EX-2.1 AMENDED AND RESTATED STOCK PURCHASE AGREEMENT BY AND AMONG ALLIANCE GAMING CORPORATION, SIERRA DESIGN GROUP, ROBERT LUCIANO, AND ROBERT LUCIANO, AS TRUSTEE OF THE ROBERT LUCIANO FAMILY TRUSTStock Purchase Agreement |
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Exhibit 2.1
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
BY AND AMONG
ALLIANCE GAMING CORPORATION,
SIERRA DESIGN GROUP,
ROBERT LUCIANO,
AND
ROBERT LUCIANO,
AS TRUSTEE OF THE ROBERT LUCIANO FAMILY TRUST
DATED
March 2, 2004
TABLE OF CONTENTS
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ii
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EXHIBITS
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SCHEDULES
SCHEDULE A SCHEDULE 2.3(a)(i) SCHEDULE 2.3(a)(ii) SCHEDULE A(iv)(1) SCHEDULE A(iv)(2) SCHEDULE B(c)(i) SCHEDULE B(c)(ii) SCHEDULE C(c) SCHEDULE B SCHEDULE 3.1 SCHEDULE 3.2 SCHEDULE 3.3 SCHEDULE 3.4 SCHEDULE 3.6 SCHEDULE 3.7(a) SCHEDULE 3.8 SCHEDULE 3.9 SCHEDULE 3.10 SCHEDULE 3.11 SCHEDULE 3.12(a) SCHEDULE 3.12(b) SCHEDULE 3.13 SCHEDULE 3.15 SCHEDULE 3.16 SCHEDULE 3.17 SCHEDULE 3.18 SCHEDULE 3.19 SCHEDULE 3.20 SCHEDULE 3.21 SCHEDULE 3.22 SCHEDULE 5.8
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AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
This Amended and Restated Stock Purchase Agreement (this “ Agreement ”) is effective as of March 2, 2004, by and among Alliance Gaming Corporation, a Nevada corporation (“ Buyer ”), Sierra Design Group, a Nevada corporation (the “ Company ”), Robert Luciano (“ Luciano ”) and Luciano, as Trustee of the Robert Luciano Family Trust dated February 27, 1995, as amended, as the sole stockholder of the Company (“ Seller ”).
RECITALS
WHEREAS, on November 10, 2003, Buyer, the Company, Luciano and Seller entered into a Stock Purchase Agreement (the “Original Agreement”);
WHEREAS, on March 2, 2004, Buyer, the Company, Luciano and Seller entered into an Amendment No. 1 to the Original Agreement (the “Amendment”);
WHEREAS, Seller owns all of the issued and outstanding shares of common stock, par value $.0001 per share (the “ Shares ”), of the Company;
WHEREAS, the Company is engaged in the business of designing, developing and supplying gaming technology and integrated game systems and system products (the “ Business ”); and
WHEREAS, on the terms and subject to the conditions hereof, Seller desires to sell the Shares to Buyer and Buyer desires to purchase the Shares from Seller.
AGREEMENT
NOW, THEREFORE , in consideration of the foregoing and the provisions set forth below, and subject to the terms and conditions set forth herein, the parties agree as follows:
ARTICLE ICERTAIN DEFINITIONSAs used in this Agreement, the following terms shall have the meanings indicated below:
“ Affiliate ” means, in respect of any specified Person, any other Person, whether or not a separate legal entity, that, directly or indirectly, controls, is controlled by, or is under common control with, such specified Person (the terms “ controls ,” “ controlled ” or “ control ” meaning the possession, directly or indirectly, of the power to direct or cause the direction of management policies of a Person, whether through the ownership of securities, by contract or credit arrangement, as trustee or executor, or otherwise).
“ Agreement ” has the meaning set forth in the Preamble.
“ Alliance Shares ” means the common stock, par value $.01 per share, of Alliance Gaming Corporation.
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“ Alliance Trading Price ” has the meaning set forth in Section 2.3(a)(ii).
“ Base Purchase Price ” has the meaning set forth in Section 2.2.
“ Bonus Contingent Cash Payment ” has the meaning set forth in Section B(c)(i) of Schedule A.
“ Bonus Contingent Consideration ” has the meaning set forth in Section 2.4.
“ Bonus Contingent Stock Payment ” has the meaning set forth in Section B(c)(ii) of Schedule A.
“ Business ” has the meaning set forth in the Recitals.
“ Buyer ” has the meaning set forth in the Preamble.
“ Buyer Financial Statements ” has the meaning set forth in Section 4.4(b).
“ Buyer SEC Reports ” has the meaning set forth in Section 4.4(a).
“ Capital Stock ” means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership, partnership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.
“ Change of Control ” shall be deemed to have occurred upon (a) the consummation of a tender for or purchase of more than fifty percent (50%) of a company’s capital stock by a third party, excluding the initial public offering by Buyer of any class of its Capital Stock, (b) a merger, consolidation or recapitalization of a company such that the stockholders of the company immediately prior to the consummation of such transaction possess less than fifty percent (50%) of the voting securities of the surviving entity immediately after the transaction (determined on a fully-diluted basis assuming the conversion of all convertible securities of such Person), or (c) the sale, lease or other disposition of all or substantially all of the assets of a company.
