Execution Copy
ASSET AND LAND PURCHASE AGREEMENT
BETWEEN
SHERATON DESERT INN CORPORATION
STARWOOD HOTELS AND RESORTS WORLDWIDE, INC.
SHERATON GAMING CORPORATION
SUN INTERNATIONAL HOTELS LIMITED
AND
SUN INTERNATIONAL NEVADA, INC.
Dated as of
May 17, 1999
TABLE OF CONTENTS
ARTICLE I
Terms and Definitions
SECTION 1.1 Terms and Definitions . . . . . . . . . . . . . . .1
SECTION 1.2 Terms and Usage Generally . . . . . . . . . . . . 11
ARTICLE II
Purchase and Sale of and Description of Assets
SECTION 2.1 Purchase and Sale.. . . . . . . . . . . . . . . . 11
SECTION 2.2 Description of Assets . . . . . . . . . . . . . . 12
SECTION 2.3 Description of Excluded Assets. . . . . . . . . . 16
ARTICLE III
Contracts and Liabilities To Be Assumed
SECTION 3.1 Contracts . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.2 Assumed Liabilities . . . . . . . . . . . . . . . 18
SECTION 3.3 Consents. . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV
Purchase Price
SECTION 4.1 Purchase Price. . . . . . . . . . . . . . . . . . 20
SECTION 4.2 Payment of Purchase Price; Extension Amount . . . 20
SECTION 4.3 Disbursement of Deposit.. . . . . . . . . . . . . 21
SECTION 4.4 Purchase Price Adjustment . . . . . . . . . . . . 22
ARTICLE V
Confidential Information
SECTION 5.1 Confidentiality . . . . . . . . . . . . . . . . . 24
ARTICLE VI
Representations and Warranties of
each of Parents and Seller
SECTION 6.1 Parents' and Seller's Representations and
Warranties. . . . . . . . . . . . . . . . . . . 25
SECTION 6.2 No Implied Representations. . . . . . . . . . . . 32
SECTION 6.3 Survival of Seller's Warranties . . . . . . . . . 33
ARTICLE VII
Representations and Warranties of SUN and Buyer
SECTION 7.1 SUN's and Buyer's Representations and
Warranties. . . . . . . . . . . . . . . . . . . 34
SECTION 7.2 Survival of Buyer's and SUN'S Representations
and Warranties. . . . . . . . . . . . . . . . . 35
ARTICLE VIII
Title Insurance
SECTION 8.1 Title Policies and Exceptions . . . . . . . . . . 35
ARTICLE IX
Conduct of Business Prior to Closing
SECTION 9.1 Seller's Conduct. . . . . . . . . . . . . . . . . 37
SECTION 9.2 Operating Restrictions. . . . . . . . . . . . . . 39
ARTICLE X
Other Pre-Closing Obligations
SECTION 10.1 Access; Observers. . . . . . . . . . . . . . . . 42
SECTION 10.2 No Control . . . . . . . . . . . . . . . . . . . 43
SECTION 10.3 Xxxx-Xxxxx-Xxxxxx Filing . . . . . . . . . . . . 43
SECTION 10.4 Cooperation. . . . . . . . . . . . . . . . . . . 44
SECTION 10.5 Gaming and Other Licenses. . . . . . . . . . . . 44
SECTION 10.6 Best Efforts . . . . . . . . . . . . . . . . . . 45
SECTION 10.7 Notice . . . . . . . . . . . . . . . . . . . . . 45
SECTION 10.8 Parcel Map Requirement . . . . . . . . . . . . . 45
SECTION 10.9 Additional Agreements of Seller. . . . . . . . . 45
ARTICLE XI
Conditions to Closing
SECTION 11.1 Buyer's Conditions . . . . . . . . . . . . . . . 46
SECTION 11.2 Seller's Conditions. . . . . . . . . . . . . . . 48
SECTION 11.3 Frustration of Closing Conditions. . . . . . . . 49
ARTICLE XII
Escrow
SECTION 12.1 Escrow . . . . . . . . . . . . . . . . . . . . . 50
SECTION 12.2 Investment . . . . . . . . . . . . . . . . . . . 50
ARTICLE XIII
Closing
SECTION 13.1 Time; Location.. . . . . . . . . . . . . . . . . 51
SECTION 13.2 Recordation of Deeds . . . . . . . . . . . . . . 51
SECTION 13.3 Payment of Closing Date Amount.. . . . . . . . . 51
SECTION 13.4 Certain Expenses . . . . . . . . . . . . . . . . 52
SECTION 13.5 Transfer of Possession . . . . . . . . . . . . . 52
ARTICLE XIV
[Intentionally Omitted] . . . . . . . . 52
ARTICLE XV
Survival; Indemnification
SECTION 15.1 Survival . . . . . . . . . . . . . . . . . . . . 52
SECTION 15.2 Indemnification. . . . . . . . . . . . . . . . . 52
SECTION 15.3 Calculation of Losses. . . . . . . . . . . . . . 53
SECTION 15.4 Procedures Relating to Indemnification . . . . . 53
SECTION 15.5 Other Claims . . . . . . . . . . . . . . . . . . 54
SECTION 15.6 Exclusivity. . . . . . . . . . . . . . . . . . . 55
SECTION 15.7 No Consequential Damages . . . . . . . . . . . . 55
ARTICLE XVI
Termination
SECTION 16.1 Grounds for Termination. . . . . . . . . . . . . 55
SECTION 16.2 Effect of Termination. . . . . . . . . . . . . . 56
SECTION 16.3 Liquidated Damages.. . . . . . . . . . . . . . . 57
SECTION 16.4 Survival . . . . . . . . . . . . . . . . . . . . 58
ARTICLE XVII
Collection of Chips and Tokens;
Baggage and Safe Deposits
SECTION 17.1 Collection of Chips and Tokens . . . . . . . . . 58
SECTION 17.2 Baggage. . . . . . . . . . . . . . . . . . . . . 59
SECTION 17.3 Safe Deposits. . . . . . . . . . . . . . . . . . 59
SECTION 17.4 Valet Parking. . . . . . . . . . . . . . . . . . 59
ARTICLE XVIII
Loss by Fire or Other Casualty; Condemnation
SECTION 18.1 Fire or Other Casualty; Condemnation . . . . . . 60
ARTICLE XIX
Employee and Employee Benefit Matters
SECTION 19.1 Salaries and Benefits. . . . . . . . . . . . . . 61
SECTION 19.2 Multiemployer Plan . . . . . . . . . . . . . . . 62
ARTICLE XX
Miscellaneous
SECTION 20.1 Entire Agreement . . . . . . . . . . . . . . . . 65
SECTION 20.2 Notices. . . . . . . . . . . . . . . . . . . . . 65
SECTION 20.3 Governing Law. . . . . . . . . . . . . . . . . . 66
SECTION 20.4 Successors and Assigns . . . . . . . . . . . . . 66
SECTION 20.5 Closing Costs. . . . . . . . . . . . . . . . . . 66
SECTION 20.6 Attorneys' Fees. . . . . . . . . . . . . . . . . 67
SECTION 20.7 Amendments . . . . . . . . . . . . . . . . . . . 67
SECTION 20.8 Further Assurances . . . . . . . . . . . . . . . 67
SECTION 20.9 Headings . . . . . . . . . . . . . . . . . . . . 67
SECTION 20.10 Non-Waiver . . . . . . . . . . . . . . . . . . . 67
SECTION 20.11 No Third Party Benefitted. . . . . . . . . . . . 67
SECTION 20.12 Publicity; No Recordation. . . . . . . . . . . . 68
SECTION 20.13 Counterparts . . . . . . . . . . . . . . . . . . 68
SECTION 20.14 Severability . . . . . . . . . . . . . . . . . . 68
SECTION 20.15 Exhibits and Schedules . . . . . . . . . . . . . 68
SECTION 20.16 Finder's Fees. . . . . . . . . . . . . . . . . . 68
SECTION 20.17 Cooperation. . . . . . . . . . . . . . . . . . . 69
SECTION 20.18 Consent to Jurisdiction. . . . . . . . . . . . . 69
EXHIBITS
Exhibit 10.6(b)-1 Timeshare Joint Venture Agreement
Exhibit 10.6(b)-2 Golf Course Management Agreement
Exhibit 10.6(b)-3 Marketing Alliance Agreement
Execution Copy
ASSET AND LAND PURCHASE AGREEMENT
This Asset and Land Purchase Agreement ("Agreement") is made and
entered into as of May 17, 1999 ("Effective Date") by and between Sheraton
Desert Inn Corporation, a Nevada corporation ("SDIC" or "Seller"), Starwood
Hotels and Resorts Worldwide, Inc., a Maryland corporation ("Starwood"),
Sheraton Gaming Corporation, a Nevada corporation ("SGC", and together with
Starwood, the "Parents"), Sun International Hotels Limited, an international
business company organized under the laws of the Commonwealth of the Bahamas
("SUN") and Sun International Nevada, Inc., a Nevada corporation and a
wholly-owned subsidiary of SUN ("Buyer"), with reference to the following facts:
A. SDIC and its affiliates own the Assets (as defined below).
B. SDIC and its affiliates desire to sell, and each of the Parents desires
to cause SDIC and its affiliates to sell, the Assets to Buyer and Buyer desires
to purchase, and SUN desires to cause Buyer to purchase, the Assets and to
assume certain liabilities associated with the Assets and certain other
liabilities, on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein set forth, and other valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Terms and Definitions
SECTION 1.1 Terms and Definitions.
(a) As used in this Agreement, the following terms shall have the
following meanings:
"Accountant" means Xxxxxx Xxxxxxxx LLP or such other nationally
recognized independent public accounting firm selected by Seller and reasonably
acceptable to Buyer and Seller.
"Accrued Interest" has the meaning set forth in Section 4.1(a).
"ACSM" has the meaning set forth in Section 8.1(e).
"Adjusted Purchase Price" has the meaning set forth in Section
4.4(c).
"Affiliate" or "affiliate" means, in respect of any Person, another
Person which owns, controls, is controlled by or is under common control with
such Person, including any subsidiary or parent.
"Agreement" has the meaning set forth in the introductory paragraph
hereof.
"ALTA" has the meaning set forth in Section 8.1(e).
"Applicable Interest Rate" has the meaning set forth in Section
4.1(a).
"Applicable Accrued Deposit" means an amount equal to the sum of (x)
$15,000,000 and (y) the product of (i) $15,000,000, (ii) a fraction, the
numerator of which shall be the number of days in the period from and including
date on which the Deposit is placed in the Escrow to but excluding the Closing
Date, and the denominator of which shall be 365 and (iii) a rate of interest
equal to one-half (1/2) of the average rate of interest per annum for one-year
U.S. Treasury Notes for such period.
"Assets" has the meaning set forth in Section 2.1.
"Assumed Contracts" has the meaning set forth in Section 3.1.
"Assumed Liabilities" has the meaning set forth in Section 3.2(a).
"Balance Sheet" has the meaning set forth in Section 4.4(d).
"Business" means the hotel, casino (gaming), convention, meeting,
restaurant, bar, golf course, spa and recreational facilities and functions of
The Desert Inn Resort & Casino in Las Vegas, Nevada, and all marketing and
sales offices or other property owned, leased or occupied by SDIC, its
subsidiaries or affiliates relating to the Business whether on or away from the
Business Premises.
"Business Day" means any day other than a Saturday, a Sunday or a
day on which banking institutions in New York or Nevada are authorized by law to
close.
"Business Premises" means and includes the Real Estate and all sales
offices or real property owned, leased or occupied by SDIC or its subsidiaries
or affiliates used solely in connection with the Business, whether on or away
from the Real Estate. To the extent not located on the Real Estate, the Business
Premises are listed in Schedule 2.2(f).
"Buyer" has the meaning set forth in the introductory paragraph
hereof.
"Buyer's Closing Conditions" has the meaning set forth in Section
11.1.
"Buyer Material Adverse Effect" has the meaning set forth in Section
7.1(c).
"Caesars Closing Date" has the meaning set forth in Section 4.1(a).
"Xxxxxxx Xxxxx Agreement" means the Stock Purchase Agreement entered
into as of April 27, 1999, by and among Starwood, certain wholly owned
subsidiaries of Starwood and Park Place Entertainment Corp., a Delaware
corporation.
"Closing" has the meaning set forth in Section 13.1.
"Closing Date" has the meaning set forth in Section 13.1.
"Closing Date Amount" means the Purchase Price plus or minus the
estimated adjustment being made pursuant to Section 4.4.
"Closing Working Capital" has the meaning set forth in Section
4.4(a).
"Code" means the Internal Revenue Code of 1986, as amended.
"Collective Bargaining Agreement" has the meaning set forth in
Section 19.1.
"Confidential Information" has the meaning set forth in Section
5.1(b).
"Corner Land" has the meaning set forth in Section 2.2(b).
"Country Club Lane" means the real property described on Schedule
1.1(a).
"Current Assets" has the meaning set forth in Section 4.4(d).
"Current Liabilities" has the meaning set forth in Section 4.4(d).
"Deeds" means collectively, the deeds to be delivered pursuant to
Section 11.1(c).
"Deposit" has the meaning set forth in Section 4.2(a).
"DIIC" has the meaning set forth in Section 2.2(m).
"DIIC Land" has the meaning set forth in Section 8.1(c).
"Dio Drive Vacated Area" means the real property described on
Schedule 1.1(b).
"Effective Date" has the meaning set forth in the introductory
paragraph hereof.
"Environmental Claim" means any claim for any Loss, liability, cost
or expense, including damage to or restoration of natural resources,
administrative or regulatory oversight costs, consultants' fees and expenses,
medical monitoring costs and property value diminution, asserted by any third
Person, including any governmental authority, and arising under Environmental
Law.
"Environmental Laws" means all Federal, state and local laws, rules,
regulations, decrees, ordinances and orders which regulate the treatment,
management, storage or use of Hazardous Materials or the release of Hazardous
Materials to the environment, or impose requirements relating to environmental
protection or restoration or to public or employee health and safety.
"ERISA" has the meaning set forth in Section 19.2(b).
"Escrow" has the meaning set forth in Section 12.1.
"Escrowee" means Nevada Title Company, 0000 X. Xxxxxx Xxxxxx, Xxx
Xxxxx, Xxxxxx 00000, Attention: Xx. Xxxxx Xxxxxx, Title Officer and Xxxx
Xxxxxxxx, Escrow Officer.
"Excluded Assets" has the meaning set forth in Section 2.3.
"Excluded Liabilities" has the meaning set forth in Section 3.2(b).
"Extension Amount" has the meaning set forth in Section 4.2(c).
"GAAP" has the meaning set forth in Section 4.4(d).
"Gaming Equipment" means "associated equipment" as defined in NRS
Section 463.0136, "gaming devices" as defined in NRS Section 463.0155, gaming
tables, keno and sports book furniture and equipment and all other
equipment and paraphernalia, including (subject to those exclusionary provisions
of Section 2.2(g) concerning proprietary hardware and software) computer
equipment and computer software owned or licensed by SDIC or its subsidiaries or
affiliates and used in the conduct of gaming on the Business Premises.
"Gaming Licenses" has the meaning set forth in Section 10.5.
"Gaming Receivable" means any "Credit instrument", as such term is
defined in Chapter 463 of NRS or any successor statute thereto.
"Golf Course Management Agreement" has the meaning set forth in
Section 9.1(i).
"Hazardous Materials" means any (a) oil, petroleum products,
flammable substances, explosives, radioactive materials, hazardous materials,
wastes or substances, toxic wastes or substances; and (b) any chemical, material
or substance defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "acute hazardous waste," "extremely
hazardous waste," "restricted hazardous waste," "toxic substances," "toxic
chemicals," "infectious wastes," "contaminants" or "pollutants" or words of
similar import under any applicable Environmental Law or otherwise regulated
under applicable Environmental Law.
"HSR Act" has the meaning set forth in Section 10.3.
"Indemnified Party" has the meaning set forth in Section 15.3.
"Intangible Property" has the meaning set forth in Section 2.2(j).
"Inventoried Baggage" has the meaning set forth in Section 17.2.
"Inventoried Vehicles" has the meaning set
forth in Section 17.4.
"Inventories" has the meaning set forth in Section 2.2(q).
"ITT" means ITT Corporation, a Nevada corporation.
"knowledge" means, as of any date of determination, (a) with respect
to Seller, the actual knowledge or awareness, as of such date, of Xxxxx Xxxxxxx,
Xxxxxx Xxxxxxx, Xxxx Xxxxxxx, Xxxxxx Xxxxx or Xxxxx Xxxxx and (b) with respect
to Buyer, the actual knowledge or awareness, as of such date, of Xxxxxx Xxxxxxx,
Xxxxxxx Xxxxx or Xxxx Xxxxxxx. The words "know", "knowing" and "known" shall be
construed accordingly.
"Legal Requirements" means any applicable law, statute, treaty,
ordinance, code, orders, judgments, decrees, injunctions, rules, regulations,
permits, licenses, authorizations, directions and requirements of all
governments and governmental authorities having jurisdiction over the Real
Estate (including, for purposes hereof, any local Board of Fire Underwriters),
the Assets, the Business or over the operation thereof.
"Licenses" has the meaning set forth in Section 10.5.
"Losses" has the meaning set forth in Section 15.2.
"Marketing Alliance Agreement" has the meaning set forth in Section
10.6(b).
"Material Adverse Effect" means a material adverse effect on the
business, assets, condition (financial or otherwise) or results of operations of
the Business or the Assets taken as a whole, including the revocation or failure
to obtain any Gaming License or any permit or license necessary or required for
the continued operation of the Casino, but shall exclude any effect to the
extent resulting from (i) any condition or event that adversely
affects the gaming industry generally or the gaming industry in Nevada, (ii)
general economic conditions, (iii) the implementation of California Proposition
No. 5 or the proposal, passage or implementation of any similar law or
initiative or (iv) the proposal or passage of any law or other initiative
restricting or adversely affecting the conduct of gaming operations generally.
"Material Damage" means unrepaired damage as a result of fire or
other casualty to all or any Material Portion of the Business Premises or the
Assets such that the cost to replace or repair such damaged Business Premises
and Assets exceeds $50,000,000 or which results in any Material Portion of the
Business Premises or the Assets being unusable for a period in excess of six
months.
