Document:

Exhibit 10.10

 

EXECUTION VERSION

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT
 dated as of October 13, 2015
 by and among

 

STATION CASINOS LLC

(“Purchaser”),

 

FERTITTA BUSINESS MANAGEMENT LLC,

LNA INVESTMENTS, LLC,

KVF INVESTMENTS, LLC,

FE EMPLOYEECO LLC

(collectively, “Sellers”),

 

FERTITTA ENTERTAINMENT LLC

(the “Company”)

 

and

 

Frank J. Fertitta III

(the “Seller Representative”)

 

with respect to all

 

outstanding membership interests of
 the Company

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
No.
    
	
 
    	
 
    	
 
    
	
ARTICLE I
    
	
DEFINITIONS
    
	
 
    	
 
    	
 
    
	
1.01
    	
Definitions
    	
1
    
	
 
    
	
ARTICLE II
    
	
SALE OF UNITS AND CLOSING
    
	
 
    	
 
    	
 
    
	
2.01
    	
Purchase and Sale
    	
12
    
	
2.02
    	
Purchase Price
    	
12
    
	
2.03
    	
Closing
    	
12
    
	
2.04
    	
Purchase Price Adjustment
    	
13
    
	
2.05
    	
Purchase Price   Allocation
    	
15
    
	
2.06
    	
Further Assurances;   Post-Closing Cooperation
    	
15
    
	
2.07
    	
Excluded Assets
    	
16
    
	
2.08
    	
Tax Treatment
    	
16
    
	
2.09
    	
Certain Determinations
    	
16
    
	
 
    	
 
    	
 
    
	
ARTICLE III
    
	
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
    
	
 
    	
 
    	
 
    
	
3.01
    	
Authority
    	
17
    
	
3.02
    	
Organization of the   Company
    	
17
    
	
3.03
    	
Equity Interests
    	
17
    
	
3.04
    	
Subsidiaries
    	
17
    
	
3.05
    	
No Conflicts
    	
18
    
	
3.06
    	
Governmental Approvals   and Filings
    	
18
    
	
3.07
    	
Books and Records
    	
19
    
	
3.08
    	
Financial Statements   and Condition
    	
19
    
	
3.09
    	
Taxes
    	
20
    
	
3.10
    	
Legal Proceedings
    	
21
    
	
3.11
    	
Compliance with Laws
    	
21
    
	
3.12
    	
Benefit Plans; ERISA
    	
22
    
	
3.13
    	
Real Property
    	
24
    
	
3.14
    	
Tangible Personal   Property
    	
24
    
	
3.15
    	
Intellectual Property   Rights
    	
24
    
	
3.16
    	
Sufficiency of Assets
    	
25
    
	
3.17
    	
Contracts
    	
25
    
	
3.18
    	
Licenses; Gaming Licenses
    	
27
    
	
3.19
    	
Insurance
    	
27
    
	
3.20
    	
Employees; Labor   Relations
    	
28
    
	
3.21
    	
Certain Payments
    	
28
    

 

ii

 

	
3.22
    	
Related Party   Transactions
    	
29
    
	
3.23
    	
Brokers
    	
29
    
	
3.24
    	
Environmental Matters
    	
29
    
	
3.25
    	
Representations   Complete
    	
29
    
	
 
    	
 
    	
 
    
	
ARTICLE IV
    
	
REPRESENTATIONS AND WARRANTIES OF SELLERS
    
	
 
    	
 
    	
 
    
	
4.01
    	
Organization; Good   Standing
    	
29
    
	
4.02
    	
Authority
    	
30
    
	
4.03
    	
Ownership of Units
    	
30
    
	
4.04
    	
No Conflicts
    	
30
    
	
4.05
    	
Governmental Approvals   and Filings
    	
31
    
	
4.06
    	
Legal Proceedings
    	
31
    
	
4.07
    	
Representations   Complete
    	
31
    
	
 
    	
 
    	
 
    
	
ARTICLE V
    
	
REPRESENTATIONS AND WARRANTIES OF PURCHASER
    
	
 
    	
 
    	
 
    
	
5.01
    	
Organization
    	
31
    
	
5.02
    	
Authority
    	
31
    
	
5.03
    	
No Conflicts
    	
31
    
	
5.04
    	
Governmental Approvals   and Filings
    	
32
    
	
5.05
    	
Legal Proceedings
    	
32
    
	
5.06
    	
Purchase for Investment
    	
32
    
	
5.07
    	
Brokers
    	
32
    
	
5.08
    	
Representations   Complete
    	
32
    
	
 
    	
 
    	
 
    
	
ARTICLE VI
    
	
COVENANTS OF SELLERS
    
	
 
    	
 
    	
 
    
	
6.01
    	
Regulatory, Gaming and   Other Approvals
    	
33
    
	
6.02
    	
HSR Filings
    	
33
    
	
6.03
    	
Investigation by   Purchaser
    	
33
    
	
6.04
    	
Conduct of Business
    	
34
    
	
6.05
    	
Financial Statements   and Reports; Cooperation in IPO Transactions
    	
36
    
	
6.06
    	
Certain Restrictions
    	
37
    
	
6.07
    	
Books and Records
    	
37
    
	
6.08
    	
Notice and Cure
    	
37
    
	
6.09
    	
Satisfaction of   Conditions
    	
37
    
	
6.10
    	
Affiliate Agreements
    	
38
    
	
6.11
    	
Certification regarding   Indemnification Claims
    	
38
    
	
6.12
    	
Pre-Roadshow Bring Down
    	
38
    
	
 
    	
 
    	
 
    
	
ARTICLE VII
    
	
COVENANTS OF PURCHASER
    
	
 
    	
 
    	
 
    
	
7.01
    	
Regulatory, Gaming and   Other Approvals
    	
38
    

 

iii

 

	
7.02
    	
HSR Filings
    	
39
    
	
7.03
    	
Governmental or   Regulatory Authorities
    	
39
    
	
7.04
    	
Indemnification and   Insurance of Officers and Managers
    	
39
    
	
7.05
    	
Notice and Cure
    	
40
    
	
7.06
    	
Satisfaction of   Conditions
    	
40
    
	
7.07
    	
Employee Matters
    	
40
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII
    
	
CONDITIONS TO OBLIGATIONS OF PURCHASER
    
	
 
    	
 
    	
 
    
	
8.01
    	
Representations and   Warranties
    	
42
    
	
8.02
    	
Performance
    	
43
    
	
8.03
    	
Seller Deliverables
    	
43
    
	
8.04
    	
Orders and Laws
    	
43
    
	
8.05
    	
Regulatory Consents and   Approvals
    	
43
    
	
8.06
    	
Third Party Consents
    	
44
    
	
8.07
    	
IPO Transactions
    	
44
    
	
8.08
    	
Availability of Funds
    	
44
    
	
8.09
    	
Availability of   Specified Executives
    	
44
    
	
 
    
	
ARTICLE IX
    
	
CONDITIONS TO OBLIGATIONS OF SELLERS
    
	
 
    	
 
    	
 
    
	
9.01
    	
Representations and   Warranties
    	
44
    
	
9.02
    	
Performance
    	
45
    
	
9.03
    	
Officers’ Certificates
    	
45
    
	
9.04
    	
Orders and Laws
    	
45
    
	
9.05
    	
Regulatory Consents and   Approvals
    	
45
    
	
9.06
    	
Third Party Consents
    	
45
    
	
9.07
    	
IPO Transactions
    	
45
    
	
 
    	
 
    	
 
    
	
ARTICLE X
    
	
TAX MATTERS
    
	
 
    	
 
    	
 
    
	
10.01
    	
Tax Indemnity
    	
46
    
	
10.02
    	
Allocations; Straddle   Periods
    	
46
    
	
10.03
    	
Tax Returns
    	
46
    
	
10.04
    	
Cooperation
    	
47
    
	
10.05
    	
Transfer Taxes
    	
47
    
	
10.06
    	
Tax Refunds
    	
47
    
	
10.07
    	
Tax Audits
    	
47
    
	
10.08
    	
Disputes
    	
48
    
	
10.09
    	
Purchase Price   Adjustment
    	
48
    

 

iv

 

	
ARTICLE XI
    
	
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
    
	
COVENANTS AND AGREEMENTS
    
	
 
    	
 
    	
 
    
	
11.01
    	
Survival of   Representations, Warranties, Covenants and Agreements
    	
48
    
	
 
    	
 
    	
 
    
	
ARTICLE XII
    
	
INDEMNIFICATION
    
	
 
    	
 
    	
 
    
	
12.01
    	
Indemnification
    	
49
    
	
12.02
    	
Method of Asserting   Claims
    	
51
    
	
12.03
    	
Release
    	
52
    
	
12.04
    	
Purchase Price   Adjustment
    	
52
    
	
 
    	
 
    	
 
    
	
ARTICLE XIII
    
	
TERMINATION
    
	
 
    	
 
    	
 
    
	
13.01
    	
Termination
    	
52
    
	
13.02
    	
Effect of Termination
    	
53
    
	
 
    	
 
    	
 
    
	
ARTICLE XIV
    
	
MISCELLANEOUS
    
	
 
    	
 
    	
 
    
	
14.01
    	
Notices
    	
53
    
	
14.02
    	
Specific Performance
    	
54
    
	
14.03
    	
Entire Agreement
    	
54
    
	
14.04
    	
Expenses
    	
54
    
	
14.05
    	
Public Announcements
    	
55
    
	
14.06
    	
Confidentiality
    	
55
    
	
14.07
    	
Waiver
    	
56
    
	
14.08
    	
Amendment
    	
56
    
	
14.09
    	
No Third-Party   Beneficiary
    	
56
    
	
14.10
    	
No Assignment; Binding   Effect
    	
56
    
	
14.11
    	
Headings; Schedules
    	
56
    
	
14.12
    	
Invalid Provisions
    	
57
    
	
14.13
    	
Governing Law
    	
57
    
	
14.14
    	
Disputes
    	
57
    
	
14.15
    	
Counterparts
    	
57
    
	
14.16
    	
Seller Representative
    	
57
    

 

EXHIBITS

 

	
EXHIBIT A
    	
Form of Unit   Assignment Agreement
    
	
EXHIBIT B
    	
Form of Seller’s   Certificate
    
	
EXHIBIT C
    	
Officer’s Certificate   of Purchaser
    
	
EXHIBIT D
    	
Secretary’s Certificate   of Purchaser
    
	
EXHIBIT E
    	
Form of   Post-Closing Certificates regarding Indemnification Claims
    
	
EXHIBIT F
    	
Form of   Pre-Roadshow Bring Down Certificate
    

 

v

 

This MEMBERSHIP INTEREST PURCHASE AGREEMENT dated as of October 13, 2015 is made and entered into by and among (i) Station Casinos LLC, a Nevada limited liability company (“Purchaser”), (ii) Fertitta Business Management LLC, a Nevada limited liability company, LNA Investments, LLC, a Nevada limited liability company, KVF Investments, LLC, a Nevada limited liability company, and FE Employeeco LLC, a Delaware limited liability company (each a “Seller” and collectively the “Sellers”), (iii) Fertitta Entertainment LLC, a Delaware limited liability company (the “Company”), and (iv) Frank J. Fertitta III, an individual (the “Seller Representative”).

 

Capitalized terms not otherwise defined herein have the meanings set forth in Section 1.01.

 

WHEREAS, Sellers collectively own an aggregate of 81,133 Common Units and 18,050 Incentive Units of the Company (such Common Units and Incentive Units collectively being referred to herein as the “Units”), constituting all issued and outstanding membership interests of the Company;

 

WHEREAS, the Company and the Subsidiaries (as defined herein) currently manage all of the gaming and non-gaming facilities owned or managed by indirect subsidiaries of Purchaser (the “Station Operations”);

 

WHEREAS, Purchaser and its subsidiaries desire to internalize the management functions provided by the Company and the Subsidiaries;

 

WHEREAS, Purchaser intends to effect an initial public offering of equity securities of Purchaser or an Affiliate of Purchaser formed for the purpose of effecting such initial public offering (the “IPO Transactions”) and apply a portion of the net proceeds of the IPO Transactions to purchase the Units; and

 

WHEREAS, Sellers desires to sell, and Purchaser desires to purchase, the Units on the terms and subject to the conditions set forth in this Agreement;

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I
 DEFINITIONS

 

1.01                                          Definitions.

 

(a)         Defined Terms.  As used in this Agreement, the following defined terms have the meanings indicated below:

 

“AAA” has the meaning ascribed to it in Section 14.14.

 

1

 

“Actions or Proceedings” means any action, suit, litigation, arbitration, audit, claim, complaint, hearing, or investigation (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental or Regulatory Authority or arbitrator.

 

“Affiliate” means, with respect to any Person, any other Person that directly, or indirectly through one of more intermediaries, controls or is controlled by or is under common control with such Person.  For purposes of this definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by Contract or otherwise and, in any event and without limitation of the foregoing, any Person owning ten percent (10%) or more of the voting securities of another Person shall be deemed to control that Person.  For purposes of this Agreement, unless the context otherwise requires, prior to Closing, none of the Sellers, the Company and the Company’s Subsidiaries shall constitute or be deemed to constitute an Affiliate of Purchaser.

 

“Affiliate Agreement” has the meaning ascribed to it in Section 3.17(a)(viii).

 

“Agreement” means this Membership Interest Purchase Agreement, the Disclosure Schedule and the certificates delivered in accordance with Sections 8.03 and 9.03, as the same shall be amended from time to time

 

“Ancillary Agreement” means each assignment agreement entered into pursuant to Section 2.03(c).

 

“Arbitrating Accountants” has the meaning ascribed to it in Section 2.04(d).

 

“Assets and Properties” of any Person means all assets and properties of every kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible, and wherever situated), including the goodwill related thereto, operated, owned or leased by such Person.

 

“Assumed Liabilities” means an amount equal to (a) the aggregate Liabilities of the Company and the Subsidiaries as calculated as of 12:01 AM (Pacific time) on the Closing Date minus (b) Closing Indebtedness to the extent paid by Purchaser in accordance with Section 2.03(b)(ii).

 

“Audited Financial Statements” means the Financial Statements for the most recent fiscal year of the Company delivered to Purchaser pursuant to Section 3.08.

 

“Basket” has the meaning ascribed to it in Section 12.01  (c).

 

“Benefit Plan” means any Plan (i) covering one or more current or former Company Employees, or other individual independent contractors, of the Company or any of its Subsidiaries, or the beneficiaries or dependents of any such Persons; (ii) sponsored, maintained, contributed to, or required to be contributed to, by the Company or any of its Subsidiaries; or (iii) under or with respect to which the Company or any of its Subsidiaries have any Liabilities.

 

2

 

“Books and Records” means all files, documents, instruments, papers, books and records relating to the Business or Condition of the Company, including without limitation financial statements, Tax Returns and related work papers and letters from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute books, stock certificates and books, stock transfer ledgers, Contracts, Licenses, customer lists, operating data and plans and environmental studies and plans.

 

“Business Day” means a day other than Saturday, Sunday or any day on which banks located in the State of Nevada are authorized or obligated to close.

 

“Business or Condition of the Company” means the business, condition (including financial condition), results of operations, Liabilities and Assets and Properties of the Company and the Subsidiaries taken as a whole.

 

“Claim Notice” means written notification pursuant to Section 12.02(a) of a Third Party Claim as to which indemnity under Section 12.01 is sought by an Indemnified Party, enclosing a copy of all papers served, if any, and specifying in reasonable detail and to the extent practicable the nature of and basis for such Third Party Claim and for the Indemnified Party’s claim against the Indemnifying Party under Section 12.01, together with the amount if then known or reasonably determinable in good faith, of the Loss arising from such Third Party Claim.

 

“Closing” means the closing of the transactions contemplated by Section 2.03.

 

“Closing Date” means (a) the fifth Business Day after the day on which all of the conditions to each party’s obligations hereunder have been satisfied or, to the extent permitted under applicable Laws, waived (other than those conditions that by their nature have to be satisfied at Closing, but subject to the satisfaction or, to the extent permitted under applicable Laws, waiver of those conditions at Closing), or (b) such other date as Purchaser and Sellers mutually agree upon in writing.

 

“Closing Indebtedness” means the total aggregate amount of the Indebtedness and all accrued and unpaid interest, premiums and prepayment fees applicable with respect thereto of the Company and the Subsidiaries as calculated as of 12:01 AM (Pacific time) on the Closing Date.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Committee” has the meaning ascribed to it in Section 2.09.

 

“Company” has the meaning ascribed to it in the forepart of this Agreement.

 

“Company Employees” has the meaning ascribed to it in Section 7.07(a).

 

“Company Material Adverse Effect” means any change, development, circumstance or event that, individually or in the aggregate, has or would reasonably be expected to have, a material adverse effect on the Business or Condition of the Company or on the Company’s or Sellers’ ability to consummate the transactions contemplated by this Agreement or

 

3

 

any Ancillary Agreement; provided, however, that none of the following shall be or will be at the Closing, deemed to constitute, or shall be taken into account in determining the occurrence of, a Company Material Adverse Effect: (i) any effect or change that results from the announcement of the execution and delivery of this Agreement or the Transactions, or from any action taken by Purchaser or its Affiliates, (ii) any effect or change that results from the taking of any action required pursuant to this Agreement or expressly permitted by this Agreement, (iii) any change in general business, economic, political, legislative or social conditions, whether locally, nationally or internationally, affecting the travel, hospitality or gaming industries generally, (iv) any change in the financial, banking or securities markets (including changes to interest rates, currency rates or the value of the U.S. Dollar relative to other currencies, consumer confidence, stock, bond and/or debt prices and trends), (v) any acts of war, hostilities, military action, sabotage or terrorism (whether or not declared or undeclared) or any escalation or worsening of any such acts of war, hostility, military action, sabotage or terrorism, (vi) any failure to meet projections, forecasts or revenue or earnings predictions for any period ending on or after the Closing (provided that the changes or effects underlying or contributing to such failure to meet projections, forecasts or revenue or earnings predictions may be deemed to constitute, and be taken into account in determining the occurrence of, a Company Material Adverse Effect); or (vii) any change in Law or generally accepted accounting principles or the interpretation thereof, except, in each case of clauses (iii), (iv), (v) and (vii), to the extent the Business or Condition of the Company is disproportionately affected by such effect or change compared to Persons engaged in similar or comparable businesses in the industries in which the Company and/or its Subsidiaries operate.

 

“Company Owned Intellectual Property” has the meaning ascribed to it in Section 3.15(a).

 

“Company/Seller Fundamental Representations” has the meaning ascribed to it in Section 11.01.

 

“Contract” means any agreement, lease, license, evidence of Indebtedness, mortgage, indenture, security agreement, commitment, promise, undertaking or other contract (whether written or oral), including all amendments thereto.

 

“Disclosure Schedule” means the record delivered to Purchaser by the Company or to Purchaser by Sellers or to Sellers by Purchaser, as applicable, herewith and dated as of the date hereof, containing all lists, descriptions, exceptions and other information and materials as are required to be included therein by the Company, Sellers or Purchaser, as applicable, pursuant to this Agreement.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ERISA Affiliate” means any Person who, together with the Company, is treated as a single employer under Section 414(t) of the Code; provided, however, that in no event shall Purchaser or any subsidiary of Purchaser be deemed to be an ERISA Affiliate.

 

“Estimated Assumed Liabilities” has the meaning ascribed to it in Section 2.04(a).

 

4

 

“Estimated Closing Balance Sheet” has the meaning ascribed to it in Section 2.04(a).

 

“Estimated Closing Balance Sheet Documents” has the meaning ascribed to it in Section 2.04(a).

 

“Estimated Assumed Liabilities” has the meaning ascribed to it in Section 2.04(a).

 

“Excluded Assets” has the meaning ascribed to it in Section 2.07.

 

“FE Senior Executive” means each of Frank J. Fertitta III, Lorenzo Fertitta, Stephen L. Cavallaro, Marc J. Falcone and Richard J. Haskins.

 

“Final Assumed Liabilities” has the meaning ascribed to it in Section 2.04(b).

 

“Final Closing Balance Sheet” has the meaning ascribed to it in Section 2.04(b).

 

“Final Closing Balance Sheet Documents” has the meaning ascribed to it in Section 2.04(b).

 

“Financial Statements” means the consolidated financial statements of the Company and its consolidated Subsidiaries delivered to Purchaser pursuant to Section 3.08 or 6.05.

 

“GAAP” means United States generally accepted accounting principles, consistently applied.

 

“Gaming Authorities” means any Governmental or Regulatory Authority with regulatory control, authority or jurisdiction over casino, gambling or other gaming activities and operations conducted by any of the Company or the Subsidiaries, including the Nevada Gaming Commission, the Nevada State Gaming Control Board, the Las Vegas City Council, the North Las Vegas City Council, the Henderson City Council, the National Indian Gaming Commission, and the Clark County Liquor and Gaming Licensing Board.

 

“Gaming Laws” means all Laws pursuant to which any Gaming Authority possesses regulatory, licensing or permit authority over gambling, gaming or casino activities, including the rules and regulations established by any Gaming Authority.

 

“Gaming Licenses” means all Licenses issued under applicable Gaming Laws or by any Gaming Authorities.

 

“Governmental or Regulatory Authority” means 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, including any Gaming Authority.

 

5

 

“HSR Act” means Section 7A of the Clayton Act (Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the rules and regulations promulgated thereunder.

 

“Income Tax” means any federal, state, local, or foreign income tax, including any interest, penalty, or addition thereto, whether disputed or not.

 

“Income Tax Returns” means any return, declaration, report, claim for refund, or information return or statement relating to Income Taxes, including any schedule or attachment thereto, and including any amendment thereof.

 

“Indebtedness” of any Person means all obligations of such Person (and any accrued and unpaid interest thereon) (i) for borrowed money or extension of credit, (ii) evidenced by notes, bonds, debentures, letters of credit or similar instruments, (iii) upon which interest charges are customarily paid (other than trade payables incurred in the ordinary course of business consistent with past practice), (iv) for the deferred purchase price of goods or services including “earn-outs” and “seller notes” payable with respect to the acquisition of any business, assets or securities but excluding trade payables incurred in the ordinary course of business consistent with past practice), (v) under capital leases, synthetic leases or sale leaseback transactions, (vi) arising under Contracts relating to interest rate protection, swap or other hedging agreements, (vii) under conditional sale or other title retention agreements relating to any purchased property, and (vi) in the nature of guarantees (including “keep well” arrangements, support agreements and similar agreements) of the obligations described in clauses (i) through (vi) above of any other Person.

 

“Indemnified Party” means any Person claiming indemnification under any provision of Article XII.

 

“Indemnifying Party” means any Person against whom a claim for indemnification is being asserted under any provision of Article XII.

 

“Indemnity Notice” means written notification pursuant to Section 12.02(b) of a claim for payment or indemnity under Article XII by an Indemnified Party, specifying the nature of and basis for such claim, together with the amount, if then known or reasonably determinable in good faith, of the Loss arising from such claim.

 

“Initial Purchase Price” has the meaning ascribed to it in Section 2.02.

 

“Intellectual Property” means intellectual property rights of any kind, including both statutory and common law rights, throughout the world, as applicable, including without limitation (i) all industrial designs, invention disclosures, patents and patent applications (including divisions, continuations, continuations-in-part, reexaminations, and renewals), and any renewals, extensions, supplementary protection certificates or reissues thereof, in any jurisdiction, (ii) trademarks, service marks, names, corporate names, trade names, brand names, certification marks, designs, logos, slogans, commercial symbols, business name registrations, Internet domain names, trade dress and other similar indications of source or origin and general intangibles of like nature, together with the goodwill associated with the foregoing and registrations and applications relating to the foregoing in any jurisdiction, including any

 

6

 

extension, modification or renewal of any such registration or application, (iii) copyrights, writings and other works and other copyrightable subject matter, (including rights in computer programs (whether in source code, object code or other forms), algorithms, databases, compilations and data, technology supporting the foregoing, and all documentations including user manuals and training materials, related to any of the foregoing), in any jurisdiction, whether registered or not, and all applications and registrations for the foregoing, and any renewals or extensions thereof, (iv) trade secrets, non-public information, and all other confidential or proprietary information and materials, including, discoveries, research and development, ideas, know-how, inventions, proprietary processes, designs, procedures, laboratory notes, technical information, formulae, biological materials, models and methodologies, in each case whether patentable or not, and rights in any jurisdiction to limit the use or disclosure thereof by any Person, and (v) any other intellectual property or proprietary rights and all rights and remedies against past infringement, misappropriation, or other violation of any of the foregoing.

 

“IPO Transactions” has the meaning ascribed to it in the forepart of this Agreement.

 

“IRS” means the United States Internal Revenue Service.

 

“Knowledge of Sellers” or “Known to Sellers” means the actual knowledge after reasonable due inquiry of any FE Senior Executive at the time the applicable representation or warranty is made.

 

“Laws” means all laws, statutes, constitutions, treaties, rules, regulations, judgments, decrees, ordinances and other pronouncements having the effect of law, in each case, of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision or of any Governmental or Regulatory Authority.

 

“Lender Directors” means Station Holdco LLC’s Lender Directors (as defined in that certain Equityholders Agreement, dated as of June 16, 2011, by and among Station Holdco LLC, Purchaser and the other parties thereto, as amended.

 

“Lender Directors’ Consent” means approval of the Lender Directors to the consummation of the Transactions.

 

“Liabilities” means all direct or indirect Indebtedness, obligations and other liabilities of a Person of any kind or character (whether absolute or contingent, accrued or unaccrued, conditional or unconditional, fixed or otherwise, matured or unmatured, latent or patent, known or unknown, asserted or unasserted, due or to become due, in contract, tort, strict liability or otherwise).

 

“Licenses” means all licenses, permits, certificates of authority, authorizations, approvals, registrations, privileges, qualifications, franchises, findings of suitability, waivers and exemptions, including any condition or limitation placed thereon, and similar consents granted or issued by any Person, including Gaming Licenses.

 

“Licensed Parties” means the Company, and each Subsidiary and Licensing Affiliate that owns or holds a License.

 

7

 

“Licensing Affiliates” means any officer, director, employee or equityholder of, or other Person associated with, the Company or any Subsidiary that (a) may be required to own or hold a License, or (b) may be required to be found suitable, or may be taken into account in the process of determining the suitability of the Company or any Subsidiary, with respect to a License.

 

“Liens” means any mortgage, pledge, assessment, security interest, lease, lien, adverse claim, levy, restriction on transfer of title, charge or other encumbrance of any kind, or any conditional sale Contract, title retention Contract or other Contract to give any of the foregoing.

 

“LLC Agreement” means the limited liability company agreement of the Company, as in effect immediately prior to the Closing.

 

“Loss” means any and all damages, fines, fees, claims, judgments, settlements, penalties, deficiencies, losses and expenses (including without limitation interest, court costs, fees of attorneys, accountants and other experts or other expenses of litigation or other Actions or Proceedings or of any claim, default or assessment).

 

“New Plans” has the meaning ascribed to it in Section 7.07(b).

 

“Objection Notice” has the meaning ascribed to it in Section 2.04(c).

 

“Old Plans” has the meaning ascribed to it in Section 7.07(b).

 

“Option” with respect to any Person means any security, right, subscription, warrant, option, “phantom” stock right or other Contract that gives the right to (i) purchase or otherwise receive or be issued any equity interests of such Person or any security of any kind convertible into or exchangeable or exercisable for any equity interests of such Person or (ii) receive or exercise any benefits or rights similar to any rights enjoyed by or accruing to the holder of equity interests of such Person, including any rights to participate in the equity or income of such Person or to participate in or direct the election of any directors or officers of such Person or the manner in which any equity interests of such Person are voted.

 

“Order” means any writ, judgment, decree, injunction, award, decision, decree, ruling, subpoena, verdict or similar order of any Governmental or Regulatory Authority (in each such case whether preliminary or final).

 

“Payoff Letters” has the meaning ascribed to it in Section 2.03(b)(ii).

 

“Permitted Lien” means (i) any Lien for Taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP and (ii) any landlords’, carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and similar Lien arising in the ordinary course of business with respect to a Liability that is not yet due or delinquent.

 

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“Person” means any natural person, corporation, limited liability company, general partnership, limited partnership, proprietorship, other business organization, trust, union, association or Governmental or Regulatory Authority.

 

“Plan” means any bonus, incentive compensation, deferred compensation, compensation, pension, profit sharing, retirement, equity purchase, equity option, restricted stock, deferred stock, equity ownership, equity appreciation rights, phantom stock, equity-related, leave of absence, layoff, vacation, day or dependent care, legal services, cafeteria, life, health, accident, disability, change in control, retention, severance, separation, fringe benefit or other employee benefit plan, practice, policy, agreement or arrangement of any kind, whether written or oral, including any “employee benefit plan” within the meaning of Section 3(3) of ERISA, whether or not ERISA applies.

 

“Post-Closing Adjustment” has the meaning scribed to it in Section 2.04(e).

 

“Post-Closing Tax Period” means any taxable period that begins after the Closing Date and the portion of any Straddle Period that begins the day after the Closing Date.

 

“Pre-Closing Tax Obligations” means any Taxes of the Company or any Subsidiary that are due and payable by such Company or Subsidiary and that are allocable to any Pre-Closing Tax Period pursuant to Section 10.02.

 

“Pre-Closing Tax Period” means any taxable period that ends on or prior to the Closing Date and the portion of any Straddle Period that ends on the Closing Date.

 

“Pre-Roadshow Bring Down Certificate” has the meaning ascribed to it in Section 6.12.

 

“Preliminary Confirmations” has the meaning ascribed to it in Section 6.12.

 

“Purchase Price” has the meaning ascribed to it in Section 2.02.

 

“Purchaser” has the meaning ascribed to it in the forepart of this Agreement.

 

“Purchaser Fundamental Representations” has the meaning ascribed to it in Section 11.01.

 

“Purchaser Indemnified Parties” means Purchaser, the Company and the Subsidiaries, their respective Affiliates, and all Representatives of any of the foregoing.

 

“Purchaser Tax Contest” has the meaning ascribed to it in Section 10.07(b).

 

“Qualified Plan” means each Benefit Plan which is intended to qualify under Section 401 of the Code.

 

“Related Person” means (a) with respect to an individual, such individual’s spouse and the immediate family members of such individual and such individual’s spouse, including any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law,

 

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son-in-law, daughter-in-law, brother-in-law, or sister-in-law of such individual or such individual’s spouse, and any person sharing the household of such individual, (b) with respect to an entity, any Person that directly or indirectly controls, is controlled by or is under common control with such entity and each Person that serves as a director, officer, partner, executor or trustee of such entity, and (c) any Affiliates of any of the foregoing.

 

“Representatives” has the meaning ascribed to it in Section 6.03.

 

“Restrictive Covenant” means any non-compete, non-solicit, non-interference, non-disparagement or confidentiality obligation.

 

“Seller” or “Sellers” has the meaning ascribed to it in the forepart of this Agreement.

 

“Seller Certificate” has the meaning ascribed to it in Section 6.11.

 

“Seller Indemnified Parties” means Sellers and their Affiliates, and all Representatives of any of the foregoing.

 

“Seller Prepared Return” has the meaning ascribed to it in Section 10.03(a).

 

“Seller Representative” has the meaning ascribed to it in the forepart of this Agreement.

 

“Seller Tax Contest” has the meaning ascribed to it in Section 10.07(b).

