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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 23, 1999
CHURCHILL DOWNS INCORPORATED
(Exact name of registrant as specified in its charter)
Kentucky 0-01469 61-0156015
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
700 CENTRAL AVENUE, LOUISVILLE, KENTUCKY 40208
(Address of principal executive offices)
(502) 636-4400
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 23, 1999, Churchill Downs Incorporated (the "Company")
acquired Calder Race Course, Inc., a Florida corporation ("Calder") and Tropical
Park, Inc., a Florida corporation ("Tropical") pursuant to (i) a Stock Purchase
Agreement and Joint Escrow Instructions dated as of January 21, 1999 by and
among the Company and KE Acquisition Corp. ("KEAC"), (ii) a First Amendment to
Stock Purchase Agreement dated as of April 19, 1999 by and between the Company,
Churchill Downs Management Company ("CDMC") and KEAC, and (iii) an Agreement and
Plan of Merger and Amendment to Stock Purchase Agreement dated as of April 22,
1999 by and among the Company, CDMC, CR Acquisition Corp., TP Acquisition Corp.,
Calder, Tropical and KEAC. The acquisition of Calder and Tropical (the
"Acquisition") was completed through the merger of CR Acquisition Corp. and TP
Acquisition Corp., wholly owned subsidiaries of CDMC, a Kentucky corporation and
wholly owned subsidiary of the Company, with and into Calder and Tropical,
respectively. Prior to completion of the Acquisition, Calder and Tropical were
wholly owned subsidiaries of KEAC. The primary asset of Calder is Calder Race
Course in Miami, Florida and its license to conduct horse racing at such
facility. The primary asset of Tropical is a lease to operate Calder Race Course
(of which Calder is the lessor) and its license to conduct horse racing at such
facility. The Company intends to continue to operate Calder Race Course and the
horse racing of Calder and Tropical at the same location and under the same
name.
The Company paid KEAC Eighty Six Million Dollars ($86,000,000) cash
plus a closing net working capital adjustment of approximately Two Million
Dollars ($2,000,000) cash for the shares of Calder and Tropical. The Company
paid the purchase price from working capital and a draw on its credit facility
with PNC Bank, National Association. The purchase price was determined by the
Company based on its analysis of the financial performance and assets of Calder
and Tropical.
A copy of the press release announcing the completion of the
Acquisition is attached as Exhibit 99 to this Current Report on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
A. Financial Statements of Businesses Acquired.
To be filed by amendment on or about July 7, 1999.
B. Pro Forma Financial Information.
To be filed by amendment on or about July 7, 1999.
C. Exhibits
2.1 Stock Purchase Agreement and Joint Escrow
Instructions dated as of January 21, 1999 by and
among Churchill Downs Incorporated and KE Acquisition
Corp.
2
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2.2 First Amendment to Stock Purchase Agreement dated as
of April 19, 1999 by and between Churchill Downs
Incorporated, Churchill Downs Management Company and
KE Acquisition Corp.
2.3 Agreement and Plan of Merger and Amendment to Stock
Purchase Agreement dated as of April 22, 1999 by and
among Churchill Downs Incorporated, Churchill Downs
Management Company, CR Acquisition Corp., TP
Acquisition Corp., Calder Race Course, Inc., Tropical
Park, Inc. and KE Acquisition Corp.
99 Press release issued on April 26, 1999 by Churchill
Downs Incorporated.
3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
CHURCHILL DOWNS INCORPORATED
(Registrant)
By: /S/ THOMAS H. MEEKER
Thomas H. Meeker, President
Date: April 29, 1999
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
by and among
CHURCHILL DOWNS INCORPORATED
a Kentucky corporation
("Buyer")
and
KE ACQUISITION CORP.
a Delaware corporation
("Shareholder")
January 21, 1999
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STOCK PURCHASE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
THIS STOCK PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTIONS
("Agreement") is made as of January 21, 1999 (the "Effective Date"), by and
between Churchill Downs Incorporated, a Kentucky corporation ("Buyer"), and KE
Acquisition Corp., a Delaware corporation ("Shareholder").
R E C I T A T I O N S:
A. Calder Race Course, Inc., a Florida corporation ("Calder") and
Tropical Park, Inc., a Florida corporation ("Tropical") (Calder and Tropical
are, collectively, the "Corporations") are the owners and operators of that
certain race course commonly known and referred to as "Calder Race Course" which
is comprised of approximately 200 acres of real property, together with race
tracks, stables, office and support facilities located thereon. The Corporations
are engaged in the operation of the thoroughbred racing business and related
activities conducted under the racing permits issued to Calder and Tropical,
respectively (such business as now being conducted by the Corporations is
referred to herein in its entirety as the "Business").
B. Shareholder owns all of the issued and outstanding shares of the
Corporations (the "Stock").
C. In accordance with the provisions of this Agreement, Buyer
desires to purchase from Shareholder, and Shareholder desires to sell to Buyer,
all of the Stock together with all other right, title and interest of
Shareholder in the Business as more particularly set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and in
consideration of the mutual covenants, promises and undertakings of the parties
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties, the
parties agree as follows:
AGREEMENT
1. CERTAIN BASIC DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following definitions:
1.1 ASSETS means, with respect to an entity, all of the assets of
such entity used in the operation of the Business.
1.2 BASIC DUE DILIGENCE PERIOD means the time during which
Shareholder has made available to Buyer information with
respect to the Corporations and the Business in accordance
with Section 4.1 of this Agreement through the Basic Due
Diligence Termination Date.
1.3 BASIC DUE DILIGENCE TERMINATION DATE shall have the meaning
set forth in Section 3.3.3 below.
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1.4 BUSINESS shall have the meaning set forth for such term in
Recital A above.
1.5 BUSINESS DAY means any day other than a Saturday, a Sunday or
state, federal or national holiday, including any day on which
commercial banks in New York, New York, USA or Tokyo, Japan
are authorized or obligated to close their regular banking
business.
1.6 BUYER'S ADDRESS means the address set forth for Buyer in
Section 12.
1.7 CALDER means Calder Race Course, Inc., a Florida corporation.
1.8 CALDER RACE COURSE means all of the Assets of the race track
located in Miami-Dade County, Florida owned and operated by
Calder and commonly known and referred to as Calder Race
Course.
1.9 CALDER STOCK means 667,440 shares of $.25 par value issued and
outstanding common stock of Calder which is all of the Calder
Stock which is issued and outstanding. There are 800,000
shares of $.25 par value common stock authorized for Calder.
All authorized and issued shares of preferred stock of Calder
have been redeemed by Calder and no preferred stock is
currently outstanding. There are 190 shares of $1.00 par value
preferred stock authorized for Calder.
1.10 CLOSING means the closing of Escrow pursuant to SECTION 3 of
this Agreement.
1.11 CLOSING DATE means the date the Closing occurs, which date
shall be on or before March 18, 1999.
1.12 CODE means the Internal Revenue Code of 1986, as amended, and
any successor law, and the regulations promulgated thereunder.
1.13 CONSOLIDATED GROUP means an affiliated group (under Code
Section 1504) that includes or included either Corporation or
an affiliate or predecessor of either Corporation filing
federal or state consolidated income tax returns filed for
calendar years 1992 through 1998, and the period from January
1, 1999 through the Closing Date.
1.14 DEPOSIT means the sum of One Million Dollars ($1,000,000.00)
deposited with Escrow Holder (Main Escrow No. 91005032)
(Accommodation Escrow No. for funds at Closing: 9901-50034)
pursuant to the provisions of Section 2.2.1.
1.15 DIVISION OF PARI-MUTUEL WAGERING means the Florida Department
of Business & Professional Regulation Division of Pari-Mutuel
Wagering.
1.16 EBITDA means earnings before interest, taxes, depreciation and
amortization.
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1.17 EFFECTIVE DATE means the date that this Agreement is executed
and delivered by both Buyer and Shareholder to the other
party. A fully executed copy of this Agreement shall be
delivered on the Effective Date to Escrow Holder.
1.18 ENVIRONMENT means soil, land surface or subsurface strata,
surface waters, ground water, drinking water, stream
sediments, ambient air (including indoor air), plant and
animal life, and any other environmental medium or natural
resource.
1.19 ENVIRONMENTAL LAW means any Governmental Regulations
pertaining or related to the Environment, occupational health
and safety.
1.20 ESCROW HOLDER means the Los Angeles, California office of
Chicago Title Insurance Company.
1.21 ESCROW HOLDER'S ADDRESS means 700 South Flower Street, Los
Angeles, California 90017.
1.22 EXTENDED DUE DILIGENCE shall refer to those inspections
specifically described in Section 4.2 of this Agreement.
1.23 GOVERNMENTAL REGULATIONS means any local, state, and federal
laws, statutes, ordinances, rules, requirements, resolutions,
orders and regulations (including, without limitation, those
relating to land use, subdivision, zoning, the Environment,
labor relations, Hazardous Materials, occupational health and
safety, water, earthquake hazard reduction and building and
fire codes) bearing on the construction, development,
maintenance, use, operation, or sale of the Property, or the
conduct of the Business by the Corporations.
1.24 HSR ACT means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the related regulations and published
interpretations.
1.25 HSR NOTICE means the Antitrust Improvements Act Notification
and Report Form required to be submitted for certain mergers
and acquisitions pursuant to 16 C.F.R. Section 803.1(a).
1.26 HAZARDOUS ACTIVITY means the distribution, generation,
handling, importing, management, manufacturing, processing,
production, refinement, Release, storage, transfer,
transportation, treatment or use (including any withdrawal or
other use of groundwater) of Hazardous Materials in, on,
under, about or from the Property or Improvements or any part
thereof into the Environment, and any other act, business
operation or thing that is regulated by any Environmental Law.
1.27 HAZARDOUS MATERIALS means any hazardous or toxic substance,
material or waste which is or becomes regulated by any local
governmental authority, any agency of the State of Florida or
any agency of the United States Government. The term
"Hazardous Materials" includes, without limitation, any
material or substance which (a) contains petroleum or any
petroleum by-products, (b) contains asbestos, (c) contains
urea formaldehyde foam insulation, (d) is designated as a
"hazardous
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substance" pursuant to Section 311 of the Federal Water
Pollution Control Act (33 U.S.C. Section 1317), (e) is defined
as a "hazardous waste" pursuant to Section 1004 of the Federal
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901
(42 U.S.C. Section 6901), or (f) is defined as a "hazardous
substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601 (42 U.S.C. Section 9601) or otherwise
designated as a pollutant or contaminant under Environmental
Laws whether released into the air, water or onto land. Each
reference to a statute or law in this definition shall be
deemed to include any amendments thereto, which are enacted
from time to time.
1.28 IMPROVEMENTS means all buildings, fixtures and other
improvements located on the Property.
1.29 LICENSES means those certain governmental permits, licenses
and authorizations issued to each of Calder and Tropical with
respect to the thoroughbred racing operations and related
activities conducted by Calder and Tropical, respectively,
including without limitation the conduct of live racing and
simulcasting.
1.30 LIENS means any mortgage, lien, encumbrance, charge, pledge,
security interest, option, restriction or assessment of any
kind.
1.31 LOAN means the indebtedness owed to Mortgagee and included in
the Outstanding Loan Balance.
1.32 MORTGAGE means the mortgage(s), deed(s) of trust and other
security instruments encumbering the Corporations or Assets of
the Corporations, including without limitation the Property,
given to secure the Outstanding Loan Balance.
1.33 MORTGAGEE means the holder of the Mortgage.
1.34 NET WORKING CAPITAL means total current assets (including cash
and cash equivalents) less total current liabilities of the
Corporations.
1.35 OTHER TAX OR OTHER TAXEs means any local income tax and any
federal, state, local or foreign gross receipts, license,
payroll, employment, excise, severance, stamp, occupation,
premium, customs duty, capital stock, franchise, real
property, personal property, sales, use, transfer,
registration, value added or any other government tax or
charge of any kind whatsoever (other than Taxes as defined in
Section 1.47, including any interest, penalty or addition
thereto, whether disputed or not.
1.36 OTHER TAX RETURN means any return, declaration, report, claim
for refund or information return or statement relating to
other Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
1.37 OUTSIDE DUE DILIGENCE TERMINATION DATE shall mean March 15,
1999.
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1.38 OUTSTANDING LOAN BALANCE means an amount equal to all
principal, interest and other amounts owed by the Corporations
and/or by Shareholder to fully repay the indebtedness more
particularly described in Appendix No. 1 attached hereto.
1.39 PERMITTED EXCEPTIONS means those exceptions to title as shown
on Schedule B, Section II, of the Commitment of Title Company
dated as of December 15, 1998 as revised on January 12, 1999
with respect to the Property and which are approved by Buyer
pursuant to Buyer's approval of the Survey or otherwise
approved by Buyer.
1.40 PROPERTY means the real property described on Exhibit "A"
attached hereto.
1.41 PURCHASE PRICE means the sum payable as provided in Section
2.2 below.
1.42 RELEASE means any spilling, leaking, emitting, discharging,
depositing, escaping, leeching, dumping or other releasing
into the Environment, whether intentional or unintentional.
1.43 SEC means the Securities and Exchange Commission.
1.44 SHAREHOLDER'S ADDRESS means the address set forth for
Shareholder in Section 12.
1.45 STOCK means the Calder Stock and the Tropical Stock.
1.46 SURVEY means a survey prepared in accordance with ALTA. ACSM
minimum standard detail requirements and certified as provided
on Exhibit C.
1.47 TAX OR TAXES means any federal, state or foreign income,
windfall profits, environmental (including taxes under Code
Section 59A), profits, withholding, social security,
unemployment, disability, alternative or add-on minimum,
estimated, or other state or federal income tax or charge of
any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
1.48 TAX RETURNS means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including
any amendment thereof.
1.49 TITLE COMPANY means Chicago Title Insurance Company.
1.50 TROPICAL means Tropical Park, Inc., a Florida corporation.
1.51 TROPICAL STOCK means 195 issued and outstanding shares of no
par value common stock of Tropical, which is all of the common
stock which is issued and outstanding.. There are 1,000
shares of no par value common stock authorized for Tropical.
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2. SALE OF STOCK: PURCHASE PRICE.
2.1 PURCHASE AND SALE OF STOCK. Subject to the terms and
conditions set forth in this Agreement, at the Closing,
Shareholder shall sell, transfer, assign, convey and deliver
to Buyer, and Buyer shall purchase and acquire from
Shareholder, 100% of the Stock, free and clear of all Liens.
2.2 PURCHASE PRICE. The aggregate consideration for the transfer
to Buyer of the Stock hereunder (the "Purchase Price") shall
be Eighty Six Million Dollars ($86,000,000.00) subject to
adjustment as set forth below, which Purchase Price shall be
paid at Closing by (a) payment by Buyer to Shareholder of an
amount which shall equal the difference between the Purchase
Price and the Outstanding Loan Balance, and which amount shall
be subject to adjustment upon the determination of the actual
Purchase Price in accordance with the provisions set forth
below (the "Net Purchase Price") by wire transfer or other
immediately available funds pursuant to SECTION 2.2.2;
together with (b) payment by Buyer to Escrow Holder of an
amount equal to the then-current Outstanding Loan Balance
(which as of December 30, 1998 was $40,322,527). On the
Effective Date, Buyer shall pay to Shareholder One Thousand
Dollars ($1,000.00) which shall be non-refundable and shall be
applied to the Purchase Price. As of the Closing, Shareholder
shall cause the Mortgagee to execute and cause to be delivered
and recorded a release and full reconveyance (the "Mortgage
Release") with respect to the Mortgage encumbering the
Property and a release of any and all other liens, security
interests or collateral assignments on the assets of the
Corporations which are given to secure the Loan. As of the
Closing, any credit facilities and loan agreements related to
the Outstanding Loan Balance, together with any and all other
inter-company indebtedness owned by the Corporations in favor
of any other member of the Consolidated Group (including
without limitation any tax-sharing obligation which remains
outstanding), shall terminate.
In the event that EBITDA for the Corporations as of December
31, 1998 as set forth in the 1998 Audited Financials (as
defined in Section 4.2.3 below) is less than Thirteen Million
Seven Hundred Thousand Dollars ($13,700,000.00) but not less
than Thirteen Million Five Hundred Thousand Dollars
($13,500,000.00) the Purchase Price shall be Eighty Five
Million Dollars ($85,000,000.00). In the event that EBITDA for
the Corporations as of December 31, 1998 as set forth in the
1998 Audited Financials is less than Thirteen Million Five
Hundred Thousand Dollars ($13,500,000.00) but not less than
Thirteen Million Four Hundred Thousand Dollars
($13,400,000.00), the Purchase Price shall be Eighty Four
Million Five Hundred Thousand Dollars ($84,500,000.00). In the
event that EBITDA for the Corporations as of December 31, 1998
as set forth in the 1998 Audited Financials is less than
Thirteen Million Four Hundred Thousand Dollars
($13,400,000.00) but not less than Thirteen Million Three
Hundred Thousand ($13,300,000.00), the Purchase Price shall be
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Eighty Four Million Dollars ($84,000,000.00). In the event
that EBITDA for the Corporations as of December 31, 1998 as
set forth in the 1998 Audited Financials is less than Thirteen
Million Three Hundred Thousand Dollars ($13,300,000.00) this
Agreement shall automatically terminate and be of no further
force or effect (other than the obligations of Buyer set forth
in Section 4.1 and the obligations of Buyer and Shareholder
set forth in Section 29).
The Purchase Price also will be adjusted to reflect any
increase or decrease in Net Working Capital for the
Corporations on the Closing Date, as compared to the average
Net Working Capital as of that date for the prior two years
(1998 and 1997), as such daily average Net Working Capital is
calculated as set forth below (the "Average Net Working
Capital"). The Corporations calculated Net Working Capital on
a monthly basis in 1997 and 1998, but not a daily basis.
Therefore, the evaluation of the Purchase Price, and any
adjustments to the Purchase Price, shall be performed by Buyer
and Shareholder in good faith, utilizing the financial reports
available for the Corporations for the periods before and
after the Closing Date occurs, and for the two prior years.
The Average Net Working Capital shall be determined by
calculating the difference between (i) the sum of Net Working
Capital as of the 1998 and 1997 month-ends immediately prior
to the Closing Date divided by two and (ii) the sum of Net
Working Capital as of the 1998 and 1997 month-ends immediately
following the Closing Date DIVIDED BY TWO, then allocating the
difference on a prorata basis over the number of days in the
month in which the Closing occurs. To the extent that there is
a variation by more than $25,000.00 between the Net Working
Capital as of the Closing Date and the daily Average Net
Working Capital for that date calculated as set forth above,
the Purchase Price shall be increased or decreased, dollar for
dollar, by that amount. In evaluating the Net Working Capital
of the Corporations, Buyer and Shareholder acknowledge and
agree that both (a) the sale by the Corporations of the fee
interest in the real property underlying the Calder-Pro Player
Stadium Holiday Inn, as well as (b) the repayment by the
Corporations of the Outstanding Loan Balance as of the Closing
Date (c) capital expenditures in 1999 in accordance with the
approved 1999 Capital Budget (as defined below) and (d) other
non-recurring issues affecting possible extra-ordinary build
up of cash or depletion of cash in the Corporations in any
years, such as the repurchase in 1998 of the Preferred Stock
in Calder, are intended to not affect the determination of Net
Working Capital of the Corporations as of the Closing Date,
but rather are to be treated as "neutral" events independent
of the Net Working Capital of the Corporations.
Shareholder and Buyer agree to cause a tentative determination of the Purchase
Price, adjusted as set forth above, to be prepared no later than five (5) days
prior to the Closing Date, and updated and corrected as of the Closing Date, and
the Purchase Price payable as of the Closing Date shall be the amount agreed in
such tentative determination of the Purchase Price. In addition Shareholder and
Buyer shall concurrently agree to the amount, if any, of the Purchase Price that
should be withheld from distribution, or in the alternative additional amounts
which should be deposited by Buyer with Escrow Holder in the event of any
shortfall between the tentative
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determination and the final Purchase Price, which amounts, if any are agreed to
be withheld or deposited, shall be retained in Escrow by Escrow Holder to be
paid to Shareholder or Buyer, as appropriate, upon the final determination of
the Purchase Price as set forth below. Buyer and Shareholder agree the intent of
this provision is to reach a reasonably accurate determination of the final
adjusted Purchase Price as of the Closing Date in a fair, just and equitable
manner, and the parties agree in the event of special circumstances not
specifically covered herein, such equitable principles shall guide the parties
in reaching a fair resolution.
To the extent that the Average Net Working Capital is not capable of
determination as of the Closing Date, the obligation of Shareholder and Buyer to
make the final determination of the Purchase Price, and adjustment to the
amounts paid as of the Closing Date shall survive the closing of the transaction
contemplated by this Agreement, and Buyer and Shareholder each shall exercise
its respective best efforts to cause the final Purchase Price to be determined
as promptly as possible following the Closing Date, and in any event no later
than thirty (30) days following the Closing Date.
2.2.1. DEPOSIT. The Deposit shall be delivered by Buyer to
Escrow Holder in immediately available federal
funds by wire transfer completed prior to the close
of banking business (Eastern Time) on the first
Business Day after the Effective Date, and shall be
deposited by Escrow Holder pursuant to the
provisions of SECTION 2.3. The Deposit and any
interest thereon shall be non-refundable to Buyer
except in the event of a Shareholder default under
this Agreement as provided in Section 9.1.2 or any
failure to satisfy conditions to Buyer's
obligations to Close or termination of this
Agreement pursuant to its terms in any of which
events the Deposit plus any interest thereon shall
be paid to Buyer by Escrow Holder, and shall be
retained in Escrow by the Escrow Holder until the
Closing Date and applied against the Purchase Price
at Closing, unless it is otherwise refundable to
Buyer (together with interest thereon) or payable
to Shareholder (together with interest thereon) as
liquidated damages pursuant to this Agreement,
without the necessity of any further instruction
from Buyer.
2.2.2. BALANCE. Buyer shall deposit into Escrow by wire
transfer an amount in immediately available federal
funds equal to the Purchase Price minus the Deposit
plus interest thereon accrued during the period the
Deposit was in Escrow ("Cash Balance") (which Cash
Balance shall include both the amount to
be paid to Shareholder, plus the Outstanding Loan
Balance). Buyer shall issue instructions to
initiate the wire transfer of the Cash Balance into
Escrow in the form of immediately available federal
funds no later than 9:00 a.m. Eastern Time on the
Closing Date such that Escrow Holder will be in a
position to disburse the cash proceeds to
Shareholder on the Closing Date.
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2.3 INTEREST. All funds received from or for the account of Buyer
shall be deposited by Escrow Holder in an interest-bearing
account with Citibank, N.A., 399 Park Avenue, New York, New
York, Escrow Holder's Account No. 4054-9268.
3. ESCROW: CLOSING CONDITIONS.
3.1 ESCROW. Upon the execution of this Agreement by Buyer and
Shareholder, and the acceptance of this Agreement by Escrow
Holder in writing, this Agreement shall constitute the joint
escrow instructions of Buyer and Shareholder to Escrow Holder
to open an escrow ("Escrow") for the consummation of the sale
of the Stock to Buyer pursuant to the terms of this Agreement.
Upon Escrow Holder's receipt of the Deposit and Escrow
Holder's written acceptance of this Agreement ("Opening of
Escrow"), Escrow Holder is authorized to act in accordance
with the terms of this Agreement. Escrow Holder's general
provisions, a copy of which is attached hereto and
incorporated herein as Exhibit "B", shall be a part of this
Agreement; provided, however, that if there is any conflict or
inconsistency between such general provisions and this
Agreement, this Agreement shall control. Upon the Closing
Escrow Holder shall pay any sum owed to Shareholder with
immediately available federal funds.
3.2 CLOSING DATE. The Escrow shall close on the Closing Date,
provided that all conditions to the Closing set forth in this
Agreement have been satisfied or waived in writing by the
party intended to be benefited thereby, and provided further
that, after the Effective Date including from and after the
Closing, Shareholder shall continue to cooperate with Buyer
and exercise Shareholder's commercially practicable efforts to
effect the transactions contemplated by this Agreement.
With respect to the conditions set forth in Sections 3.3.4 and
3.4.4 (as it references Section 3.3.4 Approvals) below, to the
extent that the required consent, or approval shall not have
occurred on or before the scheduled Closing Date, Shareholder
and Buyer each shall be entitled to extend the Closing Date
one (1) time for up to thirty (30) days for a maximum possible
extension of thirty (30) days, whether such extension is at
the election of Buyer, Shareholder, or both of them in order
to obtain the necessary consent or approval, provided,
however, that in any event the Closing Date shall occur no
later than April 23, 1999 (subject to the rights in favor of
Buyer to extend the Closing Date as set forth in Section 3.3
and the right of Shareholder to extend the Closing Date as set
forth in Section 3.4). In the event that the Closing Date has
not occurred by April 23, 1999 (other than due to an extension
by Buyer pursuant to Section 3.3 or by Shareholder pursuant to
Section 3.4), this Agreement automatically shall terminate as
of 5:00 p.m. Eastern Time on April 23, 1999 (or such later
date as shall be required due to an extension by Buyer
pursuant to Section 3.3 or by Shareholder pursuant to Section
3.4) unless the parties previously shall have executed and
delivered a written mutual agreement to further extend the
Closing Date. In the absence of the timely execution and
delivery of such mutual written agreement to extend the
Closing Date, this Agreement automatically shall terminate and
be of no further
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force or effect (other than the obligations of Buyer set forth
in Section 4.1 and the obligations of Buyer and Shareholder
set forth in Section 29).as of 5:00 p.m. Eastern Time on April
23, 1999 (or such later date as shall be required due to an
extension by Buyer pursuant to Section 3.3 or by Shareholder
pursuant to Section 3.4).
