EXHIBIT 10.2
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
DATED
MAY 11, 2006,
BY AND BETWEEN
MORGANS GROUP LLC
AS BUYER,
AND
RED, WHITE AND BLUE PICTURES, INC.
AS SELLER
TABLE OF CONTENTS
PAGE
1. PURCHASE AND SALE.......................................................1
2. PURCHASE PRICE..........................................................1
2.1 Deposit........................................................1
2.2 Balance........................................................2
2.3 Adjustment for Prorations......................................2
3. OPENING OF ESCROW.......................................................2
4. PRE-EXECUTION ACTIONS...................................................2
4.1 Due Diligence..................................................2
4.2 Title..........................................................3
5. DESCRIPTION OF PROPERTY.................................................3
5.1 The Improvements...............................................3
5.2 The Real Property..............................................4
5.3 The Intangible Property........................................4
6. CONDITIONS TO CLOSING...................................................4
6.1 Buyer's Closing Conditions.....................................4
6.2 Failure of Buyer's Closing Conditions..........................6
6.3 Seller's Closing Conditions....................................6
6.4 Failure of Seller's Closing Conditions.........................7
7. CLOSING.................................................................7
7.1 Closing Date...................................................7
7.2 Deliveries by Seller...........................................7
7.3 Deliveries by Buyer............................................9
7.4 Actions by Escrow Agent........................................9
7.5 Prorations....................................................10
7.6 Closing Costs.................................................11
7.7 Deliveries Outside of Escrow..................................11
8. SELLER'S REPRESENTATIONS AND WARRANTIES................................12
8.1 Due Organization..............................................12
8.2 Seller's Authority; Validity of Agreements;
Noncontravention............................................12
8.3 Lease.........................................................12
8.4 Service Contracts.............................................12
8.5 Violations....................................................12
8.6 Litigation....................................................12
8.7 Condemnation..................................................13
8.8 Foreign Person................................................13
8.9 Environmental.................................................13
8.10 Seller's Knowledge............................................13
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8.11 No Other Representations or Warranties; Survival..............13
9. BUYER'S REPRESENTATIONS AND WARRANTIES.................................13
9.1 Due Organization..............................................13
9.2 Buyer's Authority; Validity of Agreements.....................13
9.3 Financing.....................................................14
9.4 Survival......................................................14
10. ADDITIONAL COVENANTS AND AGREEMENTS....................................15
10.1 As-Is.........................................................15
10.2 [Intentionally Omitted].......................................17
10.3 Cross Termination.............................................17
10.4 Interim Covenants.............................................17
11. RISK OF LOSS...........................................................17
11.1 Condemnation..................................................17
11.2 Casualty......................................................18
12. REMEDIES...............................................................18
12.1 Seller's Liquidated Damages...................................18
12.2 Buyer's Remedies..............................................19
13. BROKERS................................................................20
14. INDEMNIFICATION........................................................20
14.1 Indemnification by Seller.....................................20
14.2 Indemnification by Buyer......................................21
14.3 Minimum Losses................................................21
14.4 Maximum Indemnification.......................................21
14.5 [Intentionally Omitted].......................................21
14.6 Notice; Procedure for Third-Party Claims......................21
14.7 Survival of Indemnity.........................................22
14.8 No Consequential Damages......................................23
14.9 No Double Recovery............................................23
15. MISCELLANEOUS PROVISIONS...............................................23
15.1 Governing Law.................................................23
15.2 Entire Agreement..............................................23
15.3 Amendment; Waiver.............................................23
15.4 Notices.......................................................23
15.5 Expenses......................................................25
15.6 Assignment....................................................25
15.7 Severability..................................................25
15.8 Successors and Assigns; Third Parties.........................25
15.9 Counterparts..................................................26
15.10 Interpretation................................................26
15.11 [Intentionally Omitted].......................................26
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15.12 Further Assurances............................................26
15.13 Number and Gender.............................................27
15.14 Mutual Drafting...............................................27
15.15 Exhibits......................................................27
15.16 Attorneys' Fees...............................................27
15.17 Business Days.................................................27
15.18 Early Termination.............................................27
15.19 Confidentiality...............................................27
15.20 [Intentionally Omitted].......................................27
15.21 Section 1031 Exchange.........................................27
15.22 Arbitration...................................................28
ESCROW AGENT:...............................................................31
LIST OF EXHIBITS............................................................32
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PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (this
"AGREEMENT") is made and entered into as of May 11, 2006 (the "EXECUTION DATE"),
by and between MORGANS GROUP LLC, a Delaware limited liability company
("BUYER"), and RED, WHITE AND BLUE PICTURES, INC., a California corporation
("SELLER"), for the purpose of setting forth the agreement of the parties and of
instructing CHICAGO TITLE AGENCY OF NEVADA, INC., a Nevada corporation ("ESCROW
AGENT"), with respect to the transaction contemplated by this Agreement.
R E C I T A L S
A. Seller is the owner of an undivided fee simple interest in that
certain parcel of real property located at 4475 Paradise Road, in Paradise
Township, County of Clark, State of Nevada, as more particularly described on
EXHIBIT A attached hereto (the "LAND PARCEL"). The Land Parcel, together with
the "Improvements," the balance of the "Real Property" and the "Intangible
Property" (each as hereinafter defined), are sometimes collectively referred to
herein as the "PROPERTY."
B. Seller desires to sell, transfer and convey the Property to Buyer,
and Buyer desires to purchase and acquire the Property from Seller, upon and
subject to the terms and conditions set forth in this Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Buyer and Seller hereby agree, and
instruct Escrow Agent, as follows:
1. PURCHASE AND SALE. Subject to all of the terms and conditions of this
Agreement, Seller agrees to sell, transfer and convey to Buyer, and Buyer agrees
to purchase and acquire from Seller, Seller's right, title and interest in and
to the Property, upon and subject to the terms and conditions set forth herein.
2. PURCHASE PRICE. The purchase price of the Property (the "PURCHASE PRICE")
shall equal Twenty Million Dollars ($20,000,000.00), subject to adjustment as
hereinafter provided. The Purchase Price shall be payable as follows:
2.1 DEPOSIT. Concurrently with the "Opening of Escrow" (as hereinafter
defined), Buyer shall deposit into "Escrow" (as hereinafter defined) the sum of
One Million Five Hundred Thousand Dollars ($1,500,000.00) (which amount,
together with any and all interest and dividends earned thereon, shall
hereinafter be referred to as the "DEPOSIT"), by wire transfer of immediately
available federal funds, pursuant to that
certain Escrow Agreement, dated as of the date hereof, by and among Seller,
Merger Parent, Red, White and Blue Pictures, Inc., a California corporation, and
the Escrow Agent (as amended from time to time, the "ESCROW AGREEMENT"). At the
"Closing" (as hereinafter defined), the Deposit shall be credited against the
Purchase Price and shall be paid to Seller. In the event that the sale of the
Property is not consummated for any reason, then the Deposit shall be held and
disbursed in accordance with the terms hereof and the Escrow Agreement. The
Deposit shall be held in an interest bearing account and/or invested by the
Escrow Agent in accordance with the Escrow Agreement and written instructions
delivered pursuant thereto. Seller shall not be responsible for, nor shall
Seller bear the risk of loss of, the Deposit and Seller shall not be responsible
for the return thereof or the rate of return thereon.
2.2 BALANCE. At the Closing, Buyer shall pay to Seller the balance of
the Purchase Price over and above the Deposit, by wire transfer of immediately
available federal funds, net of all prorations and adjustments as provided in
Sections 2.3, 7.5 and 7.6.
2.3 ADJUSTMENT FOR PRORATIONS. On the "Closing Date" (as hereinafter
defined), Buyer shall receive as a credit against the Purchase Price an amount
equal to the sum of all: (a) rentals already received by Seller attributable to
the period from and after the Closing Date; and (b) the amount, if any, by which
prorated amounts and "Closing Costs" (as hereinafter defined) allocated to
Seller pursuant to Sections 7.5.1 and 7.6 hereof exceed prorated amounts and
Closing Costs allocated to Buyer pursuant to Sections 7.5.1 and 7.6 hereof.
3. OPENING OF ESCROW. On or before the second (2nd) "Business Day" (as
hereinafter defined) after the Execution Date, Buyer and Seller shall cause an
escrow ("ESCROW") to be opened with Escrow Agent (the "OPENING OF ESCROW") by
delivery to Escrow Agent of a fully executed copy of this Agreement. Escrow
Agent shall promptly deliver to Buyer and Seller written notice of the date of
the Opening of Escrow. This Agreement shall constitute escrow instructions to
Escrow Agent as well as the agreement of the parties. Escrow Agent is hereby
appointed and designated to act as Escrow Agent and instructed to deliver,
pursuant to the terms of this Agreement, the documents and funds to be deposited
into Escrow as herein provided. The parties hereto shall execute such additional
escrow instructions (not inconsistent with this Agreement as determined by
counsel for Buyer and Seller) as Escrow Agent shall deem reasonably necessary
for its protection, including Escrow Agent's general provisions (as may be
modified by Buyer, Seller and Escrow Agent). In the event of any inconsistency
between the provisions of this Agreement and such additional escrow
instructions, the provisions of this Agreement shall govern.
