EXHIBIT 2
AGREEMENT AND PLAN
OF MERGER
DATED
DECEMBER 22, 1997
AMONG
MIRAGE RESORTS, INCORPORATED
MIRAGE ACQUISITION SUB, INC.
AND
BOARDWALK CASINO, INC.
TABLE OF CONTENTS
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Page
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ARTICLE I THE MERGER................................................ 2
1.1 The Merger................................................ 2
1.2 Effective Time............................................ 2
1.3 Closing................................................... 3
1.4 Directors and Officers of the Surviving Corporation....... 3
1.5 Stockholders' Meeting..................................... 3
ARTICLE II CONVERSION OF SHARES........................................... 4
2.1 Conversion of Capital Stock............................... 4
2.2 Exchange of Certificates.................................. 5
ARTICLE III [Intentionally Omitted]....................................... 6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE
COMPANY............................................................ 6
4.1 Organization and Qualification............................ 6
4.2 Capitalization of the Company............................. 7
4.3 Power and Authority....................................... 8
4.4 Board Recommendations; Anti-takeover Provisions........... 9
4.5 Compliance................................................ 10
4.6 Consents and Approvals; No Violation...................... 11
4.7 Assignment of MOU......................................... 12
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4.8 SEC Reports; Financial Statements, Absence of
Undisclosed Liabilities................................... 13
4.9 Absence of Certain Changes................................ 14
4.10 Company Proxy Statement................................... 15
4.11 Absence of Litigation..................................... 15
4.12 Taxes..................................................... 15
4.13 Employee Benefits......................................... 16
4.14 Intellectual Property..................................... 19
4.15 Material Contracts........................................ 20
4.16 Insurance................................................. 20
4.17 Labor Matters............................................. 21
4.18 Real Property............................................. 21
4.19 Environmental Matters..................................... 24
4.20 Representations Complete.................................. 26
4.21 Disclosure Schedule....................................... 26
ARTICLE V REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB.............................................. 26
5.1 Organization.............................................. 26
5.2 Authority Relative to this Agreement...................... 27
5.3 Consent and Approvals; No Violation....................... 27
5.4 Information Supplied...................................... 28
5.5 Merger Sub's Operations................................... 28
5.6 Capitalization............................................ 28
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5.7 Financing................................................. 28
ARTICLE VI CONDUCT OF BUSINESS BY THE COMPANY
PRIOR TO EFFECTIVE DATE............................................ 28
6.1 Ordinary Course........................................... 28
6.2 Dividends; Changes in Stock............................... 29
6.3 Issuance, Repurchase or Repricing of Securities........... 29
6.4 Governing Documents; Board of Directors................... 29
6.5 No Dispositions........................................... 29
6.6 Indebtedness.............................................. 29
6.7 Employees and Affiliates.................................. 29
6.8 Benefit Plans............................................. 30
6.9 Taxes..................................................... 30
6.10 Consultation and Cooperation.............................. 30
6.11 Additional Matters........................................ 31
6.12 Consent to Stockholder Agreements and Release............. 31
ARTICLE VII ADDITIONAL COVENANTS.......................................... 32
7.1 No Solicitation........................................... 32
7.2 Access to Information; Confidentiality.................... 34
7.3 HSR Act................................................... 35
7.4 Consents and Approvals.................................... 35
7.5 Closing of Stockholder Agreements;
Parent Obligation to Effect Merger Once
Stockholder Agreements Fully Consummated.................. 36
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7.6 Notification of Certain Matters........................... 36
7.7 Additional Actions........................................ 37
7.8 Interference with Transactions............................ 37
7.9 Publicity................................................. 37
7.10 Opinion of Company Counsel................................ 38
7.11 Resignation of Directors.................................. 38
7.12 Parent Consent to Merger.................................. 38
7.13 Parent Consent to Deferral of March
Interest Payment on First Mortgage Notes.................. 38
ARTICLE VIII CONDITIONS................................................... 38
8.1 Conditions to each Party's Merger Obligations to Effect the
to Effect the Merger...................................... 38
8.2 Conditions to Obligations of Parent and Merger Sub
to Effect the Merger...................................... 39
ARTICLE IX TERMINATION.................................................... 41
9.1 Termination............................................... 41
9.2 Effect of Termination..................................... 42
ARTICLE X GENERAL PROVISIONS.............................................. 43
10.1 Fees and Expenses......................................... 43
10.2 Amendment and Modification................................ 44
10.3 Nonsurvival of Representations and Warranties............. 44
10.4 Notices................................................... 44
10.5 Definitions; Interpretation............................... 45
10.6 Specific Performance...................................... 46
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10.7 Counterparts.............................................. 46
10.8 Entire Agreement; No Third Party Beneficiaries............ 46
10.9 No Control of the Company by Parent Under Gaming
Laws...................................................... 46
10.10 Severability.............................................. 46
10.11 Governing Law............................................. 46
10.12 Assignment................................................ 46
10.13 No Prior Agreements....................................... 47
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "AGREEMENT") is entered into on
December 22, 1997, by and among Mirage Resorts, Incorporated, a Nevada
corporation, located at 0000 Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxx 00000
("PARENT"), Mirage Acquisition Sub, Inc, a Nevada corporation and wholly-owned
subsidiary of Parent, located at 0000 Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxx Xxxxx,
Xxxxxx 00000 ("MERGER SUB"), and Boardwalk Casino, Inc., a Nevada corporation,
located at 0000 Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxx 00000 (the
"COMPANY").
