EXHIBIT 2.1
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
Dated as of February 6, 2004,
Among
XXXX GAMING CORPORATION,
BGC, INC.
and
COAST CASINOS, INC.
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TABLE OF CONTENTS
Page
ARTICLE I
The Merger
SECTION 1.01. The Merger.....................................................1
SECTION 1.02. Closing........................................................2
SECTION 1.03. Effective Time.................................................2
SECTION 1.04. Effects........................................................2
SECTION 1.05. Articles of Incorporation and By-laws..........................2
SECTION 1.06. Directors......................................................2
SECTION 1.07. Officers.......................................................3
ARTICLE II
Effect on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock........................................3
SECTION 2.02. Exchange of Certificates.......................................8
SECTION 2.03. Elections.....................................................11
ARTICLE III
Representations and Warranties of the Company
SECTION 3.01. Organization, Standing and Power..............................13
SECTION 3.02. Company Subsidiaries; Equity Interests........................13
SECTION 3.03. Capital Structure.............................................14
SECTION 3.04. Authority; Execution and Delivery; Enforceability.............15
SECTION 3.05. No Conflicts; Consents........................................16
SECTION 3.06. Company SEC Documents; Undisclosed Liabilities................17
SECTION 3.07. Information Supplied..........................................18
SECTION 3.08. Absence of Certain Changes or Events..........................18
SECTION 3.09. Taxes.........................................................19
SECTION 3.10. Absence of Changes in Benefit Plans...........................22
SECTION 3.11. ERISA Compliance; Excess Parachute Payments...................23
SECTION 3.12. Litigation....................................................26
SECTION 3.13. Compliance with Applicable Laws...............................26
SECTION 3.14. Assets Other than Real Property Interests.....................27
SECTION 3.15. Real Property.................................................27
SECTION 3.16. Labor Matters.................................................27
SECTION 3.17. Contracts.....................................................28
SECTION 3.18. Environmental Matters.........................................30
SECTION 3.19. Intellectual Property.........................................32
SECTION 3.20. Brokers; Schedule of Fees and Expenses........................32
SECTION 3.21. Opinion of Financial Advisor..................................32
ARTICLE IV
Representations and Warranties of Parent and Sub
SECTION 4.01. Organization, Standing and Power..............................33
SECTION 4.02. Sub; Parent Subsidiaries......................................33
SECTION 4.03. Capital Structure.............................................33
SECTION 4.04. Authority; Execution and Delivery; Enforceability.............34
SECTION 4.05. No Conflicts; Consents........................................35
SECTION 4.06. Parent SEC Documents; Undisclosed Liabilities.................35
SECTION 4.07. Information Supplied..........................................36
SECTION 4.08. Absence of Certain Changes or Events..........................37
SECTION 4.09. Litigation....................................................37
SECTION 4.10. Compliance with Applicable Laws...............................37
SECTION 4.11. Brokers; Schedule of Fees and Expenses........................38
ARTICLE V
Covenants Relating to Conduct of Business
SECTION 5.01. Conduct of Business...........................................38
SECTION 5.02. No Solicitation...............................................41
ARTICLE VI
Additional Agreements
SECTION 6.01. Preparation of the Form S-4 and the Joint Proxy
Statement; Stockholders Meetings..........................43
SECTION 6.02. Access to Information; Confidentiality........................45
ii
SECTION 6.03. Reasonable Efforts; Notification..............................46
SECTION 6.04. Company Stock Options.........................................47
SECTION 6.05. Benefit Plans.................................................48
SECTION 6.06. Indemnification...............................................49
SECTION 6.07. Fees and Expenses.............................................49
SECTION 6.08. Public Announcements..........................................50
SECTION 6.09. Transfer Taxes................................................50
SECTION 6.10. Affiliates....................................................50
SECTION 6.11. Stock Exchange Listing........................................51
SECTION 6.12. Tax Treatment.................................................51
SECTION 6.13. Stockholder Litigation........................................51
SECTION 6.14. Parent Board..................................................51
ARTICLE VII
Conditions Precedent
SECTION 7.01. Conditions to Each Party's Obligation To Effect The
Merger....................................................51
SECTION 7.02. Conditions to Obligations of Parent and Sub...................53
SECTION 7.03. Conditions to Obligation of the Company.......................54
SECTION 7.04. Frustration of Closing Conditions.............................54
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.01. Termination...................................................55
SECTION 8.02. Effect of Termination.........................................56
SECTION 8.03. Amendment.....................................................56
SECTION 8.04. Extension; Waiver.............................................56
SECTION 8.05. Procedure for Termination, Amendment, Extension or Waiver.....57
ARTICLE IX
General Provisions
SECTION 9.01. Nonsurvival of Representations and Warranties.................57
SECTION 9.02. Notices.......................................................57
SECTION 9.03. Definitions...................................................58
SECTION 9.04. Interpretation; Disclosure Letters............................59
iii
SECTION 9.05. Severability..................................................59
SECTION 9.06. Counterparts; Facsimile.......................................59
SECTION 9.07. Entire Agreement; No Third-Party Beneficiaries................59
SECTION 9.08. Governing Law.................................................60
SECTION 9.09. Assignment....................................................60
SECTION 9.10. Enforcement...................................................60
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AGREEMENT AND PLAN OF MERGER dated as of February 6, 2004,
among XXXX GAMING CORPORATION, a Nevada corporation ("Parent"),
BGC, INC., a Nevada corporation and a wholly owned subsidiary
of Parent ("Sub"), and COAST CASINOS, INC., a Nevada
corporation (the "Company").
WHEREAS the respective Boards of Directors of Sub and the Company
have (i) approved the merger (the "Merger") of the Company into Sub on the
terms and subject to the conditions set forth in this Agreement, whereby each
issued share of common stock, par value $0.01 per share, of the Company (the
"Company Common Stock") not owned by Parent, Sub or the Company shall be
converted into the right to receive the Merger Consideration (as defined in
Section 2.01(c)(4)) and (ii) adopted this Agreement; and Parent, as the sole
stockholder of Sub, has approved this Agreement;
WHEREAS Parent and certain stockholders of the Company (the
"Principal Company Stockholders") have entered into an agreement (the
"Stockholders Agreement") pursuant to which the Principal Company Stockholders
have agreed to take specified actions in furtherance of the Merger;
WHEREAS for Federal income tax purposes it is intended that the
Merger qualify as a "reorganization" within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS Parent, Sub and the Company 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, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. On the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Nevada Revised
Statutes (the "NRS"), the Company shall be merged with and into Sub at the
Effective Time (as defined in Section 1.03). At the Effective Time, the
separate corporate existence of the Company shall cease and Sub shall continue
as the surviving corporation (the "Surviving Corporation"). At the election of
Parent, any direct subsidiary of Parent may be substituted for Sub as a
constituent corporation in the Merger. In such event, the parties shall
execute an appropriate amendment to this Agreement in order to reflect the
foregoing. The Merger, the payment of cash in connection with the Merger, the
issuance by Parent of shares of common stock, par value $0.01 per share, of
Parent ("Parent
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Common Stock") in connection with the Merger (the "Share Issuance") and the
other transactions contemplated by this Agreement and the Stockholders
Agreement are referred to in this Agreement as the "Transactions".
SECTION 1.02. CLOSING. The closing (the "Closing") of the Merger
shall take place at the offices of Xxxxxx, Xxxx & Xxxxxxxx LLP (Los Angeles
office) at 2:00 p.m., Pacific Coast time, on the second business day following
the satisfaction (or, to the extent permitted by Law (as defined in Section
3.05(a)), waiver by all parties) of the conditions set forth in Section 7.01,
or, if on such day any condition set forth in Section 7.02 or 7.03 has not
been satisfied (or, to the extent permitted by Law, waived by the party or
parties entitled to the benefits thereof), as soon as practicable after all
the conditions set forth in Article VII have been satisfied (or, to the extent
permitted by Law, waived by the party or parties entitled to the benefits
thereof), or at such other place, time and date as shall be agreed in writing
between Parent and the Company. The date on which the Closing occurs is
referred to in this Agreement as the "Closing Date".
SECTION 1.03. EFFECTIVE TIME. Prior to the Closing, Parent shall
prepare, and on the Closing Date the Surviving Corporation shall file with the
Secretary of State of the State of Nevada, articles of merger or other
appropriate documents (in any such case, the "Articles of Merger") executed in
accordance with the relevant provisions of the NRS and shall make all other
filings or recordings required under the NRS. The Merger shall become
effective at such time as the Articles of Merger are duly filed with such
Secretary of State, or at such later time as Parent and the Company shall
agree and specify in the Articles of Merger (the time the Merger becomes
effective being the "Effective Time").
SECTION 1.04. EFFECTS. The Merger shall have the effects set forth in
Section 92A.250 of the NRS.
SECTION 1.05. ARTICLES OF INCORPORATION AND BY-LAWS. (a) The articles
of incorporation of Sub as in effect immediately prior to the Effective Time
shall be the articles of incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable Law. The
articles of incorporation of the Surviving Corporation shall be amended at the
Effective Time so that Article I thereof reads in its entirety as follows:
1. Name of Corporation: Coast Casinos, Inc.
(b) The by-laws of Sub as in effect immediately prior to the
Effective Time shall be the by-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable Law.
SECTION 1.06. DIRECTORS. The directors of Sub immediately prior to
the Effective Time, together with Xxxxxxx X. Xxxxxxx, shall be the directors
of the Surviving
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Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
SECTION 1.07. OFFICERS. The officers of the Company immediately prior
to the Effective Time shall be the officers of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected or appointed and qualified, as the case may be.
ARTICLE II
EFFECT ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. EFFECT ON CAPITAL STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or any shares of capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of
capital stock of Sub shall continue to be outstanding as one fully paid and
nonassessable share of common stock, par value $1.00 per share, of the
Surviving Corporation.
(b) CANCELATION OF TREASURY STOCK AND PARENT-OWNED STOCK. Each share
of Company Common Stock that is owned by the Company, Parent or Sub shall no
longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and no cash, Parent Common Stock or other consideration
shall be delivered or deliverable in exchange therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. (1) Subject to Section
2.02(e), each issued and outstanding share of Company Common Stock held by
Xxxxxxx X. Xxxxxxx and each issued and outstanding share of Company Common
Stock held by Xxxxxxxx Xxxx shall be converted into the right to receive
32.8025 (the "Fixed Exchange Ratio") fully paid and nonassessable shares of
Parent Common Stock.
(2) Each issued and outstanding share of Company Common Stock held
by Xxxxx Xxxxxx shall be converted into the right to receive $550 in cash.
(3) Subject to Sections 2.01(b), 2.01(d) and 2.02(e), each issued
and outstanding share of Company Common Stock held by stockholders of the
Company other than those stockholders named in Sections 2.01(c)(1) and
2.01(c)(2) shall be converted into the right to receive, at the election of
the holder thereof, one of the following (as adjusted pursuant to Section
2.01(e)):
(i) for each such share of Company Common Stock with respect to
which an election to receive stock consideration (a "Stock
Election") has
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been effectively made, and not revoked or lost, pursuant to Section
2.03 (each, an "Electing Share"), the right to receive 32.8025
(subject to adjustment as provided in Section 2.01(e), the "Variable
Exchange Ratio") fully paid and nonassessable shares of Parent
Common Stock (the "Stock Election Amount"); and
(ii) for each such share of Company Common Stock other than
Electing Shares (each, a "Non-Electing Share"), the right to receive
$550 in cash (subject to adjustment as provided in Section 2.01(e),
the "Cash Election Price"), and each stockholder of the Company that
holds Non-Electing Shares shall be deemed to have made a cash
election (a "Cash Election") with respect to such Non-Electing
Shares.
(4) The cash payable, and the shares of Parent Common Stock to be
issued, upon the conversion of shares of Company Common Stock pursuant to this
Section 2.01(c), and any cash payable in
lieu of fractional shares of Parent Common Stock as contemplated by Section
2.02(e), are referred to collectively as "Merger Consideration". As of the
Effective Time, all such shares of Company Common Stock 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
Company Common Stock shall cease to have any rights with respect thereto,
except the right to receive Merger Consideration upon surrender of such
certificate in accordance with Section 2.02, without interest.
(5) Notwithstanding anything in this Agreement to the contrary, if,
between the date of this Agreement and the Effective Time, the outstanding
shares of the Parent Common Stock shall have been changed into a different
number of shares or a different class by reason of any reclassification,
recapitalization, split-up, combination, exchange of shares or readjustment,
or a stock dividend thereon shall be declared with a record date within said
period, each of the Fixed Exchange Ratio and the Variable Exchange Ratio shall
be correspondingly adjusted.
(d) DISSENTER RIGHTS. Notwithstanding anything in this Agreement to
the contrary, shares ("Dissenter Shares") of Company Common Stock that are
outstanding immediately prior to the Effective Time and that are held by any
person who is entitled to demand and properly demands payment for such
Dissenter Shares pursuant to, and who complies in all respects with, Sections
92A.300 through 92A.500 of the NRS (the "Dissenter Rights") shall not be
converted into Merger Consideration as provided in Section 2.01(c)(3), but
rather the holders of Dissenter Shares shall be entitled to payment for such
Dissenter Shares in accordance with the Dissenter Rights; provided, however,
that if any such holder shall fail to perfect or otherwise shall waive,
withdraw or lose the right to receive payment under the Dissenter Rights, then
the right of such holder to be paid in accordance with the Dissenter Rights
shall cease and such Dissenter Shares shall be deemed to have been converted
as of the Effective Time into, and to have become
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exchangeable solely for the right to receive, Merger Consideration as provided
in Section 2.01(c)(3). The Company shall serve prompt notice to Parent of any
written notice of intent to demand payment, or any written demand for payment,
received by the Company in respect of any shares of Company Common Stock, and
Parent shall have the right to participate in and direct all negotiations and
proceedings with respect to such demands. Prior to the Effective Time, the
Company shall not, without the prior written consent of Parent, make any
payment with respect to, or settle or offer to settle, any such demands, or
agree to do any of the foregoing.
(e) PRORATION. Notwithstanding anything in this Agreement to the
contrary: (1) the maximum aggregate number of shares of Parent Common Stock to
be issued pursuant to Section 2.01(c)(3)(i) shall not exceed 1,009,194 (the
"Target Stock Amount"), and the maximum aggregate amount of cash to be paid
pursuant to Section 2.01(c)(3)(ii) shall not exceed $336,170,276.20 (the "Cash
Cap"); provided, however, that if, on the date specified in the first sentence
of Section 1.02 (the "Date of Determination"), the opinions of counsel
referred to in Sections 7.02(e) and 7.03(d) would not be delivered solely by
reason of the average of the high and low sale price of a share of Parent
Common Stock on The New York Stock Exchange (the "NYSE") on the Date of
Determination, then the Target Stock Amount (and the Variable Exchange Ratio)
shall be increased, and the Cash Cap (and the Cash Election Price) shall be
decreased, in each case by an amount sufficient to provide that, on the
Closing Date, 40% of the aggregate value of all Adjusted Merger Consideration
(as defined in Section 2.01(e)(5)) shall consist of shares of Parent Common
Stock (the value of each such share of Parent Common Stock being the average
of the high and low sale price of a share of Parent Common Stock on the NYSE
on the Date of Determination) and that the value of the Merger Consideration
payable in respect of each share of Company Common Stock converted in
accordance with Section 2.01(c)(3) shall be in an amount equal to $550 (such
increase in the Target Stock Amount (and the Variable Exchange Ratio) and such
decrease in the Cash Cap (and the Cash Election Price), the "Merger
Consideration Adjustment"); provided further, however, that if the Target
Stock Amount following the application of the Merger Consideration Adjustment
would exceed 7,837,077 shares of Parent Common Stock (such 7,837,077 shares of
Parent Common Stock, the "Stock Cap"), then Parent shall have the right to
terminate this Agreement in accordance with Section 8.01(d);
(2) in the event that the aggregate number of shares of Parent
Common Stock requested in Stock Elections received by the Exchange Agent in
accordance with Section 2.01(c)(3)(i) exceeds the Target Stock Amount (as may
be adjusted in accordance with this Agreement), then the Electing Shares shall
be converted into the right to receive the Stock Election Amount in accordance
with Section 2.01(c)(3)(i) in the following manner:
(i) a stock proration factor (the "Stock Proration Factor")
shall be determined by dividing (A) the quotient of the Target Stock
Amount (as
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may be adjusted in accordance with this Agreement) divided by the
Variable Exchange Ratio (as may be adjusted in accordance with this
Agreement) by (B) the total number of Electing Shares;
(ii) the number of Electing Shares covered by any Stock
Election which will actually be converted into the right to receive
the Stock Election Amount shall be equal to the product (rounded up
to the nearest whole number) obtained by multiplying the Stock
Proration Factor by the total number of Electing Shares covered by
such Stock Election; and
(iii) all Electing Shares, other than those shares converted
into the right to receive the Stock Election Amount in accordance
with Section 2.01(e)(2)(ii), shall be converted into the right to
receive cash as if such shares were Non-Electing Shares in
accordance with Section 2.01(c)(3)(ii); and
(3) in the event that the aggregate amount of cash to be paid to
Non-Electing Shares pursuant to Section 2.01(c)(3)(ii) exceeds the Cash Cap
(as may be adjusted in accordance with this Agreement), then the Non-Electing
Shares shall be converted into the right to receive the Cash Election Price
(as may be adjusted in accordance with this Agreement) in accordance with
Section 2.01(c)(3)(ii) in the following manner:
(i) a cash proration factor (the "Cash Proration Factor") shall
be determined by dividing (A) the quotient of the Cash Cap (as may
be adjusted in accordance with this Agreement) divided by the Cash
Election Price by (B) the total number of Non-Electing Shares;
(ii) the number of Non-Electing Shares covered by any Cash
Election which will actually be converted into the right to receive
the Cash Election Price (as may be adjusted in accordance with this
Agreement) shall be equal to the product (rounded up to the nearest
whole number) obtained by multiplying the Cash Proration Factor by
the total number of Non-Electing Shares covered by such Cash
Election; and
(iii) all Non-Electing Shares, other than those shares
converted into the right to receive the Cash Election Price (as may
be adjusted in accordance with this Agreement) in accordance with
Section 2.01(e)(3)(ii), shall be converted into the right to receive
shares of Parent Common Stock as if such shares were Electing Shares
in accordance with Section 2.01(c)(3)(i).
(4) To the extent that a payment by the Company or the Surviving
Corporation, as the case may be, to holders of Dissenter Shares would have the
effect of reducing the fair market value of the assets of the Company acquired
in the Merger below
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(x) 90% of the fair market value of the net assets of the Company or (y) 70%
of the fair market value of the gross assets of the Company, in each case,
immediately prior to the Effective Time (taking into account any other
payments or distributions made by the Company in connection with the Merger),
Parent, in lieu of the Company or the Surviving Corporation, as the case may
be, shall pay to the holders of Dissenter Shares that portion of such payment
equal to the excess of (A) the total amount to be paid to the holders of
Dissenter Shares by the Company or the Surviving Corporation, as the case may
be, over (B) the maximum amount payable to the holders of Dissenter Shares by
the Company or the Surviving Corporation, as the case may be, such that such
payment would not reduce the fair market value of the assets of the Company
acquired by Parent below (I) 90% of the fair market value of the net assets of
the Company or (II) 70% of the fair market value of the gross assets of the
Company, in each case, immediately prior to the Effective Time (taking into
account any other payments or distributions made by the Company in connection
with the Merger). If after any such payment shall have been made to holders of
Dissenter Shares by Parent, the aggregate value of all shares of Parent Common
Stock (the value of each such share of Parent Common Stock being the average
of the high and low sale price of a share of Parent Common Stock on the NYSE
on the Date of Determination) issued in the Merger does not equal at least 40%
of the aggregate value of all Adjusted Merger Consideration (as defined
below), then Parent shall issue sufficient additional shares on a pro rata
basis to all holders of Company Common Stock (other than holders of Dissenter
Shares and the holders of Company Common Stock listed in Section 2.01(c)(1)
and (2)) so that the value of all shares of Parent Common Stock issued
pursuant to Sections 2.01(c)(1) and 2.01(c)(3) (the value of each such share
of Parent Common Stock being the average of the high and low sale price of a
share of Parent Common Stock on the NYSE on the Date of Determination) and the
value of any shares of Parent Common Stock issued pursuant to this Section
2.01(e)(4) (the value of each such share of Parent Common Stock being the
lower of (x) the average of the high and low sale price of a share of Parent
Common Stock on the NYSE on the Date of Determination and (y) the average of
the high and low sale price of a share of Parent Common Stock on the NYSE on
the date of issuance of such share of Parent Common Stock pursuant to this
Section 2.01(e)(4)) issued in the Merger equals 40% of the aggregate value of
all Adjusted Merger Consideration.