3.3 BUYER CONDITIONS TO CLOSING. The Closing and the obligations
of Buyer hereunder are subject to the following conditions
precedent. The conditions set forth in this Section 3.3 are
solely for the benefit of Buyer and may be waived only by
Buyer. Buyer shall at all times have the right to waive any
condition hereunder. Such waiver or waivers shall be in
writing to Shareholder:
3.3.1. NO DEFAULT. Shareholder shall have delivered all
closing items for the benefit of Buyer and
Shareholder shall not be in material default in the
performance of any other covenant or agreement to
be performed by Shareholder under this Agreement;
provided, however, that Shareholder, at
Shareholder's option, unless such default is waived
by Buyer in its sole discretion, shall be entitled
to reasonable adjournments (not exceeding two (2
in number or thirty (30) days in the aggregate) of
the Closing Date in order to cure any such default
that is reasonably susceptible to cure.
3.3.2. REPRESENTATIONS AND WARRANTIES. On the Closing Date
all representations and warranties made by
Shareholder in this Agreement shall be true and
correct in all material respects as if made on and
as of the Closing Date; provided, however, that to
the extent they are not, Shareholder, at
Shareholder's option, unless waived by Buyer in its
sole discretion, shall be entitled to reasonable
adjournments (not exceeding two(2) in number or
thirty (30) days in the aggregate) of the Closing
Date in order to cause the same to be materially
true and correct if any breach thereof may
reasonably be expected to be cured.
3.3.3. BUYER DUE DILIGENCE.
3.3.3.1 BASIC DUE DILIGENCE. Buyer shall have
completed Buyer's due diligence
investigations of the Corporations in
accordance with Section 4.1 of this
Agreement (the "Basic Due Diligence")
with respect to all matters other than
the areas of investigation described in
Section 4.2 (the "Extended Due
Diligence") prior to January 29, 1999
(the "Basic Due Diligence Termination
Date"), and shall have delivered to
Shareholder and Escrow Holder no later
than 5:00 p.m. Eastern Time on the
Basic Due Diligence Termination Date
Buyer's written approval of the Basic
Due Diligence and waiver of any further
due diligence other than the Extended
Due
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<PAGE> 16
Diligence. In the event that
Shareholder shall not deliver or make
available, or cause to be delivered or
made available, as appropriate, to
Buyer such information, materials and
access as shall enable Buyer to
perform Buyer's Due Diligence
Inspection (as defined in Section 4.1
below) prior to the Basic Due Diligence
Termination Date, Buyer shall give
Shareholder written notice
thereof prior to the Basic Due
Diligence Termination Date, and
shall advise Shareholder of the
time required by Buyer to review
such information or materials upon
receipt thereof by Buyer (and
Shareholder shall, to the extent
available, promptly provide Buyer with
such information or materials, or
shall advise Buyer that such
information or materials are not
reasonably available, and to the
extent within Shareholder's or
the Corporations' reasonable control,
shall provide such access), and Buyer
shall have the right to extend the
Basic Due Diligence Termination Date
for the time required to review
such information or materials,
or obtain such access, up to ten
(10) days, but the Basic Due
Diligence Termination Date in
any event shall expire no later
than 5:00 p.m. Eastern Time on
February 8, 1999. In the absence
of timely delivery of such
written notification, this Agreement
automatically shall terminate and be
of no further force or effect (other
than the obligations of Buyer set forth
in Section 4.1 and the obligations of
Buyer and Shareholder set forth in
Section 29).
3.3.3.2 EXTENDED DUE DILIGENCE. Buyer shall
have completed each of the
investigations described in Section 4.2
on or before the date set forth with
respect to each such inspection in
Section 4.2, and in any event no later
than March 15, 1999 (the "Outside Due
Diligence Termination Date") and shall
have delivered to Shareholder and
Escrow Holder no later than 5:00 p.m.
Eastern Time on the Outside Due
Diligence Termination Date (to the
extent that Buyer shall not have
previously delivered its express
written approval of each item of
Extended Due Diligence), Buyer's
written approval or confirmation of its
prior approval of each item of Extended
Due Diligence described in Section 4.2,
and Buyer's waiver of any further due
diligence with respect to this
transaction. In the absence of timely
delivery of such written notification,
this Agreement automatically shall
terminate and be of no further force or
effect (other than the obligations of
Buyer set forth in Section 4.1 and
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the obligations of Buyer and
Shareholder set forth in Section 29).
3.3.4. THIRD PARTY APPROVALS. Receipt by Buyer and
Shareholder, on terms and conditions reasonably
satisfactory to Buyer and Shareholder, of Early
Termination (as defined below) and Consent (as
defined below) (which Early Termination and Consent
are referred to herein collectively and severally
as "Approval"), and provided that Shareholder shall
not be deemed to be in default of any obligation
owed by Shareholder pursuant to this Agreement in
connection with any inability or failure of Buyer
to obtain such Approvals (other than any failure of
Shareholder to perform its obligations hereunder
with respect to the Approvals). To the extent that
a party has the right to approve or disapprove the
terms and conditions associated with any Approval,
any disapproval of such terms and conditions shall
be reasonable only to the extent that the subject
term or condition relates to that party or the
conduct of the business of such party.
3.3.4.1 HSR NOTICE. The HSR Notice required to
be filed by Buyer pursuant to the HSR
Act shall be prepared and filed by
Buyer no later than five (5) business
days following the Effective Date, and
the HSR Notice required to be filed by
Shareholder (or its ultimate parent
entity) pursuant to the HSR Act shall
be prepared and filed by or on behalf
of Shareholder no later than five (5)
business days following the Effective
Date. Buyer and Shareholder each shall
exercise their respective commercially
reasonable best efforts to obtain early
termination of the waiting period
required in connection with the HSR
Notice as promptly as possible
following the date of filing of the HSR
Notice ("Early Termination").
3.3.4.2 CONSENT TO TRANSFER OF CONTROL OF THE
CORPORATIONS. Buyer shall, no later
than five (5) business days following
the Effective Date, submit an
application to the Division of
Pari-Mutuel Wagering (the
"Application"), and any other
regulatory authority whose approval
shall be required in connection with
the continuing effectiveness of any
material License held by the
Corporations, or the conduct of the
Business by the Corporations after the
transfer of control of the Corporations
in connection with the sale of the
Stock pursuant to this Agreement, an
Application for consent to such
transfer and approval of such change of
control (collectively a "Consent"). To
the extent that an
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<PAGE> 18
Application is required to be filed by
Shareholder in connection with the
Consent Application submitted by Buyer,
Shareholder shall submit such
Shareholder Application on a timely
basis, promptly after receipt and
review of the Consent Application
submitted by Buyer and after a
reasonable opportunity for Buyer to
review and comment on such Shareholder
Application, and in such time period as
is required by the regulatory
authorities in order to approve the
Buyer's Consent Application without
delay.
3.3.5. NO INJUNCTION. There shall be no pending or
credible threatened litigation or other proceeding
(a) involving any material challenge to or seeking
material damages or other material relief in
connection with, the transactions contemplated by
this Agreement, or (b) that may have the effect of
preventing, delaying, making illegal or otherwise
materially interfering with the transactions
contemplated by this Agreement. Shareholder and
Buyer each shall retain any and all rights which
they otherwise may enjoy against the party filing
or threatening litigation which would interfere
with the Closing, including without limitation to
recover damages and any other remedies available at
law or in equity in respect of the filing or
threatening of such litigation.
3.3.6. 1998 AUDITED FINANCIALS. Buyer shall have accepted
and approved the 1998 Audited Financials in
accordance with Section 4.2.3 below.
3.3.7. ABSENCE OF CASUALTY. There shall be no material
damage or destruction to a material part of the
Property having a value in excess of $500,000.00,
or a taking of a material part of the Property
having a value in excess of $500,000.00 between the
date hereof and the Closing Date or material
adverse change in the business or operations of the
Corporations.
3.4 SHAREHOLDER'S CONDITIONS TO CLOSING. The Closing and
Shareholder's obligations hereunder are subject to the
following conditions precedent. The conditions set forth in
this Section 3.4 are solely for the benefit of Shareholder and
may be waived only by Shareholder. Shareholder shall at all
times have the right to waive any condition hereunder. Such
waiver or waivers shall be in writing to Buyer.
3.4.1. BUYER DELIVERIES. Buyer's delivery to Escrow
Holder on or prior to the Closing Date of the
following: (A) all documents and instruments
required to be delivered by Buyer pursuant to this
Agreement, including, without limitation, the
deliveries required to
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<PAGE> 19
be made in accordance with Section 3.7, and (B) the
Purchase Price in accordance with Section 2.2;
3.4.2. No Default. Buyer shall have duly performed in all
material respects each and every other obligation
to be performed by Buyer hereunder on or prior to
the Closing Date, provided, however, that Buyer, at
Buyer's option, unless such default is waived by
Shareholder in its sole discretion, shall be
entitled to reasonable adjournments (not exceeding
two (2) in number or thirty (30) days in the
aggregate) of the Closing Date in order to cure any
such default that is reasonably susceptible to
cure; and
3.4.3. REPRESENTATION AND WARRANTIES. Buyer's
representations and warranties set forth in this
Agreement shall be true and correct in all material
respects as of the Closing Date, provided, however,
that to the extent they are not, Buyer, at Buyer's
option, unless waived by Shareholder in its sole
discretion, shall be entitled to reasonable
adjournments (not exceeding two (2) in number or
thirty (30) days in the aggregate) of the Closing
Date in order to cause the same to be materially
true and correct if any breach thereof may
reasonably be expected to be cured.
3.4.4. SATISFACTION OF BUYER CONDITIONS. All approvals,
expiration (or early termination) of waiting
periods and other third party actions required to
be obtained pursuant to Section 3.3.4 shall have
been obtained or satisfied and all other conditions
to Buyer's performance set forth in Section 3.3.5,
Section 3.3.6 and Section 3.3.7 shall have been
waived by Buyer or satisfied.
3.5 CLOSING COSTS AND CHARGES. Shareholder and Buyer each shall
pay their respective legal fees and other costs and charges
incurred by such party in connection with the transactions
described in this Agreement. Buyer shall be responsible for
100% of the application fee required to be paid in connection
with the HSR Notice. Buyer and Shareholder shall each be
responsible for 50% of (i) the application fee required to be
paid in connection with the application for Consent and (ii)
all fees and charges payable to Escrow Holder in connection
with this Agreement and the services to be provided by Escrow
Holder pursuant hereto.
3.6 DEPOSIT OF DOCUMENTS BY SHAREHOLDER. Shareholder shall
deposit, or cause to be deposited, into Escrow with execution
and acknowledgement by indicated persons where appropriate,
each of the following:
3.6.1. TRANSFER CERTIFICATES. Certificates, dated as of
the Closing Date, from each of the secretaries of
Calder and Tropical, to which is attached the Stock
Register of Calder and Tropical, respectively,
showing the Transfer of the Stock, and the entries
required to
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<PAGE> 20
record on the respective books and records the
transfer of ownership of the Calder Stock and
Tropical Stock to the Buyer, and certifying that
such entries have been made in accordance with the
requirements of the Articles of Incorporation and
the Bylaws of Calder and Tropical, respectively,
together with the original share certificates for
the Stock, with duly executed stock transfer powers
of attorney attached.
3.6.2. Certificates, dated as of the Closing Date,
from each of the secretaries of Calder and Tropical
to which is attached the original permits and
original licenses with respect to Calder and
Tropical.
3.6.3. For each of Shareholder, Calder and
Tropical, a Certificate, dated as the Closing Date,
from an authorized officer of such entity stating
that such officer is authorized to execute and
deliver its Certificate and to which is attached a
true and complete and correct copy of each of the
following documents:
(a) A Certificate of Good Standing from the
jurisdiction in which each such entity is
organized;
(b) Resolutions of the Board of Directors and
with respect to the Shareholder a resolution of the
shareholders of such entity, approving this
Agreement and the transactions contemplated hereby,
or occurring contemporaneously herewith, including,
without limitation, the repayment by Calder and
Tropical of the Outstanding Loan Balance and the
sale of the Stock to Buyer;
(c) With respect to the Corporations, a copy of
the Bylaws of each such entity; and
(d) With respect to Shareholder, an incumbency
certificate with respect to any officer whose
signature appears on this Agreement or any
instrument or agreement delivered pursuant to this
Agreement.
3.6.4. A Certificate of Shareholder evidencing the
transfer to Buyer of all of the books, records,
files and documents of Calder and Tropical,
respectively.
3.6.5. A Certificate of Shareholder affirming the
representations and warranties and covenants of
Shareholder set forth in this Agreement, or setting
forth such supplemental or additional information
as shall be necessary to cause such representations
and warranties and covenants to be true as of the
Closing Date.
3.6.6. A Covenant Not to Compete substantially in
the form of Exhibit D attached hereto.
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<PAGE> 21
3.6.7. A duly executed and acknowledged release of
Mortgage and UCC-3 Financing Statement and/or other
release from Mortgagee with respect to the Mortgage
and other liens associated with the Outstanding
Loan Balance, together with instructions from
Mortgagee to cause such release to be recorded and
UCC-3 and/or other release to be filed upon
delivery to Mortgagee of the amounts required to
fully repay to Mortgagee the Outstanding Loan
Balance.
3.6.8. Duly executed resignations (as officers, but not as
employees) from each of the following officers of
the Corporations: Mr. C. Kenneth Dunn, Mr. Michael
Abes, Mr. Randall Soth, Mr. Michael Cronin, Mr.
Patrick Mahony, and resignations (as officers and
as employees, if applicable) from each of the
following officers of the Corporation: Mr.
Nishikawa, Mr. Sato and Mr. Nomoto, as well as
resignations of all directors of each Corporation.
3.6.9. A legal opinion from Isicoff and Ragatz with
respect to the matters set forth on Exhibit E
attached hereto.
3.6.10. A legal opinion from Sonnenschein Nath &
Rosenthal with respect to the matters set forth on
Exhibit F attached hereto.
3.6.11. A legal opinion from Gray, Harris & Robinson
with respect to the matters set forth in Exhibit
"G" attached hereto.
3.6.12. A limited guaranty from Kawasaki Leasing (USA),
Inc. in the form as Exhibit H attached hereto.
3.6.13. A letter agreement from Kawasaki Enterprises
substantially in the form of Exhibit I attached
hereto.
3.7 Deposit of Documents and Funds by Buyer. Buyer shall issue
instructions to initiate the wire transfer of the Adjusted
Cash Balance (as defined in Section 3.7.1 below) into Escrow
in the form of immediately available federal funds no later
than 9:00 a.m. Eastern Time on the Closing Date such that
Escrow Holder will be in a position to disburse the cash
proceeds to Shareholder (and the Outstanding Loan Balance to
Mortgagee, also prior to the deadline for wire of transfer of
funds on the Closing Date), and shall deposit such further
items into Escrow (as required by Section 3.7.2 below), with
execution and acknowledgement by Buyer where appropriate, not
later than 9:00 a.m. Eastern Time on the Closing Date.
3.7.1. The Cash Balance, reduced by the amount of
any credits due to Buyer under this Agreement, and
increased by the amount of all items chargeable to
Buyer under this Agreement (the "Adjusted Cash
Balance").
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<PAGE> 22
3.7.2. Other documents that may reasonably by
required by Escrow Holder to close the Escrow in
accordance with this Agreement.
3.8 DELIVERY OF DOCUMENTS AND FUNDS AT CLOSING. Provided that all
conditions to Closing set forth in this Agreement have been
satisfied or, as to any condition not satisfied, waived by the
party intended to be benefited thereby, on the Closing Date,
Escrow Holder shall conduct the Closing by distributing the
following documents in the following manner:
3.8.1. PURCHASE PRICE. Deliver to Shareholder the
Net Purchase Price, plus such other funds, if any,
as may be due to Shareholder by reason of credits
under this Agreement, less all items chargeable to
Shareholder under this Agreement.
3.8.2. REPAYMENT OF OUTSTANDING LOAN BALANCE. Deliver
to Mortgagee the amount required to fully repay the
Outstanding Loan Balance.
3.8.3. RELEASE OF MORTGAGE; UCC-3 FILING. Cause the
Release of Mortgage to be recorded in the official
records of the county where the Property is located
and the UCC-3 to be filed in the office of the
Secretary of State of the State of Florida.
3.8.4. DOCUMENTS TO BUYER. Deliver to Buyer the documents
and certificates delivered by Shareholder as set
forth in Section 3.6 above.
4. BUYER'S DUE DILIGENCE INSPECTIONS.
4.1 BASIC DUE DILIGENCE. Buyer acknowledges that prior to
execution of this Agreement Buyer has had, and until the
Outside Due Diligence Termination Date, assuming Shareholders
performance of its obligations under Section 5.9, will
continue to have, access to the books, records and assets of
the Corporations, including without limitation the Property
and all Due Diligence Information (as defined below) for
evaluation in connection with the transaction described in
this Agreement including without limitation such further
investigation of the matters set forth in the Disclosure
Letter (as defined in Section 7.3 below) and confirmation of
the acceptability thereof to Buyer. Buyer acknowledges that as
of the Basic Due Diligence Termination Date, assuming
Shareholder's performance of its obligations under Section
5.9, and, except with respect to those specific inspections
described in Section 4.2 below, (i) Buyer will have
acknowledged and accepted disclosure of the information set
forth in the Disclosure Letter; (ii) Buyer will have conducted
any and all surveys and inspections, and made such boring,
percolation, geologic, environmental and soils tests and other
studies of the Property (including any inspections for zoning,
land use, environmental and other laws, regulations and
restrictions, and other Governmental Regulations, as well as
any Environmental or other physical conditions); and (iii)
Shareholder will have provided Buyer with adequate opportunity
to make such inspections of
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<PAGE> 23
the books and records of the Corporations, including without
limitation all financial, tax and other records, and further
including without limitation such work papers, files and audit
papers as may be contained in the records of the accountants
for the Corporations, as Buyer, in Buyer's discretion, deemed
necessary or advisable as a condition precedent to Buyer's
purchase of the Stock and to determine the financial, legal,
and physical (including environmental and land use)
characteristics of the Corporations, the Business and the
Assets and its suitability for Buyer's intended use (the "Due
Diligence Inspection"). Buyer acknowledges that such Due
Diligence Inspection is intended to afford Buyer the
opportunity to confirm certain factual information with
respect to the Corporations and their assets, and in
connection with such inspections Buyer may elect whether or
not to proceed with the transactions described in this
Agreement, but the Purchase Price is not subject to automatic
adjustment based upon any information or adverse condition
which may be determined to exist in connection with such Due
Diligence Inspection.
Prior to execution of this Agreement Shareholder has made
available, and during the Basic Due Diligence Period, assuming
Shareholder's performance of its obligations under Section
5.9, Shareholder will continue to make available to Buyer for
Buyer's inspection and review the Property and copies of any
and all documents and materials as are in Shareholder's
possession or control related to the Corporations, the
Business and the Property ("Due Diligence Items). It is
understood by the parties that except as set forth in Section
7 of this Agreement, Shareholder does not make any
representation or warranty, express or implied, as to the
accuracy or completeness of any information contained in
Shareholder's files or in the documents produced by
Shareholder.
All inspections by Buyer shall be conducted in a manner that
minimizes any disruption to the present occupants of the
Property. Buyer and Buyer's agent shall perform inspections
only while accompanied by one or more representatives of
Shareholder, provided, however, that so long as Shareholder
shall have received prior written notice of a proposed
inspection (and so long as such inspection does not include
any invasive procedure or access to electrical panels or other
building systems), Shareholder's representative shall be given
an opportunity to be present, but if Shareholder's
representative is not available at the time proposed by Buyer
for such inspection, and so long as the time for such
inspection is during normal business hours, Buyer may proceed
with such inspection without the presence of Shareholder's
representative.
With respect to any inspections performed by Buyer with
respect to the Property, Buyer shall obtain or cause its
consultants to obtain, at Buyer's sole cost and expense prior
to commencement of any investigative activities on the
Property, a policy of commercial general liability insurance
covering any and all liability of Buyer and Shareholder with
respect to or arising out of any investigative activities.
Such policy of insurance shall be kept and maintained in force
during the term of this Agreement and so long thereafter as
necessary to cover any claims of damages suffered by persons
or property resulting from any acts or omissions
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<PAGE> 24
of Buyer, Buyer's employees, agents, contractors, suppliers,
consultants or other related parties. Such policy of insurance
shall have liability limits of not less than Three Million
Dollars ($3,000,000.00) combined single limit per occurrence
for bodily injury, personal injury and property damage
liability. Such insurance policy shall name Shareholder, and
shall be in form and substance and issued by an insurance
company licensed to do business in the State of Florida and
satisfactory to Shareholder.
Buyer hereby agrees to protect, indemnify, defend and hold the
Corporations, and Shareholder, as well as Shareholder's and
the Corporations' respective officers, directors,
shareholders, participants, affiliates, employees,
representatives, invitees, agents and contractors free and
harmless from and against any and all claims, damages, liens,
stop notices, liabilities, losses, costs and expenses,
including reasonable attorneys' fees and court costs,
resulting from Buyer's inspection and testing of the Property,
including, without limitation, repairing any and all damages
to any portion of the Property, arising out of or related
(directly or indirectly) to Buyer's conducting such
inspections, surveys, tests, and studies, but such
indemnification shall not apply to any loss or diminution in
value to the Corporations or the Property resulting from the
existence of any condition or matter which may be discovered
as a result of such Due Diligence Inspection. Buyer shall keep
the Property free and clear of any mechanics' liens or
materialmen's liens related to Buyer's right of inspection and
the activities contemplated by this Section 4. The Buyer's
indemnification obligations set forth herein shall survive the
Closing, and also shall survive any termination of this
Agreement and the Escrow prior to the Closing.
4.2 EXTENDED DUE DILIGENCE. Buyer shall endeavor to complete each
of the inspections described below in this Section 4.2 as
promptly as possible, and in any event no later than the
Outside Due Diligence Termination Date.
4.2.1. Survey of the Property. A Survey of the Property is
to be obtained by Buyer at Buyer's sole cost and
expense, which Survey is to be obtained by Buyer,
if at all, no later than March 15, 1999. In the
event that Buyer has been unable to obtain the
Survey by such date, Buyer shall deliver written
notice to Shareholder and Escrow Holder terminating
this Agreement prior to 5:00 p.m. Eastern Time on
March 15, 1999 or in the absence of timely delivery
of such notice this condition shall be deemed
waived by Buyer. Buyer shall have the right to
review and approve (or disapprove) the Survey
obtained on or before March 15, 1998, provided,
however, that Buyer's disapproval of such Survey
shall be effective only in the event that such
Survey discloses the presence of any encroachments
by or upon the Property or other matters are
disclosed which do or reasonably could materially
and adversely affect the value or marketability of
title to the Property or other matters which do or
reasonably could materially and adversely affect
Buyer's use, operation or financing of the
Property.
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<PAGE> 25
4.2.2. PHASE I ENVIRONMENTAL INSPECTION. Buyer shall have
the right to obtain and approve a current Phase I
Environmental Report ("Buyer's Phase I") which
Buyer's Phase I shall be obtained and the contents
of which approved, or disapproved, in the
reasonable discretion of Buyer no later than
February 5, 1999. Buyer's disapproval of Buyer's
Phase I shall be deemed reasonable only to the
extent that such Buyer's Phase I discloses matters
which do or reasonably could materially and
adversely affect the value or marketability of
title to the Property or other matters which do or
reasonably could materially and adversely affect
Buyer's use, operation or financing of the
Property. Buyer shall provide Shareholder with a
complete copy of Buyer's Phase I promptly after the
receipt thereof by Buyer.
4.2.3. REVIEW OF 1998 AUDITED FINANCIALS. Shareholder
shall endeavor to cause the Corporation and the
Corporations' accountants to prepare and deliver to
Buyer as soon as practicable, and if possible on or
about February 15, 1999 but in any case by March
12, 1999, audited financials with respect to the
Corporations for the calendar year ended December
31, 1998 (the "1998 Audited Financials"). Buyer
shall review and approve (or disapprove) the 1998
Audited Financials within five (5) business days
after the date of delivery of such 1998 Audited
Financials to Buyer. Buyer's disapproval of the
1998 Audited Financials shall be effective only in
the event that such 1998 Audited Financials
disclose a material and adverse variance between
the financial condition of the Corporations as of
December 31, 1998, as compared to the December 31,
1997 audited financial statements and the November
30, 1998 unaudited financial statements for the
Corporations, or in the event that EBITDA for the
Corporations as of December 31, 1998 is less than
Thirteen Million Three Hundred Thousand Dollars
($13,300,000.00).
4.2.4. REVIEW OF ESCHEAT AND EEOC LITIGATION. With
respect to EEOC v. Calder Race Course, Inc., Case
No. 97-4223; Poerr, et al. v. Calder Race Course,
Inc., Case No. 98-001006(08); Investment Corp. of
Palm Beach etc. and Calder Race Course, Inc.,
Tropical Park, Inc. and Gulfstream Park Racing
Association, Inc. v. Department of Business and
Professional Regulation, Case No. 97-3414, Third
District Court of Appeals (the "Extended Review
Litigation"), Buyer shall have the right to conduct
such further investigation and review as Buyer
deems necessary, up to February 22, 1999, which
Extended Review Litigation shall be reviewed and
approved, or disapproved, in the reasonable
discretion of Buyer no later than February 22,
1999.
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<PAGE> 26
4.2.5. REMOVAL OF UNDERGROUND STORAGE TANK. To the extent
that Buyer's Phase I identifies an underground
storage tank ("UST") located on the Property which
such report notes as a recognized environmental
condition, Shareholder agrees to cause the
Corporation, in accordance with the 1999 Capital
Budget, to remove such UST and perform such
remediation work as is reasonably required by
Governmental Regulations in connection with removal
of such UST and as is contemplated in the 1999
Capital Budget. Buyer shall have the right to
approval or disapprove, in the reasonable
discretion of Buyer, the condition of the Property
after removal of such UST. Buyer's disapproval of
the condition of the Property after removal of the
UST shall be deemed reasonable to the extent that
contamination or Hazardous Materials are identified
as having been leaked or discharged by the UST and
not remediated to the standard required by
applicable Governmental Regulations, or other
conditions exist which do or reasonably could
materially and adversely affect the value or
marketability of title to the Property, or other
matters exist which do or reasonably could
materially and adversely affect Buyer's use,
operation or financing of the Property. Removal of
the UST shall be completed as promptly as
reasonably practicable following the Effective
Date, and Shareholder shall cause the Corporations
to exercise their commercially practicable best
efforts to complete such removal and required
remediation of the UST no later than March 12,
1999. Buyer shall deliver its written approval or
disapproval of the removal of the UST no later than
March 15, 1999.
