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EXHIBIT 10.5
EXECUTION COPY
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STOCK PURCHASE AGREEMENT
dated as of
April 27, 1999
by and among
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
ITT SHERATON CORPORATION,
STARWOOD CANADA CORP.
XXXXXXX XXXXX, INC.
SHERATON DESERT INN CORPORATION
SHERATON TUNICA CORPORATION
and
PARK PLACE ENTERTAINMENT CORPORATION
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TABLE OF CONTENTS
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ARTICLE 1. PURCHASE AND SALE OF SHARES........................................2
Section 1.1. Purchase and Sale of Shares; Preliminary
Transactions..............................................2
Section 1.2. Purchase Price............................................2
Section 1.3. Closing...................................................3
Section 1.4. Purchase Price Adjustment.................................4
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY, PARENT AND
SELLER.............................................................5
Section 2.1. Corporate Organization of Parent and Sellers..............6
Section 2.2. Corporate Organization of the Companies...................6
Section 2.3. Capital Stock of the Companies............................6
Section 2.4. Subsidiaries..............................................7
Section 2.5. Due Authorization.........................................8
Section 2.6. No Conflict...............................................8
Section 2.7. Financial Statements; Books and Records;
Projections...............................................9
Section 2.8. Contracts; No Defaults...................................10
Section 2.9. Undisclosed Liabilities..................................11
Section 2.10. Absence of Certain Changes or Events.....................11
Section 2.11. Intellectual Property....................................12
Section 2.12. Litigation and Proceedings...............................13
Section 2.13. Employee Benefit Plans...................................13
Section 2.14. Labor Relations..........................................16
Section 2.15. Legal Compliance.........................................17
Section 2.16. Personal Property........................................17
Section 2.17. Real Property............................................17
Section 2.18. Environmental Matters....................................18
Section 2.19. Taxes....................................................19
Section 2.20. Governmental Authorities: Consents......................21
Section 2.21. Licenses, Permits and Authorizations.....................21
Section 2.22. Insurance................................................22
Section 2.23. Brokers' Fees............................................22
Section 2.24. Affiliate Transactions...................................22
Section 2.25. Year 2000 Compatibility..................................23
Section 2.26. Assets; Business Activities..............................23
Section 2.27. No Other Representations or Warranties...................23
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................23
Section 3.1. Corporate Organization of Purchaser......................23
Section 3.2. Due Authorization........................................23
Section 3.3. No Conflict..............................................24
Section 3.4. Litigation and Proceedings...............................24
Section 3.5. Governmental Authorities: Consents......................24
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Section 3.6. Brokers' Fees............................................24
Section 3.7. Financial Capability.....................................24
Section 3.8. Securities Act...........................................25
Section 3.9. Investigation by Purchaser; Certain Financial
Information; No Other Representations or Warranties......25
ARTICLE 4. COVENANTS AND AGREEMENTS OF PARENT, SELLER AND THE COMPANY........25
Section 4.1. Conduct of Business......................................25
Section 4.2. Inspection...............................................27
Section 4.3. HSR Act..................................................27
Section 4.4. No Solicitations.........................................28
Section 4.5. Notification.............................................28
Section 4.6. Certain Tax Matters......................................28
Section 4.7. Elimination of Intercompany Accounts and
Arrangements.............................................29
Section 4.8. Financing Obligations....................................29
Section 4.9. Title Insurance Endorsement..............................29
Section 4.10. Cooperation with Financings..............................30
Section 4.11. Confidentiality..........................................30
ARTICLE 5. COVENANTS AND AGREEMENTS OF PURCHASER.............................31
Section 5.1. Certain Transactions.....................................31
Section 5.2. HSR Act..................................................31
Section 5.3. Notification.............................................31
ARTICLE 6. JOINT COVENANTS AND AGREEMENTS....................................32
Section 6.1. Support of Transaction...................................32
Section 6.2. Section 338 Election.....................................33
Section 6.3. Approvals................................................33
Section 6.4. Certain Employee Benefits Matters........................33
Section 6.5. Employment Agreements and Severance Obligations..........37
Section 6.6. Closings Under Certain Circumstances.....................37
Section 6.7. Ancillary Agreements.....................................39
Section 6.8. Post-Closing Cooperation.................................39
Section 6.9. Resignations.............................................39
Section 6.10. Bank Accounts............................................39
Section 6.11. Form of Instruments, Etc. to be Reasonably
Satisfactory.............................................39
ARTICLE 7. CONDITIONS TO OBLIGATIONS.........................................40
Section 7.1. Conditions to Obligations of Purchaser, Parent,
Seller and the Companies.................................40
Section 7.2. Conditions to Obligations of Purchaser...................40
Section 7.3. Conditions to the Obligations of Parent, Sellers
and the Companies........................................41
ARTICLE 8. TERMINATION.......................................................41
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Section 8.1. Termination..............................................41
Section 8.2. Effect of Termination....................................42
ARTICLE 9. INDEMNIFICATION...................................................42
Section 9.1. Survival of Representations and Warranties...............42
Section 9.2. Indemnification by Purchaser.............................43
Section 9.3. Indemnification by Parent and Sellers....................44
Section 9.4. Losses Net of Insurance and Tax Benefits.................45
Section 9.5. No Right of Contribution.................................46
Section 9.6. Exclusive Remedy.........................................47
ARTICLE 10. TAX ALLOCATION AND INDEMNIFICATION................................47
Section 10.1. Preparation and Filing of Returns........................47
Section 10.2. Payment of Taxes.........................................48
Section 10.3. Refunds..................................................49
Section 10.4. Amendments to Tax Returns................................50
Section 10.5. Carrybacks...............................................50
Section 10.6. Indemnification for Taxes................................50
Section 10.7. Post-Closing Audits and Other Proceedings................51
Section 10.8. Transfer Taxes...........................................52
Section 10.9. Cooperation..............................................52
Section 10.10. Limitations..............................................52
ARTICLE 11. CERTAIN DEFINITIONS...............................................52
ARTICLE 12. MISCELLANEOUS.....................................................65
Section 12.1. Waiver...................................................65
Section 12.2. Notices..................................................65
Section 12.3. Assignment...............................................66
Section 12.4. Rights of Third Parties..................................66
Section 12.5. Expenses.................................................66
Section 12.6. Governing Law............................................67
Section 12.7. Captions; Counterparts...................................67
Section 12.8. Entire Agreement.........................................67
Section 12.9. Amendments...............................................67
Section 12.10. Publicity................................................67
Section 12.11. Construction.............................................67
Section 12.12. Dispute Resolution.......................................67
Section 12.13. Non-Hire.................................................68
Section 12.14. Insurance................................................68
Section 12.15. Specific Performance.....................................69
Section 12.16. Effectiveness............................................69
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into as
of this 27th day of April, 1999 by and among Starwood Hotels & Resorts
Worldwide, Inc., a Maryland corporation ("Parent"); ITT Sheraton Corporation, a
Delaware corporation ("ITT Sheraton"), Sheraton Desert Inn Corporation, a Nevada
corporation ("SDIC"), and Starwood Canada Corp., a body corporate under the laws
of Canada ("Starwood Canada") (collectively, "Sellers"); Xxxxxxx Xxxxx, Inc., a
Florida corporation ("Xxxxxxx Xxxxx") and Sheraton Tunica Corporation, a
Delaware corporation ("Tunica") (each a "Company" and collectively, together
with MEG, the "Companies"); and Park Place Entertainment Corp., a Delaware
corporation ("Purchaser").
RECITALS:
WHEREAS, ITT Sheraton is the sole record and beneficial owner of all
of the issued and outstanding shares ("CWI Shares") of the common stock (the
"Xxxxxxx Xxxxx Common Stock"), of Xxxxxxx Xxxxx;
WHEREAS, Starwood Canada is the record and beneficial owner of
partnership interests (the "Interests") representing a 95% economic ownership
interest in MEG;
WHEREAS, SDIC is the sole record and beneficial owner of all of the
issued and outstanding shares (the "Tunica Shares") of the common stock (the
"Tunica Common Stock") of Tunica;
WHEREAS, as of the Closing Date ITT Sheraton and SDIC will
collectively own all of the issued and outstanding CWI Shares and Tunica Shares
(collectively, the "Shares");
WHEREAS, each Seller is an indirect wholly-owned subsidiary of
Parent;
WHEREAS, upon the terms and subject to the conditions set forth
herein, Parent and Sellers desire to make the Preliminary Transfers and sell to
Purchaser, and Purchaser desires to purchase from Seller, the Shares and the
Interests; and
WHEREAS, certain capitalized terms used herein have the meanings
assigned to them in Article 11 hereof.
AGREEMENT:
In consideration of the mutual covenants and agreements contained
herein, and other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
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ARTICLE 1.
PURCHASE AND SALE OF SHARES
Section 1.1. Purchase and Sale of Shares; Preliminary Transactions.
(a) Upon the terms and subject to the conditions contained
herein (including Section 6.6), on the Closing Date, Sellers will sell, convey
and transfer to Purchaser, and Purchaser will purchase and acquire from Sellers,
the Shares and the Interests, free and clear of all Liens.
(b) Prior to the conveyance of Shares pursuant to Section
1.1(a), (x) the interests of Parent and its Subsidiaries in the Excluded
Companies and the Atlantic City Convention Center Sheraton Hotel shall be
transferred to an entity other than the Companies and their Subsidiaries, and
(y) Parent shall cause such transactions as may be necessary to effectuate the
transfer of all of Parent's and its Affiliates' interests in the Sheraton
Halifax Hotel to the Companies and their Subsidiaries (collectively, the
"Preliminary Transfers"). The parties agree and acknowledge that it is the
intent of the parties that following the Preliminary Transfers, the Companies
and their Subsidiaries will hold all assets and liabilities primarily relating
to the Business (other than the Excluded Assets and Retained Liabilities), and
Parent and Sellers agree as part of the Preliminary Transfers (or, if discovered
following the Closing, on a post-closing basis) to make additional transfers as
may be reasonably necessary to effectuate the foregoing should the parties
discover that assets and liabilities primarily relating to the Business (other
than the Excluded Assets and Retained Liabilities) are held by Parent or its
Affiliates other than the Companies and their Subsidiaries. For purposes of this
Agreement, all references to the Companies' Subsidiaries or words of similar
import shall (A) include all Affiliates of Parent that will be Subsidiaries of
the Companies following the Preliminary Transfers and (B) exclude any other
Affiliates of Parent.
Section 1.2. Purchase Price.
(a) The aggregate purchase price for the Shares and the
Interests shall, subject to Section 1.2(b), be (i) Three Billion Dollars
($3,000,000,000) (the "Base Price"), plus (ii) the Net Working Capital
Adjustment Amount (which may be positive or negative) determined in accordance
with Section 1.4, minus (iii) the amount of Existing Capitalized Leases, plus
(iv) the amount (the "Capital Expenditure Adjustment Amount") (which may be
positive or negative) equal to (A) the actual amount of capital expenditures
made by the Companies and their Subsidiaries during the period between the date
hereof and Closing, which capital expenditures were made pursuant to and in
accordance with the Company Capital Plan, less (B) the product of (x) $5 million
and (y) the number of months during the period between the date hereof and
Closing (pro-rated to take into account of any partial months during such
period) (the "Purchase Price").
(b) The Purchase Price has been established based on the
understanding that, as of the Closing Date, the Companies and their Subsidiaries
will have no Financing Obligations other than the Existing Capitalized Leases,
and Parent, Sellers and the Companies
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have covenanted to discharge all such obligations as of the Closing. In the
event any such Financing Obligations nevertheless remain in existence as of the
Closing, then at Purchaser's sole and exclusive option, (y) the Purchase Price
shall be reduced by the amount of such Financing Obligations (determined as the
amount which Purchaser or the Company would be required to expend to repay and
terminate such obligations as of the Closing, giving effect to the transactions
contemplated hereby (the "Defeasance Amount")); or (z) such Financing
Obligations shall be discharged by paying out of the Purchase Price the
Defeasance Amount to the corresponding creditor(s).
Section 1.3. Closing.
(a) The consummation of the purchase and sale of the Shares
and the Interests (the "Closing") shall take place at 10:00 a.m., local time, on
the fifth (5) Business Day following the satisfaction of the conditions to the
obligations of the parties set forth in Article 7 hereof (other than those
conditions that by their nature are to be fulfilled at Closing), at the offices
of Xxxxxx & Xxxxxxx, 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx, or at
such other time or place as Parent and Purchaser may agree in writing (the day
on which the Closing takes place being referred to herein as the "Closing
Date").
(b) At the Closing, subject to the provisions of Section 6.6,
Sellers shall deliver or cause to be delivered to Purchaser (i) one or more
stock certificates evidencing the Shares, duly endorsed in blank or accompanied
by a stock power duly executed in blank, (ii) documents sufficient to convey all
of the Interests to Purchaser, (iii) the other documents required to be
delivered by Seller pursuant to Article 7 hereof, and (iv) any other documents
or instruments necessary to evidence or effect any of the transactions
contemplated hereunder.
(c) At the Closing, subject to the provisions of Section 6.6,
(i) Purchaser shall pay to Parent (as agent for the Sellers) the Closing Date
Purchase Price by intra-bank transfer or wire transfer of immediately available
funds to an account designated in writing by Parent, (ii) Purchaser shall
deliver to Parent the documents required to be delivered by Purchaser pursuant
to Article 7 hereof, and (iii) Purchaser shall deliver to Parent any other
documents or instruments necessary to evidence or effect any of the transactions
contemplated hereunder.
(d) The parties acknowledge that the Net Working Capital
Adjustment Amount and the Capital Expenditure Adjustment Amount will not be
determinable until after Closing. Accordingly, notwithstanding anything else in
this Article 1 to the contrary, for purposes of calculating the amount of the
Closing Date Purchase Price payable on the Closing Date, the Base Price will be
increased or decreased (as applicable) pursuant to the definition of Closing
Date Purchase Price by the Estimated Net Working Capital Adjustment Amount and
the Estimated Capital Expenditure Adjustment Amount. After the Closing, the
parties will determine the Net Working Capital Adjustment Amount and the Capital
Expenditure Adjustment Amount, and make such payments as are provided in Section
1.4.
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Section 1.4. Purchase Price Adjustment.
(a) Estimated Adjustment Amounts. Not later than five (5)
Business Days prior to the Closing, Parent shall deliver to Purchaser its good
faith estimate of the Net Working Capital of the Companies and their
consolidated Subsidiaries as of the Closing Date (the "Estimated Closing Net
Working Capital") and its good faith estimate of the Capital Expenditure
Adjustment Amount (the "Estimated Capital Expenditure Adjustment Amount"),
together with a reasonably detailed explanation of the calculation thereof. The
"Estimated Net Working Capital Adjustment Amount", which may be positive or
negative, shall mean (i) the Estimated Closing Net Working Capital, minus (ii)
Twenty Five Million Dollars ($25,000,000) (the "Base Working Capital"). As set
forth in Section 1.3(d), the Estimated Net Working Capital Adjustment Amount and
the Estimated Capital Expenditure Adjustment Amount shall be used to calculate
the Closing Date Purchase Price payable at Closing.
(b) Closing Balance Sheet; Capital Expenditure Adjustment. As
soon as reasonably practicable following the Closing Date, and in any event
within seventy-five (75) days thereafter, Purchaser shall prepare and deliver to
Parent (i) a combined balance sheet of the Companies and their consolidated
Subsidiaries as of the close of business on the Closing Date (the "Closing
Balance Sheet"), (ii) a calculation of the Net Working Capital as reflected on
the Closing Balance Sheet (the "Closing Net Working Capital") and (iii) a
calculation of the actual Capital Expenditure Adjustment Amount (together with
reasonable back-up information providing the basis for such calculation). The
Closing Balance Sheet shall be prepared in accordance with United States
generally accepted accounting principles ("GAAP") and on a basis consistent with
the preparation of the Reference Balance Sheet and shall fairly present the
combined financial position of the Companies and their consolidated Subsidiaries
as of the Closing, excluding any Excluded Assets and Retained Liabilities (but
shall not include any "write-up" of assets as a result of the transactions
contemplated hereby). Without limiting the generality of the foregoing, the
Closing Balance Sheet shall contain reserves against receivables from casino
customers that are calculated in accordance with the current practices of the
Companies.
(c) Disputes. Upon delivery of the Closing Balance Sheet,
Purchaser will provide to Parent and Parent's accountants full access to the
personnel and books and records of the Companies and their consolidated
Subsidiaries, to the extent reasonably related to a review of the Closing
Balance Sheet and the calculation of the Closing Net Working Capital and the
Capital Expenditure Adjustment Amount. If Parent disagrees with the calculation
of the Closing Net Working Capital, the Capital Expenditure Adjustment Amount or
any element relevant thereto, it shall notify Purchaser of such disagreement in
writing within forty five (45) days after its receipt of the Closing Balance
Sheet and the calculation of the Capital Expenditure Adjustment Amount, which
notice shall set forth in detail the particulars of such disagreement. In the
event that Parent does not provide such a notice of disagreement within such
forty five (45) day period, Parent shall be deemed to have accepted the Closing
Balance Sheet and the calculation of the Closing Net Working Capital and the
Capital Expenditure Adjustment Amount delivered by Purchaser, which shall be
final, binding and conclusive for all purposes hereunder. In the event any such
notice of disagreement is timely provided by Parent, Purchaser and Parent shall
use their reasonable best efforts for a period of thirty (30) days (or such
longer period as they may mutually agree) to resolve any disagreements with
respect to the calculation of the Closing Net Working
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Capital and the Capital Expenditure Adjustment Amount. If, at the end of such
period, they are unable to resolve such disagreements, then an independent
accounting firm of recognized national standing other than Purchaser's or
Parent's independent auditors mutually selected by Parent and Purchaser (the
"Auditor") shall resolve any remaining disagreements. The Auditor shall
determine as promptly as practicable, but in any event within thirty (30) days
of the date on which such dispute is referred to the Auditor, based solely on
written submissions forwarded by Purchaser and Parent to the Auditor within ten
(10) days following the Auditor's selection, whether the Closing Balance Sheet
was prepared in accordance with the standards set forth in Section 1.4(b) and
the calculation of the Capital Expenditure Adjustment Amount was made in
accordance with the standards set forth in Section 1.2(a) and (only with respect
to the remaining disagreements submitted to the Auditor) whether and to what
extent (if any) the Closing Net Working Capital and the Capital Expenditure
Adjustment Amount determination requires adjustment. The parties shall share
ratably the fees and expenses of the Auditor as follows: (A) if the Auditor
resolves all of the remaining items in dispute in favor of Purchaser (the amount
so determined is referred to herein as the "low value"), Parent will be
responsible for all of the fees and expenses of the Auditor; (B) if the Auditor
resolves all of the remaining items in dispute in favor of the Seller (the
amount so determined is referred to herein as the "high value"), Purchaser will
be responsible for all of the fees and expenses of the Auditor; and (C) if the
Auditor resolves some of the remaining items in dispute in favor of Purchaser
and the rest of the remaining items in dispute in favor of Parent (the amount so
determined is referred to herein as the "actual value"), Parent will be
responsible for that fraction of the fees and expenses of the Auditor equal to
(I) the difference between the high value and the actual value divided by (II)
the difference between the high value and the low value, and Purchaser will be
responsible for the remainder of the fees and expenses of the Auditor. The
determination of the Auditor shall be final, conclusive and binding on the
parties. The date on which the Closing Net Working Capital and the Capital
Expenditure Adjustment Amount is finally determined in accordance with this
Section 1.4(c) is referred as to the "Determination Date."
(d) Payment. The "Net Working Capital Adjustment Amount,"
which may be positive or negative, shall mean (i) the Closing Net Working
Capital minus (ii) the Base Working Capital. If the Net Working Capital
Adjustment Amount plus the Capital Expenditure Adjustment Amount is greater than
the Estimated Net Working Capital Adjustment Amount plus the Estimated Capital
Expenditure Adjustment Amount (such difference, the "Increase Amount"), then
within five (5) days after the Determination Date, Purchaser shall pay to Parent
an additional amount equal to the Increase Amount, together with interest
thereon calculated from the Closing Date to the date of payment at the
Applicable Rate. If the Estimated Net Working Capital Adjustment Amount plus the
Estimated Capital Expenditure Adjustment Amount is greater than the Net Working
Capital Adjustment Amount plus the Capital Expenditure Adjustment Amount (such
difference, the "Deficit Amount"), then within five (5) days after the
Determination Date Parent shall pay to Purchaser an amount equal to the Deficit
Amount, together with interest thereon calculated from the Closing Date to the
date of payment at the Applicable Rate.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY,
PARENT AND SELLER
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Parent, Sellers and the Companies, jointly and severally, represent
and warrant to Purchaser, except as set forth in the disclosure letter delivered
to Purchaser on or prior to the date of this Agreement (the "Parent Disclosure
Letter") or as otherwise contemplated by this Agreement, as follows:
Section 2.1. Corporate Organization of Parent and Sellers. Parent has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the State of Maryland. Each of the Sellers has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of its jurisdiction of organization.
Section 2.2. Corporate Organization of the Companies. Each of the
Companies has been duly organized and is validly existing as a corporation or
partnership, as applicable, in good standing (other than MEG) under the laws of
its jurisdiction of organization and has the corporate or partnership power and
authority, as applicable, to own and lease its properties and to conduct the
Business as it is now being conducted. The copies of the Charter Documents of
the Companies previously delivered by the Companies to Purchaser are true,
correct and complete. Each of the Companies is duly licensed or qualified and in
good standing as a foreign corporation or partnership, as applicable, in each
jurisdiction in which the ownership of its property or the character of its
activities is such as to require it to be so licensed or qualified, except where
any failures to be so licensed or qualified would not, either individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 2.3. Capital Stock of the Companies. The Shares constitute all the
authorized, issued and outstanding shares of capital stock of the Companies. The
Shares have been duly authorized and validly issued and are fully paid and
nonassessable and were not issued in violation of any preemptive rights. Except
as set forth in Section 2.3 of the Parent Disclosure Letter, the Interests
constitute all of the authorized, issued and outstanding equity interests of
MEG. Except as set forth in Section 2.3 of the Parent Disclosure Letter and
except for the Shares and the Interests, there are outstanding (i) no shares of
capital stock or other voting securities of the Companies, (ii) no securities of
the Companies convertible into or exchangeable for shares of capital stock,
equity interests or other voting securities of the Companies; (iii) no
subscription rights, options, warrants, calls, commitments, preemptive rights or
other rights of any kind to acquire from the Companies, and no obligation of the
Companies to issue or sell, any shares of capital stock, equity interests or
other voting securities or any securities of the Companies convertible into or
exchangeable for such capital stock, equity interests or voting securities, and
(iv) no equity equivalents, interests in the ownership or earnings of, or stock
appreciation, phantom stock or other similar rights of or with respect to the
Companies. The Sellers are and on the Closing Date (prior to the consummation of
the transactions contemplated by this Agreement) will be the sole record and
beneficial owner of the Shares and the Interests. Upon consummation of the
transactions contemplated in this Agreement, Purchaser will acquire good and
valid title to the Shares and the Interests, free and clear of all Liens, and
the Shares will be fully paid and nonassessable.
