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EXHIBIT 10
EXECUTION VERSION
PURCHASE AGREEMENT
BY AND AMONG
MANDALAY RESORT GROUP
AS SELLER
EDGEWATER HOTEL CORPORATION
COLORADO BELLE CORP.
AS THE COMPANIES
--------------------
ACES HIGH MANAGEMENT, LLC
AS PURCHASER
DATED AS OF OCTOBER 13, 2006
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ARTICLE I
DEFINITIONS................................................................................
1
ARTICLE II
PURCHASE AND SALE OF
SHARES................................................................
14
Section 2.1 Purchase
and Sale of
Shares................................................................
14
Section 2.2 Retained
Property..........................................................................
14
Section 2.3 Additional
Property........................................................................
15
ARTICLE III
CLOSING; PURCHASE
PRICE....................................................................
15
Section 3.1
Closing....................................................................................
15
Section 3.2 Deliveries
at
Closing......................................................................
15
Section 3.3 Purchase
Price Payment at
Closing..........................................................
18
Section 3.4
Calculation of Closing Date Purchase
Price................................................. 18
Section 3.5 Adjustment
Procedures to the Closing Date Purchase
Price................................... 18
Section 3.6
Calculation and Payment of Final Purchase
Price............................................ 19
Section 3.7 Additional
Payments........................................................................
20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
SELLER...................................................
20
Section 4.1
Organization and
Qualification.............................................................
20
Section 4.2 Ownership
of
Shares........................................................................
21
Section 4.3 Authority;
No Conflict; Required Filings and
Consents...................................... 21
Section 4.4 Financial
Information......................................................................
22
Section 4.5 No
Undisclosed
Liabilities.................................................................
23
Section 4.6 Absence of
Certain Changes or
Events.......................................................
23
Section 4.7
Taxes......................................................................................
23
Section 4.8 Real
Property..............................................................................
24
Section 4.9 Tangible Personal
Property.................................................................
26
Section 4.10 Intellectual
Property......................................................................
27
Section 4.11
Contracts..................................................................................
27
Section 4.12
Litigation.................................................................................
28
Section 4.13 Environmental
Matters......................................................................
29
Section 4.14 Employee Benefit
Plans.....................................................................
30
Section 4.15 Compliance with
Applicable
Laws............................................................
31
Section 4.16 Labor
Matters..............................................................................
32
Section 4.17 Compliance with
the WARN
Act...............................................................
33
Section 4.18
Indebtedness...............................................................................
34
Section 4.19
Insurance..................................................................................
34
Section 4.20 Internal
Controls and
Procedures...........................................................
34
Section 4.21
Brokers....................................................................................
35
Section 4.22 Solvency;
Sufficient
Capital...............................................................
35
Section 4.23 Sufficiency of
Assets and
Contracts........................................................
35
Section 4.24
Knowledge..................................................................................
35
Section 4.25 Nevada Takeover
Statutes...................................................................
35
Section 4.26 As Is, Where Is;
Release...................................................................
35
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
PURCHASER................................................
36
Section 5.1
Organization of
Purchaser..................................................................
36
Section 5.2
Ownership..................................................................................
36
Section 5.3 Authority;
No Conflict; Required Filings and
Consents...................................... 36
Section 5.4
Brokers....................................................................................
37
Section 5.5
Licensing..................................................................................
38
Section 5.6 Compliance
with Gaming
Laws................................................................
38
Section 5.7
Litigation.................................................................................
38
Section 5.8
Availability of
Funds......................................................................
39
Section 5.9 No
Breach..................................................................................
39
Section 5.10 No Knowledge of
Misrepresentations or
Omissions............................................ 39
Section 5.11
Knowledge..................................................................................
39
Section 5.12 Investment
Intent..........................................................................
39
ARTICLE VI
COVENANTS..................................................................................
40
Section 6.1 Conduct of
Business of the
Companies.......................................................
40
Section 6.2
Cooperation; Notice;
Cure..................................................................
41
Section 6.3 Access to
Information......................................................................
42
Section 6.4
Confidentiality of
Information.............................................................
42
Section 6.5
Intercompany Account
Settlement............................................................
43
Section 6.6
Governmental
Approvals.....................................................................
43
Section 6.7
Performance................................................................................
44
Section 6.8
Publicity..................................................................................
44
Section 6.9
Intellectual Property -
General............................................................
45
Section 6.10 Intellectual
Property -
Post-Closing.......................................................
45
Section 6.11
Employees..................................................................................
46
Section 6.12 Transitional
Services......................................................................
47
Section 6.13 Termination of
Affiliate
Contracts.........................................................
47
Section 6.14 Termination
Fee............................................................................
47
Section 6.15 Capital
Expenditures.......................................................................
49
Section 6.16
Releases...................................................................................
49
Section 6.17 Further
Assurances and
Actions.............................................................
49
Section 6.18 FCC
Approvals..............................................................................
49
Section 6.19 No
Control.................................................................................
50
Section 6.20 Liability for
Non-Compliance with WARN
Act................................................. 50
Section 6.21 Transfer Taxes;
HSR Filing
Fee.............................................................
50
ARTICLE VII
CONDITIONS TO
CLOSING......................................................................
51
Section 7.1 Conditions
of the Parties' Obligations to Effect the
Closing............................... 51
Section 7.2 Additional
Conditions to Obligation of the MGM Entities to Effect the
Closing.............. 51
Section 7.3 Additional
Conditions to Obligation of Purchaser to Effect the
Closing..................... 52
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ARTICLE VIII
INDEMNIFICATION;
REMEDIES..................................................................
52
Section 8.1 Survival;
Right to Indemnification Not Affected by
Knowledge............................... 52
Section 8.2
Indemnification............................................................................
53
Section 8.3
Indemnification
Procedures.................................................................
55
ARTICLE IX
TAX
MATTERS................................................................................
57
Section 9.1 Tax
Indemnification........................................................................
57
Section 9.2
Preparation and Filing of Tax Returns and Payment of
Taxes................................. 58
Section 9.3 Accounting
and Tax
Records.................................................................
59
Section 9.4 Tax
Audits.................................................................................
59
Section 9.5 Tax
Treatment..............................................................................
60
Section 9.6 Refunds
and Tax
Benefits...................................................................
60
Section 9.7 Base Price
Allocation; Section 338(h)(10)
Election......................................... 60
ARTICLE X
TERMINATION................................................................................
62
Section 10.1 Termination of
Agreement...................................................................
62
Section 10.2 Effect of
Termination......................................................................
63
ARTICLE XI
MISCELLANEOUS..............................................................................
63
Section 11.1
Expenses...................................................................................
63
Section 11.2
Notices....................................................................................
63
Section 11.3
Interpretation.............................................................................
64
Section 11.4 Governing
Law..............................................................................
65
Section 11.5 Consent to
Jurisdiction and
Venue..........................................................
65
Section 11.6 Time of the
Essence........................................................................
65
Section 11.7
Assignment.................................................................................
65
Section 11.8
Amendment..................................................................................
66
Section 11.9 Extension;
Waiver..........................................................................
66
Section 11.10 No Third Party
Beneficiaries...............................................................
66
Section 11.11 Entire
Agreement...........................................................................
66
Section 11.12
Severability...............................................................................
67
Section 11.13
Counterparts...............................................................................
67
Section 11.14 Limitation of
Liability....................................................................
67
Section 11.15 Disclosure
Schedules.......................................................................
67
Schedule 1A - Software
Schedule 1B - Used Intellectual Property
Schedule 2.2 - Retained Property
Schedule 2.3 - Additional Property
Schedule 6.1 - Ordinary Course of Business Exceptions
Schedule 6.3(c) - Access to Information
Schedule 6.12 - List of Transitional Services
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Schedule 7.1(c) - Government Approvals
Schedule 11.7(b) - Approved Holder
Seller Disclosure Schedule
Purchaser Disclosure Schedule
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<PAGE>
PURCHASE AGREEMENT
THIS
PURCHASE AGREEMENT (this "Agreement"), dated as of October 13,
2006,
is by and among MANDALAY RESORT GROUP, a Nevada corporation
("Seller"),
EDGEWATER HOTEL CORPORATION, a Nevada corporation (the "Edgewater
Company") and
COLORADO BELLE CORP., a Nevada corporation (the "Colorado Belle
Company") (the
Edgewater Company and the Colorado Belle Company each a "Company"
and
collectively, the "Companies"), on the one hand, and ACES HIGH
MANAGEMENT, LLC,
a Nevada limited liability company (or its assignee pursuant to
Section 11.7(b)
hereof) ("Purchaser"), on the other hand.
WHEREAS,
Seller is the sole shareholder of the Edgewater Company and the
Colorado Belle Company;
WHEREAS,
Seller desires to sell, and Purchaser desires to purchase, the
Edgewater Shares and the Colorado Belle Shares for the
consideration and on the
terms set forth in this Agreement;
WHEREAS,
Seller would not enter into this Agreement with Purchaser
unless
Purchaser Parent guarantees the obligations of Purchaser hereunder
concurrently
with the execution of this Agreement, and Purchaser Parent desires
to enter into
the Purchaser Guaranty as Purchaser Parent will derive benefits
from Purchaser
entering into this Agreement; and
WHEREAS,
capitalized terms used herein and not otherwise defined shall
have the meanings set forth in Article I hereof.