 

“Shared Tax Return” has the meaning ascribed to it in Section 10.03(b).

 

“Specified Executive” means Frank J. Fertitta III, Marc J. Falcone, Stephen L. Cavallaro and Richard J. Haskins.

 

“Station Operations” has the meaning ascribed to it in the forepart of this Agreement.

 

“Straddle Period” means any taxable period that begins prior to the Closing Date and ends after the Closing Date.

 

“Subsidiary” means any Person in which the Company, directly or indirectly through Subsidiaries or otherwise, beneficially owns more than fifty percent (50%) of either the equity interests in, or the voting control of, such Person and any partnership the only general partner or general partners of which are the Company or one or more of its Subsidiaries.

 

“Tax Claim” has the meaning ascribed to it in Section 10.07(b).

 

“Tax Dispute” has the meaning ascribed to it in Section 10.08.

 

“Tax Return” means any return, declaration, report, claim for refund, or information return or statement filed with or submitted to, or required to be filed with or submitted to, any Governmental or Regulatory Authority in connection with the determination,

 

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assessment, collection, or payment of any Tax, including any schedule or attachment thereto, and including any amendment thereof.

 

“Taxes” or “Tax” means any federal, state, local, or foreign income, gross receipts, License, payroll, employment, excise, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto.

 

“Termination Date” has the meaning ascribed to it in Section 13.01(d).

 

“Third Party Claim” has the meaning ascribed to it in Section 12.02(a).

 

“Threshold” has the meaning ascribed to it in Section 12.01(c).

 

“Transactions” means all transactions contemplated by this Agreement.

 

“Transfer Taxes” has the meaning ascribed to it in Section 10.02.

 

“Treasury Regulations” means regulations promulgated by the United States Treasury Department pursuant to the Code.

 

“Unaudited Financial Statement Date” means the last day of the most recent fiscal quarter of the Company for which Financial Statements are delivered to Purchaser pursuant to Section 3.08.

 

“Unaudited Financial Statements” means the Financial Statements for the most recent fiscal quarter of the Company delivered to Purchaser pursuant to Section 3.08.

 

“Underwriters” has the meaning ascribed to it in Section 6.03.

 

“Units” has the meaning ascribed to it in the forepart of this Agreement.

 

“Zuffa 401(k) Plan” has the meaning ascribed to it in Section 7.07(c).

 

Construction of Certain Terms and Phrases.  Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; (iii) the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to this entire Agreement; (iv) the terms “Article” or “Section” refer to the specified Article or Section of this Agreement; (v) the phrases “ordinary course of business” and “ordinary course of business consistent with past practice” refer to the business and practice of the Company or a Subsidiary; and (vi) wherever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”  Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified.

 

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All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP.

 

ARTICLE II
 SALE OF UNITS AND CLOSING

 

2.01                                          Purchase and Sale.  Each Seller agrees to sell to Purchaser, and Purchaser agrees to purchase from such Seller, all of the right, title and interest of such Seller in and to the Units listed opposite such Seller’s name on Section 2.01 of the Disclosure Schedule, free and clear of all Liens, at the Closing on the terms and subject to the satisfaction or waiver of the conditions set forth in this Agreement.

 

2.02                                          Purchase Price.  At the Closing, Purchaser shall pay an aggregate purchase price for the Units equal to $460,000,000, minus Estimated Assumed Liabilities, minus the amount, if any, of the Closing Indebtedness (the resulting amount, the “Initial Purchase Price” and, following adjustment pursuant to Section 2.04, the “Purchase Price”) in immediately available United States funds in the manner provided in Section 2.03.  The Purchase Price shall be allocated among Sellers in accordance with the terms and conditions of the LLC Agreement.

 

2.03                                          Closing.

 

(a)         The Closing will take place at the offices of Purchaser at 1505 South Pavilion Center Drive, Las Vegas, Nevada 89135, or at such other place as Purchaser and the Seller Representative mutually agree, at 10:00 a.m. local time, on the Closing Date.

 

(b)         At the Closing, Purchaser will pay or cause to be paid, by wire transfer of immediately available funds:

 

(i)                         an aggregate amount equal to the Initial Purchase Price, in such amounts and to such accounts as shall be designated in writing by the Seller Representative to Purchaser at least two (2) Business Days before the Closing Date; and

 

(ii)                      an aggregate amount equal to the Closing Indebtedness, in such amounts and to such accounts as set forth in payoff letters (the “Payoff Letters”), in form and substance reasonably satisfactory to Purchaser, indicating that all corresponding Indebtedness will have been paid in full and providing for, among other things, the release of any Liens relating to such Indebtedness and including all necessary Uniform Commercial Code authorizations.

 

(c)          Simultaneously, each Seller will assign and transfer to Purchaser all of such Seller’s right, title and interest in and to the Units by delivering to Purchaser an assignment agreement, in the form of Exhibit A attached hereto, and the Sellers will cause the Company to prepare an amendment to the LLC Agreement to reflect such transfers and the admission of Purchaser, and the withdrawal of each Seller, as a member thereunder.  At the Closing, there shall also be delivered to the Seller Representative and Purchaser the certificates and other documents to be delivered under Articles VIII and IX.

 

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2.04                                          Purchase Price Adjustment.

 

(a)         No less than five (5) Business Days prior to the Closing Date, the Seller Representative shall prepare and deliver to Purchaser (i) a projected unaudited consolidated balance sheet of the Company and the Subsidiaries as of 12:01 AM (Pacific time) on the Closing Date, prepared in accordance with (I) GAAP and (II) accounting policies applied by the Company for purposes of preparing its consolidated financial statements for the year ended December 31, 2014 (with any conflicts between GAAP and the policies set forth in the preceding clause (II) to be resolved in favor of GAAP), without reflecting any actual or anticipated adjustments or effects arising from the transactions contemplated hereby (the “Estimated Closing Balance Sheet”), and (ii) a closing statement setting forth in reasonable detail a calculation, on the basis of the Estimated Closing Balance Sheet, of Assumed Liabilities (the “Estimated Assumed Liabilities”) and Closing Indebtedness (the items specified in the preceding clauses (i) and (ii) collectively, the “Estimated Closing Balance Sheet Documents”).  The Estimated Closing Balance Sheet Documents shall be subject to Purchaser’s review.  In reviewing such items, Purchaser shall have the right to review the work papers, schedules, memoranda and other documents Sellers and/or the Company prepared or reviewed in preparing the Estimated Closing Balance Sheet Documents and thereafter will have access, during normal business hours, to all relevant Books and Records, all to the extent Purchaser reasonably requires them to complete its review of the Estimated Closing Balance Sheet Documents.  In the event that Purchaser does not agree with the Estimated Closing Balance Sheet Documents or any portion thereof, Sellers shall consider any comments or changes proposed by Purchaser in good faith and Sellers and Purchaser shall negotiate in good faith to resolve the disputed items; provided that, for the avoidance of doubt, none of the failure to include in the Estimated Closing Balance Sheet Documents any comments or changes proposed by Purchaser, Purchaser’s acceptance of the Estimated Closing Balance Sheet Documents, and the consummation of Closing shall constitute an acknowledgement by Purchaser of the accuracy of the Estimated Closing Balance Sheet Documents or limit or otherwise affect Purchaser’s rights and remedies under this Agreement, including Purchaser’s right to include such comments or changes in the Final Closing Balance Sheet Documents.

 

(b)         Not later than 90 days after the Closing Date, Purchaser shall deliver to the Seller Representative (i) an unaudited consolidated balance sheet of the Company and the Subsidiaries as of 12:01 AM (Pacific time) on the Closing Date, prepared in accordance with (I) GAAP and (II) accounting policies applied by the Company for purposes of preparing its consolidated financial statements for the year ended December 31, 2014 (with any conflicts between GAAP and the policies set forth in the preceding clause (II) to be resolved in favor of GAAP), without reflecting any actual or anticipated adjustments or effects arising from the transactions contemplated hereby (the “Final Closing Balance Sheet”), and (ii) a closing statement setting forth in reasonable detail a calculation, on the basis of the Final Closing Balance Sheet, of Assumed Liabilities (the “Final Assumed Liabilities”) (the items specified in the preceding clauses (i) and (ii) collectively, the “Final Closing Balance Sheet Documents”).

 

(c)          The Final Closing Balance Sheet Documents shall be subject to the Seller Representative’s review.  In reviewing such items, the Seller Representative shall have the right to review the work papers, schedules, memoranda and other documents Purchaser prepared or reviewed in preparing the Final Closing Balance Sheet Documents and thereafter will have

 

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access, during normal business hours and upon reasonable advance notice, to all relevant Books and Records, all to the extent the Seller Representative reasonably requires them to complete its review of the Final Closing Balance Sheet Documents.  Within 30 days after its receipt of the Final Closing Balance Sheet Documents, the Seller Representative shall notify Purchaser whether, based on such review, it has any objections to the calculation of the Final Assumed Liabilities (an “Objection Notice”).  Unless the Seller Representative delivers to Purchaser within such 30-day period an Objection Notice, the Final Assumed Liabilities shall be final and binding.

 

(d)         If the Seller Representative delivers an Objection Notice, then (i) for 20 days after Purchaser receives such Objection Notice, Purchaser and the Seller Representative shall use their commercially reasonable efforts to agree on the calculation of the disputed amounts and (ii) lacking such agreement, the matter shall be referred to an independent nationally-recognized accounting firm as may be mutually agreed upon by Purchaser and the Seller Representative (the “Arbitrating Accountants”).  The Arbitrating Accountants shall be directed to render a written report to the Seller Representative and Purchaser on the unresolved disputed items as soon as practicable (and in no event later than thirty (30) days after submission of the dispute to the Arbitrating Accountants), to resolve only those unresolved disputed items set forth in the Objection Notice, not to make any determination of a disputed amount that is outside the range of the proposed amounts submitted by Purchaser and the Seller Representative, and to make any determinations solely in accordance with the terms and provisions of this Agreement.  If unresolved disputed items are submitted to the Arbitrating Accountants, the Seller Representative and Purchaser shall each furnish to the Arbitrating Accountants such work papers, schedules and other documents and information relating to the unresolved disputed items as the Arbitrating Accountants may reasonably request.  The determination of the Arbitrating Accountants shall be final and binding on Purchaser and Sellers and not subject to collateral attack for any reason other than manifest error or fraud.  The Seller Representative and Purchaser each agree to use its respective commercially reasonable efforts to cooperate with the Arbitrating Accountants and to cause the Arbitrating Accountants to resolve any dispute no later than thirty (30) days after submission of the dispute to the Arbitrating Accountants in accordance with this Agreement.  Of the fees, costs and expenses of the Arbitrating Accountants, Purchaser, on the one hand, and Sellers jointly and severally, on the other hand, shall bear a fraction equal to (i) the absolute value of the difference between the Post-Closing Adjustment that would have been payable based on the submission of such party and the Post-Closing Adjustment based on the determination of the Arbitrating Accountants divided by (ii) the absolute value of the difference between the Post-Closing Adjustment that would have been payable based on the submission of Purchaser and the Post-Closing Adjustment that would have been payable based on the submission of the Seller Representative.  For illustrative purposes only, should the Post-Closing Adjustment payable based on the submission of Purchaser be $80, the Post-Closing Adjustment payable based on the submission of the Seller Representative be $100 and the Post-Closing Adjustment payable based on the determination of the Arbitrating Accountants be $95, Purchase would bear 75% (($95 — $80) / ($100 - $80)) and Sellers would bear 25% (($100-$95) / ($100 - $80)) of the fees, costs and expenses of the Arbitrating Accountants.

 

(e)          If the amount equal to the Estimated Assumed Liabilities minus the Final Assumed Liabilities as finally determined hereunder (the “Post-Closing Adjustment”) is greater than $0 (zero), then Purchaser shall pay to the Seller Representative (for the benefit of Sellers) an

 

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amount equal to the Post-Closing Adjustment.  If the Post-Closing Adjustment is less than $0 (zero), then the Seller Representative shall (on behalf of Sellers) pay to Purchaser an amount equal to the absolute value of the Post-Closing Adjustment.  Each payment under this Section 2.04(e) shall be made within five Business Days after such final determination by wire transfer of immediately available funds to a bank account specified by the recipient.

 

2.05                                          Purchase Price Allocation.  Within sixty (60) days following the Closing, the Seller Representative shall deliver to Purchaser a proposed allocation of the Purchase Price (including any liabilities of the Company or any Subsidiary that are properly taken into account for Tax purposes and any payments to Sellers pursuant to Section 14.04) among the Assets and Properties of the Company and the Subsidiaries in accordance with Section 1060 of the Code and Treasury Regulations thereunder (and any similar provision of state, local or foreign law, as applicable). Purchaser shall have thirty (30) days following receipt of Seller Representative’s proposed allocation to provide any changes or objections. If Purchaser objects in writing to Seller Representative’s proposed allocation within such thirty (30) day period, then the parties shall cooperate in good faith to reach a mutually agreeable allocation. Any agreed allocation shall be binding on the parties, and each Seller and Purchaser shall use such agreed allocation in connection with the filing of all relevant U.S. federal, state and local income Tax Returns.  If the parties cannot agree on an appropriate allocation of the Purchase Price, each party shall be entitled to report using an allocation that such party determines appropriate for purposes of computing such party’s Tax obligations.

 

2.06                                          Further Assurances; Post-Closing Cooperation.

 

(a)         At any time or from time to time after the Closing, Sellers shall execute and deliver to Purchaser such other documents and instruments, provide such materials and information and take such other actions as Purchaser may reasonably request more effectively to vest title to the Units in Purchaser and, to the full extent permitted by Law, to put Purchaser in actual possession and operating control of the Company and the Subsidiaries and their Assets and Properties and Books and Records, and otherwise to cause Sellers to fulfill their obligations under this Agreement.

 

(b)         Following the Closing, Sellers and Purchaser will afford each other, and their respective counsel and accountants, during normal business hours, reasonable access to the books, records and other data relating to the Business or Condition of the Company in their possession with respect to periods prior to the Closing and the right to make copies and extracts therefrom, to the extent that such access may be reasonably required by the requesting party in connection with (i) the preparation of Tax Returns, (ii) the determination or enforcement of rights and obligations under this Agreement, (iii) compliance with the requirements of any Governmental or Regulatory Authority, (iv) the determination or enforcement of the rights and obligations of any party to this Agreement or (v) in connection with any actual or threatened Action or Proceeding.  Further, Sellers and Purchaser agree for a period extending six (6) years after the Closing Date not to destroy or otherwise dispose of any such books, records and other data unless they shall first offer in writing to surrender such books, records and other data to the other party and such other party shall not agree in writing to take possession thereof during the ten (10) day period after such offer is made.

 

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(c)          Notwithstanding anything to the contrary contained in this Section, if the parties are in an adversarial relationship in litigation or arbitration, the furnishing of information, documents or records in accordance with any provision of this Section shall be subject to applicable rules relating to discovery; provided that nothing in this Section 2.06(c) shall limit or otherwise modify Purchaser’s rights in, and Sellers’ obligation to deliver, all Assets and Properties and Books and Records of the Company and/or any Subsidiary.

 

2.07                                          Excluded Assets.  Notwithstanding anything in this Agreement to the contrary, the Assets and Properties listed on Section 2.07 of the Disclosure Schedule and all accounts receivable of any of the Company and the Subsidiaries to the extent such accounts receivable are set forth, with specific ledger references allowing their identification, on the Estimated Closing Balance Sheet (such Assets and Properties and accounts receivable, collectively, the “Excluded Assets”) shall be excluded from the Assets and Properties of the Company and its Subsidiaries.  The Sellers shall cause the Company and its Subsidiaries to transfer all right, title and interest in, and all obligations and liabilities related to, such Excluded Assets to a Person, other than the Company or any Subsidiary, effective prior to the Closing.  There shall be no adjustment of the Purchase Price in respect of such Excluded Assets.

 

2.08                                          Tax Treatment.  Purchaser and Sellers agree to treat the purchase and sale of the Units pursuant to this Agreement in accordance with, and as covered by, Revenue Ruling 99-6, 1999-1 C.B. 423 (Situation 2).  Sellers and Purchaser shall not (and shall cause their respective Affiliates not to) take any position on any Tax Return or any other filings, declarations or reports with the Internal Revenue Service and/or other taxing authorities that is inconsistent with such treatment unless otherwise required by applicable Law or pursuant to a final determination (within the meaning of Code Section 1313(a)) or corresponding provision of state, local or foreign Tax Law.

 

2.09                                          Certain Determinations.  Any determinations under this Agreement in which Purchaser action is required, including in connection with determinations of Purchase Price (specifically adjustments thereto), and indemnification (to the extent provided in Section 12.02(c)) or any dispute hereunder, any amendment or waiver of any of the terms and provisions hereof, and any consent or approval provided hereunder, shall be made by the Special Committee of the Board of Managers of Purchaser (or as may be constituted at the parent company of Purchaser) as constituted on the date hereof or, if such committee is no longer constituted, by a majority of the independent members of the Board of Managers of Purchaser or its parent (independence for these purposes meaning such individual is and has been independent of the Seller and has no interest in the Seller or any of its Affiliates other than solely by reason of an interest in Purchaser) (as applicable, the “Committee”).

 

ARTICLE III
 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth in the applicable section of the Disclosure Schedule (it being agreed that any matter disclosed in any section or subsection of the Disclosure Schedule shall be deemed disclosed in any other section or subsection thereof to the extent that such information is reasonably apparent to be applicable to such other section or subsection), the Company represents and warrants to Purchaser, as of the date hereof and as of the Closing Date, as follows:

 

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3.01                                          Authority.  The Company has all requisite limited liability company power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.  This Agreement has been duly and validly executed and delivered by the Company.  This Agreement constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms (assuming in each case due execution and delivery by each other party to this Agreement).

 

3.02                                          Organization of the Company.  The Company is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Delaware, and has full limited liability company power and authority to conduct its business as and to the extent now conducted and to own, use and lease its Assets and Properties.  The Company is duly qualified, licensed or admitted to do business and is in good standing in those jurisdictions specified in Section 3.02 of the Disclosure Schedule, which are the only jurisdictions in which the ownership, use or leasing of its Assets and Properties, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for those jurisdictions in which the adverse effects of all such failures by the Company to be qualified, licensed or admitted and in good standing could not in the aggregate reasonably be expected to have a Company Material Adverse Effect.  Sellers have prior to the execution of this Agreement delivered to Purchaser true and complete copies of the certificate of formation and limited liability company agreement of the Company as in effect on the date hereof.

 

3.03                                          Equity Interests.

 

(a)         The Units are duly authorized, validly issued and outstanding and represent 100% of the equity interests in the Company.

 

(b)         Except as disclosed in Section 3.03 of the Disclosure Schedule, there are no outstanding Options with respect to the Company.  The delivery of an assignment agreement, in the form of Exhibit A attached hereto, and an amendment to the LLC Agreement reflecting such transfer will transfer to Purchaser good and valid title to such Units, free and clear of all Liens.  Except as provided under the LLC Agreement, there are no preemptive rights, rights of first refusal, registration rights or similar rights with respect to the Units or any other equity interests of the Company or any agreements relating to voting of the Units or any other equity interests of the Company.

 

3.04                                          Subsidiaries.

 

(a)         Section 3.04 of the Disclosure Schedule lists the name and jurisdiction of organization of each Subsidiary.  Each Subsidiary is a limited liability company duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization, and has full limited liability company power and authority to conduct its business as and to the extent now conducted and to own, use and lease its Assets and Properties.  Each Subsidiary is duly qualified, licensed or admitted to do business and is in good standing in each jurisdiction in which the ownership, use or leasing of such Subsidiary’s Assets and Properties, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for those jurisdictions in which the adverse effects of all such failures by the Subsidiaries to be

 

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qualified, licensed or admitted and in good standing could not in the aggregate reasonably be expected to have a Company Material Adverse Effect.  Except for the equity interests in the Subsidiaries set forth on Section 3.04 of the Disclosure Schedule, neither the Company nor any Subsidiary owns or holds, directly or indirectly, any equity, membership, limited or general partner, or other ownership, economic and/or voting interests in any Person or any other securities.

 

(b)         Section 3.04 of the Disclosure Schedule lists for each Subsidiary all record owners of the outstanding equity interests of each Subsidiary and the equity interests held by each such record owner.  Except as disclosed in Section 3.04 of the Disclosure Schedule, all of the outstanding equity interests of each Subsidiary have been duly authorized and validly issued, are fully paid and nonassessable, and are owned, beneficially and of record, by the Company or Subsidiaries wholly owned by the Company free and clear of all Liens.  Except as disclosed in Section 3.05 of the Disclosure Schedule, there are no outstanding Options with respect to any Subsidiary.

 

(c)          Sellers have prior to the execution of this Agreement delivered to Purchaser true and complete copies of the certificate of formation and limited liability company agreement of each of the Subsidiaries as in effect on the date hereof.

 

3.05                                          No Conflicts.  The execution and delivery by the Company of this Agreement does not, and the performance by the Company of its obligations under this Agreement and the consummation of the transactions contemplated hereby will not:

 

(a)         conflict with or result in a violation or breach of any of the terms, conditions or provisions of the certificate or articles of incorporation or by-laws (or other comparable organizational documents) of the Company or any Subsidiary;

 

(b)         subject to obtaining the consents, approvals and actions, making the filings and giving the notices disclosed in Section 3.06 of the Disclosure Schedule, conflict with or result in a material violation or breach of any term or provision of any Law or Order applicable to the Company or any Subsidiary or any of their respective Assets and Properties (other than such conflicts, violations or breaches as would occur solely as a result of the identity or the legal or regulatory status of Purchaser or any of its Affiliates); or

 

(c)          except as disclosed in Section 3.05 of the Disclosure Schedule, (i) conflict with or result in a material violation or breach of, (ii) constitute (with or without notice or lapse of time or both) a default under, (iii) require the Company or any Subsidiary to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of, (iv) result in or give to any Person any right of termination, cancellation, acceleration or modification of or with respect to any Contract or License to which the Company or any Subsidiary is a party or by which any of their respective Assets and Properties is bound, or (v) result in the creation or imposition of any Lien upon the Company or any Subsidiary or any of their respective Assets and Properties.

 

3.06                                          Governmental Approvals and Filings.  Except as disclosed in Section 3.06 of the Disclosure Schedule, no consent, approval or action of, filing with or notice

 

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to any Governmental or Regulatory Authority, including any Gaming Authority, on the part of the Company or any Subsidiary is required in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby.

 

3.07                                          Books and Records.  The minute books and other similar records of the Company and the Subsidiaries as made available to Purchaser contain a true and complete record, in all material respects, of all action taken at all meetings and by all written consents in lieu of meetings of the members and managers of the Company and the Subsidiaries.  The membership interest transfer ledgers and other similar records of the Company and the Subsidiaries as made available to Purchaser accurately reflect all prior record transfers in the equity interests of the Company and the Subsidiaries. At Closing, all such books and records will be in the possession of the Company.

 

3.08                                          Financial Statements and Condition.

 

(a)         Prior to the execution of this Agreement, the Company has delivered to Purchaser true and complete copies of the following financial statements:

 

(i)                                                             the audited balance sheets of the Company and its consolidated Subsidiaries as of December 31, 2014, 2013 and 2012, and the related audited consolidated statements of operations, members’ equity and cash flows and related notes for each of the years ended December 31, 2014, 2013 and 2012 together with a true and correct copy of the report on such audited information by Ernst & Young LLP, and all letters from such accountants with respect to the results of such audits; and

 

(ii)                                                          the unaudited balance sheets of the Company and its consolidated Subsidiaries as of June 30, 2015, and the related unaudited consolidated statements of operations, members’ equity and cash flows for the portion of the fiscal year then ended.

 

Except as set forth in the notes thereto and as disclosed in Section 3.08(a) of the Disclosure Schedule, all such financial statements were prepared in accordance with GAAP (except for the absence of footnotes and changes resulting from audits and year-end adjustments in the case of the Unaudited Financial Statements the effect of which is not, individually or in the aggregate, material) and fairly present in all material respects the consolidated financial condition and results of operations of the Company and its consolidated Subsidiaries as of the respective dates thereof and for the respective periods covered thereby.  The financial condition and results of operations of each Subsidiary are, and for all periods referred to in this Section 3.08 have been, consolidated with those of the Company.

 

(b)         Except for the execution and delivery of this Agreement and the transactions to take place pursuant hereto on or prior to the Closing Date and as disclosed in Section 3.08 of the Disclosure Schedule, since the Unaudited Financial Statement Date (i) the business of the Company and the Subsidiaries has been operated in all material respects in the ordinary course, (ii) there has not been any Company Material Adverse Effect and (iii) no action has been taken that, if taken after the date hereof, would require the consent of Purchaser under Section 6.04(b).

 

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(c)          Except (i) as and to the extent disclosed in the Financial Statements, (ii) for Liabilities incurred after June 30, 2015 in the ordinary course of business consistent with past practice and expressly included in the calculation of Final Assumed Liabilities, and (iii) for Liabilities set forth on Section 3.08(c) of the Disclosure Schedule, neither the Company nor any of its Subsidiaries has any Liabilities, whether or not such Liabilities would be required by GAAP to be reflected on a consolidated balance sheet of the Company and its Subsidiaries.

 

3.09                                          Taxes.  Except as set forth in Section 3.09 of the Disclosure Schedule:

 

(a)         The Company has been treated as a partnership and not as an association taxable as a corporation for U.S. federal income tax purposes since its inception, and will be so treated for all taxable periods up to the Closing Date.  Each Subsidiary has been treated as disregarded as an entity separate from the Company for U.S. federal income tax purposes and will be so treated for all taxable periods up to the Closing Date.

 

(b)         The Company and each Subsidiary have filed all Tax Returns required to be filed by applicable Law.  All Tax Returns were (and, as to Tax Returns not filed as of the date hereof but due on or before the Closing Date, will be) true, complete and correct and filed on a timely basis.  The Company and each Subsidiary (i) has timely paid all Taxes required to be paid as of the date hereof (and, as to Taxes not due as of the date hereof but due on or before the Closing Date, will timely pay such Taxes); or (ii) has duly and fully provided (or, prior to the Closing Date, will provide) reserves adequate to pay all Taxes for the periods up to and including the Closing Date.

 

(c)          There are no Tax Liens upon the assets of the Company (or any Subsidiary) except Permitted Liens.

 

(d)         The Company and each Subsidiary have withheld and paid all Taxes required to have been withheld and paid by it in connection with amounts paid or owing to any employee, independent contractor, creditor, equityholder or other third party, and all Forms W-2 and 1099 with respect thereto have been properly completed and timely filed.

 

(e)          No deficiency for any Taxes has been proposed, asserted or assessed, in each case in writing, against the Company or any Subsidiary that has not been resolved and paid in full.

 

(f)           No audits or other Actions or Proceedings are presently pending or, to the Knowledge of Sellers, threatened with regard to any Taxes or Tax Returns of the Company or any Subsidiary.

 

(g)          Neither the Company nor any Subsidiary has received any written ruling of a Governmental or Regulatory Authority relating to Taxes, or any other written and legally binding agreement with a Governmental or Regulatory Authority relating to Taxes, in each case within the last five years.

 

(h)         No agreement as to indemnification for, contribution to, or payment of Taxes exists between the Company or any Subsidiary, on the one hand, and any other person, on the

 

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other (other than the LLC Agreement).  Neither the Company nor any Subsidiary has any liability for Taxes of any person under Treasury Regulation Section 1.1502-6 (or any similar provision of any state, local or foreign Law), or as a transferee or successor, by contract or otherwise.

 

(i)             No written claim has been made by a Governmental or Regulatory Authority with respect to the Company or any Subsidiary in a jurisdiction where such Company or Subsidiary does not file Tax Returns that it is subject to taxation by that jurisdiction.

 

(j)            Neither the Company nor any Subsidiary has ever been a member of any consolidated, combined, affiliated, unitary or similar group for any Tax purposes.

 

(k)         Neither the Company nor any Subsidiary has engaged in any “reportable transactions” as defined in Treasury Regulation Section 1.6011-4(b).

 

(l)             Neither the Company nor any Subsidiary has, nor has it ever had, a permanent establishment in any country other than the United States.

 

(m)     Neither the Company nor any Subsidiary (nor any other Person on their behalf) has (i) executed or entered into a closing agreement pursuant to Section 7121 of the Code or any similar provision of law; or (ii) other than pursuant to extensions of time to file Tax Returns obtained in the ordinary course of business, granted any extension or waiver for the assessment or collection of Taxes, which Taxes have not since been paid.

 

3.10                                          Legal Proceedings.  Except as disclosed in Section 3.10 of the Disclosure Schedule (with paragraph references corresponding to those set forth below), (i) there is not pending or, to the Knowledge of Sellers, threatened (A) any material Actions or Proceedings against, relating to or affecting the Company or any Subsidiary or any of their respective Assets and Properties or any of their respective directors, officers, employees or agents (in their capacities as such), or (B) any Actions or Proceedings seeking to restrain, enjoin, or otherwise prohibit or make illegal the consummation of any of the Transactions, and (ii) there are no Orders outstanding against the Company or any Subsidiary. To the Knowledge of Sellers, no event has occurred or circumstance exists that would reasonably be expected to give rise to or serve as a basis for the commencement of any material Actions or Proceedings or material Orders against the Company or any Subsidiary.

 

3.11                                          Compliance with Laws.  Since December 31, 2012, (i) the Company and each of its Subsidiaries have complied in all material respects with all applicable Laws, including Gaming Laws, and Orders, (ii) no written notice, charge, claim, action or assertion has been received by the Company or any of its Subsidiaries or has been filed or commenced against the Company or any Subsidiary alleging any violation of any of the foregoing, and (iii) to the Knowledge of Sellers, no charge, claim, action or assertion has been threatened in writing against the Company or any of its Subsidiaries alleging any material violation of any of the foregoing.

 

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3.12                                          Benefit Plans; ERISA.

 

(a)         Section 3.12(a) of the Disclosure Schedule contains a true and complete list of each Benefit Plan.

 

(b)         With respect to each material Benefit Plan, true and complete copies of the following have been provided or made available to Purchaser:  (i) the three (3) most recent annual reports (if required under ERISA), including all schedules and attachments; (ii) the latest/current summary plan description (if required under ERISA), together with each summary of material modifications required under ERISA; (iii) each such written Benefit Plan and all amendments and restatements thereto; (iv) with respect to each Qualified Plan, the most recent determination, opinion or advisory letter, ruling or notice issued by the IRS or any other Governmental or Regulatory Authority, and a complete set of plan documents since inception or, if later, the date of the last IRS determination or opinion letter; (v) all trust agreements, insurance contracts, and other funding vehicles, (vi) to the extent applicable, the most recent financial statements; (vii) all contracts with third party administrators, investment managers, consultants, and other service providers; (viii) all reports, including all discrimination testing reports, submitted within the three (3) years preceding the Closing Date by third party administrators, actuaries, investment managers, consultants, or other service providers; (ix) all correspondence within the last six (6) years to or from the IRS, U.S. Department of Labor or other Governmental or Regulatory Authority; and (x) such additional documents related to the Benefit Plans as are reasonably requested by Purchaser prior to the Closing Date.

