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Exhibit 10.84
PURCHASE AGREEMENT
dated as of August 11, 2000
among
UC ACQUISITION COMPANY OF NEVADA, LLC
ALLIANCE GAMING CORPORATION
and
APT GAMES, INC.
with respect to
UNITED COIN MACHINE CO.
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This PURCHASE AGREEMENT dated as of August 11, 2000 is made and
entered into among UC Acquisition Company of Nevada, LLC, a Delaware limited
liability company (the "Purchaser"), APT Games, Inc., a Nevada corporation
("Seller"), and Alliance Gaming Corporation, a Nevada corporation ("Parent").
Capitalized terms not otherwise defined herein have the meanings set forth in
Section 13.01.
WHEREAS, Seller owns 2,500 shares of common stock, par value
$0.10 per share, of United Coin Machine Co., a Nevada corporation (the
"Company"), constituting all issued and outstanding shares of capital stock of
the Company (the "Shares");
WHEREAS, Parent is the direct owner of all the issued and
outstanding capital stock of Seller;
WHEREAS, the Company is engaged in the business of selecting,
owning, installing, operating and maintaining video poker devices, reel-type
slot machines and other electronic gaming machines in local establishments in
Nevada (the "Business");
WHEREAS, subject to certain conditions, including approval of the
Governmental or Regulatory Authorities, on the Closing Date, Seller shall cause
the Company to be merged into United Coin, LLC, a Nevada limited liability
company to be formed ("United Coin, LLC"), with United Coin, LLC surviving such
merger (the "Merger"), pursuant to which the Shares shall be exchanged for
common membership interests in United Coin, LLC, constituting all issued and
outstanding common membership interests in United Coin, LLC (the "Membership
Interest") and for preferred membership interests; and
WHEREAS, Seller desires to sell, and Purchaser desires to
purchase, the Membership Interest on the terms and subject to the conditions set
forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
SALE OF MEMBERSHIP INTEREST; CLOSING; PARENT INVESTMENT
1.01 Purchase and Sale. Seller agrees to sell to Purchaser, and
Purchaser agrees to purchase from Seller, all of the right, title and interest
of Seller in and to the Membership Interest at the Closing on the terms and
subject to the conditions set forth in this Agreement.
1.02 Purchase Price. The purchase price for the Membership Interest
shall be equal to the sum of One Hundred Eighteen Million Dollars
($118,000,000): (a) increased by the product of (i) the amount by which Adjusted
EBITDA for the fiscal year ending June 30, 2001 (or if the Closing Date is
earlier than August 1, 2001, then as of the twelve month period ending on the
Determination Date) exceeds the sum of Twenty-seven Million Five Hundred
Thousand Dollars ($27,500,000) multiplied (ii) by a factor of 4 and 29/100ths
(4.29 ) or (b) decreased by the product of (i) the amount by which Adjusted
EBITDA, for the fiscal year ending June 30, 2001 (or if the Closing Date is
earlier than August 1, 2001, then as of the twelve month period ending on the
Determination Date), is less than the sum of Twenty-seven Million Five Hundred
Thousand Dollars ($27,500,000) multiplied (ii) by a factor of 4 and 29/100ths
(4.29 )(the "Purchase Price"). The
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Purchase Price shall be payable at the Closing as follows:
(a) Ninety-five percent (95%) of the Purchase Price in
immediately available United States funds; and
(b) The balance of the Purchase Price by the retention by Seller of
senior preferred equity ("Senior Preferred Equity") of United Coin, LLC for the
balance of the Purchase Price, having the rights and preferences set forth in
the form of amended and restated operating agreement for United Coin, LLC (the
"LLC Agreement") attached hereto as Exhibit A. Purchaser shall have the right to
make changes to the form of the LLC Agreement prior to the Closing Date;
provided, however that the provisions of the Operating Agreement requiring
Seller's consent as described in Section 16.3 of the LLC Agreement and any other
change to the LLC Agreement to the extent that such amendment, modification or
revision would adversely affect Seller's rights, privileges or preferences may
only be changed upon the approval of Seller, which approval, in the case of such
other change(s), shall not be unreasonably withheld. The definitive agreements
for the debt finance described in Section 5.05(a) hereof shall provide for the
ability of United Coin, LLC to redeem the Senior Preferred Equity at the time
and in the amounts set forth in Article VIII of the LLC Agreement in the absence
of a default by Purchaser or United Coin, LLC under such definitive debt
agreements.
1.03 Closing. The Closing will take place at the offices of James,
Driggs, Walch, Santoro, Kearney, Johnson, & Thompson, 3773 Howard Hughes Pkwy.,
Suite 290N, Las Vegas, Nevada 89109 or at such other place as Purchaser and
Seller mutually agree, at 10:00 A.M. local time, on the Closing Date. At the
Closing, Purchaser shall pay the cash component of the Purchase Price by
delivery of the Deposit and the wire transfer of immediately available funds to
such account as Seller may reasonably direct by written notice delivered to
Purchaser by Seller at least two Business Days before the Closing Date and
Seller shall retain the Senior Preferred Equity. Simultaneously, Seller will
assign and transfer to Purchaser all of Seller's right, title and interest in
and to the Membership Interest by delivering to Purchaser a certificate or
certificates representing the Membership Interest, in genuine and unaltered
form, duly endorsed in blank with requisite transfer tax stamps, if any,
attached. At the Closing, (a) there shall also be delivered to Seller and
Purchaser the certificates and opinions to be delivered under Articles VI and
VII, (b) United Coin, LLC shall enter into a supply agreement with Bally in the
form of Exhibit F hereto (the "Supply Agreement") and (c) Purchaser and United
Coin, LLC shall enter into a license agreement with Parent in the form of
Exhibit G hereto with respect to the Alliance Intellectual Property and the
United Intellectual Property (the "Intellectual Property License Agreement").
1.04 Excluded Liabilities. The Seller and Parent shall pay in full or
assume any continuing liability on and after the Closing for the following
obligations of the Company (the "Excluded Obligations"):
(a) All capital leases, long term Liabilities for borrowed money
(including current maturities thereof), certain real estate leases and the
obligations for leased or financed gaming equipment located at locations under
contract with the Company, consisting of the leases and Liabilities described on
Section 1.04(a) of the Disclosure Schedule which Disclosure Schedule shall be
updated as of the Closing Date;
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(b) Obligations accrued as of the Closing Date to employees and
former employees of Seller as set forth in Sections 9.02(b), 9.05, and 9.07; and
(c) Any and all obligations to Bally for the lease of gaming
equipment not described on Schedule 1.04(c). The Excluded Obligations to be paid
in full on the Closing Date are identified on Section 1.04(a) of the Disclosure
Schedule which Disclosure Schedule shall be updated as of the Closing Date. The
Excluded Obligations to be assumed on the Closing Date are identified on Section
1.04(b) of the Disclosure Schedule which Disclosure Schedule shall be updated as
of the Closing Date.
(d) Parent and Seller shall fully assume, and secure for the
benefit of Purchaser and United Coin, LLC, a complete release of Company and
United Coin, LLC, from any and all obligations of the Company under that certain
lease between Jorai Enterprises, a Nevada general partnership, as landlord, and
The Junior Corp., a Nevada corporation, as tenant, dated August 8, 1989, as
subsequently assigned to the Company, pursuant to the terms of that certain
Assignment, Delegation, Assumption and Consent Agreement dated August 14, 1989
(the "Jorai Lease"). If Parent and Seller are unable to secure a full and
complete release of Company and United Coin, LLC from the obligations under the
Jorai Lease by the first day of the thirty-fifth (35th) month following the
Closing Date, then Purchaser shall have the right to set-off against the sums
payable in redemption of the Senior Preferred Equity on the third, fourth and
fifth anniversary dates of the Closing Date an amount equal to the cost of a
commercial annuity issued by an insurance company having a Best rating of A or
better that, if purchased as of the third anniversary date of the Closing Date,
would provide a sufficient monthly annuity to discharge the tenant's monetary
obligations under the Jorai Lease over the remaining term thereof. If Purchaser
exercises this right of set-off, then Purchaser shall assume the continuing
obligation to make payments under the Jorai Lease as the tenant thereof.
Purchaser shall provide Seller with written notice of its election to set-off
the amount of the cost of the commercial annuity not later than the first day of
the thirty-fifth (35th) month following the Closing Date together with written
evidence of the cost of such commercial annuity. Seller shall have ten (10) days
from the receipt of such notice in which to dispute the cost of the commercial
annuity. If Seller disputes the cost of the commercial annuity, then Seller
shall select an independent insurance broker to obtain a quote from an insurance
company having a Best rating of A or better. Seller's independent insurance
broker and Purchaser's independent insurance broker shall jointly select a third
independent insurance broker. The quote of the independent insurance broker
whose quote for the cost of the commercial annuity is neither the highest nor
the lowest, shall be binding and conclusive on Seller and Purchaser.
1.05 Further Assurances; Post-Closing Cooperation
(a) Subject to the terms and conditions of this Agreement, at any
time or from time to time after the Closing, each of the parties hereto shall
execute and deliver such other documents and instruments, provide such materials
and information, and take such other actions as may reasonably be necessary,
proper or advisable, to the extent permitted by Law, to fulfill its obligations
under this Agreement.
(b) Following the Closing, each party will afford the other
party, its counsel and
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its accountants, during normal business hours, upon prior written notice
specifying the nature of the inquiry and the information sought, with copies of
the Books and Records relating to the Business or Condition of the Company in
its possession with respect to periods prior to the Closing and the right to
make copies and extracts therefrom, to the extent that such access may be
reasonably required by the requesting party in connection with (i) the
preparation of Tax Returns, (ii) the determination or enforcement of rights and
obligations under this Agreement, (iii) compliance with the requirements of any
Governmental or Regulatory Authority, or (iv) in connection with any actual or
threatened Action or Proceeding. Further, each party agrees for a period
extending six years after the Closing Date not to destroy or otherwise dispose
of any such Books and Records and other data unless such party shall first offer
in writing to surrender such Books and Records and other data to the other party
and such other party shall not agree in writing to take possession thereof
during the ten-day period after such offer is made.
(c) If, in order properly to prepare its Tax Returns, other
documents or reports required to be filed with Governmental or Regulatory
Authorities or its financial statements or to fulfill its obligations hereunder,
it is necessary that a party be furnished with additional information, documents
or records relating to the Business or Condition of the Company not referred to
in paragraph (b) above, and such information, documents or records are in the
possession or control of the other party, such other party agrees to use its
best efforts to furnish or make available such information, documents or records
(or copies thereof) at the recipient's request, cost and expense. Any
information obtained by Parent or Seller in accordance with this paragraph shall
be held confidential by Parent or Seller in accordance with Section 14.05.
(d) Notwithstanding anything to the contrary contained in this
Section, if the parties are in an adversarial relationship in litigation or
arbitration, the furnishing of information, documents or records in accordance
with any provision of this Section shall be subject to applicable rules relating
to discovery.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT
Seller and Parent hereby represent and warrant to Purchaser as follows:
2.01 Corporate Existence of Seller and Parent. Each of Seller and Parent
is a corporation duly incorporated, validly existing and in good standing under
the Laws of the State of Nevada. Each of Seller and Parent has full corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated hereby,
including, in the case of Seller, without limitation to own, hold, sell and
transfer (pursuant to this Agreement) the Shares.
2.02 Authority. The execution and delivery by each of Seller and Parent
of this Agreement, and the performance by each of Seller and Parent of their
respective obligations hereunder, have been duly and validly authorized by the
Board of Directors of Seller and Parent, respectively, no other corporate action
on the part of Seller or Parent being necessary. This Agreement has been duly
and validly executed and delivered by each of Seller and Parent and
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constitutes a legal, valid and binding obligation of Seller and of Parent
enforceable against Seller and Parent in accordance with its terms.
2.03 Corporate Existence of the Company. The Company is a corporation
duly incorporated, validly existing and in good standing under the Laws of the
State of Nevada, and has full corporate power and authority to conduct its
business as and to the extent now conducted and to own, use and lease its Assets
and Properties. The Company is duly qualified, licensed or admitted to do
business and is in good standing in those jurisdictions specified in Section
2.03 of the Disclosure Schedule, which are the only jurisdictions in which the
ownership, use or leasing of its Assets and Properties, or the conduct or nature
of the Business, makes such qualification, licensing or admission necessary,
except for those jurisdictions in which the adverse effects of all such failures
by the Company to be qualified, licensed or admitted and in good standing could
not in the aggregate reasonably be expected to have a material adverse effect on
the Business or Condition of the Company. Seller has prior to the execution of
this Agreement delivered to Purchaser true and complete copies of the articles
of incorporation and by-laws of the Company as in effect on the date hereof. The
Company has no Subsidiaries.
2.04 Capital Stock. The authorized capital stock of the Company consists
solely of 2,500 shares of Common Stock, of which only the Shares have been
issued. The Shares are duly authorized, validly issued, outstanding, fully paid
and nonassessable. Except as disclosed in Section 2.04 of the Disclosure
Schedule, Seller owns the Shares, beneficially and of record, free and clear of
all Liens. Except for this Agreement and as disclosed in Section 2.04 of the
Disclosure Schedule, there are no outstanding Options with respect to the
Company. The delivery of a certificate or certificates at the Closing
representing the Shares in exchange for the Membership Interest in connection
with the Merger will transfer good and valid title to the Shares, free and clear
of all Liens other than Liens created or suffered to exist by Purchaser.
2.05 Membership Interest. On the Closing Date, and effective upon the
Merger, the authorized and issued membership interests in United Coin, LLC,
shall consist of the Membership Interest and the Senior Preferred Equity. The
delivery of a certificate or certificates at the Closing representing the
Membership Interest will transfer good and valid title to the Membership
Interest, free and clear of all Liens other than Liens created or suffered to
exist by Purchaser.
2.06 No Conflicts. The execution and delivery by each of Seller and
Parent of this Agreement do not, and the performance by Seller and Parent of
their respective obligations under this Agreement and the consummation of the
transactions contemplated hereby will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the certificate or articles of
incorporation or by-laws (or other comparable corporate charter documents) of
Seller, Parent or the Company;
(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Section 2.07 of the
Disclosure Schedule, conflict with or result in a violation or breach of any
term or provision of any Law or Order applicable to Seller, Parent or
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the Company or any of their respective Assets and Properties (other than such
conflicts, violations or breaches (i) which could not in the aggregate
reasonably be expected to adversely affect the validity or enforceability of
this Agreement or to have a material adverse effect on the Business or Condition
of the Company or (ii) as would occur solely as a result of the identity or the
legal or regulatory status of Purchaser or any of its Affiliates); or
(c) except as disclosed in Section 2.06 of the Disclosure
Schedule or as could not, individually or in the aggregate, reasonably be
expected to be materially adverse to the Business or Condition of the Company or
to adversely affect the ability of Seller and Parent to consummate the
transactions contemplated hereby or to perform its obligations hereunder, (i)
conflict with or result in a violation or breach of, (ii) constitute (with or
without notice or lapse of time or both) a default under, (iii) require Seller,
Parent or the Company to obtain any consent, approval or action of, make any
filing with or give any notice to any Person as a result or under the terms of,
(iv) result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, or (v) result in the
creation or imposition of any Lien upon Seller, Parent or the Company or any of
their respective Assets and Properties under, any Contract or License to which
Seller, Parent or the Company is a party or by which any of their respective
Assets and Properties is bound.
2.07 Governmental Approvals and Filings. Except as disclosed in Section
2.07 of the Disclosure Schedule, no consent, approval or action of, filing with
or notice to any Governmental or Regulatory Authority on the part of Seller,
Parent, or the Company, is required in connection with the execution, delivery
and performance of this Agreement or the consummation of the transactions
contemplated hereby, except: (a) where the failure to obtain any such consent,
approval or action, to make any such filing or to give any such notice could not
reasonably be expected to adversely affect the ability of Seller or Parent to
consummate the transactions contemplated by this Agreement or to perform its
obligations hereunder, or to have a material adverse effect on the Business or
Condition of the Company, and (b) those as would be required solely as a result
of the identity or the legal or regulatory status of Purchaser or any of its
Affiliates.
2.08 Books and Records. The minute books and other similar records of
the Company as made available to Purchaser prior to the execution of this
Agreement contain a true and complete record, in all material respects, of all
action taken at all meetings and by all written consents in lieu of meetings of
the stockholders, the boards of directors and committees of the boards of
directors of the Company. The stock transfer ledgers and other similar records
of the Company as made available to Purchaser prior to the execution of this
Agreement accurately reflect all record transfers prior to the execution of this
Agreement in the capital stock of the Company.
2.09 Financial Statements and Condition.
(a) Prior to the execution of this Agreement, Seller has
delivered to Purchaser true and complete copies of the unaudited balance sheet
of the Company as of June 30, 2000 and the related unaudited statement of
operations for the year then ended. The foregoing financial statement together
with the financial statements to be provided Purchaser under Section 4.05 are
referred to herein collectively as the "Disclosed Financial Statements." Except
as disclosed in Section 2.09(a) of the Disclosure Schedule, the Disclosed
Financial Statements: (i) were and shall be prepared in
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all material respects in accordance with the Books and Records of Seller, Parent
and Company; (ii) set forth and shall present fairly in accordance with GAAP the
Company's financial condition and the results of operations as at the relevant
dates thereof and for the periods covered thereby, (iii) were and shall be
prepared, in all material respects, in accordance with GAAP, subject to year end
adjustments and except for the lack of footnotes; and (iv) in the case of
interim financial statements, contain and reflect and shall reflect all
adjustments necessary for a fair presentation of Company's financial condition
and the results of operations for the periods covered by the Disclosed Financial
Statements. Except to the extent reflected or reserved against in Company's
balance sheet dated as June 30, 2000 (the "Unaudited Financial Statement Date"),
or except as disclosed in Section 2.09(a) of the Disclosure Schedule, on the
Unaudited Financial Statement Date the Company has or had no material Liability
(secured, unsecured, contingent or otherwise) of a nature customarily reflected
in a balance sheet prepared in accordance with GAAP. Seller, Parent and Company
are not in material monetary default with respect to any term or condition of
any material Indebtedness or Liability. There is no material Liability of
Company of the type required to be recorded on balance sheets that is not set
forth in this Agreement, in the Disclosed Financial Statements or in the
Schedules and Exhibits attached to this Agreement other than Liabilities
incurred or to be incurred in the ordinary course of business, consistent with
past practice.
(b) The Company has devised and maintained a system of internal
accounting controls sufficient to provide reasonable assurances: (i) that
transactions are executed in accordance with management's general or specific
authorization; (ii) that transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP or any other
criteria applicable to such statements and to maintain proper accountability for
items; (iii) that access is permitted only in accordance with management's
general or specific authorization; (iv) that the recorded accountability for
items is compared with the actual levels at reasonable intervals, and
appropriate action is taken with respect to differences, if any; and (v) that
applicable requirements imposed by the Nevada Gaming Commission are materially
complied with.
(c) Except for the execution and delivery of this Agreement and
the transactions to take place pursuant hereto on or prior to the Closing Date
and as disclosed in Section 2.09(b) of the Disclosure Schedule, since the
Unaudited Financial Statement Date the Business of the Company has been operated
in all material respects in the ordinary course and there has not been any
Material Adverse Change in the Business or Condition of the Company.
2.10 Taxes. Except as disclosed in Section 2.10 of the Disclosure
Schedule (with paragraph references corresponding to those set forth below):
(a) The Company has timely filed (taking into account all
available extensions) all Tax Returns (or such Tax Returns have or will be filed
on its behalf) required by Law to be filed before or as of the Closing Date. All
such Tax Returns and amendments thereto are or will be true, complete and
correct in all material respects. All Taxes payable by Company, or by Seller or
Parent on behalf of Company, or otherwise arising from, imposed in connection
with, or applicable to the Assets or Properties, the operations and/or the
Business of Company, in respect to any period ending before or as of the Closing
Date, have been, or will have been paid, on or before the Closing Date,
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or, where payment is not yet due, Seller, Parent or Company has established, or
will establish or cause to be established on or before the Closing Date, an
adequate accrual for the payment of all such Taxes. The reserves and provisions
for Taxes as set forth on the Disclosed Financial Statements are adequate for
all open years and for the current fiscal period.
(b) As of the date hereof, Seller, Parent or Company have not
received notice from any Governmental or Regulatory Authority that it intends to
audit the Tax Returns of Seller, Parent of Company for any open year, nor is
there an audit currently in progress. As of the date hereof, neither the
Company, Parent nor Seller on behalf of the Company has executed any outstanding
waivers or comparable consents regarding the application of the statute of
limitations with respect to any Taxes or Tax Returns.