“ Closing ” has the meaning set forth in Section 2.5.
“ Closing Cash Payment ” has the meaning set forth in Section 2.3(a)(i).
“ Closing Date ” has the meaning set forth in Section 2.5.
“ Closing Debt ” means certain Indebtedness of the Company as described on Schedule B hereto in the amount outstanding on the Closing Date; provided, however , that if any Indebtedness described on Schedule B is prepaid prior to Closing due to a default on such Indebtedness, such prepayment amount shall be included as Closing Debt.
“ Closing Payment ” has the meaning set forth in Section 2.3(a).
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“ Closing Stock Payment ” has the meaning set forth in Section 2.3(a)(ii).
“ COBRA ” means the group health plan requirements of Part 6 of Subtitle B of Title I of ERISA and of Section 4980B of the Code.
“ Code ” means the Internal Revenue Code of 1986, as amended.
“ Common Stock ” has the meaning set forth in Section 3.3.
“ Company ” has the meaning set forth in the Preamble.
“ Company Account ” means a bank account designated by the Company a reasonable amount of time prior to the Closing to receive cash payments from Buyer under this Agreement, which account may be changed by the Company from time to time after the Closing Date by written notice to Buyer.
“ Confidentiality Agreement ” has the meaning set forth in Section 9.1(b)(ii).
“ Contingent Cash Payment ” has the meaning set forth in Section A(iv)(1) of Schedule A.
“ Contingent Consideration ” has the meaning set forth in Section 2.3(b).
“ Contingent Stock Payment ” has the meaning set forth in Section A(iv)(2) of Schedule A.
“ Contingent Tax Bonus” means $1.35 million compounded at a rate of six percent (6%) per annum.
“Contingent Tax Cash Payment” has the meaning set forth in Section C(c) of Schedule A.
“ Contract ” means each of the contracts, purchase orders and agreements (whether written or oral) to which the Company is a party or is legally bound.
“ EBITDA ” means the earnings of the Company (or following the Closing, the earnings of the business unit of Buyer in which the Business is operated) before interest, taxes, depreciation and amortization as determined in accordance with GAAP; provided, however , that for purposes of calculating the Contingent Consideration, any expense allocations of any kind from Buyer (including, but not limited to, administrative, management, overhead and systems integration expenses), in excess of the levels contemplated in the Company’s business plan and model upon which the Contingent Consideration EBITDA were determined shall be excluded.
“ Employee Benefit Plan ” means any (a) nonqualified deferred compensation or retirement plan or arrangement, (b) Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any Multiemployer Plan), (d) Employee Welfare Benefit Plan or (e) Other Employee Benefit Obligation.
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“ Employee Pension Benefit Plan ” has the meaning set forth in Section 3(2) of ERISA.
“ Employee Welfare Benefit Plan ” has the meaning set forth in Section 3(1) of ERISA.
“ Employment Agreement ” has the meaning set forth in Section 2.6(a)(v).
“ Environmental Law ” means any and all applicable international, federal, state, or local laws, statutes, ordinances, regulations, policies, guidance, rules, judgments, orders, court decisions or rule of common law, permits, restrictions and licenses, which (i) regulate or relate to the protection or clean up of the environment; the use, treatment, storage, transportation, handling, disposal or Release of a Hazardous Substance, the preservation or protection of waterways, groundwater, drinking water, air, wildlife, plants or other natural resources; or the health and safety of persons or property, including without limitation protection of the health and safety of employees; or (ii) impose liability or responsibility with respect to any of the foregoing, including without limitation the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.), or any other law of similar effect.
“ Environmental Permits ” means any material permit, license, authorization or approval required under applicable Environmental Laws.
“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time.
“ Excess Accounts Payable ” means that portion of the accounts payable of the Company that has been outstanding greater than 60 days as of the Closing Date.
“ Exchange Act ” Securities Exchange Act of 1934, as amended.
“ Fiduciary ” has the meaning set forth in Section 3(21) of ERISA.
“ Financial Statements ” has the meaning set forth in Section 3.4.
“ First Contingent Installment ” has the meaning set forth in Section A(i) of Schedule A.
“ GAAP ” means United States generally accepted accounting principles as in effect at the time in question.
“Gaming Laws” means any Law, permit, consent, registration, finding of suitability, approval, license or other authorization, including any condition or limitation placed thereon, governing or relating to the current or contemplated operations, sales or licensing of casino or gaming products or services of a person, including any applicable gaming Law and any federal or state Laws relating to currency transactions.
“ Governmental Entity ” has the meaning set forth in Section 3.6.
“ Hazardous Substance ” means any pollutant, chemical, substance and any toxic, infectious, carcinogenic, reactive, corrosive, ignitable or flammable chemical, or chemical compound, or hazardous substance, material or waste, whether solid, liquid or gas, that is subject to regulation, control or remediation under any Environmental Law, including without limitation,
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any quantity of asbestos in any form, urea formaldehyde, PCBs, radon gas, crude oil or any fraction thereof, all forms of natural gas, petroleum products or by-products or derivatives.
“ HSR Act ” has the meaning set forth in Section 3.20.
“ Indebtedness ” of any Person means all obligations of such Person (a) for borrowed money, (b) evidenced by notes, bonds, debentures or similar instruments, (c) for the deferred purchase price of goods or services (other than trade payables or accruals incurred in the ordinary course of business), (d) under capital leases and (e) in the nature of guarantees of the obligations described in clauses (a) through (d) above of any other Person.
