AGREEMENT AND PLAN OF MERGER
Dated as of February 1, 1998
between
HARVEYS ACQUISITION CORPORATION
and
HARVEYS CASINO RESORTS
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.01. THE MERGER . . . . . . . . . . . . . . . . . . . 8
SECTION 2.02. CLOSING. . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.03. EFFECTIVE TIME . . . . . . . . . . . . . . . . . 9
SECTION 2.04. EFFECTS OF THE MERGER. . . . . . . . . . . . . . 9
SECTION 2.05. ARTICLES OF INCORPORATION AND BY-LAWS. . . . . . 9
SECTION 2.06. DIRECTORS. . . . . . . . . . . . . . . . . . . . 9
SECTION 2.07. OFFICERS . . . . . . . . . . . . . . . . . . . .10
SECTION 2.08. FURTHER ACTIONS. . . . . . . . . . . . . . . . .10
ARTICLE III
CONVERSION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . .10
SECTION 3.01. EFFECT ON CAPITAL STOCK. . . . . . . . . . . . .10
SECTION 3.02. EXCHANGE OF CERTIFICATES . . . . . . . . . . . .12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TARGET . . . . . . . . . . . . . .14
SECTION 4.01. ORGANIZATION, STANDING AND CORPORATE POWER . . .14
SECTION 4.02. SUBSIDIARIES . . . . . . . . . . . . . . . . . .14
SECTION 4.03. CAPITAL STRUCTURE. . . . . . . . . . . . . . . .15
SECTION 4.04. AUTHORITY; NONCONTRAVENTION. . . . . . . . . . .15
SECTION 4.05. OPINION OF FINANCIAL ADVISOR . . . . . . . . . .17
SECTION 4.06. SEC DOCUMENTS; FINANCIAL STATEMENTS. . . . . . .17
SECTION 4.07. ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . .18
SECTION 4.08. LITIGATION . . . . . . . . . . . . . . . . . . .19
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SECTION 4.09. ABSENCE OF CHANGES IN BENEFIT PLANS. . . . . . .19
SECTION 4.10. EMPLOYEE BENEFITS; ERISA . . . . . . . . . . . .19
SECTION 4.11. TAXES. . . . . . . . . . . . . . . . . . . . . .22
SECTION 4.12. ENVIRONMENTAL MATTERS. . . . . . . . . . . . . .23
SECTION 4.13. PERMITS; COMPLIANCE WITH GAMING LAWS . . . . . .25
SECTION 4.14. STATE TAKEOVER STATUTES; CHARTER PROVISIONS. . .26
SECTION 4.15. BROKERS. . . . . . . . . . . . . . . . . . . . .27
SECTION 4.16. TRADEMARKS, ETC. . . . . . . . . . . . . . . . .27
SECTION 4.17. TITLE TO PROPERTIES. . . . . . . . . . . . . . .28
SECTION 4.18. INSURANCE. . . . . . . . . . . . . . . . . . . .28
SECTION 4.19. CONTRACTS; DEBT INSTRUMENTS. . . . . . . . . . .28
SECTION 4.20. LABOR RELATIONS. . . . . . . . . . . . . . . . .29
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQ CORP. . . . . . . . . . . . . .29
SECTION 5.01. ORGANIZATION, STANDING AND CORPORATE POWER . . .29
SECTION 5.02. AUTHORITY; NONCONTRAVENTION. . . . . . . . . . .30
SECTION 5.03. INTERIM OPERATIONS OF ACQ CORP . . . . . . . . .31
SECTION 5.04. SUFFICIENT FUNDS.. . . . . . . . . . . . . . . .31
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS. . . . . . . . . . . . . .32
SECTION 6.01. CONDUCT OF BUSINESS . . . . . . . . . . . . . . .32
SECTION 6.02. ADVICE OF CHANGES. . . . . . . . . . . . . . . .37
SECTION 6.03. NO SOLICITATION. . . . . . . . . . . . . . . . .37
ARTICLE VII
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . .39
SECTION 7.01. STOCKHOLDERS MEETING . . . . . . . . . . . . . .39
SECTION 7.02. PROXY STATEMENT AND OTHER FILINGS; REGISTRATION
STATEMENT; AUDITOR'S LETTER. . . . . . . . . . .40
ii
SECTION 7.03. ACCESS TO INFORMATION; CONFIDENTIALITY . . . . .41
SECTION 7.04. REASONABLE EFFORTS; NOTIFICATION . . . . . . . .42
SECTION 7.05. STOCK OPTION PLANS; CHANGE OF CONTROL PLAN . . .44
SECTION 7.06. INDEMNIFICATION AND INSURANCE. . . . . . . . . .45
SECTION 7.07. FEES AND EXPENSES. . . . . . . . . . . . . . . .46
SECTION 7.08. PUBLIC ANNOUNCEMENTS . . . . . . . . . . . . . .47
SECTION 7.09. TITLE POLICIES . . . . . . . . . . . . . . . . .47
SECTION 7.10. TRANSFER TAXES . . . . . . . . . . . . . . . . .48
SECTION 7.11. MAINTENANCE OF COMMITMENT. . . . . . . . . . . .48
ARTICLE VIII
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . .48
SECTION 8.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER . . . . . . . . . . . . . . . . . . .48
SECTION 8.02. CONDITIONS TO OBLIGATIONS OF ACQ CORP. . . . . .49
SECTION 8.03. CONDITIONS TO OBLIGATIONS OF TARGET. . . . . . .50
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . .51
SECTION 9.01. TERMINATION. . . . . . . . . . . . . . . . . . .51
SECTION 9.02. EFFECT OF TERMINATION. . . . . . . . . . . . . .52
SECTION 9.03. AMENDMENT. . . . . . . . . . . . . . . . . . . .52
SECTION 9.04. EXTENSION; WAIVER. . . . . . . . . . . . . . . .52
SECTION 9.05. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION
OR WAIVER. . . . . . . . . . . . . . . . . . . .52
ARTICLE X
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . .53
SECTION 10.01. NONSURVIVAL OF REPRESENTATIONS. . . . . . . . .53
SECTION 10.02. NOTICES . . . . . . . . . . . . . . . . . . . .53
SECTION 10.03. INTERPRETATION. . . . . . . . . . . . . . . . .55
SECTION 10.04. COUNTERPARTS. . . . . . . . . . . . . . . . . .55
SECTION 10.05. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.55
iii
SECTION 10.06. GOVERNING LAW . . . . . . . . . . . . . . . . .55
SECTION 10.07. GAMING LAWS . . . . . . . . . . . . . . . . . .55
SECTION 10.08. ASSIGNMENT. . . . . . . . . . . . . . . . . . .55
SECTION 10.09. ENFORCEMENT . . . . . . . . . . . . . . . . . .56
iv
SCHEDULES
EXHIBITS
Exhibit A Voting and Profit Sharing Agreement
Exhibit B Non-Competition and Trade Secrets Agreement
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AGREEMENT AND PLAN OF MERGER dated as of February 1, 1998 (this
"AGREEMENT"), among HARVEYS ACQUISITION CORPORATION, a Nevada corporation ("ACQ
CORP"), and HARVEYS CASINO RESORTS, a Nevada corporation ("TARGET").
W I T N E S S E T H
WHEREAS, the respective Boards of Directors of Acq Corp and Target
have determined that the merger of Acq Corp with and into Target (the "MERGER"),
upon the terms and subject to the conditions set forth in this Agreement, is
advisable and in the best interests of their respective corporations and
stockholders, and have approved this Agreement;
WHEREAS, as a condition for Acq Corp to enter into this Agreement,
those stockholders of Target listed in the signature pages to the Voting
Agreement, as defined below (the "FAMILY"), have entered into the Voting
Agreement as of the date hereof with Acq Corp, which provides, among other
things, that, subject to the terms and conditions thereof, each trustee or
member of the Family will vote its shares of Common Stock, as defined below, in
favor of the Merger and the approval and adoption of this Agreement;
WHEREAS, the Board of Directors of Target has approved the terms of
the Voting Agreement; and
WHEREAS, Acq Corp and Target desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained in this Agreement and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
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ARTICLE I
DEFINITIONS
Capitalized and certain other terms used in this Agreement and not
otherwise defined have the meanings set forth below. Unless the context
otherwise requires, such terms shall include the singular and plural and the
conjunctive and disjunctive forms of the terms defined.
"AFFILIATE" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first Person.
"ARTICLES OF MERGER" has the meaning set forth in Section 2.01.
"AUDIT" means any audit, assessment of Taxes, other examination by any
Tax Authority, proceeding or appeal of such proceeding relating to Taxes.
"BENEFIT PLAN" has the meaning set forth in Section ?(i).
"BUDGET" has the meaning set forth in Section 6.01(a)(v).
"CHANGE OF CONTROL PLAN" means Target's Change of Control Plan dated
November 20, 1997, as in effect on the date hereof.
"CLASS A COMMON STOCK" has the meaning set forth in Section
3.01(a)(i).
"CLASS B COMMON STOCK" has the meaning set forth in Section
3.01(a)(ii).
"CLOSING" has the meaning set forth in Section 2.02.
"CLOSING DATE" has the meaning set forth in Section 2.02.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" means the Common Stock of Target, par value $.01 per
share.
2
"COMPETITIVE PROPOSAL" means any written proposal made by a third
party, other than any member of either the Family or the Board of Directors of
Target, to acquire, for consideration consisting of cash and/or publicly traded
equity securities, more than 50% of the shares of Common Stock then outstanding
or all or substantially all the assets of Target, with respect to which proposal
(i) the Board of Directors of Target determines in its good faith judgment
(based on the opinion, with only customary qualifications, of an independent
financial advisor of good national reputation in such matters) that (a) the
value of the consideration of such proposal exceeds the value of each of the
Merger Consideration and any alternative proposal presented by Acq Corp or any
of its Affiliates and (b) such proposal is more favorable to Target and Target's
stockholders than the Merger and any alternative proposal presented by Acq Corp
or any of its Affiliates, and (ii) there is no financing condition and
financing, to the extent required, is fully committed.
"CONTRACT" means any mortgage, indenture, note, debenture, agreement,
lease, license, permit, franchise or other instrument or obligation, whether
written or oral.
"COVERED PERSON" has the meaning set forth in Section 6.03(a).
"DLJ" means Donaldson, Lufkin & Jenrette Securities Corporation.
"EFFECTIVE TIME" has the meaning set forth in Section 2.03.
"ENVIRONMENTAL CLAIM" has the meaning set forth in Section 4.12(c).
"ENVIRONMENTAL LAWS" has the meaning set forth in Section 4.12(a).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE FUNDS" has the meaning set forth in Section 3.02(a).
"EXPENSES" has the meaning set forth in Section 7.07(b).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
3
"FAMILY" has the meaning set forth in the second recital hereof.
"GAMING AUTHORITY" means any governmental authority or agency with
regulatory control or jurisdiction over the conduct of lawful gaming or
gambling, including, without limitation, the Nevada State Gaming Control Board,
the Nevada Gaming Commission, the Colorado Division of Gaming, the Colorado
Limited Gaming Control Commission and the Iowa Racing and Gaming Commission.
"GAMING LAWS" means any Federal, state, local or foreign statute,
ordinance, rule, regulation, permit, consent, approval, license, judgment,
order, decree, injunction or other authorization governing or relating to the
current or contemplated manufacturing, distribution, casino gambling and gaming
activities and operations of Target, including, without limitation, the Nevada
Gaming Control Act and the rules and regulations promulgated thereunder, the
Colorado Limited Gaming Act and the rules and regulations promulgated thereunder
and chapter 99F of the Code of Iowa and the rules and regulations promulgated
thereunder.
"GOVERNMENTAL ENTITY" means any Federal, state or local government or
any court, administrative or regulatory agency or commission or other
governmental authority or agency, domestic or foreign, including any Gaming
Authority.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"INDEBTEDNESS" means, with respect to any Person, without
duplication, (A) all obligations of such Person for borrowed money, or with
respect to deposits or advances of any kind, (B) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (C) all
obligations of such Person upon which interest charges are customarily paid
(other than trade payables incurred in the ordinary course of business), (D)
all obligations of such Person under conditional sale or other title
retention agreements relating to property purchased by such Person, (E) all
obligations of such Person issued or assumed as the deferred purchase price
of property or services or for trade or barter arrangements (excluding
obligations of such Person to creditors for raw materials, inventory,
services and supplies incurred in the ordinary course of such Person's
business), (F) all lease obligations of such Person capitalized on the books
and records of such Person, (G) all obligations of others secured by any Lien
on property or assets owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (H) all obligations of such
4
Person under interest rate, or currency or commodity hedging, swap or similar
derivative transactions (valued at the termination value thereof), (I) all
letters of credit issued for the account of such Person (excluding letters of
credit issued for the benefit of suppliers or lessors to support accounts
payable to suppliers incurred in the ordinary course of business) and (J) all
guarantees and arrangements having the economic effect of a guarantee by such
Person of any other Person.