 

(c)          Each Benefit Plan complies and has been administered in all material respects in accordance with the applicable Benefit Plan documents and with all applicable Laws (including ERISA and the Code).  Each Benefit Plan that is intended to be a Qualified Plan has received a favorable determination letter from the IRS, or with respect to a prototype plan, can rely on an opinion letter from the IRS to the prototype plan sponsor, to the effect that such Qualified Plan is so qualified and that the plan and the trust related thereto are exempt from federal income Taxes under Sections 401(a) and 501(a), respectively, of the Code, and, to the Knowledge of Sellers, nothing has occurred that could reasonably be expected to cause the revocation of such determination letter from the IRS or the unavailability of reliance on such opinion letter from the IRS, as applicable.

 

(d)         Except as set forth in Section 3.12(d) of the Disclosure Schedule, all benefits, contributions and premiums required by Sellers, the Company or any of its Subsidiaries and due under the terms of each Benefit Plan or applicable Law have been timely made and paid in accordance with the terms of such Benefit Plan, the terms of all applicable Laws and GAAP.  With respect to any Benefit Plan, no event has occurred or, to the Knowledge of Sellers, is reasonably expected to occur that has resulted in or would subject the Company or a Subsidiary to a Tax under Section 4971 of the Code or the assets of the Company or the Subsidiaries to a lien under Section 430(k) of the Code.

 

(e)          Except as set forth in Section 3.12(e) of the Disclosure Schedule, (i) no Benefit Plan has been or is covered by Title IV of ERISA, ERISA Section 302 or 303 or Code Section 412 or 430 and neither the Company nor the Subsidiaries nor any ERISA Affiliate has any liability or obligation under Title IV of ERISA, ERISA Section 302 or 303 or Code Section

 

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412 or 430; and (ii) neither the Company nor any Subsidiary (A) has at any time prior to the execution date of this Agreement contributed to or had an obligation to contribute to, (B) contributes to or has an obligation to contribute to, (C) has any obligation whatsoever relating to, or (D) expects to incur an obligation relating to, any of the following: (x) any “employee pension benefit plan” as defined in ERISA Section 3(2) subject to Title IV of ERISA, Section 302 or 303 or Code Section 412 or 430, (y) any “multiemployer plan” as defined in ERISA Section 3(37) or ERISA Section 4001(a)(3), or (z) a “multiple employer plan” (within the meaning of Code Section 413(c) or ERISA Section 4001(a)(3)).

 

(f)           Except as set forth in Section 3.12(f) of the Disclosure Schedule and other than as required under Section 4980B of the Code or other applicable Laws, no Benefit Plan provides benefits or coverage in the nature of health, life or disability insurance following retirement or other termination of employment (other than death benefits when termination occurs upon death).

 

(g)          Except as set forth in Section 3.12(g) of the Disclosure Schedule: (i) there is no pending or, to the Knowledge of Sellers, threatened Actions or Proceedings relating to a Benefit Plan; and (ii) to the Knowledge of Sellers, no Benefit Plan has within the three (3) years prior to the date hereof been the subject of an examination or audit by a Governmental or Regulatory Authority.

 

(h)         Except as set forth in Section 3.12(h) of the Disclosure Schedule, neither the execution of the Agreement nor the consummation of the Transactions will, either alone or in combination with another event: (i) result in the payment to any Company Employee, director or consultant of the Company or the Subsidiaries of any money or other property; (ii) accelerate the vesting of or provide any additional rights or benefits (including funding of compensation or benefits through a trust or otherwise) to any Company Employee, director or consultant; or (iii) limit or restrict the ability of Purchaser or its Affiliates to merge, amend or terminate any Benefit Plan.  Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will result in “excess parachute payments” within the meaning of Section 280G(b) of the Code or otherwise result in any payments that would fail to be deductible under Section 280G of the Code.

 

(i)             Except as set forth on Section 3.12(i) of the Disclosure Schedule, each Benefit Plan can be terminated within thirty (30) days of the Closing Date without payment of any additional contribution or amount and without creating any unfunded or unaccrued liability or the vesting or acceleration of any benefits promised by such Benefit Plan, except with respect to vesting as may be required by law.  Except as set forth on Section 3.12(i) of the Disclosure Schedule, no action or omission of the Company or any Subsidiary, Benefit Plan fiduciary, or any shareholder, director, officer, employee, or agent thereof, and no Benefit Plan documentation or agreement, summary plan description or other written communication distributed generally to employees, in any way restricts, impairs or prohibits (whether legally binding or not) the Company, any Subsidiary, Purchaser, Purchaser’s Affiliates or any successor thereof from amending, merging, terminating or otherwise discontinuing any Benefit Plan in accordance with the express terms of any such plan and applicable law at or after Closing, except as required by law and any such amendment, merger, termination or discontinuance may occur without any liability to the Company, any Subsidiary or Purchaser or any Affiliate of Purchaser.

 

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(j)            Except as set forth in Section 3.12(j) of the Disclosure Schedule, to the Knowledge of Sellers, there is no transaction nor has there been any such transaction in connection with the Company or any Subsidiary or any fiduciary of any Benefit Plan which could be subject to either a civil penalty assessed pursuant to ERISA Section 502, a tax imposed by Code Section 4975 or Liabilities for a breach of fiduciary responsibility under ERISA (including liability through an indemnification agreement or policy), and, to the Knowledge of Sellers, no basis for any such Liability exists, including, but not limited to, any transaction in violation of ERISA Section 406(a) or (b) or any “prohibited transaction” (as defined in Code Section 4975(c)(1)).

 

(k)         No Benefit Plan is funded by, associated with, or related to a “voluntary employee’s beneficiary association” within the meaning of Code Section 501(c)(9), a “welfare benefit fund” within the meaning of Code Section 419, a “qualified asset account” within the meaning of Code Section 419A or a “multiple employer welfare arrangement” within the meaning of ERISA Section 3(40).

 

(l)             Neither the Company nor any of its Subsidiaries has any obligation or Liabilities for the gross-up or reimbursement of Taxes resulting from violations of Code Section 409A.

 

3.13                                          Real Property.  None of the Company nor any Subsidiary owns any real property.  Section 3.13 of the Disclosure Schedule contains a true and correct list of all leases of real property under which the Company or any Subsidiary is the lessee as of the date hereof (true and complete copies of which, together with all amendments and supplements thereto and all waivers of any terms thereof, have been delivered to Purchaser prior to the execution of this Agreement).

 

3.14                                          Tangible Personal Property.  The Company or a Subsidiary is in possession of and has good title to, or has valid leasehold interests in or valid rights under Contract to use, all tangible personal property used in and individually or in the aggregate with other such property material to the Business or Condition of the Company.  All such tangible personal property is free and clear of all Liens, other than Permitted Liens and Liens, if any, disclosed in Section 3.14 of the Disclosure Schedule.  All such tangible personal property is in good working order and condition, ordinary wear and tear excepted, and free of any deferred maintenance or deferred capital expenditure needs.

 

3.15                                          Intellectual Property Rights.

 

(a)         The Company or a Subsidiary owns (free and clear of any Liens), or is licensed or otherwise has sufficient rights to use, for any purpose and without restrictions, all Intellectual Property used or held for use in the operation of the business of the Company and the Subsidiaries as currently conducted and to the knowledge of the Company and the Subsidiaries as currently planned to be conducted (“Company Owned Intellectual Property”).  Section 3.15(a) of the Disclosure Schedule sets forth a true and complete list of all Intellectual Property owned by the Company or any Subsidiary with a description of owner, jurisdiction, registration number, applicant number or issuance number, date of application, issuance and/or filing as to which a registration has been obtained by or applied for with any Governmental or Regulatory

 

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Authorities in any jurisdiction in the world.  Except as disclosed in Section 3.15(a) of the Disclosure Schedule all registrations with and applications to Governmental or Regulatory Authorities with respect to Intellectual Property owned by the Company or a Subsidiary are valid, subsisting and in full force and effect (or with respect to applications applied for).

 

(b)         Except as disclosed in Section 3.15(b) (i) there are no material restrictions on the direct or indirect transfer of any Contract, or any interest therein, held by the Company or any Subsidiary with respect to Intellectual Property and (ii) neither the Company nor any Subsidiary is in default in any material respect under any Contract to use Intellectual Property.

 

(c)          Except as set forth in Section 3.15(c) of the Disclosure Schedule, none of Sellers, the Company nor any Subsidiary has received written notice that the Company or any Subsidiary is infringing, misappropriating, diluting or otherwise violating any Intellectual Property of any other Person.  To the Knowledge of Sellers, no claim is pending or has been made, asserted or threatened to such effect that has not been resolved and neither the Company nor any Subsidiary is infringing, misappropriating, diluting or otherwise violating any Intellectual Property of any other Person.  To the Knowledge of Sellers, no Person has misappropriated, infringed, diluted, or otherwise violated, either directly or indirectly, any Intellectual Property owned, used or held for use by the Company or any Subsidiary.

 

3.16                                          Sufficiency of Assets; No other Business.

 

(a)         Immediately following the Closing, the Company and the Subsidiaries will own, or will have valid rights to use, all rights, properties and other assets used in the ordinary course or necessary for the conduct of the business of the Company and the Subsidiaries as it is currently conducted, other than the Excluded Assets.

 

(b)         Except as set forth in Section 3.16(b) of the Disclosure Schedule, neither the Company nor any Subsidiary currently engages, or since January 1, 2012 has engaged, in any business or in the provision of any services, other than in the management of the Station Operations.

 

3.17                                          Contracts.

 

(a)         Section 3.17(a) of the Disclosure Schedule (with paragraph references corresponding to those set forth below) contains a true and complete list of each of the following Contracts or other arrangements (true and complete copies or, with respect to oral Contracts or oral arrangements, reasonably complete and accurate written descriptions of which, together with all amendments and supplements thereto and all waivers of any terms thereof, have been delivered to Purchaser prior to the execution of this Agreement), to which the Company or any Subsidiary is a party or by which any of their respective Assets and Properties is bound:

 

(i)                                                             all Contracts (excluding Benefit Plans) providing for a commitment of employment or consultation services for a specified or unspecified term or otherwise relating to employment or consultation services or the termination of employment or consultation services;

 

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(ii)                                                          all Contracts containing any provision or covenant prohibiting or limiting the ability of the Company or any Subsidiary to engage in any business activity or compete with any Person or prohibiting or materially limiting the ability of any Person to compete with the Company or any Subsidiary;

 

(iii)                                                       all Contracts containing any provision or covenant prohibiting or limiting the ability of the Company or any Subsidiary to solicit or hire any individual or group of individuals;

 

(iv)                                                      all material partnership, joint venture, shareholders’ or other similar Contracts with any Person;

 

(v)                                                         all Contracts relating to Indebtedness of the Company or any Subsidiary in excess of One Hundred Thousand Dollars ($100,000.00) (including Indebtedness owing to the Company or any wholly-owned Subsidiary);

 

(vi)                                                      all Contracts relating to (A) the disposition or acquisition of any Assets and Properties, other than dispositions or acquisitions in the ordinary course of business consistent with past practice, and (B) any merger or other business combination;

 

(vii)                                                   all Contracts that (A) limit or contain restrictions on the ability of the Company or any Subsidiary to declare or pay dividends on, to make any other distribution in respect of or to issue or purchase, redeem or otherwise acquire its capital stock, to incur Indebtedness, to incur or suffer to exist any Lien, to purchase or sell any Assets and Properties, to change the lines of business in which it participates or engages or to engage in any merger, consolidation or other business combination or (B) require the Company or any Subsidiary to maintain specified financial ratios or levels of net worth or other indicia of financial condition;

 

(viii)                                                all Contracts with or for the benefit of any Affiliate of the Company (other than any Subsidiary or the Purchaser or any of its subsidiaries), any Seller, or any Related Person of any Seller (each, an “Affiliate Agreement”);

 

(ix)                                                      any Contract between the Company or any Subsidiary, on the one hand, and Purchaser or any of Purchaser’s subsidiaries, on the other hand, including Contracts providing for management services;

 

(x)                                                         any Contract relating to the development, ownership, licensing or use of any Intellectual Property, including license agreements, coexistence agreements and covenants not to sue;

 

(xi)                                                      any Contract for capital expenditures committing the Company and Subsidiaries, collectively, to such expenditures in excess of One Hundred Thousand Dollars ($100,000);

 

(xii)                                                   any collective bargaining agreement or other Contract with any labor union or employee representative;

 

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(xiii)                                                each Contract which provides for payment by the Company or any Subsidiary of commissions or similar payments (other than to their respective employees in the ordinary course of business);

 

(xiv)                                               any power of attorney that is currently effective and outstanding;

 

(xv)                                                  each written warranty, guaranty or other similar undertaking with respect to contractual performance extended by the Company or any Subsidiary other than in the ordinary course of business; and

 

(xvi)                                               all other Contracts (other than Benefit Plans, leases listed in Section 3.13 of the Disclosure Schedule and insurance policies listed in Section 3.19 of the Disclosure Schedule) that either (A) involve the payment or potential payment, pursuant to the terms of any such Contract, by or to the Company or any Subsidiary of more than One Hundred Thousand Dollars ($100,000.00) at one time or in any twelve (12) month period, or (B) cannot be terminated within sixty (60) days after giving notice of termination without resulting in any material cost or penalty to the Company or any Subsidiary.

 

(b)         Each Contract required to be disclosed in Section 3.13 of the Disclosure Schedule, Section 3.17(a) of the Disclosure Schedule, or Section 3.19 of the Disclosure Schedule is in full force and effect and constitutes a legal, valid and binding agreement, enforceable in accordance with its terms, of the Company or its Subsidiary and, to the Knowledge of Sellers, each other party thereto, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability.  Except as disclosed in Section 3.17(b) of the Disclosure Schedule neither the Company, any Subsidiary nor, to the Knowledge of Sellers, any other party to such Contract is, or has received notice of termination or notice that it is, in violation or breach of or default under any such Contract (or with notice or lapse of time or both, would be in violation or breach of or default under any such Contract) in any material respect, and there are no outstanding claims for indemnification under any such Contract.

 

3.18                                          Licenses; Gaming Licenses.  Except as disclosed in Section 3.18 of the Disclosure Schedule: (i) collectively, all Licensed Parties own or validly hold all Licenses necessary for or used in the operation of the business of the Company and the Subsidiaries; (ii) each such License is valid, binding and in full force and effect and no event has occurred that permits (or with the giving of notice or lapse of time, would permit) the revocation, non-renewal, modification, suspension, limitation or termination of any such License; (iii) no Licensed Party is (or with the giving of notice or lapse of time or both, would be) in non-compliance with or default under any such License or has received written notification by a Governmental or Regulatory Authority alleging any such non-compliance or default; and (iv) neither the Company nor any Subsidiary or Licensing Affiliate has ever abandoned or withdrawn or been denied or had suspended or revoked a License or an application therefor.

 

3.19                                          Insurance.  Section 3.19 of the Disclosure Schedule contains a true and complete list of all material insurance policies currently in effect that insure the business, operations or employees of the Company or any Subsidiary or affect or relate to the ownership,

 

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use or operation of any of the Assets and Properties of the Company or any Subsidiary and that (i) have been issued to the Company or any Subsidiary or (ii) have been issued to any Person (other than the Company or any Subsidiary) for the benefit of the Company or any Subsidiary.  The insurance coverage provided by any of the policies described in clause (i) above will not terminate or lapse by reason of the transactions contemplated by this Agreement.  Each policy referred to in clause (i) above is valid and binding and in full force and effect, all premiums due under such policies have been paid and neither the Company nor any Subsidiary has received any written notice of cancellation or termination in respect of any such policy or is in default thereunder in any material respect.

 

3.20                                          Employees; Labor Relations.  The Company and its Subsidiaries are, and have at all times within the past five years been, in compliance in all material respects with all Laws relating to the employment of labor, including any provision thereof relating to wages, hours, collective bargaining, labor relations, employment practices, prohibited discrimination, immigration status, worker classification (including the proper classification of working as independent contractors and consultants and exempt or non-exempt), equal opportunity, leave issues, unemployment insurance, workers’ compensation, affirmative action, plant closing, layoffs, and employee health, safety and welfare.  Neither the Company nor any Subsidiary is the subject of any Actions or Proceedings or other legal controversies, including strikes, slowdowns, work stoppages, lockouts or other material labor dispute, that is pending or, to the Knowledge of Sellers, threatened, which involve any past or current employees or contractors of the Company or any of its Subsidiaries, and no such Actions or Proceedings or other legal controversies have occurred within the past five (5) years.  Neither the Company nor any of its Subsidiaries is or has been party to (or required to be a party to) or bound by any collective bargaining, or contract with a union or other similar labor-related representative or organization, and, to the Knowledge of Sellers, there exists no current union organizational effort with respect to any employees of the Company or any of its Subsidiaries. To the knowledge of Sellers, no employees of the Company or any of its Subsidiaries are represented by a union or similar employee representative or organization. No officer of the Company has notified the Company that he or she intends to terminate his or her employment with the Company. To the Knowledge of Sellers, no past or current employee of or consultant to the Company or any of its Subsidiaries is currently in violation of any Restrictive Covenant owing (i) to the Company or any of its Subsidiaries or (ii) to any other Person that would reasonably be expected to adversely affect the right or ability of any such individual to work for or provide services to the Company or any of its Subsidiaries.

 

3.21                                          Certain Payments.  None of the Company, any Subsidiary, any director, officer, manager or, to the Knowledge of the Sellers, any agent or employee of the Company or any Subsidiary, or any other Person associated with or acting for or on behalf of the Company or any Subsidiary, has directly or indirectly (a) made any contribution, gift (other than routine business gifts and entertainment of nominal value), bribe, rebate, payoff, influence payment, kickback or other payment to any Person, private or public, regardless of form, whether in money, property or services to (i) obtain favorable treatment in securing business, (ii) to pay for favorable treatment for business secured or (iii) to obtain special concessions or for special concessions already obtained, for or in request of the Company or any Subsidiary, in each case that would violate any legal requirement, or (b) established or maintained any fund or asset on

 

28

 

behalf of the Company or any Subsidiary that has not been recorded in the books and records of the Company or Subsidiary, as applicable.

 

3.22                                          Related Party Transactions.  Except as set forth on Section 3.22 of the Disclosure Schedule, (i) neither any Seller nor any Related Person of any Seller has, directly or indirectly, any interest in any property (other than the Excluded Assets) (whether real, personal, or mixed and whether tangible or intangible) used by the Company or its Subsidiaries or in any Contract to which the Company or any Subsidiary is a party, (ii)  there is no indebtedness, obligations or other Liabilities owed by the Company or any Subsidiary to any Seller or any Related Person of any Seller or by any Seller or any Related Person of any Seller to the Company or any Subsidiary, and (iii) neither the Company nor any Subsidiary has guaranteed any indebtedness or other obligation or liability owed by any Seller or any Related Person of any Seller.  Except as set forth on Section 3.22 of the Disclosure Schedule, no Related Person of the Company or its Subsidiaries has any interest in any property (other than the Excluded Assets) (whether real, personal, or mixed and whether tangible or intangible) used by the Company or its Subsidiaries and there are no Contracts or Liabilities between the Company or any Subsidiary, on the one hand, and any such Related Person, on the other hand.

 

3.23                                          Brokers.  All negotiations relative to this Agreement and the transactions contemplated hereby have been carried out by Sellers directly with Purchaser without the intervention of any Person on behalf of Sellers in such manner as to give rise to any valid claim by any Person against Purchaser, the Company or any Subsidiary for a finder’s fee, brokerage commission or similar payment.

 

3.24                                          Environmental Matters.  To the Knowledge of Sellers, there are no hazardous substances, materials or pollutants located or managed in, on or under any of the real property leased or subleased by the Company or any Subsidiary in violation of applicable Law.

 

3.25                                          Representations Complete.  None of the representations or warranties made by the Company in this Agreement contains any untrue statement of a material fact, or omits to state any material fact necessary in order to make the statements contained herein, in the light of the circumstances under which they were made, not misleading.

 

ARTICLE IV
 REPRESENTATIONS AND WARRANTIES OF SELLERS

 

Except as set forth in the applicable section of the Disclosure Schedule (it being agreed that any matter disclosed in any section or subsection of the Disclosure Schedule shall be deemed disclosed in any other section or subsection thereof to the extent that such information is reasonably apparent to be applicable to such other section or subsection), each Seller, severally and not jointly, hereby represents and warrants to Purchaser, as of the date hereof and as of the Closing Date, as follows:

 

4.01                                          Organization; Good Standing.  Such Seller is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization.  Such Seller has full power and authority to execute and deliver this Agreement and to perform its

 

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obligations hereunder and to consummate the transactions contemplated hereby, including without limitation to own, hold, sell and transfer (pursuant to this Agreement) the Units.

 

4.02                                          Authority.  Such Seller has all requisite trust or limited liability company, as applicable, power and authority to execute and deliver this Agreement and each Ancillary Agreement, to perform its obligations hereunder under thereunder and to consummate the transactions contemplated hereby and thereby.  This Agreement has been, and at Closing each Ancillary Agreement will be, duly and validly executed and delivered by such Seller.  This Agreement constitutes, and each Ancillary Agreement will at Closing constitute, a legal, valid and binding obligation of such Seller enforceable against such Seller in accordance with its terms (assuming in each case due execution and delivery by each other party to the applicable agreement).

 

4.03                                          Ownership of Units.  Such Seller owns the Units listed opposite such Seller’s name in Section 4.03 of the Disclosure Schedule, beneficially and of record, free and clear of all Liens.  The delivery of such Seller’s assignment agreement, in the form of Exhibit A attached hereto, and an amendment to the LLC Agreement reflecting such transfer will transfer to Purchaser good and valid title to such Seller’s Units, free and clear of all Liens.  Except for the LLC Agreement, such Seller is not party to any agreement pursuant to which such Seller has granted preemptive rights, rights of first refusal, registration rights or similar rights with respect to the Units or any other equity interests of the Company or any agreement relating to voting of the Units or any other equity interests of the Company.

 

4.04                                          No Conflicts.  The execution and delivery such Seller of this Agreement or any Ancillary Agreement do and will not, and the performance by such Seller of its obligations under this Agreement or any Ancillary Agreement and the consummation of the transactions contemplated hereby or thereby will not:

 

(a)         conflict with or result in a violation or breach of any of the terms, conditions or provisions of the certificate or articles of incorporation or by-laws (or other comparable organizational documents) of such Seller;

 

(b)         subject to obtaining the consents, approvals and actions, making the filings and giving the notices disclosed in Section 3.06 of the Disclosure Schedule, conflict with or result in a violation or breach of any term or provision of any Law or Order applicable to such Seller or any of its Assets and Properties (other than such conflicts, violations or breaches as would occur solely as a result of the identity or the legal or regulatory status of Purchaser or any of its Affiliates); or

 

(c)          except as disclosed in Section 4.04 of the Disclosure Schedule, (i) conflict with or result in a violation or breach of, (ii) constitute (with or without notice or lapse of time or both) a default under, (iii) require such Seller to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of, (iv) result in or give to any Person any right of termination, cancellation, acceleration or modification of or with respect to any Contract or License to which such Seller is a party or by which any of its respective Assets and Properties is bound, or (v) result in the creation or imposition of any Lien upon such Seller, such Seller’s Units, any of such Seller’s respective Assets and Properties.

 

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4.05                                          Governmental Approvals and Filings.  Except as disclosed in Section 3.07 of the Disclosure Schedule, no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority, including any Gaming Authority, on the part of such Seller is required in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby.

 

4.06                                          Legal Proceedings.  Except as disclosed in Section 4.06 of the Disclosure Schedule, there are no Actions or Proceedings pending or threatened against, relating to or affecting such Seller or any of its respective Assets and Properties or any of its directors, officers, employees or agents (in their capacities as such) that relate to or affect the Company or any Subsidiary or any of their respective Assets and Properties or that are seeking to prevent, hinder or delay any transaction contemplated under this Agreement.

 

4.07                                          Representations Complete.  None of the representations or warranties made by the Sellers in this Agreement contains any untrue statement of a material fact, or omits to state any material fact necessary in order to make the statements contained herein, in the light of the circumstances under which they were made, not misleading.

 

ARTICLE V
 REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

Except as set forth in the applicable section of the Disclosure Schedule (it being agreed that any matter disclosed in any section or subsection of the Disclosure Schedule shall be deemed disclosed in any other section or subsection thereof to the extent that such information is reasonably apparent to be applicable to such other section or subsection), Purchaser hereby represents and warrants to Sellers, as of the date hereof and as of the Closing Date, as follows:

 

5.01                                          Organization.  Purchaser is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Nevada.  Purchaser has full limited liability company power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.

 

5.02                                          Authority.  The execution and delivery by Purchaser of this Agreement and each Ancillary Agreement, and the performance by Purchaser of its obligations hereunder and thereunder, have been duly and validly authorized by the Board of Managers of Purchaser, no other limited liability company action on the part of Purchaser being necessary.  This Agreement has been, and at Closing each Ancillary Agreement will be, duly and validly executed and delivered by Purchaser.  This Agreement constitutes, and each Ancillary Agreement will at Closing constitute, a legal, valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its terms (assuming in each case due execution and delivery by each other party to the applicable agreement).

 

5.03                                          No Conflicts.  The execution and delivery by Purchaser of this Agreement or any Ancillary Agreement do not and will not, and the performance by Purchaser of its obligations under this Agreement or any Ancillary Agreement and the consummation of the transactions contemplated hereby and thereby will not:

 

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(a)         conflict with or result in a violation or breach of any of the terms, conditions or provisions of the certificate of formation or limited liability company agreement of Purchaser;

 

(b)         subject to obtaining the consents, approvals and actions, making the filings and giving the notices disclosed pursuant to Section 3.06 of the Disclosure Schedule, conflict with or result in a violation or breach of any term or provision of any Law, including Gaming Laws, or Orders applicable to Purchaser or any of its Assets and Properties; or

 

(c)          except as disclosed pursuant to Section 3.06 or 4.04(c) of the Disclosure Schedule, (i) conflict with or result in a violation or breach of, (ii) constitute (with or without notice or lapse of time or both) a default under, (iii) require Purchaser to obtain any consent, approval or action of, make any filing with or give any notice to, any Person as a result or under the terms of, or (iv) result in the creation or imposition of any Lien upon Purchaser or any of its Assets or Properties under, any Contract or License to which Purchaser is a party or by which any of its Assets and Properties is bound.

 

5.04                                          Governmental Approvals and Filings.  Except as disclosed in Section 4.04 of the Disclosure Schedule, no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority, including any Gaming Authority, on the part of Purchaser is required in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby.

 

5.05                                          Legal Proceedings.  There are no Actions or Proceedings pending or, to the knowledge of Purchaser, threatened against, relating to or affecting Purchaser or any of its Assets and Properties which could reasonably be expected to result in the issuance of an Order restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement.

 

5.06                                          Purchase for Investment.  The Units will be acquired by Purchaser (or, if applicable, its assignee pursuant to Section 14.10(b)(i)) for its own account for the purpose of investment, it being understood that the right to dispose of such Units shall be entirely within the discretion of Purchaser (or such assignee, as the case may be).

 

5.07                                          Brokers.  Except as set forth in Section 5.07 of the Disclosure Schedule, all negotiations relative to this Agreement and the transactions contemplated hereby have been carried out by Purchaser directly with Sellers without the intervention of any Person on behalf of Purchaser in such manner as to give rise to any valid claim by any Person against Sellers, the Company or any Subsidiary for a finder’s fee, brokerage commission or similar payment.

 

5.08                                          Representations Complete.  None of the representations or warranties made by Purchaser in this Agreement contains any untrue statement of a material fact, or omits to state any material fact necessary in order to make the statements contained herein, in the light of the circumstances under which they were made, not misleading.

 

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ARTICLE VI
 COVENANTS OF SELLERS

 

Each Seller covenants and agrees with Purchaser that, at all times from and after the date hereof until the Closing and, with respect to any covenant or agreement by its terms to be performed in whole or in part after the Closing, for the period specified therein or, if no period is specified therein, indefinitely, such Seller will comply with all covenants and provisions of this Article V, except to the extent Purchaser may otherwise consent in writing.

 

6.01                                          Regulatory, Gaming and Other Approvals.  Such Seller will, and will cause the Company and the Subsidiaries to, as promptly as practicable, (a) use reasonable best efforts to obtain all consents, approvals or actions of, make all filings with and give all notices to Governmental or Regulatory Authorities, including Gaming Authorities, or any other Person required of such Seller, the Company or any Subsidiary to consummate the transactions contemplated hereby, including without limitation those described in Sections 3.06 and 3.07 of the Disclosure Schedule, (b) provide such other information and communications to such Governmental or Regulatory Authorities, including Gaming Authorities, or other Persons as Purchaser or such Governmental or Regulatory Authorities or other Persons may reasonably request in connection therewith and (c) cooperate with Purchaser in connection with the performance of its obligations under Sections 6.01 and 6.02.  Until the Closing, such Seller will provide prompt notification to Purchaser when any such consent, approval, action, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will advise Purchaser of any communications (and, unless precluded by Law, provide copies of any such communications that are in writing) with any Governmental or Regulatory Authority, including Gaming Authorities, or other Person regarding any of the transactions contemplated by this Agreement.

 

6.02                                          HSR Filings.  In addition to and not in limitation of such Seller’s covenants contained in Section 6.01, such Seller will, and will cause the Company to, (a) take promptly all actions necessary to make the filings required of such Seller or its Affiliates under the HSR Act, (b) comply at the earliest practicable date with any request for additional information received by such Seller or its Affiliates from the Federal Trade Commission or the Antitrust Division of the Department of Justice pursuant to the HSR Act and (c) cooperate with Purchaser in connection with Purchaser’s filing under the HSR Act and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by this Agreement commenced by either the Federal Trade Commission or the Antitrust Division of the Department of Justice or state attorneys general.

 

6.03                                          Investigation by Purchaser.  Sellers will, and will cause the Company and the Subsidiaries to, (a) provide (i) Purchaser, (ii) any Person who is considering providing financing to Purchaser to finance all or any portion of the Purchase Price, (iii) the underwriters engaged by Purchaser in connection with the IPO Transactions (the “Underwriters”), and their respective officers, directors, employees, agents, counsel, accountants, financial advisors, consultants and other representatives (together “Representatives”) with full access, upon reasonable prior notice and during normal business hours, to all officers, employees, agents and accountants of the Company and the Subsidiaries and their Assets and Properties and Books and Records, and (b) furnish Purchaser and such other Persons with all

 

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such information and data concerning the business and operations of the Company and the Subsidiaries as Purchaser or any of such other Persons reasonably may request in connection with such investigation.

