EXECUTION COPY
STOCK PURCHASE AGREEMENT
by and among
MAGNA ENTERTAINMENT CORP.,
AS BUYER
AND
ALL OF THE STOCKHOLDERS
OF
LAUREL RACING ASSOC., INC.
AND
PIMLICO RACING ASSOCIATION, INC.,
AND
XXXXXX XXXXX GROUP
AS SELLERS
JULY 15, 2002
EXECUTION COPY
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is executed on
this 15th day of July, 2002, by and among MAGNA ENTERTAINMENT CORP., a Delaware
corporation ("Buyer"), and XXXXXX X. XXXXXXXXX ("JAD"), XXXXXX LLC, a Maryland
limited liability company ("Xxxxxx LLC") (JAD and Xxxxxx LLC are collectively,
"Xxxxxx"), XXXXX X. XXXXXXXXX ("KMD"), XXXXX LLC, a Maryland limited liability
company ("Xxxxx LLC"), CMYD LLC, a Maryland limited liability company ("CMYD
LLC") (KMD, Xxxxx LLC and CMYD LLC are collectively, "Xxxxx"), XXXXXX XXXXXX
("Xxxxxx"), LUK-FLATS LLC, a Delaware limited liability company ("LUK-Flats"),
and XXXXXX XXXXX GROUP, a New Jersey general partnership ("Guida"), (JAD, Xxxxxx
LLC, KMD, Xxxxx LLC, CMYD LLC, Xxxxxx, LUK-Flats and Guida are each, a "Seller,"
and collectively, the "Sellers").
PRELIMINARY STATEMENT
A. The Maryland Jockey Club of Baltimore City, Inc., a
Maryland corporation (the "Jockey Club"), is the owner and operator of the
Pimlico Race Course thoroughbred racetrack ("Pimlico"), which is comprised of
approximately 125 acres of real property, together with the grandstands and
clubhouse buildings, dirt and turf tracks, stables, offices and support
facilities located thereon. Laurel Racing Association Limited Partnership, a
Maryland limited partnership ("LRALP"), is the owner and operator of the Laurel
Park thoroughbred racetrack ("Laurel"), which is comprised of approximately 356
acres of real property, together with the grandstands and clubhouse buildings,
dirt and turf tracks, stables, offices and support facilities located thereon.
The Jockey Club and LRALP also jointly (indirectly) own and operate the Bowie
Training Center, which is comprised of approximately 161.6 acres of real
property, one dirt track, stables, offices and support facilities located
thereon, and have interests in three off-track betting establishments in
Maryland. The Jockey Club and LRALP are engaged in the operation of the
thoroughbred racing business and related activities conducted under the racing
licenses and permits issued to the Jockey Club and LRALP or LRAI (as defined
below), respectively (such businesses as are now being conducted by the
Companies and the Subsidiaries (each as defined below) are referred to herein
collectively in their entirety as the "Business").
B. Laurel Racing Assoc., Inc., a Maryland corporation
("LRAI"), owns the general partner interest in LRALP. Guida owns the entire
limited partner interest in LRALP (the "LP Interest"). Pimlico Racing
Association, Inc., a Maryland corporation ("PRAI"), owns all of the issued and
outstanding shares of capital stock of the Jockey Club. Each Seller (other than
Guida) owns as of the date hereof and will own on the Closing Date the
respective number and shares of capital stock of LRAI and PRAI set forth on
SCHEDULE 1 hereof, which shares in the aggregate constitute all of the issued
and outstanding shares of capital stock of LRAI and PRAI as of the times
indicated
thereon (the "Shares," and together with the LP Interest, hereinafter
collectively referred to as, the "Stock").
X. Xxxxxxx desire to sell to Buyer, and Buyer desires to
purchase from Sellers, the Stock, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and
the mutual covenants, conditions and agreements set forth in this Agreement, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. DEFINITIONS.
The following terms shall have the following meanings for
purposes of this Agreement:
"ACTION" shall mean any claim, action, suit, arbitration,
inquiry, proceeding or investigation by or before any governmental agency or
authority. Notwithstanding the foregoing, Action shall not include any claim,
action, suit, arbitration, inquiry, proceeding or investigation between any of
the Companies or Sellers and ODS.
"AFFILIATE" shall mean, when used with respect to any Person,
any other Person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, the
specified Person. For purposes of this definition, the term "control" or any
form thereof means, with respect to any Person, the possession, directly or
indirectly, of the power to direct or cause the direction of the management
policies of such Person through the ownership of voting securities, by contract
or otherwise.
"AFFILIATED GROUP" has the meaning set forth in Section 9.3(b)
of this Agreement.
"AUDITED STATEMENTS" shall mean the audited statements of
operations, equity, cash flows, and the balance sheet of PRAI and its
subsidiary, the Jockey Club, and LRALP for the periods ending December 31, 1999,
December 31, 2000 and December 31, 2001.
"BASKET" has the meaning set forth in Section 10.4(a) of this
Agreement.
"BENEFICIAL OWNER" shall have the meaning set forth in Rule
13d-3 of the Exchange Act.
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"BRING DOWN CERTIFICATE" has the meaning set forth in Section
3.2(k) of this Agreement.
"BUSINESS" has the meaning set forth in Section A of the
Preliminary Statement.
"BUY/SELL AGREEMENT" shall mean that certain Buy/Sell
Agreement dated March 9, 1998 by and between JAD and KMD.
"BUYER GENERATED CARRYBACKS" has the meaning set forth in
Section 9.3(i) of this Agreement.
"BUYER TAX LIABILITIES" has the meaning set forth in Section
9.3(a) of this Agreement.
"CAP" shall mean Twenty Million Three Hundred Thousand Dollars
($20,300,000).
"CLEANUP PAYMENT" shall mean that certain principal amount
paid to maintain the outstanding balance under the Revolving Credit Agreement at
zero dollars ($0) for at least thirty (30) consecutive days in accordance with
Section 1.2 of the Revolving Credit Agreement.
"CLOSING" has the meaning set forth in Section 3.1 of this
Agreement.
"CLOSING DATE" shall mean the date on which the Closing
occurs.
"CLOSING DATE CASH PAYMENT" shall mean the Purchase Price LESS
the aggregate amount of the Xxxxxx LLC Letter of Credit and the Xxxxx LLC Letter
of Credit and LESS the Option Grant Payment.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder.
"COMPANIES" shall mean PRAI, the Jockey Club, LRAI and LRALP,
collectively.
"COMPANY GUARANTY AGREEMENT" shall mean a Guaranty Agreement
by and among LRAI, PRAI, LRALP, the Jockey Club and JKC Holdings, LLC in form
and substance reasonably satisfactory to Buyer.
"CONFIDENTIALITY AGREEMENT" shall mean that certain
Confidentiality Agreement, dated September 18, 2001, between LRAI, PRAI and
Buyer.
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"CONFIRMATION AND AMENDMENT TO LOAN AGREEMENTS" shall mean the
Confirmation and Amendment to Loan Agreement by and among LRALP, LRAI and
Mercantile dated July 7, 1999, the Confirmation and Amendment to Loan Agreement
by and among the Jockey Club, PRAI and Mercantile dated July 7, 1999, and the
Confirmation Agreement by and among PRAI, the Jockey Club, Maryland Jockey Club,
Inc., LRAI, Southern Maryland Agricultural Association, Southern Maryland
Racing, Inc., Maryland-Virginia Racing Circuit, Inc. and Mercantile dated June
7, 2002.
"CONSENTS" shall mean all notices, filings, consents,
approvals and other items set forth on SCHEDULE 4.4 hereof.
"CONSULTING AND NON-COMPETITION AGREEMENT" shall mean that
certain Consulting and Non-Competition Agreement by and among Buyer, LRAI, PRAI,
LRALP and Xxxxxx, in the form attached hereto as EXHIBIT F.
"XXXXXXXXX TRANSFERRED SHARES" has the meaning set forth in
Section 2.1(b) of this Agreement.
"DEPOSIT" has the meaning set forth in Section 2.2(a) of this
Agreement.
"DEPOSIT ESCROW AGREEMENT" shall mean that certain Escrow
Agreement by and among Mercantile, Buyer and Sellers in the form attached hereto
as EXHIBIT K.
"DISQUALIFIED INDIVIDUAL" has the meaning set forth in Section
4.15(b)(6).
"EMPLOYMENT AGREEMENTS" shall mean that certain Employment
Agreement by and among LRAI, PRAI, LRALP, Buyer and JAD and that certain
Employment Agreement by and among LRAI, PRAI, LRALP, Buyer and KMD, the forms of
each of which are attached hereto as EXHIBIT B.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA AFFILIATE" has the meaning set forth in Section
4.15(b)(12) of this Agreement.
"ESCROW AGENT" shall mean Mercantile.
"ESCROW AGREEMENT" shall mean that certain Escrow Agreement by
and among Buyer, Escrow Agent, Xxxxxx LLC and Xxxxx LLC as attached to the
Option Agreement.
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"EXCHANGE ACT" has the meaning set forth in Section 5.7 of
this Agreement.
"FAMILY" has the meaning set forth in the definition of
Related Person.
"FINANCIAL STATEMENTS" shall mean the Audited Statements and
the Unaudited Statements, copies of which are attached hereto as EXHIBIT A and
made a part hereof.
"FORMATION AGREEMENT" shall mean that certain Formation
Agreement by and among PRAI, LRAI, the Jockey Club, LRALP, JAD, KMD, Xxxxxx,
LUK-Flats and Guida in the form attached hereto as EXHIBIT C.
"FUNDS" has the meaning set forth in Section 5.9 of this
Agreement.
"GUARANTY AGREEMENT" shall mean that certain Guaranty
Agreement by and among Buyer, PRAI, LRAI, the Jockey Club, LRALP, JAD, KMD,
Xxxxxx, LUK-Flats, Guida and certain other parties as set forth therein, in the
form attached hereto as EXHIBIT N.
"GP INTEREST" has the meaning set forth in Section 4.1(c) of
this Agreement.
"GUIDA CAP" shall mean $2,400,000.
"HAZARDOUS MATERIALS" shall mean any waste or other substance
that is listed, defined, designated, or classified as, or otherwise determined
to be, hazardous, radioactive, or toxic, or a pollutant or contaminant, pursuant
to any environmental law, and specifically including petroleum and all
derivatives thereof or synthetic substitutes therefor and asbestos or
asbestos-containing materials.
"HSR ACT" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the related rules and regulations
issued pursuant thereto.
"IDOTS" shall mean Indemnity Deeds of Trust by (i) the Jockey
Club for the benefit of JKC Holdings, LLC securing the Jockey Club's obligations
under the Company Guaranty Agreement and (ii) LRALP for the benefit of JKC
Holdings, LLC securing LRALP's obligations under the Company Guaranty Agreement,
which Indemnity Deeds of Trust shall be automatically and unconditionally
subject to and subordinate to all existing and future indebtedness secured by
the property of the Jockey Club or LRALP, as applicable, and shall be in form
and substance reasonably satisfactory to Buyer.
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"INDEMNIFIABLE LOSS" has the meanings set forth in Section
10.5(f) and Section 10.6(c) of this Agreement.
"10.5 INDEMNIFICATION NOTICE" has the meaning set forth in
Section 10.5(a) of this Agreement.
"10.6 INDEMNIFICATION NOTICE" has the meaning set forth in
Section 10.6(a) of this Agreement.
"INDEMNIFIED PARTY" has the meaning set forth in Section
10.5(a) of this Agreement.
"INDEMNIFYING PARTY" has the meaning set forth in Section
10.5(a) of this Agreement.
"INTELLECTUAL PROPERTY RIGHTS" shall mean any and all (i)
patents, tradenames, trademarks, service marks, URLs and Internet domain names,
trade secrets, know-how, copyrights, designs and any pending applications for
any of the foregoing, (ii) items, designs, concepts, techniques, inventions,
discoveries and improvements, whether or not subject to a patent (or similar
protection) and whether or not patentable, copyrightable, or capable of being
similarly protected, including all know-how, and (iii) other rights in
intellectual property of any type or description, including but not limited to
source codes and software (excluding any and all software subject to shrinkwrap
or clickwrap licenses), as itemized and set forth on SCHEDULE 4.9, and all
registrations, applications, recordings, renewals, continuations,
continuations-in-part, divisions, reissues, reexaminations, foreign counterparts
and other legal protections, together with all goodwill, related to the
foregoing.
"IRS" shall mean the Internal Revenue Service.
"XXXXXX AND LUK-FLATS SHARES" has the meaning set forth in
Section 2.1(a) of this Agreement.
"XXXXXX LETTER" shall mean that certain letter from Xxxxxx to
Buyer in the form attached hereto as EXHIBIT G.
"JKC GUARANTY AGREEMENT" shall mean that certain Guaranty
Agreement by and among JAD, KMD, Xxxxxx, LUK-Flats, and JKC Holdings, LLC.
"JOCKEY CLUB" has the meaning set forth in Section A of the
Preliminary Statement.
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"XXXXXX LLC/XXXXX LLC OPTION AGREEMENT" shall mean that
certain Option Agreement by and among Xxxxxx LLC, Xxxxx LLC and Buyer, in the
form attached hereto as EXHIBIT R.
"XXXXXX LLC LETTER OF CREDIT" has the meaning set forth in
Section 2.2(c) of this Agreement.
"XXXXXX LLC OPERATING AGREEMENT" shall mean that certain
Operating Agreement of Xxxxxx LLC by and between JAD and Maryland Racing, Inc.,
a Delaware corporation, in the form attached hereto as EXHIBIT P.
"XXXXX LLC LETTER OF CREDIT" has the meaning set forth in
Section 2.2(c) of this Agreement.
"XXXXX LLC OPERATING AGREEMENT" shall mean that certain
Operating Agreement of Xxxxx LLC by and among KMD, CMYD LLC and Maryland Racing,
Inc., a Delaware corporation, in the form attached hereto as EXHIBIT Q.
"KEEP WELL AGREEMENT" shall mean that certain Keep Well
Agreement by and among Xxxxxxx Enterprises, Inc., a Colorado corporation,
LUK-Flats and Buyer, in the form attached hereto as EXHIBIT L.
"KNOWLEDGE" shall mean (i) in the case of JAD, KMD and Xxxxxx,
knowledge that a "prudent" person would have, without any duty of independent
inquiry, or if such person has actual knowledge of such fact or matter, without
any duty of independent inquiry; or (ii) in the case of LUK-Flats, the actual
knowledge of Xxxx Xxxxxxxx or Xxxxxx Xxxxxx without any duty of independent
inquiry; or (iii) in the case of Xxxxxx LLC, the Knowledge of JAD, and in the
case of Xxxxx LLC and CMYD LLC, the Knowledge of KMD; or (iv) in the case of
Buyer, the actual knowledge without any duty of independent inquiry, of any
individual who is serving as a director or officer of Buyer. JAD, KMD, Xxxxxx,
Xxxxxx LLC, Xxxxx LLC and CMYD LLC shall be entitled to meet the "prudent"
person standard by relying solely on certificates of the Senior Executives
reasonably expected to have relevant knowledge.
"LAUREL" has the meaning set forth in Section A of the
Preliminary Statement.
"LIEN" shall mean, with respect to any asset, any mortgage,
claim, community property interest, option, right of first refusal, pledge,
lien, encumbrance, security interest or charge against real or personal
property.
"LOAN" shall mean the aggregate indebtedness owed to
Mercantile pursuant to (i) the Confirmation and Amendment to Loan Agreements;
and (ii) the Revolving Credit Agreement.
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"LOSSES" has the meaning set forth in the first paragraph of
Section 10.1 of this Agreement.
"LP INTEREST" has the meaning set forth in Section B of the
Preliminary Statement.
"LRAI" has the meaning set forth in Section B of the
Preliminary Statement.
"LRALP" has the meaning set forth in Section A of the
Preliminary Statement.
"MACHINERY AND EQUIPMENT" shall mean all fixed and moveable
machinery, equipment, vehicles, furniture, fixtures, supplies, tools,
accessories, parts and all other tangible personal property, owned or leased by
the Companies which are used in, useful in, or held in connection with, the
conduct of the Business.
"MATERIAL ADVERSE EFFECT" shall mean any circumstance, change
in, or effect on the Companies or any Subsidiary that (a) results in Losses of
Two Hundred Fifty Thousand Dollars ($250,000) or more, except that with respect
to Sections 4.8, 4.11(a), 4.12 and 4.18, it shall mean any circumstances, change
in, or effect on the Companies or any Subsidiary that results in Losses of One
Million Dollars ($1,000,000) or more, or (b) for circumstances, changes or
effects which are not so quantifiable, is materially adverse to the results of
operations or financial condition of the Companies and the Subsidiaries, taken
as a whole, or a material adverse effect on the Companies or any Subsidiary's
ability to perform its obligations under this Agreement; provided however, that
any adverse effect arising out of, resulting from, or caused by (i) general
changes in economic, regulatory or political conditions, generally including,
but not limited to, changes in general economic conditions as a result of the
terrorist attacks on the United States on September 11, 2001 or thereafter, in
each case affecting the Companies and their Subsidiaries and the industries in
which they operate, (ii) general changes in conditions affecting the national
pari-mutuel and gaming industries in the United States, (iii) the execution and
delivery of this Agreement and the transactions contemplated herein or the
consummation of the transactions contemplated by this Agreement or the public
announcement of the transactions contemplated by this Agreement, or (iv) ODS, or
any agreement or contract between any of the Companies and ODS, in each case,
whether alone or in combination, shall not be taken into account in determining
whether there has been a Material Adverse Effect or be deemed to constitute a
Material Adverse Effect.
"MATERIAL CONTRACTS" shall mean all agreements, leases,
contracts, orders, commitments (whether written or oral and including any
amendments, supplements and other modifications thereto) to which any of the
Companies or Subsidiaries is a party or which are binding on any of the
Companies or Subsidiaries as of the date of this Agreement, and/or are entered
into by any of the Companies or
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Subsidiaries in the ordinary course of the Business between the date hereof and
the Closing Date, (including without limitation, all customer contracts, service
contracts, supplier contracts, leases, licenses, purchase agreements, and
employment agreements) that either (i) obligates any of the Companies or
Subsidiaries to pay or perform services, or entitles any of the Companies or
Subsidiaries to receive, an amount or services valued, in excess of $175,000
annually and which cannot be terminated at any time on less than thirty (30)
days prior notice without material penalty, (ii) has an unexpired term as of the
date hereof of one (1) year or more and which cannot be terminated prior to the
scheduled expiration date without material penalty, except that with respect to
Section 6.2(e)(ii), it shall mean an unexpired term, as of the date of such new
agreement, amendment or extension, of five (5) years or more, (iii) is a written
employment agreement or collective bargaining agreement, (iv) contains covenants
that purport to restrict the business activity of any Company or any Affiliate
of any Company or limit the freedom of any Company or any Affiliate of any
Company to engage in any line of business or to compete with any Person, the
violation of which could reasonably be expected to result in damages of an
amount in excess of $175,000 or in equitable relief with equivalent effect, (v)
contains a power of attorney that is currently effective and outstanding
relating to the Business, or (vi) contains a guaranty or other similar
undertaking with respect to a contractual performance extended by any Company or
Subsidiary which undertaking could reasonably be expected to result in payment,
by the Companies or Subsidiaries, of an amount in excess of $175,000.
Notwithstanding the foregoing, Material Contracts shall not include any
agreement or contract between any of the Companies and ODS listed on SCHEDULE
4.7(A).
"MATERIAL INTEREST" has the meaning set forth in the
definition of Related Person.
"MEC GUARANTY AGREEMENT" shall mean a Guaranty Agreement by
and between Buyer and JKC Holdings, LLC, in form and substance reasonably
satisfactory to Buyer.
"MEMBER" has the meaning set forth in Section 9.3(b) of this
Agreement.
"MERCANTILE" shall mean Mercantile-Safe Deposit and Trust
Company.
"MULTIEMPLOYER PLAN" has the meaning set forth in Section
4.15(b)(3) of this Agreement.
"ODS" shall mean ODS Technologies, L.P., a Delaware limited
partnership doing business as "TVG" or "The Television Games Network."