“ Indemnified Party ” has the meaning set forth in Section 8.3.
“ Indemnifying Party ” has the meaning set forth in Section 8.3.
“ Intellectual Property ” means all patents and patent applications; registered trademarks, service marks, trade names and applications therefor; domain names; trade secrets; and registered copyrights.
“ Interim Balance Sheet ” has the meaning set forth in Section 3.4.
“ Interim Financial Statements ” has the meaning set forth in Section 3.4.
“ Investment Assets ” means all debentures, notes and other evidences of Indebtedness, stocks, securities (including rights to purchase and securities convertible into or exchangeable for other securities), interests in joint ventures and general and limited partnerships, mortgage loans and other investment or portfolio assets owned of record or beneficially by the Company and issued by any Person other than the Company (other than trade receivables generated in the ordinary course of business of the Company).
“ Knowledge ” means with respect to the Company, the actual knowledge of Luciano, Roger Helwig, Alan Harlan, Craig Bullis or Lars Perry; and with respect to any other Person, the actual knowledge of such Person, and, if such Person is not a natural person, that of any of the current officers, directors, partners, members or managers of such Person.
“ Laws ” means all laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of the United States or any state, county, city or other political subdivision or of any Governmental Entity.
“ Lien ” means any mortgage, pledge, hypothecation, assignment, encumbrance, lien (statutory or other) or other security agreement of any kind or nature whatsoever.
“ Losses ” has the meaning set forth in Section 8.1.
“ Luciano ” has the meaning set forth in the Preamble.
“ Material Adverse Effect ” means with respect to any Person, any event, circumstance or change that (i) materially adversely affects the ability of such Person and its Subsidiaries, taken as a whole, to perform its obligations under this Agreement or to consummate the transactions
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contemplated by this Agreement or (ii) is materially adverse to the business, assets, financial condition or results of operations of such Person and its Subsidiaries, taken as a whole; provided, however , that any material adverse impact to the business, assets, financial condition or results of operations of the Company resulting directly or indirectly from the execution of this Agreement and the public announcement thereof shall not constitute a Material Adverse Effect; and provided further, that the Company currently is operating at a deficit and the continued operation of the Company at a deficit shall not constitute a Material Adverse Effect.
“ Material Contracts ” has the meaning set forth in Section 3.12(a).
“ Multiemployer Plan ” has the meaning set forth in Section 3(37) of ERISA.
“Net Closing Payment” has the meaning set forth in Section 2.3(a).
“Net Contingent Tax Payment” has the meaning set forth in Section C(a) of Schedule A.
“ Non-Competition Agreement ” has the meaning set forth in Section 2.6(a)(vi).
“ Non-Mediation Date ” has the meaning set forth in Section 12.15.
“ NYSE ” has the meaning set forth in Section 6.5.
“ Objection Notice ” has the meaning set forth in Section 2.7.
“Optionees” means those employees and consultants of the Company who will receive proceeds from the Closing Payment, the Contingent Consideration and the Bonus Consideration, in consideration for Optionees entering into the Stock Option Cancellation Agreements or the Warrant Cancellation Agreements, or both, as the case may be prior to the Closing.
“ Order ” means any writ, judgment, decree, injunction or similar order of any Governmental Entity (in each such case whether preliminary or final).
“ Other Employee Benefit Obligation ” means all obligations, arrangements, or customary practices, whether or not legally enforceable, to provide benefits, other than salary, as compensation for services rendered, to present or former directors, officers, employees, or agents, including, without limitation, bonus, incentive compensation, stock option and severance plans, agreements and arrangements.
“ Permitted Lien ” means (a) any Lien for Taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (b) any statutory Lien arising in the ordinary course of business by operation of Law with respect to any liability of the Company that is not yet due or delinquent, (c) any minor imperfection of title or similar Lien which individually or in the aggregate with other such Liens could not reasonably be expected to have a Material Adverse Effect and (d) any Lien in favor of Buyer.
“ Person ” means any entity or natural person or any corporation, partnership, joint venture or other entity, whether or not a legal entity.
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“ Plan ” has the meaning set forth in Section 3(3) of ERISA.
“ Prohibited Transaction ” has the meaning set forth in Section 406 of ERISA and in Section 4975 of the Code.
“ Purchase Price ” has the meaning set forth in Section 2.1.
“ Qualified Plan ” means each Employee Benefit Plan which is intended to qualify under Section 401 of the Code.
“ Release ” means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, including, without limitation, the movement of Hazardous Substances through ambient air, soil, surface water, ground water, wetlands, land or subsurface strata.
“ Second Contingent Installment ” has the meaning set forth in Section A(ii) of Schedule A.
“ Second Contingent Installment Percentage ” has the meaning set forth in Section A(ii) of Schedule A.
“ Securities Act ” has the meaning set forth in Section 3.3.
“ Seller ” has the meaning set forth in the Preamble.
“ Seller Group ” means Seller and Optionees.
“ Seller’s Account ” means a bank account designated by Seller at least two business days prior to the Closing to receive cash payments under this Agreement, which account may be changed by Seller from time to time after the Closing by written notice to Buyer.