"INDEMNIFIED PARTIES" has the meaning set forth in Section 7.06(a).
"KNOWLEDGE" of any Person means the current actual knowledge of the
officers and directors of such Person.
"LAW" means any law, statute, ordinance, regulation or rule or any
judgment, decree, order, regulation or rule of any court or governmental
authority or body.
"LIEN" means any mortgage, pledge, assessment, security interest,
lease, sublease, lien, adverse claim, levy, charge, option, right of others or
restriction (whether on voting, sale, transfer, disposition or otherwise) or
other encumbrance of any kind, whether imposed by agreement, understanding, law
or equity, or any conditional sale contract, title retention contract or other
contract to give or to refrain from giving any of the foregoing.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" with respect to
any Person means any change or effect (or any development that, insofar as can
reasonably be foreseen, is likely to result in any change or effect) that is
materially adverse to the business, business prospects, properties, assets,
financial condition or results of operations of such Person and its
Subsidiaries, taken as a whole.
"MATERIAL SUBSIDIARY" has the meaning set forth in Section 4.02.
"MAXIMUM PREMIUM" has the meaning set forth in Section 7.06(b).
"MERGER" has the meaning set forth in the first recital hereof.
"MERGER CONSIDERATION" has the meaning set forth in Section 3.01(c).
5
"MATERIAL OF ENVIRONMENTAL CONCERN" has the meaning set forth in
Section 4.12(a).
"NRS" means Nevada Revised Statutes.
"NYSE" means the New York Stock Exchange, Inc., or any successor
entity.
"NEVADA MERGER LAW" has the meaning set forth in Section 2.03.
"OPTION AGREEMENT" has the meaning set forth in Section 6.01(b).
"ORDINARY COURSE OF BUSINESS," when used with respect to Target, in
addition to its usual and customary meaning, shall be deemed to mean
transactions in the ordinary course of business consistent with Target's prior
practice.
"PAYING AGENT" has the meaning set forth in Section 3.02(a).
"PERSON" means any natural person, corporation, general partnership,
limited partnership, limited liability company, limited liability partnership,
proprietorship, trust, union, association, court, tribunal, agency, government,
department, commission, self-regulatory organization, arbitrator, board, bureau,
instrumentality or other entity, enterprise, authority or business organization.
"PLAN" has the meaning set forth in Section 4.10.
"PREFERRED STOCK" means the Preferred Stock of Target, par value $.01
per share.
"SEC" means the Securities and Exchange Commission.
"SEC DOCUMENTS" has the meaning set forth in Section 4.06.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"STOCK PURCHASE PLAN" has the meaning set forth in Section 7.05(c)
hereof.
6
"SUBSIDIARY" means, with respect to any Person, (i) any corporation
with respect to which such Person, directly or indirectly through one or more
Subsidiaries, (a) owns more than 50% of the outstanding shares of capital
stock having generally the right to vote in the election of directors or (b)
has the power, under ordinary circumstances, to elect, or to direct the
election of, a majority of the board of directors of such corporation, (ii)
any partnership with respect to which (a) such Person or a Subsidiary of such
Person is a general partner, (b) such Person and its Subsidiaries together
own more than 50% of the interests therein, or (c) such Person and its
Subsidiaries have the right to appoint or elect or direct the appointment or
election of a majority of the directors or other Person or body responsible
for the governance or management thereof, (iii) any limited liability company
with respect to which (a) such Person or a Subsidiary of such Person is the
manager or managing member, (b) such Person and its Subsidiaries together own
more than 50% of the interests therein, or (c) such Person and its
Subsidiaries have the right to appoint or elect or direct the appointment or
election of a majority of the directors or other Person or body responsible
for the governance or management thereof, or (iv) any other entity in which
such Person has, and/or one or more of its Subsidiaries have, directly or
indirectly, (a) at least a 50% ownership interest or (b) the power to appoint
or elect or direct the appointment or election of a majority of the directors
or other Person or body responsible for the governance or management thereof.
"SURVIVING CORPORATION" has the meaning set forth in Section 2.01
hereof.
"TAKEOVER PROPOSAL" means (a) any proposal or offer from any Person
relating to any direct or indirect acquisition or purchase of a material
amount of assets of Target or any of its Subsidiaries or of over 10% of any
class of equity securities of Target or any of its Subsidiaries or which
would require approval under any Gaming Law, or any tender offer or exchange
offer that if consummated would result in any Person beneficially owning 10%
or more of any class of equity securities of Target or any of its
Subsidiaries or which would require approval under any Gaming Law, or any
merger, consolidation, business combination, sale of all or substantially all
assets, recapitalization, liquidation, dissolution or similar transaction
involving Target or any of its Subsidiaries other than the transactions
contemplated by this Agreement, or any other transaction the consummation of
which would reasonably be expected to impede, interfere with, frustrate,
prevent, nullify or materially delay the Merger or which would reasonably be
expected to dilute materially the benefits to Acq Corp of the transactions
contemplated hereby. Notwithstanding the foregoing, a transaction or
7
series of related transactions involving the sale, transfer or other
disposition of Reno Projects, Inc. or a material amount of the assets thereof
(substantially as such assets consist on the date hereof) for consideration
not to exceed $2 million shall not be deemed to constitute a Takeover
Proposal.
"TAX" or "TAXES" means all Federal, state, local and foreign taxes and
other assessments and governmental charges of a similar nature (whether imposed
directly or through withholdings), including any interest, penalties and
additions to Tax applicable thereto.
"TAX AUTHORITY" means the Internal Revenue Service and any other
domestic or foreign governmental authority responsible for the administration of
any Taxes.
"TAX RETURNS" means all Federal, state, local and foreign returns,
declarations, statements, reports, schedules, forms and information returns
relating to Taxes, and all amendments thereto.
"TERMINATION FEE" has the meaning set forth in Section 7.07(b).
ARTICLE II
THE MERGER
SECTION 2.01. THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement and in the articles of merger or other
appropriate documents (in any such case, the "ARTICLES OF MERGER") required
by law in connection with the Merger, and in accordance with the applicable
provisions of Nevada law, Acq Corp shall be merged with and into Target.
Following the Merger, Target shall continue as the surviving corporation (the
"SURVIVING CORPORATION") and the separate existence of Acq Corp will cease.
SECTION 2.02. CLOSING. The closing (the "CLOSING") of the Merger
will take place at 10:00 a.m. on a date (the "CLOSING DATE") to be specified
by Acq Corp, which may be on, but shall be no later than the third business
day after, the day on which there shall have been satisfaction or waiver of
the conditions set forth in Article VIII, at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, 919 Third
8
Avenue, New York, New York 10022, unless another time date or place is
agreed to in writing by the parties hereto.
SECTION 2.03. EFFECTIVE TIME. On the Closing Date, or as soon as
practicable thereafter, the parties shall file the Articles of Merger with the
Secretary of State of the State of Nevada (the "NEVADA SECRETARY OF STATE") in
accordance with the provisions of NRS section 92A.005 ET SEQ. (the "NEVADA
MERGER LAW") and make all other filings or recordings required by law in
connection with the Merger. The Merger shall become effective at such time as
the Articles of Merger are duly filed with the Nevada Secretary of State, or at
such other later time (which shall not be more than 90 days after the Articles
of Merger are filed) as Acq Corp and Target shall agree and specify in the
Articles of Merger (the time the Merger becomes effective being the "EFFECTIVE
TIME").
SECTION 2.04. EFFECTS OF THE MERGER. The Merger shall have the
effects set forth in the Nevada Merger Law. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time, all the
properties, rights, privileges, powers and franchises of Target and Acq Corp
shall vest in the Surviving Corporation, and all debts, liabilities and
duties of Target and Acq Corp shall become the debts, liabilities and duties
of the Surviving Corporation.
SECTION 2.05. ARTICLES OF INCORPORATION AND BY-LAWS. The Articles
of Incorporation of Acq Corp, as in effect immediately prior to the Effective
Time of the Merger, shall become the Articles of Incorporation of the
Surviving Corporation after the Effective Time, except that such Articles of
Incorporation shall be amended to provide that the name of the Surviving
Corporation shall be "Harveys Casino Resorts," and thereafter may be amended
in accordance with its terms and as provided by law. The By-laws of Acq Corp
as in effect on the Effective Time shall become the By-laws of the Surviving
Corporation and thereafter may be amended in accordance with its terms and as
provided by law.
SECTION 2.06. DIRECTORS. The directors of Acq Corp immediately
prior to the Effective Time shall become the directors of the Surviving
Corporation, and shall serve in such capacity until the earlier of their
resignation or removal or until their respective successors are duly elected
and qualified, as the case may be.
SECTION 2.07. OFFICERS. The officers of Target immediately prior
to the Effective Time shall become the officers of the Surviving Corporation,
and shall
9
serve in such capacity until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be.
SECTION 2.08. FURTHER ACTIONS. At and after the Effective Time,
the Surviving Corporation shall take all action as shall be required in
connection with the Merger, including, but not limited to, the execution and
delivery of any further deeds, assignments, instruments or documentation as
are necessary or desirable to carry out the provisions of this Agreement.
ARTICLE III
CONVERSION OF SHARES
SECTION 3.01. EFFECT ON CAPITAL STOCK. As of the Effective Time,
by virtue of the Merger and without any action on the part of the holder of
any shares of Common Stock or any shares of capital stock of Acq Corp:
(a) CAPITAL STOCK OF ACQ CORP.
(i) Each share of the Class A Common Stock, par
value $.01 per share ("CLASS A COMMON STOCK"), of Acq Corp issued and
outstanding immediately prior to the Effective Time shall be converted
into and become one fully paid and nonassessable share of Class A
Common Stock, par value $.01 per share, of the Surviving Corporation.
(ii) Each share of the Class B Common Stock, par
value $.01 per share (the "CLASS B COMMON STOCK"), of Acq Corp issued
and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and nonassessable share of
Class B Common Stock, par value $.01 per share, of the Surviving
Corporation.
(iii) Each share of the Series A Preferred Stock,
par value $.01 per share, of Acq Corp issued and outstanding
immediately prior to the Effective Time shall be converted into and
become one fully paid and nonassessable share of Series A Preferred
10
Stock, par value $.01 per share, of the Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND ACQ CORP OWNED STOCK.
Each share of Common Stock that is owned by Target or by any Subsidiary of
Target and each share of Common Stock that is owned by Acq Corp shall
automatically be canceled and retired and shall cease to exist, and no
payment shall be made in exchange therefor.
(c) CONVERSION OF COMMON STOCK. Each issued and outstanding
share of Common Stock (other than shares to be canceled in accordance with
Section 3.01(b)) shall be converted into the right to receive from the
Surviving Corporation $28.00 in cash, without interest, plus the additional
consideration, if any, contemplated by the next following sentence
(collectively, the "MERGER CONSIDERATION"). If the Closing shall not have
occurred on or before August 31, 1998 as a result of the failure of Acq
Corp to cause the conditions specified in Section 8.03 to be satisfied due
to the failure of Acq Corp or its directors or officers to be licensed or
found suitable under any applicable Gaming Law, the per share Merger
Consideration shall include an amount in cash, without interest, equal to
the difference, if positive, of (i) the product of (A) $1.96 times (B) a
fraction the numerator of which shall be the number of days elapsed from
and including September 1, 1998 to and excluding the Closing Date and the
denominator of which shall be 365, minus (ii) the quotient of (1) the
aggregate amount of all cash dividends on the Common Stock paid during the
period from and including September 1, 1998 to and excluding the Closing
Date, divided by (2) the number of shares of Common Stock upon which the
Merger Consideration is paid pursuant to this Section 3.01(c) plus the
number of shares of Common Stock underlying the stock options, warrants and
other rights to acquire Common Stock cancelled in connection with the
Merger pursuant to Section 7.05. As of the Effective Time, all shares of
Common Stock upon which the Merger Consideration is payable pursuant to
this Section 3.01(c) shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares of Common Stock shall cease to
have any rights with respect thereto, except the right to receive the
Merger Consideration, without interest.
11
SECTION 3.02. EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT. Immediately prior to the Effective Time,
Acq Corp shall designate a bank or trust to act as paying agent in the
Merger (the "PAYING AGENT"), and, from time to time on, prior to or after
the Effective Time, Acq Corp shall make available, or cause the Surviving
Corporation to make available, to the Paying Agent immediately available
funds (the "EXCHANGE FUNDs") in amounts and at the times necessary for the
payment of the Merger Consideration upon surrender of certificates
representing Common Stock as part of the Merger pursuant to Section 3.01,
it being understood that any and all interest earned on the Exchange Fund
shall be turned over to Acq Corp.
