Exhibit 2
________________________________________________________________________________
________________________________________________________________________________
PURCHASE AGREEMENT
Dated as of August 25, 2000
By and Among
BMOC ACQUISITIONS XIV, LLC,
a Delaware limited liability company,
PAINE WEBBER REAL ESTATE SECURITIES, INC.,
a Delaware corporation,
and
MAGNA ENTERTAINMENT CORP.,
a Delaware corporation.
________________________________________________________________________________
________________________________________________________________________________
TABLE OF CONTENTS
1. DEFINITIONS........................................................................................ 1
2. SALE AND TRANSFER OF INTERESTS AND SHARES; CLOSING................................................. 10
2.1 TRANSFER OF INTERESTS AND SHARES.......................................................... 10
2.2 PURCHASE PRICE............................................................................ 10
2.3 CLOSING................................................................................... 10
2.4 CLOSING OBLIGATIONS....................................................................... 10
2.5 PURCHASE PRICE ADJUSTMENT................................................................. 11
3. REPRESENTATIONS AND WARRANTIES OF SELLER........................................................... 12
3.1 ORGANIZATION AND GOOD STANDING............................................................ 12
3.2 AUTHORITY; NO CONFLICT.................................................................... 12
3.3 CAPITALIZATION............................................................................ 13
3.4 FINANCIAL STATEMENTS...................................................................... 13
3.5 BOOKS AND RECORDS......................................................................... 14
3.6 TITLE TO PROPERTIES; ENCUMBRANCES......................................................... 14
3.7 ACCOUNTS RECEIVABLE....................................................................... 14
3.8 NO UNDISCLOSED LIABILITIES................................................................ 15
3.9 TAXES..................................................................................... 15
3.10 NO MATERIAL ADVERSE CHANGE................................................................ 15
3.11 EMPLOYEE BENEFITS......................................................................... 15
3.12 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS........................... 19
3.13 LEGAL PROCEEDINGS; ORDERS................................................................. 20
3.14 ABSENCE OF CERTAIN CHANGES AND EVENTS..................................................... 20
3.15 CONTRACTS; NO DEFAULTS.................................................................... 21
3.16 INSURANCE................................................................................. 22
3.17 ENVIRONMENTAL MATTERS..................................................................... 22
3.18 EMPLOYEES................................................................................. 24
3.19 LABOR RELATIONS; COMPLIANCE............................................................... 24
3.20 INTELLECTUAL PROPERTY..................................................................... 25
3.21 CERTAIN PAYMENTS.......................................................................... 26
3.22 DISCLOSURE................................................................................ 26
3.23 BROKERS OR FINDERS........................................................................ 26
TABLE OF CONTENTS
(Continued)
Page
4. REPRESENTATIONS AND WARRANTIES OF BUYER................................................................ 26
4.1 ORGANIZATION AND GOOD STANDING................................................................ 26
4.2 AUTHORITY; NO CONFLICT........................................................................ 26
4.3 CERTAIN PROCEEDINGS........................................................................... 27
4.4 INVESTMENT INTENT OF BUYER.................................................................... 27
4.5 BROKERS OR FINDERS............................................................................ 28
4.6 BUYER'S INVESTIGATION......................................................................... 28
5. COVENANTS OF SELLER.................................................................................... 28
5.1 ACCESS AND INVESTIGATION...................................................................... 28
5.2 OPERATION OF THE BUSINESS OF ACQUIRED COMPANIES............................................... 28
5.3 NEGATIVE COVENANT............................................................................. 29
5.4 REQUIRED APPROVALS............................................................................ 29
5.5 NOTIFICATION.................................................................................. 29
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS.................................................... 30
5.7 NO NEGOTIATION................................................................................ 30
5.8 BEST EFFORTS.................................................................................. 30
5.9 NON-COMPETITION............................................................................... 30
5.10 PAYMENT TO EMPLOYEES.......................................................................... 30
6. COVENANTS OF BUYER..................................................................................... 31
6.1 APPROVALS OF GOVERNMENTAL BODIES.............................................................. 31
6.2 BEST EFFORTS.................................................................................. 31
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.................................................... 32
7.1 ACCURACY OF REPRESENTATIONS................................................................... 32
7.2 SELLER'S PERFORMANCE.......................................................................... 32
7.3 CONSENTS...................................................................................... 32
7.4 ADDITIONAL DOCUMENTS.......................................................................... 32
7.5 NO PROCEEDINGS................................................................................ 33
7.6 NO CLAIM REGARDING LIMITED LIABILITY COMPANY INTERESTS, STOCK OWNERSHIP OR SALE PROCEEDS...... 33
7.7 NO PROHIBITION................................................................................ 33
ii
TABLE OF CONTENTS
(continued)
Page
7.8 COMPLETION OF DUE DILIGENCE................................................................... 33
7.9 SAN MATEO COUNTY.............................................................................. 33
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE................................................... 33
8.1 ACCURACY OF REPRESENTATIONS................................................................... 34
8.2 BUYER'S PERFORMANCE........................................................................... 34
8.3 ADDITIONAL DOCUMENTS.......................................................................... 34
8.4 NO INJUNCTION................................................................................. 34
9. TERMINATION............................................................................................ 34
9.1 TERMINATION EVENTS............................................................................ 34
9.2 EFFECT OF TERMINATION......................................................................... 35
10. INDEMNIFICATION; REMEDIES.............................................................................. 35
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE.................................. 35
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER.............................................. 36
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER-- ENVIRONMENTAL MATTERS...................... 36
10.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER............................................... 37
10.5 TIME LIMITATIONS.............................................................................. 37
10.6 LIMITATIONS ON AMOUNT-- SELLER................................................................ 38
10.7 LIMITATIONS ON AMOUNT-- BUYER................................................................. 38
10.8 PROCEDURE FOR INDEMNIFICATION-- THIRD PARTY CLAIMS............................................ 38
10.9 PROCEDURE FOR INDEMNIFICATION-- OTHER CLAIMS.................................................. 39
11. BUYER'S ACKNOWLEDGEMENT................................................................................ 39
12. GUARANTY OF SELLER'S OBLIGATIONS....................................................................... 40
12.1 GUARANTY...................................................................................... 40
13. GENERAL PROVISIONS..................................................................................... 40
13.1 EXPENSES...................................................................................... 40
13.2 PUBLIC ANNOUNCEMENTS.......................................................................... 40
13.3 CONFIDENTIALITY............................................................................... 41
13.4 NOTICES....................................................................................... 41
13.5 JURISDICTION; SERVICE OF PROCESS.............................................................. 42
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TABLE OF CONTENTS
(continued)
Page
13.6 FURTHER ASSURANCES............................................................................ 42
13.7 WAIVER........................................................................................ 43
13.8 ENTIRE AGREEMENT AND MODIFICATION............................................................. 43
13.9 DISCLOSURE LETTER............................................................................. 43
13.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS............................................ 43
13.11 SEVERABILITY.................................................................................. 43
13.12 SECTION HEADINGS, CONSTRUCTION................................................................ 44
13.13 TIME OF ESSENCE............................................................................... 44
13.14 GOVERNING LAW................................................................................. 44
13.15 COUNTERPARTS.................................................................................. 44
iv
PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement") is made as of August 25,
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2000 by and among BMOC Acquisitions XIV, LLC, a Delaware limited liability
company ("Seller"), Paine Webber Real Estate Securities, Inc., a Delaware
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corporation ("Guarantor"), and Magna Entertainment Corp., a Delaware corporation
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("Buyer").
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RECITAL
Seller desires to sell, and Buyer desires to purchase, all of the
issued and outstanding (i) limited liability company interests (the "Interests")
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of Bay Meadows Operating Company LLC, a Delaware limited liability company
("BMOC"), which owns and operates a thoroughbred horse racing and pari-mutuel
----
wagering business (the "Business") at Bay Meadows (the "Track"), and (ii) shares
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of capital stock (the "Shares") of Bay Meadows Catering, a California
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corporation ("Catering"), for the consideration and on the terms set forth in
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this Agreement.
AGREEMENT
The parties, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"Acquired Companies" -- means BMOC and Catering, collectively.
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"Acquisition Date" -- February 25, 1999.
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"Applicable Contract" -- any Contract (a) under which either Acquired
-------------------
Company has or may acquire any rights, (b) under which either Acquired Company
has or may become subject to any obligation or liability, or (c) by which either
Acquired Company or any of the assets owned or used by it is or may become bound
and that (i) obligates such Acquired Company to pay an amount of $50,000 or more
after June 30, 2000, (ii) has an unexpired term as of June 30, 2000 in excess of
one year, (iii) contains a covenant not to compete or otherwise significantly
restricts the business or affairs of such Acquired Company, (iv) provides for an
extension of credit to or by such Acquired Company in an amount in excess of
$10,000 other than consistent with normal credit terms, (v) substantially limits
the ability of Seller or either Acquired Company to conduct business in the
ordinary course, including as to manner or place, (vi) provides for a guaranty
by such Acquired Company, (vii) provides for a right of first refusal by or in
favor of such Acquired Company, (viii) constitutes a collective bargaining
agreement or provides for severance benefits to any officer, director or
employee of such Acquired Company, (ix) represents a contract upon which the
business of such Acquired Company is substantially dependent or a contract which
is otherwise Material to such business, (xi) requires aggregate expenditures in
excess of $50,000 or (xii) relates to the leasing of or future commitments to
lease any of the assets of such Acquired Company, including any Intellectual
Property Assets.
"Balance Sheet" -- as defined in Section 3.4(a).
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"Best Efforts" -- the efforts that a prudent Person acting in a
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commercially reasonable manner and desirous of achieving a result would use in
similar circumstances to ensure that such result is achieved as expeditiously as
possible.
"BMOC" -- as defined in the recital to this Agreement.
----
"Breach" -- a "Breach" of a representation, warranty, covenant,
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obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any Material inaccuracy in or Material breach of, or any Material
failure to perform or comply with, such representation, warranty, covenant,
obligation, or other provision or (b) any Material claim (by any Person) or
other occurrence or circumstance that is or was inconsistent with such
representation, warranty, covenant, obligation, or other provision, and the term
"Breach" means any such Material inaccuracy, breach, failure, claim, occurrence,
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or circumstance.
"Business" -- as defined in the recital to this Agreement.
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"Business Day" -- means any day that is not a Saturday, a Sunday or
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other day on which banks are required or authorized by law to be closed in
Toronto or the City of New York.
"Buyer" -- as defined in the first paragraph of this Agreement.
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"Buyer's Accountants" -- Ernst & Young LLP, independent accountants of
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Buyer.
"Catering" -- as defined in the recital to this Agreement.
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"CHRB" -- the California Horse Racing Board.
----
"Cleanup" -- as defined in the definition of Environmental, Health and
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Safety Liabilities.
