EXHIBIT 10
EXECUTION VERSION
PURCHASE AGREEMENT
BY AND AMONG
MANDALAY RESORT GROUP
AS SELLER
EDGEWATER HOTEL CORPORATION
COLORADO BELLE CORP.
AS THE COMPANIES
--------------------
ACES HIGH MANAGEMENT, LLC
AS PURCHASER
DATED AS OF OCTOBER 13, 2006
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS................................................................................ 1
ARTICLE II PURCHASE AND SALE OF SHARES................................................................ 14
Section 2.1 Purchase and Sale of Shares................................................................ 14
Section 2.2 Retained Property.......................................................................... 14
Section 2.3 Additional Property........................................................................ 15
ARTICLE III CLOSING; PURCHASE PRICE.................................................................... 15
Section 3.1 Closing.................................................................................... 15
Section 3.2 Deliveries at Closing...................................................................... 15
Section 3.3 Purchase Price Payment at Closing.......................................................... 18
Section 3.4 Calculation of Closing Date Purchase Price................................................. 18
Section 3.5 Adjustment Procedures to the Closing Date Purchase Price................................... 18
Section 3.6 Calculation and Payment of Final Purchase Price............................................ 19
Section 3.7 Additional Payments........................................................................ 20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER................................................... 20
Section 4.1 Organization and Qualification............................................................. 20
Section 4.2 Ownership of Shares........................................................................ 21
Section 4.3 Authority; No Conflict; Required Filings and Consents...................................... 21
Section 4.4 Financial Information...................................................................... 22
Section 4.5 No Undisclosed Liabilities................................................................. 23
Section 4.6 Absence of Certain Changes or Events....................................................... 23
Section 4.7 Taxes...................................................................................... 23
Section 4.8 Real Property.............................................................................. 24
Section 4.9 Tangible Personal Property................................................................. 26
Section 4.10 Intellectual Property...................................................................... 27
Section 4.11 Contracts.................................................................................. 27
Section 4.12 Litigation................................................................................. 28
Section 4.13 Environmental Matters...................................................................... 29
Section 4.14 Employee Benefit Plans..................................................................... 30
Section 4.15 Compliance with Applicable Laws............................................................ 31
Section 4.16 Labor Matters.............................................................................. 32
Section 4.17 Compliance with the WARN Act............................................................... 33
Section 4.18 Indebtedness............................................................................... 34
Section 4.19 Insurance.................................................................................. 34
Section 4.20 Internal Controls and Procedures........................................................... 34
Section 4.21 Brokers.................................................................................... 35
Section 4.22 Solvency; Sufficient Capital............................................................... 35
Section 4.23 Sufficiency of Assets and Contracts........................................................ 35
Section 4.24 Knowledge.................................................................................. 35
Section 4.25 Nevada Takeover Statutes................................................................... 35
Section 4.26 As Is, Where Is; Release................................................................... 35
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER................................................ 36
Section 5.1 Organization of Purchaser.................................................................. 36
Section 5.2 Ownership.................................................................................. 36
Section 5.3 Authority; No Conflict; Required Filings and Consents...................................... 36
Section 5.4 Brokers.................................................................................... 37
Section 5.5 Licensing.................................................................................. 38
Section 5.6 Compliance with Gaming Laws................................................................ 38
Section 5.7 Litigation................................................................................. 38
Section 5.8 Availability of Funds...................................................................... 39
Section 5.9 No Breach.................................................................................. 39
Section 5.10 No Knowledge of Misrepresentations or Omissions............................................ 39
Section 5.11 Knowledge.................................................................................. 39
Section 5.12 Investment Intent.......................................................................... 39
ARTICLE VI COVENANTS.................................................................................. 40
Section 6.1 Conduct of Business of the Companies....................................................... 40
Section 6.2 Cooperation; Notice; Cure.................................................................. 41
Section 6.3 Access to Information...................................................................... 42
Section 6.4 Confidentiality of Information............................................................. 42
Section 6.5 Intercompany Account Settlement............................................................ 43
Section 6.6 Governmental Approvals..................................................................... 43
Section 6.7 Performance................................................................................ 44
Section 6.8 Publicity.................................................................................. 44
Section 6.9 Intellectual Property - General............................................................ 45
Section 6.10 Intellectual Property - Post-Closing....................................................... 45
Section 6.11 Employees.................................................................................. 46
Section 6.12 Transitional Services...................................................................... 47
Section 6.13 Termination of Affiliate Contracts......................................................... 47
Section 6.14 Termination Fee............................................................................ 47
Section 6.15 Capital Expenditures....................................................................... 49
Section 6.16 Releases................................................................................... 49
Section 6.17 Further Assurances and Actions............................................................. 49
Section 6.18 FCC Approvals.............................................................................. 49
Section 6.19 No Control................................................................................. 50
Section 6.20 Liability for Non-Compliance with WARN Act................................................. 50
Section 6.21 Transfer Taxes; HSR Filing Fee............................................................. 50
ARTICLE VII CONDITIONS TO CLOSING...................................................................... 51
Section 7.1 Conditions of the Parties' Obligations to Effect the Closing............................... 51
Section 7.2 Additional Conditions to Obligation of the MGM Entities to Effect the Closing.............. 51
Section 7.3 Additional Conditions to Obligation of Purchaser to Effect the Closing..................... 52
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ARTICLE VIII INDEMNIFICATION; REMEDIES.................................................................. 52
Section 8.1 Survival; Right to Indemnification Not Affected by Knowledge............................... 52
Section 8.2 Indemnification............................................................................ 53
Section 8.3 Indemnification Procedures................................................................. 55
ARTICLE IX TAX MATTERS................................................................................ 57
Section 9.1 Tax Indemnification........................................................................ 57
Section 9.2 Preparation and Filing of Tax Returns and Payment of Taxes................................. 58
Section 9.3 Accounting and Tax Records................................................................. 59
Section 9.4 Tax Audits................................................................................. 59
Section 9.5 Tax Treatment.............................................................................. 60
Section 9.6 Refunds and Tax Benefits................................................................... 60
Section 9.7 Base Price Allocation; Section 338(h)(10) Election......................................... 60
ARTICLE X TERMINATION................................................................................ 62
Section 10.1 Termination of Agreement................................................................... 62
Section 10.2 Effect of Termination...................................................................... 63
ARTICLE XI MISCELLANEOUS.............................................................................. 63
Section 11.1 Expenses................................................................................... 63
Section 11.2 Notices.................................................................................... 63
Section 11.3 Interpretation............................................................................. 64
Section 11.4 Governing Law.............................................................................. 65
Section 11.5 Consent to Jurisdiction and Venue.......................................................... 65
Section 11.6 Time of the Essence........................................................................ 65
Section 11.7 Assignment................................................................................. 65
Section 11.8 Amendment.................................................................................. 66
Section 11.9 Extension; Waiver.......................................................................... 66
Section 11.10 No Third Party Beneficiaries............................................................... 66
Section 11.11 Entire Agreement........................................................................... 66
Section 11.12 Severability............................................................................... 67
Section 11.13 Counterparts............................................................................... 67
Section 11.14 Limitation of Liability.................................................................... 67
Section 11.15 Disclosure Schedules....................................................................... 67
Schedule 1A - Software
Schedule 1B - Used Intellectual Property
Schedule 2.2 - Retained Property
Schedule 2.3 - Additional Property
Schedule 6.1 - Ordinary Course of Business Exceptions
Schedule 6.3(c) - Access to Information
Schedule 6.12 - List of Transitional Services
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Schedule 7.1(c) - Government Approvals
Schedule 11.7(b) - Approved Holder
Seller Disclosure Schedule
Purchaser Disclosure Schedule
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement"), dated as of October 13, 2006,
is by and among MANDALAY RESORT GROUP, a Nevada corporation ("Seller"),
EDGEWATER HOTEL CORPORATION, a Nevada corporation (the "Edgewater Company") and
COLORADO BELLE CORP., a Nevada corporation (the "Colorado Belle Company") (the
Edgewater Company and the Colorado Belle Company each a "Company" and
collectively, the "Companies"), on the one hand, and ACES HIGH MANAGEMENT, LLC,
a Nevada limited liability company (or its assignee pursuant to Section 11.7(b)
hereof) ("Purchaser"), on the other hand.
WHEREAS, Seller is the sole shareholder of the Edgewater Company and the
Colorado Belle Company;
WHEREAS, Seller desires to sell, and Purchaser desires to purchase, the
Edgewater Shares and the Colorado Belle Shares for the consideration and on the
terms set forth in this Agreement;
WHEREAS, Seller would not enter into this Agreement with Purchaser unless
Purchaser Parent guarantees the obligations of Purchaser hereunder concurrently
with the execution of this Agreement, and Purchaser Parent desires to enter into
the Purchaser Guaranty as Purchaser Parent will derive benefits from Purchaser
entering into this Agreement; and
WHEREAS, capitalized terms used herein and not otherwise defined shall
have the meanings set forth in Article I hereof.
NOW, THEREFORE, IN CONSIDERATION of the foregoing and the respective
representations, warranties, covenants, obligations and agreements set forth
below, the Parties agree as follows:
ARTICLE I
DEFINITIONS
"Actual Working Capital" shall mean the Working Capital of the applicable
Company as of the Closing Date as set forth in such Company's Final Statement.
"Additional Property" shall have the meaning ascribed in Section 2.3.
"Affiliate" means, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person. For
purposes of this definition, "control" (including the terms "controlled by" and
"under common control with") with respect to the relationship between or among
two or more Persons, means the possession, directly or indirectly or as a
trustee or executor, of the power to direct or cause the direction of the
management and policies
of a Person whether through the ownership of voting securities, as trustee or
executor, by Contract or otherwise, including the ownership, directly or
indirectly, of securities having the power to elect a majority of the board of
directors or similar body governing the management and policies of such Person;
provided, however, that notwithstanding the foregoing, in no event shall the
term Affiliate, when used in the context of Seller or Parent, include the
majority shareholder of Parent or any entities owned or controlled by or under
common control with, the majority shareholder of Parent, other than Parent and
each subsidiary of Parent.
"Affiliate Contracts" shall have the meaning ascribed in Section 4.11(c).
"Agreement" shall have the meaning ascribed in the preamble.
"Allocation Statement" shall have the meaning ascribed in Section 9.7(a).
"Approved Holder" shall have the meaning ascribed in Section 11.7(b).
"Asset Allocation Statement" shall have the meaning ascribed in Section
9.7(c).
"Assigned Intellectual Property" means that Used Intellectual Property
that will be assigned to a Company at or prior to Closing, as more particularly
identified on Schedule 2.3.
"Base Price" shall have the meaning ascribed in Section 3.4.
"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 the State of
Nevada.
"Claim Notice" means written notification pursuant to Section 8.3(a) of a
Third Party Claim as to which indemnity under Section 8.2 is sought by an
Indemnified Party, enclosing a copy of all papers served, if any, and specifying
the nature of and basis for such Third Party Claim and for the Indemnified
Party's claim against the Indemnifying Party under Section 8.2, together with
the amount or, if not then reasonably determinable, the estimated amount,
determined in good faith, of the Loss arising from such Third Party Claim.
"Cleanup" means all actions required to (a) cleanup, remove, treat or
remediate Hazardous Materials in the indoor or outdoor environment in accordance
with Environmental Laws, (b) perform pre-remedial studies and investigations and
post-remedial monitoring and care or (c) respond to any requests by a
Governmental Entity for information or documents relating to cleanup, removal,
treatment or remediation or potential cleanup, removal, treatment or remediation
of Hazardous Materials in the indoor or outdoor environment.
"Closing" shall have the meaning ascribed in Section 3.1.
"Closing Date" shall have the meaning ascribed in Section 3.1.
"Closing Date Purchase Price" shall have the meaning ascribed in Section
3.4.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, including the rules and regulations promulgated thereunder.
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"Colorado Belle Company" shall have the meaning ascribed in the preamble.
"Colorado Belle Shares" means the issued and outstanding shares in the
Colorado Belle Company.
"Commercially Reasonable Efforts" means the efforts that a prudent Person
desirous of achieving a result would use in similar circumstances.
"Companies" and "Company" shall each have the meaning ascribed in the
preamble.
"Company Employees" shall have the meaning ascribed in Section 6.11(d).
"Confidentiality Agreements" means the Confidentiality Agreements
previously entered into by and between (i) Sher Capital, LLC and Parent and (ii)
AAM Enterprises, LLC and Parent, each as amended from time to time.
"Consumable Items" means all foodstuffs and nonalcoholic beverages that
are located at the Real Property.
"Contract" means any agreement, undertaking, obligation or understanding,
whether written or oral, or subject to conditions, including any commitment,
letter of intent, mortgage, indenture, note, loan, guarantee, lease, sublease,
license, contract, deed of trust, option agreement, right of first refusal,
security agreement, development agreement, operating agreement, management
agreement, service agreement, partnership agreement, joint venture agreement,
limited liability agreement, put/call arrangement, purchase, sale, merger or
other agreement, together with any amendments or modifications thereto and
restatements thereof; provided that Contracts do not include Leases respecting
Leased Real Property or Tenant Leases.
"Copyrights" means all works protectible under the Copyright Act of 1976,
17. U.S.C. 101 (as amended), whether registered or unregistered, including
related moral rights and rights of attribution and integrity.
"Current Assets" means, in respect of a Company and as of any applicable
date in question, (a) all assets of such Company that should be classified as
current in accordance with generally accepted accounting principles, plus, to
the extent not otherwise included, (b) all assets of such Company that are
classified as current in accordance with the historical practices of the Company
in the preparation of its financial statements, and (c) any Additional Property
(other than net fixed assets) reflected on the books of an Affiliate but not
reflected on the books of that Company, less (x) all accounts receivable of that
Company from its Affiliates (other than another Company) to the extent
classified as current and (y) any Retained Property reflected on the books of
that Company to the extent classified as current. For the avoidance of doubt,
Current Assets includes, with respect to the Companies, among other things, cash
on hand in the cage, on the gaming floor, in retail outlets, in food and
beverage outlets owned by the Companies and elsewhere within the Companies'
respective businesses.
"Current Liabilities" means, in respect of a Company and as of any
applicable date in question, all liabilities of such Company that should be
classified as current in accordance with generally accepted accounting
principles, plus, to the extent not otherwise included, all liabilities
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of such Company that are classified as current in accordance with the historical
practices of the Company in the preparation of its financial statements, less
all accounts payable of that Company to its Affiliates (other than another
Company) to the extent classified as current. For the avoidance of doubt,
Current Liabilities shall include, among other things, all outstanding chips and
tokens, progressive slot machine liability, table games having an in-house
progressive jackpot feature, unpaid keno tickets, unredeemed race and sports
book ▇▇▇▇▇▇ and such other obligations that may arise that are similar to the
foregoing.
"Customer List" means a compilation of information regarding individual
players, customers or patrons who have had their table or slot play tracked at
the Company's Business, and, with respect to the foregoing, appears within the
Players Club.
"DCP II" shall have the meaning ascribed in Section 6.11(b).
"Disclosure Schedules" shall mean the Seller Disclosure Schedule and the
Purchaser Disclosure Schedule.
"Dispute Notice" shall have the meaning ascribed in Section 3.5(a).
"Dispute Period" means the period ending thirty days following receipt by
an Indemnifying Party of either a Claim Notice or an Indemnity Notice.
"Domain Names" means any alphanumeric designation registered with any
domain name register for use as a Universal Resource Locator or other electronic
address for a web site on the Internet.
"Edgewater Company" shall have the meaning ascribed in the preamble.
"Edgewater Shares" means the issued and outstanding shares in the
Edgewater Company.
"Elections" shall have the meaning ascribed in Section 9.7(b).
"Encumbrance" means any security interest, pledge, mortgage, option, lien
(including environmental and Tax liens), assessment, lease, charge, encumbrance,
adverse claim, preferential arrangement, equitable interest, right of first
refusal or restriction of any kind, including any restriction on the use,
voting, transfer, receipt of income or other exercise of any attributes of
ownership.
"Environmental Claim" means any claim, action, or cause of action by any
Person, or investigation by a Governmental Entity, alleging Liability (including
Liability for Cleanup costs, governmental response costs, natural resources
damages, property damages, or personal injuries) arising out of, based on, or
resulting from, (a) the presence, Release or threatened Release of any Hazardous
Materials at a location, currently or formerly owned or operated by the Company
or at any third party location where the Company sent, or caused to be sent,
Hazardous Materials or (b) any violation, or alleged violation, of any
Environmental Law.
"Environmental Laws" means all federal, state and local Laws relating to
pollution or protection of human health or the environment, including Laws
relating to Releases or threatened
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Releases of Hazardous Materials, the manufacture, processing, distribution, use,
treatment, storage, Release, transport or handling of Hazardous Materials,
record keeping, notification, disclosure and reporting requirements respecting
Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, including the rules and regulations promulgated
thereunder.
"ERISA Affiliate" shall have the meaning ascribed in Section 4.14(a).
"Estimated Closing Date" shall have the meaning ascribed in Section 3.7.
"Estimated Working Capital" shall have the meaning ascribed in Section
3.4.
"Estimated Working Capital Statement" and "Estimated Working Capital
Statements" shall each have the meaning ascribed in Section 3.4.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, including the rules and regulations promulgated thereunder.
"Extension Payment(s)" shall have the meaning ascribed in Section 3.7.
"FCC" means the Federal Communications Commission.
"FF&E" means all furniture, fixtures and equipment owned or leased by
either Company in connection with its businesses, including floor coverings,
pictures, and furniture located within the Company's Real Property, and all
Operating Equipment, and all other equipment used in the operation of the
casinos, kitchens, dining rooms and bars, cleaning equipment, office equipment,
machinery, vehicles, computers and other data processing hardware, special
lighting and other equipment of a like nature, with such additions and deletions
as may occur in the Ordinary Course of Business.
"Final Purchase Price" means the Closing Date Purchase Price as adjusted
pursuant to Section 3.5 and 3.6.
"Final Statement" shall have the meaning ascribed in Section 3.5(a) and
Section 3.5(b).
"FIRPTA" shall mean the Foreign Investment in Real Property Tax Act, as
amended from time to time, including the rules and regulations promulgated
thereunder.
"Foreign Corrupt Practices Act" shall mean the Foreign Corrupt Practices
Act of 1977, as amended, from time to time, including the rules and regulations
promulgated thereunder.
"GAAP" means United States generally accepted accounting principles and
practices as in effect from time to time.
"Gaming Authorities" means, collectively, (a) the Nevada Gaming
Commission, (b) the Nevada State Gaming Control Board, (c) the New Jersey Casino
Control Commission, (d) the New Jersey Division of Gaming Enforcement, (e) the
Mississippi Gaming Commission, (f) the
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Michigan Gaming Control Board, (g) the Illinois Gaming Board, (h) the New York
Division of Lottery, and (i) any other Governmental Entity that holds
regulatory, licensing or permit authority over gambling, gaming or casino
activities conducted or proposed to be conducted by the MGM Entities or any of
their Affiliates within its jurisdiction.
"Gaming Laws" means any federal, state, local or foreign statute,
ordinance, rule or regulation governing or relating to the ownership of the
Company and the gambling, gaming or casino activities and operations of the MGM
Entities or any of their Affiliates, in each case as amended, from time to time.
"Gaming Licenses" means all licenses, permits, approvals, authorizations,
registrations, findings of suitability, waivers and exemptions, including any
condition or limitation placed thereon, that are necessary for each Company to
own and operate its gaming facilities and related amenities issued under the
applicable Gaming Laws.
"Governmental Approvals" means all (a) Gaming Licenses, Liquor Licenses
and any other permit, license, certificate, franchise, concession, approval,
consent, ratification, permission, clearance, confirmation, endorsement, waiver,
certification, filing, franchise, notice, variance, right, designation, rating,
registration, qualification, authorization or order that is or has been issued,
granted, given or otherwise made available by or under the authority of any
Governmental Entity or pursuant to any Law and (b) rights under any Contract
with any Governmental Entity that relates to or is used in a Person's business
or operations.
"Governmental Entity" means any (a) nation, principality, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature anywhere in the world, (b) governmental or
quasi-governmental entity of any nature, including any governmental division,
subdivision, department, agency, bureau, branch, office, commission, council,
board, instrumentality, officer, official, representative, organization, taxing
authority or unit and any court or other tribunal (foreign, federal, state or
local), or (c) Person, or body exercising, or entitled to exercise, any
executive, legislative, judicial, administrative, regulatory, police, military
or taxing authority or power of any nature, including the Gaming Authorities.
"Governmental Order" means any order, writ, judgment, injunction, decree,
stipulation, determination, or award entered by or with any Governmental Entity.
"Hazardous Materials" means all substances defined or regulated as
Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil and
Hazardous Substances Pollution Contingency Plan, 40 C.F.R. Section 300.5,
including toxic mold and friable asbestos.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended from time to time, including the rules and regulations promulgated
thereunder.
"Improvements" shall have the meaning ascribed in Section 4.8(d).