NOW,
THEREFORE, IN CONSIDERATION of the foregoing and the respective
representations, warranties, covenants, obligations and agreements
set forth
below, the Parties agree as follows:
ARTICLE I
DEFINITIONS
"Actual
Working Capital" shall mean the Working Capital of the
applicable
Company as of the Closing Date as set forth in such Company's Final
Statement.
"Additional Property" shall have the meaning ascribed in Section
2.3.
"Affiliate" means, with respect to any specified Person, any other
Person
that directly, or indirectly through one or more intermediaries,
controls, is
controlled by, or is under common control with, such specified
Person. For
purposes of this definition, "control" (including the terms
"controlled by" and
"under common control with") with respect to the relationship
between or among
two or more Persons, means the possession, directly or indirectly
or as a
trustee or executor, of the power to direct or cause the direction
of the
management and policies
<PAGE>
of a Person whether through the ownership of voting securities, as
trustee or
executor, by Contract or otherwise, including the ownership,
directly or
indirectly, of securities having the power to elect a majority of
the board of
directors or similar body governing the management and policies of
such Person;
provided, however, that notwithstanding the foregoing, in no event
shall the
term Affiliate, when used in the context of Seller or Parent,
include the
majority shareholder of Parent or any entities owned or controlled
by or under
common control with, the majority shareholder of Parent, other than
Parent and
each subsidiary of Parent.
"Affiliate
Contracts" shall have the meaning ascribed in Section 4.11(c).
"Agreement" shall have the meaning ascribed in the preamble.
"Allocation Statement" shall have the meaning ascribed in Section
9.7(a).
"Approved
Holder" shall have the meaning ascribed in Section 11.7(b).
"Asset
Allocation Statement" shall have the meaning ascribed in
Section
9.7(c).
"Assigned
Intellectual Property" means that Used Intellectual Property
that will be assigned to a Company at or prior to Closing, as more
particularly
identified on Schedule 2.3.
"Base
Price" shall have the meaning ascribed in Section 3.4.
"Business
Day" means any day that is not a Saturday, Sunday or other day
on which banks are required or authorized by Law to be closed in
the State of
Nevada.
"Claim
Notice" means written notification pursuant to Section 8.3(a) of
a
Third Party Claim as to which indemnity under Section 8.2 is sought
by an
Indemnified Party, enclosing a copy of all papers served, if any,
and specifying
the nature of and basis for such Third Party Claim and for the
Indemnified
Party's claim against the Indemnifying Party under Section 8.2,
together with
the amount or, if not then reasonably determinable, the estimated
amount,
determined in good faith, of the Loss arising from such Third Party
Claim.
"Cleanup"
means all actions required to (a) cleanup, remove, treat or
remediate Hazardous Materials in the indoor or outdoor environment
in accordance
with Environmental Laws, (b) perform pre-remedial studies and
investigations and
post-remedial monitoring and care or (c) respond to any requests by
a
Governmental Entity for information or documents relating to
cleanup, removal,
treatment or remediation or potential cleanup, removal, treatment
or remediation
of Hazardous Materials in the indoor or outdoor environment.
"Closing"
shall have the meaning ascribed in Section 3.1.
"Closing
Date" shall have the meaning ascribed in Section 3.1.
"Closing Date
Purchase Price" shall have the meaning ascribed in Section
3.4.
"Code"
means the Internal Revenue Code of 1986, as amended from time
to
time, including the rules and regulations promulgated
thereunder.
2
<PAGE>
"Colorado
Belle Company" shall have the meaning ascribed in the preamble.
"Colorado
Belle Shares" means the issued and outstanding shares in the
Colorado Belle Company.
"Commercially Reasonable Efforts" means the efforts that a prudent
Person
desirous of achieving a result would use in similar
circumstances.
"Companies" and "Company" shall each have the meaning ascribed in
the
preamble.
"Company
Employees" shall have the meaning ascribed in Section 6.11(d).
"Confidentiality Agreements" means the Confidentiality
Agreements
previously entered into by and between (i) Sher Capital, LLC and
Parent and (ii)
AAM Enterprises, LLC and Parent, each as amended from time to
time.
"Consumable Items" means all foodstuffs and nonalcoholic beverages
that
are located at the Real Property.
"Contract"
means any agreement, undertaking, obligation or understanding,
whether written or oral, or subject to conditions, including any
commitment,
letter of intent, mortgage, indenture, note, loan, guarantee,
lease, sublease,
license, contract, deed of trust, option agreement, right of first
refusal,
security agreement, development agreement, operating agreement,
management
agreement, service agreement, partnership agreement, joint venture
agreement,
limited liability agreement, put/call arrangement, purchase, sale,
merger or
other agreement, together with any amendments or modifications
thereto and
restatements thereof; provided that Contracts do not include Leases
respecting
Leased Real Property or Tenant Leases.
"Copyrights" means all works protectible under the Copyright Act of
1976,
17. U.S.C. 101 (as amended), whether registered or unregistered,
including
related moral rights and rights of attribution and integrity.
"Current
Assets" means, in respect of a Company and as of any applicable
date in question, (a) all assets of such Company that should be
classified as
current in accordance with generally accepted accounting
principles, plus, to
the extent not otherwise included, (b) all assets of such Company
that are
classified as current in accordance with the historical practices
of the Company
in the preparation of its financial statements, and (c) any
Additional Property
(other than net fixed assets) reflected on the books of an
Affiliate but not
reflected on the books of that Company, less (x) all accounts
receivable of that
Company from its Affiliates (other than another Company) to the
extent
classified as current and (y) any Retained Property reflected on
the books of
that Company to the extent classified as current. For the avoidance
of doubt,
Current Assets includes, with respect to the Companies, among other
things, cash
on hand in the cage, on the gaming floor, in retail outlets, in
food and
beverage outlets owned by the Companies and elsewhere within the
Companies'
respective businesses.
"Current
Liabilities" means, in respect of a Company and as of any
applicable date in question, all liabilities of such Company that
should be
classified as current in accordance with generally accepted
accounting
principles, plus, to the extent not otherwise included, all
liabilities
3
<PAGE>
of such Company that are classified as current in accordance with
the historical
practices of the Company in the preparation of its financial
statements, less
all accounts payable of that Company to its Affiliates (other than
another
Company) to the extent classified as current. For the avoidance of
doubt,
Current Liabilities shall include, among other things, all
outstanding chips and
tokens, progressive slot machine liability, table games having an
in-house
progressive jackpot feature, unpaid keno tickets, unredeemed race
and sports
book wagers and such other obligations that may arise that are
similar to the
foregoing.
"Customer
List" means a compilation of information regarding individual
players, customers or patrons who have had their table or slot play
tracked at
the Company's Business, and, with respect to the foregoing, appears
within the
Players Club.
"DCP II"
shall have the meaning ascribed in Section 6.11(b).
"Disclosure Schedules" shall mean the Seller Disclosure Schedule
and the
Purchaser Disclosure Schedule.
"Dispute
Notice" shall have the meaning ascribed in Section 3.5(a).
"Dispute
Period" means the period ending thirty days following receipt
by
an Indemnifying Party of either a Claim Notice or an Indemnity
Notice.
"Domain
Names" means any alphanumeric designation registered with any
domain name register for use as a Universal Resource Locator or
other electronic
address for a web site on the Internet.
"Edgewater
Company" shall have the meaning ascribed in the preamble.
"Edgewater
Shares" means the issued and outstanding shares in the
Edgewater Company.
"Elections" shall have the meaning ascribed in Section 9.7(b).
"Encumbrance" means any security interest, pledge, mortgage,
option, lien
(including environmental and Tax liens), assessment, lease, charge,
encumbrance,
adverse claim, preferential arrangement, equitable interest, right
of first
refusal or restriction of any kind, including any restriction on
the use,
voting, transfer, receipt of income or other exercise of any
attributes of
ownership.
"Environmental Claim" means any claim, action, or cause of action
by any
Person, or investigation by a Governmental Entity, alleging
Liability (including
Liability for Cleanup costs, governmental response costs, natural
resources
damages, property damages, or personal injuries) arising out of,
based on, or
resulting from, (a) the presence, Release or threatened Release of
any Hazardous
Materials at a location, currently or formerly owned or operated by
the Company
or at any third party location where the Company sent, or caused to
be sent,
Hazardous Materials or (b) any violation, or alleged violation, of
any
Environmental Law.
"Environmental Laws" means all federal, state and local Laws
relating to
pollution or protection of human health or the environment,
including Laws
relating to Releases or threatened
4
<PAGE>
Releases of Hazardous Materials, the manufacture, processing,
distribution, use,
treatment, storage, Release, transport or handling of Hazardous
Materials,
record keeping, notification, disclosure and reporting requirements
respecting
Hazardous Materials.
"ERISA"
means the Employee Retirement Income Security Act of 1974, as
amended from time to time, including the rules and regulations
promulgated
thereunder.
"ERISA
Affiliate" shall have the meaning ascribed in Section 4.14(a).
"Estimated
Closing Date" shall have the meaning ascribed in Section 3.7.
"Estimated
Working Capital" shall have the meaning ascribed in Section
3.4.
"Estimated
Working Capital Statement" and "Estimated Working Capital
Statements" shall each have the meaning ascribed in Section
3.4.
"Exchange
Act" means the Securities Exchange Act of 1934, as amended from
time to time, including the rules and regulations promulgated
thereunder.
