EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the 14th day of October, 2004, by and between (i) CHURCHILL DOWNS
LOUISIANA HORSERACING COMPANY, L.L.C., a Louisiana limited liability company
("Buyer""), (ii) FINISH LINE MANAGEMENT CORP., a Louisiana corporation
("Seller"), (iii) for the sole purpose of the provisions set forth in ss.12,
CHURCHILL DOWNS INCORPORATED, a Kentucky corporation ("Churchill"), and (iv) for
the sole purpose of the provisions set forth in ss.2(f) and ss.6(h), BRYAN G.
KRANTZ, an individual ("Krantz"). Buyer and Seller are each a "Party" and
collectively, the "Parties."
Recitals
Seller manages five off-track betting facilities for Fair Grounds
Corporation ("Fair Grounds") located in Kenner, Gretna, Houma, Covington and
Slidell, Louisiana (collectively, the "Finish Line OTBs") at which pari-mutuel
wagering and, in some cases, video poker gaming is conducted and, in connection
therewith, Seller is the owner of certain assets associated with such facilities
and operations (all such businesses and activities as are now being conducted by
the Seller are referred to herein collectively as the "Business").
Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, on the terms and conditions set forth in this Agreement, the assets
owned by Seller and/or used or useful in the conduct of the Business.
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, and other good and valuable consideration, the
Parties agree as follows:
1. Definitions.
"ACQUIRED ASSETS" means all of the assets of Seller, other than
the Excluded Assets, INCLUDING all of Seller's (a) Owned Real Property and
Leased Real Property, (b) tangible personal property (such as machinery,
equipment, inventory, furniture, automobiles, trucks, tractors, trailers and
tools), (c) to the extent transferable by Seller, Intellectual Property,
goodwill associated therewith, licenses and sublicenses granted and obtained
with respect thereto (including any trade names or other intellectual property
not owned by Seller but used or useful in the Business), and rights thereunder,
remedies against infringements thereof, and rights to protection of interests
therein under the laws of all jurisdictions, (d) leases, subleases and rights
thereunder, (e) agreements, contracts, indentures, mortgages, instruments,
Liens, guaranties, other similar arrangements, and rights thereunder, (f) notes,
(g) securities (excluding the capital stock in Fair Grounds Corporation), (h)
Cash (subject to ss.2(d) and ss.6(i)), (i) Claims, causes of action, choses in
action, rights of recovery, rights of set off, and rights of recoupment relating
to any Acquired Asset, Assumed Contract or Assumed Liability; (j) accounts
receivable and the proceeds thereof, (k) to the extent transferable by Seller,
all franchises, approvals, permits, licenses, orders, registrations,
certificates, variances, and similar rights obtained from governments and
governmental agencies, (l) to the extent transferable by Seller, any and all
product service records, equipment and parts lists, operating records, operating
manuals, safety manuals and maintenance manuals, engineering design plans,
blueprints and as-built plans,
specifications, architectural plans and drawings, engineering drawings, plats,
environmental compliance and regulatory information, creative materials,
advertising and promotional materials, studies and reports; (m) any and all
prepaid expenses, retainers, customer advances and deposits and security
deposits of Seller relating to the Business and claims for refunds and rights to
offset in respect thereof, (n) Seller's telephone and telecopy numbers,
websites, email addresses and post office boxes, (o) all insurance benefits,
including rights and proceeds, arising from or relating to the Acquired Assets
or the Assumed Liabilities prior to the Closing, (p) any and all goodwill
associated with the Business, (q) any and all business plans and projections,
records of sales, customer lists, supplier lists and vendor lists, used in (or
for the benefit of) the Business, and (r) at Buyer's expense, copies of any and
all employee records, accounting records, accounts, files, correspondence,
credit and sales records, billing records, customer correspondence relating to
the Business, all regulatory filings with the Louisiana State Racing Commission
and/or Louisiana Gaming Control Board (but excluding personal history and
personal financial questionnaires filed by Seller's officers, directors and
shareholders) and other books and records provided or utilized by Seller in
connection with the operation of the Business.
"ASSUMED CONTRACTS" shall mean the written contracts,
agreements, real or personal property leases, commitments, understandings or
instruments which relate to the Business or the Acquired Assets and which are
specifically listed on SCHEDULE 1 attached hereto. Notwithstanding the foregoing
in no event may Assumed Contracts include any contract, agreement, real or
personal property lease, commitment, understanding or instrument included in
Excluded Assets.
"ASSUMED LIABILITIES" means only (a) those liabilities and
obligations of Seller which arise after the Closing Date under the Assumed
Contracts, and (b) those liabilities and obligations which are set forth on
SCHEDULE 2.
"BUSINESS" has the meaning set forth in the recitals above.
"BUSINESS DAY" means a day other than a Saturday, Sunday or
other day on which commercial banks are authorized or required to close under
the laws of the United States or the State of Louisiana.
"BUYER" has the meaning set forth in the preface above.
"CASH" means cash, cash equivalents (including marketable
securities, short term investments, uncollected checks, bank accounts,
certificates of deposit and treasury bills) calculated in accordance with GAAP
applied on a basis consistent with the preparation of Seller's financial
statements.
"CLAIMS" means any action, cause of action, demand, claim,
Proceeding or investigation.
"CLOSING" has the meaning set forth in ss.2(f) below.
"CLOSING DATE" has the meaning set forth in ss.2(f) below.
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"CODE" means the Internal Revenue Code of 1986, as amended.
"DISCLOSURE LETTER" shall mean that certain Disclosure Letter
delivered to Buyer by Seller on or before September 23, 2004, the purpose of
which is to disclose certain matters related to this Agreement and which is
acceptable to Buyer, in its sole discretion.
"ENVIRONMENTAL, HEALTH AND SAFETY REQUIREMENTS" means all Legal
Requirements, including but not limited to federal, state, local and foreign
statutes, regulations, and ordinances concerning health and safety, and
pollution or protection of the environment, including without limitation all
those relating to the presence, use, production, generation, management,
handling, transportation, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, threatened release, control, cleanup,
response to or remediation of any hazardous materials, hazardous substances,
hazardous waste, solid waste, petroleum or petroleum products, pollutant,
contaminant or other regulated material or substance.
"ENVIRONMENTAL, HEALTH AND SAFETY LIABILITIES" means any cost,
claims, damages, expense, liability, obligation or other responsibility arising
from under any Environmental, Health and Safety Requirements or any
Environmental Laws.
"ENVIRONMENTAL LAWS" has the meaning set forth in ss.3(q) below.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EXCLUDED ASSETS" means Seller's (a) corporate charter,
qualifications to conduct business as a foreign corporation, arrangements with
registered agents relating to foreign qualifications, taxpayer and other
identification numbers, seals, minute books, stock transfer books, blank stock
certificates, and other documents relating to the organization, maintenance, and
existence of Seller as a corporation, (b) rights under this Agreement, (c)
non-assignable Permits and (d) those certain Assets set forth on SCHEDULE 3
attached hereto.
"EXCLUDED LIABILITIES" means all liabilities other than Assumed
Liabilities.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"GOVERNMENTAL ENTITY" means any federal, state, municipal or
local court, legislature, governmental agency, commission or regulatory
authority or instrumentality.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 and regulations and rules issued pursuant to that Act.
"INCOME TAX" means any federal, state, local, or foreign income
tax, including any interest, penalty, or addition thereto, whether disputed or
not.
"INTELLECTUAL PROPERTY" means all ideas and tangible expressions
thereof which belong to Seller worldwide and includes without limitation all
patents, patentable inventions,
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trademarks, trade names, service marks, copyrights, copyrightable material,
software, trade secrets and franchises.
"KNOWLEDGE" an individual will be deemed to have "Knowledge" of
a particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of conducting
a reasonably comprehensive investigation concerning the existence of such fact
or other matter.
Seller will be deemed to have "Knowledge" of a particular fact
or other matter if any living individual who is serving, or who has since 1994
served, as a director, president, vice president, secretary or treasurer of
Seller has, or at any time since January 1, 1995 had, Knowledge of such fact or
other matter.