(b) EXCHANGE PROCEDURE. As soon as reasonably practicable after
the Effective Time, the Surviving Corporation shall cause the Paying Agent
to mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Common Stock (the "CERTIFICATES") whose shares were converted into the
right to receive the Merger Consideration pursuant to Section 3.01, (i) a
letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Paying Agent and shall be in such form
and have such other provisions as the Surviving Corporation may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by the Surviving Corporation, together with such
letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Paying Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor the amount of cash into
which the shares of Common Stock theretofore represented by such
Certificate shall have been converted pursuant to Section 3.01, and the
Certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of Common Stock which is not registered in the
transfer records of Target, payment may be made to a Person other than the
Person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the Person requesting such payment shall pay any transfer or
other taxes required
12
by reason of the payment to a Person other than the registered holder
of such Certificate or establish to the satisfaction of
the Surviving Corporation that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 3.02, each Certificate
shall be deemed at any time after the Effective Time to represent only the
right to receive upon such surrender the amount of cash, without interest,
into which the shares of Common Stock theretofore represented by such
Certificate shall have been converted pursuant to Section 3.01. No
interest will be paid or will accrue on the cash payable upon the surrender
of any Certificate.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMMON STOCK. All cash paid
upon the surrender of Certificates in accordance with the terms of this
Article III shall be deemed to have been paid in full satisfaction of all
rights pertaining to the shares of Common Stock theretofore represented by
such Certificates, and there shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the shares of
Common Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Paying Agent for any reason, they shall be
cancelled and exchanged as provided in this Article III, except as
otherwise provided by law.
(d) TERMINATION OF EXCHANGE FUNDS. Any portion of the Exchange
Funds which remains undistributed to the holders of the Certificates for
six months after the Effective Time shall be delivered to an entity
identified in writing to Target by Colony Capital, Inc., upon demand, and
any holders of the Certificates who have not theretofore complied with this
Article III shall thereafter look only to such identified entity for
payment of their claim for the Merger Consideration, and any cash or
dividends or distributions payable to such holders pursuant to this Article
III.
(e) NO LIABILITY. None of Acq Corp, Target, the Surviving
Corporation or the Paying Agent shall be liable to any Person in respect of
any cash delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TARGET
Target represents and warrants to Acq Corp as follows:
SECTION 4.01. ORGANIZATION, STANDING AND CORPORATE POWER. Each of
Target and each of its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized and has the requisite corporate power and authority to carry on its
business as now being conducted. Each of Target and its Subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not have a material adverse effect on
Target or any Material Subsidiary. Target has made available to Acq Corp
complete and correct copies of the Restated Articles of Incorporation and By-
laws of the corporation, in each case as amended to the date of this Agreement,
and will make available immediately following the date of this Agreement the
certificates of incorporation and by-laws or other organizational documents of
its Subsidiaries, in each case as amended to the date of this Agreement. The
respective certificates of incorporation and by-laws or other organizational
documents of the Subsidiaries of Target do not contain any provision limiting or
otherwise restricting the ability of Target to control such Subsidiaries.
SECTION 4.02. SUBSIDIARIES. The Subsidiaries of Target identified on
Schedule 4.02(a) (collectively, the "MATERIAL SUBSIDIARIES") own or lease all of
the material assets, hold all material Permits and conduct all of the material
business and operations of Target and its Subsidiaries, taken as a whole
(including, without limitation, all business and operations associated with
Target's Lake Tahoe, Colorado and Iowa casino resorts and related facilities).
Each Subsidiary of Target that is not a Material Subsidiary is identified on
Schedule 4.02(b). All the outstanding shares of capital stock of each
Subsidiary are owned by Target, by another wholly owned Subsidiary of Target or
by Target and another wholly owned Subsidiary of Target, free and clear of all
Liens, except as set forth on Schedule 4.02(c). There are no proxies with
respect to any shares of any such Subsidiary.
14
SECTION 4.03. CAPITAL STRUCTURE. The authorized capital stock of
Target consists of 30,000,000 shares of Common Stock and 5,000,000 shares of
Preferred Stock. At the close of business on January 27, 1998, (i) 9,906,869
shares of Common Stock and no shares of Preferred Stock were issued and
outstanding, (ii) 12,792 shares of Common Stock were held by Target in its
treasury, and (iii) 950,543 shares of Common Stock were reserved for issuance
upon exercise of outstanding Stock Options (as defined in Section 7.05). Except
as set forth above, as of the date of this Agreement, no shares of capital stock
or other voting securities of Target were issued or outstanding. Except as set
forth in Schedule 4.03, as of the date of this agreement, there are no
outstanding stock appreciation rights, restricted stock grants or contingent
stock grants and there are no other outstanding contractual rights to which
Target is a party, the value of which is derived from the value of shares of
Common Stock. All outstanding shares of capital stock of Target are, and all
shares which may be issued will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
There are no bonds, debentures, notes or other indebtedness of Target having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of Target may vote. Except
as set forth above, as of the date of this Agreement, there are no outstanding
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which Target or any of its
Subsidiaries is a party or by which any of them is bound obligating Target or
any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting securities
of Target or of any of its Subsidiaries or obligating Target or any of its
Subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking.
SECTION 4.04. AUTHORITY; NONCONTRAVENTION. Target has the requisite
corporate power and authority to enter into this Agreement and, subject to
approval of this Agreement by the holders of at least two-thirds of the
outstanding shares of Common Stock, to consummate the transactions contemplated
by this Agreement. The execution and delivery of this Agreement by Target and
the consummation by Target of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate action on the part of
Target, subject, in the case of this Agreement, to approval of this Agreement by
the holders of at least two-thirds of the outstanding shares of Common Stock.
This Agreement has been duly executed and delivered by Target and, assuming this
Agreement constitutes the valid and binding obligation of Acq Corp, constitutes
the valid and binding obligation of Target,
15
enforceable against Target in accordance with its terms. The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any Lien upon
any of the properties or assets of Target or any of its Subsidiaries under,
(i) the Restated Articles of Incorporation or By-laws of Target or the
comparable charter or organizational documents of any of its Subsidiaries,
(ii) other than subject to the governmental filings and other matters
referred to in the following sentence and except as set forth on Schedule
4.04(a), any loan or credit agreement, note, bond, mortgage, indenture, lease
or other agreement, instrument, permit, concession, franchise or license
applicable to Target or any of its Subsidiaries or their respective
properties or assets (including all agreements described pursuant to Section
4.19) or (iii) subject to the governmental filings and other matters referred
to in the following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Target or any of its Subsidiaries
or their respective properties or assets, other than, in the case of clauses
(ii) or (iii), any such conflicts, violations, defaults, rights or Liens that
individually or in the aggregate would not (x) have a material adverse effect
on Target or any Material Subsidiary, (y) impair in any material respect the
ability of Target to perform its obligations under this Agreement or (z)
prevent or impede, in any material respect, the consummation of any of the
transactions contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required by Target or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by Target or the
consummation by Target of the transactions contemplated by this Agreement,
except for (i) the filing of a premerger notification and report form by
Target under the HSR Act, (ii) the filing with the SEC of such reports under
Section 13(a) of the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated by this Agreement, (iii) the
filing of the Articles of Merger with the Nevada Secretary of State and
appropriate documents with the relevant authorities of other states in which
Target is qualified to do business, (iv) the licensing, permitting,
registration or other approval of, or written consent or no action letter
from, each Gaming Authority within each municipality, state, or commonwealth,
or subdivision thereof, wherein Target or any of its Subsidiaries conducts
business on the date hereof and as of the Effective Date, each of which
licenses, permits, registrations or other approvals, consents or no action
letters are set forth in Schedule 4.04(b) hereto, (v) such filings as may be
required by any applicable
16
state securities or "blue sky" laws, and (vi) such other consents, approvals,
orders, authorizations, registrations, declarations and filings the failure
of which to be obtained or made would not, individually or in the aggregate,
(x) have a material adverse effect on Target or any Material Subsidiary, (y)
impair, in any material respect, the ability of Target to perform its
obligations under this Agreement or (z) prevent or delay the consummation of
the transactions contemplated by this Agreement.
SECTION 4.05. OPINION OF FINANCIAL ADVISOR. The Board of
Directors of Target has received the opinion of DLJ, dated February 1, 1998
(the "FAIRNESS OPINION"), to the effect that, as of such date, the Merger
Consideration is fair to the stockholders of Target, from a financial point
of view, and a copy of the Fairness Opinion has been delivered to Acq Corp.
SECTION 4.06. SEC DOCUMENTS; FINANCIAL STATEMENTS. Target files and
has filed all required reports, proxy statements, forms, and other documents
with the SEC since February 1, 1994 (the "SEC DOCUMENTS"). Schedule 4.06(a)
hereto sets forth a complete list of all the SEC Documents through the date
hereof. True and complete copies of all such SEC Documents have been delivered
to Acq Corp. As of their respective dates, (i) the SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents, and (ii) none of the
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Except to the extent that information contained in any
SEC Document has been revised or superseded by a later filed SEC Document filed
and publicly available prior to the date of this Agreement, none of the SEC
Documents contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of Target included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved and fairly
present the consolidated financial position of Target and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except as set
forth in the SEC
17
Documents filed and publicly available prior to the date of this Agreement
and in Schedule 4.06(b), and except for liabilities and obligations incurred
in the Ordinary Course of Business since the date of the most recent
consolidated balance sheet included in the SEC Documents filed and publicly
available prior to the date of this Agreement (the "BASE BALANCE SHEET"),
neither Target nor any of its Subsidiaries has any liabilities or obligations
of any nature (whether accrued, absolute, contingent or otherwise) required
by generally accepted accounting principles to be set forth on a consolidated
balance sheet of Target and its consolidated Subsidiaries or in the notes
thereto.
SECTION 4.07. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in SEC Documents filed and publicly available during the year ended
November 30, 1997 (the "1997 SEC DOCUMENTS"), Target and its Material
Subsidiaries have conducted their respective businesses only in the Ordinary
Course of Business, and there has not been (i) any material adverse change in
Target, (ii) any declaration, setting aside or payment of any dividend or other
distribution with respect to its capital stock, except for the declaration and
payment of regular quarterly cash dividends on the Common Stock in an amount not
to exceed $.05 per share for each of Target's fiscal quarters, (iii) any split,
combination or reclassification of any of its capital stock or any issuance or
the authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, (iv) except as set forth
in Schedule 4.07, (x) any granting by Target or any of its Subsidiaries to any
officer of Target or any of its Subsidiaries of any increase in compensation,
except in the Ordinary Course of Business (including in connection with
promotions) or as was required under employment agreements in effect as of the
date of the Base Balance Sheet, (y) any granting by Target or any of its
Subsidiaries to any such officer of any increase in severance or termination
pay, except as part of a standard employment package to any Person promoted or
hired, or as was required under employment, severance or termination agreements
in effect as of the date of the Base Balance Sheet or (z) any entry by Target or
any of its Subsidiaries into any employment, severance or termination agreement
with any executive officer of Target, (v) any damage, destruction or loss,
whether or not covered by insurance, that has or reasonably could be expected to
have a material adverse effect on Target or any Material Subsidiary or (vi) any
change in accounting methods, principles or practices by Target materially
affecting its assets, liabilities or business.
18
SECTION 4.08. LITIGATION. There is no suit, action or proceeding
pending or, to the Knowledge of Target, threatened against Target or any of its
Subsidiaries that, individually or in the aggregate, could reasonably be
expected to have a material adverse effect on Target or any Material Subsidiary,
including any affecting its licenses, permits, registration or other gaming
approvals under the Gaming Laws, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against
Target or any of its Subsidiaries that, individually or in the aggregate, could
reasonably be expected to have such an effect.
SECTION 4.09. ABSENCE OF CHANGES IN BENEFIT PLANS. Except as
disclosed in the 1997 SEC Documents, as set forth in Schedule 4.09 or as
otherwise expressly permitted hereunder, there has not been any adoption or
amendment in any material respect by Target or any of its Subsidiaries of any
Plan since August 31, 1997. All employment, consulting, severance, termination
or indemnification agreements, arrangements or understandings between Target or
any of its Subsidiaries which are required to be disclosed in the SEC Documents
have been disclosed therein.
SECTION 4.10. EMPLOYEE BENEFITS; ERISA.
(a) Schedule 4.10(a) contains a true and complete list of each
employment, consulting, bonus, deferred compensation, incentive
compensation, stock purchase, stock option, stock appreciation right or
other stock-based incentive, severance, change-in-control or termination
pay, hospitalization or other medical, disability, life or other insurance,
supplemental unemployment benefits, profit-sharing, pension, or retirement
plan, program, agreement or arrangement, and each other employee benefit
plan, program, agreement or arrangement, sponsored, maintained or
contributed to or required to be contributed to by Target or any of its
Subsidiaries, or by any trade or business, whether or not incorporated,
that together with Target or any of its Subsidiaries would be deemed to
comprise a controlled group or affiliated service group or be deemed to be
under common control or otherwise aggregated for purposes of Sections
414(b), (c), (m) or (o) of the Code (an "ERISA AFFILIATE"), for the benefit
of any current or former employee or director of Target, or any of its
Subsidiaries or any ERISA Affiliate (the "PLANS"). Schedule 4.10(a)
identifies each of the Plans that is an "employee welfare benefit plan," or
"employee pension benefit plan" as such terms are defined in Sections 3(1)
and 3(2) of ERISA (such plans being hereinafter referred to collectively as
the "ERISA PLANS").
