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Agreement and Plan of Merger

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AFFINITY GAMING | AFFINITY MERGER SUB, INC | Las Vegas, NV | Surviving Corporation | Z Capital Affinity Owner, LLC | Z Capital Partners, LLC

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Title: AGREEMENT AND PLAN OF MERGER
Governing Law: Nevada     Date: 8/23/2016
Industry: Hotels and Motels     Law Firm: Morrison Foerster;Sidley Austin     Sector: Services

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EXHIBIT 2.1

 

EXECUTION VERSION

 

 

AGREEMENT AND PLAN OF MERGER

 

among

 

Z CAPITAL AFFINITY OWNER, LLC,

 

AFFINITY MERGER SUB, INC.

 

and

 

AFFINITY GAMING

 

Dated as of August 22, 2016

 

 



 

TABLE OF CONTENTS

 

ARTICLE I THE MERGER

2

 

 

 

Section 1.1.

The Merger

2

 

 

 

Section 1.2.

Closing

2

 

 

 

Section 1.3.

Effective Time

2

 

 

 

Section 1.4.

Effects of the Merger

3

 

 

 

Section 1.5.

Articles of Incorporation; Bylaws

3

 

 

 

Section 1.6.

Directors

3

 

 

 

Section 1.7.

Officers

3

 

 

 

ARTICLE II EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES

4

 

 

 

Section 2.1.

Conversion of Capital Stock

4

 

 

 

Section 2.2.

Treatment of Options and Other Equity-Based Awards

4

 

 

 

Section 2.3.

Exchange and Payment

6

 

 

 

Section 2.4.

Withholding Rights

8

 

 

 

Section 2.5.

Dissenting Shares

9

 

 

 

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY

9

 

 

 

Section 3.1.

Organization, Standing and Power

10

 

 

 

Section 3.2.

Capital Stock

10

 

 

 

Section 3.3.

Authority

12

 

 

 

Section 3.4.

No Conflict; Consents and Approvals

12

 

 

 

Section 3.5.

SEC Reports; Financial Statements

13

 

 

 

Section 3.6.

No Undisclosed Liabilities

15

 

 

 

Section 3.7.

Absence of Certain Changes or Events

16

 

i



 

Section 3.8.

Litigation

16

 

 

 

Section 3.9.

Compliance with Laws

16

 

 

 

Section 3.10.

Benefit Plans

17

 

 

 

Section 3.11.

Labor Matters

19

 

 

 

Section 3.12.

Environmental Matters

20

 

 

 

Section 3.13.

Taxes

21

 

 

 

Section 3.14.

Contracts

23

 

 

 

Section 3.15.

Insurance

26

 

 

 

Section 3.16.

Properties

26

 

 

 

Section 3.17.

Intellectual Property

28

 

 

 

Section 3.18.

State Takeover Statutes

30

 

 

 

Section 3.19.

Affiliate Transactions

30

 

 

 

Section 3.20.

Brokers

30

 

 

 

Section 3.21.

Opinion of Financial Advisor

30

 

 

 

Section 3.22.

Certain Information

31

 

 

 

Section 3.23.

No Other Parent Representations or Warranties

31

 

 

 

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

31

 

 

 

Section 4.1.

Organization, Standing and Power

31

 

 

 

Section 4.2.

Authority

32

 

 

 

Section 4.3.

No Conflict; Consents and Approvals

32

 

 

 

Section 4.4.

Litigation

33

 

 

 

Section 4.5.

Ownership and Operations of Parent and Merger Sub

33

 

 

 

Section 4.6.

Financing

33

 

 

 

Section 4.7.

Vote/Approval Required

35

 

 

 

Section 4.8.

Ownership of Shares

35

 

ii



 

Section 4.9.

Solvency

35

 

 

 

Section 4.10.

Brokers

36

 

 

 

Section 4.11.

Limited Guarantee

36

 

 

 

Section 4.12.

Licensability

36

 

 

 

Section 4.13.

Certain Information

37

 

 

 

Section 4.14.

Access to Information

37

 

 

 

Section 4.15.

No Other Company Representations or Warranties

37

 

 

 

Section 4.16.

Non-Reliance on Company Estimates, Projections, Forecasts, Forward-Looking Statements and Business Plans

38

 

 

 

ARTICLE V COVENANTS

39

 

 

 

Section 5.1.

Conduct of Business of the Company

39

 

 

 

Section 5.2.

Conduct of Business of Parent and Merger Sub Pending the Merger

42

 

 

 

Section 5.3.

No Control of Other Party’s Business

42

 

 

 

Section 5.4.

No Solicitation or Negotiation

42

 

 

 

Section 5.5.

Preparation of Proxy Statement; Stockholders’ Meeting

46

 

 

 

Section 5.6.

Access to Information; Confidentiality

48

 

 

 

Section 5.7.

Further Action; Efforts

48

 

 

 

Section 5.8.

Employment and Employee Benefit Matters

53

 

 

 

Section 5.9.

Takeover Laws

54

 

 

 

Section 5.10.

Notification of Certain Matters

54

 

 

 

Section 5.11.

Indemnification, Exculpation and Directors’ and Officers’ Insurance

54

 

 

 

Section 5.12.

Rule 16b-3

57

 

 

 

Section 5.13.

Public Announcements

57

 

 

 

Section 5.14.

Agreements Concerning Parent and Merger Sub

57

 

iii



 

Section 5.15.

Financing

58

 

 

 

Section 5.16.

Director Resignations

63

 

 

 

Section 5.17.

Transaction Litigation

64

 

 

 

Section 5.18.

Pay-Off Letter

64

 

 

 

Section 5.19.

WARN Act

65

 

 

 

Section 5.20.

Further Assurances

65

 

 

 

Section 5.21.

Standstill

65

 

 

 

Section 5.22.

Credit Agreement Amendment

65

 

 

 

ARTICLE VI CONDITIONS PRECEDENT

66

 

 

 

Section 6.1.

Conditions to Each Party’s Obligation to Effect the Merger

66

 

 

 

Section 6.2.

Conditions to the Obligations of the Company

66

 

 

 

Section 6.3.

Conditions to the Obligations of Parent and Merger Sub

67

 

 

 

Section 6.4.

Frustration of Closing Conditions

67

 

 

 

ARTICLE VII TERMINATION, AMENDMENT AND WAIVER

67

 

 

 

Section 7.1.

Termination

67

 

 

 

Section 7.2.

Effect of Termination

70

 

 

 

Section 7.3.

Fees and Expenses

70

 

 

 

Section 7.4.

Amendment or Supplement

75

 

 

 

Section 7.5.

Extension of Time; Waiver

75

 

 

 

ARTICLE VIII GENERAL PROVISIONS

76

 

 

 

Section 8.1.

Nonsurvival of Representations and Warranties

76

 

 

 

Section 8.2.

Notices

76

 

 

 

Section 8.3.

Certain Definitions

77

 

 

 

Section 8.4.

Interpretation

81

 

 

 

Section 8.5.

Entire Agreement

81

 

iv



 

Section 8.6.

Parties in Interest

82

 

 

 

Section 8.7.

Governing Law

82

 

 

 

Section 8.8.

Submission to Jurisdiction

82

 

 

 

Section 8.9.

Assignment; Successors

83

 

 

 

Section 8.10.

Remedies

83

 

 

 

Section 8.11.

Severability

86

 

 

 

Section 8.12.

Waiver of Jury Trial

86

 

 

 

Section 8.13.

Counterparts

86

 

 

 

Section 8.14.

Facsimile Signature

87

 

 

 

Section 8.15.

No Presumption Against Drafting Party

87

 

 

 

Section 8.16.

No Personal Liability

87

 

v



 

INDEX OF DEFINED TERMS

 

Definition

 

Location

 

 

 

2015 Audited Financial Statements

 

5.15(f)(iv)

Acceptable Confidentiality Agreement

 

5.4(d)(iii)

Acquisition Proposal

 

5.4(d)(i)

Action

 

3.8

Affiliate

 

8.3(a)

Agreement

 

Preamble

Alternative Acquisition Agreement

 

5.4(e)(iii)

Alternative Financing

 

5.15(b)

Antitrust Law

 

5.7(j)

Articles of Merger

 

1.3

Book-Entry Shares

 

2.1(a)

Business Day

 

8.3(b)

Certificates

 

2.1(a)

Change of Recommendation

 

5.4(e)(ii)

Closing

 

1.2

Closing Date

 

1.2

Code

 

2.4

Collective Bargaining Agreement

 

3.11(d)

Company

 

Preamble

Company Board

 

Recitals

Company Bylaws

 

3.1(b)

Company Charter

 

3.1(b)

Company Disclosure Letter

 

Article III

Company Employees

 

5.8(a)

Company Material Adverse Effect

 

8.3(c)

Company Parties

 

7.3(c)

Company Performance-Based Restricted Stock

 

2.2(b)

Company Plans

 

3.10(a)

Company Recommendation

 

3.3(b)

Company Registered IP

 

3.17

Company Related Parties

 

7.3(b)

Company Restricted Stock

 

2.2(b)

Company SEC Documents

 

3.5(a)

Company Stock Option

 

2.2(a)

Company Stock Plans

 

2.2(a)

Company Stockholder Approval

 

3.3(a)

Company Stockholder Meeting

 

5.5(b)

Company Termination Fee

 

7.3(b)

Company Time-Based Restricted Stock

 

2.2(b)

 

vi



 

Definition

 

Location

 

 

 

Company Title Insurance Policy

 

3.16(f)

Confidentiality Agreement

 

5.6(b)

Contract

 

3.4(a)

control

 

8.3(d)

Credit Agreement

 

5.18

Credit Agreement Amendment

 

5.22

Credit Facility Termination

 

5.18

Debt Financing

 

4.6(a)

Debt Financing Commitment

 

4.6(a)

Debt Financing Sources

 

8.3(e)

Dissenting Shares

 

2.5

DTC

 

2.3(e)

DTC Payment

 

2.3(e)

Effective Time

 

1.3

Environmental Laws

 

3.12(b)(i)

Environmental Permits

 

3.12(b)(ii)

Equity Financing

 

4.6(a)

Equity Financing Commitments

 

4.6(a)

Equity Financing Sources

 

4.6(a)

ERISA

 

3.10(a)

Exchange Act

 

3.4(b)

Financing

 

4.6(a)

Financing Commitments

 

4.6(a)

Financing Sources

 

4.6(a)

GAAP

 

3.5(b)

Gaming Approvals

 

8.3(f)

Gaming Authorities

 

8.3(g)

Gaming Law

 

8.3(h)

Governmental Entity

 

3.4(b)

Hazardous Materials

 

3.12(b)(iii)

HSR Act

 

3.4(b)

Indebtedness

 

8.3(i)

Indemnified Parties

 

5.11(a)

Insurance Policies

 

3.15

IRS

 

3.10(a)

Joinder

 

Recitals

knowledge

 

8.3(j)

Law

 

3.4(a)

Lease

 

3.16(a)

Leased Real Property

 

3.16(a)

Licensing Affiliates

 

4.12

Licensing Parties

 

4.12

Liens

 

8.3(k)

Limited Guarantee

 

Recitals

Marketing Period

 

8.3(l)

 

vii



 

Definition

 

Location

 

 

 

Material Contract

 

3.14(a)

Merger

 

Recitals

Merger Sub

 

Preamble

Nevada Secretary of State

 

1.3

Notice

 

5.4(h)

NRS

 

1.1

Owned Real Property

 

3.16(a)

Parent

 

Preamble

Parent Disclosure Letter

 

Article IV

Parent Material Adverse Effect

 

4.1

Parent Plan

 

5.8(c)

Parent Parties

 

7.3(b)

Parent Related Parties

 

7.3(c)

Paying Agent

 

2.3(a)

Payment Fund

 

2.3(a)

Payoff Amount

 

5.18

PBGC

 

3.10(e)(iii)

Per Share Merger Consideration

 

8.3(m)

Permits

 

3.9

Permitted Liens

 

8.3(n)

Person

 

8.3(o)

Personal Information

 

3.17

Preferred Stock

 

3.2(a)

Proxy Statement

 

3.22

Representatives

 

8.3(p)

Required Amount

 

4.6(f)

Retained Claims

 

8.10(c)(iv)

Reverse Termination Fee

 

7.3(c)

Rollover Commitment Letter

 

Recitals

Rollover Investment

 

Recitals

Rollover Investors

 

Recitals

Rollover Shares

 

Recitals

Sarbanes-Oxley Act

 

3.5(a)

Schedule 13E-3

 

3.22

SEC

 

3.5(a)

Securities Act

 

3.5(a)

Shares

 

2.1(a)

Solvent

 

4.9(b)

Special Committee

 

Recitals

Sponsor

 

Recitals

Sponsor Voting Agreement

 

Recitals

Standstill Period

 

5.21

Subsidiary

 

8.3(q)

Superior Proposal

 

5.4(d)(ii)

Survey

 

8.3(r)

 

viii



 

Definition

 

Location

 

 

 

Surviving Corporation

 

1.1

Systems

 

3.17

Takeover Laws

 

3.18

Tax Returns

 

3.13(n)(ii)

Taxes

 

3.13(n)(i)

Termination Date

 

7.1(b)(i)

Third Party Lease

 

3.16(c)

Third Party Tenant

 

3.16(c)

Transaction Litigation

 

5.17

WARN Act

 

3.11(d)

Zoning Report

 

8.3(s)

 

ix



 

Exhibits

 

Exhibit A — Rollover Investors

 

Exhibit B — Rollover Commitment Letter

 

Exhibit C — Articles of Incorporation of the Surviving Corporation

 

Exhibit D — Bylaws of the Surviving Corporation

 

x


 


 

AGREEMENT AND PLAN OF MERGER

 

AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated as of August 22, 2016, among Z Capital Affinity Owner, LLC, a Delaware limited liability company (“ Parent ”), Affinity Merger Sub, Inc., a Nevada corporation and a wholly owned Subsidiary of Parent (“ Merger Sub ”), and Affinity Gaming, a Nevada corporation (the “ Company ”).  Parent, Merger Sub and the Company are referred to herein collectively as the “ parties ” and individually as a “ party ”.