RECITALS
WHEREAS, Parent and the Board of Directors of Merger Sub have determined
that it is advisable and in the best interests of Parent and Merger Sub to
engage in a transaction whereby Parent will acquire the Company on the terms and
subject to the conditions set forth herein; and
WHEREAS, the Board of Directors of the Company has determined that it is
advisable and in the best interests of the Company and its stockholders to
engage in a transaction whereby Parent will acquire the Company on the terms and
subject to the conditions set forth in this Agreement; and
WHEREAS, as an inducement to Parent to acquire the Company, and as a
condition to Parent's willingness to enter into this Agreement, concurrently
with the execution and delivery of this Agreement, Xxxxxxx X. Xxxxxx and certain
of his affiliates (collectively "XXXXXX"), and Xxxx Xxxxxx, on behalf of
herself, the Estate of Xxxxxxx X. Xxxxxx and the Xxxxxx Family Trust
(collectively, "XXXXXX"), have each executed agreements with Parent, dated the
date hereof (collectively, the "STOCKHOLDER AGREEMENTS") pursuant to which
Xxxxxx and Xxxxxx (individually, a "SELLING STOCKHOLDER"; and collectively, the
"SELLING STOCKHOLDERS") have agreed, among other things, to sell to Parent or
Merger Sub all of their shares of common stock, par value $.001 per share, of
the Company (hereinafter referred to as either the "SHARES" or the "COMPANY
COMMON STOCK") and the Company's 6% Non-Voting Cumulative Preferred Shares,
Series A (the "PREFERRED SHARES"), and, pursuant to the Stockholder Agreements
with Xxxxxx, the parties have agreed to certain amendments to the lease
agreement pursuant to which Xxxxxx operates a gift shop upon the Company's
premises and that Parent will purchase from Xxxxxx, and Xxxxxx will sell to
Parent, certain real estate currently leased to the Company; and
WHEREAS, Parent and the respective Boards of Directors of Merger Sub and
the Company have approved the merger (the "MERGER") of Merger Sub into the
Company, upon the terms and subject to the conditions set forth in this
Agreement, whereby each issued and outstanding share of Company Common Stock not
owned directly or indirectly by Parent or the Company, except shares of Company
Common Stock held by persons
who object to the Merger and comply with all the provisions of Nevada law
concerning the rights, if any, of holders of Company Common Stock to dissent
from the Merger and demand appraisal of their shares of Company Common Stock
(each, a "DISSENTING STOCKHOLDER"), will be converted into the right to receive
$5.00 per share in cash.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger.
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(a) Subject to the terms and conditions of this Agreement, and
pursuant to Section 92A.250 of the Nevada Revised Statutes ("NRS"), at the
Effective Time (as defined in Section 1.2) the Company and Merger Sub shall
consummate the Merger pursuant to which (i) Merger Sub shall be merged with and
into the Company and the separate corporate existence of Merger Sub shall
thereupon cease, (ii) the Company shall be the successor or surviving
corporation in the Merger (the "SURVIVING CORPORATION") and shall continue to be
governed by the laws of the State of Nevada, and (iii) the separate corporate
existence of the Company with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger.