"Closing" -- as defined in Section 2.3.
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"Closing Balance Sheet" -- the audited statement of assets,
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liabilities and members' or shareholders' equity (including the related notes
and schedules thereto) of the Acquired Companies, to be prepared pursuant to
Section 2.5(a) and to be dated as of the Closing Date.
"Closing Date" -- the date and time as of which the Closing actually
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takes place.
"Consent" -- any approval, consent, ratification, waiver, or other
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authorization (including any Governmental Authorization).
2
"Contemplated Transactions" -- all of the transactions contemplated by
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this Agreement, including:
(a) the sale of the Interests and the Shares by Seller to Buyer;
(b) the performance by Buyer and Seller of their respective covenants
and obligations under this Agreement;
(c) Buyer's acquisition and ownership of the Interests and the Shares
and exercise of control over the Acquired Companies; and
(d) the execution, delivery and performance of the Lease by the
parties thereto.
"Contract" -- any agreement, contract, obligation, promise, or
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undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Damages" -- as defined in Section 10.2.
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"Disclosure Letter" -- the disclosure letter delivered by Seller to
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Buyer concurrently with the execution and delivery of this Agreement.
"Encumbrance" -- any charge, claim, community property interest,
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condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"Environment" -- soil, land surface or subsurface strata, surface
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waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
"Environmental, Health and Safety Liabilities" -- any cost, damages,
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expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses;
(c) financial responsibility for cleanup costs or corrective action,
including any required investigation, cleanup, removal, containment, or other
remediation or response actions ("Cleanup") (whether or not such Cleanup has
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been required or requested by any Governmental Body or any other Person) and for
any natural resource damages; or
3
(d) any other required compliance, corrective, investigative, or
remedial measures.
The terms "removal," "remedial," and "response action" include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. (S) 9601 et seq., as amended.
"Environmental Law" -- any Legal Requirement that requires or relates
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to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing
the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(g) cleaning up pollutants that have been released, preventing the
Threat of Release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment, or permitting self-
appointed representatives of the public interest to recover for injuries done to
public assets.
"ERISA" -- the Employee Retirement Income Security Act of 1974 or any
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successor law, and regulations and rules issued pursuant to that act or any
successor law.
"Existing Lease" -- any and all Contracts between Seller and its
--------------
affiliates, as landlord, and BMOC and its affiliates, as tenant, existing prior
to the Closing.
"Facilities" -- any real property, leaseholds, or other interests
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currently or formerly owned, leased or operated by either Acquired Company and
any buildings, plants, structures, or equipment (including motor vehicles, tank
cars, and rolling stock) currently or formerly owned, leased or operated by
either Acquired Company.
4
"GAAP" -- generally accepted United States accounting principles,
----
applied on a basis consistent with the basis on which the Balance Sheet and the
other financial statements referred to in Section 3.4 were prepared.
"Governmental Authorization" -- any approval, consent, license,
--------------------------
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"Governmental Body" -- any:
-----------------
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"Guarantor" -- as defined in the first paragraph of this Agreement.
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"Hazardous Activity" -- the distribution, generation, handling,
------------------
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities or any part thereof into the Environment, and any
other act, business, operation, or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may affect the value of the Facilities or either
Acquired Company.
"Hazardous Materials" -- any waste or other substance that is listed,
-------------------
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"HSR Act" -- the Hart-Scott-Rodino Antitrust Improvements Act of 1976
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or any successor law, and regulations and rules issued pursuant to that act or
any successor law.
"Indemnified Persons" -- as defined in Section 10.2.
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"Instrument of Assignment" -- the Assignment of Limited Liability
------------------------
Company Interests assigning all of Seller's right, title and interest in the
Interests to Buyer, substantially in the form of Exhibit 1.1 attached hereto.
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5
"Intellectual Property Assets" -- as defined in Section 3.20.
----------------------------
"Interests" -- as defined in the recital to this Agreement.
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"Interim Balance Sheet" -- as defined in Section 3.4(a).
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"IRC" -- the Internal Revenue Code of 1986 or any successor law, and
---
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" -- the United States Internal Revenue Service or any successor
---
agency, and, to the extent relevant, the United States Department of the
Treasury.
"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 ordinary course of business.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, manager, member, officer, partner, executor, or
trustee of such Person (or in any similar capacity) has, or at any time had,
Knowledge of such fact or other matter.
"Lease" -- the Lease between PW Acquisitions IV, LLC, a Delaware
-----
limited liability company, as landlord, and BMOC, as tenant, in the form of
Exhibit 1.2 attached hereto, as such Lease may be amended, supplemented or
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otherwise modified from time to time.
"Legal Requirement" -- any federal, state, local, municipal, foreign,
-----------------
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"Material" -- any inaccuracy, breach, failure, claim, occurrence,
--------
circumstance or event, whether individually or in conjunction with any other
inaccuracy, breach, failure, claim, occurrence, circumstance or event, whether
or not related, that does or could reasonably be expected to change or influence
the judgment of a reasonable person.
"Occupational Safety and Health Law" -- any Legal Requirement designed
----------------------------------
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards, and any program, whether governmental or private
(including those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"Order" -- any award, decision, injunction, judgment, order, ruling,
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subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
6
"Ordinary Course of Business" -- an action taken by a Person will be
---------------------------
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person;
(b) such action is not required to be authorized by the governing
body of such Person and is not required to be specifically authorized by the
parent company (if any) of such Person; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the governing body, in the
ordinary course of the normal day-to-day operations of other Persons that are in
the same line of business as such Person.
"Organizational Documents" -- (a) the certificate of formation and
------------------------
limited liability company agreement of a limited liability company; (b) the
articles or certificate of incorporation and the bylaws or code of regulation of
a corporation; (c) the partnership agreement and any statement of partnership of
a general partnership; (d) the limited partnership agreement and the certificate
of limited partnership of a limited partnership; (e) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; and (f) any amendment to any of the foregoing.
"Person" -- any individual, corporation (including any non-profit
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corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Plan" -- as defined in Section 3.11.
----
"Proceeding" -- any action, arbitration, audit, hearing,
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investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"Purchase Price" -- as defined in Section 2.2.
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"Related Person" -- with respect to a particular individual:
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(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a manager, member, director,
officer, partner, executor, or trustee (or in a similar capacity).
7
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a manager, member, director, officer,
partner, executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves as
a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or
(c).
For purposes of this definition, (a) the "Family" of an individual
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includes (i) the individual, (ii) the individual's spouse and former spouses,
(iii) any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other natural person
who resides with such individual, and (b) "Material Interest" means direct or
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indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act) of voting securities or other voting interests representing at
least 50% of the outstanding voting power of a Person or equity securities or
other equity interests representing at least 50% of the outstanding equity
securities or equity interests in a Person.
"Release" -- any spilling, leaking, emitting, discharging, depositing,
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escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"Representative" -- with respect to a particular Person, any manager,
--------------
member, director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants, and
financial advisors.
"Schedule of Payments to Employees" -- the schedule of severance
---------------------------------
payment and bonus policies set forth on Exhibit 1.3 attached hereto.
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"Securities Act" -- the Securities Act of 1933 or any successor law,
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and regulations and rules issued pursuant to that act or any successor law.
"Securities Exchange Act" -- the Securities Exchange Act of 1934 or
-----------------------
any successor law, and regulations and rules issued pursuant to that act or any
successor law.
"Seller" -- as defined in the first paragraph of this Agreement.
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"Seller's Accountants" -- Ernst & Young LLP, independent
--------------------
accountants of Seller.
8
"Seller's Knowledge"-- the Knowledge of any of Terrence E. Fancher,
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John C. Tashjian, F. Jack Liebau, Michael Scalzo, and Michael Ziegler.
"Shares" -- as defined in the recital to this Agreement.
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"Subsidiary" -- with respect to any Person (the "Owner"), any
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corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred), are held by the Owner or one or more of its
Subsidiaries.
"Tax" -- any tax (including any income tax, capital gains tax, value-
---
added tax, sales tax, property tax, gift tax, or estate tax), levy, assessment,
tariff, duty (including any customs duty), deficiency, or other fee, and any
related charge or amount (including any fine, penalty, interest, or addition to
tax), imposed, assessed, or collected by or under the authority of any
Governmental Body or payable pursuant to any tax-sharing agreement or any other
Contract relating to the sharing or payment of any such tax, levy, assessment,
tariff, duty, deficiency, or fee.
"Tax Return" -- any return (including any information return), report,
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statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"Threat of Release" -- a substantial likelihood of a Release that may
-----------------
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"Threatened" -- a claim, Proceeding, dispute, action, or other matter
----------
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in writing),
or if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
"Track" -- as defined in the recital to this Agreement.
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"Trade Secrets" -- as defined in Section 3.20(a).
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9
2. SALE AND TRANSFER OF INTERESTS AND SHARES; CLOSING
2.1 TRANSFER OF INTERESTS AND SHARES
Subject to the terms and conditions of this Agreement, at the Closing,
Seller will sell and transfer the Interests and the Shares to Buyer, and Buyer
will purchase the Interests and the Shares from Seller.
2.2 PURCHASE PRICE
The purchase price will be $24,100,001 in cash (the "Purchase Price"),
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of which $24,100,000 is allocated to the Interests and $1.00 is allocated to the
Shares.
2.3 CLOSING
The purchase and sale (the "Closing") provided for in this Agreement
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will take place at the offices of Buyer's counsel at 400 South Hope Street, Los
Angeles, California, at 10:00 a.m. (local time) on the later of (i) November 17,
2000 or (ii) a Business Day selected by Buyer with not less than three (3)
Business Days notice to Seller that is not less than two (2) but not more than
ten (10) Business Days following the receipt of all Governmental Authorizations
required in order for Buyer and Seller to consummate the Contemplated
Transactions, or at such other time and place as the parties may agree. Subject
to the provisions of Section 9, failure to consummate the purchase and sale
provided for in this Agreement on the date and time and at the place determined
pursuant to this Section 2.3 will not result in the termination of this
Agreement and will not relieve any party of any obligation under this Agreement.
2.4 CLOSING OBLIGATIONS
At the Closing:
(a) Seller will deliver to Buyer:
(i) the Instrument of Assignment executed by Seller;
(ii) certificates representing the Shares, endorsed
to Buyer or endorsed in blank for transfer to Buyer; and
(iii) a certificate executed by Seller to the effect
that each of Seller's representations and warranties in this Agreement
was accurate in all Material respects as of the date of this Agreement
and is accurate in all Material respects as of the Closing Date as if
made on the Closing Date (giving full effect to any supplements to the
Disclosure Letter that were delivered by Seller to Buyer prior to the
Closing Date in accordance with Section 5.5); and
(b) Buyer will deliver to Seller:
(i) $24,100,001 in immediately available funds by
wire transfer to the account specified by Seller; and
10
(ii) a certificate executed by Buyer to the effect
that each of Buyer's representations and warranties in this Agreement
was accurate in all Material respects as of the date of this Agreement
and is accurate in all Material respects as of the Closing Date as if
made on the Closing Date.