"LEASED REAL PROPERTY" means all of Seller's leasehold or
subleasehold estates and other rights to use or occupy any land, buildings,
structures, improvements, fixtures or other interest in the real property which
are described on SCHEDULE 4 attached hereto.
"LEGAL REQUIREMENTS" shall mean any federal, state, local,
municipal, foreign, international or other administrative order, constitution,
law, ordinance, common law, regulations, statute or treaty.
"LIENS" means any claim, pledge, option, charge, hypothecation,
easement, security interest, right-of-way, encroachment, mortgage, deed of
trust, covenant, restriction, reservation, agreement of record or other
encumbrance.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA
ss.3(37).
"ORDINARY COURSE OF BUSINESS" means the ordinary course of
business consistent with the conduct of Seller's Business since December 31,
2003.
"OWNED REAL PROPERTY" means all of Seller's real property,
together with all buildings, structures, improvements and fixtures located
thereon, and all easements, servitudes and other rights and interests
appurtenant thereto as set forth in Schedule 5 attached hereto.
"PARTY" and "PARTIES" have the meaning set forth in the preface
above.
"PERMITS" shall mean any and all licenses, franchises, permits,
certificates, consents or other authorization or approval granted, given or
otherwise made available by or under the authority of any Governmental Entity or
pursuant to any Legal Requirement.
"PERMITTED ENCUMBRANCE" means: (a) Liens for real estate Taxes
that are not yet due or payable; (b) any laws, regulations or ordinances
(including zoning) adopted or imposed by any Governmental Entity; (c) all
easements, servitudes, rights of way, covenants and restrictions, in each case
of record; (d) as to any lease, any Lien encumbering, attaching to or
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otherwise affecting solely the interest of the lessor thereunder and not the
interest of the lessee thereunder; and (e) any liens, claims, alienations,
encumbrances or other matters listed in schedule B-2 to any title policy
accepted by Buyer at Closing. The Acquired Assets shall only be subject to those
Permitted Encumbrances described in Section (d) of the Disclosure Letter as
required by ss.3(d) of this Agreement.
"PERSON" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"PROCEEDING" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative or informal) commenced, brought, conducted, or heard by or before,
or otherwise involving any Governmental Entity or arbitrator.
"PURCHASE PRICE" has the meaning set forth in ss.2(c) below.
"SELLER" has the meaning set forth in the preface above.
"SUBSIDIARY" means any entity with respect to which a specified
Person (or a Subsidiary thereof) owns or has the power to vote 50% or more of
the equity interests in such entity having general voting power to participate
in the election of the governing body of such entity, including, with respect to
Seller, those entities listed in Section (s) of the Disclosure Letter.
"TAX" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code ss. 59A),
custom duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, intangible property,
personal property, sales, use, transfer, registration, value added, alternative
or add-on minimum, estimated, or other government tax or charge of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"THREATENED" shall mean with respect to a claim, Proceeding,
dispute, or other matter that a demand or statement has been made (orally or in
writing) or notice has been given (orally or in writing), or another event has
occurred or other circumstances exist, that would lead a prudent Person to
conclude that such a claim, Proceeding, dispute, or other matter is likely to be
asserted, commenced, taken or otherwise pursued in the future.
"TRANSFER TAXES" shall have the meaning specified in ss.6(e)
below.
"VSI" means Video Services, Inc., a Louisiana corporation.
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"WARN ACT" means the Worker Adjustment and Retraining
Notification Act of 1988, as amended, and any successor or similar state or
local law, and the rules and regulations thereunder and under any successor or
similar state or local law.
2. Basic Transaction.
(a) PURCHASE AND SALE OF ASSETS. On and subject to the
terms and conditions of this Agreement, Buyer agrees to purchase from Seller,
and Seller agrees to sell, assign, transfer, convey and deliver to Buyer, all of
the Acquired Assets at the Closing for the consideration specified below in this
ss.2.
(b) ASSUMPTION OF LIABILITIES. On and subject to the terms
and conditions of this Agreement, Buyer agrees to assume and become responsible
for all of the Assumed Liabilities at the Closing. Buyer will not assume or have
any responsibility, however, with respect to any other obligation or liability
of Seller not included within the definition of Assumed Liabilities.
(c) PURCHASE PRICE. Buyer agrees to pay to Seller an
aggregate amount equal to Two Million Two Hundred Thousand Dollars ($2,200,000)
plus an additional sum of up to Four Million Five Hundred Thousand Dollars
($4,500,000) equal to the balance due on Seller's secured debt obligations to
First Bank and Trust, New Orleans, Louisiana (such aggregate amount, the
"Purchase Price"), adjusted as contemplated by Section 2(d). The Purchase Price
shall be delivered at Closing via wire transfer of immediately available funds
to Seller; provided, however, the amount necessary to pay First Bank and Trust
in order to obtain the release of any Liens affecting any Acquired Assets shall
be paid directly to such bank.
(d) OTHER CLOSING ADJUSTMENTS. Prior to Closing, Seller
shall use its cash only to pay its liabilities incurred in the ordinary course
of business, other than any Claims owed by Seller to Krantz or any person
related directly or indirectly to Krantz. In addition, the following items shall
be prorated as of the Closing Date with Seller being responsible for that
portion of such obligations accruing through the Closing Date and Buyer being
responsible for the portion of such obligations accruing after the Closing Date.
(i) The Purchase Price shall be adjusted at Closing
for real estate taxes and assessments, which shall be prorated as of the
Closing Date on the basis of the latest available rates and valuations
furnished for the Owned Real Property by the taxing authorities.
Further, all water, sewer and other utility bills that are required by
the utility operators to be paid current in order to allow Buyer to open
an account in Buyer's name for such utility shall be prorated as of the
Closing Date.
(ii) Seller shall be responsible for the Transfer
Taxes.
(iii) Seller shall be responsible for the amount of
obligations or liabilities accrued but not yet paid or payable as such
accrual relates to obligations or liabilities relating to Assumed
Contracts through the Closing Date and Buyer shall be responsible for
the obligations or liabilities relating to Assumed Contracts which arise
after the Closing Date.
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(iv) Amounts payable by Seller under subparagraphs
(i), (ii) or (iii) immediately above may be paid by Seller from cash
(prior to the transfer of cash to Buyer) or from the escrow account to
be set up with such cash at or after the Closing. To the extent that
cash is not sufficient to pay the amounts payable by Seller under
subparagraphs (i), (ii) or (iii) immediately above, Buyer may deduct
from the Purchase Price an amount sufficient to pay the unpaid amounts
payable by Seller under subparagraphs (i), (ii) or (iii) immediately
above.
(e) THE CLOSING. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Lemle & Kelleher, L.L.P., 601 Poydras Street, in New Orleans, Louisiana
commencing at 10:00 a.m. local time no later than ten (10) days following the
satisfaction or waiver of all conditions to the obligations of the Parties to
consummate the transactions contemplated hereby (other than conditions with
respect to actions the respective Parties will take at the Closing itself) or
such other date as the Parties may mutually determine (the "Closing Date")
PROVIDED, HOWEVER, that the Closing Date shall be no later than October 15,
2004.
