EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as of
December 23, 2002, by and among MTR Gaming Group, Inc., a Delaware corporation
("Parent"), Racing Acquisition, Inc., an Ohio corporation and wholly owned
subsidiary of Parent ("Merger Subsidiary"), and Scioto Downs, Inc., an Ohio
corporation (the "Company"). Parent, Merger Subsidiary and the Company are
referred to collectively herein as (the "Parties").
WHEREAS, the respective Boards of Directors of Parent, Merger Subsidiary
and the Company have each approved the merger of Merger Subsidiary with and into
the Company on the terms and subject to the conditions set forth in this
Agreement (the "Merger");
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER; CLOSING
Section 1.01. The Merger. Upon the terms and subject to the conditions of
this Agreement, and in accordance with the Ohio General Corporation Law as
embodied in Title 17, Chapter 1701 of the Ohio Revised Code (the "Ohio Revised
Code"), Merger Subsidiary shall be merged with and into the Company at the
Effective Time (as defined in Section 1.02). Following the Merger, the separate
existence of Merger Subsidiary shall cease and the Company shall continue as the
surviving corporation (the "Surviving Corporation") and a wholly owned
subsidiary of Parent, and shall succeed to and assume all the rights and
obligations of Merger Subsidiary in accordance with the Ohio Revised Code.
Section 1.02. Effective Time. The Merger shall become effective when
articles of merger (the "Articles of Merger"), executed in accordance with the
relevant provisions of the Ohio Revised Code, are filed with the Secretary of
State of the State of Ohio (the "Commission"); provided, however, that, upon
mutual consent of the constituent corporations to the Merger, the Articles of
Merger may provide for a later date of effectiveness of the Merger not more than
thirty (30) days after the date of filing the Articles of Merger with the
Commission. When used in this Agreement, the term "Effective Time" shall mean
the date and time at which the Articles of Merger are accepted for record or
such later time established by the Articles of Merger. The Articles of Merger
shall be filed on the Closing Date (as defined in Section 1.07).
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Section 1.03. Effects of the Merger. The Merger shall have the effects set
forth in Section 1701.78 of the Ohio Revised Code.
Section 1.04. Conversion of Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Merger Subsidiary, the
Company or the holders of any of the following securities:
(a) each issued and outstanding share of the Company's common stock,
par value $1.05 per share (the "Common Stock") held by the Company
as treasury stock and each issued and outstanding share of the
Common Stock owned by any subsidiary of the Company, (collectively,
the "Treasury Stock"), shall be canceled and retired and shall cease
to exist, and no payment or consideration shall be made with respect
thereto;
(b) each issued and outstanding share of Common Stock, other than
those shares of Common Stock constituting Treasury Stock (the
"Exchange Stock"), shall be converted into the right to receive,
subject to Section 1.10(a) of this Agreement and certain adjustment
as provided in this Section 1.04(b), an amount in cash, without
interest, equal to $32.00 (the "Merger Consideration") payable to
the Record Holder (as defined in Section 1.05(d)) thereof upon
surrender of the Certificate (as defined in this Section 1.04(b))
with respect to such shares, provided, however, that at the election
of the Record Holder of each issued and outstanding share of
Exchange Stock which election shall be in writing and delivered to
the Disbursing Agent in a notice of election ("Notice of Election")
in the form and subject to the written instructions that shall be
provided to each Record Holder by the Disbursing Agent pursuant to
the terms of this Agreement, the Merger Consideration shall be
adjusted and be deemed to be an amount equal to (A) $17.00 plus (B)
an amount in cash equal to the Track Business Contingent Earnout
Payment as defined and provided for in Section 5.12 of this
Agreement (the "Contingent Consideration") ($17.00 plus the
Contingent Consideration being referred to herein as the "Adjusted
Merger Consideration") to be paid to the Record Holder of each such
share of Common Stock, pursuant and subject to the terms of this
Agreement. In the event any such Record Holder fails to make the
election hereunder requesting to be paid the Adjusted Merger
Consideration within the permitted period of time as shall be
designated in written instructions to be distributed by the
Disbursing Agent, each such Record Holder shall be deemed to have
elected to receive only the amount of $32.00 as Merger Consideration
hereunder and shall have no right to any other consideration with
respect to the transactions contemplated hereby. At the Effective
Time, and notwithstanding anything to the contrary herein, all such
shares of Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and
each holder of a certificate or other reasonable evidence of
ownership of non-certificated shares, including, but not limited to,
those held electronically or in street name (collectively, a
"Certificate") representing any such shares of Common Stock shall
cease to have any rights with respect
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thereto, except the right to receive the Merger Consideration or,
for those Record Holders who so elect, the Adjusted Merger
Consideration; and
(c) each issued and outstanding share of capital stock or ownership
interest of Merger Subsidiary shall be converted into one fully paid
and nonassessable share of common stock, par value $1.05, of the
Surviving Corporation.
Section 1.05. Payment of Shares.
(a) Prior to the mailing of the Proxy Statement (as herein defined)
to the Company's shareholders, Parent shall appoint a bank or trust
company reasonably satisfactory to the Company, and which shall be
located in Columbus, Ohio, to act as disbursing agent (the
"Disbursing Agent") for the payment of the Merger Consideration upon
surrender of the Certificates and payment of the Adjusted Merger
Consideration, including any Contingent Consideration, as provided
herein. Parent will enter into a disbursing agent agreement with the
Disbursing Agent, in form and substance reasonably acceptable to the
Company. Prior to the Effective Time, Parent shall deposit or cause
to be deposited with the Disbursing Agent in trust for the benefit
of the Company's shareholders cash in an aggregate amount necessary
to make the payments pursuant to Section 1.04(b)(i) to holders of
the Exchange Stock (such amounts being hereinafter referred to as
the "Exchange Fund"). The Disbursing Agent shall invest the Exchange
Fund, as the Surviving Corporation directs, in direct obligations of
the United States of America, obligations for which the full faith
and credit of the United States of America is pledged to provide for
the payment of all principal and interest, or a combination thereof,
provided that, in any such case and subject to the obligation to
effect payment of the Merger Consideration pursuant to Section
1.05(b), no such instrument shall have a maturity exceeding three
months. Any net profit resulting from, or interest or income
produced by, such investments shall be payable to the Surviving
Corporation. The Exchange Fund shall be used only as provided in
this Agreement.
(b) Concurrently with the mailing of the Proxy Statement to the
Company's shareholders, the Company shall mail or cause to be mailed
to each person who is a record holder of the Exchange Stock, a
letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Disbursing
Agent) and any other appropriate materials and instructions for use
in effecting the surrender of the Certificates in exchange for
payment of the Merger Consideration including, without limitation, a
Notice of Election pursuant to Section 1.04(b)(ii) of this Agreement
and written instructions regarding the completion and timely return
of such Notice to the Disbursing Agent. Upon surrender to the
Disbursing Agent of a Certificate, together with such letter of
transmittal duly executed and such other documents as may be
reasonably required by the Disbursing Agent, the holder of such
Certificate
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shall be paid promptly after the Effective Time in exchange therefor
cash in an amount equal to the product of the number of shares of
Common Stock represented by such Certificate multiplied by the
Merger Consideration or Adjusted Merger Consideration, as the case
may be, and each such Certificate shall be cancelled. No interest
will be paid or accrue on the cash payable upon the surrender of the
Certificates. If payment is to be made to a person other than the
person in whose name the Certificate surrendered is registered, it
shall be a condition of payment that the Certificate so surrendered
be properly endorsed or otherwise be in proper form for transfer and
that the person requesting such payment pay any transfer or other
taxes required by reason of the payment to a person other than the
registered holder of the Certificate surrendered or establish to the
satisfaction of the Surviving Corporation that such tax has been
paid or is not applicable. Until surrendered in accordance with this
Section 1.05, each Certificate (other than Certificates representing
Controlling Shares) shall represent for all purposes only the right
to receive the Merger Consideration or Adjusted Merger Consideration
in cash multiplied by the number of shares of Company Common Stock
evidenced by such Certificate without any interest thereon, and, for
those Record Holders who have elected to receive the Adjusted Merger
Consideration, the right to receive the Contingent Consideration if
any is to be paid.
(c) From and after the Effective Time, there shall be no
registration of transfers of shares of the Common Stock which were
outstanding immediately prior to the Effective Time on the stock
transfer books of the Surviving Corporation. From and after the
Effective Time, the holders of shares of the Common Stock
outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such shares except as otherwise
provided in this Agreement or by applicable law. All cash paid upon
the surrender of Certificates in accordance with this Article I
shall be deemed to have been paid in full satisfaction of all rights
pertaining to the shares of the Common Stock previously represented
by such Certificates. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, such
Certificates shall be canceled and exchanged for cash as provided in
this Article I. At the close of business on the day of the Effective
Time the stock ledger of the Company shall be closed.
(d) With respect to the Merger Consideration, at any time more than
twelve months after the Effective Time, the Surviving Corporation
shall be entitled to require the Disbursing Agent to deliver to it
any funds which had been made available to the Disbursing Agent and
not disbursed in exchange for Certificates (including, without
limitation, all interest and other income received by the Disbursing
Agent in respect of all such funds). Thereafter, holders of shares
of the Common Stock shall look only to Parent (subject to the terms
of this Agreement, abandoned property, escheat and other similar
laws) as general creditors thereof with respect to any Merger
Consideration that may be payable, without interest, upon due
surrender of the Certificates held by
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them. If any Certificates shall not have been surrendered
immediately prior to the time on which any payment in respect hereof
would otherwise escheat or become the property of any governmental
unit or agency, the payment in respect of such Certificates shall,
to the extent permitted by applicable law, become the property of
the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto. Notwithstanding the
foregoing, none of Parent, the Company, the Surviving Corporation
nor the Disbursing Agent shall be liable to any holder of the Common
Stock for any Merger Consideration in respect of such Common Stock
delivered to a public official pursuant to any abandoned property,
escheat or other similar law. With respect to the Contingent
Consideration for Record Holders who have elected to receive the
Adjusted Merger Consideration, the Surviving Corporation shall pay
such amounts to the Disbursing Agent to the extent and as shall be
required by this Agreement and the President of the Surviving
Corporation shall certify annually to the Disbursing Agent in
writing that each such amount is the proper amount owed by it as
Contingent Consideration under the terms of this Agreement. Upon
each receipt of such amount by the Disbursing Agent, the Surviving
Corporation shall mail or cause to be mailed to each person who was
a record holder of the Company's stock on the record date set forth
in the Proxy Statement ("Record Holder") with respect to the
transactions contemplated hereby (the "Record Date") a letter of
transmittal which shall specify all appropriate materials and
instructions for use in effecting delivery of the Contingent
Consideration to such holders.