 

6.04                                          Conduct of Business.  Sellers will cause the Company and the Subsidiaries to conduct business only in the ordinary course.  Without limiting the generality of the foregoing, at all times prior to Closing, Sellers will cause the Company and the Subsidiaries to:

 

(a)                                 Use their reasonable best efforts to (i) preserve intact the present business organization and reputation of the Company and the Subsidiaries, (ii) keep available (subject to dismissals for cause and retirements in the ordinary course of business) the services of the officers and employees of the Company and the Subsidiaries, (iii) maintain the Assets and Properties of the Company and the Subsidiaries in good working order and condition, ordinary wear and tear excepted, and (iv) maintain the good will of key customers, suppliers and lenders and other Persons with whom the Company or any Subsidiary otherwise has significant business relationships; and

 

(b)                                 Not, without the prior written consent of Purchaser (not to be unreasonably withheld, conditioned or delayed):

 

(i)                                                             amend the LLC Agreement or any other organizational document of the Company or any Subsidiary;

 

(ii)                                                          (A) declare, set aside or pay any dividend (whether in cash, equity interests or property), or make any other distribution (whether in cash, equity interests or property), in respect of the outstanding equity interests of the Company or any Subsidiary, other than (x) any distributions of Excluded Assets and (y) any distributions of cash in excess of the working capital requirements of the Company and its Subsidiaries; (B) split, combine or reclassify any of the outstanding equity interests of the Company or any Subsidiary or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for the outstanding equity interests of the Company or any Subsidiary; (C) purchase, redeem or otherwise acquire any equity interests of the Company or any Subsidiary or any rights, warrants or options to acquire any such equity interests; or (D) issue, sell or grant any equity interests in the Company or any Subsidiary or any securities convertible into, or any rights, warrants or options to acquire, any such equity interests or convertible securities;

 

(iii)                                                       (A) acquire (by merger, consolidation, acquisition of stock or assets or otherwise) any corporation, partnership or other business organization or assets comprising a business or any substantial amount of property or assets in or of any other Person or (B) dispose, transfer or lease any property or assets, except for (x) acquisitions or dispositions effected in the ordinary course of business consistent with past practice and (y) transfers of Excluded Assets;

 

(iv)                                                      incur (A) any material Liabilities or (B) any non-material Liabilities not in the ordinary course of business consistent with past practice;

 

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(v)                                                         make any material change in its Tax accounting or financial accounting principles that could have an impact on the business of the Company and/or the Subsidiaries following the Closing, except insofar as may be required by a change in applicable Law or GAAP;

 

(vi)                                                      make any Tax election that could have an impact on the business of the Company and/or the Subsidiaries following the Closing, other than in the ordinary course of business;

 

(vii)                                                   mortgage, pledge or otherwise encumber any material assets of the Company and any of its Subsidiaries, except for Permitted Liens incurred in the ordinary course of business;

 

(viii)                                                make any capital expenditures, capital additions or capital improvements in excess of One Hundred Thousand Dollars ($100,000) individually or in excess of Five Hundred Thousand Dollars ($500,000) in the aggregate;

 

(ix)                                                      enter into any Contract understanding or commitment (A) that would have been a Material Contract if entered into prior to the date hereof, or violate, amend or otherwise modify or waive any of the material terms of any Material Contracts or (B) that restrains, restricts or limits the ability of the Company or any of its Subsidiaries to compete with or conduct any business or line of business in any geographic area or solicit the employment of any persons;

 

(x)                                                         enter into any Contract understanding or commitment that restrains, restricts or limits the ability of the Company or any of its Subsidiaries to compete with or conduct any business or line of business in any geographic area or solicit the employment of any persons;

 

(xi)                                                      grant to or acquire from any Person, or dispose of or permit to lapse any rights to, any material items of Company Owned Intellectual Property (other than Excluded Assets constituting Intellectual Property) or disclose to any Person, other than representatives of Purchaser, any material trade secret;

 

(xii)                                                   settle, compromise, discharge or agree to settle any litigation, investigation, arbitration or proceeding other than those that (A) do not involve the payment by the Company or any of its Subsidiaries of monetary damages of Five Hundred Thousand Dollars ($500,000) individually or in excess of One Million Dollars ($1,000,000) in the aggregate, plus applicable reserves and any applicable insurance coverage, and do not involve any material injunctive or other non-monetary relief or impose material restrictions on the business or operations of the Company or its Subsidiaries, and (B) provide for a complete release of the Company and its Subsidiaries from all claims and do not provide for any admission of liability by the Company or any of its Subsidiaries;

 

(xiii)                                                (A) recognize any new labor union, labor organization or similar employee representative; (B) negotiate, enter into, amend, modify or terminate any collective bargaining agreement or any other Contract with any labor union, labor organization, or similar employee representative; (C) waive, release, limit, or condition any Restrictive

 

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Covenant obligation of any current or former employee or contractor of the Company or any of its Subsidiaries; or (D) except as required by the terms of any Benefit Plan as of the date of this Agreement or as expressly contemplated by this Agreement, (i) amend any Benefit Plan to increase benefits thereunder or take any action to accelerate the vesting or payment of any benefits under a Benefit Plan or (ii) establish or adopt any new plan, agreement or arrangement that would be a Benefit Plan if in effect on the date of this Agreement; or

 

(xiv)                                               enter into any Contract, agreement, commitment or arrangement to do any of the foregoing.

 

6.05                                          Financial Statements and Reports; Cooperation in IPO Transactions.

 

(a)         As promptly as practicable and in any event no later than forty five (45) days after the end of each fiscal quarter ending after the date hereof and before the Closing Date (other than the fourth quarter) or ninety (90) days after the end of each fiscal year ending after the date hereof and before the Closing Date, as the case may be, the Seller Representative will deliver to Purchaser true and complete copies of (in the case of any such fiscal year) the audited and (in the case of any such fiscal quarter) the unaudited consolidated balance sheet, and the related audited or unaudited consolidated statements of operations, stockholders’ equity and cash flows, of the Company and its consolidated Subsidiaries, in each case as of and for the fiscal year then ended or as of and for each such fiscal quarter and the portion of the fiscal year then ended, as the case may be, together with the notes, if any, relating thereto, which financial statements shall be prepared on a basis consistent with the Audited Financial Statements.

 

(b)         As promptly as practicable, the Seller Representative will deliver to Purchaser true and complete copies of such other regularly-prepared financial statements, reports and analyses as may be prepared or received by Sellers, the Company or any Subsidiary relating to the business or operations of the Company or any Subsidiary.

 

(c)          Sellers shall cause the Company and the Subsidiaries to provide reasonable cooperation in connection with the IPO Transactions, including by:

 

(i)                                                             assisting in the preparation for and participation by executives with appropriate seniority and expertise in meetings, drafting sessions, presentations, road shows and due diligence sessions (including accounting due diligence sessions) and sessions with prospective investors in connection with the IPO Transaction;

 

(ii)                                                          furnishing Purchaser and the Underwriters as promptly as practicable with financial and other pertinent information regarding the Company and the Subsidiaries as may be reasonably requested by Purchaser or the Underwriters to consummate the IPO Transactions and that is customary to be included in a prospectus relating to the IPO Transactions;

 

(iii)                                                       using reasonable best efforts to obtain accountants’ consent letters (including consents of accountants for use of their reports in any materials relating

 

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to the IPO Transactions), legal opinions, surveys, title insurance and landlord estoppel letters as reasonably requested by Purchaser in connection with the IPO Transactions;

 

(iv)                                                      arranging for customary payoff letters, lien terminations and instruments of discharge to be delivered at Closing providing for the payoff, discharge and termination on the Closing Date of all Indebtedness contemplated by any such debt financing to be paid off, discharged and terminated on the Closing Date; and

 

(v)                                                         using reasonable best efforts to take all other actions necessary or desirable in connection with the IPO Transactions.

 

6.06                                          Certain Restrictions.  Sellers will cause the Company and the Subsidiaries to refrain from violating, breaching or defaulting under in any material respect, or taking or failing to take any action that (with or without notice or lapse of time or both) would constitute a material violation or breach of, or default under, any term or provision of any License, including any Gaming License, held or used by the Company or any Subsidiary or any Contract to which the Company or any Subsidiary is a party or by which any of their respective Assets and Properties is bound.

 

6.07                                          Books and Records.  On the Closing Date, Sellers will deliver or make available to Purchaser at the offices of the Company and the Subsidiaries all of the Books and Records, and if at any time after the Closing Sellers discover in their possession or under their control any other Books and Records, they will forthwith deliver such Books and Records to Purchaser.

 

6.08                                          Notice and Cure.  The Seller Representative will notify Purchaser in writing (where appropriate, through updates to the Disclosure Schedule) of, and contemporaneously will provide Purchaser with true and complete copies of any and all information or documents relating to, and will use all reasonable best efforts to cure before the Closing, any event, transaction or circumstance, as soon as practicable after it becomes Known to Sellers, occurring after the date of this Agreement that causes or may reasonably be expected to cause any covenant or agreement of Sellers under this Agreement to be breached or that renders or may reasonably be expected to render untrue any representation or warranty of Sellers contained in this Agreement as if the same were made on or as of the date of such event, transaction or circumstance.  No notice given pursuant to this Section, including any updates on the Disclosure Schedules, shall have any effect on the representations, warranties, covenants or agreements contained in this Agreement for purposes of determining satisfaction of any condition contained herein or shall in any way limit Purchaser’s right to seek indemnity under Article XII.

 

6.09                                          Satisfaction of Conditions.  Sellers will, and will cause the Company and each Subsidiary to (a) execute and deliver at the Closing each agreement, certificate, instrument or other document that Sellers, the Company or Subsidiary, as applicable, is required hereby to execute and deliver as a condition to the Closing and (b) use reasonable best efforts and proceed diligently and in good faith to satisfy each condition to the obligations of Purchaser contained in this Agreement and will not, and will not permit the Company or any

 

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Subsidiary to, take or fail to take any action that could reasonably be expected to result in the nonfulfillment of any such condition.

 

6.10                                          Affiliate Agreements.  Except as set forth in Section 6.10 of the Disclosure Schedule, the Sellers shall cause all Affiliate Agreements to be terminated effective as of the Closing, without any further right, obligation or liability of any Person thereunder.

 

6.11                                          Certification regarding Indemnification Claims.  On the date that is thirty (30) days immediately preceding each of the first and second anniversaries of the Closing Date (or, if such day is not a Business Day, on the immediately succeeding Business Day), each Seller shall deliver to Purchaser a certificate from such Seller (certified by such Seller and an executive officer of the Company), in the form attached hereto as Exhibit E (each a “Seller Certificate”), confirming that, except as expressly set forth in reasonable detail in such certificate, (a) no circumstances exist or events have occurred that constitute or may constitute a breach with respect to any representation or warranty set forth in Articles III or IV that is then surviving in accordance with the terms of this Agreement, and (b) there is no basis for any right to indemnification by any Purchaser Indemnified Party under Article XII.  Absent a determination by the Committee in accordance with Sections 2.09 and 12.02(c) that any disclosures on the Seller Certificates give rise to a right to indemnification by a Purchaser Indemnified Party under Article XII, such disclosures shall not, in and of themselves, constitute an admission by Sellers that any such right to indemnification exists.  Promptly upon receipt of each Seller Certificate, Purchaser shall provide a copy thereof to each member of the Board of Managers of Purchaser.

 

6.12                                          Pre-Roadshow Bring Down.  On the third Business Day immediately preceding commencement of the “roadshow” to be conducted for purposes of the IPO Transactions, each Seller shall deliver to Purchaser a certificate from such Seller (certified by such Seller and an executive officer of the Company), in the form attached hereto as Exhibit F (each a “Pre-Roadshow Bring Down Certificate”), confirming that, except as expressly set forth in reasonable detail in such certificate, (a) each representation or warranty made by such Seller or made by the Company in this Agreement is true on and as of such Business Day, as though such representation or warranty was made on and as of such Business Day, and (b) no circumstances exist or events have occurred that could reasonably be expected to result in the failure of any condition set forth in Article VIII to be satisfied at Closing (the certifications in clauses (a) and (b), being the “Preliminary Confirmations”).  Promptly upon receipt of each Seller Certificate, Purchaser shall provide a copy thereof to each director of Purchaser.

 

ARTICLE VII
 COVENANTS OF PURCHASER

 

Purchaser covenants and agrees with Sellers that, at all times from and after the date hereof until the Closing, Purchaser will comply with all covenants and provisions of this Article VII, except to the extent Sellers may otherwise consent in writing.

 

7.01                                          Regulatory, Gaming and Other Approvals.  Purchaser will as promptly as practicable (a) use reasonable best efforts to obtain all consents, approvals or actions

 

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of, make all filings with and give all notices to Governmental or Regulatory Authorities, including Gaming Authorities, or any other Person required of Purchaser to consummate the transactions contemplated hereby, including without limitation those described in Sections 4.03 and 4.04 of the Disclosure Schedule, (b) provide such other information and communications to such Governmental or Regulatory Authorities, including Gaming Authorities, or other Persons as Sellers or such Governmental or Regulatory Authorities or other Persons may reasonably request in connection therewith and (c) cooperate with Sellers, the Company and the Subsidiaries in connection with the performance of their obligations under Sections 5.01 and 4.02.  Purchaser will provide prompt notification to the Seller Representative when any such consent, approval, action, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will advise the Seller Representative of any communications (and, unless precluded by Law, provide copies of any such communications that are in writing) with any Governmental or Regulatory Authority, including Gaming Authorities, or other Person regarding any of the transactions contemplated by this Agreement.

 

7.02                                          HSR Filings.  Purchaser will (i) take promptly all actions necessary to make the filings required of Purchaser or its Affiliates under the HSR Act, (ii) comply at the earliest practicable date with any request for additional information received by Purchaser or its Affiliates from the Federal Trade Commission or the Antitrust Division of the Department of Justice pursuant to the HSR Act and (iii) cooperate with Sellers in connection with Sellers’ filing under the HSR Act and in connection with resolving any investigation or other regulatory inquiry concerning the transactions contemplated by this Agreement commenced by either the Federal Trade Commission or the Antitrust Division of the Department of Justice or state attorneys general.

 

7.03                                          Governmental or Regulatory Authorities.  Notwithstanding anything to the contrary in Section 7.01 or 7.02, Purchaser shall not be required to (a) defend or contest any Actions or Proceedings by any Governmental or Regulatory Authority, (b) take any action to have vacated, lifted, reversed or overturned any Order of any Governmental or Regulatory Authority, (c) otherwise participate in any Action by any Governmental or Regulatory Authority or other Person commenced or threatened to be commenced which questions the validity or legality of the transactions contemplated hereby, (d) divest or transfer any assets, (e) discontinue any operations, (f) hold separate any assets or operations, (g) make any commitment regarding future operations, or (h) license or otherwise make available any Intellectual Property.

 

7.04                                          Indemnification and Insurance of Officers and Managers.

 

(a)         Purchaser agrees that, for a period of six (6) years after the Closing, Purchaser will not, and will not permit the Company or any of its Subsidiaries to, amend, repeal or otherwise modify any provision in the their respective limited liability company agreements in any manner that would materially adversely affect the rights to indemnification, liability limitation or exculpation thereunder of individuals who, as of the date hereof and prior to the Closing Date, were managers, officers, employees or agents of the Company or any Subsidiary, unless such modification is required by applicable law.

 

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(b)         The managers, officers, employees and agents of the Company and the Subsidiaries entitled to the indemnification, liability limitation or exculpation set forth in this Section 7.04 are intended to be third party beneficiaries of this Section 7.04.  This Section 7.04 shall survive the consummation of the transactions contemplated by this Agreement and shall be binding on all successors and assigns of Sellers and Purchaser.

 

(c)          Purchaser shall maintain for a period of six (6) years after the Closing an officers’ and directors’ liability insurance policy in respect of acts or omissions that occurred prior to or at the Closing and covering each person currently covered by the Company’s officers’ and directors’ liability insurance policies on terms with respect to coverage and amount not materially less favorable than those of such policy in effect on the date of this Agreement.

 

7.05                                          Notice and Cure.  Purchaser will notify the Seller Representative in writing of, and, to the extent not prohibited pursuant to confidentiality or other agreements, contemporaneously will provide the Seller Representative with true and complete copies of any and all information or documents relating to, and will use all commercially reasonable efforts to cure before the Closing, any event, transaction or circumstance, as soon as practicable after it becomes known to Purchaser, occurring after the date of this Agreement that causes or will cause any covenant or agreement of Purchaser under this Agreement to be breached or that renders or will render untrue any representation or warranty of Purchaser contained in this Agreement as if the same were made on or as of the date of such event, transaction or circumstance.  No notice given pursuant to this Section shall have any effect on the representations, warranties, covenants or agreements contained in this Agreement for purposes of determining satisfaction of any condition contained herein or shall in any way limit Sellers’ right to seek indemnity under Article XII.

 

7.06                                          Satisfaction of Conditions.  Purchaser will use reasonable best efforts and proceed diligently and in good faith to satisfy each condition to the obligations of Sellers contained in this Agreement and will not take or fail to take any action that could reasonably be expected to result in the nonfulfillment of any such condition.

 

7.07                                          Employee Matters.

 

(a)         From and after the Closing, Purchaser shall, or shall cause its applicable Subsidiary (including the Company) to, honor all Benefit Plans (other than the Zuffa LLC 401(k) Profit Sharing Plan and Trust (the “Zuffa 401(k) Plan”)) in accordance with their terms as in effect immediately prior to the Closing.  For a period of one year following Closing (or, if earlier, the date of termination of the relevant employee), Purchaser shall, or shall cause its Subsidiaries (including the Company) to, provide each employee of the Company or its Subsidiaries as of immediately prior to the Closing (the “Company Employees”) with (i) base compensation and annual cash bonus opportunities that, in each case, are not less than the base compensation and annual cash bonus opportunities that were provided to the applicable Company Employee immediately prior to the Closing, and (ii) all other compensation and employee benefits (excluding any equity-based compensation, which shall be determined by Purchaser’s Board of Managers in its sole discretion) that are not less favorable in the aggregate than the other compensation and employee benefits that were provided to the applicable Company Employee immediately prior to the Closing.

 

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(b)         For all purposes (including for purposes of vesting, eligibility to participate and level of benefits) under the compensation and benefit plans, programs, policies, contracts, agreements and arrangements of Purchaser and its Subsidiaries (including the Company) providing compensation or benefits to any Company Employees after the Closing (the “New Plans”), each Company Employee shall be credited with his or her years of service with the Company and its Subsidiaries and their respective predecessors before the Closing, to the same extent as such Company Employee was entitled, before the Closing, to credit for such service under any similar Benefit Plan in which such Company Employee participated or was eligible to participate immediately prior to the Closing; provided that the foregoing shall not apply with respect to benefit accrual under any defined benefit pension plan or to the extent that its application would result in a duplication of benefits with respect to the same period of service.  In addition, and without limiting the generality of the foregoing, (i) each Company Employee and his or her eligible dependents and domestic partners shall be immediately eligible to participate, without any waiting time, in any and all New Plans to the extent coverage under such New Plan replaces coverage under a comparable Benefit Plan in which such Company Employee participated immediately before the Closing (such plans, collectively, the “Old Plans”), and (ii) for purposes of each New Plan providing medical, dental, pharmaceutical and/or vision benefits to any Company Employee, Purchaser shall cause all pre-existing condition exclusions and actively-at-work requirements of such New Plan to be waived for such employee and his or her covered dependents, unless such conditions would not have been waived under the comparable plans of the Company or its Subsidiaries in which such employee participated immediately prior to the Closing, and Purchaser shall cause any eligible expenses incurred by such employee and his or her covered dependents during the portion of the plan year of the Old Plans ending on the date such employee’s participation in the corresponding New Plan begins to be taken into account under such New Plan for purposes of satisfying all deductible, coinsurance and maximum out-of-pocket requirements applicable to such employee and his or her covered dependents for the applicable plan year as if such amounts had been paid in accordance with such New Plan.

 

(c)          Prior to the Closing Date, Purchaser shall ensure that any defined contribution plans in which Company Employees shall be eligible to participate after the Closing that is or are tax-qualified under applicable provisions of the Code will accept eligible rollover distributions of the account balances of Company Employees (in cash and, in the form of a direct rollover, loan notes, if any, evidencing loans to such Company Employees as of the date of distribution) from the Zuffa 401(k) Plan.  Sellers shall take all actions necessary to ensure that the Zuffa 401(k) Plan allows Company Employees to rollover distributions of the account balances of the Company Employees (in cash and in loan notes, if any, evidencing loans to such Company Employees as of the date of distribution).

 

(d)         Nothing in this Section 7.07 or any other provision of this Agreement shall (i) confer upon any Company Employee or any other Person any right to continue in the employ or service of Sellers, Purchaser, the Company or any of their respective Affiliates, or shall interfere with or restrict in any way the rights of Sellers, Purchaser, the Company or any of their respective Affiliates, which rights are hereby expressly reserved, to discharge or terminate the services of any Company Employee or any other Person at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between Sellers, Purchaser, the Company or any of their respective Affiliates, and the applicable

 

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Person; (ii) be construed to establish, amend, or modify any compensation or benefit plan, program, agreement, contract, policy or arrangement; or (iii) limit the ability of Sellers, Purchaser, the Company or any of their respective Affiliates to amend, modify or terminate in accordance with its terms any compensation or benefit plan, program, agreement, contract, policy or arrangement at any time adopted, assumed, established, sponsored or maintained by any of them.  Notwithstanding any provision in this Agreement to the contrary, nothing in this Section 7.07 shall create any third-party rights in any Person, including any current or former director, officer, employee or other service provider of Sellers, Purchaser, the Company or any of their respective Affiliates, or any participant in any Benefit Plan or other compensation or benefit plan, program, agreement, contract, policy or arrangement (or any beneficiaries or dependents thereof).

 

(e)          Immediately prior to the Closing Date, each employee who is a participant in the Company’s annual performance incentive plan or other bonus plan or agreement shall be paid by the Company (less applicable withholdings) a pro-rata portion of the employee’s (i) annual bonus awarded for the fiscal year in which the Closing Date occurs and (ii) any other bonus as determined by the Company, the performance period of which spans one or more years including the fiscal year in which the Closing Date occurs, based on the number of days elapsed in such fiscal year as of the Closing Date in the case of an annual performance bonus, or the number of days elapsed in the performance period prior to the Closing Date in the case of a multi-year arrangement.  Any such payments and the related obligation allocable to the pre-Closing period shall not be a Liability of the Company following the Closing Date.

 

(f)           Notwithstanding anything to the contrary in this Section 7.07, in no event shall the execution or performance of, or the exercise of any rights under, any employment agreement entered into in accordance with Sections 8.08 and 9.08 hereof constitute, or result in, a breach of this Section 7.07.

 

ARTICLE VIII
 CONDITIONS TO OBLIGATIONS OF PURCHASER

 

The obligations of Purchaser hereunder to effect the Closing are subject to the satisfaction, at or before the Closing, of each of the following conditions (all or any of which may, to the extent permitted by Law, be waived in writing in whole or in part by Purchaser in its sole discretion except for the condition set forth in Section 8.06(b) which may not be waived by any party hereto):

 

8.01                                          Representations and Warranties.  Each of the Company/Seller Fundamental Representations shall be true and correct in all respects on and as of the date hereof and on and as of the Closing Date as though such representation or warranty was made on and as of the Closing Date.  Each other representation or warranty made by the Company or any or all of the Sellers in this Agreement (other than those made as of a specified date earlier than the Closing Date) shall be true and correct in all material respects on and as of the date hereof and on and as of the Closing Date as though such representation or warranty was made on and as of the Closing Date, and any representation or warranty made as of a specified date earlier than the Closing Date shall have been true and correct in all material respects on and as of such earlier date; provided that to the extent that any representation or warranty is qualified as to materiality

 

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or Company Material Adverse Effect pursuant to the terms of such representation or warranty, such representation or warranty shall be true and correct in all respects on and as of the date hereof and on and as of the Closing Date as though such representation or warranty was made on and as of the Closing Date unless such representation or warranty was made as of a specified date earlier than the Closing Date in which case such representation shall be true and correct in all respects on and as of such earlier date.

 

8.02                                          Performance.  Sellers shall have performed and complied with, in all material respects, each agreement, covenant and obligation required by this Agreement to be so performed or complied with by Sellers at or before the Closing.

 

8.03                                          Seller Deliverables.  Sellers shall have delivered to Purchaser:

 

(a)         a statement setting forth the aggregate amount of the Closing Indebtedness, along with applicable wire transfer instructions;

 

(b)         the Payoff Letters;

 

(c)          a certificate from each Seller (certified by such Seller and an executive officer of the Company), dated the Closing Date, substantially in the form and to the effect of Exhibit B hereto;

 

(d)         a copy of a good standing certificate with respect to the Company and each Subsidiary from the secretary of state of the state under whose laws the applicable entity was formed, in each case as of a date not earlier than ten Business Days prior to the Closing Date; and

 

(e)          written resignations effective as of the Closing, in a form reasonably acceptable to Purchaser, of each officer and each director of the Company or any Subsidiary, other than those officers and directors set forth on Section 8.03(d) of the Disclosure Schedule.

 

8.04                                          Orders and Laws.  There shall not be in effect on the Closing Date any Order or Law, including any Gaming Laws, restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement or which could reasonably be expected to otherwise result in a material diminution of the benefits of the transactions contemplated by this Agreement to Purchaser, and there shall not be pending on the Closing Date any Action or Proceeding in, before or by any Governmental or Regulatory Authority which could reasonably be expected to result in the issuance of any such Order or the enactment, promulgation or deemed applicability to Purchaser, the Company, any Subsidiary or the transactions contemplated by this Agreement of any such Law.

 

8.05                                          Regulatory Consents and Approvals.  All consents, approvals and actions of, filings with and notices to any Governmental or Regulatory Authority, including any Gaming Authority, necessary to permit Purchaser and Sellers to perform their obligations under this Agreement and to consummate the transactions contemplated hereby (a) shall have been duly obtained, made or given, (b) shall be in form and substance reasonably satisfactory to Purchaser, (c) shall not be subject to the satisfaction of any condition that has not been satisfied or waived and (d) shall be in full force and effect, and all terminations or expirations of waiting

 

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periods imposed by any Governmental or Regulatory Authority necessary for the consummation of the transactions contemplated by this Agreement, including under the HSR Act, shall have occurred.

 

8.06                                          Third Party Consents.

 

(a)         Sellers shall have obtained and delivered to Purchaser all consents (or in lieu thereof waivers) listed on Schedule 8.06 attached hereto to the performance by Purchaser and Sellers of their obligations under this Agreement or to the consummation of the transactions contemplated hereby.  Such consents (or in lieu thereof waivers) (i) shall be in form and substance reasonably satisfactory to Purchaser, (ii) shall not be subject to the satisfaction of any condition that has not been satisfied or waived and (iii) shall be in full force and effect.

 

(b)         The Lender Directors’ Consent shall have been obtained.

 

8.07                                          IPO Transactions.  The IPO Transactions shall have been consummated and Purchaser or its Affiliates shall have entered into the ancillary agreements described in the prospectus therefor, in each case in form and substance satisfactory to Purchaser.

 

8.08                                          Availability of Funds.  Purchaser or its Affiliates shall have funds available (including the availability of financing on terms reasonably satisfactory to Purchaser) in an amount at least equal to the sum of the Purchase Price, the amount of Closing Indebtedness and the expenses of Purchaser incurred in connection with the negotiation, preparation, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.

 

8.09                                          Availability of Specified Executives.  None of the Specified Executives shall have resigned from his employment or provided the Company or Purchaser or any of their Affiliates with verbal or written notice of his intention to resign.

 

ARTICLE IX
 CONDITIONS TO OBLIGATIONS OF SELLERS

 

The obligations of Sellers hereunder to effect the Closing are subject to the satisfaction, at or before the Closing, of each of the following conditions (all or any of which may, to the extent permitted by Law, be waived in writing in whole or in part by Seller Representative on behalf of Sellers in his sole discretion, except for the condition set forth in Section 9.06(b) which may not be waived by any party hereto):

 

9.01                                          Representations and Warranties.  Each of the Purchaser Fundamental Representations shall be true in all respects on and as of the date hereof and on and as of the Closing Date as though such representation or warranty was made on and as of the Closing Date.  Each other representations and warranties made by Purchaser in this Agreement (other than those made as of a specified date earlier than the Closing Date) shall be true and correct in all material respects on and as of the date hereof and on and as of the Closing Date as though such representation or warranty was made on and as of the Closing Date and any representation or warranty made as of a specified date earlier than the Closing Date shall have been true and correct in all material respects as of such date; provided that to the extent that any representation or warranty is qualified as to materiality pursuant to the terms of such

 

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representation or warranty, such representation or warranty shall be true and correct in all respects as of the Closing Date unless such representation or warranty was made as of a specified date earlier that the Closing Date in which case such representation shall be true and correct in all respects on and as of such earlier date.

 

9.02                                          Performance.  Purchaser shall have performed and complied with, in all material respects, each agreement, covenant and obligation required by this Agreement to be so performed or complied with by Purchaser at or before the Closing.

 

9.03                                          Officers’ Certificates.  Purchaser shall have delivered to Sellers a certificate, dated the Closing Date and executed in the name and on behalf of Purchaser by the Chairman of the Board, the President or any Executive or Senior Vice President of Purchaser, substantially in the form and to the effect of Exhibit C hereto, and a certificate, dated the Closing Date and executed by the Secretary or any Assistant Secretary of Purchaser, substantially in the form and to the effect of Exhibit D hereto.

 

9.04                                          Orders and Laws.  There shall not be in effect on the Closing Date any Order or Law, including any Gaming Laws, that became effective after the date of this Agreement restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement.

 

9.05                                          Regulatory Consents and Approvals.  All consents, approvals and actions of, filings with and notices to any Governmental or Regulatory Authority, including any Gaming Authority, necessary to permit Sellers and Purchaser to perform their obligations under this Agreement and to consummate the transactions contemplated hereby (a) shall have been duly obtained, made or given, (b) shall not be subject to the satisfaction of any condition that has not been satisfied or waived and (c) shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any Governmental or Regulatory Authority necessary for the consummation of the transactions contemplated by this Agreement, including under the HSR Act, shall have occurred.

 

9.06                                          Third Party Consents.

 

(a)         All consents (or in lieu thereof waivers) to the performance by Sellers of their obligations hereunder and to the consummation of the transactions contemplated hereby as are required under the Contracts listed in Section 8.06 of the Disclosure Schedule (i) shall have been obtained, (ii) shall not be subject to the satisfaction of any condition that has not been satisfied or waived and (iii) shall be in full force and effect.

 

(b)         The Lender Directors’ Consent shall have been obtained.

 

9.07                                          IPO Transactions.  The IPO Transactions shall have been consummated and Purchaser or its Affiliates shall have entered into the ancillary agreements described in the prospectus therefor, in each case in form and substance satisfactory to Sellers.

 

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ARTICLE X
 TAX MATTERS

 

10.01                                   Tax Indemnity.  Sellers hereby agree, jointly and severally, to be liable for and to indemnify Purchaser from and against (a) all Taxes of the Company and each Subsidiary (or any predecessor thereof) for any Pre-Closing Tax Period (determined as provided in Section 10.02); and (b) all Transfer Taxes for which Sellers are responsible pursuant to Section 10.05.

 

10.02                                   Allocations; Straddle Periods.  In the case of any Taxes other than property and ad valorem Taxes, obligations shall be allocated to the Pre-Closing Tax Period or the Post-Closing Tax Period, as applicable, by assuming that the Pre-Closing Tax Period and the Post-Closing Tax Period consisted of two (2) taxable years or periods, one of which ended at the close of the Closing Date and the other of which began at the beginning of the day following the Closing Date and items of income, gain, deduction, loss or credit shall be allocated between such two (2) taxable years or periods on a “closing of the books basis” by assuming that the books were closed at the close of the Closing Date.  In the case of any property or ad valorem Taxes, obligations shall be allocated to the Pre-Closing Tax Period and the Post-Closing Tax Period based upon a fraction, the numerator of which is the number of calendar days in the period ending on the close of the Closing Date, in the case of an allocation to a Pre-Closing Tax Period, or the number of calendar days in the period beginning the day following the Closing Date and ending on the last day of the period, in the case of an allocation to a Post-Closing Tax Period, and in each case the denominator of which is the number of calendar days in the entire period.