4.2.6. REVIEW OF ERISA MATTERS. With respect to (i) the
insurance benefit fund or agreement maintained for
Pari-Mutuel clerks, (ii) the pension plan covering
racing employees (including Messrs. Dunn and Soth)
(iii) the IBEW Pension Plan and the South Florida
Pension Fund maintained under the Collective
Bargaining Agreement for electrical workers, and
(iv) other materials and plans related to ERISA as
may be discovered, Shareholder shall cause the
Corporations to deliver, or cause to be delivered,
to Buyer, copies of each such aforementioned
pension plans, and other related material together
with a copy of the Collective Bargaining Agreement
applicable to the electrical workers covered by the
plans identified in (iii) as soon as practicable
after the Effective Date (all of which foregoing
materials and other information as may be
discovered are referred to herein as the "Extended
ERISA Materials"). Buyer shall have the right to
conduct such further investigation and review as
Buyer deems necessary with respect to the Extended
ERISA Materials, up to March 15, 1999, which
Extended ERISA Materials shall be
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reviewed and approved, or disapproved, in the
reasonable discretion of Buyer no later than March
15, 1999.
4.2.7. REVIEW OF PENDING AUDITS. With respect to those
audits currently pending with respect to the
Corporations as more particularly described in
Section 7.16 or 7.17 of this Agreement or the
Disclosure Letter delivered concurrently herewith,
Buyer shall have the right to approve or
disapprove, in the reasonable discretion of Buyer,
the effect of such audits on the liabilities and
obligations of the Corporations up to March 15,
1999, provided, however, that Buyer's disapproval
of the effect of such audits on the Corporations
shall be effective only in the event that as a
result of such audits, the Corporations are subject
to material additional liabilities beyond those
disclosed in the 1998 Audited Financials or the
1997 Financial Statements, or there is insufficient
information available for Buyer to make such
determination.
5. CERTAIN COVENANTS.
5.1 CONDUCT OF THE BUSINESS. Subject to the last paragraph of this
Section 5.1, prior to Closing except with the consent in
writing of Buyer and except as may be required to effect the
transactions contemplated by this Agreement, Shareholder
covenants, between the date hereof and the Closing Date, that
the Corporations and Shareholder will conduct the Business in
the ordinary course, and that they will, except as otherwise
provided in this Agreement:
5.1.1. Maintain the assets of the Corporations in
the same working order and condition as such assets
are in as of the date of this Agreement, reasonable
wear and tear excepted;
5.1.2. Keep in force at no less than their present limits
all existing bonds and policies of insurance
insuring the assets of the Corporations or the
Business;
5.1.3. Use their best efforts to preserve intact
the current business organization of the
Corporations, keep available the services of the
current officers, employees, and agents of the
Corporations, and maintain the relations and good
will with suppliers, customers, landlords,
creditors, employees, agents, and others having
business relationships with the Corporations;
5.1.4. Not make decisions or commitments concerning
operational matters of a material nature except
such decisions or commitments as may be appropriate
to implement actions reflected in the draft forms
of the 1999 Capital Budget or the 1999 Operating
Budget (as each such term is defined below) for the
Corporations, as such draft forms of the respective
budget has been or will be provided to
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the Buyer. From and after the Effective Date,
without the prior approval of Buyer, the
Corporations shall not make any further decisions
or commitments concerning operational matters of a
material nature except such decisions or
commitments as may be appropriate to implement
actions reflected in the approved 1999 Capital
Budget or the 1999 Operating Budget for the
Corporations;
5.1.5. Not discharge any employee of the Corporations; and
5.1.6. Otherwise report periodically to Buyer
concerning the status of the business, operations,
and finances of the Corporations, including
providing regularly prepared internal monthly
financial reports on or before the dates set forth
in Section 5.10 below.
The Corporations are in the process of preparing proposed monthly
phased capital and operating budgets for calendar year 1999 (the "1999 Capital
Budget" and the "1999 Operating Budget"), which will be submitted by the
Corporations to the Shareholder for approval as promptly as possible following
the date hereof. Upon Shareholder's approval of each such proposed budget,
Shareholder shall deliver to Buyer the approved 1999 Capital Budget and 1999
Operating Budget, respectively. Within five (5) business days of Buyer's receipt
of each such budget, Buyer shall confirm in writing to Shareholder that Buyer
has approved or disapproved each such budget. In the event of a disapproval by
Buyer of either the 1999 Capital Budget or the 1999 Operating Budget,
Shareholder and Buyer immediately shall meet and confer to resolve any issues
with respect to such budgets and in any event shall either (i) confirm mutual
agreement and approval of a final 1999 Capital Budget and 1999 Operating Budget;
or (ii) confirm mutual agreement on those portions of the respective budgets as
shall be necessary for the continued operation of each of the Corporations
through and reasonably beyond the Closing Date, and in the event that agreement
with respect to either (i) or (ii) is not achieved, then engage Pricewaterhouse
Coopers (both the Miami, Florida and the Louisville, Kentucky offices) to
determine whether the position of Shareholder or the position of Buyer is
correct with respect to any particular item in dispute. The determination of
Pricewaterhouse Coopers shall be obtained as promptly as possible, and in any
event within ten (10) business days after the inability of Buyer and Shareholder
to reach agreement. Upon determination of the final approved budgets pursuant to
the procedures set forth above, Shareholder and the Corporations shall be
authorized to continue to conduct their business in accordance with the final
approved 1999 Capital Budget and 1999 Operating Budget.
5.2 NEGATIVE COVENANT. Except as otherwise expressly permitted by
this Agreement, and as set forth in the letter to be delivered
by Shareholder to Buyer concurrently herewith, between the
date of this Agreement and the Closing Date, Shareholder will
not, and will cause each Corporation not to, without the prior
consent of Buyer, take any affirmative action, or fail to take
any reasonable action within their or its control, as a result
of which any of the changes or events listed in Section 7.12
is likely to occur.
5.3 NOTIFICATION. Between the date of this Agreement and the
Closing Date, Shareholder will promptly notify Buyer in
writing if Shareholder becomes aware
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of any fact or condition that causes or constitutes a breach
of any of Shareholder's representations and warranties as of
the date of this Agreement, or if Shareholder or any
Corporation becomes aware of the occurrence after the date of
this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute
a breach of any such representation or warranty had such
representation or warranty been made as of the time of
occurrence or discovery of such fact or condition. On or
before the Closing, Buyer must notify Shareholder whether such
further disclosure or notification is acceptable to it.
Between the date of this Agreement and the Closing Date,
Shareholder will promptly notify Buyer of the occurrence of
any breach of any covenant of Shareholder in this Agreement or
of the occurrence of any event that may make the satisfaction
of the conditions in Section 3.4 impossible or unlikely.
5.4 NO NEGOTIATION OR SOLICITATION. Until such time, if any, as
this Agreement is terminated by the parties, Shareholder will
not, and will cause each Corporation not to, directly or
indirectly solicit, initiate, or encourage any inquiries or
proposals from, discuss or negotiate with, or provide any
non-public information to, any person (other than Buyer)
relating to any transaction involving the sale of the business
or assets (other than the Ground Lease Property Transaction as
described in Section 31 or other than any other transaction in
the ordinary course of business or information provided to the
Division of Pari-Mutuel Wagering, subject to the approval of
Buyer) of any Corporation, or any of the capital stock of any
Corporation, or any merger, consolidation, business
combination, or similar transaction involving the change in
control of any Corporation.
5.5 SHAREHOLDER EFFORTS. Between the date of this Agreement and
the Closing Date, Shareholder will use its best efforts,
without incurring undue additional expense, to cause the
conditions in Sections 3.3 and 3.4 to be satisfied.
5.6 COMPLIANCE WITH LAW. Shareholder shall cause Calder and
Tropical each to comply with, and shall not be in default, or
in violation in any material respect of, any permit or of any
applicable law, requirement or order, the violation of which
would have a material adverse effect upon Calder or Tropical
or the operation of the Business.
5.7 CONSENTS. Shareholder shall and shall cause the Corporations
to cooperate with and assist Buyer in obtaining all consents,
approvals and authorizations from governmental agencies and
others as may be required in order to consummate the
transactions contemplated herein, including without limitation
the Approval from the Division of Pari-Mutuel Wagering with
respect to transfer of control of the Corporation in
connection with the continued effectiveness of the Licenses.
5.8 INSURANCE. Shareholder shall cause the Corporations to
maintain the insurance policies currently maintained by the
Corporations, or shall replace such policies with new
insurance on terms and with such carriers as are consistent
with the current insurance coverage of the Corporations. .
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5.9 ACCESS TO INFORMATION AND PROPERTY. Prior to the Closing,
Shareholder shall, and shall cause the Corporations and their
respective officers, employees, accountants, counsel and other
representatives to afford to Buyer and its representatives,
upon reasonable notice, access during normal working hours to
the properties, offices and personnel of the Corporations, as
well as access to the financial, contractual and corporate
records of the Corporations as shall be reasonable and
necessary for Buyer's investigation of the Business, and
Property, such access to include access to the Property,
books, records and work papers (including auditor's work
papers, if in the possession of the Corporations or their
representatives, supporting said books and records of the
Business of the Corporations).
5.9.1. ACCESS. Shareholder shall cause the Corporations
to cause their respective officers, employees,
accountants, counsel and other representatives to
afford Buyer and its officers, employees,
accountants, counsel and other representatives
reasonable access during normal business hours
during the period prior to the Closing to the
Corporations' respective properties, books,
contracts, commitments, personnel and records and,
during such period, Shareholder shall cause each
Corporation to promptly furnish to Buyer such other
information concerning its business, properties and
personnel as Buyer may reasonably request.
5.9.2. CONFIDENTIAL INFORMATION. Unless and until the
Closing has been consummated, Buyer and its
officers, employees, counsel, accountants and other
representatives shall hold in strictest confidence,
and shall not distribute, transmit or use any of
the data and information obtained from Shareholder
or the Corporations or developed by Buyer in
connection with the transactions contemplated by
this Agreement except in furtherance of the Closing
or except information already in the public domain
or as required by law, order of court, rules and
regulations, of the SEC or Nasdaq Stock Market or
as otherwise known by Buyer. If the Closing is not
consummated for any reason, Buyer shall return to
Shareholder all such data and information. Buyer's
obligations under this Section 5.9.2 are in
addition to its obligations pursuant to the
Confidentiality Agreement.
5.10 Throughout the term of this Agreement, Shareholder shall cause
the Corporations to deliver to Buyer company-prepared
unaudited financial statements on a monthly basis as promptly
as possible following the close of each month, and with
respect to all months beginning with the month of February,
1999 in any event on or before the 20th day of the month
following the respective month-end. With respect to the months
of December, 1998 and January, 1999, the company-prepared
unaudited financial statements shall be delivered prior to the
end of the month following the respective month end. To the
extent that the Closing Date is March 18, 1999, the
company-prepared unaudited financial statements shall be
delivered no later than March 15, 1999.
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6. COMMISSIONS. Buyer and Shareholder each represent and warrant to the
other that except for the commission due to CIBC Oppenheimer Corp.
("CLBC")(as "Shareholder's Broker") Buyer and Shareholder each are
unaware of any commission, finder's fee or brokerage fee arising out of
out of the transactions contemplated by this Agreement. Shareholder
shall be responsible for payment of all fees, expenses and commissions
payable to Shareholder's Broker. Buyer and Shareholder each shall
indemnify and hold the other party harmless from and against any and
all liabilities, claims, demands, damages, costs and expenses,
including, without limitation, reasonable attorneys' fees and court
costs, in connection with claims for any such commissions, finders'
fees or brokerage fees arising out of the conduct or the inaccuracy of
the foregoing representation and/or warranty of the indemnifying party.
7. SHAREHOLDER'S REPRESENTATIONS AND WARRANTIES. Shareholder represents
and warrants to Buyer that as of the date of this Agreement and as of
the Closing Date:
7.1 DUE INCORPORATION, QUALIFICATION AND CORPORATE POWER.
7.1.1. Incorporation. Shareholder is a corporation duly
organized, validly existing and in good standing
under the laws of the State of Delaware. Calder and
Tropical each is a corporation duly organized,
validly existing, and in good standing under the
laws of Florida. Each of Calder and Tropical is
qualified to transact business as a foreign
corporation and in good standing in each other
jurisdiction in which the ownership of its
properties or the conduct of its Business requires
it to be qualified or registered, except where the
failure to be so qualified or in good standing
would not have a material adverse effect on the
Corporations or the Business.
7.1.2. AUTHORITY AND STATUS. Shareholder has the
requisite corporate power and authority to execute,
deliver and perform this Agreement. The execution,
delivery and performance by Shareholder of this
Agreement have been duly authorized by all
requisite corporate action of Shareholder. This
Agreement constitutes the valid and legally binding
obligation of Shareholder, enforceable against
Shareholder in accordance with its terms, except as
enforceability may be limited by applicable
equitable principles or by bankruptcy, insolvency,
reorganization, moratorium or similar laws from
time to time in affecting the enforcement of
creditors' rights generally.
7.2 CAPITALIZATION. The authorized capital stock of Calder
consists of 800,000 shares of $.25 par value common stock, of
which 667,440 shares are issued and outstanding, and are the
Calder Stock being transferred to Buyer pursuant to this
Agreement and 190 shares of $1.00 par value preferred stock.
Calder has repurchased from the holder thereof and fully paid
for all preferred stock previously issued by Calder, and no
such preferred stock currently is outstanding.
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The authorized capital stock of Tropical consists of 1,000
shares of no par value common stock, of which 195 shares are
issued and outstanding, and are the Tropical Stock being
transferred to Buyer pursuant to this Agreement. Shareholder
is the record and beneficial owner of all of the Stock, free
and clear of any Liens. All of the Stock is issued and
outstanding, has been duly authorized, is validly issued, and
is fully paid and nonassessable, and all of said issued and
outstanding shares will have been issued in compliance with
all applicable federal and state securities laws, with the
filing of appropriate notices. There are no options, warrants,
conversion privileges, preemptive rights, rights of first
refusal or other rights presently outstanding with regard to
any of the Stock or any of the authorized but unissued capital
stock of the Corporation.
7.3 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed or
reflected in the 1997 Financial Statements (as described in
Section 7.8 below) and the unaudited financial statements for
calendar year 1998 through November 30, 1998 (collectively the
"Available Financial Reports") (including any notes thereto),
neither Calder nor Tropical has any material indebtedness,
liability or obligation (accrued, absolute, contingent or
otherwise) which would be required to be reflected in
financial statements prepared in accordance with generally
accepted accounting principles other than as reflected in
Available Financial Reports and notes thereto and liabilities
incurred in the ordinary course of business since the date of
the most recent Available Financial Reports. Without limiting
the generality of the foregoing, to the knowledge of
Shareholder and the Corporations, neither Calder nor Tropical
is contingently liable for, or obligated in any way to provide
funds in respect of, any material debt, liability or other
obligation of any other person or entity except as disclosed
in Section 7.3 of the letter of disclosure delivered by
Shareholder to Buyer concurrently with execution hereof (the
"Disclosure Letter").
7.4 NO BREACH. The execution, delivery and performance of this
Agreement and the consummation of the transactions
contemplated by this Agreement (i) will not cause a violation
of or, with due notice, lapse of time or both, result in any
default under, or in any breach of, permit the termination of,
result in the imposition of any charge under, result in the
acceleration of or entitle any party to accelerate (whether
after the giving of notice or lapse of time or both) any
obligation under any agreement, instrument, order, arbitration
award, judgment or decree to which Shareholder is a party or
by which Shareholder is bound; (ii) will not violate or
conflict with any other restriction of any kind or character
to which Shareholder is subject, including without limitation
the Articles of Incorporation or Bylaws of Shareholder; (iii)
will not violate or contravene any Governmental Regulation or
any order to which Shareholder or its assets are bound; (iv)
will not result in the imposition of any tax or lien on
Shareholder or its assets (including the Stock); or (v) does
not require any consent, approval or other authorization of
any person, entity or authority required to be obtained by
Shareholder or the Corporations not previously obtained (other
than the Approvals). To the knowledge of Shareholder and the
Corporations, the execution, delivery and performance of this
Agreement and the consummation of the transactions
contemplated by this Agreement (i) will
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not cause a violation of or, with due notice, lapse of time or
both, result in any default under, or in any breach of, permit
the termination of, result in the imposition of any charge
under, result in the acceleration of or entitle any party to
accelerate (whether after the giving of notice or lapse of
time or both) any obligation under any agreement, instrument,
order, arbitration award, judgment or decree to which Calder
or Tropical are a party or by which Calder or Tropical is
bound; (ii) will not violate or conflict with any other
restriction of any kind or character to which Calder or
Tropical is subject; (iii) will not violate or contravene any
Governmental Regulation or any order to which Calder or
Tropical or their assets are bound; (iv) will not result in
the imposition of any tax or lien on Calder, Tropical or their
respective Assets; or (v) without any knowledge qualification,
will not violate the Articles of Incorporation or the Bylaws
of Calder or Tropical.
7.5 LITIGATION AND CLAIMS. Except for routine accounts payable
incurred in the ordinary course of business or as otherwise
disclosed in Section 7.5 of the Disclosure Letter, there are
no claims or judgments unsatisfied against the Corporations or
Shareholder or consent decrees or injunctions to which the
Corporations or Shareholder are subject, and there is no
litigation or proceeding pending or, to the knowledge of the
Corporations or Shareholder, threatened against or relating to
the Corporations, the Stock or the Business, nor do the
Corporations or Shareholder know of any basis for any such
action or of any governmental investigation relative to the
Corporations, the Stock or the Business, including the
Licenses of the Corporations.
7.6 TITLE TO AND CONDITION OF PROPERTY AND OTHER ASSETS. Except
(i) such Permitted Exceptions as are shown on the Commitment;
(ii) liens securing the Outstanding Loan Balance, and (iii) as
disclosed in the Financial Statements, the Corporations have
good and valid and marketable title to all of their respective
Assets, free and clear of all Liens or any easements that
materially and adversely could affect the use of the Property
in connection with the Business. Except for the Property and
the Ground Lease Parcel (as discussed in Section 31, below),
neither Calder nor Tropical owns any real property. The
Corporations have sole and exclusive right, title and interest
in and to their respective Assets. The transfer and conveyance
of the Stock to Buyer shall not adversely affect the good,
valid and marketable title in the Corporations to their
respective Assets, or cause to be imposed upon their
respective Assets any mortgage, lien, conditional sales
agreement, charge, claim, breach or encumbrance of any nature
whatsoever. There is no pending or to the knowledge of
Shareholder and the Corporations threatened modification to
any zoning or land use regulation applicable to the Property
which could impair the continued use of the Property by the
Corporations for the conduct of the Business. The accounts
receivable of the Corporations, subject to any allowance for
doubtful accounts on the books of the Corporations, and
excluding accounts receivable payable by certain pari-mutuel
sites receiving broadcast signal from Calder which are the
subject of the Investment Corp. of Palm Beach et al. v.
Department of Business and Professional Regulation litigation
and the related claims are collectible without material
discount from the face amount thereof
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within 180 days of Closing, and the inventory of the
Corporations are useable and saleable, as applicable, in the
ordinary course of the operation of the business of the
Corporations.
7.7 COMPLIANCE WITH LAWS; ENVIRONMENTAL COMPLIANCE. To the
knowledge of Shareholder and the Corporations, each of Calder
and Tropical have complied in all material respects with all
Governmental Regulations applicable to the Business, and has
obtained all governmental permits, authorizations or licenses
which are material and required in order to conduct the
Business. The present use by the Corporations of their
respective Assets, and the conduct of the Business do not
violate in any material respect any Governmental Regulations
or governmental permits, authorizations or licenses. From
January 1, 1992 to the Closing Date, there has not been any
generation, use, transportation, release or disposal of any
Hazardous Materials by the Corporations in violation of any
Government Regulation regarding Hazardous Materials. From
January 1, 1992 to the Closing Date, no notice or warning from
any governmental authority with respect to any failure or
alleged failure of Corporations or Shareholder to comply with
any law, regulation or order has been issued or given, nor to
the knowledge of Shareholder and the Corporations has any such
notice or warning been proposed or threatened. There is no
pending or, to the knowledge of Shareholder and the
Corporations, threatened, action by the Florida Division of
Pari-Mutuel Wagering, nor do Shareholder and the Corporations
have any knowledge or information of any event which could
impair the ability of the Corporations to maintain the
Licenses which presently are held by the Corporations with
respect to the operation of the Business.
7.8 FINANCIAL STATEMENTS. Shareholder has made available to Buyer
for review by Buyer copies of the audited balance sheets of
each Corporation as of December 31, 1997 and December 31,
1996, together with the related statements of income and
statements of cash flow for the years then ended, all
certified by the Corporations' independent public accountant
(the "1997 Financial Statements"). Shareholder has delivered
to Buyer copies of the Corporation's unaudited balance sheets
and income statements as of November 30, 1998. All such
financial statements and balance sheets have been prepared in
accordance with generally accepted accounting principles
consistently applied, except as indicated in the notes
thereto, and fairly present the financial condition and
results of operations of the subject corporation as of and for
the period indicated. Each Corporation has adequate and
complete books, records and internal controls.
7.9 EMPLOYEE PLANS; ERISA.
(a) Subject to Buyer's agreement as set forth in
Section 32 below, the Calder Race Course,
Inc. 401(k) Plan will be terminated by
appropriate board resolution adopted by
Calder's board of directors before the
Closing Date with the effective date of plan
termination to be before the Closing Date.
All contributions to the Calder Race
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Course, Inc. 401(k) Plan shall immediately
cease on the effective date of the plan
termination as stated in the board
resolution.
(b) All benefit plans and agreements to which
either Calder or Tropical is a party or by
which either Corporation is bound or
responsible for contributions thereunder are
set forth in Section 7.9 of the Disclosure
Letter. Shareholder has delivered or made
available to Buyer for review true and
complete copies of all documents
constituting such plans and agreements.
7.10 LABOR CONTRACTS AND EMPLOYMENT AGREEMENTS. Except for (i)
agreements terminable at will without liability beyond the
amounts due under the Corporations' generally applicable
severance policies and (ii) plans disclosed in Section 7.10 of
the Disclosure Letter, Section 7.10 of the Disclosure Letter
contains a complete list of all written employment contracts,
stock purchase, stock option, stock appreciation right, bonus
plans and agreements and other similar plans or agreements by
which either Calder or Tropical is bound. Other than employees
covered by the collective bargaining agreements described in
the Disclosure Letter, none of the employees of Calder or
Tropical belong to any union or collective bargaining unit in
connection with their employment by the Corporation. There is
not presently pending or existing, and to Shareholder's and
the Corporation's knowledge there is not threatened (i) any
strike, slowdown, picketing, work stoppage or employee
grievance process, (ii) any proceeding against or affecting
either of the Corporations relating to the alleged violation
of any Governmental Regulation pertaining to labor relations
or employment matters except as described in Section 7.10 of
the Disclosure Letter, or (iii) any application for
certification of a collective bargaining agent. There is no
lockout of any employee by either of the Corporations and no
such action is contemplated by either of the Corporations.
Neither of the Corporations is liable for the payment of any
material compensation, damages, taxes, fines, penalties or
other amounts, however, designated, for any failure to comply
with any Governmental Regulation relating to employment,
except as disclosed in the Available Financial Reports or
otherwise described in Section 7.10 of the Disclosure Letter.
7.11 PATENTS, TRADEMARKS, TRADE NAMES. Except as set forth in
Section 7.11 of the Disclosure Letter, there are no pending or
to the knowledge of Shareholder and the Corporations
threatened claims against the Corporations alleging that, nor
to the knowledge of Shareholder and the Corporations, does the
conduct by the Corporations of their Business infringe or
conflict with the rights of others under patents, trademarks,
trade names, copyrights, or registrations thereof. The
Corporations own or have rights to use the trademarks and
names identified in Section 7.11 of the Disclosure Letter.
Those names and marks are all of the names and marks necessary
for the operation of the Business. The Corporations are the
owners of such names and marks free and clear of all liens,
security interest, charges, encumbrances, equities and other
adverse claims except as disclosed in Section 7.11 of the
Disclosure Letter, and the Corporations have the right to use
such names and marks without payment to a third party with
respect
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<PAGE> 36
thereto. No written notification has been received by the
Corporations or the Shareholder stating that the Corporations
are not in compliance with any material formal legal
requirement with respect to the effectiveness of the
registration of those marks which are identified in Section
7.11 of the Disclosure Letter as being registered with the
United States Patent and Trademark Office.
