GLOBAL TERM SHEET
EXHIBIT 2.3
This global term sheet outlines the terms of the agreement by and among Xxxxxxxxx Xxxxx Incorporated or its designee (“Xxxxxxxxx”), Fair Grounds Corporation (the “Debtor”), Xxx X. Xxxxxxxx (“Xxxxxxxx”), Finish Line Management Corp. (“Finish Line”), and Xxxxx X. Xxxxxx (“Xxxxxx”) to pursue a consensual amended plan of reorganization (“Amended Plan”) in form acceptable to all of the parties in the bankruptcy case styled In re: Fair Grounds Corporation, United States Bankruptcy Court, Case no. 03-16222, Section A and to consummate other agreements related thereto as outlined herein. This global term sheet shall be binding upon the parties hereto upon its execution and be further delineated in definitive documentation that is acceptable to all of the parties hereto. Nonetheless, this global term sheet is contingent upon Xxxxxxxxx and LHBPA reaching an agreement on or before August 31, 2004 at 11:59 p.m. for mutually agreeable terms regarding Xxxxxxxxx’x obligations as the Enabling Transaction Partner under the LHBPA-Debtor Settlement. If Xxxxxxxxx is unable to obtain this agreement with LHBPA by that time, this global term sheet shall be null and void and of no effect unless extended by mutual agreement of the parties hereto.
Fair Grounds:
Purchase Price: $47,000,000.
Closing Date: October 15, 2004. The term “Closing“ shall refer to the closing of all transactions described in this global term sheet on the Closing Date.
Terms and Conditions: The terms and conditions shall be the same as those set forth in the attached Asset Purchase Agreement (“APA”) which has been executed by the Debtor and Xxxxxxxxx.
Assets to be Purchased: All assets owned by the “Debtor” free and clear of all claims, liens, encumbrances and other interests, except for the State Claim, which shall remain with the Debtor and the LHBPA as provided hereinafter, and except for the other Excluded Assets as defined in the APA. Xxxxxxxxx agrees to waive all claims under Chapter 5 of Title 11 of the Bankruptcy Code upon its acquisition of the Debtor’s assets.
As part of the Amended Plan, the Debtor will be required to share any Net Recovery (as defined in the LHBPA-Debtor Agreement) of the State Claim with the LHBPA in the manner set forth in the LHBPA-Debtor Settlement Agreement and to grant a security interest in the State Claim in favor of LHBPA to secure its obligation to do so.
VSI: At the Closing, Xxxxxxxxx shall assume all obligations of the Debtor and Finish Line to Video Services, Inc. (“VSI”) relating to video poker at the Debtor’s and/or Finish Line’s locations and contracts pertaining thereto. Xxxxxxxxx shall be responsible for consummating an agreement with VSI to acquire its assets or stock at Xxxxxxxxx’x sole cost and expense. Xxxxxxxxx covenants and agrees that it shall waive any rejection claim or other claims that VSI has against the Debtor or Finish Line arising from its agreements with the Debtor and Finish Line and will obtain from VSI and VSI’s shareholders a release of the Debtor, Finish Line, Mr. and Xxx. Xxxxxx, Family Racing Venture, L.L.C. (“Family Racing”), Gentilly Gaming, and all other legal entities owned or controlled by any of the foregoing, together with their respective officers, directors, managers, employees, members, shareholders, attorneys, agents and representatives, of all claims, damages, causes of action, etc. relating to video
poker at the Debtor’s and/or Finish Line’s locations and contracts pertaining thereto, which release shall be delivered to the Debtor, Finish Line and Xxxxxx.
DIP Loan: The terms and conditions shall be the same as those set forth in the letter from Xxxxx Xxxxxxxxxx to Xxx Xxxxxx dated July 20, 2004 except that the amount of the DIP loan shall be $3,500,000, no origination fee shall be charged, and an emergency motion for use of the DIP loan shall be filed.
Optional Contractual Arrangement for Licensing Purposes: Xxxxxxxxx shall be entitled, at its sole option, to require that the Debtor maintain its corporate existence on and after the Closing and enter into a lease, management agreement, or other contract for no consideration paid to the Debtor other than that stated in the APA, that would allow the continued operation of the Debtor’s racing, video poker and other businesses until Xxxxxxxxx is licensed to conduct such businesses. Any such arrangement shall comply with all state and federal gaming laws and state racing laws, and shall be at Xxxxxxxxx’x sole cost and expense.
Expense Reimbursement: At the Closing, Xxxxxxxxx shall waive its $250,000 expense reimbursement claim.