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"OPERATING AGREEMENT" shall mean that certain Limited
Liability Company Agreement of Maryland Ventures, LLC by and among the
Companies, JAD, KMD, Xxxxxx, Xxxxx and LUK-Flats in the form attached hereto as
EXHIBIT O.
"OPTION" has the meaning set forth in Section 2.1(d) of this
Agreement.
"OPTION AGREEMENT" shall mean that certain Option Agreement by
and among Buyer, Xxxxxx LLC, Xxxxx LLC, JAD and KMD in the form attached hereto
as EXHIBIT D.
"OPTION GRANT PAYMENT" has the meaning set forth in the Option
Agreement.
"OUTSIDE CLOSING DATE" has the meaning set forth in Section
11.1(d) of this Agreement.
"OUTSTANDING LOAN BALANCE" shall mean an amount equal to
Twenty Seven Million Six Hundred Fifty Thousand Two Hundred and Forty and 80/100
Dollars $27,650,240.80, PLUS, any and all overdue interest and other overdue
amounts with respect to the Loan on the Closing Date, PLUS any principal amounts
borrowed under the Loan in excess of the Cleanup Payment, if any, LESS any
regularly scheduled principal payments made on the Loan between the date hereof
and the Closing Date as required by the terms of the Loan.
"OWNER" has the meaning set forth in the definition of
Subsidiary.
"PENSION PLAN" has the meaning set forth in Section 4.15(b)(3)
of this Agreement.
"PERMITTED LIENS" shall include each Lien labeled as such on
SCHEDULE 4.6 of this Agreement.
"PERSON" shall mean an individual, corporation, association,
partnership, limited liability company, limited liability entity, trust,
unincorporated organization, governmental entity (or any department, agency or
political subdivision thereof) or any other organization or entity.
"PIMLICO" has the meaning set forth in Section A of the
Preliminary Statement.
"PLAN" has the meaning set forth in Section 4.15(a) of this
Agreement.
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"POST-CLOSING DATE TAX RETURNS" has the meaning set forth in
Section 9.3(d) of this Agreement.
"PRAI" has the meaning set forth in Section B of the
Preliminary Statement.
"PRE-CLOSING DATE TAX RETURNS" has the meaning set forth in
Section 9.3(c) of this Agreement.
"PRE-CLOSING TAX LIABILITIES" has the meaning set forth in
Section 9.3(a) of this Agreement.
"PRO-RATA SHARE" shall mean with respect to each Seller (other
than Guida), such Seller's percentage share of the Purchase Price as set forth
on SCHEDULE 2.2(A).
"PURCHASE PRICE" has the meaning set forth in Section 2.2 of
this Agreement.
"RELATED PERSON" shall mean, (i) with respect to a particular
individual: (a) each other member of such individual's Family; (b) any Affiliate
of such individual or one or more members of such individual's Family; (c) any
Person in which such individual or members of such individual's Family hold
(individually or in the aggregate) a Material Interest; and (d) any Person with
respect to which such individual or one or more members of such individual's
Family serves as a director, officer, partner, executor, or trustee (or in a
similar capacity); and (ii) with respect to a specified Person other than an
individual: (a) any Affiliate of such specified Person; (b) any Person that
holds a Material Interest in such specified Person; (c) each Person that serves
as a director, officer, partner, executor, or trustee of such specified Person
(or in a similar capacity); (d) any Person in which such specified Person holds
a Material Interest; (e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity); and (f) any
Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual shall include
(i) the individual, (ii) the individual's spouse and former spouses, (iii) any
other natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other person who resides with such
individual, and (b) a "Material Interest" shall mean the direct or indirect
Beneficial Ownership of voting securities or other voting interests representing
at least 50% of the outstanding voting power of a Person or equity securities or
other equity interests representing at least 50% of the outstanding equity of a
Person.
"REMAINING SHARES" has the meaning set forth in Section
2.1(d) of this Agreement.
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"REVOLVING CREDIT AGREEMENT" shall mean the Revolving Credit
Agreement by and among the Jockey Club, PRAI and Mercantile dated July 7, 1999,
and amended pursuant to the Confirmation Agreement by and among PRAI, the Jockey
Club, Maryland Jockey Club, Inc., LRAI, Southern Maryland Agricultural
Association, Southern Maryland Racing, Inc., Maryland-Virginia Racing Circuit,
Inc. and Mercantile dated June 7, 2002 whereby Mercantile converted $5,000,000
of the outstanding balance under the Revolving Credit Agreement into a fifteen
(15) year term loan.
"SECTION 7 ISSUE" has the meaning set forth in Section 6.6(b)
of this Agreement.
"SECURITIES ACT" has the meaning set forth in Section 5.6 of
this Agreement.
"SEC DOCUMENTS" has the meaning set forth in Section 5.7 of
this Agreement.
"SENIOR EXECUTIVES" shall mean JAD, KMD, Xxxxxx, Xxxxxxx X.
Xxxxx, Xxxx Xxxxxxx, Xxxxxxx Xxxxxxx, Xxxxxxx X. Xxxxx, Xxxxx X. Xxxxxxxx, Xx.,
Xxxxx X. Xxxxxxxxx, Xxxxxx Xxx Xxxx, Xxxxx X. Mango and such other members of
senior management of the Companies as JAD, KMD and Xxxxxx may designate, subject
to the approval of Buyer, which approval shall not be unreasonably withheld,
conditioned or delayed.
"SHARES" has the meaning set forth in Section B of the
Preliminary Statement.
"STOCK" has the meaning set forth in Section B of the
Preliminary Statement.
"STOCKHOLDERS' AGREEMENT" shall mean that certain
Stockholders' Agreement by and among Buyer, Xxxxxx LLC, Xxxxx LLC, JAD, KMD,
PRAI and LRAI in the form attached hereto as EXHIBIT E.
"SUBSIDIARY" shall mean, with respect to any Person (the
"Owner"), any corporation or other Person of which securities or other interests
having the power to elect a majority of that corporation's or other Person's
board of directors or similar governing body, or otherwise having the power to
direct the business and policies of that corporation or other Person (other than
securities or other interests having such power only upon the happening of a
contingency that has not occurred), are held by the Owner or one or more of its
Subsidiaries. Unless otherwise specifically stated, Subsidiaries shall mean only
the Subsidiaries of LRAI, PRAI and LRALP, considering their holdings
individually and in the aggregate.
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"TAXES" has the meaning set forth in Section 9.3(a) of this
Agreement.
"2001 TAX LIABILITIES" has the meaning set forth in Section
9.3(b) of this Agreement.
"TAX RETURNS" has the meaning set forth in Section 9.3(b) of
this Agreement.
"2001 TAX RETURNS" has the meaning set forth in Section
9.3(b) of this Agreement.
"TITLE COMMITMENT" has the meaning set forth in Section 5.10
of this Agreement.
"TITLE INSURANCE COMPANY" has the meaning set forth in
Section 5.10 of this Agreement.
"TITLE POLICY" has the meaning set forth in Section 6.8 of
this Agreement.
"TRANSACTION DOCUMENTS" shall mean this Agreement and all of
the other agreements, certificates, instruments and documents required or
contemplated hereby or executed in connection herewith and such other documents
expressly referring to Section 11.2 hereof.
"TRIPLE CROWN NOTE" shall mean the Promissory Note in the
principal sum of Two Million Five Hundred Thousand Dollars ($2,500,000) by and
between the Jockey Club, as borrower, and Triple Crown Productions, LLC, as
lender.
"UNAUDITED STATEMENTS" shall mean the unaudited statements of
operations, equity, cash flows, and the balance sheet of each of the Companies
for the monthly and year to date periods ending April 30, 2002.
2. PURCHASE AND SALE OF STOCK.
2.1 PURCHASE AND SALE OF STOCK. At the Closing, upon the
terms and conditions set forth in this Agreement and in the Option Agreement:
(a) Xxxxxx and LUK-Flats shall sell, assign, transfer,
convey and deliver to Buyer and Buyer shall purchase from Xxxxxx and LUK-Flats,
all of their respective right, title and interest in the Shares) and Xxxxxx
shall sell, assign, transfer, convey and deliver to Buyer and Buyer shall
purchase from Xxxxxx all of his right, title and interest in the option from
LUK-Flats to acquire shares in PRAI held by
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Xxxxxx and the option from LUK-Flats to acquire shares in LRAI held by Xxxxxx
(collectively, the "Xxxxxx and LUK-Flats Shares");
(b) JAD and CMYD LLC shall sell, assign, transfer,
convey and deliver to Buyer, and Buyer shall purchase from JAD and CMYD LLC, all
of their respective right, title and interest in the Shares, other than their
position as Beneficial Owner of the Remaining Shares owned by Xxxxxx LLC and
Xxxxx LLC (the "XxXxxxxxx Transferred Shares");
(c) Guida shall sell, assign, transfer, convey and
deliver to Buyer, and Buyer shall purchase from Guida, all of its right, title
and interest in the LP Interest; and
(d) Xxxxxx LLC and Xxxxx LLC shall grant to Buyer, and
Buyer shall purchase from Xxxxxx LLC and Xxxxx LLC, an option (collectively, the
"Option") to purchase all of Xxxxxx LLC's and Xxxxx LLC's right, title and
interest in the Shares (the "Remaining Shares"), and Buyer shall grant to Xxxxxx
LLC and Xxxxx LLC an option to put the Remaining Shares to Buyer, pursuant to
the terms and conditions of the Option Agreement.
Buyer will not make any election under Section 338 of the Code in connection
with the sale and purchase of the Stock.
2.2 PURCHASE PRICE; PAYMENT OF PURCHASE PRICE. The aggregate
amount payable by Buyer to Sellers for the Stock (including all principal
amounts (but not including interest) payable to Xxxxxx LLC and Xxxxx LLC upon
exercise of the Option in accordance with the terms and conditions of the Option
Agreement) (the "Purchase Price") shall be One Hundred Fifteen Million Dollars
($115,000,000) LESS the Outstanding Loan Balance and less the outstanding
principal balance of any other interest bearing debt of the Companies or the
Subsidiaries from a bank or other financial institution as of the Closing Date
(excluding finance leases, the Triple Crown Note, and amounts secured by the
Loan Contract and Security Agreement by and between LRALP and Xxxx Deere
Construction Equipment Company dated April 26, 2000). The Purchase Price shall
be payable as follows:
(a) Within one (1) business day following the execution
of this Agreement, Buyer shall deliver to Mercantile, as escrow agent, by wire
transfer of immediately available funds, the amount of Seven Million Five
Hundred Thousand Dollars ($7,500,000) as a deposit (the "Deposit") to be held
pursuant to the terms of the Deposit Escrow Agreement. In the event of the
Closing, the Deposit and any interest thereon (such interest being net of any
fees or expenses of the Escrow Agent payable therefrom) shall be released to
Sellers and applied to the Closing Date Cash Payment.
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(b) At Closing, Buyer shall pay to Sellers (in the
respective proportions or amounts set forth on SCHEDULE 2.2(b) hereof), by wire
transfers of immediately available funds, the Closing Date Cash Payment.
(c) At Closing, Buyer shall deliver to (i) Xxxxxx LLC an
irrevocable bank letter of credit in the amount of $7,903,314 in accordance with
the terms of the Option Agreement (the "Xxxxxx LLC Letter of Credit") and (ii)
Xxxxx LLC an irrevocable bank letter of credit in the amount of $10,409,336 in
accordance with the terms of the Option Agreement (the "Xxxxx LLC Letter of
Credit").
(d) At Closing, Buyer shall pay to Xxxxxx LLC and Xxxxx
LLC, by wire transfer of immediately available funds, the Option Grant Payment.
3. CLOSING.
3.L TIME AND PLACE. The closing of the transactions
contemplated hereby (the "Closing") shall take place at the offices of Xxxxxxx,
Xxxxxxx and Xxxxxx, LLP, Suite 1800, Two Xxxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxx
00000, within five (5) business days following the satisfaction or waiver of all
conditions to Closing set forth in Sections 7 and 8 hereof, or on such other
date and/or location as may be agreed by Buyer and Sellers (other than Guida) in
writing. Subject to the provisions of Section 11.1, failure to consummate the
purchase and sale provided for in this Agreement on the date and time and at the
place determined pursuant to this Section 3.1 will not result in the termination
of this Agreement and will not relieve any party of any obligation under this
Agreement.
3.2 ITEMS TO BE DELIVERED BY SELLERS. At or prior to Closing,
Sellers shall deliver (or cause to be delivered) the following items to Buyer:
(a) Certificates representing the Xxxxxx and LUK-Flats
Shares and the XxXxxxxxx Transferred Shares, duly endorsed for transfer to Buyer
(or accompanied by duly executed stock powers) and certificates representing the
Remaining Shares duly endorsed in blank shall be delivered to the Escrow Agent
to be held in accordance with the terms of the Escrow Agreement;
(b) Such assignment documents as Buyer may reasonably
request to evidence the transfer of the LP Interest by Guida to Buyer, and to
evidence the release by Xxxx Xxxx Xxxxx Incorporated of the pledge of the Shares
owned on the date hereof by LUK-Flats;
(c) The Employment Agreements executed by JAD and KMD
and the Consulting and Non-Competition Agreement executed by Xxxxxx;
(d) The Option Agreement in the form attached hereto as
EXHIBIT D executed by Xxxxxx LLC, Xxxxx LLC, JAD and KMD;
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(e) The Escrow Agreement in the form attached to the
Option Agreement executed by Xxxxxx LLC and Xxxxx LLC;
(f) The Stockholders' Agreement in the form attached
hereto as EXHIBIT E executed by Xxxxxx LLC, Xxxxx LLC, JAD and KMD;
(g) Certified copies of the charter and bylaws, or
comparable organizational documents, of the Companies and the Subsidiaries
(excluding Southern Maryland Agricultural Association and SMAA II), including
all amendments thereto;
(h) A Certificate of Good Standing (or its equivalent)
issued with respect to each of the Companies and all Subsidiaries (excluding
Southern Maryland Agricultural Association and SMAA II), by the jurisdiction of
its organization, dated within fifteen (15) days prior to the Closing Date, and
verification of such good standing dated within twenty-four (24) hours prior to
the Closing Date;
(i) The originals of each of the Consents;
(j) Legal opinions of counsel to the Companies and
counsel to the Sellers (other than Guida) in substantially the form attached
hereto as EXHIBIT H;
(k) A certificate executed by each of JAD, KMD and
Xxxxxx, a general partner of Guida on behalf of Guida, the manager of Xxxxxx
LLC, the manager of Xxxxx LLC, the manager of CMYD LLC, and an officer of
LUK-Flats, dated as of the Closing Date (the "Bring Down Certificate"),
certifying, severally and not jointly, that, except (i) as disclosed in the
Bring Down Certificate, and (ii) to the extent qualified by Knowledge, each of
the representations and warranties made by such Seller in Section 4 hereof
(solely with respect to such Seller's interest in the Stock with respect to
representations and warranties that relate to such Stock and solely with respect
to himself/herself/itself with respect to those representations and warranties
that relate individually to a Seller) was accurate in all respects as of the
date of this Agreement and is accurate as of the Closing Date, in accordance
with the standard of Knowledge applicable to such Seller, and that such Seller
has performed in all material respects all of his, her or its respective
obligations and covenants set forth in this Agreement required to be performed
on or prior to the Closing Date;
(l) The minute books, corporate seal, if any, and
ownership records for LRAI since 1984 and for PRAI since 1986, and all other
minute books, corporate seals and ownership records for the Companies and the
Subsidiaries in Sellers' possession;
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(m) All such other documents, agreements, certificates
or materials referred to herein as then deliverable by Sellers or reasonably
requested by Buyer to transfer, assign and convey good and marketable title to
the Xxxxxx and LUK-Flats Shares, the XxXxxxxxx Transferred Shares and the LP
Interest to Buyer, and to consummate the other transactions contemplated hereby;
(n) Written resignations of all directors of LRAI, PRAI,
the Jockey Club or any Subsidiary whom JAD chooses not to nominate as directors
pursuant to the Stockholders' Agreement in his sole and absolute discretion;
(o) Amendments to the bylaws of PRAI, LRAI, the Jockey
Club and any corporate Subsidiary as may be necessary to set the number of seats
of the board of directors of each such entity at seven (7);
(p) The Keep Well Agreement executed by an appropriate
officer of LUK-Flats and Xxxxxxx Enterprises, Inc.;
(q) The Xxxxxx Letter executed by Xxxxxx;
(r) The Formation Agreement and the Guaranty Agreement
executed by JAD, KMD, Xxxxxx, a general partner of Guida and an appropriate
officer of LUK-Flats;
(s) The JKC Guaranty Agreement executed by each of JAD,
KMD, Xxxxxx and LUK-Flats;
(t) Written resignation of Xxxxxx from the management
committee of Triple Crown Productions, LLC and from any other organization on
which he serves on behalf of the Companies or the Subsidiaries;
(u) An agreement terminating the Buy/Sell Agreement; and
(v) The Xxxxxx LLC/Xxxxx LLC Option Agreement executed
by the manager of Xxxxxx LLC and the manager of Xxxxx LLC.
3.3 ITEMS TO BE DELIVERED BY BUYER. At or prior to
Closing, Buyer shall deliver (or cause to be delivered) the following items to
Sellers:
(a) The Closing Date Cash Payment (which includes the
Deposit and any interest earned thereon (such interest being net of any fees or
expenses of the Escrow Agent payable therefrom)) and the Option Grant Payment;
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(b) The Employment Agreements and the Consulting and
Non-Competition Agreement executed by an appropriate officer of Buyer, LRAI,
PRAI and LRALP;
(c) The Stockholders' Agreement executed by an
appropriate officer of Buyer, LRAI and PRAI;
(d) The Option Agreement executed by an appropriate
officer of Buyer;
(e) The Xxxxxx LLC Letter of Credit and the Xxxxx LLC
Letter of Credit;
(f) The Escrow Agreement executed by an appropriate
officer of Buyer;
(g) The Keep Well Agreement executed by an appropriate
officer of Buyer;
(h) A Certificate of Good Standing issued with respect
to Buyer and Maryland Racing, Inc. by the State of Delaware, dated within
fifteen (15) days prior to the Closing Date, and verification of such good
standing within twenty-four (24) hours prior to the Closing Date;
(i) An officer's certificate of Buyer, dated as of the
Closing Date, certifying that the representations and warranties set forth in
Section 5 hereof were accurate in all respects as of the date of this Agreement
and are accurate as of the Closing Date, and that Buyer has performed in all
material respects all of its respective obligations and covenants set forth in
this Agreement required to be performed on or prior to the Closing Date;
(j) An officer's certificate of Buyer, stating that
except as disclosed in writing by Buyer to Seller, Buyer has no Knowledge that
any of the representations and warranties of Sellers in this Agreement are
inaccurate or that Sellers are in breach of any covenants or agreements
contained herein;
(k) A legal opinion of counsel to the Buyer in
substantially the form attached hereto as EXHIBIT J;
(l) The Formation Agreement executed by an appropriate
officer of each of LRAI, PRAI, the Jockey Club and LRALP;
(m) The Guaranty Agreement executed by an appropriate
officer of Buyer, LRAI, PRAI, the Jockey Club and LRALP;
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(n) The MEC Guaranty Agreement executed by an
appropriate officer of Buyer;
(o) The Company Guaranty Agreement executed by an
appropriate officer of LRAI, PRAI, LRALP and the Jockey Club;
(p) The IDOTs executed by an appropriate officer of
LRALP and the Jockey Club;
(q) An acknowledgement by Mercantile of the complete
payoff of the Loan by Buyer or a consent from Mercantile to the sale of the
Stock to Buyer;
(r) The Xxxxxx LLC/Xxxxx LLC Option Agreement executed
by an appropriate officer of Buyer; and
(s) All such other documents, agreements, certificates
or materials reasonably requested by Sellers to consummate the transactions
contemplated hereby.
