EXHIBIT 10.51
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ELSINORE CORPORATION
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
Dated as of September 29, 1998
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ELSINORE CORPORATION
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
This SERIES A PREFERRED STOCK PURCHASE AGREEMENT (this
"Agreement") is dated as of September 29, 1998, and made by and between Elsinore
Corporation, a Nevada corporation (the "Company"), and the investment accounts
listed on the signature pages hereof (collectively, "Investor").
RECITALS
WHEREAS, the Company desires to issue and sell to Investor,
and Investor desires to purchase from the Company, 50,000,000 shares of Series A
Preferred Stock; and
WHEREAS, Investor will purchase the shares of Series A
Preferred Stock in exchange for $18,000,000 original principal amount of 13 1/2%
Second Mortgage Notes due 2001 (the "Mortgage Notes") issued by the Company
pursuant to the Amended and Restated Indenture, dated March 3, 1997, among the
Company, the Guarantors named therein, and First Trust National Association, as
Trustee.
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants contained herein, the Parties hereby agree
as follows:
ARTICLE I. Purchase and Sale of Stock.
Section 1.1 Sale and Issuance of Series A Preferred Stock.
(a) The Company shall adopt and file with the Secretary of State of Nevada on or
before the Closing (as such term is defined in Section 1.2) the Certificate of
Designations, Preferences and Rights in the form attached hereto as Exhibit A
(the "Certificate of Designations").
(b) On or prior to the Closing (as defined below), the Company shall have (i)
authorized the sale and issuance to Investor of 50,000,000 shares of Elsinore
Corporation cumulative convertible Series A Preferred Stock with a cumulative
dividend of 6% and a liquidation preference of $0.36 per share, as evidenced by
share certificates substantially in the form of Exhibit B attached hereto (the
"Series A Preferred Stock"), and (ii) reserved the issuance of 93,000,000 shares
of common stock of the Company to be issued upon a conversion of the Series A
Preferred Stock (the "Conversion Shares"). The Series A Preferred Stock shall
have the rights, preferences, privileges and restrictions set forth in the
Certificate of Designations and the Conversion Shares shall have the rights,
preferences, privileges and restrictions of common stock of the Company as set
forth in the Company's Amended and Restated Articles of Incorporation (the
"Articles of Incorporation").
(c) Subject to the terms and conditions of this Agreement, Investor agrees to
purchase at the Closing, and the Company agrees to sell and issue to, and
authenticate for, Investor at the Closing, 50,000,000 shares of the Series A
Preferred Stock in exchange for the Mortgage Notes in the original aggregate
principal amount of $18,000,000.
(d) Both the Company and Investor agree that the existing requirements governing
the election of the Company's directors are adequate to provide for the election
of directors by the holders of shares of Series A Preferred Stock, pursuant to
the voting rights granted to such holders herein, in the certificate evidencing
such shares of Series A Preferred Stock, in the Certificate of Designations,
Preferences and Rights of Elsinore Corporation Series A Preferred Stock, dated
September 23, 1998, or in other documents ancillary hereto or thereto, in the
event of a default in the payment of dividends to such holders by the Company.
Section 1.2 Closing. The purchase and sale of the Preferred Stock shall take
place at the office of O'Melveny & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, on September 29, 1998, or at such other time and place the
Company and Investor mutually agree upon orally or in writing (which time and
place are designated as the "Closing"). At the Closing, the Company will deliver
to Investor authorized, issued, and authenticated certificates representing
50,000,000 shares of the Series A Preferred Stock, and Investor will
simultaneously deliver the Mortgage Notes to the Company.
ARTICLE II. Representations and Warranties of the Company.
The Company hereby represents and warrants to Investor as follows:
Section 2.1 Organization and Qualification; Subsidiaries.
(a) The Company and each of its subsidiaries are corporations or limited
partnerships duly organized, validly existing and in good standing under the
laws of the State of Nevada, and have all requisite corporate power and
authority to own, lease and operate their respective properties and to carry on
their respective businesses as now being conducted, except as disclosed in the
SEC Reports (as defined in Section 2.6) filed prior to the date hereof, or where
the failure to be so organized, existing and in good standing or to have such
power and authority would not, individually or in the aggregate, have a Company
Material Adverse Effect.
The term "Company Material Adverse Effect" means any change or
effect (i) that would be materially adverse to the business, results of
operations, conditions (financial or otherwise) or prospects of the Company and
its subsidiaries, taken as a whole, or (ii) that would impair the ability of the
Company to consummate the transactions contemplated hereby.
(b) Each of the Company and its subsidiaries is duly qualified or licensed
(excluding gaming and liquor licenses, which are covered by Section 2.4 hereof)
and in good standing to do business in each jurisdiction in which property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, and to perform all of its
obligations under any contract under which the Company or any of its
subsidiaries (i) has any rights, (ii) has any obligation or liability, (iii) is,
or any of the assets used or owned by it are bound, except as disclosed in the
SEC Reports filed prior to the date hereof or where the failure to be so duly
qualified or licensed and in good standing or to effect such performance would
not, individually or in the aggregate, have a Company Material Adverse Effect.
(c) The Company has heretofore furnished or made available to Investor complete
and correct copies of the Company's Articles of Incorporation and the Company's
bylaws, and the equivalent organizational documents of each of its subsidiaries,
each as amended to the date hereof. The Company's articles of incorporation, the
Company's bylaws, and the equivalent organizational documents of each of its
subsidiaries are in full force and effect. The Company is not in violation of
any of the provisions of its Articles of Incorporation or its bylaws, and no
subsidiary of the Company is in violation of any of the provisions of such
subsidiary's equivalent organizational documents. The organizational documents
of the subsidiaries of the Company do not contain any provision limiting or
otherwise restricting the ability of the Company to control such subsidiaries.
(d) The Company has heretofore furnished or made available to Investor a
complete and correct list of the subsidiaries of the Company, which list is
attached hereto as Schedule 2.1(d) and sets forth the amount of capital stock of
or other equity interests in such subsidiaries owned by the Company, directly or
indirectly.
Section 2.2 Capitalization of the Company and its Subsidiaries.
(a) The authorized capital stock of the Company consists of 100,000,000 shares
of common stock of which, as of the Closing, [4,929,313] shares were issued and
outstanding, and 50,000,000 shares of preferred stock, 50,000,000 of which have
been designated as Series A Preferred Stock (all of which will be sold to
Investor pursuant to this Agreement) of which, after giving effect to the
transactions contemplated hereby, 50,000,000 shares of Series A Preferred Stock
will be issued and outstanding. All outstanding shares of capital stock of the
Company have been validly issued, are fully paid, nonassessable and free of
preempting rights and were issued in accordance with the registration or
qualification provisions of the Securities Act of 1933, as amended (the
"Securities Act") and any relevant state securities laws, or pursuant to valid
exemptions therefrom. Except for the conversion privileges of the Series A
Preferred Stock or as set forth on Schedule 2.2(a) hereof, as of the Closing,
there are
(i) no outstanding shares of capital stock or other voting securities of the
Company;
(ii) no outstanding securities of the Company convertible into or exchangeable
for shares of capital stock or voting securities of the Company;
(iii) no outstanding options, subscriptions, warrants, convertible securities,
calls or other rights to acquire from the Company, and no obligation of the
Company to issue, deliver or sell any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Company; and
(iv) no outstanding equity equivalents, performance shares, interests in the
ownership or earnings of the Company or other similar rights issued by the
Company (all stock and other securities described in this subsection (a) are
collectively termed "Company Securities").
(b) Except as set forth on Schedule 2.2(b) hereto, there are no outstanding
obligations of the Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any Company Securities.