(e) To the extent required by applicable law, delivery of the
Contingent Consideration shall be effected by a Trustee under the
terms of an Indenture to be entered into by Parent and Merger
Subsidiary and a Trustee with appropriate credentials that are
substantially the same as other Trustees involved in transactions
that are similar to the transactions contemplated by this Agreement.
Concurrently with the mailing of the Proxy Statement to the
Company's shareholders, five days prior written notice of which
shall be given to Parent by the Company, Parent shall mail or cause
to be mailed to each person who is a record holder of the Company's
Common Stock a summary of the terms of any such Indenture and any
related prospectus that may be required to be delivered by the
Parent to the Company's shareholders with respect to the Contingent
Consideration under applicable securities law. Parent shall file a
Registration Statement on Form S-4, and effect such other filings,
to the extent required by applicable securities laws and pursuant to
the terms of Section 5.12 hereof.
Section 1.06. Lost or Stolen Certificates. If any Certificate has been
lost, stolen, or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen, or destroyed and, if
required by the Surviving Corporation, the posting by such person of a bond in
such reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against the Surviving Corporation with
respect to such Certificate, the Disbursing Agent will deliver
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in exchange for such lost, stolen, or destroyed Certificate, the appropriate
Merger Consideration with respect to the shares of Company Common Stock formerly
represented by that Certificate.
Section 1.07. Stock Options. At the Effective Time, each unexercised
option, whether or not then vested or exercisable in accordance with its terms,
to purchase shares of Common Stock (the "Options") previously granted by the
Company or any of its subsidiaries shall be canceled automatically and the
Parent shall or shall cause the Surviving Corporation to provide the holder
thereof with a lump sum cash payment equal to the product of the total number of
shares of the Common Stock subject to such Option immediately prior to the
Effective Time and the excess (if any) of the Merger Consideration over the
purchase price per share of the Common Stock subject to such Option.
Section 1.08. The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at such place as shall be agreed
upon by the Parties commencing at 9:00 a.m. local time on the earlier of (a)
fifteen (15) days after the satisfaction (or waiver by the appropriate party) of
the conditions precedent and the receipt of the approvals and the satisfaction
of the closing conditions set forth in Article VI of this Agreement, or (b)
December 31, 2003, provided that all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the Parties will take at the Closing) have
been satisfied or waived, or such other place and date as the Parties may
mutually determine (the "Closing Date").
Section 1.09. Dissenters' Rights. Notwithstanding anything in this
Agreement to the contrary, shares of the Common Stock outstanding immediately
prior to the Effective Time and held by a holder who has not voted in favor of
the Merger and who has dissented from the Merger in accordance with Section
1701.85 of the Ohio Revised Code ("Dissenting Shares") shall not be converted
into the right to receive the Merger Consideration as provided in Section 1.05,
unless and until such holder fails to perfect or withdraws or otherwise loses
his right to payment under the Ohio Revised Code. If, after the Effective Time,
any such holder fails to perfect or withdraws or loses his right to such
payment, such Dissenting Shares shall thereupon be treated as if they had been
converted as of the Effective Time into the right to receive the Merger
Consideration, if any, to which such holder is entitled, without interest
thereon. The Company shall give Parent and Merger Subsidiary prompt notice of
any notice of dissent received by the Company and, prior to the Effective Time,
Parent and Merger Subsidiary shall have the right to participate in all
negotiations, proceedings and appraisals with respect to any exercise of
dissenters' rights. Prior to the Effective Time, the Company shall not, except
with the prior written consent of Parent and Merger Subsidiary, make any payment
with respect to, or settle or offer to settle, any such dissents.
Section 1.10. Consideration to Company; Company Improvements. In
consideration of the Company's covenants set forth in Section 5.03, Parent
hereby agrees as follows:
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(a) On the date hereof, subject to the terms of this Agreement,
Parent shall deliver to the Company the amount of $1,000,000 (the
"Improvement Amount") by wire transfer, such amount to be used by
the Company solely for the purposes set forth in Section 1.10 of the
Company Disclosure Schedule, provided, however, that if any portion
of the Improvement Amount shall remain unused by the Company on the
Closing Date, such unused portion of the Improvement Amount shall be
added to the Merger Consideration and shall be payable on a pro
rated basis to the record owners of the Company's Exchange Stock
entitled to receive the Merger Consideration hereunder.
(b) The Company agrees that commencing with the date of this
Agreement, and continuing on a calendar week basis until the
Closing, the Company shall deliver to Parent a written spending
report, the accuracy and completeness of which shall be certified by
the Company's President, setting forth the uses of any portion of
the Improvement Amount during such week and shall also deliver a
final written spending report to Parent at the Closing setting forth
the uses of any portion of the Improvement Amount not previously
accounted for in prior weekly reports.
(c) In the event (i) Parent terminates this Agreement for "Cause"
(as defined below) pursuant to Section 7.01(vii) of this Agreement,
or (ii) this Agreement is terminated for any reason other than
pursuant to Section 7.01(viii) of this Agreement, then the
Improvement Amount shall be deemed and shall become a loan to be
repaid by the Company to the Parent on December 23 2005 and shall
bear interest at the rate equal to Parent's cost of borrowing as may
vary from time to time (the "Loan"). The Loan will be secured by the
Company's real and personal property (junior only to liens of record
on the date hereof) with agreements and related instruments
containing ordinary and customary terms and provisions, including,
but not limited to, the execution by the Company and delivery to
Parent of a Promissory Note in the form attached hereto as Exhibit
A. In the following circumstances, however, the Company shall have
no obligation to repay the Improvement Amount: (i) this Agreement is
terminated by Parent without cause at any time during the Due
Diligence Period; (ii) notwithstanding any provisions to the
contrary herein, the Parent fails to obtain a license to engage in
the Company's business by December 31, 2003, because Parent is found
to be unsuitable by the Ohio Racing Commission; or (iii) the
transactions contemplated hereby are consummated, provided, that in
such event, notwithstanding any provisions to the contrary herein,
the Company shall have no other remedy with respect to the
transactions contemplated hereby. For the purpose of this Agreement,
"Cause" shall mean: (i) any event or circumstance discovered or
occurring during the Due Diligence Period which would make it
impracticable for the Company to conduct its business including, but
not limited to such impracticability arising from the loss of any
racing or liquor license, or other significant license or permit;
inability to convey free and clear title to the
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Company's property (matters of record on the date hereof excepted);
the presence of any hazardous materials on the Company's property or
any other material violation of any environmental law or regulation,
except as set forth in the Company Disclosure Schedule; or the
commencement of bankruptcy proceedings; (ii) any material breach by
the Company of any of its representations, warranties or obligations
hereunder following the completion of the Due Diligence Period and
prior to the Closing, (iii) failure of the Company's Board of
Directors to recommend the merger pursuant to the terms hereof to
the Company's shareholders, or (iv) approval or other acceptance by
the Company's shareholders of a merger or other Acquisition
Transaction (as defined in Section 5.03 hereof) other than as set
forth herein.
ARTICLE II
THE SURVIVING CORPORATION; DIRECTORS AND OFFICERS
Section 2.01. Articles of Incorporation. The articles of incorporation of
the Company in effect at the Effective Time shall be the articles of
incorporation of the Surviving Corporation until amended in accordance with
applicable law.
Section 2.02. Bylaws. The bylaws of Merger Subsidiary in effect at the
Effective Time shall be the bylaws of the Surviving Corporation, until amended
in accordance with applicable law and this Agreement.
Section 2.03. Directors and Officers. The directors of Merger Subsidiary
prior to the Effective Time shall be the directors of the Surviving Corporation
as of the Effective Time, provided, however, that Xxxxxxx Xxxx shall continue as
the Vice President of the Surviving Corporation. The officers of the Merger
Subsidiary shall be the officers of the Surviving Corporation as of the
Effective Time, provided; however that Xxxxxx X. Xxxx shall continue as
President of the Surviving Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY
Parent and Merger Subsidiary jointly and severally represent and warrant
to the Company that, except as set forth in the Parent Disclosure Schedule dated
as of the date hereof and signed by an authorized officer of Parent (the "Parent
Disclosure Schedule"), it being agreed that disclosure of any item on the Parent
Disclosure Schedule shall be deemed disclosure with respect to all Sections of
this Agreement if the relevance of such item is reasonably apparent from the
face of the Parent Disclosure Schedule:
Section 3.01. Organization and Qualification. Parent is a corporation and
Merger Subsidiary is a corporation and each of Parent's other subsidiaries is a
corporation in
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each case duly organized, validly existing and in good standing under the laws
of the state of its incorporation or formation and has all requisite corporate
or company power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted. Each of
Parent and Merger Subsidiary is qualified to transact business and is in good
standing in each jurisdiction in which the properties owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified and in good standing
would not reasonably be expected to have a Parent Material Adverse Effect. The
term "Parent Material Adverse Effect" means an effect that is materially adverse
to (i) the business, financial condition or ongoing operations or prospects of
Parent and its subsidiaries, taken as a whole or (ii) the ability of Parent or
any of its subsidiaries to obtain financing for or to consummate any of the
transactions contemplated by this Agreement.
Section 3.02. Authority; Non-Contravention; Approvals.
(a) Each of Parent and Merger Subsidiary has the requisite corporate
power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. This Agreement and the Merger
have been approved and adopted by the boards of directors of Parent
and Merger Subsidiary and Parent as the sole shareholder of Merger
Subsidiary, and no other corporate or similar proceeding on the part
of Parent or Merger Subsidiary (or any other party) is necessary to
authorize the execution and delivery of this Agreement or the
consummation by Parent and Merger Subsidiary of the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by each of Parent and Merger Subsidiary and, assuming the
due authorization, execution and delivery hereof by the Company,
constitutes a valid and legally binding agreement of each of Parent
and Merger Subsidiary enforceable against each of them in accordance
with its terms, except that such enforcement may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting or relating to enforcement of creditors' rights
generally, and (ii) general equitable principles.
(b) The execution, delivery and performance of this Agreement by
each of Parent and Merger Subsidiary and the consummation of the
Merger and the transactions contemplated hereby, do not and will not
violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result
in a right of termination or acceleration under, or result in the
creation of any lien, security interest or encumbrance upon any of
the properties or assets of Parent or any of its
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subsidiaries under any of the terms, conditions or provisions of (i)
the respective certificates of incorporation or bylaws of Parent or
any of its subsidiaries currently in effect, (ii) any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority
applicable to Parent or any of its subsidiaries or any of their
respective properties or assets, subject, in the case of
consummation, to obtaining (prior to the Effective Time) the Parent
Required Statutory Approvals (as defined in Section 3.02(c)), or
(iii) any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind (each a "Contract") to which
Parent or any of its subsidiaries is now a party or by which Parent
or any of its subsidiaries or any of their respective properties or
assets may be bound or affected, except, with respect to any item
referred to in clause (ii) or (iii), for any such violation,
conflict, breach, default, termination, acceleration or creation of
liens, security interests or encumbrances that would not reasonably
be expected to have a Parent Material Adverse Effect and would not
materially delay the consummation of the Merger.