7.12 ABSENCE OF CERTAIN CHANGES AND EVENTS. To the knowledge of
Shareholder and the Corporations, since November 30, 1998, the
Corporations have conducted their businesses only in the
ordinary course of business and there has not, except such
expenditures as have been made prior to the Effective Date
which were anticipated to be in accordance with the 1999
Capital Budget or the 1999 Operating Budget (assuming that
such budgets are approved in the form of the draft budgets
existing as of the Effective Date), been any:
(a) change in any of the Corporations authorized
or issued capital stock; grant of any stock
option or right to purchase shares of
capital stock of any of the Corporations;
issuance of any security convertible into
such capital stock, grant of any
registration rights, purchase, redemption,
retirement, or other acquisition by any of
the Corporations of any shares of any such
capital stock; or declaration or payment of
any dividend or other distribution or
payment in respect of shares of capital
stock, provided, however, that the
resolution adopted by the Corporation in
1999 in respect of the redemption of certain
stock of Dorothy Zachar shall not be deemed
to be a change in violation of the foregoing
subparagraph (a);
(b) amendment to the organizational documents of
any of the Corporations;
(c) except as set forth in Section 5.2 above or
in accordance with the terms of existing
employment agreements, payment or increase
by any of the Corporations of any bonuses,
salaries, or other compensation to any
director, officer, or (except in the
ordinary course of business) employee or
(except in the ordinary course of business)
entry into any employment, severance, or
similar contract with any director, officer,
or employee;
(d) adoption of, or increase in the payments to
or benefits under, any profit sharing,
bonus, deferred compensation, savings,
insurance, pension, retirement, or other
employee benefit plan for or with any
employees of any of the Corporations;
(e) damage to or destruction or loss of any
asset or property of any of the
Corporations, whether or not covered by
insurance, materially and adversely
affecting the properties, assets, business,
financial condition, or prospects of the
Corporations; taken as a whole;
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(f) entry into, termination of, or receipt of
notice of termination of (i) any joint
venture, credit, or similar agreement, or
(ii) any Contract or transaction involving a
total remaining commitment by or to any of
the Corporations of at least $25,000.00
except in compliance with the 1999 Capital
Budget or the 1999 Operational Budget;
(g) sale (other than sales of inventory or
simulcast signal or grants of the use of
stalls in the ordinary course of business),
lease, or other disposition of any material
asset or property of any of the Corporations
(other than the Ground Lease Property
Transaction described in Section 31) or
mortgage, pledge, or imposition of any lien
or other encumbrance on any material asset
or property of any of the Corporations;
(h) cancellation or waiver of any claims or
rights with a material value to any of the
Corporations;
(i) material change in the accounting methods
used by any of the Corporations or change of
or disagreement with the independent
accountants of the Corporations; or
(j) agreement, whether oral or written, by any
of the Corporations to do any of the
foregoing.
7.13 Insurance. Shareholder has made available to Buyer for Buyer's
review true and complete copies of all policies of insurance
to which any Corporation is a party or under which any
Corporation, or any director (in respect of director
liability) of any Corporation, is or has been covered at any
time within the three years preceding the date of this
Agreement.
7.13.1. Neither Shareholder nor any Corporation has
received (A) any refusal of coverage or any
notice that a defense will be afforded with
reservation of rights, or (B) any notice of
cancellation or any other indication that
any insurance policy is no longer in full
force or effect or will not be renewed or
that the issuer of any policy is not willing
or able to perform its obligations
thereunder.
7.13.2. The Corporations have paid all premiums due,
and have otherwise performed all of their
respective obligations, under each policy to
which any Corporation is a party or that
provides coverage to any Corporation or
director thereof.
7.13.3. The Corporations have given notice to the
insurer of all claims that may be insured
thereby.
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7.14 EMPLOYEES. To the knowledge of Shareholder and the
Corporations, no employee of any Corporation is a party to, or
is otherwise bound by, any agreement, including any
confidentiality, noncompetition, or proprietary rights
agreement, between such employee and any other person
("Proprietary Rights Agreement") that in any way adversely
affects or will affect (i) the performance of his duties as an
employee of the Corporations, or (ii) the ability of any
Corporation to conduct its business. To Shareholder's and the
Corporation's knowledge (without any investigation), no
officer, or other key employee of any Corporation intends to
terminate his employment with such Corporation.
7.15 BANKRUPTCY. No act of bankruptcy has occurred with respect to
Shareholder or the Corporations. As used herein, the term "Act
of Bankruptcy" shall mean any of the following by a party
thereto or any general partner thereof: (a) applying for or
consenting to the appointment of, or the taking of possession
by, a receiver, custodian, trustee or liquidator of itself or
of all or a substantial part of its assets; (b) admitting in
writing its inability to pay its debts as they become due; (c)
making a general assignment for the benefit of its creditors;
(d) filing a voluntary petition or commencement of a voluntary
case or proceeding under the Federal Bankruptcy Code (as now
or hereafter in effect); (e) being adjudicated a bankrupt or
insolvent; (f) filing a petition seeking to take advantage of
any other law relating to bankruptcy, insolvency,
reorganization, winding-up or composition or adjustment of
debts; or (g) failing to controvert in a timely or appropriate
manner, or acquiesce in writing to, any petition filed against
it in an involuntary case or proceeding under the Federal
Bankruptcy Code (as now or hereafter in effect).
7.16 TAX MATTERS.
7.16.1. tax representations and warranties.
(a) Each of the Corporations and the
Consolidated Group has filed all Tax Returns
that it was required to file. All such Tax
Returns were correct and complete in all
material respects and none of such returns
is currently under audit, other than the
audit currently being concluded between the
former consolidated group which included the
Corporations for calendar years 1991 through
1996. All field work for such audit has been
completed. In addition, both the
Corporations and other members of the
Consolidated Group have received notices
from the State of Florida with respect to
audit of certain sales tax obligations, and
tangible personal property tax obligations
which audits currently are pending. All
Taxes owed by the Consolidated Group or
either of the Corporations (whether or not
shown on any Tax Return) have been paid,
except such additional tax as may be
assessed pursuant to such audit, which
additional tax, if any, shall be paid by
Shareholder or other members of the
Consolidated Group, other than the
Corporations. None of Shareholder and the
Corporations currently are the beneficiary
of any extension of time within which to
file any Tax
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Return but an extension may be filed by
Shareholder with respect to Tax Returns for
calendar year 1998. No claim has ever been
made by an authority in a jurisdiction where
any of the Consolidated Group or the
Corporations do not file Tax Returns that it
is or may be subject to taxation by that
jurisdiction. There are no security
interests on any of the assets of either of
the Corporations that arose in connection
with the failure (or alleged failure) to pay
any Tax.
(b) Each of the Corporations and the
Consolidated Group has withheld and paid all
Taxes required to have been withheld and
paid in connection with amounts paid or
owing to any employee, independent
contractor, creditor, stockholder, or other
third party.
(c) No director or officer (or employee
responsible for Tax matters) of Shareholder
or the Corporations expect any authority to
assess any additional Taxes for any period
for which Tax Returns have been filed except
as may be described in Section 7.16 of the
Disclosure Letter. There is no dispute or
claim concerning any Tax liability of any of
the Consolidated Group and the Corporations
either (A) claimed or raised by any
authority in writing or (B) as to which any
of the directors and officers (and employees
responsible for Tax matters) of Shareholder
or the Corporations have knowledge based
upon personal contact with any agent of such
authority. Shareholder has made available to
Buyer correct and complete copies of all Tax
Returns, examination reports, and statements
of deficiencies assessed against or agreed
to by any of Shareholder or the Corporations
since January 1, 1995. Buyer is aware that
the Corporations are included in the
consolidated returns filed by Shareholder's
parent company, and Buyer will be provided
with copies of the separate federal Tax
Returns of the Corporations that were used
to prepare such consolidated returns.
(d) None of Shareholder, the Corporations and
the Consolidated Group has waived any
statute of limitations in respect of Taxes
or agreed to any extension of time with
respect to any Tax assessment or deficiency.
(e) Neither of the Corporations has filed a
consent under Code Section 341(f) concerning
collapsible corporations. Neither of the
Corporations has made any payments, is
obligated to make any payments, or is a
party to any agreement that under certain
circumstances could obligate it to make any
payments that will not be deductible under
Code Section 280G. Shareholder, the
Consolidated Group and the Corporations have
disclosed on their federal income Tax
Returns all positions taken therein that
could give rise to a substantial
understatement of federal income Tax within
the meaning of
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Code Section 6662. The Corporations are a
party to a Tax sharing agreement with
Shareholder and other members of the
Consolidated Group, which Tax sharing
agreement will be terminated as to the
Corporations as of the Closing Date and
neither Corporation will have any remaining
liability thereunder for any tax year.
During calendar year 1995, the ownership of
Shareholder was transferred from one
affiliate of Shareholder to another.
Subsequent to this transfer, none of
Shareholder nor the Corporations has been a
member of an affiliated group filing a
consolidated federal income Tax Return
(other than a group the common parent of
which was the parent corporation of
Shareholder). Neither of the Corporations
has any liability for the Taxes of any
person or entity (other than Reg. 1.1502-6
or any similar provision of state, local or
foreign law), as transferee or successor, by
contract or otherwise.
(f) The unpaid Taxes of Shareholder, the
Consolidated Group and the Corporations: (A)
did not, as of the most recent fiscal month
end, exceed the reserve for Tax liability
(other than any reserve for deferred Taxes
established to reflect timing differences
between book and Tax income) set forth on
the face of the most recent balance sheet
provided to Buyer (rather than in any notes
thereto); and (B) do not exceed that reserve
as adjusted for the passage of time through
the Closing date in accordance with the past
custom and practice of Shareholder, the
Consolidated Group and the Corporations.
7.16.2. CONSOLIDATED INCOME RETURNS; SEPARATE INCOME
RETURNS. Each of Calder and Tropical shall
continue to be included for all then current
taxable periods ended on or before the
Closing Date in the federal consolidated
income Tax Return and any required state or
local consolidated or combined income or
franchise Tax Returns that include such
Corporation (all such Tax Returns, together
with all federal consolidated and state or
local consolidated or combined returns for
all taxable periods of either Corporation
ended on or through the Closing Date, are
hereinafter referred to, collectively, as
"Pre-Closing Consolidated Income Returns").
Shareholder shall cause the timely
preparation and filing of all Pre-Closing
Consolidated Income Returns and, on behalf
of each of the Corporations, all state and
local income and franchise Tax Returns
(other than Pre-Closing Consolidated Income
Returns) that are required by applicable
law, covering such Corporations for all
taxable periods ending on or through the
Closing Date ("Pre-Closing Separate Income
Returns").
7.16.3. Non-Income Returns. Shareholder shall cause
each Corporation to timely prepare and file
all Tax Returns of such Corporation other
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than Pre-Closing Consolidated Income Returns
and Pre-Closing Separate Income Returns
required by law for all taxable periods
ending on or through the Closing Date
("Pre-Closing Non-Income Returns").
7.16.4. PRE-CLOSING RETURNS. Pre-Closing
Consolidated Income Returns, Pre-Closing
Separate Income Returns and Pre-Closing
Non-income Returns (whether or not yet
filed) are hereinafter collectively referred
to as "Pre-Closing Returns". All Pre-Closing
Returns shall be prepared by Shareholder
subject to the review of Buyer, in a manner
consistent with prior practices and shall
properly include and reflect the income,
activities, operations and transactions of
the applicable Corporation. After the
Closing Date, Buyer shall timely make
available to Shareholder all records and
information of the Corporations reasonably
required in order for Shareholder to cause
the preparation or review of any Pre-Closing
Returns not yet filed as of the Closing
Date.
7.16.5. END OF TAXABLE PERIOD. If either Corporation
is permitted under any applicable state or
local income tax law to treat the Closing
Date as the last day of the taxable period
during or immediately after which the
Closing occurs, Buyer and Shareholder shall
treat (and cause their respective affiliates
to treat) the Closing Date, as the last day
of such taxable period.
7.16.6. POST-CLOSING TAXES. Buyer shall timely
prepare and file, or cause to be prepared
and filed, all Tax Returns required by law
for all Taxes covering the Corporations for
taxable periods ending after the Closing
Date ("Post-Closing Returns"). Buyer shall
cause the Corporations to timely pay all
Taxes relating to Post-Closing Returns
("Post-Closing Taxes").
7.16.7. TAX COOPERATION. The Corporations will
furnish Tax information to Shareholder for
inclusion in Shareholder's Federal
Consolidated Income Tax Return for the
period which includes the Closing Date in
accordance with the Corporations' past
custom and practice. Shareholder will allow
Buyer an opportunity to review and comment
upon such Tax Return (including any amended
return) to the extent that they relate to
the Corporations. Shareholder will take no
position on such returns that relate to the
Corporations that would adversely affect the
Corporations after the Closing Date, unless
such position would be reasonable in the
case of a person that owned the Corporations
both before and after the Closing Date. The
income of the Corporations will be
apportioned to the period up to and
including the Closing Date and the period
after the Closing Date by closing the books
of the Corporations as of the end of the
Closing Date. Buyer and Shareholder and
their affiliates
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shall preserve all information, returns,
books, records, including machine sensible
records as defined in Internal Revenue
Service Revenue Procedure 91-59 and
documents relating to any liabilities for
Taxes with respect to a taxable period until
the later of the expiration of all
applicable statutes of limitation and
extension thereof or a final determination
with respect to Taxes for such period.
7.16.8. INDEMNIFICATION.
(a) OBLIGATIONS OF SHAREHOLDER. After the
Closing Date, Shareholder shall indemnify
and hold harmless Buyer and the Corporations
from and against any unpaid Tax liability
with respect to any Pre-Closing Return filed
or required to be filed for any period
ending on or through Closing, except to the
extent such unpaid Tax liability is (i)
either reflected as a liability of a
Corporation in the 1997 Financial Statements
or 1998 Audited Financials made available to
Buyer for review (other than an
inter-company tax liability which is
required to be adjusted or paid as of the
Closing Date) or (ii) taken into account in
calculating working capital for the
Corporation from the 1997 Financial
Statements or 1998 Audited Financials
(together, a "Scheduled Tax Liability").
Shareholder shall pay such amounts as it is
obligated to pay to Buyer or the
Corporations within 30 calendar days after
receipt by Shareholder of notice from Buyer
of payment of any such unpaid Tax liability
by Buyer or the Corporations. Except to the
extent it is a Scheduled Tax Liability
(other than an inter-company tax liability
which is required to be adjusted or paid as
of the Closing Date), Shareholder shall also
indemnify and hold harmless Buyer and the
Corporations from and against (i) any unpaid
Tax liability of the Corporations for
periods prior to and including the Closing
Date resulting from the Corporations being
severally liable for any Taxes of any
Consolidated Group of which the Corporations
(prior to the Closing Date) or an affiliate
(or predecessor) were or are a member
pursuant to Treasury Regulations Section
1.1502-6 or any analogous state or local Tax
provision (ii) any unpaid Tax liability of
the Corporations resulting solely from the
Corporations' ceasing to be a member of the
Consolidated Group, including under Treasury
Regulations Sections 1.1502-13, 1.1502-14
and 1.1502-19 and analogous state or local
Tax provisions.
(b) Obligations of Buyer and the Corporation.
After the Closing Date, Buyer and the
Corporations, jointly and severally, shall
indemnify and hold harmless Shareholder and
each of its affiliates from (i) all
Post-Closing Taxes and (ii) all unpaid Tax
liabilities of the Corporations, Shareholder
or any of their affiliates as a result of
any transaction of either Corporation not in
the ordinary course of
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business occurring after Closing Date and
after Buyer's purchase of the Stock. Buyer
shall pay such amounts within 30 calendar
days after receipt of notice of payment of
any such Tax liability by Shareholder or any
affiliate, subject to Buyer's right to
contest in good faith such liability.
The foregoing indemnification obligations
shall survive the Closing.
7.16.9. NOTIFICATION OF PROCEEDINGS; CONTROL:
REFUNDS.
(a) If Buyer or either Corporation or any
affiliate of any of them receives notice,
whether orally or in writing, of any pending
or threatened federal, state, local,
municipal or foreign tax examinations,
claims, settlements, proposed adjustments,
assessments or reassessments or related
matters with respect to any Pre-Closing
Taxes, Buyer shall notify Shareholder in
writing within 10 calendar days thereof.
(b) Each of Shareholder and Buyer shall have the
right to control any audit or examination by
any taxing authority, initiate any claim for
refund, file any amended return, contest,
resolve and defend against any assessment,
notice of deficiency or other adjustment or
proposed adjustment relating or with respect
to any Taxes, the ultimate liability for
which is the responsibility of that party or
its affiliates under this Section 7.16 and
each shall be entitled to, and to the extent
received by the other shall be promptly paid
by the other, all refunds with respect to
any such Taxes.
7.16.10. TAX EFFECT OF PAYMENTS. The amount of any
payments required to be made under Section
7.16.9 shall be reduced by the amount of any
Tax benefit actually received (including by
refund or by reduction of or offset against
Taxes otherwise payable) by recipient by
reason of the payment or occurrence by such
recipient of the item for which the
indemnity is being sought. Each party shall
notify the other of such receipt of any such
Tax benefits.
7.16.11. TAX COVENANTS.
(a) TAX SHARING AGREEMENTS. Any tax sharing
agreement between Shareholder, the
Consolidated Group and either of the
Corporations shall be terminated as of the
Closing Date and will have no further effect
for any future taxable year.
(b) TAXES OF OTHER PERSONS. Shareholder agrees
to indemnify Buyer and the Corporations from
and against the entirety of any adverse
consequences Buyer or the Corporations may
suffer resulting from, arising out of,
relating to, in the nature of, or caused by
any
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liability of either of the Corporations for
Taxes of any entity other than the
Corporations (i) under Reg. ss.1.1502-6 (or
any similar provision of state, local or
foreign law); (ii) as a transferee or
successor; (iii) by contract; or (iv)
otherwise. The foregoing indemnification
obligation shall survive the Closing.
(c) RETURNS FOR PERIODS THROUGH THE CLOSING
DATE. Shareholder will include the income of
the Corporations (including any deferred
income triggered into income by
Reg.SS.1.1502-13 and SS.1.1502-14 and any
excess loss accounts taken into income under
Reg.SS.1.1502-19) on the Consolidated
Group's consolidated federal income Tax
Returns for all periods through the Closing
Date and pay any federal income Taxes
attributable to such income. Shareholder
will take no position on such returns that
relate to the Corporations that would
adversely affect the Corporations after the
Closing Date. The income of the Corporations
will be apportioned to the period up to and
including the Closing Date and the period
after the Closing Date by closing the books
of Shareholder and its subsidiaries as of
the end of the Closing Date.
(d) AUDITS. To the extent that any audit of
Shareholder's consolidated federal income
tax returns related to the Corporations,
Shareholder shall advise Buyer thereof and
shall keep Buyer advised concerning any
possible assessment of additional tax
obligations for the Corporations.
Shareholder will advise Buyer of the terms
of any proposed settlement of such audits
which would have a material adverse effect
on the Corporations after the Closing Date,
and provide Buyer with a reasonable
opportunity to object to the terms of such
settlement, or otherwise provide for
reasonable protections for the Corporations
in respect of such settlement, to the extent
reasonably practicable.
7.17 OTHER TAX MATTERS.
7.17.1. OTHER TAX REPRESENTATIONS AND WARRANTIES.
Each of the Corporations (and to the extent
applicable as related to the Corporations,
the (Consolidated Group) has filed all Other
Tax Returns for calendar years 1991 through
the Effective Date, and has paid all Other
Taxes for such period except such additional
Other Tax as may be assessed pursuant to the
Florida sales tax audits or AD VALOREM
litigation mentioned below, and except to
the extent that any unpaid liability for
Other Tax is either (i) reflected as a
liability of a Corporation in the 1997
Financial Statements or 1998 Audited
Financials made available to Buyer for
review or (ii) taken into account in
calculating working capital for the
Corporations from the 1997 Financial
Statements or the 1998
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Audited Financials (together a "Scheduled
Other Tax Liability"). All such Other Tax
Returns were correct and complete in all
material respects and none of such returns
is currently under audit (other than certain
sales tax audits of both the Corporations
and other members of the Consolidated Group
by the State of Florida, which audits
currently are pending. Ad Valorem litigation
with the Property Assessor for the State of
Florida ) also is pending, as identified in
the Disclosure Letter. No claim has been
made by an authority in a jurisdiction where
the Corporations do not file Other Tax
Returns that the Corporations are, or may be
subject to Tax by that jurisdiction. The
Corporations have withheld and paid all
Other Taxes required to have been withheld
and paid in connection with the amounts paid
or owing to any employee, independent
contractor, creditor, stockholder or other
third party. To the knowledge of
Shareholder, none of the Shareholder, the
Corporations or the Consolidated Group has
waived any statute of limitations with
respect to Other Taxes or agreed to an
extension of time with respect to any Other
Tax assessment or deficiency payable by the
Corporations.
7.17.2. AUDITS AND SUPPLEMENTAL ASSESSMENTS. To the
extent that there is any audit, supplemental
assessment or other challenge to the amounts
reported and paid by the Corporations in
respect of any Other Taxes, the Corporations
and Buyer shall advise Shareholder thereof
and shall keep Shareholder advised
concerning any possible assessment of
additional tax obligations in respect of
Other Taxes payable for the period with
respect to which Shareholder is responsible.
Buyer and the Corporations will advise
Shareholder of the terms of any proposed
settlement of such audits or additional
assessments which could result in the
liability of Shareholder under this
Agreement, and provide Shareholder with a
reasonable opportunity to object to the
terms of such settlement.
7.18 LIMITATIONS ON REPRESENTATIONS AND WARRANTIES. Shareholder's
representations and warranties hereunder are subject to the
following:
(a) BUYER HEREBY AGREES AND ACKNOWLEDGES THAT,
EXCEPT AS SET FORTH IN THIS SECTION 7,
NEITHER SHAREHOLDER NOR ANY AGENT, ATTORNEY,
EMPLOYEE OR REPRESENTATIVE OF SHAREHOLDER
HAS MADE ANY REPRESENTATION WHATSOEVER
REGARDING THE SUBJECT MATTER OF THIS
AGREEMENT, OR ANY PART THEREOF, INCLUDING
(WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING) REPRESENTATIONS OR WARRANTIES AS
TO THE OPERATION OF THE BUSINESS OR THE
PHYSICAL NATURE OR CONDITION OF THE
PROPERTY,
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<PAGE> 46
OR THE IMPROVEMENTS THEREON, OR THE
CAPABILITIES THEREOF, AND THAT BUYER, IN
EXECUTING, DELIVERING AND/OR PERFORMING THIS
AGREEMENT, DOES NOT RELY UPON ANY STATEMENT
AND/OR INFORMATION TO WHOMEVER MADE OR
GIVEN, DIRECTLY OR INDIRECTLY, ORALLY OR IN
WRITING, BY ANY INDIVIDUAL, FIRM OR
CORPORATION EXCEPT THOSE EXPRESSLY CONTAINED
HEREIN OR DELIVERED PURSUANT HERETO OR IN
ANY DOCUMENTS EXECUTED IN CONNECTION
HEREWITH. EXCEPT AS OTHERWISE PROVIDED
HEREIN, BUYER AGREES TO TAKE THE STOCK, AND
ACCEPTS ALL ASSETS OF THE CORPORATION,
INCLUDING WITHOUT LIMITATION THE PROPERTY.
"AS IS," AS OF THE CLOSING DATE. IN
ADDITION, EXCEPT AS SET FORTH IN THIS
SECTION 7 AND SHAREHOLDER'S INDEMNIFICATION
HEREUNDER, SHAREHOLDER MAKES NO
REPRESENTATIONS OR WARRANTIES REGARDING THE
COMPLIANCE WITH ANY ENVIRONMENTAL
REQUIREMENTS, INCLUDING THE EXISTENCE OF
HAZARDOUS MATERIALS IN, ON OR UNDER THE
PROPERTY. THE PROVISIONS OF THIS PARAGRAPH
SHALL SURVIVE THE CLOSING OR ANY TERMINATION
OF THIS AGREEMENT.
(b) SHAREHOLDER'S KNOWLEDGE; RECEIPT OF NOTICE.
Each reference in Shareholder's
representations in this Agreement to
Shareholder or the Corporations having
received notice is limited to written notice
received by Shareholder and written notice
having been received by the Designated
Employees of Corporation. The term
"DESIGNATED EMPLOYEES OF CORPORATION" shall
mean the following employees of the
Corporations who are currently involved in
the operation, maintenance, management
and/or leasing of the Property: C. Kenneth
Dunn and Michael Abes. The term "to
Shareholder's knowledge," "to the knowledge
of Shareholder" "to Corporation's knowledge"
or "to the knowledge of Corporation(s)" or
similar phrase shall mean the matters a
person is actually aware of, or those
matters a prudent and competent person under
similar circumstances would have knowledge
of, without any duty to investigate. A
non-natural person shall be deemed to have
knowledge if any individual who is serving,
or has at any time served, as a director,
officer, or management employee of such
person (or in a similar capacity) has, or at
any time had, knowledge of such matter.
7.18.2. SUPPLEMENTS TO DISCLOSURES. Shareholder may
supplement any disclosure made by
Shareholder to Buyer prior to the Closing,
by
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<PAGE> 47
notice given in accordance with Section 12,
to update the disclosures made hereunder or
to otherwise include information which would
have been required to be set forth or
described in the 1997 Financial Statements
or the 1998 Audited Financials or to have
been noted as an exception to the
representations and warranties in Section 7
had it existed on the date hereof. Buyer
must accept such supplement within five (5)
days after delivery of such supplemental or
further disclosure by Shareholder. If such
supplemental disclosure is not timely
accepted by Buyer in accordance with this
Agreement, Buyer may terminate this
Agreement and obtain a refund of the Deposit
(and interest thereon).
8. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants
to Shareholder that as of the date of this Agreement and as of the
Closing Date:
8.1 BUYER'S EXISTENCE. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Kentucky.
8.2 BUYER'S AUTHORITY. Buyer has the full corporate power and
authority to execute, deliver and perform Buyer's obligations
under this Agreement.
8.3 ENFORCEABILITY. This Agreement constitutes a legal, valid and
binding obligation of Buyer enforceable against Buyer in
accordance with its terms, except as enforceability may be
limited by the application of bankruptcy, insolvency,
reorganization, moratorium or similar laws or by equitable
principles affecting creditors' rights generally.
8.4 NO VIOLATION. The execution, delivery and performance of
Buyer's obligations under this Agreement and the consummation
of the transactions contemplated hereby by Buyer (i) will not
contravene, or result in a breach or violation of any
provisions of applicable law or regulation, or any agreement,
judgment, injunction, order, decree or other instrument to
which Buyer is a party or by which Buyer is bound; (ii) other
than the Approvals, do not require any consent, approval or
other authorization of any person, entity or authority
required to be obtained by Buyer not previously obtained, and
(iii) will not result in the creation of any lien or other
encumbrance on any asset of Buyer.
8.5 adverse events. There is no action, suit or proceeding,
pending or known to be threatened, against or affecting Buyer
in any court or before any arbitrator or before any
governmental authority which (a) in any manner raises any
question affecting the validity or enforceability of this
Agreement or any other agreement or instrument to which Buyer
is a party or by which it is bound and that is to be used in
connection with, or is contemplated by, this Agreement, (b)
could materially and adversely affect the business, financial
position or results of operations of Buyer, and (c) could
materially and adversely affect the ability of
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Buyer to perform its obligations hereunder, or under any
document to be delivered pursuant hereto.