(c) Except as set forth on Schedule 2.2(c) hereto, each of the outstanding
shares of capital stock of each of the Company's subsidiaries is duly
authorized, validly issued, fully paid and nonassessable and is directly or
indirectly owned by the Company, free and clear of all security interests,
liens, claims, pledges, charges, voting agreements or other encumbrances of any
nature whatsoever (collectively, "Liens").
(d) Except as set forth on Schedule 2.2(d) hereto, there are no existing
options, calls or commitments of any character relating to the issued or
unissued capital stock or other equity securities of any subsidiary of the
Company.
(e) The Series A Preferred Stock, when issued, sold and delivered in accordance
with the terms of this Agreement for the consideration expressed herein, will be
duly and validly issued, fully paid, and nonassessable, and will be free of
restrictions on transfer other than restrictions on transfer under this
Agreement and the Registration Rights Agreement, dated as of the date hereof,
between Investor and the Company (the "Registration Rights Agreement") and under
applicable state and federal securities laws. The Common Stock issuable upon
conversion of the Series A Preferred Stock has been duly and validly reserved
for issuance and, upon issuance in accordance with the terms of the Articles of
Incorporation, will be duly and validly issued, fully paid, and nonassessable
and will be free of restrictions on transfer other than restrictions on transfer
under this Agreement, the Registration Rights Agreement and under applicable
state and federal securities laws.
Section 2.3 Power and Authority. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement and the Registration
Rights Agreement, the performance of all obligations of the Company hereunder
and thereunder, and the authorization, issuance (or reservation for issuance),
sale and delivery of the Series A Preferred Stock being sold hereunder and the
common stock issuable upon conversion of the Series A Preferred Stock has been
taken or will be taken prior to the Closing, and this Agreement and the
Registration Rights Agreement constitute valid and legally binding obligations
of the Company, enforceable in accordance with their respective terms, except
(a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
and other laws of general application affecting enforcement of creditors' rights
generally (collectively, the "Bankruptcy Exceptions");
(b) as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies; and
(c) to the extent the indemnification provisions contained in the Registration
Rights Agreement may be limited by applicable federal or state securities laws.
Section 2.4 Compliance.
(a) Except as set forth in Schedule 2.4(a) or as disclosed in the SEC Reports
filed prior to the date hereof, the Company, its subsidiaries and affiliates,
and their respective officers or directors or, to the best knowledge of the
Company, their respective agents or employees (if any), have been and are in
compliance with all applicable laws and regulations of foreign, federal, state
and local governmental authorities applicable to the businesses conducted by any
of the Company and its subsidiaries (including without limitation any federal,
state, local or foreign statute, ordinance, rule, regulation, permit, consent,
approval, license, judgment, order, decree, injunction or other authorization
governing or relating to current or contemplated casino, liquor related
activities and gaming activities and operations, including, without limitation,
the Nevada Gaming Control Act, as amended, and the Indian Gaming Regulatory Act,
and the rules and regulations promulgated thereunder, or applicable to the
properties owned or leased and used by the Company or its subsidiaries
(collectively, "Gaming Laws")), except where the failure to be in compliance
with such laws and regulations would not have a Company Material Adverse Effect,
and neither the Company nor any of its subsidiaries or affiliates, has received
notice of any claim of violation, or of any actual violation, of any such laws
and regulations, by the Company or any of its subsidiaries, except where such
failure or violation (whether actual or claimed) would not have a Company
Material Adverse Effect. Except as set forth in Schedule 2.4(a) or as disclosed
in the SEC Reports filed prior to the date hereof , none of the Company or its
subsidiaries, any officer, director or, to the knowledge of the Company,
affiliate or stockholder thereof, has received any written claim, demand,
notice, complaint, court order or administrative order from any governmental
authority since asserting that a license of it or them, as applicable, under any
Gaming Laws should be revoked or suspended.
(b) Except as set forth in Schedule 2.4(b) or as disclosed in the SEC Reports
filed prior to the date hereof, each of the Company and its subsidiaries has and
currently possesses, and is current on all fees with regard to, all franchises,
certificates, licenses, permits and other authorizations from any governmental
authorities and has sufficient title and ownership of all patents, trademarks,
service marks, trade names, copyrights, licenses, information, and other rights
that are necessary to each of the Company and its subsidiaries for the present
ownership, maintenance and operation of its business, properties and assets
(including, without limitation, all gaming and liquor licenses), except where
the failure to possess such franchises, certificates, licenses, permits, and
other authorizations, patents, trademarks, service marks, trade names,
copyrights, licenses and other rights (other than those required to be obtained
by the Nevada Gaming Commission, the Nevada State Gaming Control Board, the
▇▇▇▇▇ County Liquor and Gaming Licensing Board, the City of Las Vegas and the
National Indian Gaming Commission (collectively referred to as the "Gaming
Authorities"), including approvals under the Gaming Laws) would not have a
Company Material Adverse Effect; and none of the Company and its subsidiaries is
in violation of any thereof, except where such violation would not have a
Company Material Adverse Effect.
(c) Except as disclosed in the SEC Reports filed prior to the date hereof,
neither the Company nor any of its subsidiaries is in violation of, or has
violated (with or without notice or lapse of time), any applicable provisions of
(i) any laws, rules, statutes, orders, ordinances or regulations, or (ii) any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise, or other instrument or obligations to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
its or any of their respective properties are bound or affected, which,
individually or in the aggregate, would have a Company Material Adverse Effect.
(d) Except as set forth in Schedule 2.4(d) or as disclosed in the SEC Reports
filed prior the date hereof, (i) the Company and each of its subsidiaries is,
and has been, in full compliance with all of the terms and requirements of each
award, decision, injunction, judgment, order, ruling, subpoena, or verdict
(each, an "Order") entered, issued, made, or rendered by any court,
administrative agency, or other governmental entity, officer or authority or by
any arbitrator to which it, or any of the assets owned or used by it, is or has
been subject, and (ii) no event has occurred or circumstance exists that could
reasonably be expected to constitute or result in (with or without notice or
lapse of time) a violation of or failure to comply with any term or requirement
of any Order to which the Company or its subsidiaries, or any of the assets
owned or used by the Company or its subsidiaries, is subject, except where such
non-compliance, violation or failure to comply would not have a Company Material
Adverse Effect.
(e) Except as disclosed in the SEC Reports filed prior to the date hereof,
neither the Company nor any of its subsidiaries has received any notice or other
communication (whether oral or written) regarding any actual, alleged, possible,
or potential violation of, or failure to comply with, any term or requirement of
any Order to which the Company or any of its subsidiaries, or any of the assets
owned or used by the Company or any of its subsidiaries, is or has been subject
and which would have a Company Material Adverse Effect.
(f) Except as disclosed in Schedule 2.4(f), attached hereto, or in the SEC
Reports filed prior to the date hereof, no investigation or review by any
government entity, officer or authority with respect to the Company or any of
its subsidiaries is pending or, to the knowledge of the Company, threatened,
nor, to the knowledge of the Company, has any government entity, officer or
authority indicated an intention to conduct the same, other than, in each case,
those which would not have a Company Material Adverse Effect.
(g) Subject in part to the truth and accuracy of Investor's representations set
forth in Article III of this Agreement, the offer, sale and issuance of the
Series A Preferred Stock as contemplated by this Agreement is exempt from the
registration requirements of any applicable state and federal securities laws,
and neither the Company nor any authorized agent acting on its behalf will take
any action hereafter that would cause the loss of such exemption.
Section 2.5 Non-Contravention; Required Filings and Consents.