 

RECITALS

 

WHEREAS, the board of directors of the Company (the “ Company Board ”), acting upon the unanimous recommendation of a special committee of the Company Board (the “ Special Committee ”), has (i) approved and declared advisable this Agreement and the transactions contemplated by this Agreement, including the Merger, upon the terms and subject to the conditions set forth in this Agreement and (ii) determined that this Agreement and the transactions contemplated by this Agreement, including the Merger, are fair to, and in the best interests of, the Company and the Company’s stockholders (other than Parent and its Subsidiaries);

 

WHEREAS, the managing member of Parent and the board of directors of Merger Sub have each determined that an acquisition of the Company by Parent is in the best interests of their respective companies and stockholders or members, as applicable and, accordingly, have each approved this Agreement and declared it advisable for Parent and Merger Sub to enter into this Agreement and consummate the merger (the “ Merger ”) of Merger Sub with and into the Company on the terms and subject to the conditions set forth in this Agreement;

 

WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to the Company’s willingness to enter into this Agreement, Z Capital Partners II, L.P., Z Capital Partners II-A, L.P. and Z Capital Partners II-B, L.P., each a Delaware limited partnership (collectively, “ Sponsor ”), are entering into a limited guarantee with the Company (the “ Limited Guarantee ”), pursuant to which, and subject to the terms and conditions set forth therein, Sponsor is guaranteeing certain obligations of Parent and Merger Sub under this Agreement;

 

WHEREAS, Z Capital Partners, L.L.C. has entered into a Joinder (“ Joinder ”) with respect to various provisions of this Agreement, including Section 5.21 ;

 

WHEREAS, concurrently with the execution and delivery of this Agreement, certain Affiliates of Sponsor that are stockholders of the Company are entering into a Voting Agreement with the Company (the “ Sponsor Voting Agreement ”) and certain other stockholders of the Company are entering into a voting agreement with Parent;

 

WHEREAS, certain Affiliates of Sponsor set forth on Exhibit A (the “ Rollover Investors ”) are entering into the Rollover Commitment Letter in the form attached hereto as Exhibit B (the “ Rollover Commitment Letter ”), pursuant to which the Rollover Investors will contribute (the “ Rollover Investment ”) to Parent, subject to the terms and conditions in the Rollover Commitment Letter, the Shares set forth therein (the “ Rollover Shares ”); and

 

1



 

WHEREAS, Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe certain conditions to the Merger as specified herein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing, and of the representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, Parent, Merger Sub and the Company hereby agree as follows:

 

ARTICLE I
THE MERGER

 

Section 1.1.                                  The Merger .

 

Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the Nevada Revised Statute (the “ NRS ”), at the Effective Time, Merger Sub shall be merged with and into the Company.  Following the Merger, the separate corporate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation in the Merger (the “ Surviving Corporation ”) and as a wholly owned subsidiary of Parent.

 

Section 1.2.                                  Closing.

 

The closing of the Merger (the “ Closing ”) shall take place at 7:00 a.m., Pacific Time, on the second (2 nd ) Business Day following the satisfaction or, to the extent permitted by applicable Law, waiver of the conditions set forth in Article VI (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permitted by applicable Law, waiver of those conditions), remotely via the exchange of documents and signatures by facsimile or electronic transmission, unless this Agreement has been terminated pursuant to its terms or unless another date, time, place and/or method is agreed to in writing by Parent and the Company; provided , however , that if the Marketing Period has not ended prior to the time that the Closing would otherwise have occurred pursuant to the foregoing, then the Closing shall occur on the earlier to occur of (i) a date during the Marketing Period specified by Parent on three (3) Business Days written notice to the Company and (ii) the second (2 nd ) Business Day immediately following the final day of the Marketing Period, subject in each case to the satisfaction or, to the extent permitted by applicable Law, waiver of the conditions set forth in Article VI (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permitted by applicable Law, waiver of those conditions) as of the date determined pursuant to this proviso.  The date on which the Closing occurs is referred to in this Agreement as the “ Closing Date .”

 

2



 

Section 1.3.                                  Effective Time.

 

Upon the terms and subject to the conditions of this Agreement, as soon as practicable following the Closing, the parties shall cause an articles of merger (the “ Articles of Merger ”) to be filed with the Secretary of State of the State of Nevada (the “ Nevada Secretary of State ”), executed in accordance with the relevant provisions of the NRS, and, as soon as practicable on or after the Closing Date, shall make any and all other filings or recordings required under the NRS to make the Merger effective.  The Merger shall become effective at such time as the Articles of Merger is duly filed with the Nevada Secretary of State or at such other date or time as Parent and the Company shall mutually agree in writing and shall specify in the Articles of Merger (the time the Merger becomes effective being the “ Effective Time ”).

 

Section 1.4.                                  Effects of the Merger.

 

The Merger shall have the effects set forth in this Agreement and in the relevant provisions of the NRS.  Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all of the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all of the debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

 

Section 1.5.                                  Articles of Incorporation; Bylaws.

 

(a)                                  At the Effective Time, the articles of incorporation of the Company, as in effect immediately prior to the Effective Time, shall be amended and restated so that it reads in its entirety as set forth in Exhibit C hereto, and, as so amended and restated, shall be the articles of incorporation of the Surviving Corporation until thereafter amended in accordance with its terms and as provided by applicable Law.

 

(b)                                  At the Effective Time, the bylaws of the Company, as in effect immediately prior to the Effective Time, shall be amended and restated so that it reads in its entirety as set forth in Exhibit D hereto, and, as so amended and restated, shall be the bylaws of the Surviving Corporation until thereafter amended in accordance with their terms, the articles of incorporation of the Surviving Corporation and as provided by applicable Law.

 

Section 1.6.                                  Directors.

 

The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified.

 

Section 1.7.                                  Officers.

 

The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified.

 

3



 

ARTICLE II
 EFFECT ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES

 

Section 2.1.                                  Conversion of Capital Stock.

 

At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Parent, Merger Sub or the holders of any shares of capital stock of the Company, Parent or Merger Sub:

 

(a)                                  Each share of common stock, par value $0.001 per share, of the Company (such shares, collectively, the “ Shares ”) issued and outstanding immediately prior to the Effective Time (other than (i) Shares to be cancelled or contributed in accordance with Section 2.1(b) , (ii) Company Restricted Stock to be treated in accordance with Section 2.2(b) , and (iii) any Dissenting Shares) shall thereupon be converted automatically into and each certificate (a “ Certificate ”) formerly representing any such Shares, if any, or such Shares that are non-certificated and represented by book-entry (a “ Book-Entry Share ”), shall thereafter represent the right to receive the Per Share Merger Consideration in cash, without interest, and subject to deduction for any required withholding Tax.  As of the Effective Time, all such Shares shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and shall thereafter only represent the right to receive the Per Share Merger Consideration to be issued or paid in accordance with Section 2.3 , without interest.  Immediately following the Effective Time, an equivalent amount of such Shares shall be issued by the Company to Parent.

 

(b)                                  Each Share held in the treasury of the Company or owned, directly or indirectly, by Parent or Merger Sub immediately prior to the Effective Time (other than Rollover Shares contributed to Parent by the Rollover Investors immediately prior to the Effective Time) shall automatically be cancelled and shall cease to exist, and no consideration shall be delivered in exchange therefor.  Each Share contributed to Parent by the Rollover Investors immediately prior to the Effective Time shall remain outstanding after the Effective Time.

 

(c)                                   Each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be cancelled as of the Effective Time.

 

(d)                                  If at any time during the period between the date of this Agreement and the Effective Time, any change in the outstanding shares of capital stock of the Company, or securities convertible into or exchangeable into or exercisable for shares of such capital stock, shall occur as a result of any reclassification, recapitalization, stock split (including a reverse stock split) or subdivision or combination, exchange or readjustment of shares, or any stock dividend or stock distribution with a record date during such period, merger or other similar transaction, the Per Share Merger Consideration and the number of shares to be issued to Parent pursuant to this Section 2.1 and Section 2.2 shall be equitably adjusted, without duplication, to reflect such change.  Nothing in this Section 2.1(d)  shall relieve the Company or its Subsidiaries from the obligations contained in Sections 5.1(b)(iii)  and (b)(iv) .

 

4



 

Section 2.2.                                  Treatment of Options and Other Equity-Based Awards.

 

(a)                                  At the Effective Time, each option (each, a “ Company Stock Option ”) to purchase Shares granted under any employee or director stock option, stock purchase or equity compensation plan, arrangement or agreement of the Company, including the Company’s Amended and Restated 2011 Long Term Incentive Plan (the “ Company Stock Plans ”), whether vested or unvested, that is outstanding immediately prior to the Effective Time shall be treated in accordance with the terms and conditions applicable to such Company Stock Option immediately prior to the Effective Time under the Company Stock Plans or any other Contract (including any Company Plan) except as otherwise agreed by Parent and the holder of such Company Stock Option.

 

(b)                                  At the Effective Time, each outstanding share of restricted stock granted under any Company Stock Plan subject to time-based vesting restrictions (“ Company Time-Based Restricted Stock ”) that is vested and outstanding immediately prior to the Effective Time (excluding the Rollover Shares) shall be cancelled and converted into the right to receive from the Surviving Corporation as soon as practicable following (and in no event later than three (3) Business Days following) the Effective Time an amount in cash (without interest, and subject to deduction for any required withholding Tax) equal to the product of (i) the Per Share Merger Consideration and (ii) the number of Shares subject to such Company Time-Based Restricted Stock.  Immediately following the Effective Time, an equivalent amount of such shares of Company Time-Based Restricted Stock shall be issued by the Company to Parent.  At the Effective Time, each outstanding share of Company Time-Based Restricted Stock that is unvested and outstanding immediately prior to the Effective Time (excluding the Rollover Shares) shall be treated in accordance with the same terms and conditions applicable to such Company Time-Based Restricted Stock immediately prior to the Effective Time under the Company Stock Plans or any other Contract (including any Company Plan) except as otherwise agreed by Parent and the holder of such Company Time-Based Restricted Stock.  At the Effective Time, each outstanding share of restricted stock granted under any Company Stock Plan subject to performance-based vesting restrictions (“ Company Performance-Based Restricted Stock ” and, together with Company Time-Based Restricted Stock, “ Company Restricted Stock ”) that is vested and outstanding immediately prior to the Effective Time (excluding the Rollover Shares) shall be cancelled and converted into the right to receive from the Surviving Corporation as soon as practicable following (and in no event later than three (3) Business Days following) the Effective Time an amount in cash (without interest, and subject to deduction for any required withholding Tax) equal to the product of (i) the Per Share Merger Consideration and (ii) the number of Shares subject to such Company Performance-Based Restricted Stock.  Immediately following the Effective Time, an equivalent amount of such shares of Company Performance-Based Restricted Stock shall be issued by the Company to Parent.  At the Effective Time, each outstanding share of Company Performance-Based Restricted Stock that is unvested and outstanding immediately prior to the Effective Time (excluding the Rollover Shares) shall be treated in accordance with the same terms and conditions applicable to such Company Performance-Based Restricted Stock immediately prior to the Effective Time under the Company Stock Plans or any other Contract (including any Company Plan) except as otherwise agreed by the Company and the holder of such Company Performance-Based Restricted Stock.

 

(c)                                   Prior to the Effective Time, the Company shall adopt such resolutions as may be reasonably required to effectuate the provisions of this Section 2.2 .  Parent and Merger Sub will ensure that the Surviving Corporation has an amount in cash sufficient to timely pay, in addition to all other obligations of the Surviving Corporation, all amounts required to be paid by this Section 2.2 .

 

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Section 2.3.                                  Exchange and Payment.

 

(a)                                  Prior to the Closing, Parent shall enter into an agreement (in a form reasonably acceptable to the Company) with a paying agent selected by Parent (that is reasonably satisfactory to the Company) to act as agent for the stockholders of the Company in connection with the Merger (the “ Paying Agent ”) to receive the aggregate amount of Per Share Merger Consideration to which the stockholders of the Company shall become entitled pursuant to Section 2.1(a) .  At or prior to the Effective Time, Parent shall deposit (or cause to be deposited) with the Paying Agent cash in an amount sufficient to make all payments pursuant to Section 2.1(a)  (such cash being hereinafter referred to as the “ Payment Fund ”).  The Payment Fund shall not be used for any purpose other than to fund payments due pursuant to Section 2.1(a) , except as provided in this Agreement.  Parent shall pay (or cause to be paid) all charges and expenses, including those of the Paying Agent, incurred by it in connection with the exchange of Shares for the Per Share Merger Consideration and other amounts contemplated by this Article II .

 

(b)                                  Prior to, on or promptly after the Effective Time, and in any event not later than the second (2 nd ) Business Day following the Effective Time, the Surviving Corporation shall cause the Paying Agent to mail to each record holder, as of immediately prior to the Effective Time, of an outstanding Certificate(s) that immediately prior to the Effective Time represented outstanding Shares that were converted into the right to receive the Per Share Merger Consideration with respect thereto pursuant to Section 2.1(a) , (i) a letter of transmittal in such form as Parent and the Company shall reasonably agree (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates held by such Person shall pass, only upon proper delivery of the Certificates and a duly completed and validly executed letter of transmittal to the Paying Agent and have such other provisions as Parent and the Company shall reasonably agree) and (ii) instructions (in such form as Parent and the Company shall reasonably agree) for use in effecting the surrender of such Certificates in exchange for the Per Share Merger Consideration payable with respect thereto pursuant to Section 2.1(a) .  Upon surrender of a Certificate to the Paying Agent, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may reasonably be required by the Paying Agent to evidence ownership, the holder of such Certificate shall be entitled to receive in exchange therefor a check or wire transfer for the amount of cash equal to the Per Share Merger Consideration for each Share formerly represented by such Certificate (subject to deduction for any required withholding Tax) within five (5) Business Days of receipt by the Paying Agent of such Certificate, and the Certificate so surrendered shall forthwith be cancelled.  Promptly after the Effective Time and in any event not later than the second (2 nd ) Business Day following the Effective Time, the Paying Agent shall issue and deliver to each holder as of immediately prior to the Effective Date of outstanding Book-Entry Shares that delivers to the Paying Agent a letter of transmittal, duly completed and validly executed in accordance with the instructions thereto (or such other evidence of transfer reasonably acceptable to the Paying Agent), a check or wire transfer for the amount of cash that such holder is entitled to receive pursuant to Section 2.1(a)  in respect of such Book-Entry Shares, without such holder being required to deliver a Certificate to the Paying Agent, and such Book-Entry Shares shall then be cancelled.  No interest will be paid or accrued for the benefit of holders of Certificates or Book-Entry Shares on the Per Share Merger Consideration payable in respect of Certificates or Book-Entry Shares.