"Material Portion" means (i) all or any portion of the Business
Premises that represents at least 15% of the assessed value for tax purposes of
the Real Estate or (ii) 5% or more of the Corner Land.
"Multiemployer Plans" has the meaning set forth in Section 19.2(a).
"Nevada Gaming Authorities" means the Nevada State Gaming Control
Board, the Nevada Gaming Commission and the Xxxxx County Liquor and Gaming
Licensing Board.
"Nevada Power Land" means the real property subject to the Nevada
Power Sale Agreement, and consisting of a portion of the Corner Land, as more
fully set forth in Schedule 2.2(a).
"Nevada Power Sale Agreement" means that certain Property Agreement
between Nevada Power Company and SDIC, fully executed as of March 21, 1997,
relating to the Nevada Power Land.
"Notice of Disagreement" has the meaning set forth in Section
4.4(b).
"NRS" means Nevada Revised Statutes.
"Out Parcel" means the real property described on Schedule 1.1(c).
"Outside Date" has the meaning set forth in Section 13.1.
"Parcel Map" has the meaning set forth in Section 6.1(z).
"parent" means a corporation, trust, partnership, limited
partnership, limited liability company or other entity or person which directly
or indirectly holds more than 50% of the beneficial equity interest in or voting
control of another such entity. Such other entity shall be deemed the Subsidiary
or subsidiary of its parent.
"Parents" has the meaning set forth in the introductory paragraph
hereto.
"Permits" has the meaning set forth in Section 6.1(e).
"Permitted Exceptions" has the meaning set forth in Section 8.1(a).
"Permitted Liens" has the meaning set forth in Section 6.1(u).
"Person" means any general partnership, limited partnership,
corporation, limited liability company, joint venture, trust, business trust,
governmental agency, cooperative, association, individual or other entity, and
the heirs, executors, administrators, legal representatives, successors and
assigns of such person, as the context may require.
"Personal Property" has the meaning set forth in Section 2.2(h).
"Property Taxes" means real, personal and intangible property taxes
and assessments, together with any interest, penalty or other additional amount
imposed by a taxing authority.
"PUC" has the meaning set forth in Section 2.2(m).
"Purchase Price" has the meaning set forth in Section 4.1(a).
"Real Estate" has the meaning set forth in Section 2.2(a).
"Receivables" means all of Seller's and its subsidiaries' and
affiliates' accounts receivable, notes and loans receivable, Gaming Receivables,
Real Estate tenant receivables and ledger receivables and other accounts
generated by or otherwise relating to the Assets.
"Recording Instructions" has the meaning set forth in Section 4.3.
"Representatives" has the meaning set forth in Section 5.1(a)
hereof.
"Required Records" has the meaning set forth in Section 2.2(n).
"Residential Real Estate" has the meaning set forth in Section
2.2(c).
"SGC" has the meaning set forth in the introductory paragraph
hereof.
"SDIC" has the meaning set forth in the introductory paragraph
hereof.
"Seller" has the meaning set forth in the introductory paragraph
hereof.
"Seller's Closing Conditions" has the meaning set forth in Section
11.2.
"Sheraton" means ITT Sheraton Corporation, a Delaware corporation.
"Starwood" has the meaning set forth in the introductory paragraph
hereof.
"Statement" has the meaning set forth in Section 4.4(a).
"Stock" has the meaning set forth in Section 2.2(m).
"Subsidiary" or "subsidiary" means a corporation, trust,
partnership, limited partnership, limited liability company, or other entity
more than 50% of the beneficial equity interest in or voting control of which is
directly or indirectly held by another person or entity. Such other person or
entity shall be deemed the "Parent" or "parent" of its subsidiary.
"Survey" has the meaning set forth in Section 8.1(a).
"Tax" means any income, gross receipts, sales, use, real estate, ad
valorem, transfer, franchise, withholding, payroll, employment, excise,
severance, occupation, premium or property tax or other like assessment or
charge of any kind whatsoever, together with any interest, penalty or other
additional amount imposed by any taxing authority.
"Third Party Claim" has the meaning set forth in Section 15.4(a).
"Timeshare Joint Venture Agreement" has the meaning set forth in
Section 10.6(b).
"Title Insurer" has the meaning set forth in Section 8.1(c).
"Title Policies" has the meaning set forth in Section 8.1(c).
"Title Report" has the meaning set forth in Section 8.1(a).
"Transferred Software Programs" has the meaning set forth in Section
2.2(h).
"Transfer Time" has the meaning set forth in Section 13.1.
"Union Employees" has the meaning set forth in Section 9.2(k).
"WC Amount" has the meaning set forth in Section 4.4(c).
"Working Capital" has the meaning set forth in Section 4.4(d).
SECTION 1.2 Terms and Usage Generally. The definitions referred to in
Section 1.1 shall apply equally to both the singular and plural forms of the
terms defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. All references herein to
Articles, Sections, Exhibits and Schedules shall be deemed to be references to
Articles and Sections of, and Exhibits and Schedules to, this Agreement unless
the context shall otherwise require. All Exhibits and Schedules attached hereto
shall be deemed incorporated herein as if set forth in full herein. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation". The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
References to a Person are also to its successors and permitted assigns. Unless
otherwise expressly provided herein, any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument defined or
referred to herein means such agreement, instrument or statute as from time to
time amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes, and references to all attachments thereto and
instruments incorporated therein.
ARTICLE II
Purchase and Sale of and Description of Assets
SECTION 2.1 Purchase and Sale. Subject to the terms and provisions of this
Agreement, each of SDIC, its subsidiaries and affiliates shall, and each of the
Parents shall cause each of the foregoing to, sell, convey, transfer and assign
to Buyer at the Closing, free and clear of all liens and encumbrances (except
Permitted Exceptions and Permitted Liens), and Buyer shall purchase from SDIC or
such subsidiaries or affiliates (w) all of the tangible and intangible assets
owned by SDIC or such subsidiaries or affiliates and constituting, associated
with or used or usable in connection with the ownership or operation of the
Business existing as of the Effective Date, whether or not such assets are
located on or about the Business Premises, as augmented or diminished as
permitted by Section 9.2 in the ordinary course of the operation of the Business
between the Effective Date and the Transfer Time and all tangible and intangible
assets owned by SDIC or such subsidiaries or affiliates which are necessary to
cause all of Parents' and Seller's representations, warranties and covenants
contained herein to be materially true and correct as of the Closing Date,
except the Excluded Assets, (x) the Stock, (y) the Corner Land and (z) the
Residential Real Estate (collectively, the "Assets"), including those items
described in Section 2.2.
SECTION 2.2 Description of Assets. The term "Assets" shall include:
(a) fee simple title to the real property described on Schedule
2.2(a)(i), together with all buildings, improvements and fixtures (other than
such fixtures which are leased) located thereon, and all of SDIC's right, title
and interest in and to all hereditaments and rights appurtenant thereto,
including (i) any easements or rights of way pertaining to or benefitting such
real property, (ii) all water rights, air rights and mineral, oil, gas and other
hydrocarbon substance rights owned by SDIC or such subsidiary's or affiliate's
with respect to
such real property and (iii) any interest in streets, alleys, advantages, and
any strips or gores appurtenant thereto, if, and to the extent, included within
the perimeter boundaries of such real estate (collectively, the "Real Estate"),
subject in each case to the Permitted Exceptions; provided, however, that Seller
is making no representations and warranties as to the status of title with
respect to the Dio Drive Vacated Area, Country Club Lane and the Out Parcel
beyond those implied under Nevada Law by the grant, bargain and sale deed);
(b) fee simple title to the Corner Land, excluding the Nevada Power
Land. As used herein, the "Corner Land" means (i) the real property described in
Schedule 2.2(b), together with all buildings, improvements and fixtures
(excluding leased fixtures) located thereon, and (ii) all of SDIC's right, title
and interest in and to all hereditaments and rights appurtenant thereto,
including (A) any easements or other rights of way pertaining to or benefitting
such real property, (B) all water rights, air rights and mineral, oil, gas and
other hydrocarbon substance rights owned by SDIC with respect to such real
property and (C) any interest in streets, alleys, advantages, and any strips or
gores appurtenant thereto, subject in each case to the Permitted Exceptions;
(c) fee simple title to those certain parcels of real property
located in the County of Xxxxx, State of Nevada, and more particularly described
on Schedule 2.2(c), together with all buildings, improvements and fixtures
located thereon, and all of SDIC's right, title and interest in and to all
hereditaments and rights appurtenant thereto, including (i) any easements or
rights of way pertaining to or benefitting such real property, (ii) all water
rights, air rights and mineral, oil, gas and other hydrocarbon substance rights
owned by SDIC with respect to such real property and (iii) any interest in
streets, alleys, advantages, and any strips or gores appurtenant thereto, if,
and to the extent, included within the perimeter boundaries of such real estate
(collectively, the "Residential Real Estate"), subject in each case to the
Permitted Exceptions;
(d) fee simple title to any real property contiguous to the Real
Estate, Corner Land and Residential Real Estate owned by SDIC or its
subsidiaries or affiliates as of the Effective Date, and located within the area
bounded by Las Vegas Boulevard, Sands Avenue, Paradise Road and Desert Inn
Arterial;
(e) subject to the Timeshare Joint Venture Agreement, all of SDIC's
right, title and interest in and to any development rights of SDIC or its
affiliates appurtenant to the Real Estate, the Corner Land and Residential Real
Estate;
(f) all right, title and interest in the Business Premises not
located on the Real Estate, the Corner Land and Residential Real Estate, if any,
as described in Schedule 2.2(f);
(g) all right, title and interest to any Gaming Equipment;
(h) all right, title and interest of SDIC or any of its affiliates
in and to all machinery, equipment, furniture, office equipment, telephone and
communications equipment, restaurant equipment, consumables, inventory,
merchandise, linen, utensils, liquor, food, vehicles, storage tanks, spare and
replacement parts, fuel, cleaning and office supplies and other tangible
property (other than Gaming Equipment) located on the Real Estate, the Corner
Land or the Residential Real Estate, including personal computers and computer
hardware and related transferable software non-proprietary of SDIC, its
subsidiaries or affiliates (the "Transferred Software Programs"), but excluding
(i) any and all proprietary computer hardware or software of SDIC, its
subsidiaries or affiliates (including Starwood's Reservation software and SDIC's
"forecasting program" financial analysis software), (ii) any and all proprietary
operating manuals and other information and materials belonging to SDIC, its
subsidiaries or affiliates and (iii) any copyrights relating to any such
software, information and materials (collectively, and together with the Gaming
Equipment, the "Personal Property");
(i) to the extent assignable, all Permits affecting or relating to
the Business or the Assets;
(j) all right, title and interest of SDIC or any of its affiliates
to any and all copyrights, trademarks, trade names, service marks, displays,
symbols, color arrangements, designs, logos, applications, registrations and
other intangible personal property used or held for use in the operation of the
Business and/or the Assets, including "Desert Inn" and any derivative names or
marks and all logos, designs and other intellectual property related thereto
(but excluding "Sheraton", "ITT", "Caesars", "ITT Sheraton Luxury Collection"
and any derivative names or marks and all logos, designs and other intellectual
property related thereto), and related applications and registrations, if any,
and all other intangible property or rights, and all goodwill associated
therewith, directly or indirectly relating thereto or used in the ownership, use
or operation of the Business or the Assets, (collectively, the "Intangible
Property");
(k) all right, title and interest of SDIC or any of its affiliates
in and to all benefits arising after the Transfer Time, if any, from contracts,
agreements, leases, licenses, commitments, sale and purchase orders and other
items included in the Assumed Contracts, including all contracts, leases,
agreements, claims and rights (and benefits arising therefrom) with or against
all persons whomsoever, relating to the Business or the Assets or any portion
thereof, including all warranties, guaranties, indemnities, development
agreements, supply agreements, service agreements and/or franchise agreements,
if any, and all leases of personal property, regardless of whether SDIC or its
subsidiaries or affiliates is lessee or lessor thereunder, including matters of
public record;
(l) all plans, specifications, drawings, renderings, models and
photographs relating to the improvements located on the Real Estate and the
Residential Real Estate, or any proposed improvements on the Corner Land, that
are in the possession or control of SDIC or its subsidiaries or affiliates and
that are not proprietary to any third party, including those commissioned or
prepared in
connection with the recent renovation of the improvements on the Real Estate,
and, to the extent transferable, any and all warranties given to SDIC or its
subsidiaries or affiliates by suppliers and traders in connection with such
renovations;
(m) all issued and outstanding shares of common stock, $100 par
value per share (the "Stock"), of Desert Inn Improvement Co., a Nevada
corporation and a wholly owned subsidiary of SGC ("DIIC") and the corporate
minute books and stock records and business records of DIIC; provided, however,
that the parties hereto acknowledge that DIIC is a "Public Utility" in
accordance with the provisions of NRS Sections 704.020 and 704.329 and sale and
transfer of the Stock contemplated hereby, which constitutes more than
twenty-five percent of the outstanding shares of DIIC, requires prior
authorization of the Nevada Public Utilities Commission ("PUC");
(n) all books and records required by the Nevada Gaming Authorities
to be maintained at the Business Premises, and copies (Seller may retain the
originals) of such other books and records, if any, which are necessary for the
ongoing operations of the Business after the Transfer Time (including only such
employee records as it is lawful to transfer) (collectively, the "Required
Records");
(o) all advance reservations, bookings and room deposits applicable
to any period following the Closing, and originals of casino credit files with
respect to the casino operations, and any telephone numbers used exclusively in
connection with the Business;
(p) all customer lists relating to the Business prepared in
accordance with Section 9.1(h);
(q) all inventory purchased by SDIC or any of its affiliates in the
ordinary course of business and then located on the Business Premises
("Inventories");
(r) all of SDIC's cash on hand and/or on deposit in banks or other
financial institutions, trade deposits, prepaid rent, security deposits or other
pre-
expenses paid by SDIC, its subsidiaries or affiliates, and rights arising
therefrom, cash equivalents, coins and marketable securities, whether or not
such assets relate to SDIC's ownership of Assets or SDIC's operation of the
Business; and
(s) all Receivables existing as of the Transfer Time, including the
Receivable arising from Seller's sale of the Nevada Power Land not theretofore
paid.
SECTION 2.3 Description of Excluded Assets. Seller shall not, and shall
not cause its subsidiaries or affiliates to, sell, convey, transfer or assign to
Buyer, and Buyer shall not purchase or acquire from Seller, any of the following
assets, which shall remain the sole and exclusive property of Seller
(collectively, the "Excluded Assets"):
(a) all proprietary computer hardware and software of Seller,
Sheraton and its affiliates, including Starwood's Reservation software and
SDIC's "forecasting program" financial analysis software and any copyrights
relating to any such software, and any Intangible Property involving the names
"Sheraton," "ITT," "Caesars," "ITT Sheraton Luxury Collection," including any
derivative names and related marks, designs or logos and all proprietary
operating manuals and related knowhow;
(b) all of SDIC's right, title and interest in and to all books and
records, in whatever medium, including digitally or magnetically stored data,
files relating to the Business or the Assets, including all financial
statements, certified financial reports, gaming tax returns (including
supporting , originals of all credit reports and files, including casino files
and all books and accounting records relating to the Business or the Assets in
the possession or control of SDIC and its subsidiaries and affiliates, save and
except the Required Records; provided that upon reasonable request by Buyer,
Buyer shall be provided with access and the right to copy the portions of such
records that reasonably relate to the Business or the Assets;
(c) all corporate charter, minute and stock record books, corporate
seals and tax returns and supporting schedules and documents of Sheraton or SDIC
or its subsidiaries or affiliates relating to the Business, and all refunds,
claims, entitlements or liabilities for income taxes or other taxes of any type
whatsoever which SDIC or its subsidiaries or affiliates may hereafter receive or
be responsible for by reason of its ownership of the Assets or operation of the
Business prior to the Transfer Time; provided that upon reasonable request by
Buyer, Buyer shall be provided with the access and the right to copy the
portions of such tax materials that reasonably relate to the Business or the
Assets;
(d) except as otherwise specifically provided for in this Agreement,
all insurance policies relating to the Business or the Assets and all rights and
claims thereunder, including refund claims;
(e) all claims and litigation and causes of action, and any tax
refunds relating to any of the Excluded Assets;
(f) all of SDIC's gaming chips and tokens (including all (i) slot
machine tokens not currently in circulation and (ii) "reserve" chips, if any,
not currently in circulation), except that at Buyer's written election made
within six months following the Effective Date, such tokens may be acquired by
Buyer at the Closing without further consideration other than Buyer's assumption
of SDIC's liability with respect to tokens in circulation;
(g) any Assets sold or otherwise disposed of in the ordinary course
of business and as permitted by Section 9.2 during the period from the Effective
Date until the Transfer Time;
(h) all rights of indemnification, claims and causes of action which
relate to the conduct of the Business prior to the Transfer Time, including
those arising by operation of law or in equity or otherwise, but excluding
warranty claims with respect to the inventory or the equipment described in
Section 2.2(g) or 2.2(h) above, or
product liability against the suppliers or manufacturers thereof; and
(i) all issued and outstanding shares of common stock of Sheraton
Corner Enterprises Corporation, a Nevada corporation, all issued and outstanding
shares of common stock of Rimtech Marketing Incorporated, a Nevada corporation,
and all issued and outstanding shares of common stock of Sheraton Tunica
Corporation, a Delaware corporation.
ARTICLE III
Contracts and Liabilities To Be Assumed
SECTION 3.1 Contracts. The "Assumed Contracts" shall be all contracts,
agreements, licenses, leases, commitments, sales and purchase orders and other
orders relating to the Assets or Business and those entered into by SDIC or its
subsidiaries after the Effective Date and prior to the Closing as permitted by
Section 9.2 hereof.
SECTION 3.2 Assumed Liabilities.
