writing
and delivering a check to each of the Sellers for the Seller's share of the
Undeposited Net Win in the percentage allocation set forth in Section 1.06 of
the Disclosure Letter, and (C) making a wire transfer of $500,000 as of the
Closing to the Escrow Agent.
(d) All corporate and other approvals required to be obtained by
Purchaser in connection with the transactions contemplated by the Transaction
Documents and the form of all certificates and other documents delivered
hereunder shall be reasonably satisfactory to LVI.
(e) The suit entitled Fair Grounds Corporation and Finish Line
Management Corp. v. Video Services, Inc. in U.S. Bankruptcy Court, Eastern
District of Louisiana, shall have been dismissed with prejudice.
(f) Purchaser shall have delivered to Sellers, in writing, at and as of
the Closing, a certificate duly executed by Purchaser, in form and substance
reasonably satisfactory to Sellers and Sellers' counsel, certifying that the
condition in each of Sections 5.03 (a) - (e) have been satisfied.
ARTICLE 6
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing Date:
SECTION 6.01 GENERAL. In case, at any time after the Closing Date, any
further action is necessary to carry out the purposes of this Agreement
(specifically but without limitation those matters required to satisfy Section
5.01), each of the Parties will take such further action as any other party
reasonably may request.
SECTION 6.02 EMPLOYEE RETENTION.
(a) Purchaser may, in its discretion, offer employment to any employees
of VSI, but it is under no obligation to offer employment to any employee of
VSI. Sellers shall be responsible for all payroll, vacation pay, sick pay,
severance pay and other benefits and obligations owed to or accrued to any
employee of VSI as of the Closing Date. Sellers shall use all reasonable efforts
to cause all employees of VSI to return to VSI all company property, including
credit cards. With respect to any employee of VSI who is not retained by
Purchaser, Sellers shall be responsible for any severance expenses and all other
contractually or legally imposed obligation and liabilities, including without
limitation any requirements, if applicable, of the Worker's Adjustment and
Retraining Notification Act of 1988 ("WARN ACT"). With respect to such
employees, Sellers will comply fully with the WARN Act and hold Purchaser
harmless against liabilities that arise out of its violation by Sellers. With
respect to any termination or layoff by Purchaser of employees after the Closing
Date, Purchaser will comply fully with the WARN Act and hold Sellers harmless
against liabilities that arise out of such termination by Purchaser.
27
(b) Notwithstanding anything in this Section 6.02 to the contrary, from
the Closing Date to the first anniversary of the Closing Date, Purchaser shall,
or shall cause VSI to, provide Xxxx Xxxxxxxxx and Xxxxxx Xxxxxxx, salaries and
wages at no less than the levels of such salaries and wages paid to them
immediately prior to the Closing Date, and bonus opportunities and employee
benefits that are the same as those provided to other similarly situated
employees of Purchaser and its affiliates.
SECTION 6.03 NON-COMPETITION; NON-SOLICITATION.
(a) For a period of two years from the Closing Date, Alliance and the
other Sellers shall not, and Alliance shall cause its subsidiaries, successors
and assigns, not to:
(i) carry on or engage in a business similar to that of
the Business in the Louisiana parishes of Orleans,
Jefferson, Lafourche, St. Xxxxxxx, St. Xxxxxxx, St.
Xxxx the Baptist, St. Tammany, and Terrebonne;
pursuant to this obligation, Alliance shall not
directly or indirectly own, operate, manage, control
or participate in the ownership, management,
operation or control, or be paid or employed by, or
otherwise become associated with, affiliated with or
provide assistance to, whether as a consultant,
independent contractor, shareholder, partner, agent,
associate, principal, representative or in any other
capacity, any business entity that directly or
indirectly competes with the Business; or
(ii) not directly or indirectly, for itself or on behalf
of any other person or entity, solicit or induce any
person, firm, corporation or other entity who is, was
or had been a customer of the Business, or any
prospective customer of the Business, to transfer or
divert their patronage or business from the Business
to any other entity engaged in a business that
directly or indirectly competes with the Business in
the Louisiana parishes of Orleans, Jefferson,
Lafourche, St. Xxxxxxx, St. Xxxxxxx, St. Xxxx the
Baptist, St. Tamman, and Terrebonne; or
(iii) solicit the employment of any employee of Purchaser
or, after the Closing, VSI, unless (A) such employee
resigns voluntarily (without any solicitation from
Alliance or any of its subsidiaries, successors and
assign), or (B) Purchaser consents in writing to such
solicitation, or (C) such employee is terminated by
his or her employer or the Purchaser after the
Closing Date.