2.5 PURCHASE PRICE ADJUSTMENT
The Purchase Price shall be subject to adjustment after the Closing as
specified in this Section 2.5:
(a) As promptly as practicable, but in any event within
sixty (60) calendar days following the Closing Date, Seller shall deliver to
Buyer the Closing Balance Sheet, together with a report thereon of Seller's
Accountants stating that the Closing Balance Sheet fairly presents the financial
position of the Acquired Companies at the Closing Date in conformity with GAAP
applied on a basis consistent with the Acquired Companies' historical accounting
policies. Promptly upon receipt of the Closing Balance Sheet and such report,
Buyer shall deliver copies of the same to Buyer's Accountants. As promptly as
practicable, but in any event within fifteen (15) calendar days, Buyer shall
deliver to Seller its objection, if any, to the Closing Balance Sheet and any
proposed adjustments.
(b) If the parties are unable to agree on the Closing
Balance Sheet, then each party shall refer the open issues to a senior technical
accounting partner of such party's accountants selected by such party to resolve
the disagreement, and such partners' determination of the validity of Buyer's
objection and proposed adjustments shall be final and binding on all parties. If
the technical accounting partners are unable to agree on the Closing Balance
Sheet, then either Buyer or Seller may refer the matter to a nationally
recognized accounting firm independent of Buyer and Seller (the "Independent
-----------
Firm"); provided that, if Buyer and Seller are unable to agree on the
- ---- --------
Independent Firm within a period of fifteen (15) calendar days from the receipt
by Seller of Buyer's objection and proposed adjustments, the Independent Firm
shall be chosen at random by Buyer's Accountants and Seller's Accountants from
among the "Big Five" accounting firms that are independent of Buyer and Seller.
The Independent Firm's determination of the validity of Buyer's objection and
proposed adjustments shall be final and binding on all parties. The fees and
expenses of the Independent Firm shall be paid by the party against whom the
Independent Firm's final determination is made; provided that, if such final
--------
determination is not wholly in favor of one or the other party, the Independent
Firm shall apportion its fees and expenses between the parties in accordance
with the Independent Firm's determination of the relative merits of each party's
position, which determination shall be final and binding on all parties.
(c) Seller shall pay to Buyer in cash within five Business
Days of delivery to Buyer of the Closing Balance Sheet (the "Adjustment Date")
---------------
the amount, if any, by which liabilities of the Acquired Companies exceed
current assets of the Acquired Companies as shown, in each case, on the Closing
Balance Sheet. If current assets of the Acquired Companies exceed liabilities of
the Acquired Companies, as shown on the Closing Balance Sheet, Buyer shall pay
to Seller in cash within five Business Days of the Adjustment Date the amount of
such excess.
11
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represent and warrant to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) Part 3.1 of the Disclosure Letter contains a complete
and accurate list for each Acquired Company of its name, its jurisdiction of
organization, other jurisdictions in which it is authorized to do business, and
its capitalization (including the identity of each member or shareholder and the
percentage interest held by each). Each Acquired Company is duly organized and
validly existing, in good standing under the laws of its jurisdiction of
organization, with full power and authority to conduct its business as it is now
being conducted, to own or use the properties and assets that it purports to own
or use, and to perform all its obligations under Applicable Contracts. Each
Acquired Company is duly qualified to do business as a foreign entity and is in
good standing under the laws of each state or other jurisdiction in which either
the ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
(b) Seller has delivered to Buyer copies of the
Organizational Documents of each Acquired Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and
binding obligation of Seller, enforceable against Seller in accordance with its
terms. Seller has the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and to perform its obligations
under this Agreement.
(b) Except as set forth in Part 3.2 of the Disclosure
Letter, neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents of Seller or
either Acquired Company, or (B) any resolution adopted by the governing body or
the members or shareholders of Seller or either Acquired Company;
(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to which Seller or
either Acquired Company, or any of the assets owned or used by either Acquired
Company, may be subject;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by Seller or either Acquired Company or
that otherwise relates to the business of, or any of the assets owned or used
by, either Acquired Company;
12
(iv) contravene, conflict with, or result in a violation
or breach of any provision of, or give any Person the right to declare a default
or exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any Applicable Contract; or
(v) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or used by either
Acquired Company.
Except as set forth in Part 3.2 of the Disclosure Letter, neither Seller nor
either Acquired Company is or will be required to give any notice to or obtain
any Consent from any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the Contemplated
Transactions.
3.3 CAPITALIZATION
(a) Seller is the owner of all of the outstanding limited
liability company interests of BMOC, all of which constitute the Interests.
Seller is and will be on the Closing Date the record and beneficial owner and
holder of the Interests, free and clear of all Encumbrances.
(b) The authorized equity securities of Catering consist of
250 shares of common stock, par value $100 per share, of which 250 shares are
issued and outstanding and constitute the Shares. Seller is and will be on the
Closing Date the record and beneficial owner and holder of the Shares, free and
clear of all Encumbrances.
(c) The Interests and the Shares have been duly authorized and
validly issued and are fully paid and nonassessable. There are no Contracts
relating to the issuance, sale, or transfer of any limited liability company
interests, equity securities or other securities of either Acquired Company.
None of the outstanding equity securities or other securities of either Acquired
Company was issued in violation of the Securities Act or any other Legal
Requirement. Neither Acquired Company owns, or has any Contract to acquire, any
equity securities or other securities of any Person or any direct or indirect
equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS
(a) Seller has delivered to Buyer: (a) combined balance sheets
of BMOC and Catering as at December 31 in each of 1998 and 1999, and the related
combined statements of income, equity and cash flow for the periods then ended,
together with the report thereon of Seller's Accountants (the combined balance
sheet as at December 31, 1999, including the notes thereto, is referred to
herein as the "Balance Sheet"), and (b) an unaudited combined balance sheet of
-------------
BMOC and Catering as at June 30, 2000 (the "Interim Balance Sheet") and the
---------------------
related unaudited combined statement of income.
(b) Such financial statements fairly present the financial
condition and the results of operations, changes in equity and cash flow of BMOC
and Catering as at the respective dates of and for the periods referred to in
such financial statements, all in accordance with GAAP, subject, in the case of
interim financial statements, to normal recurring year-end
13
adjustments (the effect of which will not, individually or in the aggregate, be
Materially adverse) and the absence of notes (that, if presented, would not
differ Materially from those included in the Balance Sheet). The financial
statements referred to in this Section 3.4 reflect the consistent application of
such accounting principles throughout the periods involved, except as disclosed
in the notes to such financial statements. No financial statements of any other
Person are required by GAAP to be included in the financial statements of either
Acquired Company.
3.5 BOOKS AND RECORDS
The books of account, minute books, limited liability company interest
records, stock record books and other records of the Acquired Companies, all of
which have been made available to Buyer, are complete and correct in all
Material respects. At the Closing, all of those books and records will be in the
possession of the Acquired Companies.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
(a) The Acquired Companies own all the assets (whether
tangible or intangible) that they purport to own located in the Facilities or
reflected as owned in the books and records of the Acquired Companies, including
all of the assets reflected in the Balance Sheet and the Interim Balance Sheet
(except for assets held under capitalized leases disclosed or not required to be
disclosed in Part 3.6 of the Disclosure Letter and personal property sold since
the date of the Balance Sheet and the Interim Balance Sheet, as the case may be,
in the Ordinary Course of Business) and all of such assets purchased or
otherwise acquired since the date of the Balance Sheet (except for personal
property acquired and sold since the date of the Balance Sheet in the Ordinary
Course of Business and consistent with past practice).
(b) All assets of the Acquired Companies are free and clear
of all Encumbrances, except, with respect to all such assets: (a) security
interests shown on the Balance Sheet or the Interim Balance Sheet as securing
specified liabilities or obligations, with respect to which no default (or event
that, with notice or lapse of time or both, would constitute a default) exists,
and (b) security interests incurred in connection with the purchase of property
or assets after the date of the Interim Balance Sheet (such security interests
being limited to the property or assets so acquired), with respect to which no
default (or event that, with notice or lapse of time or both, would constitute a
default) exists.
3.7 ACCOUNTS RECEIVABLE
All accounts receivable of the Acquired Companies that are reflected
on the Balance Sheet or the Interim Balance Sheet or on the accounting records
of the Acquired Companies as of the Closing Date (collectively, the "Accounts
--------
Receivable") represent or will represent valid obligations arising from sales
- ----------
actually made or services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable are or will be as
of the Closing Date current and collectible net of the respective reserves shown
on the Balance Sheet or the Interim Balance Sheet or on the accounting records
of the Acquired Companies as of the Closing Date (which reserves are adequate
and calculated consistent with past practice), except as may be provided in the
Closing Balance Sheet. Part 3.7 of the
14
Disclosure Letter contains a complete and accurate list of all Accounts
Receivable as of the date of the Interim Balance Sheet, which list sets forth
the aging of such Accounts Receivable.
3.8 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.8 of the Disclosure Letter, neither
Acquired Company has liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet or
the Interim Balance Sheet and current liabilities incurred in the Ordinary
Course of Business since the respective dates thereof.
3.9 TAXES
(a) Each Acquired Company has filed or caused to be filed
(on a timely basis since the Acquisition Date) all Tax Returns that are or were
required to be filed by or with respect to it pursuant to applicable Legal
Requirements. Seller has delivered to Buyer copies of, and Part 3.9 of the
Disclosure Letter contains a complete and accurate list of, all such Tax
Returns. Each Acquired Company has paid, or made provision for the payment of,
all Taxes that have or may have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by Seller or the Acquired
Companies, except such Taxes, if any, as are listed in Part 3.9 of the
Disclosure Letter and are being contested in good faith and as to which adequate
reserves (determined in accordance with GAAP) have been provided in the Balance
Sheet and the Interim Balance Sheet.
(b) The charges, accruals, and reserves with respect to
Taxes on the respective books of each Acquired Company are adequate (determined
in accordance with GAAP) and are at least equal to such Acquired Company's
liability for Taxes. To Seller's Knowledge there exists no proposed tax
assessment against either Acquired Company, except as disclosed in the Balance
Sheet or in Part 3.9 of the Disclosure Letter. All Taxes that each Acquired
Company is or was required by Legal Requirements to withhold or collect have
been duly withheld or collected and, to the extent required, have been paid to
the proper Governmental Body or other Person.