(c) Except for (i) applicable filings, if any, with the Securities
and Exchange Commission (the "SEC") pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), (ii) filing
of the Articles of Merger with the Commission, and (iii) filings
with and approvals by any regulatory authority with jurisdiction
over the Parent's operations (including all Parent's subsidiaries)
and the Company's racing and parimutuel wagering operations required
under any Federal, state, local or foreign statute, ordinance, rule,
regulation, permit, consent, approval, license, judgment, order,
decree, injunction or other authorization governing or relating to
the current or contemplated activities and operations of the
Company, including, but not limited to, Title 37, Chapter 3769 of
the Ohio Revised Code and the rules and regulations promulgated
thereunder and all other rules and regulations, statutes and
ordinances having authority or with which compliance is required for
the conduct of gambling, and gaming (collectively, the "Racing
Laws") (the filings and approvals referred to in clauses (i) through
(iii) being collectively referred to as the "Parent Required
Statutory Approvals"), no declaration, filing or registration with,
or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the
execution and delivery of this Agreement by Parent or Merger
Subsidiary, or the consummation by Parent or Merger Subsidiary of
the transactions contemplated hereby, other than such declarations,
filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would
not reasonably be expected to have a Parent Material Adverse Effect
and would not materially delay the consummation of the Merger.
Section 3.03. Proxy Statement and Other SEC Filings. None of the
information to be supplied by Parent or its subsidiaries for inclusion in any
proxy statement (the "Proxy Statement") to be distributed in connection with the
Company's special meeting of shareholders (the "Special Meeting") called for the
purpose of voting on this Agreement and the transactions contemplated hereby at
the time of the mailing to shareholders of the Proxy Statement or any amendment
or supplement thereto at the time of the Special
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Meeting, will contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they are
made, not misleading.
SECTION 3.04. BROKERS AND FINDERS. EXCEPT AS DISCLOSED IN THE PARENT
DISCLOSURE SCHEDULE, NEITHER PARENT NOR MERGER SUBSIDIARY HAS ENTERED INTO ANY
CONTRACT, ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON OR FIRM WHICH MAY RESULT
IN THE OBLIGATION OF THE COMPANY TO PAY ANY INVESTMENT BANKING FEES, FINDER'S
FEES OR BROKERAGE FEES IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 3.05. Compliance with Applicable Laws. The businesses of Parent
and Merger Subsidiary are not being conducted in violation of any law, ordinance
or regulation of any governmental entity which violation, insofar as reasonably
can be foreseen, would prevent or materially impair the consummation by Parent
and Merger Subsidiary of the Merger and the transactions contemplated hereby. As
of the date of this Agreement, no investigation or review by any governmental
entity with respect to Parent and Merger Subsidiary is pending or, to the
knowledge of Parent and Merger Subsidiary, threatened, nor has any governmental
entity indicated an intention to conduct the same which investigation or review,
insofar as reasonably can be foreseen, would prevent or materially impair the
consummation by Parent and Merger Subsidiary of the Merger and the transactions
contemplated hereby.
Section 3.06. Litigation. There is no suit, action or proceeding pending
or, to the knowledge of Parent, threatened against or affecting Parent or any of
its subsidiaries, which, if determined adversely to Parent or any of its
subsidiaries and insofar as reasonably can be foreseen, would prevent or
materially impair the consummation by Parent of the Merger and the transactions
contemplated hereby; nor is there any judgment, decree, writ, injunction, rule
or order of any governmental entity or arbitrator outstanding against Parent or
any of its subsidiaries which judgment, decree, writ, injunction, rule or order,
insofar as reasonably can be foreseen, would prevent or materially impair the
consummation by Parent of the Merger and the transactions contemplated hereby.
Section 3.07. Ownership and Interim Operations. The Merger Subsidiary was
formed solely for the purpose of engaging in the transactions contemplated
hereby and has engaged in no other business activities and has conducted its
operations only as contemplated by this Agreement. The Merger Subsidiary is, and
immediately prior to the Effective Time will be, directly and wholly owned by
Parent. Merger Subsidiary does not own, and at all times from and after the date
hereof and prior to the Effective Time will continue not to own, any asset other
than an amount of cash necessary for its due incorporation and good standing and
to pay the fees and expenses of the Merger attributable to it if the Merger is
consummated or otherwise required pursuant to the terms of this Agreement and
any other assets as are reasonably necessary for the
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Merger Subsidiary to fulfill its obligations with respect to the transactions
contemplated by this Agreement.
Section 3.08. Organizational Instruments. Parent heretofore has furnished
to the Company complete and correct copies of the respective organizational and
constituent instruments and documents of Parent and Merger Subsidiary, in each
case as amended or restated to the date hereof. Neither Parent nor Merger
Subsidiary is in violation of any material provisions of its respective
organizational and constituent instruments and documents.
Section 3.09. Disclosure. No representation or warranty made by Parent or
Merger Subsidiary in this Agreement and no statement of Parent or Merger
Subsidiary contained in any certificate delivered by Parent or Merger Subsidiary
pursuant to this Agreement, contains or will contain any untrue statement of a
material fact or omits or will omit any material fact necessary to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading. For purposes of this Section 3.09, the term
"material" shall be measured by reference to Parent and its subsidiaries,
considered as an entirety.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Subsidiary that,
except as set forth in the disclosure schedule dated as of the date hereof and
signed by an authorized officer of the Company (the "Company Disclosure
Schedule"), it being agreed that disclosure of any item on the Company
Disclosure Schedule shall be deemed disclosure with respect to all Sections of
this Agreement if the relevance of such item is reasonably apparent from the
face of the Company Disclosure Schedule:
Section 4.01. Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of Ohio and
has the requisite corporate power and authority to own, lease and operate its
assets and properties and to carry on its business as it is now being conducted.
The Company is qualified to transact business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing would not
reasonably be expected to have a Company Material Adverse Effect (as hereinafter
defined). The term "Company Material Adverse Effect" means an effect or effects
that are materially adverse to (i) the business, financial condition, or ongoing
operations or prospects of the Company and its subsidiaries, taken as a whole,
or (ii) has a materially adverse effect on the ability of the Company to
consummate the Merger or the ability of the Parties hereto to retain any
Material Racing License (as hereinafter defined). True, accurate and complete
copies of the Company's articles of incorporation and bylaws, in each case as in
effect on the date hereof, including all
15
amendments thereto, have heretofore been delivered to Parent. The term "Material
Racing License" means a license or similar authorization without which Parent or
the Company, as the case may be, would be prohibited from operating any of its
properties in the manner in which they are being operated on the date hereof.
Section 4.02. Capitalization.
(a) The authorized capital stock of the Company consists of
3,600,000 shares of Common Stock. As of the close of business on the
date hereof: (i) 595,767 shares of Common Stock are issued and
outstanding all of which shares are validly issued and are fully
paid, nonassessable and free of preemptive rights, (ii) 3,004,233
shares of Common Stock are authorized but unissued, (iii) no shares
of Common Stock are reserved for issuance upon exercise of Options
issued and outstanding, (iv) No options to purchase shares of Common
Stock are issued and outstanding. Since July 31, 2002, (i) no shares
of capital stock of the Company have been issued, and (ii) no
options, warrants, securities convertible into, or commitments with
respect to the issuance of shares of capital stock of the Company
have been issued, granted or made.
(b) Except as set forth in Section 4.02(a) and Section 4.02(a) of
the Company Disclosure Schedule, as of the date hereof, there are no
outstanding subscriptions, options, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding
security, instrument or other agreement and including any rights
plan or other anti-takeover agreement, obligating the Company or any
subsidiary of the Company to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of the capital stock of
the Company or obligating the Company or any subsidiary of the
Company to grant, extend or enter into any such agreement or
commitment. Except as set forth in Section 4.02(a) there are no
outstanding stock appreciation rights or similar derivative
securities or rights of the Company or any of its subsidiaries.
Except as disclosed in the SEC Reports (as defined in Section 4.05)
or as otherwise contemplated by this Agreement, there are no voting
trusts, irrevocable proxies or other agreements or understandings to
which the Company or any subsidiary of the Company is a party or is
bound with respect to the voting of any shares of capital stock of
the Company.
Section 4.03. Subsidiaries. Each direct and indirect subsidiary of the
Company is duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization and has the requisite power
and authority to own, lease and operate its assets and properties and to carry
on its business as it is now being conducted and each subsidiary of the Company
is qualified to transact business, and is in good standing, in each jurisdiction
in which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary; except, in all
cases, where the failure to be so organized, existing, qualified or in good
standing would not reasonably be expected to have a Company Material Adverse
16
Effect. All of the outstanding shares of capital stock of or other equity
interests in each subsidiary of the Company are validly issued, fully paid,
nonassessable and free of preemptive rights, as applicable. There are no
subscriptions, options, warrants, rights, calls, contracts or other commitments,
understandings, restrictions or arrangements relating to the issuance or sale
with respect to any shares of capital stock of or other equity interests in any
subsidiary of the Company, including any right of conversion or exchange under
any outstanding security, instrument or agreement. For purposes of this
Agreement, the term "subsidiary" means, with respect to any specified person
(the "Owner") any other person of which more than 50% of the total voting power
of shares of capital stock or other equity interests entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers, trustees or other governing body thereof is at the time owned or
controlled, directly or indirectly, by such Owner or one or more of the other
subsidiaries of such Owner.
Section 4.04. Authority; Non-Contravention; Approvals.
(a) The Company has the requisite corporate power and authority to
enter into this Agreement and, subject to the Company Shareholders'
Approval (as defined in Section 6.01(a)) with respect solely to the
Merger, to consummate the transactions contemplated hereby. This
Agreement and the Merger have been approved and adopted by the board
of directors of the Company, and no other corporate proceedings on
the part of the Company are necessary to authorize the execution and
delivery of this Agreement or, except for the Company Shareholders'
Approval with respect solely to the Merger, the consummation by the
Company of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by the Company, and, assuming the
due authorization, execution and delivery hereof by Parent and
Merger Subsidiary, constitutes a valid and legally binding agreement
of the Company, enforceable against the Company in accordance with
its terms, except that such enforcement may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles.