"Indebtedness" means, with respect to a Person without duplication, (a)
all indebtedness for borrowed money, (b) all indebtedness for the deferred
purchase price of property or services (other than property, including
inventory, and services purchased, trade payables, other expense accruals and
deferred compensation items arising in the Ordinary Course of Business), (c) all
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obligations evidenced by notes, bonds, debentures or other similar instruments
(other than performance, surety and appeal bonds arising in the Ordinary Course
of Business in respect of which such Person's liability remains contingent), (d)
all indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired (even though the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), (e) all
obligations under leases that have been or should be, in accordance with GAAP,
recorded as capital leases, to the extent required to be so recorded, (f) all
reimbursement, payment or similar obligations, contingent or otherwise, under
acceptance, letter of credit or similar facilities, (g) all indebtedness of
others referred to in clauses (a) through (f) above guaranteed directly or
indirectly by a Person, or in effect guaranteed directly or indirectly by a
Person through a Contract, to: (i) pay or purchase such indebtedness or to
advance or supply funds for the payment or purchase of such indebtedness, (ii)
purchase, sell or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make payment of
such indebtedness, (iii) supply funds to or in any other manner invest in the
debtor (including any agreement to pay for property or services irrespective of
whether such property is received or such services are rendered), or (iv)
otherwise assure a creditor against loss in respect of such indebtedness, and
(h) all indebtedness referred to in clauses (a) through (g) above secured by (or
for which the holder of such indebtedness has an existing right, contingent or
otherwise, to be secured by) any Encumbrance upon or in property (including
accounts and Contract rights) owned by a Person, even though the Person may not
have assumed or become liable for the payment of such indebtedness, and
including in clauses (a) through (h) above any accrued and unpaid interest
thereon.
"Indemnified Party" means a Purchaser Indemnified Party or a Seller
Indemnified Party, as the case may be.
"Indemnifying Party" means the Seller Indemnifying Parties or the
Purchaser Indemnifying Parties, as the case may be.
"Indemnity Notice" means written notification pursuant to Section 8.3(b)
of a claim for indemnity under Article VII by an Indemnified Party, specifying
the nature of and basis for such claim, together with the amount or, if not then
reasonably determinable, the estimated amount, determined in good faith, of the
Loss arising from such claim.
"Independent Accounting Firm" shall have the meaning ascribed in Section
3.5(b).
"Infringement" means a violation of Intellectual Property rights.
"Intellectual Property" means all Copyrights, Customer Lists, Domain
Names, Patents, Trademarks, and Trade Secrets.
"Intercompany Account Settlement" shall have the meaning ascribed in
Section 6.5.
"IP Agreements" means all Contracts or court decisions, orders or
judgments, that are binding on the Company and that contain provisions relating
to the ownership or use of Owned Intellectual Property or Used Intellectual
Property.
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"IP Claim" means any claim, demand, dispute, lawsuit, arbitration,
opposition, interference, cancellation or other adversarial proceeding
concerning alleged Infringement respecting the validity, registrability,
enforceability, ownership or Use of Intellectual Property.
"IP Enforcement Documents" means all Contracts, outstanding decrees,
orders, judgments, settlement agreements or stipulations to which the Company is
a party or otherwise bound (whether oral or written, and whether between the
Company and an independent Person or inter-corporate) that contain provisions:
(a) covenanting not to ▇▇▇ any Person for Infringement of any Owned Intellectual
Property or Used Intellectual Property; or (b) restricting the Company's Use of
Owned Intellectual Property or Used Intellectual Property.
"IRS" shall mean the Internal Revenue Service.
"Law" and "Laws" means all laws, statutes, rules, regulations, ordinances
and other pronouncements having the effect of law of the United States, any
foreign country or any domestic or foreign state, county, city or other
political subdivision or of any Governmental Entity, including all Gaming Laws.
"Leased Real Property" shall have the meaning ascribed in Section 4.8(a).
"Leases" means all leases, ground leases, subleases or other agreements,
including all amendments, extensions, renewals, guaranties or other agreements
with respect to the Leased Real Property, but excluding any lease or sublease as
to which a Company is the lessor or sublessor.
"Liabilities" means all debts, obligations and other liabilities of a
Person (whether absolute, accrued, contingent, fixed or otherwise, or whether
due or to become due), including those arising under any Law, action,
investigation, inquiry or order and those arising under any Contract and
"Liability" means any one of them.
"Licensed Parties" shall have the meaning ascribed in Section 5.5.
"Licensing Affiliates" shall have the meaning ascribed in Section 5.5.
"Liquor Assets" means the inventory of alcoholic beverages at the Real
Property.
"Liquor Licenses" means all those certain "off sale," "portable bar" and
other alcoholic beverage licenses issued by Governmental Entities to the Company
pursuant to which the sale of alcoholic beverages is permitted in the
restaurants, bars, function rooms and guest rooms of the hotels owned by a
Company.
"Loss" means any action, cost, damage, Liability, loss, injury, penalty,
or obligation of any kind or nature, including interest, penalties, fines,
legal, accounting, and other professional fees and expenses incurred in the
investigation, collection, prosecution, determination and defense thereof,
amounts paid in settlement, any incidental or consequential damages and any
punitive damages payable to third parties that may be imposed on or otherwise
incurred or suffered and which give rise to a valid claim for indemnification
under ARTICLE VIII.
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"Material Adverse Effect" means any circumstance, development, change in,
or effect on a Company that, individually or in the aggregate with any other
circumstances, developments, changes in, or effects on, a Company is, or is
reasonably expected to be, directly or indirectly, materially adverse to (a) the
overall business and financial condition of the Companies taken as a single
enterprise, or (b) the ability of Seller to consummate the transactions
contemplated by this Agreement. For the avoidance of doubt, a circumstance,
development, change, or effect on the Companies is not to be considered in
determining whether there has been a Material Adverse Effect if (i) such
circumstance, development or change affects the gaming industry generally, (ii)
such circumstance, development, change or effect is the result of general
economic conditions, or (iii) such circumstance, development, change or effect
results from any act of terrorism, commencement or escalation of armed
hostilities in the U.S. or internationally or declaration of war by the U.S.
Congress. Accordingly, a Material Adverse Effect does not include matters such
as legal, regulatory, economic, industry, political, industrial, climatic,
geographic or demographic conditions, factors, changes or circumstances or
financial, banking or capital market changes which are related to companies,
businesses or premises generally (domestically or internationally) or to
companies, businesses or premises in the gaming, recreational, resort,
entertainment, leisure or similar sectors within the State of Nevada, throughout
the United States or internationally.
"Material Contracts" shall have the meaning ascribed in Section 4.11(a).
"MGM Entities" means Seller and, until the Closing, the Colorado Belle
Company and the Edgewater Company.
"MGM Group Property" means any property operated by Parent or any of its
Affiliates other than either Company.
"Multiemployer Plan" means the Construction Industry and Carpenters Joint
Pension Trust Fund.
"New Plans" shall have the meaning ascribed in Section 6.11(d).
"NLRA" means the National Labor Relations Act of 1947, as amended from
time to time, including the rules and regulations promulgated thereunder.
"NLRB" means the National Labor Relations Board established pursuant to
the NLRA.
"Notifying Party" shall have the meaning ascribed in Section 6.6(a).
"NRS" means the Nevada Revised Statutes, as amended from time to time,
including the rules and regulations promulgated thereunder.
"Old Plans" shall have the meaning ascribed in Section 6.11(d).
"Operating Equipment" means all items owned or leased by a Company and
used in its business, including in the operation or maintenance of its Real
Property, including all specialized casino equipment, such as slot machines,
cards, poker chips, gaming devices, dice, baccarat chips, gaming tables,
pneumatic stools, drop buckets, cans and racks, tokens, token racks, card
9
shuffler devices and accessories, change sorters, pit stands, counting
equipment, roulette table covers, casino and game table signage, cage and game
tables supplies, and all other gaming equipment relating to its business, and
including food service preparation utensils, chinaware, glassware, silverware
and hollowware, food and beverage service equipment, uniforms and also including
consumable supplies for housekeeping, engineering, accounting and office use,
together with paper supplies and miscellaneous general supply items.
"Ordinary Course of Business" means an action taken by a Person if (a)
such action is consistent with the past practices of such Person and is taken in
the normal day-to-day operations of such Person and (b) such action is not
required to be authorized by the board of directors of such Person (or by any
Person or group of Persons exercising similar authority) and is not required to
be specifically authorized by the parent company (if any) of such Person.
"Owned Intellectual Property" means all Intellectual Property that is
owned exclusively by a Company.
"Owned Real Property" shall have the meaning ascribed in Section 4.8(a).
"Parent" means MGM MIRAGE, a Delaware corporation.
"Parties" means Seller, the Edgewater Company, the Colorado Belle Company
and Purchaser.
"Patents" means all patents, whether issued or pending, and patentable
inventions.
"Permitted Exceptions" means the matters set forth in Section 4.8(a) of
the Seller Disclosure Schedule.
"Person" means an individual, corporation, partnership, limited liability
company, joint stock company, joint venture, association, trust or other entity
or organization, including a Governmental Entity.
"Plans" shall have the meaning ascribed in Section 4.14(a).
"Policies" shall have the meaning ascribed in Section 4.19.
"Players Club" means the players club database maintained on the player
database system utilized by the Companies.
"Pre-Closing Period" shall have the meaning ascribed in Section 9.1(a)(i).
"Pre-Closing Period Tax Returns" shall have the meaning ascribed in
Section 9.2(b).
"Proposed Assignee" shall have the meaning ascribed in Section 11.7(b).
"Purchaser" shall have the meaning ascribed in the preamble.
"Purchaser Disclosure Schedule" shall have the meaning ascribed in ARTICLE
V.
10
"Purchaser Group" shall have the meaning ascribed in Section 6.11(d).
"Purchaser Guaranty" means that certain Guaranty of even date herewith
executed by ▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, as trustees for the ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ Sher Trust, and Austi, LLC, a Nevada limited liability company,
jointly and severally guarantying all of Purchaser's obligations hereunder.
"Purchaser Indemnified Parties" means Purchaser, its respective Affiliates
and, after the Closing, the Companies and their respective directors, managers,
officers, employees, agents and representatives.
"Purchaser Indemnifying Parties" means Purchaser, its respective
Affiliates and, after the Closing, the Companies.
"Purchaser Parent" shall have the meaning ascribed in the preamble.
"Purchaser Termination Fee" shall have the meaning ascribed in Section
6.14(b).
"Real Property" means Owned Real Property and Leased Real Property of
either Company, as the context may require.
"Recipient" shall have the meaning ascribed in Section 9.4(a).
"Release" means any release, spill, emission, discharge, leaking, pumping,
injection, deposit, disposal, dispersal, leaching or migration into the indoor
or outdoor environment (including ambient air, surface water, groundwater and
surface or subsurface strata) of Hazardous Materials in, at, on or under the
property, including the movement of Hazardous Materials through or in the air,
soil, surface water, groundwater or real property.
"Release of Guaranties" shall have the meaning ascribed in Section 6.16.
"Rent Roll" shall have the meaning ascribed in Section 4.8(c).
"Resolution Period" means the period ending thirty days following receipt
by an Indemnified Party of a written notice from an Indemnifying Party stating
that it disputes all or any portion of a claim set forth in an Indemnity Notice.
"Retained Property" shall have the meaning ascribed in Section 2.2.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, including the rules and regulations promulgated thereunder.
"Seller" shall have the meaning ascribed in the preamble.
"Seller Disclosure Schedule" shall have the meaning ascribed in ARTICLE
IV.
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"Seller Indemnified Parties" means Parent, Seller and their respective
Affiliates, and their respective members, partners, directors, officers,
employees, agents and representatives.
"Seller Indemnifying Parties" means Seller.
"Seller Termination Fee" shall have the meaning ascribed in Section
6.14(a).
"SERP II" shall have the meaning ascribed in Section 6.11(b).
"Shares" means the Colorado Belle Shares and/or the Edgewater Shares, as
the context may require.
"Software" means those computer programs (whether in source code or object
code form), databases, compilations of data, and all documentation related to
any of the foregoing, more particularly as set forth on Schedule 1A.
"SOXA" means the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, as amended from time to time,
including the rules and regulations promulgated thereunder.
"Straddle Period" shall have the meaning ascribed in Section 9.1(a)(i).
"Straddle Period Tax Returns" shall have the meaning ascribed in Section
9.2(a).
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, trust, estate or other Person of which (or
in which), directly or indirectly, more than 50% of (a) the issued and
outstanding capital stock having ordinary voting power to elect a majority of
the board of directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall or might
have voting power upon the occurrence of any contingency), (b) the interest in
the capital or profits of such partnership, joint venture or limited liability
company or other Person or (c) the beneficial interest in such trust or estate,
is at the time owned by such first Person, or by such first Person and one or
more of its other Subsidiaries or by one or more of such Person's other
Subsidiaries.
"Tangible Personal Property" means all items of tangible personal
property, whether owned or leased, including: (a) FF&E; (b) Consumable Items;
(c) Liquor Assets; and (d) all other items of tangible personal property that
are owned by the Company and located at, and used in the operation of, its
business.
"Tangible Personal Property Leases" shall have the meaning ascribed in
Section 4.9.
"Tax Claim" shall have the meaning ascribed in Section 9.4(a).
"Tax Returns" means all information or filing required to be supplied to
any taxing authority or jurisdiction (foreign or domestic) with respect to
Taxes, including attachments thereto, declarations, disclosures, schedules,
estimates and elections and amendments thereof, including information returns.
12
"Taxes" means any and all taxes, charges, customs, fees, levies, duties,
Liabilities, impositions or other assessments, including income, gross receipts,
profits, excise, real or personal property, environmental, recapture, sales,
use, value-added, withholding, social security, retirement, employment,
unemployment, occupation, service, license, net worth, payroll, franchise,
gains, stamp, transfer and recording taxes, general or special assessments, fees
and charges, imposed by the IRS or any other taxing authority (whether domestic
or foreign including any state, county, local or foreign government or any
subdivision or taxing agency thereof (including a United States possession)),
and all taxes, fees and other charges assessed under the Gaming Laws (excluding
any and all fees, charges, costs and expenses assessed against Purchaser or any
of its principals by the Gaming Authorities in connection with the filing,
investigation and/or processing of the applications of Purchaser and any of its
principals to obtain all Governmental Approvals necessary to own and operate a
Company and its facilities and related amenities), whether computed on a
separate, consolidated, unitary, combined or any other basis; and any interest,
fines, penalties, additions to tax, or additional amounts attributable to, or
imposed upon, or with respect to, any such taxes, charges, customs, fees,
levies, duties, Liabilities, impositions or other assessments.
"Tenant Leases" means all leases and subleases of Real Property as to
which a Company is the lessor or sublessor.
"Termination of Affiliate Contracts" shall have the meaning ascribed in
Section 6.13.
"Third Party Claim" shall have the meaning ascribed in Section 8.3(a).
"Trademarks" means all indicia of the source or origin of goods or
services in commerce (including, but not limited to, trademarks, service marks,
trade names, slogans, logos and trade dress), whether registered or
unregistered, together with associated goodwill.
"Trade Secrets" means all information that qualifies for trade secret
protection under the Nevada Trade Secrets Act, NRS 600A.010 et seq.
"Transfer Taxes" shall have the meaning ascribed in Section 6.21.
"Transitional Services Agreement" shall have the meaning ascribed in
Section 6.12.
"Trust Agreement" shall have the meaning ascribed in Section 6.11.
"Use" means: (1) with respect to works protectible by copyright, to copy,
distribute, publicly display, publicly perform, or make derivative works based
on the work; (2) with respect to Trademarks, to use in commerce to denote the
source or origin of goods or services; (3) with respect to patented inventions,
to make, use, sell (or offer to make, use or sell) import or export, patented
invention; (4) with respect to trade secrets, means used in the course of
business; and (5) to grant to others the right or license to do any of the
foregoing.
"Used Intellectual Property" means Intellectual Property that is: (1)
owned or controlled by Parent or its Affiliates other than a Company or any
Person other than a Company, and (2) Used or held for Use in the business of a
Company, all as more particularly set forth on Schedule 1B. Assigned
Intellectual Property is a subset of Used Intellectual Property.
▇▇
"▇▇▇▇ ▇▇▇" shall mean the Worker Adjustment and Retraining Notification
Act of 1988, as amended from time to time, including the rules and regulations
promulgated thereunder.
"Working Capital" as to a Company means Current Assets minus Current
Liabilities of that Company.
"Working Capital Statement" and "Working Capital Statements" shall each
have the meaning ascribed in Section 3.5(a).
ARTICLE II
PURCHASE AND SALE OF SHARES
Section 2.1 Purchase and Sale of Shares.
On and subject to the terms and conditions of this Agreement, Purchaser
agrees to purchase from Seller, and Seller agrees to sell to Purchaser, the
Shares for the Final Purchase Price. At the Closing, the Shares shall be
transferred or otherwise conveyed to Purchaser free and clear of all
Encumbrances, excepting only restrictions on the subsequent transfer of the
Shares or as may be imposed under applicable Laws.
Section 2.2 Retained Property.
Notwithstanding anything to the contrary contained in this Agreement, from
and after the Closing, Seller shall retain all of its right, title and interest
in and to each and all of the assets set forth on Schedule 2.2 (collectively,
the "Retained Property"), which Retained Property is not a part of the
transactions contemplated hereby, whether or not such Retained Property is
presently owned by a Company. Prior to the Closing Date, each Company shall
assign to Parent or an Affiliate designated by Parent, all right, title and
interest of such Company in such Retained Property. All items, whether located
at a Company's Real Property, or otherwise owned by a Company, that constitute
Retained Property, may be removed on or prior to the Closing Date or within
sixty (60) days after the Closing Date by Seller, Parent or any of their
respective Affiliates. Purchaser, and from and after the Closing, the Companies,
shall take such further actions and provide such further instruments as may be
reasonably requested by the MGM Entities to confirm the transfer of the Retained
Property from such Company to Parent or its Affiliate and in effecting the
removal of any Retained Property from any Real Property.
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Section 2.3 Additional Property.
Schedule 2.3 identifies certain property that is presently used by a
Company and intended to be a part of the transactions contemplated by this
Agreement, but is presently owned by an Affiliate, including without limitation,
Assigned Intellectual Property (collectively, the "Additional Property"). Prior
to or concurrently with the Closing, Seller shall cause its Affiliates to
transfer the Additional Property to the Company identified opposite such item on
Schedule 2.3.
ARTICLE III
CLOSING; PURCHASE PRICE
Section 3.1 Closing.
The closing of the purchase and sale of the Shares (the "Closing") shall
take place at the executive offices of Parent, located at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ (or such other location agreed upon in
writing by Purchaser and Seller) at such time to be agreed upon by Purchaser and
Seller on the fifth (5th) Business Day (the "Closing Date") after satisfaction
or, if permissible, waiver of the conditions set forth in ARTICLE VII (other
than those conditions that by their nature are to be satisfied at the Closing),
unless another date is agreed to in writing between Purchaser and Seller.
Section 3.2 Deliveries at Closing.
(a) In connection with the sale of the Shares at the Closing, Seller shall
deliver or cause to be delivered the following to Purchaser at the Closing:
(i) an executed receipt for the Closing Date Purchase Price;
(ii) certificates representing the Shares of each Company, together
with appropriate instruments of transfer in a form mutually reasonably
satisfactory to Seller and Purchaser for transfer on the books of each
Company;
(iii) copies of the publicly filed organizational documents of each
Company, certified as of a recent date prior to the Closing Date by the
Secretary of State of the State of Nevada;
(iv) a copy, certified by an officer of the relevant Company, of the
bylaws of each Company;
(v) a copy, certified by an officer of Seller of the resolutions of
its Board of Directors authorizing the execution and delivery of this
Agreement and consummation of the transactions contemplated by this
Agreement, which resolutions shall be in full force and effect and not
revoked;
15
(vi) a duly executed certificate of an officer of Seller pursuant to
Section 7.3(c);
(vii) a good standing certificate (or its equivalent) for each
Company issued by (i) the Secretary of State of the State of Nevada (dated
within a recent date prior to the Closing Date), and (ii) of such other
applicable jurisdictions where such Company is qualified or licensed to do
business or own, lease or operate property making such qualification or
licensing necessary (dated as of a date within a recent date prior to the
Closing Date);
(viii) a bring down good standing certificate (or its equivalent),
dated as of the Closing Date, of the certificates delivered pursuant to
Section 3.2(a)(vii), or a verbal confirmation from the Secretary of State
of the applicable jurisdiction on the Closing Date with respect to such
good standing;
(ix) the stock ledgers and minute books of each Company;
(x) duly executed resignations effective as of the Closing Date from
such directors and officers of the Company as Seller shall have notified
Purchaser in writing not less than one Business Day prior to the Closing
Date;
(xi) duly executed copies of documentation evidencing the
Termination of Affiliate Contracts;
(xii) evidence in form and substance mutually reasonably
satisfactory to Seller and Purchaser that the Release of Guaranties occurs
at the Closing;
(xiii) an executed counterpart of the Transitional Services
Agreement;
(xiv) duly executed copies of the assignment and/or license
agreements as required by Section 6.9(d), including evidence of the filing
of all assignments with the United States Patent and Trademark Office,
United States Copyright Office and any applicable domain name registries
and any other documents executed by Parent or its Affiliates conveying the
right to Use the Used Intellectual Property to Purchaser;
(xv) FIRPTA certificate in form and substance reasonably
satisfactory to Purchaser; and
(xvi) All other previously undelivered documents, agreements,
instruments, writings and certificates, and such other documents,
agreements, instruments, writings and certificates as Purchaser may
reasonably request to effect the transactions contemplated by this
Agreement, in form and substance reasonably satisfactory to Purchaser.