(a) Except as set forth in Schedule 2.5 hereto and as contemplated by Section
2.5(b), the execution, delivery and performance by the Company of this Agreement
and the Registration Rights Agreement and the consummation of the transactions
contemplated hereby and thereby do not and will not:
(i) contravene or conflict with the Company's Articles of Incorporation or
bylaws, or the equivalent organizational documents of any of its subsidiaries,
or any resolution adopted by the Company's board of directors or stockholders,
or the board of directors, managing partner, limited partners, general partners,
members, or stockholders of any of the Company's subsidiaries;
(ii) contravene or conflict with or constitute a violation of any provision of
any law, regulation, judgment, injunction, order or decree binding upon or
applicable to the Company, any of its subsidiaries, or any of their respective
properties;
(iii) contravene, conflict with, or result in a violation of any of the terms or
requirements of, or give any governmental entity, official or authority the
right to revoke, withdraw, suspend, cancel, terminate or modify, any
authorization that is held by the Company or any of its subsidiaries, or that
otherwise relates to the business of, or any of the assets owned by, the Company
or any of its subsidiaries;
(iv) conflict with, or result in the breach or termination of any provision of
or constitute a default (with or without the giving of notice or the lapse of
time or both) under, or give rise to any right of termination, cancellation, or
loss of any benefit to which the Company or any of its subsidiaries is entitled
under any provision of any agreement, contract, license or other instrument
binding upon the Company, any of its subsidiaries, or any of their respective
properties, or allow the acceleration of the performance of, any obligation of
the Company or any of its subsidiaries under any indenture, mortgage, deed of
trust, lease, license, contract, instrument or other agreement to which the
Company or any of its subsidiaries is a party or by which the Company, any of
its subsidiaries, or any of their respective assets or properties is subject or
bound; and
(v) result in the creation or imposition of any Lien on any asset of the Company
or any of its subsidiaries, except in the case of clauses (i), (ii), (iii) and
(iv) for any such contraventions, conflicts, violations, breaches, terminations,
defaults, cancellations, losses, accelerations and Liens which would not,
individually or in the aggregate, have a Company Material Adverse Effect or be
reasonably expected to prevent the consummation by the Company of the
transactions contemplated by this Agreement.
(b) The execution, delivery and performance by the Company of this Agreement and
the consummation of the transactions contemplated hereby by the Company require
no action by or in respect of, or filing with, any governmental entity, official
or authority (either domestic or foreign) other than:
(i) the filing of the Certificate of Designations with the Secretary of State
of Nevada; and
(ii) other filings that have been made or taken on or before the Closing Date.
Section 2.6 SEC Reports.
(a) The Company has filed all required forms, reports and documents with the
Securities and Exchange Commission (the "SEC").
(i) The Company has made available to Investor, in the form filed with the SEC,
the Company's (A) quarterly reports on Form 10-Q filed by the Company with the
SEC since January 1, 1998, (B) all current reports on Form 8-K, (C) all
information statements on Form 14C, and (D) all registration statements filed by
the Company with the SEC since January 1, 1998 (collectively and as amended as
required, including the exhibits thereto, the "SEC Reports"). As of their
respective dates, the SEC Reports complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act, each as in
effect on the dates such SEC Reports were filed. As of their respective dates,
none of the SEC Reports, including, without limitation, any financial statements
or schedules included therein, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(ii) No subsidiary of the Company is required, as of the date hereof, to file
any form, report, or other document with the SEC under Section 12 of the
Exchange Act.
(iii) The audited consolidated financial statements and unaudited consolidated
interim financial statements of the Company included in the SEC Reports fairly
present in all material respects, in conformity with generally accepted
accounting principles set forth in opinions and pronouncements of the Financial
Accounting Standards Board and of the Accounting Principles Board of the
American Institute of Certified Public Accountants or by such other entity as
may be approved by a significant segment of the United States accounting
profession, in each case as the same are applicable to the circumstances as of
the date of determination ("GAAP") applied on a consistent basis (except as may
be indicated in the notes thereto), the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and their
consolidated results of operations and cash flows for the periods then ended
(subject to normal year-end adjustments in the case of any unaudited interim
financial statements). The Company has heretofore made available or promptly
will make available to Investor a complete and correct copy of any amendments or
modifications, which are required to be filed with the SEC but have not yet been
filed with the SEC, to the SEC Reports.
(b) Except as set forth in Schedule 2.6(b) hereto, the Company and its
subsidiaries have no liabilities of any nature (whether accrued, absolute,
contingent or otherwise), except for:
(i) liabilities set forth in the audited balance sheet of the Company dated June
30, 1998 or on the notes thereto, contained in the Company's quarterly report on
Form 10-Q for the quarterly period ended June 30, 1998;
(ii) liabilities incurred in the ordinary course of business consistent with
past practice since June 30, 1998; and
(iii) liabilities which would not, individually or in the aggregate, have a
Company Material Adverse Effect.
Section 2.7 Absence of Certain Changes. Except as set forth in Schedule 2.7
hereto or as disclosed in the SEC Reports filed prior to the date hereof, the
Company and its subsidiaries have conducted their respective businesses only in
the ordinary course, and there has not been:
(a) any declaration, setting aside or payment of any dividend or other
distribution with respect to its capital stock;
(b) any incurrence, assumption or guarantees by the Company or any of its
subsidiaries of any indebtedness for borrowed money other than in the ordinary
course of business;
(c) any making of any loan, advance or capital contributions to, or investments
in, any other person;
(d) any split, combination or reclassification of any of its capital stock or
any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock;
(e) any granting by the Company or any of its subsidiaries to any officer of the
Company or any of its subsidiaries of any increase in compensation, except in
the ordinary course of business (including in connection with promotions)
consistent with past practice or as was required under employment agreements in
effect as of the date of the most recent audited financial statements included
in the SEC Reports filed and publicly available prior to the date of this
Agreement, or any granting by the Company or any of its subsidiaries to any such
officer of any increase in severance or termination pay, except as part of a
standard employment package to any person promoted or hired, or as was required
under employment, severance or termination agreements in effect as of the date
of the most recent audited financial statements included in the SEC Reports
filed;
(f) except termination arrangements in the ordinary course of business
consistent with past practice with employees other than any executive officer of
the Company, any entry by the Company or any of its subsidiaries into any
employment, severance or termination agreement with any such officer;
(g) any damage, destruction or loss (other than a decline of revenue or net
income), whether or not covered by insurance, that would be expected to have a
Company Material Adverse Effect;
(h) any transaction or commitment made, or any contract or agreement entered
into, by the Company or any of its subsidiaries relating to any of their assets
or business (including the acquisition or disposition of any assets) or any
relinquishment by the Company or any of its subsidiaries or any contract or
other right, in either case, material to the Company and its subsidiaries, taken
as a whole, other than transactions and commitments in the ordinary course of
business and those contemplated by this Agreement;
(i) any change in accounting methods, principles or practices by the Company
materially affecting its assets, liabilities or business, except insofar as may
have been required by a change in generally accepted accounting principles; or
(j) any other change (other than a decline of revenue or net income) which would
have a Company Material Adverse Effect.
Section 2.8 No Brokers. The Company has not employed any broker, finder or
financial advisor or incurred any liability for any brokerage fees, commissions,
finders' or financial advisory fees in connection with the transactions
contemplated hereby.