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Section 2.4. Subsidiaries.
(a) Set forth on Section 2.4(a) of the Parent Disclosure
Letter is a list of all Subsidiaries of the Companies. Each Subsidiary of the
Companies has been duly formed and is validly existing (except as will be cured
prior to Closing) under the laws of the jurisdiction of its formation and has
the corporate, limited liability company, or partnership power and authority, as
applicable, to own or lease its properties and to conduct its business as it is
now being conducted. The Companies have made available to Purchaser copies of
the Charter Documents of each Subsidiary of the Company, and such copies are
true, correct and complete except as disclosed on Section 2.4(a) of the Parent
Disclosure Letter. Each such Subsidiary is duly licensed or qualified and in
good standing in each jurisdiction in which its ownership of property or the
character of its activities is such as to require such Subsidiary to be so
licensed or qualified, except where any failures to be so licensed or qualified
would not, either individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(b) All of the issued and outstanding shares of each
Subsidiary's capital stock or other equity securities are duly authorized,
validly issued and outstanding, and with respect to corporate Subsidiaries are
fully paid and nonassessable, and, except as set forth on Section 2.4(b) of the
Parent Disclosure Letter, are owned of record and beneficially by the Companies
free and clear of any Liens. Except for the shares of capital stock or other
equity securities owned by the Companies and as set forth on Section 2.4 of the
Parent Disclosure Letter, there are outstanding (i) no shares of capital stock
or other equity or voting securities of any Subsidiary of the Companies, (ii) no
securities of any Subsidiary of the Companies convertible into or exchangeable
for shares of capital stock or other equity or voting securities of any
Subsidiary of the Companies; (iii) no subscription rights, options, warrants,
calls, commitments, preemptive rights (other than preemptive rights imposed
solely by statute) or other rights of any kind to acquire from any Subsidiary of
the Companies, and no obligation of any Subsidiary of the Companies to issue or
sell, any shares of capital stock or other equity or voting securities or any
securities of such Subsidiary convertible into or exchangeable for such capital
stock or other equity or voting securities, and (iv) no equity equivalents,
interests in the ownership or earnings of, or stock appreciation, phantom stock
or other similar rights of or with respect to any Subsidiary of the Companies.
There are no outstanding obligations (contractual or otherwise) of the Companies
or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock or any other securities of the type described in clauses
(i)-(iv) of the preceding sentence. Notwithstanding the foregoing, the
representations contained in this Section 2.4(b) shall not apply to Subsidiaries
that are inactive, own no assets or are otherwise immaterial to the operation of
the Business.
(c) Section 2.4(c) of the Parent Disclosure Letter sets forth
each material partnership, joint venture or other arrangement (a "Joint
Venture") pursuant to which the Company or any of its Subsidiaries holds any
equity interest (a "Joint Venture Interest") in any Person that is not a
Subsidiary of the Company. Each such Joint Venture Interest has been duly
authorized and validly issued, and is owned of record and beneficially by the
Companies and the Subsidiaries as set forth in Section 2.4(c) of the Parent
Disclosure Letter, free and clear of all Liens.
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Section 2.5. Due Authorization.
(a) Each of the Companies has the requisite corporate or
partnership power and authority, as applicable, to execute and deliver this
Agreement and each of the Ancillary Agreements to which it is a party and to
perform all obligations to be performed by it hereunder and thereunder. The
execution and delivery of this Agreement and each such Ancillary Agreement and
the consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized and approved by each of the Companies and no other
proceeding on its part is necessary to authorize this Agreement and each such
Ancillary Agreement and the consummation of the transactions contemplated hereby
and thereby. This Agreement has been duly and validly executed and delivered by
each of the Companies, and constitutes a legally valid and binding obligation of
each of the Companies, enforceable against each of the Companies in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights generally and subject, as to enforceability, to general principles of
equity. Each Ancillary Agreement to which the Companies are a party upon being
duly and validly executed and delivered by the Companies shall constitute a
legally valid and binding obligation of the Companies, enforceable against the
Companies in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights generally and subject, as to enforceability, to
general principles of equity.
(b) Each of Parent and the Sellers has the requisite corporate
power and authority to execute and deliver this Agreement and each of the
Ancillary Agreements to which it is a party and to perform all obligations to be
performed by it hereunder and thereunder. The execution and delivery of this
Agreement and each such Ancillary Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized and approved by Parent and the Sellers and no other proceeding on
Parent's or the Sellers' part is necessary to authorize this Agreement and each
such Ancillary Agreement and the consummation of the transactions contemplated
hereby and thereby. This Agreement has been duly and validly executed and
delivered by Parent and the Sellers, and constitutes a legally valid and binding
obligation of Parent and the Sellers, enforceable against Parent and the Sellers
in accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights generally and subject, as to enforceability, to general
principles of equity. Each Ancillary Agreement to which Parent or the Sellers is
a party upon being duly and validly executed by Parent or the Sellers shall
constitute a legally valid and binding obligation of Parent and the Sellers,
enforceable against Parent and the Sellers in accordance with its terms, subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights generally and subject,
as to enforceability, to general principles of equity.
Section 2.6. No Conflict. Except as set forth in Section 2.6 of the Parent
Disclosure Letter, the execution and delivery of this Agreement and any
Ancillary Agreement by Parent, the Sellers and the Companies, and the
consummation of the transactions contemplated hereby and thereby by Parent, the
Sellers and the Companies, does not and will not violate any provision of, or
result in the breach of, or terminate any material rights or accelerate any
material obligations of the Companies or their Subsidiaries under, or result in
the creation of any Lien other than
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Permitted Liens on the assets or properties of the Companies or their
Subsidiaries pursuant to, (i) the Charter Documents of Parent, the Sellers, the
Companies or any Subsidiary of the Companies, (ii) any Contract required to be
listed in Section 2.8 of the Parent Disclosure Letter, or (iii) subject to
matters described in Section 2.20, any order, judgment, decree, law, rule or
regulation of any Governmental Authority, except, in the case of items
referenced in clauses (ii) and (iii), to the extent that the occurrence of any
of the foregoing would not, either individually or in the aggregate reasonably
be expected to, (x) have a Material Adverse Effect or (y) materially impair the
ability of Parent, the Sellers and the Companies to perform their respective
obligations under this Agreement.
Section 2.7. Financial Statements; Books and Records; Projections.
(a) The Company has heretofore delivered to Purchaser true and
correct copies of:
(i) the unaudited combined and combining balance sheets
of the Companies and their Subsidiaries as of December 31, 1998, and the
related unaudited combined and combining statements of income and of cash
flows for each of the fiscal years then ended (the "Annual Financial
Statements"); and
(ii) the unaudited combined and combining balance sheets
of the Companies and their Subsidiaries as of March 31, 1999 and the
related unaudited combined and combining statements of income and of cash
flows for the period then ended (the "Interim Financial Statements").
(b) The financial statements listed in paragraph (a) above:
(i) fairly present in all material respects the
financial condition and the results of operations and changes in cash flow
of the Companies and their Subsidiaries, on a combined and combining basis
at the date of, and for the period referred to in, such financial
statements, in accordance with GAAP (except for the absence of notes and
as otherwise noted therein), subject to, in the case of the Interim
Financial Statements, normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, be materially adverse to
the Companies and their Subsidiaries); and
(ii) reflect the application of GAAP consistent with
past practices, except as disclosed in the notes to such financial
statements or as otherwise indicated therein.
(c) The parties acknowledge that the financial statements
listed in paragraph 2.7(a) have been prepared on a combined and combining basis
and do not, among other things, make pro forma adjustments to reflect cost
increases or savings, or other such effects that might have resulted from the
operation of the Companies and their Subsidiaries as a single entity during the
periods presented.
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Section 2.8. Contracts; No Defaults.
(a) Section 2.8 of the Parent Disclosure Letter contains a
listing of all Contracts described in clauses (i) through (xi) below to which
the Companies or any of their Subsidiaries is a party other than (x) Contracts
to be transferred with the Excluded Companies in connection with the Preliminary
Transfers, (y) Contracts solely between the Companies and their Subsidiaries or
among the Companies Subsidiaries and (z) Contracts between the Companies and
their Subsidiaries on the one hand, and Parent or any of its Affiliates (other
than the Companies and their Subsidiaries) on the other hand, which will be
terminated on or prior to the Closing without any continuing obligation or
liability of the Companies and their Subsidiaries. True, correct and complete
copies of Contracts referred to in clauses (i) through (xi) below have been
delivered to or made available to Purchaser.
(i) each Contract involving performance of services or
delivery of goods or materials by the Companies or any of their
Subsidiaries of an amount or value in excess of $6,000,000 and with a term
of 12 months or greater;
(ii) each Contract involving performance of services or
delivery of goods or materials to the Companies or any of their
Subsidiaries of an amount or value in excess of $6,000,000 and with a term
of 12 months or greater;
(iii) each note, debenture or other Contract reflecting
any Financing Obligation other than the Existing Capitalized Leases,
including any Contract for future loans, credit or financing, entered into
by the Companies or any of their Subsidiaries, either as lender or
borrower which Financing Obligations is in excess of $1,000,000;
(iv) each material lease, sub-lease or rental agreement
pursuant to which the Company leases real property as lessee;
(v) each material licensing agreement or other material
Contract with respect to patents, trademarks, copyrights, or other
Intellectual Property or Licensed IP Rights;
(vi) each collective bargaining agreement or other
Contract with any labor union or other labor organization relating to
wages, hours and other conditions of employment in effect as of the date
hereof;
(vii) each material joint venture agreement, partnership
agreement, or limited liability company agreement or other Contract
(however named) involving a sharing of any material profits, losses, costs
or liabilities by the Companies or any of their Subsidiaries with any
other Person;
(viii) each Contract that commits capital expenditures
after the date hereof in an amount in excess of $500,000 (other than
commitments reflected in the Company Capital Plan);
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(ix) any material written warranty, guaranty or other
similar Contract with respect to contractual performance extended by the
Companies or any of their Subsidiaries other than in the ordinary course
of business;
(x) any Contract containing covenants which purport to
materially restrict the Companies or any of their Subsidiaries from
engaging in the Business; and
(xi) any employment, change of control, severance,
settlement, conciliation or similar Contract with respect to any Personnel
and which may not be terminated at will, or by giving notice of 90 days or
less, without cost or penalty.
(b) Except as set forth on Section 2.8(b) of the Parent
Disclosure Letter, each of the Contracts listed on Section 2.8 is in full force
and effect, and neither the Companies nor any of their Subsidiaries (or, to the
Knowledge of the Companies, any other party thereto) is in material breach or
violation of, or material default under such Contracts. No condition exists or
event has occurred which, with notice or lapse of time or both, would be
reasonably likely to constitute a breach or violation of, or a default by the
Companies or any of their Subsidiaries under, such Contracts by the Companies or
any of their Subsidiaries, or, to the Knowledge of the Companies, any other
party thereto except for such breaches or defaults which would not reasonably be
expected to have a Material Adverse Effect.
Section 2.9. Undisclosed Liabilities. Other than (a) environmental
liabilities, which are the subject of Section 2.18, (b) liabilities or Actions
which are the subject of Section 2.12 and (c) severance and retention
liabilities which are the subject of Article 6, neither the Companies nor any of
their Subsidiaries has any material liabilities or obligations (whether absolute
or contingent, liquidated or unliquidated, or due or to become due) of a type
required to be reflected or reserved for on a balance sheet prepared in
accordance with GAAP or disclosed in the notes thereto, except for liabilities
and obligations (i) reflected or reserved for on the Reference Balance Sheet or
disclosed in the notes thereto, (ii) that have arisen since the date of the
Reference Balance Sheet in the ordinary course of the operation of business, and
consistent with past practice of the Companies and their Subsidiaries, which
would not, either individually or in the aggregate, have a Material Adverse
Effect or (iii) that are disclosed on Section 2.9 of the Parent Disclosure
Letter.
Section 2.10. Absence of Certain Changes or Events. Except with respect to
the Preliminary Transfers and except as expressly contemplated by this Agreement
or as set forth in Section 2.10 of the Parent Disclosure Letter, from December
31, 1998 to the date of this Agreement, there has not been any:
(a) change which would reasonably be expected to have a
Material Adverse Effect;
(b) acquisition of any material assets of the Companies or
their Subsidiaries (or any interest therein), except purchases of inventory,
furnishings, equipment and other goods in the ordinary course of business and
except for purchases pursuant to and in accordance with the Company Capital
Plan;
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(c) issuance or acquisition, directly or indirectly, by
redemption or otherwise, of any shares of capital stock or other equity
securities of the Companies or any of their Subsidiaries;
(d) except in the ordinary course of business and consistent
with past practices (i) increase in the compensation payable or to become
payable by the Companies or their Subsidiaries to any of their respective
officers or employees whose total compensation benefits and other payments for
services rendered to the Companies or their Subsidiaries is currently at an
annual rate of more than $200,000 (collectively, "Personnel") or (ii) material
bonus (other than retention bonuses which are the responsibility of Sellers),
incentive compensation, service award or other like benefit granted, made or
accrued, contingently or otherwise, for or to the credit of any of the
Personnel;
(e) sale, lease, license, mortgage, encumbrance, Lien or other
disposition of any material assets or properties of the Companies or their
Subsidiaries, except for disposal and replacement of obsolete equipment in the
ordinary course of business consistent with past practice;
(f) except in the ordinary course of business, cancellation of
any material indebtedness or waiver of any material claims or rights of the
Companies or any of their Subsidiaries;
(g) commitments for capital expenditures involving payments in
excess of $1,000,000 individually (except for commitments pursuant to and in
accordance with the Company Capital Plan);
(h) material change in accounting methods or practices by the
Company or its Subsidiaries; or
(i) damage, destruction or loss (whether or not covered by
insurance) of any material assets of the Companies and their Subsidiaries.
Section 2.11. Intellectual Property. Section 2.11 of the Parent Disclosure
Letter lists (i) each material patent, registered trademark, service xxxx or
trade name or registered copyright and applications for any of the foregoing
(collectively, "Intellectual Property") owned by the Companies and their
Subsidiaries for use in connection with the Business and (ii) each agreement
pursuant to which a material patent, trademark, service xxxx, trade name or
copyright used or held for use in connection with the Business is licensed from
others ("Licensed IP Rights"). Except as set forth on Section 2.11 of the Parent
Disclosure Letter , (i) the Companies and their Subsidiaries own each such item
of Intellectual Property free and clear of any Liens, except for Permitted
Liens, and have the right to use such Intellectual Property in connection with
the Business as currently conducted, (ii) within the last three years there has
been no claim of infringement made, or to the Knowledge of the Companies,
threatened against the Companies or any of their Subsidiaries relating to any
item of Intellectual Property or Licensed IP Rights which would reasonably be
expected to have a Material Adverse Effect, (iii) to the Knowledge of the
Companies, no third party has interfered with, infringed upon, misappropriated,
or violated in any
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material respect any Intellectual Property or Licensed IP Rights which would
reasonably be expected to have a Material Adverse Effect, and (iv) the Companies
and their Subsidiaries have valid rights to use the Licensed IP Rights pursuant
to Contracts which have been disclosed and made available to Purchaser.
Section 2.12. Litigation and Proceedings. Except as set forth on Section
2.12 of the Parent Disclosure Letter, there are no Actions, or to the Knowledge
of the Companies, investigations, before or by any court or Governmental
Authority or before any arbitrator pending or, to the Knowledge of the
Companies, threatened, against the Companies or any of their Subsidiaries (a)
which would reasonably be expected to have a material adverse effect on the
ability of Parent, Seller or the Companies to enter into and perform their
obligations under this Agreement or have a Material Adverse Effect or (b) as of
the date hereof, in which the reasonable likelihood for recovery of damages
against the Companies and their Subsidiaries is in excess of $1,000,000 in any
individual case. Except as set forth on Section 2.12 of the Parent Disclosure
Letter, there is no unsatisfied judgment, order or decree (a) which would
reasonably be expected to have a material adverse effect on the ability of the
Companies to enter into and perform their obligations under this Agreement or
have a Material Adverse Effect or (b) as of the date hereof requiring payment in
excess of $1,000,000 or any open injunction binding upon the Companies or any of
their Subsidiaries.
Section 2.13. Employee Benefit Plans.
(a) Disclosure; Delivery of Copies of Relevant Documents and
Other Information. Section 2.13(a) of the Parent Disclosure Letter contains a
complete list of Employee Plans other than Plans maintained by Foreign
Subsidiaries and all material Plans maintained by Foreign Subsidiaries which
cover or have covered within the last 5 years current or former employees,
directors, officers or consultants of the Companies or any of their Subsidiaries
(with respect to their relationship with such entities). Except as set forth in
Section 2.13(a) of the Parent Disclosure Letter, true and complete copies of
each of the following documents have been made available by the Company to
Purchaser: (i) each material Welfare Plan and Pension Plan (and, if applicable,
related trust agreements) which covers current or former employees, directors,
officers or consultants of the Companies or any of their Subsidiaries (with
respect to their relationship with such entities) and all amendments thereto,
all summary plan descriptions thereof which have been distributed to the
participants therein and all annuity contracts or other funding instruments and
(ii) each material Benefit Arrangement which covers current or former employees,
directors, officers or consultants of the Companies or any of their Subsidiaries
(with respect to their relationship with such entities) including summary plan
descriptions thereof which have been distributed to the participants therein.
(b) Representations.
(i) Pension Plans
(A) Except as set forth on Section 2.13(a) of the
Parent Disclosure Letter, neither the Companies nor any of their
Subsidiaries currently maintains a Pension Plan. Except as set forth
on Section 2.13(b)(i)(A) of the
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Parent Disclosure Letter, none of the Companies or any of their
Subsidiaries has any direct or indirect liability, contingent or
otherwise, now or previously in existence with respect to any
Pension Plan maintained by the Companies, any of their Subsidiaries,
or any ERISA Affiliate that is subject to Title IV of ERISA which
has not been satisfied.
(B) The Starwood Hotels & Resorts Worldwide, Inc.
Savings and Retirement Plan (the "Parent Savings Plan") and its
related trust agreement, annuity contract or other funding
instrument are qualified and tax-exempt under the provisions of Code
Sections 401(a) (or 403(a), as appropriate) and 501(a) and have been
so qualified during the period from their adoption to date.
(C) Each Employee Plan that covers current or
former employees, directors, officers or consultants of any Foreign
Subsidiary (with respect to their relationship with such entity) has
been maintained in substantial compliance with its terms and with
the requirements prescribed by all applicable statutes, orders,
rules and regulations (including without limitation any special
provisions relating to the tax status of contributions to, earnings
of or distributions from such Plans where each such Plan was
intended to have such tax status) and has been maintained in good
standing with applicable regulatory authorities. Neither the
Companies nor any Subsidiary thereof has any direct or indirect
liability, contingent or otherwise, for unpaid contributions with
respect to any such Plan or an employee benefit plan of any foreign
government.
(ii) Multiemployer Plans
(A) Neither the Company nor any ERISA Affiliate
has, at any time, withdrawn from a Multiemployer Plan in a "complete
withdrawal" or a "partial withdrawal" as defined in Sections 4203
and 4205 of ERISA, respectively, so as to result in a liability,
contingent or otherwise (including without limitation the
obligations pursuant to an agreement entered into in accordance with
Section 4204 of ERISA), of the Company or any of its Subsidiaries.
Neither the Company nor any ERISA Affiliate has engaged in, or is a
successor or parent corporation to an entity that has engaged in, a
transaction described in Section 4212(c) of ERISA.
(B) All contributions required to be made by the
Company or any ERISA Affiliate to each Multiemployer Plan have been
made when due.
(C) Neither the Companies nor any of their
Subsidiaries has any direct or indirect liability, contingent or
otherwise, with respect to any Multiemployer Plan to which the
Companies or any ERISA Affiliate have contributed or been obligated
to contribute.
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(D) To the Knowledge of the Companies: (1) no
Multiemployer Plan has been terminated or has been in reorganization
under ERISA; (2) no proceeding has been initiated by any person
(including the PBGC) to terminate any Multiemployer Plan; (3) a
"mass withdrawal", as defined in PBGC Reg. Section 2640.7, with
respect to any Multiemployer Plan has not occurred; and (4) the
Companies and the ERISA Affiliates do not expect to withdraw in a
"complete withdrawal" or "partial withdrawal" from any Multiemployer
Plan.
(iii) Welfare Plans
(A) Each Welfare Plan maintained or contributed to
by the Companies or any of their Subsidiaries (with respect to their
relationship with such entities) has been maintained in compliance
with its terms and, both as to form and operation, with the
requirements prescribed by any and all statutes, orders, rules and
regulations which are applicable to such Welfare Plan, including
without limitation ERISA and the Code.
(B) Except as set forth on Section 2.13(b)(iii) of
the Parent Disclosure Letter none of the Companies, any of their
Subsidiaries or any Welfare Plan has any present or future
obligation to make any payment to, or with respect to any present or
former employee of the Companies or any of their Subsidiaries
pursuant to, any retiree medical benefit plan, or other retiree
Welfare Plan, and no condition exists which would prevent the
Companies or any of their Subsidiaries from amending or terminating
any such benefit plan or Welfare Plan.
(C) There are no dependent care spending accounts
or flexible spending accounts maintained by the Companies or any
Subsidiaries thereof or covering any Employees in either case for
which Purchaser will be responsible following the Closing Date.
(iv) Benefit Arrangements. Each Benefit Arrangement
which covers current or former employees, directors, officers or
consultants of the Company or any of their Subsidiaries (with respect to
their relationship with such entities) has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and
all statutes, orders, rules and regulations which are applicable to such
Benefit Arrangement, including without limitation the Code. Except as set
forth in Section 2.13(b)(iv) of the Parent Disclosure Letter, and except
as provided by law, or pursuant to any collective bargaining agreement or
other Contract with any labor union or other labor organization the
employment of all persons presently employed or retained by the Companies
or any of their Subsidiaries is terminable at will.
(v) Fiduciary Duties and Prohibited Transactions.
Neither the Companies, any of their Subsidiaries nor any plan fiduciary of
any Welfare Plan or Pension Plan which covers current or former employees,
directors, officers or consultants of the Companies or any ERISA
Affiliate, has been assessed any material civil penalty under Section
502(l) of ERISA which has not been satisfied. To the Knowledge of the
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Company, none of the Companies, any of their Subsidiaries, nor any Plan
fiduciary of any Welfare Plan or Pension Plan which covers current or
former employees, directors, officers or consultants of the Company or any
ERISA Affiliate has (A) engaged in any transaction in violation of
Sections 404 or 406 of ERISA or any "prohibited transaction," as defined
in Section 4975(c)(1) of the Code, for which no exemption exists under
Section 408 of ERISA or Section 4975(c)(2) or (d) of the Code, or (B)
otherwise violated the provisions of Part 4 of Title I, Subtitle B of
ERISA which, in either case, could reasonably be expected to lead to any
material direct or indirect liability of the Companies or any of their
Subsidiaries. Neither the Company nor any of its Subsidiaries has
knowingly participated in a violation of Part 4 of Title I, Subtitle B of
ERISA by any plan fiduciary of any Welfare Plan or Pension Plan (or other
employee benefit plan subject to ERISA).