(5) For purposes of this Section 2.01(e), "Adjusted Merger
Consideration" shall mean: (a) any consideration paid pursuant to Section
2.01(c) (in the case of consideration comprised of Parent Common Stock, the
value of each such share of Parent Common Stock being the average of the high
and low sale price of a share of Parent Common Stock on the NYSE on the Date
of Determination), (b) solely for purposes of Section 2.01(e)(4), any
consideration paid pursuant to Section 2.01(e)(4) (in the case of
consideration comprised of Parent Common Stock, the value of each such share
of Parent Common Stock being the lower of (x) the average of the high and low
sale price of a share of Parent Common Stock on the NYSE on the Date of
Determination and (y) the average of the high and low sale price of a share of
Parent Common Stock on the NYSE on the date of issuance of such share of
Parent Common Stock pursuant to
8
Section 2.01(e)(4)), (c) any cash paid in lieu of fractional shares pursuant
to Section 2.02(e), (d) any cash to be paid to or payable to holders of
Dissenter Shares in accordance with the Dissenter Rights by Parent or any
person related to Parent within the meaning of Treasury Regulation Section
1.368-1(e)(3), (e) any cash or the fair market value of any property that is
distributed, transferred or paid by the Company to holders of Company Common
Stock and that satisfies the requirements set forth in Treasury Regulation
Section 1.368-1(e)(1)(ii) and (f) any other cash or property (other than
shares of Parent Common Stock) that is transferred, paid or distributed by
Parent (or any person related to Parent within the meaning of Treasury
Regulation Section 1.368-1(e)(3)) to holders of Company Common Stock in
exchange for shares of Company Common Stock in connection with the Merger. For
purposes of Section 2.01(e)(1), the value of any cash payable in respect of
Dissenter Shares in accordance with Dissenter Rights shall be deemed to be
$550 per Dissenter Share.
SECTION 2.02. EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT. As soon
as practicable following the date of this Agreement and in any event not less
than three days prior to dissemination of the Joint Proxy Statement (as
defined in Section 6.01(a)) to the stockholders of the Company and the
stockholders of Parent, Parent shall select a bank or trust company reasonably
satisfactory to the Company to act as exchange agent (the "Exchange Agent")
for payment of Merger Consideration upon surrender of certificates
representing Company Common Stock. Promptly following the Effective Time,
Parent shall deposit with the Exchange Agent, for the benefit of the holders
of shares of Company Common Stock, for exchange in accordance with this
Article II, through the Exchange Agent (i) certificates representing the
maximum number of shares of Parent Common Stock issuable and (ii) 80% of the
maximum amount of cash consideration payable, in each case, pursuant to
Section 2.01(c) in exchange for outstanding shares of Company Common Stock. In
addition, Parent shall take all steps necessary to enable and cause the
Surviving Corporation to provide to the Exchange Agent on a timely basis, as
and when needed after the Effective Time, the remaining amount of cash
necessary to pay for the shares of Company Common Stock converted into the
right to receive cash pursuant to Section 2.01 (such shares of Parent Common
Stock and cash, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund"). For the
purposes of such deposit, Parent shall assume that there will not be any
fractional shares of Parent Common Stock. Parent shall make available to the
Exchange Agent, from time to time as needed, cash sufficient to pay cash in
lieu of fractional shares in accordance with Section 2.02(e). The Exchange
Agent shall, pursuant to irrevocable instructions, deliver the Parent Common
Stock contemplated to be issued pursuant to Section 2.01 out of the Exchange
Fund. The Exchange Fund may not be used for any other purpose.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates (the "Certificates") that immediately prior to the
Effective Time represented outstanding shares of Company Common Stock whose
shares were converted into the
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right to receive Merger Consideration pursuant to Section 2.01(c), (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 Exchange Agent and shall be in such form and have
such other provisions as Parent may reasonably specify) and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for Merger
Consideration. Upon surrender of a Certificate for cancelation to the Exchange
Agent or to such other agent or agents as may be appointed by Parent, together
with such letter of transmittal, duly executed, and such other documents as
may reasonably be required by the Exchange Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor the amount of
cash, if any, and the number of whole shares of Parent Common Stock, if any,
which the aggregate number of shares of Company Common Stock previously
represented by such Certificate shall have been converted pursuant to Section
2.01(c) into the right to receive, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Company
Common Stock that is not registered in the transfer records of the Company,
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 by
reason of the payment to a person other than the registered holder of such
Certificate or establish to the satisfaction of Parent that such tax has been
paid or is not applicable. Until surrendered as contemplated by this Section
2.02, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Merger
Consideration into which the shares of Company Common Stock theretofore
represented by such Certificate have been converted pursuant to Section
2.01(c). No interest shall be paid or accrue on any cash payable upon
surrender of any Certificate.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends
or other distributions with respect to Parent Common Stock with a record date
on or after the Effective Time shall be paid to the holder of any Certificate
formerly representing Company Common Stock with respect to the shares of
Parent Common Stock issuable upon surrender thereof, and no cash payment in
lieu of fractional shares shall be paid to any such holder pursuant to Section
2.02(e) until the surrender of such Certificate in accordance with this
Article II. Subject to applicable Law, following surrender of any such
Certificate, there shall be paid to the holder of the Certificate representing
whole shares of Parent Common Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of any cash payable in
lieu of a fractional share of Parent Common Stock to which such holder is
entitled pursuant to Section 2.02(e) and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with
a record date after the Effective Time but prior to such surrender and a
payment date subsequent to such surrender payable with respect to such whole
shares of Parent Common Stock.
10
(d) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. The Merger
Consideration paid (and issued) in accordance with the terms of this Article
II upon conversion of any shares of Company Common Stock shall be deemed to
have been paid (and issued) in full satisfaction of all rights pertaining to
such shares of Company Common Stock, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the Effective Time that may have been declared or
made by the Company on such shares of Company Common Stock in accordance with
the terms of this Agreement or prior to the date of this Agreement and which
remain unpaid at the Effective Time, and after the Effective Time there shall
be no further registration of transfers on the stock transfer books of the
Surviving Corporation of shares of Company Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time, any
Certificates formerly representing shares of Company Common Stock are
presented to the Surviving Corporation or the Exchange Agent for any reason,
they shall be canceled and exchanged as provided in this Article II.
(e) NO FRACTIONAL SHARES. (1) No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the conversion
of Company Common Stock pursuant to Section 2.01(c), and such fractional share
interests shall not entitle the owner thereof to vote or to any rights of a
holder of Parent Common Stock. For purposes of this Section 2.02(e), all
fractional shares to which a single record holder would be entitled shall be
aggregated and calculations shall be rounded to three decimal places.
(2) Except as otherwise provided in Section 2.02(e)(3), in lieu of
any such fractional shares, each holder of Company Common Stock who would
otherwise be entitled to such fractional shares shall be entitled to an amount
in cash, without interest, rounded to the nearest cent, equal to the product
of (A) the amount of the fractional share interest in a share of Parent Common
Stock to which such holder is entitled under Section 2.01(c) (or would be
entitled but for this Section 2.02(e)) and (B) an amount equal to the average
of the closing sale prices for the Parent Common Stock on the NYSE, as
reported in The Wall Street Journal, Northeastern edition, for each of the ten
consecutive trading days ending with the second complete trading day prior to
the Effective Time.
(3) Notwithstanding anything in this Agreement to the contrary, in
the event that a Merger Consideration Adjustment is made in accordance with
Section 2.01(e)(1), each holder of Company Common Stock who would otherwise be
entitled, upon application of the Merger Consideration Adjustment, to a
fractional share in accordance with this Section 2.02(e) shall not receive
cash in lieu of such fractional share but instead shall be entitled only to
receive one whole share of Parent Common Stock in lieu of such fractional
share.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
that remains undistributed to the holders of Company Common Stock for six
months after
11
the Effective Time shall be delivered to Parent, upon demand, and any holder
of Company Common Stock who has not theretofore complied with this Article II
shall thereafter look only to Parent and the Surviving Corporation for payment
of its claim for Merger Consideration and any applicable dividends or
distributions with respect to any Parent Common Stock constituting Merger
Consideration as provided in Section 2.02(c).
(g) NO LIABILITY. None of Parent, Sub, the Company or the Exchange
Agent shall be liable to any person in respect of any cash or any shares of
Parent Common Stock (or dividends or distributions with respect thereto)
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar Law. If any Certificate has not been surrendered prior to
five years after the Effective Time (or immediately prior to such earlier date
on which Merger Consideration in respect of such Certificate would otherwise
escheat to or become the property of any Governmental Entity (as defined in
Section 3.05(b)), any such cash, shares, dividends or distributions in respect
of such Certificate shall, to the extent permitted by applicable Law, become
the property of the Surviving Corporation, free and clear of all claims or
interest of any person previously entitled thereto.
(h) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Parent, on a daily basis.
Any interest and other income resulting from such investments shall be paid to
Parent.
(i) WITHHOLDING RIGHTS. Parent shall be entitled to deduct and
withhold from the consideration otherwise payable to any holder of Company
Common Stock pursuant to this Agreement such amounts as may be required to be
deducted and withheld with respect to the making of such payment under the
Code, or under any provision of state, local or foreign tax Law. To the extent
that amounts are so withheld and paid over to the appropriate taxing
authority, the Surviving Corporation will be treated as though it withheld an
appropriate amount of the type of consideration otherwise payable pursuant to
this Agreement to any holder of Company Common Stock, sold such consideration
for an amount of cash equal to the fair market value of such consideration at
the time of such deemed sale and paid such cash proceeds to the appropriate
taxing authority.
(j) INCOME TAX TREATMENT. It is intended by the parties hereto that
the Merger qualify as a "reorganization" within the meaning of Section 368(a)
of the Code. The parties hereto hereby adopt this Agreement as a "plan of
reorganization" within the meanings of Sections 1.368-2(g) and 1.368-3(a) of
the U.S. Treasury Regulations promulgated under the Code.
SECTION 2.03. ELECTIONS. (a) Each person who, on or prior to the
Election Date referred to in paragraph (b) below, is a record holder of shares
of Company Common Stock shall be entitled, with respect to all or any portion
of such shares, to make an unconditional Stock Election on or prior to such
Election Date, on the basis hereinafter set forth.
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(b) Parent shall prepare a form of election, which form shall be
subject to the reasonable approval of the Company (the "Form of Election") and
shall be mailed with the Joint Proxy Statement to the record holders of
Company Common Stock as of the record date for the Company Stockholders
Meeting (as defined in Section 6.01(d)), which Form of Election shall be used
by each record holder of shares of Company Common Stock who wishes to elect to
receive the Stock Election Amount for any or all shares of Company Common
Stock held by such holder. The Company shall use all reasonable efforts to
make the Form of Election and the Joint Proxy Statement available to all
persons who become record holders of Company Common Stock during the period
between such record date and the Election Date. Any such holder's election to
receive the Stock Election Amount shall have been properly made only if the
Exchange Agent shall have received at its designated office, by 5:00 p.m.,
Pacific Coast time, on the business day (the "Election Date") immediately
preceding the date of the Company Stockholders Meeting, a Form of Election
properly completed and signed and accompanied by Certificates for the shares
of Company Common Stock to which such Form of Election relates, duly endorsed
in blank or otherwise in form acceptable for transfer on the books of the
Company (or accompanied by an appropriate guarantee of delivery of such
Certificates as set forth in such Form of Election from a firm which is a
member of a registered national securities exchange or of the National
Association of Securities Dealers, Inc. or a commercial bank or trust company
having an office or correspondent in the United States, provided such
Certificates are in fact delivered to the Exchange Agent within three NYSE
trading days after the date of execution of such guarantee of delivery).
Failure to deliver Certificates covered by any guarantee of delivery within
three NYSE trading days after the date of execution of such guarantee of
delivery shall be deemed to invalidate any otherwise properly made Stock
Election.
(c) Any Form of Election may be revoked by the stockholder who
submitted such Form of Election to the Exchange Agent only by written notice
received by the Exchange Agent (i) prior to 5:00 p.m., Pacific Coast time, on
the Election Date or (ii) after such time, if (and only to the extent that)
the Exchange Agent is legally required to permit revocations and only if the
Effective Time shall not have occurred prior to such date. In addition, all
Forms of Election shall automatically be revoked if the Exchange Agent is
notified in writing by Parent and the Company that the Merger has been
abandoned. If a Form of Election is revoked, the Certificate or Certificates
(or guarantees of delivery, as appropriate) for the shares of Company Common
Stock to which such Form of Election relates shall be promptly returned to the
stockholder submitting the same to the Exchange Agent.
(d) The determination of the Exchange Agent in its sole discretion
shall be binding as to whether or not elections to receive the Stock Election
Amount have been properly made or revoked pursuant to this Section 2.03 with
respect to shares of Company Common Stock and when elections and revocations
were received by it. If no Form of Election is received with respect to shares
of Company Common Stock, or if the Exchange Agent determines that any election
to receive the Stock Election Amount was
13
not properly made with respect to shares of Company Common Stock, such shares
shall be treated by the Exchange Agent as Non-Electing Shares at the Effective
Time, and such shares shall be converted into the right to receive the Cash
Election Price in accordance with Section 2.01(c)(3)(ii). The Exchange Agent
shall also make all computations as to the proration contemplated by Section
2.01(e), and absent manifest error any such computation shall be conclusive
and binding on the holders of shares of Company Common Stock. The Exchange
Agent may, with the mutual agreement of Parent and the Company, make such
rules as are consistent with this Section 2.03 for the implementation of the
elections provided for herein as shall be necessary or desirable fully to
effect such elections.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as expressly set forth in that certain letter (with specific
reference to the Section or Subsection of this Agreement to which the
information stated in such disclosure relates and such other Sections or
Subsections of this Agreement to the extent a matter is disclosed in such a
way as to make its relevance to the information called for by such other
Section or Subsection readily apparent), dated as of the date of this
Agreement, from the Company to Parent and Sub (the "Company Disclosure
Letter") or in any Company SEC Document (as defined in Section 3.06) filed and
publicly available prior to the date of this Agreement (the "Filed Company SEC
Documents"), the Company represents and warrants to Parent and Sub that:
SECTION 3.01. ORGANIZATION, STANDING AND POWER. Each of the Company
and each of its subsidiaries (the "Company Subsidiaries") is duly organized or
formed, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has full corporate or limited
liability company power and authority to conduct its businesses as presently
conducted. The Company and each Company Subsidiary is duly qualified to do
business in each jurisdiction where the nature of its business or the
ownership or leasing of its properties make such qualification necessary or
the failure to so qualify, individually or in the aggregate, has had or would
reasonably be expected to have a Company Material Adverse Effect (as defined
in Section 9.03). The Company has delivered to Parent true and complete copies
of the articles of incorporation of the Company, as amended to the date of
this Agreement (as so amended, the "Company Charter"), and the by-laws of the
Company, as amended to the date of this Agreement (as so amended, the "Company
By-laws"), and the comparable charter and organizational documents of each
Company Subsidiary, in each case as amended to the date of this Agreement.
SECTION 3.02. COMPANY SUBSIDIARIES; EQUITY INTERESTS. (a) Section
3.02(a) of the Company Disclosure Letter lists each Company Subsidiary and its
jurisdiction of organization or formation. All the outstanding shares of
capital stock of
14
each Company Subsidiary have been validly issued and are fully paid and
nonassessable and are owned by the Company, by another Company Subsidiary or
by the Company and another Company Subsidiary, free and clear of all pledges,
liens, charges, mortgages, encumbrances and security interests of any kind or
nature whatsoever (collectively, "Liens").
(b) Except for its interests in the Company Subsidiaries, the
Company does not own, directly or indirectly, any capital stock, membership
interest, partnership interest, joint venture interest or other equity
interest in any person.
SECTION 3.03. CAPITAL STRUCTURE. (a) The authorized capital stock of
the Company consists of 75,000,000 shares of Company Common Stock and
10,000,000 shares of preferred stock, par value $0.01 per share. At the close
of business on February 5, 2004, (i) 1,461,177.94 shares of Company Common
Stock were issued and outstanding, (ii) 33,175 shares of Company Common Stock
were held by the Company in its treasury and (iii) 35,415 shares of Company
Common Stock were subject to outstanding Company Employee Stock Options (as
defined in Section 6.04(d)) and no additional shares of Company Common Stock
were reserved for issuance pursuant to the Company Stock Plan (as defined in
Section 6.04(d)). Except as set forth above, at the close of business on
February 5, 2004, no shares of capital stock or other voting securities of the
Company were issued, reserved for issuance or outstanding, and since February
5, 2004, no shares of capital stock or other voting securities of the Company
were issued by the Company, except for shares of Company Common Stock issued
upon the exercise of Company Employee Stock Options outstanding as of February
5, 2004. There are no outstanding stock appreciation rights linked to the
price of Company Common Stock and granted under the Company Stock Plan or
otherwise. All outstanding shares of Company Common Stock are, and all such
shares that may be issued prior to the Effective Time will be when issued,
duly authorized, validly issued, fully paid and nonassessable and not subject
to or issued in violation of any purchase option, call option, right of first
refusal, preemptive right, subscription right or any similar right under any
provision of the NRS, the Company Charter, the Company By-laws or any Contract
(as defined in Section 3.05(a)) to which the Company is a party or otherwise
bound. There are not any bonds, debentures, notes or other indebtedness of the
Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which holders of
Company Common Stock may vote ("Voting Company Debt"). Except as set forth
above, as of the date of this Agreement, there are not any options, warrants,
rights, convertible or exchangeable securities, "phantom" stock rights, stock
appreciation rights, stock-based performance units, commitments, Contracts,
arrangements or undertakings of any kind to which the Company or any Company
Subsidiary is a party or by which any of them is bound (i) obligating the
Company or any Company Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other equity
interests in, or any security convertible or exercisable for or exchangeable
into any capital stock of or other equity interest in, the Company or any
Company Subsidiary or any Voting Company Debt, (ii) obligating the
15
Company or any Company Subsidiary to issue, grant, extend or enter into any
such option, warrant, call, right, security, commitment, Contract, arrangement
or undertaking or (iii) that give any person the right to receive any economic
benefit or right similar to or derived from the economic benefits and rights
occurring to holders of Company Common Stock. As of the date of this
Agreement, there are not any outstanding contractual obligations of the
Company or any Company Subsidiary to repurchase, redeem or otherwise acquire
any shares of capital stock of the Company or any Company Subsidiary.
(b) Section 3.03(b) of the Company Disclosure Letter sets forth a
true, complete and correct list of all outstanding Company Employee Stock
Options, the number of shares of Company Common Stock subject to each such
Company Employee Stock Option, the grant dates, expiration dates and vesting
schedule of each such Company Employee Stock Option and the names of the
holders of each Company Employee Stock Option. All outstanding Company
Employee Stock Options are evidenced by the Company Employee Stock Option
agreements set forth in Section 3.03(b) of the Company Disclosure Letter, and
no Company Employee Stock Option agreement contains terms that are
inconsistent with, or in addition to, the terms contained therein. Each
Company Employee Stock Option intended to qualify as an "incentive stock
option" under Section 422 of the Code so qualifies and the exercise price of
each other Company Employee Stock Option is not less than the fair market
value of a share of Company Common Stock as determined on the date of grant of
such Company Employee Stock Option.
SECTION 3.04. AUTHORITY; EXECUTION AND DELIVERY; ENFORCEABILITY. (a)
The Company has all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the Merger and the other Transactions
to be performed or consummated by the Company in accordance with the terms of
this Agreement. The execution and delivery by the Company of this Agreement
and the consummation by the Company of the Merger and the other Transactions
to be performed or consummated by the Company in accordance with the terms of
this Agreement have been duly authorized by all necessary corporate action on
the part of the Company, subject, in the case of the Merger, to receipt of the
Company Stockholder Approval (as defined in Section 3.04(c)). The Company has
duly executed and delivered this Agreement, and, assuming due authorization,
execution and delivery of this Agreement by Parent and Sub, this Agreement
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.