Gravolet Claim:
Gravolet’s claims against the Debtor which were asserted or which could have been asserted in (i) Xxx X. Xxxxxxxx v. Fair Grounds Corporation, No. 2000-17002, Civil District Court for the Parish of Orleans, State of Louisiana, (ii) Proof of Claim No. 115, an unsecured claim in the amount of $1,679,705.00 plus judicial interest and attorneys fees filed on 7/15/04, and (iii) Proof of Claim No. 3, a secured claim in the amount of $7,548.28 filed on 8/27/03 shall be fully and finally compromised, settled and allowed in the amount of $2,000,000 which shall be paid by the Debtor on October 15, 2004 from the Purchase Price paid to the Debtor.
Claim of Louisiana Horsemen’s Benevolent and Protective Association 1993, Inc. (“HBPA”):
The Debtor shall comply with the terms of the Settlement Agreement Between Fair Grounds Corporation And Louisiana Horsemen’s Benevolent And Protective Association 1993, Inc. of August 6, 2004 (“Settlement Agreement”) or the Settlement Agreement as modified in writing by the HBPA and the Debtor. The Debtor shall not file the Amended Plan contemplated herein unless the HBPA consents to and authorizes such Amended Plan. The Amended Plan shall guarantee the payment to the HBPA of twenty-five million ($25,000,000) dollars from the Purchase Price on or before October 15, 2004 and the Debtor shall pay the HBPA all other consideration required to be paid by the Debtor in the Settlement Agreement. In addition, the Plan shall recognize and provide to HBPA the terms of any agreement by and between HBPA and Xxxxxxxxx under which Xxxxxxxxx assumes certain obligations of the Enabling Transaction Partner under the Settlement Agreement as may be mutually agreed to by HBPA and Xxxxxxxxx. Nothing herein shall be construed as obligating Xxxxxxxxx to enter into an agreement with HBPA to assume certain obligations of the Enabling Transaction Partner under the Settlement Agreement. If such an agreement is not reached by August 31, 2004 or such later date as may be mutually agreed to by the parties hereto, this global term sheet shall be null and void and of no
force and effect whatsoever. The Debtor will also pay the HBPA proof of claim #105 like all other undisputed unsecured claims.
Finish Line:
Purchase Price: $2.2 million plus amount of the secured debt on Kenner OTB that is owed to First Bank which is not to exceed $4,500,000.
Assets to be Purchased: All assets owned by Finish Line, including the Kenner OTB facility, free and clear of all claims, liens, encumbrances and other interests, excluding (1) all Fair Grounds stock, (2) any operations currently designated on Finish Lines’ internal accounting records as unallocated, (3) the assets listed on the balance sheet as (i) due from MGK in the amount of $100,000, (ii) officer advances (loans) in the amount of $25,000, (iii) due from Xxxxxxx in the amount of $1,465.42, (iv) employee advances (loans) in the amount of $344.68, (v) due from employees in the amount of $5,267.28, (vi) deferred tax – current in the amount of $73,500, (vii) deferred tax – non-current in the amount of $186,300, and (4) any other assets designated by Xxxxxxxxx in its sole discretion. In addition, the remaining cash of Finish Line will be used to establish an escrow account to pay preclosing ordinary trade expenses of Finish Line with the balance of such account paid to Xxxxxxxxx within 90 days of closing. The transaction shall not include the vacant lot on the opposite side of the street used for overflow parking
Pre-closing payments: Prior to closing, Finish Line shall use its cash to pay its liabilities except for claims owed by Finish Line to Xx. Xxxxxx or any person related directly or indirectly to Xx. Xxxxxx. This provision shall not be construed as obligating Xxxxxxxxx to pay any debt or liability of Finish Line.
Debt Assumption: Xxxxxxxxx will assume no debt or liabilities of Finish Line.
Forgiveness of Debt: Upon acquiring the receivable due from Finish Line to the Debtor (“Finish Line Receivable”), Xxxxxxxxx shall forgive the Finish Line Receivable, the current balance of which Finish Line represents to be approximately $4,100,000, up to a maximum amount of $4,500,000. In addition, upon acquiring any claim by Finish Line against the Debtor, Xxxxxxxxx shall waive any such claim against the Debtor and, upon acquiring any claim by the Debtor against Finish Line, Xxxxxxxxx shall waive any such claim against Finish Line.
Houma Lease: Xxxxxxxxx shall agree to lease from Family Racing on a triple net basis the real property and improvements currently used as the Houma OTB for a term of not less than five (5) years at a monthly rent of $5,000.00 per month plus an annual CPI adjustment after the second year. The property to be leased shall consist of the existing Houma OTB building and a reasonable non-exclusive parking area adjacent to the building, but will not include the second building site and a non-exclusive parking area adjacent thereto.
Necessary Documentation: Subject to the execution of definitive and mutually satisfactory legal documentation for the transaction, including without limitation a definitive asset purchase agreement for the assets to be purchased which is acceptable to Xxxxxxxxx and Finish Line which shall contain usual and customary terms, indemnities, representations and warranties, suitable escrows to insure such
representations and warranties, and include conditions to closing such as completion of Xxxxxxxxx’x remaining Finish Line due diligence and Xxxxxxxxx’x acquiring the Fair Grounds’ assets pursuant to the APA.