(b) The execution, delivery and performance of this Agreement by the
Company and the consummation of the Merger and the transactions
contemplated hereby do not and will not violate, conflict with or
result in a breach of any provision of, or constitute a default (or
an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of
termination or acceleration under, contractually require any offer
to purchase or any prepayment of any debt, or result in the creation
of any lien, security interest or encumbrance upon any of the
properties or assets of the Company or any of its subsidiaries under
any of the terms, conditions or provisions of (i) the respective
certificates of incorporation or bylaws of the Company or any of its
subsidiaries, (ii) any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any
17
court or governmental authority applicable to the Company or any of
its subsidiaries or any of their respective properties or assets,
subject, in the case of consummation, to obtaining (prior to the
Effective Time) the Company Required Statutory Approvals (as defined
in Section 4.04(c)) and the Company Shareholders' Approval, or (iii)
any Contract to which the Company or any of its subsidiaries is now
a party or by which the Company or any of its subsidiaries or any of
their respective properties or assets may be bound or affected,
subject, in the case of consummation, to obtaining (prior to the
Effective Time) consents required from commercial lenders, lessors
or other third parties as specified in Section 4.04(b) of the
Company Disclosure Schedule, except, with respect to any items
referred to in clause (ii) or (iii), for any such violation,
conflict, breach, default, termination, acceleration or creation of
liens, security interests or encumbrances that would not,
individually or in the aggregate, have a Company Material Adverse
Effect and would not prevent or materially delay the consummation of
the Merger.
(c) Except for (i) the filings, if any, by Parent required by the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), (ii) any applicable filings with the SEC pursuant
to the Exchange Act, (iii) filing of the Articles of Merger with the
Commission, (iv) any filings with or approvals from authorities
required solely by virtue of the jurisdictions in which Parent or
its subsidiaries conduct any business or own any assets, and (v)
filings with and approvals in respect of the Racing Laws (the
filings and approvals referred to in clauses (i) through (v) and
those disclosed in Section 4.04(c) of the Company Disclosure
Schedule being collectively referred to as the "Company Required
Statutory Approvals"), no declaration, filing or registration with,
or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the
execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby,
other than such declarations, filings, registrations, notices,
authorizations, consents or approvals which, if not made or
obtained, as the case may be, would not individually or in the
aggregate have a Company Material Adverse Effect and would not
prevent or materially delay the consummation of the Merger.
Section 4.05. Reports and Financial Statements. Since January 1, 1998, the
Company has filed with the SEC all forms, statements, reports and documents
(including all exhibits, post-effective amendments and supplements thereto)
(collectively, the "SEC Reports") required to be filed by it under each of the
Securities Act, the Exchange Act and the respective rules and regulations
promulgated thereunder, all of which, as amended if applicable, complied when
filed in all material respects with all requirements of the applicable act and
the rules and regulations promulgated thereunder. As of their respective dates,
the SEC Reports did not contain any untrue statement of a material fact or omit
to state a material fact required to make the statements therein, in the light
of the circumstances under which they were made, not misleading. The audited
consolidated financial statements of the Company (the
18
"Company Financial Statements") included in the Company's Annual Report on Form
10-K for the year ended October 31, 2001 as filed with the SEC have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis (except as may be indicated therein or in the notes thereto)
and fairly present in all material respects the financial position of the
Company and its subsidiaries as of the dates thereof and the results of their
operations and changes in financial position for the periods then ended.
Section 4.06. Absence of Undisclosed Liabilities. Except as disclosed in
the SEC Reports or the Company Disclosure Schedule, neither the Company nor any
of its subsidiaries had at October 31, 2001 or July 31, 2002 or has incurred
since July 31, 2002 and as of the date hereof, any liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of any nature, except (a)
liabilities, obligations or contingencies (i) which are accrued or reserved
against in the Company Financial Statements or reflected in the notes thereto,
or (ii) which were incurred after July 31, 2002 in the ordinary course of
business and consistent with past practice, (b) liabilities, obligations or
contingencies which (i) would not, individually or in the aggregate, have a
Company Material Adverse Effect, or (ii) have been discharged or paid in full
prior to the date hereof in the ordinary course of business, and (c)
liabilities, obligations and contingencies which are of a nature not required to
be reflected in the consolidated financial statements of the Company and its
subsidiaries prepared in accordance with generally accepted accounting
principles consistently applied.
Section 4.07. Absence of Certain Changes or Events. Since the date of the
most recent SEC Report filed prior to the date of this Agreement that contains
consolidated financial statements of the Company, there has not been any Company
Material Adverse Effect.
Section 4.08. Litigation. Except as referred to in the SEC Reports or
Section 4.08 of the Company Disclosure Schedule, there are no claims, suits,
actions or proceedings pending or, to the knowledge of the Company, threatened
against, relating to or affecting the Company or any of its subsidiaries, before
any court, governmental department, commission, agency, instrumentality or
authority, or any arbitrator that would, individually or in the aggregate, have
a Company Material Adverse Effect. Except as referred to in the SEC Reports,
neither the Company nor any of its subsidiaries is subject to any judgment,
decree, injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or authority, or any arbitrator that
prohibits the consummation of the transactions contemplated hereby or would
reasonably be expected, individually or in the aggregate, to have a Company
Material Adverse Effect.
Section 4.09. Proxy Statement and Other SEC Filings. None of the
information to be supplied by the Company or any of its subsidiaries for
inclusion in the Proxy Statement at the time of the mailing thereof, or any
Registration Statement or related filing to be made by Parent, or any amendment
or supplement thereto at the time of final filing thereof or any amendment or
supplement thereto with the SEC, and at the time of
19
the Special Meeting will contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which
they are made, not misleading. The Proxy Statement will comply in all material
respects with all applicable laws, including, but not limited to, the provisions
of the Exchange Act and the rules and regulations promulgated thereunder, except
that no representation is made by the Company with respect to information
supplied by Parent, Merger Subsidiary or any stockholder of Parent for inclusion
therein.
Section 4.10. No Violation of Law. Except as disclosed in the SEC Reports
or Section 4.10 of the Company Disclosure Schedule, neither the Company nor any
of its subsidiaries is in violation of or has been given written, or oral,
notice of any violation of, any law, statute, order, rule, regulation, ordinance
or judgment (including, without limitation, any applicable environmental law,
ordinance or regulation) of any governmental or regulatory body or authority,
except for violations which would not reasonably be expected, individually or in
the aggregate, to have a Company Material Adverse Effect. Except as disclosed in
the SEC Reports or Section 4.10 of the Company Disclosure Schedule, no
investigation or review by any governmental or regulatory body or authority is
pending or threatened, nor has any governmental or regulatory body or authority
indicated an intention to conduct the same, other than, in each case, those the
outcome of which would not reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect. The Company and its
subsidiaries are not in material violation of the terms of any material permit,
license, franchise, variance, exemption, order or other governmental
authorization, consent or approval necessary to conduct their businesses as
presently conducted (collectively, the "Company Permits"), except for delays in
filing reports or violations which would not reasonably be expected,
individually or in the aggregate, to have a Company Material Adverse Effect.
Section 4.11. Compliance with Agreements. Except as disclosed in the SEC
Reports or Section 4.11 of the Company Disclosure Schedule, neither the Company
nor any of its subsidiaries is in breach, violation or default in the
performance or observance of any term or provision of, and, to the knowledge of
the Company's executive officers, no event has occurred which, with lapse of
time or action by a third party, would result in a default under, any Contract
to which the Company or any of its subsidiaries is a party or by which any of
them is bound or to which any of their property is subject, other than breaches,
violations and defaults which would not, individually or in the aggregate, have
a Company Material Adverse Effect. The Company's insurance policies relating to
directors' and officers' liability are in full force and effect.
Section 4.12. Taxes.
(a) The Company and its subsidiaries have (i) duly filed with the
appropriate governmental authorities all Tax Returns (as defined in
Section 4.12(c)) required to be filed by them, and such Tax Returns
are true, correct and complete, and (ii) duly paid in full or
reserved in accordance with generally
20
accepted accounting principles on the Company Financial Statements
all Taxes (as defined in Section 4.12(c)) required to be paid,
except in each such case as would not, individually or in the
aggregate, have a Company Material Adverse Effect. Except as would
not, individually or in the aggregate, have a Company Material
Adverse Effect, there are no liens for Taxes upon any property or
asset of the Company or any subsidiary thereof, other than liens for
Taxes not yet due or Taxes contested in good faith and reserved
against in accordance with generally accepted accounting principles.
There are no unresolved issues of law or fact arising out of a
notice of deficiency, proposed deficiency or assessment from the
Internal Revenue Service (the "IRS") or any other governmental
taxing authority with respect to Taxes of the Company or any of its
subsidiaries which would individually or in the aggregate, have a
Company Material Adverse Effect. Except as would not, individually
or in the aggregate, have a Company Material Adverse Effect, neither
the Company nor any of its subsidiaries has agreed to an extension
of time with respect to a Tax deficiency, other than extensions
which are no longer in effect. Except as would not, individually or
in the aggregate, have a Company Material Adverse Effect, neither
the Company nor any of its subsidiaries is a party to any agreement
providing for the allocation or sharing of Taxes with any entity
that is not, directly or indirectly, a wholly owned subsidiary of
the Company, other than agreements the consequences of which are
fully and adequately reserved for in the Company Financial
Statements.
(b) Except as would not, individually or in the aggregate, have a
Company Material Adverse Effect, the Company and each of its
subsidiaries has withheld or collected and has paid over to the
appropriate governmental entities (or is properly holding for such
payment) all material Taxes required to be collected or withheld.
(c) For purposes of this Agreement, "Taxes" means all federal,
state, local and foreign income, profits, franchise, gross receipts,
environmental, customs duty, capital stock, communications services,
severance, stamp, payroll, sales, employment, unemployment,
disability, use, property, withholding, excise, production, value
added, occupancy and other taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties and
additions imposed with respect to such amounts and any interest in
respect of such penalties and additions, and includes any liability
for Taxes of another person by contract, as a transferee or
successor, under Treasury Regulation 1.1502-6 or analogous state,
local or foreign law provision or otherwise, and "Tax Return" means
any return, report or similar statement (including attached
schedules) required to be filed with respect to any Tax, including,
without limitation, any information return, claim for refund,
amended return or declaration of estimated Tax.
21
Section 4.13. Employee Benefit Plans; ERISA.
(a) The SEC Reports and the Company Disclosure Schedule set forth
each material employee or director benefit plan, arrangement or
agreement, including, without limitation, any employee welfare
benefit plan within the meaning of Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), any
employee pension benefit plan within the meaning of Section 3(2) of
ERISA (whether or not such plan is subject to ERISA) and any bonus,
incentive, deferred compensation, vacation, stock purchase, stock
option, severance, employment, change of control or fringe benefit
plan, program or agreement (excluding any multi-employer plan as
defined in Section 3(37) of ERISA (a "Multi-employer Plan") and any
multiple employer plan within the meaning of Section 413(c) of the
Internal Revenue Code of 1986, as amended (the "Code")) that is
sponsored, maintained or contributed to by the Company or any of its
subsidiaries or by any trade or business, whether or not
incorporated, all of which together with the Company would be deemed
a "single employer" within the meaning of Section 4001 of ERISA
(collectively, the "Company Plans").