(b) The Board of Directors of the Company (the "Company Board"), at
a meeting duly called and held, duly and unanimously adopted resolutions (i)
adopting this Agreement and approving the Merger and the other Transactions to
be performed or consummated by the Company in accordance with the terms of
this Agreement, (ii) determining that the terms of the Merger and the other
Transactions to be performed or consummated by the Company in accordance with
the terms of this Agreement are fair
16
to and in the best interests of the Company and its stockholders, (iii)
directing that this Agreement be submitted to a vote at the Company
Stockholders Meeting and (iv) recommending that the Company's stockholders
approve this Agreement. The Company hereby confirms that (A) the Company does
not qualify as a "resident domestic corporation", as such term is defined in
Section 78.427 of the NRS and used in Sections 78.438 through 78.444 of the
NRS, and (B) to the Company's knowledge, no other state takeover statute or
similar statute or regulation applies or purports to apply to the Company with
respect to this Agreement, the Merger or any other Transaction to be performed
or consummated by the Company in accordance with the terms of this Agreement.
(c) The only vote of holders of any class or series of the capital
stock of the Company necessary to approve this Agreement and the Merger is the
approval of this Agreement by a majority of the voting power of the holders of
the outstanding Company Common Stock (the "Company Stockholder Approval"). The
affirmative vote of the holders of Company Common Stock, or any of them, is
not necessary to consummate any Transaction to be performed or consummated by
the Company in accordance with the terms of this Agreement other than the
Merger.
SECTION 3.05. NO CONFLICTS; CONSENTS. (a) The execution and delivery
by the Company of this Agreement do not, and the consummation by the Company
of the Merger and the other Transactions to be performed or consummated by the
Company in accordance with the terms of this Agreement and compliance by the
Company with the terms hereof 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, cancelation or acceleration of
any obligation or to loss of a material benefit under, or to increased,
additional, accelerated or guaranteed rights or entitlements of any person
under, or result in the creation of any Lien upon any of the properties or
assets of the Company or any Company Subsidiary under, any provision of (i)
the Company Charter, the Company By-laws or the comparable charter or
organizational documents of any Company Subsidiary, (ii) any contract, lease,
license, indenture, note, bond, agreement, permit, concession, franchise or
other instrument (a "Contract") to which the Company or any Company Subsidiary
is a party or by which any of their respective properties or assets is bound
or (iii) subject to the filings and other matters referred to in Section
3.05(b), any judgment, order or decree ("Judgment") or statute, law (including
common law), ordinance, rule or regulation ("Law") applicable to the Company
or any Company Subsidiary or their respective properties or assets, other
than, in the case of clauses (ii) and (iii) above, any such items that,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
(b) No consent, approval, license, permit, order or authorization
("Consent") of, or registration, declaration or filing with, or permit from,
any Federal, state, local or foreign government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or instrumentality, domestic or
17
foreign (a "Governmental Entity"), is required to be obtained or made by the
Company or any Company Subsidiary in connection with the execution, delivery
and performance of this Agreement or the consummation of the Merger and the
other Transactions to be performed or consummated by the Company in accordance
with the terms of this Agreement, other than (i) compliance with and filings
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), (ii) the filing with the Securities and Exchange Commission
(the "SEC") of (A) the Joint Proxy Statement and (B) such reports under, or
other applicable requirements of, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as may be required in connection with this
Agreement, the Merger and the other Transactions to be performed or
consummated by the Company in accordance with the terms of this Agreement,
(iii) the filing of the Articles of Merger with the Secretary of State of the
State of Nevada and appropriate documents with the relevant authorities of the
other jurisdictions in which the Company is qualified to do business, (iv)
compliance with and such filings as may be required under applicable
Environmental Laws (as defined in Section 3.18(g)), (v) compliance with and
such filings as may be required under applicable Gaming Laws (as defined in
Section 3.13(b)) (including those promulgated by the Nevada Gaming Authorities
(as defined in Section 3.13(b)), (vi) such filings as may be required in
connection with the Taxes described in Section 6.09 and (vii) such other items
that, individually or in the aggregate, have not had and would not reasonably
be expected to have a Company Material Adverse Effect.
SECTION 3.06. COMPANY SEC DOCUMENTS; UNDISCLOSED LIABILITIES. (a)
The Company has filed all reports, schedules, forms, statements and other
documents required to be filed by the Company with the SEC since January 1,
2003 pursuant to Sections 13(a) and 15(d) of the Exchange Act (the "Company
SEC Documents").
(b) As of its respective date, each Company SEC Document complied in
all material respects with the requirements of the Exchange Act or the
Securities Act of 1933, as amended (the "Securities Act"), as the case may be,
and the rules and regulations of the SEC promulgated thereunder applicable to
such Company SEC Document, and did not contain any untrue statement of a
material fact or omit 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 Filed Company SEC Document has been revised
or superseded by a later filed Filed Company SEC Document, none of the Company
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 consolidated financial statements of the
Company included in the Company 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 ("GAAP") (except, in
the case of unaudited statements, as permitted by Form 10-Q of the
18
SEC) applied on a consistent basis during the periods involved (except as may
be indicated in the notes thereto) and fairly present the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods shown (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
(c) Neither the Company nor any Company Subsidiary has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of the Company and its consolidated subsidiaries or in the notes
thereto and that, individually or in the aggregate, would reasonably be
expected to have a Company Material Adverse Effect.
(d) The effectiveness of any additional SEC disclosure requirement
that, as of the date of this Agreement, have been formally proposed that are
not yet in effect, is not expected by the Company to lead to any material
change in the Company's disclosures as set forth in the Filed Company SEC
Documents.
(e) None of the Company Subsidiaries is, or has at any time since
January 1, 2002 been, subject to the reporting requirements of Sections 13(a)
and 15(d) of the Exchange Act.
SECTION 3.07. INFORMATION SUPPLIED. None of the information supplied
or to be supplied by the Company for inclusion or incorporation by reference
in (i) the registration statement on Form S-4 to be filed with the SEC by
Parent in connection with the Share Issuance (the "Form S-4") will, at the
time the Form S-4 is filed with the SEC, at any time it is amended or
supplemented or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, or (ii) the Joint Proxy Statement will, at the date it is
first mailed to the Company's stockholders or Parent's stockholders or at the
time of the Company Stockholders Meeting or the Parent Stockholders Meeting
(as defined in Section 6.01(e)), contain any untrue statement of a material
fact or omit 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 are made, not misleading. The Joint Proxy
Statement will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder,
except that no representation is made by the Company with respect to
statements made or incorporated by reference therein based on information
supplied by Parent or Sub in writing for inclusion or incorporation by
reference in the Form S-4 or the Joint Proxy Statement.
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. From the date of
the most recent audited financial statements included in the Filed Company SEC
Documents to the date of this Agreement, the Company has conducted its
business only in the ordinary course, and during such period there has not
been:
19
(i) any state of facts, event, change, effect, development,
condition or occurrence that, individually or in the aggregate, has
had or would reasonably be expected to have a Company Material
Adverse Effect;
(ii) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with
respect to any Company Common Stock or any repurchase for value by
the Company of any Company Common Stock;
(iii) any split, combination or reclassification of any Company
Common 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 Company Common Stock;
(iv) (A) any granting by the Company or any Company Subsidiary
to any Participant (as defined in Section 3.10(a)) of any loan or
any increase in compensation, benefits, perquisites or any bonus or
award, except in the ordinary course of business consistent with
prior practice, (B) any payment of any bonus to any Participant or
(C) any granting by the Company or any Company Subsidiary to any
such Participant of any increase in severance, change in control or
termination pay or benefits, in each case, except as was required
under any employment, severance or termination agreements in effect
as of the date of the most recent audited financial statements
included in the Filed Company SEC Documents;
(v) any damage, destruction or loss, whether or not covered by
insurance, that individually or in the aggregate has had or would
reasonably be expected to have a Company Material Adverse Effect;
(vi) any change in accounting methods, principles or practices
by the Company or any Company Subsidiary, except insofar as may have
been required by a change in GAAP;
(vii) any material elections with respect to Taxes (as defined
in Section 3.09) by the Company or any Company Subsidiary or
settlement or compromise by the Company or any Company Subsidiary of
any material Tax liability or refund;
(viii) any revaluation by the Company or any Company Subsidiary
of any of the material assets of the Company or any Company
Subsidiary; or
(ix) any other action or inaction by the Company or any Company
Subsidiary that would have violated Section 5.01(a) if taken after
the date of this Agreement.
SECTION 3.09. TAXES. (a) As used in this Agreement:
20
"Taxes" shall mean all (i) Federal, state and local, domestic and
foreign, taxes, assessments, duties or similar charges of any kind whatsoever,
including all corporate franchise, income, sales, use, ad valorem, receipts,
value added, profits, license, withholding, employment, excise, property, net
worth, capital gains, transfer, stamp, documentary, social security, payroll,
environmental, alternative minimum, occupation, recapture and other taxes, and
including any interest, penalties and additions imposed with respect to such
amounts; (ii) liability for the payment of any amounts of the type described
in clause (i) as a result of being a member of an affiliated, consolidated,
combined, unitary or aggregate group; and (iii) liability for the payment of
any amounts as a result of an express or implied obligation to indemnify any
other person with respect to the payment of any amounts of the type described
in clause (i) or (ii).
"Taxing Authority" shall mean any Federal, state or local, domestic
or foreign, governmental body (including any subdivision, agency or commission
thereof), or any quasi-governmental body, in each case, exercising regulatory
authority in respect of Taxes.
"Tax Return" shall mean all returns, declarations of estimated tax
payments, reports, estimates, information returns and statements, including
any related or supporting information with respect to any of the foregoing,
filed or to be filed with any Taxing Authority in connection with the
determination, assessment, collection or administration of any Taxes.
(b) The Company and each Company Subsidiary has timely filed, or has
caused to be timely filed on its behalf, all Federal, state and local,
domestic and foreign, income and franchise Tax Returns and all other Tax
Returns required to be filed by or on behalf of the Company and each Company
Subsidiary in the manner prescribed by applicable law. All such Tax Returns
are complete and correct in all material respects. The Company and each
Company Subsidiary has timely paid (or Company has paid on any Company
Subsidiary's behalf) all Taxes due from it with respect to the taxable periods
covered by such Tax Returns and all other Taxes for which the Company and each
Company Subsidiary is or might otherwise be liable, and, in accordance with
GAAP, the most recent financial statements contained in the Filed Company SEC
Documents reflects an adequate reserve for all Taxes payable by the Company
and each Company Subsidiary for all taxable periods and portions thereof
through the date of such balance sheet. Neither the Company nor any Company
Subsidiary has requested any extension of time within which to file any Tax
Return which Tax Return has not yet been filed. Neither the Company nor any
Company Subsidiary has any liability for any Taxes of any person other than
itself or any other affiliated group of which the Company is the parent (i)
under Treasury Regulation Section 1.1502-6 (or any similar provision of
Federal, state or local, domestic or foreign, law), (ii) as a transferee or
successor or (iii) by contract or otherwise.
(c) No Federal, state or local, domestic or foreign, Tax Return of
the Company or any Company Subsidiary is under audit or examination by any
Taxing
21
Authority, and no written or unwritten notice of such an audit or examination
has been received by the Company or any Company Subsidiary. Each material
deficiency resulting from any audit or examination relating to Taxes by any
Taxing Authority has been timely paid and there is no deficiency, refund
litigation, proposed adjustment or matter in controversy with respect to any
Taxes due and owing by the Company or any Company Subsidiary. No issues
relating to Taxes were raised by the relevant Taxing Authority during any
presently pending audit or examination, and no issues relating to Taxes were
raised by the relevant Taxing Authority in any completed audit or examination
that would reasonably be expected to recur in a later taxable period. The
Company has delivered to Parent documents setting forth the dates of the most
recent audits or examinations, if any, of the Company or any Company
Subsidiary by any Taxing Authority in respect of Federal, state and local,
domestic and foreign, Taxes for all taxable periods for which the statute of
limitations has not yet expired. The Tax Returns of the Company and each
Company Subsidiary have been examined by the Internal Revenue Service or other
relevant Taxing Authority or the relevant statute of limitations has closed
with respect to any Federal and state income Tax Returns for all years through
1999.
(d) There is no agreement or other document extending, or having the
effect of extending, the period of assessment or collection of any Taxes and
no power of attorney with respect to any Taxes has been executed or filed with
any Taxing Authority by or on behalf of the Company or any Company Subsidiary.
(e) No material Liens for Taxes exist with respect to any assets or
properties of the Company or any Company Subsidiary, except for statutory
liens for Taxes not yet due.
(f) Except for agreements among the Company and any Company
Subsidiary, copies of which have been delivered to Parent, neither the Company
nor any Company Subsidiary is a party to or bound by any tax sharing
agreement, tax indemnity obligation or similar agreement, arrangement or
practice with respect to Taxes (including any advance pricing agreement,
closing agreement or other agreement relating to Taxes with any Taxing
Authority).
(g) The Company and each Company Subsidiary has complied in all
material respects with all applicable statutes, ordinances, laws, rules and
regulations relating to the payment and withholding of Taxes (including
withholding of Taxes pursuant to Sections 1441, 1442, 3121 and 3402 of the
Code or similar provisions under any Federal, state or local, domestic or
foreign, laws) and has, within the time and the manner prescribed by law,
withheld from and paid over to the proper Governmental Entities all amounts
required to be so withheld and paid over under applicable Law.
(h) Neither the Company nor any Company Subsidiary has ever (i) made
an election under Section 1362 of the Code to be treated as an S corporation
for Federal
22
income tax purposes or (ii) made a similar election under any comparable
provision of any Federal, state, local, domestic or foreign, tax Law.
(i) Neither the Company nor any Company Subsidiary has constituted
either a "distributing corporation" or a "controlled corporation" (within the
meaning of Section 355(a)(1)(A) of the Code) in any distribution of stock
qualifying or intended to qualify for tax-free treatment under Section 355 of
the Code within the two-year period ending on the date of this Agreement.
(j) Neither the Company nor any Company Subsidiary is, or has ever
been, a personal holding company within the meaning of Section 542 of the Code
or a foreign personal holding company within the meaning of Section 552 of the
Code.
SECTION 3.10. ABSENCE OF CHANGES IN BENEFIT PLANS. (a) From the date
of the most recent audited financial statements included in the Filed Company
SEC Documents to the date of this Agreement, neither the Company nor any
Company Subsidiary has terminated, adopted, amended, modified or agreed to
amend or modify (or announced an intention to amend or modify) any collective
bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
appreciation, restricted stock, stock option, phantom stock, performance,
retirement, thrift, savings, stock bonus, cafeteria, paid time off,
perquisite, fringe benefit, vacation, severance, disability, death benefit,
hospitalization, medical or other welfare benefit or other plan, program,
arrangement or understanding, whether oral or written, formal or informal,
funded or unfunded (whether or not legally binding) maintained, contributed to
or required to be maintained or contributed to by the Company or any Company
Subsidiary or any other person or entity that, together with the Company or
any Company Subsidiary, is treated as a single employer under Section 414(b),
(c), (m) or (o) of the Code (each, a "Commonly Controlled Entity"), in each
case providing benefits to any current or former employee, officer, director
or independent contractor of the Company or any Company Subsidiary (each, a
"Participant") and whether or not subject to United States law (collectively,
"Company Benefit Plans") or has made any change in any actuarial or other
assumption used to calculate funding obligations with respect to any Company
Benefit Plan that is a Company Pension Plan (as defined in Section 3.11), or
any change in the manner in which contributions to any such Company Pension
Plan are made or the basis on which such contributions are determined, other
than changes made pursuant to any collective bargaining agreement to which the
Company or any Company Subsidiary is a party. Since December 31, 2002, the
Company has not adopted, amended, modified or agreed to amend or modify (or
announced an intention to amend or modify) any Company Benefit Plan so as to
accelerate the vesting of any Company Employee Stock Option.
(b) As of the date of this Agreement there (i) is not any
employment, deferred compensation, severance, change in control, termination,
employee benefit, loan, indemnification, retention, stock repurchase, stock
option, consulting or similar
23
agreement, commitment or obligation between the Company or any Company
Subsidiary, on the one hand, and any Participant, on the other hand, (ii) any
agreement between the Company or any Company Subsidiary, on the one hand, and
any Participant, on the other hand, the benefits of which are contingent, or
the terms of which are materially altered, upon the occurrence of transactions
involving the Company or any Company Subsidiary of the nature contemplated by
this Agreement or (iii) any trust or insurance Contract or other agreement to
fund or otherwise secure payment of any compensation or benefit to be provided
to any Participant (all such agreements under this clause (b), collectively,
"Company Benefit Agreements").
SECTION 3.11. ERISA COMPLIANCE; EXCESS PARACHUTE PAYMENTS. (a)
Section 3.11(a) of the Company Disclosure Letter contains a list of all
"employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) ("Company
Pension Plans"), "employee welfare benefit plans" (as defined in Section 3(1)
of ERISA) and all other material Company Benefit Plans maintained, or
contributed to, by the Company or any Company Subsidiary for the benefit of
any Participant. Each Company Benefit Plan (other than Company Multiemployer
Pension Plans (as defined in Section 3.11(c)), and, to the knowledge of the
Company, each Company Multiemployer Pension Plan has been administered in
material compliance with its terms and applicable Law, and the terms of any
applicable collective bargaining agreements. The Company has delivered to
Parent true, complete and correct copies of (i) each Company Benefit Plan
required to be listed on Section 3.11(a) of the Company Disclosure Letter and
each Company Benefit Agreement (or, in the case of any unwritten Company
Benefit Plans or Company Benefit Agreements, written descriptions thereof),
(ii) the two most recent annual reports required to be filed, or such similar
reports, statements, information returns or material correspondence filed with
or delivered to any Governmental Entity, with respect to each Company Benefit
Plan (including reports filed on Form 5500 with accompanying schedules and
attachments), (iii) the most recent summary plan description prepared for each
Company Benefit Plan, (iv) each trust agreement and group annuity contract and
other documents relating to the funding or payment of benefits under any
Company Benefit Plan, (v) the most recent determination or qualification
letter issued by any Governmental Entity for each Company Benefit Plan
intended to qualify for favorable tax treatment, as well as a true, correct
and complete copy of each pending application for a determination letter, if
applicable, and (vi) the two most recent actuarial valuations for each Company
Benefit Plan. All Participant data necessary to administer each Company
Benefit Plan, other than any Company Benefit Plan that is a Company
Multiemployer Pension Plan, and Company Benefit Agreement is in the possession
of the Company and is in a form that is sufficient for the proper
administration of the Company Benefit Plans and Company Benefit Agreements in
accordance with their terms and all applicable Laws and such data is complete
and correct in all material respects.
(b) All Company Pension Plans (other than Company Multiemployer
Pension Plans, and, to the knowledge of the Company, each Company
Multiemployer
24
Pension Plan have been the subject of determination letters from the Internal
Revenue Service to the effect that such Company Pension Plans are qualified
and exempt from Federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code, and no such determination letter has been revoked
nor, to the knowledge of the Company, has revocation been threatened, nor has
any such Company Pension Plan been amended since the date of its most recent
determination letter or application therefor in any respect that would
adversely affect its qualification or materially increase its costs or require
security under Section 307 of ERISA. No Company Pension Plans are required to
have been approved by any non-U.S. Governmental Entity.
(c) During the past six years neither the Company nor any Commonly
Controlled Entity has maintained, contributed to or been obligated to maintain
or contribute to, or has any actual or contingent liability under, any Company
Benefit Plan that is subject to Title IV of ERISA, other than any Company
Pension Plan that is a "multiemployer plan" within the meaning of Section
4001(a)(3) of ERISA (a "Company Multiemployer Pension Plan"). There have been
no non-exempt "prohibited transactions" (as such term is defined in Section
406 of ERISA or Section 4975 of the Code) with respect to any Company Benefit
Plan that is subject to ERISA or any other breach of fiduciary responsibility
that could reasonably be expected to subject the Company, any Company
Subsidiary or any officer of the Company or any Company Subsidiary or any of
the Company Benefit Plans which are subject to ERISA, or, to the knowledge of
the Company, any trusts created thereunder or any trustee or administrator
thereof to the tax or penalty on prohibited transactions imposed by such
Section 4975 or to any material liability under Section 502(i) or 502(1) of
ERISA or to any other material liability for breach of fiduciary duty under
ERISA or any other applicable Law. No Company Pension Plan or related trust
has been terminated. Neither the Company nor any Company Subsidiary has
incurred any liability that remains unsatisfied with respect to a "complete
withdrawal" or a "partial withdrawal" (as such terms are defined in Sections
4203 and 4205, respectively, of ERISA) since the effective date of such
Sections 4203 and 4205 with respect to any Multiemployer Pension Plan.