Closing Date: At the Closing.
Optional Contractual Arrangement for Licensing Purposes: Xxxxxxxxx shall be entitled, at its sole option, to require that Finish Line maintain its corporate existence on and after the Closing and enter into a lease, management agreement, or other contract for no consideration paid to Finish Line other than that stated herein, that would allow the continued operation of Finish Line’s video poker and other businesses until Xxxxxxxxx is licensed to conduct such businesses. Any such arrangement shall comply with all state and federal gaming laws and state racing laws, and shall be at Xxxxxxxxx’x sole cost and expense.
Xxxxxx:
At the Closing, Xxxxxxxxx shall enter into a contractual arrangement with Xxxxxx which shall include the following key terms:
Titles: Xxxxx X. Xxxxxx, Chairperson, Fair Grounds Race Course
Scope of Responsibilities: To be determined and defined in a consulting agreement to be executed at the Closing.
Term: Three (3) years.
Bonus: $300,000, $100,000 of which is payable upon confirmation of the Amended Plan and the balance (up to $300,000 if the $100,000 installment is not paid for any reason) payable at the Closing.
Total Annual Consideration: In the event the Closing occurs, the additional annual compensation to Xxxxxx shall be as follows: $400,000 per year payable semi-monthly plus Xxxxxxxxx will agree to pay premiums for hospitalization insurance for Xxxxxx and his family in an amount not to exceed $10,000 annually.
Releases: At the Closing, Xxxxxxxxx shall xxxxx the Debtor, Finish Line, Mr. and Xxx. Xxxxxx, Family Racing, Gentilly Gaming, and all other legal entities owned or controlled by any of the foregoing (collectively, the “Xxxxxx Interests”), together with their respective officers, directors, managers, employees, members, shareholders, attorneys, agents and representatives (collectively with the Xxxxxx Interests, the “Released Parties”) a general release, releasing, remising and discharging all claims which Xxxxxxxxx has or may have against any of the Released Parties, including but not limited to claims acquired by Xxxxxxxxx, except for claims for breach of this term sheet, the definitive documentation further evidencing this term sheet, or to the extent that the Finish Line receivable owed to the Debtor exceeds $4,500,000.
In furtherance of this global agreement, the Debtor, Finish Line, Continental Advertising, Family Racing, Gentilly Gaming, F.G. Staffing Services, Inc., Fair Grounds International Ventures, Inc., the Xxxxxx Interests and Xxxxxx agree to waive and release and obtain full waivers and releases from the
Debtor, Finish Line, the Xxxxxx Interests, and any of their affiliates, Xxxxx Xxxxxx, Xxxxx Xxxxxxxxx, Xxxxx Xxxxx, and the Chehardy Law Firm and any officer, director, member or employee thereof of any and all claims that these persons may have against Xxxxxxxxx, together with its respective officers, directors, managers, employees, members, shareholders, attorneys, agents and representatives and the LHBPA together with its respective officers, directors, managers, employees, members, shareholders, attorneys, agents and representatives and any horsemen entitled to receive any portion of the amount paid to the LHBPA stated herein. The Debtor, Finish Line, Continental Advertising, Family Racing, Gentilly Gaming, F.G. Staffing Services, Inc., Fair Grounds International Ventures, Inc., and the Xxxxxx Interests shall provide such releases in form acceptable to LHBPA by October 1, 2004; Xxxxxx shall provide such other releases in form acceptable to LHBPA by October 15, 2004.
Both the Finish Line Proposal and the Xxxxxx Proposal will be subject to and conditioned upon the confirmation of the Amended Plan by final and nonappealable order on or before October 1, 2004 and occurrence of the Closing under the APA on or before October 15, 2004.
All parties hereto acknowledge that this is an all or nothing agreement and that the obligations of the respective parties hereto are expressly conditioned upon the consummation of all of the transactions described herein at the Closing.
SIGNATURES ON FOLLOWING PAGE
The foregoing terms and conditions are approved and accepted.
| FAIR GROUNDS CORPORATION By: /s/ Xxxxx X. Xxxxxx Title: Xxxxx X. Xxxxxx President | |
| XXXXXXXXX XXXXX INCORPORATED By: /s/ Xxxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxx Exectuvie Vice President & Chief Financial Officer | |
| /s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx, Individually and on Behalf of Continential Advertising, F.G. Staffing Services, Inc., Fair Grounds International Ventures, Inc., Family Racing Venture, L.L.C. Gentilly Gaming, L.L.C., and the Xxxxxx Interests | |
| FINISH LINE MANAGEMENT CORP. By: /s/ Xxxxx X. Xxxxxx Title: Xxxxx X. Xxxxxx President /s/ Xxx X. Xxxxxxxx Xxx X. Xxxxxxxx |