(b) In connection with the purchase of the Shares at the Closing,
Purchaser shall deliver or cause to be delivered the following to Seller, at the
Closing:
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(i) the Closing Date Purchase Price in immediately available funds
by wire transfer to an account designated by Seller in writing to
Purchaser;
(ii) a receipt for delivery of the Shares of each Company, duly
executed by an officer of Purchaser;
(iii) a copy of the organizational documents of each of Purchaser ,
certified as of a recent date prior to the Closing Date by the Secretary
of State of the State of Nevada;
(iv) copies, certified by an officer of Purchaser, of their
respective bylaws;
(v) copies, certified by an officer of Purchaser, of the resolutions
of Purchaser's manager (or board of directors, as the case may be)
authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement, which
resolutions shall be in full force and effect and not revoked;
(vi) a duly executed certificate of an officer of Purchaser pursuant
to Section 7.2(c);
(vii) a good standing certificate (or its equivalent) of Purchaser
issued by the Secretary of State of the State of Nevada, dated as of a
recent date prior to the Closing Date;
(viii) a bring down good standing certificate (or its equivalent),
dated as of the Closing Date, of the certificate delivered pursuant to
Section 3.2(b)(vii), or a verbal confirmation from the Secretary of State
of the State of Nevada on the Closing Date with respect to such good
standing;
(ix) a receipt for delivery of the books of each Company, duly
executed by an officer of Purchaser;
(x) an executed counterpart of the Transitional Services Agreement;
(xi) the duly executed Purchaser Guaranty;
(xii) evidence reasonably satisfactory to Seller that all Gaming
Licenses required to be obtained by Purchaser or any of its directors,
officers, employees, stockholders and Affiliates in connection with the
acquisition of the Shares have been obtained and are in full force and
effect; and
(xiii) all other previously undelivered documents, agreements,
instruments, writings and certificates, and such other documents,
agreements, instruments, writings and certificates as Seller may
reasonably request to effect the transactions contemplated by this
Agreement, in form and substance reasonably satisfactory to Seller.
17
Section 3.3 Purchase Price Payment at Closing.
In consideration of the purchase and sale of the foregoing, at the
Closing, Purchaser shall pay to Seller the Closing Date Purchase Price (less any
sums previously paid to Seller pursuant to Section 3.7), if any, subject to
further adjustment post-Closing pursuant to Sections 3.5 and 3.6; provided that
if no adjustment is made post-Closing to the Closing Date Purchase Price
pursuant to Sections 3.5 and 3.6, the Closing Date Purchase Price shall be the
Final Purchase Price for purposes of this Agreement.
Section 3.4 Calculation of Closing Date Purchase Price.
Two days prior to the Closing, Seller shall deliver to Purchaser the
Estimated Working Capital Statement for each Company (each an "Estimated Working
Capital Statement" and collectively the "Estimated Working Capital Statements").
Each Estimated Working Capital Statement shall be prepared by Seller using the
same types of management judgments, estimates, forecasts, policies, opinions and
allocations (including reserve calculations) that have historically been used in
the preparation of such Company's financial statements. The amount of Working
Capital of such Company set forth in its Estimated Working Capital Statement
shall hereinafter be referred to as the "Estimated Working Capital." Purchaser
(and its independent accountants) shall be afforded the opportunity to review
each Estimated Working Capital Statement. The "Closing Date Purchase Price"
shall be equal to the sum of Two Hundred Million Dollars ($200,000,000) (the
"Base Price") plus the amount of aggregate Estimated Working Capital (if greater
than zero), or minus the amount of aggregate Estimated Working Capital (if less
than zero).
Section 3.5 Adjustment Procedures to the Closing Date Purchase
Price.
(a) As promptly as practicable, but no later than twenty-five (25) days
after the Closing, Purchaser shall prepare and deliver to Seller a statement
setting forth the Working Capital of each Company as of the Closing (each a
"Working Capital Statement" and collectively the "Working Capital Statements").
The Working Capital Statements shall be prepared by Purchaser using the same
types of management judgments, estimates, forecasts, policies, opinions and
allocations, including reserve calculations, that have historically been used in
the preparation of each Company's financial statements. Following the Closing,
Purchaser shall give Seller and any independent accountants of Seller access at
all reasonable times to the properties, books, records and personnel of the
Company relating to periods prior to the Closing for purposes of reviewing the
Working Capital Statements. Seller shall have thirty (30) days following receipt
of the Working Capital Statements in which to notify Purchaser in writing of any
dispute of any item contained in any Working Capital Statement, which notice
shall set forth in reasonable detail the basis for such dispute and the Working
Capital figure proposed by Seller (the "Dispute Notice"). If Seller fails to
notify Purchaser in writing of any dispute within such thirty-day period, then
each Working Capital Statement shall be deemed to be a "Final Statement." In the
event that Seller shall so notify Purchaser of any dispute on or prior to such
thirtieth day, any amounts contained in the Working Capital Statements that are
not disputed by Seller in the Dispute Notice shall be deemed to have been
finally determined for purposes of calculating the Actual Working Capital. For a
period of fifteen (15) days following the delivery
18
of the Dispute Notice to Purchaser, an officer of each of Purchaser and Seller
shall attempt to resolve in good faith the amounts disputed in the Dispute
Notice. During such fifteen-day period, Purchaser shall be permitted to review
the working papers of Seller and Seller's independent accountants relating to
the Estimated Working Capital Statements and the Dispute Notice, and Seller
shall be permitted to review the working papers of Purchaser and Purchaser's
independent accountants relating to the Working Capital Statements. Amounts
resolved by such attempts within such fifteen (15) day period shall be deemed to
have been finally determined for purposes of calculating the Actual Working
Capital.
(b) If Purchaser and Seller are unable to resolve any such dispute prior
to the end of such fifteen (15) day period, an accounting firm mutually
acceptable to both Purchaser and Seller (the "Independent Accounting Firm")
shall be deemed appointed by Purchaser and Seller to resolve such dispute and
such determination shall be final and binding on the parties to this Agreement.
If Purchaser and Seller cannot mutually agree on the selection of the
Independent Accounting Firm, Purchaser and Seller shall submit to such other
Person's independent accountants the name of a nationally recognized accounting
firm which does not at the time and has not in the prior two years provided
audit or other attestation services or diligence services in connection with
this Agreement to any of the MGM Entities or Purchaser or any of their
respective Affiliates, and the Independent Accounting Firm shall be selected by
lot from these two firms by the independent accountants of Purchaser and Seller.
The Independent Accounting Firm may not make any determination with respect to
any matter not set forth in the Dispute Notice and the Independent Accounting
Firm's determination shall not be more than the amount of the Working Capital
set forth in the Dispute Notice or less than the amount of the Working Capital
of the relevant Company as of the Closing Date set forth in the relevant Working
Capital Statement. Each of Purchaser and Seller and their respective independent
accountants shall give the Independent Accounting Firm access at all reasonable
times to the properties, books, records and personnel of the Company relating to
periods prior to the Closing for purposes of reviewing the Estimated Working
Capital Statements, the Dispute Notice and the Working Capital Statements and
calculating the Actual Working Capital. The Independent Accounting Firm shall be
instructed to use every reasonable effort to perform its services within thirty
days of submission of the Estimated Working Capital Statements, the Dispute
Notice and the Working Capital Statements to it and, in any case, as promptly as
practicable after such submission. Each Working Capital Statement, as modified
by resolution of any disputes by Purchaser and Seller or by the Independent
Accounting Firm, shall be deemed to be a "Final Statement."
(c) Purchaser and Seller shall pay all expenses relating to the engagement
of the Independent Accounting Firm in proportion to the percentage of the dollar
value of the disputed items prevailed upon by each Person. Purchaser and Seller
shall each pay all advisors' fees, charges and expenses incurred by such Person
in connection with the dispute.
Section 3.6 Calculation and Payment of Final Purchase Price.
The Closing Date Purchase Price shall be adjusted as follows: (i) if the
aggregate Actual Working Capital is greater than the aggregate Estimated Working
Capital, then the Closing Date Purchase Price shall be increased by the amount
of such excess; or (ii) if the aggregate Actual Working Capital is less than the
aggregate Estimated Working Capital, then the Closing Date
19
Purchase Price shall be decreased by the amount of such deficiency (in each such
event, the "Final Purchase Price").
To the extent the aggregate Actual Working Capital is: (i) greater than
the aggregate Estimated Working Capital, Purchaser shall, within five days of
Purchaser's receipt of the Final Statements, deliver by wire transfer of
immediately available funds to the account specified by Seller in writing for
the Closing Date Purchase Price, an amount equal to such excess; or (ii) less
than the aggregate Estimated Working Capital, Seller shall, within five days of
Seller's receipt of the Final Statements, deliver by wire transfer of
immediately available funds to an account specified by Purchaser in writing (no
later than two Business Days prior to the expiration of such five day period),
an amount equal to such deficiency, in either case without interest.
Section 3.7 Additional Payments.
Purchaser acknowledges and agrees that the Parties have agreed upon the
Purchase Price in part on the representations by Purchaser that it will be able
to receive all necessary Gaming Licenses expeditiously, and that the Closing
will be able to occur on or before the date that is six (6) months from the date
hereof (as such date may be extended from time to time in accordance with this
Section 3.7, the "Estimated Closing Date"). Purchaser may extend the Estimated
Closing Date for up to three (3) consecutive thirty (30) day periods by
providing Seller written notice thereof and payment of an Extension Payment (as
hereinafter defined) on the respective dates set forth below. Each "Extension
Payment" shall be equal to the sum of One Million Two Hundred Fifty Thousand and
no/100 Dollars ($1,250,000.00) payable to Seller prior to the commencement of
each requested thirty (30) day extension (each, an "Extension Payment," and
collectively, the "Extension Payments"). The Extension Payments shall be (i)
applied towards the Closing Date Purchase Price in the event the Closing occurs,
(ii) applied towards the Termination Fee in the event the Termination Fee
becomes due and payable, and (iii) otherwise disbursed pursuant to the terms of
Article X hereof. Notwithstanding any provision to the contrary contained
herein, in the event Purchaser shall receive the Purchaser Termination Fee in
accordance with Section 6.14(b), Seller hereby acknowledges and agrees to
immediately refund to Purchaser the amount of any Extension Payments received by
Seller in accordance with this Section 3.7.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser, except as expressly set forth
herein and in the disclosure schedule delivered by Seller to Purchaser before
the execution and delivery of this Agreement (the "Seller Disclosure Schedule"),
as follows:
Section 4.1 Organization and Qualification.
Seller is duly incorporated, validly existing and in good standing under
the laws of the State of Nevada and has all requisite corporate power and
authority to carry on its business as (i) now being conducted and as proposed to
be conducted prior to Closing, and (ii) is duly
20
qualified or licensed to do business in each jurisdiction in which the ownership
or use of its assets or conduct of its business requires it to be so qualified,
except in the case of clause (i) or (ii), for such failure would not have a
Material Adverse Effect.
Section 4.2 Ownership of Shares.
(a) Seller is the record and beneficial owner of the Shares of each
Company and, except as set forth in Section 4.2(a) of the Seller Disclosure
Schedule, the Shares of each Company are free and clear of all Encumbrances,
excepting only restrictions on the subsequent transfer as may be imposed under
applicable Laws. Section 4.2(a) of the Seller Disclosure Schedule sets forth the
authorized Shares and the number of outstanding Shares for each Company. The
Shares of each Company have been duly authorized, validly issued and fully paid,
are non-assessable and have not been issued in violation of any pre-emptive
rights, applicable Laws, the respective Company's articles of organization or
the terms of any Contract to which any of the MGM Entities is a party or bound.
There are no obligations, contingent or otherwise, to repurchase, redeem (or
establish a sinking fund with respect to redemption) or otherwise acquire all or
any portion of the Shares of either Company. There are no bonds, debentures,
notes or other Indebtedness of such Company having voting rights (or convertible
into securities having voting rights). Except as set forth in Section 4.2(a) of
the Seller Disclosure Schedule, there are no other equity interests or
securities of such Company reserved for issuance or any outstanding
subscriptions, options, warrants, rights, "phantom" stock rights (or other stock
appreciation rights or contractual rights, the value of which is derived from
the financial performance of the Companies), convertible or exchangeable
securities, stock appreciation rights, or other Contracts (other than this
Agreement) granting to any Person any interest in or right to acquire at any
time, or upon the happening of any stated event, any shares in such Company
(whether issued or un-issued) or other equity interests or securities of the
Company, or any interest in, exchangeable for, or convertible into, shares in
such Company or other equity interests or securities of such Company.
(b) The Companies do not own directly or indirectly, of record or
beneficially, or have the right to acquire under any Contract, any capital stock
or equity interests or any securities convertible, exchangeable, redeemable or
exercisable into capital stock or equity interests of any other Person (nor is
it a general partner or manager of any other Person).
Section 4.3 Authority; No Conflict; Required Filings and
Consents.
(a) Seller has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions that are contemplated by this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement (and all related documents) by the MGM Entities and the
performance by the MGM Entities of the transactions that are contemplated by
this Agreement (and all related documents) have been duly authorized by all
necessary corporate action on the part of the MGM Entities, respectively. Except
as at that time made or obtained, as of the Closing Date, no corporate act or
proceeding on the part of the MGM Entities or their respective stockholders or
members will be necessary to authorize, execute, deliver and perform this
Agreement (and all related documents) and consummate the transactions
contemplated by this Agreement (and all related documents). This Agreement (and
all related
21
documents) has been duly executed and delivered by each of the MGM Entities and,
assuming this Agreement (and all related documents) constitutes the valid and
binding obligation of Purchaser (or such other parties thereto), constitutes the
valid and binding obligation of each of the MGM Entities, enforceable against
each of the MGM Entities in accordance with its terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar Laws now or hereafter in
effect relating to creditors' rights generally and (ii) general principles of
equity (regardless of whether enforcement is considered in a proceeding at Law
or in equity).
(b) Except as set forth in Section 4.3(b) of the Seller Disclosure
Schedule, the execution and delivery of this Agreement (and all related
documents) by each of the MGM Entities does not, and the consummation by each of
the MGM Entities of the transactions to which it is a party that are
contemplated by this Agreement (and all related documents), including the
Intercompany Account Settlement will not, (i) conflict with, or result in any
violation or breach of, any provision of the articles of organization,
certificate of incorporation or bylaws of the MGM Entities, as the case may be,
(ii) conflict with, result in a breach of, constitute a default (or an event
which with the giving of notice or lapse of time, or both, would become a
default) under, require any notice, consent, approval or waiver under, or give
to others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, or result in the creation or continuance of any
Encumbrance on the Shares, any of the assets or properties of the Company
pursuant to, any Contract, permit or obligation to which any of the MGM Entities
is a party or by which any of the MGM Entities or any of their respective assets
or properties is bound or (iii) conflict with or violate any Law or Governmental
Order applicable to any of the MGM Entities or the Shares, any of the assets or
properties of either Company, except where such conflict or violation would not
have a Material Adverse Effect.
(c) Except for (i) the filing of notification reports under the HSR Act,
(ii) any Governmental Approvals related to, or arising out of, compliance with
(x) Gaming Laws and (y) Gaming Licenses, (iii) any Governmental Approvals
related to, or arising out of, compliance with Liquor Licenses, (iv) any
Governmental Approvals as may be required under applicable state securities
Laws, (v) any Governmental Approvals as may be required under any Laws
pertaining to any notification, disclosure or required approval triggered by the
Closing or the transactions contemplated by this Agreement, and (vi) the
satisfaction or waiver of the closing conditions in Section 7.1 and Section 7.3
and the closing deliveries in Section 3.2, no Governmental Approval, or consent,
approval, authorization or action by, notice to, filing with, or waiver from,
any other Person is required in connection with the execution, delivery and
performance by the MGM Entities of this Agreement and consummation by the MGM
Entities of the transactions contemplated by this Agreement.
Section 4.4 Financial Information.
Section 4.4 of the Seller Disclosure Schedule contains (a) an audited (i)
Supplemental Consolidating Balance Sheet Information of Parent, including
Balance Sheet Information of each Company as of December 31, 2005 (each a
"Company Balance Sheet" and collectively the "Company Balance Sheets"), and (ii)
Supplemental Consolidating Income Statement Information and Supplemental
Consolidating Cash Flow Information of Parent, setting forth Income Statement
Information and Cash Flow Information of each Company for the eleven
22
months ended December 31, 2005, audited by Deloitte & Touche LLP, whose report
thereon is included therein (including all notes thereto); and (b) an unaudited
(i) balance sheet of each Company as of June 30, 2006, and (ii) income statement
of each Company for the six months ended June 30, 2006. The balance sheet
information of each Company referenced in clauses (a)(i) and (b)(i) of the
immediately preceding sentence is true, complete and accurate in all material
respects, has been prepared in accordance with the books of account and other
financial records of each Company, and presents fairly the assets, liabilities
and financial condition of each Company as of the date thereof and, with respect
to the audited balance sheet information in clause (a)(i), in accordance with
GAAP. The income statement and cash flow information of each Company referenced
in clauses (a)(ii) and (b)(ii) in this Section 4.4 is true, complete and
accurate, has been prepared in accordance with the books of account and other
financial records of each Company, and presents fairly the results of operations
of such Company for the periods therein referred to and, with respect to the
audited income statement and cash flow information in clause (a)(ii), in
accordance with GAAP.
Section 4.5 No Undisclosed Liabilities.
Except as set forth in Section 4.5 of the Seller Disclosure Schedule,
neither Company has any Liability that is not reflected or reserved against on
its Company Balance Sheet or otherwise disclosed in the notes thereto which
could have a Material Adverse Effect, other than Liabilities incurred subsequent
to December 31, 2005 in the Ordinary Course of Business.
Section 4.6 Absence of Certain Changes or Events.
Except as disclosed in Section 4.6 of the Seller Disclosure Schedule,
since December 31, 2005, and except as contemplated by or as otherwise set forth
in this Agreement, the business and operations of each Company have been
conducted only in the Ordinary Course of Business and, since such date, there
has not been any Material Adverse Effect.
Section 4.7 Taxes.
Except as set forth in Section 4.7 of the Seller Disclosure Schedule, to
the knowledge of Seller:
(a) Parent, Seller or the relevant Company (i) has timely filed (taking
into account all valid extensions of time for filing) with the appropriate
taxing authorities all material Tax Returns that report the activities of the
Companies required by Law to be filed by Parent, Seller or such Company, as the
case may be, and (ii) each of Parent, Seller and the relevant Company will
timely file any such returns required by Law to be filed (taking into account
all valid extensions of time for filing) on or prior to the Closing Date. Such
Tax Returns are (and, to the extent they will be filed prior to the Closing
Date, will be) complete and accurate in all material respects. Neither Company
has pending any request for an extension of time within which to file Tax
Returns.
(b) No federal, state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with regard to any Taxes
or Tax Returns of either Company. Neither Company has received notice of any
such pending audits or proceedings.
23
There are no outstanding waivers extending the statutory period of limitation
relating to the payment of Taxes due from either Company.
(c) Neither the IRS nor any other taxing authority (whether domestic or
foreign) has asserted, or to the knowledge of the Company threatened to assert,
against either Company any material deficiency or material claim for Taxes.
(d) There are no Encumbrances for Taxes upon any property or assets of
either Company, except for Encumbrances for Taxes not yet due and payable and as
to which adequate reserves have been established on the financial statements of
such Company.
(e) Neither Company has any obligation under any Tax sharing agreement or
similar arrangement with any other Person with respect to Taxes of such other
Person.
(f) Neither Company has received a written ruling from any taxing
authority.
(g) No jurisdiction where a Company does not file a Tax Return has made a
claim that such Company is required to file a Tax Return in such jurisdiction.
(h) No audit or other proceeding by any Governmental Authority is pending
or threatened with respect to any Taxes due from or with respect to the
Companies or any Tax Returns filed by or with respect to the Companies. All
material Taxes that the Companies are, or were, requested by legal requirements
to withhold or collect have been duly withheld or collected, and to the extent
required, have been paid to the proper Government Authority.
Section 4.8 Real Property.
(a) Section 4.8(a) of the Seller Disclosure Schedule identifies a
complete, accurate and current list, including the address or other description,
and the identity of the holder of title, of all real property owned by each
Company (including all land, and all interests in buildings, structures,
improvements and fixtures located thereon and all easements and other rights and
interests appurtenant thereto (the "Owned Real Property"), and Section 4.8(a) of
the Seller Disclosure Schedule identifies a complete, accurate and current list
of all real property leased or operated by each Company, including the date of
each Lease, the expiration date of such Lease, the term of such Lease, the
parties to such Lease, all renewal rights and options to purchase and a
description of the demised premises thereunder (including all leasehold,
subleasehold, ground leasehold, or other rights to use or occupy any land,
buildings, structures, improvements, fixtures, or other interest in real
property used in connection with such Company and the operation of its business)
(collectively, the "Leased Real Property"). The Company is in lawful possession
of the Real Property, subject only to Permitted Exceptions and those matters
described in the Seller Disclosure Schedule.
(b) With respect to each Lease, except as set forth in Section 4.8(b) of
the Seller Disclosure Schedule to the knowledge of each Company, respectively,
as of the date of this Agreement: (i) each party named therein is not in default
thereunder; (ii) no defaults (whether or not subsequently cured) are currently
alleged thereunder, by or against either party, and no event has occurred or
failed to occur or circumstance exists which, with the delivery of notice, the
passage of time or both, would constitute such a breach or default, or permit
the termination,
24
modification or acceleration of rent under such Lease; (iii) such Lease is a
valid and binding obligation upon the Company named therein, and is a valid and
binding obligation of each other party thereto, and is in full force and effect
and enforceable by the Company named therein in accordance with its terms,
except as such enforceability may be limited by (x) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar Laws now or
hereafter in effect relating to creditors' rights generally, and (y) general
principles of equity (regardless of whether enforcement is considered in a
proceeding at Law or in equity); (iv) no security deposit or portion thereof
deposited with respect to such Lease has been applied in respect of a breach or
default under such Lease that has not been redeposited in full, except where the
failure to redeposit such security deposit would not have a Material Adverse
Effect; (v) the interest of tenant thereunder has not been subleased, licensed,
or assigned, and no Person has otherwise been granted the right to use or occupy
the Leased Real Property or any portion thereof; and (vi) there are no
Encumbrances, Contracts, defects, claims or exceptions on or affecting the
estate or interest created thereby or pursuant thereto.
(c) A complete, accurate and current rent roll for the Tenant Leases (the
"Rent Roll") is set forth in Section 4.8(c) of the Seller Disclosure Schedule.