(vi) Litigation. There is no action, order, writ,
injunction, judgment or decree outstanding or claim, suit, litigation,
proceeding, arbitral action, governmental audit or investigation relating
to or seeking benefits under any Employee Plan (other than routine claims
for benefits) that is pending or, to the Knowledge of the Companies,
threatened or anticipated under which the Companies or any of their
Subsidiaries could have liability which would reasonably be expected to
have a Material Adverse Effect.
(vii) No Amendments. Except as required by law, neither
the Companies, Sellers, Parent nor any ERISA Affiliate has any announced
plan or legally binding commitment to create any additional Employee Plans
which are intended to cover current or former employees, directors,
officers or consultants of the Companies or any of their Subsidiaries
(with respect to their relationship with such entities) or to amend or
modify any existing Employee Plan which covers or has covered current or
former employees, directors, officers or consultants of the Companies or
any of their Subsidiaries (with respect to their relationship with such
entities).
(viii) No Acceleration or Creation of Rights. Except as
provided in Section 2.13(b)(viii) of the Parent Disclosure Letter, neither
the execution and delivery of this Agreement by Parent, Sellers and the
Companies nor the consummation of the transactions contemplated hereby
will result in the acceleration or creation of any rights of any person to
benefits under any Employee Plan (including, without limitation, the
acceleration of the accrual or vesting of any benefits under any Pension
Plan or the acceleration or creation of any rights under any severance,
parachute or change in control agreement).
Section 2.14. Labor Relations. Except as set forth in Section 2.14 of the
Parent Disclosure Letter, during the past year, there has not been (a) any
material strike, slowdown or organized work stoppage by any of the employees of
the Company or any of its Subsidiaries, (b) to the Knowledge of the Companies,
any application for certification of a collective bargaining representative or
other effort to organize any such employees for the purpose of forming or
joining a union, or (c) any material lockout of any employees by the Company or
any of its Subsidiaries.
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Section 2.15. Legal Compliance. Except with respect to matters set forth
on Section 2.15, of the Parent Disclosure Letter and compliance with
Environmental Laws (as to which certain representations and warranties are made
pursuant to Section 2.18), each of the Companies and its Subsidiaries is in
compliance with all laws (including rules, ordinances and regulations
thereunder) of federal, state, local and foreign governments (and all agencies
thereof) applicable thereto, including, without limitation, applicable Gaming
Laws and Governmental Permits, except to the extent that any such noncompliance
would not, either individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
Section 2.16. Personal Property. Except as disclosed in Section 2.16, of
the Parent Disclosure Letter the Companies and their Subsidiaries own, lease or
otherwise have the legal right to use all material tangible personal property
reflected in the Reference Balance Sheet or acquired in the ordinary course of
business since the date of the Reference Balance Sheet which would have been
required to be reflected on such Reference Balance Sheet if acquired on or prior
to such date, other than tangible personal property disposed of in the ordinary
course of business since such date (the "Tangible Personal Property"). The
Companies and their Subsidiaries have good title to or, in the case of leased or
subleased Tangible Personal Property, valid and subsisting leasehold interests
in, all of the Tangible Personal Property, free and clear of all Liens, except
Permitted Liens. The Companies and their Subsidiaries have caused the Tangible
Personal Property when considered in the aggregate to be maintained in
accordance with good business practice, and the material Tangible Personal
Property when considered in the aggregate is in satisfactory operating condition
ordinary wear and tear excepted.
Section 2.17. Real Property.
(a) Section 2.17 of the Parent Disclosure Letter identifies
all Owned Real Property and Leased Real Property. The Companies and their
Subsidiaries have good, valid and marketable fee simple title to the Owned Real
Property, and valid leasehold interests in the Leased Real Property, free and
clear of all Liens, except: (i) as disclosed on Section 2.17 of the Parent
Disclosure Letter and (ii) for Permitted Liens.
(b) The Companies and their Subsidiaries enjoy peaceful and
undisturbed possession of all Leased Real Property. Except as disclosed on
Section 2.17 of the Parent Disclosure Letter, to the Knowledge of the Companies,
no material default exist with respect to any Leased Real Property.
(c) Except as provided in Section 2.17 of the Parent
Disclosure Letter: (i) every certificate, permit or license from any
Governmental Authority having jurisdiction over any of the Owned Real Property
and Leased Real Property and any agreement, easement or other right that is
necessary to permit the lawful use and operation of the buildings and
improvements on any of the Owned Real Property or Leased Real Property or that
is necessary to permit the lawful use and operation of all driveways, roads and
other means of egress and ingress to and from any of the Owned Real Property or
Leased Real Property has been obtained and is in full force and effect, and
there is no pending threat of modification or cancellation of any of same,
except in each case for deviations from the foregoing set forth in this clause
(i) which would not reasonably be expected to materially impair the continued
use of such Owned Real Property or
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Leased Real Property for the use currently being made thereof; (ii) there are no
material structural defects relating to any Owned Real Property or Leased Real
Property that would materially impair the continued use of such Owned Real
Property or Leased Real Property for the use currently being made thereof; (iii)
there are no Owned Real Property building systems that are not in working order
so as to materially impair the continued use of such Owned Real Property or
Leased Real Property for the use currently being made thereof; or (iv) no
physical damage has occurred to any Owned Real Property that would have a
material adverse effect on the continued use of such Owned Real Property or
Leased Real Property for the use currently being made thereof for which there is
no insurance in effect covering the full cost (subject to retention amounts) of
the restoration.
(d) The Owned Real Property and Leased Real Property is
sufficiently supplied with utilities and other services as necessary for the
operation of such facilities as currently operated including, without
limitation, adequate water, storm and sanitary sewer, gas, electric, cable and
telephone facilities, all of which run through public rights-of-way or perpetual
private easements, requiring minimal payments, if any (except for deviations
from the foregoing that would not materially impair the continued use of such
Owned Real Property or Leased Real Property).
(e) None of Parent, Sellers, the Companies or any of their
Subsidiaries has received notice of any material special assessment relating to
any Owned Real Property or Leased Real Property or any portion thereof, and
neither Parent, Seller nor any Company has knowledge of any pending or
threatened material special assessment.
(f) There are no outstanding options or rights of first
refusal to purchase all or a portion the Owned Real Property or Leased Real
Property except as disclosed on Section 2.17 of the Parent Disclosure Letter.
(g) Except the set forth on Section 2.17 of the Parent
Disclosure Letter or reflected in the Company Capital Plan, there is no material
construction at any of the Owned Real Property or Leased Real Property. No
building or improvement, or the operation or maintenance thereof, violates in
any way any restrictive covenant, or encroaches on any property owned by others
that would have a material adverse effect on the continued use of such Owned
Real Property or Leased Real Property for the use currently being made thereof.
(h) Prior to the date hereof, to the Knowledge of the
Companies, the Companies have delivered to Purchaser true and correct copies of
all title reports, title policies and surveys currently in Parent's, each
Seller's and each Company's possession for each respective parcel of Owned Real
Property or Leased Real Property.
Section 2.18. Environmental Matters. Except as set forth in Section 2.18
of the Parent Disclosure Letter:
(a) For purposes of this Section 2.18 and the defined terms
used herein, the term "Companies" shall include (i) the Companies and (ii) any
Subsidiaries of the Companies.
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(b) Each of the Companies: (i) is, and at all times during the
preceding three years has been, in compliance in all respects with all
applicable Environmental Laws; (ii) holds, and at all times during the preceding
three years has held, all material Environmental Permits (each of which is in
full force and effect) required for any current or intended operations or for
any Facility; (iii) is, and at all times during the preceding three years has
been, in compliance in all material respects with all of their Environmental
Permits; and (iv) has not received any written correspondence indicating that
any of their material Environmental Permits will not be renewed effective prior
to the expiration of such Environmental Permit currently in effect, except, in
each case for such noncompliances as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(c) None of the Companies have received any notice of alleged,
actual or potential responsibility for, or any inquiry or investigation
regarding, any environmental matter which liability arising therefrom would
reasonably be expected to have a Material Adverse Effect.
(d) Except with respect to such matters as have been fully and
finally resolved and as to which there are no remaining obligations known or
reasonably anticipated, none of the Companies have entered into or agreed to any
consent decree, order, memorandum or settlement or other Contract, nor is any of
the Companies subject to any judgment, decree, order, memorandum or settlement
or other Contract, in any judicial, administrative, arbitral, or other forum,
relating to any non-compliance with or liability under any Environmental Law
which would reasonably be expected to have a Material Adverse Effect.
(e) No Hazardous Materials (i) are located on, at, in, under
or about any Facility or (ii) have been disposed of, or Released, to, from or at
any Facility which would be reasonably likely to have a Material Adverse Effect.
(f) The Companies have not assumed or retained, by contract or
operation of law in connection with the sale or transfer of any assets or
business, any liabilities arising from or associated with or otherwise in
connection with such assets or business under any applicable Environmental Law
which would be reasonably likely to have a Material Adverse Effect.
(g) To the Knowledge of the Companies, true, complete and
correct copies of all material written environmental reports, audits,
investigations or assessments which have been conducted within the last five
years and which are in the possession of Parent, any Seller or any Company in
respect of any owned or leased Facility, by any attorney, environmental
consultant, engineer or other third party engaged for such purpose, have been
made available to Purchaser.
Section 2.19. Taxes.
(a) Filing of Tax Returns. All material Tax Returns required
to be filed by any Taxpayer on or prior to the date hereof have been properly
completed and filed on a timely basis and in correct form or appropriate
extensions have been timely requested or granted.
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(b) Payment of Taxes. With respect to all material Taxes
imposed on any Taxpayer, or for which any Taxpayer is or could be liable,
whether to taxing authorities (as, for example, under law) or to other persons
or entities (as, for example, under tax allocation agreements), relating to
taxable periods or portions of periods ending on or before the Closing Date, all
such amounts required to be paid to taxing authorities or others on or before
the date hereof have been paid or adequately reserved for on the Reference
Balance Sheet.
(c) Audit History. Except as set forth on Section 2.19 or
Section 2.12 of the Parent Disclosure Letter, no material issues have been
raised (and are currently pending) by any taxing authority in connection with
any Tax Return of any Taxpayer. Except as set forth on Section 2.19 the Parent
Disclosure Letter, no waivers of statutes of limitation with respect to any such
Tax Returns have been given by the applicable Taxpayer that have not expired or
been revoked and no waivers of statute of limitations have been requested from
the applicable Taxpayer. Section 2.19 of the Parent Disclosure Letter also sets
forth (i) the taxable years of each Company and each Subsidiary (other than
Subsidiaries that are inactive, own no assets, and are otherwise immaterial to
the operation of the Business) as to which the respective statutes of
limitations with respect to Taxes have not expired, and (ii) with respect to
such taxable years, those years for which examinations have been completed,
those years for which examinations are presently being conducted, those years
for which examinations have not been initiated, and those years for which
required Tax Returns have not yet been filed. All deficiencies asserted or
assessments made as a result of any examinations have been fully paid, or are
being contested and an adequate reserve therefor has been established.
(d) Liens. There are no Liens for Taxes (other than for
current Taxes not yet due and payable and Taxes being contested pursuant to
appropriate proceedings for which adequate reserves have been established) on
any of the assets of the Companies or any of their Subsidiaries.
(e) Safe Harbor Lease Property. None of the assets of the
Companies or any of their Subsidiaries is property required to be treated as
being owned by any other person pursuant to the "safe harbor lease" provisions
of former Section 168(f)(8) of the Code.
(f) Tax-Exempt Use Property. None of the assets of the
Companies or any of their Subsidiaries is "tax-exempt use property" within the
meaning of Section 168(h) of the Code.
(g) Foreign Person. Parent is not, and other than ITT Canada,
no Seller is a person other than a United States person within the meaning of
the Code.
(h) No Withholding. MEG does not own any asset which is a
"United States real property interest" within the meaning of Section 897(c) of
the Code.
(i) Permanent Establishment. Except as set forth on Section
2.19 of the Parent Disclosure Letter, none of the Companies nor any of their
Subsidiaries has a permanent establishment in any foreign country, as defined in
any applicable tax treaty or convention between the United States and such
foreign country.
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(j) Existing Partnerships and Limited Liability Companies.
With respect to each Company that is not a corporation, and each Subsidiary of
each Company that is not a corporation, (i) each such entity has at all times
during its existence claimed classification as a partnership, and not as an
association or publicly traded partnership taxable as a corporation for federal
and applicable state income tax purposes, and (ii) no such entity nor any member
of such entity was notified in writing by any Taxing authority on or before May
8, 1996 that the classification of such entity as a partnership was under
examination.
(k) Private Letter Rulings. There are no private letter
rulings in respect of any Tax pending between any Taxpayer and any taxing
authority.
(l) Tax Elections. All material elections with respect to
federal Taxes affecting the Companies and their Subsidiaries made on or after
January 1, 1996 are set forth in Section 2.19 of the Parent Disclosure Letter.
(m) Section 341(f) Consent. None of the Companies nor any of
their Subsidiaries has filed a consent pursuant to the collapsible corporation
provisions of Section 341(f) of the Code (or any corresponding provision of
state, local, or foreign income tax law) or agreed to have Section 341(f)(2) of
the Code (or any corresponding provision of state, local, or foreign income tax
law) apply to any disposition of any asset owned by it.
(n) Adjustments under Section 481. Except as set forth on
Section 2.19 of the Parent Disclosure Letter, none of the Companies nor any of
their Subsidiaries has agreed to make nor is any such entity required to make
any adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise.
(o) International Boycott. None of the Companies nor any of
their Subsidiaries has participated in an international boycott within the
meaning of Section 999 of the Code.
(p) Section 338(h)(10) Qualification. Parent is presently
eligible to make an election under Section 338(h)(10) of the Code with respect
to Tunica and each Subsidiary of Tunica that is a corporation.
Section 2.20. Governmental Authorities: Consents. Assuming the truth and
completeness of the representations and warranties of Purchaser contained in
this Agreement, no material consent, approval or authorization of, or material
designation, declaration or filing with, any Governmental Authority is required
under applicable laws on the part of Parent or any Seller with respect to
Parent's or the Sellers' execution or delivery of this Agreement or consummation
of the transactions contemplated hereby, except for (i) applicable requirements
of the HSR Act, (ii) the approval of Governmental Authorities under any Gaming
Laws and (iii) as otherwise disclosed in Section 2.20 of the Parent Disclosure
Letter.
Section 2.21. Licenses, Permits and Authorizations.
(a) All licenses, approvals, consents, franchises,
authorizations, and other permits of, or with, any Governmental Authority,
whether foreign, federal, state or local,
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which are held by either the Company or any of its Subsidiaries, including all
material authorizations under Environmental Laws and Gaming Laws ("Governmental
Permits") are valid and in full force and effect and there are no proceedings
pending or, to the Knowledge of the Companies, threatened that seek the
revocation, cancellation, suspension or adverse modification thereof, except in
each case as would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. Such Governmental Permits constitute all of
the material licenses, franchises and other permits necessary to permit the
Company or any of its Subsidiaries to own, operate, use and maintain their
assets in the manner in which they are now operated and maintained and to
conduct the Business as currently conducted.
(b) Except as set forth on Section 2.21 of the Parent
Disclosure Letter, and except to the extent that any deviations from the
following would not, either individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect:
(i) none of the Companies or any of their Subsidiaries
has received, at any time during the past three years, any notice or other
communication (whether oral or written) from any Governmental Authority or
any other Person regarding (A) any actual, alleged, possible, or potential
violation of or failure to comply with any term or requirement of any
Governmental Permit, or (B) any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Permit;
(ii) all applications required to have been filed for
the renewal of the Governmental Permits have been duly filed on a timely
basis with the appropriate Governmental Authority, and all other filings
required to have been made with respect to such Governmental Permit have
been duly made on a timely basis with the appropriate Governmental
Authority.
Section 2.22. Insurance. The activities and properties of the Companies
and their Subsidiaries are covered by valid and currently effective insurance
policies or programs of self-insurance in such types and amounts as are
consistent with customary practices and standards of companies engaged in
businesses similar to that of the Companies and their Subsidiaries.
Section 2.23. Brokers' Fees. Except as set forth in Section 2.23 of the
Parent Disclosure Letter (which fee constitutes a Retained Liability), no
broker, finder, investment banker or other Person is entitled to any brokerage
fee, finders' fee or other commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by Parent, Sellers,
the Companies or any of their respective Affiliates.
Section 2.24. Affiliate Transactions. Except (i) as set forth in Section
2.24 of the Parent Disclosure Letter, (ii) for intercompany accounts that will
be eliminated at Closing and (iii) for payments under an individual's
compensation arrangements and similar arrangements entered into in the ordinary
course of business with the Companies or any of their Subsidiaries, none of
Parent, the Sellers, their respective Affiliates or any officers or directors of
any of the foregoing or any members of their families (collectively, "Affiliated
Parties") is a party to any material agreement, understanding, indebtedness or
proposed transaction with the Company or any of its Subsidiaries.
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Section 2.25. Year 2000 Compatibility. The Companies have reviewed their
consolidated operations to evaluate the extent to which the Companies will be
affected by the Year 2000 Problem. The Companies do not anticipate incurring
operating expenses or costs in connection with the actions that the Companies
currently believe are necessary to address the Year 2000 Problem with respect to
the Company and their Subsidiaries which would reasonably be expected to have a
Material Adverse Effect. As a result of the aforementioned review, the Companies
do not believe, that the Year 2000 Problem will have a Material Adverse Effect.
The "Year 2000 Problem" as used herein means any risk that computer hardware or
software used by the Companies and their Subsidiaries in the receipt,
transmission, processing, manipulation, storage, retrieval, retransmission or
other utilization of data or in the operation of mechanical or electrical
systems of any kind will be incapable of recognizing or processing characters
representing dates on or after January 1, 2000.
Section 2.26. Assets; Business Activities. The assets of the Companies and
their Subsidiaries constitute all of the material properties, assets and rights
of Parent and its Affiliates used primarily in the conduct of the Business.
Section 2.27. No Other Representations or Warranties. Except for the
representations and warranties contained in this Agreement and the Ancillary
Agreements, none of Parent, Sellers, the Companies nor any other Person makes
any other express or implied representation or warranty on behalf of Parent,
Sellers or otherwise in respect of the Parent, Sellers, the Companies and their
Subsidiaries and the Business. Each of Parent and Sellers acknowledge it is not
relying on any representation or warranty of Purchaser except as set forth in
this Agreement and the Ancillary Agreements or of any other Person.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Parent, Sellers and the
Companies as follows:
Section 3.1. Corporate Organization of Purchaser. Purchaser has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the State of Delaware.
Section 3.2. Due Authorization. Purchaser has the requisite corporate
power and authority to execute and deliver this Agreement and each of the
Ancillary Agreements to which it is a party, and to perform all obligations to
be performed by it hereunder and thereunder. The execution and delivery of this
Agreement and each such Ancillary Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized and approved by Purchaser and no other proceeding on its part is
necessary to authorize this Agreement and each such Ancillary Agreement and the
consummation of the transactions contemplated hereby and thereby. This Agreement
has been duly and validly executed and delivered by Purchaser, and constitutes a
legally valid and binding obligation of Purchaser, enforceable against Purchaser
in accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws
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affecting creditors' rights generally and subject, as to enforceability, to
general principles of equity. Each Ancillary Agreement to which Purchaser is a
party upon being duly and validly executed and delivered by Purchaser shall
constitute a legally valid and binding obligation of Purchaser, enforceable
against Purchaser in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity.
Section 3.3. No Conflict. The execution and delivery of this Agreement and
each of the Ancillary Agreements to which it is a party by Purchaser, and the
consummation of the transactions contemplated hereby and thereby by Purchaser,
does not and will not violate any provision of, or result in the breach of, any
(i) Charter Documents of Purchaser, (ii) any material agreement, indenture or
other instrument to which Purchaser or its Affiliates is a party or by which
Purchaser or its Affiliates may be bound, or (iii) any order, judgment, decree,
law, rule or regulation of any Governmental Authority, except, in the case of
items referenced in clauses (ii) and (iii), to the extent that the occurrence of
any of the foregoing would not, either individually or in the aggregate,
materially interfere with the ability of Purchaser to perform its obligations
under this Agreement.
Section 3.4. Litigation and Proceedings. There are no Actions or, to the
knowledge of Purchaser, investigations, before or by any court or Governmental
Authority or before any arbitrator pending or, to the knowledge of Purchaser,
threatened, against Purchaser or any of its Affiliates which, if determined
adversely, would reasonably be expected to have a material adverse effect on the
ability of Purchaser to enter into and perform its obligations under this
Agreement. There is no unsatisfied judgment or any injunction binding upon
Purchaser or any of its Affiliates which would reasonably be expected to have a
material adverse effect on the ability of Purchaser to enter into and perform
its obligations under this Agreement.
Section 3.5. Governmental Authorities: Consents. Assuming the truth and
completeness of the representations and warranties of Parent, Seller and the
Companies contained in this Agreement, no material consent, approval or
authorization of, or material designation, declaration or filing with, any
Governmental Authority is required under applicable laws on the part of
Purchaser with respect to Purchaser's execution or delivery of this Agreement or
consummation of the transactions contemplated hereby, except for (i) applicable
requirements of the HSR Act, (ii) the approval of Governmental Authorities under
any Gaming Laws and (iii) as otherwise disclosed in Section 3.5 of the Parent
Disclosure Letter.
Section 3.6. Brokers' Fees. No broker, finder, investment banker or other
Person is entitled to any brokerage fee, finders' fee or other commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by Purchaser or any of its Affiliates.
Section 3.7. Financial Capability. Purchaser will have at the Closing
sufficient funds to pay the Purchase Price (and any post-closing adjustments
thereto) and all other amounts payable by the Purchaser at Closing and to
perform its obligations hereunder following the Closing.
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Section 3.8. Securities Act. Purchaser is acquiring the Shares and the
Interests solely for the purpose of investment and not with a view to, or for
sale in connection with, any distribution thereof in violation of the Securities
Act. Purchaser acknowledges that the Shares and the Interests are not registered
under any securities laws and that such Shares and the Interests may not be
transferred or sold except pursuant to the registration and other provisions of
applicable securities laws or pursuant to an applicable exemption therefrom.
Section 3.9. Investigation by Purchaser; Certain Financial Information; No
Other Representations or Warranties.
(a) As part of its own investigation and evaluation of the
Companies and their Subsidiaries and the Business, Purchaser has received or has
reviewed operating, business and financial information including financial
statements, forecasts, projections and other oral or written information and
materials with respect to the Companies and their Subsidiaries and the Business
made available by Parent or its representatives. There are assumptions and
uncertainties inherent in projections and forecasts for the Companies and their
Subsidiaries and the Business and Purchaser acknowledges that it is familiar
with such assumptions and uncertainties. Purchaser has made its own evaluation
of such financial information and acknowledges that neither Parent nor any other
Person is making any representations or warranties with respect to such
operating, business or financial information except for the specific
representations and warranties set forth in this Agreement and the Ancillary
Agreements.