4. PRE-EXECUTION ACTIONS.
4.1 DUE DILIGENCE. On or prior to the Execution Date, Buyer has (i)
reviewed all contracts, documents, books, records and other materials relating
to the Property that have been made available to Buyer by Seller or Seller's
agents or representatives (collectively, the "PROPERTY DOCUMENTS") that it deems
appropriate or
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necessary, and (ii) performed any inspections, investigations, studies and tests
of the Property that it deems appropriate or necessary, and Buyer is satisfied
with all of the foregoing. By its execution hereof, Buyer hereby accepts the
Property in its present "AS IS, WHERE IS" condition "WITH ALL FAULTS," and
acknowledges that it has been afforded the opportunity to make any and all
inspections of the Property and such related matters as Buyer has desired and,
accordingly, except as expressly set forth in Section 8 hereof, Buyer will rely
solely on its own due diligence and investigations in purchasing the Property.
Notwithstanding anything to the contrary contained herein, in the event that
this Agreement terminates for any reason other than a default by Seller, as a
condition to the release of the Deposit to Buyer if Buyer is otherwise entitled
to such release under the terms of this Agreement, Buyer shall deliver to Seller
copies of all third party reports, plans, studies, surveys and test results
developed by or for Buyer relating to the Property.
4.2 TITLE.
4.2.1 TITLE DOCUMENTS. (a) Prior to the Execution Date, Seller
has caused to be delivered to Buyer from Chicago Title Agency of Nevada, Inc., a
Nevada corporation (in such capacity, "TITLE COMPANY") (i) a current preliminary
title report for a standard coverage owner's policy of title insurance for the
Real Property (the "PTR") and (ii) copies of all documents referenced as
exceptions therein (collectively, the "UNDERLYING DOCUMENTS"). Seller shall
deliver a current ALTA survey of the Real Property certified to Seller, Buyer,
Buyer's lender and Title Company as promptly as practicable after the execution
and delivery hereof (the "SURVEY"). In the event the Closing occurs, Buyer shall
reimburse Seller for the cost of the Survey in lieu of the payment therefor as
set forth in Section 7.6.4 below. The PTR and the Underlying Documents shall be
collectively referred to herein as the "TITLE DOCUMENTS."
(b) Buyer and Seller agree that in addition to that certain Lease
Agreement, dated as of November 30, 1989, by and between Red White & Blue
Pictures, Inc., a California corporation, and Hard Rock Cafe Investors Ltd. IX,
a Nevada limited partnership (as amended, modified and assigned from time to
time, the "LEASE"), all matters set forth on EXHIBIT B attached hereto shall be
hereinafter referred to as "PERMITTED EXCEPTIONS"; PROVIDED, HOWEVER, in no
event shall a deed of trust, mortgage or other voluntary monetary lien incurred
by Seller be a Permitted Exception, and Seller (at Seller's cost) shall cause
all such deeds of trust, mortgages and voluntary monetary liens incurred by
Seller to be paid off and discharged of record at Closing.
4.2.2 CONDITION OF TITLE AT CLOSING. Upon the Closing, Seller
shall sell, transfer and convey to Buyer fee simple title to the Real Property
by a duly executed and acknowledged grant bargain and sale deed in the form of
EXHIBIT C attached hereto (the "DEED"), subject only to the Permitted
Exceptions.
5. DESCRIPTION OF PROPERTY.
5.1 THE IMPROVEMENTS. As used herein, the term "IMPROVEMENTS" shall
mean, subject to and in accordance with the terms of the Lease, all of Seller's
right, title and interest in and to all buildings, improvements, structures and
fixtures now or
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hereafter located on or in the Land Parcel.
5.2 THE REAL PROPERTY. As used herein, the term "REAL PROPERTY" shall
mean, collectively, subject to and in accordance with the terms of the Lease,
all of Seller's right, title and interest in and to: (a) the Land Parcel; (b)
the Improvements; (c) all apparatus, equipment and appliances affixed to and
used in connection with the operation or occupancy of the Land Parcel and/or any
of the Improvements (such as heating, air conditioning or mechanical systems and
facilities used to provide any utility services, refrigeration, ventilation,
waste disposal or other services) and now or hereafter located on or in the Land
Parcel and/or any of the Improvements; and (d) all of Seller's rights, benefits,
entitlements, privileges and easements appurtenant to or used in connection with
the Land Parcel and/or any of the Improvements, including, without limitation,
all minerals, oil, gas and other hydrocarbon substances, all development rights,
air rights, water, water rights and water stock relating to the Land Parcel, all
strips and gores, streets, alleys, easements, rights-of-way, public ways, or
other rights of Seller appurtenant, adjacent or connected to the Land Parcel.
5.3 THE INTANGIBLE PROPERTY. As used herein, the term "INTANGIBLE
PROPERTY" shall mean all of Seller's right, title and interest in and to that
certain intangible property owned by Seller and used by Seller exclusively in
connection with all or any portion of the Real Property, including, without
limitation, all of Seller's right, title and interest, if any, in and to: (a)
the Lease, all books, records, reports, test results, environmental assessments,
if any, as-built plans, specifications and other similar documents and materials
relating to the use, operation, maintenance, repair, construction or fabrication
of all or any portion of the Real Property; (b) all transferable business
licenses, architectural, site, landscaping or other permits, applications,
approvals, authorizations and other entitlements of Seller affecting any portion
of the Real Property; and (c) all transferable guarantees, warranties and
utility contracts of Seller relating to all or any portion of the Real Property.
6. CONDITIONS TO CLOSING.
6.1 BUYER'S CLOSING CONDITIONS. The obligation of Buyer to complete
the transaction contemplated by this Agreement is subject to the following
conditions precedent (and conditions concurrent, with respect to deliveries to
be made by the parties at the Closing) (the "BUYER'S CLOSING CONDITIONS"), which
conditions may be waived, or the time for satisfaction thereof extended, by
Buyer only in a writing executed by Buyer (provided, however, that Buyer's
acceptance of the Deed shall be deemed to be a waiver of any unsatisfied
conditions regardless of whether Buyer executes a separate written instrument to
that effect at the Closing):
6.1.1 TITLE. Title Company shall be prepared and irrevocably
committed to issue to Buyer (with an effective date not earlier than the Closing
Date), a standard coverage owner's policy of title insurance in favor of Buyer
for the Real Property (a) showing fee title to the Real Property vested in
Buyer, (b) with liability coverage in an amount equal to the Purchase Price, (c)
with those endorsements reasonably requested by Buyer (provided that such
endorsements are available in the
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State of Nevada and are paid for by Buyer in accordance with the terms hereof)
and (d) containing no exceptions other than the Permitted Exceptions (the
"Owner's Title Policy").
6.1.2 SELLER'S DUE PERFORMANCE. All of the representations and
warranties of Seller set forth in this Agreement shall be true, correct and
complete in all material respects as of the Closing Date (except for
representations and warranties made as of a specified date set forth in the
applicable representation or warranty, which shall be true and complete in all
material respects as of such date), except where the failure of such
representations and warranties to be so true and correct in all material
respects (without giving effect to any limitation as to "materiality" or
material adverse effect) would not reasonably be expected to have a material
adverse effect on the value of Property. Seller, on or prior to the Closing
Date, shall have complied with and/or performed in all material respects all of
the obligations, covenants and agreements required on the part of Seller to be
complied with or performed pursuant to the terms of this Agreement..
6.1.3 PHYSICAL CONDITION OF PROPERTY. Subject to the terms of
Section 11 hereof, the physical condition of the Property shall be substantially
the same on the Closing Date as on the Execution Date, except for reasonable
wear and tear and any damages due to any act of Buyer or Buyer's
representatives.
6.1.4 BANKRUPTCY. No action or proceeding shall have been
commenced by or against Seller under the federal bankruptcy code or any state
law for the relief of debtors or for the enforcement of the rights of creditors,
and no attachment, execution, lien or levy shall have attached to or been issued
with respect to Seller's interest in the Property or any portion thereof.
6.1.5 DELIVERIES. Seller shall have delivered to Escrow Agent or
Buyer, as the case may be, such documents or instruments as are required to be
delivered by Seller pursuant to the terms of this Agreement.
6.1.6 OTHER TRANSACTION CLOSINGS. All conditions to each of the
Other Transaction Closings shall have been satisfied or, if permissible, waived
by the party entitled to make such a waiver, and each of the Other Transaction
Closings shall occur simultaneously with the Closing. For purposes hereof,
"OTHER TRANSACTION CLOSINGS" shall mean (i) the "Closing," as such term is
defined in Section 1.3 of the Agreement and Plan of Merger, dated as of the date
hereof (the "MERGER AGREEMENT"), by and among Hard Rock Hotel, Inc., a Nevada
corporation ("HRH"), Morgans Hotel Group Co., a Delaware corporation ("MERGER
PARENT"), and MHG HR Acquisition Corp., a Nevada corporation, (ii) the
"Closing," as such term is defined in Section 7.1 of the Purchase and Sale
Agreement and Joint Escrow Instructions, dated as of the date hereof (the "PMR
ASSET PURCHASE AGREEMENT"), by and between PM Realty, LLC, a Nevada
limited-liability company, and Buyer, (iii), the execution of the Trademark
Agreement, to be dated as of the Closing, by and between Peter A. Morton and HRH
(the "TRADEMARK AGREEMENT"), (iv) the execution of the License Agreement, to be
dated as of the Closing, by and between Peter A. Morton and Merger Parent (the
"LICENSE AGREEMENT"), and (v)
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the execution of the "Morton Trademark Assignment" (as defined in the Merger
Agreement) (the "MORTON TRADEMARK ASSIGNMENT" and, together with the Merger
Agreement, the PMR Asset Purchase Agreement and the License Agreement, the
"OTHER TRANSACTION AGREEMENTS").