 

10.03                                   Tax Returns.

 

(a)         Sellers shall, at the sole cost and expense of the Sellers, prepare (or cause to be prepared) all Tax Returns of the Company and the Subsidiaries, including IRS Form 1065, for each taxable year that ends on or prior to the Closing Date (each a “Seller Prepared Return”).  Each Seller Prepared Return shall be prepared in accordance with the past practices and customs of the Company and the Subsidiaries except as otherwise required by Law.  Subject to the Seller Representative’s prior written consent, neither the Company nor any Subsidiary shall amend or file any Tax Return, or make any retroactive Tax election, relating to any tax period ending on or before the Closing Date.

 

(b)         Purchaser shall, at the sole cost and expense of Purchaser, prepare (or cause to be prepared) all Tax Returns of the Company and each Subsidiary for each Straddle Period (each, a “Shared Return”).  Each Shared Return shall be prepared on a basis consistent with past practices and customs of each Company and Subsidiary and shall be delivered to the Seller Representative, for the review and approval of the Seller Representative, at least ten (10) days prior to the due date for such Tax Return (including any applicable extensions).  The Purchaser shall cause the Shared Return to incorporate any changes reasonably requested by the Seller Representative that are consistent with the past practices and customs of the Company and each Subsidiary, as applicable. The Seller Representative and the Purchaser shall attempt in good faith to resolve any disagreements regarding the Shared Returns subject to the dispute resolution procedures of Section 10.08.  In no event shall the provision of comments by the Seller Representative prevent the Purchaser from timely filing any Shared Return, subject to

 

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amendment to reflect the resolution when rendered by the Arbitrating Accountants.  Any Pre-Closing Tax Obligations owed by Sellers on a Shared Return shall be paid by Sellers to Purchaser by the due date of such Shared Return.

 

10.04                                   Cooperation.  After the Closing Date, Sellers and Purchaser shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the preparation of all Tax Returns pursuant to this Article X, in connection with any Tax investigation, audit or other proceeding and any other matters relating to Taxes.  Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information that are reasonably relevant to any such Tax Return, investigation, audit or other proceeding, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.

 

10.05                                   Transfer Taxes.  Each of Purchaser, on the one hand, and Sellers, jointly and severally, on the other hand, shall pay 50% of all sales, use, transfer, real property transfer, recording, gains, stock transfer and other similar taxes and fees (“Transfer Taxes”) arising out of or in connection with the transactions effected pursuant to this Agreement. Purchaser shall file all necessary documentation and Tax Returns with respect to such Transfer Taxes, and Sellers shall cooperate in the preparation and filing of such Tax Returns, including by joining in the execution of any such Tax Return and/or providing documentation required to establish an exemption from Transfer Taxes as required or allowed by law.

 

10.06                                   Tax Refunds.  Any Tax refunds that are received by Purchaser, the Company or any Subsidiary, and any amounts credited against Taxes to which Purchaser, the Company or any Subsidiary becomes entitled, in each case that relate to any Pre-Closing Tax Period, shall be for the account of Sellers and shall be forwarded by Purchaser to Sellers promptly following receipt, but in no event later than fifteen (15) days after receipt or entitlement thereto, provided, however, that Sellers shall not be entitled to any refund that is attributable to the carryback of losses arising in or attributable to a Post-Closing Tax Period.

 

10.07                                   Tax Audits.

 

(a)         If notice of any judicial, administrative or arbitral actions, suits, mediation, investigation, inquiry, proceedings or claims (including counterclaims) by or before any Governmental or Regulatory Authority with respect to Taxes of the Company or any Subsidiary (a “Tax Claim”) shall be received by any party for which another party would be liable pursuant to this Article X, the notified party shall notify such other parties in writing of such Tax Claim.

 

(b)         The Seller Representative may elect, within 30 days of receiving such notice, to direct any Tax Claim, at Sellers expense, that relates solely to a Pre-Closing Tax Period (a “Seller Tax Contest”) and to employ counsel of its choice; provided, however, that Purchaser shall have the right, at its expense, to consult with the Seller Representative regarding such Seller Tax Contest.  Purchaser, at its expense, shall have the right to control all other Tax Claims (each a “Purchaser’s Tax Contest”); provided, however, that the Seller Representative shall have the right, at its expense, to consult with Purchaser regarding a Purchaser’s Tax Contest if Sellers would be liable for a portion of the Taxes that may result from the Purchaser’s Tax Contest; and provided, further, that Purchaser may not agree to settle any such Purchaser’s Tax Contest

 

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without the Seller Representative’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed, unless the Purchaser agrees to assume and become liable for all Taxes resulting from the Purchaser’s Tax Contest.  In the event of a conflict between the provisions of this Section 10.07, on the one hand, and the provisions of Section 12.02, on the other, the provisions of this Section 10.07 shall control.

 

10.08                                   Disputes.  Notwithstanding the terms and conditions of Section 14.14, any dispute as to any matter covered under this Article X (a “Tax Dispute”) shall be resolved through binding arbitration administered by tax experts of the Arbitrating Accountants.  The place of the arbitration shall be Las Vegas, Nevada and the arbitration shall be conducted in the English language.  The Arbitrating Accountants shall be instructed to resolve the Tax Dispute and such resolution shall be (A) set forth in writing and signed by the Arbitrating Accountants, (B) delivered to each party involved in the Tax Dispute as soon as practicable after the Tax Dispute is submitted to the Arbitrating Accountants but no later than the fifteenth (15th) day after the Arbitrating Accountants are instructed to resolve the Tax Dispute, (C) made in accordance with this Agreement, and (D) final, binding and conclusive on the parties involved in the Tax Dispute on the date of delivery of such resolution.  The Arbitrating Accountants shall only be authorized on any one issue to decide in favor of and choose the position of either of the parties involved in the Tax Dispute or to decide upon a compromise position between the ranges presented by the Parties to the Arbitrating Accountants.  The Arbitrating Accountants shall base their decision solely upon the presentations of the parties to the Arbitrating Accountants at a hearing held before the Arbitrating Accountants and upon any materials made available by either party and not upon independent review.  The fees and expenses of the Arbitrating Accountants shall be borne by Purchaser, on the one hand, and Sellers, on the other hand, in accordance with the principles set forth in the last two sentences of Section 2.04(d).  Purchaser and Sellers shall keep the decision of the Arbitrating Accountants confidential, except to the extent required by Law or pursuant to disclosure of Tax Returns.

 

10.09                                   Purchase Price Adjustment.  For federal, state and local Tax purposes, any payments made under this Article X shall be treated by the Purchaser and Sellers as an adjustment to the Purchase Price except as otherwise required by applicable Law or pursuant to a good faith resolution of a Tax Claim.

 

ARTICLE XI
 SURVIVAL OF REPRESENTATIONS, WARRANTIES,
 COVENANTS AND AGREEMENTS

 

11.01                                   Survival of Representations, Warranties, Covenants and Agreements.  Notwithstanding any right of Purchaser (whether or not exercised) to investigate the affairs of the Company and the Subsidiaries or any right of any party (whether or not exercised) to investigate the accuracy of the representations and warranties of the other party contained in this Agreement, Sellers and Purchaser have the right to rely fully upon the representations, warranties, covenants and agreements of the other contained in this Agreement.  Except as provided in the following sentence, each of the representations and warranties contained in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Closing until the later of (x) the date that is twelve (12) months after the Closing and (y) the date that is thirty (30) days after Purchaser’s receipt of the report by its external auditors

 

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on the audited balance sheets of Purchaser and its consolidated subsidiaries (including the Company and the Subsidiaries) and the related audited consolidated statements of operations, members’ equity and cash flow with respect to the year ended December 31, 2016.  Notwithstanding the foregoing, the representations, warranties, covenants and agreements of Sellers and Purchaser contained in this Agreement will survive the Closing (a) until the date that is eighteen (18) months after the Closing with respect to the representations and warranties contained in Section 3.12; (b) indefinitely with respect to (i) the representations and warranties contained in (A) Sections 3.02, 3.03, 3.05(b), 3.23, 4.02, 4.03, 4.04(b) (the “Company/Seller Fundamental Representations”) and (B) Sections 5.02 and 5.07 (the “Purchaser Fundamental Representations”) and (ii) the covenants and agreements contained in Sections 2.06 and 14.04; (c) until sixty (60) days after the expiration of all applicable statutes of limitation (including all periods of extension, whether automatic or permissive) with respect to matters covered by Sections 3.09 and Article X; (d) for six (6) months in the case of any covenant or agreement to be performed in whole or in part on or prior to the Closing; or (e) with respect to each other covenant or agreement contained in this Agreement, until sixty (60) days following the last date on which such covenant or agreement is to be performed or, if no such date is specified, indefinitely; provided that any representation, warranty, covenant or agreement that would otherwise terminate in accordance with clause (a), (c), (d) or (e) above will continue to survive if a Claim Notice or Indemnity Notice (as applicable) shall have been timely given under Article XII on or prior to such termination date, until the related claim for indemnification has been satisfied or otherwise resolved as provided in Article XII.  Following the expiration of a representation, warranty, covenant or agreement as set forth above, no Action or Proceeding may be initiated by any Purchaser Indemnified Party or Seller Indemnified Party with respect thereto, regardless of any statute of limitations period that would otherwise apply.

 

ARTICLE XII
 INDEMNIFICATION

 

12.01                                   Indemnification.

 

(a)         Subject to paragraphs (c) of this Section 12.01 and the other Sections of this Article XII,

 

(i)                                                             each Seller shall indemnify the Purchaser Indemnified Parties in respect of, and hold each of them harmless from and against, any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, whether or not involving a third-party claim, directly or indirectly resulting from, arising out of or relating to any breach of any representation or warranty made by such Seller; and

 

(ii)                                                          Sellers shall, jointly and severally, indemnify the Purchaser Indemnified Parties in respect of, and hold each of them harmless from and against, any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, whether or not involving a third-party claim, directly or indirectly resulting from, arising out of or relating to (A) any breach of any representation or warranty made by the Company in this Agreement, (B) nonfulfillment of or failure to perform any covenant or agreement on the part of Sellers contained in this Agreement, (C) the Excluded Assets, including all obligations and liabilities related thereto or (D) the matters set forth in Section 3.08 of the Disclosure Schedule.

 

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(b)         Subject to the other Sections of this Article XII, Purchaser shall indemnify the Seller Indemnified Parties in respect of, and hold each of them harmless from and against, any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, resulting from, arising out of or relating to (i) any breach of representation or warranty made by Purchaser in this Agreement or (ii) nonfulfillment of or failure to perform any covenant or agreement on the part of Purchaser contained in this Agreement.

 

(c)          Notwithstanding anything to the contrary in this Section 12.01, Sellers shall have no obligation to indemnify any Purchaser Indemnified Parties pursuant to Section 12.01(a)(ii)(A) (i) unless and until such time as the aggregate amount of all Losses suffered by, imposed on or incurred by the Purchaser Indemnified Parties exceeds an amount equal to Four Million Dollars ($4,000,000) (the “Threshold”), and then only for such excess, or (ii) for any claim or series of related claims for which the Losses aggregate less than One Hundred Fifty Thousand Dollars ($150,000) (the “Basket”) (provided, if such Losses do aggregate to or exceed such amount, the Purchaser Indemnified Parties shall be entitled to indemnification for the entire aggregate amount of such Losses, irrespective of the Basket but subject to the Threshold); provided, however, that (A) neither the Threshold nor the Basket shall apply to Losses arising from any breach of any Company/Seller Fundamental Representation or of any of those representations and warranties set forth in Section 3.08 or 3.09 or in the case of fraud or criminal or willful misconduct, (B) the cumulative aggregate indemnity obligations of Sellers under Section 12.01(a)(ii)(A) with respect to representations and warranties other than (x) the Company/Seller Fundamental Representations, (y) any representations and warranties set forth in Section 3.08 or 3.09, or (z) in the case of fraud or criminal or willful misconduct shall in no event exceed Forty Six Million Dollars ($46,000,000), and (C) the cumulative aggregate indemnity obligations of Sellers under Section 12.01(a)(i) or 12.01(a)(ii)(A) with respect to the Company/Seller Fundamental Representations or any representations and warranties set forth in Section 3.08 or 3.09 shall in no event exceed the Purchase Price (determined without regard to Section 12.04), other than in the case of fraud or criminal or willful misconduct.

 

(d)         The indemnification obligation of any particular Seller for Losses arising under Section 12.01(a)(i) or 12.01(a)(ii)(A) shall not, other than in the case of fraud or criminal or willful misconduct of such Seller, exceed such Seller’s allocable portion of the Purchase Price.  The indemnification obligation of any Purchaser for Losses arising under Section 12.01(b)(i) shall not, other than in the case of fraud or criminal or willful misconduct of Purchaser, exceed the Purchase Price (determined without regard to Section 12.04).

 

(e)          No Seller shall have, and no Seller shall exercise or assert (or attempt to exercise or assert), any right of contribution, reimbursement, subrogation or indemnity against the Company or any Subsidiary in connection with any indemnification obligation to which such Seller may become subject pursuant to this Agreement.  From and after the Closing Date, Sellers hereby irrevocably waive and release the Company and each Subsidiary from any such right of contribution, reimbursement, subrogation or indemnity.

 

(f)           For purposes of determining the occurrence of a breach of a representation or warranty or the amount of any Losses under this Section 12.01, any materiality qualifiers (including Company Material Adverse Effect), or monetary thresholds to similar effect contained

 

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in the applicable representation and warranty shall be deemed to be deleted and shall be given no force or effect.

 

12.02                                   Method of Asserting Claims.  All claims for indemnification by any Indemnified Party under Section 12.01 will be asserted and resolved as follows:

 

(a)                                 In the event any claim or demand in respect of which an Indemnified Party might seek indemnity under Section 12.01 is asserted against or sought to be collected from such Indemnified Party by a Person other than Sellers or any Affiliate of Sellers or of Purchaser (a “Third Party Claim”), the Indemnified Party shall deliver a Claim Notice with reasonable promptness to the Indemnifying Party.  If the Indemnified Party fails to provide the Claim Notice with reasonable promptness after the Indemnified Party receives notice of such Third Party Claim, the Indemnifying Party will not be obligated to indemnify the Indemnified Party with respect to such Third Party Claim to the extent that the Indemnifying Party’s ability to defend has been irreparably prejudiced by such failure of the Indemnified Party.  The Indemnifying Party will notify the Indemnified Party as soon as practicable whether the Indemnifying Party disputes its liability to the Indemnified Party under Section 12.01 and whether the Indemnifying Party desires, at its sole cost and expense, to defend the Indemnified Party against such Third Party Claim.  The Indemnifying Party will be entitled to participate in such Third Party Claim and, to the extent that it wishes (unless (i) the indemnifying party is also a party to such Third Party Claim 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 Third Party Claim and provide indemnification with respect to such Third Party Claim), to assume the defense of such Third Party Claim 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 Third Party Claim, the Indemnifying Party will not, as long as it diligently conducts such defense, be liable to the Indemnified Party under Section 12.01 for any fees of other counsel or any other expenses with respect to the defense of such Third Party Claim, in each case subsequently incurred by the Indemnified Party in connection with the defense of such Third Party Claim.  The Indemnifying Party will have fifteen (15) days from receipt of a notice of a Third Party Claim from an Indemnified Party to assume the defense thereof.  The Indemnifying Party shall keep the Indemnified Party reasonably informed of the status of defense.

 

(b)         Subject to Section 12.02(c), in the event any Indemnified Party should have a claim under Section 12.01 against any Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party shall deliver an Indemnity Notice with reasonable promptness to the Indemnifying Party.  The failure by any Indemnified Party to give the Indemnity Notice shall not impair such party’s rights hereunder except to the extent that an Indemnifying Party demonstrates that it has been irreparably prejudiced thereby.  If the Indemnifying Party notifies the Indemnified Party that it does not dispute the claim described in such Indemnity Notice or fails to notify the Indemnified Party within thirty (30) days following receipt of such Indemnity Notice whether the Indemnifying Party disputes the claim described in such Indemnity Notice, the Loss arising from the claim specified in such Indemnity Notice will be conclusively deemed a liability of the Indemnifying Party under Section 12.01 and the Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on demand following the final determination thereof.  If the Indemnifying Party has timely disputed its liability with respect to such claim, the

 

51

 

Indemnifying Party and the Indemnified Party will proceed in good faith to negotiate a resolution of such dispute.

 

(c)          Notwithstanding anything in Section 12.02(b) to the contrary but without limiting the rights of any Purchaser Indemnified Party under Section 12.02(a) with respect to Third Party Claims, the determination of whether any Purchaser Indemnified Party makes any claim or demand for indemnification under Section 12.01(a)(i) that is based on any disclosures set forth in the Seller Certificates shall be vested exclusively in the Committee.  The Committee shall have sole authority to determine whether any Purchaser Indemnified Party shall assert any such indemnification claim and, in making such determination, may be assisted by independent legal and financial advisors of its choosing, the costs of which shall be borne by Purchaser and shall not be taken into account in determining the amount of indemnifiable Losses, if any.

 

12.03                                   Release. Effective as of the Closing, each Seller, on behalf of itself and its Affiliates, hereby releases and discharges the Company and each Subsidiary, and each of Representatives of any of the foregoing, from any and all Liabilities arising in respect of any period ending on or prior to the Closing other than any Liabilities (a) arising under this Agreement or (b) in respect of indemnification rights specified in Section 7.04.

 

12.04                                   Purchase Price Adjustment.  For federal, state and local Tax purposes, any payments made under this Article XII shall be treated by the Purchaser and Sellers as an adjustment to the Purchase Price except as otherwise required by applicable Law or pursuant to the good faith resolution of a Tax Claim.

 

ARTICLE XIII
 TERMINATION

 

13.01                                   Termination.  This Agreement may be terminated, and the transactions contemplated hereby may be abandoned:

 

(a)         at any time before the Closing, by mutual written agreement of the Seller Representative on behalf of Sellers and Purchaser;

 

(b)         at any time before the Closing, by the Seller Representative on behalf of Sellers or Purchaser, in the event (i) of a material breach hereof by the non-terminating party if such non-terminating party fails to cure such breach within twenty (20) Business Days following notification thereof by the terminating party or (ii) upon notification of the non-terminating party by the terminating party that the satisfaction of any condition to the terminating party’s obligations under this Agreement becomes impossible or impracticable with the use of commercially reasonable efforts if the failure of such condition to be satisfied is not caused by a breach hereof by the terminating party;

 

(c)          at any time before the Closing, by the Seller Representative on behalf of Sellers or by Purchaser, in the event that any Order or Law becomes effective restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement, upon notification of the non-terminating party by the terminating party;

 

52

 

(d)         at any time after May 31, 2016 (the “Termination Date”) by the Seller Representative or Purchaser upon notification of the non-terminating party by the terminating party if the Closing shall not have occurred on or before such date and such failure to consummate is not caused by a breach of this Agreement by the terminating party; provided, that if all of the conditions to Closing shall have been satisfied, shall be capable of being satisfied at such time or would be capable of being satisfied at such time but for the fact that the conditions set forth in Sections 8.05, 8.07 and 9.05 are not satisfied, the Termination Date may be extended by Purchaser or the Seller Representative from time to time by written notice to the other to a date not later than July 31, 2016; or

 

(e)          at any time prior to commencement of the “roadshow” to be conducted for purposes of the IPO Transactions, by Purchaser, in the event that (i) any Seller fails to timely deliver a Pre-Roadshow Bring Down Certificate in accordance with Section 13.03, or (ii) any Pre-Roadshow Bring Down Certificate delivered to Purchaser fails to make the Preliminary Confirmations without qualification thereof or exception thereto.

 

13.02                                   Effect of Termination.  If this Agreement is validly terminated pursuant to Section 13.01, this Agreement will forthwith become null and void, and there will be no liability or obligation (other than any liabilities or obligations resulting from fraud or criminal or willful misconduct) on the part of Sellers or Purchaser (or any of their respective officers, directors, employees, agents or other representatives or Affiliates), except that the provisions with respect to expenses in Section 14.04 and confidentiality in Section 14.05 will continue to apply following any such termination.

 

ARTICLE XIV
 MISCELLANEOUS

 

14.01                                   Notices.  All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given:  (a) on the date of service if served personally on the party to whom notice is to be given; (b) on the day of transmission if sent via facsimile transmission to the facsimile number given below, and telephonic confirmation of receipt is obtained promptly after completion of transmission; (c) on the day after delivery to Federal Express or similar overnight courier or the Express Mail service maintained by the United States Postal Service; or (d) on the fifth day after mailing, if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid and properly addressed, to the party as follows:

 

If to Purchaser, to:

 

Station Casinos LLC
 1505 South Pavilion Center Drive

Las Vegas, Nevada 89135

Facsimile No.:  702-795-4245
 Attention:  General Counsel

 

with a copy, which shall not constitute notice, to:

 

53

 

The Special Committee of Station Casinos LLC

c/o Station Casinos LLC

1505 South Pavilion Center Drive

Las Vegas, Nevada 89135

Facsimile No.:  702-795-4245

Attention:  Dr. James Nave

 

with a copy, which shall not constitute notice, to each Lender Director, in each case at such address as Purchaser or such Lender Director may from time to time specify by notice to Sellers.

 

If to Sellers, to the Seller Representative:

 

Frank J. Fertitta III
 1505 South Pavilion Center Drive

Las Vegas, Nevada 89135

Facsimile No.:  702-692-3701

 

with a copy, which shall not constitute notice, to:

 

Milbank, Tweed, Hadley & McCloy LLP
 601 S. Figueroa Street, 30th Floor

Los Angeles, CA 90017
 Facsimile No.:  213-892-4733
 Attention:  Kenneth J. Baronsky

 

Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other party hereto.

 

14.02                                   Specific Performance.  The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  Accordingly, the parties agree that, in addition to any other remedies, each party shall be entitled to enforce the terms of this Agreement by a decree of specific performance without the necessity of proving the inadequacy of money damages as a remedy.  Each party hereby waives any requirement for the securing or posting of any bond in connection with such remedy.  Each party further agrees that the only permitted objection that it may raise in response to any action for equitable relief is that it contests the existence of a breach or threatened breach of this Agreement.

 

14.03                                   Entire Agreement.  This Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof.

 

14.04                                   Expenses.  Whether or not the transactions contemplated hereby are consummated, Purchaser shall pay its own costs and expenses and shall pay or reimburse

 

54

 

Sellers for the out-of-pocket fees and expenses incurred in connection with the negotiation, execution and closing of this Agreement and the transactions contemplated hereby; provided, that Purchaser shall not, directly or indirectly, bear, pay or reimburse any fees and expenses or portion thereof in respect of any premium, bonus, success or similar non-standard and non-hourly-based consideration for legal or accounting services.

 

14.05                                   Public Announcements.  At all times at or before the Closing, Sellers and Purchaser will not, and Sellers will cause the Company not to, issue or make any reports, statements or releases to the public with respect to this Agreement or the transactions contemplated hereby without the consent of the other, which consent shall not be unreasonably withheld; provided, that Purchaser may include a summary description of this Agreement in the prospectus included in the registration statement filed in connection with the IPO Transactions and file a copy of this Agreement with the U.S. Securities and Exchange Commission.  Subject to the foregoing proviso, if either party is unable to obtain the approval of its public report, statement or release from the other party and such report, statement or release is, in the opinion of legal counsel to such party, required by Law in order to discharge such party’s disclosure obligations, then such party may make or issue the legally required report, statement or release and promptly furnish the other party with a copy thereof.  Sellers and Purchaser will also obtain the other party’s prior approval of any press release to be issued immediately following the Closing announcing the consummation of the transactions contemplated by this Agreement.

 

14.06                                   Confidentiality Each party hereto will hold, and will use its best efforts to cause its Affiliates, and in the case of Purchaser, any Person who has provided, or who is considering providing, financing to Purchaser to finance all or any portion of the Purchase Price or who is providing or considering providing underwriting services in connection with the IPO Transactions, and their respective Representatives to hold, in strict confidence from any Person (other than any such Affiliate, Representative, or Person who has provided, or who is considering providing, financing or underwriting services), unless (i) compelled to disclose by judicial or administrative process (including without limitation in connection with obtaining the necessary approvals of this Agreement and the transactions contemplated hereby of Governmental or Regulatory Authorities) or by other requirements of Law or (ii) disclosed in an Action or Proceeding brought by a party hereto in pursuit of its rights or in the exercise of its remedies hereunder, all documents and information concerning the other party or any of its Affiliates furnished to it by the other party or such other party’s Representatives in connection with this Agreement or the transactions contemplated hereby, except to the extent that such documents or information can be shown to have been (a) previously known by the party receiving such documents or information, (b) in the public domain (either prior to or after the furnishing of such documents or information hereunder) through no fault of such receiving party or (c) later acquired by the receiving party from another source if the receiving party is not aware that such source is under an obligation to another party hereto to keep such documents and information confidential; provided that following the Closing the foregoing restrictions will not apply to Purchaser’s use of documents and information concerning the Company and the Subsidiaries furnished by Sellers hereunder.  In the event the transactions contemplated hereby are not consummated, upon the request of the other party, each party hereto will, and will cause its Affiliates, any Person who has provided, or who is considering providing, financing to such party and their respective Representatives to, promptly (and in no event later than five (5) Business Days after such request) redeliver or cause to be redelivered all copies of documents

 

55

 

and information furnished by the other party in connection with this Agreement or the transactions contemplated hereby and destroy or cause to be destroyed all notes, memoranda, summaries, analyses, compilations and other writings related thereto or based thereon prepared by the party furnished such documents and information or its Representatives.

 

14.07                                   Waiver.  Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition.  No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion.  All remedies, either under this Agreement or by Law or otherwise afforded, will be cumulative and not alternative.

 

14.08                                   Amendment.  This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of each party hereto; provided, however, that no amendment or other modification may be made to this Agreement that has the effect of waiving or otherwise altering the overall effect of Sections 8.06(b) or 9.06(b) without the prior written approval of the Lender Directors.

 

14.09                                   No Third-Party Beneficiary.  The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors or permitted assigns, and it is not the intention of the parties to confer third-party beneficiary rights upon any other Person other than any Person entitled to indemnity under Article XII, except that the Lender Directors shall be third-party beneficiaries with a right of enforcement only of the conditions set forth in Section 8.06(b) and 9.06(b).

 

14.10                                   No Assignment; Binding Effect.  Neither this Agreement nor any right, interest or obligation hereunder may be assigned by any party hereto without the prior written consent of the other party hereto and any attempt to do so will be void, except (a) for assignments and transfers by operation of Law and (b) that Purchaser may assign any or all of its rights, interests and obligations hereunder (including without limitation its rights under Article XI) to (i) a wholly-owned subsidiary, provided that any such subsidiary agrees in writing to be bound by all of the terms, conditions and provisions contained herein, (ii) any post-Closing purchaser of all of the issued and outstanding membership interests of the Company or a substantial part of its assets or (iii) any financial institution providing purchase money or other financing to Purchaser or the Company from time to time as collateral security for such financing, but no such assignment referred to in clause (i) or (ii) shall relieve Purchaser of its obligations hereunder.  Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and their respective successors and assigns.

 

14.11                                   Headings; Schedules.  The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. Each exception to the any representation or warranty disclosed on one section of the Disclosure Schedule shall constitute an exception to all other applicable representations and warranties

 

56

 

made in this Agreement requiring disclosure of such exception to the extent that such exception is reasonably apparently from a plain reading of the disclosure contained in such section.

 

14.12                                   Invalid Provisions.  If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, and (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom.

 

14.13                                   Governing Law.  This Agreement shall be governed by and construed in accordance with the Laws of the State of Delaware applicable to a Contract executed and performed in such State, without giving effect to the conflicts of laws principles thereof.

 

14.14                                   Disputes.  Any dispute, claim or controversy arising out of or relating to this Agreement that cannot be resolved amicably by the parties, including the scope or applicability of this agreement to arbitrate, shall be determined by binding arbitration pursuant to Section 349 of the Rules of the Court of Chancery of the State of Delaware if it is eligible for such arbitration.  If the dispute claim or controversy is not eligible for such arbitration, it shall be settled by arbitration administered by the American Arbitration Association (“AAA”) in accordance with its Commercial Rules and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.  Any AAA arbitration proceeding shall be conducted in the State of Delaware.  The AAA arbitrator shall have the authority to award any remedy or relief that a court of competent jurisdiction could order or grant, including the issuance of an injunction or other equitable relief.  However, any party may, without inconsistency with this arbitration provision, apply to any court having jurisdiction hereof and seek interim provisional, injunctive or other equitable relief until the arbitration award is rendered or the controversy is otherwise resolved.  Except as necessary in court proceedings to enforce this arbitration provision or an award rendered hereunder, or to obtain interim relief, neither a party nor an arbitrator may disclose the existence, content, or results of any arbitration hereunder without the prior written consent of both parties.  TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTER-CLAIM, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY MATTER ARISING HEREUNDER.

 

14.15                                   Counterparts.  This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

 

14.16                                   Seller Representative.  Each Seller, by the execution of this Agreement, shall be deemed to have irrevocably appointed, authorized and directed Frank J. Fertitta III, in his capacity as the Seller Representative, to act as such Seller’s agent, representative, proxy and attorney-in-fact for the purpose of effecting the consummation of the

 

57

 

transactions contemplated by this Agreement and exercising, on behalf of all Sellers, the rights and powers of Sellers hereunder and thereunder.  Without limiting the generality of the foregoing, the Seller Representative shall have full power and authority, and is hereby directed, for and on behalf of all Sellers, to take such action, and to exercise such rights, power and authority, as are authorized, delegated and granted to the Seller Representative hereunder in connection with the transactions contemplated hereby and to exercise such rights, power and authority as are incidental thereto, to represent any Seller at and after the Closing, to give or receive any notices required or permitted to be given hereunder and thereunder, to accept service of process on behalf of any Seller, to execute and deliver, or hold in escrow and release, any exhibits or amendments to this Agreement, or any other agreements, certificates, statements, notices, approvals, extensions or waivers relating to the transactions contemplated hereby or thereby, to conduct or cease to conduct the defense of all claims against any Seller in connection with this Agreement, and to settle all such claims on behalf of all Sellers.  The appointment and agency created hereby is irrevocable, and shall be deemed to be coupled with an interest.  The Seller Representative shall serve as such from the date hereof until the earlier of his resignation, death or incapacity or the completion of his obligations hereunder.  In the event that Frank J. Fertitta III is unable or unwilling to continue to serve as the Seller Representative, or otherwise ceases to be Sellers Representative, his successor shall be promptly appointed by Sellers.

 

[Signature Page Follows]

 

58

 

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officer of each party hereto as of the date first above written.