Section 2.9 Absence of Litigation. Except as disclosed in the SEC Reports filed
prior to the date hereof or in Schedule 2.9 hereto, there is no action, suit,
claim, investigation or proceeding pending against, or to the knowledge of the
Company, threatened against, the Company or any of its subsidiaries or any of
their respective properties or the Company's board of directors before any court
or arbitrator or any administrative, regulatory or governmental body, or any
agency or official which, individually or in the aggregate, would have a Company
Material Adverse Effect. There is no action, suit, proceeding or investigation
pending or, to the Company's knowledge, currently threatened against the Company
that questions the validity of this Agreement, the Registration Rights
Agreement, or the right of the Company to enter into such agreements, or to
consummate the transactions contemplated hereby or thereby. Except as disclosed
in the SEC Reports filed prior to the date hereof, there is no action, suit,
claim, investigation or proceeding pending against, or to the knowledge of the
Company, threatened against, the Company or any of its subsidiaries or any of
their respective properties or the Company's board of directors before any court
or arbitrator or any administrative, regulatory or governmental body, or any
agency or official which alleges any criminal action or inaction. Except as
disclosed in the SEC Reports filed prior to the date hereof, neither the Company
nor any of its subsidiaries nor any of their respective properties is subject to
any order, writ, judgment, injunction, decree, determination or award having, or
which would have, a Company Material Adverse Effect or which would prevent or
delay the consummation of the transactions contemplated hereby. The foregoing
includes, without limitation, actions, suits, proceedings or investigations
pending or threatened involving the prior employment of any of the Company's
employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality, other than the Confirmation Order (as defined in Section 2.17).
Except as disclosed in the SEC Reports filed prior to the date hereof, there is
no action, suit, proceeding or investigation by the Company currently pending or
that the Company intends to initiate.
Section 2.10 Taxes. Except as set forth in Schedule 2.10 hereto or as disclosed
in the SEC Reports filed prior to the date hereof:
(a) the Company and its subsidiaries have filed, been included in or sent, all
material returns, material declarations and reports and information returns and
statements required to be filed or sent by or relating to any of them relating
to any Taxes (as defined herein) with respect to any material income, properties
or operations of the Company or any of its subsidiaries (collectively,
"Returns");
(b) as of the time of filing, the Returns correctly reflected in all material
respects the facts regarding the income, business, assets, operations,
activities and status of the Company and its subsidiaries and any other material
information required to be shown therein;
(c) the Company and its subsidiaries have timely paid or made provision for all
material Taxes that have been shown as due and payable on the Returns that have
been filed;
(d) the Company and its subsidiaries have made or will make provision for all
material Taxes payable for any periods that end before the Closing for which no
Returns have yet been filed and for any periods that begin before the Closing
and end after the Closing to the extent such Taxes are attributable to the
portion of any such period ending at the Closing;
(e) the charges, accruals and reserves for Taxes reflected on the books of the
Company and its subsidiaries are adequate under generally accepted accounting
principles to cover the Tax liabilities accruing or payable by the Company and
its subsidiaries;
(f) neither the Company nor any of its subsidiaries is delinquent in the payment
of any material Taxes or has requested any extension of time within which to
file or send any material Return (other than extensions granted to the Company
for the filing of its Returns as set forth in Schedule 2.10), which Return has
not since been filed or sent;
(g) no material deficiency for any Taxes has been proposed, asserted or assessed
in writing against the Company or any of its subsidiaries other than those Taxes
being contested in good faith by appropriate proceedings and set forth in
Schedule 2.10 (which shall set forth the nature of the proceeding, the type of
return, the deficiencies proposed, asserted or assessed and the amount thereof,
and the taxable year in question);
(h) neither the Company nor any of its subsidiaries has granted any extension of
the limitation period applicable to any material Tax claims other than those
Taxes being contested in good faith by appropriate proceedings; and
(i) neither the Company nor any of its subsidiaries is subject to liability for
Taxes of any person (other than the Company or its subsidiaries).
"Tax" or "Taxes" means all federal, state, local and foreign
taxes, and other assessments of a similar nature (whether imposed directly or
through withholding), including any interest, additions to tax, or penalties
applicable thereto, imposed by any Tax Authority. "Tax Authority" means the
Internal Revenue Service and any other domestic or foreign governmental
authority responsible for the administration of any Taxes.
Section 2.11 Employee Benefits.
(a) As used in this Section 2.11, "Plan" means each bonus, deferred
compensation, incentive compensation, stock purchase, stock option, severance or
termination pay, hospitalization or other medical, dental, life, disability or
other insurance, supplemental unemployment benefits, profit-sharing, pension,
savings or retirement plan, program, agreement or arrangement, and each other
employee benefit plan, program, agreement or arrangement, sponsored, maintained
or contributed to or required to be contributed to by the Company or by any
trade or business, whether or not incorporated (an "ERISA Affiliate"), that
together with the Company would be deemed a "single employer" within the meaning
of section 4001 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), for the benefit of any employee or terminated employee of the
Company or any ERISA Affiliate. As used in this Section 2.11, "ERISA Plan" means
each of the Plans that is an "employee benefit plan," as that term is defined in
section 3(3) of ERISA.
(b) [intentionally omitted]
(c) Neither the Company nor any ERISA Affiliate has incurred any liability under
Title IV of ERISA, including any "withdrawal liability" (within the meaning of
Section 4201 of ERISA) with respect to any benefit plan, and, to the knowledge
of the Company, no condition exists that presents a material risk to the Company
or any ERISA Affiliate of incurring a material liability under such Title.
(d) Neither the Company nor any ERISA Affiliate, nor, to the knowledge of the
Company, any ERISA Plan, any trust created thereunder, nor any trustee or
administrator thereof has engaged in a transaction in connection with which the
Company or any ERISA Affiliate, any ERISA Plan, any such trust, or any trustee
or administrator thereof, or any party dealing with any ERISA Plan or any such
trust would be subject to either a civil penalty assessed pursuant to section
409 or 502(i) of ERISA or a Tax imposed pursuant to section 4975 or 4976 of the
Internal Revenue Code of 1986, as amended (the "Code"), except for such
penalties and Taxes which would not, individually or in the aggregate, have a
Company Material Adverse Effect.
(e) All contributions required to be made with respect to any ERISA Plan
(whether pursuant to the terms of any ERISA Plan or otherwise) on or prior to
the Closing have been timely made.
(f) To the knowledge of the Company, each Plan has been operated and
administered in all material respects in accordance with its terms and
applicable law, including but not limited to ERISA and the Code except where
such noncompliance would not be expected to have a Company Material Adverse
Effect.
(g) Each ERISA Plan intended to be "qualified" within the meaning of section
401(a) of the Code has been drafted with the intention to be so qualified and
has received a favorable determination letter from the Internal Revenue Service
on or before the date hereof. (h) To the Company's knowledge, except as
reasonably estimated and as set forth in Schedule 2.11
(h), no amounts payable under the Plans as a result of the consummation of the
transactions contemplated by this Agreement will fail to be deductible for
federal income tax purposes by application of section 280G of the Code.
(i) Except as set forth on Schedule 2.11(i) hereto, no Plan provides benefits,
including without limitation death or medical benefits (whether or not insured),
with respect to current or former employees of the Company or any ERISA
Affiliate beyond their retirement or other termination of service, other than:
(i) coverage mandated by applicable law; or
(ii) death benefits or retirement benefits under any "employee pension plan,"
as that term is defined in section 3(2) of ERISA). (j) Except as provided in
Schedule 2.11
(j) hereto, the consummation of the transactions contemplated by this Agreement
will not:
(i) entitle any current or former employee or officer of the Company or
any ERISA Affiliate to severance pay, unemployment compensation or any other
payment; or
(ii) accelerate the time of payment or vesting, or increase the amount
of compensation due any such employee or officer.
(k) There are no pending or, to the knowledge of the Company, threatened claims
by or on behalf of any Plan, by any employee or beneficiary covered under any
such Plan, or otherwise involving any such Plan (other than routine claims for
benefits).