4. REPRESENTATIONS AND WARRANTIES OF SELLERS.
(i) Each of Xxxxxx, Xxxxx and Xxxxxx, solely with
respect to his/her/its own Shares with respect to those representations and
warranties that relate to such Shares, and solely with respect to
himself/herself/itself with respect to those representations and warranties that
relate individually to a Seller and in accordance with the standard of Knowledge
applicable to him/her/it, to the extent any such representations or warranties
contain any Knowledge qualifications therein, and subject to the limitations set
forth in Section 4.22 and Section 11.11, hereby severally, and not jointly with
any other Seller, represents and warrants to Buyer, as of the date hereof and as
of the Closing Date, (ii) LUK-Flats, solely with respect to its Shares with
respect to those representations and warranties that relate to such Shares, and
solely with respect to itself with respect to those representations and
warranties that relate individually to a Seller and in accordance with the
standard of Knowledge applicable to it (except with respect to the first
sentence in Section 4.1(c) and Section 4.2 which representations are made by
LUK-Flats, severally and not jointly with any other Seller, without
qualification as to any standard of Knowledge), and subject to the limitations
set forth in Section 4.22 and Section 11.11, hereby severally, and not jointly
with any other Seller, represents and warrants to Buyer solely with respect to
Sections 4.1, 4.2, 4.3, 4.4, 4.5, 4.6, 4.8, 4.10(a), 4.10(b), 4.18 and 4.19 and
to no other representations or warranties, as of the date hereof and as of the
Closing Date, and (iii) Guida, solely with respect to itself with respect to
those representations and warranties that relate individually to a Seller,
and subject to the limitations set forth in Section 4.22 and Section 11.11,
hereby severally, and not jointly with any other Seller, represents and
warrants to Buyer, solely with respect to
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Sections 4.1(d) and 4.2(b) and to no other representations or warranties, as
of the date hereof and as of the Closing Date, that:
4.1 ORGANIZATION AND CAPITALIZATION.
(a) Each of the Companies is duly organized, validly
existing and in good standing under the laws of the State of Maryland, and has
all the requisite power and authority to own, lease and operate its properties
and to carry on its respective Business as currently conducted. Each of the
Companies is duly qualified to do business, is validly licensed and is in good
standing in each jurisdiction in which such company conducts the Business or
where the conduct of the Business requires it to be so qualified and/or licensed
except where the failure to be qualified and/or licensed would not have a
Material Adverse Effect. Each jurisdiction where the Companies are qualified
and/or licensed to do business is listed on SCHEDULE 4.1 hereof.
(b) SCHEDULE 4.1 contains a complete and accurate list
of each of the Subsidiaries of LRAI, PRAI and LRALP, showing its name, its
jurisdiction of organization, other jurisdictions in which it is authorized to
do business (if any), its authorized capital stock, partnership capital or
equivalent, the number and type of its issued and outstanding shares of capital
stock, partnership interests or similar ownership interests, and the current
ownership of such shares, partnership interests, or similar ownership interests.
Each Subsidiary is a corporation or other business organization duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and each jurisdiction in which such Subsidiary conducts its
business or where the conduct of its business requires it to be so qualified
and/or licensed, except where the failure to be so qualified and/or licensed
would not have a Material Adverse Effect. Each Subsidiary has the full power and
authority to conduct its business as it is now being conducted. All of the
outstanding shares of capital stock or ownership interests of each such
Subsidiary have been duly paid and are nonassessable, and are owned of record
and beneficially, by the entities specified on SCHEDULE 4.1. Except as set forth
on SCHEDULE 4.1, there are no other corporations, partnerships, joint ventures,
associations or other entities in which the Companies own, of record or
beneficially, any direct or indirect equity or other interest or any ownership
right (contingent or otherwise) to acquire the same.
(c) Except as set forth on SCHEDULE 4.1, each of Xxxxxx,
Xxxxx and Xxxxxx is (or will be) the sole Beneficial Owner and sole owner of
record, of the Shares listed next to such Seller's name on SCHEDULE 1 (as of the
times indicated thereon), free and clear of any and all Liens, and except as set
forth on SCHEDULE 4.1, LUK-Flats is (or will be) the sole Beneficial Owner and
sole owner of record of the Shares listed next to LUK-Flats' name on SCHEDULE 1
(as of the times indicated thereon), free and clear of any and all Liens. The
Shares constitute all of the issued and outstanding shares of capital stock of
PRAI and LRAI as of the times indicated thereon. LRAI is the sole Beneficial
Owner and sole owner of record of the general partner interest in LRALP (the "GP
Interest"), free and clear of any and all Liens.
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(d) Guida is the sole owner of record of the LP
Interest, free and clear of any and all Liens. The full name and the last known
address of each of the Beneficial Owners of the LP Interest are listed on
SCHEDULE 4.1.
(e) The authorized capital stock of LRAI consists of Ten
Thousand (10,000) shares of Class A common stock, $.10 par value per share, and
Ten Thousand (10,000) shares of Class B common stock, $.10 par value per share.
The authorized capital stock of PRAI consists of Ten Thousand (10,000) shares of
Class A common stock, $.10 par value per share, and Ten Thousand (10,000) shares
of Class B common stock, $.10 par value per share. Except as set forth on
SCHEDULE 4.1 hereof, all of the issued and outstanding Shares are duly
authorized, validly issued, fully paid and non-assessable. None of the issued
and outstanding Shares was issued in violation of any legal requirement,
preemptive or preferential rights or similar claims. Except as set forth in
SCHEDULE 4.1, there are no outstanding or authorized subscriptions, warrants,
options, conversion rights, exchange rights or other commitments obligating such
Seller or LRAI or PRAI, as the case may be, to issue, transfer, sell, convert or
otherwise dispose of any Shares or any other equity or debt securities. None of
the issued and outstanding shares of capital stock or ownership interests in any
of the Subsidiaries was issued in violation of any legal requirement, any
preemptive or preferential rights or similar claims. There are no outstanding or
authorized subscriptions, warrants, options, conversion rights, exchange rights
or other commitments obligating any stockholder of such Subsidiary or such
Subsidiary to issue, transfer, sell, convert or otherwise dispose of any shares
of capital stock or ownership interest or other equity or debt securities.
(f) The authorized ownership interests in LRALP consist
solely of the GP Interest and the LP Interest. All of the issued and outstanding
ownership interests in LRALP are duly authorized, validly issued, fully paid and
non-assessable. None of the issued and outstanding ownership interests in LRALP
was issued in violation of any legal requirement, preemptive or preferential
rights or similar claims. There are no outstanding or authorized subscriptions,
warrants, options, conversion rights, exchange rights or other commitments
obligating such Seller or LRALP, LRAI or PRAI, as the case may be, to issue,
transfer, sell, convert or otherwise dispose of any general partner interest, LP
Interest or any other equity or debt securities of LRALP.
(g) The full names and titles of the officers and
directors of each of the Companies and Subsidiaries (other than Southern
Maryland Agricultural Association and SMAA II) are set forth on SCHEDULE 4.1
hereof. True and complete copies of the organizational documents of each of the
Companies are attached hereto as EXHIBIT I. All records of stockholders and
board of directors actions of each Company are contained in the minute book of
each such Company, true and complete copies of which relating to the past five
(5) years have been furnished to Buyer.
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4.2 ORGANIZATION; AUTHORIZATION; ENFORCEABILITY.
(a) LUK-Flats is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite power and authority to enter into and comply
with its obligations under this Agreement and the other Transaction Documents to
which it is a party. Xxxxxx LLC is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Maryland,
and has all requisite power and authority to enter into and comply with its
obligations under this Agreement and the other Transaction Documents to which it
is a party. Xxxxx LLC is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Maryland, and has
all requisite power and authority to enter into and comply with its obligations
under this Agreement and the other Transaction Documents to which it is a party.
CMYD LLC is a limited liability company duly organized, validly existing and in
good standing under the laws of the State of Maryland, and has all requisite
power and authority to enter into and comply with its obligations under this
Agreement and the other Transaction Documents to which it is a party.
(b) The execution, delivery and performance by each
Seller of this Agreement and all of the other Transaction Documents to which
such Seller is a party are within the power of such Seller and have been duly
and validly authorized by such Seller, and no other proceedings on the part of
such Seller are necessary to authorize this Agreement, the other Transaction
Documents to which such Seller is a party, or the transactions contemplated
hereby and thereby. This Agreement is, and the other Transaction Documents will
be, when executed and delivered by a Seller, the valid and binding obligations
of such Seller, enforceable against such Seller in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, moratorium,
reorganization and other similar laws affecting the rights of creditors
generally, and to the exercise of a court's equitable powers.
4.3 NO VIOLATION OR CONFLICT. Except as set forth on
SCHEDULE 4.3 hereof, the execution, delivery and performance by each Seller of
this Agreement and the other Transaction Documents to which such Seller is a
party do not and will not directly or indirectly (with or without notice or
lapse of time) (i) conflict with or violate any of the provisions of the
organizational documents, if any, of the Companies or the Sellers, or (ii)
conflict with, violate or result in a breach of the terms, conditions or
provisions of, constitute a default under, or give to any other Person any right
of termination or acceleration under, any law, order, rule, ordinance,
regulation, judgment, injunction, order, decree, Material Contract, license,
permit, authorization or other agreement or instrument to which the Companies or
such Seller is a party, or by which the Companies or such Seller is bound, in
the case of the Companies, that would result in a Material Adverse Effect, and
in the case of the Sellers, that would result in a material adverse effect on
such Seller or its ability to consummate the transactions contemplated hereby,
or (iii) result in, or require the creation or imposition of, any Lien, other
than a
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Permitted Lien, upon or with respect to the Stock, or any of the property
or assets of the Companies.
4.4 CONSENTS. Except as set forth on SCHEDULE 4.4 hereof, and
except for (i) the approval of the Maryland Racing Commission pursuant to
ss.ss.11-316 and 11-317 of the Business Regulation Article of the Annotated Code
of Maryland, (ii) the filing of an HSR Act Report with the Pre-Merger
Notification Office of the Federal Trade Commission and with the Antitrust
Division of the Department of Justice pursuant to the HSR Act, and (iii) the
approval of the Virginia Racing Commission, no notice to, filing with, or
consent or approval of, or any other action by, any Person is necessary in
connection with the execution, delivery and performance by Sellers of this
Agreement and the other Transaction Documents to which any Seller is a party,
other than any such notices, filings, consents or approvals which if not
obtained would not have a Material Adverse Effect.
4.5 FINANCIAL INFORMATION. Sellers have delivered to Buyer
complete copies of the Financial Statements. Except as set forth on SCHEDULE 4.5
hereof, the Financial Statements, taken as a whole, including in each case the
notes thereto, (a) were prepared in accordance with GAAP except as otherwise
noted therein; and (b) present fairly and accurately the financial condition and
the results of operations of the Companies and the Subsidiaries, taken as a
whole, for the periods stated to be covered by such Financial Statements,
subject in the case of any interim financial statements or Unaudited Statements,
to normal recurring year-end adjustments and the absence of footnotes.
4.6 TITLE.
(a) SCHEDULE 4.6 accurately identifies, by legal
description, or other identifying information, all material real and personal
property owned or leased by the Companies and the Subsidiaries. Sellers have
delivered or made available to Buyer copies of all deeds (as recorded) in the
possession of Sellers or the Companies relating to such real property.
(b) Each of the Companies has good, valid and marketable
title to all properties and assets reflected on the Companies' balance sheet
included in the most recent Audited Statements and Unaudited Statements and on
SCHEDULE 4.6, free and clear of any and all Liens, except (a) Permitted Liens,
and (b) (i) minor imperfections of title, if any, that do not materially impair
the use of the real property subject thereto for its current purposes, and (ii)
zoning laws and other land use restrictions that do not materially impair the
use of the property subject thereto for its current purposes.
4.7 MATERIAL CONTRACTS. SCHEDULE 4.7 contains a list of
contracts including all Material Contracts which are identified by an asterisk
thereon. The Companies have made available to Buyer true and complete copies of
all Material
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Contracts. To Sellers' Knowledge, all Material Contracts are currently in full
force and effect and are unmodified, and there are no defaults under the
Material Contracts which, in the aggregate, would have a Material Adverse
Effect. Except as set forth on SCHEDULE 4.7 hereof, (i) each Material Contract
was entered into at arm's length in the ordinary course of the Business; (ii)
the Companies and Subsidiaries have not received any prepayments for more than
ninety (90) days with regard to any Material Contract other than in the ordinary
course of the Business; (iii) the Companies or Subsidiaries are entitled to
request full payment under each Material Contract for the Companies' or
Subsidiaries' performance or delivery of products or services thereunder; (iv)
to Sellers' Knowledge, no event has occurred or circumstance exists that (with
or without notice or lapse of time) may contravene, conflict with, or result in
a violation or breach of, or give any Company or Subsidiary or other Person the
right to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate or modify, any Material
Contracts which, in the aggregate, would have a Material Adverse Effect; (v) to
Sellers' Knowledge, neither the Companies nor any Subsidiary has given to or
received from any other Person, at any time since January 1, 2001, any notice or
other communication (whether oral or written) regarding any actual, alleged,
possible or potential termination, violation or breach of, or default under, any
Material Contracts which, in the aggregate, would have a Material Adverse
Effect; and (vi) to Sellers' Knowledge, there are no renegotiations of, or
outstanding rights to renegotiate any material amounts paid or payable to any of
the Companies or any Subsidiary, under the Material Contracts, with any Person,
and no such Person has made written demand for such renegotiation.
Notwithstanding the foregoing or anything contained herein to the contrary, the
Companies make no representations or warranties regarding the enforceability,
validity, or status of any agreement or contract between any of the Companies
and ODS, except that the Companies have made available to Buyer all such
agreements and contracts, material correspondence and documents concerning any
such agreement or contract and such agreements, contracts, correspondence and
documents are set forth on SCHEDULE 4.7(a).
4.8 UNDISCLOSED LIABILITIES. Except as disclosed on SCHEDULE
4.8 hereof and except for liabilities and obligations incurred after the date of
the Unaudited Statements in the ordinary course of the Business, the Companies
and the Subsidiaries do not have any liabilities or obligations, whether
absolute, accrued, contingent or otherwise which are not reflected, reserved
against or otherwise disclosed in the most recent Audited Statements and
Unaudited Statements which individually, or in the aggregate, would have a
Material Adverse Effect.
4.9 INTELLECTUAL PROPERTY RIGHTS. To Sellers' Knowledge,
SCHEDULE 4.9 hereof contains an accurate and complete description of all of the
Intellectual Property Rights of the Companies and Subsidiaries. Except as set
forth on SCHEDULE 4.9, the Companies and Subsidiaries own or have the right and
authority to use the Intellectual Property Rights in connection with the conduct
of the Business in the manner presently conducted, and to Sellers' Knowledge
such use does not conflict with, infringe upon or violate any trademark,
tradename, copyright, patent or patent rights,
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trade secret rights or any other intellectual property rights of any other
Person. Except as set forth on SCHEDULE 4.9, none of the Companies nor any
Subsidiary has been a party to any Action within the last five (5) years
concerning the ownership, use, validity or infringement of the Intellectual
Property Rights.
4.10 ABSENCE OF CERTAIN CHANGES. Except as set forth on
SCHEDULE 4.10 hereof, the Companies have conducted the Business only in the
ordinary course and have not:
(a) since the date of the Unaudited Statements, amended
the organizational documents of any of the Companies or Subsidiaries;
(b) since the date of the Unaudited Statements, suffered
any damage to or destruction or loss of any asset or property of any of the
Companies or Subsidiaries, not covered by insurance or in excess of insured
limits, that would have a Material Adverse Effect in the aggregate;
(c) since the date of the Unaudited Statements, forgiven
or canceled debts of substantial value or waived any claims or rights of
substantial value, except in the ordinary course of the Business;
(d) since the date of the most recent Audited
Statements, made any change in its accounting principles, methods or practices,
except in the ordinary course of the Business or which would not have a Material
Adverse Effect in the aggregate;
(e) since the date of the most recent Audited
Statements, (i) made any change in the terms of any employment agreement or
compensatory arrangement, or any bonus, pension, insurance or other employee
benefit plan, or any payment or benefit made to or for any employee, except in
the ordinary course of the Business or which would not have a Material Adverse
Effect in the aggregate, or (ii) made any payments to any party, including
without limitation, any employee, consultant, agent or Related Person, outside
the ordinary course of the Business;
(f) since the date of the most recent Audited
Statements, made capital or operating expenditures in excess of Five Hundred
Thousand Dollars ($500,000) in the aggregate, which were not contemplated by the
2001 or 2002 capital or operating budgets of the Companies and have not entered
into any long-term leases or other agreements involving real estate or capital
equipment;
(g) since the date of the most recent Audited
Statements, granted any option or convertible security or registration rights in
respect of any equity interests or securities; issued, purchased, redeemed,
retired or otherwise
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acquired any equity interests or securities, issued or declared or paid any
dividends or other distributions or payments in respect of its equity interests
or securities;
(h) since the date of the most recent Audited
Statements, sold, leased, or otherwise disposed of any material asset or
property of the Companies or Subsidiaries, except in the ordinary course of the
Business, or mortgaged, pledged or had any Lien imposed (other than Permitted
Liens) on any material asset or property owned or leased by the Companies or the
Subsidiaries;
(i) since the date of the most recent Audited
Statements, (i) made any payment on any long term indebtedness, except (A) as
required by the terms of such long term indebtedness, or (B) as a result of the
application of Excess Funds with respect to, and as defined in, the Confirmation
and Amendment to Loan Agreements or (ii) made any payments on the Revolving
Credit Agreement except (A) as required by the terms of the Revolving Credit
Agreement or (B) in the ordinary course of Business; or
(j) agreed to do any of the foregoing (i) with respect
to subsections (a)-(c) hereof, since the date of the Unaudited Statements, or
(ii) with respect to subsections (d)-(i) hereof, since the date of the most
recent Audited Statements.
4.11 COMPLIANCE WITH LAWS.
(a) Except as set forth on SCHEDULE 4.11, to Sellers'
Knowledge the Companies and Subsidiaries are in compliance in all respects in
their operation of the Business with all applicable laws, regulations,
ordinances, orders, writs, decrees, licenses, permits, approvals and judgments
of any court, arbitrator, or governmental or regulatory body, except where such
non-compliance would not, in the aggregate, have a Material Adverse Effect.
(b) Except as set forth on SCHEDULE 4.11, to Sellers'
Knowledge, neither the Companies nor the Subsidiaries has received any oral or
written notices from any such authorities of any violation or non-compliance, or
any potential violation or non-compliance, with any such laws, regulations,
ordinances, orders, writs, decrees, licenses, permits, approvals or judgments,
that would in the aggregate have a Material Adverse Effect.
4.12 LITIGATION AND CLAIMS. Except as set forth on SCHEDULE
4.12, there are no Actions now pending that the Companies or the Subsidiaries
have received written notice of or, to Sellers' Knowledge, threatened by or
against any of the Companies or Subsidiaries, or their respective properties or
assets, or that otherwise relate to or may affect the Business, which if
determined adversely would have a Material Adverse Effect individually or in the
aggregate, or that challenge, or that may have the effect of preventing or
making illegal any of the transactions contemplated hereby. The Companies have
delivered to, or made available for inspection by, Buyer copies of all
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pleadings, correspondence and other documents relating to each scheduled Action
to the extent within the Companies' possession and not violative of any
attorney-client privilege. As of the date hereof, there is no pending claim,
action, suit, arbitration, inquiry or proceeding between the Companies or
Sellers and ODS or any of its Affiliates, or relating to the business of ODS or
its Affiliates.
4.13 TAXES. Except as set forth on SCHEDULE 4.13 (i) the
Companies and Subsidiaries have duly prepared and filed all Pre-Closing Date Tax
Returns, within the time or extended time required or permitted, and have timely
paid when due all Taxes shown on such returns; (ii) all Pre-Closing Date Tax
Returns were accurate and complete in all material respects as filed and/or
amended, and were prepared in all material respects in accordance with all
applicable government regulations; (iii) all Taxes of the Companies and
Subsidiaries through the date of the Unaudited Statements have been or will be
paid in full by the Companies and Subsidiaries or accrued or provided for in the
Unaudited Statements; (iv) except to the extent so paid, or accrued or provided
for in the Unaudited Statements, and except for Tax obligations arising in the
ordinary course of the Business from and after the date of the Unaudited
Statements through and including the Closing Date, the Companies and
Subsidiaries do not have any liability for Taxes in excess of the amount so paid
or accrued or provided for in the Unaudited Statements, and no deficiencies for
any Tax has been asserted or assessed against the Companies and Subsidiaries and
(v) the Companies and Subsidiaries are not a party to any pending or, to
Sellers' Knowledge, threatened, administrative or judicial action or proceeding
by any governmental authority for the assessment or collection of Taxes, and no
amounts are owed or will be owed by the Companies and Subsidiaries with respect
to any audits or reviews by any governmental authority of any Pre-Closing Date
Tax Returns. The fiscal year end in 2001 for each of the Companies and each of
the Subsidiaries was December 31, 2001.