 

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(c)                                   If payment of the Per Share Merger Consideration is to be made to a Person other than the Person in whose name the surrendered Certificate or Book-Entry Share is registered, it shall be a condition of payment that such Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer or such Book-Entry Share shall be properly transferred and that the Person requesting such payment shall have paid any transfer and other Taxes required by reason of the payment of the Per Share Merger Consideration to a Person other than the registered holder of the Certificate or Book-Entry Share surrendered or shall have established to the satisfaction of Parent that such Tax either has been paid or is not applicable.

 

(d)                                  Until surrendered as contemplated by this Section 2.3 , each Certificate or Book-Entry Share shall be deemed at any time after the Effective Time to represent only the right to receive the Per Share Merger Consideration payable in respect of Shares theretofore represented by such Certificate or Book-Entry Shares, as applicable, pursuant to Section 2.1(a) , without any interest thereon.

 

(e)                                   Prior to the Effective Time, Parent and the Company shall cooperate to establish procedures with the Paying Agent and the Depository Trust Company (“ DTC ”) to ensure that (i) if the Closing occurs at or prior to 11:30 a.m. (New York City time) on the Closing Date, the Paying Agent will transmit to DTC or its nominees on the Closing Date an amount in cash in immediately available funds equal to the number of Shares held of record by DTC or such nominee immediately prior to the Effective Time (excluding any Dissenting Shares) multiplied by the Per Share Merger Consideration (such amount, the “ DTC Payment ”), and (ii) if the Closing occurs after 11:30 a.m. (New York time) on the Closing Date, the Paying Agent will transmit to DTC or its nominee on the first (1 st ) Business Day after the Closing Date an amount in cash in immediately available funds equal to the DTC Payment.

 

(f)                                    All cash paid upon the surrender for exchange of Certificates or Book-Entry Shares in accordance with the terms of this Article II shall be deemed to have been paid in full satisfaction of all rights pertaining to the Shares formerly represented by such Certificates or Book-Entry Shares.  At the Effective Time, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the Shares that were outstanding immediately prior to the Effective Time.  If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Paying Agent for transfer or transfer is sought for Book-Entry Shares, such Certificates or Book-Entry Shares shall be cancelled and exchanged as provided in this Article II , subject to applicable Law in the case of Dissenting Shares.

 

(g)                                   The Paying Agent shall invest any cash included in the Payment Fund as directed by Parent, on a daily basis; provided , that any investment of such cash shall in all events be in short-term obligations of the United States of America with maturities of no more than 30 days or guaranteed by the United States of America and backed by the full faith and credit of the United States of America, or in short-term commercial paper obligations rated A-1 or P-1 or better by Moody’s Investors Service, Inc. or Standard & Poor’s Corporation, respectively; provided , however , that Parent shall take all actions necessary to ensure that the Payment Fund includes at all times cash sufficient to satisfy Parent’s obligation under this Article II .  Any interest and other income resulting from such investments shall be payable to Parent or its designee.

 

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(h)                                  At any time following the date that is 12 months after the Effective Time, Parent shall be entitled to require the Paying Agent to deliver to Parent or its designee any funds (including any interest received with respect thereto) that have been made available to the Paying Agent and which have not been claimed by holders of Certificates or Book-Entry Shares, and thereafter such Persons shall be entitled to look to Parent and the Surviving Corporation (subject to abandoned property, escheat or other similar Laws), and Parent and the Surviving Corporation shall remain liable, only as general creditors thereof with respect to the Per Share Merger Consideration payable upon due surrender of their Certificate (or affidavit in lieu thereof as provided in Section 2.3(j) ) or Book-Entry Shares.

 

(i)                                      Any portion of the Per Share Merger Consideration made available to the Paying Agent pursuant to Section 2.3(a)  to pay for Dissenting Shares for which appraisal rights have been perfected in accordance with Section 2.5 shall be returned to the Surviving Corporation, upon demand.

 

(j)                                     If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the record holder thereof and, if necessary, the posting by such Person of a bond in customary amount as indemnity against any claim that may be made against it or the Surviving Corporation with respect to such Certificate, the Paying Agent will deliver in exchange for such lost, stolen or destroyed Certificate the Per Share Merger Consideration payable in respect thereof pursuant to this Agreement.

 

(k)                                  None of Parent, Merger Sub, the Company or the Paying Agent, or any employee, officer, director, agent or Affiliate thereof, shall be liable to any Person in respect of any cash from the Payment Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.  If any Certificate has not been surrendered prior to five (5) years after the Effective Time (or immediately prior to such earlier date on which the Per Share Merger Consideration in respect of such Certificate would otherwise escheat to or become the property of any Governmental Entity), any such cash in respect of such Certificate shall, to the extent permitted by applicable Law, become the property of Parent, free and clear of all claims or interest of any person previously entitled thereto.

 

Section 2.4.                                  Withholding Rights.

 

Parent, the Surviving Corporation or the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable to any holder of Shares, Company Stock Options, Company Restricted Stock or otherwise pursuant to this Agreement such amounts as Parent, the Surviving Corporation or the Paying Agent, as the case may be, is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the “ Code ”) or the Treasury Regulations promulgated thereunder, or any provision of state, local or foreign Tax Law.  To the extent that amounts are so withheld and paid over to the appropriate Taxing authority by Parent, the Surviving Corporation or the Paying

 

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Agent on behalf of the Person in respect of which such deduction and withholding was made, such withheld and remitted amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.  Parent, the Surviving Corporation and the Paying Agent shall use commercially reasonably efforts to cooperate with each other and with the former holders of Shares, Company Stock Options or Company Restricted Stock in the collection, preparation and filing of any forms or other documentation relating to any claim of exemption or relief from any requirement to withhold so as to eliminate or minimize to the greatest extent possible any such requirement.

 

Section 2.5.                                  Dissenting Shares.

 

If, pursuant to the terms of NRS 92A.300 through 92A.500, holders of Shares are entitled to dissenter’s rights, then notwithstanding anything in this Agreement to the contrary, Shares issued and outstanding immediately prior to the Effective Time that are held by any holder who has not voted such Shares in favor of the Merger or consented thereto in writing and who shall have properly demanded and perfected dissenter’s rights under NRS 92A.300 through 92A.500, inclusive (“ Dissenting Shares ”) shall not be converted into the right to receive the Per Share Merger Consideration but instead shall be entitled to receive such payment from the Surviving Corporation with respect to such Dissenting Shares as shall be determined pursuant to the NRS; provided , however , that if such holder shall have failed to perfect or shall have effectively withdrawn or otherwise lost such holder’s right to dissent and demand payment of fair value under the NRS, each such Share held by such holder shall thereupon be deemed to have been converted into, as of the Effective Time, the right to receive, without any interest thereon, the Per Share Merger Consideration in accordance with Section 2.1(a) , and such Share shall no longer be a Dissenting Share.  The Company shall give prompt notice to Parent of any written demands received by the Company for payment of the fair value (as defined in NRS 92A.320) in respect of any Shares and attempted withdrawals of such demands and any other instruments served pursuant to NRS 92A.440 and received by the Company, and Parent shall have the right to participate in all negotiations and proceedings with respect to such demands.  The Company shall not, except with the prior written consent of Parent, voluntarily make or agree to make any payment with respect to any demands for appraisals of Shares, offer to settle or settle any demands or approve any withdrawal of any such demands.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except (a) as disclosed in the Company SEC Documents filed with the SEC prior to the date of this Agreement (including the Exhibits and Schedules hereto but excluding any risk factor disclosures contained under the heading “Risk Factors,” any disclosure of risks included in any “forward-looking statements” disclaimer or any other statements that are similarly cautionary, predictive or forward-looking in nature, in each case, other than any specific factual information contained therein) (provided, that nothing in this clause (a) shall be deemed to modify or qualify the representations and warranties set forth in Section 3.1, Section 3.2 or Section 3.3), or (b) as set forth in the corresponding sections or subsections of the disclosure letter delivered by the Company to Parent prior to the execution of this Agreement (the “ Company Disclosure Letter ”) (it being agreed that disclosure of any information in a particular

 

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section or subsection of the Company Disclosure Letter shall be deemed disclosure with respect to any other section or subsection of this Agreement to which the relevance of such information is reasonably apparent on the face of the information so disclosed (other than Section 3.1, Section 3.2 or Section 3.3, which matters shall only be disclosed by specific disclosure in the respective corresponding section or subsections of the Company Disclosure Letter)), the Company represents and warrants to Parent and Merger Sub as follows:

 

Section 3.1.                                  Organization, Standing and Power.

 

(a)                                  Each of the Company and its Subsidiaries (i) is an entity duly organized, validly existing and in good standing (with respect to jurisdictions that recognize such concept) under the Laws of the jurisdiction of its organization, (ii) has all requisite corporate or similar power and authority to own, lease and operate its properties and to carry on its business as now being conducted and (iii) is duly qualified or licensed to do business and is in good standing (with respect to jurisdictions that recognize such concept) in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its assets or properties makes such qualification or licensing necessary, except, with respect to clause (iii), for any such failure to be so qualified or licensed or in good standing as would not have a Company Material Adverse Effect.

 

(b)                                  The Company has previously furnished or otherwise made available to Parent true and complete copies of the Company’s articles of incorporation (the “ Company Charter ”) and bylaws (the “ Company Bylaws ”) and the articles of incorporation, bylaws, or comparable organizational documents of each of the Company’s Subsidiaries, which subsidiaries are set forth on Section 3.2(d) of the Company Disclosure Letter , in each case as amended to the date of this Agreement, and each as so delivered is in full force and effect.

 

Section 3.2.                                  Capital Stock.

 

(a)                                  The authorized capital stock of the Company consists of (a) 200,000,000 Shares and (b) 10,000,000 shares of preferred stock, par value $0.001 per share (the “ Preferred Stock ”).  The rights and privileges of the Shares and Preferred Stock are as set forth in the Company Charter.  As of August 22, 2016, (i) 20,462,329 Shares were issued and outstanding, all of which were (and all Shares that may be issued pursuant to any Company Stock Plan will be, when issued in accordance with the respective terms thereof) duly authorized, validly issued, fully paid and nonassessable and were free of preemptive rights and not issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under applicable Law, the Company Charter, the Company Bylaws, or any agreement or instrument to which the Company is a party or is otherwise bound, (ii) no Shares were held in treasury, (iii) no shares of Preferred Stock were outstanding, (iv) an aggregate of 566,741 Shares were subject to or otherwise deliverable in connection with the exercise of outstanding Company Stock Options and (v) 462,329 Shares of Company Restricted Stock issued under the Company Stock Plans were outstanding.  As of August 22, 2016, other than an aggregate of 970,930 Shares reserved for issuance under future grants under the Company Stock Plans, the Company has no Shares reserved for issuance.

 

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(b)                                  Section 3.2(b)  of the Company Disclosure Letter contains a complete and correct list as of the date hereof of (i) each outstanding Company Stock Option, including with respect to each such option, the holder, date of grant, vesting and expiration schedule, exercise price, number of Shares subject thereto, and whether such Company Stock Option is an “incentive stock option” (as defined in the Code) or non-qualified stock option, and (ii) all outstanding Company Restricted Stock, including with respect to each such Company Restricted Stock, the holder, date of grant, vesting schedule and number of Shares subject thereto.  The Company’s Amended and Restated 2011 Long Term Incentive Plan is the only plan or program the Company or any of its Subsidiaries maintain under which stock options, restricted stock, restricted stock units, stock appreciation rights or other compensatory equity-based awards are outstanding.  The Company has made available to Parent each outstanding award agreement under the Company Stock Plans.  No Shares are held by any Subsidiary of the Company.

 

(c)                                   Except as set forth in this Agreement, (A) there are not outstanding any (1) shares of capital stock or other voting securities of the Company or any of its Subsidiaries or other ownership or voting interest in the Company or any of its Subsidiaries, (2) securities of the Company or any of its Subsidiaries convertible into or exchangeable for shares of capital stock or voting securities of the Company or any of its Subsidiaries or other ownership or voting interest in the Company or any of its Subsidiaries, or (3) options or other rights to acquire from the Company or any of its Subsidiaries, and no obligation of the Company or any of its Subsidiaries to issue, any capital stock, voting securities or other ownership of voting interest or securities convertible into or exchangeable for capital stock or voting securities of the Company or any of its Subsidiaries or other ownership or voting interest in the Company or any of its Subsidiaries, (B) there are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any capital stock, voting securities, or other ownership or voting interest or securities convertible into or exchangeable for capital stock or voting securities of the Company or any of its Subsidiaries or other ownership or voting interest in the Company or any of its Subsidiaries, (C) there are no other options, calls, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company or any of its Subsidiaries to which the Company or any of its Subsidiaries is a party, including any agreements granting any preemptive rights, anti-dilutive rights, rights of first refusal or similar rights with respect to any equity or voting securities of or ownership or voting interest in the Company or any of its Subsidiaries, (D) there are no restricted shares, share appreciation rights, performance units, contingent value rights, “phantom” stock or similar securities or rights issued by the Company or any of its Subsidiaries that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any capital stock of, or other equity or voting securities of or ownership or voting interests in, the Company or any of its Subsidiaries and (E) neither the Company nor any of its Subsidiaries is party to any agreement, arrangement or understanding (including any voting trusts or proxies, stockholders agreements, “poison pill” or rights agreement or registration rights agreements) with respect to the voting, registration, sale, purchase or transfer of any capital stock or other securities of the Company or any of its Subsidiaries, and, there are no voting trusts or other agreements or understandings with respect to the voting of the capital stock or other equity interest of the Company or any of its Subsidiaries.  There are no bonds, debentures, notes or other Indebtedness of the Company or any of its Subsidiaries having the right to vote (or convertible into, exchangeable for, securities or other interests having the right to vote) on any matter on which stockholders of the Company or the equity holders of the Company’s Subsidiaries may vote.