 

	
 
    	
STATION CASINOS LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Richard J. Haskins
    
	
 
    	
 
    	
Name: Richard J.   Haskins
    
	
 
    	
 
    	
Title: Executive Vice   President
    

 

 

	
 
    	
FERTITTA ENTERTAINMENT   LLC
    
	
 
    	
 
    
	
 
    	
By: FERTITTA HOLDCO LLC
    
	
 
    	
Its: Manager
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Frank J. Fertitta   III
    
	
 
    	
 
    	
Name: Frank J. Fertitta   III
    
	
 
    	
 
    	
Title: Manager
    
	
 
    	
 
    
	
 
    	
FERTITTA BUSINESS   MANAGEMENT LLC
    
	
 
    	
 
    
	
 
    	
By: F & J   FERTITTA FAMILY BUSINESS TRUST
    
	
 
    	
Its: Member
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Frank J. Fertitta   III
    
	
 
    	
 
    	
Name: Frank J. Fertitta   III
    
	
 
    	
 
    	
Title: Trustee
    
	
 
    	
 
    
	
 
    	
By: L & T   FERTITTA FAMILY BUSINESS TRUST
    
	
 
    	
Its: Member
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Lorenzo J. Fertitta
    
	
 
    	
 
    	
Name: Lorenzo J.   Fertitta
    
	
 
    	
 
    	
Title: Trustee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LNA INVESTMENTS, LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Lorenzo J. Fertitta
    
	
 
    	
 
    	
Name: Lorenzo J.   Fertitta
    
	
 
    	
 
    	
Title: Manager
    
	
 
    	
 
    
	
 
    	
KVF INVESTMENTS, LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Frank J. Fertitta   III
    
	
 
    	
 
    	
Name: Frank J. Fertitta   III
    
	
 
    	
 
    	
Title: Manager
    

 

 

	
 
    	
FE EMPLOYEECO LLC
    
	
 
    	
 
    
	
 
    	
By: FERTITTA HOLDCO LLC
    
	
 
    	
Its: Manager
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Frank J. Fertitta   III
    
	
 
    	
 
    	
Name: Frank J. Fertitta   III
    
	
 
    	
 
    	
Title: Manager
    
	
 
    	
 
    
	
 
    	
/s/   Frank J. Fertitta III
    
	
 
    	
Frank J. Fertitta III,   as the Seller Representative
    

 

 

DISCLOSURE SCHEDULE

 

TO

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

BY AND AMONG

 

STATION CASINOS LLC,

(“PURCHASER”),

 

FERTITTA BUSINESS MANAGEMENT LLC,

LNA INVESTMENTS, LLC,

KVF INVESTMENTS, LLC,

FE EMPLOYEECO LLC

(COLLECTIVELY, “SELLERS”),

 

FERTITTA ENTERTAINMENT LLC

(THE “COMPANY”)

 

AND

 

FRANK J. FERTITTA III

(THE “SELLER REPRESENTATIVE”)

 

WITH RESPECT TO ALL

OUTSTANDING MEMBERSHIP INTERESTS OF

THE COMPANY

 

DATED AS OF OCTOBER 13, 2015

 

 

DISCLOSURE SCHEDULE

 

The following constitutes the Disclosure Schedule referenced in the Membership Interest Purchase Agreement, dated as of October 13, 2015 (the “Agreement”), by and among Purchaser, the Company, Sellers and the Seller Representative.  Capitalized terms not otherwise defined herein shall have the meanings given to them in the Agreement, to which Agreement this Disclosure Schedule is attached and into which this Disclosure Schedule is incorporated by reference.

 

This Disclosure Schedule (including all of the individual sections and subsections hereof and all the exhibits and attachments hereto) is qualified in its entirety by reference to specific provisions of the Agreement, and is not intended to constitute, and shall not be construed as constituting, representations, warranties or covenants of any party to the Agreement, except as and to the extent provided in the Agreement. The inclusion in this Disclosure Schedule of any fact, item or information or reference to any agreement or document shall not imply any representation, warranty or covenant not expressly given in the Agreement.  This Disclosure Schedule and the information and disclosures contained herein shall not be deemed to expand in any way the scope or effect of any representations, warranties or covenants contained in the Agreement.  Where the terms of a Contract or other disclosure item have been summarized or described in this Disclosure Schedule, such summary or description does not purport to be a complete statement of the material terms of such Contract or other item.  Document summaries herein are provided solely for convenience.

 

Certain matters set forth in this Disclosure Schedule are included for informational purposes only notwithstanding the fact that, because they do not rise above applicable materiality thresholds or otherwise, they would not be required by the terms of the Agreement to be set forth herein.  All parties to the Agreement have agreed that disclosure of any fact, item, information or reference to any agreement or document in this Disclosure Schedule is not an admission or acknowledgement that such fact, item, information or reference (or any non-disclosed fact, item, information or reference of comparable or greater significance) is material, is required to have been disclosed herein, or is of a nature that is material or would, individually or in the aggregate, have a Company Material Adverse Effect.  Nothing in this Disclosure Schedule constitutes an admission of any liability or obligation by Sellers or the Company to any third party, nor an admission against Sellers’ or the Company’s interests.

 

The section and subsection numbers contained in this Disclosure Schedule correspond to the section and subsection numbers in the Agreement to which the disclosure contained therein relates.  However, notwithstanding anything to the contrary contained in this Disclosure Schedule or in the Agreement, any item of information or other matter disclosed in one section of this Disclosure Schedule shall be deemed disclosed in each other section of this Disclosure Schedule to the extent it is reasonably apparent on its face that the disclosure is responsive to the representation to which such other section relates, notwithstanding the omission of a reference or cross-reference in or to that other section.  The headings contained in this Disclosure Schedule are for reference purposes only and shall not affect in any way the reading or interpretation of this Disclosure Schedule or the Agreement.

 

 

SECTION 2.01 OF THE DISCLOSURE SCHEDULE

Purchase and Sale

 

	
 
    	
 
    	
Common Units
    	
 
    	
Incentive Units
    	
 
    
	
Fertitta   Business Management LLC
    	
 
    	
55,170.44
    	
 
    	
0
    	
 
    
	
LNA Investments,   LLC
    	
 
    	
12,981.28
    	
 
    	
0
    	
 
    
	
KVF Investments,   LLC
    	
 
    	
12,981.28
    	
 
    	
0
    	
 
    
	
FE Employeeco   LLC
    	
 
    	
0
    	
 
    	
18,050
    	
 
    

 

 

SECTION 2.07 OF THE DISCLOSURE SCHEDULE

Excluded Assets

 

Personal Property

 

1.              All computers, computer hardware, computer peripheral devices and software owned, used or held for use by the Company and its Subsidiaries, in each case solely to the extent pertaining to the Apple Mac system and incompatible with the systems of Purchaser.

 

2.              All artwork owned by the Company and its Subsidiaries.

 

3.              2015 Cadillac Escalade owned by the Company.

 

4.              28’ x 28’ Tai Ping Carpets Custom Agate design area rug owned by the Company.

 

5.              The Aircraft (as defined in Section 3.08(b)(i)).

 

Contracts

 

1.              Non-Recourse Secured Promissory Note, dated as of April 26, 2012 (the “Promissory Note”), by Fertitta Investment LLC, a Delaware limited liability company, in favor of FE Special Investor LLC, a Delaware limited liability company.  The Promissory Note shall be assigned to an Affiliate of Sellers prior to Closing.

 

2.              Promissory Note, dated as of March 5, 2014 (the “Falcone Note”), by Marc J. Falcone, Chief Financial Officer of the Company, in favor of the Company in the amount of $500,000.  The Falcone Note shall be assigned to an Affiliate of Sellers prior to Closing.

 

3.              Operating Agreement of SCCR Tejon, LLC, a Nevada limited liability company, dated as of April 5, 2013, by and between the Company, Cannery Casino Resorts, LLC, and William C. Wortman, as amended on June 1, 2013 and October 14, 2014.  The Company has withdrawn as a member of SCCR Tejon, LLC, but retains certain rights pursuant to Section 11.3(c) thereof under certain circumstances.

 

4.              All Contracts relating to the Aircraft, including all Contracts set forth in Section 3.08(b)(i) and all Contracts set forth in Section 3.17(a)(v)(12) through (16).

 

Federal Trademarks Registrations

 

	
Mark
    	
 
    	
Registration Number
    	
 
    	
Registration Date
    
	
Fertitta
    	
 
    	
4,092,448
    	
 
    	
1/24/2012
    
	
Fertitta
    	
 
    	
3,745,572
    	
 
    	
2/02/2010
    
	
Fertitta
    	
 
    	
4,092,445
    	
 
    	
1/24/2012
    
	
Fertitta Entertainment
    	
 
    	
4,486,983
    	
 
    	
2/25/2014
    

 

State Trademark Registrations

 

	
Mark
    	
 
    	
State
    	
 
    	
Registration Number
    	
 
    	
Registration Date
    
	
Fertitta
    	
 
    	
NV
    	
 
    	
E0383022007-5
    	
 
    	
5/31/2007
    
	
Fertitta
    	
 
    	
NV
    	
 
    	
E0382652012-6
    	
 
    	
7/18/2012
    
	
Fertitta Entertainment
    	
 
    	
NV
    	
 
    	
E0564972012-4
    	
 
    	
10/23/2012
    
	
Fertitta Entertainment
    	
 
    	
NV
    	
 
    	
E0564962012-3
    	
 
    	
10/23/2012
    

 

 

	
Fertitta
    	
 
    	
NV
    	
 
    	
E0382652012-6
    	
 
    	
7/18/2012
    
	
Fertitta Entertainment
    	
 
    	
NV
    	
 
    	
E0564972012-4
    	
 
    	
10/23/2012
    
	
Fertitta Entertainment
    	
 
    	
NV
    	
 
    	
E0564962012-3
    	
 
    	
10/23/2012
    

 

Federal Trademark Applications

 

	
Mark
    	
 
    	
Application Number
    	
 
    	
Filing Date
    
	
Fertitta
    	
 
    	
85-657,016
    	
 
    	
6/20/2012
    
	
Fertitta Entertainment
    	
 
    	
85-180,567
    	
 
    	
11/18/2010
    
	
Fertitta Entertainment
    	
 
    	
85-975,774
    	
 
    	
11/18/2010
    
	
Fertitta Gaming
    	
 
    	
85-180,560
    	
 
    	
11/18/2010
    

 

Domain Names

 

	
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fertittaent.net
    
	
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SECTION 3.02 OF THE DISCLOSURE SCHEDULE

Organization of the Company

 

	
 
    	
 
    	
Jurisdiction of Organization
    	
 
    	
Foreign Qualifications
    
	
Fertitta Entertainment LLC
    	
 
    	
Delaware
    	
 
    	
Nevada
    

 

 

SECTION 3.03 OF THE DISCLOSURE SCHEDULE

Equity Interests

 

Outstanding Options

 

On January 12, 2011, the Limited Liability Company Agreement of the Company was amended to provide for the issuance of Incentive Unit awards to be indirectly granted to certain key executives of the Company and its affiliates (the “Incentive Unit Awards”) and FE Employeeco LLC was formed to acquire, own and hold the Incentive Unit Awards on behalf of the key executives that indirectly received awards of Incentive Unit Awards. The Incentive Unit Awards vest in equal annual installments over four or five years, depending on the terms of the award agreement governing the applicable Incentive Unit Award. Holders of the Incentive Unit Awards are entitled to participate in the Company’s distributions, subject to the return of capital contributions made by the members and certain other preferred distribution rights.  FE Employeeco will settle the Incentive Unit Awards in cash at Closing from the proceeds allocated to FE Employeeco LLC.

 

 

SECTION 3.04 OF THE DISCLOSURE SCHEDULE

Subsidiaries

 

	
Entity
    	
 
    	
Jurisdiction of
   Organization
    	
 
    	
Foreign
   Qualifications
    	
 
    	
Record Owner
    	
 
    	
Percent
   Owned
    	
 
    
	
FE Propco   Management LLC
    	
 
    	
Delaware
    	
 
    	
Nevada
    	
 
    	
The Company
    	
 
    	
100
    	
%
    
	
FE Opco   Management LLC
    	
 
    	
Delaware
    	
 
    	
Nevada
    	
 
    	
The Company
    	
 
    	
100
    	
%
    
	
FE Landco   Management LLC
    	
 
    	
Delaware
    	
 
    	
Nevada
    	
 
    	
The Company
    	
 
    	
100
    	
%
    
	
FE GVR   Management LLC
    	
 
    	
Delaware
    	
 
    	
Nevada
    	
 
    	
The Company
    	
 
    	
100
    	
%
    
	
FE Interactive   Investor LLC
    	
 
    	
Delaware
    	
 
    	
 
    	
 
    	
The Company
    	
 
    	
100
    	
%
    
	
FE Special   Investor LLC
    	
 
    	
Delaware
    	
 
    	
Nevada
    	
 
    	
The Company
    	
 
    	
100
    	
%
    
	
FE   Transportation LLC
    	
 
    	
New York
    	
 
    	
 
    	
 
    	
The Company
    	
 
    	
100
    	
%
    
	
FE JV Holdco LLC
    	
 
    	
Delaware
    	
 
    	
 
    	
 
    	
The Company
    	
 
    	
100
    	
%
    
	
FE JV Tejon   Holdco LLC
    	
 
    	
Delaware
    	
 
    	
 
    	
 
    	
FE JV Holdco LLC
    	
 
    	
100
    	
%
    
	
FE Aviation LLC
    	
 
    	
Delaware
    	
 
    	
Nevada
    	
 
    	
The Company
    	
 
    	
100
    	
%
    
	
FE Aviation I   LLC
    	
 
    	
Delaware
    	
 
    	
 
    	
 
    	
FE Aviation LLC
    	
 
    	
100
    	
%
    
	
FE Aviation II   LLC
    	
 
    	
Delaware
    	
 
    	
Nevada
    	
 
    	
FE Aviation I LLC
    	
 
    	
100
    	
%
    

 

Liens

 

In connection with the Credit Agreement (as defined in Section 3.17(a)(iv)(1)), the Company granted a continuing security interest in all of its right, title and interest in the limited liability company interests it holds in each of FE GVR Management LLC, FE Landco Management LLC, FE Opco Management LLC, FE Propco Management LLC, FE Interactive Investor LLC, FE Transportation LLC and FE Aviation LLC (formerly known as FE Development LLC) (collectively, the “Guarantors”) pursuant to that certain Security Agreement, dated as of April 26, 2012 (the “Security Agreement”), by the Company and the Guarantors in favor of the Administrative Agent (as defined in Section 3.17(a)(v)(1)) under the Credit Agreement.  Pursuant to the Agreement, such Liens will be released concurrently with the Closing in connection with the payoff of the Closing Indebtedness.

 

See Section 3.08(b)(i).  In connection with the Aircraft Loan Agreement (as defined in Section 3.08(b)(i)), FE Aviation I LLC pledged its equity interest in FE Aviation II LLC as collateral to secure the Aircraft Loan Agreement.  Pursuant to the Agreement, such Lien will be released concurrently with the Closing in connection with the payoff of the Closing Indebtedness.

 

 

SECTION 3.05 OF THE DISCLOSURE SCHEDULE

No Conflicts

 

None.

 

 

SECTION 3.06 OF THE DISCLOSURE SCHEDULE

Governmental Approvals and Filings

 

1.              Approval from the Nevada Gaming Control Board and Nevada Gaming Commission with respect to the Transactions, including the IPO Transactions.

 

2.              Filings pursuant to the HSR Act and expiration of applicable waiting periods thereunder with respect to the transactions contemplated by the Agreement.

 

 

SECTION 3.08 OF THE DISCLOSURE SCHEDULE

Financial Statements and Condition

 

(a)

 

Financial Statements

 

With respect to its consolidated financial statements for the years ended December 31, 2012, 2013 and 2014 and for the six months ended June 30, 2015, the Company did not record share-based compensation expense associated with equity incentives issued to current and former executives of the Company from FI Station Investor LLC.  FI Station Investor LLC is an entity that is owned by the parent entities of the Company.  Pursuant to GAAP, this non-cash share-based compensation is required to be recorded as a component of the Company’s statement of operations since these executives were employees of the Company and FI Station Investor LLC is a common-controlled entity of the Company’s equity holders.  The Company’s auditor, Ernst & Young LLP, has determined that each of the foregoing financial statements would require to be restated and has withdrawn its opinions for each audit period that are dated March 25, 2015, May 14, 2014, April 16, 2013 and May 15, 2012, respectively.  Except for the foregoing, the Financial Statements were prepared in accordance with GAAP (except for the absence of footnotes and changes resulting from audits and year-end adjustments in the case of the Unaudited Financial Statements) and fairly present in all material respects the consolidated financial condition and results of operations of the Company and its consolidated Subsidiaries as of the respective dates thereof and for the respective periods covered thereby. In connection with the foregoing, the Administrative Agent and the Required Lenders (as defined in the Credit Agreement) waived the Borrower Financial Statements Default (as defined in the Credit Agreement) and any other Defaults or Events of Default (each as defined in the Credit Agreement) arising as a direct result of the Borrower Financial Statements Default pursuant to that certain Waiver No. 1 to Credit Agreement, dated as of September 15, 2015, by and among the Company, the Administrative Agent and the Required Lenders signatory thereto.

 

(b)

 

(i)

 

On July 24, 2015, the Company entered into a Purchase and Sale Agreement (the “Aircraft PSA”) for the purchase of a 2011 Bombardier Global XRS Aircraft, S/N 9354 (the “Aircraft”).  On September 24, 2015, FE Aviation II LLC, a newly-formed Subsidiary, entered into that certain Loan and Aircraft Security Agreement (the “Aircraft Loan Agreement”) with Guggenheim Aircraft Opportunity Master Fund, L.P. (the “Aircraft Lender”) for purposes of financing the purchase of the Aircraft through an asset based loan.  The Company guaranteed FE Aviation II LLC’s payment and performance obligations under the Aircraft Loan Agreement, limited to $1,000,000 in the aggregate, pursuant to that certain Corporate Guaranty, dated as of September 24, 2015 (the “Aircraft Guaranty”), by the Company in favor of the Aircraft Lender.  The Aircraft Loan Agreement is secured by a first priority security interest in the Aircraft, and FE Aviation I LLC, a newly-formed Subsidiary and the immediate parent of FE Aviation II LLC, pledged its equity interest in FE Aviation II LLC to the Aircraft Lender pursuant to that certain

 

 

Membership Interest Pledge Agreement, dated as of September 24, 2015 (the “Aircraft Equity Pledge Agreement”), by and between FE Aviation I LLC and the Aircraft Lender.  Pursuant to the Agreement, the Aircraft shall constitute an Excluded Asset and the Indebtedness (including the aforementioned guarantee) incurred in connection with the purchase thereof shall be paid off or assumed by an Affiliate of Sellers, and any related liens will be released, prior to or concurrently with the Closing.

 

(ii)  None.

 

(iii)

 

1.              6.04(b)(i): On July 8, 2015, the limited liability company agreement of FE Development LLC was amended for purposes of changing the name of FE Development LLC to FE Aviation LLC.

 

2.              6.04(b)(i): On September 29, 2015, the LLC Agreement was amended in connection with the transfers of Common Units from F & J Fertitta Family Business Trust and L & T Fertitta Family Business Trust to Fertitta Business Management LLC.

 

3.              6.04(b)(iii): See Section 3.08(b)(i).

 

4.              6.04(b)(iv)(A): See Section 3.08(b)(i).

 

5.              6.04(b)(v): See Section 3.08(a).

 

6.              6.04(b)(vii): The Aircraft and the equity interest in FE Aviation II LLC were pledged as collateral pursuant to the Aircraft Loan Agreement.

 

(c)

 

Liabilities

 

See Section 3.08(b)(i).

 

 

SECTION 3.09 OF THE DISCLOSURE SCHEDULE

Taxes

 

(a) None.

 

(b) None.

 

(c) None.

 

(d) None.

 

(e) None.

 

(f) None.

 

(g) None.

 

(h) None.

 

(i) None.

 

(j) None.

 

(k) None.

 

(l) None.

 

(m) None.

 

 

SECTION 3.10 OF THE DISCLOSURE SCHEDULE

Legal Proceedings

 

(i) None.

 

(ii) None.

 

 

SECTION 3.12 OF THE DISCLOSURE SCHEDULE

Benefit Plans; ERISA

 

(a)

 

1.              Employees of the Company and its Subsidiaries participate in the Zuffa LLC 401(k) Profit Sharing Plan and Trust, which is sponsored by Zuffa LLC (“Zuffa”), an Affiliate of the Company because certain of the Company’s equity holders (or Affiliates thereof) also own a direct interest in Zuffa.

 

2.              See Section 3.17(a)(i).  The Company has employment agreements with certain of its executive officers which provide for, among other things, an annual base salary, annual bonus, and eligibility for group health and life insurance benefits, and retirement plans, when applicable.

 

3.              Health Plan of Nevada HMO Value Plan.

 

4.              Health Plan of Nevada HMO Plus Plan.

 

5.              Sierra Health & Life Platinum PPO Plan.

 

6.              Sierra Health & Life PPO High Deductible Plan with Health Savings Account Plan.

 

7.              Boon-Chapman Dental Insurance Plan.

 

8.              Davis Vision Vision Plan.

 

9.              Principal Financial Group Life Insurance Plan.

 

10.       Principal Financial Group Short-Term Disability Insurance Plan.

 

11.       Principal Financial Group Voluntary Short Term Disability Buy Up Plan.

 

12.       Principal Financial Group Voluntary Long Term Disability Plan.

 

13.       Principal Financial Group Voluntary Life Insurance Plan.

 

14.       Hyatt Legal Plans MetLaw Legal Program Plan.

 

15.       The Fertitta Entertainment Employee Handbook dated November 2012 and the policies set forth therein (including policies regarding vacation, sick leave, and leaves of absence).

 

16.       Letter Agreement regarding Long-Term Stay-On Performance Incentive Payment, by and between the Company and Shawn Cardinal, dated September 1, 2014.

 

17.       Letter Agreement regarding Long-Term Stay-On Performance Incentive Payment, by and between the Company and Daniel P Schafer, dated October 8, 2013.

 

 

(d)

 

All representations made under Section 3.13(d) of the Agreement with respect to the Zuffa 401(k) Plan are qualified by the Knowledge of the Sellers.

 

(e)

 

See Section 3.12(a)(1).

 

(f)

 

None.

 

(g)

 

None.

 

(h)

 

See Section 3.12(a)(16)-(17). The Company plans to accelerate the vesting of the Incentive Payments (as defined in the respective letter agreements) and pay the full amount of the Incentive Payments immediately prior to Closing.

 

(i)

 

None.

 

(j)

 

None.

 

 

SECTION 3.13 OF THE DISCLOSURE SCHEDULE

Real Property

 

In connection with the Management Agreements set forth in Section 3.17(a)(ix)(1)-(4), the Company, certain of its Subsidiaries and Station Casinos LLC entered into that certain Manager Allocation Agreement, dated as of June 16, 2011 (the “Manager Allocation Agreement”), that provides for the Company to pay 20% of all rent and other amounts paid to the landlord under Station Casinos LLC’s corporate headquarters lease and other operating expenses associated with the corporate headquarters.  The Company has paid approximately $1.2 million on an annual basis in accordance with the Manager Allocation Agreement.

 

 

SECTION 3.14 OF THE DISCLOSURE SCHEDULE

Tangible Personal Property

 

In connection with the Company’s Credit Agreement (as defined in Section 3.17(a)(v)(1)), the Company and each of the Guarantors pledged all of their respective personal property as collateral pursuant to the Security Agreement.  Pursuant to the Agreement, such Liens will be released concurrently with the Closing in connection with the payoff of the Closing Indebtedness.

 

 

SECTION 3.15 OF THE DISCLOSURE SCHEDULE

Intellectual Property Rights

 

The Company is the owner or applicant, as applicable, with respect to each of the following items of Intellectual Property:

 

1.              Each of the trademark registrations, applications and domain names set forth in Section 2.07 will constitute Excluded Assets.  The Company will transfer all right, title and interest to such Intellectual Property to a Person other than the Company or any Subsidiary prior to Closing.

 

Trademarks

 

A.            Federal Registrations

 

	
Mark
    	
 
    	
Registration Number
    	
 
    	
Registration Date
    
	
Viva
    	
 
    	
3,342,201
    	
 
    	
11/20/2007
    
	
Viva
    	
 
    	
3,628,800
    	
 
    	
5/26/2009
    
	
Viva
    	
 
    	
3,735,308
    	
 
    	
1/05/2010
    
	
Viva Casino
    	
 
    	
3,473,703
    	
 
    	
7/22/2008
    
	
Viva Las Vegas
    	
 
    	
3,705,345
    	
 
    	
11/03/2009
    

 

B.            Federal Applications

 

	
Mark
    	
 
    	
Application Number
    	
 
    	
Filing Date
    
	
Viva
    	
 
    	
85-083,356
    	
 
    	
7/13/2010
    
	
Viva
    	
 
    	
78-616,285
    	
 
    	
4/25/2005
    
	
Viva
    	
 
    	
85-510,486
    	
 
    	
1/06/2012
    
	
Viva
    	
 
    	
85-669,270
    	
 
    	
7/05/2012
    
	
Viva Resort Spa Casino
    	
 
    	
77-910,035
    	
 
    	
1/12/2010
    
	
Viva Resort Spa Casino
    	
 
    	
85-669,292
    	
 
    	
7/05/2012
    
	
Viva Casino
    	
 
    	
86-409,210
    	
 
    	
9/29/2014
    
	
Viva Resort Spa Casino
    	
 
    	
86-409,126
    	
 
    	
9/29/2014
    

 

C.            State Registrations

 

	
Mark
    	
 
    	
State
    	
 
    	
Registration Number
    	
 
    	
Registration Date
    
	
Viva
    	
 
    	
NV
    	
 
    	
E0473232012-6
    	
 
    	
9/11/2012
    

 

 

	
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NV
    	
 
    	
E0473232012-6
    	
 
    	
9/11/2012
    
	
Viva Salsa
    	
 
    	
NV
    	
 
    	
SM0300766
    	
 
    	
3/06/1998
    

 

Licenses

 

1.              See Section 3.17(a)(ix)(5)-(12).

 

Domain Names

 

	
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Section 3.15(a), last sentence: None.

 

 

Section 3.15(b)(i): None.

 

Section 3.15(b)(ii): None.

 

Section 3.15(c):  The Company has periodically received notices from third parties challenging the validity or exclusive ownership of the trademark “VIVA” from the owners of marks substantially similar thereto throughout several international jurisdictions.  No litigation is currently pending or envisioned.

 

 

SECTION 3.16(b) OF THE DISCLOSURE SCHEDULE

No Other Business

 

1.              On April 5, 2013, the Company and Cannery Casino Resorts, LLC, a third party, entered into an operating agreement to form SCCR Tejon, LLC, a Nevada limited liability company. SCCR Tejon, LLC’s purpose was to develop and manage a casino resort for the Tejon Indian Tribe. On May 19, 2015, the Company withdrew as a member from SCCR Tejon, LLC.

 

2.              See Section 3.08(b)(i).

 

 

SECTION 3.17 OF THE DISCLOSURE SCHEDULE

Contracts

 

(a)

 

(i)

 

1.              Employment Agreement, by and between the Company and Stephen L. Cavallaro, dated as of October 10, 2012.  It is expected that this agreement will be superseded by a new employment agreement at Closing.

 

2.              Employment Agreement, by and between the Company and Marc J. Falcone, dated as of October 29, 2009.  It is expected that this agreement will be superseded by a new employment agreement at Closing.

 

3.              Employment Agreement, by and between the Company and Scott M. Nielson, dated as of June 16, 2011, and amended as of November 10, 2014.  It is expected that this agreement will be superseded by a new employment agreement at Closing.

 

4.              Employment Agreement, by and between the Company and Richard J. Haskins, dated as of June 16, 2011.  It is expected that this agreement will be superseded by a new employment agreement at Closing.

 

5.              Employment Agreement, by and between the Company and Glen T. Bashore, dated as of June 16, 2011, and amended as of September 19, 2012.  It is expected that this agreement will be superseded by a new employment agreement at Closing.

 

6.              Employment Agreement, by and between the Company and Steve Chayra, dated as of February 13, 2012.  It is expected that this agreement will be superseded by a new employment agreement at Closing.

 

7.              Employment Agreement, by and between the Company and Joseph Haley, dated as of June 16, 2011, and amended as of September 19, 2012.  It is expected that this agreement will be superseded by a new employment agreement at Closing.

 

8.              Employment Agreement, by and between the Company and Matthew L. Heinhold, dated as of June 16, 2011.  It is expected that this agreement will be superseded by a new employment agreement at Closing.

 

9.              Employment Agreement, by and between the Company and Joleen Legakes, dated as of June 16, 2011 and amended as of September 19, 2012 and May 1, 2014.  It is expected that this agreement will be superseded by a new employment agreement at Closing.

 

10.       Employment Agreement, by and between the Company and Daniel P. Schafer dated as of June 16, 2011.  It is expected that this agreement will be superseded by a new employment agreement at Closing.

 

 

11.       Professional Services Agreement, by and between the Company and BETA Consultants LLC, dated as of January 19, 2015.

 

12.       Consulting Agreement, by and between the Company and Tobin Prior, dated as of June 1, 2015.

 

13.       Consulting Agreement, by and between the Company and Semprel SA, a Brazilian company, dated as of August 1, 2015.

 

(ii)

 

1.              Non-Competition Agreement, by and between Station Casinos LLC, the Company, FE Propco Management LLC, FE Opco Management LLC, FE GVR Management LLC, Frank J. Fertitta III, Lorenzo J. Fertitta, German American Capital Corporation and JPMorgan Chase Bank, N.A.

 

(iii)

 

1.              See Section 3.17(a)(ix)(1)-(4).

 

(iv)

 

1.              The LLC Agreement.

 

(v)

 

1.              Amended and Restated Credit Agreement, by and between the Company, Bank of America, N.A. as administrative agent (the “Administrative Agent”), as L/C Issuer and as a Lender, JPMorgan Chase Bank, N.A., as a Lender, the other Lenders party thereto, Bank of America Merrill Lynch and J.P, Morgan Securities LLC, as Joint Lead Arrangers and Joint Book Managers, dated as of December 24, 2013, and amended by that certain Joinder, Assignment and Amendment No. 2 to Credit Agreement, dated as of March 26, 2015, by and among the Company, the Lenders party thereto and the Administrative Agent (as amended, the “Credit Agreement”).

 

2.              Amended and Restated Guaranty, dated as of December 24, 2013, by each of the Company and the Guarantors in favor of the Administrative Agent on behalf of itself, each Lender, the L/C Issuer, each Cash Management Bank and each Hedge Bank (capitalized terms as defined therein).

 

3.              Omnibus Reaffirmation, dated as of December 24, 2013, by and among the Company, the Guarantors, the Sellers, FI Station Investor LLC and the Administrative Agent.

 

4.              The Parent Pledge Agreement.

 

5.              The Security Agreement.

 

 

6.              Trademark Security Agreement, dated as of December 24, 2013, made by the Company in favor of the Administrative Agent.

 

7.              The Manager Allocation Agreement.

 

8.              Guaranty by the Company (Guarantor) dated June 16, 2011 (Required by the Management Agreement with respect to FE GVR Management LLC).

 

9.              Guaranty by the Company (Guarantor) dated June 16, 2011 (Required by the Management Agreement with respect to FE Landco Management, LLC and NP Tropicana LLC).

 

10.       Guaranty by the Company (Guarantor) dated June 16, 2011 (Required by the Management Agreement with respect to FE Propco Management, LLC and Station Casinos LLC).

 

11.       Guaranty by the Company (Guarantor) dated June 16, 2011 (Required by the Management Agreement with respect to FE Opco Management LLC and NP Opco LLC, LLC and Station Casinos LLC).