(b) Except for the representations and warranties contained in
this Agreement and the Ancillary Agreements, neither Purchaser nor any other
Person makes any other express or implied representation or warranty on behalf
of the Purchaser. Purchaser acknowledges that it is not relying on any
representation or warranty of Parent, Sellers, the Companies or of any other
Person except as set forth in this Agreement and the Ancillary Agreements.
ARTICLE 4.
COVENANTS AND AGREEMENTS OF PARENT, SELLER AND THE COMPANY
Section 4.1. Conduct of Business.
(a) From the date hereof through the Closing except as (i)
contemplated by this Agreement (including the Preliminary Transfers), or (ii)
required by applicable law or any Contract described in Section 2.8 of the
Parent Disclosure Letter or Employee Plan, or (iii) with the consent of the
Purchaser (which shall not be unreasonably withheld or delayed), the Companies
shall, and Parent and Sellers shall cause the Companies and each of their
Subsidiaries to:
(i) operate the business of the Companies and each of
their Subsidiaries in the ordinary course, consistent with past practice;
(ii) use their respective reasonable efforts to preserve
intact the business organization of the Companies and their Subsidiaries,
keep available to the
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Companies and their Subsidiaries the services of the current officers,
employees and agents of the Companies and their Subsidiaries and maintain
the relations and good will with suppliers, customers, landlords,
creditors, employees, and others having business relationships with the
Companies or any of their Subsidiaries; and
(iii) maintain property level cash and inventories in
amounts consistent with past practice.
(b) Without limiting the generality of Section 4.1(a), prior
to the Closing, except as (i) contemplated by this Agreement (including the
Preliminary Transfers), (ii) required by applicable law or any Contract
described in Section 2.8 of the Parent Disclosure Letter or Employee Plan, or
(iii) with the consent of Purchaser (which shall not be unreasonably withheld or
delayed), the Companies shall not, and Parent and Sellers shall cause each of
the Companies and each of their Subsidiaries not to:
(i) issue, deliver, sell, pledge or otherwise encumber
or amend any shares of its capital stock, any other voting or equity
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, interests, voting or equity
securities or convertible securities;
(ii) amend its Charter Documents;
(iii) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of the assets
of, or by any other manner, any business or any Person or other business
organization or division thereof or (B) any other material assets, except
purchases of inventory, furnishings, equipment and other goods in the
ordinary course of business consistent with past practice or in accordance
with the Company Capital Plan;
(iv) sell, lease, license, mortgage or otherwise
encumber or subject to any Lien other than Permitted Liens or otherwise
dispose of any material assets, except for disposal and replacement of
obsolete equipment in the ordinary course of business consistent with past
practice;
(v) make any material loans or advances (including,
without limitation, furnishing any "markers") or capital contributions to,
or investments in, any other Person other than (X) loans, advances or
capital contributions to the Companies or any direct or indirect
wholly-owned Subsidiary of any of the Companies or to any of the joint
ventures in which the Companies or their Subsidiaries holds an interest to
the extent such funding is reasonably required by such joint ventures, (Y)
advances to employees or suppliers in the ordinary course of business
consistent with past practice and (Z) extensions of credit to customers in
the ordinary course of business and consistent with past practice;
(vi) except as required to comply with applicable laws
or any Employee Plan or any Contract, (A) adopt, enter into or terminate,
any material Employee
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Plan for the benefit or welfare of any director, officer or current or
former employee, (B) materially increase in any manner the compensation or
fringe benefits of, or pay any bonus to, any Personnel (except for normal
increases or bonuses as contractually required pursuant to agreements
disclosed on Section 2.8 of the Parent Disclosure Letter or payments under
the Caesars Bonus Retention Program or other such retention programs for
which Sellers are fully responsible or in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in a
significant increase in benefits or compensation expenses to such
Personnel of the Company and its Subsidiaries relative to the level in
effect prior to such action), (C) except for payments or awards in cash
permitted by clause (B), grant any awards under any bonus, incentive,
performance or other compensation plan or arrangement or Employee Plan
(including the grant of stock options, stock appreciation rights, stock
based or stock related awards, performance units or restricted stock, or
the removal of existing restrictions in any Employee Plans or agreements
or awards made thereunder) or (D) take any action to fund or in any other
way secure the payment of compensation or benefits under any Employee Plan
other than in the ordinary course of business consistent with past
practice;
(vii) except in the ordinary course of business
consistent with past practices, materially and adversely modify, amend or
terminate any Contract set forth on Section 2.8 of the Parent Disclosure
Letter or waive, release or assign any material rights or claims
thereunder;
(viii) conduct its business in a manner or take, or
cause to be taken, any other action that would reasonably be expected to
prevent or materially delay Parent, Sellers, the Companies or Purchaser
from consummating the transactions contemplated hereby;
(ix) except as required to comply with applicable laws
or any Contract, enter into any Contract that would be required to be
disclosed on Section 2.8 of the Parent Disclosure Letter or that is a
significant real property lease or supply agreement which continues in
effect for a period of more than 18 months (including, without limitation,
any agreement relating to Forum III or Forum IV);
(x) authorize any of, or commit or agree to take any of,
the foregoing actions.
Section 4.2. Inspection. Parent, Sellers and the Companies shall afford to
Purchaser and its accountants, counsel and other representatives reasonable
access during normal business hours and upon advance notice, to the properties,
books, contracts, commitments, Tax Returns, records and appropriate officers and
employees of the Companies and their Subsidiaries, and shall furnish such
representatives with all such existing financial and operating data and other
information concerning the affairs of the Companies and their Subsidiaries as
they may reasonably request.
Section 4.3. HSR Act. Subject to and in furtherance of Section 6.1, in
connection with the transactions contemplated by this Agreement, Parent, Seller
and the Company (and, to the
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extent required, their Affiliates) shall comply promptly with the notification
and reporting requirements of the HSR Act and use their reasonable best efforts
to obtain early termination of the waiting period under the HSR Act. Parent,
Seller and the Company shall substantially comply with any additional requests
for information, including requests for production of documents and production
of witnesses for interviews or depositions, by any Antitrust Authority.
Section 4.4. No Solicitations. Neither Parent, Sellers nor the Companies
will, directly or indirectly, (a) solicit any inquiries or proposals or enter
into or continue any discussions, negotiations or agreements with a third party
relating to (i) the sale or exchange of the Companies, or any of their
Subsidiaries' capital stock, (ii) the merger of the Companies or any of their
Subsidiaries with, or the direct or indirect disposition of any material assets
of the Companies and their Subsidiaries or any portion of the Business to, any
Person other than Purchaser or its Affiliates or (b) provide any assistance or
any information to or otherwise cooperate with any Person in connection with any
such inquiry, proposal or transaction. Parent, Sellers and the Companies agree
to terminate any current discussions and negotiations with any party other than
Purchaser with respect to any transaction of the kind described in clauses (a)
(i) through (a) (ii) of the preceding sentence (a "Proposed Acquisition
Transaction").
Section 4.5. Notification. Between the date of this Agreement and the
Closing Date, Parent, Sellers and the Companies will promptly notify Purchaser
in writing if Parent, Sellers, the Companies or any of their respective
Subsidiaries becomes aware of any fact or condition that they believe causes or
constitutes a breach of any of the representations and warranties of Parent,
Sellers and the Companies as of the date of this Agreement, or if Parent,
Sellers, the Companies or any of their respective Subsidiaries becomes aware of
the occurrence after the date of this Agreement of any fact or condition that
they believe would cause or constitute a breach of any such representation or
warranty had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition, unless in each case such
breach of representation and warranty is reasonably expected by Parent, Sellers
and the Companies to be cured prior to Closing. Any claim for a breach of
covenant set forth in the previous sentence shall be made only for the
incremental Losses due to the failure to comply with such covenant (and not for
Losses due to the breach of the underlying representation and warranty). During
the same period, Parent, Sellers and the Companies will promptly notify
Purchaser of the occurrence of any breach of any covenant of Parent, Sellers or
the Companies in this Article 4 or of the occurrence of any event that they
believe may make the satisfaction of the conditions in Article 7 impossible or
unlikely.
Section 4.6. Certain Tax Matters.
(a) Termination of Existing Tax-Sharing Agreements. All
tax-sharing agreements or similar agreements with respect to or involving any
Company or any of the Subsidiaries shall be terminated prior to the Closing
Date, and, from and after the Closing Date, no such entity shall be bound
thereby or have any liability thereunder for amounts due in respect of periods
prior to the Closing Date.
(b) Nonforeign Affidavit. As a condition precedent to the
consummation of the transactions contemplated by this Agreement, all Sellers
other than ITT Canada shall
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furnish Purchaser an affidavit, stating, under penalty of perjury, that the
indicated number is the transferor's United States taxpayer identification
number and that the transferor is not a foreign person, pursuant to Section
1445(b)(2) of the Code.
(c) Tax Elections. Other than elections contemplated by this
Agreement, no new elections with respect to Taxes, or any changes in current
elections with respect to Taxes, that would reasonably be expected to have a
material adverse effect on any Company or any of their Subsidiaries shall be
made after the date of this Agreement without the prior written consent of
Purchaser which consent shall not be unreasonably withheld or delayed.
Section 4.7. Elimination of Intercompany Accounts and Arrangements. Prior
to the Closing, Parent, Sellers and the Companies shall cause the elimination of
all intercompany indebtedness and all other intercompany accounts by and between
the Companies or their Subsidiaries, on the one hand, and Parent, Sellers or any
of their other Affiliates (other than the Companies and their Subsidiaries), on
the other hand. Such intercompany accounts may be eliminated by means of
settlement, setoff, capital contributions or distributions. Parent and its
Affiliates are not obligated to effectuate such eliminations through use of cash
if the objective could be achieved through setoff or capital contributions. Such
elimination of intercompany accounts shall be in satisfaction of all amounts
owed by the Parent, Sellers or any of its Affiliates (other than the Companies
and their Subsidiaries) to the Companies and their Subsidiaries and all amounts
owed by the Companies and its Subsidiaries to the Parent, Sellers or any of
their Affiliates (other than the Companies and their Subsidiaries) in respect of
such intercompany accounts. At Closing, Purchaser shall have received absolute
and unconditional releases from Parent (on behalf of itself and each of its
Affiliates (other than the Companies and their Subsidiaries)) of any and all
claims with respect to intercompany accounts for payment to Parent and such
Affiliates from the Company in form and substance reasonably satisfactory to the
parties. At Closing, Parent shall have received absolute and unconditional
releases from the Companies and their Subsidiaries of any and all claims with
respect to such intercompany accounts for payment by Parent and its Affiliates
(other than the Companies and their Subsidiaries) to the Companies and their
Subsidiaries in form and substance reasonably satisfactory to the parties. Prior
to Closing, Parent, Sellers and their Affiliates shall cause all agreements
between Parent and its Affiliates (other than the Companies and their
Subsidiaries) on the one hand and the Companies and their Subsidiaries on the
other hand, to be terminated (including, without limitation, the lease with
respect to the Sheraton Halifax Hotel), except for the Ancillary Agreements and
the Note dated July 7, 1997 from Forum Ride Associates as maker to ITT
Corporation as lender in the principal amount of approximately $23 million and
the related loan agreement.
Section 4.8. Financing Obligations. At or prior to the Closing, Parent and
Sellers shall cause all material Financing Obligations (other than the Existing
Capitalized Leases) of the Companies and their Subsidiaries to be redeemed,
defeased or repaid or otherwise terminated.
Section 4.9. Title Insurance Endorsement. Parent, Sellers, the Companies
and their Subsidiaries agree to cooperate with Purchaser and its title insurance
company, and to provide such title insurance company with affidavits and
certificates as may be reasonably requested from such title insurance company
(but in no event shall Parent, Sellers, Companies or their
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Subsidiaries be required to provide an indemnity or hold harmless such title
insurance company or Purchaser) in order to issue a (i) "Non Imputation
Endorsement" in favor of Purchaser with respect to the existing title insurance
held by the Company and its Subsidiaries with respect to the each parcel of the
Owned Real Property and Leased Real Property and (ii) an endorsement making the
Closing Date the effective date for each such title insurance policy.
Section 4.10. Cooperation with Financings. Parent and Sellers agree that
they will (and will cause the Companies and their Subsidiaries to) reasonably
cooperate in providing information to Purchaser necessary for the preparation of
any offering materials required to be prepared by or on behalf of Purchaser in
connection with Purchaser's offering of securities, the syndication of
Purchaser's senior credit facilities and any other financings undertaken by
Purchaser in connection with the transactions contemplated hereby, to the extent
information contained therein relates to the Business, the Companies or any of
their Subsidiaries. Without limiting the generality of the foregoing, Parent and
Sellers will use their reasonable efforts to cause the Companies' independent
public accountants to cooperate with Purchaser and its independent public
accountants in the preparation of such offering materials. In connection with
the foregoing, Parent and Sellers will cause the Companies to deliver to
Purchaser as soon as such financial statements may reasonably be made available
by Parent and Sellers such consolidated interim financial statements (including
notes thereto) of the Companies and their Subsidiaries as may reasonably be
requested by Purchaser for inclusion in such offering materials. The costs and
expenses for the preparation of any audit of such financial statements shall be
paid by Purchaser promptly following delivery of such financial statements.
Purchaser shall indemnify and hold harmless Parent and its Affiliates against
any liability arising in connection with any information relating to the
Business disclosed by Purchaser, any Affiliate of Purchaser or any of their
respective officers, employees, advisers or agents to any third party financing
source, including but not limited to: (1) any Person lending money to Purchaser
or providing any direct or indirect financial assistance to Purchaser; (2) any
equity or other financial investor in Purchaser or, together with Purchaser, in
the Companies; and (3) in any offering materials prepared in connection with the
financing of the Purchase Price.
Section 4.11. Confidentiality. Each of Parent and the Sellers agrees that
from and after the Closing Date, it shall, and shall use its reasonable efforts
to cause its respective directors, officers, employees, advisors and Affiliates
to, keep the Information (as defined below) confidential for a period of three
years from the Closing Date, except that any Information required by law or
legal or administrative process to be disclosed may be disclosed without
violating the provisions of this Section 4.11. At Purchaser's request, Parent
and Sellers shall use legal action, including the commencement of litigation if
required, to enforce such confidentiality obligations, and Purchaser shall
reimburse Parent and Sellers for out-of-pocket expenses (including the fees and
expenses of counsel) incurred in connection with any such legal action. For
purposes hereof, the term "Information" means all confidential and proprietary
information that primarily relates to the Companies, the Subsidiaries or the
Business (and not primarily to the assets, business or operations of Parent and
its Affiliates other than the Companies and their Subsidiaries), other than any
such information that is available to the public on the Closing Date, or
thereafter becomes available to the public other than as a result of a breach of
this Section 4.11, or is developed independently by Parent or Sellers or their
respective Affiliates after the
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Closing or is obtained from third parties who have no duty of confidentiality to
Purchaser, the Companies or any of their Subsidiaries.
ARTICLE 5.
COVENANTS AND AGREEMENTS OF PURCHASER
Section 5.1. Certain Transactions. Purchaser shall not, and shall not
permit any of its Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of or
equity in, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets, if the entering into of a definitive
agreement relating to or the consummation of such acquisition, merger or
consolidation would reasonably be expected to (i) impose any material delay in
the obtaining of, or significantly increase the risk of not obtaining, any
authorizations, consents, orders, declarations or approvals of any Governmental
Authority necessary to consummate the transactions contemplated by this
Agreement or the expiration or termination of any applicable waiting period,
(ii) significantly increase the risk of any Governmental Authority entering an
order prohibiting the consummation of the transactions contemplated by this
Agreement, (iii) significantly increase the risk of not being able to remove any
such order on appeal or otherwise or (iv) materially delay or prevent the
consummation of the transactions contemplated by this Agreement. Purchaser shall
not conduct its business in a manner or take, or cause to be taken, any other
action that would reasonably be expected to prevent or materially delay Parent,
Sellers, the Companies or Purchaser from consummating the transactions
contemplated hereby.
Section 5.2. HSR Act. Subject to and in furtherance of Section 6.1, in
connection with the transactions contemplated by this Agreement, Purchaser (and,
to the extent required, its Affiliates) shall comply promptly with the
notification and reporting requirements of the HSR Act and use their reasonable
best efforts to obtain early termination of the waiting period under the HSR
Act. Purchaser shall substantially comply with any additional requests for
information, including requests for production of documents and production of
witnesses for interviews or depositions, by an Antitrust Authority.
Section 5.3. Notification. Between the date of this Agreement and the
Closing Date, Purchaser will promptly notify Parent in writing if Purchaser or
any of its Subsidiaries becomes aware of any fact or condition that it believes
causes or constitutes a breach of any of the representations and warranties of
Purchaser as of the date of this Agreement, or if Purchaser or any of its
respective Subsidiaries becomes aware of the occurrence after the date of this
Agreement of any fact or condition that it believes would cause or constitute a
breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition, unless in each case such breach or representation or warranty is
reasonably expected by Purchaser to be cured prior to Closing. Any claim for a
breach of covenant set forth in the previous sentence shall be made only for the
incremental Losses due to the failure to comply with such covenant (and not for
Losses due to the breach of the underlying representation and warranty). During
the same period, Purchaser will promptly notify Parent of the occurrence of any
breach of any covenant of Purchaser in this
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Article 5 or of the occurrence of any event that it believes may make the
satisfaction of the conditions in Article 7 impossible or unlikely.
ARTICLE 6.
JOINT COVENANTS AND AGREEMENTS
Section 6.1. Support of Transaction.
(a) Each of Parent and Purchaser agree to cooperate with
respect to the notices and filings to be made in connection with the consents,
approvals, waivers and authorizations required in connection with the
transactions contemplated hereby. Each of Parent, Sellers and Purchaser shall
(i) use its best efforts to assemble, prepare and file any information (and, as
needed, to supplement such information) as may be necessary to obtain as
promptly as practicable all governmental and regulatory consents required to be
obtained by it in connection with the transactions contemplated hereby
(including in respect of any Gaming Law), (ii) use its reasonable best efforts
to obtain all material consents and approvals of third parties that any of
Parent, Sellers, Purchaser or their respective Affiliates is required to obtain
in order to consummate the transactions contemplated hereby, and (iii) take such
other action as may reasonably be necessary or as another party may reasonably
request to satisfy the conditions of Article 7 or otherwise to comply with this
Agreement.
In connection therewith and not in limitation thereof, each party
shall take or cause to be taken all actions reasonably necessary in relation to
(i) obtaining of all necessary waivers, consents, authorizations and approvals
from Governmental Authorities and the making of necessary registrations and
filings and the taking of all steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, any Governmental Authority,
and (ii) the defending of any legal proceedings challenging the consummation of
any of the transactions contemplated by this Agreement.
(b) In furtherance of the foregoing, Purchaser agrees that it
will comply with any requirements imposed by Governmental Authorities as a
condition of Purchaser's obtaining any Regulatory Authorizations required to be
obtained by it in order to consummate the transactions contemplated hereby which
requirements would not (either individually or in the aggregate) have a material
adverse effect on the business, operations or financial condition of Purchaser
and its Subsidiaries taken as a whole, including without limitation divestiture
of any Non-Primary Properties.
(c) In furtherance of the foregoing, Parent agrees that it
will use its reasonable best efforts to obtain consents required under
Contracts, or other third party consents required to consummate the transactions
contemplated hereby ("Third Party Consents"), and Purchaser will cooperate in
all reasonable respects, and work together with Parent to obtain such Third
Party Consents; provided, however, that Parent shall not be required to make any
material expenditures to obtain such Third Party Consents and Purchaser shall
not be required to agree to any material modifications to Contracts in order to
obtain such Third Party Consents.
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Section 6.2. Section 338 Election.
(a) Except as set forth in Section 6.2(b), neither Parent,
Sellers, Purchaser or their respective Affiliates shall make, or allow to be
made, an election under Section 338 of the Code and any corresponding elections
permitted under state, local or foreign law with respect to the acquisition of
the Companies and each of their Subsidiaries.
(b) Notwithstanding Section 6.2(a), Parent, SDIC, Purchaser
and their respective Affiliates agree to join in making Section 338(h)(10)
Elections with respect to the acquisition of Tunica and each of its Subsidiaries
that is a corporation so long as such election does not require a corresponding
election regarding Xxxxxxx Xxxxx and its Subsidiaries. Purchaser, Parent and
SDIC shall exchange completed and executed copies of Internal Revenue Service
Form 8023, required schedules thereto, and any similar state, local and foreign
forms as soon as practical after the Closing. The Purchase Price and all other
capitalized costs shall be allocated among the Interests and Shares (other than
the Tunica Shares) and the assets of Tunica. In connection therewith, Purchaser,
Parent and Sellers shall attempt in good faith to agree to an allocation of the
Purchase Price and all other capitalized costs among the Shares (other than the
Tunica Shares), the Interests and the assets of Tunica as soon as reasonably
practical after the Closing.
Section 6.3. Approvals. Each of Purchaser, Parent, Sellers and the
Companies shall as promptly as practicable, but in no event later than 30 days
following the execution and delivery of this Agreement, file or submit any
applications, filings and other submissions required by applicable laws or by
Governmental Authorities in connection with obtaining all necessary regulatory
consents, approvals, waivers and authorizations required to be obtained prior to
the Closing (the "Regulatory Authorizations") and to respond to any requests
from Government Authorities and promptly file any additional information
required in connection with such filings as promptly as practicable after
receipt of requests therefor. Each of Purchaser and Parent agrees to cooperate
with and promptly to consult with, to provide any reasonably available
information with respect to, and to provide the other party (and its counsel)
advance drafts and copies of all presentations and filings to be made in
connection with the Regulatory Authorizations. In addition, each of Purchaser,
Parent, Sellers and the Companies shall, and shall cause each of its
Subsidiaries to (and shall use its reasonable efforts to cause each of its
Affiliates other than each of its Subsidiaries to), if it is necessary to obtain
any regulatory approval for the consummation of the transactions contemplated
hereby, disassociate themselves from any Person or Persons deemed, or reasonably
likely to be deemed, unsuitable by any Gaming Commission. Purchaser, Parent,
Sellers and the Companies shall keep each other apprised of the status of any
communications with, and any inquiries or requests for additional information
from, the Gaming Commissions and shall comply promptly with any such inquiry or
request.
Section 6.4. Certain Employee Benefits Matters.
(a) Savings Plans.
(i) As soon as is practicable after the Closing Date,
but effective as of such date, Purchaser shall adopt or designate a 401(k)
Savings Plan (the
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"Purchaser Savings Plan") and shall establish a trust pursuant thereto
(the "Purchaser Savings Trust"). As soon as is practicable after the
Closing Date, Purchaser shall furnish to Parent a determination letter
finding the Purchaser Savings Plan and the Purchaser Savings Trust to be
qualified and tax-exempt under Sections 401(a) and 501(a) of the Code.
(ii) As soon as practicable after Parent's receipt of a
copy of such letter, Parent, shall cause the Parent Savings Plan and the
Trust pursuant thereto (the "Parent Savings Trust") to transfer to the
Purchaser Savings Plan and Purchaser Savings Trust the accounts under the
Parent Savings Plan and the Parent Savings Trust (and the assets and
liabilities therein) attributable to any employee of the Companies or any
Subsidiary as of immediately prior to the Closing Date or any employee of
Parent or Sellers or any of their affiliates, in any case, who will
continue their employment with or shall become an employee, of Purchaser
or any of its affiliates as of the Closing Date (the "Employees"). Seller
shall cause all of such accounts to be fully vested upon such transfer.