 

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(d)                                  Each of the issued and outstanding shares of capital stock or other equity interests of each of the Company’s Subsidiaries is duly authorized, validly issued, fully paid, nonassessable and not subject to any preemptive rights and was not issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under applicable Law, the articles of incorporation, bylaws or comparable organizational documents of the Company’s Subsidiaries, or any agreement or instrument to which the Company’s Subsidiaries are a party or is otherwise bound.  All such shares are owned by the Company or another wholly owned Subsidiary of the Company and are owned free and clear of all Liens of any nature whatsoever, other than restrictions imposed by Law.  Except for the Company’s Subsidiaries, the Company does not own any capital stock or other equity or voting interest in, or any interest convertible into or exercisable or exchangeable for any capital stock of or other equity or voting interest in, any other Person.  Section 3.2(d) of the Company Disclosure Letter sets forth (i) a true and complete list of each Subsidiary of the Company as of the date hereof and its jurisdiction of incorporation or organization and (ii) the identity of the holder of each outstanding share of capital stock or other equity interest of each Subsidiary of the Company.

 

Section 3.3.                                  Authority.

 

(a)                                  The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject to the adoption and approval of this Agreement and the transactions contemplated hereby by the holders of at least a majority of the issued and outstanding Shares (the “ Company Stockholder Approval ”), to consummate the transactions contemplated hereby.  The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to adopt and approve this Agreement or the consummation of the transactions contemplated hereby, subject, in the case of the consummation of the Merger, to obtaining the Company Stockholder Approval and the filing with the Nevada Secretary of State of the Articles of Merger as required by the NRS.  This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent and Merger Sub, constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar Laws affecting the enforcement of creditors’ rights generally or by general principles of equity.

 

(b)                                  The Company Board, acting upon the unanimous recommendation of the Special Committee, has approved and declared advisable this Agreement and the transactions contemplated hereby and, subject to Section 5.4 , has resolved to recommend that the Company’s stockholders adopt and approve this Agreement and the transactions contemplated hereby (the “ Company Recommendation ”).  The Company Stockholder Approval is the only vote or consent of the holders of any class or series of capital stock of the Company necessary to adopt and approve this Agreement, the Merger or the other transactions contemplated hereby.

 

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Section 3.4.                                  No Conflict; Consents and Approvals.

 

(a)                                  The execution, delivery and performance of this Agreement by the Company do not, and the consummation by the Company of the transactions contemplated hereby will not, (i) subject to the Company Stockholder Approval, conflict with or violate the Company Charter or Company Bylaws or the equivalent organizational documents of any of the Company’s Subsidiaries, (ii) assuming that the Company Stockholder Approval and all consents, approvals and authorizations contemplated by clauses (i) through (v) of subsection (b) below have been obtained and all filings described in such clauses have been made, conflict with or violate any federal, state, local or foreign law, statute, ordinance, code, rule, regulation, order, judgment, decree, injunction, ruling or similar requirement enacted, adopted, promulgated or enforced by a Governmental Entity (collectively, “ Law ”) applicable to the Company or any of its Subsidiaries or by which any of their respective properties or assets are bound or (iii) result in any breach or violation of, or constitute a default (or an event which with notice or lapse of time or both would become a default), or result in the loss of a benefit under, or give rise to any right of termination, cancellation, amendment or acceleration of, any note, bond, mortgage, indenture, loan, contract, subcontract, agreement, lease, sublease, license, sublicense or other instrument or obligation (each, a “ Contract ”) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective properties or assets are bound, except, in the case of clauses (ii) and (iii), for any such conflict, breach, violation, default, loss, right or other occurrence that would not have a Company Material Adverse Effect (without giving effect to the exclusion from the definition of Company Material Adverse Effect contained in clause (11) of such definition insofar as such exclusion relates directly to the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby).

 

(b)                                  The execution, delivery and performance of this Agreement by the Company do not, and the consummation by the Company of the transactions contemplated hereby will not, require any consent, approval, authorization, declaration or permit of, action by, filing with or notification to, any domestic, foreign, international, federal, state or local governmental, administrative, judicial or regulatory authority (including any stock exchange, local authority, political subdivision, and any Gaming Authority), agency, court, commission, body, self-regulatory organization or other executive, legislative, judicial, regulatory or governmental body (each, a “ Governmental Entity ”), except for (i) such filings as may be required under applicable requirements of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and the rules and regulations promulgated thereunder, and under state securities and “blue sky” laws, (ii) the filings required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), (iii) the filing with the Nevada Secretary of State of the Articles of Merger as required by the NRS, (iv) compliance with and obtaining such Gaming Approvals as may be required under applicable Gaming Laws as set forth on Schedule 3.4(b) of the Company Disclosure Letter , and (v) any such consent, approval, authorization, permit, action, filing or notification the failure of which to make or obtain would not have a Company Material Adverse Effect (without giving effect to the exclusion from the definition of Company Material Adverse Effect contained in clause (11) of such definition insofar as such exclusion relates directly to the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby).

 

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Section 3.5.                                  SEC Reports; Financial Statements.

 

(a)                                  The Company timely has filed or otherwise transmitted all forms, reports, statements, certifications and other documents (including all exhibits, schedules, amendments and supplements thereto and all information incorporated therein by reference) required to be filed by it with the Securities and Exchange Commission (the “ SEC ”) since January 1, 2014 (all such forms, reports, statements, certificates and other documents filed since January 1, 2014, including those that are filed or furnished after the date of this Agreement and any amendments or supplements thereto, collectively, the “ Company SEC Documents ”).  As of their respective dates, or, if amended or superseded by a subsequent filing, as of the date of the last such amendment or superseding filing, each of the Company SEC Documents complied (or will comply) as to form in all material respects with the applicable requirements of the Securities Act of 1933, as amended (the “ Securities Act ”), the Exchange Act and the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act ”), as applicable, and the applicable rules and regulations promulgated thereunder, as the case may be, each as in effect on the date so filed.  As of their respective filing dates (or, if amended or superseded by a subsequent filing, as of the date of the last such amendment or superseding filing), none of the Company SEC Documents, contained (or will contain) any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided , however , that no representation is made as to the accuracy of any financial projections or forward-looking statements.  No Subsidiary of the Company is required to file any report, statement, schedule, form, prospectus, registration statement or other document, or make any other filing, with the SEC.

 

(b)                                  The audited consolidated financial statements of the Company (including any related notes and schedules thereto) included or incorporated by reference in the Company SEC Documents, and the unaudited consolidated interim financial statements of the Company (including any related notes and schedules thereto) included or incorporated by reference in the Company SEC Documents, have been (or will be) prepared in accordance with U.S. generally accepted accounting principles (“ GAAP ”) applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto and subject, in the case of unaudited interim financial statements, to normal, recurring year-end adjustments which are not individually or in the aggregate material) and fairly present (or will fairly present) in all material respects the consolidated financial position of the Company and its Subsidiaries at the respective dates thereof and the results of their operations and cash flows for the periods indicated (except as may be indicated in the notes thereto and subject, in the case of unaudited interim financial statements, to normal, recurring year-end adjustments which are not individually or in the aggregate material).

 

(c)                                   The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) designed to ensure that material information relating to the Company, including its Subsidiaries, required to be disclosed in reports the Company files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and is accumulated and made known on a timely basis to the chief executive officer and the chief financial officer of the Company by others within those entities, as appropriate to allow timely decisions regarding required disclosure.

 

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(d)                                  The Company maintains a system of internal controls over financial reporting sufficient in all material respects to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals. The Company’s management has completed an assessment of the effectiveness of the Company’s system of internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act as of December 31, 2014 and December 31, 2015. To the knowledge of the Company, since January 1, 2014, none of the Company, its Subsidiaries or the Company’s independent registered accountant has identified or been made aware of: (A) any significant deficiency or material weakness in the design or operation of internal control over financial reporting utilized by the Company and its Subsidiaries; (B) any illegal act or fraud related to the operations or business of the Company or its Subsidiaries, whether or not material, that involves the Company’s management; or (C) any claim or allegation regarding any of the foregoing.

 

(e)                                   As of the date of this Agreement, to the knowledge of the Company, there are no outstanding or unresolved comments in comment letters received by the Company from the SEC.  To the knowledge of the Company, as of the date of this Agreement, none of the Company SEC Documents is the subject of ongoing SEC review.  Since January 1, 2014, no principal executive officer or principal financial officer of the Company has failed to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act, and neither the Company nor any of its executive officers has received notice from any Governmental Entity challenging or questioning the accuracy, completeness, form or manner of filing of such certifications.

 

(f)                                    There are no unconsolidated Subsidiaries of the Company or any off-balance sheet arrangements of the type required to be disclosed pursuant to Item 303(a)(4) of Regulation S-K promulgated by the SEC that have not been so described in the Company SEC Documents.

 

(g)                                   The Company is in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act.  Neither the Company nor any of its Subsidiaries has outstanding, or has arranged any outstanding, “extensions of credit” to directors or executive officers within the meaning of Section 402 of the Sarbanes-Oxley Act.

 

(h)                                  Section 3.5(h) of the Company Disclosure Letter sets forth, as of the date of this Agreement, any Indebtedness of the Company and its Subsidiaries and any material Lien (other than Permitted Liens) on their respective assets or properties.

 

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Section 3.6.                                  No Undisclosed Liabilities.

 

Neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, that would be required by GAAP to be reflected on a consolidated balance sheet (or the notes thereto) of the Company and its Subsidiaries, except for liabilities and obligations (a) reflected or reserved against in the Company’s consolidated balance sheet (or the notes thereto) included in the Company SEC Documents filed or furnished to the SEC prior to the date of this Agreement, (b) incurred in the ordinary course of business since December 31, 2015, (c) which have been discharged or paid in full prior to the date of this Agreement, (d) incurred pursuant to the transactions contemplated by this Agreement, (e) in connection with any Permitted Lien or (f) that would not have a Company Material Adverse Effect.

 

Section 3.7.                                  Absence of Certain Changes or Events.

 

Since January 1, 2016, except in connection with the transactions contemplated by this Agreement or as otherwise contemplated or permitted by this Agreement, the businesses of the Company and its Subsidiaries have been conducted in the ordinary course of business.  Since January 1, 2016, there has not been any change, event or occurrence which has had a Company Material Adverse Effect.  Since January 1, 2016 and through the date of this Agreement, there has not been (a) any declaration, setting aside or payment of any dividend or other distribution in cash, stock, property or otherwise in respect of the Company’s or its Subsidiaries capital stock, except for any dividend or distribution of a Company Subsidiary to the Company or a Company Subsidiary, (b) any redemption, repurchase, or other acquisition of any shares of capital stock of the Company or its Subsidiaries (other than the acquisition of Shares tendered by employees or former employees in connection with the cashless exercise or vesting of any grants (including Company Stock Options and Company Restricted Stock)), (c) any material change by the Company in its accounting principles, except as may be appropriate to conform to changes in statutory or regulatory accounting rules or GAAP or regulatory requirements with respect thereto, (d) any material Tax election made by the Company or its Subsidiaries or any settlement or compromise of any material Tax liability by the Company or its Subsidiaries, other than in the ordinary course of business, or (e) any action by the Company or any of its Subsidiaries that would be prohibited by Section 5.1(b)(v) , (b)(viii)  or (b)(xii) .

 

Section 3.8.                                  Litigation.

 

There is no material suit, claim, action, litigation, proceeding, arbitration, hearing, mediation or, to the knowledge of the Company, audit, examination or investigation (each, an “ Action ”) pending or, to the knowledge of the Company, threatened (including cease and desist letters or invitations to take a patent license) against the Company or any of its Subsidiaries or any of their respective rights, assets or properties by or before any Governmental Entity, (b) no Governmental Entity has, since January 1, 2014, challenged or questioned in writing the legal right of the Company or any of its Subsidiaries to conduct its operations in any material respect as presently or previously conducted, and (c) neither the Company nor any of its Subsidiaries nor any of their respective properties is or are subject to any judgment, order, injunction, ruling or decree of any Governmental Entity that is materially adverse to the conduct of the Company’s business as currently conducted.

 

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Section 3.9.                                  Compliance with Laws.

 

The Company and each of its Subsidiaries is, and since January 1, 2014 has been, in compliance in all material respects with all Laws (including Gaming Laws) applicable to them or by which any of their respective properties are bound.  The Company and its Subsidiaries have in effect all material permits, licenses, certificates, waivers, consents, variances, exemptions, authorizations, franchises, orders, approvals, registrations, licenses, accreditations and similar approvals of all Governmental Entities (collectively, “ Permits ”) necessary for them to own, lease or operate their properties and to carry on their businesses as now conducted and all material Permits are in full force and effect.  Since January 1, 2014, there have occurred no material defaults (with or without notice or lapse of time or both) under, material violations of, or events giving rise to any right of termination, material amendment or cancelation of, any such Permits.

 

Section 3.10.                           Benefit Plans.