(b) Except as disclosed in the SEC Reports or in the Company
Disclosure Schedule, (i) there have been no prohibited transactions
within the meaning of Section 406 or 407 of ERISA or Section 4975 of
the Code with respect to any of the Company Plans that could result
in penalties, taxes or liabilities which would individually or in
the aggregate, have a Company Material Adverse Effect, (ii) no
Company Plan is subject to Title IV of ERISA, (iii) each of the
Company Plans has been operated and administered in accordance with
all applicable laws during the period of time covered by the
applicable statute of limitations, except for failures to comply
which would not, individually or in the aggregate, have a Company
Material Adverse Effect, (iv) each of the Company Plans which is
intended to be "qualified" within the meaning of Section 401(a) of
the Code has been determined by the IRS to be so qualified and such
determination has not been revoked by failure to satisfy any
condition thereof or by a subsequent amendment thereto or a failure
to amend, except that it may be necessary to make additional
amendments retroactively to maintain the "qualified" status of such
Company Plans, and the period for making any such necessary
retroactive amendments has not expired, (v) to the knowledge of the
Company and its subsidiaries, there are no pending, threatened or
anticipated claims involving any of the Company Plans other than
claims for benefits in the ordinary course or claims which would not
reasonably be expected, individually or in the aggregate, to have a
Company Material Adverse Effect, (vi) no Company Plan provides
post-retirement medical benefits to employees or directors of the
Company or any of its subsidiaries beyond their retirement or other
termination of service, other than coverage mandated by applicable
law, (vii) all material contributions or other amounts payable by
the Company or its subsidiaries as of the date hereof with respect
to each Company Plan in respect of current or prior plan
22
years have been paid or accrued in accordance with generally
accepted accounting principles, (viii) with respect to each
Multi-employer Plan contributed to by the Company, to the knowledge
of the Company and its subsidiaries, as of the date hereof, none of
the Company or any of its subsidiaries has received any notification
that any such Multi-employer Plan is in reorganization, has been
terminated or is insolvent, (ix) the Company and each of its
subsidiaries has complied in all respects with the Worker Adjustment
and Retraining Notification Act, except for failures which would
not, individually or in the aggregate, have a Company Material
Adverse Effect, and (x) no act, omission or transaction has occurred
with respect to any Company Plan that has resulted or could result
in any liability of the Company or any subsidiary under Section 409
or 502(c)(1) of ERISA or Chapter 43 of Subtitle (A) of the Code,
except for liabilities which would not, individually or in the
aggregate, have a Company Material Adverse Effect.
(c) Except as set forth in the Company Disclosure Schedule, and
excluding payments in respect of outstanding Options or Common
Stock, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result
in any payment (including, without limitation, any severance or
"excess parachute payment" (within the meaning of Section 280G of
the Code)) becoming due to any director or employee of the Company
or any of its subsidiaries under any Company Plan, (ii) increase any
benefits otherwise payable under any Company Plan, or (iii) result
in any acceleration of the time of payment or vesting of any such
benefits.
Section 4.14. Labor Controversies. Except as disclosed in the SEC Reports,
(a) there are no significant controversies pending or, to the knowledge of the
Company, threatened between the Company or any of its subsidiaries and any
representatives (including unions) of any of their employees, and (b) to the
knowledge of the Company, there are no organizational efforts presently being
made involving any of the presently unorganized employees of the Company or any
of its subsidiaries. Further, the Company has a valid, enforceable contract with
the organization representing its horsemen that does not expire until December
1, 2012.
Section 4.15. Environmental Matters.
(a) Except as disclosed in the SEC Reports or Section 4.15 of the
Company Disclosure Schedule, (i) the Company and its subsidiaries
have conducted their respective businesses in compliance with all
applicable Environmental Laws, including, without limitation, having
all permits, licenses and other approvals and authorizations
necessary for the operation of their respective businesses as
presently conducted, (ii) none of the properties owned by the
Company or any of its subsidiaries contain any Hazardous Substance
(as defined in Section 4.15(c)) in amounts exceeding the levels
permitted by applicable Environmental Laws (as defined in Section
4.15(b)), (iii) since
23
January 1, 1992, neither the Company nor any of its subsidiaries has
received any notices, demand letters or requests for information
from any Federal, state, local or foreign governmental entity
indicating that the Company or any of its subsidiaries may be in
violation of, or liable under, any Environmental Law in connection
with the ownership or operation of their businesses, (iv) there are
no civil, criminal or administrative actions, suits, demands,
claims, hearings, investigations or proceedings pending or, to the
Company's knowledge, threatened, against the Company or any of its
subsidiaries relating to any violation, or alleged violation, of any
Environmental Law, (v) no Hazardous Substance has been disposed of,
released or transported in violation of any applicable Environmental
Law from any properties owned by the Company or any of its
subsidiaries as a result of any activity of the Company or any of
its subsidiaries during the time such properties were owned, leased
or operated by the Company or any of its subsidiaries, and (vi)
neither the Company, its subsidiaries nor any of their respective
properties are subject to any liabilities or expenditures (fixed or
contingent) relating to any suit, settlement, court order,
administrative order, regulatory requirement, judgment or claim
asserted or arising under any Environmental Law, except for
violations of the foregoing clauses (i) through (vi) that would not,
individually or in the aggregate, have a Company Material Adverse
Effect.
(b) As used herein, "Environmental Law" means any federal, state,
local or foreign law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, legal doctrine,
order, judgment, decree, injunction, requirement or agreement with
any governmental entity relating to (x) the protection, preservation
or restoration of the environment (including, without limitation,
air, water vapor, surface water, groundwater, drinking water supply,
surface land, subsurface land, plant and animal life or any other
natural resource) or to human health or safety, or (y) the exposure
to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release
or disposal of Hazardous Substances, in each case as amended and as
in effect at the Effective Time. The term "Environmental Law"
includes, without limitation, (i) the Federal Comprehensive
Environmental Response Compensation and Liability Act of 1980, the
Superfund Amendments and Reauthorization Act, the Federal Water
Pollution Control Act of 1972, the Federal Clean Air Act, the
Federal Clean Water Act, the Federal Resource Conservation and
Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments thereto), the Federal Solid Waste Disposal Act and the
Federal Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act, and the Federal Occupational Safety
and Health Act of 1970, each as amended and as in effect at the
Effective Time, and (ii) any common law or equitable doctrine
(including, without limitation, injunctive relief and tort doctrines
such as negligence, nuisance, trespass and strict liability) that
may impose liability or obligations for injuries or damages arising
from or threatened as a result of, the presence of, effects of or
exposure to any Hazardous Substance.
24
(c) As used herein, "Hazardous Substance" means any substance
presently or hereafter listed, defined, designated or classified as
hazardous, toxic, radioactive, or dangerous, or otherwise regulated,
under any Environmental Law. Hazardous Substance includes any
substance to which exposure is regulated by any government authority
or any Environmental Law including, without limitation, any toxic
waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance or petroleum or
any derivative or by-product thereof, radon, radioactive material,
asbestos, or asbestos-containing material, urea formaldehyde foam
insulation, lead or polychlorinated biphenyls.
Section 4.16. Title to Assets. The Company and each of its subsidiaries
has good and valid title in fee simple to all its real property and good title
to all its leasehold interests and other properties, as reflected in the most
recent balance sheet included in the Company Financial Statements, except for
properties and assets that have been disposed of in the ordinary course of
business since the date of such balance sheet, free and clear of all mortgages,
liens, pledges, options, charges, rights or encumbrances of any nature
whatsoever, except (i) the lien for current taxes, payments of which are not yet
delinquent, (ii) such imperfections in title and easements and encumbrances, if
any, as are not substantial in character, amount or extent and do not materially
detract from the value, or interfere with the present use of the property
subject thereto or affected thereby, or otherwise materially impair the
Company's business operations (in the manner presently carried on by the
Company), or (iii) as disclosed in the SEC Reports, or Section 4.16 of the
Company Disclosure Schedule, and except for such matters which would not
reasonably be expected individually or in the aggregate to have a Company
Material Adverse Effect. All leases under which the Company or any of its
subsidiaries leases any real or personal property are in good standing, valid
and effective in accordance with their respective terms, and there is not, under
any of such leases, any existing default or event which with notice or lapse of
time or both would become a default other than failures to be in good standing
and defaults under such leases which would not reasonably be expected,
individually or in the aggregate, to have a Company Material Adverse Effect.
Section 4.17. Company Shareholders' Approval. The affirmative vote of
shareholders of the Company required for approval and adoption of this Agreement
and the Merger is more than sixty-six and two-thirds percent (66.666%) of the
outstanding shares of the Common Stock.
Section 4.18. Brokers and Finders. The Company has not entered into any
contract, arrangement or understanding with any person or firm which may result
in the obligation of the Company to pay any finder's fees or brokerage fees in
connection with the transactions contemplated hereby.
Section 4.19. Financial Advisors. The Company has not entered into any
contract, arrangement or understanding with any person or firm which may result
in the
25
obligation of the Company to pay any financial advisory fees in connection with
the transactions contemplated hereby, except as set forth in the Company
Disclosure Schedule.
ARTICLE V
COVENANTS
Section 5.01. Conduct of Business by the Company Pending the Merger.