8.6 BANKRUPTCY. No Act of Bankruptcy has occurred with
respect to Buyer.
8.7 EMPLOYEES OF CORPORATION. The Buyer represents and warrants to
Shareholder, without restricting the ability of Buyer in
Buyer's sole discretion to make employment decisions with
respect to all employees from and after the Closing Date, that
Buyer does not have any current plan to terminate any officer
or other executive employee of the Corporations, or to
restructure or terminate the employment of any category of
employee of the Corporations. Nothing herein is intended to
alter the employment-at-will status of any employee whose
employment is not currently the subject of an employment
agreement.
9. DEFAULT.
9.1 MATERIAL BREACH. In the absence of a timely cure of any breach
which has occurred prior to the Closing of the transactions
described in this Agreement:
9.1.1. SHAREHOLDER'S LIQUIDATED DAMAGES.
IF THE TRANSFER OF THE STOCK PURSUANT TO
THIS AGREEMENT IS NOT CONSUMMATED BECAUSE OF
BUYER'S DEFAULT UNDER THE AGREEMENT,
SHAREHOLDER SHALL BE ENTITLED TO RETAIN THE
DEPOSIT AND ALL INTEREST ACCRUED THEREON AS
SHAREHOLDER'S LIQUIDATED DAMAGES. THE
PARTIES ACKNOWLEDGE THAT THE PAYMENT OF SUCH
LIQUIDATED DAMAGES IS NOT INTENDED AS A
FORFEITURE OR PENALTY, BUT IS INTENDED TO
CONSTITUTE LIQUIDATED DAMAGES TO
SHAREHOLDER.
9.1.2. BUYER'S REMEDIES.
IF THE TRANSFER OF THE STOCK PURSUANT TO
THIS AGREEMENT IS NOT CONSUMMATED BECAUSE OF
SHAREHOLDER'S DEFAULT UNDER THE AGREEMENT,
BUYER SHALL BE ENTITLED EITHER TO TERMINATE
THIS AGREEMENT AND OBTAIN REFUND OF THE
DEPOSIT (AND INTEREST THEREON), OR TO THE
REMEDY OF SPECIFIC PERFORMANCE WITH RESPECT
TO THIS AGREEMENT, BUT SPECIFIC PERFORMANCE
SHALL BE ALLOWED ONLY UNDER THE FOLLOWING
CONDITIONS AND CIRCUMSTANCES:
(x) BUYER SHALL HAVE PERFORMED IN ALL
MATERIAL RESPECTS ALL OBLIGATIONS OF
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<PAGE> 49
BUYER UNDER THIS AGREEMENT WHICH ARE
TO BE PERFORMED AS OF SUCH DATE,
EXCEPT THAT WITH RESPECT TO
DEPOSITING THE BALANCE OF THE
PURCHASE PRICE, BUYER SHALL BE
READY, WILLING AND ABLE TO TIMELY
DEPOSIT SAID FUNDS IN ESCROW; AND
(y) THE ACTION SHALL BE COMMENCED, AND A
COPY OF THE SUMMONS AND COMPLAINT
SHALL HAVE BEEN DELIVERED TO
SHAREHOLDER IN THE SAME MANNER AS
REQUIRED FOR THE DELIVERY OF A
NOTICE PURSUANT TO THIS AGREEMENT AS
SET FORTH IN SECTION 12, NOT LATER
THAN FORTY FIVE (45) DAYS AFTER
SHAREHOLDER'S DEFAULT.
IN THE EVENT THAT BUYER SHALL NOT HAVE MADE
ITS ELECTION TO BRING SUCH SPECIFIC
PERFORMANCE ACTION, AND DELIVERED NOTICE
THEREOF TO SHAREHOLDER WITHIN FORTY FIVE
(45) DAYS AFTER SHAREHOLDER'S DEFAULT AS
REQUIRED ABOVE, BUYER SHALL BE DEEMED
IRREVOCABLY TO HAVE WAIVED, AS MATERIAL
CONSIDERATION FOR SHAREHOLDER'S HAVING
ENTERED INTO THIS AGREEMENT, THE REMEDY OF
SPECIFIC PERFORMANCE ON ACCOUNT OF
SHAREHOLDER'S DEFAULT UNDER THIS AGREEMENT
AND TO HAVE ELECTED TO TERMINATE THIS
AGREEMENT AND OBTAIN REFUND OF THE DEPOSIT
(AND INTEREST THEREON).
9.2 NO CONTESTING LIQUIDATED DAMAGES. As material consideration to
each party's agreement to the liquidated damages provisions
stated above, each party hereby agrees to waive any and all
rights whatsoever to contest the validity of the liquidated
damage provisions for any reason whatsoever, including, but
not limited to, that such provision was unreasonable under
circumstances existing at the time this Agreement was made.
9.3 REMEDIES. If either party breaches its obligations hereunder,
then the other party may, without terminating this Agreement,
suspend performance until such breach is cured. The
obligations of Shareholder under this Agreement shall be
without recourse to the assets of any of Shareholder's
officers, shareholders, directors, or employees or any parent
company, affiliate or subsidiary of Shareholder. The sole
recourse of Shareholder for Buyer's default under this
Agreement shall be limited solely to the payment of the
liquidated damages payable to Shareholder as provided in
Section 9.1 above. The obligations of Buyer under this
Agreement shall be without recourse to the assets of Buyer's
officers, shareholder, directors or employees, or any parent
company, affiliate or subsidiary of Buyer.
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<PAGE> 50
10. WAIVER OF TRIAL BY JURY. Shareholder and Buyer, to the extent they may
legally do so, hereby expressly waive any right to trial by jury of
any claim, demand, action, cause of action, or proceeding arising
under or with respect to this Agreement, or in any way connected with,
or related to, or incidental to, the dealings of the parties hereto
with respect to this Agreement or the transactions related hereto or
thereto, in each case whether now existing or hereafter arising, and
irrespective of whether sounding in contract, tort, or otherwise. To
the extent they may legally do so, Shareholder and Buyer hereby agree
that any such claim, demand, action, cause of action, or proceeding
shall be decided by a court trial without a jury and that any party
hereto may file an original counterpart or a copy of this Section with
any court as written evidence of the consent of the other party or
parties hereto to waiver of its or their right to trial by jury.
11. ATTORNEY'S FEES. If any action or proceeding or arbitration is
commenced by either party to enforce their rights under this Agreement
or to collect damages as a result of the breach of any of the
provisions of this Agreement, the prevailing party in such action or
proceeding or arbitration, including any bankruptcy, insolvency or
appellate proceedings, shall be entitled to recover all reasonable
costs and expenses, including, without limitation, reasonable
attorneys' fees and court costs, in addition to any other relief
awarded by the court or arbitrator.
12. NOTICES. All notices, demands, approvals, and other communications
provided for in this Agreement shall be in writing and shall be
effective upon the earliest of the following to occur: (a) when
delivered to the recipient; or (b) three (3) Business Days after
deposit in a sealed envelope in the United States mail, postage
prepaid by registered or certified mail, return receipt requested,
addressed to the recipient as set forth below; or (c) the next
business day after delivery to an authorized representative of a
reputable overnight courier service or (d) when sent if sent via
facsimile to the numbers below with receipt confirmed. All notices
shall be sent to the addresses set forth below, unless such address
shall previously been changed by notice delivered in writing in
accordance with the terms of this Agreement:
If to Shareholder: KE Acquisition, Inc.
c/o 660 South Figueroa Street
Suite 1720
Los Angeles, California 90017
Attn: Mr. Kaoru Nishikawa
Fax No.: (213) 622-6252
With a copy to: Sonnenschein Nath & Rosenthal
601 South Figueroa Street, Suite 1500
Los Angeles, CA 90017
Attn: Pamela K. Prickett, Esq.
Fax No.: (213) 623-9924
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<PAGE> 51
If to Buyer: Churchill Downs Incorporated
700 Central Avenue
Louisville, Kentucky 40208
Attn: Robert L. Decker, Executive
Vice President
Fax No.: (502) 636-4439
With a copy to: Wyatt, Tarrant & Combs
2800 Citizens Plaza
Louisville, Kentucky 40202
Attn: Robert A. Heath
Fax No.: (502) 589-0309
All notices to Escrow Holder shall be sent to Escrow Holder's Address,
Attention: Rose Martinez, fax no. (213) 488-4384. If the date on which
any notice to be given hereunder falls on a Saturday, Sunday or legal
holiday, then such date shall automatically be extended to the next
Business Day immediately following such Saturday, Sunday or legal
holiday. The foregoing addresses may be changed by written notice given
in accordance with this Section.
13. AMENDMENT: COMPLETE AGREEMENT. All amendments and supplements to this
Agreement must be in writing and executed by Buyer and Shareholder.
This Agreement contains the entire agreement and understanding
between Buyer and Shareholder concerning the subject matter of this
Agreement and supersedes all prior agreements, terms, understandings,
conditions, representation and warranties, whether written or oral,
made by Buyer or Shareholder concerning the Property or the other
matters which are the subject of this Agreement. This Agreement has
been drafted through a joint effort of the parties and their counsel
and, therefore, shall not be construed in favor of or against either of
the parties. The preparation and/or delivery of unsigned drafts of
this Agreement shall not create any legally binding rights in the Stock
and/or obligations of the parties, and Buyer and Shareholder
acknowledge that this Agreement shall be of no effect until it is duly
executed by Buyer and Shareholder.
14. GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Florida.
15. SEVERABILITY. If any provision of this Agreement or application thereof
to any person or circumstance shall to any extent be invalid or
unenforceable, the remainder of this Agreement (including the
application of such provision to persons or circumstances other than
those to which it is held invalid or unenforceable) shall not be
affected thereby, and each provision of this Agreement shall be valid
and enforced to the fullest extent permitted by law.
16. COUNTERPARTS, HEADINGS AND DEFINED TERMS. This Agreement may be
executed in counterparts, each of which shall be an original, but all
of which together shall constitute one agreement. The headings to
sections of this Agreement are for convenient reference only and shall
not be used in interpreting this Agreement. Unless expressly stated to
the
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contrary, all references to "days" in this Agreement mean calendar
days, and "business days" has the meaning assigned to such term in
Section 1.7.
17. TIME OF THE ESSENCE. Time is of the essence of this Agreement.
18. WAIVER. No waiver by Buyer or Shareholder of any of the terms or
conditions of this Agreement or any of their respective rights under
this Agreement shall be effective unless such waiver is in writing and
signed by the party charged with the waiver.
19. THIRD PARTIES. This Agreement is entered into for the sole benefit of
Buyer and Shareholder and their respective permitted successors and
assigns. No party other than Buyer and Shareholder and such permitted
successors and assigns shall have any right of action under or rights
or remedies by reason of this Agreement.
20. ADDITIONAL DOCUMENTS. Each party agrees to perform any further acts and
to execute and deliver such further documents which may be reasonably
necessary to carry out the terms of this Agreement.
21. INDEPENDENT COUNSEL. Buyer and Shareholder each acknowledge that: (i)
they have been represented by independent counsel in connection with
this Agreement; (ii) they have executed this Agreement with the advice
of such counsel; and (iii) this Agreement is the result of negotiations
between the parties hereto and the advice and assistance of their
respective counsel. The fact that this Agreement was prepared by
Shareholder's counsel as a matter of convenience shall have no import
or significance. Any uncertainty or ambiguity in this Agreement, shall
not be construed against Shareholder because Shareholder's counsel
prepared this Agreement in its final form.
22. EFFECT OF REPRESENTATIONS AND WARRANTIES. The express representations
and warranties made by any party in this Agreement (as such
representations or warranties may be supplemented or modified (with
Buyer's express or deemed consent) in accordance with the terms of this
Agreement, including without limitation by Shareholder's delivery of
the Certificate to be delivered pursuant to Section 3.6.5 which is
accepted by Buyer, which shall supercede any conflicting representation
or warranty set forth in this Agreement) shall survive the Closing of
the transactions described herein for a period of two (2) years, with
the exception of Section 7.2, Section 7.7 (only as to the
representations and warranties set forth in the third and fourth
sentences thereof, with respect to Environmental Compliance), and 7.17
which shall survive for the period of the statute of limitations
applicable to the respective subject of such representations and
warranties, or a claim based upon a breach thereof. No claim shall be
asserted based upon a violation or breach of any representation or
warranty contained in this Agreement unless the aggregate amount of the
damages claimed to have been caused as a direct result of all such
breaches or violations is not less than One Hundred Thousand Dollars
($100,000.00) and the particular items which collectively comprise such
claimed damages each have an individual amount of not less than Five
Thousand Dollars ($5,000.00) as to any individual item of damage within
that aggregate claimed damages. To the extent that the aggregate damage
of $100,000.00 is met or exceeded, the full amount of the damage (and
not just the amounts claimed in excess of $100,000.00) shall
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<PAGE> 53
be payable, subject to the requirement that no constituent item of
damage be for an amount less than $5,000.00). No party shall have any
liability in respect of any alleged breach or violation of a
representation or warranty unless a claim is made setting forth the
specific breach or basis of liability, and the amount of damages
asserted to have been caused thereby, which notice shall be delivered
to the party asserted to be in breach or violation prior to the
expiration of the respective time limitation set forth above applicable
to the specific representation or warranty asserted to have been
breached.
Shareholder shall have no liability with respect to any of the
representations or warranties made by Shareholder in connection with
this Agreement if, prior to the Closing, Buyer has actual knowledge
(from whatever source, including without limitation as a result of
Buyer's due diligence investigations or written disclosure by
Shareholder or Shareholder's agents and employees) that contradicts any
of the foregoing representations and warranties in any material respect
or renders any of the foregoing representations and warranties untrue
or incorrect in any material respect, and Buyer nonetheless consummates
the transaction contemplated by this Agreement.
23. AS IS TRANSACTION; NO WARRANTIES. EXCEPT FOR THE EXPRESS
REPRESENTATIONS AND WARRANTIES AND COVENANTS SET FORTH IN THIS
AGREEMENT, THE STOCK, CORPORATIONS AND ALL ASSETS OF THE CORPORATIONS,
INCLUDING WITHOUT LIMITATION THE PROPERTY IS PURCHASED AND SOLD "AS
IS". THE PURCHASE PRICE AND THE TERMS AND CONDITIONS SET FORTH HEREIN
ARE THE RESULT OF ARM'S-LENGTH BARGAINING BETWEEN PARTIES FAMILIAR WITH
TRANSACTIONS OF THIS KIND, AND SAID PRICE, TERMS AND CONDITIONS REFLECT
THE FACT THAT BUYER SHALL HAVE THE BENEFIT OF, AND IS RELYING UPON, NO
STATEMENTS, REPRESENTATIONS OR WARRANTIES WHATSOEVER, MADE BY OR
ENFORCEABLE AGAINST SHAREHOLDER RELATING TO THE CORPORATIONS, THE
PROPERTY OR OTHER ASSETS, EXCEPT SUCH REPRESENTATIONS AND WARRANTIES
AND OTHER PROVISIONS AS ARE EXPRESSLY SET FORTH IN THIS AGREEMENT.
BUYER REPRESENTS, WARRANTS AND COVENANTS TO SHAREHOLDER THAT, EXCEPT
FOR SHAREHOLDER'S EXPRESS REPRESENTATIONS AND WARRANTIES AND COVENANTS
SPECIFIED IN THIS AGREEMENT, BUYER IS RELYING SOLELY UPON BUYER'S OWN
INVESTIGATION OF THE CORPORATIONS AND THE PROPERTY. IF SHAREHOLDER
OBTAINS OR HAS OBTAINED THE SERVICES, OPINIONS OR WORK PRODUCT OF
SURVEYORS, ARCHITECTS, ENGINEERS, ESCROW HOLDER, GOVERNMENTAL
AUTHORITIES OR ANY OTHER PERSON OR ENTITY WITH RESPECT TO THE
CORPORATIONS OR THE PROPERTY, BUYER AND SHAREHOLDER AGREE THAT
SHAREHOLDER SHALL DO SO ONLY FOR THE CONVENIENCE OF BOTH PARTIES, AND
THE RELIANCE BY BUYER UPON ANY SUCH SERVICES, OPINIONS OR WORK PRODUCT
SHALL NOT CREATE OR GIVE RISE TO ANY LIABILITY OF OR AGAINST
SHAREHOLDER.
BUYER HEREBY EXPRESSLY ACKNOWLEDGES THAT PRIOR TO THE CLOSING, BUYER
WILL HAVE HAD THE OPPORTUNITY TO INVESTIGATE
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<PAGE> 54
ALL PHYSICAL AND ECONOMIC ASPECTS OF THE CORPORATIONS AND THEIR ASSETS
AND TO MAKE ALL INSPECTIONS AND INVESTIGATIONS OF THE CORPORATIONS AND
THE PROPERTY WHICH BUYER DEEMS NECESSARY OR DESIRABLE TO PROTECT ITS
INTERESTS IN ACQUIRING THE CORPORATION AND THE PROPERTY, INCLUDING,
WITHOUT LIMITATION, RACING OR GAMING LICENSES AND OTHER PERMITS RELATED
TO OPERATION OF THE BUSINESS, BUILDING PERMITS, CERTIFICATES OF
OCCUPANCY, ENVIRONMENTAL AUDITS AND ASSESSMENTS, TOXIC REPORTS,
SURVEYS, INVESTIGATION OF LAND USE AND DEVELOPMENT RIGHTS, AND THE
CONDITION OF THE PROPERTY AND ALL IMPROVEMENTS THEREON (INCLUDING
WITHOUT LIMITATION WITH RESPECT TO ANY ENVIRONMENTAL HAZARDS OR
CONDITIONS). EXCEPT AS MAY BE SET FORTH IN THIS AGREEMENT, BUYER DOES
HEREBY WAIVE, AND SHAREHOLDER DOES HEREBY DISCLAIM, ALL WARRANTIES OF
ANY TYPE OR KIND WHATSOEVER WITH RESPECT TO THE PROPERTY, WHETHER
EXPRESS OR IMPLIED, INCLUDING, BY WAY OF DESCRIPTION BUT NOT
LIMITATION, THOSE OF FITNESS FOR A PARTICULAR PURPOSE AND USE.
24. GOVERNMENTAL APPROVALS; LICENSE TRANSFER. Nothing contained in this
Agreement shall be construed as authorizing Buyer to apply for any
discretionary governmental act, approval or permit with respect to the
Corporations, Business or Property prior to the Closing, other than the
submission by Buyer to the Division of Pari-Mutuel Wagering of an
application for approval of a change in control of the Pari-Mutuel
wagering permits and licenses issued to Calder and Tropical for the
operation of the Business ("Transfer Application") and the HSR Notice.
Buyer agrees to submit Buyer's Transfer Application and the HSR Notice
as provided in Section 3.3.4 above. Shareholder agrees to cooperate
with Buyer, and to exercise Shareholder's best commercially practicable
efforts to cause the Transfer Application to be approved as promptly as
practicable. Buyer agrees not to submit any reports, studies or other
documents, including, without limitation, plans and specifications,
impact statements for water, sewage, drainage or traffic, environmental
review forms, or energy conservation checklists to any governmental
agency, or any amendment or modification to any such instruments or
documents prior to the Closing unless first approved by Shareholder,
which approval shall not be unreasonably withheld. Buyer's obligation
to purchase the Stock shall not be subject to or conditioned upon
Buyer's obtaining any variances, zoning amendments, subdivision maps,
lot line adjustment or other discretionary governmental act, approval
or permit other than approval of the Transfer Application and HSR
Notice.
25. INDEMNIFICATION FOR BREACH OF REPRESENTATIONS AND WARRANTIES. Buyer and
Shareholder each hereby agrees to indemnify and hold the other harmless
from, against and respect of (and shall be entitled to reimbursement on
demand by the indemnifying party for) any and all loss, liability,
damages or expenses (including reasonable attorneys' fees) resulting
from (i) any untrue representation or breach of warranty by the
indemnifying party contained herein, or in any certificate, document or
instrument delivered to the other party hereunder or (ii) any breach by
Buyer or Shareholder of any covenant which is, by its terms, to be
performed by Buyer or Shareholder from and after the Closing of
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<PAGE> 55
the transactions described herein. Any covenants with respect to
performance which are required to be performed in full prior to the
Closing and are not expressly stated to survive and be required to be
performed post-Closing shall be deemed to be waived or satisfied by the
Closing of the transactions described in this Agreement.
In the event any loss, liability, damages or expenses are incurred by
the indemnified party for which such indemnified party would be
entitled to indemnification pursuant to this Section 25, the
indemnified party shall promptly notify the indemnifying party in
writing of such loss, liability, damages and expenses. The indemnifying
party agrees that it will promptly reimburse and pay the indemnified
party for such damages, loss, liability and expenses. If any claim for
indemnification hereunder is based upon an action or claim filed or
made by a third party, the indemnifying party shall have the right to
negotiate a settlement or compromise of any such action or claim, or to
defend any such action or claim at the sole cost and expense of the
indemnifying party with counsel selected by the indemnifying party and
approved by the indemnified party; provided, however, that the
indemnified party at its expense shall have the right to have its
counsel participate in such proceedings, and any compromise or
settlement of any claim for other than solely money damages shall be
subject to the consent of the indemnified party.
An assertion, demand or request for indemnification pursuant to
subsection (i) of the first paragraph of this Section 25, shall not be
effective unless it is made within two years after the Closing Date or
such longer period as may be in accordance with Section 22, and only to
the extent that the damage caused by such breach of warranty or untrue
representation exceeds One Hundred Thousand Dollars ($100,000.00) in
the aggregate and not less than Five Thousand Dollars ($5,000.00) as to
any individual item of damage within that aggregate claimed damage.
26. ASSIGNMENT. Neither Shareholder nor Buyer shall assign its rights nor
delegate its obligations hereunder, without obtaining the prior written
consent of the other. Notwithstanding the foregoing, Buyer may assign
its rights and delegate its obligations hereunder if (i) the assignee
and/or delegatee is a partnership, limited liability company or other
entity formed by Buyer, the principals of Buyer or any entity which
controls or is controlled by or under common control with Buyer or the
principals of Buyer, and (ii) the assignee and/or designee has executed
an express written assumption of all of Buyer's obligations hereunder.
In no event shall any such assignment relieve Buyer from its
obligations under this Agreement. Any other purported or attempted
assignment or delegation without obtaining Shareholder's prior written
consent shall be void and of no effect.
27. SUCCESSORS AND ASSIGNS. Subject to the restrictions on transfer set
forth in Section 26, this Agreement shall be binding upon and inure to
the benefits of the heirs, successors and assigns of the parties
hereto. In no event shall Buyer have any right to delay or postpone the
Closing to create a partnership, corporation or other form of business
association or to obtain financing to acquire title to the Stock or to
coordinate with any other sale, transfer, exchange or conveyance.
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<PAGE> 56
28. EXHIBITS. Each reference to an exhibit, appendix or schedule in this
Agreement shall mean the exhibits, appendices and schedules attached to
or delivered as part of the Disclosure Letter to this Agreement. Each
such exhibit, appendix and schedule is incorporated herein by this
reference.
29. DUTY OF CONFIDENTIALITY. Buyer and Shareholder covenant, represent and
warrant that each shall keep all information and/or reports obtained
from the other, or related to or connected with the Property, the other
party, or this transaction, confidential and will not disclose any such
information to any person or entity, except such disclosure to such
party's attorneys, accountants or advisors assisting with this
transaction as is necessary in connection with this transaction,
disclosure of information in the public domain or compelled by law or
order of court, or the rules and regulations of the SEC or the Nasdaq
Stock Market, without obtaining the prior written consent of the other
party, which consent shall not be unreasonably withheld, conditioned or
delayed. Buyer is in full compliance with its obligations under the
terms of the Confidentiality Agreement dated October 24, 1998, and both
Buyer and Shareholder are in full compliance with their obligations
concerning confidentiality under the terms of the proposal letter dated
December 24, 1998 and the terms thereof are hereby incorporated herein.
Buyer's obligations under such agreement shall terminate upon the
Closing; provided, however, that from and after the Closing Date, Buyer
shall comply with this Section 29 and any confidentiality requirements
imposed on Buyer under any applicable law, except that Buyer shall be
permitted to disclose information concerning the Corporations.
30. FURTHER DOCUMENTS AND ACTS; GOOD FAITH. Each of the parties hereto
agrees to cooperate in good faith with each other, and to execute and
deliver such further documents and perform such other acts as may be
reasonably necessary or appropriate to consummate and carry into effect
the transactions contemplated under this Agreement. Both parties'
obligations to perform acts or to approve, disapprove, or conditionally
approve documents, materials or other matters called for in this
Agreement shall, unless expressly permitted by the terms of this
Agreement to be in the sole and absolute discretion of such party, be
in good faith.
31. GROUND LEASE PROPERTY TRANSACTION. Buyer acknowledges that Shareholder
has entered into an agreement with American Real Estate Holding Limited
Partnership ("ARE") to sell to ARE the fee interest in the real
property adjacent to the Property on which the Holiday Inn Hotel is
located. All net proceeds payable by ARE to Calder, as "Seller" under
such agreement, is required by the Mortgagee to be paid to Mortgagee in
partial repayment of the Outstanding Loan Balance as a condition to
obtaining from Mortgagee of a partial reconveyance of the Mortgage with
respect to such real property, and Buyer hereby accepts and agrees that
such net proceeds payable to Calder shall be paid to the Mortgagee in
partial repayment of the Outstanding Loan Balance unless such
Outstanding Loan Balance has already been paid.
32. INDEMNIFICATION BY BUYER. With respect to the resignations to be given
by the officers of the Corporations as set forth in Section 3.6.8, or
the termination of the Calder 401 (k) Plan in accordance with Section
7.9(a) (each and all of which is referred to as a "Buyer Requested
Action"), Buyer hereby agrees to indemnify and hold Shareholder (and in
the
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<PAGE> 57
event the transactions described herein do not Close, the Corporations)
harmless from, against and respect of (and the indemnified party shall
be entitled to reimbursement on demand from Buyer for) any and all
loss, liability, damage or expense (including reasonable attorneys'
fees) resulting from any claim or damage asserted to have been caused
by having performed the Buyer Requested Action.
