IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
)
IN RE BALLY'S GRAND DERIVATIVE ) Consolidated Civil Actions
LITIGATION ) Nos. 14644 and 15325
)
MEMORANDUM OF UNDERSTANDING
1. The undersigned parties in the above captioned litigation
hereby agree in principle to settle this litigation, including all claims
alleged in all complaints filed in Civil Action Nos. 14644, 15197 and 15325,
and all claims that could have been asserted in these complaints or any
amendments to these complaints, and whether or not asserted in other pending
actions (the "Litigation").
2. The parties agree in principle to settle the Litigation by
means of
(a) a repurchase by Bally's Grand, Inc. ("Bally's Grand") of
388,561 shares of Bally's Grand common stock and 61,285 warrants to purchase
shares of Bally's Grand common stock held by Tower Investment Group, Inc.
("Tower") and 578,186 shares of Bally's Grand common stock and 41,413
warrants to purchase shares of Bally's Grand common stock held by Executive
Life of New York ("Executive Life") at a price of $52.75 per share in cash
for stock, and, for warrants, the difference between $52.75 per share in cash
less the exercise price of warrants, as soon as practicable but in no event
later than 14 days from the date
of this Memorandum of Understanding, and
(b) a merger pursuant to which Hilton Hotels Corporation or a
Hilton subsidiary ("Hilton") will acquire all remaining shares of Bally's
Grand stock not already held by Hilton (including the remaining shares held
by Tower and Executive Life) in exchange for $52.75 in cash (less attorneys'
fees and expenses awarded by the Court pursuant to Paragraph 5(c) below) for
stock, and, for warrants, the difference between $52.75 per share in cash
(less attorneys' fees and expenses awarded by the Court pursuant to Paragraph
5(c) below) less the exercise price of warrants. Hilton will use reasonable
efforts to complete the merger as soon as practicable following the final
termination of the Litigation, although Hilton may, in its sole discretion,
complete the merger at any time prior to the termination of the Litigation.
(c) In the merger described in Paragraph 2(b) above, any
Bally's Grand shareholder other than Tower and Executive Life shall have the
right to seek appraisal under Delaware law. In any such appraisal
proceeding, the dissenting shareholder may assert, as an element of value,
his, her or its percentage share of the value of the derivative claims
asserted in the Litigation.
3. This Memorandum of Understanding, except the transaction
described in Paragraph 2(a) above, is subject to and conditioned upon the
drafting and execution of a written
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settlement agreement (the "Settlement Agreement") and final approval of the
Settlement Agreement by the Court. The Settlement Agreement shall contain
the usual and customary terms included in settlements of shareholder
derivative and class litigation, including, but not limited to:
a. A dismissal of the Litigation against all defendants with
prejudice and without costs to any party except as provided in Paragraphs
2(c) and 5 of this Memorandum of Understanding;
b. An exchange of releases;
c. A form of proposed notice and scheduling of hearing order;
d. A form of proposed notice of settlement to be sent to
Bally's Grand shareholders; and
e. A form of proposed final order.
4. If a Settlement Agreement is not completed by the parties
and/or if final Court approval of the Settlement Agreement substantially in
the form submitted to the Court is not obtained, this Memorandum of
Understanding shall be null and void and not be admissible for any purpose in
any proceeding in any Court or tribunal, and shall have no further force and
effect, except as provided for in this Paragraph. All proceedings in the
Litigation then will revert to their status as of 5:00 P.M. on May 7, 1997,
with the exception of matters decided in the Court's Memorandum Opinion dated
June 4, 1997. This Memorandum of Understand-
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ing is not intended to be and shall not be construed as an admission of
liability by any defendant in the Litigation. If for any reason the
repurchase provided for in Paragraph 2(a) is completed but the Settlement
Agreement is not completed by the parties and/or if final Court approval of
the Settlement Agreement substantially in the form submitted to the Court is
not obtained, Tower and Executive Life will release all claims, whether or
not asserted in the Litigation, that Tower and Executive Life have against
defendants and/or Bally's Grand with respect to all shares and warrants that
have been repurchased. In no event will any derivative claim be released
pursuant to this Paragraph.
5. (a) Counsel for Tower and Executive Life will be compensated
by Tower and Executive Life. Counsel for Tower and Executive Life will not
seek attorneys' fees and expenses from the Court except as provided for in
Paragraph 5(b).
(b) If the Court enters a final order substantially in the
form submitted to the Court with the Settlement Agreement, counsel for
plaintiffs Alan R. Kahn and David Shaev will seek attorneys' fees and
expenses, in an amount to be determined by the Court and not to exceed $1.25
million. Any attorneys' fees and expenses awarded by the Court may be shared
with Tower and Executive Life as partial reimbursement for their attorneys'
fees and expenses in the Litigation.