19
None of Target, any of its Subsidiaries nor any ERISA Affiliate has any
formal plan or commitment, whether legally binding or not, to create any
additional Plan or modify or change any existing Plan that would affect
any current or former employee or director of Target, any of its
Subsidiaries or any ERISA Affiliate.
(b) With respect to each of the Plans, Target has heretofore
delivered or as promptly as practicable after the date hereof shall deliver
to Acq Corp true and complete copies of each of the following documents, as
applicable:
(i) a copy of the Plan documents (including all
amendments thereto) for each written Plan or a written description of
any Plan that is not otherwise in writing;
(ii) a copy of the annual report or Internal
Revenue Service Form 5500 Series, if required under ERISA, with
respect to each ERISA Plan for the last three Plan years ending prior
to the date of this Agreement for which such a report was filed;
(iii) a copy of the actuarial report, if required
under ERISA, with respect to each ERISA Plan for the last three Plan
years ending prior to the date of this Agreement;
(iv) a copy of the most recent Summary Plan
Description ("SPD"), together with all Summaries of Material
Modification issued with respect to such SPD, if required under ERISA,
with respect to each ERISA Plan, and all other material employee
communications relating to each ERISA Plan;
(v) if the Plan is funded through a trust or any
other funding vehicle, a copy of the trust or other funding agreement
(including all amendments thereto) and the latest financial statements
thereof, if any;
(vi) all contracts relating to the Plans with
respect to which Target, any of its Subsidiaries or any ERISA
Affiliate may have any liability, including insurance contracts,
investment
20
management agreements, subscription and participation
agreements and record keeping agreements; and
(vii) the most recent determination letter
received from the IRS with respect to each Plan that is intended to be
qualified under Section 401(a) of the Code.
(c) Neither Target, nor any Subsidiary nor any current or former
ERISA Affiliate has at any time sponsored, maintained, contributed to or
been required to contribute to any "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) subject to Title IV of ERISA, including
without limitation any "multiemployer plan" (as defined in Sections 3(37)
and 4001(a)(3) of ERISA). No liability under Title IV of ERISA has been
incurred by Target, any of its Subsidiaries or any ERISA Affiliate since
the effective date of ERISA, and no condition exists that presents a
material risk to Target, any of its Subsidiaries or any ERISA Affiliate of
incurring any liability under such Title.
(d) None of Target, any of its Subsidiaries, any ERISA
Affiliate, any of the ERISA Plans, any trust created thereunder, nor to
Target's Knowledge, any trustee or administrator thereof has engaged in a
transaction or has taken or failed to take any action in connection with
which Target, any of its Subsidiaries or any ERISA Affiliate could be
subject to any material liability for either a civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to
Section 4975(a) or (b), 4976 or 4980B of the Code.
(e) All contributions which Target, any of its Subsidiaries or
any ERISA Affiliate is required to pay under the terms of each of the ERISA
Plans have, to the extent due, been paid in full or properly recorded on
the financial statements or records of Target or its Subsidiaries.
(f) Each of the Plans has been operated and administered in all
material respects in accordance with applicable Laws, including but not
limited to ERISA and the Code.
(g) Each of the ERISA Plans that is intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified.
21
Target has applied for and received a currently effective determination
letter from the IRS stating that it is so qualified, and no event has
occurred which would affect such qualified status.
(h) No Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current
or former employees of Target, its Subsidiaries or any ERISA Affiliate
after retirement or other termination of service (other than (i) coverage
mandated by applicable Laws, (ii) death benefits or retirement benefits
under any "employee pension plan," as that term is defined in Section 3(2)
of ERISA, (iii) deferred compensation benefits accrued as liabilities on
the books of Target, any of its Subsidiaries or an ERISA Affiliate, or
(iv) benefits, the full direct cost of which is borne by the current or
former employee (or beneficiary thereof)).
(i) Except pursuant to the Plans set forth in Schedule 4.10(i),
the consummation of the transactions contemplated by this Agreement will
not (i) entitle any current or former employee, officer or director of
Target, any of its Subsidiaries or any ERISA Affiliate to severance pay,
unemployment compensation or any other similar termination payment, or (ii)
accelerate the time of payment or vesting, or increase the amount of or
otherwise enhance any benefit due any such employee, officer or director.
(j) There are no pending or, to Target's Knowledge, threatened
or anticipated claims by or on behalf of any Plan, by any employee or
beneficiary under any such Plan or otherwise involving any such Plan (other
than routine claims for benefits).
SECTION 4.11. TAXES.
(a) Each of Target and its Subsidiaries has timely filed (or has
had timely filed on its behalf) or will file or cause to be timely filed,
all material Tax Returns required by applicable law to be filed by it prior
to or as of the Closing Date. All such Tax Returns and amendments thereto
are, or will be before the Closing Date, true, complete and correct in all
material respects.
(b) Each of Target and its Subsidiaries has paid (or has had
paid on its behalf), or where payment is not yet due, has established (or
has had established on its behalf and for its sole benefit and recourse),
or will
22
establish or cause to be established on or before the Closing Date,
an adequate accrual in accordance with generally accepted accounting
principles for the payment of, all Taxes due with respect to any period
ending prior to or as of the Closing Date.
(c) Except as set forth in Schedule 4.11(c), no Audit by a Tax
Authority is pending or threatened with respect to any material Taxes due
from Target or any of its Subsidiaries. There are no outstanding waivers
extending the statutory period of limitation relating to the payment of
material Taxes due from Target or any of its Subsidiaries for any taxable
period ending prior to the Closing Date which are expected to be
outstanding as of the Closing Date. No issue has been raised by any Tax
Authority in any Audit of Target or any of its Subsidiaries that if raised
with respect to any other period not so audited could be expected to result
in a proposed deficiency for any period not so audited.
(d) No deficiency or adjustment for any Taxes has been proposed,
asserted or assessed against Target or any of its Subsidiaries that has not
been resolved or paid or for which an adequate accrual has not been
established in accordance with generally accepted accounting principles.
There are no Liens for Taxes upon the assets of Target or any of its
Subsidiaries, except Liens for current Taxes not yet due and for which
adequate accruals have been established in accordance with generally
accepted accounting principles.
(e) All Tax sharing agreements, Tax indemnity agreements and
similar agreements to which Target or any of its Subsidiaries is a party
are disclosed in the 1997 SEC Documents.
SECTION 4.12. ENVIRONMENTAL MATTERS.
(a) Each of Target and the Material Subsidiaries is in full
compliance with all Federal, state, local and foreign laws and regulations
relating to pollution or protection of human health or the environment,
including, without limitation, ambient air, surface water, ground water,
land surface or subsurface strata, and natural resources (together
"ENVIRONMENTAL LAWS" and including, without limitation, laws and
regulations relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants, contaminants, wastes, toxic or hazardous
substances or wastes, petroleum and
23
petroleum products, polychlorinated biphenyls (PCBs), or asbestos or
asbestos-containing materials ("MATERIALS OF ENVIRONMENTAL CONCERN")),
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Materials of
Environmental Concern. Such compliance includes, but is not limited to,
the possession by Target and the Material Subsidiaries of all permits
and other governmental authorizations required under all applicable
Environmental Laws, and compliance with the terms and conditions
thereof. All permits and other governmental authorizations currently
held by the Target and the Material Subsidiaries pursuant to the
Environmental Laws are identified in Schedule 4.12(a).
(b) Neither Target nor any of its Subsidiaries has received any
communication (written or oral), whether from a governmental authority,
citizens group, employee or otherwise, that alleges that Target or any
such Subsidiary is not in full compliance with any Environmental Laws, and
there are no circumstances that may prevent or interfere with such full
compliance in the future. Target has provided to Acq Corp all information
that is in the possession of or reasonably available to Target regarding
environmental matters pertaining to the environmental condition of Target's
and its Subsidiaries' business, or Target's and its Subsidiaries'
compliance (or noncompliance) with any Environmental Laws.
(c) There is no claim, action, cause of action, investigation or
notice (written or oral) (together, "ENVIRONMENTAL CLAIM") by any Person or
entity alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal
injuries, or penalties) arising out of, based on or resulting from (a) the
presence, or release into the environment, of any Material of Environmental
Concern at any location, whether or not owned or operated by Target or (b)
circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law, that in either case is pending or threatened against
Target or any of its Subsidiaries or against any Person or entity whose
liability for any Environmental Claim Target or any of its Subsidiaries has
retained or assumed either contractually or by operation of law.
(d) There are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without
limitation,
24
the release, emission, discharge, presence or disposal of any
Material of Environmental Concern, that could form the basis of any
Environmental Claim against Target or any of its Subsidiaries or, to
Target's best Knowledge after due inquiry, against any Person or entity
whose liability for any Environmental Claim Target or any of its
Subsidiaries has retained or assumed either contractually or by operation
of law.
(e) Without in any way limiting the generality of the foregoing,
(i) all on-site and off-site locations where Target or any of its
Subsidiaries has (previously or currently) stored, disposed or arranged for
the disposal of Materials of Environmental Concern are identified in
Schedule 4.12(e), (ii) all underground storage tanks, and the capacity and
contents of such tanks, located on any property owned, leased, operated or
controlled by Target or any of its Subsidiaries are identified in Schedule
4.12(e), (iii) except as set forth in Schedule 4.12(e), there is no
asbestos contained in or forming part of any building, building component,
structure or office space owned, leased, operated or controlled by Target
or any of its Subsidiaries, and (iv) except as set forth in Schedule
4.12(e), no PCBs or PCB-containing items are used or stored at any property
owned, leased, operated or controlled leased by Target or any of its
Subsidiaries.
(f) Neither Target nor any Material Subsidiary is subject to any
Environmental Laws requiring the performance of site assessments for
Materials of Environmental Concern, or the removal or remediation of
Materials of Environmental Concern, or the giving of notice to any
governmental agency or the recording or delivery to other Persons or an
environmental disclosure document or statement by virtue of the
transactions set forth herein and contemplated hereby, or as a condition to
the effectiveness of any transactions contemplated hereby.
SECTION 4.13. PERMITS; COMPLIANCE WITH GAMING LAWS.
(a) Each of Target, its Subsidiaries and their respective
officers, directors and other personnel has in effect all Federal, state,
local and foreign governmental approvals, authorizations, certificates,
filings, franchises, orders, registrations, findings of suitability,
licenses, notices, permits, applications and rights, including all
authorizations under Gaming Laws ("PERMITS"), necessary for Target and its
Subsidiaries to own, lease or operate
25
their properties and assets and to carry on their business as now
conducted, other than such Permits the absence of which would not,
individually or in the aggregate, have a material adverse effect on
Target or any Material Subsidiary, and there has occurred no default
under any such Permit other than such defaults which, individually or
in the aggregate, would not have a material adverse effect on Target or
any Subsidiary, result in a limitation or condition on any Permit or
result in the imposition of a fine or penalty in excess of $25,000 against
Target or any Subsidiary. All such Permits are held only by Target or a
Material Subsidiary. Except as disclosed in the 1997 SEC Documents, Target
and its Subsidiaries are in compliance with all applicable statutes, laws,
ordinances, rules, orders and regulations of any Governmental Entity,
except for possible noncompliance which individually or in the aggregate
would not have a material adverse effect on Target or any Material
Subsidiary. The preceding sentence of this Section 4.13(a) does not
apply to matters specifically covered by Sections ?, 4.10, 4.12 or
4.13(b).
(b) Each of Target and its Subsidiaries is in compliance with
all applicable Gaming Laws, except for possible noncompliance which,
individually or in the aggregate, would not have a material adverse effect
on Target or any Material Subsidiary, result in a limitation or condition
on any Permit or result in the imposition of a fine or penalty in excess of
$25,000 against Target or any Subsidiary.
(c) Neither Target, any Subsidiary or Target nor any officer or
director of Target or any Subsidiary of Target has received any written
claim, demand, notice, complaint, court order or administrative order from
any Governmental Entity in the past three years, asserting that a Permit of
it or them, as applicable, under any Gaming Laws should be limited, revoked
or suspended.
SECTION 4.14. STATE TAKEOVER STATUTES; CHARTER PROVISIONS. The Board
of Directors of Target has approved the Merger, this Agreement and the Voting
Agreement and, (a) by virtue of NRS Section 78.3783(2)(b)(4), the control share
statutes (including, without limitation, the provisions of NRS Sections 78.378
to 78.3793) and, (b) by virtue of NRS Section 78.438(1), the business
combination statutes (including, without limitation, the provisions of NRS
Sections 78.411 to 78.444), and (c) by virtue of NRS Section 92A.390, the fair
price or value or dissenters' rights statutes (including, without limitation,
the provisions of NRS Sections 92A.300 to 92A.500) of the State of Nevada do
26
not apply to the Merger, this Agreement or the Voting Agreement or to the
transactions contemplated thereby or hereby. In addition, such approval is
sufficient to render inapplicable to the Merger, this Agreement and the
Voting Agreement the provisions of Article VIII of Target's Restated Articles
of Incorporation.