(l) The Company has reserved the right to amend or terminate any Plan which is a
welfare benefit plan, as that term is defined in section 3(1) of ERISA.
Section 2.12 Intellectual Property. Except as disclosed in the SEC Reports filed
prior to the date of this Agreement or as set forth in Schedule 2.12 hereto, the
Company and each of its subsidiaries owns, or is licensed or has the right to
use (in each case, free and clear of any Liens), all Intellectual Property (as
defined below) used in or necessary for the conduct of its business
substantially as currently conducted. To the knowledge of the Company, the use
of any Intellectual Property by the Company and its subsidiaries does not
infringe on or otherwise violate the rights of any person, and, to the knowledge
of the Company, no person is challenging, infringing on or otherwise violating
any right of the Company or any of its subsidiaries with respect to any
Intellectual Property owned by and/or licensed to the Company or its
subsidiaries, except in each case for such infringements or failures to own or
be licensed as would not, individually or in the aggregate, have a Company
Material Adverse Effect. "Intellectual Property" shall mean trademarks, service
marks, brand names, certification marks, trade dress, assumed names, trade names
and other indications of origin, the goodwill associated with the foregoing and
any registration in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of any
such registration or application; inventions, discoveries and ideas, whether
patentable or not in any jurisdiction; patents, applications for patents
(including, without limitation, divisions, continuations, continuations in part
and renewal applications), and any renewals, extensions or reissues thereof, in
any jurisdiction; nonpublic information, trade secrets and confidential
information and rights in any jurisdiction to limit the use or disclosure
thereof by any person; writings and other works, whether copyrightable or not in
any jurisdiction; registrations or applications for registration of copyrights
in any jurisdiction, and any renewals or extensions thereof; and any similar
intellectual property or proprietary rights.
Section 2.13 Material Contracts.
(a) [intentionally omitted]
(b) Except as disclosed in the SEC Reports filed prior to the date hereof,
assuming each contract or agreement that has been or is required to be filed as
an exhibit to a Form 10-K by the Company with the SEC (collectively, the
"Material Contracts") constitutes a valid and binding obligation of each other
party thereto, each Material Contract is a valid and binding obligation of the
Company or a subsidiary of the Company, as the case may be. To the Company's
knowledge, each Material Contract is a valid and binding obligation of each
other party thereto, and each such Material Contract is in full force and effect
and is enforceable by the Company or its subsidiaries in accordance with its
terms, except as enforcement may be limited by the Bankruptcy Exceptions and
subject to the general principles of equity. There are no existing defaults (or
circumstances or events that, with the giving of notice or lapse of time or both
would become defaults) of the Company or any of its subsidiaries (or, to the
knowledge of the Company, any other party thereto) under any of the Material
Contracts except for defaults that would not, individually or in the aggregate,
have a Company Material Adverse Effect.
Section 2.14 Insurance.
(a) The Company and its subsidiaries have obtained and maintained in full force
and effect insurance with responsible and reputable insurance companies or
associations in such amounts, on such terms and covering such risks, including
fire and other risks insured against by extended coverage, as is consistent with
industry practice for companies engaged in similar businesses, and of at least
similar size, to that of the Company and its subsidiaries, and the Company and
each of its subsidiaries have maintained in full force and effect public
liability insurance, insurance against claims for personal injury or death or
property damage occurring in connection with any of the activities of the
Company or its subsidiaries or any of any properties owned, occupied or
controlled by the Company or its subsidiaries, in such amount as reasonably
deemed necessary by the Company or its subsidiaries.
(b) Except as disclosed in the SEC Reports filed prior to the date hereof, each
material insurance policy of the Company or its subsidiaries is in full force
and effect, no notice of termination, cancellation or reservation of rights has
been received with respect to any such policy, there is no default with respect
to any provision contained in any such policy, and there has not been any
failure to give any notice or present any claim under any such policy in a
timely fashion or in the manner or detail required by any such policy, except
for any such failures to be in full force and effect, any such terminations,
cancellations, reservations or defaults, or any such failures to give notice or
present claims which, individually or in the aggregate, would have a Company
Material Adverse Effect.
Section 2.15 Labor Matters.
(a) Except as set forth in Schedule 2.15(a) hereto or as disclosed in the SEC
Reports filed prior to the date hereof, neither the Company nor any of its
subsidiaries is a party to any collective bargaining or other labor union
contract applicable to persons employed by the Company or any of its
subsidiaries, no collective bargaining agreement is being negotiated by the
Company or any of its subsidiaries, and the Company has no knowledge of any
material activities or proceedings:
(i) involving any unorganized employees of the Company or its subsidiaries
seeking to certify a collective bargaining unit; or
(ii) of any labor union to organize any of the employees of the Company or
its subsidiaries.
(b) There is no labor dispute, strike or work stoppage against the Company or
any of its subsidiaries pending or, to the Company's knowledge, threatened which
is likely to interfere with the respective business activities of the Company or
any of its subsidiaries, except where such dispute, strike or work stoppage
would not have a Company Material Adverse Effect.
(c) Except as set forth in Schedule 2.15(c) hereto or as disclosed in the SEC
Reports filed prior to the date hereof, the Company and each of its subsidiaries
have paid in full, or fully accrued for in their financial statements, all
wages, salaries, commissions, bonuses, severance payments, vacation payments,
holiday pay, sick pay, pay in lieu of compensatory time and other compensation
due or to become due to all current and former employees of the Company and of
each of its subsidiaries for all services performed by any of them on or prior
to the date hereof. The Company and each of its subsidiaries are in compliance
with all applicable federal, state, local and foreign laws, rules and
regulations relating to the employment of labor, including without limitation,
laws, rules and regulations relating to payment of wages, employment and
employment practices, terms and conditions of employment, hours, immigration,
discrimination, child labor, occupational health and safety, collective
bargaining and the payment and withholding of Taxes and other sums required by
governmental authorities.
(d) Property. Except as set forth in Schedule 2.16 or as disclosed in the SEC
Reports filed prior to the date hereof, the Company and each of its subsidiaries
have good and marketable title to all of their properties and assets, free and
clear of all Liens, except for those disclosed in the financial statements and
except Liens for Taxes not yet due and payable and such Liens or other
imperfections of title, if any, as do not materially detract from the value of
or interfere with the present use of the property affected thereby or which,
individually or in the aggregate, would not have a Company Material Adverse
Effect; and all leases pursuant to which the Company or any of its subsidiaries
lease from others real or personal property are in good standing, valid and
effective in accordance with their respective terms, and there is not, to the
knowledge of the Company, under any of such leases, any existing material
default or event of default (or event which with notice or lapse of time, or
both, would constitute a material default and in respect of which the Company or
such subsidiary has not taken adequate steps to prevent such a default from
occurring) except where the lack of such good standing, validity and
effectiveness, or the existence of such default or event, would not have a
Company Material Adverse Effect.
Section 2.16 Bankruptcy. The plan of reorganization of the Company, which became
effective on February 28, 1997, has been confirmed by the appropriate court, and
the confirmation order issued by such court (the "Confirmation Order") has been
entered. All motions for rehearing or reconsideration of the Confirmation Order
have been denied or withdrawn. The time allowed for appeals of the Confirmation
Order has expired without any appeal having been taken or, if the confirmation
order has been appealed, no stay is in effect. The Company has not defaulted and
has fully complied with the Confirmation Order in all material respects.