Except as otherwise contemplated by this Agreement or disclosed in Section 5.01
of the Company Disclosure Schedule, after the date hereof and prior to the
Effective Time or earlier termination of this Agreement, unless Parent shall
otherwise agree in writing, the Company shall, and shall cause its subsidiaries
to:
(a) conduct their respective businesses in the ordinary and usual
course of business and in a manner substantially consistent with
past practice;
(b) not (i) amend or propose to amend their respective articles of
incorporation or bylaws or equivalent constitutional documents, (ii)
split, combine or reclassify their outstanding capital stock, or
(iii) declare, set aside or pay any dividend or distribution payable
in cash, stock, property or otherwise, except for the payment of
dividends or distributions to the Company or a wholly owned
subsidiary of the Company by a direct or indirect wholly owned
subsidiary of the Company;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options,
warrants or rights of any kind to acquire any shares of, their
capital stock of any class or any debt or equity securities
convertible into or exchangeable for any such capital stock, except
that the Company may issue shares upon the exercise of Options
outstanding on the date hereof;
(d) not (i) incur or become contingently liable with respect to
any indebtedness for borrowed money other than (A) borrowings
in the ordinary course of business or borrowings under the
existing credit facilities of the Company or of any of its
subsidiaries up to the existing borrowing limit on the date
hereof, and (B) borrowings to refinance existing indebtedness
on terms which are reasonably acceptable to Parent; provided
that in no event shall aggregate indebtedness of the Company
and its subsidiaries, net of all cash and cash equivalents,
exceed Two Million, Seven Hundred Seventy-Five Thousand
Dollars ($2,775,000.00), (ii) redeem, purchase, acquire or
offer to purchase or acquire any shares of its capital stock
or any options, warrants or rights to acquire any of its
capital stock or any security convertible into or exchangeable
for its capital stock other than in connection with the
exercise of outstanding Options
26
pursuant to the terms of the Company Plans, (iii) make any
acquisition of any assets or businesses other than
expenditures for current assets for fixed or capital assets in
each case in the ordinary course of business, (iv) without
Parent's consent, acquire any property, (v) sell, pledge,
dispose of or encumber any assets or businesses other than (A)
sales of businesses or assets disclosed in Section 5.01 of the
Company Disclosure Schedule, (B) pledges or encumbrances
pursuant to existing credit facilities or other permitted
borrowings, (C) sales or dispositions of businesses or assets
as may be required by applicable law, and (D) sales or
dispositions of assets in the ordinary course of business, or
(vi) enter into any binding contract, agreement, commitment or
arrangement with respect to any of the foregoing;
(e) use best efforts to preserve intact their respective business
organizations and goodwill, keep available the services of their
respective present officers and key employees, and use all
reasonable efforts to preserve the goodwill and business
relationships with customers and others having business
relationships with them other than as expressly permitted by the
terms of this Agreement;
(f) not enter into, amend, modify or renew any employment,
consulting, severance or similar agreement with, or grant any
salary, wage or other increase in compensation or increase in any
employee benefit to, any director or officer of the Company or of
any of its subsidiaries, except (i) for changes that are required by
applicable law, (ii) to satisfy obligations existing as of the date
hereof, or (iii) in the ordinary course of business consistent with
past practice;
(g) not enter into, establish, adopt, amend or modify any pension,
retirement, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee
benefit, incentive or welfare plan, agreement, program or
arrangement, in respect of any director, officer or employee of the
Company or of any of its subsidiaries, except, in each such case, as
may be required by applicable law or by the terms of contractual
obligations existing as of the date hereof, including any collective
bargaining agreement;
(h) not make expenditures in excess of expenditures permitted by the
Company's last budget approved by the Board of Directors, including,
but not limited to, capital expenditures, or enter into any binding
commitment or contract to make expenditures, except (i) expenditures
which the Company or its subsidiaries are currently contractually
committed to make, (ii) other expenditures not exceeding $50,000 in
each such case and $150,000 in the aggregate, (iii) for emergency
repairs and other expenditures necessary in light of circumstances
not anticipated as of the date of this Agreement which are necessary
to avoid significant disruption to the Company's business or
27
operations consistent with past practice (and, if reasonably
practicable, after consultation with Parent), or (iv) for repairs
and maintenance in the ordinary course of business consistent with
past practice; provided; however, that all expenditures under
Sections 1.10 of the Company Disclosure Schedule shall be permitted,
subject to the terms of this Agreement;
(i) not make, change or revoke any material Tax election unless
required by law or make any agreement or settlement with any taxing
authority regarding any material amount of Taxes or which would
reasonably be expected to materially increase the obligations of the
Company or the Surviving Corporation to pay Taxes in the future;
(j) maintain all existing insurance policies of the Company and any
of its subsidiaries in full force and effect.
Section 5.02. Control of the Company's Operations. Nothing contained in
this Agreement shall give to Parent, directly or indirectly, rights to control
or direct the Company's operations prior to the Effective Time. Prior to the
Effective Time, the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision of its
operations.
Section 5.03. Acquisition Transactions.
(a) In consideration of the Improvement Amount and Parent's due
diligence undertakings, after the date hereof and prior to the
Effective Time or earlier termination of this Agreement, the Company
shall not, and shall not permit any of its subsidiaries to,
initiate, solicit, negotiate, encourage or provide confidential
information to facilitate, and the Company shall use all reasonable
efforts to cause any officer, director or employee of the Company,
or any attorney, accountant, investment banker, financial advisor or
other agent retained by it or any of its subsidiaries, not to
initiate, solicit, negotiate, encourage or provide non-public or
confidential information to facilitate, any proposal or offer to
acquire all or any substantial part of the business, properties or
capital stock of the Company, whether by merger, purchase of assets,
tender offer or otherwise, whether for cash, securities or any other
consideration or combination thereof (any such transactions being
referred to herein as an "Acquisition Transaction").
(b) Company acknowledges that in the event of its breach of the
obligations set forth in this Section 5.03, Parent would suffer
damages that are difficult to quantify and not compensable by money
damages alone. Accordingly, Company hereby consents to the entry of
injunctive relief in favor of Parent in the event of breach of
provisions of this Section 5.03. Further, Parent shall be entitled
to an award of specific performance, it being understood that any
term of the transaction not specifically provided for herein may be
supplied by a court to be guided by reasonableness under all of the
circumstances. The
28
foregoing shall be without prejudice to Parent's right to seek
additional remedies as permitted by law.
Section 5.04. Access to Information; Due Diligence Review. The Company
shall provide Parent with copies of all operating statements generated by or for
the Company's management from the date hereof until the Effective Date, such
statements to be delivered to Parent on a prompt and timely basis (but in any
event within two (2) business days of availability). Parent shall have from the
date hereof a period of 30 days to determine the suitability of the transactions
contemplated hereby, in its sole and absolute discretion, provided, however,
that Parent shall be entitled to reasonable extensions (such extensions not to
exceed an aggregate of 30 days) to the extent necessary for third parties to
complete their studies or inspections of the Company, its property and other
assets (including, but not limited to, environmental, title and survey matters)
(the "Due Diligence Period"). In this regard, the Company shall grant Parent and
its agents a right of entry to Scioto Downs to obtain all information they may
reasonably request concerning the business, operations, and development
activities of Scioto Downs, including but not limited to access to personnel,
financial statements, appraisals, equipment lists, finance documents, corporate
organization documents of the Company, revenue sharing agreements involving
parimutuel wagering, management agreements and similar material contracts, Phase
I Environmental Studies, title reports, surveys, inspections, as-built drawings,
if any, and other engineering tests, and such other studies Parent deems
necessary and customary in connection with its evaluation of Scioto Downs and of
the Transaction. In addition, Parent may review all contracts as well as leases
and other ownership documents, review zoning ordinances, and governmental
regulations affecting Scioto Downs. Further, the Company will use its best
efforts to arrange meetings between Parent and any governmental (or
quasi-governmental) officials, vendors, Standardbred owners, union
representatives and creditors that Parent deems reasonably necessary for its
evaluation of Scioto Downs and the transactions contemplated hereby. Parent
agrees that it shall bear the cost and expense of its due diligence
investigation.
Section 5.05. Confidentiality. The Company, Parent and Merger Subsidiary
shall each insure that all non-public information which the Company, Parent
and/or Merger Subsidiary, any of their respective officers, directors,
employees, attorneys, agents, investment bankers, or accountants may now possess
or may hereafter create or obtain relating to the financial condition, results
of operations, business, properties, assets, liabilities, or future prospects of
the Company, Parent and/or Merger Subsidiary, any affiliate of any of them, or
any customer or supplier of any of them or any such affiliate, shall not be
published, disclosed, or made accessible by any of them to any other person or
entity at any time or used by any of them except pending the Closing in the
business and for the benefit of the Surviving Corporation; provided, however,
that the restrictions of this sentence shall not apply (a) as may otherwise be
required by law, (b) as may be necessary or appropriate in connection with the
enforcement of this Agreement, or (c) to the extent such information shall have
otherwise become publicly available. The Company, Parent and/or Merger
Subsidiary shall, and shall cause all other such persons and entities to,
deliver to the Parent all tangible evidence of such
29
non-public information to which the restrictions of the foregoing sentence apply
at the Closing or the earlier rightful termination of this Agreement.
Section 5.06. Notices of Certain Events.
(a) The Company shall as promptly as reasonably practicable after
executive officers of the Company acquire knowledge thereof, notify
Parent of: (i) any notice or other communication from any person
alleging that the consent of such person (or another person) is or
may be required in connection with the transactions contemplated by
this Agreement which consent relates to a material Contract to which
the Company or any of its subsidiaries is a party or which, if not
obtained, would materially delay consummation of the Merger; (ii)
any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and (iii) any actions, suits,
claims, investigations or proceedings commenced or, to its knowledge
threatened against, relating to or involving or otherwise affecting
the Company or any of its subsidiaries that, if pending on the date
of this Agreement, would have been required to have been disclosed
pursuant to Section 4.08 or 4.10 or which relate to the consummation
of the transactions contemplated by this Agreement.
(b) Each of Parent and Merger Subsidiary shall as promptly as
reasonably practicable after executive officers of Parent acquire
knowledge thereof, notify the Company of: (i) any notice or other
communication from any person alleging that the consent of such
person (or other person) is or may be required in connection with
the transactions contemplated by this Agreement which consent
relates to a material Contract to which Parent or any of its
subsidiaries is a party or which, if not obtained, would materially
delay the Merger, (ii) any notice or other communication from any
governmental or regulatory agency or authority in connection with
the transactions contemplated by this Agreement, and (iii) any
actions, suits, claims, investigations or proceedings commenced or,
to its knowledge, threatened against Parent or Merger Subsidiary,
which relate to consummation of the transactions contemplated by
this Agreement.
(c) Each of the Company, Parent and Merger Subsidiary agrees to give
prompt notice to each other of, and to use commercially reasonable
efforts to remedy, (i) the occurrence or failure to occur of any
event which occurrence or failure would be likely to cause any of
its representations or warranties in this Agreement to be untrue or
inaccurate at the Effective Time unless such failure or occurrence
would not have a Company Material Adverse Effect or a Parent
Material Adverse Effect, as the case may be, and (ii) any failure on
its part to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder unless
such failure or occurrence would not have a Company Material Adverse
Effect or a Parent Material Adverse Effect, as the case may be. The
delivery of any notice pursuant to this Section 5.05(c)
30
shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
(d) The Company shall promptly notify Parent after receipt of any
proposal or other offer with respect to any Acquisition Transaction
("Acquisition Proposal"), indication of interest or request for
non-public information relating to the Company or its subsidiaries
in connection with an Acquisition Proposal or for access to the
properties, books or records of the Company or any subsidiary by any
person or entity that informs the Board of Directors of the Company
or such subsidiary that it is considering making, or has made, an
Acquisition Proposal. Such notice to Parent shall be given orally
and in writing and shall indicate in reasonable detail the identity
of the offeror and the material terms and conditions of such
proposal, inquiry or contact.
Section 5.07. Meeting of the Company's Shareholders. The Company shall as
promptly as practicable after the date of this Agreement and the completion of
the Due Diligence Period take all action necessary in accordance with the Ohio
Revised Code, applicable state and federal securities laws, and the Company's
articles of incorporation and bylaws to convene the Special Meeting. The board
of directors of the Company shall recommend that the Company's shareholders vote
to approve the Merger and adopt this Agreement.