(b) In the event any provision set forth in Section 6.03(a) of this
Agreement should be deemed unenforceable under controlling law, Alliance and the
Purchaser agree that such provision shall be reformed by the court to permit
enforcement of such provision to the maximum extent permitted under applicable
law. Alliance acknowledges that its breach or threatened or attempted breach of
its obligations under Section 6.03(a) of this Agreement will cause irreparable
harm to the Purchaser not compensable by monetary
28
damages alone and that the Purchaser shall be entitled, in addition to all other
available remedies, to temporary and permanent injunctive relief without being
required to prove irreparable harm or furnish any bond of other security.
(c) Notwithstanding anything in this Section 6.03 to the contrary,
nothing contained in this Agreement shall prohibit Alliance or any of its
subsidiaries, successors and assigns from:
(i) purchasing and holding as an investment not more than
5% of any class of the issued and outstanding and
publicly traded (on a recognized national or regional
securities exchange or in the over-the-counter
market) security of any corporation, partnership or
other business entity that conducts a business in
competition with the Business; or
(ii) the placement, distribution and advertising by
Alliance and its Affiliates through sales or leases
in the ordinary course of their business of gaming
devices, systems or games under participation
agreements or daily fee arrangements, or in wide area
progressive networks under authority of the Louisiana
licenses held by Alliance or its Affiliates, or other
activities of a distributor or manufacturer of gaming
devices or systems, so long as Alliance or its
Affiliates perform the customary activities of a
distributor or manufacturer of gaming devices or
systems or an operator of an inter-casino linked
system.
(d) Notwithstanding anything in this Section 6.03 to the contrary, the
provisions of this Section 6.03 shall not be deemed to be violated in the event
that a Change of Control of Alliance, causes Alliance or its successor entity to
compete with the Business as conducted on the Closing Date if (i) the Company or
entity causing the Change of Control was already competing with the Business
prior to such Change of Control and (ii) the consummation of such Change of
Control occurs at least six months after the Closing Date.
(e) Notwithstanding anything in this Section 6.03 to the contrary,
nothing contained in this Agreement shall prohibit the Sellers from purchasing
and holding as an investment not more than 5% of any class of the issued and
outstanding and publicly traded (on a recognized national or regional securities
exchange or in the over-the-counter market) security of any corporation,
partnership or other business entity that conducts a business in competition
with the Business.
(f) Notwithstanding anything in this Section 6.03 to the contrary,
nothing contained in this Agreement shall prohibit Xxxxxx X. Xxxxxx from
engaging in the business of consulting, providing financial advice and capital
raising activities for entities in the gaming industry (provided that Xx. Xxxxxx
does not acquire any ownership interest in connection with any such capital
raising activities), including but not limited to operating his current
businesses, The Innovation Group, Innovation Capital, L.L.C. and Urban
29
Systems, Inc., and any new businesses which he may form to offer consulting
services, providing financial advice and capital raising activities for gaming
entities in the state of Louisiana.
SECTION 6.04 ALLIANCE GAMING CORPORATION 401K PROFIT SHARING PLAN. LVI
covenants to take such action to remove VSI as a participating employer under
the Alliance Gaming Corporation 401(k) Savings Plan (the "ALLIANCE PLAN"). LVI
agrees to take all action so that all employees of VSI who are participants in
the Alliance Plan and are actively employed by VSI on the Closing Date shall be
100 percent vested in their account balances under the Alliance Plan.