3.10 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any Material
adverse change in the business, operations, properties, prospects, assets, or
condition of the Acquired Companies, and no event has occurred or circumstance
exists that may result in such a Material adverse change.
3.11 EMPLOYEE BENEFITS
(a) As used in this Section 3.11, the following terms have
the meanings set forth below.
"Company Other Benefit Obligation" means an Other Benefit
--------------------------------
Obligation owed, adopted, or followed by either Acquired Company or an ERISA
Affiliate of either Acquired Company.
15
"Company Plan" means all Plans in which employees or former
------------
employees of either Acquired Company participate, or to which either Acquired
Company otherwise contributes or has contributed. All references to Plans are to
Company Plans unless the context requires otherwise.
"ERISA Affiliate" means, with respect to an Acquired Company,
---------------
any other person that, together with such Acquired Company, would be treated as
a single employer under IRC (S) 414.
"Federation Plan" means the California Race Track Pension Plan.
---------------
"Multi-Employer Plan" means a Company Plan described in ERISA
-------------------
(S) 3(37)(A).
"Other Benefit Obligations" means all obligations,
-------------------------
arrangements, or customary practices, whether or not legally enforceable, to
provide benefits, other than salary, as compensation for services rendered, to
present or former directors, employees, or agents of either Acquired Company,
other than obligations, arrangements, and practices that are Plans. Other
Benefit Obligations include consulting agreements under which the compensation
paid does not depend upon the amount of service rendered, sabbatical policies,
severance payment policies, and fringe benefits within the meaning of IRC (S)
132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
----
successor thereto.
"Pension Plan" has the meaning given in ERISA (S) 3(2)(A).
------------
"Plan" has the meaning given in ERISA (S) 3(3).
----
"Plan Sponsor" has the meaning given in ERISA (S) 3(16)(B).
------------
"Qualified Plan" means any Plan that meets or purports to meet
--------------
the requirements of IRC (S) 401(a).
"Title IV Plans" means all Pension Plans that are subject to
--------------
Title IV of ERISA, 29 U.S.C. (S) 1301 et seq., other than Multi-Employer Plans.
(b) Part 3.11(b) of the Disclosure Letter contains a
complete and accurate list of all Company Plans and Company Other Benefit
Obligations, and identifies as such all Company Plans that are (A) Qualified
Plans or (B) Multi-Employer Plans.
(c) Seller has delivered to Buyer and without regard to any
Multi-Employer Plan or the Federation Plan except for purposes of clause (iii)
hereof:
(i) all documents that set forth the terms of any
Company Plan or Company Other Benefit Obligation and of any related trust,
including (A) all plan descriptions and summary plan descriptions of Company
Plans for which Seller or either Acquired Company are required to prepare, file,
and distribute plan descriptions and summary plan descriptions, and
16
(B) all summaries and descriptions furnished to participants and beneficiaries
regarding Company Plans and Company Other Benefit Obligations for which a plan
description or summary plan description is not required;
(ii) all personnel, payroll, and employment manuals
and policies;
(iii) all collective bargaining agreements pursuant to
which contributions have been made or obligations incurred (including both
pension and welfare benefits) by either Acquired Company, and all collective
bargaining agreements pursuant to which contributions are being made or
obligations are owed by either Acquired Company;
(iv) a written description of any Company Plan or
Company Other Benefit Obligation that is not otherwise in writing;
(v) all insurance policies purchased by or to
provide benefits under any Company Plan;
(vi) all contracts with third party administrators,
actuaries, investment managers, consultants, and other independent contractors
that relate to any Company Plan sponsored by either Acquired Company;
(vii) all reports submitted within the two years
preceding the date of this Agreement by third party administrators, actuaries,
investment managers, consultants, or other independent contractors with respect
to any Company Plan or Company Other Benefit Obligation;
(viii) the Form 5500 filed in each of the most recent
three plan years with respect to any Company Plan, including all schedules
thereto and the opinions of independent accountants;
(ix) all notices that were given by either Acquired
Company or any Company Plan to the IRS or the PBGC, pursuant to statute, within
the four years preceding the date of this Agreement, including notices that are
expressly mentioned elsewhere in this Section 3.11;
(x) all notices that were given by the IRS, the
PBGC, or the Department of Labor to either Acquired Company, or any Company Plan
sponsored by either Acquired Company, within the four years preceding the date
of this Agreement; and
(xi) with respect to Qualified Plans, the most recent
determination letter for each Plan of either Acquired Company that is a
Qualified Plan.
(d) Except as set forth in Part 3.11(d) of the Disclosure
Letter:
(i) Each Acquired Company has performed all of its
obligations under all Company Plans and Company Other Benefit Obligations. Each
Acquired
17
Company has made appropriate entries in its financial records and statements for
all obligations and liabilities under such Plans and Obligations that have
accrued but are not due.
(ii) Each Acquired Company, with respect to all
Company Plans and Company Other Benefits Obligations (other than any Multi-
Employer Plan or the Federation Plan), is, and each such Company Plan and
Company Other Benefit Obligation is, in all Material respects, in compliance
with ERISA, the IRC, and other applicable Legal Requirements including the
provisions of such Legal Requirements expressly mentioned in this Section 3.11,
and with any applicable collective bargaining agreement.
(A) All filings required by ERISA and the IRC
as to each Plan have been timely filed, and all notices and disclosures to
participants required by either ERISA or the IRC have been timely provided.
(B) After the Closing Date, neither Buyer nor
either Acquired Company will have any liability with respect to any Plan of a
pre-Closing Date ERISA Affiliate.
(iii) Each Company Plan that is not a Qualified Plan
can be terminated within thirty days, without payment of any additional
contribution or amount and without the vesting or acceleration of any benefits
promised by such Plan.
(iv) Since the Acquisition Date, there has been no
establishment or amendment of any Company Plan or Company Other Benefit
Obligation.
(v) To Seller's Knowledge, no event has occurred or
circumstance exists that could result in a Material increase in premium costs of
any Company Plan or Company Other Benefit Obligations that is insured, or a
Material increase in benefit costs of such Plans and Other Benefit Obligations
that are self-insured.
(vi) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or Proceeding involving, any
Company Plan or Company Other Benefit Obligation (other than any Multi-Employer
Plan or the Federation Plan) is pending or, to Seller's Knowledge, threatened.
(vii) Except for defects that be corrected without
meaningful cost or liability, each Qualified Plan of either Acquired Company
(other than any Multi-Employer Plan or the Federation Plan) is qualified in form
and operation under IRC (S) 401(a), and each trust for each such Plan is exempt
from federal income tax under IRC (S) 501(a). No event has occurred or
circumstance exists that will or could give rise to disqualification or loss of
tax-exempt status of any such Plan or trust.
(viii) Neither Acquired Company has withdrawn from any
Multi-Employer Plan with respect to which there is any outstanding liability as
of the date of this Agreement.
(ix) Neither Acquired Company has received notice
from any Multi-Employer Plan that it is in reorganization or is insolvent, that
increased contributions may
18
be required to avoid a reduction in plan benefits or the imposition of any
excise tax, or that such Plan intends to terminate or has terminated.
(x) Except to the extent required under ERISA (S)
601 et seq. and IRC (S) 4980B, neither Acquired Company provides health or
welfare benefits for any retired or former employee or is obligated to provide
health or welfare benefits to any active employee following such employee's
retirement or other termination of service.
(xi) Seller and each Acquired Company have
complied with the provisions of ERISA (S) 601 et seq. and IRC (S) 4980B.
(xii) No payment that is owed or may become due to
any director, officer, employee, or agent of either Acquired Company will be
non-deductible to such Acquired Company or be subject to tax under IRC (S) 280G
or (S) 4999; nor will either Acquired Company be required to "gross up" or
otherwise compensate any such person because of the imposition of any excise tax
on a payment to such person.
(xiii) The consummation of the Contemplated
Transactions will not result in the payment, vesting, or acceleration of any
benefit.
(xiv) No event has occurred that could result in
any liability of either Acquired Company as the result of being treated,
together with one or more ERISA Affiliates, as a single employer under IRC (S)
414 or similar provisions of ERISA.
3.12 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS
(a) Except as set forth in Part 3.12(a) of the Disclosure
Letter:
(i) to Seller's Knowledge, each Acquired Company is
in compliance in all Material respects with each Legal Requirement that is
applicable to the conduct or operation of its business or the ownership or use
of any of its assets;
(ii) to Seller's Knowledge no event has occurred or
circumstance exists that (with or without notice or lapse of time) may
constitute or result in a violation by either Acquired Company of, or a failure
on the part of either Acquired Company to comply with, in any Material respect
any Legal Requirement applicable to the conduct or operation of its business or
the ownership or use of any of its assets; and
(iii) neither Acquired Company has received, at any
time since the Acquisition Date, any notice or other communication (whether oral
or written) from any Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential violation of, or failure to comply with,
any Legal Requirement, or (B) any actual, alleged, possible, or potential
obligation on the part of either Acquired Company to undertake, or to bear all
or any portion of the cost of, any remedial action of any nature.
(b) To Seller's Knowledge, Part 3.12(b) of the Disclosure
Letter contains a complete and accurate list of each Governmental Authorization
that is held by each
19
Acquired Company and that is required in the conduct or operation of its
business or the ownership or use of its assets. To Seller's Knowledge, each
Governmental Authorization listed or required to be listed in Part 3.12 of the
Disclosure Letter is valid and in full force and effect.
3.13 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.13 of the Disclosure
Letter, there is no pending Proceeding:
(i) that has been commenced by or against either
Acquired Company or that otherwise relates to or may affect the business of, or
any of the assets owned or used by, either Acquired Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To Seller's Knowledge: (1) no such Proceeding has been Threatened and (2) no
event has occurred or circumstance exists that may give rise to or serve as a
basis for the commencement of any such Proceeding. Seller has delivered to Buyer
copies of all pleadings, correspondence, and other documents relating to each
Proceeding listed in Part 3.13 of the Disclosure Letter. The Proceedings listed
in Part 3.13 of the Disclosure Letter will not have a Material adverse effect on
the business, operations, assets, condition, or prospects of either Acquired
Company.
(b) Except as set forth in Part 3.13 of the Disclosure
Letter:
(i) there is no Order to which either Acquired
Company, or any of the assets owned or used by such Acquired Company, is
subject;
(ii) Seller is not subject to any Order that relates
to the business of, or any of the assets owned or used by, either Acquired
Company; and
(iii) no manager, member, officer, director, agent,
or employee of either Acquired Company is subject to any Order that prohibits
such Person from engaging in or continuing any conduct, activity, or practice
relating to the business of the Acquired Companies.