There are no Tenant Leases with respect to the Real Property other than the
Tenant Leases which are set forth on the Rent Roll. Except as set forth in the
Rent Roll, to the knowledge of each Company, respectively, as of the date of
this Agreement: (i) each Tenant Lease is in full force and effect; (ii) the
tenants have accepted possession of, and are in occupancy of, all of their
respective demised premises and have commenced the payment of rent under the
Tenant Leases to the extent set forth on the Rent Roll, and there are no
offsets, claims or defenses to the enforcement thereof presently outstanding;
(iii) all rents due and payable under the Tenant Leases have been paid and no
portion of any rent has been paid for any period more than thirty days in
advance; and (iv) no tenant or other party in possession of any of the Real
Property subject to the Tenant Leases has any right to purchase, or holds any
right of first refusal to purchase, such properties. The Rent Roll sets forth
the scheduled expiration date of each Tenant Lease and any arrearages in the
payment of rent thereunder as of the date of the Rent Roll. Section 4.8(c) of
the Seller Disclosure Schedule may be amended after the date of this Agreement
to add Tenant Leases and to add additional agreements comprising the Tenant
Leases; provided, that such additional Tenant Leases or agreements comprising
any additional Tenant Leases are entered into in accordance with Section 6.1 of
this Agreement. Each Tenant Lease is enforceable in accordance with its terms,
except as such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar Laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforcement is considered in a
proceeding at Law or in equity).
(d) Except as set forth in Section 4.8(d) of the Seller Disclosure
Schedule, to the knowledge of the Company, all material buildings, structures,
fixtures, building systems and equipment included in the Owned Real Property
(the "Improvements") are in good condition and repair in all material respects,
subject to reasonable wear and tear, and there are no facts or conditions
affecting any of the Improvements that would adversely interfere with the use or
occupancy of the Improvements or any portion thereof in the operation of the
business presently conducted thereon, subject to the terms of the Leases. Except
as set forth in Schedule 4.8(d) of the Seller Disclosure Schedules, to the
knowledge of the Company, solely with respect to that portion of the Leased Real
Property consisting of the surface parking lot used by the Companies
25
for employee parking, such surface parking lot is in good condition and repair
in all material respects, subject to reasonable wear and tear, and there are no
facts or conditions affecting that portion of the Leased Real Property that
would adversely interfere with the use thereof or any portion thereof in the
operation of the business as presently conducted thereon, subject to the terms
of the Leases.
(e) To the knowledge of Seller, neither Company has received notice of any
currently proposed or pending assessment for public improvements or otherwise.
(f) Except as set forth in Section 4.8(f) of the Seller Disclosure
Schedule, to the knowledge of the respective Companies, the present use of the
Improvements is in substantial conformity with or is excused from conformity
with all applicable zoning Laws, and neither Company has received written notice
of a violation thereof which would have a Material Adverse Effect.
(g) Except as disclosed in Section 4.8(g) of the Seller Disclosure
Schedule, all requisite certificates of occupancy required with respect to the
Improvements on any of the Real Property have been obtained and are currently in
full force and effect.
(h) Except as set forth in Section 4.8(h) of the Seller Disclosure
Schedule, neither Company has received written notice of any action, proceeding
or litigation pending, overtly contemplated or threatened: (i) to take all or
any material portion of the Real Property, or any interest therein, by eminent
domain; (ii) to modify the zoning of, or other governmental rules or
restrictions applicable to, the Real Property or the use or development thereof;
(iii) for any street widening or changes in highway or traffic lanes or patterns
in the immediate vicinity of the Real Property; or (iv) otherwise relating to
the Real Property or the interests of the Company therein, any of (i) through
(iv) which could have a Material Adverse Effect.
(i) Except as disclosed in Section 4.8(i) of the Seller Disclosure
Schedule, or as otherwise contemplated by this Agreement, there are no Contracts
or other obligations outstanding for the sale, exchange, Encumbrance or transfer
of the Company's interest in its Real Property, or any portion of it.
Section 4.9 Tangible Personal Property.
Section 4.9 of the Seller Disclosure Schedule sets forth each item of
Tangible Personal Property (other than inventory and supplies) owned by the
respective Companies having an initial purchase price in excess of Fifty
Thousand Dollars ($50,000) (including subsequent installment payments) purchased
pursuant to purchase orders within the last two years. Section 4.9 of the Seller
Disclosure Schedule sets forth each item of Tangible Personal Property leased by
the respective Companies (other than pursuant to individual leases having an
annual rental of less than Fifty Thousand Dollars ($50,000) or that are
terminable by the Company upon sixty (60) days notice or less without penalty)
(the "Tangible Personal Property Leases"). Section 4.9 of the Seller Disclosure
Schedule lists each live gaming device (including gaming tables), electronic
gaming devices (including all slot machines), and other regulated gaming
equipment owned, leased or otherwise used by the respective Companies. Except as
set forth in Section 4.9 of the Seller Disclosure Schedule, the Tangible
Personal Property owned by such Company is
26
free and clear of all Encumbrances. Except as set forth in Section 4.9 of the
Seller Disclosure Schedule, the Tangible Personal Property owned by such Company
is located at the Real Property. To the Company's knowledge, the Tangible
Personal Property owned or leased by such Company is in working order, subject
to ordinary wear and tear, or, if not, such failure would not have a Material
Adverse Effect. With respect to each Tangible Personal Property Lease, there has
been no breach or default or claim of default by either Company under any such
Tangible Personal Property Lease to which it is a party, or to the knowledge of
each such Company, any other party thereto, under any provision thereof and no
event has occurred with or without notice, the passage of time, or both, which
would constitute a default by it, or to its knowledge by any other party
thereto, under any provision thereof or that would permit modification,
acceleration or termination of any Tangible Personal Property Lease by any other
party thereto or by it, except where such failure to perform, breach, default,
claim of default, acceleration or termination would not have a Material Adverse
Effect.
Section 4.10 Intellectual Property.
(a) Section 4.10(a) of the Seller Disclosure Schedule sets forth a
complete list of Owned Intellectual Property that is material to the business of
each Company.
(b) Section 4.10(b) of the Seller Disclosure Schedule sets forth a
complete list of all IP Agreements that are material to the business of each
Company.
(c) Section 4.10(c) of the Seller Disclosure Schedule sets forth a
complete list of Assigned Intellectual Property that is material to the business
of each Company.
(d) Except as set forth on Section 4.10(d) of the Seller Disclosure
Schedule, to the knowledge of Seller, there is no pending or threatened IP Claim
against either Company involving Owned Intellectual Property or Used
Intellectual Property, except as such pending or threatened IP Claim would not
have a Material Adverse Effect.
(e) Except as set forth on Section 4.10(e) of the Seller Disclosure
Schedule, none of Parent or its Affiliates has brought or threatened an IP Claim
against any Person involving Owned Intellectual Property or Used Intellectual
Property. Seller may amend Section 4.10(e) of the Seller Disclosure Schedule
after the date of this Agreement to add any IP Claims brought or threatened by
it against any Person; provided, that any such additional Claims are made in
accordance with Section 6.1.
(f) To the knowledge of Seller, there exists no event or condition
(including the consummation of the transactions contemplated by this Agreement)
that with the giving of notice or lapse of time, or both, would become a default
under any IP Agreement or IP Enforcement Document by either Company or any other
party thereto, except those events or conditions which would not have a Material
Adverse Effect.
Section 4.11 Contracts.
(a) Except for those Contracts that are terminable by the relevant Company
upon sixty (60) days notice or less without penalty, Section 4.11(a) of the
Seller Disclosure Schedule sets forth a complete, accurate and current list of
any Contract providing for aggregate annual
27
payments to or by either Company in excess of One Hundred Thousand Dollars
($100,000) (collectively the "Material Contracts"). Upon mutual agreement of the
Parties or as expressly permitted by Section 6.1, Section 4.11(a) of the Seller
Disclosure Schedule may be amended after the date of this Agreement to add as
Material Contracts additional Contracts entered into after the date hereof by
each Company. Each Material Contract is a valid and binding obligation of the
applicable Company and, to the knowledge of such Company, is a valid and binding
obligation of each other party thereto, and is in full force and effect and
enforceable by such Company in accordance with its terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar Laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or in
equity). Each Company has performed all material obligations required to be
performed by it under each Material Contract to which it is a party, and there
has been no breach or default or claim of default by it or, to its knowledge by
any other party thereto, under any provision thereof and no event has occurred
which, with or without notice, the passage of time or both, would constitute a
default by it, or, to its knowledge any other party thereto, under any provision
thereof or that would permit modification, acceleration or termination of any
Material Contract by any other party thereto or by it, except where such failure
to perform, breach, default, claim of default, modification, acceleration or
termination would not have a Material Adverse Effect.
(b) Except as set forth in Section 4.11(b) of the Seller Disclosure
Schedule, no Company is a party to or bound by: (i) any Material Contract with
agents, consultants, advisors, salesmen, sales representatives, distributors,
suppliers or dealers; (ii) any Material Contract providing for the payment of
any bonus or commission based on sales or earnings; (iii) any Contract for the
purchase or sale of any security, except as contemplated by this Agreement; (iv)
any Material Contract for Indebtedness; (v) any Material Contract relating to
the granting of express product or service warranties by such Company; (vi) any
Contract containing a covenant not to compete by such Company; (vii) any
Contract granting an Encumbrance on the Shares or any of the assets or
properties of such Company; (viii) any Material Contract permitting or requiring
such Company to provide insurance or indemnification or advance expenses to any
Person; (ix) any Contract relating to merger, consolidation, business
combination, share exchange, business acquisition, bulk room sales agreements;
(x) any Contract which materially restricts (geographically or otherwise) the
conduct of any line of business by such Company; (xi) any partnership, joint
venture or limited liability or management agreement with any Person; or (xii)
any Contract for the sale of all or substantially all of the assets, properties
or rights of such Company outside of the Ordinary Course of Business, except as
contemplated by this Agreement.
(c) Other than the transactions contemplated by this Agreement or as set
forth in Section 4.11(c) of the Seller Disclosure Schedule, there are no
Contracts between or among a Company on the one hand, and Parent and its
Affiliates (other than the Company), on the other hand (the "Affiliate
Contracts"), which would survive the Closing.
Section 4.12 Litigation.
Except as set forth in Section 4.12 of the Seller Disclosure Schedule, (a)
there is no action, suit or proceeding, claim, arbitration or investigation,
including indemnification matters,
28
against either Company or any property or asset of either Company, pending or,
to the knowledge of Seller, threatened against either Company or any of their
respective properties or assets, before any Governmental Entity or arbitration
body, the adverse determination of which would have a Material Adverse Effect,
(b) there is no Governmental Order or arbitration award outstanding against
either Company or any of the respective Company's properties or assets, which
would have a Material Adverse Effect or which would adversely affect in a
material manner the ability of Purchaser to consummate the acquisition of the
Shares, and (c) there is no action, suit or proceeding, claim, arbitration or
investigation, including indemnification matters, by either Company, pending, or
as to which either Company has sent any notice of assertion.
Section 4.13 Environmental Matters.
Except as set forth in Section 4.13 of the Seller Disclosure Schedule, to
the knowledge of each Company:
(a) Such Company is in substantial compliance with all applicable
Environmental Laws (which compliance includes the possession by such Company of
all permits and other Governmental Approvals required under applicable
Environmental Laws, and compliance with the terms and conditions thereof),
except where the failure to comply would not have a Material Adverse Effect.
Neither Company has received any written notice from a Person alleging that such
Company is not in such compliance, and there are no present actions, activities,
circumstances, conditions, events or incidents that may prevent or interfere
with such compliance. All Governmental Approvals currently held by such Company
pursuant to applicable Environmental Laws are set forth in Section 4.13 of the
Seller Disclosure Schedule.
(b) There is no Environmental Claim pending or threatened against either
Company, the adverse determination of which would have a Material Adverse
Effect.
(c) There are no known present actions, activities, circumstances,
conditions, events or incidents, including the Release or threatened Release of
any Hazardous Materials on, any of the Real Property, that is reasonably
expected to form the basis of any Environmental Claim against either Company,
the adverse determination of which would have a Material Adverse Effect.
(d) During the period of Parent's ownership of the Companies, neither
Company has stored, deposited, discharged, buried, dumped or disposed of
Hazardous Materials or any other hazardous wastes produced by, or resulting
from, any business, commercial or industrial activities, operations or
processes, on or beneath any property currently or formerly owned, operated or
leased by such Company, except (i) for inventories of such substances to be
used, and wastes generated therefrom, in the Ordinary Course of Business of such
Company (which inventories and wastes, if any, were and are stored or disposed
of in accordance with applicable Environmental Laws), or (ii) as would not have
a Material Adverse Effect.
(e) Each Company has delivered or made available to Purchaser complete,
accurate and current copies and results of any reports, studies, analyses, tests
or monitoring possessed or initiated by or on behalf of such Company and in its
possession pertaining to Hazardous
29
Materials, if any, in, on, beneath or adjacent to any of the Real Property or
regarding such Company's compliance with applicable Environmental Laws.
Section 4.14 Employee Benefit Plans.
(a) Section 4.14(a) of the Seller Disclosure Schedule sets forth a
complete, accurate and current list of each deferred compensation and each bonus
or other incentive compensation, stock purchase, stock option and other equity
compensation plan, program, agreement or arrangement, each severance or
termination pay, medical, surgical, hospitalization, life insurance and other
"welfare" plan, fund or program (within the meaning of section 3(1) of ERISA);
each profit-sharing, stock bonus or other "pension" plan, fund or program
(within the meaning of section 3(2) of ERISA), each employment, termination,
change in control or severance agreement; and each other material employee
benefit plan, fund, program, agreement or arrangement; in each case, that is
sponsored, maintained or contributed to or required to be contributed to by
either Company, Parent or by any trade or business other than either Company,
whether or not incorporated, that together with Parent would be deemed a "single
employer" within the meaning of section 4001(b) of ERISA (an "ERISA Affiliate"),
or to which either Company, Parent or an ERISA Affiliate is a party, whether
written or oral, for the benefit of any employee or former employee of the
Company (collectively, the "Plans"). None of either Company, Parent or any ERISA
Affiliate has any legally binding or publicly announced commitment or formal
plan to create any additional employee benefit plan or modify or change any
existing Plan that would affect any employee or former employee of either
Company.
(b) With respect to each Plan, Seller has delivered or made available to
Purchaser complete, accurate and current copies of each of the following
documents:
(i) a copy of the Plan and any amendments thereto (or if the Plan is
not a written Plan, a written description of the material terms thereof);
(ii) a copy of the two most recent annual reports and actuarial
reports, if required under ERISA, and the most recent report (if any)
prepared with respect thereto in accordance with Statement of Financial
Accounting Standards No. 87;
(iii) a copy of the most recent Summary Plan Description required
under ERISA with respect thereto;
(iv) if the Plan is funded through a trust or any third-party
funding vehicle, a copy of the trust or other funding agreement and the
latest financial statements thereof (if any); and
(v) the most recent determination letter received from the IRS with
respect to each Plan intended to qualify under section 401 of the Code.
(c) None of the Plans is subject to Section 302 or Title IV of ERISA or
Section 412 of the Code, and each Company has no Liability under Title IV or
Section 302 of ERISA with respect to any plan sponsored, maintained or
contributed to (or required to be contributed to) by Parent or any ERISA
Affiliate.
30
(d) As of the date of this Agreement, all contributions required to be
made on or before December 31, 2005 with respect to any Plan have been timely
made, or are reflected on the audited, consolidated balance sheet (or the notes
thereto) of Parent contained in its Form 10-K for the fiscal year ended December
31, 2005 filed with the SEC on March 13, 2006 to the extent such contributions
were required to have been so reflected by the Exchange Act. There has been no
amendment to, written interpretation of or announcement (whether or not written)
by Parent or any ERISA Affiliate relating to, or change in employee
participation or coverage under, any Plan that would increase materially the
expense of maintaining such Plan above the level or expense incurred in respect
thereof for the Parent's most recent fiscal year ended prior to the date of this
Agreement.
(e) Except as set forth in Section 4.14(e) of the Seller Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not, either alone or in combination with another event, (i) entitle any
current or former director, officer or employee of either Company to severance
pay, unemployment compensation or any other payment or distribution, (ii)
accelerate the time of payment or vesting of any benefits granted under any
Plan, or increase, the amount of compensation due any such director, officer or
employee, (iii) result in the forgiveness of any Indebtedness with respect to
any such director, officer or employee or (iv) result in the obligation to fund
benefits with respect to any such director, officer or employee.
(f) There has been no material failure of a Plan that is a group health
plan (as defined in Section 5000(b)(1) of the Code) to meet the requirements of
Section 4980B(f) of the Code with respect to a qualified beneficiary (as defined
in Section 4980B(g) of the Code). Neither Parent nor any ERISA Affiliate has
contributed to a nonconforming group health plan (as defined in Section 5000(c)
of the Code) and neither Parent nor any ERISA Affiliate of Parent has incurred a
Tax under Section 5000(a) of the Code that is or could become a Liability of
Purchaser or the Company.
(g) With respect to each Plan that is a Multiemployer Plan, (i) neither
Company has made or suffered a "complete withdrawal" or "partial withdrawal," as
such terms are respectively defined in sections 4203 and 4205 of ERISA (or any
Liability resulting therefrom has been satisfied in full), (ii) no event has
occurred that presents a material risk of a partial withdrawal, (iii) neither
Company has any contingent Liability under section 4204 of ERISA, and (iv) to
the knowledge of Seller and the Companies no circumstances exist that present a
material risk that such Plan will go into reorganization.
Section 4.15 Compliance with Applicable Laws.
Except as disclosed in Section 4.15 of the Seller Disclosure Schedule:
(a) (i) During the period of Parent's ownership of Seller and each
Company, each Company has complied and is complying with, and to the knowledge
of the Companies, has complied with, all applicable Laws, except where the
failure to have been in compliance or comply would not have a Material Adverse
Effect, and (ii) each Company has neither received written notice of any
asserted present or past failure to comply, nor, to the knowledge of the
31
Companies, is aware of any threatened action to do so, except where the failure
to have been in compliance or comply would not have a Material Adverse Effect.
(b) Each Company has all Governmental Approvals necessary for each to
carry on its non-gaming business as now conducted and there have occurred no
defaults, revocations or suspensions under any such Governmental Approvals,
except for such which would not have a Material Adverse Effect.
(c) Each Company holds all Gaming Licenses necessary to operate its gaming
business, and such Gaming Licenses are in full force and effect and have not
been revoked or suspended, and there has been no violation under such Gaming
Licenses, except for such as would not have a Material Adverse Effect. During
Parent's ownership of Seller and each Company, each Company has maintained at
all times cash reserves required by Gaming Laws.
(d) During the period of Parent's ownership of Seller and the Companies,
neither Company has: (i) applied for a casino, racing or other Gaming License in
any state or other jurisdiction and been denied; (ii) experienced any revocation
or failure to renew any such license; or (iii) withdrawn or not applied for any
such license or renewal after being informed orally or in writing by any
Governmental Entity, that such Company would be denied such a license or renewal
if it were applied for.
(e) Each Company's respective directors, officers, employees and
stockholders hold all Governmental Approvals (including all Gaming Licenses and
other authorizations under Gaming Laws and Liquor Licenses) necessary to carry
on its business as now conducted, each of which is in full force and effect, and
there has occurred no default, revocation or suspension under any such
Governmental Approval.
(f) To the knowledge of Seller and the Companies, none of the Companies'
respective directors, officers, employees or stockholders has received written
notice of any asserted present or past failure by such respective Person to
comply with applicable Gaming Laws which could result in a Material Adverse
Effect.
Section 4.16 Labor Matters.
Except as set forth in Section 4.16 of the Seller Disclosure Schedule, to
the knowledge of Seller:
(a) Each Company is, and during Parent's ownership of Seller and the
Companies each has been, in compliance with all applicable Laws respecting
employment and employment practices, terms and conditions of employment, wages,
hours of work and occupational safety and health, and is not engaged in any
unfair labor practices as defined in the NLRA or other applicable Law, except
where the failure to comply or any such labor practice would not have a Material
Adverse Effect.
(b) There is no labor strike, dispute, slowdown, stoppage or lockout
pending or threatened against or affecting either Company.
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(c) Neither Company is a party to or bound by any collective bargaining or
similar agreement with any labor organization, or work rules or practices agreed
to with any labor organization or employee association applicable to employees
of such Company.
(d) None of the employees of either Company is represented by any labor
organization in their capacities as employees of such Company, there are no
current union organizing activities among the employees of such Company, nor
does any question concerning representation exist concerning such employees.
(e) Seller has delivered or made available to Purchaser a complete,
accurate and current copy of all written personnel policies, rules or procedures
applicable to employees of each Company.
(f) Neither Company has received written notice of any unfair labor
practice charge or complaint against it pending or threatened before the NLRB or
any other Governmental Entity.
(g) Neither Company has received written notice of any grievance arising
out of any collective bargaining agreement or other grievance procedure against
it.
(h) Neither Company has received written notice of any charge or complaint
with respect to or relating to it pending before the Equal Employment
Opportunity Commission or any other Governmental Entity responsible for the
prevention of unlawful employment practices.
(i) Neither Company has received written notice from any Governmental
Entity responsible for the enforcement of labor, employment, wages and hours of
work, or occupational safety and health Laws of its intent to conduct an
investigation with respect to or relating to it and no such investigation is in
progress.
(j) Neither Company has received written notice of any complaint, lawsuit
or other proceeding pending or threatened in any forum by or on behalf of any
present or former employee of such entities, any applicant for employment or
classes of the foregoing alleging breach of any express or implied Contract of
employment, any Law governing employment or the termination thereof or other
discriminatory, wrongful or tortious conduct in connection with the employment
relationship.