"Extension
Payment(s)" shall have the meaning ascribed in Section 3.7.
"FCC"
means the Federal Communications Commission.
"FF&E"
means all furniture, fixtures and equipment owned or leased by
either Company in connection with its businesses, including floor
coverings,
pictures, and furniture located within the Company's Real Property,
and all
Operating Equipment, and all other equipment used in the operation
of the
casinos, kitchens, dining rooms and bars, cleaning equipment,
office equipment,
machinery, vehicles, computers and other data processing hardware,
special
lighting and other equipment of a like nature, with such additions
and deletions
as may occur in the Ordinary Course of Business.
"Final
Purchase Price" means the Closing Date Purchase Price as
adjusted
pursuant to Section 3.5 and 3.6.
"Final
Statement" shall have the meaning ascribed in Section 3.5(a)
and
Section 3.5(b).
"FIRPTA"
shall mean the Foreign Investment in Real Property Tax Act, as
amended from time to time, including the rules and regulations
promulgated
thereunder.
"Foreign
Corrupt Practices Act" shall mean the Foreign Corrupt Practices
Act of 1977, as amended, from time to time, including the rules and
regulations
promulgated thereunder.
"GAAP"
means United States generally accepted accounting principles
and
practices as in effect from time to time.
"Gaming
Authorities" means, collectively, (a) the Nevada Gaming
Commission, (b) the Nevada State Gaming Control Board, (c) the New
Jersey Casino
Control Commission, (d) the New Jersey Division of Gaming
Enforcement, (e) the
Mississippi Gaming Commission, (f) the
5
<PAGE>
Michigan Gaming Control Board, (g) the Illinois Gaming Board, (h)
the New York
Division of Lottery, and (i) any other Governmental Entity that
holds
regulatory, licensing or permit authority over gambling, gaming or
casino
activities conducted or proposed to be conducted by the MGM
Entities or any of
their Affiliates within its jurisdiction.
"Gaming
Laws" means any federal, state, local or foreign statute,
ordinance, rule or regulation governing or relating to the
ownership of the
Company and the gambling, gaming or casino activities and
operations of the MGM
Entities or any of their Affiliates, in each case as amended, from
time to time.
"Gaming
Licenses" means all licenses, permits, approvals,
authorizations,
registrations, findings of suitability, waivers and exemptions,
including any
condition or limitation placed thereon, that are necessary for each
Company to
own and operate its gaming facilities and related amenities issued
under the
applicable Gaming Laws.
"Governmental Approvals" means all (a) Gaming Licenses, Liquor
Licenses
and any other permit, license, certificate, franchise, concession,
approval,
consent, ratification, permission, clearance, confirmation,
endorsement, waiver,
certification, filing, franchise, notice, variance, right,
designation, rating,
registration, qualification, authorization or order that is or has
been issued,
granted, given or otherwise made available by or under the
authority of any
Governmental Entity or pursuant to any Law and (b) rights under any
Contract
with any Governmental Entity that relates to or is used in a
Person's business
or operations.
"Governmental Entity" means any (a) nation, principality,
state,
commonwealth, province, territory, county, municipality, district
or other
jurisdiction of any nature anywhere in the world, (b) governmental
or
quasi-governmental entity of any nature, including any governmental
division,
subdivision, department, agency, bureau, branch, office,
commission, council,
board, instrumentality, officer, official, representative,
organization, taxing
authority or unit and any court or other tribunal (foreign,
federal, state or
local), or (c) Person, or body exercising, or entitled to exercise,
any
executive, legislative, judicial, administrative, regulatory,
police, military
or taxing authority or power of any nature, including the Gaming
Authorities.
"Governmental Order" means any order, writ, judgment, injunction,
decree,
stipulation, determination, or award entered by or with any
Governmental Entity.
"Hazardous
Materials" means all substances defined or regulated as
Hazardous Substances, Oils, Pollutants or Contaminants in the
National Oil and
Hazardous Substances Pollution Contingency Plan, 40 C.F.R. Section
300.5,
including toxic mold and friable asbestos.
"HSR Act" means the
Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended from time to time, including the rules and regulations
promulgated
thereunder.
"Improvements" shall have the meaning ascribed in Section
4.8(d).
"Indebtedness" means, with respect to a Person without duplication,
(a)
all indebtedness for borrowed money, (b) all indebtedness for the
deferred
purchase price of property or services (other than property,
including
inventory, and services purchased, trade payables, other expense
accruals and
deferred compensation items arising in the Ordinary Course of
Business), (c) all
6
<PAGE>
obligations evidenced by notes, bonds, debentures or other similar
instruments
(other than performance, surety and appeal bonds arising in the
Ordinary Course
of Business in respect of which such Person's liability remains
contingent), (d)
all indebtedness created or arising under any conditional sale or
other title
retention agreement with respect to property acquired (even though
the rights
and remedies of the seller or lender under such agreement in the
event of
default are limited to repossession or sale of such property), (e)
all
obligations under leases that have been or should be, in accordance
with GAAP,
recorded as capital leases, to the extent required to be so
recorded, (f) all
reimbursement, payment or similar obligations, contingent or
otherwise, under
acceptance, letter of credit or similar facilities, (g) all
indebtedness of
others referred to in clauses (a) through (f) above guaranteed
directly or
indirectly by a Person, or in effect guaranteed directly or
indirectly by a
Person through a Contract, to: (i) pay or purchase such
indebtedness or to
advance or supply funds for the payment or purchase of such
indebtedness, (ii)
purchase, sell or lease (as lessee or lessor) property, or to
purchase or sell
services, primarily for the purpose of enabling the debtor to make
payment of
such indebtedness, (iii) supply funds to or in any other manner
invest in the
debtor (including any agreement to pay for property or services
irrespective of
whether such property is received or such services are rendered),
or (iv)
otherwise assure a creditor against loss in respect of such
indebtedness, and
(h) all indebtedness referred to in clauses (a) through (g) above
secured by (or
for which the holder of such indebtedness has an existing right,
contingent or
otherwise, to be secured by) any Encumbrance upon or in property
(including
accounts and Contract rights) owned by a Person, even though the
Person may not
have assumed or become liable for the payment of such indebtedness,
and
including in clauses (a) through (h) above any accrued and unpaid
interest
thereon.
"Indemnified Party" means a Purchaser Indemnified Party or a
Seller
Indemnified Party, as the case may be.
"Indemnifying Party" means the Seller Indemnifying Parties or
the
Purchaser Indemnifying Parties, as the case may be.
"Indemnity
Notice" means written notification pursuant to Section 8.3(b)
of a claim for indemnity under Article VII by an Indemnified Party,
specifying
the nature of and basis for such claim, together with the amount
or, if not then
reasonably determinable, the estimated amount, determined in good
faith, of the
Loss arising from such claim.
"Independent Accounting Firm" shall have the meaning ascribed in
Section
3.5(b).
"Infringement" means a violation of Intellectual Property
rights.
"Intellectual Property" means all Copyrights, Customer Lists,
Domain
Names, Patents, Trademarks, and Trade Secrets.
"Intercompany Account Settlement" shall have the meaning ascribed
in
Section 6.5.
"IP
Agreements" means all Contracts or court decisions, orders or
judgments, that are binding on the Company and that contain
provisions relating
to the ownership or use of Owned Intellectual Property or Used
Intellectual
Property.
7
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"IP Claim"
means any claim, demand, dispute, lawsuit, arbitration,
opposition, interference, cancellation or other adversarial
proceeding
concerning alleged Infringement respecting the validity,
registrability,
enforceability, ownership or Use of Intellectual Property.
"IP
Enforcement Documents" means all Contracts, outstanding
decrees,
orders, judgments, settlement agreements or stipulations to which
the Company is
a party or otherwise bound (whether oral or written, and whether
between the
Company and an independent Person or inter-corporate) that contain
provisions:
(a) covenanting not to sue any Person for Infringement of any Owned
Intellectual
Property or Used Intellectual Property; or (b) restricting the
Company's Use of
Owned Intellectual Property or Used Intellectual Property.
"IRS"
shall mean the Internal Revenue Service.
"Law" and
"Laws" means all laws, statutes, rules, regulations, ordinances
and other pronouncements having the effect of law of the United
States, any
foreign country or any domestic or foreign state, county, city or
other
political subdivision or of any Governmental Entity, including all
Gaming Laws.
"Leased
Real Property" shall have the meaning ascribed in Section
4.8(a).
"Leases"
means all leases, ground leases, subleases or other agreements,
including all amendments, extensions, renewals, guaranties or other
agreements
with respect to the Leased Real Property, but excluding any lease
or sublease as
to which a Company is the lessor or sublessor.
"Liabilities" means all debts, obligations and other liabilities of
a
Person (whether absolute, accrued, contingent, fixed or otherwise,
or whether
due or to become due), including those arising under any Law,
action,
investigation, inquiry or order and those arising under any
Contract and
"Liability" means any one of them.
"Licensed
Parties" shall have the meaning ascribed in Section 5.5.
"Licensing
Affiliates" shall have the meaning ascribed in Section 5.5.
"Liquor
Assets" means the inventory of alcoholic beverages at the Real
Property.
"Liquor
Licenses" means all those certain "off sale," "portable bar"
and
other alcoholic beverage licenses issued by Governmental Entities
to the Company
pursuant to which the sale of alcoholic beverages is permitted in
the
restaurants, bars, function rooms and guest rooms of the hotels
owned by a
Company.