ARTICLE 7
TERMINATION AND AMENDMENT
SECTION 7.01 TERMINATION. This Agreement may be terminated and may be
abandoned at any time prior to the Closing Date:
(a) By unanimous mutual consent of Purchaser and all Sellers;
(b) By Purchaser if (i) there shall have been a material breach of any
representation, warranty, covenant or agreement on the part of Sellers and such
breach shall not have been cured prior to the latest of (A) ten (10) days
following notice of such breach (provided that if such breach cannot be cured
within 10 days with the exercise of reasonable diligence, then Seller shall have
such additional time to cure such breach), and (B) the Closing Date; or (ii) any
permanent injunction or other order of a court or other competent Governmental
Entity preventing the transactions contemplated by this Agreement shall have
become final and non-appealable;
(c) By Sellers if (i) there shall have been a material breach of any
representation, warranty, covenant or agreement on the part of Purchaser, and
such breach shall not have been cured prior to the latest of (A) ten (10) days
following notice of such breach (provided that if such breach cannot be cured
within 10 days with the exercise of reasonable diligence, then Purchaser shall
have such additional time to cure such breach) and (B) the Closing Date; or (ii)
any permanent injunction or other order of a court or other competent
Governmental Entity preventing the transactions contemplated by this Agreement
shall have become final and non-appealable; or
(d) By Purchaser or Sellers if the transactions contemplated by this
Agreement shall not have been consummated on or before December 15, 2004;
provided, that the right to terminate this Agreement under Section 7.01(d) shall
not be available to any party whose breach of its representations and warranties
in this Agreement or whose failure to perform any of its covenants and
agreements under this Agreement has resulted in the failure of the transactions
contemplated by this Agreement to occur on or before such date.
SECTION 7.02 EFFECT OF TERMINATION. In the event of a termination of
this Agreement as provided in Section 7.01, this Agreement shall forthwith
become void and
30
there shall be no liability or obligation under any provisions hereof on the
part of Purchaser or Sellers, except (a) pursuant to the covenants and
agreements contained in Section 10.01 and (b) to the extent that such
termination results from the willful material breach by a party hereto of any of
its representations, warranties, covenants or agreements set forth in this
Agreement, in which case the non-breaching party shall have a right to recover
its damages caused thereby as limited by Article 9 hereof.
SECTION 7.03 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by each of the Parties hereto.
SECTION 7.04 EXTENSION; WAIVER. At any time prior to the Closing Date,
Purchaser and Sellers may, in their respective sole discretion and to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the Parties hereto; (b) waive any inaccuracies in
the representations and warranties contained herein or in any documents
delivered pursuant thereto; and (c) waive compliance with any of the agreements
or conditions contained herein. Any agreement on the part of a Party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed by or on behalf of such Party.
ARTICLE 8
TAX MATTERS
SECTION 8.01 ADDITIONAL DEFINITIONS. As used in this Agreement, the
following terms shall have the following definitions:
"PRE-CLOSING PERIOD" means any taxable period that ends on or before
the Closing Date.
"POST-CLOSING PERIOD" means any taxable period that ends after the
Closing Date.
"TAX RETURN" means any return, declaration, report, claim for refund,
information return, statement or other document (including any related or
supporting estimates, elections, schedules, statements, attachments or
information) filed or required to be filed in connection with the determination
assessment or collection of any Tax or the administration of any law, regulation
or administrative requirements relating to any Tax, and including any amendments
thereto.
SECTION 8.02 PREPARATION AND FILING OF TAX RETURNS.
(a) LVI will be responsible for preparing and filing (or causing the
preparation and filing) of all VSI Tax Returns for any Pre-Closing Period. Any
such Tax Return shall be prepared in a manner consistent with the prior
practices and positions of VSI in the preparation of its Tax Returns, as
determined in the good faith judgment of Sellers; PROVIDED, HOWEVER, that in all
events such Tax Returns shall be prepared in a manner consistent with applicable
law. Sellers shall permit Purchaser to review and comment on each such Tax
Return prior to filing and shall make such revisions to such Tax Returns as
Sellers deem acceptable in their sole and absolute discretion. Purchaser and
Sellers
31
shall cooperate (each at their own expense) in the preparation and filing of any
Tax Returns referred to in this clause (a). On or before the due date of such
Tax Returns, Sellers shall pay (or advance to Purchaser or VSI the funds to
pay), all Taxes arising with respect to such Tax Returns. Sellers shall be
responsible for all Taxes and additions, including all assessments, interest,
penalties and fines, for all Tax periods within the Pre-Closing Period,
including without limitation for Taxes of any entity other than VSI which are
required to be paid by VSI. Should there be a refund on any Tax Return due VSI
with regard to the Pre-Closing Period, the net amount of such refund after
deduction of any expenses incurred by VSI and Purchaser directly related to the
cost associated with obtaining the refund shall be paid to Sellers.