(c) As of the date hereof, to the Knowledge of Seller, no unpaid
Tax deficiencies have been proposed by any Governmental or Regulatory Authority
with respect to Taxes of the Company. To the Knowledge of Seller there is no
proposed material additional assessment for Taxes of the Company that has not
been fully reserved against. There are no liens with respect to any Taxes upon
any of the Assets or Properties of the Company, other than (i) Taxes, the
payment of which is not yet due, or (ii) Taxes being contested.
(d) Company has withheld (or has had withheld on its behalf)
proper and accurate amounts from Company's employee payrolls for all periods in
material compliance with all Tax-withholding provisions (including, without
limitation, income Tax withholding, social security and unemployment Taxes, if
any) of applicable Law.
2.11 Legal Proceedings. Except as disclosed in Section 2.11 of the
Disclosure Schedule (with paragraph references corresponding to those set forth
below):
(a) there are no Actions or Proceedings pending or, to the
Knowledge of Seller, threatened against, relating to or affecting Seller, Parent
or the Company or any of their respective Assets and Properties, that could
reasonably be expected (i) to result in the issuance of an Order restraining,
enjoining or otherwise prohibiting or making illegal the consummation of any of
the transactions contemplated by this Agreement, or (ii) individually or in the
aggregate with other such Actions or Proceedings, to result in a Material
Adverse Change in the Business or Condition of the Company; and
(b) there are no Orders outstanding against the Company which,
individually or in the aggregate with other such Orders, materially adversely
affect the Business or Condition of the Company.
Section 2.11 of the Disclosure Schedule describes the applicable court, agency
or tribunal, case name and identity of counsel, if any, for each matter thereon
so identified, including a description of insurance coverage, if applicable.
2.12 Compliance With Laws and Orders. Except as disclosed in Section
2.12 of the Disclosure Schedule, the Company is not in violation of or in
default under any Law or Order
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applicable to the Company or any of its Assets and Properties the effect of
which, individually or in the aggregate with other such violations and defaults,
could reasonably be expected to be materially adverse to the Business or
Condition of the Company. The Company has during the last three (3) years
received no notification alleging any such violation.
2.13 Employees; Labor and Employment Agreements
(a) Section 2.13 of the Disclosure Schedule contains a complete
list of the names and Social Security Numbers of all officers, directors,
employees, and consultants of the Company who are employed in or render services
to the Company in connection with the Company's conduct of the Business,
together with the date of hire of each of such persons and the annual or hourly
rate of compensation, the job title, job description, job classification (i.e.,
full-time or part-time) and Plan participation of each of such persons on the
date of this Agreement.
(b) Except as provided in Article IX, Purchaser shall have no
liability, cost or obligation whatsoever under or by reason of any program or
past practice of any kind of Seller, Parent or the Company relating to any of
the employees of the Company for any race, color, religion, sex or gender,
sexual orientation or preference, handicap or disability, age, national origin
or ancestry, discrimination, harassment or retaliation claims asserted against
Parent, the Company or Seller or any of their officers, employees, agents or
representatives relating to facts, events or circumstances that occurred or
existed before the Closing Date.
(c) Company is, and on the Closing Date, the Company shall have
been, in full compliance with all applicable Law affecting the employment of
Company's employees, including, without limitation, those relating to wages,
hours, working conditions, collective bargaining, affirmative action,
discrimination, harassment, retaliation, occupational safety and health,
immigration, withholding and payment of applicable income Taxes and FICA,
Medicare and similar employment-related Taxes, and any and all other obligations
pertaining to employee benefits or employee compensation, the non-compliance
with which would reasonably be expected to have a material adverse effect on the
Business or Condition of the Company conducted on the date of this Agreement or
as conducted immediately before the Closing Date.
2.14 Labor Disputes, Complaints and Proceedings. Except as set forth on
Section 2.14 of the Disclosure Schedule, the Company is not, and on the Closing
Date the Company shall not have been, subject to any pending labor difficulty or
to any pending or, to the Knowledge of Seller, threatened grievance, labor
dispute, union organizing drive or union "corporate campaign," employee
representation proceeding, strike, picketing, handbilling, slowdown, sickout,
work-to-rule or work stoppage of any kind that would reasonably be expected to
materially affect adversely the Business or Condition of the Company, and there
is no, and on the Closing Date there shall not have been any, charge or
complaint against the Company or any of the Company's officers or employees by
or before any Governmental or Regulatory Agency, involving any charge or
complaint of any unfair labor practice or involving any employee representation
proceeding which could reasonably
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be expected to have such an effect. Section 2.14 of the Disclosure Schedule
shall indicate thereon the applicable court, agency or tribunal, case name and
number and identity of counsel, if any, for each matter thereon so identified,
including a description of insurance coverage if applicable.
2.15 Benefit Plans; ERISA.
(a) Section 2.15(a) of the Disclosure Schedule contains a true
and complete list of each material Benefit Plan.
(b) The Company does not maintain and is not obligated to provide
material benefits under any life, medical or health plan (other than as an
incidental benefit under a Qualified Plan) which provides benefits to retirees
or other terminated employees other than benefit continuation rights under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
(c) Neither the Company, any ERISA Affiliate nor any other
corporation or organization controlled by or under common control with any of
the foregoing within the meaning of Section 4001 of ERISA has at any time
contributed to any "multiemployer plan," as that term is defined in Section 4001
of ERISA.
(d) None of the Benefit Plans of the Company and no Plans of any
ERISA Affiliate are subject to Title IV of ERISA.
(e) Complete and correct copies of the following documents have
been furnished, or made available, to Purchaser prior to the execution of this
Agreement:
(i) the Benefit Plans and any related trust agreements;
(ii) current summary Plan descriptions of each Benefit
Plan subject to ERISA;
(iii) the most recent Form 5500 and Schedules thereto for
each Benefit Plan subject to ERISA reporting requirements; and
(iv) the most recent determination of the IRS with respect
to the qualified status of each Qualified Plan.
2.16 Marketable Assets and Properties Generally. Company has good title
to the Assets and Properties owned by it and material to its business or
condition, including, without limitation, all real property and leasehold
estates and all other tangible and intangible assets, free and clear of Liens
except for Liens (a) that are reflected in the Disclosed Financial Statements,
(b) that constitute statutory liens arising in the ordinary course of business
or (c) Permitted Liens.
2.17 Necessary Assets and Properties Generally. Except as set forth on
Section 2.17 of the Disclosure Schedule, the Assets and Properties of Company
include all Assets and Property, including, without limitation, equipment and
other personal property, and all Contract rights and other intangible property
used to conduct the Business of Company as such Business was conducted by
Company before the date of this Agreement.
2.18 Real Property.
(a) Section 2.18(a) of the Disclosure Schedule contains a true
and correct list of (i) each parcel of real property owned by the Company, (ii)
each parcel of real property leased by the Company (as lessor or lessee) and
(iii) all Liens (other than Permitted Liens) relating to or
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affecting any parcel of real property referred to in clause (i).
(b) Except as disclosed in Section 2.18(a) of the Disclosure
Schedule, the Company has good title to each parcel of real property owned by
it. Except for the real property leased or subleased to others referred to in
clause (ii) of paragraph (a) above, the Company is in possession of each parcel
of real property owned by it, together with all buildings, structures,
facilities, fixtures and other improvements thereon.
(c) The Company has a valid and subsisting leasehold estate in
and the right to quiet enjoyment of the real properties leased by it as lessee
under leases referred to in clause (ii) of Section 2.18(a) above for the full
term of the lease thereof. There are no oral or written modifications or
amendments to any of such leases that have not been made available to Purchaser.
Each such lease is a legal, valid and binding agreement of the Company,
enforceable in accordance with its terms and, to the Knowledge of Seller, of
each other Person that is a party thereto, and except as set forth in Section
2.18(a) of the Disclosure Schedule, to the Knowledge of Seller there is no
material default (or any condition or event which, after notice or lapse of time
or both, would constitute a material default).
(d) Seller has delivered to Purchaser prior to the execution of
this Agreement true and complete copies of (i) all deeds, leases, mortgages,
deeds of trust, certificates of occupancy, title insurance policies, title
reports, surveys and similar documents, and all amendments thereof, with respect
to the real property owned by the Company, and (ii) all leases and subleases
(including any amendments and renewal letters) with respect to the real property
leased by the Company. To the Knowledge of Seller there are no Liens on, or
claims to, or covenants, conditions and restrictions, easements, rights of way
or other matters not known to the general public that materially adversely
affect the real property owned by Company which are not of record.
(e) At the Closing Date, Seller shall obtain at its sole cost and
expense a CLTA standard form owner's policy of title insurance with Western
regional exceptions (a "CLTA Title Policy") issued by Escrow Holder in the
amount of the Purchase Price allocated to the fee interests in the Company's
real property insuring title to the real property as vested in Company subject
only to Permitted Liens.
(f) Except as disclosed in Section 2.18(f) of the Disclosure
Schedule, the improvements on the real property identified in Section 2.18(a) of
the Disclosure Schedule are in all material respects in good operating condition
and in a state of good maintenance and repair, ordinary wear and tear excepted,
are adequate and suitable for the purposes for which they are presently being
used and, to the Knowledge of Seller, there are no condemnation or appropriation
proceedings pending or threatened against any of such real property or the
improvements thereon.
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2.19 Tangible Personal Property. Section 2.19 of the Disclosure Schedule
contains a true and correct list of depreciation schedules setting forth the
tangible personal property of the Company necessary to the operation of the
Business, prepared as of June 30, 2000. The Company is in possession of and has
good title to, or has valid leasehold interests in or valid rights under
Contract to use, all tangible personal property used in and individually or in
the aggregate with other such property material to the Business or Condition of
the Company. All such tangible personal property is free and clear of all Liens,
other than Permitted Liens, Liens disclosed in Section 2.19 of the Disclosure
Schedule, and Liens that neither individually nor in the aggregate could
reasonably be expected to have a material adverse effect on the Business or
Condition of the Company, and is in all material respects in good working order
and condition, ordinary wear and tear excepted.
2.20 Intellectual Property Rights. Section 2.20 of the Disclosure
Schedule discloses all Intellectual Property used in and individually or in the
aggregate with other such Intellectual Property material to the Business or
Condition of the Company, each of which the Company either has all right, title
and interest in or valid and binding rights under Contract to use.
(a) Seller and Parent represent and warrant that those rights
granted to Parent, Seller and their Affiliates pursuant to that certain
Assignment and License Agreement between Michael W. Wood and Parent dated August
20, 1997, specifically referencing United States Patent Number 5,401,023
entitled "Variable Awards Wagering System" and United States Patent Number
5,511,781 entitled "Stop Play Award Wagering System" constitute rights to older
game programs that are not embodied in the Gamblers Bonus technology and that no
Person shall have any basis to assert against Company or United Coin, LLC that
the Gamblers Bonus technology or trademarks associated therewith may only be
used in the State of Nevada or require the payment of any royalty or other fee
with respect to the use by the Company or United Coin, LLC, or its successors
and assigns, of the Gamblers Bonus technology.
(b) Except as disclosed in Section 2.20 of the Disclosure
Schedule, (i) all registrations with and applications to Governmental or
Regulatory Authorities in respect of Intellectual Property owned by the Company,
Parent or its Affiliates and disclosed in Section 2.20 of the Disclosure
Schedule are valid and in full force and effect, (ii) there are no material
restrictions on the direct or indirect transfer of any Contract, or any interest
therein, held by the Company, Parent or its Affiliates in respect of
Intellectual Property disclosed in Section 2.20 of the Disclosure Schedule,
(iii) to the Knowledge of Seller the Company is not in default (or with the
giving of notice or lapse of time or both, would be in default) in any material
respect under any Contract to use the Intellectual Property disclosed in Section
2.20 of the Disclosure Schedule, (iv) to the Knowledge of Seller the
Intellectual Property does not conflict with the rights of any Person, and no
Person has any right from Company, Parent or its Affiliates to use the
Intellectual Property, the effect of which would reasonably be expected to be
material, except as set forth on Section 2.20 of the Disclosure Schedule.
Company, Parent and/or its Affiliates have, in all material respects, performed
all the obligations required to be performed by them to date under any Contract
relating to the Intellectual Property, except for failures to perform that would
not reasonably be expected to result in the restriction or termination of the
Company's rights under such Contract and (v) to the Knowledge of Seller the
Intellectual Property disclosed in Section 2.20 of the Disclosure Schedule is
not being infringed by any other Person. Except as disclosed in Section 2.20 of
the Disclosure Schedule,
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neither Seller, Parent, its Affiliates nor the Company
has received notice that Parent, its Affiliates or Company is infringing any
Intellectual Property of any other Person, to the Knowledge of Seller no claim
is pending or has been made to such effect that has not been resolved and, to
the Knowledge of Seller, the Company, Parent or its Affiliates is not infringing
any Intellectual Property of any other Person the effect of which, individually
or in the aggregate, could reasonably be expected to be materially adverse to
the Business or Condition of the Company.
2.21 Location Contracts.
(a) Section 2.21(a) of the Disclosure Schedule (with paragraph
references corresponding to those set forth below) contains a true and complete
list of each of the following Location Contracts (true and complete copies or,
if none, reasonably complete and accurate written descriptions of which,
together with all amendments and supplements thereto, have been delivered or
made available to Purchaser prior to the execution of this Agreement), to which
the Company is a party:
(i) All Space Lease Agreements; and
(ii) All Participation Agreements;
(b) Each Location Contract required to be disclosed in Section
2.21(b) of the Disclosure Schedule is in full force and effect and constitutes a
legal, valid and binding agreement, enforceable in accordance with its terms, of
the Company and, to the Knowledge of Seller, of each other party thereto. Except
as disclosed in Section 2.21(b) of the Disclosure Schedule, the Company is not
in violation or breach of or default under any Location Contract (or with notice
or lapse of time or both, would be in violation or breach of or default under
any such Location Contract) which Location Contract during the twelve (l2) month
period ending on June 30, 2000, accounted for Fifty Thousand Dollars ($50,000)
or more: (i) in Total Win (if such location is operated under a Space Lease
Agreement) or (ii) Net Win (if such location is operated under a Participation
Agreement), the effect of which would reasonably be expected to result in the
termination of the Company's rights under such Location Contract.
(c) Section 2.21(c) of the Disclosure Schedule sets forth a
schedule of Location Contracts requiring the payment or potential payment,
pursuant to the terms of any such Location Contracts by the Company of more than
$10,000 in addition to the payment of rental under any Space Lease Agreement or
the location share under a Participation Agreement.
(d) Section 2.21(d) of the Disclosure Schedule sets forth those
Location Contracts that require the consent of third parties in connection with
this transaction which the failure to obtain such consent would reasonably be
expected to have a material adverse effect on the Company. Seller and Company
shall use their commercially reasonable efforts to obtain consent of each Person
under any Location Contract whose consent is required in connection with this
transaction.
(e) Except as set forth in Section 2.21(e) of the Disclosure
Schedule, to the Knowledge of Seller no customer of the Company as of June 30,
2000, which by itself accounted for 2% or more of the Company's revenues for the
twelve (l2) month period then ended, has cancelled or otherwise terminated, or
orally or in writing advised the Company or any officer or director or other
employee of the Company of such Customer's intent to cancel or otherwise
terminate its or their relationship with the Company.
2.22 Contracts.
(a) Section 2.22(a) of the Disclosure Schedule (with paragraph
references
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corresponding to those set forth below) contains a true and complete list of
each of the following Contracts (true and complete copies or, if none,
reasonably complete and accurate written descriptions of which, together with
all amendments and supplements thereto, have been made available to Purchaser
prior to the execution of this Agreement), to which the Company is a party or by
which any of its Assets and Properties is bound:
(i) all Contracts with any Person containing any provision or
covenant prohibiting or materially limiting the ability of the Company
to engage in any business activity or compete with any Person or
prohibiting or materially limiting the ability of any Person to compete
with the Company;
(ii) all material partnership, joint venture, shareholders' or
other similar Contracts with any Person;
(iii) all Contracts relating to Indebtedness of the Company in
excess of $50,000 or to preferred stock issued by the Company (other
than Indebtedness owing to or preferred stock owned by the Company);
(iv) all Contracts with distributors, dealers, manufacturer's
representatives, sales agencies or franchisees which in any case involve
the payment or potential payment, pursuant to the terms of any such
Contract, by or to the Company of more than $50,000 annually;
(v) all Contracts relating to (A) the future disposition or
acquisition of any Assets and Properties individually or in the
aggregate material to the Business or Condition of the Company, other
than dispositions or acquisitions in the ordinary course of business,
and (B) any merger or other business combination executed within the
last 24 months;
(vi) all Contracts between or among the Company, on the one hand,
and Seller, any officer, director or Affiliate (other than the Company)
of Seller, on the other hand, and providing for annual payments by or to
the Company exceeding $50,000;
(vii) all Contracts (other than this Agreement) that (A) limit or
contain restrictions on the ability of the Company to declare or pay
dividends on, to make any other distribution in respect of or to issue
or purchase, redeem or otherwise acquire its capital stock, to incur
Indebtedness, to incur or suffer to exist any Lien, to purchase or sell
any Assets and Properties, to change the lines of business in which it
participates or engages or to engage in any merger or other business
combination or (B) require the Company to maintain specified financial
ratios or levels of net worth or other indicia of financial condition;
and
(viii) all other Contracts (other than Benefit Plans, leases
listed in Section 2.18 of the Disclosure Schedule, Location Contracts
listed in Section 2.21(a) of the Disclosure Schedule and insurance
policies listed in Section 2.24 of the Disclosure Schedule) that (A)
involve the payment or potential payment, pursuant to the terms of any
such Contract, by or to the Company of more than $50,000 annually and
(B) cannot be terminated within thirty (30) days after giving notice of
termination without resulting in any material cost or penalty to the
Company.
(b) Each Contract required to be disclosed in Section 2.22(a) of
the Disclosure Schedule is in full force and effect and constitutes a legal,
valid and binding agreement, enforceable
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in accordance with its terms, of the Company and, to the Knowledge of Seller, of
each other party thereto; and except as disclosed in Section 2.22 (b) of the
Disclosure Schedule neither the Company, nor, to the Knowledge of Seller, any
other party to such Contract is in violation or breach of or default under any
such Contract (or with notice or lapse of time or both, would be in violation or
breach of of or default under any such Contract), the effect of which,
individually or in the aggregate, could reasonably be expected to be materially
adverse to the Business or Condition of the Company.
2.23 Licenses. Section 2.23 of the Disclosure Schedule contains a true
and complete list of all Licenses used in and individually or in the aggregate
with other such Licenses material to the Business or Condition of the Company
(and all pending applications for any such Licenses), setting forth the grantor,
the grantee, the function and the expiration and renewal date of each. Prior to
the execution of this Agreement, Seller has delivered to Purchaser true and
complete copies of all such Licenses. Except as disclosed in Section 2.23 of the
Disclosure Schedule:
(i) the Company owns or validly holds all such Licenses;
(ii) each such License is valid, binding and in full force and
effect;
(iii) to the Knowledge of Seller the Company is not in default
(or with the giving of notice or lapse of time or both, would be in
default) under any such License in any material respect; and
(iv) no suspension, cancellation or termination of any of the
licenses, permits or certificates referred to in this Section 2.23 has
been made by any governmental authority (and no such claim is
anticipated by Seller) on the basis that Seller's operation of the
Business fails to comply in any respect with any Law, or that a License
or Order not listed on Section 2.23 of the Disclosure Schedule is
necessary with respect to operation of the Business or Company's
ownership of its Assets and Properties the effect of which would
reasonably be expected to result in the suspension or revocation of any
such License.
2.24 Insurance. Section 2.24 of the Disclosure Schedule contains a true
and complete list of all material insurance policies currently in effect that
insure the Business, operations or employees of the Company or affect or relate
to the ownership, use or operation of any of the Assets and Properties of the
Company and that (i) have been issued to the Company or (ii) have been issued to
any Person (other than the Company) for the benefit of the Company
(a) Section 2.24(a) of the Disclosure Schedule contains the
following information with respect to each material insurance policy (including
material policies providing property, casualty, liability, and workers'
compensation coverage, bond and surety arrangements, aviation, marine, fiduciary
liability, crime, directors and officers liability, employment practices
liability and environmental) to which the Company is, or has been for the last
three (3) years, a named insured or beneficiary:
(i) The name, address, and telephone number of the
agent;
(ii) The name of the insurer, the name of the policy
holder, and the name of each insured;
(iii) The policy number and the period of coverage;
(iv) The scope (including an indication of whether
the coverage was on a claims-made, occurrence,
or other basis) of coverage; and
(v) Any policy for which the limits have been
exhausted.