"Loss"
means any action, cost, damage, Liability, loss, injury,
penalty,
or obligation of any kind or nature, including interest, penalties,
fines,
legal, accounting, and other professional fees and expenses
incurred in the
investigation, collection, prosecution, determination and defense
thereof,
amounts paid in settlement, any incidental or consequential damages
and any
punitive damages payable to third parties that may be imposed on or
otherwise
incurred or suffered and which give rise to a valid claim for
indemnification
under ARTICLE VIII.
8
<PAGE>
"Material
Adverse Effect" means any circumstance, development, change in,
or effect on a Company that, individually or in the aggregate with
any other
circumstances, developments, changes in, or effects on, a Company
is, or is
reasonably expected to be, directly or indirectly, materially
adverse to (a) the
overall business and financial condition of the Companies taken as
a single
enterprise, or (b) the ability of Seller to consummate the
transactions
contemplated by this Agreement. For the avoidance of doubt, a
circumstance,
development, change, or effect on the Companies is not to be
considered in
determining whether there has been a Material Adverse Effect if (i)
such
circumstance, development or change affects the gaming industry
generally, (ii)
such circumstance, development, change or effect is the result of
general
economic conditions, or (iii) such circumstance, development,
change or effect
results from any act of terrorism, commencement or escalation of
armed
hostilities in the U.S. or internationally or declaration of war by
the U.S.
Congress. Accordingly, a Material Adverse Effect does not include
matters such
as legal, regulatory, economic, industry, political, industrial,
climatic,
geographic or demographic conditions, factors, changes or
circumstances or
financial, banking or capital market changes which are related to
companies,
businesses or premises generally (domestically or internationally)
or to
companies, businesses or premises in the gaming, recreational,
resort,
entertainment, leisure or similar sectors within the State of
Nevada, throughout
the United States or internationally.
"Material
Contracts" shall have the meaning ascribed in Section 4.11(a).
"MGM
Entities" means Seller and, until the Closing, the Colorado
Belle
Company and the Edgewater Company.
"MGM Group
Property" means any property operated by Parent or any of its
Affiliates other than either Company.
"Multiemployer Plan" means the Construction Industry and Carpenters
Joint
Pension Trust Fund.
"New
Plans" shall have the meaning ascribed in Section 6.11(d).
"NLRA"
means the National Labor Relations Act of 1947, as amended from
time to time, including the rules and regulations promulgated
thereunder.
"NLRB"
means the National Labor Relations Board established pursuant
to
the NLRA.
"Notifying
Party" shall have the meaning ascribed in Section 6.6(a).
"NRS"
means the Nevada Revised Statutes, as amended from time to
time,
including the rules and regulations promulgated thereunder.
"Old
Plans" shall have the meaning ascribed in Section 6.11(d).
"Operating
Equipment" means all items owned or leased by a Company and
used in its business, including in the operation or maintenance of
its Real
Property, including all specialized casino equipment, such as slot
machines,
cards, poker chips, gaming devices, dice, baccarat chips, gaming
tables,
pneumatic stools, drop buckets, cans and racks, tokens, token
racks, card
9
<PAGE>
shuffler devices and accessories, change sorters, pit stands,
counting
equipment, roulette table covers, casino and game table signage,
cage and game
tables supplies, and all other gaming equipment relating to its
business, and
including food service preparation utensils, chinaware, glassware,
silverware
and hollowware, food and beverage service equipment, uniforms and
also including
consumable supplies for housekeeping, engineering, accounting and
office use,
together with paper supplies and miscellaneous general supply
items.
"Ordinary
Course of Business" means an action taken by a Person if (a)
such action is consistent with the past practices of such Person
and is taken in
the normal day-to-day operations of such Person and (b) such action
is not
required to be authorized by the board of directors of such Person
(or by any
Person or group of Persons exercising similar authority) and is not
required to
be specifically authorized by the parent company (if any) of such
Person.
"Owned
Intellectual Property" means all Intellectual Property that is
owned exclusively by a Company.
"Owned
Real Property" shall have the meaning ascribed in Section
4.8(a).
"Parent"
means MGM MIRAGE, a Delaware corporation.
"Parties"
means Seller, the Edgewater Company, the Colorado Belle Company
and Purchaser.
"Patents"
means all patents, whether issued or pending, and patentable
inventions.
"Permitted
Exceptions" means the matters set forth in Section 4.8(a) of
the Seller Disclosure Schedule.
"Person"
means an individual, corporation, partnership, limited
liability
company, joint stock company, joint venture, association, trust or
other entity
or organization, including a Governmental Entity.
"Plans"
shall have the meaning ascribed in Section 4.14(a).
"Policies"
shall have the meaning ascribed in Section 4.19.
"Players
Club" means the players club database maintained on the player
database system utilized by the Companies.
"Pre-Closing Period" shall have the meaning ascribed in Section
9.1(a)(i).
"Pre-Closing Period Tax Returns" shall have the meaning ascribed
in
Section 9.2(b).
"Proposed
Assignee" shall have the meaning ascribed in Section 11.7(b).
"Purchaser" shall have the meaning ascribed in the preamble.
"Purchaser
Disclosure Schedule" shall have the meaning ascribed in ARTICLE
V.
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<PAGE>
"Purchaser
Group" shall have the meaning ascribed in Section 6.11(d).
"Purchaser
Guaranty" means that certain Guaranty of even date herewith
executed by Edward Sher and Mona Soderstrom Sher, as trustees for
the Mona
Soderstrom Sher Trust, and Austi, LLC, a Nevada limited liability
company,
jointly and severally guarantying all of Purchaser's obligations
hereunder.
"Purchaser
Indemnified Parties" means Purchaser, its respective Affiliates
and, after the Closing, the Companies and their respective
directors, managers,
officers, employees, agents and representatives.
"Purchaser
Indemnifying Parties" means Purchaser, its respective
Affiliates and, after the Closing, the Companies.
"Purchaser
Parent" shall have the meaning ascribed in the preamble.
"Purchaser
Termination Fee" shall have the meaning ascribed in Section
6.14(b).
"Real
Property" means Owned Real Property and Leased Real Property of
either Company, as the context may require.
"Recipient" shall have the meaning ascribed in Section 9.4(a).
"Release"
means any release, spill, emission, discharge, leaking,
pumping,
injection, deposit, disposal, dispersal, leaching or migration into
the indoor
or outdoor environment (including ambient air, surface water,
groundwater and
surface or subsurface strata) of Hazardous Materials in, at, on or
under the
property, including the movement of Hazardous Materials through or
in the air,
soil, surface water, groundwater or real property.
"Release
of Guaranties" shall have the meaning ascribed in Section 6.16.
"Rent
Roll" shall have the meaning ascribed in Section 4.8(c).
"Resolution Period" means the period ending thirty days following
receipt
by an Indemnified Party of a written notice from an Indemnifying
Party stating
that it disputes all or any portion of a claim set forth in an
Indemnity Notice.
"Retained
Property" shall have the meaning ascribed in Section 2.2.
"SEC"
shall mean the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended from
time to
time, including the rules and regulations promulgated
thereunder.
"Seller"
shall have the meaning ascribed in the preamble.
"Seller
Disclosure Schedule" shall have the meaning ascribed in ARTICLE
IV.
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<PAGE>
"Seller
Indemnified Parties" means Parent, Seller and their respective
Affiliates, and their respective members, partners, directors,
officers,
employees, agents and representatives.
"Seller
Indemnifying Parties" means Seller.
"Seller
Termination Fee" shall have the meaning ascribed in Section
6.14(a).
"SERP II"
shall have the meaning ascribed in Section 6.11(b).
"Shares"
means the Colorado Belle Shares and/or the Edgewater Shares, as
the context may require.
"Software"
means those computer programs (whether in source code or object
code form), databases, compilations of data, and all documentation
related to
any of the foregoing, more particularly as set forth on Schedule
1A.
"SOXA"
means the Sarbanes-Oxley Act of 2002, as amended from time to
time,
including the rules and regulations promulgated thereunder.
"Straddle
Period" shall have the meaning ascribed in Section 9.1(a)(i).
"Straddle
Period Tax Returns" shall have the meaning ascribed in Section
9.2(a).
"Subsidiary" of any Person means any corporation, partnership,
joint
venture, limited liability company, trust, estate or other Person
of which (or
in which), directly or indirectly, more than 50% of (a) the issued
and
outstanding capital stock having ordinary voting power to elect a
majority of
the board of directors of such corporation (irrespective of whether
at the time
capital stock of any other class or classes of such corporation
shall or might
have voting power upon the occurrence of any contingency), (b) the
interest in
the capital or profits of such partnership, joint venture or
limited liability
company or other Person or (c) the beneficial interest in such
trust or estate,
is at the time owned by such first Person, or by such first Person
and one or
more of its other Subsidiaries or by one or more of such Person's
other
Subsidiaries.
"Tangible
Personal Property" means all items of tangible personal
property, whether owned or leased, including: (a) FF&E; (b)
Consumable Items;
(c) Liquor Assets; and (d) all other items of tangible personal
property that
are owned by the Company and located at, and used in the operation
of, its
business.
"Tangible
Personal Property Leases" shall have the meaning ascribed in
Section 4.9.
"Tax
Claim" shall have the meaning ascribed in Section 9.4(a).