“ Shares ” has the meaning set forth in the Recitals.
“Stock Option Cancellation Agreements” means those cancellation agreements entered into by the Company and the contingent optionholders listed on Schedule 3.3 , which cancel all the equity interests granted under the Company’s Stock Compensation Plan, as amended.
“ Subsidiary ” of the Company, Buyer, Seller or any other Person means any corporation, partnership, limited liability company, association, trust, unincorporated association or other legal entity of which the Company, Buyer, Seller or any such other Person, as the case may be, (either alone or through or together with any other subsidiary) owns, directly or indirectly, 50% or more of the capital stock the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity.
“ Tax ” or “ Taxes ” means any and all taxes imposed or required to be collected by any federal, state or local taxing authority in the United States, or by any other foreign taxing authority under any statute or regulation, including, without limitation, all income, sales and use, property, ad valorem, excise, payroll, and other taxes, all import and export taxes, duties and fees, and all interest, penalties and additions thereto.
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“ Tax Return ” means a report, return or other information required to be supplied to a Governmental Entity with respect to or concerning Taxes including, where permitted or required, combined or consolidated returns for any group of entities that includes the Company.
“ Third Contingent Installment ” has the meaning set forth in Section A(iii) of Schedule A.
“ Third Contingent Installment Percentage ” has the meaning set forth in Section A(iii) of Schedule A.
“ Tranche 1 First Installment Bonus ” has the meaning set forth in Section B(a)(i) of Schedule A.
“ Tranche 2 First Installment Bonus ” has the meaning set forth in Section B(b)(i) of Schedule A.
“ Tranche 1 Second Installment Bonus ” has the meaning set forth in Section B(b)(ii) of Schedule A.
“ Tranche 1 Second Installment Bonus Percentage ” has the meaning set forth in Section B(b)(ii) of Schedule A.
“ Tranche 2 Second Installment Bonus ” has the meaning set forth in Section B(b)(ii) of Schedule A.
“ Tranche 2 Second Installment Bonus Percentage ” has the meaning set forth in Section B(b)(ii) of Schedule A.
“ Tranche 1 Third Installment Bonus ” has the meaning set forth in Section B(a)(iii) of Schedule A.
“ Tranche 1 Third Installment Bonus Percentage ” has the meaning set forth in Section B(a)(iii) of Schedule A.
“ Tranche 2 Third Installment Bonus ” has the meaning set forth in Section B(b)(iii) of Schedule A.
“ Tranche 2 Third Installment Bonus Percentage ” has the meaning set forth in Section B(b)(iii) of Schedule A.
“ Transaction ” has the meaning set forth in Section 5.9.
“ Transaction Agreements ” means this Agreement, the Employment Agreement and the Non-Competition Agreement.
“ Transferred Employees ” has the meaning set forth in Section 6.6(a).
“ Treasury Regulations ” has the meaning set forth in Section 12.13.
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“Warrant Cancellation Agreement” means that agreement between the Warrant Holders and the Company dated as of March 1, 2004, which cancels all equity interests in the Company granted to the Warrant Holders pursuant to the Contingent Warrant to Purchase Common Stock of Sierra Design Group agreement effective as of February 4, 2000.
“Warrant Holders” means Robert Crowder and Loren Nelson who held contingent warrants in the Company pursuant to that certain Contingent Warrant to Purchase Common Stock of Sierra Design Group agreement between the Company and Accelerated Gaming, Inc. effective as of February 4, 2000.
“Warrant Holder Bonus Contingent Consideration Payment” means the payment by Buyer to Robert Crowder and Loren Nelson of one and one-half percent (1½ %) and one percent (1%), respectively, of each installment of the Bonus Contingent Consideration.
“Warrant Holder Closing Payment” means the payment by Buyer to Robert Crowder and Loren Nelson of one and one-half percent (1 ½%) and one percent (1%), respectively, of the Closing Payment.
“Warrant Holder Contingent Consideration Payment” means the payment by Buyer to Robert Crowder and Loren Nelson of one and one-half percent (1 ½%) and one percent (1%), respectively, of each installment of the Contingent Consideration.
“Warrant Holder Contingent Tax Payment” means the payment by Buyer to Robert Crowder and Loren Nelson of one and one-half percent (1 ½%) and one percent (1%), respectively, of the Contingent Tax Bonus.
ARTICLE II
PURCHASE AND SALE OF SHARESSection 2.1 Sale of Shares; Purchase Price . On the terms and subject to the conditions of this Agreement, at the Closing, Seller agrees to sell to Buyer and Buyer agrees to purchase from Seller all of the Shares. The purchase price for the Shares (the “ Purchase Price ”) shall consist of the Base Purchase Price plus the Bonus Contingent Consideration.
Section 2.2 Base Purchase Price . Buyer shall pay to Seller, as the base purchase price (the “ Base Purchase Price ”) for the Shares, an aggregate amount equal to:
(a) $100 million; minus
(b) The Closing Debt; minus
(c) The Excess Accounts Payable (other than such Excess Accounts Payable, which are to be paid by Buyer pursuant to Section 12.1); minus
(d) The amount of cash, if any, required to be paid by Buyer at the Closing to acquire all of the interests of holders of options and warrants to purchase shares of Common Stock that remain outstanding as of the Closing Date.