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<PAGE> 58
IN WITNESS WHEREOF, Buyer and Shareholder do hereby execute this
Agreement as of the date first written above.
"SHAREHOLDER"
KE ACQUISITION CORP.,
a Delaware corporation
By: /S/ K. NISHIKAWA
Its: PRESIDENT
"BUYER"
CHURCHILL DOWNS INCORPORATED
a Kentucky corporation
By: /S/ ROBERT L. DECKER
Its: EXECUTIVE VICE PRESIDENT AND CFO
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<PAGE> 59
ACCEPTANCE BY ESCROW HOLDER
Escrow Holder acknowledges receipt of the foregoing Agreement and accepts the
instructions contained therein.
CHICAGO TITLE INSURANCE COMPANY
Escrow Holder
/S/ NKO JUSTIN
By: NKO JUSTIN FOR ROSE MARTINEZ
Its: SENIOR ESCROW OFFICER
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<PAGE> 60
APPENDIX 1
OUTSTANDING LOAN BALANCE
1. Loan Agreement by and among Calder Race Course, Inc., Tropical Park,
Inc., and Catoctin International Racing Corporation as "Borrower" and
Kawasaki Leasing International, Inc. as "Lender, dated as of July 20,
1990 with respect to the $88,000,000.00 loan made pursuant thereto (the
"Loan").
(a) Secured Promissory Note in the principal amount of Eighty Eight Million
Dollars made by Borrower in favor of Lender in respect of the Loan.
(See Item (j))
(b) Guaranty and Security Agreement made by Calder dated as of August 30,
1990 in respect of the Loan. (c) Mortgage and Security Agreement made
by Calder dated as of August 30, 1990 securing the Loan. (d) Assignment
of Leases, Rents and Profits made by Calder dated as of August 30, 1990
in respect of the Loan.
(e) Guaranty and Security Agreement made by Tropical dated as of August 30,
1990 in respect of the Loan.
(f) Subordination Agreement made by Tropical dated as of August 30, 1990 in
respect of the Loan.
(g) UCC-1 Financing Statements perfecting the Security Agreements made by
Calder and Tropical, as renewed.
(h) Contribution to capital of K E Acquisition Corp. of a portion of the
outstanding Loan balance as of January 1, 1992.
(i) Promissory Note dated as of January 2, 1992 made by Calder in favor of
Lender in the original principal amount of $3,094,878.00. (See Item
(j))
(j) Amended and Restated Promissory Note dated as of November 30, 1995 made
by Calder and Tropical confirming the then-outstanding principal
balance of the Loan as $58,873,570.00.
(k) Assignment of interest in Loan made by Kawasaki Leasing International
as "Assignor" to Kawasaki Leasing (USA), Inc. as "Assignee" dated as of
November 30, 1995.
APPENDIX I
<PAGE> 61
EXHIBIT "A"
LEGAL DESCRIPTION
The North 3/4 of the NW 1/4, less the West 30 feet thereof; the N 1/2 of the NE
1/4; and the N 1/2 of the SE 1/4 of the NE 1/4, all of Section 34, Township 51
South, Range 41 East, Miami-Dade County, Florida;
AND
All that portion of the S 1/2 of the SE 1/4 of the NE 1/4 of said Section 34
described as follows:
Begin at the Northeast corner of said S 1/2 of the SE 1/4 of the NE 1/4 of said
Section 34; thence run South 51 feet along the East line thereof; thence run
West 1323.64 feet, more or less to an intersection with the West line of said S
1/2 of the SE 1/4 of the NE 1/4 at a point 76 feet South of the Northwest corner
thereof, as measured along said West line; thence run North 76 feet along said
West line, to the Northwest corner of said S 1/2 of the SE 1/4 of the NE 1/4;
thence run East 1323.33 feet, more or less, along the North line of said S 1/2
of the SE 1/4 of the NE 1/4, to the Point of Beginning;
AND
All that portion of the N 1/2 of the SW 1/4 of the NE 1/4 of said Section 34
described as follows:
Begin at Northeast corner of said N 1/2 of the SW 1/4 of the NE 1/4; thence run
South 91 feet along the East line thereof; thence run West 1322.75 feet, to an
intersection with the West line of said N 1/2 of the SW 1/4 of the NE 1/4, at a
point 115 feet South of the Northwest corner thereof, as measured along said
West line; thence run North 115 feet along said West line to the Northwest
corner of said N 1/2 of the SW 1/4 of the NE 1/4; thence run East 1322.44 feet
along the North line of said N 1/2 of the SW 1/4 of the NE 1/4 of said Section
34 to the Point of Beginning;
AND
All that portion of the S 1/2 of the S 1/2 of the NW 1/4 of said Section 34
described as follows:
Begin at the Northeast corner of said S 1/2 of the S 1/2 of the NW 1/4; thence
run South 97.0 feet along the East line thereof; thence run West 2596.46 feet to
an intersection with a line 43 feet East of, as measured at right angles, and
parallel to the West line of said NW 1/4, at a point 137 feet South of the North
line of said S 1/2 of the S 1/2 of the NW 1/4, as measured along said parallel
line; thence run North 137 feet along said parallel line, to an intersection
with said North line of the S 1/2 of the S 1/2 of the NW 1/4; thence run East
2596.03 feet along said North line to the Point of Beginning;
AND
APPENDIX A-1
<PAGE> 62
All that portion of the NW 1/4 of Section 35, Township 51 South, Range 41 East,
Miami-Dade County, Florida, lying West of a line 5 feet West of and parallel to
the Westerly right-of-way line of the Sunshine State Parkway (Florida's
Turnpike), less the South 50 feet thereof all as described in Clerk's File No.
74R-111031 as recorded in the Public Records of Miami-Dade County, Florida;
AND
The West 20 feet of the South 50 feet of the NW 1/4 of said Section 35;
AND
The West 70 feet of the SW 1/4 of said Section 35 lying North of the Snake Creek
Canal right-of-way, less the East 50 feet thereof;
LESS
County Line Road right-of-way as described in Official Records Book 6971, at
Page 631, of the Public Records of Miami-Dade County, Florida;
AND LESS
COMMENCE at the Northwest corner of the Northwest 1/4 of Section 35, Township 51
South, Range 41 East; thence North 88(degree)56'40" East along the North line of
said Northwest 1/4, for a distance of 6.47 feet; thence South 03(degree)03'20"
East for a distance of 74.31 feet to a point on the South right-of-way line of
S.R. 872 as shown on the Right of Way Map for Section 87018-2501, said point
also being the Point of Beginning; thence North 88(degree)58'40" East along the
South right-of-way line of said S.R. 872, for 82.88 feet to a point on the West
right-of-way line of Florida's Turnpike (Sunshine State Parkway) as shown on the
Right of Way Map for Contract 1.9 sheet 4 of 8; thence South 02(degree)30'57"
East along the West right-of-way line of said Florida's Turnpike for 81.15 feet
to a point of intersection with a circular curve concave to the Southwest, said
point bearing North 57(degree)33'27" East from the center of said circular
curve; thence Northwesterly along said circular curve to the left, having for
its elements a central angle of 31(degree)54'27" and a radius of 210.00 feet for
an arc distance of 116.95 feet to the Point of Beginning, lying and being in
Miami-Dade County, Florida.
Said lands being a portion of Sections 34 and 35, according to Newman's Survey
of the East Half of Township 51 South, Range 41 East, Florida, as recorded in
Plat Book 1, at Page 118, in the Public Records of Miami-Dade County, Florida.
AND LESS:
Tract "A" and a Portion of Tract "B" according to the plat of HOLIDAY INN AT
CALDER as recorded in Plat Book 95, at Page 94, of the Public Records of
Miami-Dade County, Florida, being more particularly described as follows:
APPENDIX A-2
<PAGE> 63
Commence at the N.W. corner of Section 34, Township 51 South, Range 41 East,
Miami-Dade County, Florida; thence North 88 degrees 30 minutes 20 seconds East
along the North line of said Section 34 for 20.00 feet; thence South 01 degree
47 minutes 34 seconds East parallel with the West line of said Section 34 for
54.93 feet to the point of intersection with the Southerly right-of-way line of
County Line Road; thence run North 88 degrees 18 minutes 38 seconds East along
the said Southerly right-of-way line of County Line Road for 10.00 feet to the
Northwest corner of said Tract "A", said point being the Point of Beginning of
the following described parcel of land; thence continue North 88 degrees 18
minutes 38 seconds East along said Southerly right-of-way line for 175.00 feet
to the N.E. corner of said Tract "A"; thence continue North 88 degrees 18
minutes 38 seconds East along the said Southerly right-of-way line for 458.00
feet to the Northeast corner of said Tract "B"; thence South 01 degree 41
minutes 22 seconds East along the most Easterly line of said Tract "B" for
117.00 feet to a point; thence run South 36 degrees 42 minutes 30 seconds West
for 266.31 feet to a point; thence run South 01 degree 47 minutes 34 seconds
East along the Easterly line of said Tract "B" for 23.79 feet to a point; thence
South 88 degrees 18 minutes 38 seconds West for 467.00 feet to the point of
intersection with the West line of said Tract "B"; thence North 01 degree 47
minutes 34 seconds West along the West line of said Tract "B" for 199.50 feet to
the Southwest, corner of said Tract "A"; thence continue North 01 degree 47
minutes 34 seconds West along the West line of said Tract "A" for 150.00 feet to
the Northwest corner of said Tract "A", said point being the Point of Beginning.
AND LESS
A portion of Section 34, Township 51 South, Range 41 East, Miami-Dade County,
Florida, being more particularly described as follows:
Commence at N.W. corner of Section 34, Township 51 South, Range 41 East,
Miami-Dade County, Florida; thence North 88 degrees 30 minutes 20 seconds East
along the North line of said Section 34 for 20.00 feet; thence South 01 degree
47 minutes 34 seconds East parallel with the West line of said Section 34 for
54.93 feet to the point of intersection with the Southerly right-of-way line of
County Line Road; thence run North 88 degrees 18 minutes 38 seconds East along
the said Southerly right-of-way line of County Line Road for 10.00 feet to the
Northwest corner of said Tract "A"; thence continue North 88 degrees 18 minutes
38 seconds East along said Southerly right-of-way line for 175.00 feet to the
N.E. corner of said Tract "A"; thence continue North 88 degrees 18 minutes 38
seconds East along the said Southerly right-of-way line for 458.00 feet to the
Northeast corner of said Tract "B"; thence South 01 degree 41 minutes 22 seconds
East along the most Easterly line of said Tract "B" for 117.00 feet to a point,
said point being the Point of Beginning of the herein described parcel of land;
thence continue South 01 degree 41 minutes 22 seconds East along the extension
of the most Easterly line of said Tract "B" for 34.52 feet to a point; thence
run South 31 degrees 54 minutes 47 seconds West for 188.66 feet to a point;
thence run South 32 degrees 07 minutes 11 seconds West for 40.14 feet to as
point; thence run South 85 degrees 09 minutes 13 seconds West for 38.69 feet to
the point of intersection with the Easterly line of said Tract "B"; thence run
North 01 degree 47 minutes 34 seconds West along the Easterly line of said Tract
"B" for 18.43 feet to a point, thence run North 36 degrees 42 minutes 30 seconds
East along the Easterly line of Tract "B" for 266.31 feet to the Point of
Beginning.
APPENDIX A-3
<PAGE> 64
EXHIBIT "B"
(Escrow Holder's General Provisions)
(See Escrow Holder's General Provisions, a copy of which are attached hereto and
incorporated herein.)
APPENDIX B
<PAGE> 65
CHICAGO TITLE INSURANCE COMPANY
GENERAL CONDITIONS OF ESCROW - A(1)
EXHIBIT "A"
Notwithstanding any terms, conditions, or provisions contained in other
documents executed by the parties to the contrary, these General Conditions of
Escrow shall apply to this escrow and the property received hereunder.
1. CHICAGO TITLE INSURANCE COMPANY is herein referred to as "CTIC."
2. DEPOSITS: All funds will be processed for collection in the normal course
of business. No disbursements will be made until the funds deposited have
been irrevocably credited to CTIC's account. CTIC may co-mingle funds
received by it in escrow with escrow funds of others and may, without
limitation, deposit such funds in its custodial or Escrow accounts with any
reputable trust company, bank, savings bank, savings association, or their
financial services entity, including any affiliate of CTIC. It is
understood that CTIC shall be under no obligation to invest the funds
deposited with it on behalf of any depositor unless a completed CTIC
"Investment of Escrow Funds" form is received and approved by CTIC, nor
shall it be accountable for any earnings of incidental benefit attributable
to the funds which may be received by CTIC while it holds such funds.
Deposits held by CTIC shall be subject to the provisions of Florida Statue
717. A service charge will be made equal to the greater of the original
service charge assessed, or $100.00 for each six (6) month period that the
money deposited with CTIC is held beyond the original settlement date.
3. LIMITATIONS OF LIABILITY: Without limitation, unless otherwise caused by
its own willful misconduct or gross negligence, CTIC shall not be liable
for any loss or damage resulting from the following:
a. The effect of the transaction underlying this escrow or of any element
of the transaction, including without limitation, any failure or delay
in the surrender of possession of the property, the rights or
obligations of any party in possession of the property, the financial
status or insolvency of any party, and any misrepresentation made by any
other party.
b. Any legal effect, insufficiency, or undesirability of any instrument
deposited with or delivered by CTIC or exchanged by the parties
hereunder, whether or not CTIC prepared such instrument.
c. The default, error, action, or omission of any party to the escrow.
d. Any loss or impairment of funds that have been deposited in escrow while
those funds are in the course of collection or while those funds are on
deposit in a financial institution if such loss or impairment results
from the failure, insolvency, or suspension of a financial institution.
e. Any defects or conditions of title to any property that is the subject
of this escrow, provided, however, that this limitation of liability
does not limit or affect the liability of CTIC under any title insurance
policy which it has issued or may issue. The parties agree that no title
insurance liability is created by this Agreement.
f. The expiration of any time limit or other consequence of delay, unless a
properly executed settlement instruction, accepted by CTIC has
instructed CTIC to comply with said time limit.
g. CTIC's compliance with any legal process, subpoena, writ, order,
judgment, or decree of any court whether issued with or without
jurisdiction and whether or not consequently vacated, modified, set
aside, or reversed.
<PAGE> 66
CHICAGO TITLE INSURANCE COMPANY
GENERAL CONDITIONS OF ESCROW - A(1)
EXHIBIT "A" - PAGE 2
4. DEFAULT, NON-PERFORMANCE AND DISPUTES: In the event written notice of a
default, non-performance, or dispute is given to CTIC by any party hereto,
CTIC will promptly notify all other parties in writing, return receipt
requested of such claim. Ten days after receipt of the return receipt by
CTIC, the escrowed funds or documents will be released pursuant to the
demand unless contrary written instructions are received from any other
party(ies) to the Escrow Agreement. If contrary written instructions are
received by CTIC before the ten days have elapsed after receipt of the
return receipt, CTIC will not disburse funds or deliver any instrument
without receipt of a written agreement executed by all parties to the
escrow or upon appropriate court order.
CTIC may consult with counsel of its own choice and shall have full and
complete authorization and protection for any action taken or suffered by
it hereunder, in good faith, and in accordance with the opinion of such
counsel.
CTIC shall not be liable for any mistakes of facts or error in judgment, or any
acts or omissions of any kind, unless caused by its willful misconduct or gross
negligence, and the parties hereto agree to indemnify and hold CTIC harmless
from any claims, demands, causes of action, liability, damages, and/or
judgments, including the costs of defending any action against it together with
any reasonable attorneys fees incurred therewith, in connection with CTIC's
undertaking pursuant to the terms and conditions of the Escrow Agreement.
5. SETTLEMENT STATEMENTS: CTIC shall prepare Settlement Statements or
otherwise account to the parties for all funds received and disbursed
hereunder at the time of final settlement and closing of escrow. CTIC shall
not be liable for the accuracy of information furnished to it by other
persons in the normal course of business, or the failure to adjust items
not designated in writing. Signed approval of Settlement Statements or
other accounting forms shall constitute the authority to CTIC to disburse
funds as shown thereon, and to deliver instruments held in escrow as set
forth in the escrow instructions. Upon completion of the disbursement of
funds and delivery of instruments, CTIC shall be released and discharged of
its escrow obligations hereunder.
6. ATTORNEY'S FEES: In the event of disagreement about the interpretation of
the Escrow Agreement or about the rights and obligations or the propriety
of any action contemplated by CTIC thereunder, CTIC may, in its sole
discretion, file an interpleader action or other appropriate legal action
to resolve the disagreement. To that end, all parties hereto agree (a) to
indemnify CTIC for all attorneys fees, court costs, and expenses incurred
for such action, and (b) to the extent that CTIC holds a fund under the
terms of this escrow, CTIC may charge that fund with any such attorneys
fees, court costs, and expenses as they are incurred by CTIC as well as any
service charges which may be unpaid.
<PAGE> 67
EXHIBIT "C"
Surveyor's Certificate
SURVEYOR'S CERTIFICATE
Certified to ____________________________
RE File # _________ Drawing No. ___________ Title _____________
The undersigned Registered Land Surveyor (the "Surveyor") hereby certifies that:
1. This survey was prepared from an actual on-the-ground survey of the real
property shown hereon (the "Property") and was conducted by the Surveyor or
under the Surveyor's supervision.
2. Monuments have been duly located or placed and actually exist at all major
corners of the boundaries of the Property and such monuments are located, are of
the size, and consist of the materials, as shown on this Survey;
3. The survey and the legal description of the Property, including the point of
beginning and all calls, is true, correct, and accurate, is identical to the
legal description contained in __________ Title Insurance Company's commitment
for title insurance No. ___________, dated _____________ (the "Commitment" and
there are no visible discrepancies, conflicts, shortages in area, boundary line
conflicts, visible encroachments onto or protruding from the Property, or
visible easements or rights-of-way (other than those which exist pursuant to
recorded instruments) except as noted hereon.
4. All recorded easements or other instruments or exceptions noted in the
Commitment ("Exceptions") and capable of being located have been correctly
located hereon and are indicated by official recording information [book and
page], and those Exceptions which cannot be located or do not affect the
Property are noted hereon either as "blanket" Exceptions that affect the entire
Property or as not affecting the Property.
5. The following, if they exist on the Property, have been located on this
Survey:
a. buildings (labeled as to type, dimensions and gross square
footage, and distance from each boundary line);
b. significant other improvements other than buildings, such as
signs, parking areas, or other structures such as fences or walls (labeled as to
dimensions and nature of use);
c. water/gas/sewer mains and telephone/electricity/utility lines
(as determined by on site surface observation only);
d. water retention or detention ponds;
e. high water marks, if the Property is located on or contains a
body of water;
f. interior lot lines; and
g. any natural or constructed objects affecting the Property.
EXHIBHT C-1
<PAGE> 68
6. Lines indicating all setback restrictions of record or disclosed by
applicable building or zoning codes are drawn hereon and any height or bulk
restrictions of record or disclosed by applicable building or zoning codes, if
any, are noted hereon and the source for either type of restriction is indicated
on this Survey. If no restrictions affect or apply to the Property, a note has
been placed hereon to so indicate.
7. If a street address has been assigned for the Property, it is noted on this
Survey.
8. A vicinity map is contained on this Survey and such vicinity map shows the
Property in reference to nearby public rights-of-way and major street
intersections. This Survey shows the names and widths of all rights-of-way
bounding the Property and indicates (a) whether such rights-of-way are public or
private; (b) by use of arrows drawn to the Property boundary line that there are
no gaps between the Property boundaries and the borders of such rights-of-way;
(c) existing curb cut access points to any such rights-of-way which are public;
and (d) that the Property has access to and from a public roadway as shown on
the Survey. This Survey shows the distance to and location of the nearest
intersecting public street or road (if access is by easement or private right of
way);
9. Based upon a review of Federal Flood Insurance Rate Maps (or the state or
local equivalent if no federal map exists), the Surveyor has determined by
scaled map location and graphic plotting only that the Property is not located
in a 100 year Flood Plain or in an identified "flood prone area" as defined by
the U.S. Department of Housing and Urban Development, pursuant to the Flood
Disaster Insurance Rate Map Panel # ___________ dated __________, which such map
panel covers the area in which the Property is situated.
10. The Property contains approximately _________ acres and currently is zoned
__________________________________________________________________________
11. The name of the owners of the properties adjoining the Property are
indicated on this Survey.
12. This Survey meets or exceeds the minimum technical standards established
pursuant to the laws of the state in which the Property is located.
13. This is to certify that this map or plat and the survey on which it is based
were made (i) in accordance with "Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys," jointly established and adopted by ALTA and ACSM
in 1997, and includes items 1, 2, 3, 4, 6, 7, 8, and 10 of the Table A thereof,
and (ii) pursuant to the Accuracy Standards (as adopted by ALTA and ACSM and in
effect on the date of this certification) of a (n) __________ [insert "Urban",
"Suburban," "Rural," or "Mountain/Marshland" here] Survey.
Signature _________________________ Registered Land Surveyor No. _______________
Address _____________________________________________________________________
Phone: ______________________ Fax __________________________
EXHIBIT C-2
<PAGE> 69
EXHIBIT "D"
COVENANT NOT TO COMPETE
THIS COVENANT NOT TO COMPETE is made and entered into as of the _____
day of ________, 1999, by and between KE ACQUISITION CORP., a Delaware
corporation ("Seller"), KAWASAKI LEASING (USA), INC. a Delaware corporation
("Shareholder") and CHURCHILL DOWNS INCORPORATED, a Kentucky corporation
("Buyer").
W I T N E S S E T H:
WHEREAS, Seller and Buyer entered into a Stock Purchase Agreement dated
as of January 21, 1999 (the "Agreement") pursuant to which Seller agreed to sell
and transfer to Buyer all of the issued and outstanding shares of Calder Race
Course, Inc. a Florida corporation ("Calder") and Tropical Park, Inc., a Florida
corporation ("Tropical Park") (Calder and Tropical Park are, collectively, the
"Corporations").
WHEREAS, as a material inducement for Buyer to enter into the
Agreement, Shareholder agreed to execute this Covenant not to Compete;
WHEREAS, Seller and Shareholder have extensive knowledge of and
expertise in the business conducted by the Corporations (the "Business");
WHEREAS, capitalized terms not otherwise defined herein will have the
meanings ascribed to such terms in the Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and in the Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. NONCOMPETITION. For a period of three years from the date of this
Covenant not to Compete, Seller and Shareholder shall not except as set forth
below, directly or indirectly, [i] own, manage, operate, join, have an equity
interest in, control or participate in the ownership, management, operation or
control of, any corporation, partnership or other business entity which engages
in gaming or horse racing in the continental United States of America, or [ii]
recruit or solicit, or attempt to recruit or solicit, any employees of Buyer,
the Corporations or any of their affiliates. At no time during or after the term
of this Covenant not to Compete shall Seller or Shareholder divulge, furnish, or
make accessible to anyone any knowledge or information about the Corporations or
the business or operations of the Corporations (not otherwise in the public
domain or except as required by law or order of any governmental authority).
The foregoing covenant on the part Seller and Shareholder is not
intended to, and shall not, restrict the ability of Shareholder (and Seller, if
appropriate), and their respective affiliates, to make loans in the ordinary
course of their business of extending credit to third parties, which loans are
secured, in whole or in part, directly or indirectly, by interest in
corporations, partnerships or other business entities which engage in gaming or
horse racing in the Continental United States of America, nor shall such
foregoing covenant impair the ability of Seller,
<PAGE> 70
Shareholder or their respective affiliates to enforce any such collateral
pledge, and thereby, directly or indirectly, become the owner, manager, operator
or otherwise have an equity interest in, control or participate in the
ownership, management, operation or control of a corporation, partnership or
other business entity which engages in gaming or horse racing in the Continental
United States of America.
2. REFORMATION. If the agreement set forth in Paragraph 1 would
otherwise be determined to be invalid or unenforceable by a court of competent
jurisdiction, the parties intend and agree that such court shall exercise its
discretion in reforming the provisions of this Agreement to the end that Seller
and Shareholder shall be subject to a covenant not to compete with Buyer and the
Corporations which is reasonable under the circumstances and enforceable by
Buyer and the Corporations.
3. REMEDIES. It is agreed that no adequate remedy at law exists for the
parties for violation of this Covenant not to Compete, and that this Covenant
not to Compete may be enforced by any equitable remedy, including specific
performance and injunction, without limiting the right of the nonbreaching party
to proceed at law to obtain such relief as may be available to it.
a. The construction, interpretation, validity and performance
of this Covenant not to Compete shall be governed by the laws of the State of
Florida.
b. In the event any written notice is required by this
Covenant not to Compete, the giving of such notice in the manner and to the
address of the party set forth in the Agreement to whom such notice is required
to be given shall constitute giving of written notice for all purposes hereof.
The address of Shareholder for purposes of this Covenant Not To Compete shall be
as follows:
Kawasaki Leasing (USA), Inc.
660 South Figueroa Street, Suite 1720
Los Angeles, California 90017
Attn: President
(213) 622-5966
(213) 622-6252 (Fax)
c. The failure of any of the parties to enforce any provision
of this Covenant not to Compete cannot be construed to be a waiver of such
provision or of the right thereafter to enforce the same, and no waiver of any
breach shall be construed as an agreement to waive any subsequent breach of the
same or any other provisions.
d. This instrument contains the entire agreement between the
parties hereto with respect to the subject matter hereof and incorporates by
reference the provisions of the Agreement, and no prior or collateral promises
or conditions in connection with or with respect to the subject matter hereof
not incorporated herein shall be binding upon the parties hereto.
e. No modification, extension, renewal, rescission,
termination or waiver of any of the provisions contained herein or any future
representation, promise or condition in connection with the subject matter
hereof, shall be binding upon any of the parties unless made in writing and duly
executed by the parties or their authorized representative.