"Tax
Returns" means all information or filing required to be supplied
to
any taxing authority or jurisdiction (foreign or domestic) with
respect to
Taxes, including attachments thereto, declarations, disclosures,
schedules,
estimates and elections and amendments thereof, including
information returns.
12
<PAGE>
"Taxes"
means any and all taxes, charges, customs, fees, levies,
duties,
Liabilities, impositions or other assessments, including income,
gross receipts,
profits, excise, real or personal property, environmental,
recapture, sales,
use, value-added, withholding, social security, retirement,
employment,
unemployment, occupation, service, license, net worth, payroll,
franchise,
gains, stamp, transfer and recording taxes, general or special
assessments, fees
and charges, imposed by the IRS or any other taxing authority
(whether domestic
or foreign including any state, county, local or foreign government
or any
subdivision or taxing agency thereof (including a United States
possession)),
and all taxes, fees and other charges assessed under the Gaming
Laws (excluding
any and all fees, charges, costs and expenses assessed against
Purchaser or any
of its principals by the Gaming Authorities in connection with the
filing,
investigation and/or processing of the applications of Purchaser
and any of its
principals to obtain all Governmental Approvals necessary to own
and operate a
Company and its facilities and related amenities), whether computed
on a
separate, consolidated, unitary, combined or any other basis; and
any interest,
fines, penalties, additions to tax, or additional amounts
attributable to, or
imposed upon, or with respect to, any such taxes, charges, customs,
fees,
levies, duties, Liabilities, impositions or other assessments.
"Tenant
Leases" means all leases and subleases of Real Property as to
which a Company is the lessor or sublessor.
"Termination of Affiliate Contracts" shall have the meaning
ascribed in
Section 6.13.
"Third
Party Claim" shall have the meaning ascribed in Section 8.3(a).
"Trademarks" means all indicia of the source or origin of goods
or
services in commerce (including, but not limited to, trademarks,
service marks,
trade names, slogans, logos and trade dress), whether registered
or
unregistered, together with associated goodwill.
"Trade
Secrets" means all information that qualifies for trade secret
protection under the Nevada Trade Secrets Act, NRS 600A.010 et
seq.
"Transfer
Taxes" shall have the meaning ascribed in Section 6.21.
"Transitional Services
Agreement" shall have the meaning ascribed in
Section 6.12.
"Trust
Agreement" shall have the meaning ascribed in Section 6.11.
"Use"
means: (1) with respect to works protectible by copyright, to
copy,
distribute, publicly display, publicly perform, or make derivative
works based
on the work; (2) with respect to Trademarks, to use in commerce to
denote the
source or origin of goods or services; (3) with respect to patented
inventions,
to make, use, sell (or offer to make, use or sell) import or
export, patented
invention; (4) with respect to trade secrets, means used in the
course of
business; and (5) to grant to others the right or license to do any
of the
foregoing.
"Used
Intellectual Property" means Intellectual Property that is: (1)
owned or controlled by Parent or its Affiliates other than a
Company or any
Person other than a Company, and (2) Used or held for Use in the
business of a
Company, all as more particularly set forth on Schedule 1B.
Assigned
Intellectual Property is a subset of Used Intellectual
Property.
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<PAGE>
"WARN Act"
shall mean the Worker Adjustment and Retraining Notification
Act of 1988, as amended from time to time, including the rules and
regulations
promulgated thereunder.
"Working
Capital" as to a Company means Current Assets minus Current
Liabilities of that Company.
"Working
Capital Statement" and "Working Capital Statements" shall each
have the meaning ascribed in Section 3.5(a).
ARTICLE II
PURCHASE AND SALE OF SHARES
Section 2.1 Purchase and Sale of Shares.
On and
subject to the terms and conditions of this Agreement,
Purchaser
agrees to purchase from Seller, and Seller agrees to sell to
Purchaser, the
Shares for the Final Purchase Price. At the Closing, the Shares
shall be
transferred or otherwise conveyed to Purchaser free and clear of
all
Encumbrances, excepting only restrictions on the subsequent
transfer of the
Shares or as may be imposed under applicable Laws.
Section 2.2 Retained Property.
Notwithstanding anything to the contrary contained in this
Agreement, from
and after the Closing, Seller shall retain all of its right, title
and interest
in and to each and all of the assets set forth on Schedule 2.2
(collectively,
the "Retained Property"), which Retained Property is not a part of
the
transactions contemplated hereby, whether or not such Retained
Property is
presently owned by a Company. Prior to the Closing Date, each
Company shall
assign to Parent or an Affiliate designated by Parent, all right,
title and
interest of such Company in such Retained Property. All items,
whether located
at a Company's Real Property, or otherwise owned by a Company, that
constitute
Retained Property, may be removed on or prior to the Closing Date
or within
sixty (60) days after the Closing Date by Seller, Parent or any of
their
respective Affiliates. Purchaser, and from and after the Closing,
the Companies,
shall take such further actions and provide such further
instruments as may be
reasonably requested by the MGM Entities to confirm the transfer of
the Retained
Property from such Company to Parent or its Affiliate and in
effecting the
removal of any Retained Property from any Real Property.
14
<PAGE>
Section 2.3 Additional Property.
Schedule
2.3 identifies certain property that is presently used by a
Company and intended to be a part of the transactions contemplated
by this
Agreement, but is presently owned by an Affiliate, including
without limitation,
Assigned Intellectual Property (collectively, the "Additional
Property"). Prior
to or concurrently with the Closing, Seller shall cause its
Affiliates to
transfer the Additional Property to the Company identified opposite
such item on
Schedule 2.3.
ARTICLE III
CLOSING; PURCHASE PRICE
Section 3.1 Closing.
The
closing of the purchase and sale of the Shares (the "Closing")
shall
take place at the executive offices of Parent, located at 3950 Las
Vegas
Boulevard South, Las Vegas, Nevada 89119 (or such other location
agreed upon in
writing by Purchaser and Seller) at such time to be agreed upon by
Purchaser and
Seller on the fifth (5th) Business Day (the "Closing Date") after
satisfaction
or, if permissible, waiver of the conditions set forth in ARTICLE
VII (other
than those conditions that by their nature are to be satisfied at
the Closing),
unless another date is agreed to in writing between Purchaser and
Seller.
Section 3.2 Deliveries at Closing.
(a) In
connection with the sale of the Shares at the Closing, Seller
shall
deliver or cause to be delivered the following to Purchaser at the
Closing:
(i) an executed receipt for the Closing Date Purchase Price;
(ii) certificates representing the Shares of each Company,
together
with
appropriate instruments of transfer in a form mutually
reasonably
satisfactory to Seller and Purchaser for transfer on the books of
each
Company;
(iii) copies of the publicly filed organizational documents of
each
Company,
certified as of a recent date prior to the Closing Date by the
Secretary
of State of the State of Nevada;
(iv) a copy, certified by an officer of the relevant Company, of
the
bylaws of
each Company;
(v) a copy, certified by an officer of Seller of the resolutions
of
its Board
of Directors authorizing the execution and delivery of this
Agreement
and consummation of the transactions contemplated by this
Agreement,
which resolutions shall be in full force and effect and not
revoked;
15
<PAGE>
(vi) a duly executed certificate of an officer of Seller pursuant
to
Section
7.3(c);
(vii) a good standing certificate (or its equivalent) for each
Company
issued by (i) the Secretary of State of the State of Nevada
(dated
within a
recent date prior to the Closing Date), and (ii) of such other
applicable
jurisdictions where such Company is qualified or licensed to do
business or own,
lease or operate property making such qualification or
licensing
necessary (dated as of a date within a recent date prior to the
Closing
Date);
(viii) a bring down good standing certificate (or its
equivalent),
dated as of the
Closing Date, of the certificates delivered pursuant to
Section
3.2(a)(vii), or a verbal confirmation from the Secretary of
State
of the
applicable jurisdiction on the Closing Date with respect to
such
good
standing;
(ix) the stock ledgers and minute books of each Company;
(x) duly executed resignations effective as of the Closing Date
from
such
directors and officers of the Company as Seller shall have
notified
Purchaser
in writing not less than one Business Day prior to the Closing
Date;
(xi) duly executed copies of documentation evidencing the
Termination of Affiliate Contracts;
(xii) evidence in form and substance mutually reasonably
satisfactory to Seller and Purchaser that the Release of Guaranties
occurs
at the
Closing;
(xiii) an executed counterpart of the Transitional Services
Agreement;
(xiv) duly executed copies of the assignment and/or license
agreements
as required by Section 6.9(d), including evidence of the filing
of all
assignments with the United States Patent and Trademark Office,
United
States Copyright Office and any applicable domain name
registries
and any
other documents executed by Parent or its Affiliates conveying
the
right to
Use the Used Intellectual Property to Purchaser;
(xv) FIRPTA certificate in form and substance reasonably
satisfactory to Purchaser; and
(xvi) All other previously undelivered documents, agreements,
instruments, writings and certificates, and such other
documents,
agreements, instruments, writings and certificates as Purchaser
may
reasonably
request to effect the transactions contemplated by this
Agreement,
in form and substance reasonably satisfactory to Purchaser.