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(b) With respect to each current insurance policy: (i) the policy
is in full force and effect; (ii) the policy will continue to be in full force
and effect in accordance with the terms of the policy following the consummation
of the transactions contemplated hereby with respect to claims arising prior to
Closing to the extent the policies provide therefor; (iii) no policy is in any
material respect in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default so as to permit
termination or modification of the policy by the insurer; and (iv) no party to
the policy has repudiated any provision thereof. The Company has been
continuously covered during the past three (3) years by insurance in scope and
amount customary and reasonable for the Business in which it has engaged during
the aforementioned period. Appropriate reserves determined in accordance with
standard industry practice and actuarial practice exist for each self-insurance,
captive insurance company, retroactive premium adjustment, or other loss sharing
arrangement, and for deductibles and self-insured retentions. Appropriate
reserves exist with respect to each insurance program subject to premium
revisions or audits. Neither Company, Parent or Seller has received any written
notice from the insurance company which issued any material insurance policies
stating in effect that such insurance policy will not be renewed.
2.25 Affiliate Transactions. Except as disclosed in Section 2.25(a) of
the Disclosure Schedule, (a) there is no Indebtedness between the Company, on
the one hand, and Seller, Parent, any officer, director or Affiliate (other than
the Company) of Seller or Parent, on the other, (b) neither Seller, Parent nor
any such officer, director or Affiliate provides or causes to be provided any
assets, services or facilities to the Company which are individually or in the
aggregate material to the Business or Condition of the Company, (c) the Company
does not provide or cause to be provided any assets, services or facilities to
Seller, Parent, or any such officer, director or Affiliate which are
individually or in the aggregate material to the Business or Condition of the
Company and (d) the Company does not beneficially own, directly or indirectly,
any Investment Assets issued by Seller, Parent or any such officer, director or
Affiliate. Except as disclosed in Section 2.25(b) of the Disclosure Schedule,
each of the Liabilities and transactions listed in Section 2.25(a) of the
Disclosure Schedule was incurred or engaged in, as the case may be, on an
arm's-length basis.
2.26 Environmental Matters.
(a) The Company has obtained all Licenses which are required
under applicable Environmental Laws in connection with the conduct of the
business or operations of the Company, except where the failure to obtain any
such License could not reasonably be expected to be, individually or in the
aggregate with other such failures, materially adverse to the Business or
Condition of the Company. Each of such Licenses is in full force and effect and
the Company is in compliance with the terms and conditions of all such Licenses
and with any applicable Environmental Law, except where the failure to be in
compliance could not reasonably be expected to be, individually or in the
aggregate with other such failures, materially adverse to the Business or
Condition of the Company.
(b) Except as disclosed in Section 2.26(b) of the Disclosure
Schedule, to the Knowledge of Seller no oral or written notification of a
Release of a Hazardous Material has been filed by or on behalf of the Company
and no site or facility now or previously owned, operated or leased by the
Company is listed or proposed for listing on the NPL, CERCLIS or any similar
state
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<PAGE> 18
or local list of sites requiring investigation or clean-up.
(c) Seller has delivered to Purchaser, Phase 1 environmental
assessments for the real property owned by the Company as prepared by an
environmental engineer selected by the Company. There have been no other
environmental investigations, studies, audits, tests, reviews or other analyses
conducted by, or that are in the possession of, the Company in relation to any
site or facility now or previously owned, operated or leased by the Company
which have not been delivered to Purchaser prior to the execution of this
Agreement.
(d) All property owned or leased by Company and all property on
which Seller has conducted operations (excluding property owned by Persons under
Location Contract) fully comply with all applicable Environmental Law, except to
the extent that failure to comply would not reasonably be expected to result in
a material Liability.
(e) Company has not caused, has not permitted and does not know
of, and, to the Knowledge of Seller (which knowledge, in the case of the real
property owned by Company, is limited to knowledge based upon the Phase 1
environmental assessments previously delivered to Purchaser), no other person
has caused or permitted, any Release or threatened Release of any Hazardous
Material in, on, under or from any of Company's real property in a reportable
quantity or in violation of applicable Environmental Law, the effect of which
would reasonably be expected to result in a material Liability. Neither the
Company nor, to the Knowledge of Seller (which knowledge, in the case of the
real property owned by Company, is limited to knowledge based upon the Phase 1
environmental assessments previously delivered to Purchaser), any predecessor of
the Company, nor any employee or other agent of the Company or any predecessor
of the Company has at any time before the date of this Agreement or will have at
any time before the Closing Date conducted or permitted any activity at or on
any of Company's real property or at or on any other location that has caused or
threatens to cause a release of any Hazardous Material in, on, under or from any
of the Company's real property within the meaning of any Environmental Law the
effect of which would result in a material Liability.
(f) To the Knowledge of Seller (which knowledge, in the case of
the real property owned by Company, is limited to knowledge based upon the Phase
1 environmental assessments previously delivered to Purchaser) no past or
present environmental conditions or circumstances at Company's real property
poses a risk to the environment or to the health and safety of persons or could
reasonably form the basis of any claim against Company (or any person or entity
for whom Company could be responsible by Law or Contract) under any applicable
Environmental Law.
2.27 Customer Database. Company maintains a patron data base currently
containing approximately fifty thousand (50,000) names. Company shall maintain
and update Company's patron data base files and records in accordance with past
practices. Except for information shared in the ordinary course of business, no
employee, representative, agent of the Company has delivered or shall deliver
Company's patron data base files and records to a third party or allow a third
party access to Company's patron data base files and records in each case other
than representatives of Governmental or Regulatory Authorities or as required by
Law.
2.28 Contractual Promotions. Company is not committed to any
complimentary arrangement for food or beverage for Customers under Location
Contracts or other contractual promotions other than as set forth in a Location
Contract, and Company shall not extend any such complimentary arrangement or
contractual promotions except in accordance with past practices.
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2.29 Accounts and Notes Receivable . All of the Company's accounts and
notes receivable are carried as retained in-house accounts and notes receivable.
All of the accounts and notes receivable listed in the Disclosed Financial
Statements as of June 30, 2000, and any notes and accounts receivable arising
subsequent thereto, shall be incurred in the ordinary course of the Company's
Business.
2.30 Brokers. Except for Wasserstein Perella & Co, Inc., whose fees,
commissions and expenses are the sole responsibility of Parent, all negotiations
relative to this Agreement and the transactions contemplated hereby have been
carried out by Seller directly with Purchaser without the intervention of any
Person on behalf of Seller in such manner as to give rise to any valid claim by
any Person against Purchaser or the Company for a finder's fee, brokerage
commission or similar payment.
2.31 Accuracy of Information. All lists or other statements, information
or documents set forth in or attached to any Schedule delivered or to be
delivered in the future pursuant to this Agreement shall be deemed to be
representations and warranties of the Seller and Parent with the same force and
effect as if such lists, statements, information and documents were set forth
herein. Any list, statement, document or any information set forth in or
attached to any Schedule delivered or to be delivered pursuant to any provision
of this Agreement shall be deemed to constitute disclosure for purposes of any
other Schedule required to be delivered pursuant to any other provision of this
Agreement. The statements, representations and warranties made by Seller and
Parent in this Agreement and in the Schedules and Exhibits attached hereto are
true, and all lists contained in the Schedules attached hereto are complete and
correct, subject in all cases to the materiality, knowledge and other
limitations, assumptions and qualifications set forth in this Agreement. None of
the representations and warranties of Seller and Parent set forth herein did
contain or will contain, at the respective times when such representations and
warranties were or are made, any untrue statement of a material fact, or omitted
or will omit to state any material fact necessary in order to make the
statements contained therein, in the light of the circumstances under which they
were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
3.01 Existence. Purchaser is a limited liability company duly formed,
validly existing and in good standing under the Laws of the State of Delaware.
Purchaser has full limited liability company power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby.
3.02 Authority. The execution and delivery by Purchaser of this
Agreement, and the performance by Purchaser of its obligations hereunder, have
been duly and validly authorized by its Managers, no other limited liability
company action on the part of it or its members being necessary. This Agreement
has been duly and validly executed and delivered by Purchaser and constitutes a
legal, valid and binding obligation enforceable against Purchaser in accordance
with its terms.
3.03 No Conflicts. The execution and delivery by Purchaser of this
Agreement does not, and the performance by it of its obligations under this
Agreement and the consummation of the transactions contemplated hereby will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions
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<PAGE> 20
or provisions of the certificate of formation or operating agreement of
Purchaser (or other comparable charter document).
(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Schedule 3.04 hereto,
conflict with or result in a violation or breach of any term or provision of any
Law or Order applicable to Purchaser or any of its Assets and Properties (other
than such conflicts, violations or breaches which could not in the aggregate
reasonably be expected to adversely affect the validity or enforceability of
this Agreement); or
(c) except as disclosed in Schedule 3.03 hereto or as could not,
individually or in the aggregate, reasonably be expected to adversely affect the
ability of Purchaser to consummate the transactions contemplated hereby or to
perform its obligations hereunder, (i) conflict with or result in a violation or
breach of, (ii) constitute (with or without notice or lapse of time or both) a
default under, (iii) require Purchaser to obtain any consent, approval or action
of, make any filing with or give any notice to any Person as a result or under
the terms of, or (iv) result in the creation or imposition of any Lien upon
Purchaser or any of its Assets or Properties under, any Contract or License to
which it is a party or by which any of its Assets and Properties are bound.
3.04 Governmental Approvals and Filings. Except as disclosed in Schedule
3.04 hereto, no consent, approval or action of, filing with or notice to any
Governmental or Regulatory Authority on the part of Purchaser is required in
connection with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby, except where the failure
to obtain any such consent, approval or action, to make any such filing or to
give any such notice could not reasonably be expected to adversely affect the
ability of either to consummate the transactions contemplated by this Agreement
or to perform its obligations hereunder.
3.05 Legal Proceedings. There are no Actions or Proceedings pending or,
to the knowledge of Purchaser threatened against, relating to or affecting any
of its Assets and Properties which could reasonably be expected to result in the
issuance of an Order restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement.
3.06 Purchase for Investment. The Membership Interest to be acquired by
Purchaser shall be acquired by Purchaser (or, if applicable, its assignee
pursuant to Section 14.09) for its own account for the purpose of investment, it
being understood that the right to dispose of such Membership Interests shall be
entirely within the discretion of Purchaser (or such assignee, as the case may
be). Purchaser (or such assignee, as the case may be) will refrain from
transferring or otherwise disposing of the Membership Interest, or any interest
therein, in such manner as to cause Seller to be in violation of the
registration requirements of the Securities Act of 1933, as amended, or
applicable state securities or blue sky laws.
3.07 Brokers. Except for GMS Group, LLC and U.S. Bancorp Libra, whose
fees, commissions and expenses are the sole responsibility of Purchaser, all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried out by Purchaser directly with Seller without the intervention
of any Person on behalf of Purchaser in such manner as to give rise to any valid
claim by any Person against Seller or the Company for a finder's fee, brokerage
commission or similar payment.
3.08 Financing. Purchaser has no reason to believe that the financing
described in Section 5.05 hereof will not be available at the Closing.
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ARTICLE IV
COVENANTS OF PARENT AND SELLER
Parent and Seller covenant and agree with Purchaser that, at all times
from and after the date hereof until the Closing, Parent and Seller will comply
with all covenants and provisions of this Article IV, except to the extent
Purchaser may otherwise consent in writing.
4.01 Regulatory and Other Approvals. Parent and Seller will, and will
cause the Company to, as promptly as practicable (a) take all commercially
reasonable steps necessary or desirable to obtain all consents, approvals or
actions of, make all filings with and give all notices to Governmental or
Regulatory Authorities or any other Person required of Parent, Seller or the
Company to consummate the transactions contemplated hereby, including without
limitation those described in Sections 2.06 and 2.07 of the Disclosure Schedule,
(b) provide such other information and communications to such Governmental or
Regulatory Authorities or other Persons as such Governmental or Regulatory
Authorities, Purchaser or other Persons may reasonably request in connection
therewith and (c) provide reasonable cooperation to Purchaser in connection with
the performance of its obligations under Sections 5.01 and 5.02. Seller will
provide prompt notification to Purchaser when any such consent, approval,
action, filing or notice referred to in clause (a) above is obtained, taken,
made or given, as applicable, and will advise Purchaser of any communications
(and, unless precluded by Law, provide copies of any such communications that
are in writing) with any Governmental or Regulatory Authority or other Person
regarding any of the transactions contemplated by this Agreement.
4.02 HSR Filings. In addition to and not in limitation of Seller's
covenants contained in Section 4.01, Seller will (a) take promptly all actions
necessary to make the filings required of Seller or its Affiliates under the HSR
Act, (b) comply at the earliest practicable date with any request for additional
information received by Seller or its Affiliates from the Federal Trade
Commission or the Antitrust Division of the Department of Justice pursuant to
the HSR Act and (c) cooperate with Purchaser in connection with Purchaser's
filing under the HSR Act and in connection with resolving any investigation or
other inquiry concerning the transactions contemplated by this Agreement
commenced by either the Federal Trade Commission or the Antitrust Division of
the Department of Justice or state attorneys general.
4.03 Nonenticement. Seller and Parent will, for a period of one year
from the Closing Date, refrain from, either alone or in conjunction with any
other Person, or directly or indirectly through its present or future
Affiliates, employing, engaging or seeking to employ or engage any Person who
within the prior six months had been an officer or employee of the Company,
unless such officer or employee (a) resigns voluntarily (without any
solicitation from Seller, Parent or any of their Affiliates), (b) is terminated
by the Company after the Closing Date, or (c) is also an officer or director of
Parent or Seller.
4.04 Conduct of Business. Parent and Seller will cause the Company to
conduct business only in the ordinary course consistent with past practice.
Without limiting the generality of the foregoing, Seller will cause the Company
to use commercially reasonable efforts, to the extent the officers of the
Company believe such action to be in bests interests of the Company, to (a)
preserve intact the present business organization and reputation of the Company
in all material respects, (b) keep available (subject to dismissals,
resignations and retirements in the ordinary course of business) the services of
the key officers and employees of the Company, (c) maintain the Assets and
Properties of the Company in good working order and condition, ordinary wear and
tear
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excepted, (d) maintain the good will of customers, suppliers and lenders and
other Persons with whom the Company otherwise has significant business
relationships and (e) make necessary capital expenditures in the ordinary course
of business; provided, however, that subsequent to June 30, 2001, the Company
may deviate from its ordinary course of business of replacing older or obsolete
machines in existing Locations unless said replacement is required in connection
with the renewal of Location Contracts during the period subsequent to June 30,
2001 and preceding the Closing Date.
4.05 Financial Statements and Reports; Budget.
(a) As promptly as practicable and in any event no later than
thirty (30) days after the end of each month ending after the date hereof and
before the Closing Date (other than the fourth quarter) or twenty-seven (27)
days after the end of each fiscal year ending after the date hereof and before
the Closing Date, as the case may be, Seller will deliver to Purchaser true and
complete copies of the unaudited balance sheet, and the related unaudited
statements of operations of the Company, in each case as of and for the fiscal
year then ended or as of and for each such month and the portion of the fiscal
year then ended, as the case may be.
(b) As promptly as practicable, Seller will deliver to Purchaser
true and complete copies of such other regularly-prepared financial statements,
reports and analyses as may be prepared or received by Seller, Parent or the
Company relating to the business or operations of the Company.
(c) As promptly as practicable, Seller will deliver to Purchaser
true and complete copies of the year 2001 budget of the Company (the "Annual
Budget").
(d) Seller shall cause to be prepared and delivered to Purchaser,
at Seller's expense, audited financial statements concerning the Company for the
1998, 1999 and 2000 fiscal years (collectively, the "Audited Financial
Statements"). The Audited Financial Statements (i) shall be prepared in
accordance with the Books and Records and shall be prepared by forty-five (45)
days from the date hereof, in respect to the 1998 and 1999 fiscal years and in
the case of the Audited Financial Statements for 2000 by September 30, 2000,
(ii) shall fairly present in all material respects the financial position,
results of operations and cash flows of the Company as of the respective dates
and for the respective periods referred to therein, in accordance with GAAP,
applied on a basis consistent with that of prior years or periods except as
specified therein and (iii) shall be in material compliance with the
requirements of Regulation S-X promulgated under the Securities Act. Without
limiting the foregoing, Seller shall use its commercially reasonable best
efforts to request Seller's accountants to consent to the inclusion of their
reports and other Audited Financial Statements in any private placement
memorandum and/or registration statement and/or similar document prepared by or
on behalf of Purchaser and its Affiliates, and to consent to be named as experts
therein.
4.06 Certain Restrictions. Except as disclosed in Section 4.06 of the
Disclosure Schedule, Parent and Seller will cause the Company to refrain from:
(a) amending its certificates of incorporation or by-laws (or
other comparable corporate charter documents) in any material respect or taking
any action with respect to any such amendment or any recapitalization,
reorganization, liquidation or dissolution of any such corporation, except the
Merger;
(b) other than in the ordinary course of business, acquiring or
disposing of, or
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incurring any Lien (other than a Permitted Lien) on, any Assets and Properties
individually or in the aggregate material to the Business or Condition of the
Company;
(c) entering into, amending, modifying, terminating (partially or
completely), granting any waiver under or giving any consent with respect to any
Contract or License material to the Business or Condition of the Company other
than in the ordinary course of business or as required by Law;
(d) other than in the ordinary course of business (i) voluntarily
incurring Indebtedness in an aggregate principal amount exceeding One Hundred
Thousand Dollars ($100,000) (net of any amounts of Indebtedness discharged
during such period or constituting Excluded Liabilities to be paid at the
Closing Date), or (ii) canceling, discharging (in whole or in part) or waiving
any right under any Indebtedness owed the Company in an aggregate principal
amount exceeding One Hundred Thousand Dollars ($100,000);
(e) engaging with any Person in any merger or other business
combination other than the Merger;
(f) except to the extent required by applicable Law or reasonably
and in good faith believed by the officers of the Company to be in the best
interests of the Company, making any material change in (i) any pricing,
investment, accounting, financial reporting, inventory, credit, allowance or Tax
practice or policy, or (ii) any method of calculating any bad debt, contingency
or other reserve for accounting, financial reporting or Tax purposes;
(g) other than in the ordinary course of business or to the
extent required by applicable Law, adopting, entering into or becoming bound by
any material Benefit Plan, employment-related Contract or collective bargaining
agreement, or amending, modifying or terminating (partially or completely) any
such Benefit Plan, employment-related Contract or collective bargaining
agreement;
(h) making any change in its fiscal year;
(i) selling, assigning, transferring, sublicensing or otherwise
disposing of the Intellectual Property, except for the sublicensing in the
ordinary course of business to end users not in competition with the Business of
the Company ;
(j) failing to keep the Assets and Properties insured in
accordance with customary industry practice and the past practices of the
Company;
(k) failing to maintain the Assets and Properties in good repair,
order and condition (reasonable wear and use and damage by fire or other
casualty excepted);
(l) failing to maintain Books and Records materially in the
usual, regular and ordinary manner on a basis consistent with that heretofore
employed including, without limitation, the recording of reserves for Taxes;
(m) failing to comply materially with all Laws applicable to any
of the Assets and Properties or to the conduct of the Business;
(n) failing to timely file or cause to be timely filed all Tax
Returns required to be filed for periods ending prior to the Closing Date or
failing to pay any material applicable Taxes due on or before the Closing Date,
except for Taxes the liability for which is disputed;
(o) failing to maintain a level of newspaper, television and
other advertising reasonably comparable to that existing during the ninety (90)
day period immediately preceding the date of this Agreement; and
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(p) entering into any Contract to do or engage in any of the
foregoing.
4.07 Affiliate Transactions. Except for the leases of gaming equipment
from Bally described on Section 1.04(c) of the Disclosure Schedule, immediately
prior to the Closing, all Indebtedness and other amounts owing under Contracts
between Seller, Parent, any officer, director or Affiliate (other than the
Company) of Seller or Parent, on the one hand, and the Company, on the other,
will be paid in full, and Seller and Parent will terminate and will cause any
such officer, director or Affiliate to terminate each Contract with the Company,
including, but not limited to, any Tax sharing or similar agreement. Prior to
the Closing, the Company will not enter into any Contract or amend or modify any
existing Contract, and will not engage in any transaction outside the ordinary
course of business other than on an arm's-length basis (other than pursuant to
Contracts disclosed in Section 2.22(a)(vii) of the Disclosure Schedule or not
required to be disclosed therein in accordance with Section 2.22(a)(vii)), with
Seller, Parent or any such officer, director or Affiliate.