Section 4.17 Compliance with the WARN Act.
Except as set forth in Section 4.17 of the Seller Disclosure Schedule,
since the later of: the enactment of the WARN Act and the acquisition by Parent
of Seller and the Companies, neither Company has (a) effectuated a "plant
closing" (as defined in the WARN Act) affecting any site of employment or one or
more facilities or operating units within any site of employment or facility of
the Company, (b) effectuated a "mass layoff" (as defined in the WARN Act)
affecting any site of employment or facility of the Company or (c) been affected
by any transaction which would, or engaged in layoffs or employment terminations
sufficient in number to, trigger application of any similar Law. None of the
employees of either Company has suffered an "employment loss" (as defined in the
WARN Act) since six months prior to the date of this Agreement.
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Section 4.18 Indebtedness.
Section 4.18 of the Seller Disclosure Schedule sets forth a complete,
accurate and current list of all outstanding Indebtedness of each Company as of
the date of this Agreement which would survive the Closing. Neither Company is
in default and no waiver of default is currently in effect, in the payment of
any principal or interest on any Indebtedness of either Company and no event or
condition exists with respect to any Indebtedness of either Company that would
permit (or that with notice or lapse of time, or both, would permit) one or more
Persons to cause such Indebtedness to become due and payable before its stated
maturity or before its regularly scheduled dates of payment.
Section 4.19 Insurance.
Section 4.19 of the Seller Disclosure Schedule sets forth a complete,
accurate and current description of all policies of property and casualty
insurance, including physical damage, general liability, workers compensation
and all other forms of insurance and similar arrangements (collectively, the
"Policies") presently in effect with respect to the properties, assets and
operations of each Company. Except as set forth in Section 4.19 of the Seller
Disclosure Schedule, all Policies are in full force and effect, all premiums
with respect thereto covering all periods up to and including the Closing Date
have been paid, and no notice of cancellation or termination has been received
with respect to any Policies, except for such cancellations or terminations
which would not have a Material Adverse Effect; and no insurance or proceeds
relating to such Policies have been assigned by such Company to any Person. For
each Policy, Section 4.19 of the Seller Disclosure Schedule sets forth: (a) the
date thereof; (b) the name of the insurer; (c) the names of the entities covered
thereby; and (d) the expiration date. Except as set forth in Section 4.19 of the
Seller Disclosure Schedule, the Policies: (w) are sufficient for compliance in
all material respects with all Contracts to which either Company is a party or
bound, (x) are valid, outstanding and enforceable, and (y) provide sufficient
insurance coverage for the properties, assets and operations of each Company.
The MGM Entities have delivered or made available to Purchaser a list of all
claims made under the Policies set forth in Section 4.19 of the Seller
Disclosure Schedule and of all payments made to each Company thereunder since
January 1, 2006, and the information contained in such list is complete,
accurate and current. Any insurance refunds due to Parent or its Affiliates are
to be retained by Seller or Parent.
Section 4.20 Internal Controls and Procedures.
Each Company maintains accurate books and records reflecting its assets
and liabilities and maintains proper and adequate internal accounting controls
that provide assurance that: (a) transactions are executed with management's
authorization; and (b) transactions are recorded as necessary to permit
preparation of its financial statements and to maintain accountability for its
assets; except to the extent any of the foregoing (a) and (b) may be affected by
the matters set forth on Section 4.20 of the Seller Disclosure Schedule.
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Section 4.21 Brokers.
Except as disclosed in Section 4.21 of the Seller Disclosure Schedule, no
broker, financial advisor or finder is entitled to any brokerage fees,
commissions or finder's fees in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the MGM Entities
or their respective Affiliates.
Section 4.22 Solvency; Sufficient Capital.
After giving effect to the Intercompany Account Settlement, (a) the fair
saleable value of all of the assets and properties (including goodwill) of each
Company will be greater than the total of its Liabilities and (b) the projected
cash flow from operating activities of each Company is sufficient to pay the
probable Liability (other than Liabilities that are accounted for in the
definition of Working Capital) on its existing debts as such debts become due
and payable and will not result in unreasonably small capital of each Company.
Each Company currently pays its Liabilities as they become due and payable in
the ordinary course of business.
Section 4.23 Sufficiency of Assets and Contracts.
Except with respect to the Retained Property and the matters set forth in
Section 4.23 of the Seller Disclosure Schedule, after giving effect to the
Closing, the Companies will own or license, lease from or contract with a Person
that is not an Affiliate of Parent all Intellectual Property, Real Property,
Tangible Personal Property, IP Agreements, Material Contracts and Leases that
are reasonably necessary for the conduct of their business in substantially the
same manner as presently conducted.
Section 4.24 Knowledge.
Whenever in the course of the representations and warranties of Seller set
forth in this ARTICLE IV, reference is made in connection with any matter to the
knowledge of such Party, or the best of such Party's knowledge, Purchaser
understands and intends that such reference shall be deemed to include only
those matters within the actual knowledge of ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇▇, in connection with Seller or the Company.
Section 4.25 Nevada Takeover Statutes.
As of the date hereof and at all times on or prior to the Closing, the
provisions of Sections 78.378 through 78.3793 of the Nevada Revised Statutes
are, and shall be, inapplicable to the transactions contemplated by this
Agreement.
Section 4.26 As Is, Where Is; Release.
Purchaser is an informed and sophisticated purchaser experienced in the
evaluation and purchase of interests similar to the Shares. Purchaser and/or one
or more of its Affiliates have undertaken such investigation and have been
provided with and have evaluated such documents and information as they have
deemed necessary or advisable to enable them to make informed and intelligent
decisions with respect to the execution, delivery and performance of this
Agreement and the Purchaser Guaranty. Purchaser agrees, subject to the express
terms hereof
35
(including the representations and warranties contained in this Article IV), to
accept the Shares, and any assets related to the Shares in an "AS IS, WHERE IS"
basis, on the Closing Date based upon its own inspection, examination and
determination with respect thereto as to all matters and without reliance upon
any express or implied representations or warranties of any nature made by or on
behalf of or imputed to Seller, except as expressly set forth herein. Without
limiting the generality of the foregoing, expect as expressly set forth herein
(including the representations and warranties contained in this Article IV),
Purchaser on behalf of itself and each of its Affiliates acknowledges that
Seller makes no representation or warranty with respect to any projections,
budgets, or estimates delivered or made available to Purchaser or its Affiliates
of future revenues, future results of operations (or any component thereof) of
the business or future business of the Companies. Purchaser acknowledges that
the Purchase Price might be higher if Purchaser were not acquiring the Shares in
an "AS IS, WHERE IS" condition. Subject to the following sentence, Purchaser
hereby releases the Seller Indemnified Parties from and against any and all
claims, demands, and causes of action, past, present or future, that Purchaser
may have relating to: (i) the condition of the Shares before or after the
Closing Date; (ii) the environmental condition of the Real Property, and (iii)
any other matter pertaining to the Shares or the Companies, including without
limitation, the Real Property, Contracts, Tangible Personal Property, and
Intellectual Property. This release shall survive the Closing or the termination
of this Agreement for any reason, but excludes any release of claims arising
from Seller's representations and warranties (including the representations and
warranties contained in this Article IV) in, or any breach by Seller of its
obligations under, this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the MGM Entities that the statements
contained in this ARTICLE V are true and correct, except as set forth herein and
in the disclosure schedule delivered by Purchaser to Seller before the execution
and delivery of this Agreement (the "Purchaser Disclosure Schedule").
Section 5.1 Organization of Purchaser.
Purchaser is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Nevada
Section 5.2 Ownership.
One Hundred Percent (100%) of the membership interest of Purchaser is
owned of record and beneficially by Saddle West Investors, LLC, a Nevada limited
liability company, and Sher Gaming LLC, a Nevada limited liability company.
Section 5.3 Authority; No Conflict; Required Filings and
Consents.
(a) Purchaser has all requisite limited liability company power and
authority to enter into this Agreement and to consummate the transactions that
are contemplated by this Agreement
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and to perform its obligations hereunder. The execution and delivery of this
Agreement by Purchaser and the consummation of the transactions that are
contemplated by this Agreement have been duly authorized by all necessary
limited liability company action on the part of Purchaser. No limited liability
company act or proceeding on the part of Purchaser or its members is necessary
to authorize, execute and deliver this Agreement and consummate the transactions
contemplated by this Agreement. This Agreement has been duly executed and
delivered by Purchaser and, assuming this Agreement constitutes the valid and
binding obligation of Seller, constitutes the valid and binding obligation of
Purchaser, enforceable against each of them, in accordance with its terms,
except as such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar Laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforcement is considered in a
proceeding at Law or in equity).
(b) The execution and delivery of this Agreement by Purchaser does not,
and the consummation by Purchaser of the transactions to which it is a party
that are contemplated by this Agreement will not, (i) conflict with, or result
in any violation or breach of, any provision of the Articles of Organization or
operating agreement of Purchaser (ii) conflict with, result in a breach of,
constitute a default (or an event which with the giving of notice or lapse of
time, or both, would become a default) under, require any notice, consent,
approval or waiver under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result in
the creation or continuance of any Encumbrance on any of the assets or
properties of Purchaser pursuant to, any Contract, permit or obligation to which
Purchaser is a party or by which it or any of its assets or properties is bound,
or (iii) conflict with or violate any Law or Governmental Order applicable to
Purchaser or any of its respective assets or properties.
(c) Except for: (i) the filing of notification reports under the HSR Act,
(ii) any Governmental Approvals related to, or arising out of, compliance with
Gaming Laws, (iii) any Governmental Approvals related to, or arising out of,
compliance with Liquor Licenses, (iv) any Governmental Approvals as may be
required under applicable state securities Laws, (v) any Governmental Approvals
as may be required under any Laws pertaining to any notification, disclosure or
required approval triggered by the Closing or the transactions contemplated by
this Agreement, and (vi) the satisfaction or waiver of the closing conditions in
Section 7.1 and Section 7.2 and the closing deliveries in Section 3.2, no
Governmental Approval, or consent, approval, authorization or action by, notice
to, filing with, or waiver from, any other Person is required in connection with
the execution, delivery and performance of this Agreement by Purchaser and
consummation by Purchaser of the transactions contemplated by this Agreement.
Section 5.4 Brokers.
Except as set forth in Section 5.4 of the Purchaser Disclosure Schedule,
no broker, financial advisor or finder is entitled to any brokerage fees,
commissions or finder's fees in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Purchaser and its
Affiliates.
37
Section 5.5 Licensing.
Neither Purchaser nor any of its officers, directors, principals or
Affiliates who may reasonably be considered in the process of determining the
suitability of Purchaser (any such Persons, the "Licensing Affiliates") has ever
been denied, or had revoked, a gaming license by a Gaming Authority or
Governmental Entity. Purchaser and each of its Licensing Affiliates that are
licensed (collectively, the "Licensed Parties") are in good standing in each
jurisdiction where Purchaser or its Licensing Affiliates own or operate a gaming
facility. To the knowledge of Purchaser, there are no facts, which if known to
the regulators under the Gaming Laws, that would (a) be reasonably likely to
result in the denial, revocation, limitation or suspension of a gaming license,
or (b) result in a negative outcome to any finding of suitability proceedings
currently pending, or under the suitability proceedings necessary for the
consummation of this Agreement. Purchaser has no reason to expect that all
Gaming Licenses necessary for it to own and operate the Companies immediately
after Closing will not be timely obtained.
Section 5.6 Compliance with Gaming Laws.
Purchaser and its Licensing Affiliates hold all gaming licenses necessary
to operate their respective gaming businesses, and such gaming licenses are in
full force and effect and have not been revoked or suspended, and there has been
no violation under such gaming licenses, except for such as would not have a
material adverse effect on Purchaser or Purchaser's ability to consummate the
acquisition of the Shares. Purchaser and its Licensing Affiliates have not: (i)
applied for a casino, racing or other gaming license in any state or other
jurisdiction and been denied; (ii) experienced any revocation or failure to
renew any such license; or (iii) withdrawn or not applied for any such license
or renewal after being informed orally or in writing by any Governmental
Authority, that the company would be denied such a license or renewal if it were
applied for. Purchaser's and its Licensing Affiliates' respective directors,
officers, employees and stockholders hold all governmental approvals (including
all gaming licenses and other authorizations under Gaming Laws) necessary to
carry on their respective businesses as now conducted, each of which is in full
force and effect, and there has occurred no default, revocation or suspension
under any such governmental approval.
Section 5.7 Litigation.
There is no action, suit or proceeding, claim, arbitration or
investigation, including indemnification matters, against Purchaser any of its
properties or assets, pending, or as to which Purchaser has received notice of
assertion, or to the knowledge of Purchaser threatened against, Purchaser or any
of its properties or assets, before any Governmental Entity or arbitration body,
the adverse determination of which would have a material adverse effect
Purchaser's ability to consummate the acquisition of the Shares and there is no
Governmental Order or arbitration award outstanding against Purchaser or any
properties or assets which would have a material adverse effect on Purchaser's
ability to consummate the acquisition of the Shares, or (c) the ability of the
MGM Entities to consummate the transactions contemplated by this Agreement. To
the knowledge of Purchaser, Purchaser is not a party or subject to (including
any property or asset of Purchaser) or in default of a Governmental Order or
arbitration award.
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Section 5.8 Availability of Funds.
Purchaser has sufficient cash available to enable it to consummate the
transactions contemplated by this Agreement, to operate the business of the
Companies for the reasonably foreseeable future, to satisfy the assumed
Liabilities and to meet the financial obligations under the Contracts that
Purchaser is assuming as such obligations are presently known or reasonably
anticipated.
Section 5.9 No Breach.
The execution, delivery and performance by Purchaser of this Agreement and
the consummation by Purchaser of the transactions contemplated hereby, do not
and will not (a) breach, contravene or conflict with Purchaser's articles of
organization or operating agreement, or (b) violate any order, injunction,
judgment, decree or award, or federal, state, local or foreign law, ordinance,
statute, rule or regulation to which Purchaser or any Affiliate of Purchaser is
subject or by which Purchaser, its Affiliates or properties may be bound except
where such violations, conflicts, breaches or defaults would not, individually
or in the aggregate, have a material adverse effect on Purchaser's ability to
consummate the transactions contemplated by this Agreement.
Section 5.10 No Knowledge of Misrepresentations or Omissions.
None of Purchaser nor any Affiliate of Purchaser has any knowledge that
any representation or warranty of Seller in this Agreement or any other
agreement contemplated hereby is not true and correct in all material respects,
and none of Purchaser nor any Affiliate of Purchaser has any knowledge of any
material errors in, or material omissions from, this Agreement, the Seller
Disclosure Schedule or the schedules, exhibits or attachments to any agreement
contemplated hereby.
Section 5.11 Knowledge.
Whenever in the course of the representations and warranties of Purchaser
set forth in this ARTICLE V, reference is made in connection with any matter to
the knowledge of Purchaser, or the best of Purchaser's knowledge, Seller
understands and intends that such reference shall be deemed to include only
those matters within the actual knowledge of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ III or ▇▇▇▇ ▇▇▇▇▇,
in connection with Purchaser.
Section 5.12 Investment Intent.
Purchaser understands that the Shares may not be sold, transferred or
otherwise disposed of, without registration under the Securities Act or a valid
exemption from registration under the Securities Act and that in the absence of
an effective registration statement covering the Shares or a valid exemption
from registration under the Securities Act, the Shares must be held
indefinitely. Purchaser is acquiring the Shares for its own account solely for
the purpose of investment and not with a view to, or for offer or sale in
connection with, any distribution thereof.
39
ARTICLE VI
COVENANTS
Section 6.1 Conduct of Business of the Companies.
(a) During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Closing, subject to the
limitations set forth below, each Company (to the extent applicable) agrees,
except to the extent Purchaser shall consent in writing or as expressly
contemplated by this Agreement, to (i) carry on its business and operations
diligently (including without limitation the execution of Tenant Leases), only
in the Ordinary Course of Business, (ii) pay its debts when due (or within any
applicable grace periods) and to pay its Taxes when due subject to the right of
such Company to timely contest the payment of any such debt and/or Tax in good
faith, (iii) pay or perform its other obligations when due (or within any
applicable grace periods), (iv) maintain the Leased Real Property leased by it
and the Owned Real Property and Tangible Personal Property owned by it
substantially in its present repair, order and condition (subject to normal wear
and tear) consistent with the current needs of its business, replace in
accordance with prior practice its inoperable, worn out or obsolete assets with
assets of quality consistent with past practice to the extent the failure to so
repair or replace would reasonably be expected to have a Material Adverse
Effect, and (v) use Commercially Reasonable Efforts consistent with past
practices and policies to preserve intact its present business organization,
keep available the services of its present officers and key employees and
preserve its relationships with its customers, suppliers, distributors, and
others having business dealings with it.
(b) Without limiting the generality of the foregoing and except (i) as
expressly contemplated by this Agreement, (ii) as set forth in Schedule 6.1 or
(iii) to the extent Purchaser shall consent in writing (which consent shall not
unreasonably be withheld), during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Closing, each Company (and any of Parent or its Affiliates acting for or on
behalf of such Company) shall not:
(i) amend (whether by merger, consolidation or otherwise) or restate
its organizational documents or convert into a different form of entity.
or pay, or declare, or set aside for payment of dividends or other
distributions payable in cash, stock, or property with respect to any
shares of any class or series of its capital stock;
(ii) issue, pledge or sell, or authorize the issuance, pledge or
sale of additional equity securities, or securities convertible into
equity securities, or any rights, warrants or options to acquire any
convertible securities or equity securities, or any other securities in
respect of, in lieu of, or in substitution for, equity securities, except
for any pledges which would be released as of the Closing;
40
(iii) split, combine, subdivide, reclassify or redeem, purchase or
otherwise acquire, or propose to redeem, purchase or otherwise acquire,
any equity securities;
(iv) authorize, recommend, propose or announce an intention to adopt
a plan of complete or partial liquidation or dissolution of it;
(v) incur, assume, prepay or guaranty any Indebtedness which would
survive the Closing except in the Ordinary Course of Business;
(vi) change in any material respect any of its current policies or
practices relating to the extension of credit to customers or the
collection from customers of receivables from gaming operations;
(vii) take, or agree to commit to take, any action that would make
any representation or warranty of it contained herein inaccurate in any
material respect at, or as of any time prior to, the Closing so as to
cause the conditions to Purchaser consummating the transactions
contemplated herein not to be satisfied;
(viii) close, shut down, or otherwise eliminate any of its hotels,
casinos and related properties, except for such closures, shutdowns or
eliminations that are (A) required by Governmental Order or otherwise
required by Law or (B) due to acts of God, acts of terrorism or other
force majeure events;
(ix)(A) increase the compensation payable or to become payable or
the benefits provided to any Company director, officer or employee, except
for normal merit and cost-of-living increases consistent with past
practice, or grant any severance or termination payment to, or pay, loan
or advance any amount to, any Company director, officer or employee, or
(B) enter into or amend any employment, severance, consulting, termination
or similar agreement with, or employee benefit plan for, in each case that
would survive beyond the Closing Date, with any Company officer, director
or employee;
(x) terminate, cancel or amend, or cause the termination,
cancellation or amendment of, any insurance coverage (and any surety
bonds, letters of credit, cash collateral or other deposits related
thereto required to be maintained with respect to such coverage)
maintained by either Company that is not replaced by a comparable
insurance coverage, other than in the Ordinary Course of Business; or
(xi) enter into a Contract to do any of the foregoing, or to
authorize or announce an intention to do any of the foregoing.
Section 6.2 Cooperation; Notice; Cure.
Each of the Parties shall promptly notify the other(s) in writing of, and
shall use its Commercially Reasonable Efforts to cure before the Closing Date,
as soon as practicable after it becomes known to such Party, any event,
transaction or circumstance, that causes or will cause any covenant, obligation
or agreement of such Party under this Agreement to be violated or
41
remain unfulfilled in any material respect or that renders or shall render
untrue in any material respect any representation or warranty contained in this
Agreement. Nothing contained in this Section 6.2 above shall prevent any of the
Parties from giving such notice, using such efforts or taking any action to cure
or curing any such event, transaction or circumstance. No written notice given
pursuant to this Section 6.2 shall have any effect on the representations,
warranties, covenants, obligations or agreements contained in this Agreement for
purposes of determining satisfaction of any condition contained herein.
Section 6.3 Access to Information.
(a) The Company shall permit Purchaser's senior officers to meet with its
respective personnel who are responsible for its financial statements, its
internal controls, and its disclosure controls and procedures to discuss such
matters as Purchaser may deem reasonably necessary or appropriate for Purchaser
to satisfy its obligations (if any) under the SOXA post-Closing Date.
(b) The Company shall deliver to Purchaser promptly after they become
available and in any case within twenty-five (25) days after the end of each
calendar month, an unaudited statement of income of the Company for the one
month period then ended. Such statement of income shall be in the form currently
prepared for management's use.
(c) Upon reasonable notice, subject to applicable Law, including antitrust
Laws and Gaming Laws, the MGM Entities shall afford to those directors, officers
and representatives of Purchaser set forth on Schedule 6.3(c) of the Purchaser
Disclosure Schedule reasonable access, during normal business hours to the
Companies' personnel and to the properties relating to the Companies; provided,
that such access does not in any material way interfere with the efficient
operation of the Companies' business or the ability of the Companies' employees
to perform their duties.
Section 6.4 Confidentiality of Information.
Except as necessary or appropriate to comply with its respective
obligations under this Agreement and to consummate the transactions contemplated
by this Agreement, each of the Parties shall comply with, and shall cause their
respective directors, officers, employees, agents and representatives to comply
with, the provisions of the Confidentiality Agreements.
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Section 6.5 Intercompany Account Settlement.