 

12.       The Aircraft Loan Agreement.

 

13.       The Aircraft Guaranty.

 

14.       The Aircraft Equity Pledge Agreement.

 

15.       Liquidity Reserve Account Agreement, dated as of September 24, 2015, by and between FE Aviation II LLC and the Aircraft Lender.

 

16.       Promissory Note, dated as of September 24, 2015, by FE Aviation II LLC in favor of the Aircraft Lender.

 

17.       The Promissory Note.

 

18.       The Falcone Note.

 

(vi)

 

1.              See Section 3.08(b)(i).

 

(vii)

 

1.              The Credit Agreement contains various affirmative and negative covenants.  Pursuant to the Agreement, the Credit Agreement will be terminated concurrently with the Closing in connection with the payoff of the Closing Indebtedness.

 

(viii)

 

1.                                      The Promissory Note.

 

2.                                      The Falcone Note.

 

 

3.                                      The Company entered into various agreements for partial use of and to share in the cost of airplanes with Fertitta Enterprises, Inc. (“Enterprises”), a related party owned by the Frank J. Fertitta and Victoria K. Fertitta Revocable Family Trust, and Zuffa. As of December 31, 2014 and 2013, the Company accrued $95,000 and $391,000 respectively, related to the airplane agreements. For the years ended December 31, 2014 and 2013, the cost related to the airplane agreements was $2.1 million and $3.0 million, respectively.

 

4.                                      See Section 3.12(a)(1).

 

5.                                      See Section 3.17(a)(ix).

 

(ix)

 

1.              Amended and Restated Management Agreement, by and between NP Opco LLC and FE Opco Management LLC, dated as of August 19, 2014.

 

2.              Management Agreement, by and between Station GVR Acquisition LLC and FE GVR Management LLC, dated as of June 16, 2011, as amended by (i) that certain First Amendment to Management Agreement, dated as of November 8, 2011, (ii) that certain Second Amendment to Management Agreement, dated as of April 26, 2012, and (iii) that certain Third Amendment to Management Agreement, dated as of April 25, 2013.

 

3.              Management Agreement, by and between NP Tropicana LLC and FE Landco Management LLC, dated as of June 16, 2011, as amended by that certain First Amendment to Management Agreement dated April 26, 2012.

 

4.              Management Agreement, by and between Station Casinos LLC and FE Propco Management LLC, dated as of June 16, 2011, as amended by that certain First Amendment to Management Agreement, dated as of April 26, 2012.

 

5.              Technology Systems License, dated as of June 17, 2011, by and between NP Opco LLC, as licensor, and FE Opco Management LLC, as licensee.

 

6.              Technology Systems License, dated as of June 17, 2011, by and between CV Propco, LLC, as licensor, and FE Landco Management LLC, as licensee.

 

7.              IP License Agreement, dated as of June 17, 2011, by and between NP Opco LLC, as licensor, and FE Opco Management LLC, as licensee.

 

8.              IP License Agreement, dated as of June 17, 2011, by and between CV Propco, LLC, as licensor, and FE Landco Management LLC, as licensee.

 

9.              IP License Agreement, dated as of June 17, 2011, by and between Station Casinos LLC, as licensor, and FE Propco Management LLC, as licensee.

 

 

10.       IP License Agreement, dated as of June 17, 2011, by and between Station GVR Acquisition, LLC, as licensor, and FE GVR Management LLC, as licensee.

 

11.       Technology Systems License, dated as of June 17, 2011, by and between Station Casinos LLC, as licensor, and the Company, as licensee.

 

12.       Technology Systems License, dated as of June 17, 2011, by and between Station GVR Acquisition, LLC, as licensor, and FE GVR Management LLC, as licensee.

 

13.       The Manager Allocation Agreement.

 

(x)

 

1.              See Section 3.17(a)(ix)(5)-(12).

 

(xi)

 

1.              None.

 

(xii)

 

1.              None.

 

(xiii)

 

1.              None.

 

(xiv)

 

1.              None.

 

(xv)

 

1.              Section 3.08(b)(i).

 

2.              See Section 3.17(a)(v)(2).

 

3.              See Section 3.17(a)(v)(8)-(11).

 

(xvi)

 

1.              Section 3.08(b)(i).

 

(b) None.

 

 

SECTION 3.18 OF THE DISCLOSURE SCHEDULE

Licenses; Gaming Licenses

 

The Company and each of FE Propco Management LLC, FE Opco Management LLC, FE Landco Management LLC and FE GVR Management LLC holds a “key employee” gaming license issued by the Nevada Gaming Commission, which license will be terminated or surrendered upon the closing of the transactions contemplated under the Agreement.

 

 

SECTION 3.19 OF THE DISCLOSURE SCHEDULE

Insurance

 

	
Insurance Carrier
    	
 
    	
Policy #
    	
 
    	
Type of Coverage
    	
 
    	
Period Covered
    
	
Atlantic Specialty Insurance
    	
 
    	
7100349590000
    	
 
    	
Business Auto, Crime & Property
    	
 
    	
10/15/14 – 10/15/15
    
	
Atlantic Specialty Insurance
    	
 
    	
GL03980-00
    	
 
    	
General Liability
    	
 
    	
10/15/14 – 10/15/15
    
	
Continental Casualty
    	
 
    	
PST422311416
    	
 
    	
International Pkg. – Workers Comp, Auto & Misc.
    	
 
    	
10/15/14 – 10/15/15
    
	
RSUI Specialty
    	
 
    	
NHA236576
    	
 
    	
Excess Liability - $10mm
    	
 
    	
10/15/14 – 10/15/15
    
	
Torus Specialty
    	
 
    	
18933C142ALI
    	
 
    	
Excess Liability - $10mm xs $10mm
    	
 
    	
10/15/14 – 10/15/15
    
	
National Union Fire Insurance Company of PA
    	
 
    	
016459546
    	
 
    	
Corporate Counsel Prof. Liability
    	
 
    	
10/15/14 – 10/15/15
    
	
Federal Insurance Company
    	
 
    	
71739894
    	
 
    	
Workers Comp
    	
 
    	
07/08/15 –07/08/16
    
	
Travelers Casualty and Surety Company of America
    	
 
    	
105632736
    	
 
    	
Directors, Officers, and Organizational Liability   Policy*
    	
 
    	
06/17/15 – 06/17/16
    

 

*The Company’s senior executive officers are covered under the Directors, Officers and Organizational Liability Coverage policy maintained by Station Casinos LLC.

 

 

SECTION 3.20 OF THE DISCLOSURE SCHEDULE

Employees; Labor Relations

 

None.

 

 

SECTION 3.21 OF THE DISCLOSURE SCHEDULE

Certain Payments

 

None.

 

 

SECTION 3.22 OF THE DISCLOSURE SCHEDULE

Related Party Transactions

 

(i)  See Section 3.17(a)(viii)-(ix).

 

(ii) None.

 

(iii) None.

 

 

SECTION 4.03 OF THE DISCLOSURE SCHEDULE

Ownership of Units

 

	
 
    	
 
    	
 
    	
Common Units
    	
 
    	
Incentive Units
    	
 
    	
 
    
	
 
    	
Fertitta   Business Management LLC
    	
 
    	
55,170.44
    	
 
    	
0
    	
 
    	
 
    
	
 
    	
LNA Investments,   LLC
    	
 
    	
12,981.28
    	
 
    	
0
    	
 
    	
 
    
	
 
    	
KVF Investments,   LLC
    	
 
    	
12,981.28
    	
 
    	
0
    	
 
    	
 
    
	
 
    	
FE Employeeco   LLC
    	
 
    	
0
    	
 
    	
18,050
    	
 
    	
 
    

 

In connection with the Company’s Credit Agreement, each of the Sellers granted to the Administrative Agent, a continuing security interest in all of their respective right, title and interest in their respective Units pursuant to that certain Parent Pledge Agreement, dated as of April 26, 2012 (the “Parent Pledge Agreement”), by and among FE Employeeco LLC, F & J Family Fertitta Family Business Trust, L & T Fertitta Family Business Trust, LNA Investments, LLC, KVF Investments, LLC and the Administrative Agent.  Pursuant to the Agreement, such Liens will be released concurrently with the Closing in connection with the payoff of the Closing Indebtedness.

 

 

SECTION 4.04 OF THE DISCLOSURE SCHEDULE

No Conflicts

 

None.

 

 

SECTION 4.06 OF THE DISCLOSURE SCHEDULE

Legal Proceedings

 

None.

 

 

SECTION 6.10 OF THE DISCLOSURE SCHEDULE

Affiliate Agreements

 

None.

 

 

SECTION 8.03(e) OF THE DISCLOSURE SCHEDULE

Officers and Directors

 

	
Entity
    	
 
    	
Officers
    
	
Fertitta Entertainment LLC
    	
 
    	
1.              Frank J. Fertitta III:  Chief Executive Officer

2.              Stephen L. Cavallaro:  President & Chief Operating   Officer

3.              Marc J. Falcone:  Executive Vice President & Chief   Financial Officer

4.              Richard J. Haskins:  Executive Vice President, General   Counsel & Secretary

5.              Scott M Nielson:  Executive Vice President & Chief   Development Officer
    
	
Fertitta   Aviation LLC
   FE Aviation I LLC
    FE Aviation II LLC
    	
 
    	
1.              Marc J. Falcone:  Senior Vice President and Treasurer

2.              Richard J. Haskins:  Senior Vice President and Secretary

3.              Scott M Nielson:  Senior Vice President
    
	
Other Subsidiaries
    	
 
    	
The other Subsidiaries have not appointed officers.
    

 

 

SECTION 8.06 OF THE DISCLOSURE SCHEDULE

Third Party Consents

 

See Section 3.06.Exhibit 10.29

 

RED ROCK RESORTS, INC.
 2016 EQUITY INCENTIVE PLAN

 

 

RED ROCK RESORTS, INC.
 2016 EQUITY INCENTIVE PLAN

 

Section 1.                             Purpose.  The purposes of this Red Rock Resorts, Inc. 2016 Equity Incentive Plan are to promote the interests of Red Rock Resorts, Inc. and its stockholders by (a) attracting and retaining employees and directors of, and certain consultants to, the Company and its Affiliates; (b) motivating such individuals by means of performance-related incentives to achieve longer-range performance goals; and/or (c) enabling such individuals to participate in the long-term growth and financial success of the Company.

 

Section 2.                             Definitions.  As used in the Plan, the following terms shall have the meanings set forth below:

 

“Affiliate” shall mean any entity (i) that, directly or indirectly, is controlled by, controls or is under common control with, the Company or (ii) in which the Company has a significant equity interest, in either case as determined by the Committee.

 

“Award” shall mean any Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, Performance Award, Other Stock-Based Award or Performance Compensation Award made or granted from time to time hereunder.

 

“Award Agreement” shall mean any written agreement, contract, or other instrument or document evidencing any Award, which may, but need not, be executed or acknowledged by a Participant.  An Award Agreement may be in an electronic medium, may be limited to notation on the books and records of the Company and, unless otherwise determined by the Committee, need not be signed by a representative of the Company.

 

“Board” shall mean the Board of Directors of the Company.

 

“Cause” as a reason for a Participant’s termination of employment or service shall have the meaning assigned such term in the employment, severance or similar agreement, if any, between the Participant and the Company or a subsidiary of the Company.  If the Participant is not a party to an employment, severance or similar agreement with the Company or a subsidiary of the Company in which such term is defined, then unless otherwise defined in the applicable Award Agreement, “Cause” shall mean (i) persistent neglect or negligence in the performance of the Participant’s duties; (ii) conviction (including, but not limited to, pleas of guilty or no contest) for any act of fraud, misappropriation or embezzlement, or for any criminal offense related to the Company, any Affiliate or the Participant’s service; (iii) any deliberate and material breach of fiduciary duty to the Company or any Affiliate, or any other conduct that leads to the material damage or prejudice of the Company or any Affiliate; or (iv) a material breach of a policy of the Company or any Affiliate, such as the Company’s code of conduct.

 

“Change in Control” shall mean the occurrence of any of the following events:

 

(a)                                 Following the date that initial public offering of the Company (the “IPO”) and each of the transactions ancillary thereto, including but not limited to the issuance and sale of capital stock in connection with the IPO, are consummated, the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), other

 

1

 

than a Permitted Holder, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the combined voting power of the then-outstanding securities entitled to vote generally in the election of members of the Board (the “Voting Power”) at such time; provided that the following acquisitions shall not constitute a Change in Control: (i) any such acquisition directly from the Company; (ii) any such acquisition by the Company; (iii) any such acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries; or (iv) any such acquisition pursuant to a transaction that complies with clauses (i), (ii) and (iii) of paragraph (c) below; or

 

(b)                                 individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason (other than death or disability) to constitute at least a majority of the Board; provided, that any individual becoming a director subsequent to the Effective Date, whose election, or nomination for election by the Company’s stockholders, was approved by a vote of the directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be considered as though such individual was a member of the Incumbent Board, but excluding for this purpose, any such individual whose initial assumption of office occurs as a result of or in connection with an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

 

(c)                                  consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless following such Business Combination, (i) either (A) Permitted Holders or (B) all or substantially all of the individuals and entities who were the beneficial owners of the Voting Power immediately prior to such transaction beneficially own, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such transaction (including, without limitation, an entity that, as a result of such transaction, owns the Company or substantially all of the Company’s assets either directly or through one or more subsidiaries) and, in the case of the foregoing clause (B), in substantially the same proportions relative to each other as their ownership immediately prior to such transaction of the securities representing the Voting Power, (ii) no Person (excluding any Permitted Holder, any entity resulting from such transaction or any employee benefit plan (or related trust) sponsored or maintained by the Company or such entity resulting from such transaction) beneficially owns, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock of the entity resulting from such transaction, or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to such transaction, and (iii) at least a majority of the members of the board of directors of the entity resulting from such transaction were members of the Incumbent Board at the time of the execution of the initial agreement with respect to, or the action of the Board providing for, such transaction; or

 

(d)                                 approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

 

2

 

Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any Award which provides for the deferral of compensation that is subject to Section 409A of the Code, then, to the extent required to avoid the imposition of additional taxes under Section 409A of the Code, the transaction or event described in paragraph (a), (b), (c) or (d) above, with respect to such Award, shall only constitute a Change in Control for purposes of the payment timing of such Award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation §1.409A-3(i)(5).

 

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

 

“Committee” shall mean the Compensation Committee of the Board (or its successor(s)), or any other committee of the Board designated by the Board to administer the Plan and composed of not less than two directors, each of whom is required to be a “Non-Employee Director” (within the meaning of Rule 16b-3) and an “outside director” (within the meaning of Section 162(m) of the Code) to the extent Rule 16b-3 and Section 162(m) of the Code, respectively, are applicable to the Company and the Plan.

 

“Company” shall mean Red Rock Resorts, Inc., together with any successor thereto.

 

“Disability” shall mean a physical or mental disability or infirmity that prevents the performance by the Participant of his or her duties lasting (or likely to last, based on competent medical evidence presented to the Company) for a continuous period of six months or longer.

 

“Effective Date” shall have the definition as set forth in Section 18(a) of the Plan.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.

 

“Fair Market Value” shall mean (i) with respect to any property other than Shares, the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee and (ii) with respect to Shares, as of any date, the closing sale price (excluding any “after hours” trading) of the Shares on the date of grant or the date of calculation, as the case may be, on the stock exchange or over the counter market on which the Shares are principally trading on such date (or on the last preceding trading date if Shares were not traded on such date) if the Shares are readily tradable on a national securities exchange or other market system, and if the Shares are not readily tradable, Fair Market Value shall mean the amount determined in good faith by the Committee as the fair market value of the Shares.

 

“Good Reason” as a reason for a Participant’s termination of employment shall have the meaning assigned such term in the employment, severance or similar agreement, if any, between the Participant and the Company or a subsidiary of the Company.  If the Participant is not a party to an employment, severance or similar agreement with the Company or a subsidiary of the Company in which such term is defined, then unless otherwise defined in the applicable Award Agreement, “Good Reason” shall mean (i) a material diminution in the Participant’s base salary from the level immediately prior to the Change in Control; or (ii) a material change in the geographic location at which the Participant must primarily perform the Participant’s services (which shall in no event include a relocation of the Participant’s current principal place of

 

3

 

business to a location less than 50 miles away) from the geographic location immediately prior to the Change in Control; provided that no termination shall be deemed to be for Good Reason unless (a) the Participant provides the Company with written notice setting forth the specific facts or circumstances constituting Good Reason within 90 days after the initial existence of the occurrence of such facts or circumstances, (b) to the extent curable, the Company has failed to cure such facts or circumstances within 30 days of its receipt of such written notice, and (c) the effective date of the termination for Good Reason occurs no later than one 180 days after the initial existence of the facts or circumstances constituting Good Reason.

 

“Incentive Stock Option” shall mean a right to purchase Shares from the Company that is granted under Section 6 of the Plan and that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto.  Incentive Stock Options may be granted only to Participants who meet the requirements of Section 422 of the Code.

 

“Involuntary Termination” shall mean termination by the Company of a Participant’s employment or service by the Company without Cause or termination of a Participant’s employment by the Participant for Good Reason.  For avoidance of doubt, an Involuntary Termination shall not include a termination of the Participant’s employment or service by the Company for Cause or due to the Participant’s death, Disability or resignation without Good Reason.

 

“Negative Discretion” shall mean the discretion authorized by the Plan to be applied by the Committee to eliminate or reduce the size of a Performance Compensation Award; provided, that the exercise of such discretion would not cause the Performance Compensation Award to fail to qualify as “performance-based compensation” under Section 162(m) of the Code.  By way of example and not by way of limitation, in no event shall any discretionary authority granted to the Committee by the Plan including, but not limited to, Negative Discretion, be used to (a) grant or provide payment in respect of Performance Compensation Awards for a Performance Period if the Performance Goals for such Performance Period have not been attained or (b) increase a Performance Compensation Award above the maximum amount payable under Section 4(a) or 11(d)(vi) of the Plan.

 

“Non-Qualified Stock Option” shall mean a right to purchase Shares from the Company that is granted under Section 6 of the Plan and that is not intended to be an Incentive Stock Option or does not meet the requirements of Section 422 of the Code or any successor provision thereto.

 

“Option” shall mean an Incentive Stock Option or a Non-Qualified Stock Option.

 

“Other Stock-Based Award” shall mean any right granted under Section 10 of the Plan.

 

“Participant” shall mean any employee of, or consultant to, the Company or its Affiliates, or non-employee director who is a member of the Board or the board of directors of an Affiliate, eligible for an Award under Section 5 of the Plan and selected by the Committee, or its designee, to receive an Award under the Plan.

 

“Performance Award” shall mean any right granted under Section 9 of the Plan.

 

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“Performance Compensation Award” shall mean any Award designated by the Committee as a Performance Compensation Award pursuant to Section 11 of the Plan.

 

“Performance Criteria” shall mean the measurable criterion or criteria that the Committee shall select for purposes of establishing the Performance Goal(s) for a Performance Period with respect to any performance-based Awards under the Plan, including, but not limited to, Performance Compensation Awards.  Performance Criteria may be described in terms of Company-wide objectives or objectives that are related to the performance of the individual Participant or of one or more of the subsidiaries, divisions, departments, regions, functions or other organizational units within the Company or its Affiliates.  The Performance Criteria may be made relative to the performance of other companies or subsidiaries, divisions, departments, regions, functions or other organizational units within such other companies, and may be made relative to an index or one or more of the performance criteria themselves.  The Committee may grant performance-based Awards subject to Performance Criteria that are either Performance Compensation Awards or are not Performance Compensation Awards.  The Performance Criteria that will be used to establish the Performance Goal(s) for Performance Compensation Awards shall be based on one or more, or a combination of, the following:  (i) return on net assets; (ii) pretax income before allocation of corporate overhead and bonus; (iii) budget; (iv) net income; (v) division, group or corporate financial goals; (vi) return on stockholders’ equity; (vii) return on assets; (viii) return on capital; (ix) revenue; (x) profit margin; (xi) earnings per Share; (xii) net earnings; (xiii) operating earnings; (xiv) free cash flow; (xv) attainment of strategic and operational initiatives; (xvi) appreciation in and/or maintenance of the price of the Shares or any other publicly-traded securities of the Company; (xvii) market share; (xviii) gross profits; (xix) earnings before interest and taxes; (xx) earnings before interest, taxes, depreciation and amortization; (xxi) operating expenses; (xxii) capital expenses; (xxiii) enterprise value; (xxiv) equity market capitalization; (xxv) economic value-added models and comparisons with various stock market indices; or (xxvi) reductions in costs.  To the extent required under Section 162(m) of the Code, the Committee shall, not later than the 90th day of a Performance Period (or, if longer, within the maximum period allowed under Section 162(m) of the Code), define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period.

 

“Performance Formula” shall mean, for a Performance Period, one or more objective formulas applied against the relevant Performance Goal to determine, with regard to a performance-based Award (including, but not limited to, a Performance Compensation Award) of a particular Participant, whether all, some portion but less than all, or none of the performance-based Award has been earned for the Performance Period.

 

“Performance Goals” shall mean, for a Performance Period, one or more goals established by the Committee for the Performance Period based upon the Performance Criteria.  The Committee is authorized at any time not later than the 90th day of a Performance Period, or at any time thereafter (but only to the extent the exercise of such authority after the first 90 days of a Performance Period would not cause the Performance Compensation Awards granted to any Participant for the Performance Period to fail to qualify as “performance-based compensation” under Section 162(m) of the Code), in its sole discretion, to adjust or modify the calculation of a Performance Goal for such Performance Period to the extent permitted under Section 162(m) of the Code in order to prevent the dilution or enlargement of the rights of Participants, (a) in the

 

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event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development affecting the Company or its Affiliates; or (b) in recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the Company or its Affiliates, or the financial statements of the Company or its Affiliates, or in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions.

 

“Performance Period” shall mean the one or more periods of time of at least one year in duration, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of a performance-based Award, including, but not limited to, a Performance Compensation Award.

 

“Permitted Holder” shall mean (a) (i) Frank J. Fertitta III and Lorenzo J. Fertitta and (ii) any lineal descendants of such persons; (b) executors, administrators or legal representatives of the estate of any person listed in clause (a) of this sentence; (c) heirs, distributees and beneficiaries of any person listed in clause (a) of this sentence; (d) any trust as to which any of the foregoing is a settlor or co-settlor; and (e) any corporation, partnership or other entity which is, directly or indirectly, controlling, controlled by or under common control with, any of the foregoing.

 

“Person” shall mean any individual, corporation, partnership, association, limited liability company, joint-stock company, trust, unincorporated organization, government, political subdivision or other entity.

 

“Plan” shall mean this Red Rock Resorts, Inc. 2016 Equity Incentive Plan, as amended from time to time.

 

“Restricted Stock” shall mean any Share granted under Section 8 of the Plan.

 

“Restricted Stock Unit” shall mean any unit granted under Section 8 of the Plan.

 

“Rule 16b-3” shall mean Rule 16b-3 as promulgated and interpreted by the SEC under the Exchange Act, or any successor rule or regulation thereto as in effect from time to time.

 

“SEC” shall mean the Securities and Exchange Commission or any successor thereto, and shall include, without limitation, the Staff thereof.

 

“Shares” shall mean the class A common stock of the Company, par value $0.01 per share, or such other securities of the Company (i) into which such common stock shall be changed by reason of a recapitalization, merger, consolidation, split-up, combination, exchange of shares or other similar transaction, or (ii) as may be determined by the Committee pursuant to Section 4(b) of the Plan.

 

“Stock Appreciation Right” shall mean any right granted under Section 7 of the Plan.

 

“Substitute Awards” shall mean any Awards granted under Section 4(c) of the Plan.

 

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Section 3.                             Administration.

 

(a)                                 The Plan shall be administered by the Committee.  Subject to the terms of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee shall have full power and authority to:  (i) designate Participants; (ii) determine the type or types of Awards to be granted to a Participant and designate those Awards which shall constitute Performance Compensation Awards; (iii) determine the number of Shares to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited, or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other securities, other Awards, other property, and other amounts payable with respect to an Award (subject to Section 162(m) of the Code with respect to Performance Compensation Awards) shall be deferred either automatically or at the election of the holder thereof or of the Committee (in each case consistent with Section 409A of the Code); (vii) interpret, administer or reconcile any inconsistency, correct any defect, resolve ambiguities and/or supply any omission in the Plan, any Award Agreement, and any other instrument or agreement relating to, or Award made under, the Plan; (viii) establish, amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (ix) establish and administer Performance Goals and certify whether, and to what extent, they have been attained; and (x) make any other determination and take any other action that the Committee deems necessary or desirable for the administration or operation of the Plan.

 

(b)                                 Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award or Award Agreement shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive, and binding upon all Persons, including, but not limited to, the Company, any Affiliate, any Participant, any holder or beneficiary of any Award, and any stockholder.

 

(c)                                  The mere fact that a Committee member shall fail to qualify as a “Non-Employee Director” or “outside director” within the meaning of Rule 16b-3 and Section 162(m) of the Code, respectively, shall not invalidate any Award otherwise validly made by the Committee under the Plan.  Notwithstanding anything in this Section 3 to the contrary, the Board, or any other committee or sub-committee established by the Board, is hereby authorized (in addition to any necessary action by the Committee) to grant or approve Awards as necessary to satisfy the requirements of Section 16 of the Exchange Act and the rules and regulations thereunder and to act in lieu of the Committee with respect to Awards made to non-employee directors under the Plan.

 

(d)                                 No member of the Board or the Committee and no employee of the Company or any Affiliate shall be liable for any determination, act or failure to act hereunder (except in circumstances involving his or her bad faith), or for any determination, act or failure to act hereunder by any other member or employee or by any agent to whom duties in connection with the administration of the Plan have been delegated.  The Company shall indemnify members of the Board and the Committee and any agent of the Board or the Committee who is an employee

 

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of the Company or an Affiliate against any and all liabilities or expenses to which they may be subjected by reason of any determination, act or failure to act with respect to their duties on behalf of the Plan (except in circumstances involving such person’s bad faith).

 

(e)                                  With respect to any Performance Compensation Award granted to a “covered employee” (within the meaning of Section 162(m) of the Code) under the Plan, the Plan shall be interpreted and construed in accordance with Section 162(m) of the Code.

 

(f)                                   The Committee may from time to time delegate all or any part of its authority under the Plan to a subcommittee thereof.  To the extent of any such delegation, references in the Plan to the Committee will be deemed to be references to such subcommittee.  In addition, subject to applicable law, the Committee may delegate to one or more officers of the Company the authority to grant Awards to Participants who are not officers or directors of the Company subject to Section 16 of the Exchange Act or “covered employees” (within the meaning of Section 162(m) of the Code).  The Committee may employ such legal or other counsel, consultants and agents as it may deem desirable for the administration of the Plan and may rely upon any opinion or computation received from any such counsel, consultant or agent.  Expenses incurred by the Committee in the engagement of such counsel, consultant or agent shall be paid by the Company, or the Affiliate whose employees have benefited from the Plan, as determined by the Committee.

 

Section 4.                             Shares Available for Awards.

 

(a)                                 Shares Available.

 

(i)                                     Subject to adjustment as provided in Section 4(b), the maximum number of Shares with respect to which Awards may be granted from time to time under the Plan shall in the aggregate not exceed, at any time, the sum of (A) [            ](1) Shares, plus (B) any Shares that again become available for Awards under the Plan in accordance with Section 4(a)(ii).  Subject to adjustment as provided in Section 4(b), the maximum number of Shares with respect to which Incentive Stock Options may be granted under the Plan shall be [            ](2) Shares.  Subject in each instance to adjustment as provided in Section 4(b), the maximum number of Shares with respect to which Awards (including, without limitation, Options and Stock Appreciation Rights) may be granted to any single Participant in any fiscal year shall be [            ](3) Shares, the maximum number of Shares which may be paid to a Participant in the Plan in connection with the settlement of any Award(s) designated as “Performance Compensation Awards” in respect of a single calendar year (including, without limitation, as a portion of the applicable Performance Period) shall be as set forth in Section 11(d)(vi), and the maximum number of Shares with respect to which Awards (including, without limitation, Options and Stock Appreciation Rights) may be granted to any single non-employee member of the Board in any fiscal year shall be [            ](4) Shares.

 

(1)  To equal 10% of outstanding shares at time of IPO.

(2)  To equal 100% of Shares reserved under the Plan.

(3)  To equal 15% of Shares reserved under the Plan.

(4)  To equal 3% of Shares reserved under the Plan.

 

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(ii)                                  Shares covered by an Award granted under the Plan shall not be counted unless and until they are actually issued and delivered to a Participant and, therefore, the total number of Shares available under the Plan as of a given date shall not be reduced by Shares relating to prior Awards that (in whole or in part) have expired or have been forfeited or cancelled, and upon payment in cash of the benefit provided by any Award, any Shares that were covered by such Award will be available for issue hereunder.  For the avoidance of doubt, the following Shares shall again be made available for delivery to Participants under the Plan:  (A) Shares not issued or delivered as a result of the net settlement of an outstanding Option or Stock Appreciation Right, (B) Shares used to pay the exercise price or withholding taxes related to an outstanding Award, and (C) Shares repurchased by the Company using proceeds realized by the Company in connection with a Participant’s exercise of an Option or Stock Appreciation Right.

 

(b)                                 Adjustments.  Notwithstanding any provisions of the Plan to the contrary, in the event that the Committee determines in its sole discretion that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other corporate transaction or event affects the Shares such that an adjustment is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall equitably adjust any or all of (i) the number of Shares or other securities of the Company (or number and kind of other securities or property) with respect to which Awards may be granted, (ii) the number of Shares or other securities of the Company (or number and kind of other securities or property) subject to outstanding Awards, and (iii) the grant or exercise price with respect to any Award or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award in consideration for the cancellation of such Award, which, in the case of Options and Stock Appreciation Rights shall equal the excess, if any, of the Fair Market Value of the Share subject to each such Option or Stock Appreciation Right over the per Share exercise price or grant price of such Option or Stock Appreciation Right.  The Committee will also make or provide for such adjustments in the numbers of Shares specified in Section 4(a)(i) (and, to the extent consistent with Section 162(m) of the Code, Section 11(d)(vi)) of the Plan as the Committee in its sole discretion, exercised in good faith, may determine is appropriate to reflect any transaction or event described in this Section 4(b); provided, however, that any such adjustment to the numbers specified in Section 4(a)(i) of the Plan (and, to the extent consistent with Section 162(m) of the Code, Section 11(d)(vi) of the Plan) will be made only if and to the extent that such adjustment would not cause any Option intended to qualify as an Incentive Stock Option to fail to so qualify.

 

(c)                                  Substitute Awards.

 

(i)                                     Awards may be granted under the Plan in substitution for or in conversion of, or in connection with an assumption of, stock options, stock appreciation rights, restricted stock, restricted stock units or other stock or stock-based awards held by awardees of an entity engaging in an acquisition or merger transaction with the Company or any subsidiary of the Company.  Any conversion, substitution or assumption will be

 

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effective as of the close of the merger or acquisition, and, to the extent applicable, will be conducted in a manner that complies with Section 409A of the Code.

 

(ii)                                  In the event that an entity acquired by the Company or any subsidiary of the Company, or with which the Company or any subsidiary of the Company merges, has shares available under a pre-existing plan previously approved by stockholders and not adopted in contemplation of such acquisition or merger, the shares available for grant pursuant to the terms of such plan (as adjusted, to the extent appropriate, to reflect such acquisition or merger) may be used for Awards made after such acquisition or merger under the Plan; provided, however, that Awards using such available shares may not be made after the date awards or grants could not have been made under the terms of the pre-existing plan absent the acquisition or merger, and may only be made to individuals who were not employees or directors of the Company or any subsidiary of the Company prior to such acquisition or merger.  The Awards so granted may reflect the original terms of the awards being assumed or substituted or converted for and need not comply with other specific terms of the Plan, and may account for Shares substituted for the securities covered by the original awards and the number of shares subject to the original awards, as well as any exercise or purchase prices applicable to the original awards, adjusted to account for differences in stock prices in connection with the transaction.

 

(iii)                               Any Shares that are issued or transferred by, or that are subject to any Awards that are granted by, or become obligations of, the Company under Sections 4(c)(i) or 4(c)(ii) of the Plan will not reduce the Shares available for issuance or transfer under the Plan or otherwise count against the limits described in Section 4(a)(i) of the Plan.  In addition, no Shares that are issued or transferred by, or that are subject to any Awards that are granted by, or become obligations of, the Company under Sections 4(c)(i) or 4(c)(ii) of the Plan will be added to the aggregate limit described in Section 4(a)(i) of the Plan.

 

(d)                                 Sources of Shares Deliverable Under Awards.  Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or of treasury Shares.

 

Section 5.                             Eligibility.  Any employee of, or consultant to, the Company or any of its Affiliates (including, but not limited to, any prospective employee), or non-employee director who is a member of the Board or the board of directors of an Affiliate, shall be eligible to be selected as a Participant.

 

Section 6.                             Stock Options.

 

(a)                                 Grant.  Subject to the terms of the Plan, the Committee shall have sole authority to determine the Participants to whom Options shall be granted, the number of Shares to be covered by each Option, the exercise price thereof and the conditions and limitations applicable to the exercise of the Option.  The Committee shall have the authority to grant Incentive Stock Options, or to grant Non-Qualified Stock Options, or to grant both types of Options.  In the case of Incentive Stock Options, the terms and conditions of such Awards shall be subject to and comply with such rules as may be prescribed by Section 422 of the Code and any regulations

 

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implementing such statute.  All Options when granted under the Plan are intended to be Non-Qualified Stock Options, unless the applicable Award Agreement expressly states that the Option is intended to be an Incentive Stock Option.  If an Option is intended to be an Incentive Stock Option, and if for any reason such Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option (or portion thereof) shall be regarded as a Non-Qualified Stock Option appropriately granted under the Plan; provided that such Option (or portion thereof) otherwise complies with the Plan’s requirements relating to Non-Qualified Stock Options.  No Option shall be exercisable more than ten years from the date of grant.

 

(b)                                 Exercise Price.  The Committee shall establish the exercise price at the time each Option is granted, which exercise price shall be set forth in the applicable Award Agreement and which exercise price (except with respect to Substitute Awards) shall not be less than the Fair Market Value per Share on the date of grant.

 

(c)                                  Exercise.  Each Option shall be exercisable at such times and subject to such terms and conditions as the Committee may, in its sole discretion, specify in the applicable Award Agreement.  The Committee may impose such conditions with respect to the exercise of Options, including, without limitation, any relating to the application of federal or state securities laws, as it may deem necessary or advisable.

 

(d)                                 Payment.

 

(i)                                     No Shares shall be delivered pursuant to any exercise of an Option until payment in full of the aggregate exercise price therefor is received by the Company.  Such payment may be made (A) in cash or its equivalent, (B) in the discretion of the Committee and subject to such rules as may be established by the Committee and applicable law, by exchanging Shares owned by the Participant (which are not the subject of any pledge or other security interest and which have been owned by such Participant for at least six months), (C) in the discretion of the Committee and subject to such rules as may be established by the Committee and applicable law, through delivery of irrevocable instructions to a broker to sell the Shares otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the aggregate exercise price, (D) in the discretion of the Committee and subject to such rules as may be established by the Committee and applicable law, by the Company’s withholding of Shares otherwise issuable upon exercise of an Option pursuant to a “net exercise” arrangement (it being understood that, solely for purposes of determining the number of treasury shares held by the Company, the Shares so withheld will not be treated as issued and acquired by the Company upon such exercise), (E) by a combination of the foregoing, or (F) by such other methods as may be approved by the Committee and subject to such rules as may be established by the Committee and applicable law, provided that the combined value of all cash and cash equivalents and the Fair Market Value of any such Shares so tendered to the Company or withheld as of the date of such tender or withholding is at least equal to such aggregate exercise price.

 

(ii)                                  Wherever in the Plan or any Award Agreement a Participant is permitted to pay the exercise price of an Option or taxes relating to the exercise of an Option by

 

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delivering Shares, the Participant may, subject to procedures satisfactory to the Committee and applicable law, satisfy such delivery requirement by presenting proof of beneficial ownership of such Shares, in which case the Company shall treat the Option as exercised without further payment and shall withhold such number of Shares from the Shares acquired by the exercise of the Option.

 

Section 7.                             Stock Appreciation Rights.

 

(a)                                 Grant.  Subject to the provisions of the Plan, the Committee shall have sole authority to determine the Participants to whom Stock Appreciation Rights shall be granted, the number of Shares to be covered by each Stock Appreciation Right Award, the grant price thereof and the conditions and limitations applicable to the exercise thereof.  Stock Appreciation Rights may be granted in tandem with another Award, in addition to another Award, or freestanding and unrelated to another Award.  Stock Appreciation Rights granted in tandem with or in addition to an Award may be granted either before, at the same time as the Award or at a later time.  No Stock Appreciation Right shall be exercisable more than ten years from the date of grant.

 

(b)                                 Exercise and Payment.  A Stock Appreciation Right shall entitle the Participant to receive an amount equal to the excess of the Fair Market Value of one Share on the date of exercise of the Stock Appreciation Right over the grant price thereof (which grant price (except with respect to Substitute Awards) shall not be less than the Fair Market Value on the date of grant).  The Committee shall determine in its sole discretion whether a Stock Appreciation Right shall be settled in cash, Shares or a combination of cash and Shares.

 

Section 8.                             Restricted Stock and Restricted Stock Units.

 

(a)                                 Grant.  Subject to the provisions of the Plan, the Committee shall have sole authority to determine the Participants to whom Shares of Restricted Stock and Restricted Stock Units shall be granted, the number of Shares of Restricted Stock and/or the number of Restricted Stock Units to be granted to each Participant, the duration of the period during which, and the conditions, if any, under which, the Restricted Stock and Restricted Stock Units may vest and/or be forfeited to the Company, and the other terms and conditions of such Awards.

 

(b)                                 Transfer Restrictions.  Unless otherwise directed by the Committee, (i) certificates issued in respect of Shares of Restricted Stock shall be registered in the name of the Participant and deposited by such Participant, together with a stock power endorsed in blank, with the Company, or (ii) Shares of Restricted Stock shall be held at the Company’s transfer agent in book entry form with appropriate restrictions relating to the transfer of such Shares of Restricted Stock.  Upon the lapse of the restrictions applicable to such Shares of Restricted Stock, the Company shall, as applicable, either deliver such certificates to the Participant or the Participant’s legal representative, or the transfer agent shall remove the restrictions relating to the transfer of such Shares.  Shares of Restricted Stock and Restricted Stock Units may not be sold, assigned, transferred, pledged or otherwise encumbered, except as provided in the Plan or the applicable Award Agreement.

 

(c)                                  Payment.  Each Restricted Stock Unit shall have a value equal to the Fair Market Value of one Share.  Restricted Stock Units shall be paid in cash, Shares, other securities or other

 

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property, as determined in the sole discretion of the Committee, upon or after the lapse of the restrictions applicable thereto, or otherwise in accordance with the applicable Award Agreement.  Dividends paid on any Shares of Restricted Stock or dividend equivalents paid on any Restricted Stock Units shall be paid directly to the Participant, withheld by the Company subject to vesting of the Restricted Stock or Restricted Stock Units, as applicable, pursuant to the terms of the applicable Award Agreement, or may be reinvested in additional Shares of Restricted Stock or in additional Restricted Stock Units, as determined by the Committee in its sole discretion.  Shares of Restricted Stock and Shares issued in respect of Restricted Stock Units may be issued with or without other payments therefor or such other consideration as may be determined by the Committee, consistent with applicable law.

 

Section 9.                             Performance Awards.

 

(a)                                 Grant.  The Committee shall have sole authority to determine the Participants who shall receive a Performance Award, which shall consist of a right which is (i) denominated in cash or Shares, (ii) valued, as determined by the Committee, in accordance with the achievement of such Performance Goals during such Performance Periods as the Committee shall establish, and (iii) payable at such time and in such form as the Committee shall determine.

 

(b)                                 Terms and Conditions.  Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the Performance Goals to be achieved during any Performance Period, the length of any Performance Period, the amount of any Performance Award and the amount and kind of any payment or transfer to be made pursuant to any Performance Award.  The Committee may require or permit the deferral of the receipt of Performance Awards upon such terms as the Committee deems appropriate and in accordance with Section 409A of the Code.

 

(c)                                  Payment of Performance Awards.  Performance Awards may be paid in a lump sum or in installments following the close of the Performance Period, as set forth in the applicable Award Agreement.

 

Section 10.                      Other Stock-Based Awards.  The Committee shall have authority to grant to Participants an Other Stock-Based Award, which shall consist of any right which is (i) not an Award described in Sections 6 through 9 of the Plan, and (ii) an Award of Shares or an Award denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares), as deemed by the Committee to be consistent with the purposes of the Plan; provided that any such rights must comply, to the extent deemed desirable by the Committee, with Rule 16b-3 and applicable law.  Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the terms and conditions of any such Other Stock-Based Award, including, but not limited to, the price, if any, at which securities may be purchased pursuant to any Other Stock-Based Award granted under the Plan.

 

Section 11.                      Performance Compensation Awards.

 

(a)                                 General.  The Committee shall have the authority, at the time of grant of any Award described in Sections 8 through 10 of the Plan, to designate such Award as a Performance

 

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Compensation Award in order to qualify such Award as “performance-based compensation” under Section 162(m) of the Code.

 

(b)                                 Eligibility.  The Committee will, in its sole discretion, designate not later than the 90th day of a Performance Period (or, if longer, within the maximum period allowed under Section 162(m) of the Code) which Participants will be eligible to receive Performance Compensation Awards in respect of such Performance Period.  Designation of a Participant eligible to receive an Award hereunder for a Performance Period shall not in any manner entitle the Participant to receive payment in respect of any Performance Compensation Award for such Performance Period.  The determination as to whether or not such Participant becomes entitled to payment in respect of any Performance Compensation Award shall be decided solely in accordance with the provisions of this Section 11.  Moreover, designation of a Participant eligible to receive an Award hereunder for a particular Performance Period shall not require designation of such Participant eligible to receive an Award hereunder in any subsequent Performance Period, and designation of one person as a Participant eligible to receive an Award hereunder shall not require designation of any other person as a Participant eligible to receive an Award hereunder for such period or any other period.

 

(c)                                  Discretion of the Committee with Respect to Performance Compensation Awards.  With regard to a particular Performance Period, the Committee shall have full discretion to select the length of such Performance Period, the type(s) of Performance Compensation Awards to be issued, the Performance Criteria that will be used to establish the Performance Goal(s), the kind(s) and/or level(s) of the Performance Goals(s) that is/are to apply, and the Performance Formula, as applicable.  Not later than the 90th day of a Performance Period (or, if longer, within the maximum period allowed under Section 162(m) of the Code), the Committee shall, with regard to the Performance Compensation Awards to be issued for such Performance Period, exercise its discretion with respect to each of the matters enumerated in the immediately preceding sentence of this Section 11(c) and record the same in writing.

 

(d)                                 Payment of Performance Compensation Awards.

 

(i)                                     Unless otherwise provided in the Plan or the applicable Award Agreement, a Participant must be employed by the Company on the last day of a Performance Period to be eligible for payment in respect of a Performance Compensation Award for such Performance Period.

 

(ii)                                  Limitation.  A Participant shall be eligible to receive payment in respect of a Performance Compensation Award only to the extent that:  (1) the Performance Goals for such period are achieved; and (2) the Performance Formula as applied against such Performance Goals determines that all or some portion of such Participant’s Performance Award has been earned for the Performance Period.

 

(iii)                               Certification.  Following the completion of a Performance Period, the Committee shall review and certify in writing whether, and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, calculate and certify in writing that amount of the Performance Compensation Awards earned for the Performance Period based upon the Performance Formula.  The Committee shall then

 

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determine the actual size of each Participant’s Performance Compensation Award for the Performance Period and, in so doing, may apply Negative Discretion, if and when it deems appropriate.

 

(iv)                              Negative Discretion.  In determining the final payout of an individual Performance Compensation Award for a Performance Period, the Committee may reduce or eliminate the amount of the Performance Compensation Award earned under the Performance Formula in the Performance Period through the use of Negative Discretion if, in its sole judgment, such reduction or elimination is appropriate.

 

(v)                                 Timing of Award Payments.  The Awards granted for a Performance Period shall be paid as provided for in any applicable Award Agreement.

 

(vi)                              Maximum Award Payable.  Notwithstanding any provision contained in the Plan to the contrary, the maximum Performance Compensation Award payable to any one Participant under the Plan in respect of any single calendar year (including, without limitation, as a portion of the applicable Performance Period) is [         ](5) Shares or, in the event the Performance Compensation Award is paid in cash, the equivalent cash value thereof on the first day of the Performance Period(s) to which such Performance Compensation Award relates.  Furthermore, any Performance Compensation Award that has been deferred shall not (between the date as of which the Performance Compensation Award is deferred and the payment date) increase (i) with respect to a Performance Compensation Award that is payable in cash, by a measuring factor for each fiscal year greater than a reasonable rate of interest set by the Committee or (ii) with respect to a Performance Compensation Award that is payable in Shares, by an amount greater than the appreciation of the Shares subject to such Performance Compensation Award from the date such Performance Compensation Award is deferred to the payment date.

 

Section 12.                      Amendment and Termination.

 

(a)                                 Amendments to the Plan.  The Board may amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof at any time; provided that if an amendment to the Plan (i) would materially increase the benefits accruing to Participants under the Plan, (ii) would materially increase the number of securities which may be issued under the Plan, or (iii) must otherwise be approved by the stockholders of the Company in order to comply with applicable law or the rules of the principal national securities exchange upon which the Shares are traded or quoted, such amendment will be subject to stockholder approval and will not be effective unless and until such approval has been obtained; and provided, further, that any such amendment, alteration, suspension, discontinuance or termination that would materially impair the rights of any Participant or any holder or beneficiary of any Award previously granted shall not be effective without the written consent of the affected Participant, holder or beneficiary.

 

(b)                                 Amendments to Awards.  The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted, except in the case of a Performance Compensation Award where such action

 

(5)  To equal 15% of Shares reserved under the Plan.

 

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would result in the loss of the otherwise available exemption of the Performance Compensation Award under Section 162(m) of the Code (in such case, the Committee will not make any modification of the Performance Criteria/Goals with respect to such Performance Compensation Award); provided that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially impair the rights of any Participant or any holder or beneficiary of any Award previously granted shall not be effective without the written consent of the affected Participant, holder or beneficiary.

 

(c)                                  Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events.  The Committee is hereby authorized to make equitable adjustments in the terms and conditions of, and the criteria included in, all outstanding Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4(b) hereof) affecting the Company, any Affiliate, or the financial statements of the Company or any Affiliate, or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.

 

(d)                                 Repricing.  Except in connection with a corporate transaction or event described in Section 4(b) hereof, the terms of outstanding Awards may not be amended to reduce the exercise price of Options or the grant price of Stock Appreciation Rights, or to cancel Options or Stock Appreciation Rights in exchange for cash, other Awards or Options or Stock Appreciation Rights with an exercise price or grant price, as applicable, that is less than the exercise price of the original Options or grant price of the original Stock Appreciation Rights, as applicable, without stockholder approval.  This Section 12(d) is intended to prohibit the repricing of “underwater” Options and Stock Appreciation Rights and will not be construed to prohibit the adjustments provided for in Section 4(b) of the Plan.

 

Section 13.                      Change in Control.

 

In the event of a Change in Control, unless otherwise determined by the Committee in a written resolution upon or prior to the date of grant or set forth in an applicable Award Agreement, the following acceleration, exercisability and valuation provisions will apply:

 

(a)                                 Upon a Change in Control, each then-outstanding Option and Stock Appreciation Right will become fully vested and exercisable, and the restrictions applicable to each outstanding Restricted Stock Award, Restricted Stock Unit Award, Performance Award or Other Stock-Based Award will lapse, and each Award will be fully vested (with any applicable Performance Goals deemed to have been achieved at a target level as of the date of such vesting), except to the extent that an award meeting the requirements of Section 13(b) hereof (a “Replacement Award”) is provided to the Participant holding such Award in accordance with Section 13(b) hereof to replace or adjust such outstanding Award (a “Replaced Award”).

 

(b)                                 An award meets the conditions of this Section 13(b) (and hence qualifies as a Replacement Award) if (i) it is of the same type (e.g., stock option for Option, restricted stock for Restricted Stock, restricted stock unit for Restricted Stock Unit, etc.) as the Replaced Award, (ii) it has a value at least equal to the value of the Replaced Award, (iii) it relates to publicly traded equity securities of the Company or its successor in the Change in Control or another

 

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entity that is affiliated with the Company or its successor following the Change in Control, (iv) if the Participant holding the Replaced Award is subject to U.S. federal income tax under the Code, the tax consequences to such Participant under the Code of the Replacement Award are not less favorable to such Participant than the tax consequences of the Replaced Award, and (v) its other terms and conditions are not less favorable to the Participant holding the Replaced Award than the terms and conditions of the Replaced Award (including, but not limited to, the provisions that would apply in the event of a subsequent Change in Control).  Without limiting the generality of the foregoing, the Replacement Award may take the form of a continuation of the Replaced Award if the requirements of the preceding sentence are satisfied.  The determination of whether the conditions of this Section 13(b) are satisfied will be made by the Committee, as constituted immediately before the Change in Control, in its sole discretion (taking into account the requirements of Treasury Regulation 1.409A-3(i)(5)(iv)(B) and compliance of the Replaced Award or Replacement Award with Section 409A of the Code).  Without limiting the generality of the foregoing, the Committee may determine the value of Awards and Replacement Awards that are stock options by reference to either their intrinsic value or their fair value.

 

(c)                                  Upon the Involuntary Termination, during the period of two years immediately following a Change in Control, of a Participant holding Replacement Awards, (i) all Replacement Awards held by the Participant will become fully vested and, if applicable, exercisable and free of restrictions (with any applicable performance goals deemed to have been achieved at a target level as of the date of such vesting), and (ii) all Options and Stock Appreciation Rights held by the Participant immediately before such Involuntary Termination that the Participant also held as of the date of the Change in Control and all stock options and stock appreciation rights that constitute Replacement Awards will remain exercisable for a period of 90 days following such Involuntary Termination or until the expiration of the stated term of such stock option or stock appreciation right, whichever period is shorter (provided, however, that, if the applicable Award Agreement provides for a longer period of exercisability, that provision will control).

 

(d)                                 Notwithstanding anything in the Plan or any Award Agreement to the contrary, to the extent that any provision of the Plan or an applicable Award Agreement would cause a payment of deferred compensation that is subject to Section 409A of the Code to be made upon the occurrence of (i) a Change in Control, then such payment shall not be made unless such Change in Control also constitutes a “change in control event” within the meaning of Section 409A of the Code and the regulatory guidance promulgated thereunder or (ii) a termination of employment or service, then such payment shall not be made unless such termination of employment or service also constitutes a “separation from service” within the meaning of Section 409A of the Code and the regulatory guidance promulgated thereunder.  Any payment that would have been made except for the application of the preceding sentence shall be made in accordance with the payment schedule that would have applied in the absence of a Change in Control or termination of employment or service, but disregarding any future service and/or performance requirements.

 

Section 14.                      Non-U.S. Participants.  In order to facilitate the granting of any Award or combination of Awards under the Plan, the Committee may provide for such special terms for awards to Participants who are foreign nationals or who are employed by the Company or any Affiliate outside of the United States of America or who provide services to the Company or an

 

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Affiliate under an agreement with a foreign nation or agency, as the Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom.  Moreover, the Committee may approve such supplements to or amendments, restatements or alternative versions of the Plan (including, without limitation, sub-plans) as it may consider necessary or appropriate for such purposes, without thereby affecting the terms of the Plan as in effect for any other purpose, and the Secretary or other appropriate officer of the Company may certify any such document as having been approved and adopted in the same manner as the Plan.  No such special terms, supplements, amendments or restatements, however, will include any provisions that are inconsistent with the terms of the Plan as then in effect unless the Plan could have been amended to eliminate such inconsistency without further approval by the stockholders of the Company.

 

Section 15.                      Detrimental Activity and Recapture Provisions.  Any Award Agreement may provide for the cancellation or forfeiture of an Award or the forfeiture and repayment to the Company of any gain related to an Award, or other provisions intended to have a similar effect, upon such terms and conditions as may be determined by the Committee from time to time, including, without limitation, in the event that a Participant, during employment or other service with the Company or an Affiliate, shall engage in activity detrimental to the business of the Company.  In addition, notwithstanding anything in the Plan to the contrary, any Award Agreement may also provide for the cancellation or forfeiture of an Award or the forfeiture and repayment to the Company of any gain related to an Award, or other provisions intended to have a similar effect, upon such terms and conditions as may be required by the Committee or under Section 10D of the Exchange Act and any applicable rules or regulations promulgated by the SEC or any national securities exchange or national securities association on which the Shares may be traded or under any clawback policy adopted by the Company.

 

Section 16.                      General Provisions.

 

(a)                                 Nontransferability.

 

(i)                                     Each Award, and each right under any Award, shall be exercisable only by the Participant during the Participant’s lifetime, or, if permissible under applicable law, by the Participant’s legal guardian or representative.

 

(ii)                                  No Award may be sold, assigned, alienated, pledged, attached or otherwise transferred or encumbered by a Participant otherwise than by will or by the laws of descent and distribution, and any such purported sale, assignment, alienation, pledge, attachment, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate; provided that the designation of a beneficiary shall not constitute a sale, assignment, alienation, pledge, attachment, transfer or encumbrance.  In no event may any Award granted under the Plan be transferred for value.

 

(iii)                               Notwithstanding the foregoing, at the discretion of the Committee, an Award may be transferred by a Participant solely to the Participant’s spouse, siblings, parents, children and grandchildren or trusts for the benefit of such persons or partnerships, corporations, limited liability companies or other entities owned solely by

 

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such persons, including, but not limited to, trusts for such persons, subject to any restriction in the applicable Award Agreement.

 

(b)                                 Dividend Equivalents.  In the sole discretion of the Committee, an Other Stock-Based Award or an Award granted pursuant to Sections 8 or 9 hereof, may provide the Participant with dividends or dividend equivalents, payable in cash, Shares, other securities or other property on a current or deferred basis; provided, that in the case of Awards with respect to which any applicable Performance Goals have not been achieved, dividends and dividend equivalents may be paid only on a deferred basis, to the extent the underlying Award vests.

 

(c)                                  No Rights to Awards.  No Participant or other Person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of Participants, Awards, or holders or beneficiaries of Awards.  The terms and conditions of Awards and the Committee’s determinations and interpretations with respect thereto need not be the same with respect to each or any Participant (whether or not such Participants are similarly situated).

 

(d)                                 Share Certificates.  Shares or other securities of the Company or any Affiliate delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the SEC, any stock exchange upon which such Shares or other securities are then listed, and any applicable Federal or state laws.  The Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

 

(e)                                  Withholding.

 

(i)                                     A Participant may be required to pay to the Company or any Affiliate, and, subject to Section 409A of the Code, the Company or any Affiliate shall have the right and is hereby authorized to withhold from any Award, from any payment due or transfer made under any Award or under the Plan or from any compensation or other amount owing to a Participant the amount (in cash, Shares, other securities, other Awards or other property) of any applicable withholding taxes in respect of an Award, its exercise, or any payment or transfer under an Award or under the Plan, and to take such other action(s) as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes.

 

(ii)                                  Without limiting the generality of clause (i) above, in the discretion of the Committee and subject to such rules as it may adopt (including, without limitation, any as may be required to satisfy applicable tax and/or non-tax regulatory requirements) and applicable law, a Participant may satisfy, in whole or in part, the foregoing withholding liability by delivery of Shares owned by the Participant (which are not subject to any pledge or other security interest and which have been owned by the Participant for at least six months) with a Fair Market Value equal to such withholding liability or by having the Company withhold from the number of Shares otherwise issuable pursuant to the exercise of the Option (or the settlement of such Award in Shares) a number of Shares with a Fair Market Value equal to such withholding liability.

 

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(f)                                   Award Agreements.  Each Award hereunder shall be evidenced by an Award Agreement, which shall be delivered to the Participant and shall specify the terms and conditions of the Award and any rules applicable thereto, including, but not limited to, the effect on such Award of the death, disability or termination of employment or service of a Participant and the effect, if any, of such other events as may be determined by the Committee.

 

(g)                                  No Limit on Other Compensation Arrangements.  Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other compensation arrangements, which may, but need not, provide for the grant of options, restricted stock, restricted stock units, Shares and other types of Awards provided for hereunder (subject to stockholder approval if such approval is required), and such arrangements may be either generally applicable or applicable only in specific cases.

 

(h)                                 No Right to Employment.  The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of, or in any consulting or other service relationship to, or as a director on the Board or board of directors, as applicable, of, the Company or any Affiliate.  Further, the Company or an Affiliate may at any time dismiss a Participant from employment or discontinue any consulting or other service relationship, free from any liability or any claim under the Plan or any Award Agreement, unless otherwise expressly provided in any applicable Award Agreement or any applicable employment or other service contract or agreement with the Company or an Affiliate.

 

(i)                                     No Rights as Stockholder.  Subject to the provisions of the applicable Award, no Participant or holder or beneficiary of any Award shall have any rights as a stockholder with respect to any Shares to be distributed under the Plan until he or she has become the holder of such Shares.  Notwithstanding the foregoing, in connection with each grant of Restricted Stock hereunder, the applicable Award shall specify if and to what extent the Participant shall be entitled to the rights of a stockholder in respect of such Restricted Stock.

 

(j)                                    Governing Law.  The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan and any Award Agreement shall be determined in accordance with the laws of the State of Delaware, applied without giving effect to its conflict of laws principles.

 

(k)                                 Severability.  If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect.

 

(l)                                     Other Laws.  The Committee may refuse to issue or transfer any Shares or other consideration under an Award if, acting in its sole discretion, it determines that the issuance or transfer of such Shares or such other consideration might violate any applicable law or regulation or entitle the Company to recover the same under Section 16(b) of the Exchange Act, and any

 

20

 

payment tendered to the Company by a Participant, other holder or beneficiary in connection with the exercise of such Award shall be promptly refunded to the relevant Participant, holder or beneficiary.  Without limiting the generality of the foregoing, no Award granted hereunder shall be construed as an offer to sell securities of the Company, and no such offer shall be outstanding, unless and until the Committee in its sole discretion has determined that any such offer, if made, would be in compliance with the requirements of all applicable securities laws.

 

(m)                             No Trust or Fund Created.  Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person.  To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or such Affiliate.

 

(n)                                 No Fractional Shares.  No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated, or otherwise eliminated without additional consideration.

 

(o)                                 Deferrals.  In the event the Committee permits a Participant to defer any Award payable in the form of cash, all such elective deferrals shall be accomplished by the delivery of a written, irrevocable election by the Participant on a form provided by the Company.  All deferrals shall be made in accordance with administrative guidelines established by the Committee to ensure that such deferrals comply with all applicable requirements of Section 409A of the Code.

 

(p)                                 Headings.  Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference.  Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.

 

Section 17.                      Compliance with Section 409A of the Code.

 

(a)                                 To the extent applicable, it is intended that the Plan and any Awards granted hereunder comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the Participants.  The Plan and any Awards granted hereunder shall be administered in a manner consistent with this intent.  Any reference in the Plan to Section 409A of the Code will also include any regulations or any other formal guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.

 

(b)                                 Neither a Participant nor any of a Participant’s creditors or beneficiaries shall have the right to subject any deferred compensation (within the meaning of Section 409A of Code) payable under the Plan and Awards granted hereunder to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment.  Except as permitted under Section 409A of the Code, any deferred compensation (within the meaning of Section 409A of the Code) payable to a Participant or for a Participant’s benefit under the Plan

 

21

 

and Awards granted hereunder may not be reduced by, or offset against, any amount owing by a Participant to the Company or any of its Affiliates.

 

(c)                                  If, at the time of a Participant’s separation from service (within the meaning of Section 409A of the Code), (i) the Participant shall be a specified employee (within the meaning of Section 409A of the Code and using the identification methodology selected by the Company from time to time) and (ii) the Company shall make a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A of the Code) the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A of the Code in order to avoid taxes or penalties under Section 409A of the Code, then the Company shall not pay such amount on the otherwise scheduled payment date but shall instead pay it on the earlier of (A) the first business day of the seventh month following the Participant’s separation from service or (B) the date of the Participant’s death.

 

(d)                                 Notwithstanding anything to the contrary in the Plan or any Award Agreement, to the extent that the Plan and/or Awards granted hereunder are subject to Section 409A of the Code, the Committee may, in its sole discretion and without a Participant’s prior consent, amend the Plan and/or Award, adopt policies and procedures, or take any other actions (including, without limitation, amendments, policies, procedures and actions with retroactive effect) as the Committee determines are necessary or appropriate to (i) exempt the Plan and/or any Award from the application of Section 409A of the Code, (ii) preserve the intended tax treatment of any such Award, or (iii) comply with the requirements of Section 409A of the Code, including, without limitation, any regulations or other guidance that may be issued after the date of the grant.  In any case, notwithstanding anything to the contrary, a Participant shall be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on a Participant or for a Participant’s account in connection with the Plan and Awards granted hereunder (including, but not limited to, any taxes and penalties under Section 409A of the Code), and neither the Company nor any of its Affiliates shall have any obligation to indemnify or otherwise hold a Participant harmless from any or all of such taxes or penalties.

 

Section 18.                      Term of the Plan.

 

(a)                                 Effective Date.  The Plan shall be effective as of [         ], 2016, which was the date of its approval by the Board (the “Effective Date”), subject to approval of the Plan by the stockholders of the Company within 12 months of the Effective Date (with such approval of stockholders being a condition to the right of each Participant to receive any Awards or benefits hereunder).  Any Awards granted under the Plan prior to such approval of stockholders shall be effective as of the date of grant (unless, with respect to any Award, the Committee specifies otherwise at the time of grant), but no such Award may be exercised or settled, and no restrictions relating to any Award may lapse, prior to such stockholder approval, and if stockholders fail to approve the Plan as specified hereunder, any such Award shall be canceled.

 

(b)                                 Expiration Date.  No Award will be granted under the Plan more than ten years after the Effective Date, but all Awards granted on or prior to such date will continue in effect thereafter subject to the terms thereof and of the Plan.

 

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