(a) Buyer shall assume as of the Transfer Time and shall pay,
perform and discharge when due all obligations and liabilities of whatever kind
and nature, primary or secondary, direct or indirect, absolute or contingent,
known or unknown, of SDIC or its aforementioned subsidiaries or affiliates to
the extent arising out of or relating to the Business or the Assets and to the
extent arising or accruing after the Transfer Time ("Assumed Liabilities"),
including the following (other than any Excluded Liabilities):
(i) all obligations and liabilities included as Current Liabilities
in the calculation of Closing Working Capital pursuant to Section 4.4,
including any such Current Liabilities for progressive prizes associated
with keno, slot machines and coin operated
gaming devices and sportsbook and racebook gaming;
(ii) all obligations and liabilities of SDIC or its subsidiaries or
affiliates under the Assumed Contracts not performed or not required to
have been performed as of the Transfer Time;
(iii) all liabilities to customers with respect to all unrefunded
cash deposits paid by such customers to SDIC or its subsidiaries or
affiliates prior to the Transfer Time to the extent included as a Current
Liability in the calculation of Closing Working Capital pursuant to
Section 4.4; and
(iv) all obligations and liabilities relating to Taxes relating to
the Business or the Assets with respect to any period ending after the
Transfer Time, but to the extent attributable to periods prior to the
Transfer Time, only to the extent included as a Current Liability in the
calculation of Closing Working Capital pursuant to Section 4.4.
(b) Buyer shall not assume any of the following obligations and
liabilities of Seller or its subsidiaries or affiliates (the "Excluded
Liabilities"), all of which shall be retained and paid, performed and discharged
when due by Seller or its subsidiaries or affiliates:
(i) any Loss or liability of Seller or its subsidiaries or
affiliates of any nature or description, whether liquidated or contingent,
to the extent (A) resulting from events or conditions which occurred or
existed prior to the Transfer Time, regardless of whether they are due and
payable before or after the Transfer Time or (B) arising out of or
relating to the Excluded Assets;
(ii) any Loss or liability incurred as the result of an
Environmental Claim, or any condition requiring correction, investigation,
remediation or monitoring under Environmental Law, in either case to the
extent arising from facts, conditions or circumstances, known
or unknown, occurring or existing at or before the Transfer Time and
related in any manner to the Assets; and
(iii) any Loss or liability relating to current or former employees
of the Business (and their eligible dependents and beneficiaries) with
respect to employment or benefit plans which accrued on or prior to the
Transfer Time, except to the extent specified in Article XIX or included
as a Current Liability in the calculation of Closing Working Capital
pursuant to Section 4.4.
(b) Buyer's obligations under this Section 3.2 will not be subject
to offset or reduction by reason of any actual or alleged breach of any
representation, warranty or covenant contained in this Agreement or any document
delivered in connection herewith or any right or alleged right to
indemnification hereunder.
SECTION 3.3 Consents. To the extent that the assignment of any of the
Assumed Contracts or other rights(including Permits, except as set forth in
Section 11.1(e)) to be transferred hereunder requires the consent of any other
party thereto (including Seller or any affiliate thereof), or shall be subject
to any option in any other person or entity by virtue of a request for
permission to assign or transfer, or by reason of or pursuant to any transfer to
Buyer, this Agreement shall not constitute a contract to assign the same if any
attempted assignment would be ineffective, impair any material right of Buyer
thereunder or give rise to such an option, and Seller and Buyer shall use
commercially reasonable efforts to procure consent to any such assignment;
provided, however, that in the event that any such consent is not obtained at or
prior to the Closing Date, such event shall not cause the Closing to be delayed
or constitute a default by Seller of any obligation hereunder or result in a
reduction of the Purchase Price. If any such consent is not obtained, or if for
any reason any such assignment is not consummated, at Buyer's request, Seller
shall reasonably cooperate with Buyer to provide for Buyer the benefit, monetary
or otherwise, of any such Assumed Contract or other right,
including enforcement of any and all rights of Seller against the other party
thereto arising out of any breach or cancellation thereof by such party or
otherwise, and, at Buyer's request, by appointing Buyer as Seller's
representative and agent thereunder. Any such cooperation \(i) shall be at
Buyer's cost and expense and (ii) shall not cause Seller to violate any such
Assumed Contract.
ARTICLE IV
Purchase Price
SECTION 4.1 Purchase Price. (a) In consideration of the foregoing
sale, conveyance, transfer and assignment of the Assets, Buyer shall pay to
Seller the sum of $275,000,000 plus the sum of (1) if the Closing occurs after
the "Closing Date" under the Xxxxxxx Xxxxx Agreement (the "Caesars Closing
Date"), the Accrued Interest, (2) the aggregate amount by which documented
capital expenditures actually incurred by SDIC as contemplated by Section
9.1(g)(i) exceeds an average of $225,000 per month from and after January 1,
1999 and (3) an amount equal to 80% of all documented capital expenditures up to
$3,000,000 actually incurred by SDIC pursuant to Section 9.1(g)(ii), and 100% of
all documented capital expenditures incurred by SDIC pursuant to Section
9.1(g)(ii) in excess of such $3,000,000 (the "Purchase Price"). "Accrued
Interest" means an amount equal to the product of (i) $275,000,000 (less the
Applicable Accrued Deposit), (ii) a fraction, the numerator of which shall be
the number of days in the period from and including the Caesars Closing Date to
but excluding the Closing Date, and the denominator of which shall be 365 and
(iii) the average Applicable Interest Rate per annum for such period.
"Applicable Interest Rate" means (i) for any day during the period from the
Effective Date to the date which is fourteen months following the Effective
Date, a rate per annum equal to the lesser of (x) the applicable "rate of
interest" for revolving loans under the Credit Agreement among Starwood and
certain other borrowers and lenders named therein, dated February 23, 1998 (as
amended to the date hereof) and (y) 7.00% and (ii) for any day thereafter,
10.00%.
(b) The Purchase Price shall be subject to adjustment as set forth
in Section 4.4.
SECTION 4.2 Payment of Purchase Price; Extension Amount. The Purchase
Price and the Extension Amount shall be payable as follows:
(a) The sum of Fifteen Million Dollars ($15,000,000) in immediately
available funds (the "Deposit"), shall be delivered to Escrowee no later than
the tenth Business Day following the execution of this Agreement, to be
deposited in interest-bearing investments approved by Buyer and Seller and held
by Escrowee in accordance with the terms of this Agreement.
(b) The Purchase Price less the Applicable Accrued Deposit plus or
minus an estimate, prepared by Seller (and reasonably satisfactory to Buyer) and
delivered to Buyer at least two Business Days prior to the Closing Date, of any
adjustment to the Purchase Price under Section 4.4, shall be delivered to Buyer
in immediately available funds on the Closing Date.
(c) An extension amount of $1,000,000 in immediately available funds
(the "Extension Amount") shall be paid directly by Buyer to Seller on the
earliest to occur of (i) the Closing, (ii) termination of this Agreement other
than pursuant to Section 16.1(vi) or Section 16.1 (vii), and (iii) a date which
is fourteen (14) months following the Effective Date.
(d) Time is of the strictest essence of this Section 4.2.
SECTION 4.3 Disbursement of Deposit. Seller and Buyer shall provide joint
written instructions to Escrowee in customary form mutually approved by Seller
and Buyer, each of whose approval shall not be unreasonably withheld (the
"Recording Instructions"), which shall among other things, govern the
disbursement of the Deposit and the payment for and obtaining the Title
Policies, and other escrow and related charges; provided, however, that such
Recording Instructions shall provide that the Deposit, together with any
interest or other payments thereon, shall be disbursed to Seller on the Closing
Date. The Recording Instructions shall comply with all applicable Code
provisions. The Escrowee shall be designated as the "reporting party" for
purposes of the Code. The Recording Instructions are intended to carry out the
intent of this Agreement and shall not be inconsistent with this Agreement.
SECTION 4.4 Purchase Price Adjustment. (a) Within 75 days after the
Closing Date, Buyer shall prepare and deliver to Seller a statement (the
"Statement"), certified by an officer of Buyer, setting forth Working Capital as
of the close of business on the Closing Date ("Closing Working Capital"). A
physical inventory shall be conducted by Seller and Buyer consistent with past
practice and immediately prior to the Closing Date for the purpose of preparing
the Statement, and each of Seller and Buyer and their respective independent
auditors shall have the right to observe the taking of such physical inventory.
Any costs or expenses incurred by the parties in connection with such physical
inventory shall be shared equally by Seller and Buyer.
(b) During the 30-day period following Seller's receipt of the Statement,
Seller and its independent auditors shall be permitted to review the working
papers relating to the Statement. The Statement shall become final and binding
upon the parties on the 30th day following delivery thereof, unless Seller gives
written notice of its disagreement with the Statement (a "Notice of
Disagreement") to Buyer prior to such date. Any Notice of Disagreement shall (i)
specify in reasonable detail the nature of any disagreement so asserted and (ii)
only include disagreements based on mathematical errors or based on Closing
Working Capital not being calculated in accordance with this Section 4.4. If a
Notice of Disagreement is received by Buyer in a timely manner, then the
Statement (as revised in accordance with this sentence) shall become final and
binding upon Seller and Buyer on the earlier of (A) the date Seller and Buyer
resolve in writing any differences they have with respect to the matters
specified in the Notice of Disagreement or (B) the date any disputed matters are
finally resolved in writing by the Accountant. During the 30-day period
following the delivery of a Notice of Disagreement, Seller and Buyer shall seek
in good faith to resolve in writing any differences that they may have with
respect to the matters specified in the Notice of Disagreement. During such
period Buyer and its auditors shall have access to any working papers of
Seller's auditors prepared in connection with the Notice of Disagreement. At the
end of such 30-day period, Seller and Buyer shall submit to the Accountant for
arbitration any and all matters that remain in dispute and which were properly
included in the Notice of Disagreement, in the form of a written brief. Seller
and Buyer shall use their reasonable efforts to cause the Accountant to render a
decision resolving the matters submitted to the Accountant within 30 days
following submission thereto. Judgment may be entered upon the determination of
the Accountant in any court having jurisdiction over the party against which
such determination is to be enforced. The fees and expenses of the Accountant
shall be borne equally by Buyer and Seller. Each party shall bear the costs and
expenses of its own counsel, accountants and other advisers in connection with
any such Notice of Disagreement.
(c) The Purchase Price shall be increased by the amount by which Closing
Working Capital exceeds $5,000,000 (the "WC Amount"), and the Purchase Price
shall be decreased by the amount by which Closing Working Capital is less than
the WC Amount (the Purchase Price as so increased or decreased shall hereinafter
be referred to as the "Adjusted Purchase Price"). If the Closing Date Amount is
less than the Adjusted Purchase Price, Buyer shall, and if the Closing Date
Amount is more than the Adjusted Purchase Price, Seller shall, within 10
Business Days after the Statement becomes final and binding on the parties, make
payment by wire transfer in immediately available funds of the amount of such
difference, together with interest thereon at a rate equal to the rate of
interest from time to time announced publicly by Citibank, N.A. as its prime
rate, calculated on the basis of the actual number of days elapsed divided by
365, from the Closing Date to the date of payment.
(d) The term "Working Capital" means Current
Assets minus Current Liabilities. The terms "Current Assets" and "Current
Liabilities" mean the current assets and current liabilities, respectively, of
the Business other than Excluded Assets or Excluded Liabilities, as the case may
be, calculated in accordance with United States generally accepted accounting
principles ("GAAP"), applied on a basis consistent with Seller's current
practices (as reflected in the consolidated balance sheet of SDIC dated as of
December 31, 1998 and the applicable portions of the Caesars Palace, Caesars
Tahoe and Desert Inn Supplementary Combining Financial Information as of
December 31, 1998 (collectively, the "Balance Sheet"). Notwithstanding the
foregoing, in addition to all other Current Liabilities, (i) $300,000 for
repairing the water utility system owned by DIIC shall be included as a Current
Liability in the calculation of Closing Working Capital hereunder, less the
amount of (x) all documented capital expenditures for such repairs in excess of
$200,000 for the year 1999 and (y) all such documented expenditures in the year
2000 and (ii) all unredeemed chips and tokens of Seller, and all progressive
prizes associated with keno, slot machines and coin operated gaming devices and
sportsbook and racebook gaming, in each case as of the Transfer Time, shall be
included as a Current Liability in the calculation of Closing Working Capital
hereunder.
(e) Following the Closing, Buyer shall not take any actions with respect
to the accounting books and records of the Business on which the Statement is to
be based that would obstruct or prevent the preparation of the Statement and the
determination of Closing Working Capital as provided in this Section 4.4. During
the period of time from and after the date of delivery of the Statement to
Seller through the resolution of any adjustment to the Purchase Price
contemplated by this Section 4.4, Buyer shall afford to Seller and any
accountants, counsel or financial advisers retained by Seller in connection with
any adjustment to the Purchase Price contemplated by this Section 4.4 reasonable
access during normal business hours to the books and records of the Business (if
within the control of Buyer) to the extent relevant to the adjustment
contemplated by this Section 4.4).
ARTICLE V
Confidential Information
SECTION 5.1 Confidentiality. (a) Seller and Buyer each agree that all
Confidential Information will be kept confidential and will be used solely in
connection with this Agreement and the transactions contemplated hereby, and
that each of the parties and their respective directors, trustees, officers,
employees, advisors, agents, lenders and consultants (collectively
"Representatives") will not disclose in any manner whatsoever any of the
Confidential Information received by it; provided, however, that (i) each party
may make any disclosure of such information to which the other party gives its
prior consent and (ii) any of such information may and shall only be disclosed
to the parties' respective Representatives to the extent such Representatives
need to know such information for the sole purpose of effecting the sale of the
Assets pursuant to this Agreement. Notwithstanding the foregoing, each of the
parties may make such disclosures (i) as may be required by law, (ii) in
connection with any proceedings before any regulatory bodies or agencies, and
(iii) to the Nevada Gaming Authorities. Upon the termination of this Agreement
for any reason, all Confidential Information in the possession of either party
or its Representatives shall be returned to the party that provided such
Confidential Information.
(b) The term "Confidential Information" means all information and data
furnished by either party or its Representatives to the other party or its
Representatives, in each case, in connection with this Agreement or the
transactions contemplated hereby and shall be deemed to include all notes,
analyses, compilations, studies, interpretations or other documents prepared by
any of the parties or their respective Representatives that contain, reflect or
are based upon, in whole or in part, such information furnished to one party by
or on behalf of the other party. The term "Confidential Information" does not
include information that (i) was or becomes generally available to the public
other than as a result of a
disclosure by a party or its Representatives acting in violation of this
provision, (ii) was known to a party or its Representatives prior to being
furnished to such party in accordance with the terms of this Agreement or (iii)
was or becomes available to a party on a nonconfidential basis from a source
other than a party or its Representatives; provided, that the source of such
information was not known to the recipient to be bound by a confidentiality
agreement or other contractual, legal or fiduciary obligation of confidentiality
with respect to such information.
ARTICLE VI
Representations and Warranties of
each of Parents and Seller
SECTION 6.1 Parents' and Seller's Representations and Warranties. Each of
the Parents and Seller represents and warrants to Buyer as follows:
(a) Each of SGC and SDIC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada, and
Starwood is a corporation duly organized, validly existing and in good standing
under the laws of the State of Maryland, in each case with all requisite
corporate power and authority to execute, enter into and carry out its
obligations under this Agreement, the Deeds and the other agreements and
instruments to be executed and delivered or caused to be delivered by it in
connection herewith. Each officer of the foregoing who shall execute and deliver
this Agreement on behalf of any of the foregoing has been duly authorized to so
act by all requisite action on the part of such party.
(b) The execution, delivery, and performance of this Agreement, the
Deeds and the other agreements and instruments to be executed and delivered by
each of the Parents and SDIC in connection herewith by the persons executing the
same on behalf of such parties have been or will be duly and validly authorized
by all necessary corporate action on the part of such parties, and this
Agreement, the Deeds and such other agreements and
instruments constitute or as of the Closing will constitute the legal, valid and
binding obligations of each of them, enforceable in accordance with their
respective terms.
(c) The execution, delivery and performance of this Agreement, the
Deeds and the other agreements and instruments to be executed and delivered by
each of the Parents and SDIC in connection herewith will not (i) violate the
certificate of incorporation or by-laws of any of the Parents or SDIC, (ii)
violate any provision of law applicable to any of the Parents or SDIC, the
Business Premises or the Business, the violation of which would have a Material
Adverse Effect or which would prevent the consummation of the transactions
contemplated by this Agreement or (iii) conflict with or result in the breach or
termination of, or constitute a default under or pursuant to any judgment,
order, injunction, decree or ruling of any court or governmental authority, or
any other agreement or instrument by which SDIC or the Assets are bound, or to
which any of them are subject, which conflict, breach, termination or default
would have a Material Adverse Effect or would prevent the consummation of the
transactions contemplated by this Agreement, or (iv) result in the creation of
any material lien, charge or encumbrance upon any of the Assets which is not
removed prior to the Closing other than, in each case, Permitted Exceptions and
Permitted Liens.
(d) Schedule 6.1(d) sets forth a list of all agreements having a
remaining term in excess of twelve (12) months following the Effective Date and
which may not be terminated without penalty on less than 90 days prior notice
and which in each case require aggregate consideration in cash or in kind in
excess of $500,000 for the unexpired term thereof relating to the Business. To
the knowledge of each of the Parents and Seller, all such Assumed Contracts are
in full force and effect, neither Seller nor any other party to any thereof is
in material default thereunder, and no event has occurred which, with notice or
the passage of time, or both, would constitute a material default by Seller or
by any other party to the Assumed Contracts.
(e) Schedule 6.1(e) represents a true,
correct and complete list of all material licenses, permits, certificates of
occupancy, franchises, consents, approvals and governmental authorizations
("Permits"), including liquor licenses and gaming licenses, currently necessary
for the ownership of the Assets and the operation of the Business, including the
business of, and the services provided by, DIIC. No material default has
occurred in the due observance or condition of any material Permit which has not
been heretofore corrected and, to the knowledge of each of the Parents and
Seller, no event has occurred which, merely by notice or the passage of time, or
both, would result in a material default thereunder. The Permits are in full
force and effect and all the material requirements and conditions of the Permits
have been fully complied with.