All intercompany accounts or amounts payable (or accrued) by Parent or any
of its Affiliates, on the one hand, to either Company, on the other hand (except
as between Companies), shall, immediately prior to the Closing, be netted
against any intercompany accounts or amounts payable (or accrued), including any
instrument evidencing Indebtedness to the Parent or its Affiliates, by either
Company, on the one hand, to Parent or any of its Affiliates, on the other hand
(other than as between Companies), and the balance, if any, shall be contributed
by Parent to the capital of such Company or distributed by such Company to
Parent (collectively, the "Intercompany Account Settlement"). After giving
effect to the consummation of the Intercompany Account Settlement, neither
Company shall owe or be liable for the satisfaction of any intercompany accounts
or amounts payable (or accrued) to any of the MGM Entities (other than the other
Company), and none of the MGM Entities shall owe or be liable for the
satisfaction of any intercompany accounts or amounts payable (or accrued) to any
Company. Purchaser agrees to cooperate with Seller following the Closing,
including executing such documents and taking such actions, so as to give full
effect to the foregoing.
Section 6.6 Governmental Approvals.
(a) The Parties shall cooperate with each other and use their Commercially
Reasonable Efforts to (and, with respect to the Gaming Laws, and antitrust Laws,
if applicable, shall use their Commercially Reasonable Efforts to cause their
respective directors and officers to) promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable all Governmental Approvals, and to comply
(and, with respect to the Gaming Laws, to cause their respective directors and
officers to comply) with the terms and conditions of all such Governmental
Approvals. The Parties and their respective Affiliates, directors and officers
shall (x) file within thirty (30) days after the date of this Agreement all
required initial applications and documents in connection with the HSR Act and
obtaining the Governmental Approvals under Nevada Gaming Laws, (y) as soon as
reasonably practicable after the date hereof file all required initial
applications and documents in connection with all Governmental Approvals other
than those required under subpart (x), and (z) shall act diligently and promptly
thereafter in responding to additional requests and comments in connection
therewith and to pursue all such Governmental Approvals as promptly as possible.
The Parties acknowledge that this Agreement and the transactions contemplated
hereby are subject to the review and approval of the applicable Nevada Gaming
Authorities. Each of Seller and Purchaser shall have the right to consult with
the other on, in each case subject to applicable Laws relating to the exchange
of information (including antitrust Laws and Gaming Laws), all the information
relating to the other Person and any of its Affiliates that appears in any
filing made with, or written materials submitted to, any third Person or
Governmental Entity in connection with the transactions contemplated by this
Agreement. Without limiting the foregoing, each of Seller and Purchaser (the
"Notifying Party") shall notify the other promptly of the receipt of comments or
requests from Governmental Entities relating to Governmental Approvals, and
shall supply the other with copies of all correspondence between the Notifying
Party or any of its representatives and Governmental Entities with respect to
Governmental Approvals; provided, however, that none of the MGM Entities, on the
one hand, and Purchaser, on the other hand, shall be required to supply the
other with copies of communications relating to
43
the personal applications of individual applicants (except for evidence of
filing) or with any documents which are the subject of a confidentiality
agreement barring the same.
(b) Each of Seller and Purchaser shall promptly notify the other Party
upon receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement that causes such Person to reasonably believe that there is a
reasonable likelihood that such consent or approval from such Governmental
Entity will not be obtained or that the receipt of any such consent or approval
will be materially delayed.
(c) Each of Seller on the one hand, and Purchaser on the other hand, shall
use their/its respective Commercially Reasonable Efforts to take, or cause to be
taken, all actions reasonably necessary to (i) defend any lawsuits or other
legal proceedings challenging this Agreement or the consummation of the
transactions contemplated by this Agreement and (ii) prevent the entry by any
Governmental Entity of any Governmental Order challenging this Agreement or the
consummation of the transactions contemplated by this Agreement, appealing as
promptly as possible any such Governmental Order and having any such
Governmental Order vacated or reversed.
Section 6.7 Performance.
Each of the Parties shall perform all acts to be performed by it pursuant
to this Agreement and shall refrain from taking or omitting to take any action
that would violate or cause to remain unfilled its covenants, obligations or
agreements or breach its representations and warranties hereunder or render them
inaccurate in any material respect as of the date of this Agreement or the
Closing Date or that in any way would prevent or materially adversely affect the
consummation of the transactions contemplated by this Agreement. Each of the
Parties shall use its Commercially Reasonable Efforts to satisfy or cause to be
satisfied all of the conditions set forth in Section 7.1, and all the conditions
to the obligations of the other Parties/Party set forth in Section 7.2 and
Section 7.3, respectively.
Section 6.8 Publicity.
Seller and Purchaser shall agree on the form and content of any initial
press releases regarding the transactions contemplated by this Agreement and
thereafter shall consult with each other before issuing, provide each other the
opportunity to review and comment upon and use all Commercially Reasonable
Efforts to agree upon, any press release or other public statement with respect
to any of the transactions contemplated hereby and shall not issue directly or
indirectly any such press release or make directly or indirectly any such public
statement prior to such consultation and prior to considering in good faith any
such comments, except (a) as may be required by applicable Law or (b) in
connection with: (i) Parent complying with its obligations under the rules of
the New York Stock Exchange, (ii) Purchaser pursuing any financing in connection
herewith, or (iii) the Parties complying with their respective obligations under
this Agreement.
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Section 6.9 Intellectual Property - General.
(a) Seller shall not, directly or indirectly, perform or fail to perform
any act whereby any Owned Intellectual Property material to the business of
either Company or any Assigned Intellectual Property material to the business of
either Company may lapse, become abandoned, or become unenforceable.
(b) The Purchaser and, from and after the Closing, the Companies, agree
not to claim any right, title or interest in, or interfere with Parent or its
Affiliates' ownership or use of, any Used Intellectual property, other than
Assigned Intellectual Property.
(c) Upon Closing, Seller, on behalf of itself and its Affiliates, agrees
not to claim any right, title or interest in, or interfere with either Company's
ownership or use of, any Owned Intellectual Property or Assigned Intellectual
Property.
(d) With respect to any Software owned by Parent or Seller or any of their
Subsidiaries (other than either Company) that is Used Intellectual Property and
not excluded from the transactions contemplated hereby pursuant to Section 2.2,
Parent or Seller may elect to grant an irrevocable, perpetual, non-transferable
license on a non-exclusive basis in and to such Software (in the form that it
exists as of the Closing Date with no obligation to provide upgrades, updates,
or other alternations) to Purchaser or either Company (rather than to make an
assignment).
Section 6.10 Intellectual Property - Post-Closing.
(a) From and after the Closing, Parent and its Affiliates shall not
register or authorize others to Use or register Owned Intellectual Property,
Assigned Intellectual Property, and any other Intellectual Property that
constitutes an Infringement of Owned Intellectual Property or Assigned
Intellectual Property and shall not challenge Purchaser's or any of its
Affiliates' right to Use or register such Owned Intellectual Property or
Assigned Intellectual Property. Within thirty (30) days after the Closing,
Parent and its Affiliates shall cease Use in commerce of Owned Intellectual
Property and Assigned Intellectual Property. Notwithstanding the foregoing, (i)
the Parties agree that for a period of up to one hundred eighty (180) days from
the Closing Date, Parent and its Affiliates shall be entitled to continue to use
the Companies' Trademarks to the extent that any such Company Trademarks exist
or are contained as of the Closing Date on any promotional or advertising
materials used in the business of Parent or its Affiliates or required to be
used for any government or administrative filings; provided, however, that
Parent and its Affiliates shall use their respective Commercially Reasonable
Efforts to cease the Use of the Companies' Trademarks on the soonest possible
date and (ii) this Section 6.10 shall neither diminish nor broaden Parent's and
its Affiliates' fair use rights.
(b) Following the Closing, Purchaser shall be responsible for all updates,
maintenance fees and related upgrades on all assigned license agreements for
third party Software.
(c) Within thirty (30) days after the Closing, the Companies shall cease
Use of Parent's and its Affiliates' Trademarks (excluding the Company
Trademarks) or any other Trademarks substantially or confusingly similar
thereto. Notwithstanding the foregoing, (i) the
45
Parties agree that for a period of up to one hundred eighty (180) days from the
Closing Date, the Companies shall be entitled to continue to use the Parent's
and its Affiliates' Trademarks to the extent that any such Trademarks exist or
are contained as of the Closing Date on any promotional or advertising materials
used in the business of the Companies; provided, however, that the Companies
shall use their respective Commercially Reasonable Efforts to cease the use of
the Parent's and its Affiliates' Trademarks at the soonest possible date.
Section 6.11 Employees.
(a) Upon execution of this Agreement, Purchaser shall be permitted to hold
joint meetings with all employees of the Companies at such times as are mutually
acceptable to the Companies and the Purchaser, and shall be permitted to provide
preliminary information relating to the transactions contemplated by this
Agreement, and thereafter Purchaser shall be entitled to conduct one-on-one
meetings with all employees of the Companies at such times as Purchaser shall
reasonably request.
(b) Effective as of the date immediately preceding the Closing Date, the
participation of the Companies in all Plans sponsored by the Parent and its
ERISA Affiliates other than the Multiemployer Plan shall terminate.
Notwithstanding any provision of this Agreement to the contrary, prior to the
Closing, any of the Company, Seller or Parent may (i) amend either or both of
the MGM MIRAGE Deferred Compensation Plan II ("DCP II") and MGM MIRAGE
Supplemental Executive Retirement Plan II ("SERP II"), and take any and all
other actions as it deems necessary to transfer to the Seller, effective as of
the date immediately preceding the Closing Date, any or all of the Liabilities
of the Companies with respect to DCP II and SERP II with respect to any or all
of the employees of the Companies through and including such date, and to
transfer to Seller any right, title or interest, whether contingent or
otherwise, that either Company has or may claim with respect to the trust
created by the Trust Agreement for the MGM MIRAGE Nonqualified Plans (the "Trust
Agreement"), to the extent necessary to enable Seller to be treated as the
grantor of the account maintained pursuant to Section 1.7 of the Trust Agreement
with respect to the Companies to ensure that the payment of such Liabilities to
be deductible by the Seller for federal and state income tax purposes to the
maximum extent allowed by law, and (ii) amend DCP II and SERP II to provide for
acceleration of the payment of benefits thereunder with respect to employees of
the Companies who are employed by either Company, Purchaser or any of their
Affiliates after the Closing, to the extent permitted by Section 409A of the
Code.
(c) Notwithstanding any provision of this Agreement to the contrary,
nothing in this Agreement shall give any employee of either Company the right to
continuing employment or alter the at-will employment status of any such
employee.
(d) On and after the Closing Date, (i) Purchaser shall cause all employees
of either Company who are employed by the Purchaser or any of its Affiliates
(together, the "Purchaser Group") on or after the Closing Date (the "Company
Employees") to receive credit for all service with such Company and its
Affiliates prior to the Closing Date for purposes of eligibility and vesting
(but not benefit accrual) under any and all employee benefit plans, programs,
policies and arrangements sponsored by the Purchaser and the Purchaser Group
(such plans, collectively the "New Plans") to the extent coverage under any such
New Plan replaces coverage
46
under a comparable Plan in which such Covered Employee participates immediately
before or at any time after the Closing Date (such plans, collectively, the "Old
Plans"); and (ii) for purposes of each New Plan providing medical, dental,
pharmaceutical, vision and/or disability benefits to Company Employees and their
covered dependents, Purchaser shall cause all pre-existing condition exclusions
and actively-at-work requirements of such New Plan to be waived for such Company
Employees and their covered dependents, Purchaser shall cause any eligible
expenses incurred by such covered Employees and their covered dependents during
the portion of any plan year of the Old Plan which includes a date of
participation in the corresponding New Plan begins, to be taken into account
under such New Plan for purposes of satisfying applicable deductible,
coinsurance and maximum out-of-pocket requirements applicable to such Covered
Employee and their covered dependents for such plan year as if such amounts had
been paid in accordance with such New Plan during the corresponding plan year.
Section 6.12 Transitional Services.
Recognizing the existing operational interdependencies between the
Companies, on the one hand, and Seller and its affiliates, on the other hand,
the Parties agree that Purchaser, the Companies and Seller shall enter into,
prior to or at the Closing Date, a written agreement (the "Transitional Services
Agreement") evidencing the arrangements set forth in Schedule 6.12.
Section 6.13 Termination of Affiliate Contracts.
Seller shall, and shall cause its Affiliates (other than the Companies),
on the one hand, and the applicable Company, on the other hand, to terminate the
Affiliate Contracts with effect as of the Closing (the "Termination of Affiliate
Contracts"). The Termination of Affiliate Contracts shall be without Liability
or Loss to the Company in question, including as to Liabilities or Losses
remaining under any Affiliate Contracts. Seller shall provide a full written
release and exculpation to, and for the benefit of, the Companies and Purchaser
from any Liability, Loss, restriction or performance in connection with, arising
out of, or relating to, the Termination of Affiliate Contracts. For the
avoidance of doubt, any Liability or Loss incurred by Purchaser in connection
with any Affiliate Contract shall not be subject to the provisions of Section
8.2(c).
Section 6.14 Termination Fee.
(a) In the event that either: (X) the MGM Entities are entitled to
terminate this Agreement pursuant to Section 10.1(d) hereof, or (Y) (i) the
Closing has not occurred by the Estimated Closing Date (as such Estimated
Closing Date may be extended by the Extension Payment), and (ii) each of the
Closing conditions set forth in Section 7.1 have been satisfied or waived by
Purchaser or would have been satisfied but for Purchaser's failure to use its
Commercially Reasonable Efforts to perform its respective obligations under this
Agreement, and (iii) each of the Closing conditions set forth in Section 7.3
have been satisfied or waived by Purchaser or would have been satisfied but for
Purchaser failing to use its Commercially Reasonable Efforts to perform its
respective obligations under this Agreement in accordance with the terms and
conditions hereof, and (iv) the MGM Entities are not otherwise in default
hereunder, then in either such event (X) or (Y) the MGM Entities shall have the
right, as its sole and exclusive remedy, to give written notice to Purchaser of
their intention to terminate this
47
Agreement if Purchaser fails to close (or be prepared to close) the transactions
contemplated by this Agreement on or prior to the fifth Business Day following
receipt of such written notice and as promptly as practicable following
termination (which shall occur automatically on such fifth Business Day unless
agreed to otherwise by the Parties in writing) Purchaser shall pay, or cause to
be paid, in same day funds to Seller, the sum of Twenty-Five Million Dollars
($25,000,000) (the "Seller Termination Fee"). Only one Termination Fee shall be
payable to Seller regardless of the circumstances. In the event Seller receives
payment of the Termination Fee, Seller, and Seller on behalf of its Affiliates,
agrees to forego and not to pursue (or aid any other Person in pursuing) or
assign any allegation, claim, right or remedy, whether legal or equitable,
including specific performance, against, directly or indirectly, Purchaser or
any of their respective Affiliates, for Purchaser's failure to consummate the
transactions contemplated by this Agreement. The obligation of Purchaser to pay
the Termination Fee pursuant to this Section 6.14(a) shall be guaranteed by
Purchaser Parent pursuant to the Purchaser Guaranty. Subject to the occurrence
of the matters set forth in subsection (X) or subsection (Y) (i), (ii), (iii)
and (iv) of the first sentence of this Section 6.14(a), the Parties acknowledge
and agree that the MGM Entities would sustain substantial damages in the event
the sale of the Shares to Purchaser as contemplated by this Agreement is not
consummated as a result of Purchaser's failure to close, and Seller's actual
damages in the event the sale of the Shares to Purchaser as contemplated by this
Agreement is not consummated as a result of Purchaser's failure to close would
be difficult or impractical to determine, and the Termination Fee represents a
reasonable estimate of the harm likely to be suffered by Seller in the event the
sale of the Shares to Purchaser as contemplated by this Agreement is not
consummated as a result of Purchaser's failure to close.
(b) In the event that either: (X)(i) the Closing has not occurred by the
Estimated Closing Date; and (ii) each of the closing conditions set forth in
Section 7.1 have been satisfied or waived by Seller or would have been satisfied
but for the MGM Entities' failure to use its Commercially Reasonably Efforts to
perform their respective obligations under this Agreement; and (iii) the Closing
conditions set forth in Section 7.2 have been satisfied or waived by Seller or
would have been satisfied but for Seller failing to use its Commercially
Reasonable Efforts to perform its obligations under this Agreement; and
Purchaser is not otherwise in default hereunder, or (Y) prior to the Estimated
Closing Date Seller executes an agreement with any other Person (other than
Purchaser) for the sale or transfer of the Shares or for substantially all of
the Companies' Assets, or (Z) Purchaser is entitled to terminate this Agreement
pursuant to Section 10.1(c) hereof, then in any such event (X) or (Y) or (Z) the
Purchaser shall have, as its sole and exclusive remedy, the right to give
written notice to Seller of its intention to terminate this Agreement and Seller
shall pay, or cause to be paid, in same day funds to Purchaser, the sum of Five
Million Dollars ($5,000,000) (the "Purchaser Termination Fee"). Only one
Purchaser's Termination Fee shall be payable to Purchaser regardless of the
circumstances. In the event Purchaser receives payment of the Purchaser
Termination Fee, Purchaser on behalf of its Affiliates, agrees to forego and not
to pursue (or aid any other Person in pursuing) or assign any allegation, claim,
right or remedy, whether legal or equitable, including specific performance,
against, directly or indirectly Seller, any MGM entity or any of their
respective Affiliates, for Seller's failure to consummate the transactions
contemplated by this Agreement. Subject to the occurrence of the matters set
forth in subsections (X)(i), (ii), (iii) or (Y) or (Z) of the first sentence of
this Section 6.14(b), the Parties acknowledge and agree that Purchaser would
sustain substantial damages in the event the sale of the Shares to Purchaser as
contemplated by this Agreement is not consummated as a result of Seller's
failure to close, and Purchaser's actual
48
damages in the event the sale of the Shares to Purchaser as contemplated by this
Agreement is not consummated as a result of Seller's failure to close would be
difficult or impractical to determine, and the Purchaser Termination Fee
represents a reasonable estimate of the harm likely to be suffered by Purchaser
in the event the sale of the Shares to Purchaser as contemplated by this
Agreement is not consummated as a result of Seller's failure to close.
Section 6.15 Capital Expenditures.
The Company shall (a) undertake and complete any and all capital
expenditures required to meet an emergency (it being understood and agreed that
Seller shall promptly notify Purchaser of any such emergency and the emergency
expenditures and other actions taken in response thereto), and (b) undertake and
continue in the Ordinary Course of Business and consistent with past practice
any and all capital expenditures necessary or appropriate to maintain its
respective assets and properties.
Section 6.16 Releases.
Seller shall, and shall cause its Affiliates, to enter into one or more
Contracts to release (as of the Closing Date) the Company from all guaranty,
credit enhancement, credit support, keep well obligations or similar
arrangements to or for the benefit of, or on behalf of, Parent and/or its
Affiliates (other than the Companies) (collectively, the "Release of
Guaranties").
Section 6.17 Further Assurances and Actions.
Subject to the terms and conditions herein, each of the Parties agrees to
use its Commercially Reasonable Efforts to take, or cause to be taken, all
appropriate action, and to do, or cause to be done, all things reasonably
necessary, proper or advisable under applicable Laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, using their respective Commercially Reasonable
Efforts to obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of Governmental Authorities as are necessary for
consummation of the transactions contemplated by this Agreement, and to fulfill
all conditions precedent applicable to such Party pursuant to this Agreement. In
case at any time after the date of this Agreement and from time to time any
further action is necessary to carry out the purposes of this Agreement and to
vest Purchaser with valid and legal title, to the Shares and all properties and
assets of the Companies, each free and clear of all Encumbrances, including to
execute, deliver and file all such further documents including the termination
of financing statements, the directors, officers and employees of the Parties or
their Affiliates shall take or cause to be taken all such necessary or
appropriate action in accordance with and subject to the terms of this Agreement
and Seller shall bear the cost of any such necessary or appropriate action;
provided that if such action is necessary or appropriate due to events or
circumstances particular to Purchaser, Purchaser shall bear the cost of such
action.
Section 6.18 FCC Approvals.
Seller and Purchaser will, as applicable, not later than fifteen (15) days
after the execution of this Agreement by the Parties, execute and file FCC
applications to seek any required consent of the FCC for any licenses possessed
by the Companies in connection with the
49
operation of the business of the Companies. The Parties agree to use their
respective Commercially Reasonable Efforts to cooperate with any requests for
information, filing of forms, communications with the FCC or other actions that
are reasonably necessary in order to obtain FCC approval. If any required FCC
approvals are not obtained on or before the Closing Date and no special
temporary authority has been granted by the FCC that allows Purchaser to operate
under the FCC licensees or the FCC application has not been granted, then the
Closing shall nevertheless occur as scheduled and with no reduction in the
Purchase Price, and the Parties will comply with any applicable requirements of
the FCC or applicable Law. Purchaser agrees that it will not use or operate any
equipment which is the subject of any FCC licenses, approvals or applications
after the Closing in violation of any requirements of the FCC or any applicable
Law.
Section 6.19 No Control.
Purchaser understands and agrees that, except as expressly permitted by
the terms of this Agreement, prior to Closing Purchaser shall not, and shall not
attempt to, directly or indirectly control, supervise, direct or interfere with,
any of the Companies, and until the Closing, the operations of the Companies are
the sole responsibility of and under the complete control of Seller.
Section 6.20 Liability for Non-Compliance with WARN Act.
Seller assumes, and shall indemnify Purchaser from and against, any and
all Claims or Liabilities arising out of Seller's or the Companies' conduct from
April 25, 2005 until the Closing Date resulting in a failure to comply with the
WARN Act.
Section 6.21 Transfer Taxes; HSR Filing Fee.