(b) Purchaser shall be responsible for preparing and filing all VSI Tax
Returns for any Post-Closing Period. Any such Tax Returns shall be prepared in a
manner consistent with the prior practices and positions of VSI in the
preparation of its Tax Returns, as determined in the good faith judgment of
Purchaser; provided, however, that in all events such Tax Returns shall be
prepared in a manner consistent with applicable law. For any Post-Closing Period
which includes any period prior to the Closing, Purchaser shall permit Sellers
to review and comment on such Tax Return prior to filing and shall make such
revisions to such Tax Return as Purchaser deems acceptable in its sole and
absolute discretion. Sellers shall not be responsible for any Taxes for any Tax
period which begins after the Pre-Closing Period. For any Tax period in the
Post-Closing Period which begins prior to the Closing, Sellers shall be
responsible for those Taxes attributable to that portion of the Tax period prior
to and through the Closing Date.
SECTION 8.03 SELLERS' CONTEST RIGHTS. Sellers shall have the sole right
(but not the obligation) to control, defend, settle, compromise or prosecute in
any manner any audit, examination, investigation, hearing or other proceeding
with respect to any Tax Return of VSI involving only Pre-Closing Periods.
Sellers shall not settle, compromise or abandon without Purchaser's prior
consent, which consent shall not be unreasonably withheld, conditioned or
delayed, any issue within Sellers' control under the preceding sentence. In
addition, (a) Sellers shall keep Purchaser duly informed of any proceedings with
respect to a Pre-Closing Period in a timely manner and (b) Purchaser (or its
properly authorized representative) shall be entitled to receive in a timely
manner copies of all correspondence and documents relating to such proceedings
and may, at its option, observe such proceedings (including any associated
meetings or conferences) and participate (at its own expense) in such
proceedings.
SECTION 8.04 PURCHASER'S CONTEST RIGHTS. Except as expressly provided
in Section 8.03, Purchaser shall have the sole right (but not the obligation) to
control, defend, settle, compromise, or prosecute in any manner an audit,
examination, investigation, hearing or other proceeding with respect to any Tax
Return of VSI that relate to (a) only Post-Closing Periods, or (b) both
Pre-Closing and Post-Closing Periods; provided, however, that Taxes or Tax
issues for a Pre-Closing Period may not be settled or compromised without the
prior written consent of Sellers, which consent shall not be unreasonably
withheld, conditioned or delayed. In addition, (i) Purchaser shall keep Sellers
duly informed of any proceedings in connection with a Pre-Closing Period in a
32
timely manner and (ii) Sellers (or their properly authorized representatives)
shall be entitled to receive in a timely manner copies of all correspondence and
documents relating to such proceedings and may, at their option, observe such
proceedings (including any associated meetings or conferences).
SECTION 8.05 NOTIFICATION REQUIREMENTS.
(a) Purchaser shall promptly forward to Sellers all written
notifications and other written communications from any Tax authority received
by Purchaser or VSI relating to any Pre-Closing Period of VSI. Purchaser shall
execute or cause to be executed any power of attorney or other document or take
such actions as required by Sellers to enable Sellers to take any action Sellers
reasonably deem appropriate with respect to any proceedings relating to any
Pre-Closing Period.
(b) Sellers shall promptly forward (or cause to be forwarded) to
Purchaser all written notifications and other written communications from any
Tax authority received by Sellers relating to any Post-Closing Period of VSI.
Sellers shall execute or cause to be executed any power of attorney or other
document or take such actions as requested by Purchaser to enable Purchaser to
take any action Purchaser reasonably deems appropriate with respect to any
proceedings relating to any Post-Closing Period of VSI.
SECTION 8.06 COOPERATION. Subject to Section 8.07, the Parties shall
each at their own expense cooperate with, and make available to, each other such
Tax data and other information as may be reasonably required in connection with
(a) the preparation or filing of any Tax Return, election, consent, or
certification, or any claim for refund, (b) any determinations of liability of
Taxes, or (c) an audit, examination or other proceeding with respect to Taxes
("TAX DATA"). Such cooperation shall include, without limitation, making their
respective employees and independent auditors or accountants reasonably
available on a mutually convenient basis for all reasonable purposes, including,
without limitation, to provide explanations and background information and to
permit the copying of books, records, schedules, workpapers, notices, revenue
agent reports, settlement or closing agreements and other documents containing
the Tax Data ("TAX DOCUMENTATION"). Notwithstanding the foregoing, Purchaser
shall not be obligated to provide to Sellers any Tax Data or Tax Documentation
for Tax periods commencing after the Closing Date, unless specifically requested
by Sellers in connection with a Tax matter for which Sellers are responsible.