(d) With respect to any Company Benefit Plan that is an employee
welfare benefit plan, whether or not subject to ERISA, (i) no such Company
Benefit Plan is funded through a "welfare benefits fund" (as such term is
defined in Section 419(e) of the Code), (ii) each such Company Benefit Plan
that is a "group health plan" (as such term is defined in Section 5000(b)(1)
of the Code), complies, in all material respects, with the applicable
requirements of Section 4980B(f) of the Code or any similar state statute,
(iii) no such Company Benefit Plan provides benefits after termination of
employment, except where the cost thereof is borne entirely by the former
employee (or his eligible dependents or beneficiaries) or as required by
Section 4980B(f) of the Code or any similar state statute, (iv) each such
Company Benefit Plan (including any such Plan covering retirees or other
former employees) may be amended or terminated without material liability to
the Company and the Company Subsidiary on or at any time after the
25
Effective Time and (v) Section 3.11(d)(v) of the Company Disclosure Letter
indicates whether each welfare plan is self-insured or insured through
third-party coverage.
(e) No amount or other entitlement that could be received (whether
in cash or property or the vesting of property) as a result of any of the
transactions contemplated hereby (alone or in combination with any other
event) by any Participant who is a "disqualified individual" (as such term is
defined in final Treasury Regulation Section 1.280G-1) (each, a "Disqualified
Individual") under any Company Benefit Plan, Company Benefit Agreement or
other compensation arrangement currently in effect would be characterized as
an "excess parachute payment" (as such term is defined in Section 280G(b)(1)
of the Code) and no such disqualified individual is entitled to receive any
additional payment from the Company or any other person in the event that the
excise tax required by Section 4999(a) of the Code is imposed on such
disqualified individual.
(f) The execution and delivery by the Company of this Agreement do
not, and the consummation of the Transactions and compliance with the terms
hereof will not (either alone or in combination with any other event) (i)
entitle any Participant to any additional compensation, severance or other
benefits, (ii) accelerate the time of payment or vesting or trigger any
payment or funding (through a grantor trust or otherwise) of compensation or
benefits under, increase the amount payable or trigger any other material
obligation pursuant to, any Company Benefit Plan or Company Benefit Agreement
or (iii) result in any breach or violation of, or a default (with or without
notice or lapse of time or both) under, any Company Benefit Plan or Company
Benefit Agreement.
(g) Since January 1, 2001, and through the date of this Agreement,
neither the Company nor any Company Subsidiary has received notice of, and, to
the knowledge of the Company, there are no (i) material pending termination
proceedings or other suits, claims (except claims for benefits payable in the
normal operation of the Company Benefit Plans), actions or proceedings against
or involving or asserting any rights or claims to benefits under any Company
Benefit Plan or Company Benefit Agreement or (ii) pending investigations
(other than routine inquiries) by any Governmental Entity with respect to any
Company Benefit Plan or Company Benefit Agreement. All contributions, premiums
and benefit payments under or in connection with the Company Benefit Plans or
Company Benefit Agreements that are required to have been made by the Company
or any Company Subsidiary have been timely made, accrued or reserved for in
all material respects.
(h) Neither the Company nor any Company Subsidiary has any material
liability or obligations, including under or on account of a Company Benefit
Plan or Company Benefit Agreement, arising out of the hiring of persons to
provide services to the Company or any Company Subsidiary and treating such
persons as consultants or independent contractors and not as employees of the
Company or any Company Subsidiary.
26
SECTION 3.12. LITIGATION. There is no suit, claim, action,
investigation or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any Company Subsidiary that, individually or
in the aggregate, has had or would reasonably be expected to have a Company
Material Adverse Effect, nor is there any Judgment outstanding against the
Company or any Company Subsidiary that has had or would reasonably be expected
to have a Company Material Adverse Effect.
SECTION 3.13. COMPLIANCE WITH APPLICABLE LAWS. (a) The Company and
the Company Subsidiaries and their relevant personnel and operations are in
compliance with all applicable Laws, including applicable Gaming Laws and Laws
relating to occupational health and safety, except to the extent that the
failure to be in compliance with any such Law has not had and would not
reasonably be expected to have a Company Material Adverse Effect. Neither the
Company nor any Company Subsidiary has received any written communication
during the past two years from a Governmental Entity that alleges that the
Company or a Company Subsidiary is not in compliance in any material respect
with any applicable Law. The Company and the Company Subsidiaries have in
effect all permits, licenses, variances, exemptions, authorizations, operating
certificates, franchises, orders and approvals of all Governmental Entities
(collectively, "Permits"), necessary or advisable for them to own, lease or
operate their properties and assets and to carry on their businesses as now
conducted, except for such Permits the absence of which has not had or would
not reasonably be expected to have a Company Material Adverse Effect. There
has occurred no violation of, default (with or without notice or lapse of time
or both) under, or event giving to others any right of termination, amendment
or cancelation of, with or without notice or lapse of time or both, any such
Permit, except for any such violation, default or event which has not had or
would not reasonably be expected to have a Company Material Adverse Effect.
There is no event which, to the knowledge of the Company, would reasonably be
expected to result in the revocation, cancelation, non-renewal or adverse
modification of any such Permit, except for any such event that has not had or
would not reasonably be expected to have a Company Material Adverse Effect.
Notwithstanding the foregoing, this Section 3.13(a) does not relate to matters
with respect to Taxes (which are the subject of Section 3.09), ERISA (which
are the subject of Section 3.11), labor Laws (which are the subject of Section
3.16) or Environmental Laws (which are the subject of Section 3.18).
(b) The term "Gaming Laws" means, with respect to any person, any
Federal, state or local statute, law, ordinance, rule, regulation, permit,
consent, approval, license, judgment, order, decree, injunction or other
authorization governing or relating to the current or contemplated casino and
gaming activities and operations of such person and its subsidiaries,
including the rules and regulations established by the Nevada State Gaming
Control Board, the Nevada Gaming Commission, the Xxxxx County Liquor and
Gaming Licensing Board and the City of Las Vegas (collectively, the "Nevada
Gaming Authorities").
27
SECTION 3.14. ASSETS OTHER THAN REAL PROPERTY INTERESTS. The Company
and the Company Subsidiaries have good and valid title to all of their
respective properties and assets, in each case free and clear of all Liens,
except (i) mechanics', carriers', workmen's, repairmen's or other like Liens
arising or incurred in the ordinary course of business relating to obligations
that are not delinquent or that are being contested by the Company or a
Company Subsidiary and for which the Company or a Company Subsidiary has
established adequate reserves, (ii) Liens for Taxes that are not due and
payable or that may thereafter be paid without interest or penalty, (iii)
Liens that secure debt obligations that are reflected as liabilities on the
balance sheet of the Company and its consolidated subsidiaries as of December
31, 2003 contained in the Filed Company SEC Documents and the existence of
which is referred to in the notes to such balance sheet, (iv) Liens arising
under original purchase price conditional sales contracts and equipment leases
with third parties entered into in the ordinary course of business and (v)
other imperfections of title or encumbrances, if any, that, individually or in
the aggregate, do not materially impair, and would not reasonably be expected
materially to impair, the continued use and operation of the assets to which
they relate in the conduct of the business of the Company and the Company
Subsidiaries as presently conducted. This Section 3.14 does not relate to real
property or interests in real property, such items being the subject of
Section 3.15, or to Intellectual Property, such items being the subject of
Section 3.19.
SECTION 3.15. REAL PROPERTY. Section 3.15 of the Company Disclosure
Letter sets forth a complete list of all real property and interests in real
property owned in fee by the Company or any Company Subsidiary (individually,
an "Owned Property"). Section 3.15 of the Company Disclosure Letter sets forth
a complete list of all real property and interests in real property leased by
the Company or any Company Subsidiary (individually, a "Leased Property") and
any prime or underlying leases relating thereto. The Company or a Company
Subsidiary has good and marketable fee title to all Owned Property and good
and valid leasehold title to all Leased Property (an Owned Property or Leased
Property being sometimes referred to herein, individually, as a "Company
Property"), in each case subject only to (i) Liens described in clause (i),
(ii), (iii) or (v) of Section 3.14, (ii) leases, subleases and similar
agreements set forth in Section 3.15 of the Company Disclosure Letter, (iii)
easements, covenants, rights-of-way and other similar restrictions of record
(other than options or rights of first refusal or offer to purchase) or (iv)
any conditions that would be shown by a current, accurate survey or physical
inspection of any Company Property made on the date of this Agreement. Any
material reciprocal easement or operating agreements with respect to Company
Property are set forth in Section 3.15 of the Company Disclosure Letter.
SECTION 3.16. LABOR MATTERS. Section 3.16 of the Company Disclosure
Letter contains a list of each collective bargaining agreement between the
Company or any Company Subsidiary and any labor union. Since January 1, 2001,
neither the Company nor any Company Subsidiary has experienced any labor
strikes, union organization attempts, requests for representation, work
slowdowns or stoppages or
28
disputes due to labor disagreements, and to the knowledge of the Company and
the Company Subsidiaries there is currently no such action threatened against
or affecting the Company or any Company Subsidiary. The Company and the
Company Subsidiaries are each in compliance with all applicable Laws with
respect to labor relations, employment and employment practices, occupational
safety and health standards, terms and conditions of employment and wages and
hours, human rights, pay equity and workers compensation, except to the extent
that the failure to be in compliance with any such Law has not had and would
not reasonably be expected to have a Company Material Adverse Effect, and is
not engaged in any unfair labor practice. There is no unfair labor practice
charge or complaint against the Company or any Company Subsidiary pending or,
to the knowledge of the Company or any Company Subsidiary, threatened before
the National Labor Relations Board or any comparable Federal, state,
provincial or foreign agency or authority that would reasonably be expected to
result in material liability to the Company. No grievance or arbitration
proceeding arising out of a collective bargaining agreement is pending or, to
the knowledge of the Company or any Company Subsidiary, threatened against the
Company or any Company Subsidiary that would reasonably be expected to result
in material liability to the Company.
SECTION 3.17. CONTRACTS. (a) Neither the Company nor any Company
Subsidiary is a party to or bound by any:
(i) employment agreement or employment contract;
(ii) covenant not to compete or other covenant restricting the
business or operations of the Company or any Company Subsidiary;
(iii) Contract with any officer or director of the Company (other
than employment agreements covered by clause (i) above);
(iv) Contract under which the Company or a Company Subsidiary has
borrowed or agreed to borrow any money from, or issued any note, bond,
debenture or other evidence of indebtedness to, any person or any other
note, bond, debenture or other evidence of indebtedness of the Company or
a Company Subsidiary in any such case which, individually, is in excess
of $1,000,000;
(v) Contract (including any so-called take-or-pay or keepwell
agreements) under which (A) any person including the Company or a Company
Subsidiary, has directly or indirectly guaranteed indebtedness,
liabilities or obligations of the Company or a Company Subsidiary in
excess of $1,000,000 or (B) the Company or a Company Subsidiary has
directly or indirectly guaranteed indebtedness, liabilities or
obligations of any person, including the Company or another Company
Subsidiary, in excess of $1,000,000 (in each case other than endorsements
for the purpose of collection in the ordinary course of business);
(vi) Contract under which the Company or a Company Subsidiary has,
29
directly or indirectly, made any advance, loan, extension of credit or
capital contribution to, or other investment in, any person in excess of
$1,000,000 (other than the Company or a Company Subsidiary and other than
extensions of trade credit in the ordinary course of business);
(vii) Contract granting a Lien upon any Company Property or any
other asset of the Company or any Company Subsidiary securing
indebtedness or other obligations, in each case in excess of $1,000,000;
(viii) Contract providing for indemnification of any person in
excess of $1,000,000 with respect to material liabilities relating to any
current or former business of the Company, a Company Subsidiary or any
predecessor person;
(ix) a Contract not made in the ordinary course of business in which
the amount involved exceeds $1,000,000;
(x) (A) a Contract with a Governmental Entity in which the amount
involved exceeds $1,000,000 or (B) a material license or permit by or
from any Governmental Entity;
(xi) currency exchange, interest rate exchange, commodity exchange
or similar Contract;
(xii) a Contract for any joint venture, partnership or similar
arrangement;
(xiii) a lease, sublease or similar agreement with respect to
Company Property in which the amount involved exceeds $1,000,000;
(xiv) a Contract under which the Company or a Company Subsidiary has
agreed to purchase or lease any real property or any interest in real
property for a purchase price in excess of $1,000,000 or an annual rental
in excess of $1,000,000 or to construct any improvements on real property
or a leasehold interest in real property for a contract sum in excess of
$1,000,000; or
(xv) a Contract other than as set forth above to which the Company
or a Company Subsidiary is a party or by which it or any of its assets or
businesses is bound or subject that is material to the business of the
Company and the Company Subsidiaries or the use or operation of their
assets and in which the amount involved exceeds $10,000,000.
(b) All Contracts required to be listed in the Company Disclosure
Letter (the "Company Contracts") are valid, binding and enforceable against
the Company or the applicable Company Subsidiary in accordance with their
respective terms and, to the knowledge of the Company, are in full force and
effect in all material respects. The Company or the applicable Company
Subsidiary has performed all material obligations
30
required to be performed by it to date under the Company Contracts, and it is
not (with or without the lapse of time or the giving of notice, or both) in
breach or default in any material respect thereunder and, to the knowledge of
the Company, no other party to any Company Contract is (with or without the
lapse of time or the giving of notice, or both) in breach or default in any
material respect thereunder. None of the Company and the Company Subsidiaries
has received any written notice of the intention of any party to terminate any
Company Contract, and no party has, to the knowledge of the Company, any such
intention. Complete and correct copies of all Company Contracts, together with
all modifications and amendments thereto, have been previously delivered or
made available to Parent.
SECTION 3.18. ENVIRONMENTAL MATTERS. Except for such matters that
individually or in the aggregate have not had, and would not reasonably be
expected to have, a Company Material Adverse Effect:
(a) the Company and each of the Company Subsidiaries are, and have
been, in compliance with all Environmental Laws (as defined below), and
neither the Company nor any of the Company Subsidiaries has received any (i)
communication that alleges that the Company or any of the Company Subsidiaries
is in violation of, or has liability under, any Environmental Law or (ii)
written request for information pursuant to any Environmental Law;
(b) (i) the Company and each of the Company Subsidiaries have
obtained and are in compliance with all Permits, licenses and governmental
authorizations pursuant to Environmental Law (collectively "Environmental
Permits") necessary for their operations as currently conducted, (ii) all such
Environmental Permits are valid and in good standing and (iii) neither the
Company nor any of the Company Subsidiaries has been advised by any
Governmental Entity of any actual or potential change in the status or terms
and conditions of any Environmental Permit;
(c) there are no Environmental Claims (as defined below) pending or,
to the knowledge of the Company, threatened, against the Company or any of the
Company Subsidiaries;
(d) there have been no Releases (as defined below) of any Hazardous
Material (as defined below) that would reasonably be expected to form the
basis of any Environmental Claim against the Company or any of the Company
Subsidiaries or against any Person whose liabilities for such Environmental
Claims the Company or any of the Company Subsidiaries has, or may have,
retained or assumed, either contractually or by operation of law;
(e) there are no above-ground or underground storage tanks or known
or suspected asbestos-containing materials on, under or about property owned,
operated or leased by the Company or any Company Subsidiary, nor, to the
knowledge of the
31
Company, were there any underground storage tanks on, under or about any such
property in the past; and
(f) (i) neither the Company nor any of the Company Subsidiaries has
retained or assumed, either contractually or by operation of law, any
liabilities or obligations that would reasonably be expected to form the basis
of any Environmental Claim against the Company or any of the Company
Subsidiaries, and (ii) to the knowledge of the Company, no Environmental
Claims are pending against any Person whose liabilities for such Environmental
Claims the Company or any of the Company Subsidiaries has, or may have,
retained or assumed, either contractually or by operation of law.
(g) DEFINITIONS. As used in this Agreement:
(1) "Environmental Claim" means any and all administrative,
regulatory or judicial actions, suits, orders, demands, directives, claims,
liens, judgments, investigations, proceedings or written or oral notices of
noncompliance or violation by or from any Person alleging liability of
whatever kind or nature (including liability or responsibility for the costs
of enforcement proceedings, investigations, cleanup, governmental response,
removal or remediation, natural resources damages, property damages, personal
injuries, medical monitoring, penalties, contribution, indemnification and
injunctive relief) arising out of, based on or resulting from (y) the presence
or Release of, or exposure to, any Hazardous Materials at any location; or (z)
the failure to comply with any Environmental Law;
(2) "Environmental Laws" means all applicable federal, state, local
and foreign laws, rules, regulations, orders, decrees, judgments, legally
binding agreements or Environmental Permits issued, promulgated or entered
into by or with any Governmental Entity, relating to pollution, natural
resources or protection of endangered or threatened species, human health or
the environment (including ambient air, surface water, groundwater, land
surface or subsurface strata);
(3) "Hazardous Materials" means (y) any petroleum or petroleum
products, radioactive materials or wastes, asbestos in any form, urea
formaldehyde foam insulation and polychlorinated biphenyls; and (z) any other
chemical, material, substance or waste that in relevant form or concentration
is prohibited, limited or regulated under any Environmental Law; and
(4) "Release" means any actual or threatened release, spill,
emission, leaking, dumping, injection, pouring, deposit, disposal, discharge,
dispersal, leaching or migration into or through the environment (including
ambient air, surface water, groundwater, land surface or subsurface strata) or
within any building, structure, facility or fixture.
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SECTION 3.19. INTELLECTUAL PROPERTY. The Company and the Company
Subsidiaries own, or are validly licensed or otherwise have the right to use,
all patents, patent rights, trademarks, trademark rights, trade names, trade
name rights, service marks, service xxxx rights, copyrights and other
proprietary intellectual property rights and computer programs (collectively,
"Intellectual Property Rights"), other than such Intellectual Property Rights
the absence of which have not had or would not reasonably be expected to have
a Company Material Adverse Effect. No claims are pending or, to the knowledge
of the Company, threatened that the Company or any Company Subsidiary is
infringing or otherwise adversely affecting the rights of any person with
regard to any Intellectual Property Right. To the knowledge of the Company, no
person is infringing the rights of the Company or any Company Subsidiary with
respect to any Intellectual Property Right.
SECTION 3.20. BROKERS; SCHEDULE OF FEES AND EXPENSES. No broker,
investment banker, financial advisor or other person, other than Banc of
America Securities LLC, the fees and expenses of which will be paid by the
Company, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the Merger and the other
Transactions based upon arrangements made by or on behalf of the Company. The
Company has furnished to Parent a true and complete copy of all agreements
between the Company and Banc of America Securities LLC relating to the Merger
and the other Transactions.
SECTION 3.21. OPINION OF FINANCIAL ADVISOR. The Company has received
the written opinion of Banc of America Securities LLC, dated the date of this
Agreement, to the effect that, as of such date, the consideration to be
received in the Merger by the holders of Company Common Stock, other than
those holders receiving Merger Consideration in accordance with Sections
2.01(c)(1) and 2.01(c)(2), is fair to such holders from a financial point of
view, a signed copy of which opinion has been (or will be promptly following
the date of this Agreement) delivered to Parent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Except as expressly set forth in that certain letter (with specific
reference to the Section or Subsection of this Agreement to which the
information stated in such disclosure relates and such other Sections or
Subsections of this Agreement to the extent a matter is disclosed in such a
way as to make its relevance to the information called for by such other
Section or Subsection readily apparent), dated as of the date of this
Agreement, from Parent and Sub to the Company (the "Parent Disclosure Letter")
or in any Parent SEC Document (as defined in Section 4.06) filed and publicly
available prior to the date of this Agreement (the "Filed Parent SEC
Documents"), Parent and Sub, jointly and severally, represent and warrant to
the Company that:
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SECTION 4.01. ORGANIZATION, STANDING AND POWER. Each of Parent and
each Significant Subsidiary (as such term is defined in Regulation S-X) of
Parent is duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is organized and has full corporate power and
authority to conduct its businesses as presently conducted. Parent and each
Significant Subsidiary (each, a "Parent Subsidiary") is duly qualified to do
business in each jurisdiction where the nature of its business or the
ownership or leasing of its properties make such qualification necessary or
the failure to so qualify individually or in the aggregate has had or would
reasonably be expected to have a Parent Material Adverse Effect (as defined in
Section 9.03). Parent has delivered to the Company true and complete copies of
the articles of incorporation of Parent, as amended to the date of this
Agreement (as so amended, the "Parent Charter"), and the by-laws of Parent, as
amended to the date of this Agreement (as so amended, the "Parent By-laws").