(f) Except as set forth on Schedule 6.1(f), other than personal
property leased by Seller pursuant to the Assumed Contracts, all personal
property used by Seller in the operation and maintenance of the Business is
owned by Seller or its affiliates and constitutes a part of the Assets. Except
as set forth on Schedule 6.1(f), Seller has or will have at Closing good and
valid title to the personal property included in the Assets that are conveyed at
the Closing, free and clear of all liens, security interests, claims, charges
and encumbrances, except Permitted Exceptions and Permitted Liens.
(g) Schedule 6.1(g) lists all the pending and registered trademarks,
service marks and trade names owned by SDIC or its affiliates and used, or held
for use, exclusively in connection with the Business. All the Intangible
Property is valid, in good standing, free and clear of any encumbrances and is
not being challenged in any way. To the knowledge of the Parents and Seller,
Seller is not currently infringing on any trademark, service xxxx, trade name or
copyright of another, and there is no claim pending or, to the knowledge of each
of the Parents and Seller, threatened against Seller with respect to an alleged
infringement of any trademark, service xxxx, trade name or copyright owned by
another nor, to the knowledge of each of the Parents and Seller, does the
operation of the Business in the manner in which it has heretofore been operated
give rise to any such infringement. Seller has not granted any
party or entity any license to use any such Intangible Property.
(h) Schedule 6.1(h) identifies all contracts or reservations for the
use or occupancy of guest rooms, meeting and banquet facilities, tee times for
the golf course or other facilities of the Business to be fulfilled after
January 1, 2000, that are not terminable without penalty on less than 90 days
notice and that would result in payments to Seller in excess of $100,000.
(i) Except as set forth in Schedule 6.1(i), to the knowledge of each
of the Parents and Seller, no agreements have been entered into with any Person,
including home builders, prospective home buyers, owners, or occupants of the
land surrounding the Business, regarding: (A) the right to membership in the
golf course included in the Assets or the intent to operate such golf course as
private or semi-private country club, (B) the right to play golf on such golf
course or (C) the manner in which the Business will be operated, managed,
maintained, or improved.
(j) Except as described on Schedule 6.1(j), there are no material
actions, claims, suits, or proceedings (including gaming audits, arbitrations,
grievances, judicial proceedings, administrative proceedings and tax consents)
pending or, to any of the Parents' or Seller's knowledge, threatened against
Seller or DIIC or affecting Seller's or DIIC's rights, in each case with respect
to the Business, the Assets, at law or in equity, before any Federal, state,
municipal, or other governmental agency or instrumentality, nor is any of the
Parents or Seller aware of any investigation with respect to any of the
foregoing or any facts which to their knowledge are reasonably likely to result
in any such action, investigation, suit or proceedings affecting Seller, DIIC,
the Assets or the Business. In addition, except as described on Schedule 6.1(j),
there are no material judgments, orders, awards or decrees currently in effect
against Seller or DIIC with respect to the ownership, marketing, development or
operation of any part of the Assets or the Business.
(k) With the exception of proposed
pedestrian bridges and a proposed beautification assessment, no material
governmental assessment for sewer, sidewalk, water, paving, roadways,
electrical, power or other improvements is pending, or to any of the Parents' or
Seller's knowledge threatened, with respect to the Assets.
(l) Except for the Nevada Power Sale Agreement or as set forth on
Schedule 6.1(l), no proceedings are presently pending or, to any of the Parents'
or Seller's knowledge, threatened, for the taking by exercise of the power of
eminent domain, or in any other manner for a public or quasi-public purpose, of
all or any part of the Real Estate, the Corner Land or the Residential Real
Estate. Except as set forth on Schedule 6.1(l), to Parents' and Seller's
knowledge, there is no plan, study or effort by any governmental authority or
agency that in any way materially adversely affects or which would reasonably be
expected to materially adversely affect the present or future use or zoning of
the Real Estate, the Corner Land or the Residential Real Estate.
(m) Except as set forth on Schedule 6.1(m), there exist no
outstanding covenants or agreements in connection with the zoning or development
of the Real Estate, the Corner Land or the Residential Real Estate or any
portion thereof which would bind or require Buyer to perform any material
actions or pay any material monies in connection therewith.
(n) There is no pending or, to any of the Parents' or Seller's
knowledge, threatened curtailment or reduction of any utility service to the
Real Estate, the Corner Land or the Residential Real Estate or any part thereof,
and Seller has not received any written notice of any such pending or threatened
curtailment or reduction. No off-site easements, parking or other facilities are
by law or restrictive covenant needed for the use and operation of the Real
Estate, the Corner Land or the Residential Real Estate.
(o) Except as would not reasonably be expected to have a Material
Adverse Effect:
(i) Seller has, and is in compliance with, all Permits required
under Environmental Law for the ownership and operation of the Assets;
(ii) Seller is in compliance with all Environmental Laws governing
the ownership or operation of the Assets;
(iii) there are no pending or threatened Environmental Claims
relating to Seller's ownership or operation of the Assets;
(iv) no Hazardous Materials have been released or disposed of,
whether by Seller or any other Person, at, on, under or from the Assets in
any manner or to any place that, in any such case, has resulted in, or
could reasonably be expected to result in, an Environmental Claim;
(v) there is no requirement or restriction imposed by any
Environmental Law that will prohibit, impair or impede any currently
planned or projected, alteration by Seller or addition to or expansion of
any of the Assets;
(vi) there is no outstanding order pursuant to any Environmental Law
with which Seller has not complied pertaining to the closure or cessation
of sewer treatment services, operations and facilities formerly provided
with respect to the Business Premises; and
(vii) Seller is under no obligation pursuant to Environmental Law to
remove, encapsulate or otherwise treat any asbestos or asbestos-continuing
materials at or in the Business Premises.
(p) Seller is either the owner or the licensee of the Transferred
Software Programs and, except as set forth in the contracts or agreements listed
in Schedule 6.1(p), the Transferred Software Programs and all rights thereunder
are transferable to Buyer without restrictions other than those restrictions
that would not reasonably be expected to have a Material Adverse Effect.
(q) Except as set forth on Schedule 6.1(q), neither the Parents nor
Seller has any knowledge of any material settlement, earth movement, termite
infestation, or damage affecting the Real Estate or the Residential Real Estate,
the Corner Land or any material defects in any mechanical, electrical, plumbing,
sewer, heating, air conditioning, sprinkler systems, or irrigation systems at
the Real Estate, the Corner Land or the Residential Real Estate, all of which
are in good operating condition and repair.
(r) Except as may be shown on Schedules 6.1(j) and 6.1(l), to the
knowledge of each of Parents and Seller, neither SDIC nor any of the Assets is
in violation of, under investigation with respect to, threatened to be charged
with or given notice of any violation of, any law, rule, regulation, ordinance
or code, judgment, injunction, order or decree applicable to the Assets or the
conduct of the Business (including Environmental Laws), except for violations
that are not reasonably likely to have a Material Adverse Effect. Seller has not
received any notice from any insurer that any portion of the Assets contains any
defects or conditions that are reasonably likely to materially adversely affect
the insurability of the Assets.
(s) Except as set forth on Schedule 6.1(s) and except for the
Excluded Assets, the Assets comprise all of the material assets, property and
rights of every type and description, real, personal and mixed, tangible and
intangible, used in the conduct of the Business as presently conducted.
(t) Schedule 6.1(t) sets forth a list of all employee benefit plans
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended, and all other bonus, deferred compensation, severance,
incentive and equity-based compensation, pension, profit-sharing and stock bonus
plans, programs, policies and arrangements in which employees of the Business
participate. There are no material unfunded liabilities in respect of employees
(and their dependents and beneficiaries) of the Business (or in respect of
benefit
plans in which they participate) as to which Buyer could be liable.
(u) Seller will or will cause its affiliates to convey good and
valid title (subject to the provisions of Section 2.2(a) with respect to the Dio
Drive Vacated Area, Country Club Lane and the Out Parcel) to the Assets (other
than the Nevada Power Land), free and clear of all liens, security interests,
claims, charges and encumbrances (except (i) those pertaining to the Assumed
Contracts, (ii) such as are disclosed in Schedule 6.1(f), (iii) to the extent
bonded against mechanics', carriers', workmen's, repairmen's or other like liens
arising or incurred in the ordinary course of business, (iv) liens arising under
original purchase price conditional sales contracts and equipment leases with
third parties entered into in the ordinary course of business and providing for
periodic payments, (v) liens for taxes, assessments and other governmental
charges (A) which charges are not due and payable or (B) to the extent bonded
against, which are being contested in good faith by appropriate proceedings and
(vi) other imperfections of title or encumbrances expressly permitted hereunder
or which arise after the Effective Date other than by Seller's voluntary act and
do not materially impair the continued use and operation of the Assets to which
they relate in the operation of the Business as presently conducted
(collectively, the "Permitted Liens"), and, subject to Section 3.3, SDIC has or
will have the right, power and authority to sell, convey, transfer and assign
the Assets (other than the Nevada Power Land and the Stock) at the Closing as
contemplated by this Agreement. No material claims are being asserted that could
reasonably be expected to result in a Tax lien on the Assets.
(v) DIIC is duly organized, validly existing and in good standing
under the laws of the State of Nevada with all requisite power and authority to
conducts its business as presently conducted. The Stock constitutes all issued
and outstanding shares of common stock in DIIC. All such outstanding shares of
Stock have been duly authorized and validly issued and are fully paid and
nonassessable. There are no outstanding options, warrants, right, calls,
commitments, conversion rights, rights of exchange, plans or
other agreements or claims of any character providing for the purchase, issuance
or sale of any shares of the Stock other than as contemplated by this Agreement.
Except for the Stock, no other shares of capital stock or securities of DIIC
will be authorized, issued or outstanding at the Closing.
(w) The conveyance of the Stock to Buyer will transfer to Buyer
valid title thereto free and clear of all liens, encumbrances, restrictions,
preemptive rights, options and claims of every kind subject, however, to PUC
restrictions.
(x) Except as set forth on Schedule 6.1(x), DIIC has no material
liabilities or obligations of any nature (whether absolute, accrued, contingent,
or otherwise).
(y) All offices which Seller owns, maintains or otherwise uses in
connection with the operation of the Business are set forth on Schedule 6.1(y).
(z) Seller has filed with the Xxxxx County Planning Commission an
application for a parcel map determination in respect of the Corner Land and the
Nevada Power Land (the "Parcel Map").
SECTION 6.2 No Implied Representations. Buyer acknowledges that except as
expressly set forth in this Agreement and in the documents and instruments
delivered by Seller at the Closing, none of Starwood, ITT, Sheraton, SGC, SDIC,
or any of their respective parents, subsidiaries, affiliates, agents or
representatives or purported agents or representatives has made, and none of the
foregoing entities or Persons is liable for or bound in any manner by, any
express or implied warranties, guaranties, promises, statements, inducements,
representations or information pertaining to the Assets or any part thereof, the
physical condition thereof, environmental matters, the income, expenses or
operation thereof, the financial prospects for the Business, the uses which can
be lawfully made of the Assets under applicable zoning or other laws or any
other matter or thing with respect thereto, including any existing
or prospective Permits. Without limiting the foregoing, Buyer acknowledges and
agrees that, except as expressly set forth in this Agreement and in the
documents and instruments delivered by or for Seller at the Closing, Seller is
not liable for or bound by (and Buyer has not relied upon) any verbal or written
statements, representations, warranties, agreements, arrangements,
understandings, investment bankers or real estate brokers "setups" or offering
materials or any other information respecting any or all of the Assets furnished
by Starwood, ITT, Sheraton, SGC, SDIC or any affiliate, representative or other
person representing or purportedly representing any of the foregoing. Nothing
contained in this Section 6.2 shall be deemed to impair, limit or otherwise
affect any rights of Buyer under this Agreement in respect of the
representations, warranties and covenants of Seller set forth in this Agreement
and the other provisions hereof binding on Seller.
SECTION 6.3 Survival of Seller's Warranties.
(a) All of Seller's representations and warranties contained in this
Article VI (other than those contained in (i) Sections 6.1(a), 6.1(b) and
6.1(c), which shall survive the Closing indefinitely and (ii) Section 6.1(o),
which shall survive until twenty-four (24) months after the date of the
Closing), shall survive until eighteen (18) months after the date of the
Closing; provided, however, that Seller's liability for breach of such
representations and warranties shall not expire as to any breach or alleged
breach thereof if notice of such breach or alleged breach is given by Buyer to
Seller prior to eighteen (18) or twenty-four (24), as applicable, months after
the date of the Closing.
(b) Notwithstanding anything to the contrary set forth in this
Article VI, Seller shall have no liability to Buyer for breach of any warranty
and representation set forth in this Article VI or for breach by Seller of any
of its agreements set forth in Article VIII (other than with respect to
liability with respect to Taxes) unless and except to the extent that the
damages due to Buyer by reason of all such breaches exceeds $1,000,000.
ARTICLE VII
Representations and Warranties of SUN and Buyer
SECTION 7.1 SUN's and Buyer's Representations and Warranties. Each of SUN
and Buyer represents and warrants to Seller as follows:
(a) Buyer is a Nevada corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada, and SUN is an
international business company duly organized, validly existing and in good
standing under the laws of the Commonwealth of the Bahamas, in each case with
all requisite corporate power and authority to enter into and carry out its
obligations under this Agreement and the other agreements and instruments to be
executed and delivered by it in connection herewith. Each officer of SUN and
Buyer who shall execute and deliver this Agreement and such other agreements and
instruments has been duly authorized to so act by all requisite corporate action
on the part of SUN and Buyer.
(b) The execution, delivery, and performance of this Agreement and
the other agreements and instruments to be executed and delivered by SUN and
Buyer in connection herewith by the persons executing the same on behalf of SUN
and Buyer have been duly and validly authorized by all necessary corporate
action on the part of SUN and Buyer and this Agreement and such other agreements
and instruments constitute the legal, valid and binding obligations of each of
them, enforceable in accordance with their respective terms.
(c) The execution, delivery and performance of this Agreement, and
the other agreements and instruments to be executed and delivered by SUN and
Buyer in connection herewith will not (i) violate the articles of association or
memorandum of association or other similar organizational documents of SUN or
Buyer, (ii) violate any provision of law applicable to SUN or Buyer, the
violation of which would have a material adverse effect on SUN's or Buyer's
ability to consummate the transaction contemplated by this Agreement
or otherwise perform its obligations hereunder ("Buyer Material Adverse Effect")
or which would prevent the consummation of the transaction contemplated by this
Agreement, or (iii) conflict with or result in the breach or termination of, or
constitute a default under or pursuant to any judgment, order, injunction,
decree or ruling of any court or governmental authority, or other agreement or
instrument by which Buyer or its properties are bound, or to which any of them
are subject, which conflict, breach, termination or default would have a Buyer
Material Adverse Effect or which would prevent the consummation of the
transactions contemplated by this Agreement.
(d) Neither SUN nor Buyer nor any of the principals of either of
them has ever been denied a Gaming License. SUN and its required affiliates are
currently licensed and in good standing to conduct gaming activities in the
State of New Jersey in accordance with the New Jersey Gaming Control Act.
(e) SUN has arranged for, or will promptly following the Effective
Date arrange for, Buyer to have in its possession prior to the Closing
sufficient cash, available lines of credit or other sources of immediately
available funds to enable it to purchase the Assets and pay any other amount to
be paid by it hereunder.
SECTION 7.2 Survival of Buyer's and SUN's Representations and Warranties.
The representations and warranties of Buyer and SUN contained in Sections
7.1(a), 7.1(b) and 7.1(c) shall survive the Closing indefinitely.
ARTICLE VIII
Title Insurance
SECTION 8.1 Title Policies and Exceptions.
(a) Attached hereto as Schedule 8.1(a) is a preliminary title report
for each of the Real Estate, the Corner Land and each parcel of the Residential
Real Estate (collectively, the "Title Report"). All title exceptions
shown on the Title Report except those exceptions listed on Schedule 8.1(a) and
all matters disclosed by the surveys listed on Part II of Schedule 8.1(a)
(collectively, the "Survey"), copies of which have been delivered to Buyer, are
hereinafter referred to as the "Permitted Exceptions". The Permitted Exceptions
shall also include those other title exceptions which are disclosed or become
apparent to Buyer after the Effective Date, which are not already Permitted
Exceptions, which cannot be removed by the payment of a sum of money, which are
not caused by the intentional act of Seller or Seller's affiliates after the
Effective Date and which do not materially adversely affect the value of the
Real Estate, the Corner Land or the Residential Real Estate, or the continued
use thereof as currently conducted, or as to which Buyer has not timely
objected. Buyer must notify Seller in writing of its objection to any such
subsequently arising matter on or before the date that is ten (10) days after
Buyer's receipt of notice thereof.
(b) Seller shall cause all title exceptions (other than Permitted
Exceptions) not approved by Buyer to be removed on or before the Closing.
Seller, however, shall have the right to (i) cause the Title Insurer to remove a
lien by bonding over it or (ii) obtain the commitment of the Title Insurer to
insure Buyer against loss or damage that may be occasioned by such exceptions
that are not Permitted Exceptions.
(c) Prior to the Closing, Buyer shall obtain a ALTA extended owner's
policy of title insurance (Form B-1970) (Amended 4-6-90), issued by Nevada Title
Company or, if Nevada Title Company is unable to do so, by a title insurance
company reasonably acceptable to Buyer in its reasonable discretion ("Title
Insurer"), insuring that Buyer has fee title to the Real Estate, the Corner Land
and the Residential Real Estate, and DIIC has fee title to the real property
described as parcels 46 and 47 in the Title Report (the "DIIC Land") subject
only to (i) the Permitted Exceptions, (ii) liens for taxes not yet due and
payable, (iii) all standard exceptions, exclusions, conditions and stipulations
from coverage for the Title Insurer's Extended Coverage Form ALTA Owner's Policy
of Title Insurance, including any and all endorsements and affirmative coverage
customary in real estate sale transactions involving the magnitude and type of
the Assets (including, without limitation, an ALTA 3.1 Zoning Endorsement and as
to the DIIC Land, a non-imputation endorsement) as Buyer shall reasonably
request and (iv) those exceptions arising after the Effective Date and approved
by Buyer as provided above (the "Title Policies"). The coverage amount of the
Title Policies for the Real Estate shall be no more than the amount of (i)
$270,000,000 less (ii) the book value, net of depreciation on Seller's books as
at December 31, 1998, of all furniture, fixtures, equipment and other personal
property included in the Assets. Buyer shall have the right to require the Title
Insurer to obtain facultative reinsurance, with direct access provisions against
the reinsurer with respect to the Title Policies in such amounts and with such
title companies as Buyer shall determine in its reasonable discretion.