SECTION 8.07 RETENTION OF DATA AND DOCUMENTATION. The Tax Data and the
Tax Documentation shall be retained by VSI until one year after the expiration
of all applicable statutes of limitations (including extensions thereof);
provided, however, that in the event an audit, examination, investigation or
other proceeding has been instituted prior to the expiration of an applicable
statute of limitations, the Tax Data and Tax Documentation relating thereto
shall be retained by VSI until there is a final determination thereof (and the
time for any appeal has expired). VSI covenants to provide access and copies any
of such materials as promptly as practicable upon request to any of the Sellers.
33
SECTION 8.08 TAX AUDIT COSTS. Sellers shall be responsible in the
percentages set forth on Section 1.06 of the Disclosure Letter for paying all
costs and fees incurred with respect to any proceedings described in Section
8.03 (except for those costs and fees incurred directly by Purchaser) and
Purchaser shall be responsible for paying all costs and fees incurred with
respect to any proceedings described in Section 8.04 (except for those costs and
fees incurred directly by Sellers).
SECTION 8.09 TAX SHARING AGREEMENTS. Any tax sharing agreement between
VSI and any other entity is terminated as of the Closing Date and will have no
further effect for any taxable year (whether the current year, a future year, or
a past year).
SECTION 8.10 RETURNS FOR PERIODS THROUGH THE CLOSING DATE. Sellers will
include the income of VSI (including any deferred income triggered into income
by Reg. ss. 1.1502-3 and any excess loss accounts taken into income under Reg
ss. 1.1502-19) on the VSI Group's consolidated federal income Tax Returns for
all periods through the Closing Date and pay any federal income Taxes
attributable to such income. Sellers will take no position or cause to be taken
any position on such returns that would adversely affect VSI after the Closing
Date. The income of VSI will be apportioned to the period up to and including
the Closing Date and the period after the Closing Date by closing the books of
VSI as of the end of the Closing Date.
SECTION 8.11 CARRYBACKS. Sellers will immediately pay to Purchaser any
Tax refund (or reduction in Tax liability) resulting from a carryback of any
post acquisition Tax attribute to VSI into the VSI Group's consolidated Tax
Return, when such refund or reduction is received. Sellers will cooperate with
VSI in obtaining such refunds (or reductions in Tax liability), including
through the filing of amended Tax Returns or refund claims.
SECTION 8.12 RETENTION OF CARRYOVERS. Sellers will not elect to retain
any net operating carryovers or capital loss carryovers of VSI under Reg. ss.
1.1502-20(g).
ARTICLE 9
INDEMNIFICATION; REMEDIES
SECTION 9.01 INDEMNIFICATION BY SELLERS. Except as otherwise expressly
provided in this Article 9, LVI (and Alliance jointly, severally, and solidarily
with LVI) and the other Sellers severally shall defend, indemnify and hold
harmless Purchaser and its officers, directors, employees, affiliates,
successors and assigns (collectively, "PURCHASER'S INDEMNIFIED PERSONS"), for
its own acts and shall reimburse Purchaser or Purchaser's Indemnified Persons,
for, from and against each and every demand, claim, action, loss (which shall
include any diminution in value), liability, judgment, damage, cost and expense
(including, without limitation, interest, penalties, costs of preparation and
investigation, and the reasonable fees, disbursements and expenses of attorneys,
accountants and other professional advisors) (collectively, "LOSSES") imposed on
or incurred by Purchaser or Purchaser's Indemnified Persons, directly or
indirectly, relating to, resulting from or arising out of: (a) any material
inaccuracy in a representation or warranty made by such Seller in this Agreement
or any certificate, document or other
34
instrument delivered or to be delivered pursuant hereto in any respect whether
or not Purchaser or Purchaser's Indemnified Persons relied thereon or had
Knowledge thereof or (b) any material breach or nonperformance of any covenant,
agreement or other obligation of such Seller or any certificate, document or
other instrument delivered or to be delivered pursuant hereto; this
indemnification obligation set forth herein shall be subject to the following:
(i) No amount shall be payable by any Seller pursuant to
this Section 9.01, unless and until the aggregate
amount of Losses actually suffered or incurred by
Purchaser exceeds $100,000.00 ("SELLERS' INDEMNITY
BASKET") and then each Seller, as applicable, shall
indemnify Purchaser for such Losses including the
Sellers' Indemnity Basket; notwithstanding anything
in the foregoing to the contrary, Sellers' Indemnity
Basket shall not apply to any claim by Purchaser for
indemnity based upon there being any Indebtedness
outstanding at the Closing and Sellers shall be
obligated to indemnify Purchaser for all Losses
resulting from there being any Indebtedness
outstanding at the Closing; and
(ii) The maximum indemnity obligation of all Sellers,
collectively, shall not exceed $2,000,000.00.