Notwithstanding anything contained herein to the contrary, Purchaser
shall pay or cause to be paid all sales, use, real property transfer, real
property gains, transfer, stamp, registration, documentary, recording, filing or
similar Taxes, if any, together with any interest thereon, penalties, fines,
costs, fees, additions to Tax or additional amounts with respect thereto
(collectively, "Transfer Taxes") incurred in connection with the purchase and
sale of the Shares; provided, however, that Seller shall pay any Transfer Taxes
incurred in connection with the transfer of any Retained Property from the
Companies to Seller or its Affiliates, or the transfer of any Additional
Property to the Companies by Seller or its Affiliates. The Person with primary
responsibility under applicable Law for filing Tax Returns relating to Transfer
Taxes shall be responsible for preparing and timely filing any Tax Returns
required with respect to any such Transfer Taxes. All filing fees pursuant to
the pre-merger notifications under the HSR Act shall be borne by Purchaser.
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ARTICLE VII
CONDITIONS TO CLOSING
Section 7.1 Conditions of the Parties' Obligations to Effect
the Closing.
The respective obligations of the Parties to this Agreement to effect the
Closing shall be subject to the satisfaction or waiver by each of the Parties
prior to the Closing of the following conditions:
(a) No Injunctions. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any Governmental Order or Law that is in effect
and that has the effect of making the Closing illegal or otherwise prohibiting
consummation of the transactions contemplated by this Agreement and the Closing.
(b) HSR Act. Any applicable waiting periods, together with any extensions
thereof, under the HSR Act and the antitrust or competition Laws of any other
applicable jurisdiction shall have expired or been terminated.
(c) Governmental Approvals. The MGM Entities and Purchaser shall have
obtained all material Governmental Approvals required to consummate the Closing
(including under Gaming Laws), all of which are set forth on Schedule 7.1(c)
attached hereto, and all such approvals shall remain in full force and effect
and all statutory waiting periods in respect thereof shall have expired.
Section 7.2 Additional Conditions to Obligation of the MGM
Entities to Effect the Closing.
The obligation of Seller to effect the Closing is subject to the
satisfaction of each of the following conditions prior to or concurrent with the
Closing, any of which may be waived in writing exclusively by Seller:
(a) Representations and Warranties. The representations and warranties of
Purchaser contained in this Agreement that are not qualified by materiality
shall be true and correct in all material respects, and the representations and
warranties of Purchaser that are qualified by materiality shall be true and
correct in accordance with their express terms, when made and at and as of the
Closing Date, with the same force and effect as if made as of the Closing Date,
other than such representations and warranties as are made as of another date,
which shall be true and correct as of such date, if earlier than the Closing
Date. Notwithstanding the foregoing, Purchaser may update certain of the
Purchaser Disclosure Schedules, as provided in Article V, and not be in breach
hereof; provided, however, that if any such additional disclosure has or is
likely to have a materially adverse impact on the ability of Purchaser to
consummate the transactions contemplated hereby, Seller may terminate this
Agreement in accordance with Section 10.(d).
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(b) Performance of Obligation of Purchaser. Purchaser shall have performed
in all material respects all obligations required to be performed by Purchaser
under this Agreement on or prior to the Closing Date.
(c) Officer's Certificate. Seller shall have received a certificate dated
the Closing Date duly executed by an officer of Purchaser to the effect of
Section 7.2(b) and Section 7.2(c).
Section 7.3 Additional Conditions to Obligation of Purchaser
to Effect the Closing.
The obligation of Purchaser to effect the Closing is subject to the
satisfaction of each of the following conditions prior to or concurrent with the
Closing, any of which may be waived in writing exclusively by Purchaser:
(a) Representations and Warranties. The representations and warranties of
Seller contained in this Agreement shall have been true and correct when made
and shall be true and correct as of the Closing Date, with the same force and
effect as if made as of the Closing Date, other than such representations and
warranties as are made as of another date, which shall be true and correct as of
such date, if earlier than the Closing Date; provided that, this condition shall
be deemed to not be satisfied solely for purposes of the Closing if the
aggregate adverse economic effect of breaches or violations of such
representations and warranties as of the Closing Date has a Material Adverse
Effect.
(b) Performance of Obligations of Seller. Seller shall have performed in
all material respects all obligations required to be performed by Seller under
this Agreement on or prior to the Closing Date.
(c) Officer's Certificate. Purchaser shall have received a certificate
dated the Closing Date duly executed by an officer of Seller to the effect of
Section 7.3(a) and Section 7.3(b).
(d) Release of Guaranties. The Release of Guaranties shall have been, or
shall be simultaneously, completed with the Closing.
ARTICLE VIII
INDEMNIFICATION; REMEDIES
Section 8.1 Survival; Right to Indemnification Not Affected by
Knowledge.
(a) All representations and warranties contained in this Agreement shall
terminate one year after the Closing Date. Notwithstanding anything in this
Agreement to the contrary, nothing in this Section 8.1(a) shall limit any
covenant, obligation or agreement of the Parties which by its terms contemplates
performance after the Closing.
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(b) The right of the Purchaser Indemnified Parties, on the one hand, and
the Seller Indemnified Parties, on the other hand, to indemnification, shall not
be affected by any investigation conducted, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any of the representations, warranties,
covenants, obligations or agreements set forth in this Agreement. The waiver of
any condition based on the accuracy of any representation or warranty set forth
in this Agreement, or on the performance of or compliance with any covenant,
obligation or agreement set forth in this Agreement, shall not affect the right
to indemnification or other remedy based on such representations, warranties,
covenants, obligations and agreements.
(c) Notwithstanding anything in this Agreement to the contrary, if the
Closing occurs (i) each of the Seller Indemnified Parties hereby waives any
right to indemnification, contribution, reimbursement, set-off or other rights
to recovery that it might otherwise have against the Companies with respect to
representations, warranties, covenants, obligations and agreements made by any
of the MGM Entities contained in this Agreement and (ii) the representations,
warranties, covenants, obligations and agreements made by the Companies
contained in this Agreement shall terminate solely with respect to the Companies
(not as to the other MGM Entities).
Section 8.2 Indemnification.
(a) Provided the Closing occurs, and subject to Section 8.2(c) of this
Agreement, the Seller Indemnifying Parties shall, jointly and severally, defend
and indemnify the Purchaser Indemnified Parties in respect of, and hold each of
them harmless from and against, any and all Losses suffered, incurred or
sustained by any of them or to which any of them becomes subject, resulting
from, arising out of, or relating to (i) any breach of or inaccuracy in any
representation, warranty, covenant, obligation or agreement on the part of any
of the MGM Entities contained in this Agreement, and (ii) nonfulfillment of or
failure to perform any covenant, obligation or agreement on the part of any of
the MGM Entities contained in this Agreement.
(b) Provided the Closing occurs, and subject to Section 8.2(d) of this
Agreement, the Purchaser Indemnifying Parties shall defend and indemnify the
Seller Indemnified Parties in respect of, and hold each of them harmless from
and against, any and all Losses suffered, incurred or sustained by any of them
or to which any of them becomes subject, resulting from, arising out of, or
relating to (i) any breach of or inaccuracy in any representation, warranty,
covenant, obligation or agreement on the part of Purchaser contained in this
Agreement or (ii) nonfulfillment of or failure to perform any covenant,
obligation or agreement on the part of Purchaser contained in this Agreement.
(c) Notwithstanding anything to the contrary contained in this Agreement,
no amounts of indemnity shall be payable to the Purchaser Indemnified Parties as
a result of any claim in respect of a Loss arising under Section 8.2(a):
(i) unless and until the aggregate amount of Losses incurred by the
Purchaser Indemnified Parties pursuant to Section 8.2(a) exceeds One
Million Five Hundred Thousand Dollars ($1,500,000), in which event the
Purchaser
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Indemnified Parties shall be entitled to claim indemnity for the full
amount of such Losses in excess of One Million Dollars ($1,000,000) and
(ii)in excess of Fifteen Million Dollars ($15,000,000);
provided that the Seller Indemnifying Parties shall not pay any indemnity
amounts (and such amounts shall not count towards (c)(i) above) (a) relating to
matters for which a Liability was accrued in the Final Statement, or (b) for
which insurance proceeds of the Purchaser Indemnified Parties are payable,
unless there is an increase in the Final Purchase Price equal to the indemnity
amount for which insurance proceeds of the Purchaser Indemnified Parties are
payable that is paid by the Seller Indemnifying Parties which amount shall be
paid to Seller by the Purchaser Indemnifying Parties concurrently with Seller
making such indemnification payment. The Purchaser Indemnified Parties shall use
their Commercially Reasonable Efforts to pursue, furnish and deliver any
documents, instruments or writings required by their respective insurers to make
an insurance claim.
(d) Notwithstanding anything to the contrary contained in this Agreement,
no amounts of indemnity shall be payable to the Seller Indemnified Parties as a
result of any claim in respect of a Loss arising under Section 8.2(b):
(i) unless and until the aggregate amount of Losses incurred by the
Seller Indemnified Parties pursuant to Section8.2(b) exceeds One Million
Five Hundred Thousand Dollars ($1,500,000), in which event the Seller
Indemnified Parties shall be entitled to claim indemnity for the full
amount of such Losses in excess of One Million Dollars ($1,000,000); and
(ii)in excess of Fifteen Million Dollars ($15,000,000) in the
aggregate;
provided that the Purchaser Indemnifying Parties shall not pay any indemnity
amounts (and such amounts shall not count towards (d)(i) above) for which
insurance proceeds of the Seller Indemnified Parties are payable, unless there
is a reduction in the Final Purchase Price equal to the indemnity amount for
which insurance proceeds of the Seller Indemnified Parties are payable that is
paid by the Purchaser Indemnifying Parties which amount shall be paid to
Purchaser by the Seller Indemnifying Parties concurrently with Purchaser making
such indemnification payment. The Seller Indemnified Parties shall use their
Commercially Reasonable Efforts to pursue, furnish and deliver any documents,
instruments or writings required by their respective insurers to make an
insurance claim.
(e) In no event shall any Indemnifying Party be responsible or liable to
any Indemnified Party for any Losses or other amounts under this Article VII
that constitute multiple, exemplary, consequential, special, indirect, punitive
or other damages that are not compensatory in nature.
(f) In the event that an Indemnifying Party:
(i) consolidates with or merges into any other Person and is not the
continuing or surviving corporation or entity of such consolidation or
merger; or
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(ii) transfers or conveys all or substantially all of its properties
and assets (whether in one transaction or a series of related
transactions) to any Person,
then, and in each such case, proper provision shall be made prior to the
consummation of any such transaction so that such successors and assigns shall
assume the obligations of such Indemnifying Party set forth in this Section 8.2.
(g) No Indemnified Party hereunder shall have the right to offset any sums
it may otherwise owe to the Indemnifying Party against any sums it may be
entitled to receive under this.
Section 8.3 Indemnification Procedures.
All claims for indemnification by an Indemnified Party under Section 8.2
shall be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which an Indemnified
Party might seek indemnity under Section 8.2 is asserted against or sought to be
collected from such Indemnified Party by a Person other than a Seller
Indemnified Party or a Purchaser Indemnified Party (a "Third Party Claim"), the
Indemnified Party shall promptly deliver a Claim Notice to the Indemnifying
Party; provided that no delay on the part of the Indemnified Party in giving any
such Claim Notice shall relieve the Indemnifying Party of any indemnification
obligation hereunder unless (and then solely to the extent that) the
Indemnifying Party is materially prejudiced by such delay. The Indemnifying
Party shall notify the Indemnified Party in writing as soon as practicable
within the Dispute Period whether or not the Indemnifying Party desires, at the
Indemnifying Party's sole cost and expense and by counsel of its own choosing,
which shall be reasonably satisfactory to the Indemnified Party, to defend
against such Third Party Claim; provided further that if, under applicable
standards of professional conduct a conflict on any significant issue between
the Indemnifying Party and the Indemnified Party exists in respect of such Third
Party Claim, then the Indemnifying Party shall reimburse the Indemnified Party
for the reasonable fees and expenses of one additional counsel selected by the
Indemnified Party and reasonably acceptable to the Indemnifying Party to be
retained in order to resolve such conflict, promptly upon presentation by the
Indemnified Party of invoices or other documentation evidencing such amounts to
be reimbursed.
(i) If the Indemnifying Party notifies the Indemnified Party within
the Dispute Period that it desires to defend against such Third Party
Claim, (A) the Indemnifying Party shall use its Commercially Reasonable
Efforts to defend and protect the interests of the Indemnified Party with
respect to such Third Party Claim, (B) the Indemnified Party, prior to or
during the period in which the Indemnifying Party assumes the defense of
such matter, may take such reasonable actions as the Indemnified Party
deems necessary to preserve any and all rights with respect to such
matter, without such actions being construed as a waiver of the
Indemnified Party's rights to defense and indemnification pursuant to this
Agreement, (C) the Indemnifying Party shall not, without the prior written
consent of the Indemnified Party, consent to any settlement that (i) does
not contain an unconditional release of the Indemnified Party from the
subject matter
55
of the settlement, (ii) imposes any liabilities or obligations on the
Indemnified Party in excess of the aggregate accruals reflected in the
determination of Actual Working Capital, and (iii) with respect to any
non-monetary provision of such settlement, could, in the Indemnified
Party's reasonable judgment, have a Material Adverse Effect on the
business, assets, properties, condition (financial or otherwise), results
of operations or prospects of the Indemnified Party, (D) the Indemnified
Party shall cooperate to the extent reasonable (during regular business
hours) with the Indemnifying Party and its counsel in the investigation,
defense and settlement thereof and (E) the Indemnifying Party shall be
deemed to have agreed that it will indemnify the Indemnified Party
pursuant to, and subject to the conditions and limitations set forth in,
the provisions of this Article VIII.
(ii) If the Indemnifying Party does not notify the Indemnified Party
within the Dispute Period that it desires to defend against such Third
Party Claim, then the Indemnifying Party shall have the right to
participate in any such defense at its sole cost and expense, but, in such
case, the Indemnified Party shall control the investigation and defense
and may settle or take any other actions the Indemnified Party deems
reasonably advisable without in any way waiving or otherwise affecting the
Indemnified Party's rights to indemnification pursuant to this Agreement.
(iii) The Indemnified Party and the Indemnifying Party agree to make
available to each other, their counsel and other representatives, all
information and documents available to them that relate to such Third
Party Claim. The Indemnified Party and the Indemnifying Party, the Company
and its employees also agree to render to each other such assistance and
cooperation as may reasonably be required to ensure the proper and
adequate defense of such Third Party Claim.
(iv) Notwithstanding the foregoing, in any event, if the Indemnified
Party desires to participate in any defense of a Third Party Claim it may
do so at its sole cost and expense, and the Indemnified Party shall have
the right to control, pay or settle any Third Party Claim which the
Indemnifying Party shall have undertaken to defend so long as the
Indemnified Party shall also waive any right to indemnification therefor
by the Indemnifying Party.
(b) In the event that an Indemnified Party should have a claim against the
Indemnifying Party hereunder which it determines to assert, but which does not
involve a Third Party Claim, the Indemnified Party shall send an Indemnity
Notice with respect to such claim to the Indemnifying Party. The Indemnifying
Party shall have the Dispute Period during which to notify the Indemnified Party
in writing of any good faith objections it has to the Indemnified Party's
Indemnity Notice, setting forth in reasonable detail each of the Indemnifying
Party's objections thereto. If the Indemnifying Party does not deliver such
written notice of objection within the Dispute Period, the Indemnifying Party
shall be deemed to have accepted responsibility for the prompt payment of the
Indemnified Party's claims for indemnification set forth in the Indemnity
Notice, and shall have no further right to contest the validity of such
indemnification claims. If the Indemnifying Party does deliver such written
notice of objection
56
within the Dispute Period, the Indemnifying Party and the Indemnified Party
shall attempt in good faith to resolve any such dispute within the Resolution
Period.
(c) Claims for indemnification pursuant to Section 8.2 shall not be made
after the expiration of the representations and warranties as provided for in
Section 8.1; provided, however, that in the event a Claim Notice or an Indemnity
Notice shall have been given within the applicable survival period, the
representation or warranty that is the subject of such indemnification claim
shall survive until such time as such claim is finally resolved.
ARTICLE IX
TAX MATTERS
Section 9.1 Tax Indemnification.
(a) Seller shall indemnify, defend and hold harmless the Purchaser
Indemnified Parties against, and shall reimburse the Purchaser Indemnified
Parties for, any and all losses arising out of, based upon or relating or
attributable to (without duplication):
(i) all Taxes imposed on the Companies relating or attributable to
any taxable period ending on or before the Closing Date (the "Pre-Closing
Period") and, with respect to any period that includes but does not end on
the Closing Date (in each case, a "Straddle Period"), the portion of such
Straddle Period deemed to end on and include the Closing Date (in the
manner determined pursuant to Section 9.1(b); provided, however, that
Seller shall be liable only to the extent that such Taxes are in excess of
the amount, if any, reserved for such Taxes on the financial statements of
the Companies;
(ii) all Taxes imposed upon the Companies under Treasury Regulation
Section 1.1502-6 (and corresponding provisions of state, local or foreign
Law) as a result of being a member of any federal, state, local or foreign
consolidated, unitary, combined or similar group for any taxable period
ending on or before, or that includes, the Closing Date;
(iii) except as otherwise specifically set forth in this Agreement,
all Taxes relating or attributable to the transactions contemplated
pursuant to this Agreement; and
(iv) the breach by Seller or the failure by any such entity to
perform (or cause to have performed) any of the covenants made by them
under this Agreement relating to Taxes.
(b) For purposes of this Section 9.1, the portion of any Taxes that are
allocable to the portion of the Straddle Period ending on the Closing Date shall
be:
(i) in the case of Taxes that are imposed on a periodic basis, the
amount of such Taxes for the entire period multiplied by a fraction, the
numerator of
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which is the number of calendar days in the Straddle Period ending on (and
including) the Closing Date and the denominator of which is the number of
calendar days in the entire relevant Straddle Period; and
(ii) in the case of Taxes not described in (i) the amount that would
be payable if the taxable year or period ended on the Closing Date based
on an interim closing of the books.
Section 9.2 Preparation and Filing of Tax Returns and Payment
of Taxes.
(a) Purchaser shall prepare and timely file or cause the Companies to
prepare and timely file all Tax Returns required by Law to be filed by such
entities for all Straddle Periods (such Tax Returns, which shall specifically
exclude any income Tax Return which reports the activities of the Companies, the
"Straddle Period Tax Returns"). Purchaser shall deliver drafts of all such
Straddle Period Tax Returns to Parent and Seller for their review at least
twenty (20) days prior to the due date of any such Tax Return (taking into
account valid extensions) and shall notify Parent and Seller of Purchaser's
calculation of their share of the Taxes for such Straddle Period (determined in
accordance with Section 9.1(b)); provided, however, that such drafts of any such
Straddle Period Tax Returns and such calculations of Parent and Seller's share
of the Tax Liability for such Straddle Period (determined in accordance with
Section 9.1(b)) shall be subject to Parent and Seller's review and approval,
which approval shall not be unreasonably withheld or delayed. If Parent or
Seller shall dispute any item on such Tax Return, it shall notify Purchaser (by
written notice within ten (10) days of receipt of Purchaser's calculation) of
such disputed item (or items) and the basis for its objection. If Parent and
Seller do not object by written notice within such period, Purchaser's
calculation of Parent and Seller's share of the Taxes for such Straddle Period
shall be deemed to have been accepted and agreed upon, and final and conclusive,
for all purposes hereof.
(b) Parent and Seller shall prepare and timely file (or cause to be
prepared and timely filed) all Tax Returns required to be filed by the Companies
for taxable years ending on or prior to the Closing Date and any income Tax
Return that reports the activities of the Companies during a Straddle Period
(such Tax Returns, the "Pre-Closing Period Tax Returns"). All such Pre-Closing
Period Tax Returns shall be prepared and filed in a manner that is consistent
with prior practices, except as required by applicable Law. If any such
Pre-Closing Period Tax Returns are due after the Closing, Seller shall submit
drafts of such returns to Purchaser for its review at least twenty (20) days
prior to the due date of any such Tax Return; provided, however, that such
drafts of any such Pre-Closing Period Tax Return shall be subject to Purchaser's
review and approval, which approval shall not be unreasonably withheld or
delayed. Purchaser shall cause each of the Companies to furnish information to
Seller, as reasonably requested in writing by Seller, to allow Seller to satisfy
its obligations under this Section 9.2(b) and Section 9.4(b). Seller shall file
such Pre-Closing Period Tax Returns due after the Closing Date with the
appropriate taxing authorities.
(c) The Parties shall act in good faith to resolve any dispute prior to
the date on which the Tax Return is required to be filed. If the Parties cannot
resolve any disputed item, the item in question shall be resolved by the
Independent Accounting Firm as promptly as practicable. The
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fees and expenses of the Independent Accounting Firm shall be apportioned and
paid equally by Seller and Purchaser.
Section 9.3 Accounting and Tax Records.
Seller shall provide Purchaser with all Tax Returns that report the
activity of the Company (and other information relating to Taxes) of or relating
to the Company reasonably requested by Purchaser. Purchaser shall keep and
maintain all such Tax Returns (and other information relating to Taxes) and
shall make available to Seller such Tax Returns and information as reasonably
required by Seller to allow Seller to satisfy its obligations under ARTICLE IX.
Within twenty-five (25) days following the Closing Date, Purchaser shall
deliver to Seller an income statement for each Company covering the period from
the last regularly prepared income statement through the Closing Date.
Section 9.4 Tax Audits.