4.14 EMPLOYEE AND LABOR RELATIONS MATTERS. SCHEDULE 4.14
contains a complete list of all written employment and employee proprietary
rights contracts, collective bargaining agreements and labor contracts, stock
purchase, stock option, bonus, profit sharing and similar plans or agreements to
which the Companies or Subsidiaries are a party. Except as set forth on SCHEDULE
4.14, there is not presently pending or existing, with respect to which the
Companies or Subsidiaries have received written notice, (a) any unfair labor
practice complaints or grievances against the Companies or Subsidiaries before
the National Labor Relations Board, or strike, lockout, dispute, slow-down or
work stoppage against or involving the Companies or Subsidiaries; (b) any union
organization or certification campaign in progress against the Companies or
Subsidiaries; or (c) to Sellers' Knowledge, any charges, audits, investigations,
grievances, or complaint proceedings against the Companies or Subsidiaries
before the Equal Employment Opportunity Commission, any workmen's compensation
board, or any federal, state or local agency responsible for the prevention of
unlawful employment practices. Except as set forth on SCHEDULE 4.14 and to
Sellers' Knowledge, no event has occurred or circumstance exists that could
provide the basis for any work stoppage or any other labor dispute.
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4.15 EMPLOYEE BENEFIT PLANS.
(a) PLANS.
The Companies have made available to Buyer true and
complete copies of all documents, including summary plan descriptions or summary
descriptions of items not in writing, insurance contracts and servicing
agreements, relating to each of the following to which a Company is a party or
with respect to which it is or will be required to make any payment or could
have any material liability:
(1) any deferred compensation, pension,
profit-sharing, savings, retirement income, stock purchase, stock option, stock
appreciation right, bonus, severance, consulting, retainer, welfare or incentive
plan, agreement, arrangement or practice;
(2) any other "employee benefit plan" as defined in
Section 3(3) of ERISA; and
(3) any other plan, agreement or arrangement
providing for benefits or perquisites to employees, officers, directors or
agents, including but not limited to benefits related to automobiles, clubs,
vacations, child care, parenting, sabbatical, sick leave, medical, dental,
hospitalization, life insurance and other types of insurance.
All of such plans, agreements, arrangements or
practices described in this Section 4.15(a) are hereinafter referred to
individually as a "Plan" and collectively as the "Plans" and are listed on
SCHEDULE 4.15.
(b) EMPLOYEE BENEFITS COMPLIANCE.
(1) Each Plan complies in all material respects and
has been administered in all material respects with the provisions of ERISA, the
Code, and other laws applicable to the Plans, except where such noncompliance
may be corrected without substantial cost or liability. The Companies have
performed all of their material obligations under the Plans, including but not
limited to, the full payment when due of all amounts required to be made as
contributions thereto or otherwise. There are no actions or claims pending, or
to Sellers' Knowledge threatened, against such Plans or any of their assets, or
arising out of such Plans which could have a Material Adverse Effect, other than
routine claims for benefits and, to Sellers' Knowledge, no facts exist which
could give rise to such actions or claims that would have a Material Adverse
Effect on the Plans or the Companies.
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(2) The Companies have made available to Buyer a
copy of the Forms 5500 (annual reports) filed in the most recent three (3) plan
years for each Plan.
(3) With respect to each Plan listed on SCHEDULE
4.15 that is intended to constitute a "qualified plan" under Code Section 401(a)
(each such plan, other than a "Multiemployer Plan" as defined in Section
4001(a)(3) of ERISA, being hereinafter referred to as a "Pension Plan"): (i) the
Companies have made available to Buyer copies of the most recent favorable
determination letter that has been issued by the IRS with respect to such
Pension Plan; (ii) no Pension Plan is subject to Code Section 412 or Title IV of
ERISA; and (iii) except for defects that may be corrected without substantial
cost or liability, each Pension Plan is qualified in form and operation under
Code Section 401(a), and each trust for each such Pension Plan is exempt from
federal income tax under Code Section 501(a). To Sellers' Knowledge, except for
defects that may be corrected without substantial cost or liability, no event
has occurred or circumstance exists that will or could give rise to
disqualification or loss of tax-exempt status of any such Pension Plan or trust.
(4) Payments have been made of all amounts that are
required to be contributed to the Plans. With respect to a Plan, if any, that is
unfunded, the Companies have adequately provided for, and the most recent
Audited Statements and the Unaudited Statements accurately reflect (in
accordance with GAAP), the amount of all accrued benefits and obligations under
such Plan.
(5) Except as provided under a Pension Plan or
Multiemployer Plan, the Companies do not have any obligation to maintain any
medical, death or other benefits for its employees after they retire, except to
the extent required under the group health plan continuation requirements of
Section 601 of ERISA and 4980B of the Code.
(6) The consummation of the transactions
contemplated by this Agreement will not result directly in any special payment,
vesting or acceleration of any benefit under any Plan or result in the payment
to any employee, director or other "disqualified individual" (as defined in
Section 280G(c) of the Code and the regulations prepared thereunder in 1989 and
2002) of the Companies or Subsidiaries of any amount that would be an "excess
parachute payment" under Section 280G(b)(1) of the Code and the regulations
prepared thereunder in 1989 and 2002.
(7) To Sellers' Knowledge, no statement, either
written or oral, has been made by a Company to any Person with regard to any
Plan that was not in accordance with the Plan and that could have a Material
Adverse Effect.
(8) To Sellers' Knowledge, no transaction prohibited
by ERISAss. 406 and no "prohibited transaction" under Code ss. 4975(c) has
occurred with respect to any Plan for which a Company would have any liability.
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(9) Except for early termination charges that may be
imposed under an insurance contract relating to a health, dental or disability
Plan, each Plan, other than a Pension Plan, Multiemployer Plan, or the plans
described in a collective bargaining agreement, may be terminated within thirty
days, without payment of any additional contribution or amount and without the
vesting or acceleration of any benefits promised by such Plan.
(10) No Company maintains a voluntary employees'
beneficiary association under Section 501(c)(9) of the Code.
(11) Within the four (4) years preceding the date of
this Agreement, except as relating to a Plan set forth on SCHEDULE 4.15, no
Company has contributed to or otherwise had an obligation to contribute to, or
otherwise participate in or have any liability with respect to, any
Multiemployer Plan.
(12) No Company nor, to Sellers' Knowledge, any
other Person who, together with a Company, would be treated as a single employer
under Code Section 414 (an "ERISA Affiliate") of a Company has withdrawn from
any Multiemployer Plan with respect to which there is any outstanding liability
as of the date of this Agreement. To Sellers' Knowledge, no event has occurred
or circumstance exists that presents a risk of the occurrence of any withdrawal
from, or the participation, termination, reorganization, or insolvency of, any
Multiemployer Plan that could result in any liability of a Company to a
Multiemployer Plan.
(13) Neither a Company nor, to Sellers' Knowledge,
any ERISA Affiliate of a Company, has received notice from any Multiemployer
Plan that it is in reorganization or is insolvent, that increased contributions
may be required to avoid a reduction in plan benefits or the imposition of any
excise tax, or that such Plan intends to terminate or has terminated.
(14) No Multiemployer Plan to which a Company or, to
Sellers' Knowledge, any ERISA Affiliate of a Company, contributes or has
contributed, is a party to any pending merger or asset or liability transfer or
is subject to any proceeding brought by the Pension Benefit Guaranty
Corporation, or any successor thereto.
4.16 LICENSES AND PERMITS. SCHEDULE 4.16 hereof contains a
complete and accurate list of all material orders issued to the Companies and
the Subsidiaries by a governmental agency and all material licenses and permits
obtained by the Companies and the Subsidiaries from any governmental agency in
connection with its corporate existence, the conduct of the Business, or the
ownership of its property and assets. All such licenses and permits are in full
force and effect except to the extent that a termination or expiration thereof
would not result in a Material Adverse Effect on an aggregate basis.
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4.17 INSURANCE. SCHEDULE 4.17 hereof sets forth a complete
and accurate list of all insurance policies of the Companies and the following
information with respect to each insurance policy (including policies providing
property, casualty, liability, workers' compensation coverage and bond and
surety arrangements) maintained by the Companies and the Subsidiaries:
(a) the name of the insurer and the name of each insured
party;
(b) the policy number and the period of coverage; and
(c) a description of the type and the amount of
coverage.
The Companies have delivered to Buyer true and correct copies
of each policy listed on SCHEDULE 4.17. Except as otherwise indicated on
SCHEDULE 4.17, each such policy is currently in full force and effect, all
premiums due and payable with respect thereto have been paid in full by the
Companies, and to Sellers' Knowledge the Companies are not in breach or default
under the terms of any such policy. Sellers make no representation regarding the
continuing availability of any of the types of insurance described in SCHEDULE
4.17 or the future premium cost (including any premium increases) related to the
types of insurance listed on SCHEDULE 4.17.
4.18 ENVIRONMENTAL MATTERS.
(a) Except as set forth on SCHEDULE 4.18 or in any
environmental report, audit or similar study referenced on SCHEDULE 4.18, or
undertaken at the request of Buyer, an Affiliate of Buyer, or their respective
representatives, or except as would not, individually or in the aggregate, have
a Material Adverse Effect: (i) to Seller's Knowledge, the Companies and the
Subsidiaries are in compliance with all applicable environmental laws,
regulations, ordinances, orders, writs, decrees and judgments and have obtained
and are in compliance with all required environmental permits and approvals,
(ii) there are no environmental Actions pending or, to Sellers' Knowledge,
threatened, against any of the Companies or the Subsidiaries, (iii) to Sellers'
Knowledge, no Hazardous Materials have been released into the environment by any
of the Companies or the Subsidiaries or any other Person on any of the real
property being acquired as part of the transaction hereunder while such real
property was owned or leased by the Companies or the Subsidiaries, except for de
minimis amounts in the ordinary conduct of the Business or except as permitted
under applicable environmental laws, regulations, ordinances, orders, writs,
decrees and judgments of any court, arbitrator, or governmental or regulatory
body, and as would not require investigation or remediation as of the date of
this Agreement, and (iv) the Companies have provided the Buyer with copies of
any and all written notifications, assessments or reports regarding
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environmental compliance in the Sellers' or Companies' possession, that relate
to the Business or the real property being acquired as part of the transaction
hereunder.
(b) The Buyer acknowledges that (i) the representations
and warranties contained in this Section 4.18 are the only representations and
warranties being made with respect to compliance with or liability under
environmental laws, regulations, ordinances, orders, writs, decrees and
judgments of any court, arbitrator, or governmental or regulatory body, or with
respect to any environmental, health or safety matter, including natural
resources, related in any way to the Business or to this Agreement or its
subject matter, and (ii) no other representation contained in this Agreement,
including but not limited to, Sections 4.5, 4.8 or 4.11 shall apply to any such
matters and no other representation or warranty, express or implied, is being
made with respect thereto.
4.19 BROKER. Except as set forth on SCHEDULE 4.19, Sellers
have not made any agreement with any Person or taken any action that would cause
any Person to become entitled to any agent's, broker's or finder's fee or
commission in connection with the transactions contemplated hereby.
4.20 CERTAIN PAYMENTS. Except as set forth on SCHEDULE 4.20,
to Sellers' Knowledge no Company or Subsidiary, nor any director or officer of
any Company or Subsidiary, or any other Person duly authorized to act for or on
behalf of any Company or Subsidiary, has directly or indirectly, in violation of
any legal requirement (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback or other payment to any Person, private or public,
regardless of form, whether in money, property or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, or (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of any Company or Subsidiary, or
any Affiliate thereof, or (b) established or maintained any fund or asset that
has not been recorded in the books and records of the Companies and the
Subsidiaries.
4.21 RELATIONSHIPS WITH RELATED PERSONS. Except as set forth
on SCHEDULE 4.21, and except as may arise or result from any Transaction
Document, since July 15, 1999, neither Sellers nor, to Sellers' Knowledge, any
Related Person of any Seller (a) has or has had any interest in any property
(whether real, personal, or mixed and whether tangible or intangible) used in or
pertaining to the Business; (b) is, or has owned (of record or as a beneficial
owner), an equity interest or any other financial or profit interest in, a
Person that has (i) had material business dealings or a material financial
interest in any transaction with the Companies or Subsidiaries, or (ii) engaged
in competition with the Companies or Subsidiaries with respect to any line of
the products or services of the Companies or Subsidiaries in any market
presently served by the Companies or Subsidiaries; or (c) is a party to any
contract with, or has any claim or right against, the Companies or Subsidiaries.
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4.22 EXPRESS LIMITATION ON REPRESENTATIONS AND WARRANTIES OF
SELLERS. All of the representations and warranties of Sellers are expressly
subject to the following limitation and disclaimer:
BUYER ACKNOWLEDGES AND AGREES THAT EXCEPT AS SPECIFICALLY SET
FORTH (i) IN THIS SECTION 4, (ii) BY XXXXXXX ENTERPRISES, INC. AND
LUK-FLATS IN THE KEEP WELL AGREEMENT, (iii) BY XXXXXX LLC AND XXXXX LLC
IN THE OPTION AGREEMENT AND (iv) BY THE SELLERS (OTHER THAN XXXXXX LLC,
CMYD LLC AND XXXXX LLC) IN SECTION 2 OF THE FORMATION AGREEMENT, NONE
OF THE SELLERS, NOR ANY EMPLOYEE, MEMBER, DIRECTOR, AGENT, ATTORNEY OR
REPRESENTATIVE OF ANY SHAREHOLDER OR PARTNER OF THE COMPANIES OR THE
SUBSIDIARIES, NOR THE COMPANIES OR THE SUBSIDIARIES, HAS MADE ANY
REPRESENTATION WHATSOEVER REGARDING THE SUBJECT MATTER OF THIS
AGREEMENT, OR ANY PART THEREOF, INCLUDING WITHOUT LIMITATION,
REPRESENTATIONS OR WARRANTIES AS TO THE OPERATION OF THE BUSINESS OR
THE PHYSICAL NATURE OR CONDITION OF THE REAL PROPERTY AND IMPROVEMENTS
THEREON, OR THE MACHINERY AND EQUIPMENT USED IN THE BUSINESS, OR THE
CAPABILITIES THEREOF. BUYER, IN EXECUTING, PERFORMING AND DELIVERING
THIS AGREEMENT, DOES NOT RELY UPON ANY STATEMENT AND/OR INFORMATION TO
WHOMEVER MADE OR GIVEN, DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING,
BY ANY PERSON, EXCEPT THOSE EXPRESSLY CONTAINED HEREIN OR IN ANY
AGREEMENTS EXECUTED PURSUANT HERETO. EXCEPT FOR EACH SELLER'S EXPRESS
REPRESENTATIONS AND WARRANTIES SPECIFIED IN THIS AGREEMENT, THE
REPRESENTATIONS AND WARRANTIES BY XXXXXXX ENTERPRISES, INC. AND
LUK-FLATS IN THE KEEP WELL AGREEMENT, THE REPRESENTATIONS AND
WARRANTIES OF EACH OF THE SELLERS (OTHER THAN XXXXXX LLC, CMYD LLC AND
XXXXX LLC) IN THE FORMATION AGREEMENT, AND THE REPRESENTATIONS AND
WARRANTIES BY XXXXXX LLC AND XXXXX LLC IN THE OPTION AGREEMENT, BUYER
IS RELYING SOLELY UPON ITS OWN DUE DILIGENCE INVESTIGATION OF THE
COMPANIES AND THE SUBSIDIARIES, THEIR ASSETS AND THE BUSINESS. EXCEPT
AS OTHERWISE EXPRESSLY PROVIDED HEREIN, BY XXXXXXX ENTERPRISES, INC.
AND LUK-FLATS IN THE KEEP WELL AGREEMENT, BY XXXXXX LLC AND XXXXX LLC
IN THE OPTION AGREEMENT AND BY THE SELLERS (OTHER THAN XXXXXX LLC, CMYD
LLC AND XXXXX LLC) IN THE FORMATION AGREEMENT, BUYER AGREES TO TAKE THE
LP
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INTEREST, THE XXXXXX AND THE LUK-FLATS SHARES AND THE XXXXXXXXX
TRANSFERRED SHARES, AND ACCEPTS ALL OF THE REAL PROPERTY AND OTHER
ASSETS OF THE COMPANIES AND THE SUBSIDIARIES, "AS IS," AND "WHERE IS,"
AS OF THE CLOSING DATE. IN ADDITION, BUYER ACKNOWLEDGES AND AGREES THAT
IT HAS HAD THE OPPORTUNITY TO INVESTIGATE ALL PHYSICAL AND FINANCIAL
ASPECTS OF THE COMPANIES AND THE SUBSIDIARIES AND THEIR ASSETS AND TO
PERFORM ALL INSPECTIONS AND INVESTIGATIONS OF THE COMPANIES AND THE
SUBSIDIARIES AND THEIR ASSETS WHICH THE BUYER DEEMS NECESSARY OR
DESIRABLE TO PROTECT ITS INTERESTS IN ACQUIRING THE STOCK, INCLUDING
WITHOUT LIMITATION, ALL LICENSES AND OTHER PERMITS RELATED TO THE
OPERATION OF THE BUSINESS, BUILDING PERMITS, CERTIFICATES OF OCCUPANCY,
ENVIRONMENTAL AUDITS AND ASSESSMENTS, SURVEYS, INVESTIGATION OF LAND
USE, ZONING AND DEVELOPMENT RIGHTS, AND THE CONDITION OF ALL REAL
PROPERTY AND ALL IMPROVEMENTS THEREON (INCLUDING WITHOUT LIMITATION,
COMPLIANCE WITH ENVIRONMENTAL LAWS AND THE EXISTENCE OF HAZARDOUS
MATERIALS IN, ON OR UNDER ANY OF THE REAL PROPERTY BEING ACQUIRED AS
PART OF THE TRANSACTION HEREUNDER). EXCEPT AS EXPRESSLY SET FORTH IN
THIS AGREEMENT, BY XXXXXXX ENTERPRISES, INC. AND LUK-FLATS IN THE KEEP
WELL AGREEMENT, BY XXXXXX LLC AND XXXXX LLC IN THE OPTION AGREEMENT AND
BY THE SELLERS (OTHER THAN XXXXXX LLC, CMYD LLC AND XXXXX LLC) IN THE
FORMATION AGREEMENT, BUYER HEREBY WAIVES, AND SELLERS HEREBY DISCLAIM,
ALL WARRANTIES OF ANY TYPE OR KIND WHATSOEVER WITH RESPECT TO THE
COMPANIES, THE SUBSIDIARIES, THE BUSINESS, THE STOCK OR THE ASSETS OF
THE COMPANIES OR THE SUBSIDIARIES, WHETHER EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION, THOSE OF FITNESS FOR A PARTICULAR PURPOSE
OR USE. THE PROVISIONS OF THIS SECTION 4.22 SHALL SURVIVE THE CLOSING
OR ANY TERMINATION OF THIS AGREEMENT INDEFINITELY.
4.23 DISCLOSURES. The disclosures in any Schedule attached
hereto, the Bring-Down Certificate and any draft thereof and any notice
delivered pursuant to Section 6.6, other than the disclosures in SCHEDULE 4.5
and SCHEDULE 4.8, relate only to the representations and warranties in the
Section of the Agreement to which they expressly relate or to which it is
otherwise apparent on its face that they relate, and not any other
representation or warranty in this Agreement, except for specific
cross-references.