SECTION 9.02 INDEMNIFICATION BY PURCHASER. Except as otherwise
expressly provided in this Article 9, Purchaser shall defend, indemnify and hold
harmless each Seller, LVI's officers, directors, employees, affiliates,
successors and assigns (collectively, "LVI'S INDEMNIFIED PERSONS") and shall
reimburse Sellers or LVI's Indemnified Persons, for, from and against all Losses
imposed on or incurred by Sellers or LVI's Indemnified Persons, directly or
indirectly, relating to, resulting from or arising out of: (a) any material
inaccuracy in any representation or warranty of Purchaser in this Agreement or
any certificate, document or other instrument delivered or to be delivered
pursuant hereto in any respect whether or not Sellers' or LVI's Indemnified
Persons relied thereon or had Knowledge thereof or (b) any material breach or
nonperformance of any covenant, agreement or other obligation of Purchaser or
any certificate, document or other instrument delivered or to be delivered
pursuant hereto; this indemnification obligation set forth herein shall be
subject to the following:
(i) No amount shall be payable by Purchaser pursuant to
this Section 9.02, unless and until the aggregate
amount of losses actually suffered or incurred by
Sellers and LVI's Indemnified Persons exceeds
$100,000.00 ("PURCHASER'S INDEMNITY BASKET") and then
Purchaser shall indemnify Sellers and LVI's
Indemnified Persons for such losses including the
Purchaser's Indemnity Basket.
(ii) The maximum indemnity obligation of Purchaser shall
not exceed $2,000,000.00.
SECTION 9.03 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS. If any third
party
35
demand, claim, action or proceeding shall be brought or asserted under this
Article 9 against an indemnified person or any successor thereto (the
"INDEMNIFIED PERSON") in respect of which indemnity may be sought under this
Article 9 from an indemnifying person or any successor thereto (the
"INDEMNIFYING PERSON"), the Indemnified Person shall give prompt written notice
thereof to the Indemnifying Person who shall have the right to assume its
defense, including the hiring of counsel reasonably satisfactory to the
Indemnified Person and the payment of all expenses; except that any delay or
failure to so notify the Indemnifying Person shall relieve the Indemnifying
Person of its obligations under this Article 9 only to the extent, if at all,
that it is prejudiced by reason of such delay or failure. The Indemnified Person
shall have the right to employ separate counsel in any of the foregoing actions,
claims or Proceedings and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the Indemnified Person
unless both the Indemnified Person and the Indemnifying Person are named as
parties and the Indemnified Person shall in good faith determine that
representation by the same counsel is inappropriate. In the event that the
Indemnifying Person, within ten (10) days after notice of any such action or
claim, does not assume the defense thereof, the Indemnified Person shall have
the right to undertake the defense, compromise or settlement of such action,
claim or proceeding for the account of the Indemnifying Person, subject to the
right of the Indemnifying Person to assume the defense of such action, claim or
proceeding with counsel reasonably satisfactory to the Indemnified Person at any
time prior to the settlement, compromise or final determination thereof.
Anything in this Article 9 to the contrary notwithstanding, the Indemnifying
Person shall not, without the Indemnified Person's prior consent, settle or
compromise any action, claim or proceeding or consent to the entry of judgment
with respect to any action, claim or proceeding for anything other than money
damages paid by the Indemnifying Person. The Indemnifying Person may, without
the Indemnified Person's prior consent, settle or compromise any such action,
claim or proceeding or consent to entry of any judgment with respect to any such
action, claim or proceeding that requires solely the payment of money damages by
the Indemnifying Person and that includes as an unconditional term thereof the
release by the claimant or the plaintiff of the Indemnified Person from all
liability in respect of such action, claim or proceeding.