(f) DELIVERIES AT THE CLOSING. At the Closing, (i) Seller
will deliver to Buyer the various certificates, instruments, and documents
referred to in ss.7(a) below; (ii) Buyer will deliver to Seller the various
certificates, instruments, and documents referred to in ss.7(b) below; (iii)
Seller will execute, acknowledge (if appropriate), and deliver to Buyer, general
warranty deeds, assignments and such other instruments of sale, transfer,
conveyance, and assignment as Buyer and its counsel or the title company
insuring title to the Owned Real Property reasonably may request; (iv) Buyer
will execute, acknowledge (if appropriate), and deliver to Seller an assumption
of Assumed Contracts and such other instruments of assumption as Seller and its
counsel reasonably may request; (v) Buyer will deliver to Seller (and pay to
First Bank and Trust) the consideration specified in ss.2(c) above to be
delivered at Closing, (vi) Krantz will execute and deliver to Buyer the
Consulting Agreement in substantially the form of EXHIBIT B attached hereto;
(vii) Seller and Krantz (for himself and any entities owned or controlled by
him) will execute and deliver, and will cause Vicki Krantz, Family Racing
Venture, LLC, Gentilly Gaming, LLC, Continental Advertising, Inc., F.G. Staffing
Services, Inc., Fair Grounds International Ventures, L.L.C., James Alexander,
Firal Ryder, the Chehardy Law Firm and Fair Grounds Corporation to execute and
deliver, the Releases in substantially the form of EXHIBIT C attached hereto;
(viii) Buyer will execute and deliver, and Seller and Krantz will cause Family
Racing Venture, L.L.C. to execute and deliver, the Lease in substantially the
form of EXHIBIT D attached hereto; (ix) Buyer will deliver to Seller certified
copies of the Board of Directors of Buyer authorizing the transactions
contemplated by this Agreement; and (x) Seller will deliver to Buyer certified
copies of resolutions of the Board of Directors and shareholders of Seller
authorizing the transactions contemplated by this Agreement.
(g) ALLOCATION OF PURCHASE PRICE. Seller and Buyer shall
negotiate in good faith an allocation of the Purchase Price among the Acquired
Assets, consistent with the requirements of the Code and any and all regulations
relating thereto. At the Closing, Buyer and Seller shall agree to an allocation
of the Purchase Price among the Acquired Assets which shall be attached as
EXHIBIT A and shall be binding upon Buyer and Seller for all federal and state
income tax purposes such that Buyer and Seller shall each file their federal and
state income tax
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returns on the basis of such allocation and neither Buyer nor Seller shall take
a tax position inconsistent with such allocation.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents
and warrants to Buyer that the statements contained in this ss.3 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this ss.3), except as set
forth in the Disclosure Letter. The Disclosure Letter will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this ss.3.
(a) ORGANIZATION OF SELLER. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(b) AUTHORIZATION OF TRANSACTION. Seller has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of Seller, enforceable
against it in accordance with its terms and conditions.
(c) NONCONTRAVENTION. Except as set forth in Section (c) of
the Disclosure Letter, no filing with, and no permit, authorization, consent or
approval of, any Governmental Entity or other third party is necessary for the
consummation by Seller of the transactions contemplated by this Agreement.
Except as set forth in Section (c) of the Disclosure Letter, neither the
execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby (including the assignments and assumptions
referred to in ss.2 above), will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which Seller is
subject or any provision of the charter or bylaws of Seller or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which Seller is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any Lien upon any of such assets), except where the violation, conflict, breach,
default, acceleration, termination, modification, cancellation, failure to give
notice, or Lien would not have a material adverse effect on the financial
condition of Seller or on the ability of the Parties to consummate the
transactions contemplated by this Agreement.
(d) TITLE TO PROPERTIES; ENCUMBRANCES; SUFFICIENCY OF
ASSETS.
(i) As of the Closing, Seller shall transfer to Buyer
with full warranty of title and with all other legal warranties (A) good
and valid record and merchantable title to the Owned Real Property or a
good and valid leasehold interest in all of the Leased Real Property,
free and clear of any and all Liens, claims, interests and encumbrances
provided that the Owned Real Property and Leased Real Property may be
subject to the Permitted Encumbrances described in Section (d) of the
Disclosure Letter (the "Real Property Permitted Encumbrances"), and (B)
good and valid merchantable title to all of the Acquired Assets, other
than the Owned Real Property and Leased Real
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Property, free and clear of any and all Liens, claims, interests and
encumbrances, (in the case of Leased Real Property, subject to the terms
and conditions of the leases).
(ii) Except as set forth in Section (d) of the
Disclosure Letter, the Acquired Assets (A) constitute all of the assets,
tangible and intangible, corporeal and incorporeal, of any nature
whatsoever, necessary to operate the Business in the manner presently
operated by Seller, (B) include all of the operating assets of Seller
related to the Business, and (C) to the extent of the accounts
receivable included therein, represent valid obligations arising from
sales or services actually made or performed by Seller in the Ordinary
Course of Business and as of the Closing Date will be current and
collectible subject to no contest, claim, defense or right of setoff by
the account debtor thereunder in any material amount.
(iii) Except as set forth in Section (d) of the
Disclosure Letter, the Owned Real Property and the Leased Real Property
are not subject to any rights of way, building use restrictions,
exceptions, variances, reservations or limitations of any nature except
(x) minor imperfections of title, if any, none of which detracts from
the value or impairs the use of the property subject thereto or impairs
the operation of Seller, (y) zoning laws and other land use restrictions
that do not impair the contemplated use of the property subject thereto,
and (z) the Real Property Permitted Encumbrances. All buildings, plants
and structures owned by Seller lie wholly within the boundaries of the
Owned Real Property, have adequate access to public roads without
crossing the property of a third party and do not encroach upon the
property of, or otherwise conflict with the property rights of, any
third Person, except for the Real Property Permitted Encumbrances.
(iv) Except as set forth in Section (d) of the
Disclosure Letter, the buildings, plants and structures included in the
Acquired Assets are structurally sound and are in reasonable operating
condition and repair for the age of the respective asset (normal wear
and tear excepted) and are adequate for the uses to which they are being
put and none of such buildings, plants or structures is in need of
maintenance or repairs except for ordinary, routine maintenance and
repairs; the buildings, plants, structures and equipment included in the
Acquired Assets are sufficient for the conduct of the Business and are
adequately served by utilities; and the equipment included in the
Acquired Assets is in reasonable operating condition for the age of the
respective asset, (normal wear and tear excepted).
(e) BOOKS AND RECORDS. The books of account and other
financial records, information and data of Seller related to the Business, all
of which have been made available to Buyer, are correct in all material respects
and represent actual, bona fide transactions and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls.
(f) COMPLIANCE WITH LEGAL REQUIREMENTS; PERMITS.
(i) Except as set forth in Section (f)(i) of the
Disclosure Letter: (A) Seller is and has been in compliance in all
material respects with each Legal
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Requirement and Permit applicable to it or to the conduct of the
Business or the ownership or use of the Acquired Assets; (B) no event
has occurred or circumstance exists that (with or without notice or
lapse of time) (x) may constitute or result in a violation by Seller of,
or a failure on the part of Seller to comply with, any Legal Requirement
or Permit related to the Business in any material respect or (y) may
give rise to any obligation on the part of the Seller to undertake, or
to bear all or any portion of the cost of, any remedial action of any
nature; and (C) Seller has not received any notice or other
communication from any Governmental Entity or any other Person regarding
(x) any actual, alleged, possible or potential violation of, or failure
to comply with, in any material respect, any Legal Requirement or Permit
related to the Business, or (y) any actual, alleged, possible or
potential obligation on the part of Seller to undertake, or to bear all
or any portion of the cost of, any remedial action of any nature.
(ii) Section (f)(ii) of the Disclosure Letter sets
forth all of the material Permits necessary to permit Seller to lawfully
conduct and operate the Business in the manner it currently conducts and
operates the Business and to permit it to own and use its assets in the
manner in which it currently owns and uses such assets. All such Permits
are currently in full force and effect. All applications required to
have been filed for the renewal of the Permits listed or required to be
listed in Section (f)(ii) of the Disclosure Letter have been duly filed
on a timely basis with the appropriate Governmental Entities, and all
other filings required to have been made with respect to such Permits
have been duly made on a timely basis with the appropriate Governmental
Entities.
(g) LEGAL PROCEEDINGS. Except as disclosed in Section (g)
of the Disclosure Letter, there is no pending or to Seller's Knowledge
Threatened Proceeding: (A) that has been commenced by or against Seller related
to the Business or that otherwise relates to or may affect the Business, or any
of the assets owned or used by Seller related to the Business; or (B) that
challenges, or may have the effect of preventing, delaying, making illegal or
interfering with any of the transactions contemplated by this Agreement.