4.08 Release. Parent and Seller will use commercially reasonable efforts
to have the Company released from any liability under any guarantees by or from
the Company of the obligations of Parent, Seller or any of their Affiliates
(other than the Company) (collectively, the "Existing Guarantees") and to have
the Existing Guarantees terminated prior to the Closing Date. Section 4.08 of
the Disclosure Schedule sets forth a list of the Existing Guarantees.
4.09 Fulfillment of Conditions. Seller will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each condition to the obligations of Purchaser contained in this
Agreement and will not, and will not permit the Company to, take or fail to take
any action that could reasonably be expected to result in the nonfulfillment of
any such condition.
4.10 Non-competition. (a) For a period of five years from the Closing
Date, Parent and Seller shall not, and shall each cause their Subsidiaries,
successor and assigns, not to, directly or indirectly conduct in Nevada a
business which is the same as the Business as conducted on the Closing Date,
including without limitation as a shareholder, consultant, partner, owner,
lender (other than in the ordinary course of business), principal, member,
officer, employee or otherwise, of any entity that is conducting such business
in the State of Nevada.
(b) Notwithstanding the foregoing, however: (a) nothing contained
in this Agreement shall prohibit Seller or Parent from purchasing and holding an
investment in Purchaser, nor purchasing and holding as an investment not more
than 5% of any class of the issued and outstanding and publicly traded (on a
recognized national or regional securities exchange or in the over-the-counter
market) security of any corporation, partnership or other business entity that
conducts a business in competition with Purchaser or the Business and (b) the
continued placement by Bally in the ordinary course of business as conducted on
the date hereof of gaming devices or games by Bally under participation
agreements or daily fee arrangements, or in wide area progressive networks under
authority of the Nevada slot route operator's license held by Bally shall not be
considered to be competitive with Purchaser so long as Bally performs the
customary activities of: (i) a distributor or manufacturer of gaming devices or
(ii) operator of a wide area
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progressive network. No Person will be deemed to be conducting a business in
competition with Purchaser or the Business if such business constitutes less
than 10% of such Person's revenues.
(c) Seller and Parent are agreeing to these provisions in
consideration for the Purchase Price set forth in Section 1.02 hereof.
(d) Seller and Parent each agrees that any claim for breach of
this Section 4.10 against either of them may be brought by Purchaser or any
Affiliate of Purchaser in lieu of Purchaser.
(e) Seller and Parent each acknowledges and agrees that the
covenants contained in this Section 4.10 are fair and reasonable and of a
special unique character which gives them peculiar value and exist in order to
protect Purchaser's investment in the Business purchased under this Agreement
and that Purchaser would not have entered into this Agreement without such
covenants being made. However, if any such covenants shall be determined by any
court to be invalid by reason of their duration or geographical scope, or both,
as the case may be, shall be considered to be reduced to the longest duration or
greatest geographic scope, or both, which will cure such invalidity. Seller and
Parent each further acknowledge that monetary damages alone will not be an
adequate remedy for any breach of any of the covenants contained in this Section
4.10, and accordingly, they each expressly agree that, in addition to all other
remedies which Purchaser or its Affiliates have, they shall be entitled to
injunctive relief, both preliminary and permanent, in any court of competent
jurisdiction.
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4.11 Purchaser's Investigations. At any time and from time to time
before the Closing Date, at the request of Purchaser, Seller shall (and shall
cause Seller's representatives to) take such actions as Purchaser may reasonably
request in the preparation of, or delivery of, documents necessary for the
purpose of assisting Purchaser in obtaining Purchaser's financing; provided,
however, that Seller assumes no obligation for, or liability with respect to,
any documentation submitted by Purchaser or its Affiliates to the Securities
Exchange Commission, or to third parties with respect to Purchaser's financing.
Upon reasonable request by Purchaser, Seller shall provide Michael S. Luzich, on
behalf of Purchaser, with copies of new Location Contracts and any renewals of
Location Contracts prior to the Closing Date.
4.12 Control of Company's Operations. Nothing contained in this
Agreement shall give to Purchaser, directly or indirectly, any right to control
or direct the Company's operations prior to the Closing Date. Prior to the
Closing Date, the Company shall exercise complete control and supervision of the
Business consistent with the terms and conditions of this Agreement.
4.13 Seller's Bank Accounts. The existing bank accounts of the Company
shall be designated as the Seller's Bank Accounts. Seller shall be liable for
any over drafts in Seller's Bank Accounts on the Closing Date, and shall be
entitled to all cash in Seller's Bank Accounts in excess of: (a) outstanding
items and (b) required Cash on Hand. Outstanding items shall be determined as of
12:01 A.M. on the Closing Date.
4.14 Cash on Hand. The Assets and Properties of United Coin, LLC, on the
Closing Date shall include cash on hand in game loads (net of tokens), location
change banks and drawers, LAT drawers, bill loads, bill dispensers, bill
dispenser inventory, coin and currency inventory, markers (at 5:00 P.M. on the
Closing Date), imprest bank balances, remaining collector credits, together with
a sum sufficient to pay the cash suspense jackpot/fills (location and UC share)
("Cash on Hand"). Cash on Hand shall be an amount equal to the greater of: (a)
the sum of $8,000,000 plus $1,000 per gaming machine in excess of 8,000 gaming
machines installed as of the Determination Date, or (b) the average of the
actual Cash on Hand balance for each day during the period beginning on
September 1, 2000 and ending on the Determination Date. Seller shall count down
the cash in the Company vault beginning at 7:00 A.M. on the Closing Date. If the
Closing shall occur on the Closing Date, then Purchaser shall be entitled to all
Company collections received on and after the Cut-off Time. Adjusted Working
Capital shall not be less than zero on the Closing Date. The calculation of Cash
on Hand and of Adjusted Working Capital and post closing payments, if any,
required to be paid by Seller with respect to Cash on Hand and Adjusted Working
Capital shall be made as provided in Section 8.04.
4.15 Insurance and Insurance Benefits. (a) On or after the Closing Date,
Parent and/or Seller shall deliver to Purchaser any and all proceeds received
under those insurance policies maintained by Seller and/or Parent relating to
pre-Closing losses of the Company to the extent Seller has not theretofore paid
for such losses with its own funds. Seller shall execute whatever
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instruments are necessary to enable Purchaser to receive the insurance proceeds
arising from such losses. If subsequent to the Closing, any insurance plan
associated with or providing benefits under the Benefit Plans described in
Section 2.15(a) of the Disclosure Schedule maintained by or on behalf of the
Company by Parent or Seller prior to the Closing Date is audited and, as a
result thereof, there is an assessment or additional premium assessment, then
Seller shall pay any such assessment or additional premium. Seller shall receive
any premium refunds as a result of any audits described in the immediately
preceding sentence. On the Closing Date, Seller and Parent shall assume all
obligations of indemnity to any Person who shall have served as a director or
officer of the Company prior to the Closing Date in respect to actions taken in
such capacity on or prior to the Closing Date.
(b) If, prior to the Closing Date: (i) any of the Assets and Properties
of the Company are damaged by fire or other casualty, (ii) such damage or other
casualty is material, (iii) Seller would reasonably repair such damage or
replace such Assets and Properties in the ordinary course of business, and (iv)
such repair or replacement has not been completed as of the Closing Date, then
the Purchaser shall be entitled to receive the insurance proceeds, if any,
arising out of such damage or other casualty, including the benefits of business
interruption coverage, as provided above. If, in the circumstances described in
the proceeding sentence, the insurance proceeds, if any, arising from such
damage or other casualty are not sufficient to repair such damage or replace the
Assets or Properties, Purchaser shall receive at Closing a credit against the
Purchase Price equal to: (i) the estimated cost of repairing such damage or
replacing such Assets and Properties in excess of the insurance proceeds paid to
Purchaser, as such amount shall be determined by a qualified independent third
party selected by Purchaser and Seller (ii) less the amount of any deductible
provided for in the insurance policy(s) under which such proceeds are paid.
Subsequent to the Closing Date, Seller and/or Parent shall not settle any claim
for damage or loss to any of the Assets and Properties of the Company with any
insurer without the prior written consent of Purchaser to the extent Purchaser
is entitled to receive the insurance proceeds as provided above, which written
consent shall not be unreasonably withheld.
4.16 Management Information Systems. As disclosed on Section 2.25 of the
Disclosure Schedule, the Company shares with Parent its accounting and computer
network. Company shall investigate the requirements for installing a stand alone
computer, necessary related hardware, and necessary accounting and network
software at the Company's business premises located at 600 Pilot Road, Las
Vegas, Nevada. Company shall prepare and present to Purchaser for its approval
(subject to any limitations on such approval right under Law) a budget for the
costs of such computer, related hardware and software. Purchaser shall have
fifteen (15) days from the receipt of such budget in which to approve the
selection of the computer, related hardware, software, and costs associated
therewith (subject to any limitations on such approval right under Law). If such
budget is approved by Purchaser then Seller shall purchase, install and make
operational the required computer, related hardware and software in order for
the Company's management information systems to operate on a stand alone basis
on the Closing Date.
4.17 Notification. From the date of this Agreement to the Closing Date,
Seller shall
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promptly notify Purchaser if to the Knowledge of Seller: (a) Seller receives
notice from any Governmental or Regulatory Authority in connection with the
transactions contemplated by this Agreement (except for Tax notices of which
Seller must only advise Purchaser if such notices would result in a Lien on the
Assets and Properties); (b) any fact or circumstance makes any representation or
warranty of Seller or Parent set forth in this Agreement untrue or inaccurate in
any material respect as of the Closing Date or as of the date of this Agreement;
or (c) there occurs material damage to the Assets and Properties.
4.18 Updated Disclosure Schedules. On the Closing Date, Seller shall
provide Purchaser with Updated Disclosure Schedules that shall contain as of the
date thereof all lists, descriptions, exceptions and other information required
to be included therein in order to make all statements, representations,
warranties and covenants of Parent and Seller that reference Disclosure
Schedules complete and correct as of the Closing Date.
ARTICLE V
COVENANTS OF PURCHASER
Purchaser covenants and agrees with Parent and Seller that, at
all times from and after the date hereof until the Closing and, in the case of
Section 5.03, thereafter, Purchaser will comply with all covenants and
provisions of this Article V, except to the extent Parent or Seller may
otherwise consent in writing.
5.01 Regulatory and Other Approvals. Purchaser will as promptly as
practicable (a) take all commercially reasonable steps necessary or desirable to
obtain all consents, approvals or actions of, make all filings with and give all
notices to Governmental or Regulatory Authorities or any other Person required
of Purchaser to consummate the transactions contemplated hereby, including
without limitation those described in Schedules 3.03 and 3.04 hereto, (b)
provide such other information and communications to such Governmental or
Regulatory Authorities or other Persons as such Governmental or Regulatory
Authorities or other Persons may reasonably request in connection therewith and
(c) provide reasonable cooperation to Parent, Seller and the Company in
connection with the performance of their obligations under Sections 4.01 and
4.02. Purchaser will provide prompt notification to Seller when any such
consent, approval, action, filing or notice referred to in clause (a) above is
obtained, taken, made or given, as applicable, and will advise Seller of any
communications (and, unless precluded by Law, provide copies of any such
communications that are in writing) with any Governmental or Regulatory
Authority or other Person regarding any of the transactions contemplated by this
Agreement.
5.02 HSR Filings. In addition to and without limiting Purchaser's
covenants contained in Section 5.01, Purchaser will (a) take promptly all
actions necessary to make the filings required of Purchaser or its Affiliates
under the HSR Act, (b) comply at the earliest practicable date with any request
for additional information received by Purchaser or its Affiliates from the
Federal Trade Commission or the Antitrust Division of the Department of Justice
pursuant to the HSR Act and (c) cooperate with Parent or Seller in connection
with Parent's or Seller's filing under the HSR Act and
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in connection with resolving any investigation or other inquiry concerning the
transactions contemplated by this Agreement commenced by either the Federal
Trade Commission or the Antitrust Division of the Department of Justice or state
attorneys general.
5.03 Nonenticement. Except at provided in Article IX hereof, Purchaser
will, for a period of one year from the Closing Date, refrain from, either alone
or in conjunction with any other Person, or directly or indirectly through its
present or future Affiliates, employing, engaging or seeking to employ or engage
any Person who within the prior six months had been an officer or employee of
the Seller, Parent or any of their Affiliates (other than the Company), unless
such officer or employee: (a) resigns voluntarily (without any solicitation from
Purchaser or any of its Affiliates) or (b) is terminated by the Seller or Parent
after the Closing Date.
5.04 Fulfillment of Conditions. Purchaser will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each condition to the obligations of Seller contained in this
Agreement and will not take or fail to take any action that could reasonably be
expected to result in the nonfulfillment of any such condition.
5.05 Financing. (a) Not later than sixty (60) days from the date hereof,
Purchaser shall deliver to Seller a letter from investment bankers of recognized
national standing arranging for the placement of Purchaser's debt in form and in
substance customary for transactions similar to the present, confirming their
ability to arrange debt to finance: (i) the purchase of the Membership Interest,
(ii) pay the fees and expenses in connection with this transaction and (iii)
provide for the working capital needs of United Coin, LLC. (b) Not later than
sixty (60) days from the date hereof, Purchaser shall deliver to Parent and to
Seller reasonable written assurances from equity investors and/or investment
bankers of recognized national standing arranging for the placement of
Purchaser's equity in form and in substance customary for transactions similar
to the present, confirming that such equity has been committed. Parent and
Seller acknowledge that US Bancorp Libra is an investment bank of recognized
national standing. Purchaser will use reasonable best efforts to enter into
definitive financing agreements providing for the financing referred to in
clause (a) above, containing terms reasonably satisfactory to Purchaser, and to
obtain on the Closing Date the financing contemplated by such definitive
financing agreements. Purchaser will not take or fail to take any action that
could reasonably be expected to result in the failure to obtain on the Closing
Date such financing. Purchaser will keep Parent and Seller apprised of the
status of such efforts and of Purchaser's communications with any sources of
such financing. Purchaser will be under no obligation under any circumstances to
be capitalized with equity of more than Twenty-five Million Dollars
($25,000,000) in cash.
5.06 Purchaser's Bank Accounts. Purchaser shall open new bank accounts
for United Coin, LLC. Such bank accounts shall be utilized as a depository for
any monies received by United Coin, LLC after the Closing Date. Such bank
accounts shall be designated as the Purchaser's Bank Accounts.
5.07 Reimbursement of Costs of Audited Financial Statements. In the
event this
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Agreement is breached by Purchaser and Seller elects to rightfully terminate
this Agreement as provided in Section 12.03(d)(iv), Purchaser shall reimburse
Seller, within ten (10) days from the date of receipt of invoices from the
accountants who prepared the Audited Financial Statements described in Section
4.05, the costs actually and reasonably incurred in the preparation of such
Audited Financial Statements prior to the date of Seller's notice of
termination.
5.08 Stand Alone Computer System. On the Closing Date, Purchaser shall
reimburse Parent for the Purchaser approved budgeted costs of the hardware and
software associated with the installation of the stand alone computer, related
hardware and software described in Section 4.16, and for any cost overruns
actually and reasonably incurred in such installation. In the event this
Agreement is breached by Purchaser and Seller elects to rightfully terminate
this Agreement as provided in Section 12.03(d)(iv) or if Purchaser terminates
this Agreement as provided in Section 12.03(c), Purchaser shall reimburse
Seller, within ten (10) days from the date of receipt of third- party invoices
and other documentation supporting such costs, for the costs of the hardware and
software associated with the installation of the stand alone computer, related
hardware and software described in Section 4.16, actually and reasonably
incurred prior to the date of Seller's notice of termination. Upon payment of
the costs described in this Section 5.08, Seller shall deliver to Purchaser the
hardware and software purchased by Seller for such installation.
5.09 Notification. From the date of this Agreement to the Closing Date,
to the extent known by it, Purchaser shall promptly notify Seller of any: (a)
notice from any Governmental or Regulatory Authority in connection with the
transactions contemplated by this Agreement or (b) fact or circumstance that
would make any representation or warranty of Purchaser set forth in this
Agreement untrue or inaccurate in any material respect as of the Closing Date or
as of the date of this Agreement.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder to purchase the Shares are
subject to the fulfillment, at or before the Closing, of each of the following
conditions (all or any of which may be waived in whole or in part by Purchaser
in its sole discretion).
6.01 Representations and Warranties. The representations and warranties
made by Seller and Parent in this Agreement, taken as a whole, shall be true and
correct, in all respects material to the validity and enforceability of this
Agreement and to the Business or Condition of the Company, on and as of the
Closing Date as though made on and as of the Closing Date or, in the case of
representations and warranties made as of a specified date earlier than the
Closing Date, on and as of such earlier date.
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6.02 Performance. Seller and Parent shall have performed and complied
with, in all material respects, the agreements, covenants and obligations
required by this Agreement to be so performed or complied with by Seller and
Parent at or before the Closing.
6.03 Officers' Certificates and Updated Disclosure Schedules. Seller and
Parent shall have delivered to Purchaser a certificate, dated the Closing Date
and executed in the name and on behalf of Seller and Parent by the Chairman of
the Board or any officer of each of Seller and Parent, substantially in the form
and to the effect of Exhibit "B" hereto, and a certificate, dated the Closing
Date and executed by the Secretary or any Assistant Secretary of each of Seller
and Parent, substantially in the form and to the effect of Exhibit "C" hereto.
Seller and Parent shall have delivered to Purchaser the Updated Disclosure
Schedules.
6.04 Orders and Laws. There shall not be in effect on the Closing Date
any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement.
6.05 Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Purchaser, Parent and Seller to perform their obligations
under this Agreement and to consummate the transactions contemplated hereby
shall have been duly obtained, made or given and shall be in full force and
effect, and all terminations or expirations of waiting periods imposed by any
Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement, including under the HSR Act, shall
have occurred.
6.06 Third Party Consents. The consents and releases (or in lieu thereof
waivers) listed in Schedule 6.06 hereto shall have been obtained and shall be in
full force and effect.
6.07 No Material Adverse Changes. Since the Unaudited Financial
Statement Date, whether or not in the ordinary course of business, there has
been no Material Adverse Change in the Business or Condition of the Company.
6.08 Financing. Purchaser shall have obtained the financing described in
Section 5.05, under terms reasonably acceptable to Purchaser; provided, however
the condition set forth in this Section 6.08 shall be deemed to be waived by
Purchaser as of the first day of the Commitment Term.
6.09 Opinion. Purchaser shall have received an opinion of Jones, Vargas,
special Nevada counsel to the Seller, or other special Nevada counsel to Seller
reasonably acceptable to Purchaser, dated as of the Closing Date, substantially
in the form attached hereto as Exhibit "I, and such other customary and normal
opinions as may reasonably be requested by Purchaser.
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ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller hereunder to sell the Membership
Interests are subject to the fulfillment, at or before the Closing, of each of
the following conditions (all or any of which may be waived in whole or in part
by Seller in its sole discretion):
7.01 Representations and Warranties. The representations and warranties
made by Purchaser in this Agreement, taken as a whole, shall be true and correct
in all material respects on and as of the Closing Date as though made on and as
of the Closing Date.
7.02 Performance. Purchaser shall have performed and complied with, in
all material respects, the agreements, covenants and obligations required by
this Agreement to be so performed or complied with by Purchaser at or before the
Closing.
7.03 Managers' Certificates. Purchaser shall have delivered to Seller a
certificate, dated as of the Closing Date and executed in the name and on behalf
of Purchaser by the Managers of Purchaser, substantially in the form and to the
effect of Exhibit "D" hereto, and a certificate, dated as of the Closing Date
and executed by a Manager of Purchaser, substantially in the form and to the
effect of Exhibit "E" hereto.
7.04 Orders and Laws. There shall not be in effect on the Closing Date
any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement.
7.05 Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Seller, Parent and Purchaser to perform their obligations
under this Agreement and to consummate the transactions contemplated hereby
shall have been duly obtained, made or given and shall be in full force and
effect, and all terminations or expirations of waiting periods imposed by any
Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement, including under the HSR Act, shall
have occurred.
7.06 Third Party Consents. The consents and releases (or in lieu thereof
waivers) listed in Schedule 7.06 hereto shall have been obtained and shall be in
full force and effect.