SECTION 4.15. BROKERS. No broker, investment banker, financial
advisor or other Person, other than DLJ, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Target. Target has provided Acq Corp true and correct copies of
all agreements between Target and DLJ.
SECTION 4.16. TRADEMARKS, ETC. The material patents, trademarks
(registered or unregistered), trade names, service marks and copyrights and
applications therefor owned, used or filed by or licensed to Target and the
Material Subsidiaries (collectively, "INTELLECTUAL PROPERTY RIGHTS") are
sufficient to allow each of Target and the Material Subsidiaries exclusive
use thereof and to conduct, and continue to conduct, its business as
currently conducted or as Target proposes to conduct such business. Each of
Target and the Material Subsidiaries owns or has unrestricted right to use
the Intellectual Property Rights in order to allow it to conduct, and
continue to conduct, its business as currently conducted or as Target
proposes to conduct such business, and the consummation of the transactions
contemplated hereby will not alter or impair such ability in any respect
which individually or in the aggregate would be reasonably likely to have a
material adverse effect on Target or any Material Subsidiary. Neither Target
nor any of its Subsidiaries has received any oral or written notice from any
other Person pertaining to or challenging the right of Target or any of its
Subsidiaries to use any of the Intellectual Property Rights, which challenge
or other assertion, if upheld or successful, individually or in the aggregate
would be reasonably likely to have a material adverse effect on Target or any
Material Subsidiary. No claims are pending by any Person with respect to the
ownership, validity, enforceability or use of any such Intellectual Property
Rights challenging or questioning the validity or effectiveness of any of the
foregoing which claims would reasonably be expected to have a material
adverse effect on Target or any Material Subsidiary. Neither Target nor any
of its Subsidiaries has made any claim of a violation or infringement by
others of its rights to or in connection with the Intellectual Property
Rights in any such case where such claims (individually or in the aggregate)
would reasonably be expected to have a material adverse effect on Target or
any Material Subsidiary.
27
SECTION 4.17. TITLE TO PROPERTIES. To the Knowledge of Target, each
of Target and each of its Subsidiaries has sufficiently good and valid title to,
or an adequate leasehold interest in, its material tangible properties and
assets in order to allow it to conduct, and continue to conduct, its business as
currently conducted or as Target proposes to conduct such business. Such
material tangible assets and properties are sufficiently free of Liens to allow
each of Target and each of its Subsidiaries to conduct, and continue to conduct,
its business as currently conducted, or as Target proposes to conduct such
business and, to the Knowledge of Target, the consummation of the transactions
contemplated by this Agreement will not alter or impair such ability in any
respect which individually or in the aggregate would be reasonably likely to
have a material adverse effect on Target or any Material Subsidiary. To the
Knowledge of Target, each of Target and each of its Subsidiaries enjoys peaceful
and undisturbed possession under all material leases, except for such breaches
of the right to peaceful and undisturbed possession that do not materially
interfere with the ability of Target and its Subsidiaries to conduct its
business as currently conducted. Target and its Subsidiaries have no Knowledge
of any pending or contemplated condemnation, eminent domain or similar
proceeding or special assessment which would affect any of their properties or
leases or any part thereof in any way whatsoever. Schedule 4.17 sets forth a
complete list of all material real property and material interests in real
property owned in fee by Target or one of its Subsidiaries and sets forth all
material real property and interests in real property leased by Target or any of
its Subsidiaries as of the date hereof.
SECTION 4.18. INSURANCE. To the Knowledge of Target, Target and its
Subsidiaries have obtained and maintained in full force and effect insurance
with responsible and reputable insurance companies or associations in such
amounts, on such terms and covering such risks, including fire and other risks
insured against by extended coverage, as is reasonably prudent, and each has
maintained in full force and effect public liability insurance, insurance
against claims for personal injury or death or property damage occurring in
connection with any of activities of Target or its Subsidiaries or any of any
properties owned, occupied or controlled by Target or its Subsidiaries, in such
amount as reasonably deemed necessary by Target or its Subsidiaries.
SECTION 4.19. CONTRACTS; DEBT INSTRUMENTS. Except as set forth in
the 1997 SEC Documents or in Schedule 4.19, there are no (i) agreements of
Target or any of its Subsidiaries containing an unexpired covenant not to
compete or similar
28
restriction applying to Target or any of its Subsidiaries, (ii) interest
rate, currency or commodity hedging, swap or similar derivative transactions
to which Target is a party or (iii) other contracts or amendments thereto
that would be required to be filed as an exhibit to a Form 10-K filed by
Target with the SEC as of the date of this Agreement. Each of the material
agreements to which target or any of its Subsidiaries is a party is a valid
and binding obligation of Target or its Subsidiary, as the case may be, and,
to Target's Knowledge, of each other party thereto, and each such agreement
is in full force and effect and is enforceable by Target or its Subsidiary in
accordance with its terms, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and (ii) the
remedy of specific performance and injunctive relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. There are no existing defaults (or
circumstances or events that, with the giving of notice or lapse of time or
both would become defaults) of Target or any of its Subsidiaries (or, to the
Knowledge of Target, any other party thereto) under any of such material
agreements except for defaults that have not and would not, individually or
in the aggregate, have a material adverse effect on Target or any Material
Subsidiary.
SECTION 4.20. LABOR RELATIONS. No strike or other labor dispute
involving Target or any of its Subsidiaries is pending or, to the Knowledge of
Target, threatened, and, to the Knowledge of Target, there is no activity
involving any unorganized employees of Target or any of its Subsidiaries seeking
to certify a collective bargaining unit or engaging in any other organization
activity. Except as set forth in Schedule 4.20 and as disclosed in the 1997 SEC
Documents, since August 31, 1997, there has not been any adoption or amendment
in any material respect by Target or any of its Subsidiaries of any collective
bargaining agreement. Other than those filed as exhibits to the 1997 SEC
Document, Schedule 4.20 lists all collective bargaining agreements to which
Target or any of its Subsidiaries is a party.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQ CORP
Acq Corp represents and warrants to Target as follows:
SECTION 5.01. ORGANIZATION, STANDING AND CORPORATE POWER. Acq
Corp is a corporation duly organized, validly existing and in good standing
under the
29
laws of the jurisdiction in which it is incorporated and has the requisite
corporate power and authority to carry on its business as now being conducted.
Acq Corp is duly qualified or licensed to do business and is in good standing in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary, other
than in such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not have a material adverse effect on
Acq Corp. Acq Corp will make available to Target complete and correct copies of
its articles of incorporation and by-laws in effect on the date of this
Agreement.
SECTION 5.02. AUTHORITY; NONCONTRAVENTION. Acq Corp has the
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement by Acq Corp and the consummation by Acq Corp
of the transactions contemplated by this Agreement have been duly authorized
by all necessary corporate action on the part of Acq Corp. This Agreement
has been duly executed and delivered by Acq Corp and, assuming this Agreement
constitutes the valid and binding obligation of Target, constitutes a valid
and binding obligation of Acq Corp, enforceable against Acq Corp in
accordance with its terms. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated by this Agreement
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any Lien upon any of the
properties or assets of Acq Corp under, (i) the articles of incorporation or
by-laws of Acq Corp, (ii) subject to the governmental filings and other
matters referred to in the following sentence, any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument,
permit, concession, franchise or license applicable to Acq Corp or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Acq Corp or its properties or assets, other
than, in the case of clauses (ii) or (iii), any such conflicts, violations,
defaults, rights or Liens that individually or in the aggregate would not (x)
have a material adverse effect on Acq Corp, (y) impair in any material
respect the ability of Acq Corp to perform its obligations under this
Agreement or (z) prevent or impede the consummation of any of the
transactions contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required by Acq Corp in connection with the execution
and delivery of this Agreement or the consummation by
30
Acq Corp of any of the transactions contemplated by this Agreement, except
for (i) the filing of a premerger notification and report form under the HSR
Act, (ii) the filing with the SEC of such reports under the Exchange Act as
may be required in connection with this Agreement and the transactions
contemplated by this Agreement, (iii) the filing of the Articles of Merger
with the Nevada Secretary of State and appropriate documents with the
relevant authorities of other states in which Target is qualified to do
business, (iv) any approvals, licenses, authorizations, orders,
registrations, findings of suitability and filings of notices with Gaming
Authorities under Gaming Laws, (v) such filings as may be required by an
applicable state securities or "blue sky" laws, (vi) in connection with any
state or local tax which is attributable in respect of the beneficial
ownership of real property of Target or its Subsidiaries, (vii) such
immaterial filings and immaterial consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement, (viii) such immaterial filings,
consents, approvals, orders, registrations and declarations as may be
required under the laws of any foreign country in which the Acq Corp or any
of its Subsidiaries or Target or any of its Subsidiaries conducts any
business or owns any assets, and (ix) such other consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of which
to be obtained or made would not, individually or in the aggregate, (x) have
a material adverse effect on Acq Corp, (y) impair, in any material respect,
the ability of Acq Corp to perform its obligations under this Agreement or
(z) prevent or significantly delay the consummation of the transactions
contemplated by this Agreement.
SECTION 5.03. INTERIM OPERATIONS OF ACQ CORP. Acq Corp was formed
solely for the purpose of engaging in the transactions contemplated hereby and
has not engaged in any business activities or conducted any operations other
than in connection with the transactions contemplated hereby.
SECTION 5.04. SUFFICIENT FUNDS. On the Closing Date, Acq Corp will
have sufficient funds to pay the Merger Consideration. Acq Corp possesses the
means, pursuant to a binding commitment from Colony Investors III, L.P. or
pursuant to another arrangement from a replacement source reasonably acceptable
to Target, to obtain $10 million in cash upon 10 business days' prior notice.
31
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 6.01. CONDUCT OF BUSINESS.