(b) In
connection with the purchase of the Shares at the Closing,
Purchaser shall deliver or cause to be delivered the following to
Seller, at the
Closing:
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<PAGE>
(i) the Closing Date Purchase Price in immediately available
funds
by wire
transfer to an account designated by Seller in writing to
Purchaser;
(ii) a receipt for delivery of the Shares of each Company, duly
executed
by an officer of Purchaser;
(iii) a copy of the organizational documents of each of Purchaser
,
certified
as of a recent date prior to the Closing Date by the Secretary
of State
of the State of Nevada;
(iv) copies, certified by an officer of Purchaser, of their
respective
bylaws;
(v) copies, certified by an officer of Purchaser, of the
resolutions
of
Purchaser's manager (or board of directors, as the case may be)
authorizing the execution and delivery of this Agreement and
the
consummation of the transactions contemplated by this Agreement,
which
resolutions shall be in full force and effect and not revoked;
(vi) a duly executed certificate of an officer of Purchaser
pursuant
to Section
7.2(c);
(vii) a good standing certificate (or its equivalent) of
Purchaser
issued by
the Secretary of State of the State of Nevada, dated as of a
recent
date prior to the Closing Date;
(viii) a bring down good standing certificate (or its
equivalent),
dated as
of the Closing Date, of the certificate delivered pursuant to
Section
3.2(b)(vii), or a verbal confirmation from the Secretary of
State
of the
State of Nevada on the Closing Date with respect to such good
standing;
(ix) a receipt for delivery of the books of each Company, duly
executed
by an officer of Purchaser;
(x) an executed counterpart of the Transitional Services
Agreement;
(xi) the duly executed Purchaser Guaranty;
(xii) evidence reasonably satisfactory to Seller that all
Gaming
Licenses
required to be obtained by Purchaser or any of its directors,
officers,
employees, stockholders and Affiliates in connection with the
acquisition of the Shares have been obtained and are in full force
and
effect;
and
(xiii) all other previously undelivered documents, agreements,
instruments, writings and certificates, and such other
documents,
agreements, instruments, writings and certificates as Seller
may
reasonably
request to effect the transactions contemplated by this
Agreement,
in form and substance reasonably satisfactory to Seller.
17
<PAGE>
Section 3.3 Purchase Price Payment at Closing.
In
consideration of the purchase and sale of the foregoing, at the
Closing, Purchaser shall pay to Seller the Closing Date Purchase
Price (less any
sums previously paid to Seller pursuant to Section 3.7), if any,
subject to
further adjustment post-Closing pursuant to Sections 3.5 and 3.6;
provided that
if no adjustment is made post-Closing to the Closing Date Purchase
Price
pursuant to Sections 3.5 and 3.6, the Closing Date Purchase Price
shall be the
Final Purchase Price for purposes of this Agreement.
Section 3.4 Calculation of Closing Date Purchase Price.
Two days
prior to the Closing, Seller shall deliver to Purchaser the
Estimated Working Capital Statement for each Company (each an
"Estimated Working
Capital Statement" and collectively the "Estimated Working Capital
Statements").
Each Estimated Working Capital Statement shall be prepared by
Seller using the
same types of management judgments, estimates, forecasts, policies,
opinions and
allocations (including reserve calculations) that have historically
been used in
the preparation of such Company's financial statements. The amount
of Working
Capital of such Company set forth in its Estimated Working Capital
Statement
shall hereinafter be referred to as the "Estimated Working
Capital." Purchaser
(and its independent accountants) shall be afforded the opportunity
to review
each Estimated Working Capital Statement. The "Closing Date
Purchase Price"
shall be equal to the sum of Two Hundred Million Dollars
($200,000,000) (the
"Base Price") plus the amount of aggregate Estimated Working
Capital (if greater
than zero), or minus the amount of aggregate Estimated Working
Capital (if less
than zero).
Section 3.5 Adjustment Procedures to the Closing Date Purchase
Price.
(a) As
promptly as practicable, but no later than twenty-five (25)
days
after the Closing, Purchaser shall prepare and deliver to Seller a
statement
setting forth the Working Capital of each Company as of the Closing
(each a
"Working Capital Statement" and collectively the "Working Capital
Statements").
The Working Capital Statements shall be prepared by Purchaser using
the same
types of management judgments, estimates, forecasts, policies,
opinions and
allocations, including reserve calculations, that have historically
been used in
the preparation of each Company's financial statements. Following
the Closing,
Purchaser shall give Seller and any independent accountants of
Seller access at
all reasonable times to the properties, books, records and
personnel of the
Company relating to periods prior to the Closing for purposes of
reviewing the
Working Capital Statements. Seller shall have thirty (30) days
following receipt
of the Working Capital Statements in which to notify Purchaser in
writing of any
dispute of any item contained in any Working Capital Statement,
which notice
shall set forth in reasonable detail the basis for such dispute and
the Working
Capital figure proposed by Seller (the "Dispute Notice"). If Seller
fails to
notify Purchaser in writing of any dispute within such thirty-day
period, then
each Working Capital Statement shall be deemed to be a "Final
Statement." In the
event that Seller shall so notify Purchaser of any dispute on or
prior to such
thirtieth day, any amounts contained in the Working Capital
Statements that are
not disputed by Seller in the Dispute Notice shall be deemed to
have been
finally determined for purposes of calculating the Actual Working
Capital. For a
period of fifteen (15) days following the delivery
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of the Dispute Notice to Purchaser, an officer of each of Purchaser
and Seller
shall attempt to resolve in good faith the amounts disputed in the
Dispute
Notice. During such fifteen-day period, Purchaser shall be
permitted to review
the working papers of Seller and Seller's independent accountants
relating to
the Estimated Working Capital Statements and the Dispute Notice,
and Seller
shall be permitted to review the working papers of Purchaser and
Purchaser's
independent accountants relating to the Working Capital Statements.
Amounts
resolved by such attempts within such fifteen (15) day period shall
be deemed to
have been finally determined for purposes of calculating the Actual
Working
Capital.
(b) If
Purchaser and Seller are unable to resolve any such dispute
prior
to the end of such fifteen (15) day period, an accounting firm
mutually
acceptable to both Purchaser and Seller (the "Independent
Accounting Firm")
shall be deemed appointed by Purchaser and Seller to resolve such
dispute and
such determination shall be final and binding on the parties to
this Agreement.
If Purchaser and Seller cannot mutually agree on the selection of
the
Independent Accounting Firm, Purchaser and Seller shall submit to
such other
Person's independent accountants the name of a nationally
recognized accounting
firm which does not at the time and has not in the prior two years
provided
audit or other attestation services or diligence services in
connection with
this Agreement to any of the MGM Entities or Purchaser or any of
their
respective Affiliates, and the Independent Accounting Firm shall be
selected by
lot from these two firms by the independent accountants of
Purchaser and Seller.
The Independent Accounting Firm may not make any determination with
respect to
any matter not set forth in the Dispute Notice and the Independent
Accounting
Firm's determination shall not be more than the amount of the
Working Capital
set forth in the Dispute Notice or less than the amount of the
Working Capital
of the relevant Company as of the Closing Date set forth in the
relevant Working
Capital Statement. Each of Purchaser and Seller and their
respective independent
accountants shall give the Independent Accounting Firm access at
all reasonable
times to the properties, books, records and personnel of the
Company relating to
periods prior to the Closing for purposes of reviewing the
Estimated Working
Capital Statements, the Dispute Notice and the Working Capital
Statements and
calculating the Actual Working Capital. The Independent Accounting
Firm shall be
instructed to use every reasonable effort to perform its services
within thirty
days of submission of the Estimated Working Capital Statements, the
Dispute
Notice and the Working Capital Statements to it and, in any case,
as promptly as
practicable after such submission. Each Working Capital Statement,
as modified
by resolution of any disputes by Purchaser and Seller or by the
Independent
Accounting Firm, shall be deemed to be a "Final Statement."
(c)
Purchaser and Seller shall pay all expenses relating to the
engagement
of the Independent Accounting Firm in proportion to the percentage
of the dollar
value of the disputed items prevailed upon by each Person.
Purchaser and Seller
shall each pay all advisors' fees, charges and expenses incurred by
such Person
in connection with the dispute.
Section 3.6 Calculation and Payment of Final Purchase Price.
The
Closing Date Purchase Price shall be adjusted as follows: (i) if
the
aggregate Actual Working Capital is greater than the aggregate
Estimated Working
Capital, then the Closing Date Purchase Price shall be increased by
the amount
of such excess; or (ii) if the aggregate Actual Working Capital is
less than the
aggregate Estimated Working Capital, then the Closing Date
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Purchase Price shall be decreased by the amount of such deficiency
(in each such
event, the "Final Purchase Price").
To the
extent the aggregate Actual Working Capital is: (i) greater
than
the aggregate Estimated Working Capital, Purchaser shall, within
five days of
Purchaser's receipt of the Final Statements, deliver by wire
transfer of
immediately available funds to the account specified by Seller in
writing for
the Closing Date Purchase Price, an amount equal to such excess; or
(ii) less
than the aggregate Estimated Working Capital, Seller shall, within
five days of
Seller's receipt of the Final Statements, deliver by wire transfer
of
immediately available funds to an account specified by Purchaser in
writing (no
later than two Business Days prior to the expiration of such five
day period),
an amount equal to such deficiency, in either case without
interest.
Section 3.7 Additional Payments.