-2-
<PAGE> 71
f. This Covenant not to Compete shall bind and inure to the
benefit of the parties hereto and the Corporations and the respective successors
and assigns of the parties hereto and the Corporations.
g. This Covenant not to Compete may be executed in separate
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
h. The section and paragraph headings contained in this
Covenant not to Compete are for reference purposes only and shall not affect in
any way the meaning or interpretation of this documents.
IN WITNESS WHEREOF, the parties hereto have executed this Covenant not
to Compete as of the date first written above.
"Seller" KE ACQUISITION CORP.
By _______________________________
Title ______________________________
"Buyer" CHURCHILL DOWNS INCORPORATED
By _______________________________
Title ______________________________
"Shareholder" KAWASAKI LEASING (USA), INC.
By _______________________________
Title ______________________________
-3-
<PAGE> 72
EXHIBIT "E"
Form of Opinion from Isicoff and Ragatz
EXHIBIT E
<PAGE> 73
[ON FIRM LETTERHEAD]
[to be dated as of the closing date]
Calder Race Course, Inc.
Address:_____________
_____________________
Att: Michael Abes
Re: Calder Race Course, Inc., a Florida corporation and Tropical
Park, Inc., a Florida corporation
Ladies and Gentlemen:
We have acted as counsel to Calder Race Course, Inc., a Florida
corporation ("Calder") and Tropical Park, Inc., a Florida corporation
("Tropical") (Calder and Tropical shall hereinafter be collectively referred to
as the "Corporations"), on specific legal matters. This opinion letter is
furnished to you pursuant to your request.
In rendering the following opinions, we have relied, with your
approval, as to factual matters that affect our opinions, solely on our
examination of the corporate minute books of Calder and Tropical provided to us
[certificate from ___________] and those contracts listed on Exhibit A hereto.
We have made no independent verification of facts asserted to be true and
correct in those documents. Further, the opinions set forth below are limited to
those matters as to which we have been consulted by the Corporations and as to
which we have given substantive legal attention.
We do not express any opinion concerning any laws other that the law of
Florida and the Federal law of the United States.
Based on the foregoing, and subject to the qualifications and
limitations stated in this letter and in the Report, we are of the opinion that:
(a) Each of the Corporations has been incorporated under
the Florida Business Corporation Act and their status
is active. The Corporations have the corporate power
to conduct their respective business.
(b) The execution and delivery of the that certain Stock
Purchase Agreement by and between Churchill Downs
Incorporated, a Kentucky corporation and KE
Acquisition Corp., a Delaware corporation dated
January _____, 1999 (the "Stock Purchase Agreement")
does not (i) violate the Articles of Incorporation or
Bylaws of the Corporations, (ii) except as set forth
in the Stock Purchase Agreement, constitute a breach
of or a default under any material
<PAGE> 74
Calder
Page 2
written agreement to which, to our knowledge without
independent inquiry or investigation, the
Corporations are a party or by which, to our
knowledge without independent inquiry or
investigation, the Corporations are bound, or (iii)
to our knowledge, without independent inquiry or
investigation, violate any judicial or administrative
decree, writ, judgment or order in which the
Corporations are named or to which any of the
Corporations is a party.
(c) Calder's authorized capitalization consists of
800,000 shares, $0.25 par value per share, of which
667,440 common shares are issued and outstanding and
190 preferred shares, $1.00 par value per share of
which no preferred shares are issued and outstanding.
KE Acquisition Corp., a Delaware corporation
("Shareholder") is the record owner of 667,440 of the
shares issued and outstanding common stock of Calder.
The outstanding common shares of Calder have been
duly authorized and validly issued and are fully
paid* and nonassessable.
(d) Tropical's authorized capitalization consists of
1,000 common shares, no par value, of which 195
common shares are issued and outstanding. Shareholder
is the record owner of 195 of the shares of issued
and outstanding common stock of Tropical. The
outstanding common shares of Tropical have been duly
authorized and validly issued and are fully paid* and
nonassessable.
When reference is made in this opinion to "knowledge" or to
what is "known to us", it means the actual knowledge attributable to our
representation of the Corporations of only those shareholders and associates who
have given substantive attention to the client's representation.
This opinion is furnished to the addressee by us as counsel
for the Corporations and is solely for the benefit of the addressee. This
opinion may not be relied upon by any other person without our prior written
consent.
Sincerely yours,
ISICOFF & RAGATZ, P.A.
Eric D. Isicoff,
For the Firm
*[This will require a certification from officer of Calder and Tropical that
no consideration for the shares remains unpaid.]
<PAGE> 75
EXHIBIT "F"
Matters to be addressed in the Opinion to be delivered by
Sonnenschein Nath & Rosenthal
1. Shareholder is a corporation validly existing and in good standing under the
laws of the State of Delaware.
2. The execution and delivery of the Stock Purchase Agreement and the
consummation of the transactions contemplated thereby have been duly authorized
by all necessary corporate action on the part of Shareholder. The Stock Purchase
Agreement has been duly executed and delivered by Shareholder and constitutes
the legal, valid and binding obligation of Shareholder, enforceable against
Shareholder in accordance with its terms, subject to [i] applicable bankruptcy,
insolvency, reorganization, fraudulent conveyancing, preferential transfer,
moratorium or similar laws of general application and court decisions affecting
the rights of creditors; and [ii] general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity),
including concepts of good faith, fair dealing, commercial reasonableness and
unconscionability. Shareholder has all requisite corporate power and authority
to enter into and perform its obligations under the Stock Purchase Agreement.
3. The execution of delivery of the Guaranty by Guarantor has been duly
authorized by all necessary corporate action on the part of Guarantor. The
Guaranty has been duly executed and delivered by Guarantor and constitutes the
legal, valid and binding obligation of Guarantor, enforceable against Guarantor
in accordance with its terms, subject to (i) applicable bankruptcy, insolvency,
reorganization, fraudulent conveyancing, preferential transfer, moratorium or
similar laws of general application and court decisions affecting the rights of
creditors; and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity), including
concepts of good faith, fair dealing, commercial reasonableness and
unconscionability. Guarantor has all requisite corporate power and authority to
enter into and perform its obligations under the Guaranty.
4. The execution and delivery of the Covenant Not To Compete by Shareholder and
Guarantor has been duly authorized by all necessary corporate action on the part
of Shareholder and Guarantor. Each of Shareholder and Guarantor has all
requisite corporate power and authority to enter into and perform its
obligations under the Covenant Not To Compete.
5. Each consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental agency or public or regulatory
unit, agency, body or authority with respect to Shareholder required to be made
or obtained by Shareholder in connection with the execution, delivery or
performance of the Stock Purchase Agreement by Shareholder has been made or
obtained by Shareholder.
6. The execution and delivery of the Stock Purchase Agreement and the
performance by Shareholder of its obligations under the Stock Purchase Agreement
do not [i] violate the articles of incorporation or bylaws of Shareholder; [ii]
except as set forth in the Stock Purchase Agreement, constitute a breach of or a
default under any material written agreement to which, to our knowledge,
Shareholder is a party or by which, to our knowledge,
<PAGE> 76
Shareholders is bound; or [iii] to our knowledge, violate any judicial or
administrative decree, writ, judgment or order in which Shareholder is named or
to which Shareholder is a party.
-2-
<PAGE>
EXHIBIT "G"
Matters to be addressed in opinion of Gray, Harris & Robinson
"Subject to the filing by Buyer of the applications required
to be filed in accordance with Section 3.3.4 of the Agreement,
each consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental
agency or public or regulatory unit, agency, body or authority
with respect to the Corporations required to be made or
obtained by the Corporations in connection with the execution,
delivery or performance of the Stock Purchase Agreement by
Shareholder or the consummation of the transactions
contemplated thereby by Shareholder has been made or obtained
by the Corporations."
EXHIBIT G
<PAGE> 77
EXHIBIT "H"
LIMITED GUARANTY
THIS GUARANTY is made as of January __, 1999, by Kawasaki Leasing
(USA), Inc., a Delaware corporation ("Guarantor"), for the benefit of Churchill
Downs Incorporated, a Kentucky corporation ("Churchill").
RECITALS:
WHEREAS, KE Acquisition Corp., a Delaware corporation ("KEA"), is the
owner of 100% of the outstanding shares (the "Stock") of Calder Race Course,
Inc., a Florida corporation ("Calder") and Tropical Park, Inc., a Florida
corporation ("Tropical") (Calder and Tropical are, collectively, the
"Corporations"), which Corporations are the owners and operators of that certain
race course commonly known and referred to as "Calder Race Course" which is
comprised of approximately 200 acres of real property, together with race
tracks, stables, office and support facilities located thereon.
WHEREAS, Churchill desires to purchase from KEA, and KEA desires to
sell to Churchill, all of the Stock together with all other right, title and
interest of KEA in the business operated by the Corporations as more
particularly set forth in that certain Stock Purchase Agreement dated as of
January __, 1999 by and between KEA as "Shareholder" and Churchill as "Buyer"
(as it may be hereafter amended by Churchill or KEA the "Agreement").
Capitalized terms used in this Guaranty which are not otherwise expressly
defined herein shall have the meaning set forth for such terms under the
Agreement;
WHEREAS, as a condition to the obligations of Churchill to purchase the
Stock pursuant to the Agreement, KEA is required to deliver to Churchill at
Closing the Guaranty of Guarantor on the terms set forth here, and in the
absence of the delivery of such Guaranty, Churchill has the right to elect not
the purchase the Stock in accordance with the Agreement;
WHEREAS, Guarantor is the sole shareholder of KEA and in that capacity
expects to derive substantial benefit from the Agreement and accordingly desires
that Churchill purchase the Stock from KEA in accordance with the terms of the
Agreement;
NOW, THEREFORE, in consideration of the above recitals, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and as an essential inducement to Churchill to purchase the Stock
from KEA in accordance with the terms of the Agreement, Guarantor hereby agrees
as follows:
<PAGE> 78
Article I.
GENERAL PROVISIONS
Section 1.01 GUARANTY. Guarantor hereby absolutely, unconditionally and
irrevocably guarantees to Churchill, and its successors and permitted assigns
under Section 26 of the Agreement the due, prompt and punctual (i) payment by
KEA to Churchill of any amounts owing by KEA to Churchill as indemnification
payments due with respect to claims made within the time period, if any, for
such claim as set forth in the Agreement and otherwise payable in accordance
with the terms set forth in Section 7.16.8, 7.16.11, Section 22 or Section 25 of
the Agreement and (ii) performance by KEA of the obligations of KEA set forth in
Sections 7.16.2, 7.16.3, 7.16.4, 7.16.7, 7.16.8, 7.16.11, 20, 29 and Section 30
of the Agreement up to a maximum liability of Guarantor to Churchill under this
Guaranty of Ten Million Dollars (i) and (ii) being collectively and severally
referred to herein as the "Guaranteed Obligations").
Section 1.02 NATURE OF GUARANTOR'S OBLIGATIONS. This Guaranty is a
guaranty of payment and not of collectibility. Separate action or actions may be
brought and prosecuted against Guarantor whether or not such action or actions
are brought or prosecuted against KEA and whether or not KEA is joined in any
such action or actions. Guarantor's obligations hereunder are independent of,
and not in consideration of or contingent upon, the existence of any other
guaranty of any or all of the Guaranteed Obligations, and the release or
cancellation of any such other guaranty shall not affect Guarantor's obligations
hereunder.
Guarantor unconditionally and irrevocably waives each and every defense which,
under principles of guaranty or suretyship law, would operate to impair or
diminish the liability of Guarantor hereunder. Without limiting the foregoing,
Guarantor agrees that the liability of Guarantor hereunder shall not be
diminished or impaired by any of the following (all of which may be done by
Churchill without notice to Guarantor): (i) any extension, modification,
indulgence, compromise, settlement or variation of the terms of any of the
Guaranteed Obligations; (ii) the voluntary or involuntary discharge or release
of any of the Guaranteed Obligations, or of KEA, by reason of bankruptcy or
insolvency laws or otherwise; (iii) the acceptance or release, with or without
substitution, by Churchill of any collateral security or other guaranty, or any
settlement, compromise or extension with respect to any collateral security or
any guaranty; (iv) the application or allocation by Churchill of payments,
collections or credits on any portion of the Guaranteed Obligations, regardless
of what portion of the Guaranteed Obligations remain unpaid; or (v) the making
of a demand, or absence of demand, for payment of the Guaranteed Obligations or
giving, or failing to give, any notice of dishonor or protest or any other
notice.
Guarantor unconditionally waives: (i) any subrogation to the rights of Churchill
against KEA, until all of the Guaranteed Obligations have been satisfied or
performed in full; and (ii) any acceptance of this Guaranty.
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<PAGE> 79
Article II.
REPRESENTATIONS AND WARRANTIES
Guarantor hereby makes the following representations and warranties,
which shall be deemed to be continuing representations and warranties so long as
the Agreement remains in existence and/or any Guaranteed Obligation remains
unpaid:
Section 2.01 GUARANTY AUTHORIZED. Guarantor's execution, delivery and
performance of this Guaranty do not require the consent or approval of any body
or governmental authority and are not in contravention of or in conflict with
any law or regulation and this Guaranty will upon its execution and delivery by
Guarantor be the valid, legal and binding obligation of Guarantor, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
receivership, reorganization, liquidation, arrangement or any similar laws
affecting the enforcement of creditors' rights and applicable principles of
equity.
Section 2.02 NO CONFLICT. The execution, delivery and performance of
this Guaranty are not in contravention of or in conflict with any agreement,
indenture or undertaking to which Guarantor is a party or by which Guarantor or
any of Guarantor's property may be bound or affected and do not cause any
security interest, lien or other encumbrance to be created or imposed upon any
such property by reason thereof.
Section 2.03 ACCURACY OF INFORMATION. All information submitted by or
on behalf of Guarantor to Churchill in connection with this Guaranty is true and
correct as of the date hereof and no act or event has occurred which could
materially and adversely affect Guarantor or which could impair the validity,
effectiveness or enforceability of, or impair Guarantor's ability to perform its
obligations under, this Guaranty.
Section 2.04 LITIGATION. There is no action, suit or proceeding pending
or, to the best of Guarantor's knowledge and belief, threatened against or
affecting Guarantor or Guarantor's properties which could impair the validity,
effectiveness or enforceability of, or impair Guarantor's ability to perform
Guarantor's obligations under, this Guaranty, whether said action, suit or
proceeding is in law or equity or before or by any governmental authority.
Section 2.05 COMPLIANCE. Guarantor is in compliance with all applicable
laws and with each order, writ, injunction, decree and demand applicable to
Guarantor issued by any judicial or governmental authority.
Article III.
MISCELLANEOUS
Section 3.01 SURVIVAL OF WARRANTIES. All agreements, representations
and warranties made herein shall survive the execution and delivery of this
Guaranty.
Section 3.02 NONWAIVER OF REMEDIES. No waiver of any breach of or
default under any provision of this Guaranty shall constitute or be construed as
a waiver by Churchill of any subsequent breach of or default under that or any
other provision of this Guaranty. No
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<PAGE> 80
provisions of this Guaranty or right of Churchill hereunder can be waived nor
can Guarantor be release from Guarantor's obligations hereunder except by a
writing duly executed by Churchill.
Section 3.03 REMEDIES NOT EXCLUSIVE. Each remedy herein given shall be
cumulative with and in addition to every other remedy given herein or now or
hereafter otherwise available at law, in equity or by statute.
Section 3.04 NOTICES. All notices, requests, consents, demands and
other communications required or permitted to be given or made in connection
with this Guaranty shall be in writing and shall be personally delivered or sent
by registered or certified mail, postage prepaid, or by telecopier, and shall be
deemed to be given on the day such writing is delivered to the intended
recipient in accordance with the provisions of this Section. All notices,
requests, consents, demands and other communications shall be given to the
respective parties at their respective addresses (or telecopier numbers) set
forth below:
Guarantor:
Kawasaki Leasing (USA), Inc.
660 South Figueroa Street
Suite 1720
Los Angeles, CA 90017
Telecopier No. (213) 622-6252
Churchill:
Churchill Downs Incorporated
700 Central Avenue
Louisville, Kentucky 40208
Telecopier No. (502) 636-4439
Section 3.05 SEVERABILITY. In case any provision in this Guaranty shall
be invalid, illegal or unenforceable, such provision shall be severable from the
rest of this Guaranty and the validity, legality and enforceability of the
remaining provisions shall not be affected or impaired thereby.
Section 3.06 HEADINGS. Headings of the articles and sections of this
Guaranty are inserted for convenience only and shall not be deemed to constitute
a part hereof.
Section 3.07 MODIFICATIONS. This Guaranty cannot be changed, modified
or supplemented except in a writing signed by the party against whom enforcement
of such change, modification or supplement is sought.
Section 3.08 APPLICABLE LAW. This Guaranty is and shall be governed by
and be construed according to the laws of the State of California.
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<PAGE> 81
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date
first set forth above.
Guarantor:
KAWASAKI LEASING (USA), INC.
By:_______________________________
Its:______________________________
[The parties continue to have outstanding the issue of the guaranty to be
provided with respect to the indemnification by KEA with regard to the
environmental representations and warranties of KEA.]
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<PAGE> 82
EXHIBIT "I"
KAWASAKI ENTERPRISES INC.
River Kuramae Bldg., 2-17-4, Kuramae
Taito-ku, Tokyo 111-8654, JAPAN
81-3-3864-4339
______________, 1999
Churchill Downs Incorporated
700 Central Avenue
Louisville, Kentucky 40208
Re: CALDER RACE COURSE
Dear Sirs:
Please be advised that by this letter, the undersigned, an affiliate of
Kawasaki Leasing (USA), Inc., covenants and agrees to maintain funds in Kawasaki
Leasing (USA), Inc. sufficient to meet actual claimed guaranty obligations
pursuant to that certain guaranty agreement of __________, 1999 by and between
Kawasaki Leasing (USA), Inc. and Churchill Downs Incorporated, (the "Guaranty")
and arising with respect to certain obligations of KE Acquisition Corp. ("KEA")
to Churchill Downs Incorporated ("Churchill") arising under that certain Stock
Purchase Agreement dated as of January 21, 1999 with respect to the sale by KEA
to Churchill of all of the issued and outstanding shares of Calder Race Course,
Inc. and Tropical Park, Inc. (the "Underlying Transaction"). No other obligation
or liability, direct or indirect, is undertaken by the undersigned with respect
to the Guaranty or the Underlying Transaction.
The undersigned acknowledges that Churchill will rely upon this letter
in connection with the acceptance of the Guaranty by Churchill in the Underlying
Transaction.
Very truly yours,
KAWASAKI ENTERPRISES INC.
By:____________________________
Its:___________________________
<PAGE> 83
EXHIBIT 2.2
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
This First Amendment is made as of April 19, 1999 by and between KE
Acquisition Corp. ("Shareholder") and Churchill Downs Incorporated and Churchill
Downs Management Company (collectively "Buyer") with respect to that certain
Stock Purchase Agreement by and between Shareholder and Buyer dated as of
January 21, 1999 (the "Purchase Agreement").
WHEREAS, Buyer and Shareholder have agreed to resolve certain
objections raised by Buyer with respect to the Extended Review Litigation on the
terms set forth below in this Amendment; and
WHEREAS, Shareholder and Buyer have agreed to extend the Closing Date
as set forth in the Purchase Agreement as set forth below:
NOW, THEREFORE, Shareholder and Buyer hereby agree that the Purchase
Agreement remains in full force and effect, with the following amendments:
1. The Closing Date as defined in Section 1.11 of the Purchase
Agreement is hereby amended to be April 23, 1999, or such earlier
date as is mutually agreed between Shareholder and Buyer.
2. Shareholder is acknowledged to be a Florida corporation, and all
references in the Purchase Agreement or any amendment thereto to
the contrary are hereby deemed to be revised to reflect the
status of Shareholder as a Florida corporation.
3. The Buyer hereby confirms and agrees that, except as set forth
below and except such conditions to be satisfied at Closing, the
following conditions in Section 3.3 of the Agreement (those set
forth in Sections 3.3.3, 3.3.4, and 3.3.6, but not those set
forth in Sections 3.3.1 and 3.3.2 of the Purchase Agreement), as
well as the conditions set forth in Sections 4.1 and 4.2 of the
Purchase Agreement have been satisfied or waived by Buyer,
subject only to:
(a) the absence of the occurrence of an event described in
Sections 3.3.5 or 3.3.7 of the Purchase Agreement (which
conditions are understood and agreed to continue to such
date as the Closing Date occurs);
(b) the due performance and satisfaction of the conditions set
forth in Sections 3.6, 3.7 and 3.8 of the Purchase
Agreement.
4. Shareholder hereby agrees, subject to the Closing of the
transaction described in the Purchase Agreement and subject to
the limitations applicable to amounts indemnified pursuant to
subsection (i) of Section 25 of the Purchase Agreement, to
indemnify the Corporations for (a) up to $500,000.00 of the
liability amounts payable by the Corporations in the event of a
final judgment in favor of (i) the Investment Corporation of Palm
Beach and its co-defendants on the merits in Calder Race Course,
Inc. v. Investment Corporation of Palm Beach, et al., Case Number
98-14519, Circuit Court of Broward County requiring repayment by
Calder and/or Tropical of amounts received and/or recorded as
income by Calder
<PAGE> 84
or Tropical as breakage or uncashed ticket revenues for 1996,
1997 or 1998<F1>, (ii) the Division of Pari-Mutue Wagering on
the merits in INVESTMENT CORPORATION OF PALM BEACH, CALDER RACE
COURSE, INC. ET AL. V. DEPARTMENT OF BUSINESS AND PROFESSIONAL
REGULATION, Case Numbers 97-3414 and 97-2926, District Court of
Appeal of Florida, Third District<F2>, requiring payment or
escheat by Calder and/or Tropical of amounts received and/or
recorded as income by Calder or Tropical as breakage or uncashed
ticket revenues for 1996, 1997 or 1998, or (iii) the plaintiffs
in the EEOC litigation<F3> requiring payment by Calder of damages
to such plaintiffs, provided, however, that the maximum amount
subject to indemnification by shareholder in respect of the EEOC
litigation shall be $150,000; and (b) subject to the aggregate
$500,000 maximum indemnification amount, up to $50,000 of any
amount awarded as a part of a judgment against the Corporations
and required to be paid by the Corporations in respect of
out-of-pocket costs and attorneys fees paid by the plaintiffs in
the EEOC Litigation or the defendants in the Guest Track
Litigation. The aggregate maximum indemnification amount payable
by Shareholder shall be $500,000, of which the maximum amount
subject to indemnification in respect of the EEOC litigation
(including any amounts payable pursuant to clause (b) above)
shall be $150,000 (or such lesser amount as may be available
under the $500,000 aggregate limit, after deduction of any
amounts paid in respect of the Escheats Litigation), and the
maximum amount subject to indemnification in respect of the
Escheats Litigation (including any amounts payable pursuant to
clause (b) above) shall be $450,000 (or such lesser amount as may
be available under the $500,000 aggregate limit, after deduction
of any amounts paid in respect of the EEOC Litigation). From and
after the Closing, Buyer shall have the right to conduct the
Escheats Litigation and the EEOC Litigation in the best interest
of the Corporations, as reasonably determined by Buyer. Prior to
the Closing, Shareholder shall not agree to any settlement or
compromise of the EEOC Litigation or the Escheats Litigation
without the prior written consent of Buyer, which consent shall
not be unreasonably withheld, and after the Closing Shareholder
may not settle or compromise such matters. Subject to clause (b)
above, the foregoing indemnification does not include any
indemnification or sharing of the costs associated with legal
fees and expenses in such litigation (whether or not decisions on
the merits of such litigation are rendered adverse to Calder and
Tropical), and is subject to the limitations and procedures
applicable to claims indemnified pursuant to subsection (i) of
Section 25 of the Purchase Agreement. The obligations of
Shareholder set forth above are understood and agreed by
Guarantor to be included within the Guaranteed Obligations which
are the subject
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<F1> (which litigation is referred to herein as the "Guest Track Litigation")
<F2> (which litigation is referred to herein as the "Division Litigation").
(The Guest Track Litigation and the Division Litigation are collectively
referred to herein as the "Escheats Litigation").
<F3> EQUAL EMPLOYMENT OPPORTUNITY COMMISSION V. CALDER RACE COURSE, INC.,
Case Number 97-4223, United States District Court for the Southern District of
Florida, Miami Division; and POER ET AL. V. CALDER RACE COURSE, INC.
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<PAGE> 85
of the Guaranty (and are subject to the limitation on Guarantor's
liability thereunder and otherwise subject to all terms and
conditions of such Guaranty).
5. Buyer and Shareholder hereby agree that adjustments shall be made
to the Calder Race Course, Inc. and Tropical Park, Inc. Audited
1998 Annual Financial Statements, to (i) record a reserve in
respect of outs and escheats receivables in the amount of $
246,000.00 and (ii) record a reserve in respect of certain check
receivables in the amount of $ 93,000 (the "Churchill
Adjustments"), on the condition that such Churchill Adjustments
shall have no force or effect for purposes of any of the
financial calculations to be performed pursuant to the Purchase
Agreement. For purposes of the EBITDA, Net Working Capital or
Average Net Working Capital determinations to be performed
pursuant to Section 2.2 of the Purchase Agreement, and any other
adjustment which requires reference to the financial performance
of either Calder, Tropical or the Corporations (each term as
defined in the Purchase Agreement), such determinations shall be
based on the financial statements and performance of Calder and
Tropical assuming that the Churchill Adjustments had not been
made.
6. The Closing of the transaction described in the Purchase
Agreement is intended to Close after the closing of the
transaction described in Section 31 of the Purchase Agreement.
Shareholder and Buyer shall continue to cooperate in their mutual
efforts to cause the closing of such other transaction to occur
before April 16, 1999.
This First Amendment shall be effective as of March 18, 1999.
Capitalized terms not otherwise expressly defined in this First Amendment shall
have the same meanings set forth for such term in the Purchase Agreement. In the
event of any conflict between the terms of this First Amendment and the terms of
the Purchase Agreement, this First Amendment shall control. The Purchase
Agreement remains in full force and effect and is not modified except as
expressly set forth herein.