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5. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer hereby represents and warrants to each Seller, as of the
date hereof and as of the Closing Date, that:
5.1 ORGANIZATION. Buyer is a corporation duly
organized, validly existing and in good standing under
the laws of the State of Delaware, and has all the requisite corporate power and
authority to enter into and comply with its obligations under this Agreement and
the other Transaction Documents to which it is a party and to purchase the LP
Interest, the Xxxxxx and LUK-Flats Shares and the XxXxxxxxx Transferred Shares
pursuant to this Agreement. As of the Closing Date, Maryland Racing, Inc. is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has all the requisite corporate power and
authority to enter into and comply with its obligations under any Transaction
Document to which it is a party.
5.2 AUTHORIZATION; ENFORCEABILITY. The execution,
delivery and performance by Buyer of this Agreement and all of the other
Transaction Documents to which it is a party are within the corporate power of
Buyer and have been duly and validly authorized by Buyer, and no other
proceedings on the part of Buyer are necessary to authorize this Agreement, the
other Transaction Documents to which it is a party, or the transactions
contemplated hereby and thereby. This Agreement is, and the other Transaction
Documents will be, when executed and delivered by Buyer, the valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, moratorium,
reorganization and other similar laws affecting the rights of creditors
generally, and to the exercise of a court's equitable powers.
5.3 NO VIOLATION OR CONFLICT. The execution, delivery
and performance by Buyer of this Agreement and the other Transaction Documents
to which it is a party do not and will not (i) conflict with or violate any of
the provisions of the corporate charter or bylaws of Buyer, or (ii) materially
conflict with, violate or result in a breach of the terms, conditions or
provisions of, constitute a default under, or give to any other Person any right
of termination or acceleration under, any law, order, rule, ordinance,
regulation, judgment, injunction, order, decree, contract, agreement, document,
license, permit or instrument to which Buyer is a party or by which Buyer is
bound.
5.4 CONSENTS. Except as set forth on SCHEDULE 5.4
hereof, the filing of an HSR Act Report with the Pre-Merger Notification Office
of the Federal Trade Commission and with the Antitrust Division of the
Department of Justice pursuant to the HSR Act, and any filings with the Maryland
Racing Commission and Virginia Racing Commission, no notice to, filing with, or
consent or approval of, or any other action by, any Person is necessary for the
execution, delivery and performance by Buyer of this Agreement and the other
Transaction Documents to which it is a party, other than any
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such notices, filings, consents or approvals which if not obtained would not
have a material adverse effect on the ability of the Buyer to consummate the
transactions contemplated hereby.
5.5 NO BROKER. Buyer has not made any agreement with
any Person nor taken any action that would cause any Person to become entitled
to any agent's, broker's or finder's fee or commission in connection with the
transactions contemplated hereby.
5.6 INVESTMENT INTENT. Buyer acknowledges that it is
aware that the Stock is not registered under the Securities Act of 1933, as
amended (the "Securities Act"), or under any state securities laws. Buyer is
purchasing the LP Interest, the Xxxxxx and LUK-Flats Shares and the XxXxxxxxx
Transferred Shares solely for investment, with no present intention to
distribute any of the LP Interest, the Xxxxxx and LUK-Flats Shares and the
XxXxxxxxx Transferred Shares to any Person within the meaning of Section 2(11)
of the Securities Act. Buyer shall not sell or otherwise dispose of the Stock
except in compliance with the registration requirements or exemption provisions
under the Securities Act, and the rules and regulations promulgated thereunder,
and any other applicable federal or state securities laws.
5.7 PUBLIC FILINGS. Buyer has filed all reports,
schedules, forms, statements and other documents required to be filed under the
Securities Exchange Act of 1934 (the "Exchange Act") and the Securities Act,
with the Securities and Exchange Commission since January 1, 2000 (the "SEC
Documents") except as would not have a material adverse effect on the ability of
Buyer to consummate the transactions contemplated hereby. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such SEC Documents.
5.8 NO VIOLATION OF REPRESENTATIONS. On the date
hereof, Buyer does not have Knowledge that any of the representations and
warranties made by Sellers herein are inaccurate or incomplete or that a breach
of any such representation or warranty has occurred or is occurring. As of the
Closing Date, Buyer will not have failed to disclose to Sellers the fact of any
inaccurate or incomplete representation or warranty of which it has Knowledge,
or of any breach of which it has Knowledge, or failed to have given Sellers the
opportunity to correct such inaccurate or incomplete representation or warranty
or to cure such breach in accordance with Section 6.6 hereof.
5.9 FINANCIAL ABILITY. Buyer has sufficient funds to
enable the Buyer to pay for the Stock pursuant to this Agreement, to perform the
Buyer's obligations under this Agreement and to pay all fees and expenses
related to the transactions contemplated by this Agreement and which are payable
by Buyer (collectively, the "Funds").
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5.10 TITLE INSURANCE. Buyer has received those
certain commitments for title insurance attached hereto as EXHIBIT M insuring
fee title in all real property acquired as part of the transactions hereunder
with effective dates of April 15, 2002, April 20, 2002 and May 13, 2002
(collectively, the "Title Commitment") prepared by First American Title
Insurance Company (the "Title Insurance Company").
6. PRE-CLOSING MATTERS.
6.1 CONTINUED EFFORTS. Each party hereto shall use
commercially reasonable efforts to take all action reasonably necessary to
consummate the transactions contemplated by this Agreement. In addition, each of
the parties agrees that it shall (i) give any required notices to third parties
and (ii) use its commercially reasonable efforts to obtain or cooperate with the
other party to obtain, as applicable, all required third party consents, and
(iii) as promptly as practicable after the execution of this Agreement, use its
commercially reasonable efforts to obtain any required authorizations, consents
and approvals of any governmental agencies or authorities (including taking all
actions necessary to cause early termination of any applicable waiting period
under the HSR Act); notwithstanding the foregoing, within ten (10) days after
the execution of this Agreement, Buyer shall (to the extent reasonably within
Buyer's control) make all initial filings necessary to obtain the consents
described in Section 5.4.
6.2 CONDUCT OF BUSINESS. During the period from the
date hereof through the Closing Date, unless Sellers have obtained the prior
written consent of Buyer (which consent shall not be unreasonably withheld,
conditioned or delayed, except that with respect to subsections (g), (h), (j) or
(l) Buyer may give or withhold its consent in its sole discretion) Sellers
(other than Guida) shall (provided, that it is agreed between Buyer and Sellers
that LUK-Flats' obligation under this Section 6.2 shall be limited to those
actions over which it has approval rights) cause each Company and each
Subsidiary to:
(a) diligently carry on the Business of the
Companies and the Subsidiaries in the ordinary and usual course consistent with
past practice;
(b) maintain in full force and effect all bonds
and policies of insurance against fire, theft and usual extended coverage risks
and public liability insurance against claims for bodily injury or death and
property damage in such amounts as each Company or Subsidiary has heretofore
maintained (or as otherwise reasonably attainable by the Companies or the
Subsidiaries since the events of September 11, 2001);
(c) continue the Companies' and the Subsidiaries'
normal policies and procedures regarding suppliers of goods and services to the
Business and sales to customers;
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(d) maintain the Companies' and the Subsidiaries'
properties and assets in as good working order and condition as they were on the
date of this Agreement, normal wear and tear excepted;
(e) (i) perform all material obligations of the
Companies and the Subsidiaries under all Material Contracts; PROVIDED HOWEVER,
if the failure to perform such material obligations in the aggregate could
result in a Material Adverse Effect, Buyer may give or withhold its consent in
its sole discretion; and (ii) except as set forth on SCHEDULE 6.2, refrain from
entering into, extending or amending any Material Contracts, except that (y)
Sellers may cause the Companies or Subsidiaries to extend or renew any existing
Material Contracts on substantially the same terms (including the term, provided
that the length of such term is the shorter of (i) the original term of such
Material Contract or (ii) five (5) years) and (z) for purposes of this Section
6.2(e)(ii) Material Contracts shall not include any insurance policies of the
Companies or Subsidiaries;
(f) except as set forth on SCHEDULE 6.2, not
increase the salaries or other compensation or benefits of any of the Companies'
and the Subsidiaries' employees except in the ordinary course of the Business as
contemplated by the 2001 or 2002 operating budget of the Companies;
(g) not split, reclassify, subdivide, or change
the rights and privileges of, or redeem, repurchase or otherwise acquire any
shares of stock or ownership interests of any of the Companies or the
Subsidiaries;
(h) not cause or permit any Lien, other than
Permitted Liens, to be placed on any material asset or property owned or leased
by the Companies or the Subsidiaries;
(i) not incur any indebtedness for borrowed money
other than pursuant to existing lines of credit or for liabilities incurred in
the ordinary course of the Business;
(j) not sell, lease or otherwise dispose of any
of the Companies' or the Subsidiaries' material properties or assets, except for
properties and assets consumed or disposed of in the ordinary course of the
Business;
(k) provide Buyer unaudited monthly financial
statements of LRALP, PRAI and the Jockey Club, as prepared by the Companies
internally and in the ordinary course of the Business;
(l) refrain from doing any of the things
contemplated in Section 4.10(a), (f), (g), (i) or (j); or
(m) refrain from doing any of the things
contemplated in Section 4.10(c).
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6.3 PUBLIC ANNOUNCEMENTS. Upon execution of this
Agreement, the Companies and Buyer shall jointly issue a press release
concerning this Agreement and matters involving transactions contemplated by
this Agreement, but neither of them, nor Sellers, shall make and each of them,
and Sellers, shall cause their Affiliates not to make, any other comments,
statements or disclosures concerning this Agreement or any matter involving the
transactions contemplated in this Agreement, except (i) to its respective
employees, officers, directors, attorneys, accountants, lenders or other
advisors, each of whom shall be subject to the foregoing express obligations of
this Section 6.3 and obligated to keep such information confidential and in each
such case on an appropriately limited "need to know" basis, (ii) for such
announcements as may be required by law or the rules and regulations of a stock
exchange; and (iii) for such disclosures required to obtain the consents
described in Section 4.4 and Section 5.4 hereof.
6.4 CONFIDENTIALITY. Except as may be permitted by
Section 6.3, the Confidentiality Agreement shall remain in full force and effect
in accordance with its terms.
6.5 NO NEGOTIATION. Until such time, if any, as this
Agreement is terminated pursuant to Section 11, Sellers shall not, and shall
cause each of their representatives not to, directly or indirectly solicit,
initiate, or encourage any inquiries or proposals from, discuss or negotiate
with, provide any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than Buyer) relating
to any transaction involving the sale of the Business or the Stock, or any of
the equity interests in the Companies, or any merger, consolidation, business
combination, or similar transaction involving Sellers.
6.6 NOTIFICATION
(a) Between the date of this Agreement and the
Closing Date, Buyer shall promptly notify Sellers (other than Guida) in writing,
if it has Knowledge of a breach of any of the representations or warranties of
Sellers as of the date of this Agreement, or if Buyer has Knowledge of the
occurrence after the date of this Agreement of a breach of any such
representation or warranty. During the same period, Buyer shall promptly notify
Sellers (other than Guida) if it has Knowledge of any breach of any covenant of
Sellers in this Section 6 or of the occurrence of any event that may make the
satisfaction of the conditions in Section 7 or 8 impossible or unlikely.
(b) Upon (i) delivery of any such notice by
Buyer, or (ii) receipt of any Bring-Down Certificate, draft thereof, or any
other document supplementing or modifying the representations or warranties of
any of the Sellers herein, PROVIDED THAT Buyer has not waived, in writing, such
failure by Sellers to satisfy Section 7.1 or Section 7.2 hereof (the "Section 7
Issue"), Buyer shall have the right to terminate this Agreement or consummate
the transactions contemplated herein and seek indemnification from Sellers for
any Indemnifiable Loss arising from such Section 7 Issue pursuant to the
provisions of Section 10 hereof, unless the Seller(s) that causes such
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failure cures such Section 7 Issue, at such Seller's sole cost and expense and
without causing the Companies or their Subsidiaries to incur any out-of-pocket
expenses, by the Outside Closing Date or Sellers (other than Guida), acting as a
group, instruct Buyer to reduce the Purchase Price and the Closing Date Cash
Payment by the estimated cost of curing such Section 7 Issue, as determined
jointly by Buyer and Sellers (other than Guida) in their reasonable discretion,
in either which case, Buyer shall be obligated to consummate the transactions
contemplated herein. If Buyer and Sellers (other than Guida) are unable to agree
upon the estimated cost of curing such Section 7 Issue within three (3) business
days, the estimated cost of curing such Section 7 Issue shall be determined by a
mutually agreed upon Person experienced in the area at issue, PROVIDED, FURTHER,
that if the parties (other than Guida) are unable to agree upon such Person
within three (3) business days (after the expiration of the prior three (3)
business day period), Xxxxxxx X. Xxxxxxx shall choose such Person, who shall be
experienced in the area at issue and independent of all parties hereto, within
three (3) business days of being notified of such disagreement.
(c) Notwithstanding anything to the contrary
contained herein, if the estimated cost of curing such Section 7 Issue (as
determined pursuant to Section 6.6(b) above) is expected to exceed Five Million
Dollars ($5,000,000), Sellers (other than Guida), acting as a group, shall have
the right to terminate this Agreement by providing written notice of such
election to Buyer. If Sellers (other than Guida) provide such written notice to
Buyer, Buyer may elect to consummate the transactions contemplated hereby, by
providing written notice to Sellers (other than Guida) that it waives such
Section 7 Issue, within five (5) business days of receipt of the written notice
from Sellers (other than Guida) electing to terminate this Agreement, in which
case Sellers shall be required to consummate the transactions contemplated
hereby, subject to the terms and conditions of this Agreement. If Buyer receives
such notice from Sellers and elects to so waive such Section 7 Issue, and cause
Sellers to consummate the transactions contemplated hereby, Buyer shall not be
entitled to any indemnification protection pursuant to Section 10 hereof for any
Loss arising from or related to such Section 7 Issue.
6.7 BRING DOWN CERTIFICATE. The Sellers will provide
Buyer a draft of the Bring Down Certificate at least three (3) business days (to
the extent practicable) prior to the date of the hearing scheduled before the
Maryland Racing Commission relating to the consent required by the Maryland
Racing Commission set forth in Section 5.4 hereof, and in any event within
twenty (20) days of the Outside Closing Date, which Bring Down Certificate shall
supplement or modify the representations made by each of the Sellers in Section
4 hereof with respect to any fact or condition that causes or constitutes a
breach of any of the representations or warranties as of the Closing Date. The
Bring Down Certificate may refer to or modify any representation or warranty in
this Agreement. The final Bring Down Certificate shall be delivered by each of
the Sellers at Closing and shall be identical to the draft submitted to Buyer
prior to Closing in all material respects, PROVIDED THAT, each of the Sellers
shall be permitted to modify the draft of the Bring Down Certificate to
incorporate any fact or condition occurring after the date of the draft of the
Bring Down Certificate which, if
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existing or occurring at or prior to the date of the draft, would have been
required to be set forth or described in a representation or warranty in this
Agreement or which is necessary to correct any information in a representation
or warranty which has been rendered inaccurate by an event occurring after the
date of the draft of the Bring Down Certificate.
6.8 TITLE POLICY. Buyer shall take all action
necessary to satisfy all requirements designated as its responsibility in the
Title Commitment, and Sellers shall cooperate with Buyer to assist Buyer in
satisfying all such requirements and shall take all action necessary to satisfy
all requirements designated as their responsibility in the Title Commitment
(including, but not limited to, payment by Buyer of all premiums and other
costs), to enable the Title Insurance Company to provide Buyer one or more ALTA
extended coverage owner's title insurance policy(ies) insuring fee title in all
real property acquired as part of the transactions hereunder as provided in the
Title Commitment subject only to the exceptions as are in the Title Commitment
(collectively, the "Title Policy").
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER.
The obligations of Buyer to acquire and pay for the
LP Interest, the Xxxxxx and LUK-Flats Shares and the XxXxxxxxx Transferred
Shares, and to otherwise consummate the transactions contemplated hereby are
subject to the satisfaction, or waiver by Buyer, of each of the following
conditions at or prior to Closing:
7.1 COMPLIANCE WITH AGREEMENT. Sellers shall have
performed or complied in all material respects with all of their covenants and
other obligations under this Agreement which are to be performed or complied
with by them at or prior to Closing.
7.2 REPRESENTATIONS AND WARRANTIES. The
representations and warranties made by each Seller in this Agreement (without
giving effect to the Bring Down Certificate), the Keep Well Agreement, the
Formation Agreement and the Option Agreement, shall have been true and correct
in all material respects, individually and as a whole, as of the date of this
Agreement, and as of the Closing Date, as though said representations and
warranties had been made on the Closing Date, and to the extent qualified by
Knowledge, in accordance with the standard of Knowledge applicable to such
Seller but subject to the limitations set forth in Section 4.22 and Section
11.11.
7.3 DELIVERIES AT CLOSING. Sellers shall have
delivered to Buyer at Closing all of the items required under Section 3.2
hereof.
7.4 CONSENTS. Each of the Consents identified in
Section 5.4 shall have been obtained from governmental authorities and other
third parties, and shall
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be in full force and effect, and all applicable waiting periods shall have
expired or been terminated.
7.5 NO ORDERS; NO PROCEEDINGS. On the Closing Date,
there shall be no order or decree of any court or governmental authority of
competent jurisdiction that is in effect that restrains or prohibits the
consummation of the transactions contemplated by this Agreement. Since the date
of this Agreement, there shall not have been commenced against Buyer, or against
any Affiliate of Buyer, any material Action (a) involving any challenge to, or
seeking damages, or any portion of the Purchase Price, or other relief in
connection with, any of the transactions contemplated hereby, (b) that may have
the effect of preventing or making illegal, any of the transactions contemplated
hereby, or (c) alleging any ownership interest in the Stock.
7.6 NO OTHER CONDITIONS. Except as expressly set
forth herein, there shall be no condition, including, but not limited to,
Buyer's ability to obtain the Funds, which shall excuse Buyer from consummating
the transactions contemplated herein.
7.7 TRANSFERS OF INTERESTS. The options from
LUK-Flats to acquire shares in PRAI held by JAD and CMYD LLC and in LRAI held by
JAD and CMYD LLC shall have been fully and irrevocably exercised, at such
Sellers' sole cost and expense, which shall not be reimbursable or reimbursed by
the Companies or the Subsidiaries.
7.8 TITLE POLICY. Concurrently with the Closing,
Buyer shall have received a covenant from the Title Insurance Company that it
will provide Buyer the Title Policy.
7.9 PLEDGE TO XXXX XXXX XXXXX INCORPORATED. The
pledge of Shares to Xxxx Xxxx Xxxxx Incorporated shall have been fully and
completely released.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS.
The obligations of Sellers to sell the LP Interest, the Xxxxxx
and LUK-Flats Shares and the XxXxxxxxx Transferred Shares to Buyer and to
otherwise consummate the transactions contemplated hereby are subject to the
satisfaction, or waiver by Sellers, of each of the following conditions at or
prior to Closing:
8.1 COMPLIANCE WITH AGREEMENT. Buyer shall have
performed or complied in all material respects with
all of its covenants and other obligations under this Agreement which are to be
performed or complied with by it at or prior to Closing.
8.2 REPRESENTATIONS AND WARRANTIES. The
representations and warranties made by Buyer in this Agreement shall have been
true and correct in all
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material respects as of the date of this Agreement, and as of the Closing Date,
as though said representations and warranties had been made on the Closing Date.
8.3 DELIVERIES AT CLOSING. Buyer shall have delivered
to Sellers at Closing all of the items required under Section 3.3 hereof.
8.4 CONSENTS. Each of the Consents identified in
Section 5.4 shall have been obtained from governmental authorities and other
third parties, and shall be in full force and effect, and all applicable waiting
periods shall have expired or been terminated.
8.5 NO ORDERS; NO PROCEEDINGS. On the Closing Date,
there shall be no order or decree of any court or governmental authority of
competent jurisdiction that is in effect that restrains or prohibits the
consummation of the transactions contemplated hereby. Since the date of this
Agreement, there shall not have been commenced against Sellers, or against any
Affiliate of Sellers, any material Action (a) involving any challenge to, or
seeking damages, any portion of the Purchase Price, or other relief in
connection with, any of the transactions contemplated hereby, (b) that may have
the effect of preventing, or making illegal, any of the transactions
contemplated hereby, or (c) alleging any ownership interest in the Stock.