SECTION 4.02. SUB; PARENT SUBSIDIARIES. (a) Since the date of its
incorporation, Sub has not carried on any business or conducted any operations
other than the execution of this Agreement, the performance of its obligations
hereunder and matters ancillary thereto.
(b) The authorized capital stock of Sub consists of 1,000 shares of
common stock, par value $1.00 per share, all of which have been validly
issued, are fully paid and nonassessable and are owned by Parent free and
clear of any Lien.
(c) All the outstanding shares of capital stock of each other Parent
Subsidiary (other than Marine District Development Company, LLC, which is a
joint venture of which Parent is a 50% owner) have been validly issued and are
fully paid and non-assessable and are owned by Parent, by another Parent
Subsidiary or by Parent and another Parent Subsidiary.
SECTION 4.03. CAPITAL STRUCTURE. The authorized capital stock of
Parent consists of 200,000,000 shares of Parent Common Stock and 5,000,000
shares of preferred stock, par value $0.01 per share. At the close of business
on February 5, 2004 (or, in the case of clause (iv) below, on December 31,
2003), (i) 65,086,471 shares of Parent Common Stock were issued and
outstanding, (ii) no shares of Parent Common Stock were held by Parent in its
treasury, (iii) 7,617,524 shares of Parent Common Stock were subject to
outstanding options to purchase Parent Common Stock granted under any stock
option plan of Parent (a "Parent Employee Stock Option") and (iv) 187,122
additional shares of Parent Common Stock were reserved for issuance pursuant
to stock option plans of Parent. Except as set forth above, at the close of
business on February 5, 2004 (or, in the case of clause (iv) in the
immediately preceding sentence, on December 31, 2003), no shares of capital
stock or other voting securities of Parent were issued, reserved for issuance
or outstanding, and since February 5, 2004, no shares of capital stock or
other voting securities of Parent were issued by Parent, except for shares of
Parent Common Stock issued upon the exercise of Parent Employee Stock
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Options outstanding as of February 5, 2004. There are no outstanding stock
appreciation rights linked to the price of Parent Common Stock that were not
granted in tandem with a related Parent Employee Stock Option. All outstanding
shares of Parent Common Stock are, and all such shares that may be issued
prior to the Effective Time will be when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to or issued in violation
of any purchase option, call option, right of first refusal, preemptive right,
subscription right or any similar right under any provision of the NRS, the
Parent Charter, the Parent By-laws or any Contract to which Parent is a party
or otherwise bound. There are not any bonds, debentures, notes or other
indebtedness of Parent having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
holders of Parent Common Stock may vote ("Voting Parent Debt"). Except as set
forth above, as of the date of this Agreement, there are not any options,
warrants, rights, convertible or exchangeable securities, "phantom" stock
rights, stock appreciation rights, stock-based performance units, commitments,
Contracts, arrangements or undertakings of any kind to which Parent or any
Parent Subsidiary is a party or by which any of them is bound (i) obligating
Parent or any Parent Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other equity
interests in, or any security convertible or exercisable for or exchangeable
into any capital stock of or other equity interest in, Parent or any Parent
Subsidiary or any Voting Parent Debt, (ii) obligating Parent or any Parent
Subsidiary to issue, grant, extend or enter into any such option, warrant,
call, right, security, commitment, Contract, arrangement or undertaking or
(iii) that give any person the right to receive any economic benefit or right
similar to or derived from the economic benefits and rights occurring to
holders of Parent Common Stock. As of the date of this Agreement, there are
not any outstanding contractual obligations of Parent or any Parent Subsidiary
to repurchase, redeem or otherwise acquire any shares of capital stock of
Parent or any Parent Subsidiary.
SECTION 4.04. AUTHORITY; EXECUTION AND DELIVERY; ENFORCEABILITY. (a)
Each of Parent and Sub has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the Merger and the other
Transactions. The execution and delivery by each of Parent and Sub of this
Agreement and the consummation by it of the Merger and the other Transactions
have been duly authorized by all necessary corporate action on the part of
Parent and Sub. Parent, as sole stockholder of Sub, has approved this
Agreement. Each of Parent and Sub has duly executed and delivered this
Agreement, and, assuming due authorization, execution and delivery of this
Agreement by the Company, this Agreement constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.
(b) The Board of Directors of Parent (the "Parent Board"), at a
meeting duly called and held, duly and unanimously adopted resolutions (i)
approving this Agreement, the Merger and the Share Issuance, (ii) directing
that the Share Issuance be submitted to a vote at the Parent Stockholders
Meeting and (iii) recommending that Parent's stockholders approve the Share
Issuance.
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(c) The only vote of holders of any class or series of capital stock
of Parent necessary to approve the Share Issuance is the approval by the
holders of a majority of the stockholders of Parent present and voting, in
accordance with the requirements of the NYSE (the "Parent Stockholder
Approval"). The affirmative vote of the holders of capital stock of Parent, or
any of them, is not necessary to consummate any Transaction other than the
Share Issuance.
SECTION 4.05. NO CONFLICTS; CONSENTS. (a) The execution and delivery
by each of Parent and Sub of this Agreement do not, and the consummation by
Parent and Sub of the Merger and the other Transactions and compliance by
Parent and Sub with the terms hereof 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, cancelation or acceleration of
any obligation or to loss of a material benefit under, or to increased,
additional, accelerated or guaranteed rights or entitlements of any person
under, or result in the creation of any Lien upon any of the properties or
assets of Parent or any of its subsidiaries under, any provision of (i) the
Parent Charter, the Parent By-laws or the charter or organizational documents
of any Parent Subsidiary, (ii) any Contract to which Parent or any Parent
Subsidiary is a party or by which any of their respective properties or assets
is bound or (iii) subject to the filings and other matters referred to in
Section 4.04(b), any Judgment or Law applicable to Parent or any Parent
Subsidiary or their respective properties or assets, other than, in the case
of clauses (ii) and (iii) above, any such items that, individually or in the
aggregate, have not had and would not reasonably be expected to have a Parent
Material Adverse Effect.
(b) No Consent of, or registration, declaration or filing with, or
permit from, any Governmental Entity is required to be obtained or made by
Parent or any Parent Subsidiary in connection with the execution, delivery and
performance of this Agreement or the consummation of the Transactions, other
than (i) compliance with and filings under the HSR Act, (ii) the filing with
the SEC of (A) the Form S-4 and the Joint Proxy Statement and (B) such reports
under, or other applicable requirements of, the Exchange Act, as may be
required in connection with this Agreement, the Merger and the other
Transactions, (iii) the filing of the Articles of Merger with the Secretary of
State of the State of Nevada, (iv) compliance with and such filings as may be
required under applicable Environmental Laws, (v) compliance with and such
filings as may be required under applicable Gaming Laws (including those
promulgated by the Nevada Gaming Authorities), (vi) such filings as may be
required in connection with the Taxes described in Section 6.09 and (vii) such
other items that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Parent Material Adverse Effect.
SECTION 4.06. PARENT SEC DOCUMENTS; UNDISCLOSED LIABILITIES. (a)
Parent has filed all reports, schedules, forms, statements and other documents
required to be filed by Parent with the SEC since January 1, 2003 pursuant to
Sections 13(a) and 15(d) of the Exchange Act (the "Parent SEC Documents").
36
(b) As of its respective date, each Parent SEC Document complied in
all material respects with the requirements of the Exchange Act or the
Securities Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Parent SEC Document, and did not
contain any untrue statement of a material fact or omit 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 Filed
Parent SEC Document has been revised or superseded by a later filed Filed
Parent SEC Document, none of the Parent 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
consolidated financial statements of Parent included in the Parent 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 GAAP (except, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the consolidated financial
position of Parent and its consolidated subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows for the
periods shown (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
(c) Neither Parent nor any Parent Subsidiary has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be set forth on a consolidated balance sheet of Parent and
its consolidated subsidiaries or in the notes thereto and that, individually
or in the aggregate, would reasonably be expected to have a Parent Material
Adverse Effect.
(d) The effectiveness of any additional SEC disclosure requirement
that, as of the date of this Agreement, have been formally proposed that are
not yet in effect, is not expected by Parent to lead to any material change in
Parent's disclosures as set forth in the Filed Parent SEC Documents.
SECTION 4.07. INFORMATION SUPPLIED. None of the information supplied
or to be supplied by Parent or Sub for inclusion or incorporation by reference
in (i) the Form S-4 will, at the time the Form S-4 is filed with the SEC, at
any time it is amended or supplemented or at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, or (ii) the Joint Proxy Statement
will, at the date it is first mailed to the Company's stockholders or Parent's
stockholders or at the time of the Company Stockholders Meeting or the Parent
Stockholders Meeting, contain any untrue statement of a material fact or omit
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
are made, not misleading. The
37
Form S-4 will comply as to form in all material respects with the requirements
of the Securities Act and the rules and regulations thereunder, except that no
representation is made by Parent or Sub with respect to statements made
therein based on information supplied by the Company for inclusion therein or
incorporation by reference therein. The Joint Proxy Statement will comply as
to form in all material respects with the requirements of the Exchange Act and
the rules and regulations thereunder, except that no representation is made by
Parent with respect to statements made or incorporated by reference therein
based on information supplied by the Company in writing for inclusion or
incorporation by reference in the Form S-4 or the Joint Proxy Statement.
SECTION 4.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. From the date of
the most recent audited financial statements included in the Filed Parent SEC
Documents to the date of this Agreement, (i) Parent has conducted its business
only in the ordinary course and (ii) there has not been any state of facts,
event, change, effect, development, condition or occurrence that, individually
or in the aggregate, has had or would reasonably be expected to have a Parent
Material Adverse Effect.
SECTION 4.09. LITIGATION. There is no suit, action or proceeding
pending or, to the knowledge of Parent, threatened against Parent or any
Parent Subsidiary that, individually or in the aggregate, has had or would
reasonably be expected to have a Parent Material Adverse Effect, nor is there
any Judgment outstanding against Parent or any Parent Subsidiary that has had
or would reasonably be expected to have a Parent Material Adverse Effect.
SECTION 4.10. COMPLIANCE WITH APPLICABLE LAWS. Parent and the Parent
Subsidiaries and their relevant personnel and operations are in compliance
with all applicable Laws, including applicable Gaming Laws and Laws relating
to occupational health and safety, except to the extent that the failure to be
in compliance with any such Law has not had and would not reasonably be
expected to have a Parent Material Adverse Effect. Neither Parent nor any
Parent Subsidiary has received any written communication during the past two
years from a Governmental Entity that alleges that Parent or a Parent
Subsidiary is not in compliance in any material respect with any applicable
Law. Parent and the Parent Subsidiaries have in effect all Permits necessary
or advisable for them to own, lease or operate their properties and assets and
to carry on their businesses as now conducted, except for such Permits the
absence of which has not had and would not reasonably be expected to have a
Parent Material Adverse Effect. There has occurred no violation of, default
(with or without notice or lapse of time or both) under, or event giving to
others any right of termination, amendment or cancelation of, with or without
notice or lapse of time or both, any such Permit, except for any such
violation, default or event which has not had or would not reasonably be
expected to have a Parent Material Adverse Effect. There is no event which, to
the knowledge of Parent, would reasonably be expected to result in the
revocation, cancelation, non-renewal or adverse modification of any such
Permit.
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SECTION 4.11. BROKERS; SCHEDULE OF FEES AND EXPENSES. No broker,
investment banker, financial advisor or other person, other than Deutsche Bank
Group, the fees and expenses of which will be paid by Parent, is entitled to
any broker's, finder's, financial advisor's or other similar fee or commission
in connection with the Merger and the other Transactions based upon
arrangements made by or on behalf of Parent or Sub.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.01. CONDUCT OF BUSINESS. (a) Conduct of Business by the
Company. Except for matters set forth in Section 5.01(a) of the Company
Disclosure Letter or otherwise expressly permitted by this Agreement, from the
date of this Agreement to the Effective Time the Company shall, and shall
cause each Company Subsidiary to, conduct its business in the usual, regular
and ordinary course in substantially the same manner as previously conducted
and use all reasonable efforts to preserve intact its current business
organization, keep available the services of its current officers and
employees and keep its relationships with customers, suppliers, licensors,
licensees, distributors and others having business dealings with them to the
end that its goodwill and ongoing business shall be unimpaired at the
Effective Time. In addition, and without limiting the generality of the
foregoing, except for matters set forth in Section 5.01(a) of the Company
Disclosure Letter or otherwise expressly permitted by this Agreement, from the
date of this Agreement to the Effective Time, the Company shall not, and shall
not permit any Company Subsidiary to, do any of the following without the
prior written consent of Parent, which consent shall not be unreasonably
withheld or delayed:
(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
the $3.50 per share dividend declared prior to the date of this Agreement
or dividends and distributions by a direct or indirect wholly owned
Company Subsidiary to its parent, (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) purchase, redeem or otherwise acquire any (1)
shares of capital stock of the Company or any Company Subsidiary, (2) any
other securities thereof or any rights, warrants or options to acquire
any such shares or other securities or (3) any options, warrants, rights,
securities, units, commitments, Contracts, arrangements or undertakings
of any kind that give any person the right to receive any economic
benefits and rights accruing to holders of capital stock of the Company
or any Company Subsidiary;
(ii) issue, deliver, sell or grant (A) any shares of its capital
stock, (B) any Voting Company Debt or other voting securities, (C) any
securities convertible
39
into or exchangeable for, or any options, warrants or rights to acquire,
any such shares, Voting Company Debt, voting securities or convertible or
exchangeable securities, (D) any "phantom" stock, "phantom" stock rights,
stock appreciation rights or stock-based performance units or (E) any
options, warrants, rights, securities, units, commitments, Contracts,
arrangements or undertakings of any kind that give any person the right
to receive any economic benefits and rights accruing to holders of
capital stock of the Company or any Company Subsidiary, other than the
issuance of Company Common Stock upon the exercise of Company Employee
Stock Options outstanding on the date of this Agreement and in accordance
with their present terms;
(iii) amend its articles of incorporation, by-laws or other
comparable charter or organizational documents;
(iv) acquire or agree to acquire (A) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any
other manner, any equity interest in or business or any corporation,
partnership, joint venture, association or other business organization or
division thereof or (B) any assets that are material, individually or in
the aggregate, to the Company and the Company Subsidiaries, taken as a
whole, except purchases of inventory in the ordinary course of business
consistent with past practice;
(v) (A) grant to any Participant any loan or increase in
compensation, benefits, perquisites or any bonus or award, or pay any
bonus to any such person, except to the extent required under employment
agreements in effect as of the date of this Agreement as set forth in
Section 3.10(b) of the Company Disclosure Letter, (B) grant to any
Participant any increase in severance, change in control or termination
pay or benefits, except to the extent required under any agreement in
effect as of the date of this Agreement, as set forth in Section 3.10(b)
of the Company Disclosure Letter, (C) enter into any employment, change
in control, loan, retention, consulting, indemnification, severance,
termination or similar agreement with any Participant, (D) take any
action to fund or in any other way secure the payment of compensation or
benefits under any Company Benefit Plan or Company Benefit Agreement, (E)
establish, adopt, enter into, terminate or amend any collective
bargaining agreement, Company Benefit Plan or Company Benefit Agreement
or (F) take any action to accelerate any rights or benefits, including
vesting and payment, or make any material determinations, under any
collective bargaining agreement, Company Benefit Plan or Company Benefit
Agreement;
(vi) make any change in accounting methods, principles or practices
materially affecting the reported consolidated assets, liabilities or
results of operations of the Company, except insofar as may have been
required by a change in GAAP;
40
(vii) sell, lease (as lessor), license or otherwise dispose of or
subject to any Lien any properties or assets that have a fair value,
individually, in excess of $250,000 or, in the aggregate, in excess of
$2,500,000;
(viii) other than with respect to any credit facility or line of
credit existing prior to the date of this Agreement, copies of which have
been previously delivered or made available to Parent, (A) incur any
indebtedness for borrowed money or guarantee any such indebtedness of
another person, issue or sell any debt securities or warrants or other
rights to acquire any debt securities of the Company or any Company
Subsidiary, 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, except for short- term
borrowings incurred in the ordinary course of business consistent with
past practice, or (B) make any loans, advances or capital contributions
to, or investments in, any other person, other than to or in the Company
or any direct or indirect wholly owned Company Subsidiary;
(ix) make or agree to make any new capital expenditure or
expenditures that, in the aggregate, would exceed the aggregate amount
budgeted in the Company's 2004 budget previously delivered to Parent;
(x) make any material Tax election or settle or compromise any
material Tax liability or refund;
(xi) (A) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in respect
of any credit facility or line of credit existing prior to the date of
this Agreement, copies of which have been previously delivered or made
available to Parent, or the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved against
in, or contemplated by, the most recent consolidated financial statements
(or the notes thereto) of the Company included in the Company SEC
Documents or incurred in the ordinary course of business consistent with
past practice, (B) cancel any indebtedness in excess of $50,000 owed to
the Company or waive any claims or rights of substantial value of the
Company or (C) waive the benefits of, or agree to modify in any manner,
any confidentiality, standstill or similar agreement to which the Company
or any Company Subsidiary is a party;
(xii) enter into any Contract not set forth above having a duration
of more than one year and total payment obligations of the Company in
excess of $1,000,000 (other than (A) the renewal, on substantially
similar terms, of any Contract existing on the date of this Agreement and
(B) Contracts entered into in respect of capital expenditures permitted
by Section 5.01(a)(ix)); or
41
(xiii) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) OTHER ACTIONS. The Company and Parent shall not, and shall not
permit any of their respective subsidiaries to, take any action that would, or
that would reasonably be expected to, result in (i) any of the representations
and warranties of such party set forth in this Agreement that is qualified as
to materiality becoming untrue, (ii) any of such representations and
warranties that is not so qualified becoming untrue in any material respect or
(iii) any condition to the Merger set forth in Article VII not being
satisfied.
(c) ADVICE OF CHANGES. The Company and Parent shall promptly advise
the other orally and in writing of any state of facts, event, change, effect,
development, condition or occurrence that, individually or in the aggregate,
has had or would reasonably be expected to have a Material Adverse Effect on
such party.
SECTION 5.02. NO SOLICITATION. (a) The Company shall not, nor shall
it authorize or permit any Company Subsidiary to, nor shall it authorize or
permit any officer, director or employee of, or any investment banker,
attorney or other advisor or representative (collectively, "Representatives")
of, the Company or any Company Subsidiary to, (i) directly or indirectly
solicit, initiate or encourage the submission of, any Company Takeover
Proposal (as defined in Section 5.02(e)), (ii) enter into any agreement with
respect to any Company Takeover Proposal or (iii) directly or indirectly
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Company Takeover Proposal; provided,
however, that prior to receipt of the Company Stockholder Approval, the
Company may, in response to an unsolicited bona fide Company Takeover Proposal
which did not result from a breach of this Section 5.02(a) and which the
Company Board determines, in good faith, after consultation with outside
counsel and financial advisors, may reasonably be expected to lead to a
Superior Company Proposal (as defined in Section 5.02(e)), and subject to
compliance with Section 5.02(c), (x) furnish information with respect to the
Company to the person making such Company Takeover Proposal and its
Representatives pursuant to a customary confidentiality agreement not less
restrictive of the other party than the Confidentiality Agreement (as defined
in Section 6.02) and (y) participate in discussions or negotiations with such
person and its Representatives regarding any Company Takeover Proposal.
Without limiting the foregoing, it is agreed that any violation of the
restrictions set forth in the preceding sentence by any Representative of the
Company or any Company Subsidiary, whether or not such person is purporting to
act on behalf of the Company or any Company Subsidiary or otherwise, shall be
deemed to be a breach of this Section 5.02(a) by the Company.