SECTION 9.04 EXCLUSIVE REMEDY. The Parties acknowledge and agree that
the foregoing indemnification provisions in this Article 9 shall be the
exclusive remedy of the Sellers and Purchaser whether in contract, tort or other
applicable law, with respect to the transactions contemplated by this Agreement.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01 CONFIDENTIALITY. Until the Closing Date and subsequent to
the termination of this Agreement pursuant to Section 7.01, Purchaser will keep
confidential and will not disclose to any third party any information obtained
by it from Sellers in connection with this Agreement, except (a) that
information may be disclosed by Purchaser to its advisors in connection with the
negotiation of and the activities conducted pursuant to this Agreement, (b) to
the extent that such information is or becomes
36
generally available to the public through no act or omission of Purchaser in
violation of this Agreement, (c) as may be ordered by any court or other
governmental body having authority to compel such disclosure, or (d) as
otherwise required by applicable law, applicable gaming authority, the rules of
the New York Stock Exchange and the Nasdaq Stock Market or the rules and
regulations of the SEC.
SECTION 10.02 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) The representations and warranties in this Agreement (or in any
exhibit hereto) or in any instrument delivered pursuant to this Agreement shall
survive for two (2) years after Closing.
(b) The agreements and covenants provided for in this Agreement (or in
any exhibit or schedule hereto) shall survive the Closing for the period
provided in such covenant; provided however if no such period is provided, such
covenant or agreement shall survive for forty-two (42) months after Closing;
provided further that the agreements and covenants provided for in Article 8
shall survive until the expiration of the applicable statute of limitation. The
agreements provided for in any other instruments delivered pursuant to this
Agreement shall survive the Closing in accordance with the terms of such
instruments.
SECTION 10.03 NOTICES. All notices hereunder must be in writing and
shall be deemed to have been given upon receipt of delivery by: (a) personal
delivery to the designated individual, (b) certified or registered mail, postage
prepaid, return receipt requested, (c) a nationally recognized overnight courier
service (against a receipt therefore) or (d) facsimile transmission with
confirmation of receipt. All such notices must be addressed as follows or to
such other addresses as to which any party hereto may have notified the others
in writing:
If to Purchaser, then to:
c/o Churchill Xxxxx Incorporated
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
ATTN: Xxxxxxx X. Xxxx
Fax number: 000-000-0000
With a copy to:
Xxxxx, Xxxxxxx & Comb, LLP
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
ATTN: Xxxxxx X. Xxxxx
Fax number: 000-000-0000
If to Sellers, then to:
37
Xxxxxx X. Xxxxxx
P. O. Xxx 0000
Xxx Xxxxxxx, XX 00000
Fax number: (000) 000-0000
Xxxxx Xxxxxxxxx
0000 Xxxxxxx Xx., Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Fax number: (000) 000-0000
T. Xxxxx Xxxxxx III
0000 Xxxxxxx Xx., Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Fax number: (000) 000-0000
With a copy to:
Xxxxx X. Xxxxxxxxxx
0000 Xxxxxx Xxxx., Xxxxx 000
Xxxxxxx, XX 00000
Fax Number: (000) 000-0000
If to LVI, then to:
Xxxxxx X. Xxxxxx
Louisiana Ventures, Inc.
c/o Alliance Gaming Corporation
0000 X. Xxxxxxx Xx.
Xxx Xxxxx, XX 00000
Fax number: (000) 000-0000
With a copy to:
Xxxxxx X. Xxxxxx
Xxxxx and Xxxxx, LLP
451 Florida St., 00xx Xxxxx
Xxxx Xxx Xxxxxx
Xxxxx Xxxxx, XX 00000
Fax Number: (000) 000-0000
SECTION 10.04 HEADINGS; GENDER. When a reference is made in this
Agreement to a section, exhibit or schedule, such reference shall be to a
section, exhibit or schedule of this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. All personal pronouns used in this Agreement shall include the
other genders, whether used in the masculine, feminine or neuter gender, and the
singular shall include the plural and vice versa, whenever and as
38
often as may be appropriate.