(b) Pursuant to the Merger, (i) the articles of incorporation of the
Company, as in effect immediately prior to the Effective Time, shall be the
articles of incorporation of the Surviving Corporation until thereafter amended
as provided by applicable law and such articles of incorporation, and (ii) the
bylaws of the Company, as in effect immediately prior to the Effective Time,
shall be the bylaws of the Surviving Corporation until thereafter amended as
provided by law, the articles of incorporation and such bylaws.
(c) The Merger shall have the effects set forth in the NRS (including
without limitation Section 92A.250 thereof). Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation. As of the Effective Time, the Company shall become a
wholly-owned subsidiary of Parent.
1.2 Effective Time. On the date of Closing (as defined in Section 1.3) as
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soon as practicable following the satisfaction or waiver of the conditions set
forth in Article (or on such other date as Parent and the Company may agree)
the parties shall cause articles of merger or other appropriate documents (in
any such case, the "ARTICLES OF MERGER") to be executed and filed with the
Secretary of State of the State of Nevada in accordance with the provisions of
Chapter 92A of the NRS, and make all other filings and recordings required by
the NRS in connection with the Merger. The Merger shall
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become effective at the time and on the date on which the Articles of Merger
have been duly filed with the Secretary of State of the State of Nevada or such
later time as is agreed upon by the parties and specified in the Articles of
Merger, and such time is hereinafter referred to as the "EFFECTIVE TIME."
1.3 Closing. The Closing of the Merger (the "CLOSING") will take place at
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9:00 a.m., Las Vegas time, on a date to be specified by the parties, which shall
be no later than the second business day after satisfaction or waiver of all of
the conditions set forth in Article hereof (the "CLOSING DATE"), at the offices
of Xxxxx Xxxxxx, at 0000 Xxxxxx Xxxxxx Xxxxxxx, 0xx Xxxxx, Xxx Xxxxx, Xxxxxx,
unless another date or place is agreed to in writing by the parties hereto.
1.4 Directors and Officers of the Surviving Corporation. The directors
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and officers of Merger Sub at the Effective Time shall, from and after the
Effective Time, be the directors and officers, respectively, of the Surviving
Corporation until their successors shall have been duly elected or appointed or
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's articles of incorporation and bylaws.
1.5 Stockholders' Meeting.
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(a) The Company, acting through its Board of Directors, shall, in
accordance with applicable law:
(i) take all action necessary, in accordance with applicable
law and its articles of incorporation and bylaws, to duly call, give notice,
convene and hold a special meeting of the holders of Company Common Stock (the
"SPECIAL MEETING") as promptly as practicable for the purpose of considering and
taking action upon this Agreement;
(ii) prepare and file with the United States Securities and
Exchange Commission (the "SEC") a preliminary proxy or information statement
relating to the Merger and this Agreement and use its reasonable efforts (x) to
obtain and furnish the information required to be included by the SEC in the
Company Proxy Statement (as defined below) and, after consultation with Parent,
to respond promptly to any comments made by the SEC with respect to the
preliminary proxy or information statement and cause a definitive proxy or
information statement (the "COMPANY PROXY STATEMENT") to be mailed to its
stockholders and (y) to obtain the necessary approval of the Merger and approval
and adoption of this Agreement by its stockholders; and
(iii) include in the Company Proxy Statement the recommendation
of the Board of Directors that stockholders of the Company vote in favor of the
approval of the Merger and the approval and adoption of this Agreement.
(b) Parent and Merger Sub agree that they shall, and shall cause any
permitted assignee of each of them to, vote all Shares then owned by any of them
which
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are entitled to vote in favor of the approval of the Merger and the approval and
adoption of this Agreement.
ARTICLE II
CONVERSION OF SHARES
2.1 Conversion of Capital Stock. As of the Effective Time, by virtue of
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the Merger and without any action on the part of the holders of any share of
Company Common Stock or common stock, no par value, of Merger Sub (the "MERGER
SUB COMMON STOCK"):
(a) Merger Sub Common Stock. Each issued and outstanding share of
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Merger Sub Common Stock shall be converted into and become 71,795 fully paid and
nonassessable shares of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. All
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shares of Company Common Stock that are owned by the Company as treasury stock
and any shares of Company Common Stock owned by Parent, Merger Sub or any other
direct or indirect wholly-owned subsidiary of Parent shall be canceled and
retired and shall cease to exist and no consideration shall be delivered in
exchange therefor.