(d) Buyer and Seller equally shall pay the premiums for the Title
Policies.. Buyer shall pay for non-standard endorsements and any lender's
coverage premiums. Buyer and Seller shall each cooperate diligently to provide
customary documents required by Title Insurer as condition to issuance of the
Title Policies.
(e) Seller shall order an update of the Survey, which shall be
certified to Buyer and its lenders, if any, the Title Insurer and any other
parties reasonably requested by Buyer. In addition, Seller shall cause the
updated Survey to be prepared and be certified as having been prepared in
accordance with "Minimum Standard Detail Requirements for ALTA/ACSM Land Title
Surveys" jointly established and adopted by the American Land Title Association
("ALTA") and the American Congress of Survey and Mapping ("ACSM") in 1997 and
including all ALTA optional items except No. 5 (Contour Maps) and No. 12
(Governmental Agency Survey Requirements) and the updated Survey shall include a
certification as to whether or not the Real Estate, the Corner Land and the
Residential Real Estate are located in a floodplain or designated floodway and
such information as may be required by the Title Insurer to issue extended
coverage (consistent with all matters shown on such Survey) over all general
printed exceptions to title.
ARTICLE IX
Conduct of Business Prior to Closing
Each of the Parents and Seller agrees that, subject to the terms and
provisions of this Agreement, after the execution hereof and prior to Closing
(unless Buyer consents in writing otherwise):
SECTION 9.1 Seller's Conduct. Seller shall and shall cause each of its
subsidiaries and affiliates (as applicable) to:
(a) deliver the Assets to Buyer at the Closing in substantially
their present condition, except as otherwise permitted herein, and prior to such
time maintain and keep the Assets in substantially the same repair, working
order and condition as the Assets are in on the Effective Date (ordinary wear
and tear and damage from fire or other casualty subject to Article XVIII
excepted) so as to maintain the Business Premises as a hotel and resort with a
casino of substantially the same quality as such establishment exists as of the
Effective Date; provided, however, that, except as expressly provided in this
Agreement, SDIC shall not be required to make or undertake capital improvements,
repairs (other than in the ordinary course of business) or replacements with
respect to the Assets prior to the Transfer Time;
(b) continue in the ordinary course the existing use and operation
of the Business;
(c) promptly notify Buyer of (i) any notice or other communication
from any Person alleging that the consent of such Person is or may be required
in connection with the transactions contemplated by this Agreement, (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, Environmental Claims, investigations or
proceedings commenced or, to its knowledge threatened
against, relating to or involving or otherwise affecting SDIC or the Business
that, if adversely determined, would reasonably be expected to result in a
Material Adverse Effect or prevent or preclude the consummation of the
transactions contemplated by this Agreement;
(d) maintain a supply of consumables, inventory and operating
equipment of the type included at substantially the levels maintained on the
date of execution of this Agreement (with such increases or decreases due to
seasonality as and consistent with practice in the gaming industry in Las Vegas)
and in sufficient amounts to allow the efficient operation of the Business in a
first-class manner;
(e) comply in all material respects with all Legal Requirements
relating to the Assets or the Business and promptly provide Buyer with all
notices alleging violations of any Legal Requirement (including any violations
under applicable Legal Requirements relating to gaming) and cure, at its own
expense such violations;
(f) use best efforts to preserve in force all Permits and to cause
all expiring Permits to be renewed prior to the Closing Date. If any material
Permit shall be suspended, revoked or otherwise challenged, Seller shall
promptly notify Buyer and shall take all measures necessary to cause the
reinstatement of such material Permit without any additional limitation or
condition;
(g) make the following capital expenditures:
(i) budgeted capital expenditures of not less than $2,700,000 for
calendar year 1999 for maintenance and repair in respect of the Assets
and, following December 31, 1999, capital expenditures for such
maintenance and repair of not less than an average of $225,000 per month
in the aggregate; and
(ii) capital expenditures to install and operate an independent
information technology system, consisting of hardware and software, that
will allow Buyer, after the Transfer Time, to operate the Business as
currently conducted, which system (x) shall use the AS 400 platform and be
reasonably acceptable to Buyer, (y) shall include customer lists and
related information constituting Assets and (z) after the Transfer Time,
shall not be accessible by any Person other than Buyer and its affiliates;
(h) as promptly as practicable following the Effective Date, create
from the Xxxxxxx Xxxxx customer list a separate list of the customers of the
Desert Inn, and thereafter continue to maintain and update such customer list;
and
(i) enter into a golf course management agreement covering the
Desert Inn Golf Club and Pro Shop which is substantially consistent with Exhibit
10.6(b)-2 (the "Golf Course Management Agreement").
SECTION 9.2 Operating Restrictions. Except as required by law, as
otherwise expressly provided in this Agreement or with the consent of Buyer
(such consent not to be unreasonably withheld or delayed), SDIC shall not:
(a) create any mortgage, pledge, lien, encumbrance or charge on any
of the Assets which would bind any of the Assets following Closing (other than
Permitted Liens and Permitted Exceptions);
(b) sell or transfer the Business Premises, or any portion thereof
included as part of the Assets except transactions pursuant to the Assumed
Contracts or agreements entered into in the ordinary course of business which
sales or transfers would not, individually or in the aggregate, reasonably be
expected to materially impair the continued operation of the Business as
currently conducted;
(c) sell or transfer any Personal Property included as part of the
Assets except as contemplated by the Assumed Contracts or pursuant to agreements
entered into in the ordinary course of business which sales or transfers would
not, individually or in the aggregate, reasonably be
expected to materially impair the continued operation of the Business as
currently conducted;
(d) cancel or terminate (other than for cause or in the ordinary
course of business which would not, individually or in the aggregate, reasonably
be expected to materially impair the continued operation of the Business as
currently conducted) any of the Assumed Contracts or, with-out Buyer's prior
written consent, enter into any new contracts (except for the Golf Course
Management Agreement) which (i) require payments in excess of $250,000, (ii)
continue for more than twelve months from the Effective Date or (iii) grant to
any person any material rights with respect to the Business or the Assets unless
any such contract can be terminated on 30 days' notice without liability to
Buyer; provided, however, that the entry by SDIC into any such contract shall
not constitute a breach or default under this Agreement or a failure of any
condition of the Closing if SGC shall assume all obligations under such contract
(and indemnify Buyer in respect thereof) and if SGC has the ability to perform
all such obligations without use of the Assets following the Transfer Time;
(e) waive any material rights of substantial value that are included
as a part of the Assets;
(f) except for the Golf Course Management Agreement, enter into any
contracts or agreements with any affiliates of SDIC which will be binding on
Buyer after the Transfer Time;
(g) consent to, authorize or approve any change in the zoning, land
use classification, development rights or obligations for or with respect to the
Real Estate, the Residential Real Estate or the Corner Land or any part thereof,
except that Seller reserves the right to consummate the Nevada Power Sale
Agreement, continue to prosecute the proposed subdivision of the Corner Land and
continue, following the execution and delivery of the Timeshare Joint Venture
Agreement by the parties thereto as contemplated by this Agreement, to further
subdivide portions of the Golf Course and Residential Real Estate in a
manner consistent with, or pursuant to, such Timeshare Joint Venture Agreement;
(h) enter into any lease, license, occupancy agreement or other
agreement or contract which allows for the use or occupancy of any portion of
the Real Estate, the Residential Real Estate or the Corner Land other than (i)
bookings in the ordinary course of business which would result in aggregate
payments to Seller of less than $100,000, (ii) the conveyance contemplated by
the Nevada Power Sale Agreement and (iii) golf tournaments or events permitted
by Section 9.2(i);
(i) except for tournaments or events occurring on or prior to twelve
months following the Effective Date, enter into any agreements with respect to
use of the golf course located on the Real Estate, or any portion of such golf
course, for any tournaments or events which require, that the golf course be
unavailable to the public or to guests of the Business for more than one
calendar day;
(j) market or solicit offers to sell, transfer, convey, finance or
refinance, directly or indirectly, any interest in the Assets or in the owner of
any Asset to any party other than Buyer, or directly or indirectly negotiate,
participate or encourage the submission of any proposal with or from any other
Person relating to the sale of the Assets, nor shall Seller authorize any other
Person to do any of the foregoing on its behalf;
(k) except as set forth on Schedule 9.2(k), enter into any
collective bargaining or other agreements with any union for the employees of
the Business or enter into any agreement with any employee who will remain an
employee of the manager of the Business; provided, however, that Seller (i) may
engage in negotiations for and enter into successor collective bargaining
agreements to those collective bargaining agreements referenced in Schedule
3.1(a) which have expired or are due to expire, or may be terminated on seven
(7) days' notice by either party thereto, prior to the Transfer Time, (ii) may
engage in
negotiations and enter into a collective bargaining agreement with the
Professional, Clerical and Miscellaneous Employees, Teamsters Local Union No.
995, which was certified as the bargaining representative for the laundry
workers at the Business after an election held on October 30, 1998, and (iii)
will be required to engage in "effects bargaining", and may enter into
agreements in connection therewith, with the labor unions representing employees
of the Business (the "Union Employees"), and, provided, further, that any such
entering into collective bargaining agreements (or renewals thereof) will be on
commercially reasonable terms, and, in connection therewith, Seller will
undertake to involve Buyer, subject to agreement of the applicable labor unions,
in the foregoing negotiations;
(l) hire or solicit any employee of SDIC for employment at any of
Seller's or ITT's or its affiliates' other business or increase the compensation
of any such employee unless required by law or the terms of a collective
bargaining agreement, except for ordinary course merit increases in compensation
for non-union employees consistent with past practice for such employees or for
employees holding similar positions;
(m) except as required by applicable law (and then only following
notice to Buyer to the extent practicable) commence or commit to any capital
expenditures or capital project with respect to the Business or the Assets which
involves the payment of $500,000 or more;
(n) transfer, sell, assign, pledge, encumber or grant a security
interest in the Stock other than to Buyer. Notwithstanding any provision in this
Agreement to the contrary, the agreement contained in the immediately preceding
sentence shall survive the Closing Date until the Stock is transferred to Buyer;
or
(o) enter into any amendment, modification or supplement to the
Nevada Power Sale Agreement.
Buyer agrees to respond to Seller's request with respect to any of the
matters set forth in this Section 9.2 within 5 Business Days after receipt by
Buyer of Seller's
written request, and the failure of Buyer to respond within such 5 Business Day
period shall be deemed to be approval and consent thereto by Buyer.
ARTICLE X
Other Pre-Closing Obligations
SECTION 10.1 Access; Observers. (a) After the Effective Date and prior to
the Closing, upon prior written notice from Buyer and, if requested by Seller,
accompanied by a representative of Seller, Seller shall (unless prohibited by
law) give Buyer and its representatives, employees and agents reasonable access
during normal business hours to the Business Premises and to the books and
records relating to the Assets and shall (unless prohibited by law) furnish
Buyer during such period with such information in Seller's possession concerning
the Assets and operation of the Business as Buyer may reasonably request. Seller
and Buyer agree that prior to Closing Seller shall have no obligation to give
Buyer the names or addresses of, or other identifying information with respect
to, any of Seller's customers or players, and Buyer shall not have any access to
such identifying information or to other proprietary information of SIDC and its
Affiliates not included among the Assets. Any such access and the furnishing of
any such information shall not unduly interfere with the normal activities of
the Business, and Buyer acknowledges that no investigation by Seller or Buyer or
other information received by Buyer shall operate as a waiver or otherwise
affect any representation, warranty or agreement given or made by Seller
hereunder. Notwithstanding the foregoing, Buyer shall not have access to
personnel records of SDIC relating to individual performance or evaluation
records, medical histories or other information which in Seller's reasonable
good faith opinion is prohibited by Legal Requirements or the disclosure of
which could subject Seller to risk of liability.
(b) Buyer shall be responsible for its costs and
expenses in connection with any inspection or tests undertaken pursuant to this
Section 10.1.
SECTION 10.2 No Control. Prior to the Transfer Time, Buyer shall not
directly or indirectly control, supervise, direct or interfere with, or attempt
to control, supervise, direct or interfere with, the Assets or the Business.
Until the Transfer Time, the operations and affairs of the Business are the sole
responsibility of and (subject to the provisions of Article IX) under Seller's
complete control.
SECTION 10.3 Xxxx-Xxxxx-Xxxxxx Filing. Buyer and Seller shall use their
commercially reasonable efforts to comply as expeditiously as practicable with
the requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended ("HSR Act"), to the extent applicable to the transactions contemplated
by this Agreement, and shall make their initial filings with the Federal Trade
Commission and the United States Department of Justice as soon as practical and
no later than sixty (60) days after the Effective Date. Each party agrees to use
its commercially reasonable efforts to satisfy any requests for additional
information or other requirements imposed by the Federal Trade Commission or the
Department of Justice in connection with the transactions contemplated by this
Agreement as soon as practical and, if requested by any party, to request early
termination of any waiting period otherwise imposed by statute. Buyer shall pay
the filing fee, if any, required under the HSR Act.
SECTION 10.4 Cooperation. Each party shall use its commercially reasonable
efforts to make or file all other required notifications and to obtain all
consents, approvals and authorizations, including the Permits, which must be
obtained by such party in order to consummate the transactions contemplated
hereby. Each party shall render the other its full and complete cooperation in
giving such notices or obtaining such consents, approvals and authorizations,
including the Permits. Each party covenants and agrees promptly to furnish to
the other all information and data in the furnishing party's possession
requested in writing by the requesting party which such furnishing party
has the right to disclose and which is reasonable or necessary in order to
assist the requesting party to give the necessary notices or secure the permits,
licenses and approvals required as contemplated by this Agreement, including the
Permits.
SECTION 10.5 Gaming and Other Licenses. (a) As soon as practical after the
Effective Date, but in no event later than 60 days following the Effective Date,
Buyer will file applications with the Nevada Gaming Authorities on behalf of
Buyer, the board of directors and executive officers (if any) of Buyer, SUN and
the board of directors and executive officers of SUN for all required gaming
licenses (the "Gaming Licenses"), liquor licenses and for all other required
licenses (collectively with the Gaming Licenses and the liquor licenses, the
"Licenses") in connection with the Business, and all related necessary findings
of suitability, registrations and approvals, and no later than 120 days
following the Effective Date, Buyer will file such applications on behalf of all
other required parties in connection with the foregoing. Buyer will use its best
efforts to obtain the Licenses as soon as possible after the Effective Date, and
will respond promptly to all requests made by the Nevada Gaming Authorities
and/or the alcoholic beverage control authorities. Seller shall cooperate in
good faith to assist Buyer in obtaining the Licenses as soon as possible after
the Effective Date; provided, however, that the foregoing shall not require SUN
or Buyer, directly or indirectly, (i) to divest, or agree to divest, any
material assets of SUN or Buyer on the Effective Date or (ii) to cease to
conduct business or operations in any jurisdiction in which SUN, Buyer or their
respective subsidiaries conducts business or operations as of the Effective
Date.
(b) Seller will deliver to Buyer as promptly as practicable following the
filing thereof true, correct and complete copies of material gaming financial
reports, if any, filed by Seller with respect to the Business with the State of
Nevada or Nevada Gaming Authorities between the Effective Date and the Closing.
SECTION 10.6 Best Efforts. (a) Subject to the
terms and conditions of this Agreement, each party shall use its best efforts to
cause the Closing to occur as promptly as practicable following the Effective
Date.
(b) Without limiting the generality of the foregoing, each of Seller and
Buyer or their respective affiliates, as applicable, shall use its best efforts
to negotiate in good faith as soon as possible after the Effective Date, and
enter into as promptly as practicable following such Effective Date (or cause
their respective affiliates to enter into, as the case may be) (A) a timeshare
joint venture agreement between Starwood or an affiliate of Starwood and Buyer
or an affiliate of Buyer, the terms of which shall be substantially as set forth
in Exhibit 10.6(b)-1 (the "Timeshare Joint Venture Agreement"), and (B) a
marketing alliance agreement between Starwood or an affiliate of Starwood and
Buyer or an affiliate of Buyer, the terms of which shall be substantially as set
forth in Exhibit 10.6(b)-3 (the "Marketing Alliance Agreement").
SECTION 10.7 Notice. Each party covenants and agrees promptly to notify
the other of any claim, action, suit, proceeding or investigation relating to
the Business or this Agreement which is commenced or threatened and becomes
known to any of them between the Effective Date and the Closing.
SECTION 10.8 Parcel Map Requirement. Except for any change therefrom
approved in writing by Buyer (such approval not to be unreasonably withheld or
delayed), Seller shall effect any parcelization of the real property subject to
the Parcel Map substantially in accordance with the specifications of such
Parcel Map.
SECTION 10.9 Additional Agreements of Seller. (a) Seller agrees that
except as set forth on Schedule 6.1(x) or as contemplated by this Agreement,
DIIC shall not incur any material liabilities other than for the purchase of
water from the Las Vegas Valley Water District. Seller will pay for or cause to
be paid for (but not by DIIC) any water purchased by DIIC prior to the Closing
which is not paid for by DIIC prior to the Closing.
(b) Seller agrees that it will be solely responsible for the payment of
any fees or taxes due pursuant to any subsequent deficiency determinations made
under the Nevada Gaming Control Act (chapter 463 of the NRS) which encompasses
any period of time before the Closing Date. The foregoing provision, required by
the Nevada Gaming Control Act to be included in this Agreement, shall not be
construed to exonerate Buyer from paying, or to require Seller to pay, for fees
or taxes attributable to operations of the Business from and after the Transfer
Time.
ARTICLE XI
Conditions to Closing
SECTION 11.1 Buyer's Conditions. The obligation of Buyer to consummate the
Closing and the purchase of the Assets is conditioned upon the satisfaction or
waiver by Buyer as of the Closing Date of each of the following conditions
(collectively "Buyer's Closing Conditions"):
(a) Seller shall have delivered to Buyer a certificate of its Chief
Executive Officer or Chief Financial Officer, dated as of the Closing Date, to
the effect that all the terms, covenants, agreements and conditions of this
Agreement to be complied with and performed by Seller on or prior to the Closing
Date have been complied with and performed in all material respects, and all the
representations and warranties of Seller herein qualified as to materiality are
true and all such representations and warranties not so qualified are true in
all material respects as if made on and as of such date (unless an earlier date
is indicated in the representation and warranty).