SECTION 10.05 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement (including the documents, exhibits, and instruments referred to
herein), and the other Transaction Documents (a) constitute the entire agreement
and supersede all prior agreements, understandings and communications, both
written and oral, between Sellers on the one hand and Purchaser on the other
hand with respect to the subject matter hereof, and (b) are not intended to
confer upon any person other than the Parties hereto and VSI any rights or
remedies hereunder.
SECTION 10.06 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Louisiana without regard
to any applicable principles of conflicts of law.
SECTION 10.07 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the Parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other Parties.
SECTION 10.08 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by reason of any
rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any adverse manner to either party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
Parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the Parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible, and in any such case such term or provision
shall be deemed amended to the extent necessary to make it no longer invalid,
illegal or unenforceable.
SECTION 10.09 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same document. Fax signatures will be
valid and deemed original for all purchases under this Agreement.
SECTION 10.10 EXPENSES. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accounts, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the Party incurring such cost and expenses, whether or not the Closing
shall have occurred. No Party shall remit any brokerage fees in connection with
this Agreement.
SECTION 10.11 AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
Purchaser and Sellers' Representatives. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or
39
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
SECTION 10.12 CONSTRUCTION. The Parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
SECTION 10.13 UNDERSTANDING. The Parties stipulate and agree that at
all times during the course of the negotiations surrounding the execution and
delivery of this Agreement, they, to the extent deemed necessary or advisable in
their sole discretion, have been advised and assisted by competent counsel of
their own choosing and that they have been fully advised by such counsel of the
effect of each term, condition, provision and stipulation contained herein.
SECTION 10.14 ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration administered by the American Arbitration Association under its
Commercial Arbitration Rules, and judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The
hearings for any such arbitration shall be held in New Orleans, Louisiana.
ARTICLE 11
INTERVENORS
SECTION 11.01 SPOUSAL CONSENT. XXX RETZGER RITTVO, wife of Xxxxxx X.
Xxxxxx, XXXXX XXXXXXXXX, wife of Xxxxx Xxxxxxxxx, and XXXXXXXXXX XXXXXX, wife of
T. Xxxxx Xxxxxx III, each acknowledges and declares that she intervenes and
appears herein for the express purpose of joining in the sale of the Stock by
her respective husband and hereby expressly consents to this Stock Purchase
Agreement. Each represents that she has duly executed the Spousal Consent.
[Signatures on following page]
40
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
signed themselves or by their respective duly-authorized officers as of the date
first above written.
PURCHASER:
XXXXXXXXX XXXXX LOUISIANA
VIDEO POKER COMPANY, L.L.C.
BY:/s/ M.E. XXXXXX
Title: TREASURER
SELLERS:
/s/ XXXXXX X. XXXXXX
XXXXXX X. XXXXXX
/s/ XXXXX XXXXXXXXX
XXXXX XXXXXXXXX
/s/ T. XXXXX XXXXXX III
T. XXXXX XXXXXX III
LOUISIANA VENTURES, INC.
By:/s/ XXXXXX X. XXXXXX
Xxxxxx X. Xxxxxx
INTERVENORS:
/s/ XXX RETZGER XXXXXX
XXX RETZGER RITTVO
/s/ XXXXX XXXXXXXXX
XXXXX XXXXXXXXX
41
/s/ XXXXXXXXXX XXXXXX
XXXXXXXXXX XXXXXX
FOR PURPOSES OF SECTION 6.03
AND SECTION 9.01:
ALLIANCE GAMING CORPORATION
By:/s/ XXXXXX X. XXXXXX
Title:EXEC VICE PRESIDENT
42
EXHIBIT INDEX
Exhibit A - Operating Agreement dated Xxxxx 0, 0000 Xxxxxxxx
dated November 9, 1995 Second Addendum dated November
1, 2001 Third Addendum dated December 4, 2001 Fourth
Addendum dated April 30, 2003
Exhibit B - Form of Escrow Agreement
Exhibit C - Xxxx and Xxxxx LLP Opinion
Exhibit D - LHBPA Release
Exhibit E - Xxxxxx Release
Exhibit F - Withdrawal of Objection to Assignment
Exhibit G - Spousal Consent
43
Exhibits and schedules to the Stock Purchase Agreement have been intentionally
omitted because they are not material. The registrant agrees to furnish such
omitted exhibits and schedules supplementally to the Commission upon request.
44