7.07 Opinion of Purchaser's Counsel. Seller shall have received from
Purchaser's counsel an opinion, dated as of the Closing Date, in substantially
the form attached hereto as Exhibit J, and such other customary and normal
opinions as may reasonably be requested by Parent.
7.08 LLC Agreement. The parties shall have agreed upon the form of the
LLC Agreement.
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ARTICLE VIII
MERGER, TAX MATTERS
8.01 Merger. On the Closing Date the Company shall merge with United
Coin, LLC, with United Coin, LLC surviving the merger. The parties acknowledge
that the Purchaser's purchase of the Membership Interest in United Coin, LLC,
constitutes an "applicable asset acquisition" under Section 1060 of the Code.
The Purchase Price shall be allocated among the assets of United Coin in a
manner set forth in Section 8.04 hereof, consistent with the requirements of
Section 1060 of the Code and the regulations promulgated thereunder. The fair
market value of Class III assets, as such term is defined under Treasury
Regulations promulgated under Section 338 of the Code, including, but not
limited to, tangible personal property, real property, and premium leases, shall
be based upon the appraisal of such assets by independent third-party appraisers
mutually acceptable to the parties. If Parent, Seller and Purchaser are unable
to agree on such allocation, such dispute shall be resolved by independent
accountants of both parties, whose fees and expenses shall be paid equally by
both Seller and Purchaser as provided in Section 8.04 hereof. Parent, Seller and
Purchaser (a) shall be bound by such allocation for purposes of determining any
Taxes, (b) shall prepare and file all Tax Returns to be filed with any taxing
authority in a manner consistent with such allocation, and (c) shall take no
position inconsistent with such allocation in any Tax Return, any proceeding
before any Governmental or Regulatory Authority or otherwise.
8.02 Additional Costs and Taxes; Governmental and Regulatory Licensing
Fees. Purchaser shall pay all Governmental and Regulatory Authority licensing
and investigative fees imposed by the Governmental and Regulatory Authorities in
connection with their consideration and approval of the Merger. Purchaser shall
reimburse Parent for all additional reasonable fees, costs expenses and Taxes in
excess of the fees, costs, expenses and Taxes that would have been incurred had
the transaction been structured as a stock purchase under an Internal Revenue
Code Section 338(h)(10) election upon presentation of invoices, receipts and
statements evidencing same. The Parties agree that to the extent the Merger or
any action to complete the Merger shall result in any breach of any
representation, warranty, covenant or agreement of Parent or Seller or
nonfulfillment of any condition for Closing in this Agreement, such breach or
nonfulfillment shall be disregarded for deemed purposes of this Agreement or
such representation, warranty, covenant or condition shall be waived to the
extent necessary to comply with the provisions of this Agreement in order to
close the transaction as contemplated by Section 1.03.
8.03 Taxes. Purchaser agrees to indemnify, defend and hold Parent,
Seller and their Affiliates harmless for any Transfer Taxes arising out of or in
connection with the transactions effected pursuant to this Agreement net of any
Tax Benefit Actually Realized by Parent and/or Seller in connection with the
payment of such Taxes. Seller and Parent shall take such actions as are
necessary to terminate on the Closing Date the income tax periods of the Company
which commence within twelve months prior to the Closing Date. Seller and Parent
agree to pay, indemnify, defend and hold Purchaser and United Coin, LLC,
harmless from any Taxes imposed on the Company with respect to taxable periods
ending on or before the Closing Date, including partial periods ending on the
Closing Date, and including any Taxes arising as a result of the
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application of Treas. Reg. Section 1.1506-6, net of any Tax Benefit Actually
Realized by Purchaser in connection with the payment of any such Taxes. Parent
will include the Company in Parent's group of consolidated federal income tax
returns for all pre-Closing periods or partial periods ending on the Closing
Date. Purchaser shall pay, indemnify, defend and hold Parent and Seller harmless
for any Taxes imposed on the Company with respect to any period commencing after
the Closing Date, net of any Tax Benefit Actually Realized by Parent or Seller
in connection with the payment of any such Taxes.
8.04 Purchase Price Allocations and Closing Calculations. The
accountants selected by Purchaser ("Purchaser's Accountants") may on reasonable
notice enter the premises of the Business at all reasonable times approved by
the President and/or Chief Operating Officer of Parent, which approval shall not
be unreasonably withheld, for the purpose of making such examinations and audits
of the Business and of the Books and Records of the Business as Purchaser's
Accountants may deem necessary in a manner that does not unreasonably interfere
with the Company's operations.
(a) Tentative Allocation of the Purchase Price. Purchaser shall
inform Seller in writing of the expected date upon which Purchaser's
applications for Nevada gaming licenses are expected to appear on the agenda of
the Nevada Gaming Control Board (the "Agenda Date"), which written notice shall
be sent not later than one hundred thirty-five (135) days prior to the Agenda
Date. Based on such preliminary audits and examinations as Purchaser's
Accountants shall have conducted prior thereto, Purchaser's Accountants shall
deliver to Seller and to Purchaser not later than fifteen (15) days after the
Tentative Allocation Date a preliminary schedule setting forth: (i) the
projected Purchase Price, (ii) the projected amount of Cash On Hand, (iii) the
proposed allocation of the Purchase Price under Section 1060 of the Code, (iv)
the projected net amount of Excluded Liabilities to be paid, discharged or
assumed by Seller on the Closing Date, and (v) the projected additional
reasonable fees, costs expenses and Taxes in excess of the fees, costs, expenses
and Taxes that would have been incurred had the transaction been structured as a
stock purchase under an Internal Revenue Code Section 338(h)(10) election that
Purchaser is obligated to pay under Section 8.03 above ("Tentative Allocation
Schedule"). Seller shall have fifteen (15) days from the date of its receipt of
the Tentative Allocation Schedule in which to accept or reject the Tentative
Allocation Schedule. If, within fifteen (15) days after receipt of the Tentative
Allocation Schedule, Seller notifies Purchaser that Seller disapproves of such
Tentative Allocation Schedule and specifies in reasonable detail the reason for
Seller's disapproval, then Purchaser's Accountants and Seller's Accountants
shall jointly attempt to resolve the dispute. If such dispute is not resolved
within ten (10) days after Seller's notice, then Purchaser's Accountants and
Seller's Accountants shall jointly submit such dispute to another firm of
independent certified public accountants of recognized standing in the casino
gaming industry for the resolution of such dispute within ten (10) days
thereafter. The determination of such firm of independent certified public
accountants shall be conclusive and binding on Purchaser and Seller. The parties
shall equally share all costs, fees and expenses directly incurred in connection
with the determination of such firm of independent certified public accountants.
(b) Preliminary Closing Statement. Based on such preliminary
audits and inventories as Purchaser's Accountants shall have conducted prior to
the Closing Date, Purchaser
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shall prepare and deliver to Seller not later than the Agenda Date a preliminary
closing statement setting forth: (i) the Purchase Price, (ii) the allocation of
the Purchase Price under Section 1060 of the Code, (iii) the net amount of
Excluded Liabilities to be paid, discharged or assumed by Seller on the Closing
Date, (iv) required Cash on Hand, (v) projected Adjusted Working Capital, and
(vi) the projected additional reasonable fees, costs expenses and Taxes in
excess of the fees, costs, expenses and Taxes that would have been incurred had
the transaction been structured as a stock purchase under an Internal Revenue
Code Section 338(h)(10) election that Purchaser is obligated to pay under
Section 8.03 above (a "Preliminary Closing Statement"). If, within ten (10) days
after receipt of either the Preliminary Closing Statement or the Final Closing
Statement, Seller notifies Purchaser that Seller disapproves of such Closing
Statement and specifies in reasonable detail the reason for Seller's
disapproval, then Purchaser's Accountants and Seller's Accountants shall jointly
attempt to resolve the dispute. If such dispute is not resolved within ten (10)
days after Seller's notice, then Purchaser's Accountants and Seller's
Accountants shall jointly submit such dispute to another firm of independent
certified public accountants of recognized standing in the casino gaming
industry for the resolution of such dispute within ten (10) days thereafter, and
the determination of such firm of independent certified public accountants shall
be conclusive and binding on Purchaser, Seller and Parent. If a dispute arises
between the parties under this Section 8.04(b) that is not resolved prior to the
Closing Date, then the Closing Date shall be extended to the date that is five
(5) days after the resolution of the dispute or the date of the determination of
the firm of independent certified public accountants, as the case may be. Based
upon the Preliminary Closing Statement and such dispute resolution, at the
Cut-off Time on the Closing Date, Seller shall remove from the Company all cash
in excess of required Cash on Hand. If Adjusted Working Capital is less than
zero on the Closing Date, Seller shall pay to United Coin, LLC, on the Closing
Date the amount by which Adjusted Working Capital is less than zero. Based upon
the Preliminary Closing Statement and such dispute resolution, on the Closing
Date, Seller shall pay such Excluded Liabilities as are described on Section
1.04(a) of the Disclosure Schedule as updated as of the Closing Date in the
amounts determined under the Preliminary Closing Statement.
(c) Final Closing Statement. Within one hundred twenty (120) days
after the Closing Date, Purchaser's Accountants shall deliver a final closing
statement (a "Final Closing Statement") to Purchaser, to Seller and to Escrow
Holder setting forth the final determination of all items to be included in the
closing statements, including, but not limited to the Purchase Price and any
adjustment required for Adjusted Working Capital. If, within fifteen (15) days
after receipt of the Final Closing Statement, Seller notifies Purchaser that
Seller disapproves of such Closing Statement and specifies in reasonable detail
the reason for Seller's disapproval, then Purchaser's Accountants and Seller's
Accountants shall jointly attempt to resolve the dispute. If such dispute is not
resolved within ten (10) days after Seller's notice, then Purchaser's
Accountants and Seller's Accountants shall jointly submit such dispute to
another firm of independent certified public accountants of recognized standing
in the casino gaming industry, and the determination of such firm of independent
certified public accountants shall be conclusive and binding on Purchaser,
Seller and Parent. The parties shall equally share all costs, fees and expenses
directly incurred in connection with the determination of such firm of
independent certified public accountants. Amounts determined to be owed by
Seller to Purchaser or by Purchaser to Seller which are not
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disputed shall be settled in cash between Purchaser and Seller within ten (10)
days after receipt of the Final Closing Statement. Amounts determined to be owed
by Seller to Purchaser or by Purchaser to Seller which are disputed shall be
settled in cash between Purchaser and Seller within ten (10) days after
resolution of the dispute or the date of the determination of the firm of
independent certified public accountants, as the case may be.
ARTICLE IX
EMPLOYEES AND EMPLOYEE BENEFITS MATTERS
9.01 Continuation of Benefits. During the period from the Closing Date
until of the end of the 12-month period following the Closing Date, Purchaser
shall maintain or cause to be maintained, wages, compensation levels, employee
pension and welfare plans for the benefit of then employees of the Company that
are comparable, in the aggregate, to those wages, compensation levels and other
benefits provided under the employee pension and welfare plans that are in
effect on the date hereof. Thereafter, there shall be no limitation whatsoever
upon changes to or elimination of any or all of the foregoing.
9.02 Severance Policy and Other Agreements.
(a) With respect to any current officer or employee who is
covered by a severance policy or plan separate from the standard severance
policy for the Company's employees, (and who continue as an officer or employee
of Purchaser after the Closing Date) the Purchaser shall maintain or cause to be
maintained such separate policy or plan as in effect as of the date hereof, and
as to all other officers and employees, Purchaser shall maintain or cause to be
maintained the Company's standard severance policy as in effect as of the date
hereof for a period of at least 12 months from the Closing Date.
(b) Except in respect to the severance obligations described in
Section 9.02(a) of the Disclosure Schedule which obligations shall be that of
the Seller, Purchaser shall honor or cause to be honored all monetary
obligations under severance agreements and employment agreements with the
Company's directors, officers and employees incurred after the Closing Date
arising from termination of employment of such directors, officers or employees
after the Closing Date. Purchaser shall have no obligation for any such
obligations arising prior to the Closing Date.
9.03 Bonus. Purchaser will maintain, or cause to be maintained, the
Company's bonus Plans, as in effect on the date hereof, through the end of the
fiscal year in which the Closing occurs, with bonuses to be paid to the employee
participating thereunder at the greater of (a) the target level, if applicable,
(b) the prior year's bonus, or (c) such bonus as the employee would have earned
if the transaction contemplated by this Agreement had not occurred, in all
events on a basis consistent with past practice.
9.04 Waiver of Preexisting Conditions; Credit for Deductibles; Service
Credit. Purchaser
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shall use its commercially reasonable best efforts to cause the Company to: (a)
waive all limitations as to pre-existing conditions, exclusions and waiting
periods with respect to participation and coverage requirements applicable to
the employees of the Company under any welfare plan that such employees may be
eligible to participate in after the Closing Date, (b) provide each employee of
the Company with credit for any co-payments and deductibles paid prior to the
Effective Time in satisfying any applicable deductible or out-of-pocket
requirements under any welfare plans that such employees are eligible to
participate in after the Closing Date, and (c) provide each employee of the
Company with credit for all service with the Company and its Affiliates under
each employee benefit plan, program, or arrangement of Purchaser or its
Affiliates in which such employees are eligible to participate; provided,
however, that in no event shall the employees be entitled to any credit to the
extent that it would result in a duplication of benefits with respect to the
same period of service.
9.05 Welfare Plans. Seller shall retain responsibility for and continue
to pay all medical, life insurance, disability and other welfare plan expenses
and benefits for each employee and former employee of the Company with respect
to claims incurred by such employees or former employees or their covered
dependents prior to the Closing Date. Expenses and benefits with respect to
claims incurred by employees of United Coin, LLC or their covered dependents on
or after the Closing Date shall be the responsibility of Purchaser. For purposes
of this paragraph, a claim is deemed incurred when the services that are the
subject of the claim are performed, in the case of life insurance, when the
death occurs, and, in the case of short-term or long-term disability benefits,
when the disability occurs.
9.06 COBRA. On the Closing Date, the Purchaser shall assume, or shall
cause United Coin, LLC to assume, any and all obligations of Seller, Parent and
their affiliates (including, but not limited to, any health or medical plans
sponsored by Seller, Parent or their affiliates) to provide continuation
coverage to employees of United Coin, LLC pursuant to the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended.
9.07 401(k) Plan Assets. Employees of the Company shall cease to accrue
benefits and service credits under the Alliance Gaming Corporation Profit
Sharing 401(k) Plan (the "Seller 401(k) Plan") as of the Closing Date. Effective
as of the Closing Date, the Purchaser shall, or shall cause United Coin, LLC to
establish a new savings plan (the "Purchaser 401(k) Plan") and associated trust.
The assets of the Seller 401(k) Plan attributable to employees of the Company
prior to the Closing Date shall be retained or distributed under the terms of
the Seller 401(k) Plan as provided under the Seller 401(k) Plan. Purchaser shall
accept rollovers from the Seller 401(K) Plan for the Company employees employed
by United Coin, LLC on the Closing Date. Purchaser shall provide to Seller
evidence reasonably satisfactory to Seller that the Purchaser 401(k) Plan and
the associated trust have been established and that the Purchaser 401(k) Plan
qualifies under the requirements of Section 401(a) of the Code. Seller shall
provide to Purchaser evidence reasonably satisfactory to Purchaser that the
Seller 401(k) Plan remains qualified under the requirements of Section 401(a) of
the Code. Purchaser shall assume no Liabilities of Seller, Parent and their
affiliates with respect to employees under the Seller 401(k) Plan. Seller shall
remain responsible for all acts, omissions and transactions under or in
connection with the Seller 401(k) Plan.
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9.08 Management Services. For a period of twelve (12) months following
the Closing Date, Parent shall provide to Purchaser, at no cost to Purchaser, on
reasonable advance notice, the services of Robert Miodunski, on a limited,
non-exclusive and reasonable basis (taking into consideration Robert Miodunski's
time commitments, duties and responsibilities as Chief Operating Officer of
Parent), to advise and consult with Purchaser's managers, officers, and
employees regarding Company's technical and marketing activities, operations and
business strategies. Periodically prior to the Closing Date, Parent shall make
Robert Miodunski available to Purchaser, upon reasonable prior notice (taking
into consideration Robert Miodunski's time commitments, duties and
responsibilities as Chief Operating Officer of Parent), for the purposes of: (a)
reviewing the technical and marketing activities, operations and business
strategies of the Company and (b) meeting with Purchaser's proposed senior
lenders, subordinated senior lenders, and equity owners for the purposes of
providing relevant information regarding the Company. Neither Robert Miodunski,
Parent or Seller or any of their Affiliates shall be liable in any manner for
any advice or consultation given by Robert Miodunski to, and at the request of
Purchaser or any manager, officer of employee of Purchaser regarding the Company
or the Company's activities. Purchaser shall indemnify Robert Miodunski and the
Seller Indemnitees, as the case may be, in respect of, and hold each of them
harmless from any and all Losses or liabilities arising out of, resulting from
or relating to any such advice or consultation. Purchaser hereby acknowledges
that Robert Miodunski may be involved in other activities that may conflict with
Purchaser's activities with respect to the Company, and neither Robert
Miodunski, Parent, Seller or any of their Affiliates shall be subject to any
limitations on their activities as a result of the services provided by Robert
Miodunski hereunder and agrees that: (x) Purchaser's requests for advice and
consultation may not unreasonably interfere with Robert Miodunski's duties in
any manner, (y) Purchaser, its officers, managers or employees may request the
advice of, or consult Robert Miodunski within the period established hereby,
only so long as Robert Miodunski remains actively employed by Parent (or if such
employment is terminated, under terms that Robert Miodunski might agree with
Purchaser), and (z) will reimburse Parent, Seller and their Affiliates for any
out-of-pocket expenses incurred related to the advice and consultation provided
by Robert Miodunski, at the request of Purchaser, pursuant to this Section 9.08.
9.09 Employees. Upon prior reasonable notice, and in the presence of
designated Representatives of Seller, Seller shall permit Purchaser's
Representatives to meet with the employees of the Company, either singularly or
in groups, as the parties may agree, to discuss Purchaser's plans for the
Company and Purchaser's proposed employment policies and other
employment-related issues, unless such meetings are prohibited by Law. Seller
has delivered to Purchaser information relating to the following named key
employees of Company, including, without limitation, their compensation and
benefits: Roy Garrett, Craig Soper, Dave Sloan, Rob Woodson, Bob Craig, Susan
Stone, Bill Trimble and Mark Mullins. Purchaser shall have the right to discuss
the payment of retention bonuses, and only retention bonuses, with the above
named employees prior to the Closing Date upon reasonable notice to Seller, and
in the presence of designated Representatives of Seller, unless such discussions
are prohibited by Law.
9.10 WARN Act. Seller shall provide Purchaser with an accurate and
complete list of all
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employees whose employment was terminated during the one (1) year immediately
preceding the Closing Date, together with the dates of such employees'
employment, the location of employment and the reason that employment was
terminated (e.g., reduction-in-force, misconduct, voluntary termination,
retirement, death, etc.).
9.10.1 As soon as practicable before the Closing Date, Company shall
physically give written notice to each of Company's employees of the cessation
of their employment with Company as of the Closing Date, in form and content
satisfactory to Purchaser. After the date on which Company so notifies all of
Company's employees of their said employment cessation with Company, and before
the Closing Date, Purchaser shall determine which of Company's employees
Purchaser desires to offer employment. Purchaser agrees that Purchaser shall
offer employment commencing on the day after the Closing Date to at least that
number of Company's employees that is equal to the arithmetic remainder of the
total number of Company's employees as of the Closing Date, minus fifty (50).
Seller and Purchaser accordingly contemplate that an insufficient number of
employees will experience an "employment loss" as defined in the U.S. Worker
Adjustment and Retraining Notification Act ("WARN"), as amended, 29 U.S.C.
Section 2101, et seq., on account of Purchaser's purchase of the Membership
Interest to trigger any 60-day notice requirement under the WARN Act on or
before the Closing Date. Purchaser shall have no liability, cost or obligation
whatsoever to Seller, Parent or Company or to any of Company employees with
respect to those of Company's employees to whom Purchaser does not make such an
offer of employment, or with respect to those of Company's employees to whom
Purchaser offers employment but who do not timely accept such offer, or with
respect to those of Company's employees to whom Purchaser does make such an
offer of employment (other than to comply with the terms of such offer of
employment). Purchaser has not assumed, is not assuming and at no later time
ever shall assume, and Seller shall indemnify and hold harmless Purchaser and
United Coin, LLC for, any liability, cost or obligation whatsoever of Seller,
Parent or Company under the WARN Act.