(b) Seller, Parents or their respective affiliates shall have delivered,
or cause to be delivered, to Buyer (i) any documents, instruments or agreements
called for under this Agreement which have not previously been delivered; (ii)
Bills of Sale, endorsements of certificates of title and similar instruments of
conveyance as appropriate, in customary form covering title to the
Personal Property; and reasonably satisfactory to Seller's and Buyer's counsel;
(iii) an Assignment of Trademarks and intangible rights in customary form; (iv)
an Assignment and Assumption of Assumed Contracts in customary form and
reasonably satisfactory to Seller's and Buyer's counsel; (v) such other
customary instruments of conveyance as Buyer may reasonably request with respect
to the Assets; (vi) a "nonforeign affidavit", properly executed by an officer of
SDIC in customary form containing such information as is required by Section
1445(b)(2) of the Code; (vii) Seller's customer and player lists and related
documents, instruments or agreements called for under this Agreement which have
not been previously delivered; and (viii) such other documents, instruments or
agreements as may be reasonably required by Buyer or its counsel to transfer the
Assets to Buyer and to effectuate the transactions contemplated hereby.
(c) SDIC shall have delivered to Escrowee or to Buyer grant, bargain and
sale deeds conveying fee simple title to the Real Estate, the Corner Land and
the Residential Real Estate subject only to the Permitted Exceptions (including
the Nevada Power Sales Agreement) except as otherwise expressly provided herein,
in a form reasonably satisfactory to Buyer's and Seller's counsel.
(d) Any waiting period, including extensions thereof, applicable to the
consummation of the transactions contemplated hereunder required pursuant to the
provisions of the HSR Act shall have either expired without notice of objection
to the transaction or been previously terminated.
(e) Buyer shall have obtained all necessary approvals from the Nevada
Gaming Authorities, including Gaming Licenses, to operate the Business
substantially as currently conducted on the Effective Date.
(f) No injunction shall have been entered which prohibits or makes
impossible the consummation of the transactions contemplated hereby, whether
preliminary or permanent; provided, however, that Buyer and Seller shall use
their commercially reasonable efforts to prevent any such event (including
appealing any adverse decision).
(g) Buyer shall have received the Title Policies or commitments therefor,
and Seller shall have delivered to the Title Insurer such other documents or
affidavits as may be reasonably required as a condition to the issuance of the
Title Policies in the form herein required.
(h) Buyer shall have received from counsel to SDIC and Parents, an opinion
or opinions, dated as of the Closing Date, in form and substance reasonably
satisfactory to Buyer and its counsel, that: (i) each of SDIC and the Parents is
validly existing corporation organized and in good standing under the laws of
the state of its formation, and has all necessary power to own the Assets,
operate the Business and to consummate the transactions contemplated hereby; and
(ii) this Agreement and the other agreements and instruments to be executed and
delivered by Seller or the Parents on or prior to the Closing Date have been
duly and validly authorized by Seller or the Parents and will on the Closing
Date be valid and binding on Seller and the Parents and enforceable in
accordance with their terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity (including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing) regardless of whether considered in
a proceeding in equity or at law.
(i) The Outside Date shall not have passed, except that the same shall not
be a condition for the benefit of Buyer to the extent of any contributory delay
by Buyer in performing its obligations hereunder.
SECTION 11.2 Seller's Conditions. The obligation of Seller to consummate
the Closing is conditioned upon the satisfaction or waiver by Seller as of the
Closing Date of each of the following conditions (collectively "Seller's Closing
Conditions"):
(a) Buyer shall have delivered to Escrowee or to Seller the Closing
Date Amount (less the Applicable Accrued Deposit).
(b) Buyer, SUN or their respective affiliates shall have delivered,
or cause to be delivered, to Seller a certificate, dated as of the Closing Date,
to the effect that all the terms, covenants, agreements and conditions of this
Agreement to be complied with and performed by Buyer on or prior to the Closing
Date have been complied with and performed in all material respects, and all the
representations and warranties of Buyer herein qualified as to materiality are
true and all such representations and warranties not so qualified are true in
all material respects on the Closing Date as if made on and as of such date
(unless an earlier date is indicated in the representation and warranty).
(c) Buyer shall have delivered to Seller the instruments and
documents specified in Section 11.1 to be accepted and executed by Buyer and any
other documents, instruments and agreements called for under this Agreement
which have not previously been delivered.
(d) Seller shall have received from counsel to Buyer and SUN an
opinion or opinions dated as of the Closing Date, in form and substance
reasonably satisfactory to Seller and its counsel, that: (i) each of Buyer and
SUN is validly existing and in good standing under the laws of the state or
commonwealth of its formation, is duly qualified to conduct business in such
jurisdiction, and has all necessary corporate power to consummate the
transactions contemplated hereby; and (ii) this Agreement and the other
agreements and instruments to be executed and delivered by Buyer or SUN on or
prior to the Closing Date have been duly and validly authorized by Buyer or SUN
and will on the Closing Date be valid and binding on Buyer and SUN and
enforceable in accordance with their terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other similar
laws affecting creditors' rights generally from time to time in effect and to
general principles of equity (including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing) regardless of whether
considered in a proceeding in equity or at law.
(e) Any waiting period, including extensions
thereof, applicable to the consummation of the transactions contemplated
hereunder required pursuant to the provisions of the HSR Act shall have either
expired without notice of objection to the transaction or been previously
terminated.
(f) No injunction shall have been entered which prohibits or makes
impossible the consummation of the transactions contemplated hereby, whether
preliminary or permanent; provided, however, that Buyer and Seller shall use
their reasonable best efforts to prevent any such event (including appealing any
adverse decision).
(g) The Outside Date shall not have passed, except that same shall
not be a condition for the benefit of Seller to the extent of any contributory
delay by Seller in performing its obligations hereunder.
(h) Buyer shall have obtained all necessary approvals from the
Nevada Gaming Authorities, including Gaming Licenses, to operate the Business
substantially as conducted on the Effective Date.
SECTION 11.3 Frustration of Closing Conditions. Neither Buyer nor Seller
may rely on the failure of any condition set forth in this Article XI to be
satisfied if such failure was caused by such party's failure to act in good
faith or to use its best efforts to cause the Closing to occur as required by
Section 10.6.
ARTICLE XII
Escrow
SECTION 12.1 Escrow. If Buyer shall deliver the Deposit to Escrowee
pursuant to Section 4.2(a), then prior to or concurrently with such delivery
Buyer and Seller shall open an escrow (the "Escrow") with Escrowee by delivery
of a fully executed copy of this Agreement to Escrowee, and by Buyer's delivery
to Escrowee of the Deposit no later than the tenth Business Day following the
date of this Agreement. Escrowee will notify Seller and Buyer when Escrow has
been opened. This Agreement together with the Recording
Instructions shall constitute joint escrow instructions to Escrowee. In
addition, Seller and Buyer agree to be bound by such other reasonable and
customary escrow instructions as may be necessary or reasonably required by
Escrowee or the parties hereto in order to consummate the purchase and sale
described herein, or otherwise to distribute and pay the funds held in Escrow as
provided in this Agreement. In the event of any inconsistency between the terms
and provisions of such supplemental escrow instructions and the terms and
provisions of this Agreement and the Recording Instructions, the terms and
provisions of this Agreement and the Recording Instructions shall control,
absent an express written agreement between Seller and Buyer to the contrary
which acknowledges this Article XII. The Assets described in Sections 2.2(a),
(b) and (c) shall be conveyed at the Closing through such Escrow and the other
Assets shall be conveyed at the Closing outside of such Escrow, all in
accordance with the terms and provisions of this Agreement.
SECTION 12.2 Investment. The Escrowee shall invest or deposit all monies
delivered to the Escrowee for deposit into the Escrow in such account(s) at, or
in such certificates of deposit issued by, such bank or savings and loan
association located in Las Vegas, Nevada, as Buyer shall direct and as shall be
reasonably satisfactory to Seller. Except as otherwise expressly provided
herein, all interest, dividends and other income earned in respect of such
deposited monies shall accrue to the account and for the benefit of Buyer and
shall be reinvested or deposited as aforesaid.
ARTICLE XIII
Closing
SECTION 13.1 Time; Location. The consummation of the purchase and sale of
the Assets pursuant to this Agreement (the "Closing") shall be held at the
offices of Cravath, Swaine & Xxxxx, 000 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
(or such other place as the parties shall agree) and shall be deemed to occur at
midnight following 11:59 P.M. Las Vegas time on the Closing Date (the "Transfer
Time"). The Closing shall occur on a date (the "Closing Date") as soon as
practicable, but no later than the sixth Business Day after satisfaction (or
waiver by the applicable party) of the conditions set forth in Sections 11.1 and
11.2, and in any event on or prior to November 17, 2000 (the "Outside Date").
SECTION 13.2 Recordation of Deeds. The Closing shall, for all purposes
under this Agreement, be deemed to have occurred as of the Transfer Time. The
matters and deliveries described in Article XI shall be deemed accomplished
concurrently. The recordation of the Deeds shall be accomplished on the Closing
Date, if possible, but in any event not later than one Business Day following
the Closing Date and then only provided that the Title Insurer will insure over
the gap.
SECTION 13.3 Payment of Closing Date Amount. Prior to the Closing, Buyer
shall deliver to Escrowee or to Seller the Closing Date Amount less the
Applicable Accrued Deposit by wire transfer of immediately available funds.
Except to the extent such amounts are included as a Current Liability in the
calculation of Closing Working Capital pursuant to Section 4.4, the Escrowee
shall withhold from the monies to be delivered to Seller pursuant to the
immediately preceding paragraph such amounts as Seller and Buyer shall agree are
necessary to comply with the provisions of Nevada Revised Statutes ("NRS")
612.695, 360.525 and 616B.269 until such time as Seller furnishes to Buyer and
the Escrowee the receipts or certificates provided for in said statute or, if
not so provided for, such evidence as Buyer may reasonably require in order to
assure Buyer that the applicable obligations have been satisfied. If Sellers do
not produce such receipts and certificates within the time period provided in
said statute, or if any lien or other claim therefor is asserted against Buyer
or the Assets by a governmental authority, the Escrowee shall pay such withheld
funds to the appropriate governmental authorities.
SECTION 13.4 Certain Expenses. Buyer and Seller shall equally share the
following expenses: (i) all real estate transfer taxes, (ii) any and all sales
and use taxes
payable in respect of the transfer of the Gaming Equipment and other applicable
personal property to Buyer and (iii) the costs of filing or publishing any and
all notices or documents required by law or this Agreement to be filed or
published in connection with Buyer's purchase of the Gaming Equipment and other
applicable personal property.
SECTION 13.5 Transfer of Possession. Possession of the Assets shall be
delivered to Buyer at the Transfer Time.
ARTICLE XIV
[Intentionally omitted]
ARTICLE XV
Survival; Indemnification
SECTION 15.1 Survival. Other than Sections 5.1(a) and 15.2 through 15.7,
which shall survive indefinitely, and as otherwise provided in Sections 6.3, 7.2
and 9.2(n), any covenants, agreements, representations and warranties of the
parties hereto contained in this Agreement, the Deeds or in any other agreement,
certificate or other writing delivered pursuant hereto or in connection herewith
shall not survive the Closing.
SECTION 15.2 Indemnification. Seller agrees to indemnify and hold Buyer
harmless from and against any and all damages, losses, penalties, liabilities
and expenses, including reasonable attorneys' fees and expenses (collectively,
"Losses"), which Buyer may incur by reason of any action or claim arising from
acts or omissions of Seller (or any of its affiliates) prior to the Transfer
Time, in connection with the Assets or the Business and all liabilities in
respect of the Assets or the Business that are not Assumed Liabilities, all
liabilities in respect of the Excluded Assets, Excluded Liabilities and all
liabilities in respect of contracts assumed by SGC pursuant to Section 9.2(d).
Buyer agrees to indemnify and hold
Seller and its affiliates harmless from and against any and all Losses, which
Seller or any of its affiliates may incur by reason of (i) any action or claim
arising after the Transfer Time from acts or omissions of Buyer or otherwise
arising out of the Assets or the Business after the Transfer Time, including
Buyer's failure to discharge any of the Assumed Liabilities, (ii) any claims or
actions arising in connection with, or asserted by any broker contacted or
retained by Buyer, or (iii) Seller's cooperation with Buyer pursuant to Section
3.3 in providing Buyer with the benefits of any Assumed Contract for which
consent is not obtained.
SECTION 15.3 Calculation of Losses. The amount of any Loss for which
indemnification is provided under this Article XV shall be net of any amounts
recovered or recoverable by the party entitled to indemnification hereunder (the
"Indemnified Party") under insurance policies with respect to such Losses and
shall be (i) increased to take account of any net tax cost incurred by the
Indemnified Party arising from the receipt of indemnity payments hereunder
(grossed up for such increase) and (ii) reduced to take account of any net tax
benefit realized by the Indemnified Party arising from the incurrence or payment
of any such Losses. In computing the amount of any such tax cost or tax benefit,
the Indemnified Party shall be deemed to recognize all other items of income,
gain, loss, deduction or credit before recognizing any item arising from the
receipt of any indemnity payment hereunder or the incurrence or payment of any
indemnified Losses. Any indemnification payment hereunder shall initially be
made without regard to this paragraph and shall be increased or reduced to
reflect any such net tax cost (including gross-up) or net tax benefit only
after the Indemnified Party has actually realized such cost or benefit.
SECTION 15.4 Procedures Relating to Indemnification. (a) In order for an
Indemnified Party to be entitled to any indemnification provided for under this
Agreement in respect of, arising out of or involving a claim or demand made by
any person against the Indemnified Party (a "Third Party Claim"), such
Indemnified Party must notify the indemnifying party in writing, and in
reasonable detail, of the Third Party Claim within 10 business days after
receipt by such Indemnified Party of written notice of the Third Party Claim;
provided, however, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the indemnifying party
shall have been actually prejudiced as a result of such failure (except that the
indemnifying party shall not be liable for any expenses incurred during the
period in which the Indemnified Party failed to give such notice).
(b) If a Third Party Claim is made against an Indemnified Party, the
indemnifying party shall be entitled to participate in the defense thereof and,
if it so chooses and acknowledges its obligation to indemnify the Indemnified
Party therefor, to assume the defense thereof with counsel selected by the
indemnifying party; provided that such counsel is not reasonably objected to by
the Indemnified Party. Should the indemnifying party so elect to assume the
defense of a Third Party Claim, the indemnifying party shall not be liable to
the Indemnified Party for legal expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof. If the indemnifying
party assumes such defense, the Indemnified Party shall have the right to
participate in the defense thereof and to employ counsel (not reasonably
objected to by the indemnifying party), at its own expense, separate from the
counsel employed by the indemnifying party, it being understood that the
indemnifying party shall control such defense.
(c) If the indemnifying party so elects to assume the defense of any
Third Party Claim, all of the indemnified parties shall cooperate with the
indemnifying party in the defense or prosecution thereof. Whether or not the
indemnifying party shall have assumed the defense of a Third Party Claim, the
Indemnified Party shall not admit any liability with respect to, or settle,
compromise or discharge, such Third Party Claim without the indemnifying party's
prior written consent (which consent shall not be unreasonably withheld). If the
indemnifying party shall have assumed the defense of a Third Party Claim, the
Indemnified Party shall agree to any settlement, compromise or discharge of a
Third Party Claim which the indemnifying party may recommend and which by its
terms obligates the
indemnifying party to pay the full amount of the liability in connection with
such Third Party Claim and which releases the Indemnified Party completely in
connection with such Third Party Claim.
SECTION 15.5 Other Claims. In the event any Indemnified Party should have
a claim against any indemnifying party under Section 15.2 that does not involve
a Third Party Claim being asserted against or sought to be collected from such
Indemnified Party, the Indemnified Party shall deliver notice of such claim with
reasonable promptness to the indemnifying party. The failure by any Indemnified
Party so to notify the indemnifying party shall not relieve the indemnifying
party from any liability which it may have to such Indemnified Party, except to
the extent that the indemnifying party demonstrates that it has been materially
prejudiced by such failure. If the indemnifying party does not notify the
Indemnified Party within 10 calendar days following its receipt of such notice
that the indemnifying party disputes its liability to the Indemnified Party,
such claim specified by the Indemnified Party in such notice shall be
conclusively deemed a liability of the indemnifying party under Section 15.2 and
the indemnifying party shall pay the amount of such liability to the Indemnified
Party on demand or, in the case of any notice in which the amount of the claim
(or any portion thereof) is estimated, on such later date when the amount of
such claim (or such portion thereof) becomes finally determined. If the
indemnifying party has timely disputed its liability with respect to such claim,
as provided above, the indemnifying party and the Indemnified Party shall
proceed in good faith to negotiate a resolution of such dispute and, if not
resolved through negotiations, such dispute shall be resolved by litigation in
an appropriate court of competent jurisdiction.
SECTION 15.6 Exclusivity. After the Closing, and except for a party's
right to recover damages for breach of a representation or warranty (as limited
by Sections 6.3 and 7.2), Section 15.2 will provide the exclusive remedy for any
Losses arising out of this Agreement, the Assets, the Business or the
transactions contemplated hereby.
SECTION 15.7 No Consequential Damages. Notwithstanding anything to the
contrary in this Agreement, in no event shall any party be obligated to
indemnify any Person, including any Indemnified Party, for any special or
consequential damages.