3.14 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.14 of the Disclosure Letter, since
the date of the Balance Sheet, each Acquired Company has conducted its business
only in the Ordinary Course of Business and there has not been any:
(a) change in either Acquired Company's membership or
authorized or issued capital stock; grant of any option or right to purchase
limited liability company interests or shares of capital stock of either
Acquired Company; issuance of any security convertible into such interests or
capital stock; or declaration or payment of any distribution or payment in
respect of such interests or capital stock;
20
(b) amendment to the Organizational Documents of
either Acquired Company;
(c) increase by either Acquired Company of any
bonuses, salaries, or other compensation to any manager, officer, or (except in
the Ordinary Course of Business) employee or entry into any employment,
severance, or similar Contract with any manager, officer, or employee;
(d) increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of either
Acquired Company;
(e) damage to or destruction or loss of any asset or
property of either Acquired Company, whether or not covered by insurance,
Materially and adversely affecting the properties, assets, business, financial
condition, or prospects of either Acquired Company, taken as a whole;
(f) entry into, termination of, or receipt of notice
of termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii) any
Contract or transaction involving a total remaining commitment by or to either
Acquired Company of at least $50,000;
(g) sale (other than sales of inventory in the
Ordinary Course of Business), lease, or other disposition of any asset or
property of either Acquired Company or mortgage, pledge, or imposition of any
lien or other encumbrance on any Material asset or property of either Acquired
Company, including the sale, lease, or other disposition of any of the
Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights
with a value to either Acquired Company in excess of $50,000;
(i) Material change in the accounting methods used by
either Acquired Company; or
(j) agreement, whether oral or written, by either
Acquired Company to do any of the foregoing.
3.15 CONTRACTS; NO DEFAULTS
(a) Part 3.15(a) of the Disclosure Letter contains a
complete and accurate list, and Seller has delivered to Buyer true and complete
copies, of each Applicable Contract.
(b) Except as set forth in Part 3.15(b) of the
Disclosure Letter, each Applicable Contract identified or required to be
identified in Part 3.15(a) of the Disclosure Letter is in full force and effect
and is valid and enforceable in accordance with its terms.
(c) Except as set forth in Part 3.15(c) of the
Disclosure Letter:
21
(i) each Acquired Company is, and at all times
since the Acquisition Date has been, in compliance in all Material respects with
the applicable terms and requirements of each Applicable Contract; and
(ii) to Seller's Knowledge no event has occurred
or circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or breach of, or give either
Acquired Company or any other Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract.
(d) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any Material amounts paid or
payable to either Acquired Company under current or completed Contracts with any
Person and, to Seller's Knowledge, no such Person has made written demand for
such renegotiation.
3.16 INSURANCE
Seller has delivered to Buyer true and complete copies of all
policies of insurance to which either Acquired Company is a party or under which
either Acquired Company, or any manager or member thereof, is or has been
covered at any time within the three years preceding the date of this Agreement,
with respect to the Acquired Companies and their respective businesses. Except
as set forth in Part 3.16 of the Disclosure Letter, each Acquired Company and
its business is insured with reputable insurers against all risks normally
insured against by companies in similar lines of business, and all of the
insurance policies maintained by Seller and each Acquired Company relating to
the Acquired Companies and their respective businesses are in full force and
effect and will be in effect as of the Closing.
3.17 ENVIRONMENTAL MATTERS
Except as set forth in part 3.17 of the Disclosure Letter or in
any environmental report or study listed in part 3.17 of the Disclosure Letter
and except for the storage of normal and customary maintenance and other
supplies used in the conduct or operation of either Acquired Company's business
that are stored, used and disposed of in compliance with applicable
Environmental Laws:
(a) each Acquired Company is in full compliance with,
and has not been and is not in violation of or liable under, any Environmental
Law. Neither Seller nor either Acquired Company has any basis to expect, nor has
any of them or any other Person for whose conduct they are or may be held to be
responsible received, any actual or Threatened Order, notice, or other
communication from (i) any Governmental Body or private citizen acting in the
public interest or(ii) the current or prior owner or operator of any Facilities,
of any actual or potential violation or failure to comply with any Environmental
Law, or of any actual or Threatened obligation to undertake or bear the cost of
any Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which either Acquired Company has had an interest, or with respect to any
property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by either
Acquired Company, or any other Person for
22
whose conduct it is or may be held responsible, or from which Hazardous
Materials have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
(b) There are no pending or, to Seller's Knowledge,
Threatened claims, Encumbrances, or other restrictions of any nature, resulting
from any Environmental, Health, and Safety Liabilities or arising under or
pursuant to any Environmental Law, with respect to or affecting any of the
Facilities or any other properties and assets (whether real, personal, or mixed)
in which either Acquired Company has or had an interest.
(c) Neither Seller nor either Acquired Company has any
basis to expect, nor has any of them or any other Person for whose conduct they
are or may be held responsible received, any citation, directive, inquiry,
notice, Order, summons, warning, or other communication that relates to
Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law, or of any alleged,
actual, or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which either Acquired Company had an interest, or with respect to any
property or facility to which Hazardous Materials generated, manufactured,
refined, transferred, imported, used, or processed by either Acquired Company,
or any other Person for whose conduct it is or may be held responsible, have
been transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(d) Neither Acquired Company nor any other Person for
whose conduct it is or may be held responsible has any Environmental, Health,
and Safety Liabilities with respect to the Facilities.
(e) There are no Hazardous Materials present on or in
the Environment at the Facilities, including any Hazardous Materials contained
in barrels, above or underground storage tanks, landfills, land deposits, dumps,
equipment (whether moveable or fixed) or other containers, either temporary or
permanent, and deposited or located in land, water, sumps, or any other part of
the Facilities, or incorporated into any structure therein or thereon. Neither
Seller, either Acquired Company, any other Person for whose conduct they are or
may be held responsible, or to Seller's Knowledge, any other Person, has
permitted or conducted, or is aware of, any Hazardous Activity conducted with
respect to the Facilities or any other properties or assets (whether real,
personal, or mixed) in which either Acquired Company has or had an interest
except in full compliance with all applicable Environmental Laws.
(f) There has been no Release or, to Seller's
Knowledge or the knowledge of either Acquired Company, Threat of Release of any
Hazardous Materials at or from the Facilities or at any other locations where
any Hazardous Materials were generated, manufactured, refined, transferred,
produced, imported, used, or processed from or by the Facilities.
(g) Seller has delivered to Buyer true and complete
copies and results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by Seller or either Acquired Company pertaining to
Hazardous Materials or Hazardous Activities in, on, or under
23
the Facilities, or concerning compliance by Seller, either Acquired Company, or
any other Person for whose conduct they are or may be held responsible, with
Environmental Laws.
3.18 EMPLOYEES
(a) Part 3.18 of the Disclosure Letter contains a
complete and accurate list of the following information for each employee or
manager of each Acquired Company, including each employee on leave of absence or
layoff status: employer; name; job title; current compensation paid or payable,
and any change in compensation since the Acquisition Date outside the Ordinary
Course of Business; vacation accrued; and service credited for purposes of
vesting and eligibility to participate under such Acquired Company's pension,
retirement, profit-sharing, thrift-savings, deferred compensation, bonus,
severance pay, insurance, medical, welfare, or vacation plan, other employee
pension benefit plan or employee welfare benefit plan, or any other employee
benefit or similar plan.
(b) Except as set forth in Part 3.18 of the Disclosure
Letter, no employee or manager of either Acquired Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such employee or
manager and any other Person ("Proprietary Rights Agreement") that in any way
----------------------------
adversely affects or will affect (i) the performance of his duties as an
employee or manager of such Acquired Company, or (ii) the ability of either
Acquired Company to conduct its business, including any Proprietary Rights
Agreement with Seller or either Acquired Company by any such employee or
manager. To Seller's Knowledge, no officer or other key employee of either
Acquired Company intends to terminate his employment with such Acquired Company.
(c) Part 3.18 of the Disclosure Letter also contains a
complete and accurate list of the following information for each retired
employee or manager of each Acquired Company, or their dependents, receiving
benefits or scheduled to receive benefits in the future: name, pension benefit,
pension option election, retiree medical insurance coverage, retiree life
insurance coverage, and other benefits.
3.19 LABOR RELATIONS; COMPLIANCE
Except as set forth in Part 3.19 of the Disclosure Letter, (i)
neither Acquired Company has been and is a party to any collective bargaining or
other labor Contract since the Acquisition Date, and (ii) there has not been,
there is not presently pending or existing, and there is not Threatened: (a) any
strike, slowdown, picketing, work stoppage, or employee grievance process, (b)
any Proceeding against or affecting either Acquired Company relating to the
alleged violation of any Legal Requirement pertaining to labor relations or
employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting such Acquired Company or
its premises, or (c) any application for certification of a collective
bargaining agent. To Seller's Knowledge, no event has occurred or circumstance
exists that could provide the basis for any work stoppage or other labor
dispute. There is no lockout of any employees by either Acquired Company, and no
such action is contemplated by
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either Acquired Company. To Seller's Knowledge, each Acquired Company has
complied in all Material respects with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar taxes, occupational safety and health, and plant closing. Neither
Acquired Company is liable for the payment of any compensation, damages, taxes,
fines, penalties, or other amounts, however designated, for failure to comply
with any of the foregoing Legal Requirements.
3.20 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets-- The term
"Intellectual Property Assets" includes:
----------------------------
(i) any and all rights in the name "Bay
Meadows," all fictional business names, trade names, registered and unregistered
trademarks, service marks, and applications (collectively, "Marks");
-----
(ii) all patents, patent applications, and
inventions and discoveries that may be patentable, if any;
(iii) all copyrights in both published works and
unpublished works:
(iv) all rights in mask works; and
(v) all know-how, trade secrets, confidential
information, customer lists, software, technical information, data, process
technology, plans, drawings, and blue prints (collectively, "Trade Secrets")
-------------
owned, used, or licensed by either Acquired Company as licensee or licensor.
(b) Trademarks
(i) Part 3.20(b) of Disclosure Letter contains
a complete and accurate list and summary description of all Marks. One or both
of the Acquired Companies is the owner of all right, title, and interest in and
to each of the Marks, free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims. Buyer agrees that Seller and
its affiliates, and their respective successors and assigns, shall retain the
right to use the name "Bay Meadows" and the Mark shown on Exhibit 3.20 in
------------
connection with their use and/or development of the real property currently
owned by an affiliate of Seller that is or has been a portion of the real
property commonly known as Bay Meadows Racetrack.
(ii) No Mark has been or is now involved in any
opposition, invalidation, or cancellation and, to Seller's Knowledge, no such
action is Threatened with respect to any of the Marks.
(iii) To Seller's Knowledge, there is no
potentially interfering trademark or trademark application of any third party.