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(b) Neither the Company Board nor any committee thereof shall (i)
withdraw or modify in a manner adverse to Parent or Sub, or publicly propose
to withdraw or modify in a manner adverse to Parent or Sub, the approval or
recommendation by the Company Board of this Agreement or the Merger, (ii)
approve any letter of intent, agreement in principle, acquisition agreement or
similar agreement relating to any Company Takeover Proposal or (iii) approve
or recommend, or publicly propose to approve or recommend, any Company
Takeover Proposal. Notwithstanding the foregoing, if, prior to receipt of the
Company Stockholder Approval, (v) the Company Board has received a Superior
Company Proposal, (w) as a result thereof the Company Board shall have
determined in good faith, after consultation with outside counsel, that it is
required for the purpose of fulfilling its fiduciary duties under applicable
Law, (x) the Company has notified Parent in writing of the determination
described in clause (w) above, (y) at least three business days following
receipt by Parent of the notice received in clause (x) above, and taking into
account any revised proposal made by Parent since receipt of the notice
referred to in clause (x) above, the Company Board determines that such
Superior Company Proposal remains a Superior Company Proposal in accordance
with clause (w) above, and (z) the Company is in compliance with this Section
5.02, the Company Board may withdraw or modify its approval or recommendation
of the Merger and this Agreement.
(c) The Company promptly shall advise Parent orally and in writing
of any Company Takeover Proposal or any inquiry with respect to or that would
reasonably be expected to lead to any Company Takeover Proposal, the identity
of the person making any such Company Takeover Proposal or inquiry and the
material terms of any such Company Takeover Proposal or inquiry. The Company
shall (i) keep Parent informed of the status (including any change to the
terms thereof) of any such Company Takeover Proposal or inquiry and (ii)
provide to Parent as soon as practicable after receipt or delivery thereof
with copies of the Company Takeover Proposal (including any amendments or
supplements thereto) and all such other material information provided in
writing to the Company by the party making such Company Takeover Proposal.
(d) Nothing contained in this Section 5.02 shall prohibit the
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2(a) promulgated under the Exchange Act or from making any
required disclosure to the Company's stockholders if, in the good faith
judgment of the Company Board, after consultation with outside counsel,
failure so to disclose would be inconsistent with the fulfillment of its
fiduciary duties or any other obligations under applicable Law.
(e) For purposes of this Agreement:
"Company Takeover Proposal" means (i) any proposal or offer for a
merger, consolidation, dissolution, recapitalization or other business
combination involving the Company, (ii) any proposal for the issuance by
the Company of over 30% of its equity securities as consideration for the
assets or securities of
43
another person or (iii) any proposal or offer to acquire in any manner,
directly or indirectly, over 30% of the equity securities or consolidated
total assets of the Company, in each case other than the Merger.
"Superior Company Proposal" means any proposal made by a third party
to acquire substantially all the equity securities or assets of the
Company, pursuant to a tender or exchange offer, a merger, a
consolidation, a liquidation or dissolution, a recapitalization, a sale
of all or substantially all its assets or otherwise, on terms which the
Company Board determines in good faith, after consultation with the
Company's outside legal counsel and financial advisors, to be more
favorable from a financial point of view to the holders of the Company
Common Stock than the Merger, taking into account all the terms and
conditions of such proposal and this Agreement (including any proposal by
Parent to amend the terms of the Merger) and the Transactions; provided
that the Company Board shall not so determine that any such proposal is a
Superior Company Proposal prior to the time that is 36 hours after the
time at which the Company has complied in all material respects with
Section 5.02(c) with respect to such proposal.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. PREPARATION OF THE FORM S-4 AND THE JOINT PROXY
STATEMENT; STOCKHOLDERS MEETINGS. (a) As soon as practicable following the
date of this Agreement, the Company and Parent shall prepare and file with the
SEC a joint proxy statement (the "Joint Proxy Statement") in preliminary form
and Parent shall prepare and file with the SEC the Form S-4, in which the
Joint Proxy Statement will be included as a prospectus, and each of the
Company and Parent shall use its reasonable efforts to respond as promptly as
practicable to any comments of the SEC with respect thereto. Each of the
Company and Parent shall use its reasonable efforts to have the Form S-4
declared effective under the Securities Act as promptly as practicable after
such filing. Parent shall also take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified) required to
be taken under any applicable state securities laws in connection with the
issuance of Parent Common Stock in the Merger and under the Company Stock Plan
and the Company shall furnish all information concerning the Company and the
holders of the Company Common Stock and rights to acquire Company Common Stock
pursuant to the Company Stock Plan as may be reasonably requested in
connection with any such action. The parties shall notify each other promptly
of the receipt of any comments from the SEC or its staff and of any request by
the SEC or its staff for amendments or supplements to the Joint Proxy
Statement or the Form S-4 or for additional information and shall supply each
other with copies of all correspondence between such or any of its
representatives, on the one hand,
44
and the SEC or its staff, on the other hand, with respect to the Joint Proxy
Statement, the Form S-4 or the Merger.
(b) If, at any time prior to the receipt of the Company Stockholder
Approval or the Parent Stockholder Approval, any event occurs with respect to
the Company or any Company Subsidiary, or any change occurs with respect to
other information supplied by the Company for inclusion in the Joint Proxy
Statement or the Form S-4, which is required to be described in an amendment
of, or a supplement to, the Joint Proxy Statement or the Form S-4, the Company
shall promptly notify Parent of such event, and the Company and Parent shall
cooperate in the prompt filing with the SEC of any necessary amendment or
supplement to the Joint Proxy Statement and the Form S-4 and, as required by
Law, in disseminating the information contained in such amendment or
supplement to the Company's stockholders.
(c) If, at any time prior to the receipt of the Company Stockholder
Approval or the Parent Stockholder Approval, any event occurs with respect to
Parent or any Parent Subsidiary, or change occurs with respect to other
information supplied by Parent for inclusion in the Joint Proxy Statement or
the Form S-4, which is required to be described in an amendment of, or a
supplement to, the Joint Proxy Statement or the Form S-4, Parent shall
promptly notify the Company of such event, and Parent and the Company shall
cooperate in the prompt filing with the SEC of any necessary amendment or
supplement to the Joint Proxy Statement and the Form S-4 and, as required by
Law, in disseminating the information contained in such amendment or
supplement to the Company's stockholders.
(d) The Company shall, as soon as practicable following the date of
this Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Company Stockholders Meeting") for the purpose of seeking
the Company Stockholder Approval. The Company shall use its reasonable efforts
to cause the Joint Proxy Statement to be mailed to the Company's stockholders
as promptly as practicable after the date of this Agreement. The Company
shall, through the Company Board, recommend to its stockholders that they give
the Company Stockholder Approval, except to the extent that the Company Board
shall have withdrawn or modified its approval or recommendation of this
Agreement or the Merger as permitted by the last sentence of Section 5.02(b).
Without limiting the generality of the foregoing, the Company agrees that its
obligations pursuant to the first sentence of this Section 6.01(d) shall not
be affected by the commencement, public proposal, public disclosure or
communication to the Company of any Company Takeover Proposal; it being
understood and agreed among Parent, Sub and the Company that in the event
that, prior to the date of the Company Stockholders Meeting, the Company
withdraws or modifies its approval or recommendation of the Merger and this
Agreement in accordance with the last sentence of Section 5.02(b), then for
purposes of the first sentence of this Section 6.01(d), the term "Company
Stockholder Approval" shall mean both (i) the approval of this Agreement by a
majority of the voting power of the holders of the outstanding Company Common
45
Stock and (ii) the approval of this Agreement by a majority of the voting
power of the holders of the outstanding Company Common Stock present and duly
voted (in person or by proxy) at the Company Stockholders Meeting, exclusive
of those votes taken in respect of the shares of Company Common Stock held by
Xxxxxxx X. Xxxxxxx, Xxxxx Xxxxxx and Xxxxxxxx Xxxx.
(e) Parent shall, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Parent Stockholders Meeting") for the purpose of seeking
the Parent Stockholder Approval. Parent shall use its reasonable efforts to
cause the Joint Proxy Statement to be mailed to Parent's stockholders as
promptly as practicable after the date of this Agreement. Parent shall,
through the Parent Board, recommend to its stockholders that they give the
Parent Stockholder Approval.
(f) The Company shall use all reasonable efforts to cause to be
delivered to Parent a letter of PricewaterhouseCoopers LLP, the Company's
independent public accountants, dated a date within two business days before
the date on which the Form S-4 shall become effective and addressed to Parent,
in form and substance reasonably satisfactory to Parent and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
(g) Parent shall use all reasonable efforts to cause to be delivered
to the Company a letter of Deloitte & Touche LLP, Parent's independent public
accountants, dated a date within two business days before the date on which
the Form S-4 shall become effective and addressed to the Company, in form and
substance reasonably satisfactory to the Company and customary in scope and
substance for letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
SECTION 6.02. ACCESS TO INFORMATION; CONFIDENTIALITY. Each of the
Company and Parent shall, and shall cause each of its respective subsidiaries
to, afford to the other party and to the officers, employees, accountants,
counsel, financial advisors and other representatives of such other party,
reasonable access during normal business hours during the period prior to the
Effective Time to all their respective properties, books, contracts,
commitments, personnel and records and, during such period, each of the
Company and Parent shall, and shall cause each of its respective subsidiaries
to, furnish promptly to the other party (a) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of Federal or state securities laws and (b) all
other information concerning its business, properties and personnel as such
other party may reasonably request. All information exchanged pursuant to this
Section 6.02 shall be subject to the confidentiality agreement dated February
2, 2004 between the Company and Parent (the "Confidentiality Agreement").
46
SECTION 6.03. REASONABLE EFFORTS; NOTIFICATION. (a) Upon the terms
and subject to the conditions set forth in this Agreement, each of the parties
shall use all reasonable efforts to take, or cause to be taken, 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 and the
other Transactions to be performed or consummated by such party in accordance
with the terms of this Agreement, including (i) in the case of Parent, the
obtaining of all necessary approvals under any applicable Gaming Laws required
in connection with this Agreement, the Merger and the other Transactions, (ii)
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 an
approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (iii) the obtaining of all necessary consents, approvals
or waivers from third parties, (iv) the defending of any lawsuits or other
legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the Transactions to be performed or
consummated by such party in accordance with the terms of this Agreement,
including seeking to have any stay or temporary restraining order entered by
any court or other Governmental Entity vacated or reversed and (v) the
execution and delivery of any additional instruments necessary to consummate
the Transactions to be performed or consummated by such party in accordance
with the terms of this Agreement and to fully carry out the purposes of this
Agreement. In connection with and without limiting the foregoing, the Company
and the Company Board shall (x) take all reasonable action necessary to ensure
that no state takeover statute or similar statute or regulation is or becomes
applicable to any Transaction or this Agreement and (y) if any state takeover
statute or similar statute or regulation becomes applicable to any Transaction
or this Agreement, take all reasonable action necessary to ensure that the
Merger and the other Transactions may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger and the other
Transactions.
(b) The Company shall give prompt notice to Parent, and Parent or
Sub shall give prompt notice to the Company, of (i) any representation or
warranty made by it contained in this Agreement that is qualified as to
materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material 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) Nothing in Section 6.03(a) shall require Parent to dispose of
any of its assets or to limit its freedom of action with respect to any of its
businesses, or to consent to any disposition of the Company's assets or limits
on the Company's freedom of action
47
with respect to any of its businesses, or to commit or agree to any of the
foregoing, and nothing in Section 6.03(a) shall authorize the Company to
commit or agree to any of the foregoing, to obtain any consents, approvals,
permits or authorizations or to remove any impediments to the Merger relating
solely to the HSR Act or other antitrust, competition or premerger
notification, trade regulation law, regulation or order ("Antitrust Laws") or
to avoid the entry of, or to effect the dissolution of, any injunction,
temporary restraining order or other order in any suit or proceeding relating
solely to Antitrust Laws.
SECTION 6.04. COMPANY STOCK OPTIONS. (a) Except as otherwise agreed
in writing between Parent and any holder of Company Employee Stock Options,
Parent shall not assume any Company Employee Stock Options that are not
intended to qualify as "incentive stock options" within the meaning of Section
422 of the Code ("Company ISOs") in connection with the transactions
contemplated by this Agreement. Accordingly, as soon as reasonably practicable
following the date of this Agreement, the Company Board (or, if appropriate,
any committee administering the Company Stock Plan) shall adopt such
resolutions or take such other actions as may be required to:
(i) provide that each outstanding Company Employee Stock Option that
is not a Company ISO (a "Company NQSO") that is outstanding immediately
prior to the Effective Time shall be canceled immediately prior to the
Effective Time, whether vested or unvested, with the holder thereof
becoming entitled to receive an amount of cash equal to the excess, if
any, of $550 in cash over the per share exercise price of such Company
NQSO, multiplied by the number of shares of Company Common Stock subject
to such Company NQSO, subject to any applicable withholding of taxes; and
(ii) adjust the terms of all outstanding Company ISOs to provide
that, at the Effective Time, each Company ISO outstanding immediately
prior to the Effective Time shall be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under such
Company ISO, 32.8025 shares of Parent Common Stock at a price per share
equal to $3.04855 (each, as so adjusted, an "Adjusted Option"); provided,
however, that the foregoing shall be adjusted to the minimum extent
necessary to comply with Section 424(a) of the Code;
(iii) make such other changes to the Company Stock Plan as the
Company and Parent shall mutually agree.
(b) At the Effective Time, and subject to compliance by the Company
with Section 6.04(a), Parent shall assume all the obligations of the Company
under the Company Stock Plan, each outstanding Adjusted Option and the
agreements evidencing the grants thereof. As soon as practicable after the
Effective Time, Parent shall deliver to the holders of Adjusted Options
appropriate notices setting forth such holders' rights pursuant to the Company
Stock Plan and indicating that the agreements evidencing the grants of such
Adjusted Options shall continue in effect on the same terms and conditions
48
(subject to the adjustments required by this Section 6.04 after giving effect
to the Merger). Parent shall comply with the terms of the Company Stock Plan
and ensure, to the extent required by, and subject to the provisions of, the
Company Stock Plan, that the Adjusted Options continue to qualify as
"incentive stock options" after the Effective Time.
(c) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery
upon exercise of the Adjusted Options assumed in accordance with this Section
6.04. As soon as reasonably practicable after the Effective Time, Parent shall
file a registration statement on Form S-8 (or any successor or other
appropriate form) with respect to the shares of Parent Common Stock subject to
such Adjusted Options and shall use all reasonable efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained
therein) for so long as such Adjusted Options remain outstanding.
(d) In this Agreement:
"Company Employee Stock Option" means any option to purchase Company
Common Stock granted under the Company Stock Plan or otherwise.
"Company Stock Plan" means the Company 1996 Stock Incentive Plan.
SECTION 6.05. BENEFIT PLANS. (a) Parent shall cause the Surviving
Corporation to maintain for a period of one year after the Effective Time the
Company Benefit Plans as in effect on the date of this Agreement as set forth
on the Company Disclosure Letter (other than the Company Stock Plan and any
other Company Benefit Plan that provides benefits based on the value of
Company Common Stock) or to provide benefits (excluding benefits attributable
to equity-based plans or grants) to each current employee of the Company and
the Company Subsidiaries that are at least as favorable in the aggregate to
such employees as those in effect on the date of this Agreement.
(b) From and after the Effective Time, Parent shall, and shall cause
the Surviving Corporation to honor in accordance with their respective terms
(as in effect on the date of this Agreement), all the Company's employment,
severance and termination agreements, plans and policies disclosed in the
Company Disclosure Letter.
(c) With respect to any employee benefit plan, program or
arrangement maintained by Parent or any Parent Subsidiary (including any
severance plan), for all purposes of determining eligibility to participate
and vesting but not for purposes of benefit accrual, service with the Company
or any Company Subsidiary shall be treated as service with Parent or any
Parent Subsidiary; provided, however, that such service need not be recognized
to the extent that such recognition would result in any duplication of
benefits.
49
(d) Parent shall waive, or cause to be waived, any pre-existing
condition limitation under any welfare benefit plan maintained by Parent or
any of its affiliates (other than the Company) in which employees of the
Company and the Company Subsidiaries (and their eligible dependents) will be
eligible to participate from and after the Effective Time, except to the
extent that such pre-existing condition limitation would have been applicable
under the comparable Company welfare benefit plan immediately prior to the
Effective Time. Parent shall recognize, or cause to be recognized, the dollar
amount of all expenses incurred by each Company employee (and his or her
eligible dependents) during the calendar year in which the Effective Time
occurs for purposes of satisfying such year's deductible and co-payment
limitations under the relevant welfare benefit plans in which they will be
eligible to participate from and after the Effective Time.
SECTION 6.06. INDEMNIFICATION. (a) Parent shall, to the fullest
extent permitted by Law, cause the Surviving Corporation to honor all the
Company's obligations to indemnify (including any obligations to advance funds
for expenses) the current or former directors or officers of the Company for
acts or omissions by such directors and officers occurring prior to the
Effective Time to the extent that such obligations of the Company exist on the
date of this Agreement, whether pursuant to the Company Charter, the Company
By-laws, individual indemnity agreements or otherwise, and such obligations
shall survive the Merger and shall continue in full force and effect in
accordance with the terms of the Company Charter, the Company By-laws and such
individual indemnity agreements from the Effective Time until the expiration
of the applicable statute of limitations with respect to any claims against
such directors or officers arising out of such acts or omissions.
(b ) For a period of six years after the Effective Time, Parent shall
cause to be maintained in effect the current policies of directors' and
officers' liability insurance maintained by the Company (provided that Parent
may substitute therefor policies with reputable and financially sound carriers
of at least the same coverage and amounts containing terms and conditions
which are no less advantageous) with respect to claims arising from or related
to facts or events which occurred at or before the Effective Time; provided,
however, that Parent shall not be obligated to make annual premium payments
for such insurance to the extent such premiums exceed 175% of the annual
premiums paid as of the date hereof by the Company for such insurance (such
175% amount, the "Maximum Premium"). If such insurance coverage cannot be
obtained at all, or can only be obtained at an annual premium in excess of the
Maximum Premium, Parent shall maintain the most advantageous policies of
directors' and officers' insurance obtainable for an annual premium equal to
the Maximum Premium. The Company represents to Parent that the Maximum Premium
is $270,156.25.
SECTION 6.07. FEES AND EXPENSES. (a) Except as provided below, all
fees and expenses incurred in connection with the Merger shall be paid by the
party incurring such fees or expenses, whether or not the Merger is
consummated, except that
50
expenses incurred in connection with filing, printing and mailing the Joint
Proxy Statement and the Form S-4 shall be shared equally by Parent and the
Company.
(b) If (i) after the date of this Agreement, any person makes a
Company Takeover Proposal or amends a Company Takeover Proposal made prior to
the date of this Agreement, (ii) this Agreement is terminated by either the
Company or Parent pursuant to Section 8.01(b)(i) or 8.01(b)(iii) or by Parent
pursuant to Section 8.01(c) and (iii) within 30 months after the date of this
Agreement the Company enters into a definitive agreement to consummate, or
consummates, the transactions contemplated by a Company Takeover Proposal,
then the Company shall pay to Parent by wire transfer of same-day funds a fee
of $30,000,000 (the "Break-up Fee"), which fee shall be payable and shall be
paid on the date of consummation of such transactions. Solely for the purposes
of Section 6.07(b)(iii), the term "Company Takeover Proposal" shall have the
meaning assigned to such term in Section 5.02(e), except that all references
to "30%" shall be changed to "40%". The Company acknowledges that the
agreements contained in this Section 6.07(b) are an integral part of the
transaction contemplated by this Agreement, and that, without these
agreements, Parent would not enter into this Agreement; accordingly, if the
Company fails promptly to pay the Break-up Fee, and, in order to obtain such
payment, Parent commences a suit that results in a judgment against the
Company for the Break-up Fee, the Company shall pay to Parent interest on the
Break-up Fee from and including the date payment of the Break-up Fee was due
to but excluding the date of actual payment at the prime rate of Bank of
America, National Association in effect on the date such payment was required
to be made, together with reasonable legal fees and expenses incurred in
connection with such suit.
SECTION 6.08. PUBLIC ANNOUNCEMENTS. Parent and Sub, on the one hand,
and the Company, on the other hand, shall consult with each other before
issuing, and provide each other reasonable opportunity to review and comment
upon, any press release or other public statements with respect to the Merger
and the other Transactions 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.