Section 2.17 Environmental Matters. Except as set forth on Schedule 2.18 or as
disclosed in the SEC Reports filed prior to the date hereof, (i) the Company and
its subsidiaries are in compliance with all Environmental Laws (as defined
herein), except where the failure to be in compliance would not have a Company
Material Adverse Effect, and (ii) to the best knowledge of the Company, there
are not, with respect to the Company or any of its subsidiaries, any past
violations of Environmental Laws, releases of any material into the environment,
actions, activities, circumstances, conditions, events, incidents, contractual
obligations or other legal requirements that could reasonably be agreed to give
rise to any liability, cost or expense under any Environmental Laws, which
liabilities, costs or expenses, either individually or in the aggregate, would
have a Company Material Adverse Effect. As used in this Section 2.18, the term
"Environmental Laws" means the applicable common law and all applicable federal,
state, local and foreign laws relating to pollution or protection of human
health or the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata), including, without
limitation, laws relating to emissions, discharges, releases or threatened
releases of, or exposure to, chemicals, pollutants, contaminants,
asbestos-containing materials or industrial, toxic or hazardous substances or
wastes into the environment, as well as all applicable authorizations or codes,
decrees, injunctions, judgments, licenses, orders, permits or regulations in
effect thereunder.
Section 2.18 Representations Complete.
(a) The Company has fully provided Investor with all the information that
Investor has requested for deciding whether to purchase the Preferred Stock and
all information that the Company believes is reasonably necessary to enable
Investor to make such decision.
(b) To the best of Company's knowledge, neither this Agreement, the Registration
Rights Agreement nor any other written statements or certificates made or
delivered in connection herewith or therewith contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
herein or therein not misleading.
Section 2.19 Registration Rights. Except as provided in the Registration Rights
Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
ARTICLE III. Representations and Warranties of Investor.
Investor hereby represents and warrants that:
Section 3.1 Authorization. Investor has full power and authority to enter into
this Agreement and such agreement constitutes its valid and legally binding
obligation, enforceable in accordance with its terms, except
(a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
and other laws of general application affecting enforcement of creditors' rights
generally; and
(b) as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.
Section 3.2 [intentionally omitted].
Section 3.3 Disclosure of Information. Investor believes it has received all the
information it considers necessary or appropriate for deciding whether to
purchase the Securities. Investor further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Securities and the business,
properties, prospects and financial condition of the Company. The foregoing,
however, does not limit or modify the representations and warranties of the
Company in Section 2 of this Agreement or the right of Investor to rely thereon.
Section 3.4 Investment Experience. Investor is an investor in securities of
companies in similar financial condition as the Company and acknowledges that it
is able to fend for itself, can bear the economic risk of its investment, and
has such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Securities.
Section 3.5 Investor represents it has not been organized for the purpose of
acquiring the Securities, and Investor understands that the Securities it is
purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act, only in certain limited circumstances. In this connection, such
Investor represents that it is familiar with Securities and Exchange Commission
Rule 144 ("Rule 144"), as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act of 1933, as amended.
Section 3.6 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, Investor further agrees not to make any
disposition of all or any portion of the Securities (except under Rule 144)
unless and until the transferee has agreed in writing for the benefit of the
Company to be bound by this Section 3 and the Registration Rights Agreement
provided and to the extent this Section and such agreement are then applicable,
and:
(a) there is then in effect a registration statement under the Act covering such
proposed disposition and such disposition is made in accordance with such
registration statement; or
(b) (i) Investor shall have notified the Company of the proposed disposition and
shall have furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, and (ii) if reasonably requested by the
Company, Investor shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company that such disposition will not require
registration of such shares under the Act. It is agreed that the Company will
not require opinions of counsel for transactions made pursuant to Rule 144
except in unusual circumstances;
provided, however, that nothing in this Section 3.6 shall be construed so as to
limit the ability of any of the investment accounts listed on the signature
pages hereof which constitute the Investor to exchange, sell, or otherwise
transfer all or any portion of the Securities to or with another of such
investment accounts.
Section 3.7 Legends. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS
SOLD PURSUANT TO RULE 144 OF SUCH ACT."
ARTICLE IV. Conditions of Investor's Obligations at Closing.
The obligations of Investor under subsections 1.2 of this
Agreement are subject to the fulfillment or waiver by investor on or before the
Closing of each of the following conditions.
Section 4.1 Representations and Warranties. The representations and warranties
of the Company contained in Section 2 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the date of such Closing.
Section 4.2 Performance. The Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
Section 4.3 Compliance Certificate. The President of the Company shall deliver
to Investor at the Closing a certificate stating that the conditions specified
in Sections 4.1, 4.2, 4.3, and 4.7 have been fulfilled.
Section 4.4 Qualifications. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Securities pursuant to this Agreement shall be duly obtained and effective as of
the Closing.
Section 4.5 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to
Investor, and they shall have received all such counterpart original and
certified or other copies of such documents as they may reasonably request.
Section 4.6 Closing of Exchange Agreement . All conditions precedent to the
effectiveness of that certain Exchange Agreement dated as of the date hereof
between the Company and the Investor (other than the effectiveness of this
Agreement) shall have been satisfied or waived in accordance with the terms
thereof.
Section 4.7 Registration Rights Agreement. The Company and Investor shall have
entered into the Registration Rights Agreement in the form attached as Exhibit
C.
ARTICLE V. Conditions of the Company's Obligations at Closing.
The obligations of the Company to Investor under this
Agreement are subject to the fulfillment on or before the Closing of each of the
following conditions by that Investor:
Section 5.1 Representations and Warranties. The representations and warranties
of Investor contained in Section 3 shall be true on and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the Closing.
Section 5.2 Payment of Purchase Price. Investor shall have delivered Mortgage
Notes in the original aggregate principal amount of $18,000,000, as specified in
Section 1.2.
Section 5.3 Qualifications. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body of the-United States or of any
state that are required in connection with the lawful issuance and sale of the
Securities pursuant to this Agreement shall be duly obtained and effective as of
the Closing.
ARTICLE VI. MISCELLANEOUS.
Section 6.1 Survival of Representations, Warranties, and Covenants. The
warranties, representations and covenants of the Company and Investor contained
in or made pursuant to this Agreement shall survive the execution and delivery
of this Agreement and shall in no way be affected by any investigation of the
subject matter thereof made by or on behalf of Investor or the Company.
Section 6.2 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Securities). Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
Section 6.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York as applied to agreements among New York
residents entered into and to be performed entirely within New York.
Section 6.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 6.5 Liability The obligations and liabilities of the constituent
investment accounts of Investor under this Agreement shall be several, to the
extent of each such investment account's respective percentage ownership
interest of issued and outstanding shares of common stock of Company, and not
joint. Company has designated Morgens, Waterfall, Vintiadis & Company, Inc.
("Morgens, Waterfall") as its agent for the sole purpose of receiving
communications from, and sending communications to, such investment accounts in
connection with this Agreement. None of Morgens, Waterfall, ▇▇▇▇ ▇. Waterfall,
or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ individually, nor any officers, directors, employees, agents,
or controlling persons of Morgens, Waterfall, shall have any obligations or
liabilities under or in connection with this Agreement by reason of the
foregoing or for any other reason.
Section 6.6 Titles and Subtitles. The Section headings, titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
Section 6.7 Notices. Unless otherwise provided, all notices, requests, payments,
instructions or other documents to be given hereunder shall be in writing or by
written telecommunication, and shall be deemed to have been duly given if
(a) delivered personally (effective upon delivery),
(b) mailed by certified mail, return receipt requested, postage prepaid
(effective five (5) business days after dispatch),
(c) sent by a reputable, established courier service that guarantees next
business day delivery (effective the next business day), or
(d) sent by telecopier followed within 24 hours by confirmation by one of the
foregoing methods (effective upon receipt of the telecopy in complete, readable
form), addressed to the party to be notified at the address indicated for such
party on the signature page hereof, or at such other address as such party may
designate by ten (10) days' advance notice to the other parties.