ARTICLE X
SURVIVAL; NO OTHER REPRESENTATIONS
10.01 Post-Closing Survival of Representations, Warranties, Covenants
and Agreements. The representations, warranties, covenants and agreements of
Seller and Parent and Purchaser contained in this Agreement will survive the
Closing (a) indefinitely with respect to the representations and warranties
contained in Sections 2.01, 2.02, 2.04, 2.05, 2.30, 3.01, 3.02 and 3.07 and the
covenants and agreements contained in Sections 1.04, 4.08, 4.10, 4.15, 5.07,
5.08, 14.03 and 14.05, (b) until the expiration of all applicable statutes of
limitation (including all periods of extension, whether automatic or permissive)
with respect to matters covered by Sections 2.10 and Article VIII and (insofar
as they relate to ERISA or the Code) Sections 2.13 and Article IX, or (c) until
eighteen (18) months following the Closing Date in the case of each other
representation, warranty, covenant and agreement (other than the agreements
contained in Sections 4.03 and 5.03 which shall survive for the period specified
therein), except that any representation, warranty, covenant or agreement that
would otherwise terminate in accordance with clause (b) or (c) above
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will continue to survive if a Claim Notice or Indemnity Notice (as applicable)
shall have been timely given in good faith based on facts reasonably expected to
establish a valid claim under Article XI on or prior to such termination date,
until the related claim for indemnification has been satisfied or otherwise
resolved as provided in Article XI; and except that the representations and
warranties made by Seller and Parent under Section 2.26 with respect to real
property owned by the Company shall not survive the Closing.
10.02 No Other Representations. Notwithstanding anything to the contrary
contained in this Agreement, it is the explicit intent of each party hereto that
Seller and Parent are making no representation or warranty whatsoever, express
or implied, except those representations and warranties contained in this
Agreement and in any certificate delivered pursuant to Section 6.03. In
particular, Seller and Parent make no representation or warranty to Purchaser
with respect to any financial projection or forecast relating to the Business or
Condition of the Company. With respect to any projection or forecast delivered
by or on behalf of Seller and Parent to Purchaser, Purchaser acknowledges that
(i) there are uncertainties inherent in attempting to make such projections and
forecasts, (ii) it is familiar with such uncertainties, (iii) it is taking full
responsibility for making its own evaluation of the adequacy and accuracy of all
such projections and forecasts furnished to it and (iv) it shall have no claim
against Seller and Parent with respect thereto.
ARTICLE XI
INDEMNIFICATION
11.01 Indemnification.
(a) Subject to paragraph (c) of this Section and the other
Sections of this Article XI, on and after the Closing Date Parent and Seller
shall indemnify Purchaser, United Coin, LLC and their respective managers,
members, employees, Affiliates and their respective successors and assigns
("Purchaser Indemnitees") in respect of, and hold it harmless from and against,
any and all Losses arising after the Closing Date suffered, incurred or
sustained by it or to which it becomes subject, resulting from, arising out of
or relating to any breach of representation or warranty or nonfulfillment of or
failure to perform any covenant or agreement on the part of Parent and Seller
contained in this Agreement and from the Excluded Obligations.
(b) Subject to subsection (d) of this Section and other Sections
of this Article XI, on and after the Closing Date, Purchaser shall indemnify
Parent and Seller and their respective stockholders, officers, directors,
employees, Affiliates and their respective successors and assigns ("Seller
Indemnitees") in respect of, and hold each of them harmless from and against,
any and all Losses arising after the Closing Date suffered, incurred or
sustained by any of them or to which any of them becomes subject, resulting
from, arising out of or relating to any breach of representation or warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
Purchaser contained in this Agreement.
(c) Notwithstanding anything to the contrary contained in this
Agreement, no amounts of indemnity shall be payable as a result of any claim in
respect to a Loss arising under paragraph (a) of Section 11.01:
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(i) (A) unless, until and then only to the extent that the
Purchaser Indemnitees have suffered, incurred, sustained or become
subject to Losses referred to in such paragraph in excess of $400,000,
in the aggregate, in which event the Seller Indemnitees shall be
entitled to claim indemnity for Losses over and above such amount, and
(B) no amounts of indemnity shall be payable to the Purchaser
Indemnitees once they have received payments in respect of claims made
under such paragraph of $5,000,000 in the aggregate; or
(ii) If the Purchaser Indemnitee has not given the Seller
and Parent a Claim Notice or Indemnity Notice, as applicable, with
respect to such claim, setting forth in reasonable detail the specific
facts and circumstances pertaining thereto, (A) as soon as practical
following the time at which the Purchaser Indemnitee discovered or
reasonably should have discovered such claim (except to the extent
Seller and Parent are not prejudiced by any delay in the delivery of
such notice) and (B) in any event prior to the applicable Cut-off Date;
or
(iii) to the extent that: (A) a Purchaser Indemnitee had a
reasonable opportunity, but failed in good faith to mitigate the Loss,
including but not limited to the failure to use commercially reasonable
efforts to recover under a policy of insurance or under a contractual
right of set-off or indemnity; or (B) the Loss arises from or was caused
by actions taken or failed to be taken by a Purchaser Indemnitee or any
of its Affiliates after the Closing;
provided that the limitations contained in clauses (c)(i)(A) and (B) shall not
apply to Losses arising from breach of the representations contained in Section
2.30, the covenants contained in Sections 1.04, 4.08 and 4.10 or the agreements
of Seller contained in Section 14.05.
(d) Notwithstanding anything to the contrary contained in this
Agreement, no amounts of indemnity shall be payable as a result of any claim in
respect to a Loss arising under paragraph (b) of Section 11.01:
(i) (A) unless, until and then only to the extent that the
Seller Indemnitees have suffered, incurred, sustained or become subject
to Losses referred to in such paragraph in excess of $400,000 in the
aggregate, in which event the Seller Indemnitees shall be entitled to
claim indemnity for Losses over and above such amount; and (B) no
amounts of indemnity shall be payable to the Seller Indemnitees once
they have received payments in respect of claims made under such
paragraph of $5,000,000 in the aggregate; or
(iii) if the Seller Indemnitee has not given the Purchaser
a Claim Notice or Indemnity Notice, as applicable, with respect to such
claim, setting forth in reasonable detail the specific facts and
circumstances pertaining thereto, (A) as soon as practical following the
time at which the Seller Indemnitee discovered or reasonably should have
discovered such claim (except to the extent Purchaser is not prejudiced
by any delay in the delivery of such notice) and (B) in any event prior
to the applicable Cut-off Date; or
(iv) to the extent that: (A) the Seller Indemnitee had a
reasonable opportunity, but failed, in good faith to mitigate the Loss,
including but not limited to the failure to use commercially reasonable
efforts to recover under a policy of insurance or under a contractual
right of set-off or indemnity; or (B the Loss arises from or was caused
by actions taken or failed to be taken by Seller, Parent or any of its
Affiliates after the Closing;
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provided that the limitations contained in clauses (d)(i)(A) and (B) shall not
apply to Losses arising from breach of the representations contained in Sections
3.07, 5.07, 5.08 and 14.05.
11.02 Method of Asserting Claims. All claims for indemnification by any
Indemnified Party under Section 11.01 will be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which an
Indemnified Party might seek indemnity under Section 11.01 is asserted against
or sought to be collected from such Indemnified Party by a Person other than
Seller or any Affiliate of Seller or of Purchaser (a "Third Party Claim"), the
Indemnified Party shall deliver a Claim Notice with reasonable promptness to the
Indemnifying Party. The Indemnifying Party will notify the Indemnified Party as
soon as practicable within the Dispute Period whether the Indemnifying Party
disputes its liability to the Indemnified Party under Section 11.01 and whether
the Indemnifying Party desires, at its sole cost and expense, to defend the
Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to
defend the Indemnified Party with respect to the Third Party Claim
pursuant to this Section 11.02(a), then the Indemnifying Party will have
the right to defend, at the sole cost and expense of the Indemnifying
Party, such Third Party Claim by all appropriate proceedings, which
proceedings will be vigorously and diligently prosecuted by the
Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party. The Indemnifying Party will have
full control of such defense and proceedings, including any settlement
thereof; provided, however, that if requested by the Indemnifying Party,
the Indemnified Party will, at the sole cost and expense of the
Indemnifying Party, cooperate with the Indemnifying Party and its
counsel in contesting any Third Party Claim that the Indemnifying Party
elects to contest, or, if appropriate and related to the Third Party
Claim in question, in making any counterclaim against the Person
asserting the Third Party Claim, or any cross-complaint against any
Person (other than the Indemnified Party or any of its Affiliates).
Notwithstanding the foregoing, the Indemnified Party may retain or take
over the control of the defense or settlement of any Third Party Claim
the defense of which the Indemnifying Party has elected to control if
the Indemnified Party irrevocably waives its right to indemnity under
Section 11.01 with respect to such Third Party Claim.
(ii) If the Indemnifying Party fails to notify the
Indemnified Party within the Dispute Period that the Indemnifying Party
desires to defend the Third Party Claim pursuant to Section 11.02(a),
then the Indemnified Party will have the right to defend, at the sole
cost and expense of the Indemnifying Party, the Third Party Claim by all
appropriate proceedings, which proceedings will be vigorously and
diligently prosecuted by the Indemnified Party to a final conclusion or
will be settled at the discretion of the Indemnified Party (with the
consent of the Indemnifying Party, which consent will not be
unreasonably withheld). The Indemnified Party will have full control of
such defense and proceedings, including (except as provided in the
immediately preceding sentence) any settlement thereof; provided,
however, that if requested by the Indemnified Party, the Indemnifying
Party will, at the sole cost and expense of the Indemnifying Party,
cooperate with the Indemnified Party and its counsel in contesting any
Third Party Claim which the Indemnified Party is contesting, or, if
appropriate and related to the Third Party Claim in question, in making
any
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counterclaim against the Person asserting the Third Party Claim, or any
cross-complaint against any Person (other than the Indemnifying Party or
any of its Affiliates). Notwithstanding the foregoing provisions of this
clause (ii), if the Indemnifying Party has notified the Indemnified
Party within the Dispute Period that the Indemnifying Party disputes its
liability hereunder to the Indemnified Party with respect to such Third
Party Claim and if such dispute is resolved in favor of the Indemnifying
Party in the manner provided in clause (iii) below, the Indemnifying
Party will not be required to bear the costs and expenses of the
Indemnified Party's defense pursuant to this clause (ii) or of the
Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party will reimburse the Indemnifying Party
in full for all reasonable costs and expenses incurred by the
Indemnifying Party in connection with such litigation. The Indemnifying
Party may retain separate counsel to represent it in, but not control,
any defense or settlement controlled by the Indemnified Party pursuant
to this clause (ii), and the Indemnifying Party will bear its own costs
and expenses with respect to such participation.
(iii) If the Indemnifying Party notifies the Indemnified
Party that it does not dispute its liability to the Indemnified Party
with respect to the Third Party Claim under Section 11.01 or fails to
notify the Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes its liability to the Indemnified Party with
respect to such Third Party Claim, the Loss arising from such Third
Party Claim will be conclusively deemed a liability of the Indemnifying
Party under Section 11.01 and the Indemnifying Party shall pay the
amount of such Loss to the Indemnified Party on demand following the
final determination thereof. If the Indemnifying Party has timely
disputed its liability with respect to such claim, the Indemnifying
Party and the Indemnified Party will proceed in good faith to negotiate
a resolution of such dispute, and if not resolved through negotiations
within the Resolution Period, such dispute shall be resolved by
arbitration in accordance with paragraph (d) of this Section 11.02.
(iv) Any sums due Purchaser as the Indemnified Party for
Losses arising from such Third Party Claim, to the extent not otherwise
paid by the Indemnifying Party, may be set-off as provided in Section
11.04.
(b) In the event any Indemnified Party should have a claim under
Section 11.01 against any Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver an Indemnity Notice with reasonable
promptness to the Indemnifying Party. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim described in such Indemnity
Notice, the Loss arising from the claim specified in such Indemnity Notice will
be conclusively deemed a liability of the Indemnifying Party under Section 11.01
and the Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand following the final determination thereof. If the Indemnifying
Party has timely disputed its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through negotiations
within the Resolution Period, such dispute shall be resolved by arbitration in
accordance with paragraph (d) of this Section 11.02. Any sums due Purchaser as
the Indemnified Party for Losses, to the extent not otherwise paid by the
Indemnifying Party, may
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be set-off as provided in Section 11.04.
(c) In the event of any claim for indemnity under Section
11.01(a), Purchaser agrees to give Seller and its Representatives reasonable
access to the Books and Records and employees of the Company in connection with
the matters for which indemnification is sought to the extent Seller reasonably
deems necessary in connection with its rights and obligations under this Article
XI.
(d) Any dispute not resolved within the Resolution Period shall
be submitted to arbitration to be finally and conclusively determined. Not later
than five (5) days after the expiration of the Resolution Period, the parties
shall select one neutral arbitrator (the "Arbitrator"). If the parties are
unable to mutually agree upon the Arbitrator within the five (5) day period
described above, the dispute shall be determined by a Board of Arbitration
consisting of three (3) members (hereinafter sometimes called the "Board of
Arbitration") selected as hereinafter provided.
Each of the Indemnified Party and the Indemnifying Party shall select
one (1) member and the third member shall be selected by mutual agreement of the
other members, or if the other members fail to reach agreement on a third member
within twenty (20) days after their selection, such third member shall
thereafter be selected by the American Arbitration Association upon application
made to it for a third member possessing expertise or experience appropriate to
the dispute jointly by the Indemnified Party and the Indemnifying Party.
The Arbitrator or Board of Arbitration, as the case may be, shall reach
and render a decision in writing (concurred in by a majority of the members of
the Board of Arbitration in the event such Board of Arbitration is constituted)
with respect to the amount, if any, which the Indemnifying Party is required to
pay to the Indemnified Party in respect of a Claim Notice or Indemnity Notice.
In connection with rendering its decisions, the Arbitrator or the Board of
Arbitration, as the case may be, shall adopt and follow such rules and
procedures as the Arbitrator, or a majority of the members of the Board of
Arbitration, as the case may be, deems necessary or appropriate. To the extent
practical, decisions of the Arbitrator or Board of Arbitration, as the case may
be, shall be rendered no more than thirty (30) days following commencement of
proceedings with respect thereto. The Arbitrator or the Board of Arbitration, as
the case may be, shall cause its written decision to be delivered to the
Indemnified Party and the Indemnifying Party. Any decision made by the
Arbitrator, or Board of Arbitration, as the case may be (either prior to or
after the expiration of such thirty (30) calendar day period) shall be final,
binding and conclusive on the Indemnified Party and the Indemnifying Party and
entitled to be enforced to the fullest extent permitted by law and entered in
any court of competent jurisdiction. All reasonable expenses including legal
fees in connection with the arbitration of a dispute shall be paid by the non
prevailing party to the dispute in accordance with the decision of the
Arbitrator or Board of Arbitration, as the case may be.
11.03 Method of Calculating Losses.
(a) The amount of any payment to an Indemnified Party shall be
reduced by the amount of any Tax Benefit Actually Realized by the Indemnified
Party from payment of the liability upon which the claim for indemnity is based.
(b) "Tax Benefit" shall mean the sum of the amount by which the
actual Tax liability (after giving effect to any alternative minimum or similar
Tax) of an Indemnified Party (or in the case of Purchaser or United Coin, LLC,
the Tax liability of their members) to the appropriate taxing authority is
reduced by the payment of the liability upon which the claim for indemnity (or
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other claim) is based (including, without limitation, by or as a result of a
deduction, increase in basis, entitlement to refund, credit or otherwise,
whether available in the current taxable year, as an adjustment to the taxable
income in any other taxable year or as a carryforward or carryback, as
applicable) plus any interest (on an after-Tax basis) from such government or
jurisdiction relating to such Tax liability. For purposes of this Agreement, a
Tax Benefit shall be deemed to have been "Actually Realized" at the time any
refund of Taxes is actually received or applied against other Taxes due, or at
the time of the filing of a Tax Return (including any Tax Return relating to
estimated Taxes) on which a loss, deduction or credit or increase in basis is
applied to reduce the amount of Taxes which would otherwise be payable. Where a
Tax Benefit may be realized that may result in the reduction of a payment to the
Indemnified Party, the Indemnified Party will as promptly as practicable take or
cause its Affiliates to take such reasonable or appropriate steps (including,
without limitation, the filing of an amended Tax Return or claim for refund) to
obtain at the earliest possible time any such reasonably available Tax Benefit.
(c) For purposes of any Tax Benefit Actually Realized determined
under subsection (b) above:
(i) No later than 45 days after the filing of a Tax
Return for any taxable period that includes a date upon which any amount was
paid or accrued by the Indemnified Party in respect of the liability upon which
the claim for indemnity is based, the Indemnified Party shall provide the
Indemnifying Party a detailed statement ("Tax Benefit Statement") specifying the
amount, if any, of any Tax Benefit that was Actually Realized by the Indemnified
Party for such Tax period. To the extent that any deductions or other Tax items
(including basis) that could give rise to a Tax reduction or savings do not
result in the actual realization of such a Tax reduction or savings in the year
described in the previous sentence, this subsection 11.03(c)(i) shall apply to
each subsequent taxable period of the Indemnified Party, as the case may be,
until either such Tax savings are Actually Realized (resulting in a Tax Benefit)
or the losses or other carryforwards to which such deductions or other Tax items
(including basis) gave rise expire unused, if applicable. For each relevant
taxable period, the Indemnifying Party shall be provided with full access to the
non-proprietary work papers and other materials and information of the
Indemnified Party's accountants in connection with the review of the Tax Benefit
Statement. If the Indemnifying Party disagrees in any respect with the
Indemnified Party's computation of the amount of the Tax Benefit Actually
Realized, the Indemnifying Party may, on or prior to 45 days after the receipt
of the Tax Benefit Statement, deliver a notice to the Indemnified Party setting
forth in reasonable detail the basis for the Indemnifying Party's disagreement
therewith ("Tax Benefit Dispute Notice"). If no Tax Benefit Dispute Notice is
received by the Indemnified Party on or prior to the 45th day after the
Indemnifying Party's receipt of the Tax Benefit Statement from the Indemnified
Party, the Tax Benefit Statement shall be deemed accepted.
(ii) Within 15 days after the Indemnified Party's
receipt of a Tax Benefit Dispute Notice, unless the matters in the Tax Benefit
Dispute Notice have otherwise been resolved by mutual agreement of the parties,
the Indemnified Party and the Indemnifying Party shall jointly select a
nationally-recognized independent certified public accountant (the "Tax Benefit
Accountant"); provided, however, if the Indemnified Party and the Indemnifying
Party are unable to agree upon the Tax Benefit Accountant within such 15-day
period, then the Indemnified Party and the Indemnifying Party shall each select
a nationally-recognized independent certified public
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accountant which shall then jointly choose the Tax Benefit Accountant within 15
days thereafter. The Tax Benefit Accountant shall conduct such review of the
work papers and such other materials and information, and the Tax Benefit
Dispute Notice, and any supporting documentation as the Tax Benefit Accountant
in its sole discretion deems necessary, and the Tax Benefit Accountant shall
conduct such hearings or hear such presentations by the parties or obtain such
other information as the Tax Benefit Accountant in its sole discretion deems
necessary.
(iii) The Tax Benefit Accountant shall, as promptly as
practicable and in no event later than 45 days following the date of its
retention, deliver to the Indemnifying Party and the Indemnified Party a report
(the "Tax Benefit Report") in which the Tax Benefit Accountant shall, after
reviewing the disputed items set forth in the Tax Benefit Dispute Notice,
determine what adjustments, if any, should be made to the amount of the Tax
Benefit Actually Realized. The Tax Benefit Report shall set forth, in reasonable
detail, the Tax Benefit Accountant's determination with respect to the disputed
items or amounts specified in the Tax Benefit Dispute Notice, and the revisions,
if any, to be made to the amount of the Tax Benefit Actually Realized, together
with supporting calculations. All fees and expenses relating to this work of the
Tax Benefit Accountant shall be borne equally by the Indemnified Party and the
Indemnifying Party. The Tax Benefit Report shall be final and binding upon the
Indemnified Party and the Indemnifying Party, shall be deemed a final
arbitration award that is binding on each of the Indemnified Party and the
Indemnifying Party, and no party shall seek further recourse to courts, other
arbitral tribunals or otherwise. The amount, if any, of the Tax Benefit Actually
Realized set forth in the Tax Benefit Report shall reduce the payment of the
liability upon which the claim for indemnity is based and the net amount of such
payment shall be paid to the Indemnified Party.