(h) TAXES. Except as disclosed in Section (h) of the
Disclosure Letter:
(i) Seller has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed by Seller (whether or not shown on any Tax
Return) have been paid, including any Taxes of any other Person owed by
Seller under Treasury Regulation 1.1502-6 or any similar provision of
state, local or foreign law, or as a successor or transferee, by
contract or otherwise. Seller currently is not the beneficiary of any
extension of time within which to file any Tax Return. No claim has been
made by an authority in a jurisdiction where Seller does not file Tax
Returns that it may be subject to taxation by that jurisdiction. There
are no security interests or liens on any of the assets of Seller that
arose in connection with the failure (or alleged failure) to pay any
Tax.
(ii) Seller has withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder, or other
third party.
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(i) Employees; Employee Benefit Plans.
(i) Section (i)(i) of the Disclosure Letter sets forth
as of the date hereof, a list of all full and part time employees of
Seller (including contract employees and each employee on leave of
absence or layoff status), showing (A) name, (B) title, (C) summary of
job description, (D) date of hire, (E) whether hourly or salaried
employee, (F) current salary or wage rate, (G) sick and vacation leave
that is accrued but unused, (H) any obligation or understanding with
such employee to make any severance or other payments to such employee
upon termination of his or her employment and (I) a description of any
employment agreement.
(ii) To the Knowledge of Seller, no officer, director,
agent, employee, consultant or contractor of Seller is bound by any
contract, agreement or understanding that purports to limit the ability
of such officer, director, agent, employee, consultant or contractor (A)
to engage in or continue or perform any conduct, activity, duties or
practice relating to the Business or (B) to assign to Seller or to any
other Person any rights to any invention, improvement, or discovery. To
the Knowledge of Seller, no former or current employee of Seller is a
party to, or is otherwise bound by, any contract, agreement or
understanding that in any way adversely affected, affects or will affect
the ability of Seller, or Buyer to conduct the Business as heretofore
carried on by Seller.
(iii) Section (i)(iii) of the Disclosure Letter
contains a complete and accurate list of the following benefit plans
that are maintained or contributed to by the Seller: (i) "employee
pension benefit plans" as defined in Section 3(2) of ERISA ("Pension
Plans"); (ii) "employee welfare benefit plans" as defined in Section
3(1) of ERISA ("Welfare Plans"); and (iii) all other agreements,
commitments, understandings, policies, obligations, arrangements or
practices, whether written or unwritten, ("Other Plans") that (A) are
maintained or contributed to by Seller or any other corporation or trade
or business controlled by, controlling or under common control with
Seller (within the meaning of Section 414 of the Code or Section
4001(a)(14) or 4001(b) of ERISA) (an "ERISA Affiliate"), and (B) provide
benefits, or describe policies or procedures applicable to any current
or former director, officer, employee, agent or service provider of
Seller or any ERISA Affiliate, or the dependents of any thereof. The
Pension Plans, Welfare Plans and Other Plans are referred to
individually and collectively as the "Benefit Plans." The Seller has
delivered to Buyer (1) true, complete and correct copies of each Benefit
Plan (or, in the case of any unwritten Benefit Plan, a description
thereof), (2) the most recent annual report on Form 5500 with respect to
each Benefit Plan, if any such report was required, (3) the most recent
summary plan description for each Benefit Plan for which such summary
plan description is required. Except as set forth in Section (i)(iii) of
the Disclosure Letter the consummation of the transactions contemplated
by this Agreement will not result in the vesting of, acceleration of, or
obligation to pay, any benefit.
(iv) Except as set forth in Section (i)(iv) of the
Disclosure Letter, (A) each Pension Plan that purports to satisfy Code
Section 401(a) is qualified in form and operation under Code Section
401(a), and each trust relating to each such Pension Plan is exempt from
federal income tax under Code Section 501(a), (B) neither
11
Seller nor any ERISA Affiliate sponsors, contributes to, or is required
to contribute to a defined benefit plan as defined in Section 3(35) of
ERISA or to a Multiemployer Plan, (C) there are no facts or
circumstances concerning the Benefit Plans that may give rise to any
liability of Seller, or Buyer under Title IV of ERISA, (D) no event has
occurred or circumstance exists that presents a risk of the occurrence
of any withdrawal from, or the termination, reorganization, or
insolvency of, any Multiemployer Plan that could result in any liability
of Seller to a Multiemployer Plan, and (E) no Employee Benefit Plan
provides retiree health benefits other than group health plan
continuation coverage under Part 6 of Title I of ERISA and Section 4980B
of the Code.
(v) No transaction prohibited by ERISA Section 406 and
no "prohibited transaction" under Section 4975(c) of the Code has
occurred with respect to any Pension Plan. Seller is in compliance with
the continuation coverage provisions of Part 6 of Title I of ERISA and
Section 4980B of the Code.
(vi) The Benefit Plans are in compliance in all
respects with the applicable provisions of ERISA, the Code and all other
Legal Requirements. All reports, returns, notices, descriptions and
similar documents with respect to the Benefit Plans required by ERISA,
the Code or other applicable Legal Requirements to be filed with any
Governmental Entity or distributed to any Benefit Plan participant or
beneficiary have been duly and timely filed or distributed. There are no
investigations by any Governmental Entity or other claims (except claims
for benefits payable in the normal operation of the Benefit Plans), or
suits or proceedings against or involving any Benefit Plan.
(j) LABOR DISPUTES; COMPLIANCE.
(i) Seller has complied in all material respects with
all Legal Requirements relating to employment practices, terms and
conditions of employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective
bargaining and other requirements, the payment of social security and
similar taxes and occupational safety and health. Seller is not liable
for the payment of any taxes, fines, penalties or other amounts, however
designated, for failure to comply with, or a breach of, any of the
foregoing Legal Requirements.
(ii) Except as provided in Section (j)(ii) of the
Disclosure Letter, Seller has not been, and is not now, a party to any
collective bargaining agreement or other labor contract, and since
January 1, 2004, there has not been, there is not presently pending or
existing, and to Seller's Knowledge there is not Threatened, any strike,
slowdown, picketing, work stoppage or employee grievance process
involving Seller. No event has occurred or circumstance exists that
could provide the basis for any work stoppage or other labor dispute,
and there is not pending or, to Seller's Knowledge, Threatened against
or affecting Seller any Proceeding relating to the alleged violation of
any Legal Requirement pertaining to labor relations or employment
matters, including any charge or complaint filed with the National Labor
Relations Board, the Equal Employment Opportunity Commission or any
other Governmental Entity, and there is no organizational activity or
other labor dispute against or affecting Seller or its facilities.
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(k) Intellectual Property Rights.
(i) Section (k)(i) of the Disclosure Letter contains a
complete and accurate list, to the extent possible, of all Intellectual
Property Rights of Seller, and Seller has delivered to Buyer accurate
and complete copies of all contracts, agreements, licenses or
understandings relating to the Intellectual Property Rights, except for
any license implied by the sale of a product and perpetual, paid-up
licenses for commonly available Software programs with a value of less
than $1,000 per unit or license under which Seller is the licensee.
There are no outstanding and, to Seller's Knowledge, no Threatened
Proceedings, disputes or disagreements with respect to any such
contract, agreement, license or understanding.
(ii) Except as set forth in Section (k)(ii) of the
Disclosure Letter, the Intellectual Property Rights listed in Section
(k)(i) of the Disclosure Letter are all those necessary for the
operation of the Business as it is currently conducted, provided,
however, Seller does not represent that the foregoing are adaptable for
use by Buyer in the Business. Seller is the owner or licensee of all
right, title and interest in and to each of such Intellectual Property
Rights, free and clear of any and all Liens and Encumbrances, and it has
the right to use without payment to a third party all of such
Intellectual Property Rights, other than in respect of licenses listed
in Section (k)(ii) of the Disclosure Letter.
(l) CONTRACTS; NO DEFAULTS.