Purchaser
acknowledges and agrees that the Parties have agreed upon the
Purchase Price in part on the representations by Purchaser that it
will be able
to receive all necessary Gaming Licenses expeditiously, and that
the Closing
will be able to occur on or before the date that is six (6) months
from the date
hereof (as such date may be extended from time to time in
accordance with this
Section 3.7, the "Estimated Closing Date"). Purchaser may extend
the Estimated
Closing Date for up to three (3) consecutive thirty (30) day
periods by
providing Seller written notice thereof and payment of an Extension
Payment (as
hereinafter defined) on the respective dates set forth below. Each
"Extension
Payment" shall be equal to the sum of One Million Two Hundred Fifty
Thousand and
no/100 Dollars ($1,250,000.00) payable to Seller prior to the
commencement of
each requested thirty (30) day extension (each, an "Extension
Payment," and
collectively, the "Extension Payments"). The Extension Payments
shall be (i)
applied towards the Closing Date Purchase Price in the event the
Closing occurs,
(ii) applied towards the Termination Fee in the event the
Termination Fee
becomes due and payable, and (iii) otherwise disbursed pursuant to
the terms of
Article X hereof. Notwithstanding any provision to the contrary
contained
herein, in the event Purchaser shall receive the Purchaser
Termination Fee in
accordance with Section 6.14(b), Seller hereby acknowledges and
agrees to
immediately refund to Purchaser the amount of any Extension
Payments received by
Seller in accordance with this Section 3.7.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller
represents and warrants to Purchaser, except as expressly set
forth
herein and in the disclosure schedule delivered by Seller to
Purchaser before
the execution and delivery of this Agreement (the "Seller
Disclosure Schedule"),
as follows:
Section 4.1 Organization and Qualification.
Seller is
duly incorporated, validly existing and in good standing under
the laws of the State of Nevada and has all requisite corporate
power and
authority to carry on its business as (i) now being conducted and
as proposed to
be conducted prior to Closing, and (ii) is duly
20
<PAGE>
qualified or licensed to do business in each jurisdiction in which
the ownership
or use of its assets or conduct of its business requires it to be
so qualified,
except in the case of clause (i) or (ii), for such failure would
not have a
Material Adverse Effect.
Section 4.2 Ownership of Shares.
(a) Seller
is the record and beneficial owner of the Shares of each
Company and, except as set forth in Section 4.2(a) of the Seller
Disclosure
Schedule, the Shares of each Company are free and clear of all
Encumbrances,
excepting only restrictions on the subsequent transfer as may be
imposed under
applicable Laws. Section 4.2(a) of the Seller Disclosure Schedule
sets forth the
authorized Shares and the number of outstanding Shares for each
Company. The
Shares of each Company have been duly authorized, validly issued
and fully paid,
are non-assessable and have not been issued in violation of any
pre-emptive
rights, applicable Laws, the respective Company's articles of
organization or
the terms of any Contract to which any of the MGM Entities is a
party or bound.
There are no obligations, contingent or otherwise, to repurchase,
redeem (or
establish a sinking fund with respect to redemption) or otherwise
acquire all or
any portion of the Shares of either Company. There are no bonds,
debentures,
notes or other Indebtedness of such Company having voting rights
(or convertible
into securities having voting rights). Except as set forth in
Section 4.2(a) of
the Seller Disclosure Schedule, there are no other equity interests
or
securities of such Company reserved for issuance or any
outstanding
subscriptions, options, warrants, rights, "phantom" stock rights
(or other stock
appreciation rights or contractual rights, the value of which is
derived from
the financial performance of the Companies), convertible or
exchangeable
securities, stock appreciation rights, or other Contracts (other
than this
Agreement) granting to any Person any interest in or right to
acquire at any
time, or upon the happening of any stated event, any shares in such
Company
(whether issued or un-issued) or other equity interests or
securities of the
Company, or any interest in, exchangeable for, or convertible into,
shares in
such Company or other equity interests or securities of such
Company.
(b) The
Companies do not own directly or indirectly, of record or
beneficially, or have the right to acquire under any Contract, any
capital stock
or equity interests or any securities convertible, exchangeable,
redeemable or
exercisable into capital stock or equity interests of any other
Person (nor is
it a general partner or manager of any other Person).
Section 4.3
Authority; No Conflict; Required Filings and
Consents.
(a) Seller
has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions that are
contemplated by this
Agreement and to perform its obligations hereunder. The execution
and delivery
of this Agreement (and all related documents) by the MGM Entities
and the
performance by the MGM Entities of the transactions that are
contemplated by
this Agreement (and all related documents) have been duly
authorized by all
necessary corporate action on the part of the MGM Entities,
respectively. Except
as at that time made or obtained, as of the Closing Date, no
corporate act or
proceeding on the part of the MGM Entities or their respective
stockholders or
members will be necessary to authorize, execute, deliver and
perform this
Agreement (and all related documents) and consummate the
transactions
contemplated by this Agreement (and all related documents). This
Agreement (and
all related
21
<PAGE>
documents) has been duly executed and delivered by each of the MGM
Entities and,
assuming this Agreement (and all related documents) constitutes the
valid and
binding obligation of Purchaser (or such other parties thereto),
constitutes the
valid and binding obligation of each of the MGM Entities,
enforceable against
each of the MGM Entities in accordance with its terms, except as
such
enforceability may be limited by (i) bankruptcy, insolvency,
reorganization,
moratorium, fraudulent conveyance or other similar Laws now or
hereafter in
effect relating to creditors' rights generally and (ii) general
principles of
equity (regardless of whether enforcement is considered in a
proceeding at Law
or in equity).
(b) Except
as set forth in Section 4.3(b) of the Seller Disclosure
Schedule, the execution and delivery of this Agreement (and all
related
documents) by each of the MGM Entities does not, and the
consummation by each of
the MGM Entities of the transactions to which it is a party that
are
contemplated by this Agreement (and all related documents),
including the
Intercompany Account Settlement will not, (i) conflict with, or
result in any
violation or breach of, any provision of the articles of
organization,
certificate of incorporation or bylaws of the MGM Entities, as the
case may be,
(ii) conflict with, result in a breach of, constitute a default (or
an event
which with the giving of notice or lapse of time, or both, would
become a
default) under, require any notice, consent, approval or waiver
under, or give
to others any rights of termination, amendment, acceleration,
suspension,
revocation or cancellation of, or result in the creation or
continuance of any
Encumbrance on the Shares, any of the assets or properties of the
Company
pursuant to, any Contract, permit or obligation to which any of the
MGM Entities
is a party or by which any of the MGM Entities or any of their
respective assets
or properties is bound or (iii) conflict with or violate any Law or
Governmental
Order applicable to any of the MGM Entities or the Shares, any of
the assets or
properties of either Company, except where such conflict or
violation would not
have a Material Adverse Effect.
(c) Except
for (i) the filing of notification reports under the HSR Act,
(ii) any Governmental Approvals related to, or arising out of,
compliance with
(x) Gaming Laws and (y) Gaming Licenses, (iii) any Governmental
Approvals
related to, or arising out of, compliance with Liquor Licenses,
(iv) any
Governmental Approvals as may be required under applicable state
securities
Laws, (v) any Governmental Approvals as may be required under any
Laws
pertaining to any notification, disclosure or required approval
triggered by the
Closing or the transactions contemplated by this Agreement, and
(vi) the
satisfaction or waiver of the closing conditions in Section 7.1 and
Section 7.3
and the closing deliveries in Section 3.2, no Governmental
Approval, or consent,
approval, authorization or action by, notice to, filing with, or
waiver from,
any other Person is required in connection with the execution,
delivery and
performance by the MGM Entities of this Agreement and consummation
by the MGM
Entities of the transactions contemplated by this Agreement.
Section 4.4 Financial Information.
Section
4.4 of the Seller Disclosure Schedule contains (a) an audited
(i)
Supplemental Consolidating Balance Sheet Information of Parent,
including
Balance Sheet Information of each Company as of December 31, 2005
(each a
"Company Balance Sheet" and collectively the "Company Balance
Sheets"), and (ii)
Supplemental Consolidating Income Statement Information and
Supplemental
Consolidating Cash Flow Information of Parent, setting forth Income
Statement
Information and Cash Flow Information of each Company for the
eleven
22
<PAGE>
months ended December 31, 2005, audited by Deloitte & Touche
LLP, whose report
thereon is included therein (including all notes thereto); and (b)
an unaudited
(i) balance sheet of each Company as of June 30, 2006, and (ii)
income statement
of each Company for the six months ended June 30, 2006. The balance
sheet
information of each Company referenced in clauses (a)(i) and (b)(i)
of the
immediately preceding sentence is true, complete and accurate in
all material
respects, has been prepared in accordance with the books of account
and other
financial records of each Company, and presents fairly the assets,
liabilities
and financial condition of each Company as of the date thereof and,
with respect
to the audited balance sheet information in clause (a)(i), in
accordance with
GAAP. The income statement and cash flow information of each
Company referenced
in clauses (a)(ii) and (b)(ii) in this Section 4.4 is true,
complete and
accurate, has been prepared in accordance with the books of account
and other
financial records of each Company, and presents fairly the results
of operations
of such Company for the periods therein referred to and, with
respect to the
audited income statement and cash flow information in clause
(a)(ii), in
accordance with GAAP.
Section 4.5 No Undisclosed Liabilities.