(a) During the term of this Agreement, except as specifically
required by this Agreement or permitted under subsection (b) of this
Section 6.01, Target shall and shall cause its Subsidiaries to carry on
their respective businesses in the Ordinary Course of Business and use all
reasonable efforts to preserve intact their current business organizations,
keep available the services of their current officers and employees and
preserve their relationships consistent with past practice with desirable
customers, suppliers, licensors, licensees, distributors and others having
business dealings with them to the end that their goodwill and ongoing
businesses shall be unimpaired in all material respects at the Effective
Time. Except as expressly permitted or contemplated by the terms of this
Agreement, without limiting the generality of the foregoing, Target shall
not, and shall not permit any of its Subsidiaries to (without Acq Corp's
prior written consent, which consent may not be unreasonably withheld):
(i) (A) declare, set aside or pay any dividends
on, or make any other distributions in respect of, any of its capital
stock, other than dividends and distributions by any direct or
indirect wholly owned Subsidiary of Target to its Parent and other
than the declaration and payment of regular quarterly dividends on the
Common Stock in an amount not to exceed $.05 per share for each of
Target's fiscal quarters, (B) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock or (C) except as shall be required under currently
existing terms of any stock-based benefit plan, purchase, redeem or
otherwise acquire or amend any shares of capital stock of Target or
any of its Subsidiaries or any other securities thereof or any rights,
warrants, options to acquire or any securities convertible into or
exchangeable for any such shares or other securities (other than (x)
redemptions, purchases or other acquisitions required by applicable
provisions under Gaming Laws and (y) issuances or redemptions of
capital stock of wholly owned
32
Subsidiaries occurring between Target and any of its wholly owned
Subsidiaries or occurring between wholly owned Subsidiaries of Target);
(ii) issue, deliver, sell, pledge or otherwise
encumber or amend any shares of its capital stock, any other voting
securities or any securities convertible or exchangeable into, or any
rights, warrants or options to acquire, any such shares, voting
securities or convertible or exchangeable securities (other than the
issuance of Common Stock upon the exercise of employee stock options
and contingent incentive plans (including with respect to contingent
shares of Common Stock) outstanding on the date of this Agreement in
accordance with their present terms);
(iii) amend its Restated Articles of
Incorporation, By-laws or other comparable charter or organizational
documents;
(iv) take any action that would result in the
failure to maintain the listing of Common Stock on the NYSE;
(v) develop, acquire or agree to develop or
acquire any projects, assets or lines of business, including without
limitation by merging or consolidating with, or by purchasing all or a
substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, joint venture, association
or other business organization or division thereof, or any assets that
are material, individually or in the aggregate, to Target and its
Subsidiaries taken as a whole, except (x) purchases of inventory,
furnishings and equipment in the Ordinary Course of Business or (y)
expenditures consistent with Target's current capital budget, as set
forth in Schedule 6.01(a)(v) (the "BUDGET");
(vi) sell, lease, license, swap, barter, mortgage
or otherwise encumber or subject to any Lien or otherwise dispose of
or prevent from becoming subject to a Lien any of its properties or
assets, except transactions in the Ordinary Course of Business;
33
(vii) (A) other than (1) working capital
borrowings in the Ordinary Course of Business, (2) projects approved
prior to the date of this Agreement by the Board of Directors of
Target as set forth in Schedule 6.01(a)(vii), to the extent permitted
by Section 6.01(b), (3) specific projects at existing, operational
facilities referred to in the Budget and (4) other incurrences of
indebtedness which, in the aggregate, do not exceed $10.0 million,
incur any indebtedness, forgive any debt obligations of any Person to
Target or its Subsidiaries, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of Target or
any of its Subsidiaries, guarantee any debt securities of another
Person, enter into any "keep well" or other agreement to maintain any
financial statement condition of another Person or enter into any
arrangement having the economic effect of any of the foregoing or (B)
other than (1) to Target or any direct or indirect wholly owned
Subsidiary of Target, (2) advances to employees, suppliers or
customers in the Ordinary Course of Business, (3) projects approved
prior to the date of this Agreement by the Board of Directors of
Target as set forth in Schedule 6.01(a)(vii), to the extent permitted
by Section 6.01(b), and (4) specific projects referred to in the
Budget, make any loans, advances or capital contributions to, or
investments in, any other Person;
(viii) settle any claim, action, or lawsuit
relating to material Taxes pending as of the date hereof or arising on
or after the date hereof, make any material Tax election, or amend any
material Tax Return in any respect;
(ix) pay, discharge, settle or satisfy any
material claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the
payment, discharge, settlement or satisfaction in the Ordinary Course
of Business or in accordance with their terms of liabilities reflected
or reserved against in the Base Balance Sheet or incurred in the
Ordinary Course of Business, or, except in the Ordinary Course of
Business, waive the benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to which Target or
any of its Subsidiaries is a party;
34
(x) make any change in the compensation payable
or to become payable to any of its officers, directors, employees,
agents or consultants (other than (i) general increases in wages to
employees who are not officers, directors or Affiliates in the
Ordinary Course of Business and (ii) salary increases for officers
other than Target's President pursuant to regular annual reviews in
the Ordinary Course of Business and approved by Target's President
pursuant to previously granted Board authority, PROVIDED that no
compensation described in the clause (ii) shall be in the form of
capital stock of Target or any securities convertible or exchangeable
into, or any rights, warrants or options to acquire, such capital
stock), or to Persons providing management services, enter into or
amend any employment, severance, consulting, termination or other
agreement or employee benefit plan or make any loans to any of its
officers, directors, employees, Affiliates, agents or consultants or
make any change in its existing borrowing or lending arrangements for
or on behalf of any of such Persons pursuant to an employee benefit
plan or otherwise;
(xi) pay or make any accrual or arrangement for
payment of any pension, retirement allowance or other employee benefit
pursuant to any existing plan, agreement or arrangement to any
officer, director, employee or Affiliate or pay or agree to pay or
make any accrual or arrangement for payment to any officers,
directors, employees or Affiliates of Target of any amount relating to
unused vacation days, except payments and accruals made in the
Ordinary Course of Business; adopt or pay, grant, issue, accelerate or
accrue salary or other payments or benefits pursuant to any pension,
profit-sharing, bonus, extra compensation, incentive, deferred
compensation, stock purchase, stock option, stock appreciation right,
group insurance, severance pay, retirement or other employee benefit
plan, agreement or arrangement, or any employment or consulting
agreement with or for the benefit of any director, officer, employee,
agent or consultant, whether past or present, other than as required
under applicable law or the current terms of any plan or agreement
identified in Schedule 4.10(a); or amend in any material respect any
such existing plan, agreement or arrangement in a manner inconsistent
with the foregoing;
35
(xii) enter into any collective bargaining
agreement;
(xiii) make any payments (other than regular
compensation payable to officers and employees of Target in the
Ordinary Course of Business), loans, advances or other distributions
to, or enter into any transaction, agreement or arrangement with, any
of Target's Affiliates, officers, directors, stockholders or their
Affiliates, associates or family members or do or enter into any of
the foregoing with respect to employees, agents or consultants other
than in the Ordinary Course of Business;
(xiv) except in the Ordinary Course of Business
and except as otherwise permitted by this Agreement, modify, amend or
terminate any contract or agreement set forth in the 1997 SEC
Documents to which Target or any Subsidiary is a party or waive,
release or assign any material rights or claims; or
(xv) authorize any of, or commit or agree to take
any of, the foregoing actions except as otherwise permitted by this
Agreement.
(b) DEVELOPMENT PROJECT. Target and Acq Corp agree that Target,
without the prior written consent of Acq Corp otherwise required under
Section 6.01(a), (1) may make option payments in the monthly amount of
$37,500.00 until August 15, 1998, and in the monthly amount of $75,000.00
thereafter until October 15, 1998, in accordance with the terms of that
certain Option Agreement made and entered into as of January 8, 1998 (the
"OPTION AGREEMENT"), by and between Target and Grand Plaza Limited
Partnership, a Nevada limited partnership, as such agreement may be amended
and in effect on the date hereof, and (2) may further expend such amounts
as are reasonably necessary in connection with development opportunities
and activities for the parcel of land subject to the Option Agreement as
well as for previously identified development opportunities in
Massachusetts and in Rockford, Illinois, PROVIDED, that this Section
6.01(b) shall not permit Acq Corp to exercise the option pursuant to the
Option Agreement or to acquire (by purchase, lease or otherwise) any fixed
or other tangible assets relating to any
36
such project without Acq Corp's consent pursuant to Section 6.01(a).
(c) OTHER ACTIONS. Target shall not, and shall not permit any
of its Subsidiaries to, take any action that would result in any of its
representations and warranties set forth in this Agreement becoming untrue.
SECTION 6.02. ADVICE OF CHANGES. Acq Corp and Target shall promptly
advise the other party orally and in writing of
(a) Any representation or warranty made by it contained in this
Agreement becoming untrue or inaccurate in any respect;
(b) The failure by it to comply with or satisfy in any respect
any covenant, condition or agreement to be complied with or satisfied by it
under this Agreement; or
(c) Any change or event having, or which, insofar as can
reasonably be foreseen, would have, a material adverse effect on such party
and its Subsidiaries taken as a whole or on the truth of their respective
representations and warranties or the ability of the conditions set forth
in Article VI to be satisfied;
PROVIDED, HOWEVER, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement. Additionally, Target shall
furnish to Acq Corp, as promptly as practicable following Acq Corp's request
therefor, all information reasonably necessary for Acq Corp accurately to
determine (i) what amounts, if any, payable under any of the Plans or any other
contract, agreement or arrangement with respect to which Target or any of its
Subsidiaries may have any liability could fail to be deductible for federal
income tax purposes by virtue of section 162(m) or section 280G of the Code, or
(ii) whether Target or any of its Subsidiaries has entered into any contract,
agreement or arrangement that would result in the disallowance of any tax
deductions pursuant to section 280G of the Code.
SECTION 6.03. NO SOLICITATION.
(a) Target shall not, nor shall it permit any of its
Subsidiaries to, nor shall it authorize or permit any affiliate, agent,
partner, officer,
37
director or employee of, or any investment banker, attorney or other
advisor or representative of, Target or any of its Subsidiaries to,
directly or indirectly, (i) solicit or initiate, or encourage any
inquiries regarding or the submission of, any Takeover Proposal
(including, without limitation, any proposal or offer to Target's
stockholders) or (ii) participate in any discussions or negotiations
regarding, or furnish to any Person any information with respect to, or
take any other action to facilitate the making of any proposal that
constitutes, or may reasonably be expected to lead to, any such Takeover
Proposal; PROVIDED, if in the opinion of the Board of Directors, after
consultation with outside legal counsel, such failure to act would be
inconsistent with its fiduciary duties to Target's stockholders under
applicable law, Target may, in response to an unsolicited Takeover
Proposal, and subject to compliance with Section 6.03(c), (A) furnish
information with respect to Target to any Person pursuant to an
executed, customary confidentiality and "standstill" agreement and (B)
participate in negotiations regarding such Takeover Proposal. Without
limiting the foregoing, it is understood that any violation of the
restrictions set forth in the preceding sentence by any director or
officer of Target or any of its Subsidiaries (each a "COVERED PERSON"),
whether or not such Person is purporting to act on behalf of Target or
any of its Subsidiaries or otherwise, shall be deemed to be a breach of
this Section 6.03(a) by Target; PROVIDED that it is understood that this
Section 6.03(a) shall not be deemed to have violated if in response to
an unsolicited inquiry, a Covered Person states solely that he or she is
subject to the terms of this Agreement. All Covered Persons shall
immediately cease and cause to be terminated any existing activities,
discussions and negotiations with any parties conducted heretofore with
respect to, or that could reasonably be expected to lead to, any of the
foregoing.
(b) Neither the Board of Directors of Target nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or, in a
manner adverse to Acq Corp, modify the approval or recommendation by such
Board of Directors or any such committee of this Agreement, the Merger, or
the Voting Agreement, (ii) approve or recommend, or propose to approve or
recommend, any Takeover Proposal or (iii) enter into any agreement with
respect to any Takeover Proposal. Notwithstanding the foregoing, the Board
of Directors, prior to the approval of this Agreement or the Merger
(including as the same may be modified hereafter) by the holders of at
least two-thirds of the outstanding shares of Common Stock, to the extent
required by the fiduciary duties to Target's shareholders under applicable
Law, after consulta-
38
tion with outside legal counsel, may, subject to the terms of this and
the following sentences of this Section 6.03(b), withdraw or modify its
approval or recommendation of this Agreement, the Merger or the Voting
Agreement, approve or recommend a Competitive Proposal, or enter into an
agreement with respect to a Competitive Proposal, in each case at any
time after 12:00 noon, Los Angeles time, on the tenth day following Acq
Corp's receipt of written notice (a "NOTICE OF COMPETITIVE PROPOSAL")
advising Acq Corp that the Board of Directors has received a Competitive
Proposal, specifying the material terms and conditions of such
Competitive Proposal and identifying the Person making such Competitive
Proposal. Acq Corp shall have the opportunity, until the end of the
tenth day after it receives a Notice of Competitive Proposal, to make an
offer that the Board of Directors of Target must consider in good faith,
after consultation with its financial advisors, to determine if it is at
least as favorable, from a financial point of view, to the shareholders
of Target as the Competitive Proposal. In addition, if Target enters
into an agreement with respect to any Takeover Proposal, it shall
concurrently with entering into such agreement pay, or cause to be paid,
to Acq Corp the Expenses and the Termination Fee.
(c) In addition to the obligations of Target set forth in
paragraph (b), Target shall advise Acq Corp promptly of any request for
information or of any Takeover Proposal, or any proposal with respect to
any Takeover Proposal, the material terms and conditions of such request or
Takeover Proposal, and the identity of the Person making any such Takeover
Proposal or inquiry. Target will keep Acq Corp fully informed of the
status and details (including amendments or proposed amendments) of any
such request, Takeover Proposal or inquiry.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01. STOCKHOLDERS MEETING. Target will, as soon as
practicable, and in no event later than 120 days after the date hereof, duly
call, give notice of, convene and hold a meeting of the holders of Common Stock
(the "STOCKHOLDERS MEETING"). Subject to the provisions of Section 6.03(b),
Target will, through its Board of Directors, recommend to its stockholders
approval of this
39
Agreement, the Merger and the other transactions contemplated by this
Agreement.
SECTION 7.02. PROXY STATEMENT AND OTHER FILINGS; REGISTRATION
STATEMENT; AUDITOR'S LETTER.
(a) If required pursuant to the Exchange Act, Target shall as
promptly as possible after the execution of this Agreement, and in no event
later than 30 days after the date hereof, prepare and file with the SEC a
proxy statement (the "PROXY STATEMENT") in connection with the Merger.
Target shall cause the Proxy Statement to comply as to form in all material
respects with the applicable provisions of the Exchange Act. Target agrees
that the Proxy Statement and each amendment or supplement thereto at the
time it is filed shall not include an untrue statement of material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they
were made, not misleading. As promptly as possible after clearance by the
SEC of the Proxy Statement, Target shall mail the Proxy Statement to its
stockholders.
(b) Target shall fully cooperate with Acq Corp so that Acq Corp
may prepare and file with the SEC a registration statement on Form 10
(together with all amendments thereto, the "REGISTRATION STATEMENT") in
connection with the registration under the Exchange Act of the shares of
Class A Common Stock of Acq Corp, including using Target's best efforts to
obtain and furnish the information required to be included therein and
using its best efforts to respond promptly to any comments made by the SEC
with respect thereto.
(c) As promptly as practicable, Acq Corp and Target each shall
properly prepare and file any other filings required under the Exchange
Act, the Securities Act or any other Laws relating to the Merger, the Proxy
Statement, the registration of any capital stock of Acq Corp and the
transactions contemplated hereby (collectively, "OTHER FILINGS").
(d) Acq Corp and Target shall furnish to each other all
information concerning it as the other may reasonably request in connection
with the preparation of the Proxy Statement, the Registration Statement and
the Other Filings.
40
(e) Target shall use its best efforts to cause to be delivered
to Acq Corp a letter of Deloitte & Touche LLP, Target's independent
auditors, dated a date within two business days before the date on which
the Registration Statement shall become effective and addressed to Acq
Corp, customary in form, scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement.