6.2 FAILURE OF BUYER'S CLOSING CONDITIONS. If any of Buyer's Closing
Conditions have not been fulfilled on or prior to the "Outside Closing Date" (as
defined herein), Buyer may:
6.2.1 waive any such unfulfilled Buyer's Closing Condition and
close Escrow in accordance with this Agreement, without adjustment or abatement
of the Purchase Price; or
6.2.2 terminate this Agreement by written notice to Seller and
Escrow Agent, in which event (1)(a) Escrow Agent shall return the Deposit to
Buyer, (b) Escrow Agent shall return all other documents, instruments and funds
delivered into Escrow to the party that delivered the same into Escrow, (c) to
the extent that the failure of any applicable Buyer's Closing Condition is not
caused by a Seller default, Seller and Buyer shall each pay fifty percent (50%)
of the cancellation charges of Title Company and Escrow Agent, if any, and (d)
to the extent that the failure of any applicable Buyer's Closing Condition is
caused by a Seller default, the Deposit shall be liquidated damages, and Buyer's
sole and exclusive remedy hereunder in accordance with the terms of Section 12.2
hereof.
6.3 SELLER'S CLOSING CONDITIONS. The obligation of Seller to complete
the transaction contemplated by this Agreement is subject to the following
conditions precedent (and conditions concurrent, with respect to deliveries to
be made by the parties at the Closing) (the "SELLER'S CLOSING CONDITIONS"),
which conditions may be waived, or the time for satisfaction thereof extended,
by Seller only in a writing executed by Seller:
6.3.1 BUYER'S DUE PERFORMANCE. All of the representations and
warranties of Buyer set forth in this Agreement shall be true, correct and
complete in all material respects as of the Closing Date, and Buyer, on or prior
to the Closing Date, shall have complied with and/or performed in all material
respects all of the obligations, covenants and agreements required on the part
of Buyer to be complied with or performed pursuant to the terms of this
Agreement.
6.3.2 BANKRUPTCY. No action or proceeding shall have been
commenced by or against Buyer under the federal bankruptcy code or any state law
for the relief of debtors or for the enforcement of the rights of creditors.
6.3.3 DELIVERIES. Buyer shall have delivered to Escrow Agent or
Seller, as the case may be, such documents or instruments as are required to be
delivered by Buyer pursuant to the terms of this Agreement.
6.3.4 OTHER TRANSACTION CLOSINGS. All conditions to each of the
Other Transaction Closings shall have been satisfied or, if permissible, waived
by the
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party entitled to make such a waiver, and each of the Other Transaction
Closings shall occur simultaneously with the Closing.
6.4 FAILURE OF SELLER'S CLOSING CONDITIONS. If any of the Seller's
Closing Conditions have not been fulfilled on or prior to the Outside Closing
Date, Seller may:
6.4.1 waive any such unfulfilled Seller's Closing Condition and
close Escrow in accordance with this Agreement, without adjustment or abatement
of the Purchase Price; or
6.4.2 terminate this Agreement by written notice to Buyer and
Escrow Agent, in which event (a) Escrow Agent shall deliver the Deposit to
Seller (which Seller shall retain as liquidated damages, as its sole and
exclusive remedy hereunder, in accordance with the terms of Section 12.1
hereof); provided, however, that if Seller or any of the other parties to the
Other Transaction Agreements (other than Buyer, Merger Parent or the Escrow
Agent) has breached or failed to perform in any material respect its obligations
or satisfy the conditions under any of the Other Transaction Agreements, then
Seller shall not be entitled to retain the Deposit and, in such case, Escrow
Agent shall return the Deposit to Buyer (which shall be liquidated damages, and
Buyer's sole and exclusive remedy hereunder, in accordance with the terms of
Section 12.2 hereof), (b) Escrow Agent shall return all other documents,
instruments and funds delivered into Escrow to the party that delivered the same
into Escrow and (c) to the extent that the failure of any applicable Seller's
Closing Condition is not caused by a Buyer default, Seller and Buyer shall each
pay fifty percent (50%) of the cancellation charges of Title Company and Escrow
Agent, if any.
7. CLOSING.
7.1 CLOSING DATE. Subject to the provisions of this Agreement, the
Closing shall take place at a time and on a date specified by the parties, which
shall be no later than the fifth Business Day after satisfaction or waiver of
the conditions set forth in Sections 6.1 and 6.3 (other than those conditions,
including the occurrence of the Other Transaction Closings, that by their nature
are to be satisfied at the Closing, but subject to fulfillment or waiver of
those conditions, it being the intention of Buyer and Seller that the Closing
and Other Transaction Closings occur concurrently) at the offices of Wachtell,
Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York 10019-6150, or at
such other time, date, or place as agreed to in writing by the parties hereto.
As used herein, the following terms shall have the following meanings: (a) the
"CLOSING" shall mean the recordation of the Deed in the official records of
Clark County, Nevada (the "OFFICIAL RECORDS"); (b) the "CLOSING DATE" shall mean
the date upon which the Closing actually occurs; and (c) the "OUTSIDE CLOSING
DATE" shall mean (i) the earlier of (x) seven (7) Business Days following Merger
Parent's receipt of Gaming Approvals (as such term is defined in the Merger
Agreement) and (y) February 11, 2007 or (ii) such later date as is agreed to by
Seller.
7.2 DELIVERIES BY SELLER. On or before the Closing Date, Seller, at
its sole cost and expense, shall deliver or cause to be delivered into Escrow
the following
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documents and instruments, each dated as of the Closing Date, in addition to all
other items and payments required by this Agreement to be delivered by Seller at
the Closing:
7.2.1 DEED. The original executed and acknowledged Deed conveying
the Real Property to Buyer;
7.2.2 NON-FOREIGN AFFIDAVIT. The original executed non-foreign
affidavit in the form of EXHIBIT D attached hereto (the "NON-FOREIGN
AFFIDAVIT");
7.2.3 ASSIGNMENT OF LEASES. Four (4) original executed
counterparts of an assignment and assumption of lease in the form of EXHIBIT E
attached hereto (the "ASSIGNMENT OF LEASE"), pursuant to which Seller shall
assign all of its rights and remedies under the Lease (including, without
limitation, its right to any prepaid rent) to Buyer, and Buyer shall assume the
obligations of Seller with respect thereto arising from and after the Closing
Date;
7.2.4 BILL OF SALE. Four (4) original executed counterparts of a
bill of sale, assignment and assumption in the form of EXHIBIT F attached hereto
(the "BILL OF SALE"), pursuant to which Seller shall transfer to Buyer (and
Buyer shall assume Seller's obligations arising from and after the Closing Date,
if any, with respect to) all of the Intangible Property (other than the Lease),
in each case free of all liens and encumbrances (other than the Permitted
Exceptions);
7.2.5 PROOF OF AUTHORITY. Such proof of Seller's authority and
authorization to enter into this Agreement and the transaction contemplated
hereby, and such proof of the power and authority of the individual(s) executing
or delivering any instruments, documents or certificates on behalf of Seller to
act for and bind Seller as may be reasonably required by Title Company or Buyer;
and
7.2.6 LEASE. An original or, if the original is unavailable, a
copy, of the Lease then in effect, to the extent same are in Seller's
possession;
7.2.7 PLANS. Originals or, if originals are unavailable, copies
of plans and specifications, technical manuals and similar materials for the
Improvements, to the extent same are in Seller's possession;
7.2.8 BOOKS AND RECORDS; PERMITS. Originals or, if originals are
unavailable, copies, of all books, records, permits and licenses relating to the
operation, maintenance and repair of the Property during Seller's ownership
thereof to the extent same are in Seller's possession;
7.2.9 TITLE AFFIDAVITS. Any other affidavit, document or
instrument expressly required to be delivered by Seller pursuant to the terms of
this Agreement, or that is reasonable and customary to be required by the Title
Company in connection with the issuance of the Owner's Title Policy; and
7.2.10 OTHER. Such other documents and instruments, signed and
properly acknowledged by Seller, if appropriate, as may be reasonably required
by
8
Buyer, Title Company, Escrow Agent or otherwise in order to effectuate the
provisions of this Agreement and the Closing of the transaction contemplated
herein, including without limitation, a declaration of value form prepared by
the Escrow Agent with respect to the Real Property.
7.3 DELIVERIES BY BUYER. On or before the Closing Date, Buyer, at its
sole cost and expense, shall deliver or cause to be delivered into Escrow the
following funds, documents and instruments, each dated as of the Closing Date,
in addition to all other items and payments required by this Agreement to be
delivered by Buyer at the Closing:
7.3.1 PURCHASE PRICE. Cash in an amount equal to the sum of the
Purchase Price and all of the Buyer's Closing Costs (and otherwise sufficient to
close the transaction contemplated herein);
7.3.2 ASSIGNMENT OF LEASE. Four (4) original executed
counterparts of the Assignment of Lease;
7.3.3 BILL OF SALE. Four (4) original executed counterparts of
the Bill of Sale;
7.3.4 PROOF OF AUTHORITY. Such proof of Buyer's authority and
authorization to enter into this Agreement and the transaction contemplated
hereby, and such proof of the power and authority of the individual(s) executing
or delivering any instruments, documents or certificates on behalf of Buyer to
act for and bind Buyer as may be reasonably required by Title Company or Seller;
and
7.3.5 OTHER. Such other documents and instruments, signed and
properly acknowledged by Buyer, if appropriate, as may reasonably be required by
Seller, Title Company, Escrow Agent or otherwise in order to effectuate the
provisions of this Agreement and the Closing of the transaction contemplated
herein, including without limitation, a declaration of value form prepared by
the Escrow Agent with respect to the Real Property.