8.6 TITLE POLICY. Subject to Sellers' obligation to
cooperate and take all action to satisfy all requirements designated as Sellers'
obligations in the Title Commitment, Buyer shall have satisfied all requirements
designated as Buyer's obligations in the Title Commitment (including, but not
limited to, payment of all premiums and other costs), to enable the Title
Insurance Company to provide Buyer the Title Policy.
8.7 LOAN. Buyer shall have either obtained the
consent of Mercantile to the consummation of the transactions contemplated
hereby or shall pay off the Loan in full and deliver to Sellers an
acknowledgement from Mercantile of such complete pay off. It is acknowledged
that any such pay-off of the Loan would be made in lieu of Buyer purchasing the
Stock with the Loan still outstanding, in which case the Outstanding Loan
Balance would be deducted from the cash payable by Buyer at Closing.
Accordingly, any such pay-off shall not increase the Purchase Price and the
Outstanding Loan Balance will still be deducted from the $115,000,000 as set
forth in Section 2.2.
9. ADDITIONAL MATTERS.
9.1 FURTHER ASSURANCES. After Closing, Sellers and
Buyer agree, at the other's reasonable request and without further
consideration, to execute and deliver to each other all such additional or
confirmatory agreements, documents and instruments, as may reasonably be
furnished by the other, and to take all such other actions as may reasonably be
requested (i) to evidence or perfect the sale, assignment, transfer and
conveyance to Buyer of the LP Interest, the Xxxxxx and LUK-Flats Shares and
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the XxXxxxxxx Transferred Shares, and (ii) to vest good and marketable title
thereto in Buyer, provided that any such actions shall be at the cost of the
requesting party.
9.2 TRANSITION. Buyer and Sellers mutually agree to
cooperate fully to accomplish an orderly transition of the Business. Sellers
agree to refer to Buyer and/or the Companies all customer, supplier or employee
inquiries relating to the operation of the Business after the Closing Date.
Sellers further agree to immediately remit to the Companies all payments and
invoices received by them after Closing with respect to the operation of the
Business before or after the Closing Date.
9.3 TAX PROVISIONS.
(a) LIABILITY FOR TAXES. Subject to Sections
4.13, 10.1(c) and 10.1(e),
(i) Sellers (other than Guida), severally,
each in accordance with its respective Pro-Rata Share, shall be responsible for
and pay the "Pre-Closing Tax Liabilities," as defined herein. For purposes,
hereof, "Pre-Closing Tax Liabilities" shall include any and all federal, state,
local, foreign and other taxes (including, without limitation, income, profits,
premium, estimated, excise, sales, use, occupancy, gross receipts, franchise, ad
valorem, severance, capital levy, production, transfer, withholding, social
security, employment, unemployment compensation, payroll-related and property
taxes, alternative minimum, stamp, value added, windfall profits, import duties
and other governmental charges and assessments), whether or not measured in
whole or in part by net income, and including deficiencies, interest, additions
to tax or additional amounts, and penalties with respect thereto (collectively
"Taxes") relating to the operations of the Companies or the Subsidiaries on or
before December 31, 2000. Notwithstanding anything contained herein to the
contrary, if, and to the extent, that the Companies or the Subsidiaries are
assessed any civil penalty (including interest charges, if any) by the Internal
Revenue Service pursuant to 1998 Forms W-2G, notice number 972CG dated August 8,
2000, notice dated April 9, 2001, notice number CP 504 dated May 14, 2001 and
notice dated Xxxxx 00, 0000 (xx disclosed on SCHEDULE 4.13), Sellers (other than
Guida) shall only be responsible for paying Buyer one-half (1/2) of any such
civil penalty (including interest charges, if any) assessed against the
Companies or the Subsidiaries (and Buyer shall cause the appropriate Company or
Subsidiary to pay the other one-half (1/2) of any such civil penalty (including
interest charges, if any)).
(ii) THE COMPANIES AND BUYER'S LIABILITY FOR
TAXES. Subject to Section 10.1(c), the Companies and Buyer shall be responsible
for and pay all Taxes relating to the operations of the Companies or
Subsidiaries on or after January 1, 2001 (collectively, "Buyer Tax
Liabilities").
(b) 2001 TAX RETURNS. The Companies shall be
solely responsible for filing and Xxxxxxx Xxxxxx, Xxxxx & Co., LLC shall be
responsible for preparing (but each of Buyer and Sellers (other than Guida)
shall have the right to
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participate in the preparation of, and/or the right to review any Tax Returns
that relate to Taxes relating to the operations of the Companies or
Subsidiaries in the 2001 calendar year (the "2001 Tax Liabilities")) any and all
declarations, reports, claims for refund, information returns, returns or
statements relating to Taxes, including any schedules or attachments as well as
any amendments (whether submitted on a consolidated, combined, separate or
unitary basis), required to be filed with any federal, state, county, local or
foreign jurisdiction (collectively, "Tax Returns") for the Companies or the
Subsidiaries, and any member or former member (each, a "Member") of the
consolidated group of entities having any of the Companies as its common parent
or any other affiliated group within the meaning of Section 1504 of the Code (or
any similar group defined under a similar provision of state, local or foreign
law) (an "Affiliated Group") that includes any of the Companies or any of the
Subsidiaries, and all Tax Returns that include any Member, for the 2001 calendar
year (collectively, the "2001 Tax Returns") on or before the due date (including
extensions) thereof. Every material position taken on a 2001 Tax Return shall be
reasonably consistent with the methodology and elections employed by the
Companies or the Subsidiaries, as the case may be, in prior years. Not less than
twenty (20) days before the earlier of the due date of any 2001 Tax Return
(including amended 2001 Tax Returns and refund claims) or the date on which such
2001 Tax Returns are to be filed, the Companies shall furnish a draft of such
2001 Tax Return (as proposed to be filed) to Buyer and Sellers (other than
Guida) for their review. Not less than five (5) days before the earlier of the
due date of such 2001 Tax Return or the date on which such 2001 Tax Return is to
be filed, Buyer and Sellers (other than Guida) shall forward to the Companies
and Watkins, Meegan, Xxxxx & Co., LLC any comments they may have relating to
such 2001 Tax Return, and Buyer and Sellers (other than Guida) agree to resolve
in good faith any disputes regarding such 2001 Tax Return, PROVIDED, THAT, if
Buyer and Sellers (other than Guida) are unable to resolve such disputes,
Watkins, Meegan, Xxxxx & Co. LLC shall resolve such disputes consistent with the
methodology and elections employed by the Companies or the Subsidiaries, as the
case may be, in prior years. The Companies shall deliver a copy of all 2001 Tax
Returns filed after the Closing Date to Buyer and Sellers (other than Guida)
promptly after filing.
(c) PRE-CLOSING DATE TAX RETURNS AND TAXES.
Except as set forth in Section 9.3(a)(i), Sellers (other than Guida) shall be
responsible for preparing and filing all Tax Returns for each calendar year
prior to and including the 2000 calendar year (the "Pre-Closing Date Tax
Returns"), and for paying all Pre-Closing Tax Liabilities with respect to such
Tax Returns.
(d) POST-CLOSING DATE TAX RETURNS AND TAXES.
Buyer shall be responsible for preparing and filing all Tax Returns for each
calendar year after 2001 (the "Post-Closing Date Tax Returns"), and for paying
all Buyer Tax Liabilities with respect to such Tax Returns.
(e) COOPERATION. Sellers (other than Guida) and
Buyer shall cooperate fully with each other, at their own expense (except that
any third party costs or expenses incurred by a party in so cooperating shall be
paid by the party
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responsible for such Tax Return and any third party costs or expenses related to
the 2001 Tax Returns shall be the responsibility of the Companies), in
connection with the preparation and filing of all Tax Returns, procuring any
refund of Taxes relating thereto, and any audit examinations of the Companies or
the Subsidiaries for any period, including, but not limited to, the timely
furnishing or making available of records, books of account and any other
information necessary for the preparation of the Tax Returns, as well as making
employees available on a mutually convenient basis to provide additional
information and explanation. Sellers (other than Guida) and Buyer shall use
their respective commercially reasonable efforts to obtain any certificates or
other documents from any Persons as may be reasonably necessary or appropriate
to mitigate, reduce or eliminate any Taxes that would otherwise be imposed with
respect to the transactions contemplated by this Agreement and which do not
adversely affect any party hereto.
(f) AMENDED RETURN. After Closing, Buyer may
cause the Companies or the Subsidiaries to amend any Pre-Closing Date Tax
Returns to reflect the carryback of net operating losses or other Tax benefits
from later years to earlier years, or as a result of an audit, provided that the
amendment of any such Tax Return complies with the applicable provisions of
Section 9.3 above and except for amendments as a result of an audit, would not
have the effect of increasing Pre-Closing Tax Liabilities. Sellers (other than
Guida) shall cooperate reasonably with the Companies, at their own expense
(except that any third party costs or expenses incurred by Sellers in so
cooperating in respect of any amendments not resulting from an audit shall be
paid by Buyer), to obtain such refund of Taxes, including filing amended Tax
Returns or refund claims.
(g) RECORD RETENTION. Buyer shall cause the
Companies or the Subsidiaries, as the case may be, to retain all books, records,
returns, schedules, documents and other papers relating to Tax obligations of
the Companies or the Subsidiaries, for any taxable year or portion thereof
ending on or before the Closing Date, for the full period of the applicable
statutes of limitations, including extensions, to which such Taxes relate.
Thereafter, Buyer, the Companies and the Subsidiaries shall have the right to
dispose of or destroy any such items, provided that Buyer shall first notify
Sellers (other than Guida) of Buyer's or the Companies' or the Subsidiaries'
plan to dispose of or destroy any such items, and provided that Sellers (other
than Guida) shall have the right, at their sole cost and expense, promptly to
make copies of such items if they provide five (5) days prior written notice to
Buyer of their intention to do so.
(h) CONTESTS.
(i) With respect to any Tax Return for which
a party has responsibility, such party and its duly appointed representatives
shall have the sole right, at their own expense (except that any third party
costs and expenses related to the 2001 Tax Returns shall be the responsibility
of the Companies), to supervise or otherwise coordinate any examination process
and to negotiate, resolve, settle or contest any asserted Tax deficiencies or
assert and prosecute any claims for refund, with expenses
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paid proportionately by Buyer and Sellers (other than Guida) in accordance with
their respective responsibilities for the related Taxes. The foregoing
notwithstanding, without the express prior written consent of Sellers (other
than Guida) (which shall not be unreasonably withheld), Buyer shall not file any
amended Tax Return, settle any Tax claim or assessment, or surrender any right
to claim a refund of Tax, if such action could have the effect of increasing the
Pre-Closing Tax Liabilities.
(ii) Each party hereto shall, within thirty
(30) days (unless action is required sooner, and in such case as soon as
practicable), notify the other party hereto of the assertion of any claim or the
commencement of any suit, action, proceeding, investigation or audit with
respect to the operations of the Companies or the Subsidiaries, and shall
provide the other party with copies (subject to deletion of nonrelevant
information) of all correspondence relating to, and keep such party reasonably
apprised of, the status of such contest.
(i) ALLOCATION OF REFUNDS. Except as otherwise
agreed upon in writing, in the event an audit, amended Tax Return or other
action results in a refund of Taxes, whether related to the operations of the
Companies or Subsidiaries before or after the Closing Date, such refund
(including any interest paid thereon) shall be paid to Buyer, except to the
extent such refund relates to any Tax Return of the Companies or Subsidiaries
for any period ending on or before December 31, 2000; PROVIDED that Buyer, the
Companies and their Subsidiaries shall be entitled to retain any such refund or
credit to the extent it arises as a result of the use or application of any net
operating loss, net capital loss or other item of the Companies or their
Subsidiaries for any tax year ending on any date following December 31, 2000 in
any period of the Companies or their Subsidiaries ending on or before December
31, 2000 (the "Buyer Generated Carrybacks"); PROVIDED that should a subsequent
audit of the Companies or their Subsidiaries with respect to any periods ending
on or before December 31, 2000 result in a net proposed reduction in taxable
income for any reason that any of the Companies or their Subsidiaries are unable
to use in part or in its entirety because of the previous use or application by
Buyer of any such Buyer Generated Carrybacks, Buyer shall be required to pay an
amount to Sellers (other than Guida) in accordance with their Pro-Rata Share
equal to that amount which would have been generated in tax refunds usable by
the Sellers (other than Guida) in relation to the Companies' and Subsidiaries'
Tax Returns pursuant to the terms of this Agreement but for the prior use or
application of the Buyer Generated Carrybacks.
(j) CERTAIN TAX ELECTIONS.
(i) Except as required by the Code, without
the prior written consent of Sellers (other than Guida) (which may not be
unreasonably withheld), neither Buyer, the Companies nor the Subsidiaries shall
make any new election or change any existing election, change an annual
accounting period or adopt or change any accounting method if any such election,
adoption or change could have the effect of increasing Pre-Closing Tax
Liabilities.
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(ii) Except as required by the Code, without
the prior written consent of Buyer (which may not be unreasonably withheld),
neither Sellers, the Companies nor the Subsidiaries shall make any new election
or change any existing election, change an annual accounting period or adopt or
change any accounting method, if such election, adoption or change could have
the effect of increasing Buyer Tax Liabilities.
(k) NONFOREIGN AFFIDAVIT. If required by the
Code, Sellers shall furnish to Buyer (as soon as practicable after Buyer's
request) an affidavit stating, under penalties of perjury, Sellers' United
States taxpayer identification numbers, and affirming that each of the Sellers
is not a foreign person, pursuant to Sections 897 and 1445(b)(2) of the Code.
9.4 POST-CLOSING PAYMENTS. If, and to the extent,
that the Companies' and Subsidiaries' 2001 Tax Liabilities (excluding any 2001
Tax Liabilities arising from any subsequent adjustments made by any taxing
authority to the 2001 Tax Returns) are less than the amounts paid by the
Companies and Subsidiaries prior to Closing on account of such 2001 Tax
Liabilities and/or provided for or accrued (excluding amounts provided for or
accrued as deferred taxes) in the most recent Audited Statements (to the extent
not already paid), Buyer shall pay Sellers (other than Guida) in accordance with
their respective Pro-Rata Shares, the difference between (i) the amounts paid by
the Companies and Subsidiaries prior to Closing or provided for or accrued in
the most recent Audited Statements and (ii) the amount of the Companies' and
Subsidiaries' 2001 Tax Liabilities (excluding any 2001 Tax Liabilities arising
from any subsequent adjustments made by any taxing authority to the 2001 Tax
Returns).
9.5 MAINTENANCE OF INDEMNIFICATION PROTECTIONS.
Except to the extent required by law, following the Closing Date, LRAI, PRAI,
the Jockey Club and their Subsidiaries shall not take any action, by amendment,
modification, supplement or otherwise, to reduce the extent of indemnification
provided to JAD, KMD and Xxxxxx in their respective capacities as officers and
directors of the Companies and the Subsidiaries pursuant to the organizational
documents (including by-laws) of LRAI, PRAI, the Jockey Club and their
Subsidiaries in effect immediately prior to the Closing Date for any
circumstance occurring prior to the Closing Date.
9.6 OFFICERS AND DIRECTORS LIABILITY INSURANCE. The Companies
and the Subsidiaries shall continue to maintain, at least until the Closing
Date, officers and directors insurance with the same named and additional
insureds and coverages, in amounts and with carriers comparable to that in
effect on the date of this Agreement. Immediately prior to the Closing Date, the
Companies and the Subsidiaries shall purchase tail coverage in relation to their
directors and officers liability insurance then in effect, with respect to
liability arising prior to the Closing Date but asserted thereafter, for each
Seller covered by such directors and officers insurance policy as of the date of
this Agreement, without any reduction or change in such coverage, for a
minimum
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of three (3) years following the Closing Date, at the sole cost and expense of
the Companies and the Subsidiaries, provided that such cost shall not exceed one
hundred fifty percent (150%) of the annual premium of the officers and directors
insurance in effect on the date of this Agreement without the prior written
consent of Buyer.
9.7 LIMITATION ON ACTIONS. Buyer covenants that it shall not
and that it shall not cause the Companies, the Subsidiaries or any other Person
to file or maintain, or cause or knowingly permit the filing or maintenance, in
any state or federal court, or before any local, state or federal administrative
agency, or any other tribunal, mediator or arbitrator, nor initiate, financially
support, join, participate in, or encourage the pursuit of any charge, claim,
suit or action of any kind, nature or character against JAD, KMD and/or Xxxxxx
with respect to any acts or omissions by any of them in his or her capacity as
an employee, officer or member of the board of directors of the Companies or
Subsidiaries related to the operation or management of any of the Companies or
Subsidiaries, or other activities of Pimlico, Laurel or the Bowie Training
Center, or any other facility in which any of the Companies or Subsidiaries has
an interest prior to the Closing Date, other than a charge, claim, suit or
action for fraud, willful misconduct or gross negligence (i.e. more than simple
negligence) or breach of fiduciary duty by JAD, KMD and/or Xxxxxx. Without
limiting their rights to pursue indemnification from any of the Companies and/or
Subsidiaries pursuant to such entities' organizational documents under Section
9.5, or to pursue a claim under an officers and directors liability insurance
policy of any of the Companies and/or Subsidiaries pursuant to Section 9.6 (or
against any of the Companies and/or the Subsidiaries for failing to maintain
such policies in effect as provided in Section 9.6), JAD, KMD and Xxxxxx each
covenants that he/she in his or her capacity as an employee, officer or member
of the board of directors of the Companies or Subsidiaries shall not file or
maintain, or cause or knowingly permit the filing or maintenance, in any state
or federal court, or before any local, state or federal administrative agency,
or any other tribunal, mediator or arbitrator, nor initiate, financially
support, join, participate in or encourage the pursuit of any charge, claim,
suit or action of any kind, nature or character against the Companies or
Subsidiaries related to the operation or management of any of the Companies or
Subsidiaries, or other activities of Pimlico, Laurel or the Bowie Training
Center, or any other facility in which any of the Companies or Subsidiaries has
an interest prior to the Closing Date, except in the form of a counterclaim or
in defense of a claim brought by any of Buyer, the Companies, the Subsidiaries
or any such other Person in accordance with this Section 9.7.
10. INDEMNIFICATION.
10.1 INDEMNIFICATION BY SELLERS. Subject to the
limitations set forth in Section 10.4 hereof, (i) with respect to (a) and (b)
below, each of the Sellers, and (ii) with respect to (c), (d) and (e) below,
each of Joseph, Karin, Xxxxxx and LUK-Flats, hereby agrees, independently and
severally and not jointly, to indemnify and hold harmless Buyer, and each of its
respective stockholders, Affiliates, successors, assigns,
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officers, directors, employees, agents and representatives, from and against any
and all out-of-pocket liabilities, losses, damages, claims, obligations, fees
and expenses (including reasonable attorney's fees), but excluding incidental,
consequential or punitive damages (collectively, "Losses") which any of them may
sustain by reason of:
(a) the inaccuracy of, or failure to comply with,
or the existence of any facts resulting in the inaccuracy or breach of, any of
the warranties or representations, or nonfulfillment of any of the covenants or
agreements, of each such Seller contained in this Agreement, without giving
effect to the Bring Down Certificate, or any other delivery hereunder, unless
specifically waived by Buyer in writing, the Transaction Documents and/or in any
agreement or document delivered pursuant hereto, each Seller to be independently
and severally, and not jointly, solely responsible for its own representations,
warranties and covenants; or
(b) with respect to each such Seller
independently and severally, and not jointly, any and all actions, suits,
proceedings, claims, demands, assessments and judgments incident to any of the
foregoing; or
(c) (i) any Buyer Tax Liability resulting from
the Companies' failure to pay the Companies' and Subsidiaries' 2001 Taxes prior
to Closing and/or (to the extent not previously paid) to provide for or accrue
(excluding amounts provided for or accrued as deferred taxes) sufficient amounts
in the most recent Audited Statements to satisfy the Companies' and
Subsidiaries' 2001 Tax Liabilities (excluding any 2001 Tax Liabilities arising
from any subsequent adjustments made by any taxing authority to the 2001 Tax
Returns) and (ii) one-half (1/2) of any civil penalty (including interest
charges, if any) assessed against the Companies or the Subsidiaries pursuant to
1998 Forms W-2G, notice number 972CG dated August 8, 2000, notice dated April 9,
2001, notice number CP 504 dated May 14, 2001 and notice dated Xxxxx 00, 0000
(xx disclosed on SCHEDULE 4.13); or
(d) any claim by any Person (other than by Xxxxxx
X. XxXxxxxx pursuant to his employment agreement with the Companies) for
brokerage or finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by any such Person with
Sellers (or any Person acting on their behalf) in connection with any of the
transactions contemplated hereby; or
(e) any and all Pre-Closing Tax Liabilities for
which Sellers have responsibility pursuant to Section 9.3 hereof.