11.04 Right of Set-Off. Purchaser and/or United Coin, LLC, on behalf of
the Purchaser Indemnitees, shall have the right to set-off against sums: (a) due
Seller under the terms of the Senior Preferred Equity, (b) due Bally under the
Supply Agreement, or (c) due Bally under the lease of gaming equipment by United
Coin, LLC, from Bally, amounts due Purchaser for Losses incurred for which
Parent and/or Seller are obligated to indemnify Purchaser under this Article XI.
In the event Purchaser and/or United Coin, LLC, claims that the right of set-off
on behalf of a Purchaser Indemnitee, and Seller has disputed its liability with
respect thereto, Purchaser or Company may deliver such funds which become
payable to Seller, Parent or Bally or their assigns to Escrow Holder, to be held
by Escrow Holder pending such determination pursuant to the terms and provisions
of the escrow instructions attached hereto as Exhibit K (the "Set-Off Escrow
Instructions"). Purchaser shall pay the costs of the Escrow Holder. Delivery of
such funds to Escrow Holder shall be deemed to constitute payment or delivery to
the Seller, Parent, or Bally, as the case may be, or their assigns of the funds.
The right of set-off provided for in this Section 11.04 shall only be asserted
in an amount equal to the amount asserted in the Claim Notice or Indemnity
Notice.
Purchaser shall have the right to direct the Escrow Holder to deliver
funds deposited with such Escrow Holder as provided above at any time after
Seller or Parent fails to dispute a Indemnity Notice or a Claim Notice in the
manner set forth in Section 11.02 (a) (iii) or 11.02(b). Delivery of funds held
by the Escrow Holder as provided above shall be made to the party entitled
thereto: (i) if Seller or Parent have disputed a Claim Notice or Indemnity
Notice, at any time after resolution of such dispute during the Resolution
Period, or during the period such dispute is in arbitration, in the
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amount determined by agreement of the parties, or (ii) if the parties have
arbitrated such Claim Notice or Indemnity Notice, to the party(s) and in the
amount(s) awarded by the Arbitrator, or Board of Arbitration, as the case may
be, on the seventh (7th) day after delivery of the decision of the Arbitrator or
the Board of Arbitration, as the case may be.
11.05 Exclusivity. After the Closing, to the extent permitted by Law,
the indemnities set forth in this Article XI shall be the exclusive remedies of
Purchaser and Seller and their respective officers, directors, employees, agents
and Affiliates for any misrepresentation, breach of warranty or nonfulfillment
or failure to be performed of any covenant or agreement contained in this
Agreement, and the parties shall not be entitled to a rescission of this
Agreement or to any further indemnification rights or claims of any nature
whatsoever in respect thereof, all of which the parties hereto hereby waive.
ARTICLE XII
DEPOSIT, TERMINATION, TERMINATION FEE
12.01 Deposits by Purchaser. (a) Upon execution of this Agreement,
Purchaser shall deposit with Escrow Holder One Million Dollars ($1,000,000) in
cash (the "Deposit") (all references in this Agreement to cash shall be deemed
to mean payment by certified or bank cashier's check or wire transfer of
immediately available funds), which amount is paid for the purpose of securing
the performance of Purchaser in accordance with the terms and conditions of this
Agreement and the Deposit Escrow Agreement, the form of which is attached hereto
as Exhibit "H." Upon Seller's payment of the Purchaser approved costs described
in Section 4.16, Purchaser shall deposit with Escrow Holder the amount of such
Purchaser approved costs (the "System Deposit"). The System Deposit shall be
held by Escrow Holder in accordance with the terms and conditions of this
Agreement and the Deposit Escrow Agreement. In the absence of an uncured
material breach of the Agreement by Purchaser, the Deposit, and the System
Deposit, if made, shall be returned to Purchaser if this Agreement is rightfully
terminated as provided in Sections 12.03(a), (b), (d)(i)-(iii) or (e). In the
absence of an uncured material breach by Purchaser, the Deposit and the System
Deposit, if made, shall be returned to Purchaser at any time during the Initial
Term or the Extension Term, if during either the Initial Term or the Extension
Term Purchaser elects to rightfully terminate this Agreement as provided in
Section 12.03(c) and: (a) there is an uncured material breach of any
representation, warranty, covenant or agreement on the part of Parent or Seller
set forth in this Agreement, or (b) there is a Material Adverse Change in the
Business or Condition of the Company, or (c) after using its reasonable best
efforts, Purchaser is unable to obtain necessary gaming regulatory approvals
required under Section 6.05, or (d) after using its reasonable best efforts,
Purchaser is unable to obtain the financing described in Section 5.05, under
terms reasonably acceptable to Purchaser. In the absence of an uncured material
breach by Purchaser, the Deposit and the System Deposit, if made, shall be
returned to Purchaser at any time during the Commitment Term, if Purchaser
elects to rightfully terminate this Agreement as provided in Section 12.03(c)
and: (a) there is an uncured material breach of any representation, warranty,
covenant or agreement on the part of Parent or Seller set forth in this
Agreement, or (b) there is a Material Adverse Change in the Business or
Condition of the Company, or (c) Purchaser, after using its reasonable best
efforts, is unable to obtain necessary gaming regulatory approvals described in
Section 6.05. If Seller shall elect to rightfully terminate this Agreement under
Section 12.03(d)(iv), the Deposit and the System Deposit, if made, shall be and
become the property of Seller.
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12.02 Term. The initial term of the Agreement shall be (9) months from
the execution of this Agreement (the "Initial Term"). If there is not an uncured
material breach by Purchaser of this Agreement, the Initial Term shall be
extended for three (3) additional one (1) month periods if Purchaser delivers
confirmation in writing to Parent prior to the beginning of each such month,
from gaming counsel to Purchaser, confirming that: (a) Purchaser is continuing
to seek all necessary gaming regulatory approvals required of Purchaser under
Section 6.05 and (b) such counsel has not become aware of any reason why such
approvals will not be obtained within fifteen (15) months after execution of the
Agreement (the "Extension Term"). If there is not an uncured material breach by
Purchaser of this Agreement, Purchaser shall be granted three (3) additional one
(1) month extensions after the aforementioned Extension Term (i.e. a maximum
term of 15 months) if Purchaser delivers to Parent confirmation of: (a) a
commitment to Purchaser for the financing described in Section 5.05(a); and (b)
with respect to each such extension, confirmation in writing prior to the
beginning of each such month, from gaming counsel to Purchaser, confirming that:
(i) Purchaser is continuing to seek all necessary gaming regulatory approvals
required of Purchaser under Section 6.05 and (ii) such counsel has not become
aware of any reason why such approvals will not be obtained within fifteen (15)
months after execution of the Agreement (the "Commitment Term"). If at the end
of the Commitment Term, the gaming license applications required of Purchaser
are on the agenda for the meeting of the Nevada Gaming Control Board to be held
immediately following the expiration of the Commitment Term, then the term of
the Agreement shall be extended, at no cost or expense to Purchaser, to the date
that is ten (10) Business Days after the last of the local gaming regulatory
approvals required to be obtained by Purchaser is obtained by Purchaser in order
to permit Purchaser to close the Acquisition; provided, further that: (a)
Purchaser may not unilaterally reschedule its appearance before any gaming
regulatory agency, but any such appearance may be rescheduled at the request of
third parties due to matters beyond Purchaser's control, and (b) Purchaser shall
diligently pursue in good faith all necessary gaming regulatory approvals
required to be obtained by Purchaser to close the Acquisition. In no event shall
the term of this Agreement extend beyond the date that is ninety (90) days from
the date Purchaser's Nevada gaming licenses are approved by the Nevada Gaming
Commission. In the event of a dispute between the parties relating to the
Preliminary Closing Schedule, the Closing Date shall be extended as provided in
Section 8.04(b).
12.03 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written agreement
of Seller and Purchaser;
(b) at any time before the Closing, by Seller or Purchaser, in
the event that any Order or Law becomes effective restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement, upon notification of the
non-terminating party by the terminating party;
(c) by Purchaser, upon notification to Seller by Purchaser, if
the Closing shall not have occurred on or before such date and such failure to
consummate is not caused by an uncured breach of this Agreement by Purchaser at
any time during: (i) the Initial Term or the Extension Term, if: (A) Purchaser
after using its reasonable best efforts reasonably determines that it will not
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be able to obtain the financing described in Section 5.05, under terms
reasonably acceptable to Purchaser, or (B) Purchaser after using its reasonable
best efforts reasonably determines that it will not obtain the necessary gaming
regulatory approvals required of Purchaser under Section 6.05, or (C) there is
an uncured material breach of any representation, warranty, covenant or
agreement on the part of Parent or Seller as set forth in this Agreement or (D)
there is a Material Adverse Change in the Business or Condition of the Company;
or (ii) during the Commitment Term, if: (X) Purchaser after using its reasonable
best efforts reasonably determines that it will not be able to obtain the
necessary gaming regulatory approvals required of Purchaser under Section 6.05,
or (Y) there is an uncured material breach of any representation, warranty,
covenant or agreement on the part of Parent or Seller as set forth in this
Agreement or (Z) there is a Material Adverse Change in the Business or Condition
of the Company.
(d) by Parent or Seller, if: (i) the Board of Directors of Parent
so determines and Parent shall have paid the Purchaser the Termination Fee
described in Section 12.04; or (ii) at any time after 60 days after the date
hereof Purchaser shall not have furnished the letters referred to in Section
5.05(a) and (b); (iii) the letters referred to in Section 5.05(a) and (b) shall
fail to be in full force and effect, (iv) there exists an uncured material
breach of any representation, warranty, covenant or agreement of Purchaser, or
(v) not later than ten (10) days following the delivery to Purchaser of
Unaudited Financial Statements for the Company fiscal year ending as of June 30,
2001, or as of the Determination Date, if earlier, if Adjusted EBITDA as of June
30, 2001, or the Determination Date, if earlier, is less than $26 million.
(e) By Purchaser if: (i) Catfish Bend Casinos, L.C. fails to
obtain the approval of the Iowa Racing and Gaming Commission by September 16,
2000 to make an investment in Purchaser, by giving Seller notice thereof not
later than September 18, 2000, or (ii) not later than ten (10) days following
the receipt by Purchaser of Unaudited Financial Statements for the Company
fiscal year ending as of June 30, 2001, or on the Determination Date, if
earlier, if Adjusted EBITDA as of June 30, 2001 or the Determination Date, if
earlier, is: (x) less than $26 million or (y) greater than $29 million;
provided, however, that if within five (5) days of the receipt by Seller of
Purchaser's notice of Purchaser's election to terminate this agreement under
this clause (y) Seller notifies Purchaser, in writing, that it elects to
complete the transaction and to compute the Purchase Price as if Adjusted EBITDA
as of June 30, 2001, or on the Determination Date, if earlier, was $29 million,
then Purchaser shall not have the right to terminate this Agreement under this
clause (y).
12.04 Effect of Termination. (a) If this Agreement is validly terminated
pursuant to Section 12.03, this Agreement will forthwith become null and void,
and there will be no liability or obligation on the part of Seller or Parent (or
any of their respective officers, directors, employees, agents or other
representatives or Affiliates) or Purchaser (or any of its respective managers,
members, employees, agents or other representatives or Affiliates), except as
provided in Sections 5.07 , 5.08, 12.01, 12.05 and in this Section, and except
that the provisions with respect to expenses in Section 14.03 (as modified by
the provisions below relating to the payment of the Termination Fee and
Purchaser's fees, costs and expenses) and confidentiality in Section 14.05 will
continue to apply following any such termination. If this Agreement is
terminated pursuant to Section 12.03(e)(ii)(y), Purchaser shall pay to Seller
within ten (10) days of demand, the reasonable fees, costs, and expenses
incurred by Seller in connection with the transaction which is the subject to
this Agreement, including, but not limited to, the reasonable fees, costs and
expenses of Seller's
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attorneys, accountants , and financial advisors, in an amount not to exceed the
sum of Five Hundred Thousand Dollars ($500,000) as evidenced by receipts,
invoices, and/or billing statements. If this Agreement is terminated pursuant to
Section 12.03(d)(v) or Section 12.03(e)(ii)(x) above, Seller shall pay to
Purchaser within ten (10) days of demand, the reasonable fees, costs, and
expenses incurred by Purchaser in connection with the transaction which is the
subject to this Agreement, including, but not limited to, the fees, costs and
expenses of Purchaser's attorneys, accountants, and financial advisors, in an
amount not to exceed the sum of Five Hundred Thousand Dollars ($500,000) as
evidenced by receipts, invoices, and/or billing statements. If this Agreement is
terminated pursuant to Section 12.03(d)(i) hereof Seller shall pay to Purchaser
a fee in the sum of Two Hundred Fifty Thousand Dollars ($250,000) the
("Termination Fee") plus Purchaser's reasonable fees, costs and expenses
incurred, including the reasonable fees, costs and expenses of Purchaser's
attorneys, accountants and financial advisors. The Termination Fee shall
increase: (i) to the sum of Five Hundred Thousand Dollars ($500,000) at the end
of the first thirty (30) day period after the date of execution of this
Agreement, and (b) to the sum of Seven Hundred Fifty Thousand Dollars ($750,000)
at the later of: (A) the date Purchaser delivers the letters described in
Section 5.05 and (B) the date all gaming applications for Purchaser and its
principals are filed with the Nevada Gaming Control Board. The Termination Fee
shall increase at the rate of $250,000 for each thirty (30) day period after the
later of the events described in clauses (A) or (B) above, up to a maximum of
Three Million Dollars ($3,000,000), plus the reasonable fees, costs and expenses
as aforesaid. Seller shall pay the Termination Fee to Purchaser within two (2)
days of the date Parent gives written notice to Purchaser of its intent to
terminate this Agreement, and shall pay to Purchaser within ten (10) days of the
receipt of statements and invoices supporting same, the reasonable expenses,
costs and fees incurred by Purchaser in connection with this Agreement including
the reasonable fees of Purchaser's attorneys, accountants and professional
advisors.
(b) If this Agreement is terminated during the Commitment Term,
and the failure of Purchaser to obtain the necessary governmental and regulatory
approvals described in Section 6.05 hereof is not by reason of any uncured
material breach of any representation, warranty, covenant or agreement on the
part of Parent or Seller set forth in this Agreement or any Material Adverse
Change in the Business or Condition of the Company, Seller may direct Escrow
Holder, by giving written notice to Purchaser and Escrow Holder, to release the
Deposit to Parent.
12.05 Notice of Breach; Cure Period. If there shall a material breach of
a representation, warranty, covenant or agreement on the part of a party, the
non-breaching party shall give written notice thereof the breaching party. The
breaching party shall have thirty (30) days from the date of notice thereof from
the non-breaching party to cure such material breach, if such material breach
can reasonably be cured within such thirty (30) day period. During such thirty
(30) day cure period, if such breach can reasonably be cured within such (30)
day period, the non breaching party shall not be permitted to terminate this
Agreement by reason of such breach. If this Agreement is terminated pursuant to
Section 12.03(d)(iv) above, the Deposit shall be delivered to Seller and
Purchaser shall pay to Seller within ten (10) days of demand, the reasonable
fees, costs, and expenses incurred by Seller in connection with the transaction
which is the subject of this Agreement, including, but not limited to, the
reasonable fees, costs and expenses of Seller's attorneys, accountants (to the
extent not included in the costs described in Section 5.07), and financial
advisors in an amount not to exceed the sum of Five Hundred Thousand Dollars
($500,000)
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as evidenced by receipts, invoices, and/or billing statements. The
Deposit together with reimbursement of Seller's fees and costs as provided in
this Section 12.05 shall be liquidated damages for the failure of Purchaser to
perform the duties, liabilities and obligations imposed upon it by the terms and
provisions of this Agreement and because of the difficulty, inconvenience and
uncertainty of ascertaining actual damages. Purchaser acknowledges that the
Deposit together with reimbursement of Seller's fees and costs as provided in
this Section 12.05 represents a fair and reasonable amount for liquidated
damages. If this Agreement is terminated pursuant to Section 12.03(c) above by
reason of an uncured material breach of any representation, warranty, covenant
or agreement of Seller, Seller shall pay to Purchaser within ten (10) days of
demand: (a) the reasonable fees, costs, and expenses incurred by Purchaser in
connection with the transaction which is the subject of this Agreement,
including, but not limited to, the reasonable fees, costs and expenses of
Purchaser's attorneys, accountants and financial advisors in an amount not to
exceed the sum of Five Hundred Thousand Dollars ($500,000) as evidenced by
receipts, invoices, and/or billing statements and (b) the sum of One Million
Dollars ($1,000,000), such sums being agreed upon as liquidated damages for the
failure of Seller to perform the duties, liabilities and obligations imposed
upon it by the terms and provisions of this Agreement and because of the
difficulty, inconvenience and uncertainty of ascertaining actual damages. Seller
acknowledges that such sums represent a fair and reasonable amount for
liquidated damages.
ARTICLE XIII
DEFINITIONS
13.01 Definitions.
(a) Defined Terms. As used in this Agreement, the following
defined terms have the meanings indicated below:
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation.
"Adjusted EBITDA" means the actual EBITDA of the Company for the
twelve (12) month period ending on June 30, 2001 or the Determination Date, if
earlier, plus all payments made by the Company during the twelve (12) month
period ending on June 30, 2001 or the Determination Date, if earlier, in respect
to the liabilities, operating leases, and other obligations to be paid at the
Closing by Seller as described on Section 1.04(a) of the Disclosure Schedule.
"Adjusted Working Capital" means and shall be calculated, as of
the Closing Date, as current assets (excluding cash, prepaid Nevada state,
county and local gaming taxes and licensing fees, prepaid insurance, and the
current portion of notes receivable from locations maturing after one month from
the Closing Date) less current liabilities (excluding amounts accrued with
respect to Excluded Obligations to be paid or assumed by Parent and/or Seller at
the Closing Date).
"Affiliate" means any Person that directly, or indirectly through
one of more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition, control of a
Person means the power, direct or indirect, to direct or cause the direction of
the management and policies of such Person whether by Contract or otherwise and,
in any event and without limitation of the previous sentence, any Person owning
10% or more of the voting securities of another Person shall be deemed to
control that Person.
"Agenda Date" means the date Purchaser's applications for Nevada
gaming licenses are expected to appear on the meeting agenda of the Nevada
Gaming Control Board.
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"Agreement" means this Purchase Agreement and the Exhibits, the
Disclosure Schedule and the Schedules hereto and the certificates delivered in
accordance with Sections 6.03 and 7.03, as the same shall be amended from time
to time.
"Arbitrator" has the meaning ascribed to it in Section
11.02(d).
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, and wherever situated),
including the goodwill related thereto, operated, owned or leased by such
Person.
"Audited Financial Statements" has the meaning ascribed to it in
Section 4.05.
"Bally" means Bally Gaming, Inc., a subsidiary of Parent.
"Benefit Plan" means any Plan established by the Company, or any
predecessor or Affiliate of the Company, existing at the Closing Date or at any
time within the two-year period prior thereto, to which the Company contributes,
has contributed, has made payments or is obligated to make payments, or under
which any employee, former employee or director of the Company or any
beneficiary thereof is covered, is eligible for coverage, may receive payments
under, or has benefit rights.
"Board of Arbitration" has the meaning ascribed to it in Section
11.02(d).
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the Business or Condition of the Company,
including without limitation financial statements, Tax Returns and related work
papers and letters from accountants, budgets, ledgers, journals, deeds, title
policies, minute books, stock certificates and books, stock transfer ledgers,
Contracts, Licenses, customer lists, computer files and programs, retrieval
programs, operating data and plans and environmental studies and plans.
"Business" has the meaning ascribed to it in the forepart of this
Agreement.
"Business Day" means a day other than Saturday, Sunday or any day
on which banks located in the States of Nevada or New York are authorized or
obligated to close.
"Business or Condition of the Company" means the business,
financial condition or results of operations of the Company.
"Cash on Hand" has the meaning ascribed to it in Section 4.14.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and the rules and
regulations promulgated thereunder.
"CERCLIS" means the Comprehensive Environmental Response and
Liability Information System, as provided by 40 C.F.R. Section 300.5.
"Claim Notice" means written notification pursuant to Section
11.02(a) of a Third Party Claim as to which indemnity under Section 11.01 is
sought by an Indemnified Party, enclosing a copy of all papers served, if any,
and specifying the nature of and basis for such Third Party Claim and for the
Indemnified Party's claim against the Indemnifying Party under Section 11.01,
together with the amount or, if not then reasonably determinable, the estimated
amount, determined in good faith, of the Loss arising from such Third Party
Claim.