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Section 2.3 Payment of the Base Purchase Price . Buyer shall pay to the Seller Group the Base Purchase Price as follows:
(a) At the Closing, Buyer shall pay to the Seller Group an amount equal to fifty percent (50%) of the Base Purchase Price (the “ Closing Payment ”) minus the Warrant Holder Closing Payment (the “ Net Closing Payment ”) as follows:
(i) Sixty three and nine/tenths percent (63.90%) of the Net Closing Payment shall be paid in cash by wire transfer of immediately available funds to the Seller’s Account and to the Company Account, in such amounts or percentages as disclosed on Schedule 2.3(a)(i) (the “ Closing Cash Payment ”), and
(ii) Thirty six and one/tenths percent (36.10%) of the Net Closing Payment (the “ Closing Stock Payment ”) shall be paid by delivering a number of Alliance Shares determined by dividing the dollar amount of such payment by $24.17 (the “ Alliance Trading Price ”) to such persons and in such amounts as disclosed on Schedule 2.3(a)(ii) . No fractional shares shall be issued and Alliance shall pay cash in lieu of any fractional shares to those persons disclosed on Schedule 2.3(a)(ii) who would have received fractional shares.
(iii) Buyer will hold back $829,671 of the Closing Cash Payment (the “ Hold Back ”). The applicable amounts pursuant to the Hold Back shall be released to the Company Account and paid to such individual pursuant to the terms of the applicable Stock Option Cancellation Agreement, when such individual has executed and delivered to Buyer the applicable Stock Option Cancellation Agreement. To the extent amounts of the Hold Back are outstanding and unpaid to certain individuals as a result of such individuals’ failure to execute and deliver their applicable Stock Option Cancellation Agreement, such amounts will be paid to the Seller Account between thirty days (30) and forty-five days (45) after the Closing Date.
(b) At the Closing, Buyer shall pay to the Warrant Holders the Warrant Holder Closing Payment as follows:
(i) Sixty percent (60%) cash, of which sixty percent (60%) shall be paid to Robert Crowder and forty percent (40%) shall be paid to Loren Nelson, by wire transfer of immediately available funds to such banking accounts as designated by the Warrant Holders a reasonable amount of time prior to the Closing, and
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(ii) Forty percent (40%) shall be paid by delivering a number of Alliance Shares determined by dividing the dollar amount of such payment by the Alliance Trading Price, of which sixty percent (60%) of such Alliance Shares shall be delivered to Robert Crowder and forty percent (40%) shall be delivered to Loren Nelson. No fractional shares shall be issued and Alliance shall pay cash in lieu of any fractional shares.
(c) Subsequent to the Closing Date, Buyer shall pay to the Seller Group and the Warrant Holders an amount equal to the remaining fifty percent (50%) of the Base Purchase Price (the “ Contingent Consideration ”) in installments as set forth in Section A of Schedule A attached hereto, with each installment payable as provided therein. Additionally, Buyer shall pay to the Seller Group and the Warrant Holders an amount equal to the Contingent TaxBonus payable as provided in Section C of Schedule A.
Section 2.4 Bonus Consideration . As additional consideration for the purchase of the Shares, the Seller Group and the Warrant Holders may be entitled to additional payments up to an aggregate of $50 million if the Company meets certain targets, as set forth in Section B of Schedule A attached hereto, as Tranche 1 and Tranche 2 payments (the “ Bonus Contingent Consideration ”). Buyer shall pay to the Seller Group and the Warrant Holders the Bonus Contingent Consideration in installments as set forth in Section B of Schedule A attached hereto, with each installment payable as provided therein.
Section 2.5 Closing . The closing of the purchase and sale of the Shares (the “ Closing ”) provided for in this Agreement will take place at the offices of Buyer, 6601 South Bermuda Road, Las Vegas, NV 89109, within two business days after the satisfaction or valid waiver of all of the conditions in Article VII hereof, or at such other time and place as the parties may agree (such time and date, the “ Closing Date ”).
Section 2.6 Closing Deliveries .
(a) At the Closing, Seller will deliver, or cause to be delivered, to Buyer:
(i) a certificate or certificates representing the Shares, duly endorsed for transfer to Buyer or Buyer’s designee;
(ii) a good standing certificate for the Company from the Nevada Secretary of State;
(iii) any consents and approvals required for consummation of the transactions contemplated hereby by Seller and the Company as disclosed pursuant to Section 3.20;
(iv) an opinion from Lionel, Sawyer & Collins, counsel for Seller, relating to the Shares and the Transaction Agreements, dated as of the Closing Date, substantially in the form attached hereto as Exhibit C ;
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(v) an employment agreement, substantially in the form attached hereto as Exhibit A (the “ Employment Agreement ”) executed by Luciano;
(vi) evidence reasonably acceptable to Buyer that the Shares have been released from all Liens other than Permitted Liens;
(vii) certificates substantially in the form attached hereto as Exhibit D-1 and Exhibit D-2 , executed by the Company and Seller, respectively, representing and warranting to Buyer that (A) the representations and warranties of Seller and the Company contained in this Agreement were true and correct (without giving effect to any limitation as to “materiality” or “Material Adverse Effect” set forth therein) at and as of the date hereof and as of the Closing Date as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such earlier date), except where the failure of such representations and warranties to be true and correct (without giving effect to any limitation as to “materiality” or “Material Adverse Effect” set forth therein) would not, individually or in the aggregate, result in a Material Adverse Effect and (B) that each of Seller’s and the Company’s covenants and obligations required to be complied with prior to Closing have been so complied with in all material respects; and
(viii) an indemnification agreement, substantially in the form attached hereto as Exhibit G (the “ Indemnification Agreement ”) executed by Seller, Luciano and Luciano’s spouse.