Notwithstanding anything to the contrary contained herein,
Sellers shall have no obligation to indemnify Buyer or hold Buyer harmless for
any Loss sustained by Buyer resulting from imperfections or defects in title in
the real property being acquired as part of the transaction hereunder for which
Buyer intends to obtain title insurance, unless and to the extent such Loss
results from an act or omission of Sellers that constitutes a breach of a
representation or warranty of Sellers (other than a breach of
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Section 4.6(b)); rather, Buyer shall seek indemnification from the title
insurance company selected by Buyer which is providing Buyer with the Title
Policy.
10.2 INDEMNIFICATION BY BUYER. Buyer hereby agrees to
indemnify and hold harmless Sellers, their stockholders, members, partners,
Affiliates, successors, assigns, officers, directors, employees, agents and
representatives, from and against any and all Losses which any of them may
sustain by reason of:
(a) the inaccuracy of or failure to comply with,
or the existence of any facts resulting in the inaccuracy or breach of, any of
the warranties or representations, or nonfulfillment of any covenants or
agreements, of Buyer contained in this Agreement, the Transaction Documents or
in any agreement or document delivered pursuant hereto; or
(b) any and all Buyer Tax Liabilities for which
Buyer has responsibility pursuant to Section 9.3 hereof; or
(c) any and all actions, suits, proceedings,
claims, demands, assessments and judgments incident to any of the foregoing.
10.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties and covenants or obligations to be fully
performed prior to the Closing Date contained in this Agreement, and in the
Bring Down Certificate, shall survive the Closing until the earlier to occur of
(i) the date two (2) years following the Closing Date or (ii) the completion of
two (2) financial statement audit cycles of the Companies after the Closing Date
plus sixty (60) days; PROVIDED HOWEVER, (y) the representations and warranties
of Sellers set forth in Sections 4.1(c), 4.1(d) and, to the extent such
representations and warranties relate to a Seller, the fifth sentence of Section
4.1(e) and the last sentence of Section 4.1(f), and the covenants of Sellers and
Buyer set forth in Sections 9.1, 9.2, and 9.4 shall survive indefinitely, and
(z) the representations and warranties of Sellers set forth in Section 4.13, and
the covenants of Sellers and Buyer set forth in Section 9.3, shall survive until
sixty (60) days after the expiration of the applicable statute of limitations
for any payments related to the applicable Taxes. If an Indemnified Party
provides proper notice to the Indemnifying Party hereunder of any then existing
matter within the scope of an Indemnifying Party's indemnity obligation within
such survival periods, the Indemnified Party may pursue its claim for
indemnification after such period, in which case the representation or warranty
on which it is based shall survive until such claim is resolved.
10.4 LIMITATION ON INDEMNIFICATION.
(a) Except for indemnification payments due Buyer
for Buyer Tax Liabilities as set forth in Section 10.1(c), pursuant to Section
10.1(d), or for Pre-Closing Tax Liabilities as set forth in Section 10.1(e),
Sellers (other than Guida) shall not be obligated to make any indemnification
payments to Buyer pursuant to this
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Section 10, until the dollar amount of all Indemnifiable Losses (as defined
herein) (other than Indemnifiable Losses for which Guida is responsible), as
adjusted pursuant to Section 10.4(b) below for refunds, tax benefits or
insurance benefits, in the aggregate, exceeds One Million Five Hundred Thousand
Dollars ($1,500,000) (the "Basket"), whereupon the responsible Sellers as
provided herein shall be obligated to pay in full all such amounts for
indemnification including the Basket; PROVIDED HOWEVER, that (i) Sellers shall
not be required to make any payments for any Loss incurred by Buyer for a
Section 7 Issue specifically waived by Buyer pursuant to Section 6.6 hereof to
the extent so waived and (ii) Guida shall be obligated to make indemnification
payments to Buyer pursuant to this Section 10 immediately upon the determination
of an Indemnifiable Loss for which it is responsible. Except with respect to
Guida, Sellers' liability for any and all indemnification obligations set forth
in this Agreement shall not exceed the Cap PLUS the amount of any
indemnification payment due Buyer pursuant to Section 10.1(c), Section 10.1(d)
or Section 10.1(e) hereof. Guida's liability for any and all indemnification
obligations set forth in this Agreement shall not exceed the Guida Cap. Except
with respect to Guida, each Seller's liability for any and all indemnification
obligations set forth in this Agreement shall not exceed such Seller's share of
the Cap as set forth on SCHEDULE 10.4(a) and the amount of any indemnification
payment due Buyer pursuant to Section 10.1(c), Section 10.1(d) or Section
10.1(e) hereof. In addition to LUK-Flats' indemnification obligations set forth
in Section 10.1 hereof, if and to the extent that an Indemnifiable Loss for
which Xxxxxx, Xxxxx or Xxxxxx is responsible exceeds his/her/its share of the
Cap and such Indemnifiable Loss is related to a representation or warranty (y)
set forth in Section 4.1 (other than the first sentence of Section 4.1(c), the
fifth sentence of Section 4.1(e), to the extent it relates to such Seller as
opposed to LRAI and/or PRAI, or the last sentence of Section 4.1(f), to the
extent it relates to such Seller as opposed to LRAI, PRAI and/or LRALP), 4.3,
4.4, 4.5, 4.6, 4.8, 4.10(a), 4.10(b), 4.10(i), 4.12, 4.18 or 4.19, and (z) which
is not qualified by such Sellers' Knowledge specifically within such
representation and warranty, LUK-Flats shall be liable to Buyer for such amount
of the Indemnifiable Loss in excess of Joseph's, Karin's or Xxxxxx' share of the
Cap up to the amount of LUK-Flats' share of the Cap.
(b) In calculating the amount of any Loss
incurred by a party for purposes of this Section 10, the amount of any such Loss
shall be reduced by (1) any net reduction in tax liability or other tax benefit
or tax refund realized or to be realized by the Indemnified Party or its
Affiliates by reason of such Losses, and (2) any net actual insurance benefit
realized by the Indemnified Party or its Affiliates offsetting the amount of
such Loss, and shall be increased by any potential increase in the tax liability
of the Indemnified Party or its Affiliates resulting from the facts giving rise
to the claim for indemnification.
10.5 INDEMNIFICATION PROCEDURES - CLAIMS BY A
NON-INDEMNIFIED PARTY.
(a) If any claim or demand for which a party may
be liable pursuant to this Section 10 (including, but not limited to, the
potential liability of
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LUK-Flats pursuant to the last sentence of Section 10.4(a)) (the "Indemnifying
Party") is asserted against or sought to be collected from an indemnified party
hereunder (the "Indemnified Party"), by any Person who is not an Indemnified
Party hereunder, the Indemnified Party against whom the claim or demand is
asserted shall promptly notify the Indemnifying Party in writing (a "10.5
Indemnification Notice"), PROVIDED, THAT, if the Indemnifying Party is a Seller,
Buyer shall also send a copy of the 10.5 Indemnification Notice to all other
Sellers (other than Guida), but the failure to notify the Indemnifying Party
will not relieve the Indemnifying Party of any liability that it may have to any
Indemnified Party, except to the extent of any prejudice to the Indemnifying
Party resulting from such delay. The Indemnifying Party will have thirty (30)
days from the delivery of the 10.5 Indemnification Notice, or such lesser time
as may reasonably be available in the event that any action or proceeding has
been commenced, to notify the Indemnified Party as to whether or not (i) the
Indemnifying Party will, at its sole cost and expense, defend against such claim
or demand and/or (ii) the Indemnifying Party is disputing the claim for
indemnity hereunder.
(b) If the Indemnifying Party (i) does not
respond to the 10.5 Indemnification Notice, (ii) responds to the 10.5
Indemnification Notice, but disputes the claim for indemnity hereunder and
elects not to assume the defense, or (iii) responds to the 10.5 Indemnification
Notice and does not dispute the claim for indemnity but elects not to assume the
defense, in each case within the period allowed after delivery of the 10.5
Indemnification Notice, the Indemnified Party shall have the right to defend
such claim or demand by appropriate proceedings or to settle or pay any such
claim or demand for such an amount as the Indemnified Party shall deem
appropriate and the Indemnifying Party shall promptly pay all Indemnifiable
Losses resulting from such claim or demand in accordance with subparagraph (f)
below.
(c) If the Indemnifying Party affirmatively
disputes the right to indemnity, but nevertheless elects to defend such claim or
demand or settle or pay any such claim or demand, any right to recover from the
Indemnifying Party shall depend on the resolution of the dispute as to the right
of indemnity.
(d) If the Indemnifying Party notifies the
Indemnified Party that it desires to defend against such claim or demand and
does not dispute the claim for indemnity hereunder, then such defense shall be
at the sole cost and expense of the Indemnifying Party, and the Indemnified
Party (i) shall reasonably cooperate with the Indemnifying Party; and (ii) may
elect to participate in any such defense at its sole cost and expense, but the
control of such defense and its settlement or resolution shall rest with the
Indemnifying Party, provided that, if there exists a conflict of interest that
would make it inappropriate, in the reasonable good faith discretion of the
Indemnifying Party's counsel, for the same counsel to represent both the
Indemnified Party and the Indemnifying Party, then the Indemnified Party shall
be entitled to retain its own counsel, in each jurisdiction for which the
Indemnified Party determines counsel is required, at the reasonable expense of
the Indemnifying Party. Any Losses resulting from the final non-appealable
adjudication or settlement of such claim shall be Indemnifiable Losses (as
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defined below) and shall be payable in cash by the Indemnifying Party as
provided in subparagraph (f) hereof.
(e) The Indemnifying Party shall keep the
Indemnified Party informed of the status of the defense of any claims or demand
which it elects to defend, and in fact defends, hereunder. The Indemnifying
Party shall not compromise or settle any such claim or demand without the prior
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld, conditioned or delayed), unless such settlement or
compromise does not subject the Indemnified Party to any monetary liability and
includes a complete, unconditional release of the Indemnified Party from all
liability with respect to such claim or demand. If such prior written consent is
withheld by the Indemnified Party, and such settlement includes a complete
unconditional release of the Indemnified Party, the liability of the
Indemnifying Party with respect to such action, suit, proceeding, claim or
demand shall be limited to the amount of the settlement recommended by the
Indemnifying Party and not approved by the Indemnified Party in defending such
claim.
(f) Subject to the other provisions of this
Section 10, if the Indemnifying Party (i) does not respond to the 10.5
Indemnification Notice, (ii) does not elect to defend against any claim or
demand for which it does not dispute indemnity is due, (iii) does not elect to
defend against any claim or demand for which it disputes the right to indemnity
and such dispute is resolved in a manner affirming such right to indemnity, or
(iv) elects to defend against any claim or demand for which it does not dispute
the right to indemnity hereunder or for which it does dispute the right to
indemnity (but in such case, only to the extent the dispute is resolved in a
manner affirming such right to indemnity), the amount of such claim or demand,
or that portion thereof as to which such defense is unsuccessful, in either
case, pursuant to a final non-appealable adjudication, or any amount agreed to
be paid in settlement of such claim or demand, and all reasonable costs and
expenses of the defense, shall be payable in cash by the Indemnifying Party
(severally and not jointly, and in the event that more than one Seller is an
Indemnifying Party, the amount payable shall be based on the Pro-Rata Share of
each Seller, other than Guida, that is an Indemnifying Party) to the party
making demand for payment immediately upon the earlier of the time the
Indemnified Party pays or incurs such Losses pursuant to a final non-appealable
adjudication or in settlement of such claim or demand or at the time such Losses
are due and payable pursuant to a final non-appealable adjudication or in
settlement of such claim or demand (each an "Indemnifiable Loss").
(g) If, and to the extent, a claim or demand for
indemnification is asserted or pending against more than one Seller, and such
Sellers choose not to jointly defend or settle such claim or demand, all such
Sellers shall be joined as defendants in any proceeding regarding such claim or
demand and shall interplead their respective positions with respect to such
claim or demand. Each Seller shall be entitled to retain its own counsel and
shall be solely responsible for the cost and expenses of its, his or her
counsel.
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(h) Notwithstanding anything contained herein to
the contrary, if (i) the Indemnifying Party is or includes Xxxxxx, Xxxxx or
Xxxxxx and (ii) payment of the claim or demand asserted against Xxxxxx, Xxxxx
and/or Xxxxxx, could cause such Seller's liability to exceed his, her or its
share of the Cap and such claim or demand involves a representation or warranty
described in Section 10.4(a)(y) and (z) above, then LUK-Flats shall have thirty
(30) days from the delivery of the 10.5 Indemnification Notice, or such lesser
time as may reasonably be available, to notify the Indemnified Party and the
relevant Seller(s) that LUK-Flats desires to defend against such claim or
demand, at its sole cost and expense. If LUK-Flats desires to defend against
such claim or demand, LUK-Flats shall be entitled to retain its own counsel
(separate and apart from any counsel retained by the relevant Seller(s)), at its
sole cost and expense. No settlement or resolution of such claim or demand shall
be entered into without the prior written consent of LUK-Flats, which consent
may be withheld by LUK-Flats in its sole and absolute discretion, unless the
settlement or resolution would not cause such Seller(s) to exceed his, her or
its Cap in which case LUK-Flats shall have no consent rights hereunder.
(i) For purposes hereof, the party(ies) initially
assuming the defense shall control the defense throughout (subject to and in
accordance with Section 10.5(h)), including without limitation whether to
initiate any appeals. If such party(ies) decide(s) not to initiate an appeal in
respect of an adjudication, that adjudication shall be deemed to be final and
nonappealable. For clarification purposes, should LUK-Flats defend a claim or
demand pursuant to Section 10.5(h), it shall also be permitted to determine
whether to initiate any appeals.
10.6 INDEMNIFICATION PROCEDURES - CLAIMS BY AN
INDEMNIFIED PARTY.
(a) If an Indemnified Party has any claim or
demand against an Indemnifying Party (including, but not limited to, the
potential liability of LUK-Flats pursuant to the last sentence of Section
10.4(a)) pursuant to this Section 10 that is not a third party claim (the
procedure for which is set forth in Section 10.5 above) such Indemnified Party
shall notify the Indemnifying Party in writing (the "10.6 Indemnification
Notice"), PROVIDED, THAT, if the Indemnifying Party is a Seller, Buyer shall
also send a copy of the 10.6 Indemnification Notice to all other Sellers (other
than Guida); provided, however, that no delay on the part of the Indemnified
Party in providing the 10.6 Indemnification Notice shall relieve the
Indemnifying Party from any obligation hereunder except to the extent of any
prejudice to the Indemnifying Party resulting from such delay.
(b) The 10.6 Indemnification Notice shall state
the basis for such claim, describe in reasonable detail the facts giving rise to
such claim and specify the Losses for which the Indemnified Party is seeking
indemnification (or a reasonable and good faith estimate thereof). If the
estimated amount of any such claim
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changes or becomes determinable after the delivery of such notice, further
notice shall be given as promptly as possible after such estimated amount
becomes determinable or changes.
(c) If the Indemnified Party is not notified
(within thirty (30) days from the delivery of the 10.6 Indemnification Notice)
by the Indemnifying Party that the Indemnifying Party disputes the existence or
the amount of its liability to the Indemnified Party pursuant to this Section
10, such claim shall be conclusively deemed a liability of the Indemnifying
Party (an "Indemnifiable Loss") to the Indemnified Party, and the Indemnifying
Party shall pay such Indemnifiable Loss upon demand only after giving effect to
the provisions of Section 10.4 hereof, unless such Indemnifiable Loss arises
from Section 10.1(c), Section 10.1(d) or Section 10.1(e) hereof.
(d) If the Indemnifying Party timely notifies the
Indemnified Party that it disputes the existence or the amount of its liability
with respect to such claim, such dispute shall be resolved in accordance with
Section 11.9 hereof. If, upon a final non-appealable resolution, the
Indemnifying Party is deemed to be liable for such Loss, the Loss shall be
deemed an Indemnifiable Loss and the Indemnifying Party shall pay such
Indemnifiable Loss only after giving effect to the provisions of Section 10.4
hereof unless such Indemnifiable Loss arises from Section 10.1(c), Section
10.1(d) or Section 10.1(e) hereof.
(e) If, and to the extent, a claim or demand for
indemnification is asserted or pending against more than one Seller, and such
Sellers choose not to jointly defend or settle such claim or demand, all such
Sellers shall be joined as defendants in any proceeding regarding such claim or
demand and shall interplead their respective positions with respect to such
claim or demand. Each Seller shall be entitled to retain its own counsel and
shall be solely responsible for the cost and expenses of its, his or her
counsel.
(f) Notwithstanding anything contained herein to
the contrary, if (i) the Indemnifying Party is or includes Xxxxxx, Xxxxx or
Xxxxxx and (ii) payment of the claim or demand asserted against Xxxxxx, Xxxxx
and/or Xxxxxx, could cause such Seller's liability to exceed his, her or its
share of the Cap and such claim or demand involves a representation or warranty
described in Section 10.4(a)(y) and (z) above, then LUK-Flats shall have thirty
(30) days from the delivery of the 10.6 Indemnification Notice, or such lesser
time as may reasonably be available, to notify the Indemnified Party and the
relevant Seller(s) that LUK-Flats desires to defend against such claim or
demand, at its sole cost and expense. If LUK-Flats desires to defend against
such claim or demand, LUK-Flats shall be entitled to retain its own counsel
(separate and apart from any counsel retained by the relevant Seller(s)), at its
sole cost and expense. No settlement or resolution of such claim or demand shall
be entered into without the prior written consent of LUK-Flats, which consent
may be withheld by LUK-Flats in its sole and absolute discretion, unless the
settlement or resolution would not cause such Seller(s)
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to exceed his, her or its Cap in which case LUK-Flats shall have no consent
rights hereunder.
(g) For purposes hereof, the party(ies) initially
assuming the defense shall control the defense throughout (subject to and in
accordance with Section 10.6(f)), including without limitation whether to
initiate any appeals. If such party(ies) decide(s) not to initiate an appeal in
respect of an adjudication, that adjudication shall be deemed to be final and
nonappealable. For clarification purposes, should LUK-Flats defend a claim or
demand pursuant to Section 10.6(f), it shall also be permitted to determine
whether to initiate any appeals.
10.7 RIGHTS OF SETOFF.
(a) Notwithstanding any other language to the
contrary contained herein, until the Option has been exercised for Xxxxxx LLC's
Remaining Shares, Buyer's (and any other Person's) sole recourse for recovering
any Indemnifiable Loss from Xxxxxx as permitted under this Agreement shall be to
reduce or setoff against the Xxxxxx LLC Option Exercise Price (as defined in the
Option Agreement), and until the Option has been exercised for Xxxxxx LLC's
Remaining Shares, neither Buyer, nor any other Person, may recover from Xxxxxx
any Indemnifiable Loss to which it may be entitled under this Section 10 from
that portion of the Closing Date Cash Payment paid to JAD, that portion of the
Option Grant Payment paid to Xxxxxx LLC or any other property or assets of
Xxxxxx. After the Option for Xxxxxx LLC's Remaining Shares has been exercised,
Buyer shall be entitled to recover Indemnifiable Losses from Xxxxxx in the same
manner in which it recovers Indemnifiable Losses under this Section 10 (except
as described in Section 10.7(b) below); PROVIDED, HOWEVER, that any prior
reduction or set-off against the Xxxxxx LLC Option Exercise Price shall be taken
into account for purposes of Joseph's share of the Cap pursuant to Section
10.4(a) above.