(i) Section (l)(i) of the Disclosure Letter contains
an accurate and complete list (including the parties to the contracts,
agreements or understandings), and Seller has delivered to Buyer
accurate and complete copies, of all contracts, agreements, leases,
licenses, understandings and arrangements related to the Business, each
written warranty, guaranty and/or other similar undertaking with respect
to contractual performance by Seller related to the Business and each
amendment, supplement and modification (whether oral or written) in
respect of any of the foregoing.
(ii) Except as set forth in Section (l)(ii) of the
Disclosure Letter, each contract, agreement, lease, license,
understanding and arrangement to which Seller is a party is in full
force and effect and is valid and enforceable in accordance with its
terms; and to the Knowledge of Seller, will not upon completion or
performance thereof have a material adverse affect on the Business or
the assets or the business to be conducted by Buyer with the Acquired
Assets.
(iii) Except as set forth in Section (l)(iii) of the
Disclosure Letter, (A) Seller and to the Knowledge of Seller each other
Person that has or had any obligation or liability under any contract,
agreement, lease, license, understanding and arrangement to which Seller
is a party, is and has been in compliance in all material respects with
all applicable terms and requirements thereof and there are no
renegotiations, attempts to renegotiate or outstanding rights to
renegotiate any of the same; (B) no event has occurred or circumstance
exists that (with or without notice or lapse of time) may contravene,
conflict with or result in a breach of, or give Seller or
13
other Person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or payment
under, or to cancel, terminate or modify, any of the same; (C) no event
has occurred or circumstance exists under or by virtue of any of the
same that (with or without notice or lapse of time) would cause the
creation of any Liens affecting any of the Acquired Assets; and (D)
Seller has not given to or received from any other Person any notice or
other communication (whether oral or written) regarding any actual,
alleged, possible or potential violation or breach of, or default under,
any such contract, agreement, lease, license, understanding and
arrangement.
(m) INSURANCE.
(i) Section (m) of the Disclosure Letter lists all
insurance policies of Seller relating to the Business, the Acquired
Assets and employees of Seller engaged in the Business prior to the
Closing Date. All such insurance policies (A) are outstanding and
enforceable, (B) are issued by one or more financially sound and
reputable insurers, (C) taken together, provide adequate insurance
coverage for the Acquired Assets, the Business and the operations of
Seller until the Closing Date, and (D) are sufficient for compliance
with all Legal Requirements and any contract, agreement, lease, license,
understanding and arrangement included in the Acquired Assets to which
Seller is a party. Except as set forth in Section (m) of the Disclosure
Letter, Seller has paid all premiums due, and has otherwise performed
all of their obligations, under each such insurance policy, and Seller
has given notice to the applicable insurer of all claims that may be
insured thereby.
(ii) Seller has not received (A) any refusal of
coverage or any notice that a defense will be afforded with reservation
of rights, or (B) any notice of cancellation or any other indication
that any policy of insurance is no longer in full force or effect or
that the issuer of any policy of insurance is not willing or able to
perform its obligations thereunder.
(n) RELATED PARTY TRANSACTIONS. Except as set forth in
Section (n) of the Disclosure Letter, to Seller's Knowledge, no employee,
director or officer of Seller or any shareholder of Seller or member of the
immediate family of any of the same has any direct or indirect ownership
interest in any firm or corporation with which Seller is affiliated or with
which Seller has a business relationship, or any firm or corporation that
competes with Seller, except that employees, officers or directors of Seller and
shareholders of Seller and members of their immediate families may own stock in
publicly traded companies that may compete with Seller. Except as set forth in
Section (n) of the Disclosure Letter, no member of the immediate family of any
officer or director of Seller or of a shareholder of Seller is directly or
indirectly interested in any contract, agreement, lease, license, understanding
and arrangement to which Seller is a party.
(o) FINANCIAL STATEMENTS. Seller has delivered to Buyer:
(i) an audited balance sheet of Seller at and as of December 31, 2003, including
the notes thereto, and the related audited statements of income, changes in
shareholders' equity and cash flows for the fiscal year then ended, including in
each case the notes thereto, and (ii) an unaudited balance sheet of Seller at
and as of June 30, 2004 and the related unaudited statements of income,
14
changes in shareholders' equity, and cash flows for the six (6) months then
ended, including in the case of the audited financial statements the notes
thereto as qualified by the Report of the Independent Auditor contained therein.
Such financial statements (the "Financial Statements") fairly present the
financial condition and the results of operations, changes in shareholders'
equity and cash flows of Seller in all material respects at and as of the
respective dates and for the periods referred to in such Financial Statements,
all in accordance with GAAP, except with respect to the unaudited balance sheet
and unaudited statements of income, changes in shareholders' equity, and cash
flows, the absence of footnotes and normal recurring year-end adjustments.
Further, Seller shall deliver to Buyer all monthly operating statements for the
Business from the date of this Agreement through and until the Closing. Since
June 30, 2004, there has not been any material adverse change in the Business,
prospects, operations, properties, assets or condition of Seller, other than
ordinary seasonal variations in the Business.
(p) ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to
the extent reflected or specifically reserved against on the unaudited balance
sheet of Seller at and as of June 30, 2004 or as set forth in Section (p) of the
Disclosure Letter, Seller has no liabilities or obligations (whether accrued,
absolute, contingent, unliquidated or otherwise, whether due or to become due,
whether known or unknown, and regardless of when asserted) arising out of
transactions or events heretofore entered into, or any action or inaction, or
state of facts existing, with respect to or based upon transactions or events
heretofore occurring, except liabilities which have arisen after June 30, 2004
in the Ordinary Course of Business (none of which is a liability for breach of
contract, breach of warranty, violation of Legal Requirements, tort,
infringement, claim or lawsuit).
(q) ENVIRONMENTAL MATTERS. Except as set forth in Section
(q) of the Disclosure Letter, (i) Seller and the Owned Properties and Leased
Properties are in compliance with all environmental Permits and with all
Environmental, Health and Safety Requirements and with all other applicable
federal, state and local laws and regulations in effect on the date hereof
relating to pollution or the environment, including, but not limited to the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. 6901 et
seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42
U.S.C. Section 7401 et seq., and all other laws and regulations relating to
emissions, spills, leaks, discharges, releases or threatened releases of any
"hazardous substance," "solid waste" or "hazardous waste," as defined therein,
as well as relating to any other regulated substance or material, pollutant,
contaminant, petroleum and petroleum products, natural gas or synthetic gas,
special nuclear or by-product material, as defined by the Atomic Energy Act of
1954, 42 U.S.C. Section 3011 et seq., and the regulations promulgated thereto
and "hazardous chemicals", as defined in 29 C.F.R. Part 1910 or otherwise
relating to the manufacture, possession, distribution, use, treatment, storage,
disposal, transport or handling of such material (such laws and regulations
being hereinafter referred to as "Environmental Laws"); and (ii) Seller has not
been charged with, convicted of, or to Seller's Knowledge, investigated for any
violation, or is in violation of any Environmental Laws by any Governmental
Entity with respect to the Acquired Assets or the Business. There are no
Environmental, Health and Safety Liabilities and no environmental condition
exists on any portion of the Acquired Assets that would likely give rise to any
Environmental, Health and Safety Liabilities or a material claim that Seller is
in violation of any Environmental Laws.
15
(r) [reserved]
(s) SUBSIDIARIES. Seller does not have any ownership
interest in any other corporation, partnership, joint venture or other entity
except the ownership of common stock of Fair Grounds Corporation. Seller does
not control directly or indirectly nor have any direct or indirect equity
participation in any corporation, partnership, trust, or other business
association other than Fair Grounds Corporation; provided, however, this
representation shall not apply to any other legal entity owned by Krantz. The
Parties acknowledge that all representations and warranties as to Fair Grounds
Corporation and/or any Subsidiaries of Fair Grounds Corporation have been
separately addressed in that certain asset purchase agreement by and between
Churchill and Fair Grounds Corporation, dated as of August 31, 2004, and as
subsequently amended, and that no representations and warranties are made by
Seller as to Fair Grounds Corporation and/or any Subsidiaries of Fair Grounds
Corporation, except as set forth in the first two sentences of this ss.3(s).