SECTION 7.03. ACCESS TO INFORMATION; CONFIDENTIALITY. Target
shall afford to Acq Corp, and to Acq Corp's officers, employees, accountants,
counsel, financial advisers and other representatives, reasonable access
during normal business hours during the period prior to the Effective Time to
all the properties, books, contracts, commitments and records of Target and
its Subsidiaries and, during such period, Target shall furnish promptly to
Acq Corp (a) a copy of each report, schedule, registration statement and
other document filed by it or its Subsidiaries during such period pursuant to
the requirements of Federal or state securities laws and (b) all other
information concerning its or its Subsidiaries' business, properties and
personnel as Acq Corp may reasonably request. Except as otherwise agreed to
by Target, notwithstanding termination of this Agreement, Acq Corp will keep,
and will cause its officers, employees, accountants, counsel, financial
advisers and other representatives and affiliates to keep, all Confidential
Information (as defined below) confidential and not to disclose any
Confidential Information to any Person other than Acq Corp's or Acq Corp's
directors, officers, employees, affiliates or agents, and then only on a
confidential basis; PROVIDED, HOWEVER, that Acq Corp may disclose
Confidential Information (i) as required by law, rule, regulation or judicial
process, including as required to be disclosed in connection with the Merger,
the Registration Statement and the Other Filings, (ii) to its attorneys,
accountants and financial advisors or (iii) as requested or required by any
Governmental Entity. For purposes of this Agreement, "CONFIDENTIAL
INFORMATION" shall include all information about Target which has been
furnished by Target to Acq Corp; PROVIDED, HOWEVER, that Confidential
Information does not include information which (x) is or becomes generally
available to the public other than as a result of a disclosure by Acq Corp,
its attorneys, accountants or financial advisors not permitted by this
Agreement, (y) was available to Acq Corp on a non-confidential basis prior to
its disclosure to Acq Corp by Target or (z) becomes available to Acq Corp on
a non-confidential basis from a Person other than Target who, to the
Knowledge of Acq Corp, is not otherwise bound by a confidentiality agreement
with Target or is not otherwise prohibited from transmitting the relevant
information to Acq Corp. In the event of termination of this Agreement for any
41
reason, Acq Corp shall promptly return all Confidential Information to Target.
SECTION 7.04. REASONABLE EFFORTS; NOTIFICATION.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, each of the parties agrees to use all reasonable efforts to
take, or cause to be taken (including through its officers and directors
and other appropriate personnel), all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all
things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger, the Voting Agreement
and the other transactions contemplated by this Agreement, including (i)
the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities, if
any) and the taking of all reasonable steps as may be necessary to obtain
Permits or waivers from, or to avoid an action or proceeding by, any
Governmental Entity (including in respect of any Gaming Law), (ii) the
obtaining of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this Agreement or the
consummation of any of the transactions contemplated by this Agreement,
including seeking to have any stay or temporary restraining order entered
by any court or other Governmental Entity vacated or reversed and (iv) the
execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the
purposes of, this Agreement. In connection with and without limiting the
foregoing, Target and its Board of Directors shall (including through its
officers and directors and other appropriate personnel) (i) take all action
necessary to ensure that no state takeover, business combination, control
share, fair price or value statute or similar statute or regulation is or
becomes applicable to the Merger, this Agreement, the Voting Agreement or
any of the other transactions contemplated by this Agreement, (ii) if any
state takeover, business combination, control share, fair price or value
statute or similar statute or regulation becomes applicable to the Merger,
this Agreement or the Voting Agreement or any other transaction
contemplated by this Agreement or the Voting Agreement, take all action
necessary to ensure that the Merger and the other transactions contemplated
by this Agreement or the Voting Agreement may be consummated as promptly as
practicable on the terms contemplated by this
42
Agreement and the Voting Agreement and otherwise to minimize the effect
of such statute or regulation on the Merger, this Agreement, the Voting
Agreement and the other transactions contemplated by this Agreement and
the Voting Agreement, and (iii) take all action necessary to assist Acq
Corp in connection with efforts reasonably related to obtaining
financing for the Merger and related transactions. Notwithstanding the
foregoing, the parties acknowledge that Acq Corp and its Affiliates are
not obligated by Section 7.04(a) or any other provision of this
Agreement to obtain any consent, approval, license, waiver, order,
decree, determination of suitability or other authorization with respect
to any limited partner of any Affiliate of Acq Corp. Nothing herein
shall be deemed to require Acq Corp or any of its Affiliates to take any
steps (including without limitation the expenditure of funds) or provide
any information to obtain any consent, approval, license, waiver, order,
decree, determination of suitability or other authorization, other than
is customary in the States of Nevada, Iowa and Colorado for such matters.
(b) Target shall give prompt notice to Acq Corp of (i) any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate in any respect (including receiving Knowledge of any
fact, event or circumstance which may cause any representation qualified as
to the Knowledge of Target to be or become untrue or inaccurate in any
respect) or (ii) the failure by it to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement; PROVIDED HOWEVER, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the
parties under this Agreement.
(c) Acq Corp shall give prompt notice to Target of (i) any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate in any respect (including receiving Knowledge of any
fact, event or circumstance which may cause any representation qualified as
to the Knowledge of Acq Corp to be or become untrue or inaccurate in any
respect) or (ii) the failure by it to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement; PROVIDED, HOWEVER, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the
parties under this Agreement.
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SECTION 7.05. STOCK OPTION PLANS; CHANGE OF CONTROL PLAN.
(a) As soon as practicable following the date of this Agreement,
but in any event no later than 30 days before the Closing Date, the Board
of Directors of Target (or, if appropriate, any committee administering the
Stock Option Plans (as defined below)) shall adopt such resolutions or use
its best efforts to take such other actions as are required to provide that
each then outstanding stock option to purchase shares of Common Stock (a
"STOCK OPTION") heretofore granted under any stock option or other stock-
based incentive plan, program or arrangement of Target (collectively, the
"STOCK OPTION PLANS") shall be cancelled immediately prior to the Effective
Time in exchange for payment of an amount in cash equal to the product of
(x) the number of shares of Common Stock subject to such Stock Option
immediately prior to the consummation of the Merger and (y) the excess, if
any, of the Merger Consideration over the per share exercise price of such
Stock Option. A listing of all outstanding Stock Options as of the date
hereof, showing what portions of such Stock Options are exercisable as of
such date, the dates upon which such Stock Options expire, and the exercise
price of such Stock Options, is set forth in Schedule 7.05. Target
represents and warrants that it has the authority to provide for the
cancellation of all Target Stock Options as provided in this Section 7.05
without the need to obtain consents from the holders of any such Stock
Options.
(b) All Stock Option Plans shall terminate as of the Effective
Time, and the provisions in any other Benefit Plan providing for the
issuance, transfer or grant of any capital stock of Target or any interest
in respect of any capital stock of Target shall be deleted as of the
Effective Time. Immediately following the Effective Time no holder of a
Stock Option or any participant in any Stock Option Plan shall have any
right thereunder to acquire any capital stock of Target, Acq Corp or the
Surviving Corporation.
(c) Target shall take all actions necessary to provide that at
or immediately prior to the Effective Time, (i) each then outstanding
option or right to acquire shares of Common Stock under Target's Employee
Stock Purchase Plan (the "STOCK PURCHASE PLAN") shall automatically be
exercised or deemed exercised and (ii) in lieu of issuing certificates for
Common Stock, each option or right holder shall receive an amount in cash
(subject to any applicable withholding tax) equal to the product of (x) the
number of shares of
44
Common Stock otherwise issuable upon such exercise and (y) the Merger
Consideration. Target shall use all reasonable efforts to effectuate
the foregoing, including, without limitation, amending the Stock
Purchase Agreement and obtaining any necessary consents from holders of
such options or rights. Target (i) shall not permit the commencement of
any new offering period under the Stock Purchase Plan following the date
hereof, (ii) shall not permit any optionee or right holder to increase
his or her rate of contributions under the Stock Purchase Plan following
the date hereof, (iii) shall terminate the Stock Purchase Plan as of the
Effective Time, and (iv) shall take any other actions necessary to
provide that as of the Effective Time no holder of options or rights
under the Stock Purchase Plan will have any right to receive shares of
common stock of the Surviving Corporation upon exercise of any such
option or right.
(d) As soon as reasonably practicable after the date hereof,
Target shall amend its Change of Control Plan, effective as of the date
hereof, (i) to delete Section 9 thereof (regarding non-competition
provisions) and (ii) to clarify that, except as may be otherwise expressly
agreed to in writing by Acq Corp, no participant in the Change of Control
Plan shall, upon termination of employment, be entitled to receive an
amount in excess of the greater of (x) the amount of such participant's
severance compensation as determined under the Change of Control Plan and
(y) the amount of such participant's severance compensation as determined
under any applicable employment agreement between such participant and
Target; PROVIDED, that the amendments provided for under this Section
7.05(d) shall only apply with respect to a "Change of Control" (as defined
under the Change of Control Plan) resulting from the consummation of the
transactions contemplated hereunder.
SECTION 7.06. INDEMNIFICATION AND INSURANCE.
(a) The indemnification obligations set forth in Target's
Restated Articles of Incorporation and By-laws on the date of this
Agreement shall be duplicated, to the extent permissible under the NRS, in
the Surviving Corporation's Articles of Incorporation and By-laws and shall
not be amended, repealed or otherwise modified for a period of six years
after the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who on or prior to the Effective Time were
directors, officers, employees or agents of Target (the "INDEMNIFIED
PARTIES").
45
(b) For six years from the Effective Time, the Surviving
Corporation shall, unless Acq Corp agrees in writing to guarantee the
indemnification obligations set forth in Section 7.06(a), either (x)
maintain in effect Target's current directors' and officers' liability
insurance covering those Persons who are covered on the date of this
Agreement by Target's directors' and officers' liability insurance policy
(a copy of which has been made available to Acq Corp) or (y) procure
directors' and officers' liability insurance to cover those Persons who are
covered on the date of this Agreement by Target's directors' and officers'
liability insurance policy with respect to those matters covered by
Target's directors' and officers' liability policy; PROVIDED that in no
event shall the Surviving Corporation be required to expend to maintain or
procure insurance coverage pursuant to this Section 7.06(b) an amount per
annum in excess of 125% of the current annual premiums for the directors'
and officers' liability insurance policy approved by Target's Board of
Directors on January 22, 1998 (the "MAXIMUM PREMIUM") and, if the cost of
such coverage exceeds the Maximum Premium, the maximum amount of coverage
that shall be required to be purchased or maintained shall be such amount
that may be purchased or maintained for the Maximum Premium.
(c) Section 7.06 shall survive the consummation of the Merger at
the Effective Time, is intended to benefit Target, Acq Corp, the Surviving
Corporation and the Indemnified Parties, and shall be binding on all
successors and assigns of Acq Corp and the Surviving Corporation.
SECTION 7.07. FEES AND EXPENSES.
(a) Except as provided below, all fees and expenses incurred in
connection with the Merger, this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such fees or
expenses, whether or not the Merger is consummated.
(b) Target shall pay, or cause to be paid, in same day funds to
Acq Corp the sum of (x) all of the reasonably documented out-of-pocket
expenses (the "EXPENSES") of Acq Corp and (y) $10,000,000 (the "TERMINATION
FEE") upon demand if (i) Acq Corp terminates this Agreement pursuant to
Section 9.01(d) and prior to such termination a Takeover Proposal shall
have been made; (ii) Target terminates this Agreement pursuant to Section
9.01(e);
46
or (iii) prior to any other termination of this Agreement (which
termination does not result from the failure of Acq Corp to cause any
condition specified in Section 8.03 to be satisfied), a Takeover
Proposal shall have been made and within 12 months of such termination,
a transaction constituting a Takeover Proposal is consummated or Target
enters into an agreement with respect to, or the Board of Directors of
Target or a committee thereof approves or recommends a Takeover
Proposal. The amount of Expenses payable under this subsection (b) shall
be the amount set forth in an estimate delivered by Acq Corp or Target,
as the case may be, following the date such expenses become payable,
subject to upward or downward adjustment, upon delivery of reasonable
documentation therefor.
SECTION 7.08. PUBLIC ANNOUNCEMENTS. Acq Corp, on the one hand, and
Target, on the other hand, will consult with each other before issuing, and
provide each other the opportunity to review and comment upon, any press release
or other public statements with respect to the transactions contemplated by this
Agreement, including the Merger, and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by applicable law, court process or by obligations pursuant to any
listing agreement with any national securities exchange or national securities
quotation system (in which case the parties will use reasonable efforts to
cooperate in good faith with respect to such press release or other public
statement). The parties agree that the initial press release to be issued with
respect to the transactions contemplated by this Agreement shall be in the form
heretofore agreed to by the parties.