ARTICLE XVI
Termination
SECTION 16.1 Grounds for Termination. This Agreement may be terminated at
any time prior to the Closing:
(i) by mutual written agreement of Seller and Buyer;
(ii) by Seller if Buyer shall fail timely to make the Deposit;
(iii) by Seller if the Closing shall not have been consummated on or
before the Outside Date other than by reason of Seller's default, or by
Buyer if the Closing shall not have been consummated on or before the
Outside Date, other than by reason of Buyer's default;
(iv) by Seller if any of the conditions set forth in Section 11.2
shall have become incapable of fulfillment and shall not have been waived
by Seller;
(v) by Buyer if any of the conditions set forth in Section 11.1
shall have become incapable of fulfillment and shall not have been waived
by Buyer;
(vi) by Buyer pursuant to Section 18.1;
(vii) by Buyer upon a breach in any material respect of any
representation, warranty, covenant or agreement hereunder by Seller unless
(x) such breach is capable of being cured, (y) Seller diligently seeks to
cure such breach and (z) such breach is cured prior to the Closing Date;
and
(viii) by Seller upon a breach in any material respect of any
representation, warranty, covenant or agreement hereunder by Buyer unless
(x) such breach is capable of being cured, (y) Buyer diligently seeks to
cure such breach and (z) such breach is cured prior to the Closing Date.
provided, however, that the party seeking termination (except pursuant to clause
(i)) is not in breach in any material respect of any of its representations,
warranties, covenants or agreements contained in this Agreement.
SECTION 16.2 Effect of Termination. Except as set forth in this Section
16.2 or in Section 16.3, if this Agreement is terminated as permitted by Section
16.1, such termination shall be without liability of either party (or any
stockholder, director, officer, employee, agent, consultant or representative of
such party) to the other party to this Agreement and the Deposit, together with
any interest or other payments made thereon during the Escrow, shall be
irrevocably returned to Buyer by the Escrowee within two (2) Business Days of
such termination. If a termination shall result from the willful failure of
either party to fulfill a condition to the performance of the obligations of the
other party, failure to perform a covenant of this Agreement or breach by either
party to this Agreement of any representation or warranty or agreement contained
herein, such party shall be fully liable for any and all Losses incurred or
suffered by the other party as a result of such failure or breach.
SECTION 16.3 Liquidated Damages.
(a) BECAUSE OF THE MAGNITUDE AND THE UNIQUE NATURE OF THE ASSETS,
THE PARTIES ACKNOWLEDGE THAT SELLER'S DAMAGES IN THE EVENT OF BUYER'S FAILURE TO
CONSUMMATE THE CLOSING IN ACCORDANCE WITH BUYER'S OBLIGATIONS HEREUNDER
WOULD BE EXTREMELY DIFFICULT OR IMPRACTICAL OF ASCERTAINMENT. BUYER AND SELLER
HAVE EXPRESSLY NEGOTIATED THIS PROVISION, AND HAVE AGREED THAT IN LIGHT OF THE
CIRCUMSTANCES EXISTING AT THE TIME OF EXECUTION OF THIS AGREEMENT, AN AMOUNT
EQUAL TO THE DEPOSIT, TOGETHER WITH INTEREST AND OTHER PAYMENTS MADE THEREON
DURING THE PERIOD OF ESCROW, REPRESENTS A REASONABLE ESTIMATE OF THE HARM LIKELY
TO BE SUFFERED BY SELLER IN THE EVENT THAT THE NEVADA GAMING AUTHORITIES DENY
BUYER A GAMING LICENSE TO OPERATE THE BUSINESS AS CURRENTLY CONDUCTED UP BY A
FINAL NON-APPEALABLE DECISION, THAT SELLER'S ACTUAL DAMAGES MIGHT WELL EXCEED
THE AMOUNT OF THE DEPOSIT, BUT THAT PROOF OF ACTUAL DAMAGES WOULD BE COSTLY OR
IMPRACTICAL. ACCORDINGLY, IN THE EVENT THAT THE NEVADA GAMING AUTHORITIES DENY
BUYER A GAMING LICENSE TO OPERATE THE BUSINESS AS CURRENTLY CONDUCTED BY A FINAL
NON-APPEALABLE DECISION, THEN SELLER SHALL BE ENTITLED TO RECEIVE THE DEPOSIT
(TOGETHER WITH SUCH INTEREST AND OTHER PAYMENTS) FROM ESCROWEE AS ITS SOLE
REMEDY AND AS LIQUIDATED DAMAGES; PROVIDED, HOWEVER, THAT THE FOREGOING SHALL
NOT IMPAIR OR LIMIT ANY REMEDY OF SELLER FOR ANY BREACH OF THIS AGREEMENT BY SUN
OR BUYER.
(b) Notwithstanding the foregoing, Seller's agreement to accept the
Deposit (together with interest and other payments made thereon during the
period of Escrow) as liquidated damages pursuant to Section 16.3(a) for failure
of the Nevada Gaming Authorities to grant Buyer a Gaming License to operate the
Business as currently conducted by a final and non-appealable decision is
expressly conditioned on Buyer's full cooperation and that Buyer refrain from
obstructing or interfering in any way with Seller's exercise of such remedies
and execute a release in form reasonably satisfactory to Seller's counsel of any
and all claims against Starwood, ITT, Sheraton, SGC, SDIC and the Assets within
three (3) Business Days of Seller's demand therefor. In the event Buyer shall
fail or refuse so to cooperate with Seller in the termination of this Agreement,
the cancellation of Escrow, the payment of liquidated damages and the execution
and delivery of the foregoing described release in favor of Seller and its
affiliates, then Seller may elect to pursue any and all remedies available to it
at law or in equity. In the event of an action commenced by Seller or Buyer over
disposition of the Deposit or money
damages asserted by Buyer for Seller's alleged breach of this Agreement, the
prevailing party shall be entitled to recover, in addition to its costs of
enforcement, including attorneys' and consultants' fees, interest at ten (10%)
percent per annum on the sum ultimately recovered, calculated from the
expiration of said three (3) Business Days, and inclusive of interest earned on
the Deposit from and after said date.
(c) The parties acknowledge that, subject to the provisions of
Section 16.3(b), Buyer has the right to seek both money damages and specific
performance in the event of Seller's breach of this Agreement.
(d) In the event of Buyer's failure to timely consummate the
Closing, other than by reason of a failure of a Buyer's Closing Condition, time
being of the strictest essence of each and every provision hereof, Seller shall
be entitled to pursue any and all remedies available to it at law or in equity
(including retention of the Deposit).
SECTION 16.4 Survival. The provisions of Sections 5.1(a), 20.5, 20.6,
20.12, 20.16 and Sections 16.2 and 16.3 shall survive any termination hereof
pursuant to Section 16.1.
ARTICLE XVII
Collection of Chips and Tokens;
Baggage and Safe Deposits
SECTION 17.1 Collection of Chips and Tokens. Buyer shall redeem, as
Seller's agent but without any liability therefor, any chips or tokens, racebook
and keno tickets (from any series in use as of or prior to the Transfer Time) of
Seller relating to the use and operation of the Business, which are presented by
patrons of the Business or Buyer for payment within the applicable Nevada
statutory time periods for such redemptions. Seller's chips and tokens, racebook
and keno tickets, to the extent redeemed by Buyer during such statutory periods,
shall be
redeemed as often as weekly by Seller, upon delivery to Seller of such Seller's
chips, tokens, racebook and keno tickets redeemed. Seller agrees to make
arrangements for the additional redemption of its chips, tokens and xxxxxx as
required by Nevada law.
SECTION 17.2 Baggage. At the Transfer Time an authorized representative of
Seller shall perform the following functions for all baggage, trunks and other
property that was checked and placed in the care of Seller: (i) seal all pieces
of baggage with tape; (ii) prepare an inventory ("Inventoried Baggage") of such
items indicating the check number applicable thereto; and (iii) deliver the
Inventoried Baggage to an authorized representative of Buyer and secure a
receipt for the Inventoried Baggage. Thereafter, Buyer shall be responsible for
such Inventoried Baggage.
SECTION 17.3 Safe Deposits. Safe deposit boxes in use by customers at the
Transfer Time will be sealed in a reasonable manner mutually agreeable to Buyer
and Seller. At the Transfer Time, Seller and Buyer shall designate in writing
their initial safe deposit representatives. Representatives of both Buyer and
Seller are to be present when a seal is broken. Seller will have no further
responsibility for seals broken without the presence of Seller's representative.
Buyer will have no responsibility for loss or theft from a safe deposit box
whose seal was broken in the presence of Seller's representative. Seller will
make a representative available within one hour after Buyer notifies a person or
persons whom Seller will from time to time designate. All safe deposit keys,
combinations and records shall be delivered at the Transfer Time to Buyer.
SECTION 17.4 Valet Parking. At the Transfer Time, an authorized
representative of Seller shall perform the following functions for all motor
vehicles that were checked and placed in the care of Seller: (i) xxxx all motor
vehicles with a sticker or tape; (ii) prepare an inventory ("Inventoried
Vehicles") of such items indicating the check number applicable thereto; and
(iii) transfer control of the Inventoried Vehicles to an authorized
representative of Buyer and secure a receipt for the Inventoried Vehicles.
Thereafter, Buyer shall be responsible for the Inventoried Vehicles.
ARTICLE XVIII
Loss by Fire or Other Casualty; Condemnation
SECTION 18.1 Fire or Other Casualty; Condemnation. In the event that prior
to the Closing Date, a Material Portion of the Assets is destroyed or suffers
Material Damage, or if condemnation proceedings are commenced against all or a
Material Portion of the Business Premises, Seller shall promptly give Buyer
written notice of the occurrence of such damage, destruction or condemnation
proceeding. Buyer shall then have the right, exercisable by giving notice of
such decision to Seller within 10 Business Days after receiving such written
notice from Seller of such damage, destruction or condemnation proceedings, to
terminate this Agreement, in which case neither party shall have any further
rights or obligations hereunder and the Deposit, together with interest thereon
in Escrow, shall be returned to Buyer. If Buyer elects within such 10 Business
Day period to accept the Assets in their then condition, all proceeds of
insurance (other than any business interruption insurance), after deducting all
reasonable expenses of Seller in repairing such damage, if any, or Seller's
share of any such condemnation awards (but exclusive of awards for business
interruption) shall be paid or assigned to Buyer at the Closing with no
reduction in the Purchase Price. In the event that, after the Effective Date,
there is damage to the Assets which does not constitute Material Damage, Buyer
shall not have the right to terminate the Agreement by reason thereof and Seller
will promptly repair or replace the affected Assets at Seller's expense prior to
or within a reasonable time after the Closing Date or pay Buyer the cost of such
repair or replacement as determined below. Seller shall give Buyer written
notice within 15 Business Days of the occurrence of any such non-Material Damage
and of Seller's election to repair or replace the affected Assets as provided
above or to pay Buyer the cost of such repair or replacement. If Seller does not
deliver the notice
described above within such 15 Business Day period, Seller shall be deemed to
have elected to pay Buyer the cost of any such repair or replacement. Any
payment from Seller for the cost of the repair or replacement shall be
determined based on bids or other advice from one or more qualified contractors,
architects or engineers reasonably acceptable to Seller. Any such payment from
Seller shall be made within 10 days after the determination of the amount of
such payment. In the event of condemnation which is not of all or a Material
Portion of the Business Premises, Buyer shall not have the right to terminate
this Agreement by reason thereof and all condemnation awards payable to Seller
by reason thereof shall be paid or assigned to Buyer at the Closing with no
reduction in the Purchase Price. This Article XVIII is intended as an express
provision with respect to destruction and condemnation which supersedes the
provisions of the Nevada Uniform Vendor and Purchaser Risk Act NRS Section
113.030 et seq.
ARTICLE XIX
Employee and Employee Benefit Matters
SECTION 19.1 Salaries and Benefits. SDIC shall pay, or cause to be paid,
on or before the Transfer Time in accordance with applicable law, all salaries,
wages and related payroll expenses (including payroll taxes, social security and
unemployment compensation taxes) and employee benefits of employees or labor,
vacation pay and sick pay which has accrued for the period ending at the
Transfer Time, to all employees of the Business; provided that with the consent
of any applicable labor union representing Union Employees, Union Employees may
be permitted to carry forward such accrued vacation or sick pay, to be paid by
Buyer, the amount of such accrued items as of the Transfer Time to be included
as a payable in the calculation of Closing Working Capital pursuant to Section
4.4. Subject to the second immediately following sentence, Buyer shall offer
employment on substantially the same terms (except that all such offers shall be
for at-will employment) to all current employees of the Business (including
employees who are on an approved leave of absence as of the Transfer Time).
Unless otherwise
required by law or pursuant to the terms of any Collective Bargaining Agreement,
Buyer may condition any offer of employment to any employees of the Business who
are on an approved leave of absence as of the Transfer Time upon their
presenting themselves to Buyer for employment within six months following the
Transfer Time. All such offers of employment shall be made (i) in accordance
with all applicable laws and regulations, and (ii) for Union Employees, in
accordance with the terms of each applicable collective bargaining agreement
pertaining to such Union Employees (each a "Collective Bargaining Agreement").
All employees of the Business shall cease to be employees of Seller or its
affiliates as of the Transfer Time, and their period of employment by Buyer
shall begin as of the Transfer Time or, if later, the date that such employees
present themselves to Buyer for employment if they are not actively employed as
of the Transfer Time. With regard to Union Employees, Buyer shall (i) recognize
each labor union representing Union Employees as their exclusive bargaining
representative, (ii) assume, and become party to and bound by the terms and
conditions of, each Collective Bargaining Agreement until its respective
expiration date, (iii) comply with its legal obligations under Federal labor law
with regard to Union Employees, and (iv) treat service with Seller prior to the
Transfer Time in the same manner as such service has been recognized by Seller
for purposes of determining seniority rights and benefits under the Collective
Bargaining Agreement (except where recognition of such service by Buyer would
result in a duplication of benefits provided). Seller covenants and agrees to
indemnify and hold Buyer harmless from and against any and all claims, damages,
and liabilities arising from or in connection with (a) any matters involving the
Business' employees, (b) any claims by employees of SDIC, for wages, vacation
and/or sick pay, other benefits, and all claims, liabilities and rights of such
employees, (c) and any claims for violation of agreements with unions in all
cases which arise from SDIC's employment of such employees, or from acts or
omissions, or in connection with events occurring on or prior to the Transfer
Time. Buyer covenants and agrees to indemnify and hold Starwood, ITT Sheraton,
SGC, SDIC and their respective affiliates similarly harmless from all such
matters described in the preceding sentence in all cases
which arise from Buyer's employment of such employees, agreements with unions,
acts or omissions, or in connection with events occurring after the Transfer
Time.
SECTION 19.2 Multiemployer Plan. With respect to each Multiemployer Plan
(as defined below), after the Closing:
(a) Buyer will be obligated to make contributions to the Multiemployer
Plans (as defined below) in accordance with all collective bargaining agreements
relating thereto and shall contribute to each such Multiemployer Plan with
respect to such operations for substantially the same number of contribution
base units for which SDIC has an obligation to contribute to such Multiemployer
Plan.
For purposes of this Agreement, the "Multiemployer Plans" shall mean,
collectively: (i) the Teamsters Security Fund for Southern Nevada; (ii) the
Western Conference of Teamsters Pension Trust Fund; (iii) the Hotel Employees
and Restaurant Employees International Union Welfare Fund; (iv) the Southern
Nevada Culinary Workers and Bartenders Pension Plan Trust Agreement; (v) the
Operating Engineers Local 501 Security Fund; (vi) the Central Pension Fund of
the International Union of Operating Engineers and Participating Employers;
(vii) the Hotel Employees and Restaurant Employees International Union Welfare
Fund; (viii) the American Federation of Musicians' and Employers' Pension Fund;
(ix) the Electrical Workers Health and Welfare Trust Fund; (x) the National
Employees Benefit Board; (xi) the Nevada Resort Association-I.A.T.S.E. Local 720
Pension Trust; (xi) the Nevada Resort Association-I.A.T.S.E. Local 720
Apprentice and Journeyman Training and Education Trust; (xii) the Nevada Resort
Association-I.A.T.S.E. Local 720 Disability Trust; (xiii) xxx Xxxxxxxxxx Health
and Welfare Trust Fund; (xiv) the Construction Industry and Carpenters Joint
Pension Trust Fund; (xv) the Painters' Trust (welfare fund); and (xvi) the
I.B.P.A.T. Union and Industry National Pension Fund.
(b) Unless and until a variance or exemption is obtained in accordance
with section 4204(c) of the Employee Retirement Income Security Act of 1974, as
amended
("ERISA"), Buyer will provide to each Multiemployer Plan, for a period of five
plan years commencing with the first plan year beginning after the Closing, a
bond issued by a corporate surety company that is an acceptable surety for
purposes of section 412 of ERISA, or an amount held in escrow by a bank or
similar financial institution satisfactory to the Multiemployer Plan, or such
other security as may be permitted under section 4204(a)(1)(B) of ERISA or
regulations thereunder, in an amount equal to the greater of:
(i) the average annual contribution required to be made by SDIC to
each Multiemployer Plan with respect to the operations thereunder for the
three plan years preceding the plan year in which the Closing occurs, or
(ii) the annual contribution that SDIC was required to make with
respect to the operations under each Multiemployer Plan for the last plan
year before the plan year in which the Closing occurs,
which bond or escrow shall be paid to any such Multiemployer Plan if Buyer
withdraws from such Multiemployer Plan, or fails to make a contribution to such
Multiemployer Plan when due, at any time during the first five plan years
beginning after the Closing.
(c) If Buyer withdraws from any Multiemployer Plan in a complete
withdrawal or a partial withdrawal with respect to the union employees within
the period referred to in the preceding subsection 19.2(b), SDIC agrees to be
secondarily liable for any withdrawal liability SDIC would have had at the
Closing Date to such Multiemployer Plan, but for the application of section 4204
of ERISA, if the withdrawal liability of Buyer with respect to such
Multiemployer Plan is not paid.
(d) Buyer shall indemnify and hold SDIC harmless from, against and in
respect of (and shall on demand reimburse SDIC for) the amount of any secondary
liability incurred by SDIC under section 4204 of ERISA which is in excess of 50%
of the potential withdrawal liability of SDIC determined as of the Closing, such
determination to be made
on a plan-by-plan basis; provided, however, that if withdrawal liability is
triggered by reason of Buyer's failure to comply with any provision of the
preceding Sections 19.2(a) or (b) (it being understood that any withdrawal by
Buyer from any Multiemployer Plan shall not be deemed such a failure to comply),
Buyer's indemnification of SDIC shall be without limitation for any such
secondary liability.