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(c) Any attorneys' fees and expenses awarded by the Court
pursuant to Paragraph 5(b) will be paid out of the merger consideration
provided for in Paragraph 2(b) above, and not in any other manner by any
defendant in the Litigation. If no objections are made to the settlement,
then payment will be made five business days following the Court's award of
attorneys' fees and expenses. If one or more objections are made to the
settlement, the payment will be made five business days following the later
of the following events: (i) the date upon which the time for the filing or
noticing of any appeal of the final order expires, and (ii) if there is an
appeal or appeals, the completion, in a manner that affirms and leaves in
place the final order, of all proceedings in the Delaware Supreme Court and
the United States Supreme Court arising out of the appeal or appeals
(including, but not limited to, the expiration of all deadlines for motions
for reconsideration or petitions for certiorari, all proceedings ordered on
remand, and all proceedings arising out of any subsequent appeal or appeals
following decisions on remand).
(d) Bally's Grand will bear the cost of the notice provided
for in Paragraph 3.
6. Defendants' counsel will advise the Court as promptly as
practicable that this Memorandum of Understanding has been entered into.
7. This Memorandum of Understanding is subject
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to the approval of the Board of Directors of Bally's Grand.
8. If for any reason the repurchase provided for in Paragraph
2(a) is not completed within the time period specified in Paragraph 2(a),
Tower and Executive Life may terminate this Memorandum of Understanding, and
render this Memorandum of Understanding null and void, as provided for in
Paragraph 4.
9. This Memorandum of Understanding shall be governed by the law
of the State of Delaware.
10. This Memorandum of Understanding may be modified only in a
writing signed by counsel for all of the parties.
11. This Memorandum of Understanding may be signed in counterparts.
[Signatures begin on following page]
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POTTER ANDERSON & CORROON RICHARDS, LAYTON & FINGER
/s/ ROBERT K. PAYSON /s/ JESSE A. FINKELSTEIN
- ----------------------------------- -----------------------------------
Robert K. Payson Jesse A. Finkelstein
Stephen C. Norman Raymond J. DiCamillo
350 Delaware Trust Building One Rodney Square
Post Office Box 951 P.O. Box 551
Wilmington, Delaware 19899 Wilmington, DE 19899
(302) 984-6000 (302) 651-7754
-and- -and-
Linda C. Goldstein Hugh Steven Wilson
HOWARD, DARBY & LEVIN LATHAM & WATKINS
1330 Avenue of the Americas 701 B Street, Suite 2100
New York, NY 10019 San Diego, CA 92101-8197
(212) 841-1000 (619) 236-1234
Attorneys for Plaintiffs Tower Everett C. Johnson, Jr.
Investment Group, Inc. and LATHAM & WATKINS
Executive Life of New York 1001 Pennsylvania Ave., N.W.
Suite 1300
BIGGS AND BATTAGLIA Washington, DC 20004-2505
(202) 637-2200
/s/ ROBERT D. GOLDBERG Attorneys for Defendant
- ----------------------------------- Hilton Hotels Corporation
Victor F. Battaglia, Sr.
Robert D. Goldberg ASHBY & GEDDES
1800 Mellon Bank Center
P.O. Box. 1489
Wilmington, DE 19899 /s/ RICHARD D. HEINS
(302) 655-9677 -----------------------------------
Stephen E. Jenkins
-and- Richard D. Heins
One Rodney Square
Sidney B. Silverman P.O. Box 1150
SILVERMAN HARNES & HARNES Wilmington, DE 19899
750 Lexington Avenue (302) 654-1888
New York, NY 10022
(212) 754-2333 -and-
Attorneys for Plaintiff Alan Dennis J. Block
R. Kahn Stephen A. Radin
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, NY 10153
(212) 310-8000
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ROSENTHAL, MONHAIT, GROSS & Attorneys for Defendants
GODDESS, P.A. Bally Entertainment Corpora-
tion, Bally's Grand Management
/s/ JOSEPH A. ROSENTHAL Co. Inc., Bally Manufacturing
- ----------------------------------- Corporation, Arthur M.
Joseph A. Rosenthal Goldberg, J. Kenneth Looloian
Suite 1401, Mellon Bank Center and Darrell A. Luery
P.O. Box 1070
Wilmington, DE 19899 MORRIS, NICHOLS, ARSHT
(302) 656-4433 & TUNNELL
-and- /s/ A. GILCHRIST SPARKS, III
-----------------------------------
Robert I. Harwood A. Gilchrist Sparks, III
WECHSLER HARWOOD HALEBIAN Alan J. Stone
& FEFFER LLP 1201 N. Market Street
805 Third Avenue P.O. Box 1347
New York, NY 10022 Wilmington, DE 19899
(212) 935-7400 (302) 658-9200
Attorneys for Plaintiff David Attorneys for Defendants
Shaev Jay Burnham, Jack L. MacDonald
and Nicholas H. Politan, Jr.
SMITH KATZENSTEIN & FURLOW
/s/ BRETT D. FALLON
-----------------------------------
Brett D. Fallon
800 Delaware Avenue
P.O. Box 410
Wilmington, DE 19899
(302) 652-8400
Attorneys for Defendant
Bally's Grand, Inc.
Dated: June 12, 1997
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