 

(a)                                  The Company has provided to Parent a true and complete list of each “employee benefit plan” (within the meaning of section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”, whether or not subject to ERISA)), “multiemployer plan” (within the meaning of ERISA section 3(37)), and all other material stock purchase, stock option or other equity-based, severance, employment, individual consulting, change-in-control, fringe benefit, bonus, retention, incentive, deferred compensation and all other material employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA (including any funding mechanism therefor now in effect or required in the future as a result of the transactions contemplated by this Agreement or otherwise), whether formal or informal, written, legally binding or not, under which any current or former employee, director or individual independent contractor of the Company or its Subsidiaries has any present or future right to benefits or the Company or its Subsidiaries has had or has any present or future liability.  All such plans, agreements, programs, policies and arrangements shall be collectively referred to as the “ Company Plans .”  With respect to each Company Plan, the Company has furnished or made available to Parent a current, accurate and complete copy or, if no such copy exists, a written description of the terms thereof, and, to the extent applicable:  (i) any related trust agreement or other funding instrument, (ii) the most recent determination letter of the Internal Revenue Service (the “ IRS ”), if applicable, (iii) any summary plan description and (iv) if applicable, for the two most recent years (A) the Form 5500 and attached schedules, (B) audited financial statements, (C) actuarial valuation reports, and (D) attorney’s response to a non-routine auditor’s request for information.  Each Company Plan is either exempt from or has been established, documented, maintained and operated in all material respects in compliance with Section 409A of the Code and the applicable guidance issued thereunder.

 

(b)                                  None of the Company, its Subsidiaries or any other entity that is, or at any relevant time was, required to be treated as a single employer with the Company under Section 4001(b)(1) of ERISA or Sections 414(b), (c), (m) or (o) of the Code maintains, contributes to, or has any liability, whether contingent or otherwise, with respect to, and has not within the preceding six (6) years maintained, contributed to or had any liability, whether contingent or otherwise, with respect to any employee benefit plan (as defined in Section 3(3) of ERISA) that is or has been (i) subject to Title IV of ERISA or Section 412 of the Code or subject to Section 4063 or 4064 of ERISA, or (ii) a “multiemployer plan” (within the meaning of ERISA section 3(37).

 

(c)                                   No Company Plan provides welfare benefits or coverage beyond termination of employment except to the extent required under Part 6 of Subtitle B of Title I of ERISA or any similar state law.

 

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(d)                                  Except as has been provided to Parent, none of the Company Plans provides for payment of a benefit, the increase of a benefit amount, the payment of a contingent benefit or the acceleration of the payment or vesting of a benefit determined or occasioned, or limits or restricts the right of the Company or any of its Subsidiaries or, after the Closing, the Surviving Corporation or Parent, to merge, amend or terminate any Company Plan, in each case whether directly or in combination with any subsequent event, by reason of the execution of this Agreement or the consummation of the transactions contemplated hereby.  The consummation of the transactions contemplated by this Agreement will not, alone or when considered in conjunction with any other event, result in the payment of any “excess parachute payment” as such term is defined in Section 280G of the Code.

 

(e)                                   With respect to the Company Plans:

 

(i)                                      each Company Plan subject to ERISA has been established and administered in all material respects in accordance with its terms and in compliance with the applicable provisions of ERISA and the Code, and, no material prohibited transaction, as described in Section 406 of ERISA or Section 4975 of the Code has occurred with respect to any Company Plan, and all material contributions required to be made under the terms of any Company Plan have been timely made;

 

(ii)                                   each Company Plan intended to be qualified under Section 401(a) of the Code has received a favorable determination, advisory or opinion letter, as applicable, from the IRS that it is so qualified (or the deadline for obtaining such a letter has not expired as of the date of this Agreement) and nothing has occurred since the date of such letter that would reasonably be expected to cause the loss of such qualified status of such Company Plan;

 

(iii)                                there is no material Action (including any investigation, audit or other administrative proceeding) by the Department of Labor, the Pension Benefit Guaranty Corporation (the “ PBGC ”), the IRS or any other Governmental Entity or by any plan participant or beneficiary pending, or to the knowledge of the Company, threatened, relating to the Company Plans, any fiduciaries thereof with respect to their duties to the Company Plans or the assets of any of the trusts under any of the Company Plans (other than routine claims for benefits) nor, to the knowledge of the Company, are there facts or circumstances that exist that would reasonably be expected to give rise to any such Actions);

 

(iv)                               the Company and its Subsidiaries do not maintain any Company Plan that is a “group health plan” (as such term is defined in Section 5000(b)(1) of the Code) that has not been administered and operated in material compliance with the applicable requirements of Section 601 of ERISA and Section 4980B(b) of the Code, and the Company and its Subsidiaries are not subject to any material liability, including additional contributions, fines, penalties or loss of tax deduction as a result of such administration and operation; and

 

(v)                                  all contributions, premiums and payments that are required have been made for each Company Plan as prescribed by the terms of such plan and applicable Law, and all contributions, premiums and payments for any period ending on or before the Closing that are not due are properly accrued to the extent required to be accrued under applicable accounting principles and have been properly reflected on the most recent balance sheet in the Company SEC Documents.

 

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Section 3.11.                           Labor Matters.

 

(a)                                  The Company has provided to Parent information setting forth, with respect to each Company Employee (including any Company Employee who is on a leave of absence or on layoff status subject to recall): (i) the Company-issued identification number of such Company Employee; (ii) such Company Employee’s title or position; (iii) such Company Employee’s current base salary; and (iv) whether such Company Employee is classified as exempt or non-exempt.

 

(b)                                  The employment of each of the Company Employees is terminable by the respective Company or Subsidiary, as applicable, at will without any notice or severance obligation or other cost or liability to the respective Company or Subsidiary (other than payment of compensation earned and accrued up to the time of termination).

 

(c)                                   (i) As of the date hereof, none of the Company’s or any of its Subsidiaries’ current officers or senior employees has given the Company or any Company Subsidiary, as applicable, written notice terminating his or her employment with the Company or such Subsidiary or terminating his or her employment upon a sale of, or business combination relating to, the Company or such Subsidiary; (ii) to the Company’s knowledge, no Company Employee, consultant, or contractor is a party to or is bound by any employment contract, patent disclosure agreement, non-competition agreement, any other restrictive covenant or other contract with any Person, or subject to any order, judgment, injunction, rule or decree, which in each case, individually or in the aggregate, would reasonably be expected to have a material effect on (A) the performance by such Person of any of his or her material duties or responsibilities for the Company or such Subsidiary, or (B) the Company’s or such Subsidiary’s business or operations; and (iii) to the Company’s knowledge, no current Company Employee, consultant, contractor or any other non-employee service provider is in violation of any material term of any employment contract, patent disclosure agreement, non-competition agreement, or any other restrictive covenant to a former employer or entity relating to the right of any such Company Employee, consultant, contractor or any other non-employee service provider to be employed or retained by the Company or such Subsidiary.

 

(d)                                  Neither the Company nor any of its Subsidiaries is a party to, or is bound by or negotiating, any written or oral collective bargaining agreement, contract, memorandum of understanding or other similar agreement or understanding with any labor union or labor organization (“ Collective Bargaining Agreement ”).  There is no strike, work stoppage, lockout or similar material labor dispute or, to the knowledge of the Company, threat thereof, by or with respect to any employees of the Company or any of its Subsidiaries, nor has there been any such dispute within the past three (3) years.  Neither the Company nor any of its Subsidiaries is required by applicable Law or any Collective Bargaining Agreement to consult with or obtain the consent o, any labor or trade union, works council or other employee representative body for the Company to enter into this Agreement or to consummate any of the transactions contemplated hereby.  To the knowledge of the Company, there are no current union organizing activities by or with respect to any employees of the Company or any of its Subsidiaries, nor have there been

 

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any within the past three (3) years.  Except as would not, individually or in the aggregate, reasonably be expected to be material to the Company or any of its Subsidiaries: (i) there is no pending or, to the knowledge of the Company, threatened unfair labor practice complaint or labor or employment-related Action against the Company or any of its Subsidiaries; (ii) the Company and each of its Subsidiaries are in compliance in all material respects with all applicable Laws relating to employment and labor, including without limitation provisions thereof relating to wages, hours, equal opportunity, collective bargaining, employee classification, contractor classification, overtime, meal and rest breaks, discrimination, sexual harassment, civil rights, affirmative action, work authorization, immigration, safety and health, information privacy and security, workers compensation, continuation coverage under group health plans, payment of withholding taxes, terms and conditions of employment and the termination of employment (including any obligations pursuant to the U.S. Worker Adjustment and Retraining Notification Act of 1988 or any similar state or local Law (collectively, the “ WARN Act ”), Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of 1967, as amended, the Americans with Disabilities Act, as amended, and the U.S. Fair Labor Standards Act of 1934, as amended); (iii) neither the Company nor any of its Subsidiaries is a party to, or otherwise bound by, any consent decree with or citation by any Governmental Entity relating to employees or employment practices, and there are no pending or, to the knowledge of the Company, threatened investigations, audits or similar proceedings alleging material breach or material violation of any labor or employment Law; and (iv) the Company is in material compliance with all applicable employee licensing requirements and has used its reasonable best efforts to ensure that each Company Employee, consultant, contractor or other non-employee service provider who is required to have a gaming or other license under any Gaming Law or other Law maintains such license in current and valid form.  Each of the Company and its Subsidiaries is in material compliance with all applicable visa and work permit requirements with respect to any Company Employee, consultant, contractor or other non-employee service provider. Other than normal accruals of wages during regular payroll cycles, there are no arrearages in the payment of wages by the Company or any of its Subsidiaries except for possible violations or arrearages which, individually or in the aggregate, are not and would not be, individually or in the aggregate, material in magnitude.

 

Section 3.12.                           Environmental Matters.

 

(a)                                  Except as would not, individually or in the aggregate, reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole:  (i) the Company and each of its Subsidiaries are, and since January 1, 2014 have been, in compliance with all applicable Environmental Laws, and possess and are in compliance with all applicable Environmental Permits required under such Environmental Laws to operate as they presently operate; (ii) there are no Hazardous Materials at any property or facility currently or formerly owned or operated by the Company or any of its Subsidiaries, except under circumstances that would not reasonably be expected to result in liability of the Company or any of its Subsidiaries under any Environmental Law; (iii) neither the Company nor any of its Subsidiaries has received any written notification alleging that it is liable for, or request for information pursuant to section 104(e) of the Comprehensive Environmental Response, Compensation and Liability Act or similar state statute, concerning any release or threatened release of Hazardous Materials at any location except, with respect to any such notification or request for information concerning any

 

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such release or threatened release, to the extent such matter has been resolved with the appropriate foreign, federal, state or local regulatory authority or otherwise; (iv) neither the Company nor any of its Subsidiaries has received any written claim, complaint or request for information, or is presently subject to any Action, proceeding, citation, summons, assessment or order, relating to any Environmental Laws or any other liabilities pursuant to Environmental Laws, and to the knowledge of the Company, no such matter has been threatened in writing except, with respect to any such written claims, complaints, requests for information, Actions, proceedings, citations, summons, assessments, orders or matters to the extent resolved with the appropriate foreign, federal, state or local regulatory authority or otherwise; (v) neither the Company nor any of its Subsidiaries has disposed, arranged to dispose, released, or threatened to release Hazardous Materials in a manner or to a location that could reasonably be expected to result in liability under any Environmental Laws; (vi) to the knowledge of the Company, neither the Company nor any of its Subsidiaries has contractually assumed or provided indemnity against liabilities of any other Person under Environmental Laws; (vii) the Company and each of its Subsidiaries is in possession of all permits required pursuant to Environmental Laws necessary to carry on such Person’s business as it is currently being conducted, each such permit is valid and in full force and effect, neither the Company nor any of its Subsidiaries has received notice of any adverse change in the status or terms and conditions of any such permit and neither the Company nor any of its Subsidiaries is in violation of any such permit.

 

(b)                                  For purposes of this Agreement, the following terms shall have the meanings assigned below:

 

(i)                                      Environmental Laws ” means all Laws relating to protecting natural resources or the environment, including the quality of the ambient air, soil, surface water or groundwater, Hazardous Substances, or human health or safety.

 

(ii)                                   Environmental Permits ” means all Permits, licenses, registrations, and other authorizations required under applicable Environmental Laws.

 

(iii)                                Hazardous Materials ” means any wastes, chemicals, pollutants, contaminants, materials or substances, defined and regulated as hazardous, acutely hazardous, toxic, radioactive, ignitable, corrosive, reactive, or toxic under applicable Environmental Laws, including the federal Comprehensive Environmental Response, Compensation and Liability Act or the federal Resource Conservation and Recovery Act, or any substance, waste or material having any constituent elements displaying any of the foregoing characteristics or that would otherwise reasonably be expected to result in liability under Environmental Laws, including, without limitation petroleum, petroleum derivatives and by-products, hydrocarbons, asbestos, asbestos-containing materials, polychlorinated biphenyls, urea-formaldehyde insulation, toxic mold and radon.

 

Section 3.13.                           Taxes.

 

(a)                                  All material Tax Returns required by applicable Law to be filed by or on behalf of the Company or any of its Subsidiaries have been timely filed in accordance with all applicable Laws (after giving effect to any extensions of time in which to make such filings), and all such Tax Returns are true and complete in all material respects.  There is no outstanding claim in writing by any Governmental Entity in a jurisdiction where the Company or any of its Subsidiaries does not file a particular type of Tax Return that the Company or any of its Subsidiaries is required to file a Tax Return or may be subject to Tax in such jurisdiction.

 

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(b)                                  The Company and its Subsidiaries have paid in full all material Taxes due and payable and, for Taxes not yet due and payable, have made adequate provision in all material respects on the latest balance sheet included in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2016 in accordance with GAAP.

 

(c)                                   Neither the Company nor any of its Subsidiaries is delinquent in the payment of any material Tax (including Taxes required to have been withheld by the Company or any of its Subsidiaries).

 

(d)                                  No material Liens for Taxes exist with respect to any assets or properties owned or ground leased by the Company or any of its Subsidiaries (including, but not limited to, any Owned Real Property or any ground leased property that is a Leased Real Property), except for statutory Liens for Taxes not yet delinquent.

 

(e)                                   There are no material audits, examinations, deficiencies or other proceedings now pending, or to the knowledge of the Company, threatened in writing against or with respect to the Company or any of its Subsidiaries with respect to any material Tax or Tax Return.

 

(f)                                    No assessment of a material Tax has been proposed in writing against the Company or any of its Subsidiaries or any of their assets or properties and the Company knows of no grounds for any such assessment.