Except as
set forth in Section 4.5 of the Seller Disclosure Schedule,
neither Company has any Liability that is not reflected or reserved
against on
its Company Balance Sheet or otherwise disclosed in the notes
thereto which
could have a Material Adverse Effect, other than Liabilities
incurred subsequent
to December 31, 2005 in the Ordinary Course of Business.
Section 4.6 Absence of Certain Changes or Events.
Except as
disclosed in Section 4.6 of the Seller Disclosure Schedule,
since December 31, 2005, and except as contemplated by or as
otherwise set forth
in this Agreement, the business and operations of each Company have
been
conducted only in the Ordinary Course of Business and, since such
date, there
has not been any Material Adverse Effect.
Section 4.7 Taxes.
Except as
set forth in Section 4.7 of the Seller Disclosure Schedule, to
the knowledge of Seller:
(a)
Parent, Seller or the relevant Company (i) has timely filed
(taking
into account all valid extensions of time for filing) with the
appropriate
taxing authorities all material Tax Returns that report the
activities of the
Companies required by Law to be filed by Parent, Seller or such
Company, as the
case may be, and (ii) each of Parent, Seller and the relevant
Company will
timely file any such returns required by Law to be filed (taking
into account
all valid extensions of time for filing) on or prior to the Closing
Date. Such
Tax Returns are (and, to the extent they will be filed prior to the
Closing
Date, will be) complete and accurate in all material respects.
Neither Company
has pending any request for an extension of time within which to
file Tax
Returns.
(b) No
federal, state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with regard
to any Taxes
or Tax Returns of either Company. Neither Company has received
notice of any
such pending audits or proceedings.
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<PAGE>
There are no outstanding waivers extending the statutory period of
limitation
relating to the payment of Taxes due from either Company.
(c)
Neither the IRS nor any other taxing authority (whether domestic
or
foreign) has asserted, or to the knowledge of the Company
threatened to assert,
against either Company any material deficiency or material claim
for Taxes.
(d) There
are no Encumbrances for Taxes upon any property or assets of
either Company, except for Encumbrances for Taxes not yet due and
payable and as
to which adequate reserves have been established on the financial
statements of
such Company.
(e)
Neither Company has any obligation under any Tax sharing agreement
or
similar arrangement with any other Person with respect to Taxes of
such other
Person.
(f)
Neither Company has received a written ruling from any taxing
authority.
(g) No
jurisdiction where a Company does not file a Tax Return has made
a
claim that such Company is required to file a Tax Return in such
jurisdiction.
(h) No
audit or other proceeding by any Governmental Authority is
pending
or threatened with respect to any Taxes due from or with respect to
the
Companies or any Tax Returns filed by or with respect to the
Companies. All
material Taxes that the Companies are, or were, requested by legal
requirements
to withhold or collect have been duly withheld or collected, and to
the extent
required, have been paid to the proper Government Authority.
Section 4.8 Real Property.
(a)
Section 4.8(a) of the Seller Disclosure Schedule identifies a
complete, accurate and current list, including the address or other
description,
and the identity of the holder of title, of all real property owned
by each
Company (including all land, and all interests in buildings,
structures,
improvements and fixtures located thereon and all easements and
other rights and
interests appurtenant thereto (the "Owned Real Property"), and
Section 4.8(a) of
the Seller Disclosure Schedule identifies a complete, accurate and
current list
of all real property leased or operated by each Company, including
the date of
each Lease, the expiration date of such Lease, the term of such
Lease, the
parties to such Lease, all renewal rights and options to purchase
and a
description of the demised premises thereunder (including all
leasehold,
subleasehold, ground leasehold, or other rights to use or occupy
any land,
buildings, structures, improvements, fixtures, or other interest in
real
property used in connection with such Company and the operation of
its business)
(collectively, the "Leased Real Property"). The Company is in
lawful possession
of the Real Property, subject only to Permitted Exceptions and
those matters
described in the Seller Disclosure Schedule.
(b) With
respect to each Lease, except as set forth in Section 4.8(b) of
the Seller Disclosure Schedule to the knowledge of each Company,
respectively,
as of the date of this Agreement: (i) each party named therein is
not in default
thereunder; (ii) no defaults (whether or not subsequently cured)
are currently
alleged thereunder, by or against either party, and no event has
occurred or
failed to occur or circumstance exists which, with the delivery of
notice, the
passage of time or both, would constitute such a breach or default,
or permit
the termination,
24
<PAGE>
modification or acceleration of rent under such Lease; (iii) such
Lease is a
valid and binding obligation upon the Company named therein, and is
a valid and
binding obligation of each other party thereto, and is in full
force and effect
and enforceable by the Company named therein in accordance with its
terms,
except as such enforceability may be limited by (x) bankruptcy,
insolvency,
reorganization, moratorium, fraudulent conveyance or similar Laws
now or
hereafter in effect relating to creditors' rights generally, and
(y) general
principles of equity (regardless of whether enforcement is
considered in a
proceeding at Law or in equity); (iv) no security deposit or
portion thereof
deposited with respect to such Lease has been applied in respect of
a breach or
default under such Lease that has not been redeposited in full,
except where the
failure to redeposit such security deposit would not have a
Material Adverse
Effect; (v) the interest of tenant thereunder has not been
subleased, licensed,
or assigned, and no Person has otherwise been granted the right to
use or occupy
the Leased Real Property or any portion thereof; and (vi) there are
no
Encumbrances, Contracts, defects, claims or exceptions on or
affecting the
estate or interest created thereby or pursuant thereto.
(c) A
complete, accurate and current rent roll for the Tenant Leases
(the
"Rent Roll") is set forth in Section 4.8(c) of the Seller
Disclosure Schedule.
There are no Tenant Leases with respect to the Real Property other
than the
Tenant Leases which are set forth on the Rent Roll. Except as set
forth in the
Rent Roll, to the knowledge of each Company, respectively, as of
the date of
this Agreement: (i) each Tenant Lease is in full force and effect;
(ii) the
tenants have accepted possession of, and are in occupancy of, all
of their
respective demised premises and have commenced the payment of rent
under the
Tenant Leases to the extent set forth on the Rent Roll, and there
are no
offsets, claims or defenses to the enforcement thereof presently
outstanding;
(iii) all rents due and payable under the Tenant Leases have been
paid and no
portion of any rent has been paid for any period more than thirty
days in
advance; and (iv) no tenant or other party in possession of any of
the Real
Property subject to the Tenant Leases has any right to purchase, or
holds any
right of first refusal to purchase, such properties. The Rent Roll
sets forth
the scheduled expiration date of each Tenant Lease and any
arrearages in the
payment of rent thereunder as of the date of the Rent Roll. Section
4.8(c) of
the Seller Disclosure Schedule may be amended after the date of
this Agreement
to add Tenant Leases and to add additional agreements comprising
the Tenant
Leases; provided, that such additional Tenant Leases or agreements
comprising
any additional Tenant Leases are entered into in accordance with
Section 6.1 of
this Agreement. Each Tenant Lease is enforceable in accordance with
its terms,
except as such enforceability may be limited by (i) bankruptcy,
insolvency,
reorganization, moratorium, fraudulent conveyance or other similar
Laws now or
hereafter in effect relating to creditors' rights generally and
(ii) general
principles of equity (regardless of whether enforcement is
considered in a
proceeding at Law or in equity).
(d) Except
as set forth in Section 4.8(d) of the Seller Disclosure
Schedule, to the knowledge of the Company, all material buildings,
structures,
fixtures, building systems and equipment included in the Owned Real
Property
(the "Improvements") are in good condition and repair in all
material respects,
subject to reasonable wear and tear, and there are no facts or
conditions
affecting any of the Improvements that would adversely interfere
with the use or
occupancy of the Improvements or any portion thereof in the
operation of the
business presently conducted thereon, subject to the terms of the
Leases. Except
as set forth in Schedule 4.8(d) of the Seller Disclosure Schedules,
to the
knowledge of the Company, solely with respect to that portion of
the Leased Real
Property consisting of the surface parking lot used by the
Companies
25
<PAGE>
for employee parking, such surface parking lot is in good condition
and repair
in all material respects, subject to reasonable wear and tear, and
there are no
facts or conditions affecting that portion of the Leased Real
Property that
would adversely interfere with the use thereof or any portion
thereof in the
operation of the business as presently conducted thereon, subject
to the terms
of the Leases.
(e) To the
knowledge of Seller, neither Company has received notice of any
currently proposed or pending assessment for public improvements or
otherwise.
(f) Except
as set forth in Section 4.8(f) of the Seller Disclosure
Schedule, to the knowledge of the respective Companies, the present
use of the
Improvements is in substantial conformity with or is excused from
conformity
with all applicable zoning Laws, and neither Company has received
written notice
of a violation thereof which would have a Material Adverse
Effect.
(g) Except
as disclosed in Section 4.8(g) of the Seller Disclosure
Schedule, all requisite certificates of occupancy required with
respect to the
Improvements on any of the Real Property have been obtained and are
currently in
full force and effect.
(h) Except
as set forth in Section 4.8(h) of the Seller Disclosure
Schedule, neither Company has received written notice of any
action, proceeding
or litigation pending, overtly contemplated or threatened: (i) to
take all or
any material portion of the Real Property, or any interest therein,
by eminent
domain; (ii) to modify the zoning of, or other governmental rules
or
restrictions applicable to, the Real Property or the use or
development thereof;
(iii) for any street widening or changes in highway or traffic
la