7.4 ACTIONS BY ESCROW AGENT. Provided that Escrow Agent shall not have
received written notice from Buyer or Seller of (a) the failure of any condition
to the Closing or of the termination of the Escrow and this Agreement or (b) the
termination of any Other Transaction Agreement, when Buyer and Seller have
deposited into Escrow the documents and funds required by this Agreement and
Title Company is irrevocably and unconditionally committed to issue the Owner's
Title Policy in accordance with the terms hereof, and the Escrow Agent has been
informed that the conditions to the "Closings" under the Other Transaction
Agreements are being satisfied concurrently with the Closing, Escrow Agent
shall, in the order and manner herein below indicated, take the following
actions:
7.4.1 RECORDING. Cause the Deed and any other documents which the
parties hereto may mutually direct to be recorded in the Official Records and
obtain conformed copies thereof for distribution to Buyer and Seller;
9
7.4.2 FUNDS. Disburse all funds as follows:
7.4.2.1 pursuant to the "Closing Statement" (as hereinafter
defined), retain for Escrow Agent's own account all escrow fees and costs,
disburse to Title Company the fees and expenses incurred in connection with the
issuance of the Owner's Title Policy and disburse to any other persons or
entities entitled thereto the amount of any other Closing Costs;
7.4.2.2 disburse to Seller an amount equal to the Purchase
Price, less or plus the net debit or credit to Seller by reason of the
prorations and allocations of Closing Costs provided for herein; and
7.4.2.3 disburse to the party who deposited the same any
remaining funds in the possession of Escrow Agent after payments pursuant to
Sections 7.4.1.1 and 7.4.1.2 above have been completed; and
7.4.3 DELIVERY OF DOCUMENTS. Deliver: (a) to Seller (i) two
originals of all documents deposited into Escrow (other than the Deed and the
Non-Foreign Affidavit), (ii) one copy of the Non-Foreign Affidavit and (iii) one
conformed copy of each document recorded pursuant to the terms hereof; and (b)
to Buyer, (i) two originals of all documents deposited into Escrow (other than
the Deed and the Non-Foreign Affidavit), (ii) the original Deed, (iii) the
original Non-Foreign Affidavit and (iv) one conformed copy of each document
recorded pursuant to the terms hereof.
7.4.4 OWNER'S TITLE POLICY. Cause Title Company to issue to Buyer
the Owner's Title Policy.
7.5 PRORATIONS.
7.5.2 Rentals, revenues, and other income, if any, from the
Property, taxes, assessments, improvement bonds, service contract fees, utility
costs, and other expenses affecting the Property shall be prorated between Buyer
and Seller as of the Closing Date based on a 365 day year. For purposes of
calculating prorations, Buyer shall be deemed to be title holder of the
Property, and therefore entitled to the income and responsible for the expenses,
after 12:01 a.m. Pacific Standard Time on the Closing Date. Delinquent rentals
as of the Closing Date shall not be prorated, but when paid to Buyer shall be
delivered by Buyer to Seller, net of Buyer's reasonable collection costs. After
the Closing, Buyer shall use commercially reasonable efforts to collect
delinquent rentals on behalf of Seller, provided that Buyer shall have no
obligation to commence any action or proceeding to collect any delinquent rent.
All non-delinquent real estate taxes or assessments on the Property shall be
prorated based on the actual current tax bill, but if such tax bill has not yet
been received by Seller by the Closing Date or if supplemental taxes are
assessed after the Closing for the period prior to the Closing, the parties
shall make any necessary adjustment after the Closing by cash payment to the
party entitled thereto so that Seller shall have borne all real property taxes,
including all supplemental taxes, allocable to the period prior to the Closing
and Buyer shall bear all real property taxes, including all supplemental taxes,
allocable to the period from and after the Closing.
10
If any expenses attributable to the Property and allocable to the period prior
to the Closing are discovered or billed after the Closing, the parties shall
make any necessary adjustment after the Closing by cash payment to the party
entitled thereto so that Seller shall have borne all expenses allocable to the
period prior to the Closing and Buyer shall bear all expenses allocable to the
period from and after the Closing. Upon the Closing, Buyer assumes all expenses
and real property taxes, including all supplemental taxes, allocable to the
period from and after the Closing. The provisions of this Section 7.5.1 shall
survive the Closing.
7.5.3 Five (5) Business Days prior to the Closing Date, Escrow
Agent shall deliver to each of the parties for their review and approval a
preliminary closing statement (the "PRELIMINARY CLOSING STATEMENT") setting
forth: (a) the proration amounts allocable to each of the parties pursuant to
Section 7.5 hereof; and (b) the Closing Costs allocable to each of the parties
pursuant to Section 7.6 hereof. Based on each of the party's comments, if any,
regarding the Preliminary Closing Statement, Escrow Agent shall revise the
Preliminary Closing Statement and deliver the final version of a closing
statement to each of the parties. Each of the parties shall execute and deliver
counterparts of the final version of a closing statement at the Closing (the
"CLOSING STATEMENT"), and Escrow Agent shall deliver a fully executed
counterpart thereof to each party.
7.6 CLOSING COSTS. Each party shall pay its own costs and expenses
arising in connection with the Closing (including, without limitation, its own
attorneys' and advisors' fees, charges and disbursements), except the following
costs (the "CLOSING COSTS"), which shall be allocated between the parties as
follows:
7.6.1 all documentary transfer, stamp, sales and other taxes
related to the transfer of the Property, which shall be paid by Buyer;
7.6.2 Escrow Agent's escrow fees and costs, which shall be paid
one-half (1/2) by Seller and one-half (1/2) by Buyer;
7.6.3 the cost of the premium for a CLTA Owner's Title Policy,
which shall be paid by Seller;
7.6.4 the cost of the Survey, the difference of the cost of the
premium between a CLTA owner's title policy and ALTA owner's title policy, and
the cost of any endorsements to the Owner's Title Policy, which shall be paid by
Buyer; and
7.6.5 all recording fees, which shall be paid by Buyer.
7.7 DELIVERIES OUTSIDE OF ESCROW. Seller shall deliver possession of
the Property, subject only to the Lease and the other Permitted Exceptions, to
Buyer upon the Closing. Further, Seller hereby covenants and agrees to deliver
to Buyer, on or prior to the Closing, the following items:
7.7.1 INTANGIBLE PROPERTY. The Intangible Property, including,
without limitation, the original Property Documents.
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7.7.2 NOTICE TO TENANT. A letter dated as of the Closing Date and
addressed to the tenant under the Lease, informing such tenant of the transfer
of the Property and the assignment of the Lease to Buyer, together with an
instruction to pay all amounts due or to become due under the Lease to Buyer.
SELLER'S REPRESENTATIONS AND WARRANTIES. Seller represents and warrants to and
agrees with Buyer, as of the Execution Date and as of the Closing Date, as
follows:
8.1 DUE ORGANIZATION. Seller is a corporation duly incorporated and
existing in good standing under the laws of the State of California.
8.2 SELLER'S AUTHORITY; VALIDITY OF AGREEMENTS; NONCONTRAVENTION.
Seller has full right, power and authority to sell the Property to Buyer as
provided in this Agreement and to carry out its obligations hereunder. The
individual(s) executing this Agreement and the instruments referenced herein on
behalf of Seller have the legal power, right and actual authority to bind Seller
to the terms hereof and thereof. This Agreement is, and all other instruments,
documents and agreements to be executed and delivered by Seller in connection
with this Agreement shall be, duly authorized, executed and delivered by Seller
and shall be valid, binding and enforceable obligations of Seller (except as
enforcement may be limited by bankruptcy, insolvency or similar laws). Neither
the execution and delivery of this Agreement nor its performance by Seller will
(i) result in the breach of any material contract or agreement to which Seller
is a party or by which the Property is bound or (ii) violate any law applicable
to the Seller. No approvals, consents, authorizations, declarations,
registrations or notices of or to any governmental authority that have not been
received or made on or prior to the Closing Date are required by or with respect
to Seller in connection with the consummation by Seller of the transactions
contemplated hereby.
8.3 LEASE. Other than the Lease (together with all amendments,
modifications and guarantees thereof), Seller has not directly entered into any
leases or subleases of the Property. Seller has not delivered or received any
written notice of, and to Seller's Knowledge, there are no, material defaults
under, the Lease.
8.4 SERVICE CONTRACTS. Neither Seller nor any of its agents has
executed any service, maintenance, repair, management, supply or other contracts
(including, without limitation, any service contracts) affecting the Property
which would be binding on Buyer subsequent to the Closing.
8.5 VIOLATIONS. Seller has not received any written notice of, and to
Seller's Knowledge, there are no, material violations of any laws, ordinances,
orders or requirements of any governmental authority, agency or officer having
jurisdiction over or affecting the Property, which have not previously been
complied with.
8.6 LITIGATION. There are (a) no actions, investigations, suits or
proceedings (other than tax appeals or protests) pending or to Seller's
Knowledge threatened in writing against Seller that if adversely decided would
have, or are reasonably likely to have, a material adverse effect on the value
of Property, or the ownership or operation thereof, and (b) no judgments,
orders, awards or decrees currently
12
in effect against Seller with respect to the ownership or operation of the
Property which have not been fully discharged prior to the Execution Date;
PROVIDED, HOWEVER, in no event shall this representation be deemed to be untrue,
incorrect or incomplete in any respect if the subject of any of the foregoing
matters would be an "Indemnified Claim" (as such term is defined in that certain
Indemnification Agreement, dated as of that date hereof, by and among Morgan
Hotel Group Co., a Delaware corporation, and Peter A. Morton, an individual).