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3.21 CERTAIN PAYMENTS
Since the Acquisition Date, to Seller's Knowledge, neither
Acquired Company nor any manager, officer, agent, or employee thereof, or to
Seller's Knowledge any other Person associated with or acting for or on behalf
of either Acquired Company, has directly or indirectly made any contribution,
gift, rebate, or other payment to any Person, private or public, in violation of
any Legal Requirement.
3.22 DISCLOSURE
(a) To Seller's Knowledge no representation or
warranty of Seller in this Agreement and no statement in the Disclosure Letter
omits to state a Material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will
contain any Materially untrue statement or omit to state a Material fact
necessary to make the statements therein or in this Agreement, in light of the
circumstances in which they were made, not misleading in any Material way.
3.23 BROKERS OR FINDERS
Seller and its Representatives have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware, with full corporate power
and authority to conduct its business as it is now being conducted, to own and
use the properties and assets that it purports to own or use and to perform all
of its obligations under this Agreement.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms. Buyer has the absolute and unrestricted right, power, and authority to
execute and deliver this Agreement and to perform its obligations under this
Agreement.
(b) Except for Governmental Authorizations of the CHRB
and as required under the HSR Act, neither the execution and delivery of this
Agreement by Buyer nor the consummation or performance of any of the
Contemplated Transactions by Buyer will give
26
any Person the right to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to:
(i) any provision of Buyer's Organizational
Documents;
(ii) any resolution adopted by the board of
directors or the stockholders of Buyer;
(iii) any Legal Requirement or Order to which
Buyer may be subject; or
(iv) any Contract to which Buyer is a party or
by which Buyer may be bound.
4.3 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against
Buyer and that challenges, or may have the effect of preventing, delaying,
making illegal, or otherwise interfering with, any of the Contemplated
Transactions. To Buyer's Knowledge, no such Proceeding has been Threatened.
4.4 INVESTMENT INTENT OF BUYER
(a) Buyer is acquiring the Interests and the Shares
for its own account and not with a view to their distribution within the meaning
of Section 2(11) of the Securities Act.
(b) Without limiting or affecting the representations
and warranties of Seller, Buyer acknowledges that it has reviewed and discussed
the business, affairs and current prospects of the Acquired Companies with such
Persons as it has deemed appropriate or desirable in connection with the
Contemplated Transactions. Buyer further acknowledges that it has requested,
received and reviewed such information, undertaken such investigation and made
such further inquiries of officers of the Acquired Companies and others as it
has deemed appropriate or desirable in connection with such transactions.
(c) Buyer understands that it must bear the economic
risk of its investment for an indefinite period of time because the Interests
and the Shares will not be registered under the Securities Act or any applicable
state securities laws, and may not be resold unless subsequently registered
under the Securities Act and such other laws or unless an exemption from such
registration is available.
(d) Buyer, either alone or together with its
Representatives, has sufficient knowledge and experience in financial and
business matters to evaluate the merits and risks of its investment in the
Acquired Companies.
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4.5 BROKERS OR FINDERS
Buyer and its Representatives have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement, and
Buyer will indemnify, defend, protect and hold Seller harmless from any such
payment alleged to be due by or through Buyer as a result of the action of Buyer
or its Representatives.
4.6 BUYER'S INVESTIGATION
Buyer has completed its own review of each Acquired Company's
properties, contracts, books and records, and other documents and data. Except
for the representations and warranties set forth in Section 3 and the Disclosure
Letter, Buyer is not making the purchase of the Interests and Shares in reliance
upon any statement or representations, express or implied, made by Seller or its
Representatives as to the condition of or characteristics of the Acquired
Companies, the Interests or the Shares, or their compliance with any Legal
Requirements applicable to either Acquired Company, the Interests or the Shares,
including, but not limited to any rights granted or withdrawn by CHRB with
respect to the Acquired Companies or their respective businesses or affairs,
either now or in the future.
5. COVENANTS OF SELLER
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, Seller will,
and will cause each Acquired Company and its Representatives to: (a) afford
Buyer and its Representatives reasonable access during normal business hours to
the Acquired Companies' personnel, properties, contracts, books and records, and
other documents and data, (b) furnish Buyer and its Representatives with copies
of all such contracts, books and records, and other existing documents and data
in Seller's or the Acquired Companies' possession or control as Buyer may
reasonably request, and (c) furnish Buyer and Representatives with such
additional financial, operating, and other data and information as Buyer may
reasonably request.
5.2 OPERATION OF THE BUSINESS OF ACQUIRED COMPANIES
Between the date of this Agreement and the Closing Date, Seller will,
and will cause each Acquired Company to:
28
(a) conduct the business of such Acquired Company only in the
Ordinary Course of Business;
(b) use its Best Efforts to preserve intact the current
business organization of such Acquired Company, keep available the services of
the current officers, employees, and agents of such Acquired Company, and
maintain the relations and good will with suppliers, customers, landlords,
creditors, employees, agents, and others having business relationships with such
Acquired Company;
(c) confer with Buyer concerning operational matters of a
Material nature; and
(d) otherwise report periodically to Buyer concerning the
status of the business, operations, and finances of such Acquired Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the
date of this Agreement and the Closing Date, Seller will not, and will cause
each Acquired Company not to, without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
3.15 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Seller and
each Acquired Company will co-operate with Buyer to make all filings required by
Legal Requirements to be made in order to consummate the Contemplated
Transactions (including all filings under the HSR Act and with the CHRB).
Between the date of this Agreement and the Closing Date, Seller will, and will
cause each Acquired Company to: (a) cooperate with Buyer with respect to all
filings that Buyer elects to make or is required by Legal Requirements to make
in connection with the Contemplated Transactions and (b) cooperate with Buyer in
obtaining all Consents identified in Section 4.2 (including taking all
commercially reasonable actions requested by Buyer to cause early termination of
any applicable waiting period under the HSR Act and all commercially reasonable
actions requested by Buyer to obtain the approval of the CHRB with respect to
the Contemplated Transactions).
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, Seller will
promptly notify Buyer in writing if Seller or either Acquired Company becomes
aware of any fact or condition that causes any of Seller's representations and
warranties as of the date of this Agreement to no longer be true or correct, or
if Seller or either Acquired Company becomes aware of the occurrence after the
date of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) cause any such representation or warranty to be
untrue had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition. Should any such fact or
condition require any change in the Disclosure Letter if the Disclosure Letter
were dated the date of the occurrence or discovery of
29
any such fact or condition, Seller will promptly deliver to Buyer a supplement
to the Disclosure Letter specifying such change. During the same period, Seller
will promptly notify Buyer of the occurrence of any Breach of any covenant of
Seller in this Section 5 or of the occurrence of any event that may make the
satisfaction of the conditions in Section 7 impossible or unlikely.
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Seller will cause any indebtedness owed to either Acquired Company by
Seller or any Related Person of Seller to be paid in full prior to Closing.
5.7 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to
Section 9, Seller will not, and will cause each Acquired Company and each of
their respective Representatives not to, directly or indirectly solicit,
initiate, or encourage any inquiries or proposals from, discuss or negotiate
with, provide any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than Buyer) relating
to any transaction involving the sale of the business or assets (other than in
the Ordinary Course of Business) of either Acquired Company, or any limited
liability company interests in or capital stock of such Acquired Company, or any
merger, consolidation, business combination, or similar transaction involving
such Acquired Company.
5.8 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Seller will
use its Best Efforts to cause the conditions in Sections 7 and 8 to be
satisfied.
5.9 NON-COMPETITION
For a period of three (3) years after the Closing Date neither Seller
nor any Related Person of Seller will engage, directly or indirectly, in the
operation of a horse racing track in Northern California; provided that this
covenant should not preclude Seller and its Related Persons from owning up to
five (5) percent of the equity securities of a Person that is engaged in the
operation of a horse racing track in Northern California so long as such
securities are registered under Section 12(b) or 12(g) of the Securities
Exchange Act.
5.10 PAYMENT TO EMPLOYEES
(a) Seller shall be responsible for (i) any and all severance
payments payable to employees of either Acquired Company who are identified by
Buyer not less than thirty (30) days prior to the Closing Date and who are
terminated before or after the Closing Date and (ii) one-half of any severance
payments made to F. Jack Liebau pursuant to the second sentence of Section 4(b)
of the employment agreement dated June 27, 2000 between him and BMOC; provided,
that, if Seller makes any severance payments pursuant to this Section 5.10(a),
Buyer shall reimburse Seller for all such payments attributable to former
employees of either Acquired Company who are subsequently re-employed by Buyer
or its affiliates in California within eighteen (18) months of the Closing Date,
in the case of F. Jack Liebau, Michael A.
30
Scalzo, Paul C. Miller, Michael R. Ziegler and Richard J. Lewis, and within one
(1) year of the Closing Date, in all other cases.
(b) Buyer shall be responsible for (i) all severance payments
payable to employees of either Acquired Company who are terminated after the
Closing Date and who were not identified as provided in Section 5.10(a) and (ii)
one-half of any severance payments made to F. Jack Liebau pursuant to the second
sentence of Section 4(b) of the employment agreement dated June 27, 2000 between
him and BMOC.
(c) Seller shall be responsible for all severance payments
payable to employees of either Acquired Company who are terminated on or before
the Closing Date and who are not identified as provided in Section 5.10(a).
(d) Seller shall be responsible for all bonuses payable to
employees for the year 2000 and all bonuses payable as a result of the
Contemplated Transactions.
(e) All payments pursuant to (i) Section 5.10(a), (ii) Section
5.10(b) for employees terminated within six (6) months after the Closing Date,
(iii) Section 5.10(c) and (iv) Section 5.10(d) shall be in accordance with the
applicable severance payment and bonus policies set forth in the Schedule of
Payments to Employees.
6. COVENANTS OF BUYER
6.1 APPROVALS OF GOVERNMENTAL BODIES
(a) As promptly as practicable after the date of this
Agreement, Buyer will, and will cause each of its Related Persons to, make all
filings required by Legal Requirements to be made by them to consummate the
Contemplated Transactions (including all filings under the HSR Act and with the
CHRB). Between the date of this Agreement and the Closing Date, Buyer will, and
will cause each Related Person to, cooperate with Seller with respect to all
filings that Seller is required by Legal Requirements to make in connection with
the Contemplated Transactions, and (ii) cooperate with Seller in obtaining any
consents identified in Part 3.2 of the Disclosure Letter; provided that Buyer
will not be required to dispose of or make any change in any portion of its
business or to incur any other burden to obtain a Governmental Authorization.
(b) In the event that CHRB approval is not obtained by
December 31, 2000 and this Agreement is terminated as provided in Section
9.1(d), for a period of thirty (30) months from the date of termination of the
Agreement, Buyer will not attempt either directly or indirectly, through any
affiliate, third party, Related Person of Buyer or by any legislative action or
otherwise, to change the historically allocated racing dates of BMOC without the
prior written consent of Seller.