(b) At the Closing, Buyer will deliver, or will cause to be delivered, to Seller:
(i) the Closing Cash Payment by wire transfer to Seller’s Account;
(ii) a certificate or certificates representing the Closing Stock Payment registered to Seller;
(iii) a good standing certificate for Buyer from the Nevada Secretary of State;
(iv) any consents and approvals required for consummation of the transactions contemplated hereby by Buyer as disclosed pursuant to Section 4.6;
(v) an opinion from Jones Vargas, counsel for Buyer, relating to the issuance of the Alliance Shares to Seller, dated as of the Closing Date, substantially in form attached hereto as Exhibit E ;
(vi) the Employment Agreement executed by Buyer and Luciano;
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(vii) a certificate substantially in the form attached hereto as Exhibit F , executed by Buyer representing and warranting to Seller that (A) the representations and warranties of Buyer contained in this Agreement were true and correct (without giving effect to any limitation as to “materiality” or “Material Adverse Effect” set forth therein) at and as of the date hereof and as of the Closing Date as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such earlier date), except where the failure of such representations and warranties to be true and correct (without giving effect to any limitation as to “materiality” or “Material Adverse Effect” set forth therein) would not, individually or in the aggregate, result in a Material Adverse Effect and (B) that each of Buyer’s covenants and obligations required to be complied with prior to Closing have been so complied with in all material respects;
(viii) such documents as Seller or its counsel may reasonably request evidencing the termination of any and all security interests and guarantees provided by Seller with regard to any debt owed by the Company to Buyer; and
(ix) the Indemnification Agreement executed by Buyer.
Section 2.7 Conduct of Business of the Company . The parties hereto agree that it is in their mutual best interests to maximize the financial performance of the Company following the Closing in order that Seller shall have a fair and reasonable opportunity to earn the Contingent Consideration and the Bonus Contingent Consideration, recognizing that the Company will be operating as a business unit or Subsidiary of Buyer and will be subject to the usual and ordinary constraints of operating within a public company group, including, but not limited to, regulatory oversight, banking covenants and capital availability. Seller agrees and acknowledges that Buyer shall not be required to invest capital in the Company if such investment does not allow Buyer to realize an adequate return on investment based on commercial reasonableness.
Within these constraints, Buyer agrees to use commercially reasonable efforts to: (a) expand and grow the Company’s business consistent with the Company’s business plan and model upon which the Contingent Consideration and Bonus Contingent Consideration were determined, (b) allow the Company to pursue all reasonable business opportunities consistent with the Company’s business plan and model upon which the Contingent Consideration and Bonus Contingent Consideration were determined and (c) provide to the Company commercially reasonable funding for research and development and product placements necessary to pursue reasonable corporate opportunities. Without limiting the foregoing general principles with respect to management of the Company’s business between the Closing Date and June 30, 2007, Buyer shall not charge the Company a price for any products or services that is greater than the Company could obtain in a third party arm’s length transaction or above such levels as contemplated in the Company’s business plan and model upon which the Contingent Consideration and Bonus Contingent Consideration EBITDA and revenue were determined.
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In the event that after the Closing the Business is operated by Buyer as a division or other business unit of Buyer or one of its Subsidiaries, Buyer shall maintain, or cause to be maintained, separate financial statements for such business unit generally consistent with the Financial Statements so that the parties hereto can determine whether the threshold requirements for earning the Contingent Consideration and the Bonus Contingent Consideration have been met. If Buyer takes any action after the Closing with respect to the Company that has the effect of assigning the assets of the Company to a Subsidiary of Buyer and such assignment directly or indirectly results in the termination or modification of any contracts of the Company, or the incurrence of any fees or charges, that adversely affects the ability of Seller to earn the Contingent Consideration or the Bonus Consideration, then the EBITDA and revenue thresholds set forth in Sections 2.3 and 2.4 hereof shall be adjusted accordingly to account for the adverse economic impact resulting from such assignment of assets. Should such an assignment of assets occur, Seller and Buyer will work together in good faith to agree on the amount of the adjustments to EBITDA or revenue to appropriately reflect the amount of the adverse economic impact.
In the event that during the period beginning with the Closing Date and ending on June 30, 2007, Buyer takes any action with regards to the Company that, in Seller’s good faith reasonable judgment and subject to the above parameters, has the effect of preventing Seller from earning the Contingent Consideration or the Bonus Contingent Consideration, then Seller may deliver to Buyer a notice (an “Objection Notice” ) that states in reasonable detail how Buyer has prevented the Company from achieving the financial objectives necessary for payment to Seller of the Contingent Consideration or the Bonus Contingent Consideration and quantifies the effect of such action on the Company’s revenue and/or EBITDA for the applicable time period. Within ten (10) business days after Buyer receives such Objection Notice, Seller and a representative of each of Buyer and the Company shall meet together to negotiate in good faith in order to resolve the matters identified in such Objection Notice. If the parties are unable to resolve all such matters within thirty (30) business days of Buyer’s receipt of the original Objection Notice, then such matter shall be resolved in accordance with the procedures set forth in Section 12.15. In the event of arbitration, the arbitrators shall be authorized to (a) determine whether or not Buyer has taken any action inconsistent with the above parameters that has the effect of preventing Seller from earning any portion of the Contingent Consideration or the Bonus Contingent Consideration; and (b) if they find Buyer is responsible for such prevention, then the arbitrators may further (i) determine the adverse impact of such action on the Seller’s ability to earn all or any portions of the Contingent Consideration or the Bonus Contingent Consideration or (ii) find that the applicable revenue and/or EBITDA requirement would have been met and direct Buyer to pay to Seller the applicable portion of the Contingent Consideration or the Bonus Contingent Consideration as if the applicable revenue and/or EBITDA requirements had been achieved. In any event, in their discretion, the arbitrators may, but shall not be required to, award attorneys fees and costs to the prevailing party.
Section 2.8 Change in Structure . The parties hereto are considering whether to revise the structure of the transactions contemplated hereunder to provide for a significant benefit to be made available to the employees of the Company. Buyer agrees that it will reasonably consider any proposals made by Seller in this regard and the parties hereto agree that any changes to the structure proposed by Seller must be acceptable to Buyer and not adversely
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effect the economic impact on Buyer and its stockholders of the transactions contemplated hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANYFor purposes of this Article III, any reference to the Company shall include the Company and each of its Subsidiaries. Seller and the Company, jointly and severally, hereby represent and warrant to Buyer that:
Section 3.1 Corporate Existence . Schedule 3.1 contains a true and complete list of (i) each Subsidiary of the Company, (ii) the jurisdiction of incorporation of the Company and each such Subsidiary, (iii) and each jurisdiction in which the Company or any of its Subsidiaries is registered or qualified to do business. The Company and each of its Subsidiaries is an entity duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, with full corporate power and authority to own or lease its properties and to conduct its business in the manner and in the places where such properties are owned or leased or such business is being conducted. Except as otherwise disclosed on Schedule 3.1 , the Company and each of its Subsidiaries is registered or qualified to do business and is in good standing in each other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification, except where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect on the Company. All of the outstanding capital stock of the Company’s subsidiaries (other than director’s qualifying shares in the case of foreign subsidiaries) is owned by the Company, or one of its Subsidiaries, directly or indirectly, free and clear of any material Lien or any other material limitation or restriction (including any restriction on the right to vote or sell the same except as may be provided as a matter of law) and except for any Liens which are incurred in the ordinary course of business. The Company does not have and has never had any Subsidiaries or Affiliate companies other than those entities listed on Schedule 3.1 .
Section 3.2 Authority of Seller and the Company; No Breach . Except as otherwise disclosed on Schedule 3.2 ,
(a) Seller has all requisite trust power and authority, and Luciano has the absolute and unrestricted right, power and capacity, to execute and deliver this Agreement and the other Transaction Agreements to which either of them is a party, as the case may be, to perform its, or his, as the case may be, obligations hereunder and thereunder, and to consummate the transactions contemplated by the Agreement to be consummated by Seller or by Luciano, as the case may be. This Agreement and the other Transaction Agreements have been validly executed and delivered by Seller and Luciano and constitute the legal, valid, and binding obligation of each of them, enforceable against each of them in accordance with their terms, except as enforcement may be limited by bankruptcy and similar laws affecting the enforcement of creditors’ rights generally.
(b) The Company has all requisite corporate power and authority to execute and deliver this Agreement and the other Transaction Agreements and to perform its obligations
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hereunder and thereunder and to consummate the transactions contemplated by the Agreement to be consummated by the Company. The execution and delivery of this Agreement and the other Transaction Agreements by the Company and the consummation by the Company of the transactions contemplated hereby to be consummated by the Company 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 authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement and the other Transaction Agreements have been duly authorized and validly executed and delivered by the Company and constitute a legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy and similar laws affecting the enforcement of creditors’ rights generally.
(c) The execution, delivery and performance of this Agreement or any of the other Transaction Agreements to which it is a party by the Company or Seller and the consummation by the Company or Seller of the transactions contemplated hereby or thereby will not (i) conflict with or violate any provision of the Articles of Incorporation or Bylaws of the Company, (ii) result in a violation or breach of or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration or Lien) or, except as set forth in Schedule 3.20 , require the consent of the other party(ies) thereto under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement of any other type or description or other instrument or obligation to which the Company or Seller is a party or by which any of them or any of its properties or assets may be bound or (iii) assuming that all consents, approvals, authorizations and permits required by any Gaming Law have been obtained and all filings and notifications described in Section 3.20 have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to the Company, except as to (ii) and (iii) where any such conflicts, violations, breaches, defaults or other occurrences would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 3.3 Capitalization; Ownership of the Shares . The authorized capital stock of the Company consists of 100,000,000 shares of Common Stock, par value $.0001 per share (the “ Common Stock ”), 20,000,000 of which have been issued and are outstanding. Other than the Shares or as otherwise disclosed on Schedule 3.3 , there are no equity or other ownership interests or securities of the Company issued and outstanding. Seller is and will be on the Closing Date the sole record and beneficial owner and holder of the Shares, free and clear of any Liens, including any community property or similar such claims, except for the lien securing the $22,000,000 loan made by Buyer to the Company on October 31, 2003, if and when approved and when made effective under applicable Gaming Laws. All of the outstanding equity securities of the Company have been duly authorized and validly issued and are fully paid and nonassessable. Except as otherwise disclosed on Schedule 3.3 , there are no Contracts relating to the issuance, sale, or transfer of any equity securities or other securities of the Company. None of the Shares were issued in violation of the Securities Act of 1933, as amended (the “ Securities Act ”), or any other legal requirement. The Company does not own or have a Contract to acquire, any equity securities or other securities of any Person or any direct or indirect equity or ownership interest in any other business.
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Section 3.4 Financial Statements . Schedule 3.4 sets forth a true and complete copy of the following:
(i) an audited balance sheet of the Company and its Subsidiaries as of March 31, 2002 and an unaudited balance sheet of the Company and its Subsidiaries as of March 31, 2003:
(ii) an audited statement of operations, cash flows, and changes in stockholders investment for the one year period ended March 31, 2002 and an unaudited statement of operations, cash flows, and changes in stockholders investment for the one year period ended March 31, 2003;
(iii) an unaudited balance sheet of the Company and its Subsidiaries as of September 30, 2003 (the “ Interim Balance Sheet ”);
(iv) unaudited statements of operations, cash flows and changes in stockholders investment for the six months ended September 30, 2003 (together with the Interim Balance Sheet, the “ Interim Financial Statements ”).
The financial statements described in the foregoing clauses (i) through (iv) are collectively referred to herein as the “ Financial Statements .” The Financial Statements were prepared in accordance with GAAP, consistently applied and present fairly the consolidated financial position and results of operations and cash flows of the Company and its Subsidiaries as of the dates thereof and for the periods covered thereby, except for the absence of footnotes required by GAAP in connection with the Interim Financial Statements and the unaudited balance sheet as of March 31, 2003 and the unaudited statement of operations, cash flows and changes in stockholders investment for the period ended March 31, 2003 described in the foregoing clauses (i) and (ii).
The 2003 Audited Financial Statements to be delivered pursuant to Section 5.4(a) hereof, will not materially deviate from the financial statements described in the foregoing clauses (i) or (ii) above and the parties agree that a deviation of up to an approximate two million dollar ($2,000,000) reduction in income before taxes and a one million three hundred thousand dollar ($1,300,000) reduction to net income with no change to revenue is not a material deviation.
Section 3.5 Books and Records . The accounting books and records, minute books, and stock record books of the Company, all of which have been made available to Buyer, are true and complete in all material respects. At the Closing, all such books and records will be in the possession of the Company.
Section 3.6 Licenses and Permits . Except as otherwise disclosed on Schedule 3.6 , the Company and each director, officer and Person performing management functions similar to officers, has received and holds all permits, registrations, licenses, franchises, certifications and other approvals and authorizations required from any Person, court or tribunal, or administrative, governmental or regulatory body, agency or authority, including any gaming authority (each, a “ Governmental Entity ”), including all authorizations under Gaming Laws applicable to the Company, including but not limited to all authorizations required under the Gaming Laws
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applicable to the Company in order for the Company to conduct and operate its business as it is currently being conducted or operated, and to permit the Company to own or use its assets in the manner in which such assets are owned or used. All such approvals and authorizations are valid, and in full force and effect. Except as otherwise disclosed on Schedule 3.6 , no event has occurred which permits, or upon the giving of notice or the passage of time or both would permit revocation, non-renewal, modification, suspension, limitation or termination of any such approval or authorization that currently is in effect. The Company, and each director, officer and Person performing management functions similar to officers, is in compliance with the terms of such approvals and authorizations.
Section 3.7 Real Property .
(a) The Company does not own, and has not previously owned, any real property. Schedule 3.7(a) sets forth a true and complete list of (i) all real property currently leased or subleased by the Company, (ii) the name of the lessor (or sublessor) and (iii) the date of the lease and each amendment thereto. All such current leases or subleases are in full force and effect, are valid and effective in accordance with their respective terms, and there is not, under any of such leases, any existing default or event of default (or event which with notice or lapse of time, or both, would constitute a default) by the Company or, by the other party to such lease or sublease, except where the default or event of default could not reasonably be expected to have a Material Adverse Effect on the Company. Complete and correct copies of such leases have been delivered to Buyer.
(b) The Company has good and valid title to, or, in the case of leased properties and assets, valid leasehold interests in, all of its properties and assets, intangible, real, personal and mixed, used or held for use in its business, free and clear of any Liens, except as reflected in the Financial Statements and except for Liens for Taxes not yet due and payable and such imperfections of title, if any, that do not materially interfere with the present value of the subject property.
Section 3.8 Tangible Personal Property . The Company is in possession of and has good title to, or has valid leasehold interests in or valid rights under Contract to use, all tangible personal property used in the Business. Except as otherwise disclosed on Schedule 3.8 , all such tangible personal property is free and clear of all Liens, except for Permitt | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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