(t) [reserved]
(u) DISCLOSURE. No representation or warranty of Seller in
this Agreement and no statement contained in any certificate or other instrument
furnished or to be furnished to Buyer hereunder contains or will contain any
untrue statement of material fact or omits or will omit to state any material
fact necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading. Promptly after becoming
aware of the same, Seller shall supplement or amend the Disclosure Letter with
respect to any matter arising after the effective date of the Disclosure Letter
which, if existing, occurring or known by it at the effective date of the
Disclosure Letter would have been required to be set forth or described in the
Disclosure Letter and shall provide prompt written notice to Buyer regarding the
same. In the event Seller makes such a supplemental disclosure, Buyer shall be
entitled to review the facts pertaining thereto and may terminate this Agreement
by so notifying Seller within ten (10) Business Days after receipt of such
supplemental disclosure.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller that the statements contained in this ss.4 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this ss.4).
(a) ORGANIZATION OF BUYER. Buyer is a limited liability
company, validly existing, and in good standing under the laws of the State of
Louisiana.
(b) AUTHORIZATION OF TRANSACTION. Buyer has full corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of Buyer, enforceable in accordance with its terms and conditions.
(c) NONCONTRAVENTION. No filing with, and no permit,
authorization, consent or approval of, any Governmental Entity is necessary for
the consummation by Buyer of the transactions contemplated by this Agreement.
Except as shall be cured or resolved by, or not exist as of, the Closing,
neither the execution and the delivery of this Agreement, nor the
16
consummation of the transactions contemplated hereby by Buyer (including the
assignments and assumptions referred to in ss.2 above), will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which Buyer or Churchill is subject or any provision of its charter or
bylaws or (ii) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which Buyer is a
party or by which it is bound or to which any of its assets is subject.
(d) BUYER'S FINANCIAL STANDING. Buyer has the financial
resources necessary to consummate the transactions contemplated by this
Agreement.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with
respect to the period between the date hereof and the Closing.
(a) GENERAL. Each of the Parties will use its reasonable
best efforts to take all action and to do all things necessary in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
ss.7 below).
(b) NOTICES AND CONSENTS. Each of the Parties will (and
Buyer will cause Churchill to) give any notices to, make any filings with, and
use its reasonable best efforts to obtain any authorizations, consents, and
approvals of governments and governmental agencies in connection with the
matters referred to in ss.3(c) and ss.4(c) above.
(c) OPERATION OF BUSINESS. Seller shall not engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business or as required to perform the obligations set forth in this
Agreement. Seller shall from the date hereof through and until the Closing, use
commercially reasonable efforts to maintain and preserve the condition, value
and goodwill of the Business and the Acquired Assets. Prior to the Closing,
Seller shall use its cash only to pay its liabilities incurred in the ordinary
course of business, other than any Claims owed by Seller to Krantz or any person
related directly or indirectly to Krantz.
(d) FULL ACCESS. Seller will (i) permit representatives of
Buyer to have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of Seller, to the Acquired Assets
and all books, records (including tax records), contracts, and documents of or
pertaining to Seller. Seller will promptly furnish Buyer with such financial and
operating data and other information with respect to the Business and the
Acquired Assets as Buyer may from time to time reasonably request. For purposes
of this Agreement, Buyer will treat and hold as such any confidential
information it receives from Seller in the course of the reviews contemplated by
this ss.5(d) (except any disclosure required by law or order of court or other
governmental agency, or the rules and regulations of the Securities and Exchange
Commission or the Nasdaq Stock Market), will not use any of the confidential
information except in connection with this Agreement, and, if this Agreement is
terminated for any reason whatsoever, will return to Seller all tangible
embodiments (and all copies) of the
17
confidential information which are in its possession. Notwithstanding anything
to the contrary contained in this Section 5(d), in no event shall Seller be
required to provide (i) materials that would result in a waiver of the attorney
client privilege with respect to any Proceedings to which Seller is a party,
(ii) any attorney work product, or (iii) materials that are subject to
confidentiality agreements with third parties unless Buyer first obtains the
consent of such third parties to the disclosure of said materials.
(e) NOTICE OF DEVELOPMENTS. Each Party will give prompt
written notice to the other Party of any material adverse development causing a
breach of any of its own representations and warranties. No disclosure by any
Party pursuant to this ss.5(e), however, shall be deemed to amend or supplement
the Disclosure Letter or to prevent or cure any misrepresentation or breach of
warranty except as provided in ss.3(u).
(f) MATTERS RELATED TO THE CONDUCT OF BUSINESS. Seller will
not sell, assign, mortgage or encumber any of the Acquired Assets, incur any
indebtedness, or enter into executory contracts or leases of real property or of
personal property other than in the Ordinary Course of Business.
6. ADDITIONAL COVENANTS.
(a) EMPLOYEES. Buyer agrees that prior to the Closing it
shall offer jobs to a sufficient number of current full-time employees of Seller
so as not to trigger any WARN Act liabilities in respect of Seller. Nothing
herein shall obligate Buyer to employ any of Seller's employees for any
particular length of time following the Closing. Seller shall, effective as of
the Closing, terminate all of its employees.
(b) FURTHER ASSURANCES. Subject to the terms and conditions
of this Agreement, each of the parties hereto shall (and Buyer shall cause
Churchill to) use commercially reasonable efforts to take, or cause to be taken,
all action, and to do, or cause to be done, all things reasonably necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the sale of the Acquired Assets in accordance with this Agreement,
including using commercially reasonable efforts to ensure timely satisfaction of
the conditions precedent to each party's obligations hereunder. Neither Seller,
on the one hand, nor Buyer, on the other hand, shall, without the prior written
consent of the other party, take any action which would reasonably be expected
to prevent or materially impede, interfere with or delay the transactions
contemplated by this Agreement. From time to time on or after the Closing Date,
Seller shall, at its own expense, execute and deliver such documents to Buyer as
Buyer may reasonably request in order to more effectively vest in Buyer Seller's
title to the Acquired Assets. From time to time after the date hereof, Buyer
shall, at its own expense, execute and deliver such documents to Seller as
Seller may reasonably request in order to more effectively consummate the sale
of the Acquired Assets and the assumption and assignment of the Assumed
Liabilities and the Assumed Contracts in accordance with this Agreement. Neither
the foregoing nor any other provision of this Agreement shall in any way impact
or alter, or impose any standard of review upon, or be deemed to do any of the
same, with respect to any determination or decision to be made by Buyer in its
sole discretion with respect to the conditions set forth in Section 7(a) hereof
as expressly set forth therein.
18
(c) TRANSFER TAXES. All excise, sales, use, transfer, value
added, registration, stamp, recording, documentary, conveyance, franchise,
transfer, gains and similar taxes, levies, charges and recording, filing and
other fees (collectively, "Transfer Taxes") incurred in connection with the
transactions contemplated by this Agreement, if any, shall be paid by Seller.
Seller shall, at its own expense, timely pay and file all necessary tax returns
and other documentation with respect to all such Transfer Taxes and, if required
by applicable law, Buyer shall join in the execution of any tax returns and
other documentation at Seller's request.
(d) NAME CHANGE. Seller agrees that at the Closing, or as
soon as practicable thereafter (but in no event later than one (1) Business Day
after the Closing Date), Seller will change its name and will not use the
corporate names "Finish Line" or "Finish Line Management Corp." or any name
similar thereto in any business activity.
(e) DUE DILIGENCE RESPONSES. Seller shall promptly respond
in writing to the due diligence requests or inquiries made in writing by Buyer
or its representatives.
(f) BUSINESS MONITORING. On and after the date hereof until
the Closing, Seller shall permit Buyer to have not more than four (4) executive
personnel on site at the Owned Real Property (in suitable office space) or at
the Leased Real Property. Such executive personnel shall be permitted to inspect
the premises and monitor its operations and the operations of the Business to
assure that the Business is being operated in the Ordinary Course of Business.