 

(g)                                   There are no outstanding agreements, waivers or arrangements extending the statutory period of limitation applicable to any claim for, or the period for the collection or assessment of, Taxes due from or with respect to the Company or any of its Subsidiaries for any taxable period.

 

(h)                                  Neither the Company nor any of its Subsidiaries (i) is or has ever been a member of an affiliated group of corporations filing a consolidated federal income Tax Return (other than the group to which they are currently members and the common parent of which is the Company), or (ii) has any liability for the Taxes of any Person (other than the Company or any of its Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any similar provision of any state, local, or foreign law), as a transferee or successor, by Contract, or otherwise.

 

(i)                                      Neither the Company nor any of its Subsidiaries is a party to, or bound by, or has any obligation under, any tax allocation or sharing agreement or similar Contract or arrangement or any agreement that obligates it to make any payment computed by reference to the Taxes, taxable income or taxable losses of any other Person, except to the extent that the Company and its Subsidiaries are required to pay their landlords’ Taxes as tenants under Leases of Leased Real Property.

 

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(j)                                     Neither the Company nor any of its Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date, (ii) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state or local income Tax Law) executed on or prior to the Closing Date, (iii) intercompany transactions or any excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of state or local income Tax Law), (iv) installment sale or open transaction entered into on or prior to the Closing Date, (v) prepaid amount received on or prior to the Closing Date or (vi) Section 108(i) of the Code.

 

(k)                                  None of Company or any of its Subsidiaries has been either a “distributing corporation” or a “controlled corporation” in a distribution in which the parties to such distribution treated the distribution as one to which Section 355 of the Code is applicable.

 

(l)                                      Neither the Company nor any of its Subsidiaries has engaged in any transaction that could give rise to (i) a registration obligation with respect to any Person under Section 6111 of the Code or the regulations thereunder, (ii) a list maintenance obligation with respect to any Person under Section 6112 of the Code or the regulations thereunder, or (iii) a disclosure obligation as a “reportable transaction” under Section 6011 of the Code and the regulations thereunder.

 

(m)                              Each of the Company and its Subsidiaries (i) has complied in all material respects with all documentation (contemporaneous or otherwise) and other Tax related obligations with respect to transactions between related parties and has sufficient records and reports to support the pricing of such transactions, (ii) has kept adequate receipts or other records of payments of any material amount of Taxes paid that are necessary for purposes of claiming foreign tax credits or deductions, and (iii) has maintained and kept in all material respects all records required by any Tax law to be maintained or kept for the period prescribed by law.

 

(n)                                  As used in this Agreement:

 

(i)                                      Taxes ” means any federal, state, provincial, local or foreign taxes, levies, duties, tariffs, customs, imposts and other similar charges of whatever kind or nature imposed by a Governmental Entity, including any income, ad valorem, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall or other profits, environmental (including taxes under Code Section 59A), customs duties, capital stock, capital gains, franchise, profits, withholding, social security (or similar) unemployment, disability, real property taxes and assessments (including documentary transfer tax and so-called Mello-Roos assessments), personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, and including all interest, penalties and additions imposed with respect to such amounts.

 

(ii)                                   Tax Returns ” means any returns, declarations, statements, reports, schedules, forms and information returns, claims for refund relating to Taxes, including any schedule or attachment thereto, and including any amendment thereto.

 

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Section 3.14.                           Contracts.

 

(a)                                  Except for this Agreement and except as filed with the SEC prior to the date hereof, as of the date of this Agreement, neither the Company nor any of its Subsidiaries is a party to or is bound by any Contract that would be required to be filed by the Company as a “material contract” pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act or any Contract:

 

(i)                                      that is a “material contract” (as such term is defined in Item 601(b)(10) of the Exchange Act);

 

(ii)                                   that contains any standstill or similar agreement pursuant to which the Company or any of its Subsidiaries has agreed not to acquire assets or securities of another Person;

 

(iii)                                that indemnifies or holds harmless any Person who is now, or was during the past two (2) years prior to the date hereof, a director or executive officer of the Company or its Subsidiaries (other than pursuant to the articles of incorporation or bylaws or equivalent governing documents of the Company or its Subsidiaries or applicable Law);

 

(iv)                               that restricts payment of dividends or distributions in respect of the capital stock or equity interests of the Company or any of its Subsidiaries;

 

(v)                                  that creates or grants a material Lien on material properties or other material assets of the Company or any of its Subsidiaries, other than Permitted Liens, other than Contracts described in Section 3.14(a)(xi) ;

 

(vi)                               (A) in connection with which or pursuant to which the Company or any of its Subsidiaries will spend or receive (or are expected to spend or receive), in the aggregate, more than $500,000 during the remaining term of such Contract (other than real property leases) or that is a Contract with a Governmental Entity, or (B) that is with a top 10 vendor of material supplies, goods, services, equipment or other assets (as determined on the basis of aggregate purchases made by the Company and its Subsidiaries over the four (4) consecutive fiscal quarter periods ended June 30, 2016);

 

(vii)                            requiring or evidencing a capital commitment or capital expenditure (or series of capital expenditures) by the Company or any of its Subsidiaries in excess of $250,000 individually or $500,000 in the aggregate (other than real property leases);

 

(viii)                         that contains any non-competition or other covenants that prohibit or otherwise restrict in any material respect the Company or any of its Subsidiaries (or that expressly applies such covenants to any of its Affiliates) from freely engaging in business anywhere in the world (including any agreement materially restricting the Company or any of its Subsidiaries (or that expressly applies such covenants to any of its Affiliates) from competing in any line of business or in any geographic area or that grants to any party most-favored nation or similar rights);

 

(ix)                               (A) relating to the disposition or acquisition by the Company or any of its Subsidiaries after the date of this Agreement of a material amount of assets, or (B) pursuant to which the Company or any of its Subsidiaries will acquire after the date of this Agreement any ownership interest in any other Person or other business enterprise;

 

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(x)                                  with respect to any material acquisition pursuant to which the Company or any of its Subsidiaries has (A) any continuing indemnification obligations or (B) any potential “earn-out” or other contingent payment obligations greater than $500,000;

 

(xi)                               relating to a loan, note, mortgage, indenture, the borrowing of money, extension of credit, surety bonds, the deferred purchase price of property, or guarantees of Indebtedness, in each case, in excess of $500,000 or that relates to a swap or hedging transaction or other derivative agreement for a net amount in excess of $250,000;

 

(xii)                            that involves any joint venture, partnership or similar arrangement;

 

(xiii)                         that relates to any settlement (A) with a Governmental Entity or (B) pursuant to which the Company or any of its Subsidiaries is obligated to pay consideration in excess of $100,000 or that contains any restrictions on the business activities of the Company or any of its Subsidiaries;

 

(xiv)                        that is between the Company or any of its Subsidiaries, on the one hand, and any Affiliate (including any director or officer) of the Company or any of its Subsidiaries, on the other hand;

 

(xv)                           any Contract pursuant to which the Company or any of its Subsidiaries is the lessee or lessor of, holds, uses or makes available for use to any Person any real property that by the Contract’s terms requires payment or receipt, as the case may be, in excess of $250,000 over the remaining term of the Contract, and any Contract for the sale of real property;

 

(xvi)                        any employment Contract with the Company or any of its Subsidiaries providing for annual compensation in excess of $150,000 or providing for severance, termination or similar payments or that may not be terminated by giving notice of thirty (30) days or less without cost or penalty;

 

(xvii)                     is a shareholders agreement, registration rights agreement or voting agreement to which the Company or its Subsidiaries is a party relating to any securities of the Company or any of its Subsidiaries; and

 

(xviii)                  under which material rights are granted by or to the Company or any of its Subsidiaries in or under material intellectual property, excluding any (A) Contract under which commercially or generally available software is licensed to the Company or any of its Subsidiaries on a non-exclusive basis and which Contract has an aggregate annual value of less than $100,000, (B) Contract under which a non-exclusive license is granted by the Company or any of its Subsidiaries to a customer or service provider in the ordinary course of business, and (C) Contract listed pursuant to other subsections of this Section 3.14 ;

 

(each such Contract in effect as of the date of this Agreement as described in this Section 3.14(a) , whether or not filed with the SEC, a “ Material Contract ”).

 

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(b)                                  Section 3.14(a)  of the Company Disclosure Letter sets forth a complete and correct list, as of the date of this Agreement, of all Material Contracts.  Complete and correct copies of each Material Contract have been made available to Parent prior to the date of this Agreement.

 

(c)                                   (i) Each Material Contract is valid and binding on the Company and each of its Subsidiaries party thereto and, to the knowledge of the Company, any other party thereto; (ii) there is no actual or alleged material violation of or material default under any Material Contract by the Company or any of its Subsidiaries party thereto or, to the knowledge of the Company, any other party thereto; and (iii) no event has occurred that with the lapse of time or the giving of notice or both would constitute a material default thereunder by the Company or any of its Subsidiaries party thereto or, to the knowledge of the Company, any other party thereto and neither the Company nor any of its Subsidiaries has received written notice of any such default or event, or of any termination or non-renewal of any Material Contract.  True and complete copies of each Material Contract have been made available to Parent.

 

Section 3.15.                           Insurance.

 

Section 3.15 of the Company Disclosure Letter lists each material Insurance Policy.  Except as would not, individually or in the aggregate, reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, (a) all Insurance Policies are in full force and effect and provide insurance in such amounts and against such risks as is sufficient to comply with applicable Law, (b) no written notice of cancellation or modification has been received by the Company or any of its Subsidiaries with respect to any of the Insurance Policies, (c) the Company and its Subsidiaries have paid all premiums due and payable under the Insurance Policies when due, and (d) neither the Company nor any of its Subsidiaries is in breach or default, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action which, with notice or the lapse of time, would constitute such a breach or default, or permit termination or modification of, any of the Insurance Policies.  The Company has made available to Parent prior to the date hereof a true and complete copy of each Insurance Policy listed on Section 3.15 of the Company Disclosure Letter.  As used in this Agreement, “ Insurance Policies ” means insurance policies and fidelity bonds maintained by or for the benefit of the Company and its Subsidiaries and their respective assets, business, equipment, properties, operations, employees, officers and directors.

 

Section 3.16.                           Properties.

 

(a)                                  Section 3.16(a)(i)  of the Company Disclosure Letter sets forth a true and complete list of all real property and interests in real property owned in fee by the Company or one of its Subsidiaries free and clear of all Liens other than Permitted Liens (the “ Owned Real Property ”).  The Company or a Subsidiary of the Company owns in fee title to all of their respective Owned Real Property, and good title to all of its tangible personal property and has valid leasehold interests pursuant to leases or ground leases (each, a “ Lease ”) in each parcel of real property occupied by the Company or its Subsidiaries (the “ Leased Real Property ”), necessary or material to the conduct of their respective businesses as currently conducted, free and clear of all Liens (except in all cases for those permissible under the Credit Agreement, Permitted Liens and other Liens, whether or not of record, which do not materially impair the

 

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value of or materially affect the continued use or occupancy of the property subject to such Lien for the purposes for which the property is currently being used).  The Company has made available to Parent correct and complete copies of all vesting deeds for the Owned Real Property, as well as the most recent Surveys and Zoning Reports obtained for the Owned Real Properties and Leased Real Properties, if any.  Except as set forth in Section 3.16(c)  of the Company Disclosure Letter, no Person other the Company or a Subsidiary of the Company is in possession of any of the Owned Real Property.

 

(b)                                  Section 3.16(b)  of the Company Disclosure Letter sets forth a true and complete list of all Leased Real Property (and a true and complete list of each corresponding Lease affecting such Leased Real Property), the address for each Leased Real Property, and the current rent amounts payable by the Company and its Subsidiaries for each Leased Real Property, and the Company has made available to Parent true and complete copies of each Lease prior to the date hereof.  Except as would not have a Company Material Adverse Effect:  (i) each Lease is valid and binding on the Company or Subsidiary party to such Lease, as applicable, and is in full force and effect; (ii) neither the Company nor any of its Subsidiaries is in breach or default under any such Lease; (iii) the Company and each of its Subsidiaries has performed all obligations required to be performed by them under each Lease, (iv) no event has occurred or circumstance exists which, with the delivery of notice, passage of time or both, would constitute such a breach or default by any of the Company or its Subsidiaries or permit the termination, modification or acceleration of rent by any third party under such Lease, (v) neither the Company  nor any of its Subsidiaries has received any written communication from, or given any written communication to, any other party to a Lease or any lender alleging that the Company or any of its Subsidiaries or such other party, as the case may be, is in default under any such Lease, (vi) except for Third Party Leases, neither the Company nor any Subsidiary of the Company has subleased, licensed or otherwise granted any other Person the right to use or occupy such Leased Real Property or any portion thereof and (v) to the Company’s knowledge, each lessor of a Leased Real Property is the exclusive fee simple owner of such Leased Real Property, and such lessor is the sole owner of the lessor’s interest in such leased real property.

 

(c)                                   Section 3.16(c)  of the Company Disclosure Letter sets forth a true and complete list of all Leased Real Property or Owned Real Property leased or subleased, as applicable, by the Company or any of its Subsidiaries to a third-party (each, a “ Third Party Lease ”, and each such lessee or sublessee, a “ Third Party Tenant ”).  The Company has made available to Parent, on or before the date hereof, correct and complete copies of all Third Party Leases that are in the Company’s possession.  Except as would not have a Company Material Adverse Effect:  (i) each Third Party Lease is valid and binding on the Company or its Subsidiary and, to the knowledge of the Company, each Third Party Tenant that is a party thereto, and each Third Party Lease is in full force and effect; (ii) neither the Company nor any of its Subsidiaries is in breach or default under any such Third Party Lease; (iii) the Company and each of its Subsidiaries has performed all obligations required to be performed by such party under each Third Party Lease, (iv) no event has occurred or circumstance exists which, with the delivery of notice, passage of time or both, would constitute a breach or default by any of the Company or its Subsidiaries or, to the knowledge of the Company, any Third Party Tenant, or permit the termination, modification or abatement of rent by the Company or any of its Subsidiaries or to the knowledge of the Company, any Third Party Tenant, under such Third Party Lease, (v) neither the Company nor any of its Subsidiaries has received any written

 

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communication from, or given any written communication to, any other party to any Third Party Lease or any lender alleging that the Company or any of its Subsidiaries or any Third Party Tenant, as the case may be, is in default under any such Third Party Lease, and (vi) neither the Company nor any Subsidiary has subleased, licensed or otherwise granted any other Person, other than the Third Party Tenants set forth in Section 3.16(c)  of the Company Disclosure Letter, the right to use or occupy such Leased Real Property or Owned Real Property, as applicable, or any portion thereof, nor granted any rights to purchase the Owned Real Property.

 

(d)                                  To the Company’s knowledge, the Owned Real Property does not require a conditional use permit (or permits) to operate the business as presently operated at each Owned Real Property, which conditional use permit has not already been obtained and is in effect.

 

(e)                                   Neither the Company nor any of the Subsidiaries has received from any Governmental Entity any written notice of any condemnation, eminent domain, or zoning change, in each case affecting a material portion of any material Owned Real Property or Leased Real Property; and neither the Company nor any of the Subsidiaries has received actual written notice of any such threatened condemnation, eminent domain or zoning change, in each case affecting a material portion of any material Owned Real Property or Leased Real Property. To the Company’s knowledge, access, water, storm and sanitary sewers, and electrical, gas and telephone facilities are available to each Owned Real Property and are sufficient to meet the reasonable needs of each Owned Real Property as presently contemplated to be used, and no other utility facilities are necessary to meet the reasonable needs of each Owned Real Property as presently contemplated.

 

(f)                                    The Company and/or each Subsidiary, as applicable, is in possession of, and is the named insured under, title insurance policies with respect to each Owned Real Property and each Leased Real Property (each a “ Company Title Insurance Policy ”).  A copy of each Company Title Insurance Policy has been made available to the Parent on or before the date hereof.  No written claim has been made against any Company Title Insurance Policy, which would have a Material Adverse Effect.

 

(g)                                   Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will give rise to or create in any Person any right of first offer or first refusal to purchase any Owned Real Property.

 

Section 3.17.                           Intellectual Property.

 

Section 3.17 of the Company Disclosure Letter sets forth a true and complete list of all registered and pending trademarks, service marks or trade names, patents, patent applications, registered copyrights, applications to register copyright and domain names owned by the Company or any of its Subsidiaries on the date hereof (collectively, “ Company Registered IP ”).  Except as disclosed in Section 3.17 of the Company Disclosure Letter or as would not, individually or in the aggregate, reasonably be expected to be material to the Company or any of its Subsidiaries, (a) the Company or one its Subsidiaries (alone or in combination) exclusively owns, free and clear of all Liens (other than Permitted Liens), all Company Registered IP and all other material proprietary intellectual property rights, and owns or has been granted a license to use, or otherwise has a right to use, all other intellectual property that the Company or any of its

 

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Subsidiaries is using that is material to the conduct of their respective businesses as currently conducted (except where failure to obtain a license would not reasonably be expected to result in a material liability to the Company); (b) all Company Registered IP is subsisting and valid and enforceable, and have been duly maintained (including the payment of maintenance fees) and are not expired, canceled or abandoned; (c) no Company Registered IP is involved in any interference, reissue, reexamination, opposition, cancellation or similar proceeding and, to the Company’s knowledge, no such action is or has been threatened with respect to any of Company Registered IP; (d) there are no pending or, to the knowledge of the Company, threatened claims (including “cease and desist” letters or invitations to take a patent license), Actions or proceedings by any person alleging infringement or misappropriation by the Company or any of its Subsidiaries of the intellectual property rights of such person or challenging the validity, enforceability or ownership of, or the right to use, any intellectual property owned by the Company or any of its Subsidiaries; (e) to the knowledge of the Company, the conduct of the businesses of the Company and its Subsidiaries as currently conducted by the Company or any of its Subsidiaries does not infringe or misappropriate any intellectual property rights of any Person; (f) to the knowledge of the Company, no Person is infringing or misappropriating any intellectual property owned by the Company or any of its Subsidiaries; (g) the Company and its Subsidiaries have taken reasonable actions to protect the ownership and confidentiality of the Company-owned trade secrets that are material to the conduct of the businesses of the Company and its Subsidiaries as currently conducted (except where the Company has elected, in its reasonable business judgment, not to keep such information confidential), and the operation, continuity and security of their software, systems and networks (and the data therein) that are material to the conduct of the businesses of the Company and its Subsidiaries as currently conducted (“ Systems ”); (h) since January 1, 2014, there have been no material failures, breaches, disclosures or interruptions of any material Systems that have not been remedied or that have an ongoing material adverse effect on the Company; (i) to the knowledge of the Company, the Systems material to the conduct of the businesses of the Company and its Subsidiaries as currently conducted are free from material defect, bug, virus, malware, error or other contaminant or corruptant that would materially impair their functionality; (j) to the knowledge of the Company, neither the Company nor any Subsidiary has distributed any software owned by the Company or such Subsidiary that are material to the conduct of the businesses of the Company and its Subsidiaries as currently conducted in a manner that subjects such software to the terms of an “open source” or similar license that would require the Company or such Subsidiary to license or make available the source code of such software in connection therewith; and (k) no current or contingent rights have been granted to any Person other than the Company or its Subsidiaries to access or possess any source code owned by the Company or its Subsidiaries that are material to the conduct of the businesses of the Company and its Subsidiaries as currently conducted.  The Company and each Company Subsidiary has (i) complied in all material respects with its respective privacy policies and all applicable Laws relating to privacy and data security, including with respect to the collection, storage, transmission, transfer, disclosure, and use of information related to an identified or identifiable person, including name, mailing address, telephone number, e-mail address, social security number, driver’s license number, credit or debit card number, or financial account information (collectively, “ Personal Information ”); (ii) implemented and maintained a data security plan which maintains commercially reasonable administrative, technical and physical safeguards to protect Personal Information against loss, damage, and unauthorized access, use, modification, or

 

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other misuse; and (iii) not been required by applicable Laws to provide notice to an individual or business entity reporting the unauthorized access to or acquisition of Personal Information in the Company’s or its Subsidiaries’ possession.  To the knowledge of the Company, there has been no material loss, damage, or unauthorized access, use, modification, or breach of security of Personal Information maintained by or on behalf of by the Company or any of its Subsidiaries. To the knowledge of the Company, since January 1, 2014, no Person (including any Governmental Entity) has made any claim or commenced any action with respect to loss, damage, or unauthorized access, use, modification, or breach of security of Personal Information maintained by or on behalf of any of the Company or its Subsidiaries.  None of the execution, delivery, or performance of this Agreement or the consummation of the Merger or other transactions contemplated herein will or reasonably would be expected to result in any material violation of any privacy policy of the Company and its Subsidiaries or any applicable Law pertaining to privacy, data security, or Personal Information.

 

Section 3.18.                           State Takeover Statutes.

 

Assuming the accuracy of the representations and warranties set forth in Section 4.8 , no “fair price,” “moratorium,” “control share acquisition” “combinations with interested stockholders” or similar anti-takeover Law (collectively, “ Takeover Laws ”) enacted under any state Laws in the United States apply to this Agreement or any of the transactions contemplated hereby, including the Merger.

 

Section 3.19.                           Affiliate Transactions.

 

Except for directors’ and employment-related Material Contracts, no current executive officer or director of the Company is, and, to the knowledge of the Company, no former executive officer or director of the Company is, a party to any Material Contract with or binding upon the Company or any of its Subsidiaries or any of their respective properties or assets or has any material interest in any material property owned by the Company or any of its Subsidiaries or has engaged in any material transaction within the last twelve (12) months with the Company or any of its Subsidiaries.

 

Section 3.20.                           Brokers.

 

No broker, investment banker, financial advisor or other Person, other than Deutsche Bank Securities, Inc. (the fees and expenses of which are set forth on Section 3.20 of the Company Disclosure Letter and will be paid by the Company), is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission payable by or on behalf of the Company in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company or any of its Subsidiaries.

 

Section 3.21.                           Opinion of Financial Advisor.

 

Deutsche Bank Securities Inc. has delivered to the Special Committee its written opinion (or oral opinion to be confirmed in writing) dated as of the date of this Agreement to the effect that, as of such date, the Per Share Merger Consideration is fair, from a financial point of view, to the holders of Shares (other than the Rollover Investors).  The Company has furnished, or promptly after execution of this Agreement will furnish (for informational purposes only), a complete and correct signed copy of such opinion to Parent.

 

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Section 3.22.                           Certain Information.

 

None of the information supplied or to be supplied by the Company for inclusion or incorporation by reference in the proxy statement to be sent to the stockholders of the Company in connection with the Company Stockholder Meeting (such proxy statement, as amended or supplemented, the “ Proxy Statement ”) and the Rule 13E-3 transaction statement on Schedule 13E-3 relating to the adoption of this Agreement by the stockholders of the Company (as amended or supplemented, the “ Schedule 13E-3 ”) will, at the date the Proxy Statement is first mailed to the stockholders of the Company and at the time of the Company Stockholder Meeting, or, in the case of the Schedule 13E-3, on the date it is filed with the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading.  The Proxy Statement and the Schedule 13E-3 will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations promulgated thereunder.  Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information supplied by Parent or Merger Sub or any of their respective Representatives for inclusion or incorporation by reference in the Proxy Statement or the Schedule 13E-3.

 

Section 3.23.                           No Other Parent Representations or Warranties.

 

Except for the representations and warranties contained in Article IV , the Company acknowledges that none of Parent, Merger Sub or any other Person on behalf of Parent or Merger Sub makes any other express or implied representation or warranty with respect to Parent or Merger Sub or with respect to any other information provided to the Company.

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB

 

Except as set forth in the corresponding sections or subsections of the disclosure letter delivered by Parent to the Company prior to the execution of this Agreement (“ Parent Disclosure Letter ”), Parent and Merger Sub represent and warrant to the Company as follows:

 

Section 4.1.                                  Organization, Standing and Power.

 

Each of Parent and Merger Sub (i) is an entity duly organized, validly existing and in good standing under the Laws of the jurisdiction of its organization, (ii) has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted and (iii) is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its assets or properties makes such qualification or licensing necessary, except, with respect to clause (iii), for any such failure to be so qualified or licensed or in good standing as would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.  For purposes of this Agreement, “ Parent Material Adverse Effect ” means any event, change, occurrence or effect that would prevent, materially delay, materially impair or materially impede the performance by Parent or Merger Sub of its obligations under this Agreement or the ability to consummate the Merger and the other transactions contemplated hereby.

 

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Section 4.2.                                  Authority.

 

Parent, as the sole stockholder of Merger Sub, will adopt this Agreement promptly following its execution.  No vote of the members, or of the holders of the members, of Parent is necessary to approve and adopt this Agreement, the Merger and the other transactions contemplated hereby, including the Financing.  Each of Parent and Merger Sub has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.  The execution, delivery and performance of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the transactions contemplated hereby have been duly authorized by all necessary corporate or similar action on the part of Parent and Merger Sub (including by the managing member of Parent and the Board of Directors of Merger Sub and no other corporate proceedings on the part of Parent or Merger Sub are necessary to approve this Agreement or to consummate the transactions contemplated hereby, subject in the case of the consummation of the Merger, to the filing with the Nevada Secretary of State of the Articles of Merger as required by the NRS.  This Agreement has been duly executed and delivered by Parent and Merger Sub and, assuming the due authorization, execution and delivery by the Company, constitutes a valid and binding obligation of Parent and Merger Sub, enforceable against each of them in accordance with its terms (except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar Laws affecting the enforcement of creditors’ rights generally or by general principles of equity).

 

Section 4.3.                                  No Conflict; Consents and Approvals.

 

(a)                                  The execution, delivery and performance of this Agreement by Parent and Merger Sub do not, and the consummation by Parent and Merger Sub of the transactions contemplated hereby will not, and the approval by Parent of the execution, delivery and performance of this Agreement by Merger Sub and of the consummation by Merger Sub of the transactions contemplated hereby, do not and will not (i) conflict with or violate the limited liability company operating agreement, articles of incorporation, bylaws or similar governing instruments of Parent or Merger Sub, (ii) assuming that all consents, approvals and authorizations contemplated by clauses (i) through (v) of subsection (b) below have been obtained and all filings described in such clauses have been made, conflict with or violate any Law applicable to Parent or Merger Sub or by which any of their respective properties or assets are bound, or (iii) result in any breach or violation of, or constitute a default (or an event which with notice or lapse of time or both would become a default), or result in the loss of a benefit under, or give rise to any right of termination, cancellation, amendment or acceleration of, any Contract to which Parent or Merger Sub is a party or by which Parent or Merger Sub or any of their respective properties or assets are bound, except, in the case of clauses (ii) and (iii), for any such conflict, breach, violation, default, loss, right or other occurrence that would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.

 

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(b)                                  The execution, delivery and performance of this Agreement by Parent and Merger Sub, the consummation by Parent and Merger Sub of the transactions contemplated hereby, and the approval by Parent of the execution, delivery and performance of this Agreement by Merger Sub and of the consummation by Merger Sub of the transactions contemplated hereby, do not and will not require any consent, approval, authorization or permit of, action by, filing with or notification to, any Governmental Entity, except for (i) such filings as may be required under applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder, and under state securities, takeover and “blue sky” laws, (ii) the filings required under the HSR Act, (iii) the filing with the Nevada Secretary of State of the Articles of Merger as required by the NRS, (iv) compliance with and obtaining Gaming Approvals as required under applicable Gaming Laws set forth on Schedule 4.3(b) of the Parent Disclosure Letter , and (v) any such consent, approval, authorization, permit, action, filing or notification the failure of which to make or obtain would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.

 

Section 4.4.                                  Litigation.

 

As of the date of this Agreement, except as would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect, (a) there is no Action pending or, to the knowledge of Parent, threatened in writing against Parent or any of its Subsidiaries, or any of their respective properties or assets, by or before any Governmental Entity and (b) neither Parent nor any of its Subsidiaries nor any of their respective properties or assets, is or are subject to any outstanding judgment, order, injunction, rule or decree of any Governmental Entity.

 

Section 4.5.                                  Ownership and Operations of Parent and Merger Sub.

 

Each of Parent and Merger Sub has been formed solely for the purpose of engaging in the transactions contemplated hereby and prior to the Effective Time will have engaged in no other business activities and will have incurred no liabilities or obligations other than as contemplated herein.  The authorized capital stock of Merger Sub consists of consists of 1,000 shares of common stock, par value $0.01 per share, 100 of which are validly issued and outstanding.  All of the issued and outstanding capital stock of Merger Sub is, and at the Effective Time will be, owned by Parent.

 

Section 4.6.                                  Financing.

 

(a)                                  Parent has delivered to the Company copies as of the date of this Agreement of (i) an executed debt commitment letter, and fee letter, including all annexes, exhibits, schedules and other attachments thereto (other than the fees and other economic amounts and flex provisions (including successful syndication levels) set forth therein that could not reasonably be expected to adversely affect the amount or availability of the debt financing contemplated by such commitment letter, which have been redacted) (the “ Debt Financing Commitment ”), each dated as of the date hereof, by and among Merger Sub and the financial institutions identified therein, pursuant to which such Debt Financing Sources have agreed, subject to the terms and conditions set forth therein, to provide debt financing in an amount set forth therein (the “ Debt Financing ”), (ii) executed equity commitment letters, including all annexes, exhibits, schedules and other attachments thereto, dated as of the date hereof (the

 

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Equity Financing Commitments ” and, together with the Debt Financing Commitment, the “ Financing Commitments ”), pursuant to which Sponsor (collectively, the “ Equity Financing Sources ” and, together with the Debt Financing Sources, the “ Financing Sources ”) has committed to provide equity financing in the respective amounts, and subject to the terms and conditions, set forth therein (the “ Equity Financing ” and, together with the Debt Financing, the “ Financing ”), and (iii) the Rollover Commitment Letter.

 

(b)                                  As of the date of this Agreement, none of the Financing Commitments or Rollover Commitment Letter, in each case, in the form so delivered, have been amended or modified in any respect, and the respective commitments contained therein have not been withdrawn, rescinded or terminated, nor is any such amendment, modification, withdrawal, rescission or termination currently contemplated or the subject of current discussions (other than termination provisions expressly set forth in the Financing Commitments or the Rollover Commitment Letter).  As of the date of this Agreement, the Financing Commitments and Rollover Commitment Letter in the form so delivered are in full force and effect and constitute the legal, valid and binding obligation of Merger Sub and, to the knowledge of Parent, the other parties thereto, enforceable against such Financing Sources in accordance with their terms, except to the extent enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).

 

(c)                                   There are no conditions precedent directly or indirectly related to the funding of the full amount of the Financing or the Rollover Commitment Letter other than as expressly set forth in the Financing Commitments and the Rollover Commitment Letter.  Other than the Financing Commitments and the Rollover Commitment Letter, as of the date hereof, there are no other side letters, Contracts, arrangements or understandings (written or oral) directly or indirectly related to the Financing, including any to which Parent, Merger Sub or any of their Affiliates is a party (except for customary fee letters relating to the Debt Financing, a copy of which has been provided to the Company, with only the fee and other economic amounts and flex provisions (including successful syndication levels) that would not reasonably be expected to adversely affect the amount or availability of the Debt Financing contemplated by such commitment letter redacted) or the Rollover Investment.

 

(d)                                  As of the date hereof, (i) no event has occurred that (with or without notice or lapse of time, or both) would constitute a breach or default under the Financing Commitments or the Rollover Commitment Letter, (ii) Parent is not aware of any fact, event or other occurrence that makes any of the representations or warranties of Parent in any of the Financing Commitments or the Rollover Commitment Letter inaccurate in any material respect, and (iii) Parent has no reason to believe that any of the conditions in the Financing Commitments or the Rollover Commitment Letter will fail to be timely satisfied or that the full amount of the Financing and Rollover Investment will not be funded at the Closing.

 

(e)                                   Parent and Merger Sub have fully paid any and all commitment fees or other fees required by the terms of the Financing Commitments to be paid on or before the date of this Agreement.

 

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(f)                                    As of the date hereof, assuming (i) the accuracy of the representations and warranties set forth in Article III , (ii) the performance in all material respects by the Company of its obligations hereunder, and (iii) the satisfaction of the conditions precedent to Parent’s and Merger Sub’s obligations to close set forth in Article VI (other than those conditions the failure of which to be satisfied is a result of any breach by Parent or Merger Sub of its or their representations, warranties, covenants or agreements hereunder), the aggregate proceeds contemplated by the Financing Commitments and the Rollover Investment contemplated by the Rollover Commitment Letter, together with cash held by the Company as of the Effective Time, will be sufficient for Parent to consummate the transactions contemplated hereby, including the payment of all amounts required to be paid by Parent pursuant to Article II , and the payment of all related fees and expenses (collectively, the “ Required Amount ”).

 

Section 4.7.                                  Vote/Approval Required.

 

No vote or consent of the holders of membership units or other equity interests of Parent is necessary to approve this Agreement or the Merger or the other transactions contemplated hereby.  The vote or consent of Parent, as the sole stockholder of Merger Sub, is the only vote or consent of the holders of any class or series of capital stock of Merger Sub necessary to adopt this Agreement or approve the Merger and the other transactions contemplated hereby.  On or prior to the date hereof, Parent, as the sole stockholder of Merger Sub, has approved (by vote or consent) the adoption of this Agreement and the approval of the Merger and the other transactions contemplated herby.

 

Section 4.8.                                  Ownership of Shares.

 

Neither Parent nor Merger Sub nor any of Parent’s Affiliates owns (directly or indirectly, beneficially or of record) any Shares or holds any rights to acquire or vote any Shares, except as set forth on Schedule 4.8 of the Parent Disclosure Letter and pursuant to this Agreement.

 

Section 4.9.                                  Solvency.

 

(a)                                  Neither Parent nor Merger Sub is entering into this Agreement with the intent to hinder, delay or defraud either present or future creditors of the Company or any of its Subsidiaries.  Each of Parent and Merger Sub is solvent as of the date of this Agreement.   Assuming (i) the satisfaction of the conditions to Parent’s and Merger Sub’s obligations to consummate the Merger, or, to the extent permitted by applicable Law, waiver of such conditions, (ii) the Credit Facility Termination, (iii) the accuracy of the representations and warranties of the Company set forth in Article III , (iv) the performance by the Company in all material respects of its obligations hereunder, (v) that the Company is Solvent immediately prior to the Effective Time and (vi) that the most recent financial estimates, projections and forecasts of the Company and its Subsidiaries made available to Parent have been prepared in good faith upon assumptions that were reasonable at the time such estimates, projections and forecasts were prepared and continue to be reasonable, after giving effect to the Merger and all of the other transactions contemplated by this Agreement, including the payment of the Per Share Merger Consideration, the payment of all other amounts required to be paid in connection with the consummation of the Merger or any other transaction contemplated by this Agreement and the payment of all related fees and expenses, the Surviving Corporation and its Subsidiaries (on a consolidated basis) will be Solvent as of the Effective Time and immediately after the Effective Time.

 

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(b)                                  For the purposes of this Agreement, the term “ Solvent ” when used with respect to any Person, means that, as of any date of determination, (a) the amount of the “fair saleable value” of the assets of such Person and its Subsidiaries on a consolidated basis will, as of such date, exceed the sum of (i) the value of all “liabilities of such Person and its Subsidiaries on a consolidated basis, including contingent and other liabilities,” as of such date, as such quoted terms are generally determined in accordance with applicable Laws governing determinations of the insolvency of debtors, and (ii) the amount that will be required to pay the probable liabilities of such Person and its Subsidiaries on a consolidated basis, as of such date, on its existing debts (including contingent and other liabilities) as such debts become absolute and mature, (b) such Person and its Subsidiaries on a consolidated basis will not have, as of such date, an unreasonably small amount of capital for the operation of the businesses in which they are engaged or proposed to be engaged following such date, and (c) such Person and its Subsidiaries on a consolidated basis will be able to pay its liabilities, as of such date, including contingent and other liabilities, as they become absolute and mature.  For purposes of this definition, “not have an unreasonably small amount of capital for the operation of the businesses in which it is engaged or proposed to be engaged” and “able to pay its liabilities, as of such date, including contingent and other liabilities, as they mature” means that such Person will be able to generate enough cash from operations, asset dispositions, existing financing or refinancing, or a combination thereof, to meet its obligations as they become due.

 

Section 4.10.                           Brokers.

 

No broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission payable by or on behalf of Parent or Merger Sub in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent or Merger Sub.

 

Section 4.11.                           Limited Guarantee.

 

Concurrently with the execution of this Agreement, the Sponsor has delivered to the Company the Limited Guarantee.  The execution, delivery and performance by the Sponsor of the Limited Guarantee and the consummation by the Sponsor of the transactions contemplated thereby have been duly and validly authorized by all necessary corporate action.  The Limited Guarantee has been duly executed and delivered by the Sponsor and constitutes the legal, valid and binding obligations of the Sponsor, enforceable against the Sponsor in accordance with its terms, except to the extent enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).  No event has occurred which, with or without notice, lapse of time or both, would result in a default by the Sponsor under the Limited Guarantee.

 

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Section 4.12.                           Licensability.

 

None of Parent, Merger Sub, any of their respective officers, directors, managers, members, principals or Affiliates which may reasonably be considered in the process of determining the suitability of Parent and Merger Sub for a Gaming Approval by a Gaming Authority, or any holders of Parent’s membership units or other equity interests who will be required to be licensed or found suitable under applicable Gaming Laws (the foregoing Persons collectively, the “ Licensing Affiliates ”), has been found not to have good moral character or has been convicted of any offense that would disqualify or otherwise prevent Parent and such Licensing Affiliates from holding a gaming license in any state or other jurisdiction, has ever abandoned or withdrawn (in each case in response to a communication from a Gaming Authority regarding a likely or impending denial, suspension or revocation) or been denied or had suspended or revoked a Gaming Approval, or an application for a Gaming Approval, by a Gaming Authority.  Parent, Merger Sub and each of their respective Licensing Affiliates which is licensed or holds any Gaming Approval pursuant to applicable Gaming Laws (collectively, the “ Licensed Parties ”) is in good standing in each of the jurisdictions in which such Licensed Party owns, operates or manages gaming facilities.  To Parent’s knowledge, there are no on-going material investigations with respect to any existing gaming license held by Parent or any Licensing Affiliates and there are no facts which, if known to any Gaming Authority, would be reasonably likely to (i) result in the denial, revocation, limitation or suspension of a Gaming Approval of any of the Licensed Parties or (ii) result in a negative outcome to any finding of suitability proceedings of any of the Licensed Parties currently pending, or under the suitability proceedings necessary for the consummation of the Merger.

 

Section 4.13.                           Certain Information.

 

None of the information supplied or to be supplied by Parent or Merger Sub for inclusion or incorporation by reference in the Proxy Statement or in the Schedule 13E-3 will, at the date the Proxy Statement is first mailed to the stockholders of the Company and at the time of the Company Stockholder Meeting, or, in the case of the Schedule 13E-3, on the date it is filed with the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading.  Notwithstanding the foregoing, Parent and Merger Sub make no representation or warranty with respect to any information supplied by the Company or any of its Representatives for inclusion or incorporation by reference in the Proxy Statement or the Schedule 13E-3.

 

Section 4.14.                           Access to Information.

 

Parent and Merger Sub each acknowledges and agrees that it (a) has had an opportunity to discuss and ask questions regarding the business of the Company and its Subsidiaries with the management of the Company, (b) has had access to the books and records of the Company, the “data room” maintained by the Company for purposes of the transactions contemplated by this Agreement and such other information as it has desired or requested to review and (c) has conducted its own independent investigation of the Company and its Subsidiaries and the transactions contemplated hereby.

 

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Section 4.15.                           No Other Company Representations or Warranties.

 

Except for the representations and warranties set forth in Article III , Parent and Merger Sub hereby acknowledge and agree that neither the Company nor any of its Subsidiaries, nor any of their respective stockholders, directors, officers, employees, affiliates, advisors, agents or representatives, nor any other Person, has made or is making, and that Parent and Merger Sub have not relied on and will not be entitled to, and will not, rely on, any other express or implied representation or warranty with respect to the Company or any of its Subsidiaries or their business or operations or any other matter, including with respect to the accuracy or completeness of any information provided, disclosed or delivered to Parent or Merger Sub.  Except for the representations and warranties set forth in Article III , neither the Company nor any of its Subsidiaries, nor any of their respective stockholders, directors, officers, employees, affiliates, advisors, agents or representatives, nor any other Person, will have or be subject to any liability or indemnification obligation to Parent, Merger Sub or any other Person resulting from the delivery, dissemination or any other distribution to Parent, Merger Sub or any other Person, or the use by Parent, Merger Sub or any other Person, of any information provided or made available to them by the Company or any of its Subsidiaries, or any of their respective stockholders, directors, officers, employees, affiliates, advisors, agents or representatives, or any other Person, including any information, documents, estimates, projections, forecasts or other forward-looking information, business plans, cost-related plans or other material provided or made available to Parent, Merger Sub or any other Person in certain “data rooms,” confidential information memoranda, management presentations or due diligence discussions in anticipation or contemplation of any of the transactions contemplated by this Agreement.

 

Section 4.16.                           Non-Reliance on Company Estimates, Projections, Forecasts, Forward-Looking Statements and Business Plans.

 

In connection with the due diligence investigation of the Company by Parent and Merger Sub, Parent and Merger Sub have received and may continue to receive from the Company certain estimates, projections, forecasts and other forward-looking information, as well as certain business plan and cost-related plan information, regarding the Company, its Subsidiaries and their business and operations.  Parent and Merger Sub hereby acknowledge that there are uncertainties inherent in attempting to make such estimates, projections, forecasts and other forward-looking information, with which Parent and Merger Sub are familiar, that Parent and Merger S


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