Such transfer shall be made in the form of cash except that to the extent
that such accounts are invested in Parent, Sellers or the Companies' (as
the case may be) stock the transfer shall be made in the form of such
stock. Such transfer shall satisfy the requirements of Code Sections
401(a)(12) and 414(l) and the regulations pursuant thereto. Prior to such
transfer, Purchaser will provide Parent with such documents and other
information as Parent shall reasonably request to assure itself that the
Purchaser Savings Plan and the Purchaser Savings Trust contain participant
loan provisions and procedures necessary to effect the orderly transfer of
participant loan balances associated with the transfer of assets. Prior to
such transfer, Parent will provide Purchaser with such documents and other
information as Purchaser shall reasonably request to assure itself that
the Parent Savings Plan and Parent Savings Trust are qualified and
tax-exempt under the provisions of Code Sections 401(a) and 501(a)
respectively as of the date of such transfer. The Purchaser Savings Plan
shall preserve for the Employees all benefits, rights and features
applicable to such transferred accounts, including but not limited to
those rights and features protected under Section 411(d)(6) of the Code
and participant loans, and such Plan shall provide for future participant
loans from current account balances. Parent shall provide to Purchaser
copies of such personnel and other records of Parent pertaining to the
Employees and such records of any agent or representative of Parent, in
each case pertaining to the Parent Savings Plan and Parent Savings Trust
and as Purchaser may reasonably request in order to administer and manage
the accounts and assets transferred to the Purchaser Savings Plan and
Purchaser Savings Trust. Upon such transfer, the Purchaser Savings Plan
shall assume all liabilities and obligations whatsoever with respect to
all amounts transferred from the Parent Savings Plan and Parent Savings
Trust to the Purchaser Savings Plan and Purchaser Savings Trust in respect
of the Employees and each of Parent and its affiliates and the Parent
Savings Plan and Parent Savings Trust shall be relieved of all such
liabilities and obligations. Purchaser and Parent shall cooperate in the
filing of documents required by the transfer of assets and liabilities
described herein.
(iii) The Purchaser Savings Plan shall provide to the
Employees all of their benefits accrued under the Parent Savings Plan as
of the date of transfer. The Purchaser Savings Plan shall also provide
that an Employee's period of employment with
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Sellers, Parent, the Companies, any of their Subsidiaries or any
predecessor thereof (as applicable) for which credit was given under the
Parent Savings Plan shall be given equivalent credit under the Purchaser
Savings Plan to the effect that if any Employee becomes an employee of
Purchaser as of the Closing Date, or thereafter by reason of recall, no
interruption in participation, benefit accrual or vesting service shall be
deemed to have occurred for such Employee under the Purchaser Savings Plan
by reason of the change in employment contemplated by this Agreement. The
Purchaser Savings Plan shall further contain all such provisions as are
necessary for the transfer not to cause Parent Savings Plan to fail to
satisfy requirements of Code Sections 401(a) or 401(k).
(iv) As soon as is practicable after the Closing Date
and prior to the transfer contemplated under this Section 6.4(a), Sellers
and Purchaser shall make such filings as are required under Code Section
6058(b) with respect to such transfers including the filing of form
5310-A.
(b) Severance. Except as provided in Section 6.5(a), Purchaser
shall become responsible for payment, to any employee of the Companies or any
Subsidiary thereof and any other Employees listed on Section 6.4(b) of the
Parent Disclosure Letter other than any such employee retained by Parent or its
Affiliates following the Closing, of any severance or other similar compensation
and benefits under any Employee Plan which are or may become payable as a result
of the termination of any such employee by Purchaser, the Companies or their
Subsidiaries as of and following the Closing or which are or may become payable
solely as a result of the transactions contemplated hereby. Purchaser shall be
entitled to any tax deductions or other tax benefits attributable to any
severance or other similar compensation or benefit payments for which Purchaser
is responsible pursuant to this Section 6.4.
(c) Welfare Arrangements. Subject to obligations under
applicable law and the terms of any collective bargaining agreements or other
Contracts with any labor union or other labor organization covering Employees,
Purchaser agrees that, for a period of one year from and after the Closing, it
shall, or shall cause its Affiliates to, provide the Employees with employee
welfare and retirement plans and programs which provide benefits that are
substantially similar to those provided to similarly situated employees of
Purchaser or such Affiliates. From and after the Closing Date, Sellers shall
remain responsible for any and all liabilities with respect to the employees,
directors, officers or consultants of the Companies and Subsidiaries thereof or
their beneficiaries or dependents that are incurred by such individuals on or
prior to the Closing Date under the applicable Employee Plans for health, life,
accidental death and dismemberment, supplemental employment compensation,
dental, fringe benefits, expense reimbursement, accident, sickness and
disability benefits. For purposes of this Agreement, (i) a claim for health
benefits (including, without limitation, claims for medical, prescription drug,
dental, and vision care expenses) will be deemed to have been incurred on the
date on which the related medical service was rendered to the claimant; (ii) a
claim for sickness or disability benefits will be deemed to have been incurred
on the date such sickness or disability occurs, except that no claim shall be
deemed to have occurred prior to the Closing Date unless such claim is filed
within nine months of the Closing Date; and (iii) in the case of any claim for
benefits other than health benefits (e.g., life insurance benefits), a claim
will be deemed to have been incurred upon the occurrence of the event giving
rise to such claims. Purchaser shall be responsible for all claims that are
incurred by
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Employees on or after the Closing Date under the applicable benefit plans,
policies or arrangements providing health, life, accidental death and
dismemberment, supplemental employment compensation, dental, fringe benefits,
expense reimbursement, accident, sickness and disability benefits and which are
maintained by Purchaser, any Company or any Subsidiary thereof.
(d) Service Credit. Following the Closing, Purchaser shall
cause all employee benefit plans of Purchaser or its Affiliates to provide that
a Employee's period of employment with Sellers, Parent, the Companies, any
Subsidiary thereof or any predecessor thereof (as applicable) shall be treated
as service for Purchaser, or its Affiliates, as applicable, for purposes of
eligibility and vesting and, to the extent that Purchaser receives assets equal
in value to the liability thereby assumed (or such liability is reflected as a
liability on the balance sheet of the Companies prepared in the ordinary course
in accordance with GAAP), for purposes of benefit accrual. Any and all
pre-existing condition limitations and eligibility waiting periods under any
group health plan shall be waived with respect to the Employees and their
eligible dependents, and Employees shall be given credit for amounts paid under
any Welfare Plan during the same period for purposes of applying deductibles,
co-payments and out-of-pocket maximums as though such amounts had been paid in
accordance with the terms and conditions of the employee welfare plans
maintained by Purchaser or its Affiliates.
(e) Purchaser agrees to assume, honor, maintain and perform,
and to cause its affiliates to assume, honor, maintain and perform in accordance
with their respective terms, without deductions, counterclaims, interruptions or
deferments (other than withholding under applicable law), the employment and
severance agreements and arrangements, as amended through the date hereof or as
contemplated hereby, that are set forth on Section 6.4(e) of the Parent
Disclosure Letter. Purchaser shall, or shall cause its affiliates to, honor and
discharge all obligations under any collective bargaining agreement or other
Contract with any labor union or other labor organization covering Employees or
former employees of the Companies or any of their Subsidiaries in effect as of
the date hereof until their expiration; provided, however, that this undertaking
is not intended to prevent Purchaser or its Affiliates from exercising their
rights with respect to such collective bargaining agreements and in accordance
with their terms, including any right to amend, modify, suspend, revoke or
terminate any such contract, agreement, collective bargaining agreement or
commitment or portion thereof.
(f) Purchaser agrees to bear, and indemnify and hold harmless
Parent and Seller from and against, all direct and indirect costs, expenses and
liabilities arising from or relating to claims made by or on behalf of the
Employees in respect of all notices, payments, fines or assessments due to any
government authority pursuant to any applicable foreign, federal, state or local
law, common law, statute, rule or regulation with respect to the employment,
discharge or layoff of Employees, including, but not limited to the Worker
Adjustment and Retraining Notification Act, and any rules or regulations as have
been issued in connection with any of the foregoing, and for any liability or
benefit continuation obligation under Section 4980B of the Code and Sections
601-609 of ERISA.
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Section 6.5. Employment Agreements and Severance Obligations.
(a) Purchaser will assume each of the employment, severance
and similar agreements set forth on Section 6.5 of the Parent Disclosure Letter,
and all liabilities thereunder (provided that Parent and Purchaser will each pay
for one-half of all severance and change of control payments owing to Xxxxx
Xxxxxxx (and related tax gross-ups)) .
(b) Except for severance plans (as provided in Section 6.4(b))
or as otherwise expressly provided in this Article 6, Parent and Sellers shall
remain solely responsible for any liability incurred with respect to any
Employee under any Employee Plan sponsored, maintained or contributed to by
Parent or any of the Sellers, including, without limitation, the ITT Corporation
Salaried Retirement Plan and ITT Corporation Excess Savings Plan. Sellers shall
also be solely responsible for any liability to make payments pursuant to the
Caesars Retention Bonus Program.
Section 6.6. Closings Under Certain Circumstances.
(a) In the event that, on or after November 1, 1999, the
conditions set forth in Sections 7.1(c) and 7.2(c) have been satisfied with
respect to the Primary Properties, but not with respect to one or more
Non-Primary Properties, then (subject to satisfaction of the other closing
conditions contained in Article 7) the parties will proceed to close the
transactions contemplated by this Agreement in accordance with this Section 6.6.
(b) In the event that a conveyance of the Shares and Interests
under the circumstances set forth in Section 6.6(a) in accordance with this
Agreement would not result in a violation of law or requirements of a
Governmental Authority in either case resulting in a material liability or a
material impairment of a Contract required to be listed on Section 2.8 of the
Parent Disclosure Letter (the "Adverse Consequences"), then the Shares and
Interests shall be conveyed in accordance with this Agreement, notwithstanding
the fact that Purchaser, the Companies or their Subsidiaries may be required to
obtain consents or approvals with respect to a Non-Primary Property after
Closing and/or divest a Non-Primary Property after Closing.
(c) In the event that a conveyance of the Shares would create
Adverse Consequences but such Adverse Consequences would not occur if the
operations of a Non-Primary Property of the Companies or their Subsidiaries were
placed in a trust beneficially owned by the Companies or their Subsidiaries,
then the parties shall use all reasonable efforts to establish such a trust so
as to permit the conveyance of the Shares. If it is not reasonably possible to
establish such a trust prior to Closing, then, prior to Closing, such
Non-Primary Property (or applicable portion thereof) shall be transferred to a
wholly-owned special purpose Subsidiary of Parent (a "Special Purpose Sub");
provided, however, that such transfer shall encompass only the minimum assets,
liabilities and operations necessary to avoid the Adverse Consequences and shall
be effected in a manner that minimizes expenses and tax cost to Parent and its
Subsidiaries in connection with such transfer. Purchaser shall promptly
reimburse Parent or its Affiliates for its Taxes, Losses and reasonable costs in
transferring such assets, liabilities and operations to the Special Purpose Sub
in connection with the transactions contemplated by the foregoing (it being
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understood and agreed that for purposes of this Section 6.6, costs shall include
the reasonable value of reductions in net operating losses of Parent and its
Affiliates).
(d) In the event that the conveyance of the Interests would
create Adverse Consequences but such Adverse Consequences would not occur if the
Interests were conveyed to a trust beneficially owned by Purchaser and/or its
wholly-owned Subsidiaries, then the parties shall use all reasonable efforts to
establish such a trust and convey the Interests to such trust at Closing. If it
is not reasonably possible to establish such a trust prior to the Closing, then
the Interests shall continue to be held by Sellers subject to the provisions of
this Section 6.6. Purchaser shall reimburse Parent or its Affiliates for its
Taxes, Losses and reasonable costs in connection with the transactions
contemplated by the foregoing.
(e) Any assets, liabilities and operations transferred to a
Special Purpose Sub pursuant to Section 6.6(c), and/or MEG and its assets,
liabilities and operations if the Interests are retained by Sellers pursuant to
Section 6.6(d), are referred to herein as "Retained Operations." The parties
will continue to use their reasonable best efforts following the Closing to
obtain the consents and approvals necessary to permit the conveyance of the
Retained Operations to Purchaser without creating Adverse Consequences, and
promptly upon obtaining such consents and approvals, with respect to any
Retained Operations, shall convey such Retained Operations to Purchaser in a
manner consistent with the provisions of this Agreement. Pending such conveyance
or a disposition pursuant to Section 6.6(f), (i) Parent shall use its reasonable
efforts to ensure that such Retained Operations are conducted in the ordinary
course consistent with the provisions of this Agreement, (ii) to the extent
legally permissible, such Retained Operations shall be conducted for the
economic benefit of Purchaser and any net cash flow from such Retained
Operations shall be remitted to Purchaser monthly (or, if the foregoing is not
permitted consistent with avoiding Adverse Consequences, then such net after tax
cash flow shall be segregated by Parent and remitted to Purchaser concurrent
with the conveyance to Purchaser, or disposition pursuant to Section 6.6(f), of
such Retained Operations), and (iii) Purchaser shall be responsible for funding
(or, if not permitted to fund directly, shall promptly reimburse Parent for
funding) any net cash shortfalls of the Retained Operations, and shall promptly
reimburse Parent or its Affiliates for any other Taxes, Losses and reasonable
costs incurred by it in connection with the Retained Operations. If any assets,
liabilities or operations are placed in a trust pursuant to Section 6.6(c) or
(d), then Purchaser shall promptly reimburse Parent or its Affiliates for any
Taxes, Losses or reasonable costs incurred by it in connection with the
operation or holding thereof.
(f) In the event that, within six months after the Closing,
the parties have been unable to obtain the consents and approvals necessary to
permit the conveyance of any Retained Operations to Purchaser or its
Subsidiaries without creating Adverse Consequences, then, at Purchaser's
direction, (i) such Retained Operations shall be conveyed to Purchaser or its
Subsidiaries notwithstanding such Adverse Consequences or (ii)(x) such Retained
Operations will be sold to a third party buyer designated by Purchaser, (y)
Parent will cooperate with Purchaser in all reasonable respects in effecting
such third party sale (provided that Parent or its Affiliates shall not be
required to incur any liability in connection with such sale) and (z) Purchaser
shall promptly reimburse Parent or its Affiliates for all of its Taxes, Losses
and reasonable costs incurred in connection with such third party sale. The net
after tax proceeds of such sale shall be
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remitted to Purchaser promptly following such sale. Purchaser agrees to direct
Parent to take action with respect to the foregoing within six months after the
Closing.
Section 6.7. Ancillary Agreements. At Closing, the parties shall enter
into the following agreement (each an "Ancillary Agreement"):
(a) a License Agreement, in a form to be mutually agreed to by
the parties, pursuant to which (i) Parent and/or its appropriate Affiliates will
license the Company and/or its appropriate Affiliates, on a royalty-free basis
for a period of ten years from the Closing Date, to use the "Sheraton" name and
any related marks in connection with Gaming Facilities currently using such
marks, in a manner consistent with such current use, and (ii) the Company and/or
its appropriate Affiliates will license Parent and/or its appropriate
Affiliates, on a royalty-free basis for a period of ten years from the Closing
Date, to use the "Caesars" name and any related marks in connection with the
Excluded Assets and the Excluded Companies, in a manner consistent with current
use.
(b) a Transition Services Agreement, in a form to be mutually
agreed to by the parties, providing for the provision of required transitional
services by Purchaser for the benefit of Parent or Parent for the benefit of
Purchaser, as applicable, on a cost reimbursement basis, for a period of no more
than one year.
Section 6.8. Post-Closing Cooperation. After the Closing, upon reasonable
written notice, Purchaser and Parent shall furnish or cause to be furnished to
the other party and its employees, counsel, auditors and representatives access,
during normal business hours, such information and assistance relating to the
Companies and their Subsidiaries and the Business as is reasonably necessary for
financial reporting and accounting matters, the preparation and filing of any
Tax Returns, reports or forms or the defense of any Tax audit, claim or
assessment. Each party shall reimburse the other for reasonable out-of-pocket
costs and expenses incurred in assisting the other pursuant to this Section 6.8.
Neither party shall be required by this Section 6.8 to take any action that
would unreasonably interfere with the conduct of its business or unreasonably
disrupt its normal operations. Parent shall cooperate with Purchaser in
connection with any filings required to be made by Purchaser with Governmental
Authorities after the Closing.
Section 6.9. Resignations. Parent shall provide, as of the Closing, the
resignations and releases of the officers and directors of the Companies and
their Subsidiaries who are employees, officers or directors of Parent and its
Affiliates (other than any such persons who will continue as employees of the
Companies or their Subsidiaries following the Closing).
Section 6.10. Bank Accounts. Parent shall procure, as of the Closing,
appropriate documentation effectuating the transfer and substitution of
representatives of Purchaser with respect to the Companies' bank accounts and
security arrangements.
Section 6.11. Form of Instruments, Etc. to be Reasonably Satisfactory. The
parties agree that the form and substance of all actions, proceedings,
instruments and documents required
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to consummate the transactions contemplated by this Agreement shall be subject
to the reasonable approval of each party and their respective counsel.
ARTICLE 7.
CONDITIONS TO OBLIGATIONS
Section 7.1. Conditions to Obligations of Purchaser, Parent, Seller and
the Companies. The obligations of Purchaser, Parent, Sellers and the Companies
to consummate, or cause to be consummated, the transactions contemplated hereby
are subject to the satisfaction of the following conditions, any one or more of
which may be waived in writing by such parties:
(a) All waiting periods under the HSR Act applicable to
transactions contemplated hereby shall have expired or been terminated.
(b) There shall have been obtained, (i) all material permits,
approvals, clearances, and consents of, and all filings with, Governmental
Authorities required to be procured by Purchaser, Parent, Sellers or the
Companies under Gaming Laws required in order to consummate the transactions
contemplated by this Agreement and (ii) all other Regulatory Authorizations the
failure of which to procure would reasonably be expected to have a Material
Adverse Effect; provided, however, that from and after November 1, 1999, the
foregoing condition shall apply only with respect to such permits, approvals,
clearances, consents, filings and other Regulatory Authorizations required in
connection with the Primary Properties.
(c) There shall not be (i) in force any order or decree,
statute, rule or regulation restraining, enjoining or prohibiting the
consummation of the transactions contemplated hereby, or (ii) any material suit
or proceeding by a Governmental Authority to restrain or enjoin the consummation
of the transactions contemplated hereby or to nullify or render ineffective this
Agreement if consummated.
Section 7.2. Conditions to Obligations of Purchaser. The obligations of
Purchaser to consummate, or cause to be consummated, the transactions
contemplated by this Agreement are subject to the satisfaction of the following
additional conditions, any one or more of which may be waived in writing by
Purchaser:
(a) Each of the representations and warranties of Parent,
Sellers and the Companies contained in this Agreement shall be true and correct
in all material respects both on the date hereof and as of the Closing, as if
made anew at and as of that time (except that representations and warranties
that are made as of a specific date need be true and correct in all material
respects only as of such date), except in each case for changes after the date
hereof which are expressly contemplated or permitted by this Agreement, and each
of the covenants and agreements of Parent, Sellers and the Companies to be
performed as of or prior to the Closing shall have been duly performed in all
material respects.
(b) Parent, Sellers and the Companies shall have delivered to
Purchaser a certificate signed by an officer of Parent, Sellers and the
Companies, dated the Closing,
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certifying that the conditions specified in Section 7.1, as they relate to
Parent, Sellers and the Companies, and subsection 7.2(a) have been fulfilled.
(c) Any notice to, or consent or approval of, any party to any
Contract required to be listed on Section 2.8 of the Parent Disclosure Letter
hereto required for the consummation of the transactions contemplated hereby or
for the continued enjoyment by the Companies and their Subsidiaries of the
benefits of any such Contract after the Closing shall have been given or
obtained, except to the extent that the failure to give any such notices or
obtain any such consent or approval would not, either individually or in the
aggregate, have a Material Adverse Effect; provided, however, that from and
after November 1, 1999, the foregoing condition shall apply only with respect to
such notices, consents and approvals required in connection with the Primary
Properties.
(d) Parent, Sellers and the Companies shall have executed and
delivered to Purchaser each of the Ancillary Agreements to which each is a
party.
Section 7.3. Conditions to the Obligations of Parent, Sellers and the
Companies. The obligations of Parent, Sellers and the Companies to consummate
the transactions contemplated by this Agreement are subject to the satisfaction
of the following additional conditions, any one or more of which may be waived
in writing by Parent, Sellers or the Companies:
(a) Each of the representations and warranties of Purchaser
contained in this Agreement shall be true and correct in all material respects
both on the date hereof and as of the Closing, as if made anew at and as of that
time (except that representations and warranties that are made as of a specific
date need be true and correct in all material respects only as of such date),
except in each case for changes after the date hereof which are expressly
contemplated or permitted by this Agreement, and each of the covenants and
agreements of Purchaser to be performed as of or prior to the Closing shall have
been duly performed in all material respects.
(b) Purchaser shall have delivered to Parent and Sellers a
certificate signed by an officer of Purchaser, dated the Closing, certifying
that such officer, the conditions specified in Section 7.1, as they relate to
Purchaser, and subsection 7.3(a) have been fulfilled.
(c) Purchaser shall have executed and delivered to Parent each
of the Ancillary Agreements to which it is a party.
ARTICLE 8.
TERMINATION
Section 8.1. Termination. This Agreement may be terminated and the
transactions contemplated hereby abandoned:
(a) By mutual written consent of the parties at any time prior
to the Closing.
(b) Prior to the Closing, by written notice to Sellers from
Purchaser, if (i) there is any breach of any representation, warranty, covenant
or agreement on the part of
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Parent, Sellers or the Companies set forth in this Agreement, or if a
representation or warranty of Parent, Sellers or the Companies shall be untrue,
in either case, such that the condition specified in Section 7.2(a) hereof would
not be satisfied at the Closing (a "Terminating Seller Breach"), except that, if
such Terminating Seller Breach is curable by Parent, Sellers or the Companies
through the exercise of its reasonable best efforts, then, for a period of up to
30 days, but only as long as Parent, Sellers or the Companies continues to use
its reasonable best efforts to cure such Terminating Seller Breach (the "Seller
Cure Period"), such termination shall not be effective, and such termination
shall become effective only if the Terminating Seller Breach is not cured within
the Seller Cure Period; (ii) the Closing has not occurred on or before the Final
Date, other than as a result of a breach of a representation, warranty, covenant
or agreement of Purchaser; or (iii) consummation of any of the transactions
contemplated hereby is permanently enjoined, prohibited or otherwise restrained
by the terms of a final, non-appealable order or judgment of a court of
competent jurisdiction.
(c) Prior to the Closing, by written notice to Purchaser from
Sellers, if (i) there is any breach of any representation, warranty, covenant or
agreement on the part of Purchaser set forth in this Agreement, or if a
representation or warranty of Purchaser shall be untrue, in either case, such
that the condition specified in Section 7.3(a) hereof would not be satisfied at
the Closing (a "Terminating Purchaser Breach"), except that, if such Terminating
Purchaser Breach is curable by Purchaser through the exercise of its reasonable
best efforts, then, for a period of up to 30 days, but only as long as Purchaser
continues to use its reasonable best efforts to cure such Terminating Purchaser
Breach (the "Purchaser Cure Period"), such termination shall not be effective,
and such termination shall become effective only if the Terminating Purchaser
Breach is not cured within the Purchaser Cure Period; (ii) the Closing has not
occurred on or before the Final Date, other than as a result of a breach of a
representation, warranty, covenant or agreement of Parent, Sellers or the
Companies; or (iii) consummation of any of the transactions contemplated hereby
is permanently enjoined, prohibited or otherwise restrained by the terms of a
final, non-appealable order or judgment of a court of competent jurisdiction.
Section 8.2. Effect of Termination. In the event of termination of this
Agreement pursuant to Section 8.1, except as set forth in the last sentence of
this Section 8.2, this Agreement shall forthwith become void and have no effect,
without any liability on the part of any party hereto or their respective
Affiliates, officers, directors or stockholders; provided, however, that nothing
in this section 8.2 shall relieve or limit the liability or obligations
hereunder of any party (the "Defaulting Party") to the other party or parties on
account of a material breach of a covenant or agreement contained herein, or any
fraudulent representation or warranty contained herein by the Defaulting Party.
The provisions of Sections 8.2, 12.5, 12.6 and 12.12 hereof shall survive any
termination of this Agreement.
ARTICLE 9.
INDEMNIFICATION
Section 9.1. Survival of Representations and Warranties. Subject to the
limitations and other provisions of this Agreement, the representations and
warranties of the parties contained herein shall survive the Closing and shall
remain in full force and effect, regardless of any
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investigation made by or on behalf of Parent, Sellers or Purchaser, for a period
of eighteen months after the Closing Date; provided, however, that (i) the
representations and warranties set forth in Section 2.19 ("Taxes") shall survive
for a period equal to the applicable statute of limitations (with extensions)
with respect to the matters addressed in such Sections and (ii) the
representations and warranties in Sections 2.1, 2.2, 2.3, 2.4, 2.5, 3.1 and 3.2
shall survive indefinitely.
Section 9.2. Indemnification by Purchaser.
(a) Purchaser agrees, subject to the other terms and
conditions of this Agreement, to indemnify Parent, Affiliates of Parent and
their respective officers, directors, agents or employees, and their respective
successors and assigns (each a "Seller Indemnified Party") against and hold each
Seller Indemnified Party harmless from all Losses (without duplication) to such
Seller Indemnified Party arising out of (i) the breach of any representation or
warranty of Purchaser herein, (ii) the breach of any covenant or agreement of
Purchaser herein or (iii) the Company Liabilities (other than such Liabilities
for which Parent is required to indemnify Purchaser pursuant to Section 9.3).
Anything in Section 9.1 to the contrary notwithstanding, no claim may be
asserted nor may any action be commenced against Purchaser for breach of any
representation or warranty contained herein, unless written notice of such claim
or action is received by Purchaser describing in reasonable detail the facts and
circumstances with respect to the subject matter of such claim or action on or
prior to the date on which the representation or warranty on which such claim or
action is based ceases to survive as set forth in Section 9.1, whether or not
the subject matter of such claim or action shall have occurred before or after
such date.
(b) (i) The indemnification obligations of Purchaser pursuant
to Section 9.2(a)(i) shall not be effective until the aggregate dollar amount of
all Losses that would otherwise be indemnifiable pursuant to Section 9.2(a)(i)
exceeds $15 million (the "Purchaser's Threshold Amount"), at which point such
obligations shall be effective only as to the amount of such Losses in excess of
the Purchaser's Threshold Amount, subject to the limitation in Section
9.2(b)(ii); and (ii) the indemnification obligations of Purchaser pursuant to
Section 9.2(a)(i) shall be effective only until the dollar amount paid in
respect of the Losses indemnified against under Section 9.2(a)(i) aggregates to
an amount equal to $400 million; provided that the foregoing limitations shall
not apply with respect to any breach of the representations and warranties set
forth in Section 3.1, 3.2, 3.6 or 3.7.
(c) Parent agrees to give, and cause each Seller Indemnified
Party to give, Purchaser written notice of any claim, assertion, event or
proceeding by or in respect of a third party as to which it may request
indemnification hereunder or as to which Purchaser's Threshold Amount may be
applied as soon as is practicable and in any event within 30 days of the time
that such Seller Indemnified Party learns of such claim, assertion, event or
proceeding; provided, however, that the failure to so notify Purchaser shall not
affect rights to indemnification hereunder except to the extent that Purchaser
is actually prejudiced by such failure. Within 30 days after receipt of such
notification, Purchaser may elect to direct, through counsel of its own choosing
reasonably acceptable to the Seller Indemnified Party, the defense or settlement
of any such claim or proceeding at its own expense; provided, that no settlement
will be made without
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the consent of the Seller Indemnified Party (not to be unreasonably withheld or
delayed). If Purchaser elects to assume the defense of any such claim or
proceeding, the Seller Indemnified Party may participate in such defense, but in
such case the expenses of the Seller Indemnified Party shall be paid by such
Seller Indemnified Party. Parent shall provide, or cause such Seller Indemnified
Party to provide, Purchaser with access to its records and personnel relating to
any such claim, assertion, event or proceeding during normal business hours and
shall otherwise cooperate with Purchaser in the defense or settlement thereof,
and Purchaser shall reimburse Parent or the Seller Indemnified Party for all its
reasonable out-of-pocket expenses in connection therewith. If Purchaser elects
to direct the defense of any such claim or proceeding, the Seller Indemnified
Party shall not pay, or permit to be paid, any part of any claim or demand
arising from such asserted liability, unless Purchaser consents (which consent
is not to be unreasonably withheld) in writing to such payment or unless
Purchaser, subject to the last sentence of this Section 9.2(c), withdraws from
the defense of such asserted liability, or unless a final judgment from which no
appeal may be taken by or on behalf of Purchaser is entered against the Seller
Indemnified Party for such liability. If Purchaser shall not be entitled to
direct the defense, or fails to defend, or if, after commencing or undertaking
any such defense, Purchaser fails to prosecute or withdraws from such defense,
the Seller Indemnified Party shall have the right to undertake the defense or
settlement thereof, at Purchaser's expense. If the Seller Indemnified Party
assumes the defense of any such claim or proceeding pursuant to this Section
9.2(c) and proposes to settle such claim or proceeding prior to a final judgment
thereon or to forego appeal with respect thereto, then Parent or Seller shall
give, or cause such Seller Indemnified Party to give, Purchaser prompt written
notice thereof and Purchaser shall have the right to participate in the
settlement or assume or reassume the defense of such claim or proceeding.
Section 9.3. Indemnification by Parent and Sellers.
(a) Parent and Sellers agree, jointly and severally, subject
to the other terms and conditions of this Agreement, to indemnify Purchaser,
Affiliates of Purchaser, and each of their respective officers, directors,
agents or employees, and their respective successors and assigns (each a
"Purchaser Indemnified Party") against and hold each Purchaser Indemnified Party
harmless from all Losses (without duplication) to such Purchaser Indemnified
Party arising out of (i) the breach of any representation or warranty of Parent,
Sellers or the Companies herein (other than the breach of any representation or
warranty set forth in Section 2.19, which is addressed in Article 10), (ii) the
breach of any covenant or agreement of Parent, Sellers or the Companies herein
or (iii) the Retained Liabilities. Anything in Section 9.1 to the contrary
notwithstanding, no claim may be asserted nor any action commenced against
Parent or Sellers for breach of any representation or warranty contained herein,
unless written notice of such claim or action is received by Parent or Sellers
describing in detail the facts and circumstances with respect to the subject
matter of such claim or action on or prior to the date on which the
representation or warranty on which such claim or action is based ceases to
survive as set forth in Section 9.1, whether or not the subject matter of such
claim or action shall have occurred before or after such date.
(b) (i) The indemnification obligations of Parent and Sellers
pursuant to Section 9.3(a)(i) shall not be effective until the aggregate dollar
amount of all Losses that would otherwise be indemnifiable pursuant to Section
9.3(a)(i) exceeds $15 million (the "Seller's
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Threshold Amount"), at which point such obligations shall be effective only as
to the amount of such Losses in excess of the Seller's Threshold Amount, subject
to the limitation in Section 9.3(b)(ii); and (ii) the indemnification
obligations of Parent and Sellers pursuant to Section 9.3(a)(i) shall be
effective only until the dollar amount paid in respect of the Losses indemnified
against under Section 9.3(a)(i) aggregates to an amount equal to $400 million;
provided, that the foregoing limitations shall not apply with respect to any
breach of the representations and warranties set forth in Sections 2.1, 2.2,
2.3, 2.4, 2.5 or 2.23.
(c) Purchaser agrees to give, and to cause each Purchaser
Indemnified Party to give, Parent written notice of any claim, assertion, event
or proceeding by or in respect of a third party as to which it may request
indemnification hereunder or as to which Seller's Threshold Amount may be
applied as soon as is practicable and in any event within 30 days of the time
that such Purchaser Indemnified Party learns of such claim, assertion, event or
proceeding; provided, however, that the failure to so notify Parent shall not
affect rights to indemnification hereunder except to the extent that Parent is
actually prejudiced by such failure. Within 30 days after receipt of such
notification, Parent may elect to direct, through counsel of its own choosing
reasonably acceptable to the Purchaser Indemnified Party, the defense or
settlement of any such claim or proceeding at their own expense; provided, that
no settlement will be made without the consent of the Purchaser Indemnified
Party (not to be unreasonably withheld or delayed). If Parent elects to assume
the defense of any such claim or proceeding, the Purchaser Indemnified Party may
participate in such defense, but in such case the expenses of the Purchaser
Indemnified Party shall be paid by such Purchaser Indemnified Party. Purchaser
shall provide, or cause the Purchaser Indemnified Party to provide, Parent with
access to its records and personnel relating to any such claim, assertion, event
or proceeding during normal business hours and shall otherwise cooperate with
Parent in the defense or settlement thereof, and Parent shall reimburse
Purchaser or the Purchaser Indemnified Party for all its reasonable
out-of-pocket expenses in connection therewith. If Parent elects to direct the
defense of any such claim or proceeding, the Purchaser Indemnified Party shall
not pay, or permit to be paid, any part of any claim or demand arising from such
asserted liability unless Parent consents (which consent is not to be
unreasonably withheld) in writing to such payment or unless Parent, subject to
the last sentence of this Section 9.3(c), withdraws from the defense of such
asserted liability or unless a final judgment from which no appeal may be taken
by or on behalf of Parent is entered against the Purchaser Indemnified Party for
such liability. If Parent shall not be entitled to direct the defense, or fails
to defend, or, if after commencing or undertaking any such defense, Parent fails
to prosecute or withdraw from such defense, the Purchaser Indemnified Party
shall have the right to undertake the defense or settlement thereof, at the
expense of Parent. If the Purchaser Indemnified Party assumes the defense of any
such claim or proceeding pursuant to this Section 9.3(c) and proposes to settle
such claim or proceeding prior to a final judgment thereon or to forego any
appeal with respect thereto, then the Purchaser Indemnified Party shall give
Parent prompt written notice thereof and Parent shall have the right to
participate in the settlement or assume or reassume the defense of such claim or
proceeding.
Section 9.4. Losses Net of Insurance and Tax Benefits.
(a) The amount of any and all Losses indemnified under this
Agreement shall be determined net of any amounts recovered by or to which the
indemnified party is entitled
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under insurance policies, indemnities or other reimbursement arrangements with
respect to such Losses. The amount of any and all Losses indemnified under this
Agreement shall be computed to take into account and to deduct therefrom (i) any
prior or subsequent recovery in respect of part or all of a claim by a Seller
Indemnified Party or a Purchaser Indemnified Party, as the case may be, whether
by payment, discount, credit, offset or otherwise and (ii) the amount of any
provision reflected as a current liability in the Closing Balance Sheet in
respect of matters giving rise to such Losses.
(b) If the amount with respect to which any claim is made
under any of Sections 9.2 or 9.3 of this Agreement (an "Indemnity Claim") gives
rise to a currently realizable Tax Benefit (as defined below) to the party
making the claim, the indemnity payment shall be reduced by the amount of the
Tax Benefit available to the party making the claim. To the extent such
Indemnity Claim does not give rise to a currently realizable Tax Benefit, if the
amount with respect to which any Indemnity Claim is made gives rise to a
subsequently realized Tax Benefit to the party that made the claim, such party
shall refund to the indemnifying party the amount of such Tax Benefit when, as
and if realized. For the purposes of this Agreement, any subsequently realized
Tax Benefit shall be treated as though it were a reduction in the amount of the
initial Indemnity Claim, and the liabilities of the parties shall be
redetermined as though both occurred at or prior to the time of the indemnity
payment. For purposes of this Section 9.4 a "Tax Benefit" means an amount by
which the tax liability of the party (or group of corporations including the
party) is reduced (including, without limitation, by deduction, reduction of
income by virtue of increased tax basis or otherwise, entitlement to refund,
credit or otherwise) plus any related interest received from the relevant taxing
authority. Where a party has other losses, deductions, credits or items
available to it, the Tax Benefit from any losses, deductions, credits or items
relating to the Indemnity Claims shall be deemed to be realized only after the
utilization of such other losses, deductions, credits or items. For the purposes
of this Section 9.4, a Tax Benefit is "currently realizable" to the extent it
can be reasonably anticipated that such Tax Benefit will be realized in the
current taxable period or year or in any tax return with respect thereto
(including through a carryback to a prior taxable period) or in any taxable
period or year prior to the date of the Indemnity Claim. In the event that there
should be a determination disallowing the Tax Benefit, the indemnifying party
shall be liable to refund to the indemnified party the amount of any related
reduction previously allowed or payments previously made to the indemnifying
party pursuant to this Section 9.4. The amount of the refunded reduction or
payment shall be deemed a payment under Sections 9.2 and 9.3 of this Agreement
and thus shall be paid subject to any applicable reductions under this Section
9.4.
(c) The parties agree that any indemnification payments made,
and/or any payments (or adjustments) made with respect to a Tax Benefit,
pursuant to this Agreement shall be treated for all Tax purposes as an
adjustment to the Purchase Price, unless otherwise required by applicable law,
in which event payments shall be made in an amount sufficient to indemnify the
party on a net after-Tax basis.
Section 9.5. No Right of Contribution. Notwithstanding anything to the
contrary contained in this agreement, the Company and its Subsidiaries shall
have no liability to indemnify any Seller Indemnified Party on account of the
breach of any representation or warranty or
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unfulfillment of any covenant of the Company, and no Seller Indemnified Party
shall have any right of contribution against the Company or any of its
Subsidiaries.
Section 9.6. Exclusive Remedy. Except for any claim (a) grounded in fraud
or (b) seeking equitable relief or remedial action, the parties hereto
acknowledge and agree that, from and after the Closing Date, the indemnification
provisions of this Article 9 shall be the exclusive remedy of Purchaser, on the
one hand, and Parent and Seller, on the other hand, with respect to the
transactions contemplated by this Agreement. With respect to actions grounded in
fraud or seeking equitable relief or remedial action, (y) the right of a party
to be indemnified and held harmless pursuant to the indemnification provisions
of this Article 9 shall be in addition to and cumulative of any rights of such
party at law or in equity and (z) no such party shall, by exercising the remedy
available to it under this Article 9, be deemed to have elected such remedy
exclusively or to have waived any other remedy, whether at law or in equity,
available to it. No Purchaser Indemnified Party or Seller Indemnified Party
shall be entitled to seek punitive damages pursuant to this Article 9.
Section 9.7. Limitation on Liability Following Notice of Breach.
Notwithstanding anything to the contrary in this Agreement, following the
Closing, (a) neither Parent nor any Seller shall be liable to any Purchaser
Indemnified Party in respect of any breach of a representation or warranty by
Sellers or the Companies if (i) such breach is disclosed to Purchaser prior to
Closing pursuant to Section 4.5, (ii) such breach would constitute a failure of
a condition of Purchaser's obligation to close, and (iii) notwithstanding such
notification, the Closing shall have occurred and (b) Purchaser shall not be
liable to any Parent Indemnified Party in respect of any breach of a
representation or warranty by Purchaser if (i) such breach is disclosed to
Parent prior to Closing pursuant to Section 5.3, (ii) such breach would
constitute a failure of a condition to Sellers' and Parent's obligation to close
and (iii) notwithstanding such notification the Closing shall have occurred.
ARTICLE 10.
TAX ALLOCATION AND INDEMNIFICATION
Section 10.1. Preparation and Filing of Returns.
(a) By Seller. To the extent not filed prior to the close of
the Closing Date, Sellers shall prepare and timely file (or cause to be prepared
and timely filed):
(i) all federal Income Tax Returns and Combined Income
Tax Returns of the Parent Group (including the Companies or any member of
the Company Group for all Pre-Closing Taxable Periods) and all Separate
Income Tax Returns of the Companies and the Subsidiaries of the Companies
for all Pre-Closing Taxable Periods;
(ii) all Other Tax Returns and Information Returns of
the Companies and the Subsidiaries of the Companies for all Pre-Closing
Taxable Periods; and
(iii) all federal, state, local and foreign Tax Returns
and Information Returns of the Parent Group (excluding the Companies and
the Subsidiaries
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of the Companies for their Taxable Years beginning after the Closing) for
all Post-Closing Taxable Periods.
(b) By Purchaser. Purchaser shall prepare and timely file (or
cause to be prepared and timely filed):
(i) all federal state, local and foreign Income Tax
Returns of the Companies and the Subsidiaries of the Companies for all
Straddle Periods and Post-Closing Taxable Periods; and
(ii) all Other Tax Returns and Information Returns of
the Companies and the Subsidiaries of the Companies for all Straddle
Periods and Post-Closing Taxable Periods.
Section 10.2. Payment of Taxes.
(a) By Sellers. Except to the extent specifically provided by
any other provision of this Agreement, Sellers shall pay (or cause to be paid)
all Taxes shown to be due and payable on all Tax Returns filed (or caused to be
filed) by Sellers pursuant to Section 10.1(a) hereof and, subject to the other
provisions of this Agreement, all Taxes that shall thereafter become due and
payable with respect to such Tax Returns.
(b) By Purchaser and the Company. Except to the extent
specifically provided by Section 10.2(d) or any other provision of this
Agreement, Purchaser and the Companies shall pay (or cause to be paid) all Taxes
shown to be due and payable on all Tax Returns filed (or caused to be filed) by
Purchaser pursuant to Section 10.1(b) hereof, and all Taxes that shall
thereafter become due and payable with respect to such Tax Returns.
(c) Information and Other Tax Returns. Any party required to
file any Information or other Tax Return pursuant to this Article 10 shall pay
any related fees or charges (including any such fees or charges that shall
thereafter become due and payable with respect to such Information or other Tax
Return) and shall indemnify and hold the other party harmless against any
related interest and penalties, as well as any such fees or charges which are
assessed against such party as the result of a failure by the party responsible
for such failure to file any Information Return in a timely and accurate manner.
(d) Straddle Periods. For purposes of this Agreement, Income
Taxes shown on a Tax Return for a Straddle Period prepared consistent with past
tax practice and accounting methods shall be allocated between the Pre- and
Post-Closing Straddle Periods on the basis of the actual Taxable income for each
such Period, determined by (i) an interim closing of the books at the close of
the Closing Date (or such other allocation method as the Parties may agree to in
writing), and (ii) as to each Straddle Period, treating each member of the
combined group that is includable in a Combined Income Tax Return for the entire
Straddle Period as included in such Combined Income Tax Return, and by treating
any member of the combined group that is not includable in such Combined Income
Tax Return for the entire Straddle Period as includable in a Separate Income Tax
Return for such Straddle Period. Any dispute between the
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Purchaser and Sellers regarding the amount of Taxes allocated to the Pre-Closing
Straddle Period shall be resolved in accordance with the principles of Section
10.6(e) of this Agreement. Sellers shall pay to Purchaser the excess of any
amount allocated (based upon the undisputed amount of Tax shown on each executed
Income Tax Return for a Straddle Period) to the Pre-Closing Straddle Period over
the amount of any estimated Income Taxes previously paid by Sellers or the
Companies prior to the Closing Date; or Purchaser shall pay to Seller the excess
of the amount of any estimated Income Taxes previously paid by Sellers or the
Companies prior to the Closing Date over the undisputed amount of Tax shown on
such Tax Return allocated to such Period. Other Taxes shall be allocated between
the Pre- and Post-Closing Straddle Periods (i) in the case of real and personal
property Taxes, on a per diem basis and (ii) in the case of all other Taxes, on
the basis of the actual activities of the applicable entity. Sellers shall pay
to Purchaser and Purchaser shall pay to Sellers, as the case may be, any amount
due under this Section 10.2(d) upon the later of (i) five days before the filing
date of the Tax Return for a Straddle Period upon which such payment is based or
(ii) ten days after receipt by the Seller of the executed Tax Return upon which
such payment is based.
Section 10.3. Refunds.
(a) Sellers. Sellers shall be entitled to any refund of Taxes
of the Companies and the Subsidiaries of the Companies for any Pre-Closing
Taxable Period or any Pre-Closing Straddle Period (other than any refund of
Taxes attributable to a carryback of a net operating loss or other item or
attribute in accordance with Section 10.5 from a Post-Closing Taxable Period to
a Pre-Closing Taxable Period). The amount of any refund for any Straddle Period
shall be allocated between the Pre-Closing Straddle Period and the Post-Closing
Straddle Period using the principles described in Section 10.2(d) of this
Agreement.
(b) Purchaser. Purchaser and the Companies shall be entitled
to any refund of any and all Taxes of the Companies and the Subsidiaries of the
Companies for all Post-Closing Straddle Periods and Post-Closing Taxable Periods
and to any refund of Taxes attributable to a carryback of a net operating loss
or other item or attribute in accordance with Section 10.5 from a Post-Closing
Taxable Period to a Pre-Closing Taxable Periods. The amount of any refund for
any Straddle Period shall be allocated between the Pre-Closing Straddle Period
and the Post-Closing Straddle Period using the principles described in Section
10.2(d) of this Agreement.
(c) Transmittal of Refunds To Which Recipient Is Not Entitled.
If Sellers receive a Tax refund to which Purchaser, the Companies, a Subsidiary
of a Company or any member of the Company Group is entitled pursuant to this
Agreement, Sellers shall pay the amount of such refund (including any interest
received thereon) to Purchaser within ten (10) days after receipt thereof.
Conversely, if Purchaser, the Companies, a Subsidiary of a Company or any member
of the Company Group receives a Tax refund to which Sellers are entitled
pursuant to this Agreement, Purchaser, the Companies or such Subsidiary or
member of the Company Group, as the case may be, shall pay the amount of such
refund (including any interest received thereon) to Seller within ten (10) days
after receipt thereof.
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Section 10.4. Amendments to Tax Returns. Sellers shall be entitled to
amend any Tax Return filed (or caused to be filed) by Sellers pursuant to
Section 10.1(a) hereof, and Purchaser, the Companies, the Subsidiaries of the
Companies and any member of the Company Group shall be entitled to amend any Tax
Return for any Taxable Period filed by any of them pursuant to Section 10.1(b)
hereof; provided however that amendments by Purchaser, the Companies, the
Subsidiaries of the Companies or any member of the Company Group of any Tax
Return for a Straddle Period shall be consistent with past tax practice and
accounting methods previously used in preparing such Tax Returns.
Section 10.5. Carrybacks. Without the prior written consent of Sellers,
which shall be in the sole and absolute discretion of Sellers, none of
Purchaser, the Companies, the Subsidiaries of the Companies or any member of the
Company Group shall carry back any net operating loss or other item or attribute
from a Post-Closing Taxable Period to a Pre Closing Taxable Period. Purchaser
and the Companies agree to reimburse Sellers for any reasonable costs connected
therewith, including, but not limited to, a reasonable cost of time spent
preparing such carryback Tax Returns and any adjustment to Taxes for which
Parent or its Affiliates are liable that result from such carryback.
Section 10.6. Indemnification for Taxes.
(a) In General. Parent and Sellers shall, jointly and
severally, indemnify and hold harmless each Purchaser Indemnified Party from and
against without duplication (i) any and all Income Taxes of any Taxpayer or for
which any Taxpayer is liable (including the Companies, each Subsidiary of a
Company and each member of the Company Group) for any and all Pre-Closing
Taxable Periods and all Pre-Closing Straddle Periods, (ii) any and all Other
Taxes of any Taxpayer or for which any Taxpayer is liable (including the
Companies, each Subsidiary of a Company and each member of the Company Group)
for any and all Pre-Closing Straddle Periods and all Pre-Closing Periods and
(iii) any and all Taxes payable as a result of a breach of any representation or
warranty set forth in Section 2.19.
(b) Member Liability. For the avoidance of doubt, Parent and
Sellers shall, jointly and severally, indemnify and hold harmless each Purchaser
Indemnified Party from and against each and every liability for Taxes of the
Parent Group under Treasury Regulation Section 1.1502-6 or any similar law, rule
or regulation administered by any Taxing Authority.
(c) Asset Sale Amount. Notwithstanding anything herein to the
contrary, Parent and Sellers, jointly and severally, shall indemnify and hold
harmless each Purchaser Indemnified Party against any Taxes resulting from
Section 338(h)(10) Elections in accordance with Section 6.2(b) of this
Agreement.
(d) Indemnification by Purchaser and the Companies. Purchaser
shall indemnify and hold harmless each Seller Indemnified Party from and against
(i) any and all Taxes of the Companies and each Subsidiary of a Company for any
and all Straddle Periods (except to the extent of payments required by Seller
pursuant to Section 10.2(d) with regard to amounts shown on Income Tax Returns
for Straddle Periods or as a result of any recomputation or adjustment of such
amount, or to the extent of payments required by Seller pursuant to Section
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10.6(a)) and Post-Closing Taxable Periods of the Companies or any Subsidiary of
a Company and (ii) any and all Taxes of the Companies or any Subsidiary of a
Company arising out of any transaction including, but not limited to, a Code
Section 338 election or any corresponding state, local or foreign election
recognized by any other Taxing Authority in connection therewith (but not
including any Code Section 338 election contemplated by Section 6.2(b) hereof),
not in the ordinary course of its business that occurs after the Closing and on
the Closing Date.
(e) Indemnification Procedure. Purchaser (or Seller, as the
case may be) shall notify Sellers (or Purchaser) of any Taxes paid by the
Purchaser Group or any member thereof (or Parent Group or any member thereof)
which are subject to indemnification under this Article 10. Any notification
contemplated by this Article 10 shall include a detailed calculation (including,
if applicable, separate allocations of such Taxes between Pre- and Post-Closing
Taxable Periods and supporting work papers) and a brief explanation of the basis
for indemnification hereunder. Whenever a notification described in this Article
10 is given, the notified party shall pay the amount requested in such notice to
the notifying party within twenty (20) days, but only to the extent that the
notified party agrees with such request. To the extent the notified party
disagrees with such request, it shall, within twenty (20) days, so notify the
notifying party, whereupon the parties shall use their best efforts to resolve
any such disagreement. If the parties cannot resolve such disagreement within 15
days of the date of consultation, Purchaser and Sellers shall jointly select a
nationally recognized accounting firm, which has not performed any audit
services or acted as a primary tax advisor in the last five years for Purchaser,
Sellers or their respective Affiliates (the "Neutral Auditor"), to act as an
arbitrator to resolve all points of disagreement concerning such dispute. If the
parties cannot agree on the selection of a Neutral Auditor, then such Neutral
Auditor shall be selected by the American Arbitration Association. All fees and
expenses related to the work of the Neutral Auditor shall be borne equally by
Purchaser and Sellers. To the extent not otherwise provided for in this Article
10, any payment made after such 20 day period shall include interest at the
Overdue Rate beginning on the date the original notice was given by the
notifying party.
Section 10.7. Post-Closing Audits and Other Proceedings. Parent and
Sellers, on the one hand, and Purchaser, on the other hand, agree to give prompt
notice to each other of any proposed adjustment to Taxes for periods ending on
or prior to the Closing Date or any Pre-Closing Straddle Period. Parent, Sellers
and Purchaser shall cooperate with each other in the conduct of any audit or
other proceedings for such periods and each may participate at its own expense,
provided Parent and Sellers shall have the right to control the conduct of any
such audit or proceeding for which Parent and Sellers agree that any resulting
Tax is covered by the indemnity provided in Section 10.6(a). Notwithstanding the
foregoing, with respect to the settlement of any such claim, suit or proceeding,
if such settlement would be legally binding on the Purchaser or an Affiliate of
Purchaser with respect to a subsequent period, Sellers may not settle or
otherwise resolve such claim, suit or proceeding without the consent of
Purchaser, such consent not to be unreasonably withheld, provided, however, that
if Purchaser withholds its consent, then Purchaser shall reimburse Sellers for
(i) any professional fees and other administrative costs reasonably incurred by
Sellers in connection with defending such claim on or after the date that
Purchaser rejects the settlement and (ii) any interest payable by Sellers to a
Taxing Authority in connection with such claim that accrues on or after the date
that Purchaser rejects the settlement.
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Section 10.8. Transfer Taxes. The parties agree that all sales and
transfer taxes and fees incurred in connection with this Agreement and the
transactions contemplated hereby will be borne 50% by Purchaser, on the one
hand, and 50% by Parent and Sellers, on the other.
Section 10.9. Cooperation. Parent and Sellers, on the one hand, and
Purchaser, on the other hand, agree to furnish or cause to be furnished to each
other, upon request, as promptly as practicable, such information and assistance
(including access to books and records) relating to the Company and shall make
available such knowledgeable employees of Parent, Purchaser or their respective
Affiliates as is reasonably necessary for the preparation of any return for
Taxes, claim for refund or audit, and the prosecution or defense of any claim,
suit or proceeding relating to any proposed adjustment. For a period of seven
years from and after Closing, Purchaser shall maintain and make available to
Parent and its representatives, on Parent's reasonable request, and Parent and
shall maintain and make available to Purchaser, on Purchaser's reasonable
request, copies of any and all information, books and records referred to in
this Section 10.8. After such seven-year period, Purchaser and Parent may
dispose of such information, books and records provided that prior to such
disposition, Purchaser shall give Parent the opportunity to take possession of,
and Parent shall give Purchaser the opportunity to take possession of, such
information, books and records.
Section 10.10. Limitations. The limitations with respect to Parent's and
Seller's obligations to indemnify a Purchaser Indemnified Party set forth in
Section 9.3(b) and with respect to Purchaser's obligations to indemnify a Seller
Indemnified Party set forth in Section 9.2(b) shall not apply to this Article
10. This Article 10 shall survive the Closing indefinitely. The indemnification
and payment obligations of Parent and Sellers and of Purchaser pursuant to
Article 10 shall not be effective until the aggregate dollar amount of all Taxes
that would be indemnifiable or payable pursuant to Article 10 exceeds $100,000
(the "Tax Deductible"), at which point such obligations shall be effective only
as to the amount of such Taxes in excess of the Tax Deductible.
ARTICLE 11.
CERTAIN DEFINITIONS
As used herein, the following terms shall have the following
meanings:
"Action" means any action, suit, arbitration or other proceeding by
or before any Governmental Authority.
"actual value" has the meaning specified in Section 1.4(c).
"Adverse Consequences" has the meaning specified in Section 6.6(b).
"Affiliate" means, with respect to any specified Person, any Person
that, directly or indirectly, controls, is controlled by, or is under common
control with, such specified Person, through one or more intermediaries or
otherwise.
"Affiliated Group" means an affiliated group of corporations within
the meaning of Code Section 1504(a) for the Taxable Period or, for purposes of
any state, local or foreign
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income tax matters, any consolidated, combined or unitary group of corporations
within the meaning of the corresponding provisions of tax law for the state or
other jurisdiction in question.
"Affiliated Parties" has the meaning specified in Section 2.24.
"Agreement" has the meaning specified in the Preamble.
"Ancillary Agreements" means the agreements specified in Section
6.7.
"Annual Financial Statements" has the meaning specified in Section
2.7(a).
"Antitrust Authority" means the Antitrust Division of the United
States Department of Justice, the United States Federal Trade Commission or the
antitrust or competition law authorities of any other jurisdiction (whether
United States, foreign or multinational).
"Applicable Rate" shall mean a 7% per annum interest rate.
"Auditor" has the meaning specified in Section 1.4(c).
"Base Price" has the meaning specified in Section 1.2(a).
"Base Working Capital" has the meaning specified in Section 1.4(a).
"Benefit Arrangement" shall mean any employment, consulting,
severance or other similar Contract, arrangement or policy and each plan,
arrangement (written or oral), program, agreement or commitment providing for
compensation or other benefits, including, without limitation, insurance
coverage (including without limitation any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits, life, health, disability or accident benefits
(including without limitation any "voluntary employees' beneficiary association"
as defined in Section 501(c)(9) of the Code (as defined below) providing for the
same or other benefits) or for deferred compensation, profit-sharing bonuses,
stock options, stock appreciation rights, stock purchases or other forms of
incentive compensation or post-retirement insurance, which
(A)(1)(a) is not a Welfare Plan, Pension Plan or Multiemployer
Plan (each as defined below), (b) is entered into, maintained, contributed to or
required to be contributed to, as the case may be, by the Company or an ERISA
Affiliate (as defined below), and (c) covers any current or former employee,
director, officer or consultant of the Company or any Subsidiary thereof (with
respect to each's relationship with such entities), or (2) under which the
Company or any Subsidiary thereof may incur liability; or
(B) any plan covering any current or former employee,
director, officer or consultant of any Foreign Subsidiary (as defined below)
(with respect to each's relationship with such entity) which if maintained or
administered in or otherwise subject to the laws of the United States would be
described in paragraph (A).
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"Business" means: (i) the business of operating gaming facilities,
and related hotel, convention, retail and entertainment operations, conducted
under the Caesars name, including all trademark rights and goodwill related to
the Caesars name; (ii) the ownership and operation of the Gaming Facilities,
including all business operations ancillary thereto; and (iii) all other
activities and operations of the Companies and their Subsidiaries (other than
those of the Excluded Companies and the Excluded Assets).
"Business Day" means any day that is not a Saturday, Sunday or other
day on which banks are required or authorized by law to be closed in New York,
New York.
"Xxxxxxx Xxxxx" has the meaning specified in the Preamble.
"Xxxxxxx Xxxxx Common Stock" has the meaning specified in the
Recitals.
"Capital Expenditure Adjustment Amount" has the meaning specified in
Section 1.2(a).
"Charter Documents" means as to any Person, such Person's (i)
articles of incorporation, certificate of incorporation, certificate of
formation or equivalent organizational documents and (ii) bylaws, partnership
agreement, operating agreement, limited liability company agreement or
equivalent document.
"Closing" has the meaning specified in Section 1.3(a).
"Closing Balance Sheet" has the meaning specified in Section 1.4(b).
"Closing Date" has the meaning specified in Section 1.3(a).
"Closing Date Purchase Price" means (i) the Base Price plus (ii) the
Estimated Net Working Capital Adjustment Amount (which may be a positive or
negative number), minus (iii) the amount of Existing Capitalized Leases, plus
(iv) the Estimated Capital Expenditure Adjustment Amount (which may be a
positive or negative number).
"Closing Net Working Capital" has the meaning specified in Section
1.4(b).
"Code" means the Internal Revenue Code of 1986, as amended.
"Combined Income Tax Return" means any state, local or foreign
Income Tax Return in which Xxxxxxx Xxxxx or any member of the Company Group is
or may be included in a consolidated, combined, unitary or similar Tax Return
with an Affiliate (other than another member of the Company Group) for state,
local or foreign Tax purposes.
"Common Stock" has the meaning specified in the Recitals.
"Companies" has the meaning specified in the Preamble.
"Company" has the meaning specified in the Preamble.
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"Company Capital Plan" means the 1999 schedule of monthly capital
expenditures delivered by Parent to Purchaser prior to the date of this
Agreement.
"Company Group" means Xxxxxxx Xxxxx and each corporation which would
join Xxxxxxx Xxxxx in filing a consolidated federal income tax return if Xxxxxxx
Xxxxx was the common parent of an affiliated group, as defined in Code Section
1504, for the applicable Taxable Period.
"Company Liabilities" means the liabilities of the Companies and
their Subsidiaries, other than Retained Liabilities.
"Confidentiality Agreement" has the meaning specified in Section
12.8.
"Contracts" means any contracts, agreements, leases, subleases,
licenses or other understandings or commitments, written or oral.
"CWI Shares" has the meaning specified in the Recitals.
"Defaulting Party" has the meaning specified in Section 8.2.
"Defeasance Amount" has the meaning specified in Section 1.2(b).
"Deficit Amount" has the meaning specified in Section 1.4(d).
"Determination Date" has the meaning specified in Section 1.4(c).
"Dollars" and "$" shall mean lawful money of the United States of
America.
"Delaware Gaming Laws" means gaming laws of the State of Delaware
applicable to the Companies' operations at Dover Downs.
"Employee Plans" shall mean all Benefit Arrangements, Multiemployer
Plans, Pension Plans and Welfare Plans.
"Employees" has the meaning specified in Section 6.4(a).
"Environmental Laws" means any and all foreign, Federal, state,
local or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, legally binding decrees, or other requirements of any Governmental
Authority (including, without limitation, common law) regulating, relating to or
imposing liability or standards of conduct concerning protection of the
environment, human health or safety or relating to exposure of any kind of
Hazardous Materials, as have been, are now, or may at any time hereafter be, in
effect (including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, the Resource Conservation and
Recovery Act, as amended, the Clean Air Act, as amended and the Hazardous
Materials Transportation Act).
"Environmental Permits" means any and all permits, licenses and
registrations, required under any Environmental Law.
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"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean any entity (whether or not
incorporated) which is (or at any relevant time was) a member of a "controlled
group of corporations" with, under "common control" with, or a member of an
"affiliated service group" with, the Companies as defined in Section 414(b),
(c), (m) or (o) of the Code, or under "common control" with the Companies,
within the meaning of Section 4001(b)(1) of ERISA.
"Estimated Capital Expenditure Adjustment Amount" has the meaning
specified in Section 1.4(a).
"Estimated Closing Net Working Capital" has the meaning specified in
Section 1.4(a).
"Estimated Net Working Capital Adjustment Amount" has the meaning
specified in Section 1.4(a).
"Excluded Assets" means the assets of the Excluded Companies, the
interests of the Parent and its Affiliates in the Atlantic City Convention
Center Sheraton Hotel and assets of Parent and its Affiliates (other than the
Companies or their Subsidiaries) primarily relating to hotel reservation
systems, hotel sales and administration and other operations other than the
Business.
"Excluded Companies" shall mean Cove Haven, Inc., Pocono Palace,
Inc., Paradise Stream, Inc., Brookdale Resorts, Inc., Romantic Tours, Inc. and
Romantic Advertising, Inc.
"Existing Capitalized Leases" means the existing slot machines
leases which are accounted for as capitalized leases on the Reference Balance
Sheet. The amount of the Existing Capitalized Leases as of any date shall be
determined consistent with the accounting principles used in capitalizing such
leases on the Reference Balance Sheet.
"Facility" means any Leased Real Property, any Owned Real Property
or any property otherwise operated by the Company or any of its Subsidiaries.
"Final Date" means January 31, 2000.
"Financing Obligations" means (i) indebtedness of the Company or any
of its consolidated Subsidiaries for borrowed money, (ii) obligations of the
Company or any of its consolidated Subsidiaries evidenced by bonds, notes,
debentures, letters of credit, or similar instruments, (iii) obligations of the
Company or any of its consolidated Subsidiaries under capitalized leases, (iv)
obligations of the Company or any of its consolidated Subsidiaries under
conditional sale, title retention or similar agreements or arrangements creating
an obligation of the Company or any of its consolidated Subsidiaries with
respect to the deferred purchase price of property (other than customary trade
credit), (v) interest rate and currency obligation swaps, xxxxxx or similar
arrangements and (vi) all obligations of the Company or any of its consolidated
Subsidiaries to guarantee any of the foregoing types of obligations on behalf of
others.
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"Foreign Gaming Laws" shall mean the laws, rules and regulations
promulgated by the applicable Governmental Authorities of the Philippines, South
Africa, Canada or any political subdivisions thereof or any other relevant
foreign jurisdiction relating to casino gaming.
"Foreign Subsidiary" shall mean any Subsidiary of the Company
organized under the laws of or doing business in any country other than the
United States.
"FRA Note" has the meaning specified in Section 1.1(b).
"GAAP" has the meaning specified in Section 1.4(b).
"Gaming Commissions" shall mean, with respect to Parent, Seller, the
Company or Purchaser, as applicable, the Indiana Gaming Commission, the
Mississippi Gaming Commission, the Nevada Gaming Commission, the Nevada State
Gaming Control Board, the New Jersey Casino Control Commission, the New Jersey
Department of Law and Public Safety, Division of Gaming Enforcement, the Nova
Scotia Gaming Control Commission, and the Ontario Gaming Control Commission, and
any similar commission that regulates or enforces the Gaming Laws.
"Gaming Facilities" means (a) Caesars Palace in Las Vegas, Nevada;
(b) Caesars Tahoe in Stateline, Nevada; (c) Caesars Atlantic City in Atlantic
City, New Jersey; (d) the Caesars "Glory of Rome" riverboat casino in Xxxxxxxx
County, Indiana; (e) the Sheraton Casino & Hotel in Robinsonville, Mississippi;
(f) Dover Downs in Dover, Delaware; (g) the "S.S. Crystal Harmony" and the "S.S.
Crystal Symphony"; (h) Casino Windsor in Windsor, Canada; (i) Sheraton Casino
Sydney in Xxxx Xxxxxx, Xxxxxx; (j) the Sheraton Halifax Hotel and Casino in
Halifax, Nova Scotia; (k) Caesars Gauteng in Kempton Park, South Africa; and (l)
Caesars Manila in Manila, Philippines. The parties acknowledge that with respect
to the foregoing Gaming Facilities, the Companies' and their Subsidiaries'
interests in certain of the foregoing Gaming Facilities represent interests in
leased real property, admiralty and management contracts and not ownership of
the real or personal property associated with such facility.
"Gaming Laws" shall mean, with respect to Parent, Seller, the
Company or Purchaser, as applicable, Foreign Gaming Laws, Indiana Gaming Laws,
Mississippi Gaming Laws, Nevada Gaming Laws and the New Jersey Gaming Laws.
"Governmental Authority" means any Federal, state, municipal or
local government, governmental authority, Gaming Commission, regulatory or
administrative agency, governmental commission, department, board, bureau,
court, tribunal, arbitrator or arbitral body.
"Governmental Permits" has the meaning specified in Section 2.21(a).
"Hazardous Materials" means any hazardous substance, gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum products,
polychlorinated biphenyls, ureaformaldehyde insulation, asbestos or
asbestos-containing materials, pollutants, contaminants, radioactivity, and any
other materials or substances which are defined as hazardous, toxic or a
pollutant or contaminant or are otherwise regulated under any Environmental Law.
"high value" has the meaning specified in Section 1.4(c).
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"XXX Xxx" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Income Tax(es)" means any and all Taxes based upon or measured in
whole or in part by gross or net income (regardless of whether denominated as an
"income tax," "franchise tax" or otherwise and including any Tax imposed on
alternative bases, one of which is net income), imposed by any Taxing Authority,
together with any interest, penalties and other additions thereto.
"Income Tax Return(s)" means all Tax Returns relating to, or
required to be filed in connection with, any payment or refund of any Income
Tax.
"Increase Amount" has the meaning specified in Section 1.4(d).
"Indemnity Claim" has the meaning specified in Section 9.4(b).
"Indiana Gaming Laws" shall mean the Indiana Gaming Control Act and
the rules and regulations promulgated thereunder.
"Information" has the meaning specified in Section 4.11.
"Information Return(s)" means any and all reports, returns,
declarations or other filings (other than Tax Returns) required by, or to be
furnished to, any Taxing Authority.
"Intellectual Property" has the meaning specified in Section 2.11.
"Interests" has the meaning specified in the Recitals.
"IRS" means the United States Internal Revenue Service.
"Interim Financial Statements" has the meaning specified in Section
2.7(a).
"ITT Sheraton" has the meaning specified in the Preamble.
"Joint Venture" has the meaning specified in Section 2.4(c).
"Joint Venture Interest" has the meaning specified in Section
2.4(c).
"Knowledge of the Companies" shall mean, the actual knowledge of the
individuals identified on Section 11.02 of the Parent Disclosure Letter.
"Knowledge of Purchaser" shall mean the actual knowledge of any of the executive
officers of Purchaser.
"Leased Real Property" means material real property leased by the
Company or any of its Subsidiaries as tenant and, to the extent (but only to the
extent) leased by the Company or any of its Subsidiaries, all buildings and
other structures, facilities or improvements currently or hereafter located
thereon, all fixtures, systems, equipment and items or personal property of the
Company or of any of its Subsidiaries attached or appurtenant thereto, and all
easements, licenses, rights and appurtenances relating to the foregoing.
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"Licensed IP Rights" has the meaning specified in Section 2.11.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
encumbrance, security interest or other lien of any kind.
"Losses" of a Person means any and all losses, liabilities, damages,
diminutions in value, claims, awards, judgments, costs and expenses (including,
without limitation, the costs of reasonable attorneys' fees) actually suffered
or incurred by such Person.
"low value" has the meaning specified in Section 1.4(c).
"Material Adverse Effect" shall mean a material adverse effect on
the business, operations or financial condition of the Companies and their
Subsidiaries taken as a whole, but shall exclude any effect to the extent
resulting from (i) any condition or event which adversely affects the gaming
industry generally, the gaming industry in Nevada, New Jersey, Indiana, or
Ontario, Canada, (ii) general economic conditions, (iii) the implementation of
California Proposition No. 5. or the proposal, passage or implementation of any
similar law or initiative, (iv) the proposal or passage of any law or other
initiative restricting or adversely affecting the conduct of gaming operations
generally or (v) fluctuations in the earnings of financial condition of the
Gaming Companies during the period from December 31, 1998 to the Closing Date
that result from gaming winnings so long as the Gaming Companies have been
operating on a basis consistent with their existing policies concerning
extensions of credit and setting of gambling limits.
"MEG" means Metropolitan Entertainment Group, a Canadian
partnership.
"Mississippi Gaming Laws" shall mean the Mississippi Gaming Control
Act and the rules and regulations promulgated thereunder.
"Multiemployer Plan" shall mean
(A) any "multiemployer plan," as defined in Section 4001(a)(3)
of ERISA, (1) which the Companies or any ERISA Affiliate maintains, administers,
contributes to or is required to contribute to, or, within the six years prior
to the Closing Date, maintained, administered, contributed to or was required to
contribute to, or under which the Companies or any ERISA Affiliate may incur any
liability and (2) which covers or has covered any current or former employee,
director, officer or consultant of the Companies or any ERISA Affiliate (with
respect to each's relationship with such entities, or
(B) any plan covering any current or former employee,
director, officer or consultant of any Foreign Subsidiary (with respect to
each's relationship with such entity) which if maintained or administered in or
otherwise subject to the laws of the United States would be described in
paragraph (A).
"Net Working Capital" means current assets minus current
liabilities, excluding, however, (i) any Excluded Assets or Retained
Liabilities, (ii) any provisions for Taxes or Tax refunds, (iii) the
intercompany accounts eliminated pursuant to Section 4.7 and (iv) any accruals
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or write-ups of assets attributable to consummation of the sale of Shares and
Interests. For purposes of the foregoing, 50% of any cash that is in excess of
the $10 million (Canadian) required to be retained by Windsor Casino Limited and
is held by Windsor Casino Limited distributable in accordance with the terms of
Xxxxxxx XX Agreement (whether or not subject to the approval of the parties
thereto) shall be included as a current asset, minus any Canadian withholding
taxes that would be payable upon the distribution thereof.
"Net Working Capital Adjustment Amount" has the meaning specified in
Section 1.4(d) hereto.
"Neutral Auditor" has the meaning specified in Section 10.6(e).
"Nevada Gaming Laws" shall mean the Nevada Gaming Control Act and
the rules and regulations promulgated thereunder, the Xxxxx County, Nevada Code
and the rules and regulations promulgated thereunder, the City of Reno, Nevada
Code and other applicable local law.
"New Jersey Gaming Laws" shall mean the New Jersey Casino Control
Act and the rules and regulations promulgated thereunder.
"Non-Primary Properties" means the Gaming Facilities other than the
Primary Properties.
"Nova Scotia Gaming Laws" shall mean the Nova Scotia Gaming Control
Act and the rules and regulations promulgated thereunder.
"Ontario Gaming Laws" shall mean the Ontario Gaming Control Act,
1992 and the rules and regulations promulgated thereunder.
"Other Tax Return(s)" means all Tax Returns relating to, or required
to be filed in connection with, any payment or refund of any Other Tax.
"Other Tax(es)" means any and all Taxes, other than Income Taxes,
together with any interest, penalties and other additions thereto.
"Overdue Rate" means the rate (compounded annually) specified under
Code Section 6621(a)(2) (or any successor provision) for the underpayment of
tax.
"Owned Real Property" means all material real property owned by the
Companies or any of their Subsidiaries, together with all buildings and other
structures, facilities or improvements located thereon, all fixtures, systems,
equipment and items of personal property attached or appurtenant thereto and all
easements, licenses, rights and appurtenances relating to the foregoing.
"Panel" has the meaning specified in Section 12.12.
"Parent" has the meaning specified in the Preamble hereto.
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"Parent Disclosure Letter" has the meaning specified in Article II.
"Parent Group" means Parent and each corporation that joins with
Parent in filing a consolidated federal income tax return for the applicable
Taxable Period.
"Parent Savings Plan" has the meaning specified in Section 2.13(b).
"Parent Savings Trust" has the meaning specified in Section 6.4(a).
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall mean
(A) any "employee pension benefit plan" as defined in Section
3(2) of ERISA (other than a Multiemployer Plan) (1) which the Companies or any
ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or, within the six years prior to the Closing Date, maintained,
administered, contributed to or was required to contribute to, or under which
the Companies or any ERISA Affiliate may incur any liability and (2) which
covers or has covered any current or former employee, director, officer or
consultant of the Companies or any ERISA Affiliate (with respect to each's
relationship with such entities), or
(B) any plan covering any current or former employee,
director, officer or consultant of any Foreign Subsidiary (with respect to
each's relationship with such entity) which if maintained or administered in or
otherwise subject to the laws of the United States would be described in
paragraph (A).
"Permitted Liens" means (a) mechanics', carriers', workers',
repairers', materialmen's, warehousemen's and other similar Liens arising or
incurred in the ordinary course of business, (b) Liens for non-delinquent Taxes
or Taxes which are being contested in good faith through appropriate
proceedings, (c) any covenants, conditions, restrictions, reservations, rights,
Liens, easements, encumbrances, encroachments and other matters affecting title
to real property which are shown as exceptions on title insurance policies
and/or title commitments or reports or other documents which have been made
available to the Purchaser, (d) any other covenants, conditions, restrictions,
reservations, rights, non-monetary Liens, easements, encumbrances, encroachments
and other matters affecting title to real property which would not, in the
aggregate, be reasonably expected to materially impair the continued use of the
property subject thereto for the use currently being made thereof, (e) Liens
which will be released or otherwise terminated on or prior to the Closing and
(f) Liens set forth in Section 11.3 of the Parent Disclosure Letter.
"Person" means any individual, firm, corporation, partnership,
limited liability company, incorporated or unincorporated association, joint
venture, joint stock company, governmental agency or instrumentality or other
entity of any kind.
"Personnel" has the meaning specified in Section 2.10(d).
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"Post-Closing Straddle Period" means with respect to any Straddle
Period, the period beginning the day after the Closing Date and ending on the
last day of such Taxable Year.
"Post-Closing Taxable Period(s)" means any Taxable Year that begins
after the close of the Closing Date; in addition, solely with respect to the
Parent Group as a whole and not with respect to the Companies, their
Subsidiaries, or any member of the Company Group, the term shall also include
the Taxable Year of the Parent Group that includes the Closing Date and ends
after the close of the Closing Date.
"Pre-Closing Claims" has the meaning specified in Section 12.14(a).
"Pre-Closing Straddle Period" means with respect to any Straddle
Period, the period beginning on the first day of such Taxable Year and ending at
the close of the Closing Date.
"Pre-Closing Taxable Period(s)" means any Taxable Year that ends at
or before the close of the Closing Date.
"Preliminary Transfers" has the meaning specified in Section 1.1(b).
"Primary Properties" means the Gaming Facilities located in Nevada,
New Jersey, Indiana and Windsor (Ontario), Canada.
"Proposed Acquisition Transaction" has the meaning specified in
Section 4.4.
"Purchase Price" has the meaning specified in Section 1.2(a).
"Purchaser's Threshold Amount" has the meaning specified in Section
9.2(b).
"Purchaser" has the meaning specified in the Preamble hereto.
"Purchaser Cure Period" has the meaning specified in Section 8.1(c).
"Purchaser Group" means Purchaser and each corporation that joins
with Purchaser filing a consolidated federal income tax return for the
applicable Taxable Period.
"Purchaser Indemnified Party" has the meaning specified in Section
9.3(a).
"Purchaser Savings Plan" has the meaning specified in Section
6.4(a).
"Purchaser Savings Trust" has the meaning specified in Section
6.4(a).
"Reference Balance Sheet" means the December 31, 1998 combined
balance sheet included in the Annual Financial Statements.
"Regulatory Authorizations" has the meaning specified in Section
6.3.
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"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment or the workplace of any Hazardous Materials, or otherwise as
defined in any Environmental Law.
"Retained Liabilities" means (i) all Financing Obligations of the
Companies and their Subsidiaries, except the Existing Capitalized Leases and
other Financing Obligations to the extent an adjustment to the Purchase Price
has been made with respect to such liabilities pursuant to Section 1.2(b), (ii)
liabilities arising from operations (whether presently or formerly conducted) of
Parent, Sellers and their respective Affiliates, other than the operations of
the Companies and their Subsidiaries, (iii) liabilities of the Excluded
Companies and the Atlantic City Convention Center Sheraton Hotel, (iv)
liabilities for which Parent or Sellers have expressly assumed liability under
this Agreement and (v) liabilities relating to the "Intelnet" lawsuit.
"Retained Operations" has the meaning specified in Section 6.6(e).
"Section 338(h)(10) Election" means an election under Section
338(h)(10) of the Code and any corresponding election permitted or required
under State, local or foreign law (regardless of the name or designation of such
election under local law) but only if Parent and/or its Affiliates is not
subject to taxation in such jurisdiction on both the sale or exchange of the
capital stock of the corporation with respect to which such election is made (or
deemed made) and the deemed sale or exchange of the assets of the corporation
with respect to which such election is made (or deemed made).
"Sellers" has the meaning specified in the Preamble hereto.
"Seller Cure Period" has the meaning specified in Section 8.1(b).
"Seller Indemnified Party" has the meaning specified in Section
9.2(a).
"Seller's Threshold Amount" has the meaning specified in Section
9.3(b).
"Separate Income Tax Return(s)" means any state, local or foreign
Income Tax Return for any Company or any member of the Company Group other than
a Combined Income Tax Return.
"Shares" has the meaning specified in the Recitals.
"South Africa Gaming Laws" shall mean the laws and regulations
governing casino gaming in South Africa.
"Special Purpose Sub" has the meaning specified in Section 6.6(c).
"Starwood Canada" has the meaning specified in the Preamble.
"Straddle Period" means any Taxable Period of any of the Companies
or any member of the Company Group that begins before and ends after the close
of the Closing Date.
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"Subsidiary" means, with respect to any Person, a corporation or
other entity of which 50% or more of the voting power or economic value of the
equity securities or equity interests is owned, directly or indirectly, by such
Person, or the operations of which are otherwise consolidated with those of such
Person under GAAP.
"Tangible Personal Property" has the meaning specified in Section
2.16.
"Tax" or "Taxes" mean any and all taxes, charges, fees, levies or
other assessments, including income, gross receipts, excise, real or personal
property, sales, withholding, social security, retirement, unemployment,
occupation, use, service, license, net worth, payroll, franchise and transfer
and recording, imposed by the Internal Revenue Service or any taxing authority
(whether domestic or foreign, including any federal, state, county, local or
foreign government or any subdivision or taxing agency thereof (including a U.S.
possession)), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest whether paid or
received, fines, penalties or additional amounts attributable to, or imposed
upon, or with respect to, any such taxes, charges, fees, levies or other
assessments.
"Tax Benefit" has the meaning specified in Section 9.4.
"Tax Deductible" has the meaning specified in Section 10.10.
"Tax Return" or "Tax Returns" means all reports, returns,
declarations, claims for refund or statements of any kind or nature relating to
Taxes, and any schedule or attachment thereto and any amendment thereof.
"Taxable Period(s)" means one or more Pre- or Post-Closing Taxable
Period or Pre- or Post-Closing Straddle Period.
"Taxable Year(s)" means one or more taxable years (which may be
shorter than a full calendar or fiscal year), years of assessment or periods
with respect to which any Tax may be imposed or for which a Tax Return is
required to be filed.
"Taxing Authority" means the Internal Revenue Service or any other
domestic or foreign governmental authority responsible for the administration,
imposition or collection of any Tax.
"Taxpayer" means (i) the Companies, (ii) each Subsidiary of the
Companies, (iii) each member of any affiliated group of corporations, within the
meaning of Section 1504 of the Code, of which the Companies or any of their
Subsidiaries is a member, and (iv) each member of any group of corporations with
respect to which the Companies or any of their Subsidiaries files a combined or
unitary Tax Return.
"Terminating Purchaser Breach" has the meaning specified in Section
8.1(c).
"Terminating Seller Breach" has the meaning specified in Section
8.1(b).
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"Third Party Consents" has the meaning specified in Section 6.1(c).
"Tunica" has the meaning specified in the Preamble.
"Tunica Common Stock" has the meaning specified in the Recitals.
"Tunica Shares" has the meaning specified in the Recitals.
"Welfare Plan" shall mean
(A)(i) any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA, (a) which the Companies or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, and (b) which
covers any current or former employee, director, officer or consultant of the
Companies or any Subsidiary thereof (with respect to each's relationship with
such entities), or (2) under which the Companies or any Subsidiary thereof may
incur any liability; or
(B) any plan covering any current or former employee,
director, officer or consultant of any Foreign Subsidiary (with respect to
each's relationship with such entity which if maintained or administered in or
otherwise subject to the laws of the United States would be described in
paragraph (A).
"Year 2000 Problem" has the meaning specified in Section 2.25.
ARTICLE 12.
MISCELLANEOUS
Section 12.1. Waiver. Either party to this Agreement may, at any time
prior to the Closing, waive any of the terms or conditions of this Agreement or
agree to an amendment or modification to this Agreement by an agreement in
writing executed in the same manner as this Agreement.
Section 12.2. Notices. All notices and other communications among the
parties shall be in writing and shall be deemed to have been duly given when (i)
delivered in person, or (ii) five (5) days after posting in the United States
mail having been sent registered or certified mail return receipt requested, or
(iii) delivered by telecopy and promptly confirmed by delivery in person or post
as aforesaid in each case, with postage prepaid, addressed as follows:
(a) If to Purchaser, to:
Park Place Entertainment Corporation
00 Xxxx Xxxxxx
Xxxxxxx, Xxx Xxxxxx 00000
Fax: (000) 000-0000
Attn: Xxxxx Xxxxxx, Esq.
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with a copy to:
Xxxxxx & Xxxxxxx
0000 Xxxxxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxxx, Esq.
(b) If to Parent or Sellers, to:
Starwood Hotels & Resorts Worldwide, Inc.
000 Xxxxxxxxxxx Xxxxxx
Xxxxx Xxxxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx, Xx., Esq.
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxx, Esq.
or to such other address or addresses as the parties may from time to time
designate in writing.
Section 12.3. Assignment. No party hereto shall assign this Agreement or
any part hereof without the prior written consent of the other parties. Subject
to the foregoing, this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective permitted successors and assigns.
Notwithstanding the foregoing: (i) Purchaser may assign any of its rights and
obligations under this Agreement to a direct or indirect wholly-owned Subsidiary
of Purchaser (so long as such assignment does not materially delay the Closing
or impose material costs on Parent), provided that such assignment will not
release Purchaser from its obligations hereunder; and (ii) Purchaser may assign
its rights under this Agreement to its lenders as security. Without limiting the
generality of the foregoing, the parties anticipate that Purchaser will assign
to a wholly-owned Canadian subsidiary its rights to acquire the Interests.
Section 12.4. Rights of Third Parties. Nothing expressed or implied in
this Agreement is intended or shall be construed to confer upon or give any
Person, other than the parties hereto, any right or remedies under or by reason
of this Agreement.
Section 12.5. Expenses. Except as otherwise provided in this Agreement,
each party hereto shall bear its own expenses incurred in connection with this
Agreement and the transactions herein contemplated whether or not such
transactions shall be consummated, including, without limitation, all fees of
its legal counsel, financial advisers and accountants.
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Section 12.6. Governing Law. This Agreement shall be construed and
enforced in accordance with the laws of the State of New York, including
Sections 5-1401 and 5-1402 of the New York General Obligations Law, except to
the extent that the provisions of applicable Gaming Laws shall be mandatorily
applicable to the transactions contemplated by this Agreement.
Section 12.7. Captions; Counterparts. The captions in this Agreement are
for convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement. 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.
Section 12.8. Entire Agreement. This Agreement (including the Schedules,
Exhibits and Annexes to this Agreement, which, although they may be bound
separately, constitute part of this Agreement) and that certain Confidentiality
Agreement between Purchaser the parties relating to the transactions
contemplated hereby (the "Confidentiality Agreement") constitute the entire
agreement among the parties and supersede any other agreements, whether written
or oral, that may have been made or entered into by or among any of the parties
hereto or any of their respective Subsidiaries relating to the transactions
contemplated hereby. No representations, warranties, covenants, understandings,
agreements, oral or otherwise, relating to the transactions contemplated by this
Agreement exist between the parties except as expressly set forth in this
Agreement and the Confidentiality Agreement.
Section 12.9. Amendments. This Agreement may be amended or modified in
whole or in part, only by a duly authorized agreement in writing executed in the
same manner as this Agreement and which makes reference to this Agreement.
Section 12.10. Publicity. All press releases or other public
communications of any nature whatsoever relating to the transactions
contemplated by this Agreement, and the method of the release for publication
thereof, shall be subject to the prior mutual approval of Purchaser and Sellers
which approval shall not be unreasonably withheld by any party; provided,
however, that, nothing herein shall prevent any party from publishing such press
releases or other public communications as such party may consider necessary in
order to satisfy such party's legal or contractual obligations after such
consultation with the other parties hereto as is reasonable under the
circumstances.
Section 12.11. Construction. This Agreement is a result of negotiations
among, and has been reviewed by Sellers, Parent, the Companies, Purchaser, and
their respective counsel. Accordingly, this Agreement shall be deemed to be the
product of all parties hereto, and no ambiguity shall be construed in favor of
or against Sellers, Parent, the Companies or Purchaser.
Section 12.12. Dispute Resolution. Except with respect to any claim
seeking equitable relief to enforce any covenant of a party hereunder, the
parties hereby agree that, in order to obtain prompt and expeditious resolution
of disputes under this Agreement, each claim, dispute or controversy of whatever
nature, arising out of, in connection with, or in relation to the
interpretation, performance or breach of this Agreement (or any agreement
contemplated by or related to this Agreement), including without limitation any
claim based on contract, tort or
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statute, or the alleged breach hereof or thereof, shall be settled, at the
request of any party of this Agreement, by final and binding arbitration
conducted in New York City, New York, administered by a panel of three
arbitrators, one chosen by Purchaser and one by Parent and Seller and the third
to be selected by the two arbitrators so chosen (the "Panel"), in accordance
with the then existing Rules of Practice and Procedure of the American
Arbitration Association, and judgment upon any award rendered by the Panel may
be entered by any state or federal court having jurisdiction thereof. The
arbitration procedures shall follow the substantive law of the State of New
York, including the provisions of statutory law dealing with arbitration, as it
may exist at the time of the demand for arbitration, insofar as said provisions
are not in conflict with this Agreement and specifically excepting therefrom
sections of any such statute dealing with discovery and sections requiring
notice of the hearing date by registered or certified mail. The Panel shall
determine the prevailing party and shall include in its award that party's
reasonable attorney's fees and costs.
Section 12.13. Non-Hire.
(a) If the transactions contemplated hereby are consummated,
neither Parent, any of its Subsidiaries or any of their respective Affiliates
shall, directly or indirectly, for itself or on behalf of any other individual
or entity, hire any Personnel at any time prior to the third anniversary of the
Closing Date; provided, however, that the foregoing shall not apply to any
employee who is terminated by Purchaser or is notified by Purchaser that
Purchaser will not continue to employ such employee following the Closing.
(b) The covenants and undertakings contained in this Section
12.13 relate to matters which are of a special, unique and extraordinary
character and a violation of any of the terms of this Section 12.13 will cause
irreparable injury to Purchaser, the amount of which will be impossible to
estimate or determine and which cannot be adequately compensated. Therefore, the
Companies and Purchaser will be entitled to an injunction, restraining order or
other equitable relief from any court of competent jurisdiction in the event of
any breach of this Section 12.13. The rights and remedies provided by this
Section 12.13 are cumulative and in addition to any other rights and remedies
which the Companies and Purchaser may have hereunder or at law or in equity.
Section 12.14. Insurance.
(a) The parties shall take all reasonable actions to ensure
that, following the Closing, the Companies and their Subsidiaries shall have
access to the insurance policies maintained by Parent and its Affiliates for
their benefit prior to Closing, with respect to claims relating to pre-closing
occurrences ("Pre-Closing Claims"). To the extent reasonably feasible, Parents
and Sellers shall assign to Purchaser or the Companies the right to directly
pursue claims under such policies. To the extent it is not feasible to do so,
then Parent and Sellers shall use their reasonable best efforts to pursue such
Pre-Closing Claims on behalf of Purchaser and the Companies to the extent losses
relating to such Pre-Closing Claims are recoverable under such insurance
policies. Any insurance proceeds actually recovered by Parent, Sellers or such
Affiliates with respect to such claims shall be deemed the property of Purchaser
and the Companies and shall be remitted to Purchaser promptly following receipt
thereof. Purchaser shall
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be obligated to reimburse Parent for any reasonable costs or expenses incurred
by Parent, Seller or their Affiliates in connection with the performance of
their obligations under this Section 12.14.
(b) Following the Closing (i) Purchaser shall submit to the
appropriate insurer, with a copy to Parent, all claims under the fixed cost
insurance policies listed in Section 12.14. of the Parent Disclosure Letter as
promptly as practicable after receipt of notice such claim, and (ii) Purchaser
shall notify Parent of all claims under the loss sensitive insurance policies
listed in Section 12.14 of the Parent Disclosure Letter, in each case, as
promptly as practicable after such time as the costs associated with such claim
exceed 50% of the applicable retention amount for such policy set forth in
Section 12.14 of the Parent Disclosure Letter. Notwithstanding the foregoing,
Parent shall not be required to institute litigation pursuant to this Section
12.14 (unless Purchaser provides Parent and Sellers with indemnification
arrangements for all costs and expenses reasonably satisfactory to Parent
incurred by Parent and Sellers in connection therewith and unless such
litigation is reasonable under the circumstances).
Section 12.15. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement
required to be performed prior to the Closing were not performed in accordance
with the terms hereof and that, prior to the Closing, the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at Law or in equity.
Section 12.16. Effectiveness. This Agreement shall become effective
immediately upon execution of this Agreement by Parent and Purchaser, and Parent
agrees to cause the Sellers and Companies to execute this Agreement promptly
following execution by Parent hereof. This Agreement shall be deemed effective
with respect to all parties hereto as of the date this Agreement is executed by
Parent and Purchaser.
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IN WITNESS WHEREOF the parties have hereunto caused this Agreement
to be duly executed as of the date first above written.
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
By: /s/ Xxxxx Xxxxxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxxxxx
Title: Chairman and Chief Executive Officer
ITT SHERATON CORPORATION
By: /s/ Xxxxx Xxxxxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxxxxx
Title: President and Chief Executive Officer
STARWOOD CANADA CORP.
By: /s/ Xxxx Xxxxxxxx
---------------------------------
Name: Xxxx Xxxxxxxx
Title: President
XXXXXXX XXXXX, INC.
By: /s/ Xxxxx Xxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxx
Title: Chairman and Chief Executive Officer
SHERATON DESERT INN CORPORATION
By: /s/ Xxxx X. Xxxxxxxxxx
---------------------------------
Name: Xxxx X. Xxxxxxxxxx
Title: Senior Vice President and
General Counsel
SHERATON TUNICA CORPORATION
By: /s/ Xxxxx X. Xxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxx
Title: Treasurer
PARK PLACE ENTERTAINMENT CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
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