"SHAREHOLDER" "BUYER"
KE ACQUISITION CORP., CHURCHILL DOWNS INCORPORATED
a Florida corporation a Kentucky corporation
By: /S/ K. NISHIKAWA By: /S/ REBECCA C. REED
Its: PRESIDENT Its: SR. VICE PRESIDENT, GENERAL COUNSEL
and Secretary
CHURCHILL DOWNS MANAGEMENT
COMPANY, a Kentucky corporation
By: /S/ REBECCA C. REED
Its: ASSISTANT SECRETARY
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<PAGE> 86
Guarantor acknowledges and agrees to the terms and conditions set forth in
Paragraph 4 of the foregoing First Amendment.
"GUARANTOR"
KAWASAKI LEASING (USA), INC.
a Delaware corporation
By: /S/ K. NISHIKAWA
Its: PRESIDENT
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<PAGE> 87
EXHIBIT 2.3
AGREEMENT AND PLAN OF MERGER
AND
AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS AGREEMENT ("Agreement" or "Plan") is made and entered effective as of
the 22nd day of April, 1999, by and among CHURCHILL DOWNS INCORPORATED, a
Kentucky corporation ("Buyer"), CHURCHILL DOWNS MANAGEMENT COMPANY, a Kentucky
corporation ("CDMC"), CR ACQUISITION CORP., a Florida corporation ("CR
Acquisition"), TP ACQUISITION CORP., a Florida corporation ("TP Acquisition"),
CALDER RACE COURSE, INC., a Florida corporation ("Calder"), TROPICAL PARK, INC.,
a Florida corporation ("Tropical"), and KE ACQUISITION CORP., a Delaware
corporation and the sole shareholder of each of Calder and Tropical
("Shareholder"). Buyer is the sole shareholder of CDMC, and CDMC is the sole
shareholder of each of CR Acquisition and TP Acquisition. Calder and Tropical
are sometimes referred to herein as the "Companies" and individually as a
"Company."
RECITALS
A. Buyer and Shareholder are parties to a Stock Purchase Agreement and
Joint Escrow Instructions dated as of January 21, 1999, as amended to date (the
"Stock Purchase Agreement") under which Buyer has agreed to purchase, and Seller
has agreed to sell, subject to the terms and conditions of the Stock Purchase
Agreement, all 667,440 of the issued and outstanding common shares, $.25 par
value per share, of Calder (the "Calder Shares"), and all 195 of the issued and
outstanding common shares, with no par value per share, of Tropical (the
"Tropical Shares") (the Calder Shares and the Tropical Shares are sometimes
referred to herein collectively as the "Shares").
B. Buyer and Shareholder desire to enter into this Plan to provide for
the Buyer's acquisition of the Companies and all of the issued and outstanding
shares of capital stock thereof, pursuant to the Stock Purchase Agreement as
hereby amended, through the merger of CR Acquisition with and into Calder and
the merger of TP Acquisition with and into Tropical, in lieu of the direct
acquisition of the Shares by Buyer from Shareholder pursuant to the Stock
Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and undertakings herein contained, the parties hereby agree as
follows:
ARTICLE 1
THE MERGERS
A. THE MERGERS. Upon the terms and subject to the conditions set forth
in the Stock Purchase Agreement and this Plan, and in accordance with the
Florida Business Corporation Act (the "FBCA"), at the Effective Time (as
hereinafter defined), CR Acquisition shall be merged with and into Calder (the
"Calder Merger") and TP Acquisition shall be merged with and into
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<PAGE> 88
Tropical (the "Tropical Merger") in accordance with the FBCA (collectively, the
"Mergers"), whereupon the separate existence of CR Acquisition shall cease and
Calder shall continue as the surviving corporation of the Calder Merger (the
"Calder Surviving Corporation") and the separate existence of TP Acquisition
shall cease and Tropical shall continue as the surviving corporation of the
Tropical Merger (the "Tropical Surviving Corporation") (such surviving
corporations are sometimes referred to herein as the "Surviving Corporations").
B. ARTICLES OF MERGER. Upon the terms and subject to conditions set
forth in the Stock Purchase Agreement and this Plan (and in order to consummate
the Closing under the Stock Purchase Agreement), Articles of Merger for the
Calder Merger shall be duly prepared and executed by CR Acquisition and Calder
in the form attached as EXHIBIT A hereto and Articles of Merger for the Tropical
Merger shall be duly prepared and executed by TP Acquisition and Tropical in the
form attached as EXHIBIT B hereto, and thereafter delivered to the Secretary of
State of the State of Florida for filing on the Closing Date under the Stock
Purchase Agreement and as provided in the FBCA. The Mergers shall become
effective upon filing with the Florida Secretary of State of the Calder Articles
of Merger and the Tropical Articles of Merger or at such time and date
thereafter as provided in such Articles of Merger (the "Effective Time"). The
date on which the Effective Time occurs shall be the "Effective Date".
C. MERGER CONSIDERATION; PURCHASE PRICE; ALLOCATION OF MERGER
CONSIDERATION. The parties agree that the "Purchase Price" under the Stock
Purchase Agreement shall be calculated and paid as provided in the Stock
Purchase Agreement, subject to adjustment as provided in the Stock Purchase
Agreement, and that such Purchase Price is also referred to herein as the
"Merger Consideration". The "Cash Balance" under the Stock Purchase Agreement
shall be deposited in "Escrow" by Buyer as and when provided under the Stock
Purchase Agreement including Section 2.2.2 thereof.
The parties acknowledge that the allocation of Merger Consideration between
the Mergers as provided in Section 2(A) below (the 55%--45% allocation) is
preliminarily due to certain related concerns being considered by the parties.
Accordingly, the parties hereto agree that such allocation of the Merger
Consideration is subject to adjustment for a period of sixty (60) days following
the Effective Time by mutual written agreement of Buyer and Shareholder, and
that any such subsequently agreed allocation shall thereupon constitute the
allocation of the Merger Consideration between the Mergers under this Agreement.
Buyer and Shareholder shall endeavor in good faith to agree upon an adjusted
allocation during such 60 day period, but if such agreement does not occur
during such period then the allocation provided in Section 2(A) below shall
constitute the allocation of the Merger Consideration between the Mergers under
this Agreement.
ARTICLE 2.
CONVERSION OF SHARES
A. CONVERSION OF SHARES. At the Effective Time, by virtue of the Mergers
and without any action on the part of the parties hereto:
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<PAGE> 89
1. All of the outstanding shares of capital stock of Calder
shall be converted in the aggregate into the right to receive aggregate
consideration equal to fifty-five percent (55%) of the Merger
Consideration, and all of the outstanding shares of capital stock of
Tropical shall be converted in the aggregate into the right to receive
aggregate consideration equal to forty-five percent (45%) of the Merger
Consideration, payable as provided in the Stock Purchase Agreement; and the
outstanding shares of capital stock of each of Calder and Tropical shall
thereupon be automatically cancelled and extinguished; PROVIDED, HOWEVER,
that such allocation of the Merger Consideration shall be subject to
adjustment following the Effective Time as provided in the second paragraph
of Section 1(C) above;
2. All of the outstanding shares of capital stock of CR
Acquisition shall thereupon be converted in the aggregate into 667,440
shares of the common stock of the Calder Surviving Corporation, $0.25 par
value per share, and all of the outstanding shares of capital stock of TP
Acquisition shall thereupon be converted in the aggregate into 195 shares
of the common stock of the Tropical Surviving Corporation, $0.01 par value
per share.
B. ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATIONS; AMENDMENT TO
PAR VALUE OF TROPICAL SHARES. The articles of incorporation of Calder in effect
immediately prior to the Effective Time shall be the articles of incorporation
of the Calder Surviving Corporation and the articles of incorporation of
Tropical in effect immediately prior to the Effective Time shall be the articles
of incorporation of the Tropical Surviving Corporation, PROVIDED, HOWEVER, that
Article III of the Tropical Surviving Corporation's Articles of Incorporation
shall be amended as reflected in Exhibit B hereto to change the par value of
Tropical's capital stock from no par value to $0.01 par value per share.
C. BYLAWS OF SURVIVING CORPORATION. The Bylaws of Calder in effect
immediately prior to the Effective Time shall be the Bylaws of the Calder
Surviving Corporation, and the Bylaws of Tropical in effect immediately prior to
the Effective Time shall be the Bylaws of the Tropical Surviving Corporation.
D. DIRECTORS AND OFFICERS OF SURVIVING CORPORATIONS. From and after the
Effective Time, the respective directors and officers of the Calder Surviving
Corporation and the Tropical Surviving Corporation shall be as set forth in the
respective Articles of Merger attached as Exhibits A and B hereto, in each case
until their respective successors are duly elected or appointed and qualify in
the manner provided in the respective Articles of Incorporation and Bylaws of
the Surviving Corporations and as otherwise provided by applicable law.
ARTICLE 3.
GENERAL PROVISIONS
A. LAW AND SECTION HEADINGS. This Plan shall be construed and interpreted
in accordance with the laws of the State of Florida. Section headings are used
in this Plan for convenience only and are to be ignored in the construction of
the terms of this Plan.
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<PAGE> 90
B. MODIFICATIONS. The parties hereto may amend, modify or supplement this
Plan in such manner as may be agreed by them in writing.
C. AMENDMENT. This Plan shall constitute an amendment to the Stock
Purchase Agreement, and the Stock Purchase Agreement and this Plan shall be
construed together in a manner consistent with the intent of the parties
reflected herein and therein. Without limitation of the foregoing, the
consummation of this Plan and the effectiveness of the Mergers shall satisfy the
obligations of the parties under the Stock Purchase Agreement concerning the
assignment of the Shares to Buyer at Closing and payment of the Purchase Price,
subject, however, to the remainder of the Stock Purchase Agreement. The Buyer
and Shareholder hereby reaffirm and ratify the Stock Purchase Agreement, as so
amended in its entirety. The Shareholder's and the Buyer's respective
representations, warranties, and covenants in this Agreement shall be deemed to
be part of the Stock Purchase Agreement and subject to the applicable provisions
thereof, including indemnification provisions. The Shareholder's representations
and warranties herein shall be deemed to constitute part of Section 7.17 of the
Stock Purchase Agreement.
ARTICLE 4.
CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
A. AUTHORIZATION, ETC. Each party to this Agreement hereby represents and
warrants, to the other parties hereto, that: such representing party has the
full corporate power and authority to enter into this Agreement and the
agreements and documents contemplated hereby to which such party is or will
become a party and perform its respective obligations hereunder and thereunder;
that the execution, delivery and performance of this Agreement (including
consummation of the Mergers) by such party and all other agreements and
transactions contemplated hereby to which such party is or will become a party
have been duly authorized by the Board of Directors and shareholders of such
party (other than the shareholders of Buyer) (including all approvals required
under the FBCA for the Mergers) and no other corporate or other proceedings on
its part is necessary to authorize this Agreement and the transactions
contemplated hereby; and that upon execution and delivery of this Agreement,
this Agreement shall constitute the legal, valid and binding obligation of such
party, enforceable against such party in accordance with its terms.
* * * * *
4
<PAGE> 91
IN WITNESS WHEREOF, the parties hereto have caused this Plan to be executed
by their duly authorized officers as of the date first above written.
"SHAREHOLDER"
CHURCHILL DOWNS MANAGEMENT KE ACQUISITION CORP.
COMPANY
By: /S/ JEFFREY M. SMITH By: /S/ K. NISHIKAWA
Name: JEFFREY M. SMITH Name: KAORU NISHIKAWA
Title: PRESIDENT Title: PRESIDENT
"BUYER"
CR ACQUISITION CORP. CHURCHILL DOWNS
INCORPORATED
By: /S/ REBECCA C. REED By: /S/ ROBERT L. DECKER
Name: REBECCA C. REED Name: ROBERT L. DECKER
Title: PRESIDENT Title: EXECUTIVE V.P. AND CFO
TP ACQUISITION CORP. CALDER RACE COURSE, INC.
By: /S/ REBECCA C. REED By: /S/ C. KENNETH DUNN
Name: REBECCA C. REED Name: C. KENNETH DUNN
Title: PRESIDENT Title: PRESIDENT
TROPICAL PARK, INC.
By: /S/ C. KENNETH DUNN
Name: C. KENNETH DUNN
Title: PRESIDENT
<PAGE> 92
EXHIBIT A
<PAGE> 93
ARTICLES OF MERGER
OF
CR ACQUISITION CORP., a Florida corporation
INTO
CALDER RACE COURSE, INC., a Florida corporation
Pursuant to the provisions of Section 607.1101 and Section 607.1105 of
the Florida Business Corporation Act, CR ACQUISITION CORP., a Florida
corporation ("Acquisition"), and CALDER RACE COURSE, INC., a Florida corporation
("Calder" or the "Surviving Corporation"), hereby adopt the following Articles
of Merger for the purpose of merging Acquisition with and into the Surviving
Corporation (the "Merger"). All of the outstanding shares of common stock of
Acquisition are held by Churchill Downs Management Company, a Kentucky
corporation ("Parent"). The Parent, Acquisition, Calder, the sole shareholder of
Calder and certain other parties are parties to an Agreement and Plan of Merger
and Amendment to Stock Purchase Agreement dated April 22, 1999 (the "Merger
Agreement") pursuant to which the parties have prepared and caused to be filed
these Articles of Merger.
FIRST: The plan of merger for the Merger (the "Plan of Merger"),
pursuant to Section 607.1101 of the Florida Business Corporation Act (the
"FBCA"), is as set forth in these Articles of Merger, including Exhibit A
hereto, which Exhibit is incorporated herein and constitutes part of these
Articles of Merger.
SECOND: The Merger shall be effective upon the filing of these Articles
of Merger with the Secretary of State of the State of Florida (the "Effective
Time"). At the Effective Time, by virtue of the Merger and without any action on
the part of Calder, Acquisition or Parent or other parties to the Merger
Agreement, (i) Acquisition shall be merged with and into the Surviving
Corporation, with the Surviving Corporation being the surviving corporation of
the
<PAGE> 94
Merger and the separate existence of Acquisition shall thereupon cease, (ii) all
of the shares of capital stock of Calder outstanding immediately prior to the
Effective Time shall be automatically cancelled and converted at the Effective
Time into the right to receive an aggregate cash payment in the amount as
provided in Exhibit A hereto, and (iii) all of the outstanding shares of capital
stock of Acquisition shall be converted in the aggregate into 667,440 shares of
common stock of the Surviving Corporation, $0.25 par value per share, whereupon
Parent shall thereby become the sole shareholder of the Surviving Corporation.
The Merger shall have the effects set forth in Section 607.1106 of the FBCA, and
all property, rights, privileges, policies and franchises of each of Calder and
Acquisition shall vest in the Surviving Corporation and all debts, liabilities
and duties of each of Calder and Acquisition shall become the debts, liabilities
and duties of the Surviving Corporation.
THIRD: The Articles of Incorporation of Calder as in effect immediately
prior to the Effective Time shall continue in full force and effect as the
Articles of Incorporation of the Surviving Corporation upon and following the
Effective Time until thereafter amended in accordance with applicable law.
FOURTH: The Bylaws of Calder as in effect immediately prior to the
Effective Time shall continue in full force and effect as the Bylaws of the
Surviving Corporation upon and following the Effective Time, until thereafter
amended in accordance with applicable law.
FIFTH: From and after the Effective Time, the respective directors and
officers of the Surviving Corporation shall be as set forth in Exhibit B hereto,
in each case until their respective successors are duly elected or appointed and
qualify in the manner provided in the Articles of Incorporation and Bylaws of
the Surviving Corporations and as otherwise provided by applicable law.
2
<PAGE> 95
SIXTH: The Plan of Merger was approved by the sole Director and the sole
shareholder of Acquisition as of April 22, 1999, and by the Board of Directors
and sole shareholder of Calder as of April 22, 1999.
* * * * *
3
<PAGE> 96
IN WITNESS WHEREOF, each of Acquisition and Calder have caused these
Articles of Merger to be signed in their respective corporate names and on their
behalf by an authorized officer, as of this 23rd day of April, 1999.
CR ACQUISITION CORP.
By:______________________________
Name:____________________________
Title:___________________________
CALDER RACE COURSE, INC.
By:______________________________
Name:____________________________
Title:___________________________
<PAGE> 97
EXHIBIT A
CONVERSION OF SHARES
At the Effective Time, pursuant to these Articles of Merger and the
Merger Agreement, the outstanding shares of capital stock of Calder shall be
converted into the right to receive an aggregate cash payment of Forty-Seven
Million Three Hundred Thousand Dollars ($47,300,000) to be thereupon delivered
and paid as provided and subject to the terms set forth in the Merger Agreement.
<PAGE> 98
EXHIBIT B
OFFICERS AND DIRECTORS OF SURVIVING CORPORATION
OFFICERS
NAME OFFICE
Thomas H. Meeker Chairman
C. Kenneth Dunn President
Randell E. Soth Vice President and General Manager
Robert Decker Vice President and Treasurer
Michael Abes Assistant Secretary
Rebecca C. Reed Secretary
Vicki L. Baumgardner Assistant Treasurer
DIRECTORS
NAME
Robert L. Decker
C. Kenneth Dunn
Thomas H. Meeker
Rebecca C. Reed
Jeffrey M. Smith
<PAGE> 99
EXHIBIT B
<PAGE> 100
ARTICLES OF MERGER
OF
TP ACQUISITION CORP., A FLORIDA CORPORATION
INTO
TROPICAL PARK, INC., A FLORIDA CORPORATION
Pursuant to the provisions of Section 607.1101 and Section 607.1105 of
the Florida Business Corporation Act, TP ACQUISITION CORP., a Florida
corporation ("Acquisition"), and TROPICAL PARK, INC., a Florida corporation
("Tropical" or the "Surviving Corporation"), hereby adopt the following Articles
of Merger for the purpose of merging Acquisition with and into the Surviving
Corporation (the "Merger"). All of the outstanding shares of common stock of
Acquisition are held by Churchill Downs Management Company, a Kentucky
corporation ("Parent"). The Parent, Acquisition, Tropical, the sole shareholder
of Tropical and certain other parties are parties to an Agreement and Plan of
Merger and Amendment to Stock Purchase Agreement dated April 22, 1999 (the
"Merger Agreement") pursuant to which the parties have prepared and caused to be
filed these Articles of Merger.
FIRST: The plan of merger for the Merger (the "Plan of Merger"),
pursuant to Section 607.1101 of the Florida Business Corporation Act (the
"FBCA"), is as set forth in these Articles of Merger, including Exhibit A
hereto, which Exhibit is incorporated herein and constitutes part of these
Articles of Merger.
SECOND: The Merger shall be effective upon the filing of these Articles
of Merger with the Secretary of State of the State of Florida (the "Effective
Time"). At the Effective Time, by virtue of the Merger and without any action on
the part of Tropical, Acquisition or Parent or other parties to the Merger
Agreement, (i) Acquisition shall be merged with and into the Surviving
Corporation, with the Surviving Corporation being the surviving corporation of
the
<PAGE> 101
Merger and the separate existence of Acquisition shall thereupon cease, (ii) all
of the shares of capital stock of Tropical outstanding immediately prior to the
Effective Time shall be automatically cancelled and converted at the Effective
Time into the right to receive an aggregate cash payment in the amount as
provided in EXHIBIT A hereto, and (iii) all of the outstanding shares of capital
stock of Acquisition shall be converted in the aggregate into 195 shares of
common stock of the Surviving Corporation, $0.01 par value per share, whereupon
Parent shall thereby become the sole shareholder of the Surviving Corporation.
The Merger shall have the effects set forth in Section 607.1106 of the FBCA, and
all property, rights, privileges, policies and franchises of each of Tropical
and Acquisition shall vest in the Surviving Corporation and all debts,
liabilities and duties of each of Tropical and Acquisition shall become the
debts, liabilities and duties of the Surviving Corporation.
THIRD: The Articles of Incorporation of Tropical as in effect
immediately prior to the Effective Time shall continue in full force and effect
as the Articles of Incorporation of the Surviving Corporation upon and following
the Effective Time until thereafter amended in accordance with applicable law;
PROVIDED, HOWEVER, that THE PAR VALUE OF THE CAPITAL STOCK OF THE SURVIVING
CORPORATION AS SET FORTH IN ARTICLE III OF THE SURVIVING CORPORATION'S ARTICLES
OF INCORPORATION SHALL BE AND HEREBY IS CHANGED FROM NO PAR VALUE TO $0.01 PAR
VALUE PER SHARE, AND SUCH ARTICLE III IS HEREBY AMENDED ACCORDINGLY.
FOURTH: The Bylaws of Tropical as in effect immediately prior to the
Effective Time shall continue in full force and effect as the Bylaws of the
Surviving Corporation upon and following the Effective Time, until thereafter
amended in accordance with applicable law.
FIFTH: From and after the Effective Time, the respective directors and
officers of the Surviving Corporation shall be as set forth in EXHIBIT B hereto,
in each case until their respective
-2-
<PAGE> 102
successors are duly elected or appointed and qualify in the manner provided in
the Articles of Incorporation and Bylaws of the Surviving Corporations and as
otherwise provided by applicable law.
SIXTH: The Plan of Merger was approved by the sole Director and the
sole shareholder of Acquisition as of April 22, 1999, and by the Board of
Directors and sole shareholder of Tropical as of April 22, 1999.
* * * * *
-3-
<PAGE> 103
IN WITNESS WHEREOF, each of Acquisition and Tropical have caused these
Articles of Merger to be signed in their respective corporate names and on their
behalf by an authorized officer, as of this 23rd day of April, 1999.
TP ACQUISITION CORP.
By:______________________________
Name:____________________________
Title:___________________________
TROPICAL PARK, INC.
By:______________________________
Name:____________________________
Title:___________________________
<PAGE> 104
EXHIBIT A
CONVERSION OF SHARES
At the Effective Time, pursuant to these Articles of Merger and the Merger
Agreement, the outstanding shares of capital stock of Tropical shall be
converted into the right to receive an aggregate cash payment of Thirty-Eight
Million Seven Hundred Thousand Dollars ($38,700,000) to be thereupon delivered
and paid as provided and subject to the terms set forth in the Merger Agreement.
<PAGE> 105
EXHIBIT B
OFFICERS AND DIRECTORS OF SURVIVING CORPORATION
OFFICERS
Name Office
Thomas H. Meeker Chairman
C. Kenneth Dunn President
Randell E. Soth Vice President and General Manager
Robert Decker Vice President and Treasurer
Michael Abes Assistant Secretary
Rebecca C. Reed Secretary
Vicki L.Baumgardner Assistant Treasurer
DIRECTORS
Name
Robert L. Decker
C. Kenneth Dunn
Thomas H. Meeker
Rebecca C. Reed
Jeffrey M. Smith
<PAGE> 106
Exhibit 99
FOR IMMEDIATE RELEASE Contact: Karl Schmitt
(502) 636-4594
CHURCHILL DOWNS COMPLETES ACQUISITION OF CALDER RACE COURSE
LOUISVILLE, Ky. (April 26, 1999) - Churchill Downs Incorporated (Nasdaq: CHDN)
announced today that the Company has completed its acquisition of Calder Race
Course in Miami.
Under the terms of the agreement with KE Acquisition Corp., a private
holding company that has owned Calder Race Course since 1991, Churchill Downs
paid approximately $86 million in cash for all of the outstanding stock of
Calder Race Course Inc. and Tropical Park Inc. The completed transaction gives
Churchill Downs ownership of the racetrack facilities at Calder Race Course as
well as the licenses held by Calder Race Course Inc. and Tropical Park Inc. to
conduct horse racing at Calder Race Course. Plans for the acquisition were
initially announced in January 1999.
Kenneth Dunn and his current management team will continue to oversee
Calder Race Course.
Churchill Downs Incorporated, headquartered in Louisville, Ky., is one of
the world's leading horse racing companies. Its flagship operation, Churchill
Downs, is home of the Kentucky Derby and will host its 125th running on May 1,
1999. The Company has additional racing and simulcast-wagering operations in
Kentucky and Indiana and interests in various racing services companies.
Churchill Downs Incorporated can be found on the Internet at
WWW.KENTUCKYDERBY.COM.
THIS PRESS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS MADE PURSUANT TO THE
"SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. THE READER IS CAUTIONED THAT SUCH FORWARD-LOOKING STATEMENTS INVOLVE RISKS
AND UNCERTAINTIES THAT COULD SIGNIFICANTLY AFFECT EXPECTED RESULTS IN THE FUTURE
FROM THOSE EXPRESSED IN ANY SUCH FORWARD-LOOKING STATEMENTS MADE BY, OR ON
BEHALF OF THE COMPANY. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THE PRESENTLY ESTIMATED AMOUNTS INCLUDE: THE CONTINUED
ABILITY OF THE COMPANY TO EFFECTIVELY COMPETE FOR THE COUNTRY'S TOP HORSES AND
TRAINERS NECESSARY TO FIELD HIGH-QUALITY HORSE RACING; THE CONTINUED ABILITY OF
THE COMPANY TO GROW ITS SHARE OF THE INTERSTATE SIMULCAST MARKET; A SUBSTANTIAL
CHANGE IN REGULATIONS AFFECTING OUR GAMING ACTIVITIES; A SUBSTANTIAL CHANGE IN
ALLOCATION OF LIVE RACING DAYS; THE IMPACT OF COMPETITION FROM ALTERNATIVE
GAMING (INCLUDING RIVERBOAT CASINOS AND LOTTERIES) AND OTHER SPORTS AND
ENTERTAINMENT OPTIONS IN THOSE MARKETS IN WHICH THE COMPANY OPERATES; A DECREASE
IN RIVERBOAT ADMISSIONS REVENUE FROM THE COMPANY'S INDIANA OPERATIONS; YEAR 2000
COMPUTER ISSUES; AND THE COMPANY'S SUCCESS IN ITS PURSUIT OF STRATEGIC
INITIATIVES DESIGNED TO GENERATE ADDITIONAL REVENUES.
-END-