SECTION 7.09. TITLE POLICIES. Target agrees that, prior to the
Effective Time, it will use its reasonable efforts to cause such officers of
Target and its Subsidiaries, as Acq Corp's or Acq Corp's Title Insurer may
reasonably require, to execute such reasonable and customary affidavits as shall
permit such Title Insurer to issue an endorsement to its title insurance
policies insuring title to the real properties owned or leased by Target or any
of its Subsidiaries to the effect that the Title Insurer will not claim as a
defense under any such policy failure of insured to disclose to the Title
Insurer prior to the date of the relevant policy any defects, Liens,
encumbrances or adverse claims not shown by public records and known to the
insured (but not known to Acq Corp) prior to the Effective Time.
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SECTION 7.10. TRANSFER TAXES. All liability for transfer or other
similar taxes arising out of or related to the sale of Common Stock to the Acq
Corp or the consummation of any other transaction contemplated by this Agreement
("TRANSFER TAXES") shall be borne by Target. Target shall file or cause to be
filed all returns relating to such Transfer Taxes which are due, and, to the
extent appropriate or required by law, the stockholders of Target shall
cooperate with respect to the filing of such returns.
SECTION 7.11. MAINTENANCE OF COMMITMENT. Acq Corp shall maintain in
effect the arrangements contemplated by Section 5.04 until the earlier of (i)
the consummation of the Merger and (ii) subject to the proviso below, six months
following any termination of this Agreement prior to the Effective Time;
PROVIDED that Acq Corp's obligations pursuant to this Section 7.11 shall
terminate if and when (a) Acq Corp terminates this Agreement pursuant to Section
9.01(d) or (b) Target enters into a definitive agreement with respect to a
Takeover Proposal or such a proposal is consummated.
ARTICLE VIII
CONDITIONS PRECEDENT
SECTION 8.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement shall have been
approved and adopted by the affirmative vote of the holders of at least
two-thirds of all shares of Common Stock entitled to be cast in accordance
with applicable law and Target's Restated Articles of Incorporation.
(b) NO INJUNCTIONS OR RESTRAINTS. No statute, rule, regulation,
executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order enacted, entered, promulgated, enforced
or issued by any Governmental Entity or other legal restraint or
prohibition preventing the consummation of the Merger or the transactions
contemplated thereby shall be in effect; PROVIDED, in the case of a decree,
injunction or other order, each of the parties shall have used their best
efforts to prevent the entry of any such injunction or other order and to
appeal as promptly as possible any
48
decree, injunction or other order that may be entered.
SECTION 8.02. CONDITIONS TO OBLIGATIONS OF ACQ CORP. The
obligations of Acq Corp to effect the Merger are further subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Target contained herein that are qualified as to materiality
shall be true and accurate, and those not so qualified shall be true and
accurate in all material respects, in each case at and as of the Effective
Time with the same force and effect as though made at and as of the
Effective Time (except to the extent a representation or warranty speaks
specifically as of an earlier date or except as contemplated by this
Agreement), and Acq Corp shall have received certificates signed on behalf
of Target by its President and its Chief Financial Officer to such effect.
(b) AGREEMENTS AND COVENANTS. Target shall have performed, in
all material respects, all obligations and complied, in all material
respects, with all covenants required by this Agreement to be performed or
complied with by it at or prior to the Effective Time, and Acq Corp shall
have received certificates signed on behalf of Target by its President and
its Chief Financial Officer to such effect.
(c) NO MATERIAL ADVERSE EFFECT. From the date hereof through
and including the Effective Time, no event shall have occurred which would
have a material adverse effect on Target or any Material Subsidiary.
(d) CANCELLATION OF STOCK OPTIONS AND SARS. As of the Effective
Time, all Stock Options shall have been cancelled.
(e) GAMING AUTHORITY APPROVAL. All licenses, permits,
registrations, authorizations, consents, waivers, orders, findings of
suitability or other approvals required to be obtained from, and all
filings, notices or declarations required to be made with, any Gaming
Authority to permit Acq Corp to consummate the Merger and to permit it and
each of its Subsidiaries to conduct their businesses in the jurisdictions
regulated by such Gaming Authorities after the Effective Time in the same
manner as conducted by Target and its Subsidiaries prior to the Effective
Time shall have been obtained or
49
made, as applicable.
(f) THIRD PARTY CONSENTS. All consents, orders, approvals,
authorizations, registrations, findings of suitability and action of any
Governmental Entity other than a Gaming Authority required to permit the
consummation of the Merger shall have been obtained or made, free of any
condition.
(g) REGISTRATION STATEMENT. The Registration Statement shall
have become effective in accordance with the Exchange Act, and no stop
order suspending such effectiveness shall have been issued and remain in
effect.
SECTION 8.03. CONDITIONS TO OBLIGATIONS OF TARGET. The obligations
of Target to effect the Merger are further subject to the satisfaction or waiver
on or prior to the Closing Date of the following condition:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Acq Corp contained herein that are qualified as to
materiality shall be true and accurate, and those not so qualified shall be
true and accurate in all material respects, in each case at and as of the
Effective Time with the same force and effect as though made at and as of
the Effective Time (except to the extent a representation or warranty
speaks specifically as of an earlier date or except as contemplated by this
Agreement), and Target shall have received certificates signed on behalf of
Acq Corp by its President to such effect.
(b) AGREEMENTS AND COVENANTS. Acq Corp shall have performed, in
all material respects, all obligations and complied, in all material
respects, with all agreements and covenants required by this Agreement to
be performed or complied with by it at or prior to the Effective Time , and
Target shall have received certificates signed on behalf of Acq Corp by its
President to such effect.
(c) GAMING AUTHORITY APPROVAL. All licenses, permits,
registrations, authorizations, consents, waivers, orders, findings of
suitability or other approvals required to be obtained from, and all
filings, notices or declarations required to be made with, any Gaming
Authority to permit Acq Corp to consummate the Merger shall have been
obtained or made, as applicable.
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01. TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval of matters
presented in connection with the Merger by the stockholders of Target:
(a) by mutual written consent of Acq Corp and Target;
(b) by either Acq Corp or Target if any Governmental Entity
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the acceptance
for payment of, or payment for, shares of Common Stock pursuant to the
Merger and such order, decree or ruling or other action shall have become
final and nonappealable; PROVIDED, in the case of a order, decree, ruling
or other order, each of the parties shall have used their best efforts to
prevent the entry of any such order, decree, ruling or other order and to
appeal as promptly as possible any order, decree, ruling or other order
that may be entered; PROVIDED FURTHER, the right to terminate this
Agreement pursuant to the foregoing clause shall not be available to any
party that fails to comply with Section 7.04(a);
(c) by either Acq Corp or Target, at any time after February 1,
1999, if the Effective Time shall not have occurred on or prior to such
date; PROVIDED, HOWEVER, in the event that the parties shall have received
from any responsible individual of each Gaming Authority (i) the approval
of which is required to be obtained to permit Acq Corp to consummate the
Merger and (ii) which has not prior to February 1, 1999 finally determined
whether such approval shall be granted, reasonable assurances (written or
oral) that a hearing is scheduled or can reasonably be expected to be
scheduled on or prior to April 1, 1999, then, in such event, neither party
may terminate this Agreement pursuant to this Section 9.01(c) prior to
April 1, 1999;
(d) by Acq Corp, if this Agreement has not been approved by
holders of at least two-thirds of the outstanding shares of Common Stock
within 120 days after the date hereof; or
51
(e) by Target in connection with entering into a definitive
agreement in accordance with Section 6.03(b), PROVIDED, it has complied
with all provisions thereof, including the notice provisions therein, and
that it makes simultaneous payment of the Expenses and the Termination Fee.
SECTION 9.02. EFFECT OF TERMINATION. In the event of termination of
this Agreement by either Target or Acq Corp as provided in Section 9.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Acq Corp or Target, other than the provisions of
Section 7.03, Section 7.07, this Section 9.02 and Article X and except to the
extent that such termination results from the wilful or grossly negligent and
material breach by a party of any of its representations, warranties, covenants
or agreements set forth in this Agreement, in which case each other party shall
be entitled to recover all damages allowable at law and all relief available in
equity.
SECTION 9.03. AMENDMENT. This Agreement may be amended by the mutual
agreement of the parties at any time before or after any required approval of
matters presented in connection with the Merger by the stockholders of Target;
PROVIDED, that after any such approval, there shall not be made any amendment
that by law requires further approval by such stockholders without the further
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
SECTION 9.04. EXTENSION; WAIVER. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other party contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to the proviso of Section 9.03, waive compliance by the other party with any of
the agreements or conditions contained in this Agreement. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
SECTION 9.05. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR
WAIVER. A termination of this Agreement pursuant to Section 9.01, an amendment
of this Agreement pursuant to Section 9.03 or an extension or waiver pursuant to
Section 9.04 shall, in order to be effective, require in the case of Acq Corp or
Target, action
52
by its Board of Directors or the duly authorized designee of its Board of
Directors.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. NONSURVIVAL OF REPRESENTATIONS. Except as otherwise
provided herein, none of the representations and warranties in this Agreement
shall survive the Effective Time. This Section 10.01 shall not limit any
covenant or agreement of the parties which by its terms contemplates performance
after the Effective Time of the Merger.
SECTION 10.02. NOTICES. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier (providing
proof of delivery) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Acq Corp, to:
c/o Colony Capital, Inc.
1999 Avenue of the Stars, Suite 1200
Los Angeles, California 90067
Telephone: 310-282-8813
Facsimile: 310-282-8813
Attention: Kelvin L. Davis
and
c/o Colony Capital, Inc.
201 Main Street, Suite 2420
Fort Worth, Texas 76102
Telephone: 817-871-4023
Facsimile: 817-871-4088
Attention: Wade Hundley
53
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: Jonathan H. Grunzweig, Esq.
Telephone: 213-687-5000
Facsimile: 213-687-5600
(b) if to Target, to
Highway 50 and Stateline Avenue
P.O. Box 128
Lake Tahoe, Nevada 89449
Telephone: 702-588-2411
Facsimile:
with a copy to:
Morgan, Lewis & Bockius LLP
300 South Grand Avenue, Suite 2200
Los Angeles, California 90071
Attention: Peter P. Wallace, Esq.
Telephone: 213-612-2500
Facsimile: 213-612-2554
and with a copy to:
Scarpello & Alling, Ltd.
276 Kingsbury Grade, Suite 2000
Post Office Box 3390
Lake Tahoe, Nevada 89449
Attention: Ronald D. Alling, Esq.
Telephone: 702-588-6676
Facsimile: 702-588-4970
54
SECTION 10.03. INTERPRETATION. When a reference is made in this
Agreement to an Article, Section or Schedule, such reference shall be to an
Article or Section of or a Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." The Voting Agreement and the consummation of
the transactions contemplated by such Voting Agreement are transactions
contemplated by this Agreement. To the extent any restriction on the activities
of Target or its Subsidiaries under the terms of this Agreement, including with
respect to any negative pledge or other restriction on the ability of Target to
dispose of stock of any Colorado, Iowa or Nevada Subsidiary, requires prior
approval under any Gaming Law, such restriction shall be of no force or effect
unless and until such approval is obtained. If any provision of this Agreement
is illegal or unenforceable under any Gaming Law, such provision shall be void
and of no force or effect.
SECTION 10.04. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
SECTION 10.05. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement and the Voting Agreement constitute the entire agreements, and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of these agreements and are not
intended to confer upon any Person other than the parties any rights or remedies
hereunder.
SECTION 10.06. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA, WITHOUT
REGARD TO ANY APPLICABLE CONFLICTS OF LAW.
SECTION 10.07. GAMING LAWS. Each of the provisions of this Agreement
is subject to and shall be enforced in compliance with the Gaming Laws.
SECTION 10.08. ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written
55
consent of the other parties, except that Acq Corp may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to any controlled affiliate of Colony Capital, Inc., PROVIDED such
party assumes Acq Corp's obligations hereunder. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and
be enforceable by, the parties and their respective successors and assigns.
SECTION 10.09. ENFORCEMENT. 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. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any court
of the United States located in the State of Nevada or in Nevada state court,
this being in addition to any other remedy to which they are entitled at law
or in equity. In addition, each of the parties hereto (a) consents to commit
itself to the personal jurisdiction of any Federal court located in the State
of Nevada or any Nevada state court in the event any dispute arises out of
this Agreement or any of the transactions contemplated by this Agreement, (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction
by motion or other request for leave from any such court and (c) agrees that
it will not bring any action relating to this Agreement or any of the
transactions contemplated by this Agreement in any court other than a Federal
or state court sitting in the State of Nevada.
[SIGNATURE PAGES FOLLOW]
56
IN WITNESS WHEREOF, Acq Corp and Target have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as
of the date first written above.
HARVEYS ACQUISITION CORPORATION
By: /s/ KELVIN L. DAVIS
-----------------------------
Name: Kelvin L. Davis
Title: President
HARVEYS CASINO RESORTS
By: /s/ CHARLES W. SCHARER
-----------------------------
Name: Charles W. Scharer
Title: Chairman of the Board,
President and Chief
Executive Officer