"Closing" means the closing of the transactions contemplated by
Section 1.03.
"Closing Date" means (a) the tenth (10) Business Day after the
day on which the last of the consents, approvals, actions, filings, notices or
waiting periods described in or related to the filings described in Sections
6.05 and 6.06 and Sections 7.05 and 7.06 has been obtained, made or
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given or has expired, as applicable, unless extended for the period described in
Section 8.04(b), or (b) such other date as Purchaser and Seller mutually agree
upon in writing.
"Code" means the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Commitment Term" has the meaning ascribed to it in Section
12.02.
"Common Stock" means the common stock, par value $0.10 per share,
of the Company.
"Company" has the meaning ascribed to it in the forepart of this
Agreement.
"Contract" means any agreement, lease, license, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract.
"Cut-off Date" means, with respect to any representation,
warranty, covenant or agreement contained in this Agreement, the date on which
such representation, warranty, covenant or agreement ceases to survive as
provided in clause (b) or (c) of Section 10.01, as applicable.
"Cut-Off Time" means 10:30 A.M. on the Closing Date.
"Defined Benefit Plan" means each Benefit Plan which is subject
to Part 3 of Title I of ERISA, Section 412 of the Code or Title IV of ERISA.
"Deposit" has the meaning ascribed to it in Section 12.01.
"Deposit Escrow Agreement" means that certain escrow agreement
the form of which is attached hereto as Exhibit "H."
"Determination Date" means the last day of the month preceding
the Closing Date.
"Disclosed Financial Statements" means the financial statements
of the Company delivered to Purchaser pursuant to Section 2.09 or 4.05
"Disclosure Schedule" means the record delivered to Purchaser by
Seller herewith and dated as of the date hereof, containing all lists,
descriptions, exceptions and other information and materials as are required to
be included therein by Seller pursuant to this Agreement as updated as of the
Closing Date.
"Dispute Period" means the period ending 60 days following
receipt by an Indemnifying Party of either a Claim Notice or an Indemnity
Notice.
"EBITDA" means the Company's earnings before interest, taxes,
depreciation and amortization as determined under GAAP.
"Environmental Law" means any Law or Order relating to the
regulation or protection of human health, safety or the environment or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, ambient air, soil, surface
water, ground water, wetlands, land or subsurface strata), or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means any Person who is in the same controlled
group of corporations or who is under common control with Seller or, before the
Closing, the Company (within the meaning of Section 414(b) or 414(c) of the
Code).
"Escrow Holder" means Nevada Title Company.
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"Excluded Obligations" has the meaning ascribed to it in Section
1.04.
"Existing Guarantees" has the meaning ascribed to it in Section
4.08.
"Extension Term" has the meaning ascribed to it in Section 12.02.
"Final Closing Statement" has the meaning ascribed to it in
Section 8.04.
"GAAP" means generally accepted accounting principles.
"Governmental or Regulatory Authorities" means any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States or any state, county, city or other
political subdivision, including those with regulatory control or jurisdiction
over the conduct of lawful gaming or gambling.
"Hazardous Material" means (i) any petroleum or petroleum
products, flammable explosives, radioactive materials, asbestos in any form that
is or could become friable, urea formaldehyde foam insulation and transformers
or other equipment that contain dielectric fluid containing levels of
polychlorinated biphenyls (PCBs); (ii) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants" or words of similar import under any Environmental Law; and
(C) any other chemical or other material or substance, exposure to which is now
or hereafter prohibited, limited or regulated by any Governmental or Regulatory
Authority under any Environmental Law.
"HSR Act" means Section 7A of the Clayton Act (Title II of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the rules
and regulations promulgated thereunder.
"Income Taxes" means United States federal income tax and any
state or local taxes imposed on or measured by net income.
"Income Tax Returns" means all returns required by applicable law
to be filed with respect to Income Taxes.
"Indebtedness" of any Person means all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person.
"Indemnified Party" means any Person claiming indemnification
under any provision of Article XI.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article XI.
"Indemnity Notice" means written notification pursuant to Section
11.02(b) of a claim for indemnity under Article XI by an Indemnified Party,
specifying the nature of and basis for such claim, together with the amount or,
if not then reasonably determinable, the estimated amount, determined in good
faith, of the Loss arising from such claim.
"Initial Term" has the meaning ascribed to it in Section 12.02.
"Intellectual Property" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service mark rights, service names and service name rights, brand
names, inventions, copyrights and copyright rights, and all pending
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applications for and registrations of patents, trademarks, service marks and
copyrights.
"Intellectual Property Licensing Agreement" means the agreement
attached hereto as Exhibit "G."
"Investment Assets" means all debentures, notes and other
evidences of Indebtedness, stocks, securities (including rights to purchase and
securities convertible into or exchangeable for other securities), interests in
joint ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by the Company
and issued by any Person other than the Company (other than trade receivables
generated in the ordinary course of business of the Company).
"IRS" means the United States Internal Revenue Service.
"Jorai Lease" has the meaning ascribed to it in Section 1.04.
"Knowledge of Seller" means the actual knowledge of Robert
Miodunski, Robert Saxton, Dave Sloan, Mark Lerner, Roy Garrett, Craig Soper and
Rob Woodson.
"Laws" means all laws, statutes, rules, regulations, ordinances
and other pronouncements having the effect of law of the United States or any
state, county, city or other political subdivision or of any Governmental or
Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing.
"LLC Agreement" means the Limited Liability Company Agreement of
United Coin, LLC.
"Location" means a bar, restaurant, lounge, convenience store, or
other location under contract with Company for the placement of gaming devices.
"Location Contracts" means the Space Lease Agreements and
Participation Agreements.
"Loss" means any and all damages, fines, penalties, deficiencies,
losses and expenses (including without limitation interest, court costs,
reasonable fees of attorneys, accountants and other experts or other reasonable
expenses of litigation or other proceedings or of any claim, default or
assessment).
"Material Adverse Change in the Business or Condition of the
Company" or "Material Adverse Change" means any event, change or effect which is
materially adverse to the Business or Condition of the Company, other than those
occurring as a result of general economic or financial conditions or other
developments which are not unique to the Company but also affect other Persons
who participate or are engaged in the lines of business in which the Company
participates or is engaged occurring subsequent to the date hereof.
"Membership Interest" has the meaning ascribed to it in the
Recitals to this Agreement.
"Merger" has the meaning ascribed to it in the Recitals to this
Agreement.
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"Net Win" means with respect to a Location under a Participation
Agreement, the total drop, less jackpots and fills and the Location's share of
revenue.
"NPL" means the National Priorities List under CERCLA.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right, stock appreciation,
deferred compensation arrangement or other Contract that gives the right to (i)
purchase or otherwise receive or be issued any shares of capital stock of such
Person or any security of any kind convertible into or exchangeable or
exercisable for any shares of capital stock of such Person or (ii) receive or
exercise any benefits or rights similar to any rights enjoyed by or accruing to
the holder of shares of capital stock of such Person, including any rights to
participate in the equity or income of such Person or to participate in or
direct the election of any directors or officers of such Person or the manner in
which any shares of capital stock of such Person are voted.
"Order" means any writ, judgment, decree, injunction or similar
order of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Parent" has the meaning ascribed to it in the forepart of this
Agreement.
"Participation Agreements" means those certain slot route leases
with Locations identified in Section 2.21(a) of the Disclosure Schedule.
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA.
"Pension Benefit Plan" means each Benefit Plan which is a pension
benefit plan within the meaning of Section 3(2) of ERISA.
"Permitted Lien" means (i) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of Law
with respect to a Liability that is not yet due or delinquent and (iii) any
minor imperfection of title or similar Lien which individually or in the
aggregate with other such Liens could not reasonably be expected to materially
adversely affect the Business or Condition of the Company.
"Person" means any natural person, corporation, limited liability
company, general partnership, limited partnership, limited liability
partnership, proprietorship, other business organization, trust, union,
association or Governmental or Regulatory Authority.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, split dollar life
insurance, deferred compensation, leave of absence, layoff, vacation, day or
dependent care, legal services, cafeteria, life, health, accident, disability,
workmen's compensation or other insurance, severance, separation or other
employee benefit plan, practice, policy or arrangement of any kind, whether
written or oral, including, but not limited to, any "employee benefit plan"
within the meaning of Section 3(3) of ERISA.
"Pre-closing Date" means the date that is five (5) days after the
meeting of the Nevada Gaming Control Board at which Purchaser's gaming licenses
are recommended for approval by the Nevada Gaming Control Board.
"Preliminary Closing Statement" has the meaning ascribed to it in
Section 8.04.
"Purchase Price" has the meaning ascribed to it in Section 1.02.
"Purchaser" has the meaning ascribed to it in the forepart of
this Agreement.
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"Purchaser 401(k) Plan" has the meaning ascribed to it in Section
9.07.
"Purchaser Indemnitees" has the meaning ascribed to in Section
11.01.
"Purchaser's Accountants" has the meaning ascribed to it in
Section 8.04.
"Purchaser's Bank Accounts" means the bank accounts for United
Coin, LLC to be opened and maintained by Purchaser on and after the Closing
Date.
"Qualified Plan" means each Benefit Plan which is intended to
qualify under Section 401 of the Code.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including, without limitation, the movement
of Hazardous Materials through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.
"Representatives" means a Person's officers, employees, counsel,
accountants, financial advisors, consultants and other representatives.
"Resolution Period" means the period ending 60 days following
receipt by an Indemnified Party of a written notice from an Indemnifying Party
stating that it disputes all or any portion of a claim set forth in a Claim
Notice or an Indemnity Notice.
"Seller" has the meaning ascribed to it in the forepart of this
Agreement.
"Seller's Accountants" means the accountants engaged by Seller to
prepare the Company's Audited Financial Statements.
"Seller's Bank Accounts" means the bank accounts of the Company.
"Seller 401(k) Plan" has the meaning ascribed to it in Section
9.07.
"Seller Indemnitees" has the meaning ascribed to in Section
11.01(b).
"Senior Preferred Equity" has the meaning ascribed to it in
Section 1.02(b).
"Set-off Escrow Agreement" means that certain escrow agreement
the form of which is attached hereto as Exhibit "K."
"Shares" has the meaning ascribed to it in the forepart of this
Agreement.
"System Deposit" has the meaning ascribed to it in Section 12.01.
"Space Lease Agreements" means those certain slot route leases
with Locations as identified in Section 2.21(a) of the Disclosure Schedule.
"Subsidiary" means any Person in which the Company, directly or
indirectly through Subsidiaries or otherwise, beneficially owns more than 50% of
either the equity interests in, or the voting control of, such Person.
"Tax Benefit" has the meaning ascribed to it in Section 11.03.
"Tax Benefit Accountant" has the meaning ascribed to it in
Section 11.03.
"Tax Benefit Actually Realized" has the meaning ascribed to it in
Section 11.03.
"Tax Benefit Dispute Notice" has the meaning ascribed to it in
Section 11.03.
"Tax Benefit Report" has the meaning ascribed to it in Section
11.03.
"Tax Benefit Statement" has the meaning ascribed to it in Section
11.03.
"Tax Return" means a report, return or other information required
to be supplied to a Governmental or Regulatory Authority with respect to or
concerning Taxes including, where permitted or required, combined or
consolidated returns for any group of entities that includes the Company.
"Taxes" means any federal, state, local or foreign taxes,
charges, fees, levies, other
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assessments, or withholding taxes or charges imposed by any governmental entity,
ad includes any interest and penalties on or additions to any such taxes and any
expenses incurred in connection with the determination, settlement or litigation
of any Tax liability.
"Tentative Allocation Date" means the last day of the calendar
month that is four calendar months prior to the month containing the projected
Agenda Date.
"Tentative Allocation Schedule" has the meaning ascribed to it in
Section 8.04.
"Termination Fee" has the meaning ascribed to it in Section
12.04.
"Total Win" means with respect to a Location under a Space Lease
Agreement, the total drop less jackpots and machine fills.
"Third Party Claim" has the meaning ascribed to it in Section
11.02(a).
"Transfer Taxes" means all sales and use taxes imposed by
Chapters 372 and 374 of the Nevada Revised Statutes and the real property
transfer tax under NRS 375.090 arising out of or in connection with the
transfers effected pursuant to this Agreement.
"Unaudited Financial Statement Date" means June 30, 2000.
"United Coin, LLC" means the Nevada limited liability company
into which the Company will be merged in the Merger on the Closing Date.
"Unaudited Financial Statements" means the Financial Statements
for the most recent month or fiscal year of the Company delivered to Purchaser
pursuant to Section 2.09(a).
"United Intellectual Property" means the Intellectual Property
described on Section 2.20(a) of the Disclosure Schedule.
"Updated Disclosure Schedules" means the schedules attached to
this agreement as updated, amended and supplemented through and including the
Closing Date.
(b) Construction of Certain Terms and Phrases. Unless the context
of this Agreement otherwise requires, (i) words of any gender include each other
gender; (ii) words using the singular or plural number also include the plural
or singular number, respectively; (iii) the terms "hereof," "herein," "hereby"
and derivative or similar words refer to this entire Agreement; (iv) the terms
"Article" or "Section" refer to the specified Article or Section of this
Agreement; and (v) the phrase "ordinary course of business" refers to the
business of the Company. Whenever this Agreement refers to a number of days,
such number shall refer to calendar days unless Business Days are specified. All
accounting terms used herein and not expressly defined herein shall have the
meanings given to them under GAAP. Any representation or warranty contained
herein as to the enforceability of a Contract shall be subject to the effect of
any bankruptcy, insolvency, reorganization, moratorium or other similar law
affecting the enforcement of creditors' rights generally and to general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at Law).
ARTICLE XIV
MISCELLANEOUS
14.01 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
If to Purchaser, to:
UC Acquisition Company of Nevada, LLC
7137 Mission Hills Dr.
Las Vegas, Nevada 89113
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Attn: Michael S. Luzich, Manager
Facsimile No.: 702-247-6822
with a copy to:
James, Driggs, Walch, Santoro,
Kearney, Johnson & Thompson
3773 Howard Hughes Pkwy., Suite 290N
Las Vegas, Nevada 89109
Attn: Michael E. Kearney
Facsimile No.: 702-791-1912
If to Parent or Seller, to:
Alliance Gaming Corporation
6601 South Bermuda Road
Las Vegas, Nevada 89119
Facsimile No.: 702-270-7990
Attn: Legal Department
with a copy to:
Milbank, Tweed, Hadley & McCloy LLP
One Chase Manhattan Plaza
New York, New York 10005
Facsimile No.: 212-530-5219
Attn: Mark L. Weissler
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice, request or other communication is to be delivered pursuant
to this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other party hereto.
14.02 Entire Agreement. This Agreement supersedes all prior discussions
and agreements between the parties with respect to the subject matter hereof and
contains the sole and entire agreement between the parties hereto with respect
to the subject matter hereof.
14.03 Expenses. Except as otherwise expressly provided in this Agreement
(including, without limitation, as provided in Section 12.04), whether or not
the transactions contemplated hereby are consummated, each party will pay its
own costs and expenses incurred in connection with the negotiation, execution
and closing of this Agreement and the transactions contemplated hereby.
14.04 Public Announcements. At all times at or before the Closing,
Parent, Seller, the Company and Purchaser will not issue or make any reports,
statements or releases to the public with respect to this Agreement or the
transactions contemplated hereby without the consent of the other, which consent
shall not be unreasonably withheld. If either party is unable to obtain the
approval of its public report, statement or release from the other party and
such report, statement or release is, in the opinion of legal counsel to such
party, required by Law in order to discharge such party's disclosure
obligations, then such party may make or issue the legally required report,
statement or release and promptly furnish the other party with a copy thereof.
Parent, Seller, the Company and Purchaser will also obtain the other party's
prior approval of any press release to be issued immediately following the
Closing announcing the consummation of the transactions contemplated by this
Agreement.
14.05 Confidentiality. Each party hereto will hold, and will use its
best efforts to cause its Affiliates, and in the case of Purchaser, any Person
who has provided, or who is considering providing, financing to Purchaser to
finance all or any portion of the Purchase Price, and their respective
Representatives to hold, in strict confidence from any Person (other than any
such Affiliate, Person who has provided, or who is considering providing,
financing or Representative), unless (a) compelled to disclose by judicial or
administrative process (including without limitation in connection with
obtaining the necessary approvals of this Agreement and the transactions
contemplated hereby of Governmental or Regulatory Authorities) or by other
requirements of Law
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or (b) disclosed in an Action or Proceeding brought by a party hereto in pursuit
of its rights or in the exercise of its remedies hereunder, all documents and
information concerning the other party or any of its Affiliates furnished to it
by the other party or such other party's Representatives in connection with this
Agreement or the transactions contemplated hereby, except to the extent that
such documents or information can be shown to have been (i) previously known by
the party receiving such documents or information, (ii) in the public domain
(either prior to or after the furnishing of such documents or information
hereunder) through no fault of such receiving party or (iii) later acquired by
the receiving party from another source if the receiving party is not aware that
such source is under an obligation to another party hereto to keep such
documents and information confidential; provided that following the Closing the
foregoing restrictions will not apply to Purchaser's use of documents and
information concerning the Company furnished by Seller hereunder. In the event
the transactions contemplated hereby are not consummated, upon the request of
the other party, each party hereto will, and will cause its Affiliates, any
Person who has provided, or who is providing, financing to such party and their
respective Representatives to, promptly (and in no event later than five
Business Days after such request) redeliver or cause to be redelivered all
copies of confidential documents and information furnished by the other party in
connection with this Agreement or the transactions contemplated hereby and
destroy or cause to be destroyed all notes, memoranda, summaries, analyses,
compilations and other writings related thereto or based thereon prepared by the
party furnished such documents and information or its Representatives.
14.06 Waiver. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
14.07 Amendment. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of each party hereto.
14.08 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnity under Article XI.
14.09 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt to
do so will be void, except that Purchaser may assign any or all of its rights,
interests and obligations hereunder to an Affiliate provided that any such
Affiliate agrees in writing to be bound by all of the terms, conditions and
provisions contained herein; provided such assignment does not materially
adversely affect Parent and Seller's rights under this Agreement nor delay the
Closing. No such assignment shall relieve Purchaser of its obligations
hereunder. Subject to the preceding sentence, this Agreement is binding upon,
inures to the benefit of and is enforceable by the parties hereto and their
respective successors and assigns.
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14.10 Headings. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
14.11 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, and (c)
the remaining provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom.
14.12 Consent to Jurisdiction. Notwithstanding the provisions of Section
11.02(d), in the event of a breach of the provisions of Sections 4.03. 4.10,
5.03, or 14.05 the non breaching party shall be entitled to injunctive relief as
well as any other applicable remedies at law or in equity. Each party hereby
irrevocably submits to the exclusive jurisdiction of the United States District
Court for the District of Nevada (Unofficial Southern District) or any court of
the State of Nevada located in the City of Las Vegas in any action, suit or
proceeding arising out of the breach of Sections 4.03. 4.10, 5.03, or 14.05, for
the enforcement of any award of the Arbitrator or Board of Arbitrators, as the
case may be, or in respect to recovery of liquidated damages as set forth in
Section 12.05 for breach of this Agreement, and agrees that any such action,
suit or proceeding shall be brought only in such court; provided, however, that
such consent to jurisdiction is solely for the purpose referred to in this
Section and shall not be deemed to be a general submission to the jurisdiction
of said courts or in the State of Nevada other than for such purpose. Each party
hereby irrevocably waives, to the fullest extent permitted by Law, any objection
that it may now or hereafter have to the laying of the venue of any such action,
suit or proceeding brought in such a court and any claim that any such action,
suit or proceeding brought in such a court has been brought in an inconvenient
forum.
14.13 Governing Law. This Agreement shall be governed by and construed
in accordance
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with the Laws of the State of Nevada applicable to a contract executed and
performed in such State, without giving effect to the conflicts of laws
principles thereof.
14.14 Attorney's Fees. If a dispute arises with respect to the matters
described in Section 14.12 above, then the party prevailing in such dispute
shall be entitled to recover all reasonable expenses, including, without
limitation, reasonable attorneys' fees and expenses, incurred in ascertaining
such party's rights and in preparing to enforce and/or defend and in enforcing
and/or defending such party's rights under this Agreement.
14.15 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officer of each party hereto as of the date first above
written.
UC ACQUISITION COMPANY OF NEVADA, LLC
By:
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Name:
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Title:
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APT GAMES, INC.
By:
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Name:
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Title:
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ALLIANCE GAMING CORPORATION
By:
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Name:
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Title:
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