Seller shall cooperate in good faith with Buyer and use its best efforts to
prevent the occurrence of any acts outside the Ordinary Course of Business which
could be adverse to Buyer's operation of the Business after the Closing.
(g) RECEIVABLE AND CLAIMS. Upon acquiring the receivables
owed by Seller to Fair Grounds Corporation, Buyer agrees to forgive up to a
maximum amount of $4,500,000 of such receivables. Upon acquiring any claim by
Seller against Fair Grounds Corporation, Buyer shall and hereby waives any such
claim against Fair Grounds Corporation. Upon acquiring any other claim by Fair
Grounds Corporation against Seller, Buyer shall and hereby waives any such claim
against Seller.
(h) COVENANT NOT TO COMPETE. For any reason, without the
express written approval of Buyer, Seller and Krantz shall not, during the term
of the Consulting Agreement attached as EXHIBIT B hereto (the "Term"), and for a
period of one (1) year after the expiration of the Term, carry on or engage in
the business of conducting live horse racing meets and to accept parimutuel
wagers thereon at the race track commonly known as Fair Grounds Race Course (the
"Racetrack"), operate slot machines at the Racetrack and accept parimutuel
wagers and operate video lottery poker at the off-track wagering facilities and
any business ancillary to the foregoing operations in Louisiana parishes of
Orleans, Jefferson, Lafourche, St. Bernard, St. Charles, St. John the Baptist,
St. Tammany, and Terrebonne. Pursuant to this obligation, Seller and Krantz
shall not directly or indirectly own, operate, manage, control or participate in
the ownership, management, operation or control, or be paid or employed by, or
otherwise become associated with, affiliated with or provide assistance to,
whether as an employee, consultant, independent contractor, director, officer,
shareholder, partner, agent, associate, principal, representative or in any
other capacity, any business entity that directly or indirectly competes with
Buyer or Churchill; provided, however, that Krantz: (1) may invest in
19
stocks, bonds, or other securities of any corporation or other entity (but
without participating in the business thereof) if such stocks, bonds, or other
securities are listed for trading on a national stock exchange and Krantz's
investment does not exceed 5% of the issued and outstanding shares of capital
stock, or in the case of bonds or other securities, 5% of the aggregate
principal amount thereof issued and outstanding; (2) shall be permitted to
directly or indirectly (i) own, operate, manage, control, develop or participate
in the ownership, management, operation, control, or development of a hotel,
restaurants and bars (with gaming as allowed under the law currently in effect
in Louisiana) and (ii) pursue the potential relocation of the Treasure Chest
riverboat casino owned by Boyd Gaming Corporation or the potential relocation of
another existing riverboat casino (and collect rents therefrom howsoever based),
but, with respect to both (i) and (ii), only at and to property currently owned
directly or indirectly, in whole or in part by Krantz (collectively, the
"Gabriel Entities") and commonly known as the Gabriel real estate development
(the "Gabriel Development") (provided, however, that no off-track betting
facility (as defined by statute) or truck stop may be located on the Gabriel
Development during the period of time contemplated by this Section 6(h)); and
(3) shall be permitted to operate and/or manage third party video poker
facilities which are located a minimum of two (2) miles from any OTB owned by
Buyer or Churchill. For purposes hereof, the term "Gabriel Development" shall
mean the property which is generally bounded on the west by apartments, on the
south by Joe Yenni Boulevard, on the east by the Duncan Street drainage canal
and the property of the 4th Jefferson Drainage District, and on the north by the
farthest extent of the shoreline, riparian and/or waterbottom rights to which
the Gabriel Entities are or may be entitled and shall include all riparian and
waterbottom rights as now or hereafter may exist.
If the agreements set forth in this ss.6(h) would otherwise
be determined to be invalid or unenforceable by a court of competent
jurisdiction, the parties intend and agree that such court shall exercise its
discretion in reforming such agreements to the end that Seller and Krantz shall
be subject to a covenant not to compete with Buyer which is reasonable under the
circumstances and enforceable by Buyer. It is agreed that no adequate remedy at
law exists for Buyer for violation of such agreements, and these agreements may
be enforced by any equitable remedy, including specific performance and
injunction, without limiting the right of Buyer to proceed at law to obtain such
relief as may be available to it.
(i) APPLICATION OF CASH. From and after the Closing, Seller
shall deposit any cash on hand of Seller in an escrow account approved by Buyer
to be used to pay the pre-Closing ordinary trade expenses of Seller with the
balance of such account, if any, paid to Buyer within ninety (90) days after
Closing.
(j) As of the Closing, Seller's Board of Directors shall
have adopted a resolution providing for (i) termination of Selle's 401k Profit
Sharing Plan (the "Plan") effective as of the Closing Date; (ii) authorizing and
directing Seller's officers to implement the termination, including filing, as
soon as administratively feasible, an application with the Internal Revenue
Service for a determination that termination of the Plan does not adversely
affect the Plan's qualification for federal tax purposes; and (iii) amendment of
applicable Plan documents to provide that transfer of employment to Buyer shall
not be treated as an event of default under any loan from the Plan to a Plan
participant.
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7. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF BUYER. The obligation of
Buyer to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the transactions under that certain Asset Purchase
Agreement entered into as of August 31, 2004, as amended by a First
Amendment dated as of September 17, 2004, to which Buyer's affiliate is
a party concerning Fair Grounds Corporation shall have closed;
(ii) each of the consents identified in Sections 3(c)
and 4(c) shall have been obtained from the Governmental Entities and
other third parties, as applicable, on terms and conditions satisfactory
to Buyer, in its sole discretion, and shall be in full force and effect;
(iii) Buyer shall have received and approved a survey
acceptable to Buyer of the Owned Real Property and said survey shall
disclose, among other things, (a) that there are no gaps contained
within the Owned Real Property and (b) that there are no unrecorded
easements, servitudes, discrepancies, or conflicts in boundary lines,
shortages in areas or encroachments. Buyer shall have received and
approved a title commitment and form of title insurance policy
acceptable to Buyer (those matters disclosed in the title commitment and
title insurance policy which are Permitted Encumbrances described in
Section (d) of the Disclosure Letter previously accepted by Buyer shall
be deemed acceptable) issued by a reputable title insurance company for
a title insurance policy (which title insurance policy shall contain an
"extended coverage endorsement," a "zoning endorsement," and such other
endorsements as are customary and reasonable) insuring title to the
Owned Real Property in the amount of the Purchase Price allocated to the
Owned Real Property, covering the Owned Real Property, naming Buyer as
the proposed insured and having an effective date after the date of this
Agreement;
(iv) there shall not be any injunction, judgment,
order, decree or ruling in effect preventing consummation of any of the
transactions contemplated by this Agreement;
(v) on or before the Closing Date, there shall not
have occurred any material destruction or significant physical change to
the Acquired Assets of Seller taken as a whole, whether or not insured
(Seller shall be obligated to give Buyer notice of any of the same as
soon as possible after the occurrence thereof);
(vi) the representations and warranties of Seller
contained in ss.3 shall be true and correct in all material respects as
of the Closing with the same effect as though such representations and
warranties had been made on and as of that date;
(vii) Seller shall have performed and complied with
all of its covenants hereunder in all material respects through the
Closing; and
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(viii) Seller shall have delivered to Buyer a
certificate to the effect that each of the conditions specified above in
ss.7(a)(vi) and (vii) is satisfied in all respects.
Buyer may waive any condition specified in this ss.7(a) if it executes a writing
so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF SELLER. The obligation of
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the transactions under that certain Asset Purchase
Agreement entered into August 31, 2004, as amended by a First Amendment
dated as of September 17, 2004, to which Buyer's affiliate is a party
concerning Fair Grounds Corporation shall have closed;
(ii) there shall not be any injunction, judgment,
order, decree or ruling in effect preventing consummation of any of the
transactions contemplated by this Agreement;
(iii) the representations and warranties of Buyer
contained in ss.4 shall be true and correct in all material respects as
of the Closing with the same effect as though such representations and
warranties had been made on and as of that date;
(iv) Buyer shall have performed and complied with all
of its covenants hereunder in all material respects through the Closing;
and
(v) Buyer shall have delivered to Seller a certificate
to the effect that each of the conditions specified above in
ss.7(b)(iii) and (iv) is satisfied in all respects.