(a) After the Closing, Purchaser, on the one hand, and Seller, on the
other hand (the "Recipient"), shall promptly notify the other Person in writing
upon receipt by the Recipient or any of its Affiliates of any written notice of
any pending or threatened audit or assessment, suit, proposed adjustment,
deficiency, dispute, administrative or judicial proceeding or other similar
claim ("Tax Claim") received by the Recipient from any Tax authority or any
other Person with respect to Losses for which Seller is liable pursuant to
Section 9.1 or Section 6.20; provided, however, that a failure by Purchaser to
give such notice shall not affect the Purchaser Indemnified Parties' rights to
indemnification under this ARTICLE IX unless (and then solely to the extent)
that Seller is materially prejudiced as a consequence of such failure.
(b) Parent and Seller shall control the conduct, through their own counsel
at their sole expense, of any Tax Claim involving any asserted Liability with
respect or relating solely to any Pre-Closing Period and any income Tax Return
that reports the activities of the Companies during a Straddle Period. Parent or
Seller, as the case may be, shall have all rights to settle, compromise and/or
concede such Tax Claim and Purchaser shall reasonably cooperate and shall cause
the Company to reasonably cooperate; provided, however, that, Parent or Seller
shall not settle, compromise and/or concede such Tax Claim in a manner that
would adversely affect Purchaser or the Company without the consent of
Purchaser, which consent shall not be unreasonably withheld or delayed.
(c) With respect to any Tax Claim that involves any Straddle Period (other
than an income Tax Claim which involves the activities of a Company), Purchaser
shall control the conduct of any such Tax Claim, through counsel of Purchaser's
own choosing with participation by Parent and Seller (at Parent and Seller's
expense) and Purchaser shall have all rights to settle, compromise and/or
concede such Tax Claim and Parent and Seller shall reasonably cooperate;
provided, however, that Purchaser shall not settle, compromise and/or concede
such Tax Claim in a manner that would adversely affect Parent or Seller without
the consent of Parent and Seller, which consent shall not be unreasonably
withheld or delayed.
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Section 9.5 Tax Treatment.
The Parties agree to treat any payment made pursuant to ARTICLE VIII or
ARTICLE IX as an adjustment to the Final Purchase Price for all Tax purposes.
Section 9.6 Refunds and Tax Benefits.
Any Tax refunds that are received by any of the MGM Entities, and any
amounts credited against Tax to which Purchaser or any of the MGM Entities
becomes entitled, that relate to Tax periods or portions thereof ending on or
before the Closing Date (but only to the extent such amounts are in excess of
the amount, if any, of Tax receivables and offsets to Tax reserves on the
financial statements of the Companies from which the Final Statement was
derived) shall be for the account of Parent, and Purchaser shall pay over to
Parent (a) any such cash refund within fifteen days after receipt thereof and
(b) the amount of Tax savings realized by Purchaser or any of the MGM Entities
at the time the Tax Return to which such credit relates is filed by Purchaser or
any of the MGM Entities. Any Tax refunds that are received by Parent or any of
its Affiliates, and any amounts credited against Tax to which Parent or any of
its Affiliates becomes entitled (other than refunds of income Taxes and/or any
amounts credited against Tax resulting from adjustments in connection with the
activities of the Company which shall be for the account of Parent), that relate
to Taxes of the Company for Tax periods or portions thereof after the Closing
Date shall be for the account of Purchaser, and Parent or its Affiliates shall
pay over to Purchaser (a) any such cash refund within fifteen days after receipt
thereof and (b) the amount of Tax savings realized by Parent or any of its
Affiliates at the time the Tax Return to which such credit relates is filed by
Parent or any of its Affiliates.
Section 9.7 Base Price Allocation; Section 338(h)(10)
Election.
(a) Within sixty (60) days after the date hereof, Purchaser shall provide
to Parent and Seller a proposed allocation of the Base Price between Edgewater
Company and Colorado Belle Company (the "Allocation Statement"). Within fifteen
(15) days following such provision, Parent and Seller shall have the right to
object to all or any portion of the Allocation Statement (by written notice to
Purchaser), and if either so objects, it shall notify Purchaser (in such written
notice) of such disputed item (or items) and the basis for its objection. If
Parent and Seller do not object by written notice within such period, the
Allocation Statement shall be deemed to have been accepted and agreed upon, and
final and conclusive, for all purposes of this Agreement. Parent, Seller and
Purchaser shall act in good faith to resolve any such dispute prior to the date
that is ninety (90) days after the date hereof. If Parent, Seller and Purchaser
cannot resolve any disputed item within such time period, the item in question
shall be resolved by the Independent Accounting Firm as promptly as practicable.
The fees and expenses of the Independent Accounting Firm shall be apportioned
and paid equally by Seller and Purchaser. Except with respect to any subsequent
adjustments to the Base Price (all of which adjustments shall be allocated
between Edgewater Company and Colorado Belle Company in the same proportion as
is set forth in the final Allocation Statement), Parent, Seller and their
respective Affiliates, (i) shall be bound by the determinations and the
Allocation Statement determined pursuant to this Section 9.7(a), consistently
therewith for purposes of determining any Taxes, (ii) shall prepare and file all
Tax Returns to be filed with any Tax authority in a manner consistent with the
Allocation Statement, and (iii) shall take no position inconsistent with the
Allocation Statement
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in any Tax Return, any proceeding before any Tax authority or otherwise.
(b) Parent, on behalf of Seller, shall join Purchaser in jointly making a
timely election under Section 338(h)(10) of the Code (and any comparable
elections under state and local income Tax Law) with respect to Colorado Belle
Company (the "Elections"). Parent and Purchaser shall not make an election under
Section 338(h)(10) of the Code (or any comparable elections under state and
local income Tax Law) with respect to Edgewater Company and no other election
shall be made by or at the request of Parent or Seller, on the one hand, or
Purchaser on the other, with respect to the purchase of the Companies to the
extent such election would affect the Tax Liability of the other party without
such party's consent, which consent shall not be unreasonably withheld or
delayed.
(c) Reasonably promptly after the Closing Date, in connection with the
Elections, Purchaser shall provide to Parent and Seller a proposed allocation of
that portion of the Final Purchase Price allocated to Colorado Belle Company
among the assets of Colorado Belle Company, which allocations shall be made in
accordance with Sections 338 and 1060 or the Code and any applicable Treasury
Regulations (the "Asset Allocation Statement"). Within ten (10) days following
such provision, Parent and Seller shall have the right to object to all or any
portion of the Asset Allocation Statement (by written notice to Purchaser), and
if either so objects, it shall notify Purchaser (in such written notice) of such
disputed item (or items) and the basis for its objection. If Parent and Seller
do not object by written notice within such period, the Asset Allocation
Statement shall be deemed to have been accepted and agreed upon, and final and
conclusive, for all purposes of this Agreement. Parent, Seller and Purchaser
shall act in good faith to resolve any such dispute prior to the date on which
any of the Elections is required to be filed with the appropriate Tax authority.
If Parent, Seller and Purchaser cannot resolve any disputed item, the item in
question shall be resolved by the Independent Accounting Firm as promptly as
practicable. The fees and expenses of the Independent Accounting Firm shall be
apportioned and paid equally by Seller and Purchaser. Except with respect to any
subsequent adjustments to the Final Purchase Price (which shall be allocated
using the mechanism for allocating Final Purchase Price in this Section 9.7(c)),
Parent, Seller and their respective Affiliates, (i) shall be bound by the
determinations and the Asset Allocation Statement determined pursuant to this
Section 9.7(c), consistently therewith for purposes of determining any Taxes,
(ii) shall prepare and file all Tax Returns to be filed with any Tax authority
in a manner consistent with the Asset Allocation Statement and the Elections,
and (iii) shall take no position inconsistent with the Asset Allocation
Statement or any Election in any Tax Return, any proceeding before any Tax
authority or otherwise. Except as agreed to by Parent, Seller and Purchaser,
none of Parent, Seller or Purchaser shall revoke or modify an Election. In the
event that the Asset Allocation Statement is disputed by any Tax authority, the
Person receiving notice of such dispute shall promptly notify and consult with
the other Parties concerning resolution of such dispute.
(d) Each of Parent, Seller and Purchaser shall cooperate in the
preparation and timely filing of (i) Form 8023 and any comparable state or local
forms or reports, and (ii) to the extent permissible by or required by Law, any
corrections, amendments, or supplements (or additional forms or reports) thereto
(including any supplements, amendment, forms or reports arising as a result of
any adjustments to the Final Purchase Price).
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ARTICLE X
TERMINATION
Section 10.1 Termination of Agreement.
This Agreement may be terminated and the transactions contemplated hereby
may be abandoned at any time prior to the Closing:
(a) by mutual written consent of the Parties; or
(b) by the MGM Entities, on the one hand, or Purchaser, on the other hand,
if the transactions contemplated hereby shall not have been consummated on or
prior to the Estimated Closing Date (as such date may be extended by the
Extension Payment); provided that the right to terminate this Agreement under
this Section 10.1(b) shall not be available to any of the Parties whose willful
breach or nonfulfillment or failure to perform has prevented the consummation of
the transactions contemplated by this Agreement; or
(c) by Purchaser, if there has been a material breach or violation by any
of the MGM Entities of any of its representations and warranties or covenants
contained in this Agreement that has not been waived by Purchaser in writing or
has not been cured by the MGM Entity in all material respects within thirty days
of written notice thereof; provided, that if such breach cannot reasonably be
cured within such thirty day period but can be reasonably cured prior to the
Estimated Closing Date and Seller is diligently proceeding to cure such breach,
this Agreement may not be terminated pursuant to this Section 10.1(c); or
(d) by the MGM Entities, if there has been a material breach or violation
by Purchaser of any of its representations and warranties or covenants contained
in this Agreement that has not been waived by the MGM Entities in writing or has
not been cured by Purchaser in all material respects within thirty days of
written notice thereof; provided, that if such breach cannot reasonably be cured
within such thirty day period but can be reasonably cured prior to the Estimated
Closing Date and Purchaser is diligently proceeding to cure such breach, this
Agreement may not be terminated pursuant to this Section 10.1(d); or
(e) by Purchaser if any of the conditions to the obligation of Purchaser
set forth in Section 7.3 shall have become incapable of fulfillment and shall
not have been waived by Purchaser in writing; provided, however, that Purchaser
shall not be entitled to terminate this Agreement pursuant to this Section
10.1(e) if Purchaser is in breach in any material respect of its representations
and warranties or covenants contained in this Agreement; or
(f) by the MGM Entities if any of the conditions to the obligation of the
MGM Entities set forth in Section7.2 shall have become incapable of fulfillment
and shall not have been waived by the MGM Entities in writing; provided,
however, that the MGM Entities shall not be entitled to terminate this Agreement
pursuant to this Section 10.1(f) if any of the MGM Entities is in breach in any
material respect of its representations and warranties or covenants contained in
this Agreement; or
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(g) by the MGM Entities, on the one hand, or Purchaser, on the other hand,
if a Governmental Entity shall have issued a nonappealable, final Governmental
Order or taken any other nonappealable final action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Closing and the transactions contemplated by this Agreement.
Section 10.2 Effect of Termination.
In the event of termination of this Agreement as provided in Section 10.1,
this Agreement shall immediately become void and there shall be no Liability or
obligation on the part of the Parties, or their respective directors, officers,
members, employees, stockholders or Affiliates, except that such termination
shall not relieve Purchaser of its obligations to pay the Seller Termination Fee
or Seller to pay the Purchaser Termination Fee, respectively, if applicable;
provided further that the provisions of this Section 10.2 and Section 6.4,
Section 6.14, Section 11.1, Section 11.4, Section 11.5, Section 11.10 and
Section 11.14 shall remain in full force and effect and survive any termination
of this Agreement. Any Extension Payments which were paid to Seller prior to a
termination of this Agreement shall be deemed fully earned by Seller at the time
of payment and shall be retained by Seller, notwithstanding the basis of
termination under this Article X. The Parties acknowledge and agree that, except
as otherwise provided in Section 6.14, the sole and exclusive remedy upon the
events described in this Article X shall be termination of this Agreement.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Expenses.
Except as expressly provided in this Agreement, each of the Parties shall
pay its own legal, accounting and other miscellaneous expenses incident to this
Agreement whether or not the Closing is consummated.
Section 11.2 Notices.
All notices, requests, demands and other communications made under or by
reason of the provisions of this Agreement shall be in writing and shall be
given by hand delivery, certified or registered mail, return receipt requested,
facsimile or next-Business Day courier to the affected Party at the address and
facsimile number set forth below. Such notices shall be deemed given: at the
time personally delivered, if delivered by hand with receipt acknowledged; at
the time received, if sent by certified or registered mail; upon issuance by the
transmitting machine of a confirmation slip that the number of pages
constituting the notice has been transmitted without error and confirmed
telephonically, if sent by facsimile; and the first Business Day after timely
delivery to the courier, if sent by next-Business Day courier specifying next
Business Day delivery.
(a) if to Seller or the Companies, to:
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MGM MIRAGE
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President, Chief Financial Officer and
Treasurer
▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive Vice President, General Counsel
and Secretary
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
Christensen, Glaser, Fink, Jacobs, Weil & ▇▇▇▇▇▇▇, LLP
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Purchaser, to:
Aces High Management, LLC
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇
6725 ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Section 11.3 Interpretation
When a reference is made in this Agreement to a Section or Sections, such
reference shall be to a Section or Sections of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation." Words used in the singular form in this
Agreement shall be deemed to include the plural, and vice versa, as the sense
may require. If the date upon or by which any party hereto is required to
perform any covenant or obligation hereunder falls on a day that is not a
Business Day, then such date of performance shall be automatically extended to
the next Business Day thereafter.
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Section 11.4 Governing Law.
This Agreement, and any disputes arising out of or relating to this
Agreement or the Parties' relationship, shall be governed and construed in
accordance with the laws applicable to contracts made and to be performed
entirely in Nevada, without regard to any applicable conflicts of Law, except to
the extent the mandatory provisions of the Gaming Laws apply.
Section 11.5 Consent to Jurisdiction and Venue.
Each of the Parties irrevocably submits to the exclusive jurisdiction of
the United States District Court for the District of Nevada or any court of the
State of Nevada located in ▇▇▇▇▇ County in any action, suit or proceeding
arising out of or relating to this Agreement or any of the transactions
contemplated hereby, and agrees that any such action, suit or proceeding shall
be brought only in such court; provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this Section 11.5 and
shall not be deemed to be a general submission to the jurisdiction of said
courts or in the State of Nevada other than for such purpose. Each of the
Parties hereby irrevocably waives, to the fullest extent permitted by Law, any
objection that it may now or hereafter have to the laying of the venue of any
such action, suit or proceeding brought in such a court. Each of the Parties
further irrevocably waives and agrees not to plead or claim that any such
action, suit or proceeding brought in such a court has been brought in an
inconvenient forum.
Section 11.6 Time of the Essence.
Time is of the essence in performing covenants and agreements under this
Agreement.
Section 11.7 Assignment.
(a) Neither this Agreement nor any of the rights, interests or obligations
under this Agreement shall be assigned by any of the Parties (whether by
operation of Law or otherwise) without the prior written consent of each of the
other Parties. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the Parties and
their respective assigns.
(b) Notwithstanding any provision to the contrary contained herein,
including Section 11.7(a) above, not later than fourteen (14) days following the
date of this Agreement, Purchaser may assign all of its rights, interests,
duties and obligations under this Agreement to any other corporation or limited
liability company ("Proposed Assignee"), provided that: (i) a minimum of fifty
percent (50%) of the Proposed Assignee is beneficially owned by at least one (1)
or more of the Persons set forth on Schedule 11.7(b) (an "Approved Holder");
(ii) such assignment does not result in a breach of, or contravene, or render
unenforceable, any provision of this Agreement or the Purchaser Guaranty; (iii)
as a condition to Purchaser's right to assign this Agreement pursuant to this
Section 11.7(b), Purchaser shall cause the guarantors to the Purchaser Guaranty
to execute such amendments, guaranties or other instruments that Seller may
reasonably require to reaffirm the guarantors' obligations under the Purchaser
Guaranty; and (iv) as a condition to Purchaser's right to assign this Agreement
to this Section 11.7(b), the Proposed Assignee shall have entered into an
assignment and assumption agreement reasonably acceptable to Seller and Proposed
Assignee whereby the Proposed Assignee agrees to assume all the obligations of
65
Purchaser under this Agreement and the Proposed Assignee makes representations
and warranties for the benefit of Seller which are comparable (taking into
account the form of the entity) to those of Purchaser set forth in this
Agreement (which will thereafter be deemed to be the representations and
warranties of Purchaser in this Agreement). With respect to such Person(s)
holding an equity interest in the Proposed Assignee that is not an Approved
Holder, Seller shall have the right to reasonably disapprove such Persons (in
which case Purchaser shall not assign its interest hereunder to the Proposed
Assignee until such time that such disapproved Person no longer owns an equity
interest in the Proposed Assignee) based upon the following criteria: (A)
whether such Person may cause a delay in obtaining the Government Approvals
necessary for the consummation of this transaction, or (B) whether such Person
currently owns a resort casino on Las Vegas Boulevard located between Tropicana
Avenue and Sahara Avenue. Any attempted assignment by Purchaser pursuant to this
Section 11.7(b) that does not comply with each of the provisions hereof shall be
null and void, ab initio.
Section 11.8 Amendment.
This Agreement may not be amended or modified by the Parties except (a) by
an instrument in writing signed by each of the Parties and (b) by a waiver in
accordance with Section 11.9.
Section 11.9 Extension; Waiver.
At any time prior to the Closing, the Parties, by action taken or
authorized by their respective boards of directors or similar governing body
(may, to the extent legally allowed), (a) extend the time for or waive the
performance of any of the covenants, obligations or other acts of the other
Parties, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the conditions contained in this Agreement. Any agreement
on the part of any of the Parties to any such extension or waiver shall be valid
only if set forth in a written instrument signed on its behalf. The failure of
any of the Parties to assert any of its rights under this Agreement shall not
constitute a waiver of such rights.
Section 11.10 No Third Party Beneficiaries.
Except for the provisions of (a) ARTICLE VIII with respect to Indemnified
Parties, and (b) Section 11.14, this Agreement is for the sole benefit of the
Parties, Parent (as an intended third party beneficiary of the MGM Entities) and
their permitted assigns and nothing herein expressed or implied shall give or be
construed to give any Person, other than the Parties, Parent (as an intended
third party beneficiary of the MGM Entities) and such assigns, any legal or
equitable rights hereunder. All references herein to the enforceability of
agreements with third parties, the existence or non-existence of third-party
rights, the absence of breaches or defaults by third parties, or similar matters
or statements, are intended only to allocate rights and risks among the Parties
and were not intended to be admissions against interests, give rise to any
inference or proof of accuracy, be admissible against any Party by any
non-Party, or give rise to any claim or benefit to any non-Party.
Section 11.11 Entire Agreement.
66
This Agreement, the Disclosure Schedules, the Schedules and the other
writings referred to herein or delivered pursuant hereto that form a part hereof
constitute the entire agreement with respect to the subject matter hereof and
thereof and supersede all prior agreements and undertakings, both written and
oral, among the Parties with respect to the subject matter hereof and thereof.
Section 11.12 Severability.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any Law or public policy, all other terms and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not effected in any manner materially adverse to any of the Parties.
Upon such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the Parties shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the Parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby are consummated as originally contemplated to the greatest extent
possible.
Section 11.13 Counterparts.
This Agreement may be executed in two or more counterparts, including
facsimile counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same agreement.
Section 11.14 Limitation of Liability.
The Parties acknowledge that neither ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ nor Tracinda
Corporation, individually or collectively, is a party to this Agreement or any
of the other documents executed on the Closing Date. The Parties further
acknowledge that neither ▇▇. ▇▇▇▇▇▇▇▇▇ nor Tracinda Corporation shall have any
Liability whatsoever with respect to this Agreement. Accordingly, the Parties
hereby agree that in the event (a) there is any alleged breach or default or
breach or default by any Party under this Agreement or any such document or (b)
any Party has or may have any claim arising from or relating to the terms of
this Agreement or any such document, no Party shall commence any proceedings or
otherwise seek to impose any Liability whatsoever against ▇▇. ▇▇▇▇▇▇▇▇▇ or
Tracinda Corporation by reason of such alleged breach, default or claim.
Section 11.15 Disclosure Schedules.
The Disclosure Schedules shall be arranged in paragraphs corresponding to
the numbered and lettered paragraphs contained in this Agreement and the
disclosure in any paragraph shall qualify the other paragraphs in this Agreement
to the extent it is reasonably apparent from the face of the statement that it
is applicable. The inclusion of any information in any section of a Disclosure
Schedule shall not be deemed to be an admission, acknowledgment or evidence (i)
of the materiality of such item, nor shall it establish a standard of
materiality for any purpose whatsoever, (ii) that the matter is required to be
disclosed pursuant to the provisions of this Agreement, or (iii) that such
information actually constitutes noncompliance with, or a violation of, any
agreement, law, regulation or statute to which such disclosure is applicable.
The
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Disclosure Schedules and the information, description and disclosures included
therein are intended to qualify and limit all the representations, warranties
and covenants of the applicable Party contained in this Agreement, and shall not
be deemed to expand in any way the scope or effect of any of such
representations, warranties or covenants. Except as otherwise specifically
provided in this Agreement to the contrary, the Disclosure Schedules may only be
amended by an instrument in writing signed by the Parties.
[The remainder of this page is intentionally left blank. Signatures are on
the following page.]
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
signed by their respective duly authorized officers as of the date first written
above.
EDGEWATER HOTEL CORPORATION,
A Nevada corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Treasurer
COLORADO BELLE CORP.,
A Nevada corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Treasurer
MANDALAY RESORT GROUP,
A Nevada corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Treasurer
ACES HIGH MANAGEMENT, LLC
A Nevada limited liability company
By: SADDLE WEST INVESTORS, LLC
A Nevada limited liability company
Its: Manager
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
Title: Manager