Section 5.08. Proxy Statement and Other SEC Filings. As promptly as
practicable after execution of this Agreement and the completion of the Due
Diligence Period, the Company shall prepare and file the Proxy Statement and any
other required SEC filings and use all commercially reasonable efforts to have
the Proxy Statement cleared by the SEC and the Parent shall file the Form S-4
and effect any other required filing (if required by applicable law) and use all
commercially reasonable efforts to have the S-4 and any other required filing
declared effective by the SEC. Parent, Merger Subsidiary and the Company shall
cooperate with each other in the preparation of the Proxy Statement and other
SEC filings and the Company shall notify Parent of the receipt of any comments
of the SEC with respect to the Proxy Statement and of any requests by the SEC
for any amendment or supplement thereto or for additional information and shall
provide promptly to Parent copies of all correspondence between the Company or
any representative of the Company and the SEC. The Company shall give Parent and
its counsel the opportunity to review the Proxy Statement prior to its being
filed with the SEC and shall give Parent and its counsel the opportunity to
review all amendments and supplements to the Proxy Statement and all responses
to requests for additional information and replies to comments prior to their
being filed with, or sent to, the SEC. Each of the Company, Parent and Merger
Subsidiary agrees to use its reasonable best efforts, after consultation with
the other parties hereto, to respond promptly to all such comments of and
requests by the SEC. As promptly as practicable after the Proxy Statement has
been cleared by the SEC, the Company shall mail the Proxy Statement to the
shareholders of the Company. Prior to the date of approval of the Merger by the
Company's shareholders, each of the Company, Parent and Merger Subsidiary shall
correct promptly any information provided by it to be used specifically in
31
the Proxy Statement that shall have become false or misleading in any material
respect and the Company shall take all steps necessary to file with the SEC any
amendment to the Proxy Statement so as to correct the same and to cause the
amended Proxy Statement to be disseminated to the Shareholders of the Company,
in each case to the extent required by applicable law.
Section 5.09. Public Announcements. Parent and the Company will consult
with each other before issuing any press release or making any public statement
with respect to this Agreement and the transactions contemplated hereby and,
except as may be required by applicable law, will not issue any such press
release or make any such public statement prior to such consultation.
Section 5.10. Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses.
Section 5.11. Agreement to Cooperate.
(a) Subject to the terms and conditions of this Agreement, including
Section 5.03, each of the parties hereto shall use all best efforts
to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable
laws and regulations including, but not limited to, the HSR Act and
the Racing Laws, to consummate and make effective the transactions
contemplated by this Agreement, including using its best efforts to
obtain all necessary or appropriate waivers, consents or approvals
of third parties required in order to preserve material contractual
relationships of Parent and the Company and their respective
subsidiaries, all necessary or appropriate waivers, consents and
approvals to effect all necessary registrations, filings and
submissions and to lift any injunction or other legal bar to the
Merger (and, in that case, to proceed with the Merger as
expeditiously as possible). In addition, subject to the terms and
conditions herein provided and subject to the fiduciary duties of
the respective boards of directors of the Company and Parent, none
of the parties hereto shall knowingly take or cause to be taken any
action which would reasonably be expected to delay materially or
prevent consummation of the Merger.
(b) Without limitation of the foregoing, each of Parent and the
Company undertakes and agrees to file as soon as practicable any
Notification and Report Form required under the HSR Act with the
United States Federal Trade Commission (the "FTC") and the Antitrust
Division of the United States Department of Justice (the "Antitrust
Division") and to make such filings and apply for such approvals and
consents as are required under the Racing Laws. Each of Parent and
the Company shall (i) respond as promptly as practicable to any
inquiries received from the FTC or the Antitrust Division or any
authority enforcing applicable Racing Laws for additional
information or
32
documentation and to all inquiries and requests received from any
State Attorney General or other governmental authority in connection
with antitrust matters or Racing Laws, and (ii) not extend any
waiting period under the HSR Act or enter into any agreement with
the FTC or the Antitrust Division not to consummate the transactions
contemplated by this Agreement, except with the prior written
consent of the other Parties hereto. Each party shall (i) promptly
notify the other party of any written communication to that party
from the FTC, the Antitrust Division, any State Attorney General or
any other governmental entity and, subject to applicable law, permit
the other party to review in advance any proposed written
communication to any of the foregoing; (ii) not agree to participate
in any substantive meeting or discussion with any governmental
authority in respect of any filings, investigation or inquiry
concerning this Agreement or the Merger unless it consults with the
other party in advance and, to the extent permitted by such
governmental authority, gives the other party the opportunity to
attend and participate thereat; and (iii) furnish the other party
with copies of all correspondence, filings, and communications (and
memoranda setting forth the substance thereof) between them and
their affiliates and their respective representatives on the one
hand, and any government or regulatory authority or members or their
respective staffs on the other hand, with respect to this Agreement
and the Merger.
Section 5.12. Track Business Contingent Earnout Payment. Track Business
Contingent Earnout Payment shall mean, for each of ten (10) calendar years
beginning on January 1 of the year next following the year in which the
Triggering Event (as defined below) occurs (the "Contingent Payment Period"), an
amount equal to ten percent (10%) of the amount by which EBITDA (defined below)
for the Company for each calendar year of the Contingent Payment Period exceeds
the annual EBITDA average for the Company for the three (3) fiscal years ending
October 31, 2000, 2001 and 2002 (the "Track Base"), provided, however, that the
Track Business Contingent Earnout Payment shall not be less than $2,000,000
annually, and provided further that if less than all the shares of Exchange
Stock are delivered to the Disbursing Agent subject to the election to receive
the Contingent Consideration under Section 1.04(b) of this Agreement, then the
Track Business Contingent Earnout Payment and such $2,000,000 amount shall be
reduced by a pro rated amount, which amount shall equal (x) 100% less (y) the
percentage of the Exchange Shares designated in all Notices of Election to
receive the Contingent Consideration. Not later than ten (10) business days
after EBITDA, and thus the amount of Track Business Contingent Earnout Payment
due for a particular calendar year, has been established, Parent will deposit
the Track Business Contingent Earnout Payment for that year with the Disbursing
Agent in trust for the benefit of the persons who held shares of Common Stock in
the Company as of the Record Date and elected to receive the Adjusted Merger
Consideration in cash or other immediately available funds. The Disbursement
Agent will disburse the Track Business Contingent Payment to those persons who
were record owners of the Company's Common Stock as of the Record Date (each a
"Prior Holder") in proportion to each such prior owner's percentage ownership of
the Company. Unless and until
33
there has been a Triggering Event, Parent shall have no obligations and no
person shall have any rights with respect to a Track Business Contingent
Payment. For purposes of this Agreement, Triggering Event shall mean (i) state
or federal legislation shall have been enacted that permits the Company to
operate enhanced forms of gaming not permitted by law as of the Effective Date,
exclusive of parimutuel or internet wagering, at Scioto Downs; and (ii) the
Company shall have in fact commenced operating such enhanced forms of gaming at
Scioto Downs. For purposes of the Track Business Contingent Payments described
above, the term "EBITDA" will mean, for any period, the Company's earnings
before interest, taxes, depreciation and amortization as determined by Parent's
independent auditors, whose determination shall be final, absent manifest error.
For purposes of establishing the Track Base, EBITDA will mean, for any period,
the Company's earnings before interest, taxes, depreciation and amortization as
determined by the Company's independent auditors, whose determination shall be
final, absent manifest error. Notwithstanding anything in this Agreement to the
contrary, no person shall have any right to any portion of a Track Business
Contingent Earnout Payment to the extent prohibited by applicable law, including
but not limited to the Racing Laws. In the event a governmental authority
determines that receipt of a portion of a Track Business Contingent Earnout
Payment is prohibited, absent receipt of a license issued by such governmental
authority, then for a period of one (1) year from the date of such determination
(the "Licensing Period"), the Disbursement Agent will continue to hold the Track
Business Contingent Earnout Payment in trust. During the Licensing Period, any
Prior Holder who obtains all necessary governmental approvals to receive a
portion of a Track Business Contingent Earnout Payment (each an "Eligible Prior
Holder") shall receive such Eligible Prior Holder's allocable share of the Track
Business Contingent Earnout Payment (calculated by multiplying such Eligible
Prior Holder's percentage ownership interest in the Company as of the Effective
Date by the amount of the Track Business Contingent Earnout Payment) promptly
upon providing to the Disbursing Agent evidence of such approvals in a form
reasonably satisfactory to Parent. Upon the expiration of the Licensing Period,
Parent shall be entitled to require the Disbursing Agent to deliver to it any
funds that had been made available to the Disbursing Agent and not disbursed to
Prior Holders (including, without limitation, all interest and other income
received by the Disbursing Agent in respect of all such funds). Upon expiration
of the Licensing Period, Parent shall deposit with the Disbursing Agent in trust
for the benefit of any Prior Holder who, during the Licensing Period shall not
have become an Eligible Prior Holder (each an "Ineligible Prior Holder") in cash
or other immediately available funds an amount equal to $15.00 per share of the
Company's Common Stock owned by such Ineligible Prior Holder as of the Effective
Date (the "Alternative Payment"). Upon disbursement of the Alternative Payment
by the Disbursing Agent, an Ineligible Prior Holder shall have no further rights
pursuant to Section 1.04(b) of this Agreement.
34
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.01. Conditions to the Obligations of Each Party. The obligations
of the Company, Parent and Merger Subsidiary to consummate the Merger are
subject to the satisfaction of the following conditions:
(a) this Agreement and the Merger shall have been adopted by the
requisite vote of the shareholders of the Company in accordance with
the Ohio Revised Code (the "Company Shareholders' Approval");
(b) none of the parties hereto shall be subject to any order or
injunction of any governmental authority of competent jurisdiction
that prohibits the consummation of the Merger. In the event any such
order or injunction shall have been issued, each party agrees to use
its reasonable best efforts to have any such order overturned or
injunction lifted;
(c) the waiting period applicable to consummation of the Merger
under the HSR Act, if applicable, shall have expired or been
terminated;
(d) the Company Proxy Statement on Schedule 14A shall be filed in
definitive form with the SEC, and any Registration Statement
required under applicable law with respect to the Contingent
Consideration shall have been declared effective by the SEC, and
shall not be the subject of any stop order or similar proceeding;
and
(e) Prior to the Closing, the Ohio Racing Commission shall have
approved the transactions contemplated hereby.