Seller may waive any condition specified in this ss.7(b) if Seller executes a
writing so stating at or prior to the Closing.
8. TERMINATION.
(a) PERMITTED TERMINATION.
(i) This Agreement may, prior to or at the Closing, be
terminated by written consent of Seller and Buyer.
(ii) If any of the conditions set forth in ss.7(a)(i)
or ss.7(b)(i) have not been met on or before October 15, 2004, this
Agreement will automatically terminate without further action by either
Buyer or Seller unless otherwise agreed by Buyer and Seller.
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(iii) If the conditions set forth in ss.7(a)(ii),
(iii), (iv), or (v) have not been met on or prior to October 15, 2004,
Buyer may terminate this Agreement by written notice to Seller.
(iv) If the condition set forth in ss.7(b)(ii) has not
been met on or prior to October 15, 2004, Seller may terminate this
Agreement by written notice to Buyer.
(v) If the Closing has not occurred on or before
October 15, 2004, unless extended by agreement of the parties, this
Agreement shall terminate, but subject to and without affecting in any
way any rights or claims any party to this Agreement may have against
any other party to this Agreement for breach of this Agreement,
including any claim for the remedy of specific performance and
injunction for breach of this Agreement.
(b) TERMINATION UPON DEFAULT.
(i) If the conditions set forth in ss.7(a)(vi), (vii)
or (viii) are not met on or before the Closing, Buyer may terminate this
Agreement by written notice to Seller. It is agreed that Buyer has no
adequate remedy at law for breach of this Agreement by Seller, and Buyer
may pursue any and all remedies, at law or in equity, for such breach,
including specific performance and injunction.
(ii) If the conditions set forth in ss.7(b)(iii), (iv)
or (v) are not met on or before the Closing, then Seller may terminate
this Agreement by written notice to Buyer.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Parties contained in this Agreement shall
survive the Closing for a period of two (2) years; provided, however, the
representations and warranties in ss.3(h), ss.3(i) and ss.3(q) shall survive the
Closing without any time limit. The representations and warranties shall be
unaffected by any investigation made by any party hereto.
10. INDEMNIFICATION.
(a) BY SELLER. Seller shall indemnify and hold harmless
Buyer from and against any damage, deficiency, loss, action, judgment, cost and
expense (including reasonable attorneys' fees to the extent permitted by law)
(collectively, "Buyer's Losses") arising out of or resulting from (i) any breach
by Seller of any representation, warranty, covenant or other provision of this
Agreement, and (ii) any liabilities or obligations of Seller which are not
Assumed Liabilities.
(b) BY BUYER. Buyer shall indemnify and hold harmless
Seller from and against any damage, deficiency, loss, action, judgment, cost and
expense (including reasonable attorneys' fees to the extent permitted by law)
(collectively, "Seller's Losses") arising out of or resulting from (i) any
breach by Buyer of any representation, warranty, covenant or other provision of
this Agreement, and (ii) the Assumed Liabilities.
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(c) LIMITATIONS ON AMOUNT-SELLER. Seller will have no
liability for indemnification with respect to matters described in ss.10(a)(i)
for breach of a representation or warranty until the total Buyer Losses with
respect to all such matters exceeds $100,000, at which point Seller will be
liable for all Buyer Losses exceeding the first $25,000, but in any event
subject to a maximum of the Purchase Price for all such claims. However, this
ss.10(c) will not apply to any breach of a representation and warranty of which
Seller had Knowledge at any time prior to the date on which such representation
and warranty is made.
(d) LIMITATIONS ON AMOUNT-BUYER. Buyer will have no
liability for indemnification with respect to matters described in ss.10(b)(i)
for a breach of a representation or warranty until the total Seller Losses with
respect to all such matters exceeds $100,000, at which point Buyer will be
liable for all Seller Losses exceeding the first $25,000, but in any event
subject to a maximum of the Purchase Price for all such claims. However, this
ss.10(d) will not apply to any breach of a representation and warranty of which
Buyer had Knowledge at any time prior to the date on which such representation
and warranty is made.
11. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written approval
of the other Party; provided, however, that any Party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing Party will use its reasonable best efforts to advise the
other Party prior to making the disclosure).
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the
exhibits, schedules and Disclosure Letter referred to herein) constitutes the
entire agreement between the Parties and supersedes any prior understandings,
agreements, or representations by or between the Parties, written or oral, to
the extent they related in any way to the subject matter hereof.
(d) SUCCESSIONS AND ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder without the
prior written approval of the other Party; provided that the Buyer may assign
all or part of its rights and obligations with respect to the Acquired Assets
and the Assumed Liabilities to one or more of its affiliates ("affiliate" being
any entity in which Buyer or Churchill owns a majority of the equity interests
and/or over which either has decisional control).
(e) RISK OF LOSS. Seller shall bear all risk of loss with
respect to the Acquired Assets prior to the Closing Date. Seller agrees to
continue to carry or cause to be
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carried to the Closing Date the insurance coverage which is presently carried
relating to the Acquired Assets as set forth on Section (m) of the Disclosure
Letter.
(f) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) HEADINGS. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(h) NOTICES. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two Business Days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to Seller: Finish Line Management Corp.
c/o Bryan G. Krantz
85 Chateau Latour
Kenner, Louisiana 70065
Copy to: David R. Sherman
Chehardy, Sherman, Ellis, Breslin, Murray, Recile
& Griffith, LLP
P.O. Box 931 Metaire,
Louisiana 70004-0931
Facsimile: (504)833-8080
If to Buyer: Churchill Downs Louisiana Horseracing
Company, L.L.C.
c/o Churchill Downs Incorporated
700 Central Avenue
Louisville, Kentucky 40208
Attn: Rebecca C. Reed
Facsimile: (502) 636-4439
Copy to: Wyatt, Tarrant & Combs, LLP
500 West Jefferson Street, Suite 2800
Louisville, Kentucky 40202
Attn: Robert A. Heath
Facsimile: (502) 589-0309
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above, using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been
25
duly given unless and until it actually is received by the intended recipient.
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
(i) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Louisiana without
giving effect (to the extent permitted by law) to any choice or conflict of law
provision or rule (whether of the State of Louisiana or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Louisiana.
(j) AMENDMENTS AND WAIVER. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
Buyer and Seller. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) EXPENSES. Each of Buyer and Seller, will bear its own
costs and expenses (including fees and expenses of attorneys, accountants,
finders, financial advisors and other professionals) incurred in connection with
this Agreement and the transactions contemplated hereby.
(l) CONSTRUCTION. The Parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation 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. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(m) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits
and Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
12. CHURCHILL COVENANT. Churchill intervenes into this
Agreement, and does hereby jointly, severally and solidarily irrevocably
obligate itself unconditionally with Buyer to the performance of all of the
obligations of Buyer under this Agreement. Churchill's obligations under this
Agreement shall terminate to the extent that Buyer's obligations under this
Agreement terminate.
* * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
"BUYER"
CHURCHILL DOWNS LOUISIANA HORSE
RACING COMPANY, L.L.C.
By:/s/ RANDALL E. SOTH
Name: RANDALL E. SOTH
Title: PRESIDENT
"SELLER"
FINISH LINE MANAGEMENT CORP.
By:/s/ BRYAN G. KRANTZ
Name: BRYAN G. KRANTZ
Title: PRESIDENT
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"CHURCHILL""
CHURCHILL DOWNS INCORPORATED
By:/s/ M. E. MILLER
Name: /s/ M.E. MILLER
Title: EVP/CFO
"KRANTZ"
/s/ BRYAN G. KRANTZ
BRYAN G. KRANTZ
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Exhibits and schedules to the Asset Purchase Agreement have been intentionally
omitted because they are not material. The registrant agrees to furnish such
omitted exhibits and schedules supplementally to the Commission upon request.