6.2 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Buyer will
use its Best Efforts to cause the conditions in Sections 7 and 8 to be
satisfied.
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7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Interests and the Shares and to
take the other actions required to be taken by Buyer at the Closing is subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
Each of Seller's representations and warranties in this Agreement must
have been accurate in all Material respects as of the date of this Agreement,
and must be accurate in all Material respects as of the Closing Date as if made
on the Closing Date, without giving effect to any supplement to the Disclosure
Letter.
7.2 SELLER'S PERFORMANCE
(a) Each of the covenants and obligations that Seller is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing must have been duly performed and complied with in all Material
respects.
(b) Each document required to be delivered pursuant to Section
2.4 must have been delivered.
7.3 CONSENTS
Each of the Consents identified in Part 3.2 of the Disclosure Letter,
and each Consent identified in Section 4.2, must have been obtained and must be
in full force and effect.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Buyer:
(a) an opinion of Gibson, Dunn & Crutcher LLP, dated the
Closing Date, in the form of Exhibit 7.4(a);
--------------
(b) written resignations of those managers of the Acquired
Companies listed in a letter delivered by Buyer to Seller not less than five
days prior to the Closing Date;
(c) the Lease, duly executed by Seller and/or its affiliates;
and
(d) such other documents as Buyer may reasonably request in a
form reasonably satisfactory to Buyer and Seller for the purpose of (i) enabling
its counsel to provide the opinion referred to in Section 8.3(a), (ii)
evidencing the accuracy of any of Seller's representations and warranties, (iii)
evidencing the performance by Seller of, or the compliance by Seller with, any
covenant or obligation required to be performed or complied with by Seller, (iv)
evidencing the satisfaction of any condition referred to in this Section 7, or
(v) otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
32
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced
or Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING LIMITED LIABILITY COMPANY INTERESTS, STOCK
OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any limited liability
company interests or capital stock of, or any other voting, equity, or ownership
interest in, either Acquired Company, or (b) is entitled to all or any portion
of the Purchase Price.
7.7 NO PROHIBITION
Neither the consummation nor the performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time), Materially contravene, or conflict with, or result in a
Material violation of, or cause Buyer or any Person affiliated with Buyer to
suffer any Material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise formally proposed by or before any
Governmental Body.
7.8 COMPLETION OF DUE DILIGENCE
Buyer shall not have notified Seller in writing prior to September 14,
2000 that its review of the Acquired Companies' properties, contracts, books and
records, and other documents and data was unsatisfactory.
7.9 SAN MATEO COUNTY
Buyer shall not have notified Seller in writing prior to September 14,
2000 that it was unable to reach a satisfactory agreement in principle with San
Mateo County as to the development of a simulcast facility.
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
Seller's obligation to sell the Interests and the Shares and to take
the other actions required to be taken by Seller at the Closing is subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by Seller, in whole or in part):
33
8.1 ACCURACY OF REPRESENTATIONS
Each of Buyer's representations and warranties in this Agreement must
have been accurate in all Material respects as of the date of this Agreement and
must be accurate in all Material respects as of the Closing Date as if made on
the Closing Date.
8.2 BUYER'S PERFORMANCE
(a) Each of the covenants and obligations that Buyer is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing must have been performed and complied with in all Material respects.
(b) Buyer must have delivered each of the documents required
to be delivered by, and made each of the payments required to be made by, Buyer
pursuant to Section 2.4.
8.3 ADDITIONAL DOCUMENTS
Buyer must have caused the following documents to be delivered to
Seller:
(a) an opinion of O'Melveny & Myers LLP, dated the Closing
Date, in the form of Exhibit 8.3(a);
-------------
(b) the Lease, duly executed by BMOC and/or its affiliates;
and
(c) such other documents as Seller may reasonably request in a
form reasonably satisfactory to Buyer and Seller for the purpose of (i) enabling
their counsel to provide the opinion referred to in Section 7.4(a), (ii)
evidencing the accuracy of any representation or warranty of Buyer, (iii)
evidencing the performance by Buyer of, or the compliance by Buyer with, any
covenant or obligation required to be performed or complied with by Buyer, (iv)
evidencing the satisfaction of any condition referred to in this Section 8, or
(v) otherwise facilitating the consummation of any of the Contemplated
Transactions.
8.4 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or
other Order that (a) prohibits the sale of the Interests or the Shares by Seller
to Buyer, and (b) has been adopted or issued, or has otherwise become effective,
since the date of this Agreement.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either Buyer or Seller if a Breach of any provision of
this Agreement has been committed by the other party and such Breach has not
been waived or cured by such other party within three (3) days of written notice
of such Breach;
34
(b) by Buyer if any of the conditions in Section 7 has not
been satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Buyer to comply with
its obligations under this Agreement) and Buyer has not waived such condition on
or before the Closing Date; or (ii) by Seller, if any of the conditions in
Section 8 has not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the failure of
Seller to comply with its obligations under this Agreement) and Seller has not
waived such condition on or before the Closing Date;
(c) by mutual consent of Buyer and Seller;
(d) by Seller if CHRB approval has not been obtained on or
before December 31, 2000; or
(e) by either Buyer or Seller if the Closing has not occurred
(other than through the failure of any party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before December
31, 2000, or such later date as the parties may agree upon.
9.2 EFFECT OF TERMINATION
Each party's right of termination under Section 9.1 is in addition to
any other rights it may have under this Agreement or otherwise, and the exercise
of a right of termination will not be an election of remedies. If this Agreement
is terminated pursuant to Section 9.1, all further obligations of the parties
under this Agreement will terminate, except that the obligations in Sections
6.1(b), 13.1 and 13.3 will survive; provided, however, that if this Agreement is
terminated by a party because of the Breach of the Agreement by the other party
or because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination unimpaired;
provided, further, that in the event this Agreement is terminated as a result of
any change in the Disclosure Letter or any representation or warranty between
the date of this Agreement and the Closing Date, which change resulted from
other than a Breach by Buyer or Seller, then this Agreement shall terminate
without further obligation hereunder.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Letter, any supplement to the Disclosure Letter, the
certificate delivered pursuant to Section 2.4(a), and any other certificate or
document delivered pursuant to this Agreement will survive the Closing. The
right to indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted by Buyer in connection with the Contemplated
Transactions. Except as specifically set forth in this Agreement, the waiver of
any condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or
35
obligation, will not affect the right to indemnification, payment of Damages, or
other remedy based on such representations, warranties, covenants, and
obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER
Seller will indemnify and hold harmless Buyer, each Acquired Company,
and their respective Representatives, stockholders, controlling persons, and
affiliates (collectively, the "Indemnified Persons") for, and will pay to the
-------------------
Indemnified Persons the amount of, any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs of investigation
and defense and reasonable attorneys' fees) or diminution of value, whether or
not involving a third-party claim (collectively, "Damages"), arising, directly
-------
or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by
Seller in (i) this Agreement (without giving effect to any supplement to the
Disclosure Letter made by Seller and given to Buyer on or after September 13,
2000), (ii) the Disclosure Letter (after giving effect to any supplement to the
Disclosure Letter made by Seller and given to Buyer before September 13, 2000),
(iii) any supplement to the Disclosure Letter (after giving effect to any
subsequent supplement to the Disclosure Letter made by Seller and given to Buyer
before September 13, 2000), or (iv) any other certificate or document delivered
by Seller pursuant to this Agreement;
(b) any Breach by Seller of any covenant or obligation of
Seller in this Agreement;
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Seller or either Acquired
Company (or any Person acting on their behalf) in connection with any of the
Contemplated Transactions; or
(d) the Proceedings disclosed in Part 3.13 of the Disclosure
Letter.
The remedies provided in this Section 10.2 will not be exclusive of or
limit any other remedies that may be available to Buyer or the other Indemnified
Persons.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER-- ENVIRONMENTAL
MATTERS
In addition to the provisions of Section 10.2, Seller will indemnify
and hold harmless Buyer, each Acquired Company, and the other Indemnified
Persons for, and will pay to Buyer, such Acquired Company, and the other
Indemnified Persons the amount of, any Damages (including Cleanup costs)
arising, directly or indirectly, from or in connection with:
(a) any Environmental, Health, and Safety Liabilities arising
out of or relating to: (i) (A) the ownership, operation, or condition at any
time on or prior to the Closing Date of the Facilities or any other properties
and assets (whether real, personal, or mixed and whether tangible or intangible)
in which Seller or either Acquired Company has or had an interest, or (B) any
Hazardous Materials or other contaminants that were present on the Facilities
36
or such other properties and assets at any time on or prior to the Closing Date;
or (ii) (A) any Hazardous Materials or other contaminants, wherever located,
that were, or were allegedly, generated, transported, stored, treated, Released,
or otherwise handled by Seller or either Acquired Company or by any other Person
for whose conduct they are or may be held responsible at any time on or prior to
the Closing Date, or (B) any Hazardous Activities that were, or were allegedly,
conducted by Seller or either Acquired Company or by any other Person for whose
conduct they are or may be held responsible; or
(b) any bodily injury (including illness, disability, and
death, and regardless of when any such bodily injury occurred, was incurred, or
manifested itself), personal injury, property damage (including trespass,
nuisance, wrongful eviction, and deprivation of the use of real property), or
other damage of or to any Person, including any employee or former employee of
Seller or either Acquired Company or any other Person for whose conduct they are
or may be held responsible, in any way arising from or allegedly arising from
any Hazardous Activity conducted or allegedly conducted with respect to the
Facilities or the operation of either Acquired Company prior to the Closing
Date, or from Hazardous Material that was (i) present or suspected to be present
on or before the Closing Date on or at the Facilities (or present or suspected
to be present on any other property, if such Hazardous Material emanated or
allegedly emanated from any of the Facilities and was present or suspected to be
present on any of the Facilities on or prior to the Closing Date) or (ii)
Released or allegedly Released by Seller or either Acquired Company or any other
Person for whose conduct they are or may be held responsible, at any time on or
prior to the Closing Date.
Seller will be entitled to control any Cleanup, any related Proceeding,
and, except as provided in the following sentence, any other Proceeding with
respect to which indemnity may be sought under this Section 10.3. The procedure
described in Section 10.8 will apply to any claim solely for monetary damages
relating to a matter covered by this Section 10.3.
10.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Seller, and will pay to Seller
the amount of any Damages arising, directly or indirectly, from or in connection
with (a) any Breach of any representation or warranty made by Buyer in this
Agreement or in any certificate or document delivered by Buyer pursuant to this
Agreement, (b) any Breach by Buyer of any covenant or obligation of Buyer in
this Agreement, (c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions, (d) Buyer's
investigation of the Facilities (including mechanic's liens), or (e) any willful
misconduct or negligent act by Buyer or its Representatives during the
investigation permitted by Section 5.1.