Section 6.8 Finder's Fee.
(a) Each party represents that it neither is nor will be obligated for any
finders' fee or commission in connection with this transaction.
(b) The Company agrees to indemnify and hold harmless Investor from any
liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
Section 6.9 Expenses. Irrespective of whether the Closing is effected, the
Company shall pay all costs and expenses that it incurs, with respect to the
negotiation, execution, delivery and performance of this Agreement. If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the Registration Rights Agreement or the Certificate of
Designations, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
Section 6.10 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the holders of a majority of the
common stock issuable or issued upon conversion of the Series A Preferred Stock.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any securities purchased under this Agreement at the
time outstanding (including securities into which such securities are
convertible), each future holder of all such securities, and the Company.
Section 6.11 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
Section 6.12 Aggregation of Stock. All shares of the Series A Preferred Stock
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
Section 6.13 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
[Remainder of page intentionally left blank.]
WITNESS, the due execution hereof by the respective duly
authorized general partner or officer of the undersigned as of the date first
written above.
ELSINORE CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
INVESTOR:
BETJE PARTNERS
ENDOWMENT RESTART LLC
MORGENS WATERFALL INCOME PARTNERS, L.P.
PHOENIX PARTNERS, L.P.
MWV EMPLOYEE RETIREMENT PLAN GROUP TRUST
RESTART PARTNERS, L.P.
RESTART PARTNERS II, L.P.
RESTART PARTNERS III, L.P.
RESTART PARTNERS IV, L.P.
RESTART PARTNERS V, L.P.
By: /s/ ▇▇▇▇ ▇. "▇▇▇▇▇" Waterfall
Name: ▇▇▇▇ ▇. "▇▇▇▇▇" Waterfall
Title: Authorized Signatory
EXHIBIT A
CERTIFICATE OF DESIGNATIONS
(See Exhibit 3.3 attached to Form 8-K)
EXHIBIT B
FORM OF SERIES A PREFERRED STOCK CERTIFICATE
EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
(See Exhibit 10.50 attached to Form 8-K)
SCHEDULES TO ELSINORE CORPORATION SERIES A PREFERRED STOCK
PURCHASE AGREEMENT DATED SEPTEMBER 29, 1998
Schedule 2.1(d) Subsidiaries of the Company
Schedule 2.2(a) Capitalization of the Company an
Its Subsidiaries
Schedule 2.2(b) Other Obligations
Schedule 2.2(c) Liens
Schedule 2.2(d) Options
Schedule 2.4(a) Compliance
Schedule 2.4(b) Licenses
Schedule 2.4(d) Compliance with Orders
Schedule 2.4(f) Investigations and Reviews
Schedule 2.5 Noncontravention; Required Filings and
Consents
Schedule 2.6(b) Liabilities
Schedule 2.7 Absence of Certain Changes
Schedule 2.9 Pending or Threatened Litigation
Schedule 2.10 Taxes
Schedule 2.11(h) Payments Non-Deductible
Schedule 2.11(i) Benefits Beyond Termination
Schedule 2.11(j) Severance or Unemployment Compensation;
Acceleration of Vesting
Schedule 2.12 Intellectual Property
Schedule 2.15(a) Labor Matters
Schedule 2.15(c) Payment of Benefits
Schedule 2.16 Real Property
Schedule 2.18 Environmental Matters
SCHEDULE 2.1(d)
Subsidiaries of the Company
Subsidiaries of the Company as of the closing date:
Name of State of D.B.A. Company's
Subsidiary Corporation or Equity Interest
Organization in Subsidiary
------------------------- -------------------- ---------------------------- ------------------------------------
Four Queens, Inc. Nevada Four Queens 100%
Hotel & Casino
Pinnacle Gaming Corp. Nevada Elsinore Manufacturing 100%
Corp.
Elsub Management Corp. Nevada Elsub Management Corp. 100%
Palm Springs East L.P. Nevada Palm Springs East L.P. 90% (by Elsub Management Corp. as
general partner)
Olympia Gaming Corp. Nevada Olympia Gaming Corp. 100%
Four Queens Nevada Four Queens 100%
Experience Corp. Experience Corp.
Eagle Gaming, Inc. Nevada Eagle Gaming, Inc. 100%
Elsinore Tahoe, Inc. Nevada Elsinore Tahoe, Inc. 100%
Elsub Corp. New Jersey Elsub Corporation 100%
Elsinore of New Jersey Elsinore of 100% (by Elsub Corp.)
New Jersey, Inc. New Jersey, Inc.
Elsinore of New Jersey Elsinore of 84.3% (Elsinore of New Jersey,
Atlantic City, L.P. Atlantic City, L.P. Inc. as general partner)
Elsinore Shore New Jersey Elsinore Shore Associates 91.5% (54.3% by Elsinore of
Associates Atlantic City, L.P. and 45.7% by
Pinnacle Gaming Corp.)
Elsinore Finance Company New Jersey Elsinore Finance Company 100%
SCHEDULE 2.2(a)
Capitalization of the Company and its Subsidiaries
1. Pursuant to the Management Agreement among the Company, Four Queens,
Inc. and Riviera Gaming Management Corp. - Elsinore effective April 1,
1997, Riviera Gaming Management Corp. received warrants to purchase
1,125,000 shares of the Company's Common Stock at $1 per share (the
"Riviera Warrants").
2. Pursuant to the First Amended Plan of Reorganization of the Company
filed May 28, 1996 in the United States Bankruptcy Court for the
District of Nevada (the "Plan" or the "Plan of Reorganization"),
certain creditors of the Company are to be issued 70,687 shares of
common stock.
3. The Company has, as of the closing date, outstanding 4,929,313
shares of common stock.
SCHEDULE 2.2(b)
Other Obligations
None.
SCHEDULE 2.2(c)
Liens
None.
SCHEDULE 2.2(d)
Options
None.
SCHEDULE 2.4(a)
Compliance
The Company has received notice from the Nevada Division of Insurance,
Department of Business & Industry, that the Company is out of compliance with
the tangible net worth requirement for workers' compensation self-insurance. If
the Company fails to provide the Department of Business & Industry with audited
September 30, 1998 financial statements by November 15, 1998 and meet the
tangible net worth requirement, the Company may be required to post a bond of
$2.5 million.
SCHEDULE 2.4(b)
Licenses
1. The New Jersey Casino Service Industry License held by Four Queens, Inc. is
currently in effect, however, it will expire on May 31, 2001.
2. Olympia Gaming Corporation has not renewed its gaming license, issued by the
State of Washington.
SCHEDULE 2.4(d)
Compliance with Orders
None.
SCHEDULE 2.4(f)
Investigations and Reviews
The Company has received notice from the Nevada Division of Insurance,
Department of Business & Industry, that the Company is out of compliance with
the tangible net worth requirement for workers' compensation self-insurance. If
the Company fails to provide the Department of Business & Industry with audited
September 30, 1998 financial statements by November 15, 1998 and meet the
tangible net worth requirement, the Company may be required to post a bond of
$2.5 million.
SCHEDULE 2.5
Non-contravention; Required Filings and Consents
None.
SCHEDULE 2.6(b)
Liabilities
None.
SCHEDULE 2.7
Changes
Indebtedness Incurred by the Company
The Company guaranteed a lease by and between PDS Financial Corporation - Nevada
and Four Queens, Inc. pursuant to that certain $505,206.30 Security Equipment
Lease Financing dated May 1, 1997, as amended, for certain equipment described
therein.