(e) In the event of a subsequent sale of Assets by Buyer during the
five-year period referenced in Section 19.2(b), Buyer agrees to use its
reasonable best efforts to comply with the provisions of section 4204(a)(1) of
ERISA if such sale of Assets would trigger secondary liability on Buyer.
(f) If SDIC is liquidated before the end of the first five plan years
beginning after Closing, then, except as may otherwise be required by law, SDIC
shall provide a bond, an amount in escrow or such other security as may be
permitted under section 4204(a)(1)(B) of ERISA or regulations thereunder, equal
to the present value of the withdrawal liability SDIC or its affiliates would
have had but for the application of section 4204 of ERISA, which bond, amount in
escrow or other security may be applied toward the satisfaction of SDIC's
secondary liability described in subsection 19.2(c) hereof.
(g) Buyer agrees to provide SDIC with reasonable advance notice of any
action or event which could result in the imposition of withdrawal liability
contemplated by this Section 19.2 and in any event Buyer shall immediately
furnish SDIC with a copy of any notice of withdrawal liability it may receive
with respect to the Multiemployer Plan, together with all the pertinent details.
In the event that any such withdrawal liability shall be assessed against Buyer,
Buyer further agrees to provide SDIC with reasonable advance notice of any
intention on the part of Buyer not to make full payment of any withdrawal
liability when the same shall become due.
ARTICLE XX
Miscellaneous
SECTION 20.1 Entire Agreement. This Agreement (and the Schedules and
Exhibits), the Timeshare Joint Venture Agreement and the Marketing Alliance
Agreement shall be deemed to be the complete and entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes any and
all prior negotiations, correspondence, understandings or other agreements or
statements between the parties and/or their representatives.
SECTION 20.2 Notices. All notices required, permitted or given pursuant to
the provisions of this Agreement shall be made in writing, and either (a) hand
delivered, (b) delivered by certified mail, postage prepaid, return receipt
requested or by reputable overnight courier, (c) delivered by an overnight
delivery service or (d) delivered by facsimile machine followed within 24 hours
by transmittal under option (a), (b) or (c) above addressed as follows:
If to Parents or Seller:
In care of Starwood Hotels & Resorts Worldwide,
Inc.
000 Xxxxxxxxxxx Xxxxxx
Xxxxx Xxxxxx, Xxx Xxxx 00000
Attention: General Counsel
Fax No.: (000) 000-0000
with a copy to:
Sidley & Austin
000 Xxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
Fax No.: (000) 000-0000
If to SUN or Buyer:
Sun International Hotels Limited
Atlantis -- Executive Offices
Coral Towers
Nassau, The Bahamas
Attention: Xxxxxxx X. Xxxxx
Fax No.: (000) 000-0000
with a copy to:
Cravath, Swaine & Xxxxx
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Fax No.: (000) 000-0000
Notices shall be deemed delivered (i) on the date that is three calendar
days after the notice is deposited in the U.S. mail, if sent by certified mail
(one business day in the case of overnight courier service), return receipt
requested, (ii) on the date the hand delivery is made, if hand delivered, (iii)
on the date the transmission is made, if delivered by facsimile machine and
delivery is confirmed, and followed with notice by mail, or (iv) on the date
that the notice is delivered by an overnight delivery service, if given by an
overnight delivery service. The addressee given above may be changed by any
party by notice given in the manner provided herein.
SECTION 20.3 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (REGARDLESS OF
THE LAWS THAT MAY OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF
LAW).
SECTION 20.4 Successors and Assigns. Neither Buyer nor Seller may assign
this Agreement or any interest herein (by operation of law or otherwise) to any
other person without the prior written consent of the other party hereto. All
the terms, covenants and conditions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. No assignment or transfer permitted hereunder shall relieve
any such assignor or transferor of any of its obligations hereunder and any
assignee or transferee shall assume in writing (which writing shall be
in form reasonably satisfactory to Seller and Buyer) all of the undertakings of
assignor or transferor under this Agreement.
SECTION 20.5 Closing Costs. Seller and Buyer shall each bear their
respective costs of negotiating and completing this transaction, including
attorneys' and accountants' fees. The fees charged by Escrowee, and any and all
survey, title and recording fees, real and personal property transfer fees,
documentary Taxes or fees, and the costs of all premiums with respect to the
Title Policies in accordance with Section 8.1 shall be paid one-half by Seller
and one-half by Buyer, except that the costs of any ALTA endorsements or
extended coverage premiums shall be borne solely by Buyer. Seller and Buyer, on
or before the Closing Date, shall each deposit with Escrowee in immediately
available funds on or prior to the Closing Date an amount sufficient to cover
each party's costs set forth herein.
SECTION 20.6 Attorneys' Fees. A party in breach of this Agreement shall,
on demand, indemnify and hold harmless the other party for and against all
reasonable out-of-pocket expenses, including legal fees, incurred by such other
party by reason of the enforcement and protection of its rights under this
Agreement. The payment of such expenses is in addition to any other relief to
which such other party may be entitled.
SECTION 20.7 Amendments. This Agreement shall not be modified except by an
instrument in writing signed by the parties hereto.
SECTION 20.8 Further Assurances. From time to time, at the request and
expense of the requesting party, whether prior to, at or after the Closing, each
party agrees to and shall execute and deliver such further instruments and take
such other action as the requesting party may reasonably request in order to
effectuate the transactions set forth herein.
SECTION 20.9 Headings. All of the Article and Section headings herein are
inserted for convenience only and shall have no meaning for purposes of this
Agreement.
SECTION 20.10 Non-Waiver. No delay or omission or exercise of a right or
remedy accruing to Seller on any breach or default by Buyer shall impair any
such right or remedy, and the same shall not be construed to be a waiver of any
such breach or default. No delay or omission in the exercise of a right or
remedy accruing to Buyer on any breach or default by Seller shall impair any
such right or remedy, and the same shall not be construed to be a waiver of any
such breach or default. Any waiver must be in writing and executed by all the
parties hereto and shall be effective only the extent specifically allowed by
such writing.
SECTION 20.11 No Third Party Benefitted. Except as provided in Section
15.2, no term or provision of this Agreement is intended to be, nor shall any
term or provision of this Agreement be, for the benefit of any person or entity
not a party hereto, and no such other person or entity shall have any right or
cause of action hereunder.
SECTION 20.12 Publicity; No Recordation. Between the Effective Date and
the Closing Date (or earlier termination of this Agreement), the parties shall
consult with one another and coordinate the issuance of any press release or
similar public announcement or communication in respect of the initial execution
of this Agreement and any material new development relating to the performance
of this Agreement or the transactions contemplated hereby; provided, however,
that (i) the contents of the initial press release announcing the Agreement and
the transactions hereby shall be agreed by the parties and (ii) no party shall
be restrained, after consultation with the other, from making such disclosure as
it shall be advised by counsel it is required by law (whether the laws of the
United States or another country) or by the applicable regulations of any stock
exchange to make. Buyer and Seller agree that neither this Agreement nor any
memorandum hereof shall be recorded.
SECTION 20.13 Counterparts. This Agreement may be executed in any number
of counterparts, which when so executed and delivered shall be deemed an
original, and such counterparts shall constitute one and the same Agreement.
SECTION 20.14 Severability. The invalidity or unenforceability of any one
or more of the provisions of this Agreement or the Schedules hereto (or any
portion thereof) shall not affect the validity or enforceability of any of the
other provisions hereof (or the remaining portion thereof).
SECTION 20.15 Exhibits and Schedules. Any Exhibits and Schedules annexed
hereto or referred to herein are hereby incorporated in and made a part of this
Agreement as if set forth in full herein, and any matter disclosed in one
Schedule hereto shall be deemed incorporated by reference into each other
Schedule hereto and disclosed in each such Schedule.
SECTION 20.16 Finder's Fees. Each of Seller and Buyer agrees to indemnify,
defend (with counsel reasonably satisfactory to the other party), and hold the
other party and its successors and assigns and their respective directors,
officers, affiliates, representatives, stockholders, employees and agents
harmless from and against any and all claims, loss, cost, damage and expense,
including reasonable attorneys' fees and expenses arising from, by reason of or
in connection with any claim for or entitlement to any fee, commission,
compensation or reimbursement for brokerage, finders, advisers or similar
services by any person, firm or entity claiming by, through or under Seller or
Buyer, as applicable, or any officer, director, agent or affiliate of Seller or
Buyer, as applicable.
SECTION 20.17 Cooperation. Each party acknowledges that the other may be a
party to audits, investigations and other proceedings following the Closing
which relate to the Business or the Assets, and agrees to reasonably cooperate
with such other party in connection with such proceedings.
SECTION 20.18 Consent to Jurisdiction. Each of the parties hereto
irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of
the State of New York, New York County, and (b) the United States District
Court for the Southern District of New York, for the purposes of any suit,
action or other proceeding arising out of this Agreement or any transaction
contemplated hereby. Each of the parties hereto agrees, to the extent permitted
under applicable rules of procedure, to commence any action, suit or proceeding
relating hereto either in the United States District Court for the Southern
District of New York, or if such suit, action or other proceeding may not be
brought in such court for jurisdictional reasons, in any court of the Supreme
Court of the State of New York, New York County. Each of the parties hereto
further agrees that service of any process, summons, notice or document by U.S.
registered mail to such party's respective address set forth in Section 20.2
shall be effective service of process for any action, suit or proceeding in New
York with respect to any matters to which it has submitted to jurisdiction in
this Section 20.18. Each of the parties hereto irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions contemplated hereby in (i) the
Supreme Court of the State of New York, New York County, or (ii) the United
States District Court for the Southern District of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as
of the date first above written.
SHERATON DESERT INN CORPORATION,
By: ______________________________
Name:
Title:
STARWOOD HOTELS AND RESORTS
WORLDWIDE, INC.,
By: ______________________________
Name:
Title:
SHERATON GAMING CORPORATION,
By: ______________________________
Name:
Title:
SUN INTERNATIONAL HOTELS LIMITED,
By: ______________________________
Name:
Title:
SUN INTERNATIONAL NEVADA, INC.,
By: ______________________________
Name:
Title:
Execution Copy
EXHIBIT 10.6(b)-1
Timeshare Joint Venture Agreement
Parties: Buyer and an affiliate of Starwood.
General: Buyer and an affiliate of Starwood shall enter into a
50/50 joint venture (the "Joint Venture") pursuant to which
they will agree to use their best efforts to develop, manage,
market and sell at least 350 timeshare units to be located on
The Desert Inn Golf Club (the "Golf Course") (or the perimeter
thereof) and to be affiliated with The Desert Inn Resort and
Casino (the "Desert Inn", and, together with the Golf Course,
the "Property"). The Joint Venture will be responsible for all
costs relating to the development of timeshare units,
including the cost to acquire homes or homesites on the
perimeter of the Golf Course. Capital will be contributed, and
profits will be distributed, on a 50/50 basis.
Land: Buyer agrees to contribute up to six acres of land on
the perimeter of the Golf Course (as it shall reasonably deem
appropriate) available for contribution to the Joint Venture
at a value of $750,000 per acre.
Starwood, (i) in consultation with Buyer, may in advance of
the Closing under the Asset and Land Purchase Agreement,
acquire additional lots on the perimeter of the Golf Course in
preparation for the timeshare project, and (ii) with Buyer's
approval, may commence trading of Country Club Lane lots
(#70-84) for perimeter
lots, acquisition of options to purchase lots, preparation of
concept designs and proposed subdivision maps, filing of
proposed maps and potential litigation with homeowners.
At the time of formation of the Timeshare Joint Venture,
Starwood shall contribute such additional lots, rights,
designs and maps, and shall be credited with its costs plus
interest at the Applicable Interest Rate as defined in clause
(i) of the definition thereof set forth in Section 4.1(a) of
the Asset and Land Purchase Agreement.
Governance: All major decisions of the Joint Venture, including the
selection of a location for the timeshare units, will be
subject to the reasonable approval of both parties.
Term; Right of
First Offer: The Joint Venture will be given a 5 year (from Closing
under the Asset and Land Purchase Agreement) exclusive right
to develop timeshare units on the Property. After the
expiration of the 5 year exclusive period and provided the
Joint Venture has met certain minimum performance standards,
the Joint Venture will have a right of first offer to develop
additional timeshare units on the Property.
Timeshare
Expertise: Within twelve (12) months after the date of the Asset
and Land Purchase Agreement Starwood must as a condition to
the formation or
continuance of the Joint Venture, demonstrate to the
reasonable satisfaction of Buyer that it has the expertise in
timeshare sales and marketing and administration required by
the Joint Venture. Such expertise shall be deemed to be
demonstrated conclusively if Starwood or its affiliates
provide sales, marketing and administrative services to, or
has management with experience sufficient to operate, a
timeshare project at the Phoenician Hotel in Scottsdale, AZ
and at least 2 separate timeshare projects of at least, 200
units each.
Liquidated
Damages: Buyer will use commercially reasonable efforts to effect
the timeshare development. If the Joint Venture is precluded
by Buyer from commencing "substantial timeshare development
activities" during the 5 year exclusive right period (other
than by reason of Starwood's default under the Joint Venture
agreement) Buyer shall pay to Starwood the sum of $15,000,000,
plus Starwood's costs to date of the Joint Venture. Such
liquidated damages will not be payable if Buyer has used its
commercially reasonable efforts to effect the timeshare
development. Buyer agrees not to engage in any other timeshare
development on the Property for two (2) years following the
date of any payment of such liquidated damages to Seller.
Services: Buyer or its affiliates will provide certain development
and hospitality services to the Joint Venture, and Starwood or
its affiliates will provide certain sales and marketing and
administrative services to the Joint Venture. In all cases
these services will be provided for reasonable and customary
fees as agreed by the parties.
Paradise Island: Buyer and Starwood also agree to explore in good faith
the possibility of an arrangement on terms similar to the
Joint Venture (except for land contribution values) for the
development of timeshare units on the eastern end of Paradise
Island under the St. Regis brand or at another location on
Paradise Island under the Westin brand.
Execution Copy
EXHIBIT 10.6(b)-2
Golf Course Management Agreement
Parties: SDIC and affiliate of Starwood (the "Starwood
Affiliate").
General: Starwood Affiliate shall operate and manage The Desert
Inn Golf Club and Proshop (the "Golf Course").
Term: The agreement shall be for a term
commencing on execution, and continuing for 5 years from
Closing under the Asset and Land Purchase Agreement (with
customary "for cause" termination rights), and provide for an
annual fee and incentive fees from Golf Course operations over
an agreed upon base case performance.
Buyer or the Starwood Affiliate may terminate the agreement
effective as of the Closing Date under the Asset and Land
Purchase Agreement at no cost; provided, that, if Buyer shall
so terminate the agreement, Buyer shall grant such Starwood
Affiliate a one-time right of first offer with respect to
management of the Golf Course.
Execution Copy
EXHIBIT 10.6(b)-3
Marketing Alliance Agreement
The parties recognize that there may be certain restrictions and technical
limitations with respect to the provisions of services described herein and
agree to work together in good faith to implement the provisions of this Exhibit
as nearly as practicable in light of any such restrictions and limitations.
Parties: Buyer and Starwood (or their appropriate affiliates).
Term: 5 years from execution thereof as
provided in Section 10.6 of the Asset and Land Purchase
Agreement.
General: The Atlantis Resort and the Ocean Club and, after the
Closing under the Asset and Land Purchase Agreement, The
Desert Inn Hotel and Casino or other property developed on the
Desert Inn Property (the "Desert Inn"), shall participate in
Starwood's marketing and reservation system for a fee of 2.9%
of gross room revenues paid by guests booked through the
reservation system, and Starwood shall provide such properties
with marketing and reservation services similar to comparable
properties that participate in Starwood's marketing and
reservations program. Buyer shall reimburse Starwood for
customary out-of-pocket expenses incurred by Starwood in
connection with such services, such as travel agent
commissions and other customary third party charges and
reimbursed costs.
Exclusivity: Starwood shall also include the Ocean Club and the
Desert Inn within its Starwood portfolio of luxury properties
and the Atlantis Resort within a portfolio of properties to be
agreed.
Starwood and its affiliates will agree not to enter into any
marketing alliance agreement on the Las Vegas "strip"
effective from and after the Closing under the Asset and Land
Purchase Agreement during the term of the agreement.
Starwood
Preferred
Guest Program: Notwithstanding the foregoing, Starwood may enter into
such agreement with (i) respect to the Caesar's Palace
property so long as such agreement does not extend past the
date the Desert Inn has at least 2,000 rooms (the" Expanded DI
Date") or (ii) a person in which it holds, directly or
indirectly, a 20% greater equity interest. Prior to the
Expanded DI Date, Starwood may place group bookings and
business at other hotels to the extent the Desert Inn is not
capable of accommodating such groups.
Buyer agrees to distribute Starwood's "Preferred Guest" program
information at the Desert Inn, the Atlantis Resort and the Ocean Club.
Starwood shall continue to award points to its "Preferred
Guest" program participants for stays at the Desert Inn, and
as soon as practicable after the Effective Date under the
Asset and Land Purchase Agreement, will award such points for
stays at the Atlantis Resort and the Ocean Club at no cost to
Buyer. The parties will discuss arrangements relating to the
award of airline miles for stays at the properties.
As soon as practicable after the Effective Date under the
Asset and Land Purchase Agreement, Starwood's "Preferred
Guest" program participants shall be entitled to redeem points
for nights at the Atlantis Resort. Buyer shall be paid for
each such night as follows: (i) if the resort's occupancy rate
on such night was 80% or greater, Buyer shall be paid an
amount equal to its average cash paid room rate in effect for
such night; and (ii) if the resort's occupancy rate on such
night was less than 80%, Buyer shall be paid $150 (with
increases thereto pro rata with increases in the resort's
average room rates over time).
There will be a similar program at Ocean Club and Desert Inn.
Rates and occupancy hurdles for Ocean Club and Desert Inn to
be agreed.
Internet: Buyer and its affiliates shall be provided with an
Internet "Hot Link" on Starwood's web site at no charge, and
Starwood and its affiliates shall be provided with an Internet
"Hot Link" on SUN's
web site at no charge.