Section 6.02. Conditions to Obligation of the Company to Effect the
Merger. Unless waived by the Company, the obligation of the Company to effect
the Merger shall be subject to the fulfillment at or prior to the Effective Time
of the following additional conditions:
(a) Parent and Merger Subsidiary shall have performed in all
material respects their agreements contained in this Agreement
required to be performed on or prior to the Effective Time and the
representations and warranties of Parent and Merger Subsidiary
contained in this Agreement shall be true and correct on and as of
the Effective Time as if made at and as of such date (except to the
extent that such representations and warranties speak as of an
earlier date, and which need be true and correct as of such earlier
date) except for such failures to perform or to be true and correct
that would not have a Parent Material Adverse Effect, and the
Company shall have received a certificate of the chief executive
officer or the chief financial officer of Parent to that effect;
35
(b) all Parent Statutory Approvals and Company Statutory Approvals
required to be obtained in order to permit consummation of the
Merger under applicable law shall have been obtained, except for any
such Parent Statutory Approvals or Company Statutory Approvals the
unavailability of which would not, individually or in the aggregate
(i) have a Company Material Adverse Effect after the Effective Time,
or (ii) result in the Company or its subsidiaries failing to meet
the standards for licensing, suitability or character under any
Racing Laws relating to the conduct of Parent's or the Company's
business which (after taking into account the anticipated impact of
such failure to so meet such standards on other authorities) would
have a Company Material Adverse Effect (after giving effect to the
Merger);
(c) The Parent shall have obtained the consent or approval to the
transactions contemplated by this Agreement of each person from whom
such consent or approval is required under any loan or credit
agreement, note, mortgage, indenture, lease or other agreement or
instrument to which the Parent is a party or by which it is bound
except where the failure to obtain such consents or approvals would
not, in the reasonable opinion of the Company, individually or in
the aggregate, have a Parent Material Adverse Effect, or materially
affect the consummation of the transactions contemplated hereby; and
(d) The Parent shall have obtained and segregated for payment to
the Company sufficient cash funds as required by the terms
hereof, to pay in full at the Effective Time, or promptly
thereafter, to the holders of the Common Stock, the Exchange
Funds and shall have deposited the Exchange Funds with the
Disbursing Agent pursuant to Section 1.05 hereof.
Section 6.03. Conditions to Obligations of Parent and Merger Subsidiary to
Effect the Merger. Unless waived by Parent and Merger Subsidiary, the
obligations of Parent and Merger Subsidiary to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the additional
following conditions:
(a) the Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on
or prior to the Effective Time and the representations and
warranties of the Company contained in this Agreement shall be true
and correct on and as of the Effective Time as if made at and as of
such date (except to the extent that such representations and
warranties speak as of an earlier date), except for such failures to
perform and to be true and correct that would not have a Company
Material Adverse Effect, and Parent shall have received a
certificate of the chief executive officer or the chief financial
officer of the Company to that effect;
36
(b) all Parent Statutory Approvals, Company Statutory Approvals,
licenses and permits required to be obtained in order to permit
consummation of the Merger and permit Parent to operate Scioto Downs
under applicable law shall have been obtained, except for any such
Parent Statutory Approvals or Company Statutory Approvals whose
unavailability would not (i) have a Parent Material Adverse Effect,
or (ii) result in Parent or its subsidiaries failing to meet the
standards for licensing, suitability or character under any Racing
Laws relating to the conduct of Parent's or the Company's business
which (after taking into account the anticipated impact of such
failure to so meet such standards on other authorities) would
reasonably be expected to have a Parent Material Adverse Effect
(after giving effect to the Merger);
(c) The Company, Parent and Merger Subsidiary shall have obtained
the consent or approval to the transactions contemplated by this
Agreement of each person from whom such consent or approval is
required under any loan or credit agreement, note, mortgage,
indenture, lease or other agreement or instrument to which any of
the Company, Parent or Merger Subsidiary is a party (including, but
not limited to, with respect to Parent and Merger Subsidiary, Xxxxx
Fargo Bank, N.A.,) or by which any of such parties is bound except
where the failure to obtain such consents or approvals would not, in
the reasonable opinion of the Parent, individually or in the
aggregate, have a Company Material Adverse Effect, or materially
affect the consummation of the transactions contemplated hereby; and
(d) shareholders of the Company owning not more than ten percent
(10%) in the aggregate of the Common Stock shall have exercised
dissenter's rights pursuant to Section 1701.85 of the Ohio Revised
Code.
ARTICLE VII
TERMINATION
Section 7.01. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (notwithstanding any approval
of this Agreement by the shareholders of the Company):
(i) by mutual written consent of the Company and Parent;
(ii) by either the Company or Parent, if the Merger has not been
consummated by December 31, 2003 provided that the right to
terminate this Agreement under this clause shall not be available to
any party whose failure to fulfill any of its obligations under this
Agreement has been the cause of or resulted in the failure to
consummate the Merger by such date;
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(iii) by either the Company or Parent if any judgment, injunction,
order or decree of a court or governmental agency or authority of
competent jurisdiction shall restrain or prohibit the consummation
of the Merger, and such judgment, injunction, order or decree shall
become final and nonappealable and was not entered at the request of
the terminating party;
(iv) by either the Company or Parent, if (x) there has been a breach
by the other party of any representation or warranty contained in
this Agreement which would reasonably be expected to have a Company
Material Adverse Effect or a Parent Material Adverse Effect, as
applicable, or prevent or delay the consummation of the Merger
beyond December 31, 2003, and which has not been cured in all
material respects within 30 days after written notice of such breach
by the terminating party, or (y) there has been a breach of any of
the covenants or agreements set forth in this Agreement on the part
of the other party, which would reasonably be expected to have a
Parent Material Adverse Effect or a Company Material Adverse Effect,
as applicable, or prevent or delay the consummation of the Merger
beyond December 31, 2003, and which breach is not curable or, if
curable, is not cured within 30 days after written notice of such
breach is given by the terminating party to the other party;
(v) by the Parent, if the board of directors of the Company shall
have failed to recommend, or shall have withdrawn, modified or
amended in any material respect its approval or recommendation of
the Merger or shall have resolved to do any of the foregoing, or
shall have recommended another Acquisition Proposal or if the Board
of Directors of the Company shall have recommended to the
shareholders of the Company that they tender their shares in a
tender or an exchange offer commenced by a third party (excluding
any affiliate of Parent or any group of which any affiliate of
Parent is a member);
(vi) by Parent or the Company if the shareholders of the Company
fail to approve the Merger at a duly held meeting of shareholders
called for such purpose (including any adjournment or postponement
thereof);
(vii) by Parent for Cause or at any time during the Due Diligence
Period or thereafter; or
(viii) by Parent without Cause at any time during the Due Diligence
Period.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company pursuant to Article VII, this
Agreement
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shall forthwith become void and there shall be no liability or further
obligation on the part of the Company, Parent, Merger Subsidiary or their
respective officers or directors (except as set forth in this Section 8.01,
Section 1.10(c), Section 5.03(b) and Section 5.10, all of which shall survive
the termination). Nothing in this Section 8.01 shall relieve any party from
liability for any breach of any representation, warranty, covenant or agreement
of such party contained in this Agreement.
Section 8.02. Nonsurvival of Representations and Warranties. No
representation, warranty or agreement in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Merger, and after
effectiveness of the Merger neither the Company, Parent, Merger Subsidiary nor
any of their respective officers or directors shall have any further obligation
with respect thereto except for the agreements contained in Articles I, II and
VIII and Section 5.10.
Section 8.03. Notices. All notices and other communications hereunder
shall be in writing and shall be considered given upon receipt if delivered
personally, mailed by registered or certified mail (return receipt requested) or
sent via facsimile to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice): If to the Company:
Xxxxxx X. Xxxx
Scioto Downs, Inc.
0000 Xxxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Tel: 000-000-0000
Fax: 000-000-0000
With a copy to:
Xxxx X. Xxxxxxx, Esq.
Xxxxxxx, Xxxxxxx & Xxxxx LLP
Attorneys and Counselors at Law
00 X. Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
If to Parent or Merger Subsidiary:
Xxxxx X. Xxxxxxxx
MTR Gaming Group, Inc.
Xxxxx Xxxxx 0 Xxxxx
X.X. Xxx 000
Xxxxxxx, Xxxx Xxxxxxxx 00000
Tel: 000-000-0000
Fax: 000-000-0000
39
with a copy to:
Xxxxx & Xxxxxxx, LLP
0000 X Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Tel: 000-000-0000
Fax: 000-000-0000
Attn: Xxxxx X. Xxxxxxx
Section 8.04. Interpretation. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. In this Agreement, unless a contrary intention
appears, (i) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision, (ii) "knowledge" shall mean actual
knowledge of the executive officers of the Company or Parent, as applicable, and
(iii) reference to any Article or Section means such Article or Section hereof.
Section 8.05. Miscellaneous. This Agreement (including the documents and
instruments referred to herein) shall not be assigned by operation of law or
otherwise except that Merger Subsidiary may assign its obligations under this
Agreement to any other wholly owned subsidiary of Parent subject to the terms of
this Agreement, in which case such assignee shall become the "Merger Subsidiary"
for all purposes of this Agreement. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF OHIO
WITHOUT GIVING EFFECT TO APPLICABLE CONFLICT OF LAWS PRINCIPLES.
Section 8.06. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be considered to be an original, but all of
which shall constitute one and the same agreement.
Section 8.07. Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived prior
to the Effective Time if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by the Company,
Parent and Merger Subsidiary or, in the case of a waiver, by the
party against whom the waiver is to be effective; however, any
waiver or amendment shall be effective against a party only if the
board of directors of such party approves such waiver or amendment.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided
40
shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 8.08. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersede all prior agreements, understandings and negotiations, both written
and oral, between the parties with respect to the subject matter of this
Agreement. No representation, inducement, promise, understanding, condition or
warranty not set forth herein has been made or relied upon by either party
hereto. Neither this Agreement nor any provision hereof is intended to confer
upon any person other than the parties hereto any rights or remedies hereunder
except for Articles I, II and Section 5.12, which is intended for the benefit of
the Company's shareholders.
Section 8.09. Severability. If any term or other provision of this
Agreement is invalid, illegal or unenforceable, all other provisions of this
Agreement shall remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.
Section 8.10. Specific Performance. The parties hereto agree that
irreparable damage would occur if any of the provisions of this Agreement were
not to be performed in accordance with the terms hereof and that the parties
shall be entitled to specific performance of the terms hereof in addition to any
other remedies at law or in equity.
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IN WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED THIS AGREEMENT TO BE DULY
EXECUTED BY THEIR RESPECTIVE AUTHORIZED OFFICERS AS OF THE DAY AND YEAR FIRST
ABOVE WRITTEN.
SCIOTO DOWNS, INC.
by: ______________________________
Name: Xxxxxx X. Xxxx
Title: President
MTR GAMING GROUP, INC.
by: ______________________________
Name: Xxxxx X. Xxxxxxxx
Title: President and Chief Executive
Officer
RACING ACQUISITION, INC.
by: ______________________________
Name: Xxxxx X. Xxxxxxxx
Title: President
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