The Company guaranteed a lease by and between PDS Financial Corporation - Nevada
and Four Queens, Inc. pursuant to that certain $297,000 Security Equipment Lease
Financing dated May 1, 1997, as amended, for certain equipment described
therein.
The Company guaranteed a lease by and between PDS Financial Corporation - Nevada
and Four Queens, Inc. pursuant to that certain $200,633 Security Equipment Lease
Financing dated May 1, 1997, as amended, for certain equipment described
therein.
The Company guaranteed a lease by and between PDS Financial Corporation - Nevada
and Four Queens, Inc. pursuant to that certain $399,813 Security Equipment Lease
Financing dated May 1, 1997, as amended, for certain equipment described
therein.
The Company guaranteed a lease by and between PDS Financial Corporation - Nevada
and Four Queens, Inc. pursuant to that certain $336,770 Security Equipment Lease
Financing dated May 1, 1997, as amended, for certain equipment described
therein.
The Company guaranteed a lease by and between PDS Financial Corporation - Nevada
and Four Queens, Inc. pursuant to that certain $149,500 Security Equipment Lease
Financing dated May 1, 1997, as amended, for certain equipment described
therein.
The Company guaranteed a lease by and between PDS Financial Corporation - Nevada
and Four Queens, Inc. pursuant to that certain $216,552 Security Equipment Lease
Financing dated May 1, 1997, as amended, for certain equipment described
therein.
The Company guaranteed a lease by and between PDS Financial Corporation - Nevada
and Four Queens, Inc. pursuant to that certain $1,197,688 Security Equipment
Lease Financing dated May 1, 1997, as amended, for certain equipment described
therein.
The Company guaranteed a lease by and between PDS Financial Corporation - Nevada
and Four Queens, Inc. pursuant to that certain $534,983 Security Equipment Lease
Financing dated May 1, 1997, as amended, for certain equipment described
therein.
Employment/Severance/Termination Agreements
1. Termination Fee Agreement dated as of May 5, 1998 by and between Four
Queens, Inc., a Nevada corporation and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
2. Termination Fee Agreement dated as of May 5, 1998 by and between the
Four Queens, Inc., a Nevada corporation and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
3. Termination Fee Agreement dated as of May 5, 1998 by and between the
Four Queens, Inc., a Nevada corporation and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
4. Loan-Out of Services Agreement dated as of August 12, 1996, by and
between Four Queens, Inc. and Riviera Gaming Management Elsinore, Inc.,
as Manager, pursuant to which the Manager agreed to lend the services
of three of the Manager's employees (▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇) to assist with the management of
the Four Queens Hotel & Casino and Four Queens has agreed to reimburse
the Manager for the services provided.
Changed Accounting Methods
The Company changed its accounting method after the Plan of Reorganization was
confirmed to reflect "fresh start" reporting, whereby the reorganization value
is allocated to the Company's assets following the methodology prescribed in
APBO No. 16.
Corporate Status
The Company filed Articles of Dissolution with the Nevada Secretary of State in
order to dissolve two of the Company's subsidiaries: Elsinore-Missouri Gaming,
Inc., a Nevada corporation and Mojave Gaming, Inc., a Nevada corporation.
Employee Retention Plan
On September 5, 1998, the Board of Directors authorized and approved the
Company's Employee Retention Plan providing termination benefits to
approximately ten employees, some of whom may also receive "stay-put" bonuses on
January 1, 2000 and on January 1, 2001.
SCHEDULE 2.9
Pending or Threatened Litigation
Case No. A370692 - Maliki S. Elshaied v. Four Queens, Inc. A former employee
filed a petition for judicial review. Four Queens' labor counsel filed a notice
of intent to participate on June 17, 1997.
Case No. A366865 - ▇▇▇▇▇ ▇▇▇▇▇ v. Four Queens, Inc. The complaint, which was
filed on November 22, 1996, alleges plaintiff was hit by a vehicle and pieces of
a falling wall when a valet hit a wall and rail. Damages in excess of $10,000
were requested in the complaint. The Company has asserted that the claim arose
post-petition but pre-effective date and that the plaintiff should have filed an
administrative claim.
Case No. A348749 - ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ III v. Four Queens, Inc. This matter was
stayed by the bankruptcy proceeding. The amount of the claim (which is
classified as a Class 10 claim) will be liquidated in the state court.
Case No. CV-S-92-00662 - ▇▇▇▇▇▇-▇▇▇▇ v. Elsinore. The complaint alleges RICO
violations.
Case Nos. 89-2413 and 89-2143 ▇▇▇▇▇▇▇ v. Elsinore Share Associates and Hotel
Employees and Restaurant Employees International Union Local 54 v. Elsinore
Share Associates. These complaints allege WARN Act violations as well as other
claims for damages. As of the closing date, the claims are on appeal before both
the Third Circuit Court of Appeals and the Ninth Circuit Bankruptcy Appellate
Panel.
Case No. A382417 - ▇▇▇▇ ▇▇▇▇▇▇ v. Four Queens, Inc. This is a slip-and-fall
case, which is in the discovery stage as of the closing date. The amount of
damages claimed is less than $40,000; thus, it is in arbitration.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III, has asserted by a letter dated September 14, 1998 that
the transactions contemplated by the Series A Preferred Stock Purchase Agreement
dated September __, 1998 may be unfair to minority shareholders of the Company.
SCHEDULE 2.10
Taxes
1. The Company and its subsidiaries have received an extension to
September 15, 1998 on the filing of their Federal Income Tax Returns.
2. The Company and its subsidiaries have an extension to October 15, 1998
on the filing of on their State Taxes with California and New Jersey.
3. The Company is in receipt of a letter dated May 29, 1997, from ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, Director, Department of Finance and Business Services, City
of Las Vegas, Nevada addressed to Four Queens Hotel & Casino claiming
an underpayment of room taxes to the City for the period of January 1,
1995 through March 31, 1997 in the amount of $60,160.59. The Company is
contending that this claim is barred by the Company's bankruptcy filing
on October 31, 1995. The City of Las Vegas has yet to respond as of the
closing date.
SCHEDULE 2.11(h)
Payments Non-Deductible
None.
SCHEDULE 2.11(i)
Benefits Beyond Termination
None.
SCHEDULE 2.11(j)
Severance or Unemployment Compensation;
Acceleration of Vesting
None.
SCHEDULE 2.12
Intellectual Property
None.
SCHEDULE 2.15(a)
Labor Matters
Labor agreement between United Brotherhood of Carpenters and Joiners of America,
Local Union No. 1780, Southern California/Nevada Regional Council of Carpenters
and Four Queens Hotel and Casino for the period January 15, 1997 through January
14, 2000.
Labor agreement between International Brotherhood of Painters & Allied Trades,
Local Union No. 159, AFL-CIO and Four Queens Hotel & Casino for the period
September 1, 1997 through August 31, 2000.
Labor agreement between International Union of Operating Engineers Local No.
501, AFL-CIO and Four Queens, Inc. d/b/a Four Queens Hotel & Casino for the
period April 1, 1997 through March 31, 2002.
Labor agreement between Professional, Clerical and Miscellaneous Employees,
Teamsters Local Union No. 995 and Four Queens Hotel & Casino for the period
December 1, 1997 through November 30, 2002.
Labor agreement between Local Joint Executive Board of Las Vegas, for and on
behalf of Culinary Workers Union, Local No. 226 and Bartenders Union, Local ▇▇.
▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇ and the for the period September 1, 1997
through a future date subject to negotiations with other downtown properties.
SCHEDULE 2.15(c)
Payment of Benefits
None.
SCHEDULE 2.16
Real Property
None.
SCHEDULE 2.18
Environmental Matters
None.