10.5 TIME LIMITATIONS
If the Closing occurs, Seller will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, other than those in Sections 3.3 and 3.10, unless on or before December
31, 2001 Buyer notifies Seller of a claim specifying the
37
factual basis of that claim in reasonable detail to the extent then known by
Buyer; a claim with respect to Section 3.10, or a claim for indemnification or
reimbursement not based upon any representation or warranty or any covenant or
obligation to be performed and complied with prior to the Closing Date, may be
made at any time on or before December 31, 2005; a claim with respect to
Sections 3.3, 10.2(d) or 10.3 may be made at any time. If the Closing occurs,
Buyer will have no liability (for indemnification or otherwise) with respect to
any representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, unless on or before December 31, 2001
Seller notifies Buyer of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Seller.
10.6 LIMITATIONS ON AMOUNT -- SELLER
Seller will have no liability (for indemnification or otherwise) with
respect to the matters described in clause (a) or, to the extent relating to any
failure to perform or comply prior to the Closing Date, clause (b) of Section
10.2 until the total of all Damages with respect to such matters exceeds
$200,000 and Seller shall have no liability for Damages in excess of $7,500,000.
However, this Section 10.6 will not apply to: (a) any Breach of any of Seller's
representations and warranties of which Seller had Knowledge at any time prior
to the date on which such representation and warranty is made; (b) any
intentional Breach by Seller of any covenant or obligation; or (c) any
indemnification obligation arising from Sections 10.2(c), 10.2(d) or 10.3.
10.7 LIMITATIONS ON AMOUNT -- BUYER
Buyer will have no liability (for indemnification or otherwise) with
respect to the matters described in clause (a) or, to the extent relating to any
failure to perform or comply prior to the Closing Date, clause (b) of Section
10.4 until the total of all Damages with respect to such matters exceeds
$200,000. However, this Section 10.7 will not apply to: (a) any Breach of any of
Buyer's representations and warranties of which Buyer had Knowledge at any time
prior to the date on which such representation and warranty is made; (b) or any
intentional Breach by Buyer of any covenant or obligation; or (c) any
indemnification obligation arising from Section 4.5.
10.8 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under
Section 10.2, 10.4, or (to the extent provided in the last sentence of Section
10.3) Section 10.3 of notice of the commencement of any Proceeding against it,
such indemnified party will, if a claim is to be made against an indemnifying
party under such Section, give notice to the indemnifying party of the
commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnified party's failure
to give such notice.
(b) If any Proceeding referred to in Section 10.8(a) is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party will,
unless the claim involves Taxes, be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying party
38
is also a party to such Proceeding and the indemnified party determines in good
faith that joint representation would be inappropriate, or (ii) the indemnifying
party fails to provide reasonable assurance to the indemnified party of its
financial capacity to defend such Proceeding and provide indemnification with
respect to such Proceeding), to assume the defense of such Proceeding with
counsel satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under this
Section 10 for any fees of other counsel or any other expenses with respect to
the defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding, other than
reasonable costs of investigation.
If the indemnifying party assumes the defense of a Proceeding,
(i) no compromise or settlement of such claims may be effected by the
indemnifying party without the indemnified party's consent unless (A) there is
no finding or admission of any violation of Legal Requirements or any violation
of the rights of any Person and no effect on any other claims that may be made
against the indemnified party, and (B) the sole relief provided is monetary
damages that are paid in full by the indemnifying party; and (ii) the
indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to an
indemnifying party of the commencement of any Proceeding and the indemnifying
party does not, within ten days after the indemnified party's notice is given,
give notice to the indemnified party of its election to assume the defense of
such Proceeding, the indemnifying party will be bound by any determination made
in such Proceeding or any compromise or settlement effected by the indemnified
party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
10.9 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
11. BUYER'S ACKNOWLEDGEMENT
Notwithstanding anything contained in this Agreement to the contrary,
Buyer acknowledges that immediately prior to the Closing:
(a) the Existing Lease shall be terminated in all respects by
agreement between the landlord and tenant thereunder, and title to all
improvements and fixtures under the Existing Lease shall vest in the landlord
under such lease; and
39
(b) BMOC shall distribute to Seller all of the artwork set
forth on Exhibit 11(b), and BMOC shall have no further right, title or interest
in and to such artwork, except as a lessee under the Lease.
12. GUARANTY OF SELLER'S OBLIGATIONS
12.1 GUARANTY
(a) Guarantor hereby irrevocably and unconditionally
guaranties the due and punctual payment in full of all obligations of Seller
pursuant to this Agreement when due, including, without limitation, Seller's
obligations under Section 10.
(b) Guarantor's obligations shall not be discharged, released,
modified or affected by any failure or delay on the part of Buyer in enforcing
any of its rights or remedies nor any other circumstance which constitutes a
legal or equitable discharge of a guarantor or surety other than payment in full
of the guarantied obligations. Guarantor waives: (i) any right to require Buyer
to pursue or exhaust any remedy it may have against Seller or any other party
before proceeding against Guarantor; (ii) any principles or provisions of law,
statutory or otherwise, that are or might be, in conflict with the terms of this
guaranty; (iii) the benefit of any statute of limitations affecting Guarantor's
liability hereunder or the enforcement hereof; and (iv) notices, demands,
presentments, protests, and notices of action or inaction, including acceptance
of this guaranty.
13. GENERAL PROVISIONS
13.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party
to this Agreement will bear its respective expenses incurred in connection with
the preparation, execution, and performance of this Agreement and the
Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants. Buyer will pay one-half and Seller
will pay one-half of the HSR Act filing fee. Seller will cause the Acquired
Companies not to incur any out-of-pocket expenses in connection with this
Agreement. In the event of termination of this Agreement, the obligation of each
party to pay its own expenses will be subject to any rights of such party
arising from a breach of this Agreement by another party.
13.2 PUBLIC ANNOUNCEMENTS
Except pursuant to Legal Requirement or with the prior written consent
of the other party, neither Seller nor Buyer will, or will allow their
respective Representatives to, directly or indirectly make any public comment,
statement or communication with respect to, or otherwise disclose or permit the
disclosure of, the Contemplated Transactions or any of the terms, conditions or
other aspects thereof. If Legal Requirement requires such disclosure, the party
under such requirement must first provide to the other party (no less than 5
Business Days prior to such proposed disclosure) the content of the disclosure,
the reasons that such disclosure is required, the time and place that the
disclosure will be made, and an opportunity to comment upon the form of such
proposed disclosure.
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13.3 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, Buyer and
Seller will maintain in confidence, and will cause the directors, managers,
officers, employees, agents, and advisors of Buyer, Seller and the Acquired
Companies to maintain in confidence, any information furnished by another party
or either Acquired Company in connection with this Agreement or the Contemplated
Transactions, unless (a) such information is already known to such party or to
others not bound by a duty of confidentiality or such information becomes
publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by or
necessary or appropriate in connection with legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request. Whether or not the Closing takes place, Seller waives, and
will upon Buyer's request cause each Acquired Company to waive, any cause of
action, right, or claim arising out of the access of Buyer or its
Representatives to any Trade Secrets or other confidential information of either
Acquired Company except for the intentional competitive misuse by Buyer of such
Trade Secrets or confidential information.
13.4 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Seller: BMOC Acquisitions XIV, LLC
c/o Paine Webber Real Estate Securities, Inc.
1285 Avenue of the Americas, 19/th/ Floor
New York, New York 10019
Facsimile: 212-713-7949
Attention: John C. Tashjian/Terrence E. Fancher
With a copy to:
Gibson, Dunn & Crutcher LLP
One Montgomery Street, 26/th/ Floor
San Francisco, California 94104
Facsimile: 415-986-5309
Attention: Fred L. Pillon, Esq.
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Guarantor: Paine Webber Real Estate Securities, Inc.
1285 Avenue of the Americas, 19/th/ Floor
New York, New York 10019
Facsimile: 212-713-7949
Attention: John C. Tashjian/Terrence E. Fancher
Buyer: Magna Entertainment Corp.
c/o Magna International Inc.
337 Magna Drive
Aurora, Ontario, Canada L4G7K1
Facsimile: 905-726-7177
Attention: Mr. James Nicol
With a copy to:
Magna Entertainment Corp.
c/o O'Melveny & Myers LLP
610 Newport Center Drive
Newport Beach, California 92660
Facsimile: 949-823-6994
Attention: Scott Daruty, Esq.
and
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071-2899
Facsimile: 213-430-6407
Attention: Frederick B. McLane, Esq.
13.5 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State of California, County of San Mateo, or, if it
has or can acquire jurisdiction, in the United States District Court for the
Northern District of California, and each of the parties consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world.
13.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such
further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to in this Agreement.
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13.7 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
13.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties
with respect to its subject matter (including the Letter of Intent between Buyer
and Seller dated April 7, 2000) and constitutes (along with the documents
referred to in this Agreement) a complete and exclusive statement of the terms
of the agreement between the parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by the party
to be charged with the amendment.
13.9 DISCLOSURE LETTER
The disclosures in the Disclosure Letter, and those in any Supplement
thereto, must relate only to the representations and warranties in the Section
of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement, except for specific cross-
references.
13.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
No party may assign any of its rights under this Agreement without the
prior consent of the other parties, except that Buyer may assign any of its
rights under this Agreement to any Subsidiary of Buyer. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give any
Person other than the parties to this Agreement any legal or equitable right,
remedy, or claim under or with respect to this Agreement or any provision of
this Agreement. This Agreement and all of its provisions and conditions are for
the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
13.11 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and
43
effect. Any provision of this Agreement held invalid or unenforceable only in
part or degree will remain in full force and effect to the extent not held
invalid or unenforceable.
13.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement. All words used in this Agreement will be construed
to be of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the preceding words or
terms.
13.13 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in
this Agreement, time is of the essence.
13.14 GOVERNING LAW
This Agreement will be governed by the laws of the State of California
without regard to conflicts of laws principles.
13.15 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BMOC ACQUISITIONS XIV, LLC
By: ____________________________
Name: __________________________
Title: _________________________
PAINE WEBBER REAL ESTATE SECURITIES, INC.
By: ____________________________
Name: __________________________
Title: _________________________
MAGNA ENTERTAINMENT CORP.
By: ____________________________
Name: __________________________
Title: _________________________
S-1
EXHIBITS
Exhibit 1.1 Instrument of Assignment
Exhibit 1.2 Lease
Exhibit 1.3 Schedule of Payments to Employees
Exhibit 3.20 Bay Meadows Mark
Exhibit 7.4(a) Form of Legal Opinion of Seller's Counsel
Exhibit 8.3(a) Form of Legal Opinion of Buyer's Counsel
Exhibit 11(b) Distributed Artwork