SECTION 6.09. TRANSFER TAXES. All stock transfer, real estate
transfer, documentary, stamp, recording and other similar Taxes (including
interest, penalties and additions to any such Taxes) ("Transfer Taxes")
incurred in connection with the Transactions shall be paid by either Sub or
the Surviving Corporation, and the Company shall cooperate with Sub and Parent
in preparing, executing and filing any Tax Returns with respect to such
Transfer Taxes.
SECTION 6.10. AFFILIATES. Promptly following the date of execution
of this Agreement, the Company shall deliver to Parent a letter identifying
all persons who are expected by the Company to be, at the date of the Company
Stockholders Meeting, "affiliates" of the Company for purposes of Rule 145
under the Securities Act. The
51
Company shall use all reasonable efforts to cause each such person to deliver
to Parent on or prior to the date of mailing of the Joint Proxy Statement a
written agreement substantially in the form attached as Exhibit A.
SECTION 6.11. STOCK EXCHANGE LISTING. Parent shall use all
reasonable efforts to cause the shares of Parent Common Stock to be issued in
the Merger to be approved for listing on the NYSE, subject to official notice
of issuance, prior to the Closing Date.
SECTION 6.12. TAX TREATMENT. The parties intend the Merger to
qualify as a reorganization under Section 368(a) of the Code. Each party and
its affiliates shall use all reasonable efforts to cause the Merger to so
qualify and to obtain the opinions of Xxxxxx, Xxxx & Xxxxxxxx LLP and Cravath,
Swaine & Xxxxx LLP to the effect that the Merger will be treated for U.S.
Federal income tax purposes as a "reorganization" within the meaning of
Section 368(a) of the Code and that Parent, Sub and the Company will each be a
party to that reorganization within the meaning of Section 368(b) of the Code.
For purposes of the tax opinions described in Sections 7.02(e) and 7.03(d) of
this Agreement, each of Parent and the Company will provide customary
representation letters, substantially in the form attached hereto as Exhibits
B and C each dated on or about the date that is two business days prior to the
date the Joint Proxy Statement is mailed to the stockholders of Parent and the
Company and reissued as of the Closing Date. Each of Parent, Sub and the
Company and each of their respective affiliates shall not take any action and
shall not fail to take any action or suffer to exist any condition which
action or failure to act or condition would prevent, or would reasonably be
likely to prevent, the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
SECTION 6.13. STOCKHOLDER LITIGATION. The Company shall give Parent
the opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and its directors relating to the Merger or any
other Transaction; provided, however, that no such settlement shall be agreed
to without Parent's consent.
SECTION 6.14. PARENT BOARD. Parent shall take all actions reasonably
necessary to provide that the Parent Board be expanded, on or prior to the
Closing Date, to include, as directors, each of Xxxxxxx X. Xxxxxxx and two
designees of Xxxxxxx X. Xxxxxxx satisfactory to Parent.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation 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:
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(a) STOCKHOLDER APPROVALS. The Company shall have obtained the
Company Stockholder Approval and Parent shall have obtained the Parent
Stockholder Approval.
(b) NYSE LISTING. The shares of Parent Company Stock issuable to the
Company's stockholders pursuant to this Agreement shall have been approved for
listing on the NYSE, subject to official notice of issuance.
(c) CONSENTS, APPROVALS AND AUTHORIZATIONS. All consents, approvals,
orders or authorizations from, and all declarations, filings and registrations
with, any Governmental Entity, including all necessary approvals under any
applicable Gaming Laws, required to consummate the Merger and the other
Transactions shall have been obtained or made without the imposition of any
material conditions, and the waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have expired or been
terminated.
(d) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that prior
to asserting this condition, subject to Section 6.03, each of the parties
shall have used its reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any such
injunction or other order that may be entered.
(e) FORM S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order, and Parent shall have received all state securities or
"blue sky" authorizations necessary to issue Parent Common Stock pursuant to
the Merger.
(f) NO LITIGATION. There shall not be pending or threatened any
suit, action or proceeding by any Governmental Entity or any other person, in
each case that has a reasonable likelihood of success, (i) challenging the
acquisition by Parent or Sub of any Company Common Stock, seeking to restrain
or prohibit the consummation of the Merger or any other Transaction or seeking
to obtain from the Company, Parent or Sub any damages that are material in
relation to the Company and the Company Subsidiaries taken as a whole, (ii)
seeking to prohibit or limit the ownership or operation by the Company, Parent
or any of their respective subsidiaries of any material portion of the
business or assets of the Company, Parent or any of their respective
subsidiaries of any material portion of the business or assets of the Company,
Parent or any of their respective subsidiaries, or to compel the Company,
Parent or any of their respective subsidiaries to dispose of or hold separate
any material portion of the business or assets of the Company, Parent or any
of their respective subsidiaries, as a result of the Merger or any other
Transaction, (iii) seeking to impose limitations on the ability of Parent to
acquire or hold, or exercise full rights of ownership of, any shares of
Company Common Stock, including the right to vote the Company Common Stock
purchased by it on all
53
matters properly presented to the stockholders of the Company, (iv) seeking to
prohibit Parent or any of its subsidiaries from effectively controlling in any
material respect the business or operations of the Company and the Company
Subsidiaries or (v) which otherwise is reasonably likely to have a Company
Material Adverse Effect or a Parent Material Adverse Effect.
SECTION 7.02. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The
obligations of Parent and Sub to effect the Merger are further subject to the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company in this Agreement that are qualified as to
materiality shall be true and correct and those not so qualified shall be true
and correct in all material respects, as of the date of this Agreement and as
of the Closing Date as though made on the Closing Date, except to the extent
such representations and warranties expressly relate to an earlier date (in
which case such representations and warranties qualified as to materiality
shall be true and correct, and those not so qualified shall be true and
correct in all material respects, on and as of such earlier date). Parent
shall have received a certificate signed on behalf of the Company by an
executive officer of the Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and
Parent shall have received a certificate signed on behalf of the Company by an
executive officer of the Company to such effect.
(c) ABSENCE OF COMPANY MATERIAL ADVERSE EFFECT. Except as disclosed
in the Company Disclosure Letter, since the date of this Agreement there shall
not have been any state of facts, event, change, effect, development,
condition or occurrence that, individually or in the aggregate, has had or
would reasonably be expected to have a Company Material Adverse Effect.
(d) LETTERS FROM COMPANY AFFILIATES. Parent shall have received from
each person named in the letter referred to in Section 6.10 an executed copy
of an agreement substantially in the form of Exhibit A.
(e) TAX OPINION. Parent shall have received a written opinion, dated
as of the Closing Date, from Cravath, Swaine & Xxxxx LLP, counsel to Parent,
to the effect that the Merger will be treated for federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Code, and that
Parent, Sub and the Company will each be a party to that reorganization within
the meaning of Section 368(b) of the Code; it being understood that in
rendering such opinion, such tax counsel shall be entitled to rely upon
customary representations provided by the parties hereto substantially in the
form attached hereto as Exhibit B.
54
SECTION 7.03. CONDITIONS TO OBLIGATION OF THE COMPANY. The
obligation of the Company to effect the Merger is further subject to the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Sub in this Agreement that are qualified as to
materiality shall be true and correct and those not so qualified shall be true
and correct in all material respects, as of the date of this Agreement and on
the Closing Date as though made on the Closing Date, except to the extent such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties qualified as to materiality shall be
true and correct, and those not so qualified shall be true and correct in all
material respects, on and as of such earlier date). The Company shall have
received a certificate signed on behalf of Parent by an executive officer of
Parent to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND SUB. Parent and Sub
shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, and
the Company shall have received a certificate signed on behalf of Parent by an
executive officer of Parent to such effect.
(c) ABSENCE OF PARENT MATERIAL ADVERSE EFFECT. Except as disclosed
in the Parent Disclosure Letter, since the date of this Agreement there shall
not have been any state of facts, event, change, effect, development,
condition or occurrence that, individually or in the aggregate, has had or
would reasonably be expected to have a Parent Material Adverse Effect.
(d) TAX OPINION. The Company shall have received a written opinion,
dated as of the Closing Date, from Xxxxxx, Xxxx & Xxxxxxxx LLP, counsel to the
Company, to the effect that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
and that Parent, Sub and the Company will each be a party to that
reorganization within the meaning of Section 368(b) of the Code; it being
understood that in rendering such opinion, such tax counsel shall be entitled
to rely upon customary representations provided by the parties hereto
substantially in the form attached hereto as Exhibit C.
SECTION 7.04. FRUSTRATION OF CLOSING CONDITIONS. None of the
Company, Parent or Sub may rely on the failure of any condition set forth in
Section 7.01, 7.02 or 7.03, as the case may be, to be satisfied if such
failure was caused by such party's failure to use all reasonable efforts to
consummate the Merger and the other Transactions to be performed or
consummated by such party in accordance with the terms of this Agreement as
required by and subject to Section 6.03.
55
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after receipt of the
Company Stockholder Approval:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company:
(i) if the Merger is not consummated on or before January 31,
2005 (the "Outside Date"), unless the failure to consummate the
Merger is the result of a willful and material breach of this
Agreement by the party seeking to terminate this Agreement;
provided, however, that if, as of the Outside Date, any hearing with
respect to any necessary approval under applicable Gaming Laws shall
have been scheduled for a date after the Outside Date or any such
hearing is pending, then the "Outside Date" shall mean April 30,
2005;
(ii) if any Governmental Entity issues an order, decree or
ruling or takes any other action permanently enjoining, restraining
or otherwise prohibiting the Merger and such order, decree, ruling
or other action shall have become final and nonappealable;
(iii) if, upon a vote at a duly held meeting to obtain the
Company Stockholder Approval, the Company Stockholder Approval is
not obtained; it being understood and agreed among Parent, Sub and
the Company that in the event that, prior to the date of the Company
Stockholders Meeting, the Company withdraws or modifies its approval
or recommendation of the Merger and this Agreement in accordance
with the last sentence of Section 5.02(b), then the term "Company
Stockholder Approval" shall mean both (i) the approval of this
Agreement by a majority of the voting power of the holders of the
outstanding Company Common Stock and (ii) the approval of this
Agreement by a majority of the voting power of the holders of the
outstanding Company Common Stock present and duly voted (in person
or by proxy) at the Company Stockholders Meeting, exclusive of those
votes taken in respect of the shares of Company Common Stock held by
Xxxxxxx X. Xxxxxxx, Xxxxx Xxxxxx and Xxxxxxxx Xxxx; or
(iv) if, upon a vote at a duly held meeting to obtain the
Parent Stockholder Approval, the Parent Stockholder Approval is not
obtained;
56
(c) by Parent, if the Company breaches or fails to perform in any
material respect any of its representations, warranties or covenants
contained in this Agreement, which breach or failure to perform (i) would
give rise to the failure of a condition set forth in Section 7.02(a) or
7.02(b), and (ii) cannot be or has not been cured within 30 days after
the giving of written notice to the Company of such breach;
(d) by Parent, if the aggregate number of shares of Parent Common
Stock required to be issued by Parent in accordance with Section
2.01(c)(3) (as determined in accordance with Section 2.01(e) without
regard to the second proviso contained in Section 2.01(e)(1)) would
exceed the Stock Cap; or
(e) by the Company, if Parent breaches or fails to perform in any
material respect of any of its representations, warranties or covenants
contained in this Agreement, which breach or failure to perform (i) would
give rise to the failure of a condition set forth in Section 7.03(a) or
7.03(b), and (ii) cannot be or has not been cured within 30 days after
the giving of written notice to Parent of such breach.
SECTION 8.02. EFFECT OF TERMINATION. In the event of termination of
this Agreement by either the Company or Parent as provided in Section 8.01,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Parent, Sub or the Company, other than
Section 3.20, Section 4.11, the last sentence of Section 6.02, Section 6.07,
this Section 8.02 and Article IX, which provisions shall survive such
termination, and except to the extent that such termination results from the
willful and material breach by a party of any representation, warranty or
covenant set forth in this Agreement.
SECTION 8.03. AMENDMENT. This Agreement may be amended by the parties
at any time before or after receipt of the Company Stockholder Approval or the
Parent Stockholder Approval; provided, however, that (i) after receipt of the
Company Stockholder Approval or the Parent Stockholder Approval, there shall
be made no amendment that by law (or, in the case of the Parent Stockholder
Approval, by the regulations established by the NYSE) requires further
approval by the stockholders of the Company or Parent without the further
approval of such stockholders, (ii) no amendment shall be made to this
Agreement after the Effective Time and (iii) except as provided above no
amendment of this Agreement by the Company shall require the approval of the
stockholders of the Company. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
SECTION 8.04. 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 parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c)
subject to the proviso in Section 8.03, waive
57
compliance by the other parties with any of the agreements or conditions
contained in this Agreement. Subject to the proviso in Section 8.03, no
extension or waiver by the Company shall require the approval of the
stockholders of the Company. 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 such rights.
SECTION 8.05. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR
WAIVER. A termination of this Agreement pursuant to Section 8.01, an amendment
of this Agreement pursuant to Section 8.03 or an extension or waiver pursuant
to Section 8.04 shall, in order to be effective, require in the case of Sub or
the Company, action by its Board of Directors or the duly authorized designee
of its Board of Directors. Termination of this Agreement prior to the
Effective Time shall not require the approval of the stockholders of the
Company.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 9.01 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
SECTION 9.02. NOTICES. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given (i) upon personal delivery, (ii) one business day after being
sent via a nationally recognized overnight courier service if overnight
courier service is requested or (iii) upon receipt of electronic or other
confirmation of transmission if sent via facsimile, in each case at the
addresses or fax numbers (or at such other address or fax number for a party
as shall be specified by like notice) set forth below:
(a) if to Parent or Sub, to
Xxxx Gaming Corporation
0000 Xxxxxxxxxx Xxxx
Xxx Xxxxx, XX 00000
Attention: General Counsel
Fax No.: (000) 000-0000
with a copy to:
58
Cravath, Swaine & Xxxxx LLP
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention:Xxxxx X. Xxxxxx, Esq.
Xxxx X. Xxxxxx, Esq.
Fax No.: (000) 000-0000
(b) if to the Company, to
Coast Casinos, Inc.
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxx Xxxxx, XX 00000
Attention: President
Fax No.: (000) 000-0000
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx, LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Fax No.: (000) 000-0000
SECTION 9.03. DEFINITIONS. For purposes of this Agreement:
An "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.
"Knowledge of the Company" means, with respect to any matter in
question, the actual knowledge of the Company's executive officers and general
counsel.
"Knowledge of Parent" means, with respect to any matter in question,
the actual knowledge of Parent's executive officers.
"Material Adverse Effect" on a person means a material adverse
effect on (i) the business, assets, financial condition or results of
operations of such person and its subsidiaries, taken as a whole, (ii) the
ability of such person to perform its obligations under this Agreement or
(iii) the ability of such person to consummate the Merger and the other
Transactions to be performed or consummated by such person, other than any
state of facts, event, change, effect, development, condition or occurrence
relating (A) to
59
the economy in general, (B) to such person's industry in general and not
specifically relating to such person or such person's subsidiaries and (C)
with respect to the Company and Parent, primarily to the entering into by the
Company of this Agreement with Parent as opposed to any other third party.
A "person" means any individual, firm, corporation, partnership,
company, limited liability company, trust, joint venture, association,
Governmental Entity or other entity.
A "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more
of the equity interests of which) is owned directly or indirectly by such
first person.
SECTION 9.04. INTERPRETATION; DISCLOSURE LETTERS. When a reference
is made in this Agreement to a Section or Subsection, such reference shall be
to a Section or Subsection of 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".
SECTION 9.05. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or
Law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated hereby are
fulfilled to the extent possible.
SECTION 9.06. COUNTERPARTS; FACSIMILE. 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.
Facsimile transmission of any signed original document and/or retransmission
of any signed facsimile transmission will be deemed the same as delivery of an
original. At the request of any party, the parties will confirm facsimile
transmission by signing a duplicate original document.
SECTION 9.07. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement, taken together with the Company Disclosure Letter, (a) constitute
the entire agreement and supersede all prior agreements and understandings,
both written and oral,
60
among the parties with respect to the Merger and (b) except for Section 6.06,
are not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder. Notwithstanding clause (b) of the immediately
preceding sentence, following the Effective Time the provisions of Article II
shall be enforceable by holders of Certificates.
SECTION 9.08. GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Nevada, regardless
of the laws that might otherwise govern under applicable principles of
conflicts of laws thereof.
SECTION 9.09. 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 consent of the other parties, except that Sub may
assign, in its sole discretion, any of or all its rights, interests and
obligations under this Agreement to Parent or to any direct or indirect wholly
owned subsidiary of Parent, but no such assignment shall relieve Sub of any of
its obligations under this Agreement. Any purported assignment without such
consent shall be void. Subject to the preceding sentences, this Agreement will
be binding upon, inure to the benefit of, and be enforceable by, the parties
and their respective successors and assigns.
SECTION 9.10. 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 Nevada state
court or any Federal court located in the County of Xxxxx in the State of
Nevada, 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
submit itself to the personal jurisdiction of any Nevada state court or any
Federal court located in the County of Xxxxx in the State of Nevada in the
event any dispute arises out of this Agreement or the Merger, (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, (c) agrees that it will not bring
any action relating to this Agreement or the Merger in any court other than
any Nevada state court or any Federal court sitting in the County of Xxxxx in
the State of Nevada and (d) waives any right to trial by jury with respect to
any action related to or arising out of this Agreement or the Merger.
[The remainder of this page has been left blank intentionally.
Signature page follows.]
61
IN WITNESS WHEREOF, Parent, Sub and the Company have duly executed
this Agreement, all as of the date first written above.
XXXX GAMING CORPORATION,
by
/s/ Xxxxxxx X. Xxxx
---------------------------------
Name: Xxxxxxx X. Xxxx
Title: Chairman and Chief Executive
Officer
BGC, INC.,
by
/s/ Xxxxxxx X. Xxxx
---------------------------------
Name: Xxxxxxx X. Xxxx
Title: President
COAST CASINOS, INC.,
by
/s/ Xxxxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman and Chief Executive
Officer
EXHIBIT A
FORM OF AFFILIATE LETTER
Ladies and Gentlemen:
The undersigned refers to the Agreement and Plan of Merger (the
"Merger Agreement") dated as of February 6, 2004, among Xxxx Gaming
Corporation, a Nevada corporation, BGC, Inc., a Nevada corporation and a
wholly owned subsidiary of Xxxx Gaming Corporation, and Coast Casinos, Inc., a
Nevada corporation. Capitalized terms used but not defined in this letter have
the meanings give such terms in the Merger Agreement.
The undersigned, a holder of shares of Company Common Stock, is
entitled to receive in connection with the Merger shares of Parent Common
Stock. The undersigned acknowledges that the undersigned may be deemed an
"affiliate" of the Company within the meaning of Rule 145 ("Rule 145")
promulgated under the Securities Act, although nothing contained herein should
be construed as an admission of such fact.
If in fact the undersigned were an affiliate under the Securities
Act, the undersigned's ability to sell, assign or transfer the Parent Common
Stock received by the undersigned in exchange for any shares of Company Common
Stock pursuant to the Merger may be restricted unless such sale, assignment,
or transfer is registered under the Securities Act or an exemption from such
registration is available. The undersigned (i) understands that such
exemptions are limited and (ii) has obtained advice of counsel as to the
nature and conditions of such exemptions, including information with respect
to the applicability to the sale of such securities of Rules 144 and 145(d)
promulgated under the Securities Act. The undersigned understands that Parent
will not be required to maintain the effectiveness of any registration
statement under the Securities Act for purposes of resale of Parent Common
Stock by the undersigned.
The undersigned hereby represents to and covenants with Parent that
the undersigned will not sell, assign or transfer any of the Parent Common
Stock received by the undersigned in exchange for shares of Company Common
Stock pursuant to the Merger except (i) pursuant to an effective registration
statement under the Securities Act, (ii) in conformity with the volume and
other limitations of Rule 144 or (iii) in a transaction that, in the opinion
of independent counsel reasonably satisfactory to Parent or as described in a
"no- action" or interpretive letter from the Staff of the SEC, is not required
to be registered under the Securities Act.