(b) Notwithstanding any other language to the
contrary contained herein, until the Option has been exercised for Xxxxx LLC's
Remaining Shares, Buyer's (and any other Person's) sole recourse for recovering
any Indemnifiable Loss from Xxxxx as permitted under this Agreement shall be to
reduce or setoff against the Xxxxx LLC Option Exercise Price (as defined in the
Option Agreement), and until the Option has been exercised for Xxxxx LLC's
Remaining Shares, neither Buyer, nor any other Person, may recover from Xxxxx
any Indemnifiable Loss to which it may be entitled under this Section 10 from
that portion of the Closing Date Cash Payment paid to CMYD LLC, that portion of
the Option Grant Payment paid to Xxxxx LLC or any other property or assets of
Xxxxx. After the Option for Xxxxx LLC's Remaining Shares has been exercised,
Buyer shall be entitled to recover Indemnifiable Losses from Xxxxx in the same
manner in which it recovers Indemnifiable Losses under this Section 10 (except
as described in Section 10.7(a) above); PROVIDED, HOWEVER, that any prior
reduction or set-off against the Xxxxx LLC Option Exercise Price shall be taken
into account for purposes of Karin's share of the Cap pursuant to Section
10.4(a) above.
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(c) After giving effect to Section 10.4 hereof,
and with respect to JAD, after the Option for Xxxxxx LLC's Remaining Shares has
been exercised and with respect to CMYD LLC, after the Option for Xxxxx LLC's
Remaining Shares has been exercised, Buyer shall be permitted to reduce or
setoff any Indemnifiable Loss to which it or any other Person is entitled from
Joseph, Karin, Xxxxxx, LUK-Flats or Guida under this Section 10 against any
distribution due to such Seller under the Operating Agreement.
(d) Buyer shall have the right to offset, against
any amount owed to a Seller solely under this Agreement and no other Transaction
Document except as expressly permitted by Section 10.7(c) above, any
Indemnifiable Loss that is due to Buyer from such Seller under the terms and
conditions of this Agreement; each Seller shall have the right to offset,
against any amount owed by such Seller to Buyer under this Agreement, any
Indemnifiable Loss that is due such Seller under the terms and conditions of
this Agreement.
10.8 EXCLUSIVE REMEDY. In the absence of fraud,
indemnification pursuant to this Section 10 shall be he sole and exclusive
remedy available to any party for any breach of any representations or
warranties, or of any covenant or agreement contained herein, which survives the
Closing. The foregoing indemnification provisions are in lieu of any statutory
(including, without limitation, federal or state securities laws), other
contractual, equitable or common law remedy any party may have for a breach of
representation, warranty, covenant or agreement contained herein (other than a
fraud claim), and all such other rights and remedies are hereby irrevocably
waived.
11. MISCELLANEOUS.
11.1 TERMINATION. This Agreement may be
terminated at any time prior to the Closing Date, as follows:
(a) by mutual written agreement of Buyer and
Sellers (other than Guida);
(b) by (A) Buyer if a material breach of any
provision of this Agreement has been committed by any Seller and remains uncured
after giving effect to Section 6.6 hereof or (B) Sellers (acting as a group but
excluding Guida), if a material breach of any provision of this Agreement has
been committed by Buyer, and such breach has not been waived or cured (if
curable) by the earlier of (i) twenty (20) days or (ii) the Outside Closing
Date, after written notice thereof, PROVIDED, THAT, if the breaching party is
diligently attempting to cure such breach, the time for curing such breach shall
be extended by a reasonable period to permit the breaching party to cure such
breach, PROVIDED THAT, notwithstanding the foregoing, such additional period
shall in no event extend past the Outside Closing Date; PROVIDED, FURTHER, if
the breaching party is
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not diligently attempting to cure such breach the non-breaching party may
immediately terminate this Agreement.
(c) (i) by Buyer, if (y) any of the conditions in
Section 7 has not been satisfied as of the Outside Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Buyer to comply with its obligations under this Agreement) and
Buyer has not waived such condition on or before the Outside Closing Date or (z)
the requirements of any consent, authorization or approval of any governmental
agency or authority, individually or in the aggregate, materially alters the
obligations of Buyer as contemplated by this Agreement, PROVIDED HOWEVER, that
if any Seller (or the Sellers), in the exercise of its, his or her sole and
absolute discretion, assumes such obligations on behalf of Buyer, Buyer may not
terminate this Agreement; or (ii) by Sellers (excluding Guida), if (y) any of
the conditions in Section 8 has not been satisfied as of the Outside Closing
Date or if satisfaction of such a condition is or becomes impossible (other than
through the failure of Sellers to comply with their obligations under this
Agreement) and Sellers (other than Guida) have not waived such condition on or
before the Outside Closing Date or (z) the requirements of any consent,
authorization or approval of any governmental agency or authority, individually
or in the aggregate, materially alters the obligations of any Seller or the
Sellers as contemplated by this Agreement, PROVIDED HOWEVER, that if Buyer, in
the exercise of its sole and absolute discretion, assumes such obligations on
behalf of such Seller(s), Sellers may not terminate this Agreement; or
(d) by either party (excluding Guida), if Closing
has not occurred (other than through the failure of any party seeking to
terminate to comply fully with its obligations under this Agreement) on or
before the ninetieth (90th) day after the date hereof; or such later date by
which Sellers and Buyer obtain the necessary regulatory approvals set forth in
Sections 4.4 and 5.4 or such later date as the parties may mutually agree upon
but no later than the one hundred twentieth (120th) day after the date hereof
(the "Outside Closing Date").
Sellers shall be entitled to retain the Deposit, and any interest thereon (net
of any fees or expenses of Escrow Agent payable therefrom), in full if Sellers
terminate this Agreement pursuant to Section 11.1(b) and Buyer is not otherwise
permitted to terminate this Agreement pursuant to Section 11 for any reason, and
in all other cases Buyer shall be entitled to a return of the Deposit, and any
interest thereon (net of any fees or expenses of Escrow Agent payable
therefrom), in full if this Agreement is terminated. Sellers shall have no
further right to pursue any legal or equitable remedies upon termination of this
Agreement other than retention of the Deposit, and any interest thereon (net of
any fees or expenses of Escrow Agent payable therefrom), if permitted pursuant
to the terms hereof, and retention of the Deposit, and any interest thereon (net
of any fees or expenses of Escrow Agent payable therefrom), if permitted
pursuant to the terms hereof, shall serve as Sellers' exclusive remedy for
termination hereunder. The parties acknowledge that the actual damages incurred
by Sellers as a result of termination, if any, would be difficult to determine
and therefore agree that retention of the Deposit, and any interest thereon, if
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permitted pursuant to the terms hereof, constitutes reasonable compensation in
lieu of any such actual damages, shall be in the nature of liquidated damages,
and shall not constitute a penalty. In the event of the termination of this
Agreement, for any reason, all of the obligations and liabilities of the parties
under this Agreement shall terminate, and each party hereto shall pay its own
fees and expenses incurred in connection with the negotiation, preparation,
execution and performance of this Agreement, including without limitation,
accountants and other advisors. Except in the case of retention of the Deposit
by Sellers, if permitted pursuant to the terms hereof, nothing in this Section
11.1 shall relieve any party from any liabilities for any breach of this
Agreement. Any termination of this Agreement shall not affect the parties'
respective representations, warranties, covenants and obligations under Sections
4.19, 5.5 and 11.5 hereof, as well as under the Confidentiality Agreement.
11.2 ENTIRE AGREEMENT. This Agreement, the other
Transaction Documents and such other documents that expressly refer to this
Section 11.2 constitute the entire agreement between the parties pertaining to
the subject matter of this Agreement and supersede all prior and contemporaneous
agreements, understandings, negotiations and discussions of the parties, whether
oral or written. All Schedules and Exhibits attached to this Agreement shall be
deemed part of this Agreement and incorporated herein, where applicable, as if
fully set forth herein. No amendment, supplement, modification or termination of
this Agreement shall be binding unless executed in writing by all parties
hereto.
11.3 JOINT LIABILITY. Notwithstanding anything
contained in this Agreement to the contrary, the obligations and liabilities of
JAD and Xxxxxx LLC hereunder shall be joint and several and the obligations and
liabilities of KMD, CMYD LLC and Xxxxx LLC hereunder shall be joint and several.
11.4 WAIVER OF COMPLIANCE. A waiver of any of the
provisions of this Agreement shall not constitute and shall not be deemed a
waiver of any other provision of this Agreement, whether or not similar, nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided in writing. Except as otherwise provided in this Agreement, any failure
of any of the parties to comply with any obligation, representation, warranty,
covenant, agreement or condition herein may be waived by the party entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver. Wherever this Agreement requires or permits consent by or on behalf
of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in this
Section 11.4. Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to in
this Agreement will operate as a waiver of such right, power or privilege. No
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
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11.5 EXPENSES. Except as otherwise expressly provided
in this Agreement, whether or not the transactions contemplated by this
Agreement are consummated, Sellers, on the one hand, and Buyer, on the other
hand, shall pay the fees and expenses of their respective legal counsel,
accountants, investment bankers and other experts, agents and representatives
incident to the negotiation and preparation of this Agreement, the consummation
of the transactions contemplated by this Agreement (including, without
limitation, in the case of Buyer, all fees related to title insurance policies
and surveys, financing and transaction costs, and in the case of Sellers, any
transfer or recordation tax payable upon the recordation of the IDOTs, and all
legal fees for which JKC Holdings, LLC is entitled to reimbursement in
connection with this transaction and all amounts described in Section 4.19
(other than amounts due to Xxxxxx X. XxXxxxxx pursuant to his employment
agreement with the Jockey Club and LRALP, which amounts Buyer shall cause the
Jockey Club or LRALP to pay)), and (except as otherwise provided herein) in
connection with any disputes between the parties arising out of the transactions
contemplated by this Agreement; provided however, that Buyer agrees to pay the
fees and expenses of the Companies and each of the Sellers' legal counsel and
accountants, up to a maximum aggregate amount of One Million Dollars
($1,000,000.00), at Closing. Buyer also will pay all filing and/or application
fees required of the parties under the HSR Act, and all costs and expenses
imposed by the Maryland Racing Commission and the Virginia Racing Commission in
connection with obtaining the consents set forth in Section 5.4.
11.6 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, personal representatives, successors and assigns. Buyer and Sellers
acknowledge and agree that Buyer shall only be permitted to assign its rights
hereunder to Maryland Racing, Inc., a Delaware corporation, a newly formed,
wholly owned by Buyer, special purpose entity formed for such purposes;
PROVIDED, HOWEVER, that in no event shall such assignment release or discharge
Buyer from its obligations hereunder and/or under the Transaction Documents, and
Buyer shall remain jointly and severally liable with such assignee for all such
obligations. Except as expressly set forth in the prior sentence, and other than
an assignment by LUK-Flats to an Affiliate, no party may assign any of its
rights under this Agreement without the prior written consent of the other
party(ies). The term "successors" shall include without limitation, all
successors by way of (i) consolidation, (ii) merger or similar reorganization,
(iii) share exchange, or (iv) sale of all or substantially all of the assets of
a party.
11.7 NO THIRD PARTY BENEFICIARIES. Nothing contained
in this Agreement shall be deemed to confer any rights or benefits upon any
third parties.
11.8 SEVERABILITY. If any term or provision of this
Agreement or the application thereof to any Person or circumstances is or to any
extent shall become invalid or unenforceable, the remainder of this Agreement or
the application of such term or provisions to Persons or circumstances other
than those held invalid or unenforceable under the laws now or hereafter in
effect in the jurisdiction governing this Agreement,
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shall not be affected thereby, and each term and provision shall be held valid
and enforceable to the greatest possible extent.
11.9 APPLICABLE LAW; CONSENT TO JURISDICTION. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Maryland, without regard to principles of conflicts of laws. Any suit
involving any dispute or matter arising under this Agreement may only be brought
in the Circuit Court for Baltimore County, Maryland. Each of the parties hereto
consents to the exercise of personal jurisdiction by such court with respect to
all such proceedings and waives any objection to venue laid therein. All
expenses associated with any dispute or matter arising under this Agreement
shall be borne by the non-prevailing party to the dispute to the extent that it
does not prevail, including, but not limited to, the cost and expenses of
experts, evidence and legal counsel. The determination of the extent to which a
party does not prevail shall be made by the applicable court.
11.10 NOTICE. All notices and communications pursuant
to this Agreement shall be in writing and shall be deemed properly given and
effective when received if (i) personally delivered, or (ii) sent by a national
delivery service providing evidence of delivery and with a confirming notice
sent by facsimile, to the following:
If to JAD, to:
Maryland Jockey Club
Xxx. 000 xxx Xxxx Xxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. XxXxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Xxxx & Xxxxxx LLP
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
and
Xxxxxxx, Xxxxxxx and Xxxxxx, LLP
Xxx Xxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
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If to KMD, to:
Xxxxx X. XxXxxxxxx
Maryland Jockey Club
Hayward and Xxxxxx Xxxxxxx
Xxxxxxxxx, Xx 00000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx Xxxx & Guinot
00 X. Xxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to Xxxxxx, to:
Xxxxxx Xxxxxx
000 Xxxxxxxxxx Xxxx
Xxxxxx Xxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Xxxx & Xxxxxx LLP
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to Guida, to:
Xxxxxx Xxxxx Group
0000 Xxxx Xxxxxx Xxxx Xxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxx
Facsimile: (000) 000-0000
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with a copy to:
Xxxxx Xxxxxx Xxxxxxxxx Xxxxxxxx, PLLC
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
If to LUK-Flats, to:
LUK-Flats LLC
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxx
Facsimile: (000) 000-0000
and
Xxxx Xxxxxxx & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
If to Xxxxxx LLC, to:
Xxxxxx LLC
c/o Xxxxxx X. Xxxxxxx, Esq.
Xxxxxx Xxxx & Xxxxxx LLP
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxxx X. XxXxxxxxx
with a copy to:
Xxxxxx X. XxXxxxxxx
000 Xxxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
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and
Xxxxxx Xxxx & Xxxxxx LLP
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to Xxxxx LLC, to:
Xxxxx LLC
c/o Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxxx Xxxx & Guinot
00 X. Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxx X. XxXxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxx X. XxXxxxxxx
Maryland Jockey Club
Hayward and Xxxxxx Xxxxxxx
Xxxxxxxxx, Xx 00000
Facsimile: (000) 000-0000
and
Xxxxxxx Xxxx & Guinot
00 X. Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
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If to CMYD LLC, to:
CMYD LLC
c/o Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxxx Xxxx & Guinot
00 X. Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxx X. XxXxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxx X. XxXxxxxxx
Maryland Jockey Club
Hayward and Xxxxxx Xxxxxxx
Xxxxxxxxx, Xx 00000
Facsimile: (000) 000-0000
and
Xxxxxxx Xxxx & Guinot
00 X. Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to Buyer, to:
Magna Entertainment Corp.
000 Xxxx Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: President and CEO
Facsimile: (000) 000-0000
with a copy to:
Magna Entertainment Corp.
000 Xxxx Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: General Counsel
Facsimile: (000) 000-0000
and
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O'Melveny & Xxxxx LLP
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxxxxx X. XxXxxx, Esq.
Facsimile: (000) 000-0000
or to such other address as a party provides (in accordance herewith) to the
other parties hereto from time to time.
11.11 CONSTRUCTION. The parties and their respective
legal counsel actively participated in the negotiation and drafting of this
Agreement, and in the event of any ambiguity or mistake herein, or any dispute
among the parties with respect to the provisions hereto, no provision of this
Agreement shall be construed unfavorably against any of the parties on the
ground that he, it, or his or its counsel was the drafter thereof. The parties
acknowledge and agree that, notwithstanding anything herein to the contrary, the
representations and warranties set forth in Section 4.5 and Section 4.8 hereof
(including, but not limited to SCHEDULE 4.5 and SCHEDULE 4.8) shall not be
deemed to be breached by the existence or nonexistence of any fact or
circumstance the subject of which is addressed in any other representation or
warranty made herein.
11.12 HEADINGS. The headings in this Agreement are
for reference purposes and shall not affect the meaning or interpretation of
this Agreement.
11.13 COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement may
be executed by exchange of facsimile signatures provided that original
signatures are exchanged promptly thereafter.
11.14 TIME OF ESSENCE. With regard to all dates and
time periods set forth or referred to in this Agreement, time is of the essence.
11.15 TERMS. Common nouns and pronouns shall be
deemed to refer to the masculine, feminine, neuter, singular and plural, as the
identity of the Person may in the context require.
(Signatures on following page)
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, or caused this Agreement to be executed by their duly authorized
officers, as of the date first written above.
WITNESS: BUYER:
MAGNA ENTERTAINMENT CORP., a Delaware
corporation
________________________________ By:__________________________(SEAL)
Name: __________________________
Title: __________________________
________________________________ By:__________________________(SEAL)
Name: __________________________
Title: __________________________
SELLERS:
________________________________ _____________________________(SEAL)
Xxxxxx X. XxXxxxxxx
________________________________ _____________________________(SEAL)
Xxxxx X. XxXxxxxxx
________________________________ _____________________________(SEAL)
Xxxxxx Xxxxxx
LUK-FLATS LLC, a Delaware limited
liability company
________________________________ By:__________________________(SEAL)
Name: __________________________
Title: __________________________
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XXXXXX XXXXX GROUP, a New Jersey
General Partnership
________________________________ By:__________________________(SEAL)
Name: __________________________
Title: General Partner
XXXXXX LLC, a Maryland limited liability
company
________________________________ By:__________________________(SEAL)
Xxxxxx X. XxXxxxxxx
Manager
XXXXX LLC, a Maryland limited liability
company
________________________________ By:__________________________(SEAL)
Xxxxx X. XxXxxxxxx
Manager
CMYD LLC, a Maryland limited liability
company
________________________________ By:__________________________(SEAL)
Xxxxx X. XxXxxxxxx
Manager
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STOCK PURCHASE AGREEMENT
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
Schedule 1 Ownership of Stock
Schedule 2.2(a) Pro-Rata Shares
Schedule 2.2(b) Closing Date Cash Payment
Schedule 4.1 Organization and Capitalization
Schedule 4.3 No Violation or Conflict
Schedule 4.4 Consents
Schedule 4.5 Financial Information
Schedule 4.6 Title
Schedule 4.7 Material Contracts
Schedule 4.7(A) ODS Agreements and Correspondence
Schedule 4.8 Undisclosed Liabilities
Schedule 4.9 Intellectual Property Rights
Schedule 4.10 Absence of Certain Changes
Schedule 4.11 Compliance with Laws
Schedule 4.12 Litigation and Claims
Schedule 4.13 Taxes
Schedule 4.14 Employee and Labor Relations Matters
Schedule 4.15 Employee Benefit Plans
Schedule 4.16 Licenses and Permits
Schedule 4.17 Insurance
Schedule 4.18 Environmental Matters
Schedule 4.19 Broker
Schedule 4.20 Certain Payments
Schedule 4.21 Relationship with Related Persons
Schedule 5.4 Consents - Buyer
Schedule 6.2 Conduct of Business
Schedule 10.4(a) Seller's Share of Cap
EXHIBITS
Exhibit A Financial Statements
Exhibit B Employment Agreements
Exhibit C Formation Agreement
Exhibit D Option Agreement
Exhibit E Stockholders' Agreement
Exhibit F Consulting and Non-Competition Agreement
Exhibit G Xxxxxx Letter
Exhibit H Legal Opinions of Companies' Counsel and
Counsel to Sellers (other than Guida)
Exhibit I Organizational Documents for Each Company
Exhibit J Legal Opinion of Buyer's Counsel
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Exhibit K Deposit Escrow Agreement
Exhibit L Keep Well Agreement
Exhibit M Title Commitment
Exhibit N Guaranty Agreement
Exhibit O Operating Agreement
Exhibit P Xxxxxx LLC Operating Agreement
Exhibit Q Xxxxx LLC Operating Agreement
Exhibit R Xxxxxx LLC/Xxxxx LLC Option Agreement