8.7 CONDEMNATION. As of the date hereof, there are no pending
proceedings or, to Seller's Knowledge, proceedings threatened in writing by
applicable governmental authority, to condemn all or any portion of the Property
by eminent domain proceedings or otherwise.
8.8 FOREIGN PERSON. Seller is not a "foreign person" as defined in
Section 1445 of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
8.9 ENVIRONMENTAL. To Seller's Knowledge, except as would not result
in a material adverse effect, Seller has not received any written notice or
claim from any governmental authority or third party alleging that Seller is not
in compliance with any applicable federal, state and local laws governing
pollution or the protection of the environment.
8.10 SELLER'S KNOWLEDGE. As used herein, the term "SELLER'S KNOWLEDGE"
shall mean the actual knowledge of Peter A. Morton or Brian Ogaz; and the
knowledge of no other person shall be imputed to any such individual.
8.11 NO OTHER REPRESENTATIONS OR WARRANTIES; SURVIVAL. Other than the
representations and warranties expressly set forth in this Section 8, Seller
shall not be deemed to have made any other representation or warranty in
connection with this Agreement or the transactions contemplated hereby and no
other person (including any officer, director, employee, stockholder, or
Affiliate of Seller) shall be deemed to have made any representation or warranty
in connection with this Agreement or the transactions contemplated hereby. The
representations and warranties of Seller set forth in this Agreement shall
survive until the first anniversary of Closing Date (the "EXPIRATION DATE").
9. BUYER'S REPRESENTATIONS AND WARRANTIES.
Buyer represents and warrants to Seller, as of the Execution Date and
as of the Closing Date, as follows:
9.1 DUE ORGANIZATION. Buyer is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
9.2 BUYER'S AUTHORITY; VALIDITY OF AGREEMENTS. Buyer has full right,
power and authority to purchase and acquire the Property from Seller as provided
in this Agreement and to carry out its obligations hereunder. The individual(s)
executing this
13
Agreement and the instruments referenced herein on behalf of Buyer have the
legal power, right and actual authority to bind Buyer to the terms hereof and
thereof. This Agreement is, and all instruments, documents and agreements to be
executed and delivered by Buyer in connection with this Agreement shall be, duly
authorized, executed and delivered by Buyer and shall be valid, binding and
enforceable obligations of Buyer (except as enforcement may be limited by
bankruptcy, insolvency or similar laws) and do not, and as of the Closing Date
will not, violate any provision of any agreement or judicial order to which
Buyer is a party or to which Buyer is subject.
9.3 FINANCING. Buyer has obtained written commitments (the "FINANCING
COMMITMENTS") for any and all financing (whether equity financing, debt
financing or otherwise) necessary to pay the Purchase Price and all fees, costs
and expenses relating to the transactions contemplated by this Agreement (the
"FINANCING"). Buyer has provided true, accurate and complete copies of the
Financing Commitments to Seller, and Buyer has paid all commitment fees and any
other fees and amounts due under the Financing Commitments at or prior to the
date hereof. None of the Financing Commitments has been amended, modified or
terminated, and the respective commitments contained in the Financing
Commitments have not been withdrawn or rescinded in any respect in any way
materially adverse to Seller. The Financing Commitments are in full force and
effect and no event has occurred which, with or without notice, lapse of time
(other than the expiration of the term thereof) or both, would constitute a
default on the part of Buyer under any of the Financing Commitments. There are
no conditions precedent or other contingencies related to the funding of the
full amount of the Financing, other than as set forth in or contemplated by the
Financing Commitments. The aggregate proceeds to be disbursed pursuant to the
agreements contemplated by the Financing Commitments, together with Buyer's cash
and cash equivalents, will be sufficient for Buyer to pay the Purchase Price and
all fees, costs and expenses related to the transactions contemplated by this
Agreement. Buyer has no reason to believe that any of the conditions to the
Financing contemplated by the Financing Commitments will not be satisfied or
that Buyer will not receive the proceeds of the Financing on or prior the
Closing Date.
9.4 SURVIVAL Other than the representations and warranties expressly
set forth in this Section 9, Buyer shall not be deemed to have made any other
representation or warranty in connection with this Agreement or the transactions
contemplated hereby and no other person (including any officer, director,
employee, stockholder, or Affiliate of Buyer) shall be deemed to have made any
representation or warranty in connection with this Agreement or the transactions
contemplated hereby. The representations and warranties of Buyer set forth in
this Section 9 shall survive the delivery of the Deed and the Closing for twelve
(12) months following the Closing Date. Each such representation and warranty
shall automatically be null and void and of no further force and effect on the
date that is twelve (12) months after the Closing Date, and Seller shall not be
entitled to commence an action or proceeding claiming breach of any such
representation or warranty by Buyer at any time subsequent to such date that is
twelve (12) months after the Closing Date.
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10. ADDITIONAL COVENANTS AND AGREEMENTS.
10.1 AS-IS. THE PARTIES HEREBY ACKNOWLEDGE AND AGREE AS FOLLOWS: (A)
BUYER IS A SOPHISTICATED PURCHASER WHO IS FAMILIAR WITH THIS TYPE OF PROPERTY;
AND (B) EXCEPT AS MAY BE SPECIFICALLY SET FORTH IN THIS AGREEMENT, INCLUDING,
WITHOUT LIMITATION, IN SECTION 8 HEREOF, NEITHER SELLER NOR ANY OF ITS AGENTS,
REPRESENTATIVES, BROKERS, OFFICERS, DIRECTORS, SHAREHOLDERS, OR EMPLOYEES HAS
MADE OR WILL MAKE ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER,
WHETHER ORAL OR WRITTEN, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY. THE
PROPERTY IS BEING SOLD TO BUYER IN ITS PRESENT "AS IS, WHERE IS" CONDITION "WITH
ALL FAULTS." SUBJECT TO SECTION 8 HEREOF, BUYER ACKNOWLEDGES THAT IT HAS BEEN
AFFORDED THE OPPORTUNITY TO MAKE ANY AND ALL INSPECTIONS OF THE PROPERTY AND
SUCH RELATED MATTERS AS BUYER HAS DESIRED AND, ACCORDINGLY, EXCEPT AS MAY BE
SPECIFICALLY SET FORTH TO THE CONTRARY HEREIN, BUYER WILL RELY SOLELY ON ITS OWN
DUE DILIGENCE AND INVESTIGATIONS IN PURCHASING THE PROPERTY.
15
SELLER AND BUYER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE
PROVISIONS OF THIS SECTION 10.1, AND BY THEIR INITIALS IMMEDIATELY BELOW AGREE
TO BE BOUND BY ITS TERMS.
/s/ P.M. /s/ W.E.S
- ---------- ----------
Seller's Buyer's
Initials Initials
16
10.2 [INTENTIONALLY OMITTED].
10.3 CROSS TERMINATION. If the Merger Agreement is terminated in
accordance with the terms thereof, then unless Buyer and Seller shall otherwise
expressly agree in writing, this Agreement shall automatically terminate, and
this Agreement and all of the provisions hereof shall be void and of no further
force or effect (except that Section 13 shall survive the termination of this
Agreement), and neither party shall have any further rights or obligations
hereunder, other than pursuant to any provision hereof which expressly survives
the termination of this Agreement. If this Agreement is terminated as a result
of the termination of the Merger Agreement pursuant to Section 6.1 thereof, then
upon such termination, (i) if HRH is entitled to and elects to receive the
"Deposit" (as defined in the Merger Agreement) under the Merger Agreement (the
"MERGER DEPOSIT") then upon termination of this Agreement the Deposit shall be
paid to Seller, and (ii) if Merger Parent is entitled to and elects to receive
the Merger Deposit under the Merger Agreement, then upon termination of this
Agreement the Deposit shall be delivered to Buyer.
10.4 INTERIM COVENANTS. During the period from the date hereof until
the Closing Date, Seller:
(a) shall not enter into any agreements with respect to all or
any portion of the Property, unless such agreements expire by their terms on or
prior to the Closing Date or may be terminated by the owner of the Property
without penalty upon not more than thirty (30) days' prior notice;
(b) shall maintain in full force and effect any insurance
policies that Seller currently maintains in effect with respect to the Property
(or if Seller maintains any such insurance policies in effect, replacement
policies providing for substantially similar coverage if available on
commercially reasonable terms); and
(c) shall operate, maintain, manage and repair the Property in a
manner consistent in all material respects with Seller's past practice.
11. RISK OF LOSS.
11.1 CONDEMNATION. If, prior to the Closing, all or any "Material
Portion" (as hereinafter defined) of the Property is taken by condemnation or
eminent domain (or is the subject of a pending or contemplated taking which has
not been consummated), Seller shall within five (5) Business Days notify Buyer
of such fact. In such event, Buyer shall have the option to terminate this
Agreement upon written notice to Seller given not later than fifteen (15) days
after receipt of such notice from Seller. Upon such termination, Escrow Agent
shall return the Deposit to Buyer, the parties shall equally share the
cancellation charges of Escrow Agent and Title Company, if any, and neither
party shall have any further rights or obligations hereunder, other than
pursuant to any provision hereof which expressly survives the termination of
this Agreement. Buyer shall have no right to terminate this Agreement as a
result of any taking of any portion of
17
the Property that is not a Material Portion. If Buyer does not elect or has no
right to terminate this Agreement, Seller shall assign and turn over to Buyer,
and Buyer shall be entitled to receive and keep, all awards for the taking by
condemnation and Buyer shall be deemed to have accepted the Property subject to
the taking without reduction in the Purchase Price. As used herein, the term
"MATERIAL PORTION" shall mean any portion having a value in excess of ten
percent (10%) of the Purchase Price.
11.2 CASUALTY. Prior to the Closing and notwithstanding the pendency
of this Agreement, the entire risk of loss or damage by earthquake, hurricane,
tornado, flood, landslide, fire or other casualty shall be borne and assumed by
Seller. If, prior to the Closing, any material damage occurs to any portion of
the Property as a result of any earthquake, hurricane, tornado, flood,
landslide, fire or other casualty, Seller shall within five (5) Business Days
notify Buyer of such fact. Buyer shall have no right to terminate this Agreement
as a result of any damage or destruction of any portion of the Property;
however, Seller shall assign and turn over, and Buyer shall be entitled to
receive and keep, all insurance proceeds payable with respect to such damage or
destruction (which shall then be repaired or not at Buyer's option and cost) and
the parties shall proceed to the Closing pursuant to the terms hereof without
modification of the terms of this Agreement. Buyer shall have the right to
participate in any adjustment of the insurance claim.
12. REMEDIES.
12.1 SELLER'S LIQUIDATED DAMAGES. IN THE EVENT THAT THE ESCROW AND
THIS TRANSACTION FAIL TO CLOSE AS A RESULT OF (x) THE DEFAULT OF BUYER IN THE
PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT OR (y) THE TERMINATION OF
THIS AGREEMENT DESCRIBED IN THE SECOND SENTENCE OF SECTION 10.3 ABOVE AND CLAUSE
(i) OF THE SECOND SENTENCE OF SECTION 10.3 APPLIES, BUYER AND SELLER AGREE THAT
(1) SELLER'S ACTUAL DAMAGES WOULD BE IMPRACTICABLE OR EXTREMELY DIFFICULT TO
FIX, (2) EXCEPT AS SET FORTH IN SECTION 6.4.2(a), IN THE CASE OF THE TERMINATION
OF THIS AGREEMENT PURSUANT TO SECTION 6.4.2, , SELLER, AS SELLER'S SOLE AND
EXCLUSIVE REMEDY, IS ENTITLED TO LIQUIDATED DAMAGES IN THE AMOUNT OF THE DEPOSIT
AND (3) (A) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF BUYER AND SELLER
HEREUNDER AND THE ESCROW CREATED HEREBY SHALL TERMINATE, (B) ESCROW AGENT SHALL,
AND IS HEREBY AUTHORIZED AND INSTRUCTED TO, RETURN PROMPTLY TO BUYER AND SELLER
ALL DOCUMENTS AND INSTRUMENTS TO THE PARTIES WHO DEPOSITED THE SAME, (C) EXCEPT
AS SET FORTH IN SECTION 6.4.2(a), IN THE CASE OF THE TERMINATION OF THIS
AGREEMENT PURSUANT TO SECTION 6.4.2, ESCROW AGENT SHALL DELIVER THE DEPOSIT TO
SELLER PURSUANT TO SELLER'S INSTRUCTIONS, AND THE SAME SHALL BE THE FULL, AGREED
AND LIQUIDATED DAMAGES, AND (D) ALL TITLE AND ESCROW CANCELLATION CHARGES, IF
ANY, SHALL BE CHARGED TO BUYER; PROVIDED, HOWEVER, THAT THE FOREGOING SHALL NOT
LIMIT SELLER'S RIGHTS OR REMEDIES WITH RESPECT TO (1) THE
18
OBLIGATIONS OF BUYER UNDER SECTIONS 4, 13 AND 15.16 HEREOF AND (2) THOSE RIGHTS
AND OBLIGATIONS THAT, BY THEIR TERMS, SURVIVE THE TERMINATION OF THIS AGREEMENT.
12.2 BUYER'S REMEDIES. IN THE EVENT THAT THE ESCROW AND THIS
TRANSACTION FAIL TO CLOSE AS A RESULT OF (x) THE DEFAULT OF SELLER IN THE
PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT OR (y) THE TERMINATION OF
THIS AGREEMENT PURSUANT TO SECTION 10.3 ABOVE AND CLAUSE (ii) OF THE SECOND
SENTENCE OF SECTION 10.3 ABOVE APPLIES, (1) BUYER AND SELLER AGREE THAT BUYER'S
ACTUAL DAMAGES WOULD BE IMPRACTICABLE OR EXTREMELY DIFFICULT TO FIX, (2) BUYER,
AS BUYER'S SOLE AND EXCLUSIVE REMEDY, IS ENTITLED TO LIQUIDATED DAMAGES IN THE
AMOUNT OF THE DEPOSIT, AND (3) (A) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF BUYER AND SELLER HEREUNDER AND THE ESCROW CREATED HEREBY SHALL TERMINATE, (B)
ESCROW AGENT SHALL, AND IS HEREBY AUTHORIZED AND INSTRUCTED TO, RETURN PROMPTLY
TO BUYER AND SELLER ALL DOCUMENTS AND INSTRUMENTS TO THE PARTIES WHO DEPOSITED
THE SAME, (C) ESCROW AGENT SHALL DELIVER THE DEPOSIT TO BUYER PURSUANT TO
BUYER'S INSTRUCTIONS, AND THE SAME SHALL BE THE FULL, AGREED AND LIQUIDATED
DAMAGES, AND (d) ALL TITLE AND ESCROW CANCELLATION CHARGES, IF ANY, SHALL BE
CHARGED TO SELLER; PROVIDED, HOWEVER, THAT THE FOREGOING SHALL NOT LIMIT BUYER'S
RIGHTS OR REMEDIES WITH RESPECT TO (1) THE OBLIGATIONS OF SELLER UNDER SECTIONS
13 AND 15.16 HEREOF AND (2) THOSE RIGHTS AND OBLIGATIONS THAT, BY THEIR TERMS,
SURVIVE THE TERMINATION OF THIS AGREEMENT. NOTWITHSTANDING THE FOREGOING, IN THE
EVENT THAT THE OTHER TRANSACTION CLOSINGS HAVE OCCURRED AND THE ESCROW AND THIS
TRANSACTION FAIL TO CLOSE AS A RESULT OF THE DEFAULT OF SELLER IN THE
PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT, IN LIEU OF BUYER'S REMEDIES
SET FORTH ABOVE IN THIS PARAGRAPH, BUYER MAY ELECT TO PURSUE THE REMEDY OF
SPECIFIC PERFORMANCE AGAINST SELLER. Notwithstanding anything to the contrary
contained herein, Seller shall not be in default with respect to any of its
obligations hereunder unless and until (y) it receives written notice from Buyer
specifying such default and (z) it fails to cure such default within twenty (20)
Business Days after receipt of such notice.
SELLER AND BUYER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE
PROVISIONS OF THIS ARTICLE 12, AND BY THEIR INITIALS IMMEDIATELY BELOW AGREE TO
BE BOUND BY ITS TERMS.
/s/ P.M. /s/ W.E.S.
- ---------- ----------
Seller's Buyer's
Initials Initials
19
13. BROKERS.
Buyer and Seller each hereby represent, warrant to and agree with each
other that it has not had, and shall not have, any dealings with any third party
to whom the payment of any broker's fee, finder's fee, commission or other
similar compensation ("COMMISSION") shall or may become due or payable in
connection with the transaction contemplated hereby, other than Leeds Equity
Partners (the "BROKER"). Seller hereby agrees to pay any Commission due and
payable to the Broker in connection with the transaction contemplated hereby
pursuant to its separate agreement with the Broker. Seller shall indemnify,
defend, protect and hold Buyer harmless from and against any and all claims,
causes of action, demands, obligations, losses, damages, liabilities, judgments,
costs and expenses (including, without limitation, reasonable attorneys' fees,
charges and disbursements) (collectively, "CLAIMS") incurred by Buyer by reason
of any breach or inaccuracy of the representation, warranty and agreement of
Seller contained in this Section 13. Buyer shall indemnify, defend, protect and
hold Seller harmless from and against any and all Claims incurred by Seller by
reason of any breach or inaccuracy of the representation, warranty and agreement
of Buyer contained in this Section 13. The provisions of this Section 13 shall
survive the Closing or earlier termination of this Agreement.
14. INDEMNIFICATION.
14.1 INDEMNIFICATION BY SELLER. Seller shall indemnify, defend and
hold harmless Buyer and each of its predecessors and successors, members,
managers, stockholders, employees, officers, directors, agents and
representatives (collectively, the "BUYER INDEMNITEES") from and against, and
pay or reimburse the Buyer Indemnitees for, any and all damages, liabilities,
losses, claims, obligations, Liens, assessments, judgments, fines and penalties
(collectively, "LOSSES") that any of them may suffer, incur or sustain, directly
or indirectly, arising out of, attributable to, relating to or resulting from:
(a) any inaccuracy in or breach of any representation and
warranty made by the Seller in this Agreement;
(b) any inaccuracy in or breach of any representation and
warranty (without giving effect to any qualifiers or exceptions relating to
knowledge, Seller's knowledge or materiality) made by Seller in this Agreement
if such inaccuracy or breach, individually or together with all such
inaccuracies or breaches, would reasonably be expected to have a material
adverse effect on the value of Property, in each case by virtue of the failure
of such representation or warranty to be true and correct (i) on and as of the
Closing Date with the same effect as thought made on and as of the Closing Date
(other than any such representation or warranty that speaks as of a specific
date or time other than the Closing Date), or (ii) on and as of the date or time
when made, in the case of any representation or warranty that speaks as of a
specific date of time other than the Closing Date; and
(c) any breach or nonperformance of any of the covenants or
20
other agreements made and to be performed by the Seller pursuant to this
Agreement.
14.2 INDEMNIFICATION BY BUYER. Buyer shall indemnify, defend and hold
harmless Seller and each of its predecessors and successors, members, managers,
stockholders, employees, officers, directors, agents and representatives
(collectively, the "SELLER INDEMNITEES") from and against, and pay or reimburse
the Seller Indemnitees for, any and all Losses that any of them may suffer,
incur or sustain, directly or indirectly, arising out of, attributable to,
relating to or resulting from:
(a) any inaccuracy in or breach of any representation and
warranty made by Buyer in this Agreement; and
(b) any breach or nonperformance of any of the agreements made
and to be performed by the Buyer pursuant to this Agreement.
14.3 MINIMUM LOSSES. No Buyer Indemnitee shall have any right to
indemnification under Section 14.1 until aggregate Losses incurred by all Buyer
Indemnitees would exceed $250,000 (the "INDEMNITY THRESHOLD"), after which there
may only be recovered those Losses in excess of the Indemnity Threshold, subject
to the conditions of this ARTICLE 14, including the limitations set forth in
SECTION 14.4.
14.4 MAXIMUM INDEMNIFICATION. Seller shall not be obligated to provide
indemnification pursuant to SECTION 14.2 exceeding, in the aggregate, the
Indemnification Escrow Amount . Notwithstanding anything in this Agreement, any
indemnification obligation of Seller under SECTION 14.1 shall be satisfied
solely from the Indemnification Escrow Fund.
14.5 [INTENTIONALLY OMITTED].
14.6 NOTICE; PROCEDURE FOR THIRD-PARTY CLAIMS.
(a) Any Person entitled to indemnification under ARTICLE 14 (an
"INDEMNIFIED PARTY") may seek indemnification for any Loss or potential Loss by
giving written notice to the applicable party or parties from whom
indemnification is sought (the "INDEMNIFYING PARTY") before, if applicable, the
Expiration Date. Written notice to such Indemnifying Party of the existence of a
claim shall be given by the Indemnified Party as soon as practicable after the
Indemnified Party first receives notice of the potential claim, PROVIDED that
any failure to provide such prompt notice of the existence of a claim to the
applicable Indemnifying Party shall not affect the Indemnified Party's right to
seek indemnification pursuant to this ARTICLE 14 except and only to the extent
that such failure results in such Indemnifying Party actually incurring an
expense or otherwise being prejudiced as a result of such delay. In the case of
a claim involving a Third-Party Claim (as hereinafter defined), (i) the notice
of claim shall describe in reasonable detail the facts known to the Indemnified
Party giving rise to such indemnification claim and the amount, or good faith
estimate of the amount, of Losses arising therefrom, and (ii) the Indemnified
Party shall deliver to the Seller (if the Indemnified Party is a Buyer
Indemnitee) or to Buyer (if the Indemnified Party is a Seller Indemnitee), as
applicable, promptly after the Indemnified Party's receipt thereof, copies of
all notices and
21
documents (including court papers) received by the Indemnified Party relating to
such Third-Party Claim.
(b) In the case of any claim asserted by a Person that is not a
party to this Agreement against an Indemnified Party (a "THIRD-PARTY CLAIM"),
the Indemnified Party shall permit the Indemnifying Party (at the expense of
such Indemnifying Party) to assume the defense of such Third-Party Claim and any
litigation or proceeding resulting therefrom; provided that (i) counsel for the
Indemnifying Party who shall conduct the defense of such claim or litigation
shall be reasonably satisfactory to the Indemnified Party and (ii) the
Indemnified Party may participate in such defense at such Indemnified Party's
expense. Notwithstanding the election of the Indemnifying Party to assume
control of such defense, the Indemnified Party shall be entitled to retain or
assume the defense of such Third-Party Claims (at such Indemnified Party's
expense) if (A) the amount of Losses from such claim (x) if the Indemnified
Party is a Buyer Indemnitee, could reasonably be expected to exceed, when
aggregated with all other pending claims and unpaid claims for indemnification
from such Indemnifying Party (together with, in the case of Seller as the
Indemnifying Party, pending claims and unpaid claims for indemnification from
each such other Indemnifying Party), the Indemnification Escrow Fund, and (y) if
the Indemnified Party is a Seller Indemnitee, otherwise may not, in the good
faith judgment of the Indemnified Party, be capable of being satisfied in full
by such Indemnifying Party; (B) the claim for indemnification relates to or
arises in connection with any criminal proceeding, action, indictment,
allegation or investigation that could reasonably be expected to adversely
affect the business of Buyer; or (C) the Indemnified Party has been advised in
writing by counsel that a conflict of interest exists between the Indemnifying
Party and the Indemnified Party with respect to such claim (including the
defense thereof). No Indemnifying Party, in the defense of any Third-Party
Claim, shall consent to entry of any judgment or enter into any settlement
without the consent of the Indemnified Party, which consent may be withheld in
the Indemnified Party's sole discretion (unless the terms of such judgment or
settlement include an unconditional full release of the Indemnified Party from
all liability with respect to such Third-Party Claim and solely the payment of
money and all such moneys shall be paid by the Indemnifying Party, in which case
such consent shall not be unreasonably withheld). In the event that the
Indemnifying Party does not accept the defense of any matter as above provided,
the Indemnified Party shall have the right to defend against any such claim or
demand, and shall be entitled to settle or agree to pay in full such claim or
demand. In any event, the parties to this Agreement shall cooperate in the
defense of any Third-Party Claim subject to this ARTICLE 14 and the records of
each shall be made reasonably available to the other with respect to such
defense.
14.7 SURVIVAL OF INDEMNITY. Any matter as to which a claim has been
asserted in good faith by an Indemnified Parry, by formal notice satisfying the
requirements of SECTION 14.7, and prior to the Expiration Date, that is pending
or unresolved as of the Expiration Date, by law or otherwise shall continue to
be covered by this ARTICLE 14 notwithstanding such limitation (which the parties
hereby waive solely with respect to such circumstances), until such matter is
finally terminated or otherwise resolved by the parties under this Agreement, by
an arbitration or by a court of competent jurisdiction and any amounts payable
hereunder are finally determined and paid.
22
14.8 NO CONSEQUENTIAL DAMAGES. Notwithstanding anything to the
contrary contained in this Agreement, no person shall be liable to or otherwise
responsible for consequential, incidental or punitive damages.
14.9 NO DOUBLE RECOVERY. Notwithstanding anything herein to the
contrary, no Indemnified Party shall be entitled to indemnification under any
provision of this Agreement for any amount to the extent such Indemnified Party
has been indemnified or reimbursed for such amount under any other provision of
this Agreement or any other agreement or action at law or equity or otherwise.
15. MISCELLANEOUS PROVISIONS
15.1 GOVERNING LAW. This Agreement and the legal relations between the
parties hereto shall be governed by and construed and enforced in accordance
with the laws of the State of Nevada, without regard to its principles of
conflicts of law. Each of the parties hereto irrevocably consents to the
jurisdiction and venue of any state or federal district court within Clark
County, Nevada, in connection with any matter based upon or arising out of this
Agreement or the transactions under this Agreement, agrees that process may be
served upon them in any manner authorized by the laws of the or State of Nevada
and waives and covenants not to assert or plead any objection that they might
otherwise have to such jurisdiction, venue and process.
15.2 ENTIRE AGREEMENT. This Agreement, including the exhibits attached
hereto, constitutes the entire agreement between Buyer and Seller pertaining to
the subject matter hereof and supersedes all prior agreements, understandings,
letters of intent, negotiations and discussions, whether oral or written, of the
parties, and there are no warranties, representations or other agreements,
express or implied, made to either party by the other party in connection with
the subject matter hereof except as specifically set forth herein or in the
documents delivered pursuant hereto or in connection herewith.
15.3 AMENDMENT; WAIVER. This Agreement may not be amended except by an
instrument in writing signed by the party against whom enforcement of any such
amendment is sought. Any party hereto may, only by an instrument in writing,
waive compliance by any other party hereto with any term or provision of this
Agreement on the part of such other party hereto to be performed or complied
with. The waiver by any party hereto of a breach of any term or provision of
this Agreement shall not be construed as a waiver of any subsequent breach.
15.4 NOTICES. All notices and other communications hereunder
("NOTICES") shall be in writing and shall be deemed given (i) upon actual
receipt by the recipient, if delivered personally, (ii) one Business Day after
deposit with an overnight courier, as shown on the records of such overnight
courier, if delivered by overnight courier or (iii) on the day of transmission
if prior to 5:00 p.m. on a Business Day (or if such day is not a Business Day or
if the transmission occurs after 5:00 p.m. on a Business Day, then on the next
succeeding Business Day) if by facsimile and the sender receives electronic
confirmation of receipt by the recipient, in each case to the parties at the
23
following addresses or facsimile numbers (or at such other address for a party
as shall be specified by like notice):
To Buyer: Morgans Group LLC
Morgans Hotel Group Co.
475 Tenth Avenue, 11th Floor
New York, New York 10018
Attention: W. Edward Scheetz
Telephone: _________________
Facsimile: (212) 277-4260
With A Copy To: Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Stephen G. Gellman, Esq.
Adam O. Emmerich, Esq.
Telephone: _________________
Facsimile: (212) 403-2000
To Seller: Red, White and Blue Pictures, Inc.
150 North Robertson Boulevard
Los Angeles, California 90048-1738
Attention: Brian Ogaz
Telephone: (310) 358-1710
Facsimile: (310) 652-8787
With A Copy To: Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: Allan G. Mutchnik
Telephone: (213) 687-5391
Facsimile: (213) 621-5391
And to: Gordon & Silver, Ltd
3960 Howard Hughes Parkway
Ninth Floor
Las Vegas, Nevada 89109
Attention: Kathryn G. Noall
Telephone: (702) 796-5555
Facsimile: (702) 369-2666
24
To Escrow Agent: Chicago Title Agency of Nevada, Inc.
3980 Howard Hughes Parkway, Suite 100
Las Vegas, Nevada 89109
Attention: Kathryn Wonders, Esq.
Telephone: (702) 836-8195
Facsimile: (702) 836-8027
All Notices given by facsimile shall be followed by the delivery of a hard copy
of such Notice, provided that such Notice shall be deemed to have been given
when received by facsimile.
15.5 EXPENSES. Subject to the provision for payment of the Closing
Costs in accordance with the terms of Section 7.6 hereof and any other provision
of this Agreement, whether or not the transaction contemplated by this Agreement
shall be consummated, all fees and expenses incurred by any party hereto in
connection with this Agreement shall be borne by such party.
15.6 ASSIGNMENT. Neither all nor any portion of either party's
interest under this Agreement may be sold, assigned, encumbered, conveyed, or
otherwise transferred, whether directly or indirectly, voluntarily or
involuntarily, or by operation of law or otherwise (including, without
limitation, by a transfer of interests in such party) (collectively, a
"TRANSFER"), without the prior written consent of the other party hereto, which
consent may be granted or denied in its sole and absolute discretion. Any
attempted Transfer without such consent shall be null and void. No Transfer,
whether with or without consent, shall operate to release the party requesting a
Transfer or alter such party's primary liability to perform its obligations
under this Agreement. Notwithstanding the foregoing, subject to Buyer's
continuing primary liability to perform its obligations under this Agreement,
Buyer may, upon prior written notice to Seller but without the necessity of
obtaining Seller's consent, assign this Agreement to an Affiliate of Buyer.
15.7 SEVERABILITY. If any provision of this Agreement or the
application of any such provision shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement. In lieu of any such invalid, illegal or unenforceable
provision, the parties hereto agree to negotiate in good faith to add to this
Agreement a provision as similar in terms to such invalid, illegal or
unenforceable provision as may be possible and be valid, legal and enforceable.
15.8 SUCCESSORS AND ASSIGNS; THIRD PARTIES. Subject to and without
waiver of the provisions of Section 15.6 hereof, all of the rights, duties,
benefits, liabilities and obligations of the parties shall inure to the benefit
of, and be binding upon, their respective successors and assigns. Except as
specifically set forth or referred to herein, nothing herein expressed or
implied is intended or shall be construed to confer upon or give to any person
or entity, other than the parties hereto and their successors or permitted
assigns, any rights or remedies under or by reason of this Agreement.
25
15.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
15.10 INTERPRETATION. For all purposes of this Agreement, except as
otherwise expressly provided,
(a) defined terms have the meanings assigned to them in this
Agreement and include the plural as well as the singular,
(b) all accounting terms not otherwise defined herein have the
meanings assigned under GAAP, as in effect on the date hereof, unless otherwise
stated,
(c) all references in this Agreement to designated Articles,
Sections or Exhibits are to the designated Article, Section or Exhibit to this
Agreement, unless otherwise indicated, and all Exhibits to this Agreement are
incorporated herein by reference,
(d) the headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement,
(e) pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms,
(f) the words "TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,"
"TRANSACTIONS UNDER THIS AGREEMENT," "TRANSACTIONS CONTEMPLATED HEREBY" and
words of similar import mean the sale of the Property by Seller to Buyer
pursuant to this Agreement and shall not be deemed or construed to include any
of the transactions contemplated by the Other Transaction Documents;
(g) the words "HEREIN," "HEREOF," "HEREWITH," "HEREUNDER" and
"HERETO" and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision, and
(h) the words "INCLUDE," "INCLUDING" and other words of similar
import mean "INCLUDE, WITHOUT LIMITATION" or "INCLUDING, WITHOUT LIMITATION,"
regardless of whether any reference to "without limitation" or words of similar
import is made.
15.11 [INTENTIONALLY OMITTED]
15.12 FURTHER ASSURANCES. In addition to the actions recited herein
and contemplated to be performed, executed, and/or delivered by Seller and
Buyer, Seller and Buyer agree to perform, execute and/or deliver or cause to be
performed, executed and/or delivered at the Closing or after the Closing any and
all such further acts, instruments, deeds and assurances as may be reasonably
required to consummate the transaction
26
contemplated hereby.
15.13 NUMBER AND GENDER. Whenever the singular number is used, and
when required by the context, the same includes the plural, and the masculine
gender includes the feminine and neuter genders.
15.14 MUTUAL DRAFTING. Each party hereto has participated in the
drafting of this Agreement, which each party acknowledges is the result of
extensive negotiations between the parties. In the event any ambiguity or
question of intent arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
15.15 EXHIBITS. All exhibits attached hereto are hereby incorporated
by reference as though set out in full herein.
15.16 ATTORNEYS' FEES. In the event that either party hereto brings an
action or proceeding against the other party to enforce or interpret any of the
covenants, conditions, agreements or provisions of this Agreement, the
prevailing party in such action or proceeding shall be entitled to recover all
costs and expenses of such action or proceeding, including, without limitation,
attorneys' fees, charges, disbursements and the fees and costs of expert
witnesses.
15.17 BUSINESS DAYS. As used herein, the term "BUSINESS DAY" shall
mean a day that is not a Saturday, Sunday, federal holiday or legal holiday in
Clark County, Nevada. In the event that the date for the performance of any
covenant or obligation under this Agreement shall fall on a Saturday, Sunday or
legal holiday, the date for performance thereof shall be extended to the next
Business Day.
15.18 EARLY TERMINATION. In the event that this Agreement is
terminated pursuant to the terms hereof, this Agreement and all of the
provisions hereof shall be of no further force or effect and neither party shall
have any further rights or obligations hereunder, other than pursuant to any
provision hereof which expressly survives the termination of this Agreement.
15.19 CONFIDENTIALITY. Each of Buyer and Seller acknowledges that the
information being provided to Buyer and its representatives by the Seller is
subject to the terms of a confidentiality agreement, dated April 20, 2006, among
HRH, Peter A. Morton, HR Condominium Investors (Vegas), L.L.C., a Delaware
limited liability company, PMR and Merger Parent. In the event that the Closing
hereunder shall not occur, Buyer shall promptly return to Seller all due
diligence materials delivered by Seller to Buyer and shall destroy all copies
and abstracts thereof.
15.20 [Intentionally Omitted]
15.21 SECTION 1031 EXCHANGE. Seller or Buyer may consummate the sale
of the Property as part of a like-kind exchange intended to qualify under
Section 1031 of the Internal Revenue Code of 1986, as amended (an "EXCHANGE"),
at such party's sole
27
cost and expense, provided in no event shall the Closing be affected or delayed
by reason thereby; provided further neither party shall be obligated to take
title to a contract to the purchase of any other property, to expend any funds
or to incur any direct or contingent liability in connection with the other
party's Exchange.
15.22 ARBITRATION Any dispute that may arise between the Indemnified
Parties and the Indemnifying Parties (collectively, the "PARTIES" and each, a
"PARTY") with respect to the performance, interpretation or enforcement of this
Agreement (other than a dispute in which specific performance is sought under
the terms of Section 12.2) shall be submitted to arbitration conducted in Los
Angeles, California pursuant to the rules and procedures of the American
Arbitration Association, and, to the maximum extent applicable, the Federal
Arbitration Act (Title 9 of the United States Code). The arbitrator shall be a
retired judge of the Federal District Court, or some similarly qualified,
mutually agreeable individual. The arbitration of such issues shall be final and
binding upon the Parties. The arbitrator shall be entitled to impose sanctions
and to take such other actions as the arbitrator deems necessary to the same
extent as a judge could under the Federal Rules of Civil Procedure and
applicable law. Notwithstanding the foregoing, the arbitrator shall not be
authorized to award punitive damages with respect to any dispute(s) arising
under this Agreement, nor shall any Party seek punitive damages relating to any
such dispute(s) in any other forum. The cost of any arbitration hereunder,
including the cost, if any, of the record or transcripts thereof, administrative
fees, and all other fees involved, including reasonable attorneys' fees incurred
by the party determined by the arbitrator to be the prevailing party, shall be
paid by the party determined by the arbitrator not to be the prevailing party.
The parties to the arbitration shall instruct the arbitrator to render its
decision no later than sixty (60) days after the submission of the dispute(s).
28
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BUYER:
MORGANS GROUP LLC,
a Delaware limited liability company
By: Morgans Hotel Group Co.,
a Delaware corporation,
its Managing Member
By: /s/ W. Edward Scheetz
--------------------------------
Name: W. Edward Scheetz
Title: Chief Executive Officer
SELLER:
RED, WHITE AND BLUE PICTURES, INC.
a California corporation
By: /s/ Peter A. Morton
--------------------------------
Name: Peter A. Morton
Title:
ESCROW AGENT:
The undersigned Escrow Agent hereby accepts the foregoing Purchase and Sale
Agreement and Joint Escrow Instructions and agrees to act as Escrow Agent under
this Agreement in strict accordance with its terms.
CHICAGO TITLE AGENCY OF NEVADA, INC.,
a Nevada corporation
By: /s/ Kathryn S. Wonders
--------------------------------
Name: Kathryn S. Wonders
Title: Assistant Vice President and
Legal Counsel