In the event of a sale or other disposition by the undersigned
pursuant to Rule 145, of Parent Common Stock received by the undersigned in
the Merger, the undersigned will supply Parent with evidence of compliance
with such Rule, in the form
2
of a letter in the form of Annex I hereto and the opinion of counsel or
no-action letter referred to above. The undersigned understands that Parent
may instruct its transfer agent to withhold the transfer of any Parent Common
Stock disposed of by the undersigned, but that upon receipt of such evidence
of compliance the transfer agent shall effectuate the transfer of the Parent
Common Stock sold as indicated in the letter.
The undersigned acknowledges and agrees that appropriate legends
will be placed on certificates representing Parent Common Stock received by
the undersigned in the Merger or held by a transferee thereof, which legends
will be removed by delivery of substitute certificates upon receipt of an
opinion in form and substance reasonably satisfactory to Parent from
independent counsel reasonably satisfactory to Parent to the effect that such
legends are no longer required for purposes of the Securities Act.
The undersigned acknowledges that (i) the undersigned has carefully
read this letter and understands the requirements hereof and the limitations
imposed upon the distribution, sale, transfer or other disposition of Parent
Common Stock and (ii) the receipt by Parent of this letter is an inducement
and a condition to Parent's obligations to consummate the Merger.
This Agreement shall only become effective as of the Effective Time
of the Merger.
Very truly yours,
Dated:
ANNEX I TO
EXHIBIT A
[Name]
On [ ], the undersigned sold the securities of Xxxx Gaming
Corporation ("Parent") described below in the space provided for that purpose
(the "Securities"). The Securities were received by the undersigned in
connection with the merger of BGC, Inc., a Nevada corporation and a wholly
owned subsidiary of Parent, with Coast Casinos, Inc., a Nevada corporation.
Based upon the most recent report or statement filed by Parent with
the Securities and Exchange Commission, the Securities sold by the undersigned
were within the prescribed limitations set forth in paragraph (e) of Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities
Act").
The undersigned represents that the Securities were sold in "brokers
transactions", within the meaning of Section 4(4) of the Securities Act or in
transactions with a "market maker" as that term is defined in Section 3(a)(38)
of the Securities Exchange Act of 1934, as amended. The undersigned further
represents that the undersigned has not solicited or arranged for the
solicitation of orders to buy the Securities, and that the undersigned has not
made any payment in connection with the offer or sale of the Securities to any
person other than to the broker who executed the order in respect of such
sale.
Very truly yours,
[Space to be provided for description of the Securities]
EXHIBITS B & C
[Letterhead of Coast Casinos, Inc.]
[DATE]
Cravath, Swaine & Xxxxx LLP
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to Sections
7.02(e) and 7.03(d) of the Agreement and Plan of Merger dated as of February
6, 2004 (the "Merger Agreement"), among Xxxx Gaming Corporation, a Nevada
corporation ("Parent"), BGC, Inc., a Nevada corporation and a wholly owned
subsidiary of Parent ("Sub"), and Coast Casinos, Inc., a Nevada corporation
(the "Company"), whereby the Company will merge with and into Sub (the
"Merger") with Sub becoming the "Surviving Corporation", and in connection
with the filing with the Securities and Exchange Commission of the
registration statement on Form S-4 in which the Joint Proxy Statement will be
included as a prospectus (the "Registration Statement"), each as amended or
supplemented through the date hereof, the undersigned certifies and represents
on behalf of the Company, after due inquiry and investigation, as follows (any
capitalized term used but not defined herein shall have the meaning given to
such term in the Merger Agreement):
1. The facts relating to the Merger as described in the Merger
Agreement, the Registration Statement and the other documents described in the
Registration Statement are, insofar as such facts pertain to the Company are
true, correct and complete in all material respects. The Merger will be
consummated in accordance with the Merger Agreement.
2. The formulas set forth in the Merger Agreement pursuant to which
each issued and outstanding share Company Common Stock will be converted as
outlined in Section 2.01 of the Merger Agreement are the result of arm's
length bargaining.
2
3. If cash payments are made to holders of Company Common Stock in
lieu of fractional shares of Parent Common Stock that would otherwise be
issued to such holders in the Merger, such payments will be made for the
purpose of saving Parent the expense and inconvenience of issuing and
transferring fractional shares of Parent Common Stock and will not represent
separately bargained-for consideration. The total cash consideration that will
be paid in the Merger to the Company stockholders in lieu of fractional shares
of Parent Common Stock will not exceed one percent (1%) of the total
consideration that will be issued in the Merger to the Company stockholders in
exchange for their shares of Company Common Stock. The fractional share
interests of each Company stockholder will be aggregated, and no Company
stockholder will receive cash for fractional share interests in an amount
equal to or greater than the value of one full share of Parent Common Stock.
4. Neither the Company nor any person related to the Company (as
defined in Treasury Regulation Section 1.368-1(e)) has acquired or has any
plan or intention to acquire any Company Common Stock in contemplation of the
Merger, or otherwise as part of a plan of which the Merger is a part. A person
is considered related to the Company under Treasury Regulation Section
1.368-1(e) if: (i) the Company and the corporation in question are members of
the same affiliated group as defined in Section 1504 of the Code (determined
without regard to Section 1504(b)) or (ii) a purchase of the stock of the
Company by the corporation in question or the purchase of the stock of the
corporation in question by the Company would be treated as a distribution in
redemption of the stock of the first corporation under Section 304(a)(2) of
the Code (determined without regard to Treasury Regulation Section
1.1502-80(b)). In addition, a corporation will be treated as related to the
Company if a relationship described in the preceding sentence exists
immediately before or immediately after the Merger.
5. The Company has not made, and does not have any plan or intention
to make, any distributions prior to, in contemplation of or otherwise in
connection with, the Merger to holders of Company Common Stock (other than
dividends made in the ordinary course of business and other than payment of
cash to holders of Dissenter Shares as set forth in Paragraph 17 of this
letter).
6. Immediately following the Merger, the Surviving Corporation will
hold (i) at least 90% of the fair market value of the net assets and at least
70% of the fair market value of the gross assets that were held by the Company
immediately prior to the Merger and (ii) at least 90% of the fair market value
of the net assets and at least 70% of the fair market value of the gross
assets that were held by Sub immediately prior to the Merger. For purposes of
this representation, amounts paid to stockholders who receive cash or other
property (including cash in lieu of fractional shares of Parent Common Stock
and cash paid to dissenting stockholders) provided, directly or indirectly, by
the Company or Sub in connection with the Merger, assets of the Company or Sub
used to pay its respective reorganization expenses (including transfer taxes,
if any) and all redemptions and distributions made by the Company (other than
dividends made in the ordinary course of business) immediately preceding, or
in contemplation of, the Merger
3
will be included as assets held by the Company or Sub, respectively,
immediately prior to the Merger.
7. Except as otherwise specifically contemplated under the Merger
Agreement, the Company will pay its expenses, if any, incurred in connection
with the Merger. The Company has neither paid nor assumed (directly or
indirectly), or agreed to pay or assume (directly or indirectly), any expense
or other liability, whether fixed or contingent, incurred or to be incurred by
any holder of Company Common Stock in connection with or as part of the Merger
or any related transactions.
8. Except as otherwise specifically contemplated under the Merger
Agreement, immediately prior to the time of the Merger, the Company will not
have outstanding any warrants, options, convertible securities or any other
type of right pursuant to which any person could acquire Company Common Stock.
Simultaneously with the Merger, all outstanding options and related stock
appreciation rights, if any, to purchase or acquire share of Company Common
Stock granted under employee incentive or benefits plans, programs or
arrangements and non-employee director plans presently maintained by the
Company, together with all other outstanding awards granted under such plans,
will be canceled or converted into similar instruments of Parent.
9. No assets of the Company have been sold, transferred or otherwise
disposed of which would prevent Parent from continuing the "historic business"
of the Company or from using a significant portion of the "historic business
assets" of the Company in a business following the Merger (as such terms are
defined in Treasury Regulation Section 1.368-1(d)).
10. The Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
11. The Company will not take, and, to the best knowledge of the
management of the Company, there is no plan or intention by stockholders of
the Company to take, any position on any Federal, state or local income or
franchise tax return, or take any other tax reporting position, that is
inconsistent with the treatment of the Merger as a reorganization within the
meaning of Section 368(a) of the Code, unless otherwise required by a
"determination" (as defined in Section 1313(a)(1) of the Code) or by
applicable state or local tax law (and then only to the extent required by
such applicable state or local tax law).
12. None of the compensation received by any stockholder-employee or
stockholder-independent contractor of the Company in respect of periods at or
prior to the Effective Time (including pursuant to any consulting agreement)
represents separate consideration for, or is allocable to, any of the Company
Common Stock. None of the Parent Common Stock that will be received by any
stockholder-employee or stockholder-independent contractor of the Company in
the Merger represents separately bargained-for consideration which is
allocable to any employment agreement or arrangement. The compensation paid to
any stockholder-employee or stockholder-independent contractor
4
will be for services actually rendered and will be determined by bargaining at
arm's length.
13. There is no intercorporate indebtedness existing between Parent
(or any of its subsidiaries, including Sub) and the Company (or any of its
subsidiaries) that was issued, acquired or will be settled at a discount.
14. The liabilities of Company assumed by Sub and the liabilities to
which the transferred assets of the Company are subject were incurred by the
Company in the ordinary course of business.
15. The Company is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
16. On the date of the Merger, the fair market value of the assets
of the Company will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which such assets are subject.
17. Provided that this representation does not result in a violation
of the representation set forth in Paragraph 6 of this letter, the Company
will pay holders of Dissenter Shares the value of their shares out of the
Company's own funds and not out of funds provided, directly or indirectly, by
Parent.
18. At least 40% of the value of the Adjusted Merger Consideration
(as determined as of the Closing Date) will be comprised of shares of Parent
Common Stock. For purposes of this representation, shares of Parent Common
Stock issued in the Merger shall be valued in the manner set forth in Section
2.01(e) of the Merger Agreement.
19. All obligations to pay holders of Dissenter Shares the value of
their shares under applicable law are obligations of the Company or the
Surviving Corporation.
20. The Merger is being undertaken for purposes of enhancing the
business of the Company and for other good and valid business purposes of the
Company.
21. The Merger Agreement, the Registration Statement and the other
documents described in the Registration Statement represent the entire
understanding of the Company with respect to the Merger.
22. The undersigned is authorized to make all the representations
set forth herein on behalf of the Company.
The undersigned acknowledges that (i) your opinions will be based on
the accuracy of the representations set forth herein and on the accuracy of
the representations and warranties and the satisfaction of the covenants and
obligations contained in the Merger Agreement and the various other documents
related thereto, and (ii) your
5
opinions will be subject to certain limitations and qualifications including
that it may not be relied upon if any such representations or warranties are
not accurate or if any of such covenants or obligations are not satisfied in
all material respects.
The undersigned acknowledges that your opinions will not address any
tax consequences of the Merger or any action taken in connection therewith
except as expressly set forth in such opinions.
Very truly yours,
Coast Casinos, Inc.
by
---------------------------
Name:
Title:
[Letterhead of Xxxx Gaming Corporation]
[DATE]
Cravath, Swaine & Xxxxx LLP
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to Sections
7.02(e) and 7.03(d) of the Agreement and Plan of Merger dated as of February
6, 2004 (the "Merger Agreement"), among Xxxx Gaming Corporation, a Nevada
corporation ("Parent"), BGC, Inc., a Nevada corporation and a wholly owned
subsidiary of Parent ("Sub"), and Coast Casinos, Inc., a Nevada corporation
(the "Company"), whereby the Company will merge with and into Sub (the
"Merger") with Sub becoming the "Surviving Corporation", and in connection
with the filing with the Securities and Exchange Commission of the
registration statement on Form S-4 in which the Joint Proxy Statement will be
included as a prospectus (the "Registration Statement"), each as amended or
supplemented through the date hereof, the undersigned certifies and represents
on behalf of Parent and Sub, after due inquiry and investigation, as follows
(any capitalized term used but not defined herein shall have the meaning given
to such term in the Merger Agreement):
1. The facts relating to the Merger as described in the Merger
Agreement, the Registration Statement and the other documents described in the
Registration Statement are, insofar as such facts pertain to Parent and Sub,
true, correct and complete in all material respects. The Merger will be
consummated in accordance with the Merger Agreement.
2
2. The formulas set forth in the Merger Agreement pursuant to which
each issued and outstanding share of Company Common Stock will be converted as
outlined in Section 2.01 of the Merger Agreement are the result of arm's
length bargaining.
3. Prior to the Merger, Parent will own at least 80% of the total
combined voting power of all classes of Sub stock entitled to vote and at
least 80% of the total number of shares of all other classes of Sub stock.
4. If cash payments are made to holders of Company Common Stock in
lieu of fractional shares of Parent Common Stock that would otherwise be
issued to such holders in the Merger, such payments will be made for the
purpose of saving Parent the expense and inconvenience of issuing and
transferring fractional shares of Parent Common Stock and will not represent
separately bargained for consideration. The total cash consideration that will
be paid in the Merger to Company stockholders in lieu of fractional shares of
Parent Common Stock will not exceed one percent (1%) of the total
consideration that will be issued in the Merger to Company stockholders in
exchange for their shares of Company Common Stock. The fractional share
interests of each Company stockholder will be aggregated, and no Company
stockholder will receive cash for fractional share interests in an amount
equal to or greater than the value of one full share of Parent Common Stock.
5. At least 40% of the value of the Adjusted Merger Consideration
(as determined as of the Closing Date) will be comprised of shares of Parent
Common Stock. For purposes of this representation, shares of Parent Common
Stock issued in the Merger shall be valued in the manner set forth in Section
2.01(e) of the Merger Agreement.
6. Parent has no plan or intention to, and will not in connection
with the Merger, acquire or redeem any of the Parent Common Stock issued in
the Merger, either directly or through any transaction, agreement or
arrangement with any other person, provided however, that Parent may adopt or
continue an open market stock repurchase program that satisfies the
requirements of Revenue Ruling 99-58, 1999-2 C.B. 701. To the best knowledge
of the management of Parent, no person related to Parent (as defined in
Treasury Regulation Section 1.368-1(e)) has a plan or intention to, nor will
in connection with the Merger, acquire or redeem any of the Parent Common
Stock issued in the Merger, either directly or through any transaction,
agreement or arrangement with any other person. A person is considered related
to the Parent under Treasury Regulation Section 1.368-1(e) if: (i) Parent and
the corporation in question are members of the same affiliated group as
defined in Section 1504 of the Code (determined without regard to Section
1504(b)) or (ii) a purchase of the stock of Parent by the corporation in
question or the purchase of the stock of the corporation in question by Parent
would be treated as a distribution in redemption of the stock of the first
corporation under Section 304(a)(2) of the Code (determined without regard to
Treasury Regulation Section 1.1502-80(b)). In addition, a corporation will be
treated as related to Parent if a relationship described in the preceding
sentence: (i) exists immediately before or immediately after the Merger or
(ii) the relationship is created in connection with the Merger. For purposes
of this
3
representation letter, a person is considered to own or acquire stock
owned or acquired (as the case may be) by a partnership in which such person
is a partner in proportion to such person's interest in the partnership.
7. Parent does not have any plan or intention to make any
distributions after, but in connection with, the Merger to holders of Parent
Common Stock (other than dividends made in the ordinary course of business).
8. Neither Parent nor Sub (nor any other subsidiary of Parent) has
acquired or, except as a result of the Merger, will acquire, or has owned in
the past five years, any Company Common Stock.
9. Immediately following the Merger, the Surviving Corporation will
hold (i) at least 90% of the fair market value of the net assets and at least
70% of the fair market value of the gross assets that were held by the Company
immediately prior to the Merger and (ii) at least 90% of the fair market value
of the net assets and at least 70% of the fair market value of the gross
assets that were held by Sub immediately prior to the Merger. For purposes of
this representation, amounts paid to stockholders who receive cash or other
property (including cash in lieu of fractional shares of Parent Common Stock
and cash paid to dissenting stockholders) provided, directly or indirectly, by
the Company or Sub in connection with the Merger, assets of the Company or Sub
used to pay its respective reorganization expenses (including transfer taxes,
if any) and all redemptions and distributions made by the Company (other than
dividends made in the ordinary course of business) immediately preceding, or
in contemplation of, the Merger will be included as assets held by the Company
or Sub, respectively, immediately prior to the Merger.
10. Parent has no plan or intention, following the Merger, to
liquidate the Surviving Corporation, merge the Surviving Corporation with or
into another corporation in which the Surviving Corporation is not the
survivor, sell or otherwise dispose of any of the stock of the Surviving
Corporation, cause the Surviving Corporation to distribute to Parent or any of
its subsidiaries any assets of the Surviving Corporation or the proceeds of
any borrowings incurred by the Surviving Corporation or cause the Surviving
Corporation to sell or otherwise dispose of any of the assets held by the
Surviving Corporation at the time of the Merger or any of the assets of Sub
acquired by the Surviving Corporation in the Merger, except for dispositions
made in the ordinary course of business and transfers of assets permitted
under Section 368(a)(2)(C) of the Code or Treasury Regulation Section
1.368-2(k). Parent may transfer the stock of Sub to a controlled subsidiary of
Parent (as defined in Section 368(c) of the Code) after the Merger in a manner
permitted under Section 368(a)(2)(C) of the Code or Treasury Regulation
Section 1.368-2(k).
11. Except as otherwise specifically contemplated under the Merger
Agreement, Parent and Sub will pay their respective expenses, if any, incurred
in connection with the Merger.
4
12. Following the Merger, Parent intends to cause the Surviving
Corporation to continue the "historic business" of the Company or to use a
significant portion of the "historic business assets" of the Company in a
business (as such terms are defined in Treasury Regulation Section
1.368-1(d)).
13. Neither Parent nor Sub is an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
14. Neither Parent nor Sub will take any position on any Federal,
state or local income or franchise tax return, or take any other tax reporting
position, that is inconsistent with the treatment of the Merger as a
reorganization within the meaning of Section 368(a) of the Code, unless
otherwise required by a "determination" (as defined in Section 1313(a)(1) of
the Code) or by applicable state or local tax law (and then only to the extent
required by such applicable state or local tax law).
15. None of the compensation received by any stockholder-employee or
stockholder-independent contractor of the Company in respect of periods after
the Effective Time (including pursuant to any consulting agreement) represents
separate consideration for, or is allocable to, any of its Company Common
Stock. None of the Parent Common Stock that will be received by any
stockholder-employee or stockholder-independent contractor of the Company in
the Merger represents separately bargained-for consideration which is
allocable to any employment agreement or arrangement. The compensation paid to
any stockholder-employee or stockholder-independent contractor will be for
services actually rendered and will be determined by bargaining at arm's
length.
16. There is no intercorporate indebtedness existing between Parent
(or any of its subsidiaries, including Sub) and Company (or any of its
subsidiaries) that was issued, acquired or will be settled at a discount.
17. Neither Parent nor Sub is under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the
Code.
18. Parent will not reimburse the Company, directly or indirectly,
for any payments made by the Company to holders of Dissenter Shares in
connection with the Merger.
19. Sub is a corporation newly formed for the purpose of
participating in the Merger, and at no time prior to the Merger has it had
assets (other than nominal assets contributed upon the formation of Sub, which
assets will be held by the Surviving Corporation following the Merger) or
business operations.
20. No stock of Sub will be issued in the Merger.
21. The Merger is being undertaken for purposes of enhancing the
business of Parent and for other good and valid business purposes of Parent.
5
22. The Merger Agreement, the Registration Statement and the other
documents described in the Registration Statement represent the entire
understanding of Parent and Sub with respect to the Merger.
23. The undersigned is authorized to make all the representations
set forth herein on behalf of Parent and Sub.
The undersigned acknowledges that (i) your opinions will be based on
the accuracy of the representations set forth herein and on the accuracy of
the representations and warranties and the satisfaction of the covenants and
obligations contained in the Merger Agreement and the various other documents
related thereto, and (ii) your opinions will be subject to certain limitations
and qualifications including that it may not be relied upon if any such
representations or warranties are not accurate or if any of such covenants or
obligations are not satisfied in all material respects.
The undersigned acknowledges that your opinions will not address any
tax consequences of the Merger or any action taken in connection therewith
except as expressly set forth in such opinions.
Very truly yours,
Xxxx Gaming Corporation
by
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Name:
Title:
