UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________________________________________
FORM 8-K
________________________________________________________________________________
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: MAY 11, 2006
(DATE OF EARLIEST EVENT REPORTED)
________________________________________________________________________________
MORGANS HOTEL GROUP CO.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
________________________________________________________________________________
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION)
000-51802 16-1736884
(COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
475 TENTH AVENUE
NEW YORK, NY 10018
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(212) 277-4100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
________________________________________________________________________________
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2 below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
MERGER AGREEMENT
On May 11, 2006, Morgans Hotel Group Co., a Delaware corporation
("MHGC"), MHG HR Acquisition Corp., a Nevada corporation and a direct
wholly-owned subsidiary of MHGC ("Merger Sub") and Hard Rock Hotel, Inc., a
Nevada corporation ("HRH") entered into an Agreement and Plan of Merger (the
"Merger Agreement"). Pursuant to the terms and subject to the conditions set
forth in the Merger Agreement, Merger Sub will merge with and into HRH (the
"Merger"), with HRH continuing as the surviving corporation after the Merger. As
a result of the Merger, HRH will become a wholly-owned subsidiary of MHGC. The
Board of Directors of MHGC and HRH approved the Merger and the Merger Agreement.
The holder of all of the issued and outstanding shares of HRH Class A voting
common stock and of approximately 94% of HRH Class B non-voting common stock has
approved the Merger and the Merger Agreement.
At the effective time of the Merger (the "Effective Time"), by virtue
of the Merger and without any action on the part of any holder of any shares of
capital stock of HRH, MHGC or Merger Sub, each share of common stock of HRH
issued and outstanding immediately prior to the Effective Time (other than any
dissenting shares, if applicable) shall be canceled and shall be converted into
the right to receive the per share amount of the total Merger Consideration. The
"Merger Consideration" shall be an amount equal to $421 million, subject to
adjustments for working capital and other transaction-related items. At the time
of the execution of the Merger Agreement, the Company deposited $30 million (the
"Merger Deposit") into an escrow account, which amount shall be released at the
closing of the Merger in accordance with an escrow agreement entered into by the
parties to the Merger Agreement, a stockholders' representative and an escrow
agent. The Merger Deposit is non-refundable under certain circumstances,
including a material breach by MHGC of its obligations under the Merger
Agreement and MHGC's failure to obtain required gaming approvals. At the closing
of the Merger, MHGC shall deposit $15 million of the Merger Consideration into
an indemnification escrow fund to be disbursed in accordance with the Merger
Agreement and the applicable escrow agreement, with the remaining funds from the
indemnification escrow fund to be released on the one-year anniversary of the
closing date.
The completion of the Merger is subject to various customary
conditions, including the receipt of required gaming approvals and the closing
of the other transactions contemplated by the Merger Agreement, including the
Land Purchase (as defined herein) and the execution of agreements related to the
acquisition of certain intellectual property, including a trademark agreement, a
license agreement and a trademark assignment agreement (collectively, the "IP
Agreements").
A copy of the Merger Agreement is attached hereto as Exhibit 2.1 and
is incorporated herein by reference. The foregoing description of the Merger
Agreement does not purport to be complete and is qualified in its entirety by
reference to the full text of the Merger Agreement.
LAND PURCHASE AGREEMENT
Additionally, on May 11, 2006, Morgans Group LLC, a Delaware limited
liability company and an affiliate of MHGC ("Morgans Group") entered into a
purchase and sale agreement with PM Realty, LLC (the "Land Purchase Agreement")
to acquire, for $259 million, a parcel of land adjacent to the Hard Rock Hotel &
Casino (the "Resort"), comprising a 544 unit multi-family residential apartment
project (the "Land Purchase"). At the time of the execution of the Land Purchase
Agreement, Morgans Group deposited $18.5 million (the "Land Deposit") into an
escrow account in accordance with an escrow agreement entered into among the
parties to the Land Purchase Agreement, Red, White and Blue Pictures, Inc., a
California corporation ("RWB"), Peter A. Morton and the escrow agent. At the
closing date, $3.5 million of the deposit will be released and credited towards
the purchase price and the remaining $15 million of the deposit will be retained
as part of an indemnification escrow fund to be disbursed in accordance with the
Land Purchase Agreement and the applicable escrow agreement, with the remaining
funds from the indemnification escrow fund to be released on the eighteen-month
anniversary of the closing date.
The completion of the Land Purchase is subject to various customary
conditions, including the closing of the transactions contemplated by the Merger
Agreement and the execution of the IP Agreements.
A copy of the Land Purchase Agreement is attached hereto as Exhibit
10.1 and is incorporated herein by reference. The foregoing description of the
Land Purchase Agreement does not purport to be complete and is qualified in its
entirety by reference to the full text of the Land Purchase Agreement.
HARD ROCK CAFE PURCHASE AGREEMENT
Additionally, on May 11, 2006, Morgans Group entered into a purchase
and sale agreement with RWB (the "Cafe Purchase Agreement") to acquire, for $20
million, a parcel of land on which the Hard Rock Cafe restaurant in Las Vegas is
situated (the "Cafe Purchase"). At the time of the execution of the Cafe
Purchase Agreement, the Company deposited $1.5 million in an escrow account,
which amount shall be released at the closing in accordance with an escrow
agreement.
The completion of the Cafe Purchase is subject to various customary
conditions, including the closing of the other transactions contemplated by the
Merger Agreement and the Land Purchase Agreement and the execution of the IP
Agreements.
A copy of the Cafe Purchase Agreement is attached hereto as Exhibit
10.2 and is incorporated herein by reference. The foregoing description of the
Cafe Purchase Agreement does not purport to be complete and is qualified in its
entirety by reference to the full text of the Cafe Purchase Agreement.
CONDOMINIUM-RELATED DOCUMENTS PURCHASE AGREEMENT
Additionally, on May 11, 2006, Morgans Group entered into a purchase
and sale agreement with HR Condominium Investors (Vegas), L.L.C. (the "Condo
Docs Purchase Agreement") to acquire, for $1 million, certain assets related to
a proposal for a condominium development on certain real property adjacent to
the Resort (the "Condo Docs Purchase").
The completion of the Condo Docs Purchase is subject to various
customary conditions, including the closing of the other transactions
contemplated by the Merger Agreement and the Land Purchase Agreement and the
execution of the IP Agreements.
A copy of the Condo Docs Purchase Agreement is attached hereto as
Exhibit 10.3 and is incorporated herein by reference. The foregoing description
of the Condo Docs Purchase Agreement does not purport to be complete and is
qualified in its entirety by reference to the full text of the Condo Docs
Purchase Agreement.
FIRST AMENDMENT TO MORGANS LAS VEGAS, LLC LIMITED LIABILITY COMPANY AGREEMENT
AND THE LETTER AGREEMENT
On May 15, 2006, Morgans/LV Investment LLC, a Delaware limited
liability company and an affiliate of MHGC ("Morgans LV") and Echelon Resorts
Corporation, a Nevada corporation and a subsidiary of Boyd Gaming Corporation
("Boyd"), entered into the first amendment (the "First Amendment") to the
limited liability company agreement of Morgans Las Vegas, LLC, a joint venture
between Morgans LV and Boyd (the "Joint Venture"), which agreement governs the
development of the Delano Las Vegas and the Mondrian Las Vegas at Echelon Place
(the "LLC Agreement"). In connection with the First Amendment, Morgans LV and
Boyd also entered into a letter agreement, dated May 15, 2006 (the "Letter
Agreement").
The First Amendment confirms that Morgans LV and its affiliates are
not prohibited by the LLC Agreement from entering into or consummating the
transactions described above.
Additionally, the First Amendment requires Morgans LV or one of its
affiliates to make a $30 million deposit (the "Boyd Deposit") to Boyd at the
closing of the Merger and the other transactions described above. The Boyd
Deposit shall be non-refundable in certain circumstances, including Morgans LV's
failure to satisfy its financial commitments under the LLC Agreement. The First
Amendment also provides that if Morgans LV commits a default under the LLC
Agreement or the First Amendment, Boyd shall have the exclusive right to use at
Echelon Place (and Morgans shall not use in Las Vegas), without payment of any
fee or other compensation, the names "Delano Las Vegas" and "Mondrian Las Vegas"
until December 31, 2055.
The Letter Agreement provides, among other things, that neither
Morgans LV nor any of its affiliates shall (i) invest capital in the any of the
real properties covered by the above transactions in an aggregate amount in
excess of, or with a value in excess of, 175% of Morgans LV's capital commitment
to the Joint Venture or (ii) negotiate with, hire or retain a public gaming
company as gaming operator of the Resort without first providing Boyd with a
right of first refusal and right of last offer with respect thereto.
Copies of the First Amendment and the Letter Agreement are attached
hereto as Exhibits 10.4 and 10.5, respectively, and are incorporated herein by
reference. The foregoing descriptions of the First Amendment and the Letter
Agreement do not purport to be complete and are qualified in their entirety by
reference to the full text of the First Amendment and the Letter Agreement.
ITEM 2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
Pursuant to a commitment letter from Column Financial, Inc.
("Column"), an affiliate of Credit Suisse, dated as of May 11, 2006 (the
"Commitment Letter"), Column has committed to provide Merger Sub, with a
facility (the "Credit Facility") with an
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aggregate principal amount equal to the lesser of $700,000,000 and 82.5% of the
capitalized cost (including certain costs, fees and funding requirements) of the
Acquisition described above, subject to certain adjustments. The proceeds from
the Credit Facility may be used by Merger Sub (i) to finance the acquisition by
Merger Sub, directly or indirectly, of HRH, which owns and operates the Resort,
and certain other assets (collectively, the "Acquisition"), (ii) to finance the
repayment, restructuring or redemption of certain indebtedness of the HRH, and
(iii) to finance all transaction costs of the Acquisition and of such
refinancings.
The Credit Facility will consist of one or more mortgage loans or
mezzanine loans (the "CMBS Loans") to certain subsidiaries of Merger Sub which
will initially mature on the date that is two years after the closing date of
the Acquisition. To the extent that the conditions precedent to the CMBS Loans
cannot be fulfilled prior to the closing date, a portion of the Credit Facility
may be funded as a bridge facility (the "Bridge Loan"), the availability of
which is subject to a more limited set of conditions. The Bridge Loan will
initially mature on a date that is one year after the closing date of the
Acquisition. The Bridge Loan may be extended for an additional six-month period
at the option of the applicable borrower, subject to certain conditions. The
CMBS Loans may be extended for two additional one-year periods at the option of
the applicable borrowers, subject to certain conditions.
The CMBS Loans, to the extent they are mortgage loans, will be
borrowed by one or more single purpose, bankruptcy remote subsidiaries of Merger
Sub that own, among other things, the Resort, certain land and any improvements
thereon or adjacent thereto and certain rights in improvements known as the Hard
Rock Cafe, and will be secured by a first lien on, among other things, such
properties. The CMBS Loans, to the extent they are mezzanine loans, will be
borrowed by one or more single purpose, bankruptcy remote subsidiaries that hold
equity interests in other borrowers of the CMBS Loans, and will be secured by,
among other things, certain intellectual property owned or licensed by HRH
and/or its affiliates and a first lien on such equity interests. Any Bridge Loan
will be borrowed by Merger Sub or one or more single purpose, bankruptcy remote
subsidiaries of Merger Sub and will be secured by, among other things, certain
intellectual property owned or licensed by HRH and/or its affiliates and equity
interests in each of the other borrowers and on certain properties.
The CMBS Loans are expected to initially bear interest at a rate per
annum equal to LIBOR plus 3.85%. The Bridge Loan is expected to initially bear
interest at a rate per annum equal to LIBOR plus 3.85%, subject to increases of
0.25% for each 90 day period during which the Bridge Loan is not repaid or
refinanced in full.
Column's financing commitments under each of the CMBS Loans and the
Bridge Loan are subject to certain customary conditions for such financing
transactions as set forth in the Commitment Letter. The loans under the Credit
Facility will be non-recourse to the borrowers other than to certain collateral,
except in the case of certain bankruptcy-related events and other customary
non-recourse carveout events. Morgans Hotel Group Co. and other principals, if
any, of Merger Sub and the borrowers may be required to provide guarantees to
lenders under the credit facility to the extent of certain non-recourse
carveouts customary in financing transactions of this kind.
The foregoing description of the Commitment Letter does not purport to
be complete and is qualified in its entirety by reference to the Commitment
Letter, which is attached as Exhibit 10.6 hereto.
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ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(a) None
(b) None
(c) None
(d)
EXHIBIT NO. EXHIBIT DESCRIPTION
2.1 Agreement and Plan of Merger, dated May 11, 2006, by
and among Morgans Hotel Group Co., MHG HR Acquisition
Corp., Hard Rock Hotel, Inc. and Peter Morton
10.1 Purchase and Sale Agreement and Joint Escrow
Instructions dated May 11, 2006, by and between Morgans
Group LLC and PM Realty, LLC
10.2 Purchase and Sale Agreement and Joint Escrow
Instructions dated May 11, 2006, by and between Morgans
Group LLC and Red, White and Blue Pictures, Inc.
10.3 Purchase and Sale Agreement, dated May 11, 2006, by and
between Morgans Group LLC and HR Condominium Investors
(Vegas), L.L.C.
10.4 First Amendment to Morgans Las Vegas, LLC Limited
Liability Company Agreement, dated May 15, 2006, by and
between Morgans/LV Investment LLC and Echelon Resorts
Corporation
10.5 Letter Agreement Re: Morgans Las Vegas, LLC, dated May
15, 2006, by and between Morgans/LV Investment LLC and
Echelon Resorts Corporation
10.6 Commitment Letter from Column Financial, Inc., dated
May 11, 2006
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MORGANS HOTEL GROUP CO.
Date: May 17, 2006 By: /s/ RICHARD SZYMANSKI
----------------------------------------
Richard Szymanski
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT NO. EXHIBIT DESCRIPTION
2.1 Agreement and Plan of Merger, dated May 11, 2006, by
and among Morgans Hotel Group Co.; MHG HR Acquisition
Corp., Hard Rock Hotel, Inc. and Peter Morton
10.1 Purchase and Sale Agreement and Joint Escrow
Instructions dated May 11, 2006, by and between Morgans
Group LLC and PM Realty, LLC
10.2 Purchase and Sale Agreement and Joint Escrow
Instructions dated May 11, 2006, by and between Morgans
Group LLC and Red, White and Blue Pictures, Inc.
10.3 Purchase and Sale Agreement, dated May 11, 2006, by and
between Morgans Group LLC and HR Condominium Investors
(Vegas), L.L.C.
10.4 First Amendment to Morgans Las Vegas, LLC Limited
Liability Company Agreement, dated May 15, 2006, by and
between Morgans/LV Investment LLC and Echelon Resorts
Corporation
10.5 Letter Agreement Re: Morgans Las Vegas, LLC, dated May
15, 2006, by and between Morgans/LV Investment LLC and
Echelon Resorts Corporation
10.6 Commitment Letter from Column Financial, Inc., dated
May 11, 2006
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