(c) Conversion of Shares. Each issued and outstanding share of
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Company Common Stock (other than shares to be canceled in accordance with
Section 2.1(b) and, if applicable, Shares held by Dissenting Stockholders as
described in Section 2.1(e)) shall be converted into the right to receive $5.00
in cash, payable to the holder thereof, without interest (the "MERGER
CONSIDERATION"), upon surrender of the certificate formerly representing such
share of Company Common Stock in the manner provided in Section 2.2. All such
shares of Company Common Stock, when so converted, 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 shall cease
to have any rights with respect thereto, except the right to receive the Merger
Consideration therefor upon the surrender of such certificate in accordance with
Section 2.2, without interest.
(d) Company Preferred Stock. All shares of preferred stock of the
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Company, including without limitation the Preferred Shares, which are
outstanding at the Effective Time shall remain outstanding and shall not be
affected by the Merger.
(e) Shares of Dissenting Stockholders. Notwithstanding anything in
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this Agreement to the contrary, in the event that holders of Shares are
determined to have rights pursuant to Section 92A.380 of the NRS, any issued and
outstanding shares of Company Common Stock held by a Dissenting Stockholder
shall not be converted as described in Section 2.1(c) but shall become the right
to receive such consideration as may be determined to be due to such Dissenting
Stockholder pursuant to the laws of the State of Nevada; provided, however, that
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the shares of Company Common Stock
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outstanding immediately prior to the Effective Time and held by a Dissenting
Stockholder who shall, after the Effective Time, fail to perfect his right to
appraisal, withdraw his demand for appraisal or lose his right of appraisal, in
any case pursuant to Sections 92A.390 through 92A.440 of the NRS, shall be
deemed to be converted as of the Effective Time into the right to receive the
Merger Consideration. The Company shall give Parent (i) prompt notice of any
written demands for appraisal of shares of Company Common Stock received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to any such demands. Prior to the Effective Time, the Company shall not,
without the prior written consent of Parent, voluntarily make any payment with
respect to, or settle, offer to settle or otherwise negotiate, any such demands.
2.2 Exchange of Certificates.
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(a) Paying Agent. Parent shall designate a bank or trust company to
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act as agent for the holders of shares of Company Common Stock in connection
with the Merger (the "PAYING AGENT") to receive the funds to which holders of
shares of Company Common Stock shall become entitled pursuant to Section 2.1(c).
Such funds shall be invested by the Paying Agent as directed by Parent or the
Surviving Corporation.
(b) Exchange Procedures. As soon as reasonably practicable after the
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Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "CERTIFICATES"),
whose Shares were converted pursuant to Section 2.1 into the right to receive
the Merger Consideration (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Paying Agent and shall be in
such form and have such other provisions as Parent and the Company may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for payment of the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Paying Agent or to such other
agent or agents as may be appointed by Parent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor the Merger Consideration for each share of Company
Common Stock formerly represented by such Certificate and the Certificate so
surrendered shall forthwith be canceled. If payment of the Merger Consideration
is to be made to a person other than the person in whose name the surrendered
Certificate is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the person requesting such payment shall have
paid any transfer and other taxes required by reason of the payment of the
Merger Consideration to a person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation that such tax either has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration in cash as contemplated by this Section 2.2.
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(c) Transfer Books; No Further Ownership Rights in Company Common
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Stock. At the Effective Time, the stock transfer books of the Company shall be
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closed and thereafter there shall be no further registration of transfers of
shares of Company Common Stock on the records of the Company. From and after
the Effective Time, the holders of Certificates evidencing ownership of shares
of Company Common Stock outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such Shares, except as otherwise
provided for herein or by applicable law. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article II.
(d) Termination of Fund; No Liability. At any time following six
---------------------------------
months after the Effective Time, the Surviving Corporation shall be entitled to
require the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying Agent
and which have not been disbursed to holders of Certificates, and thereafter
such holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors
thereof with respect to the Merger Consideration payable upon due surrender of
their Certificates, without any interest thereon. Notwithstanding the
foregoing, neither the Surviving Corporation nor the Paying Agent shall be
liable to any holder of a Certificate for Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
ARTICLE III
[INTENTIONALLY OMITTED]
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub as follows:
4.1 Organization and Qualification.
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(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation, and
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
(b) The Company is duly qualified or licensed and in good standing to
do business in each jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification or
licensing necessary, and to perform all of its obligations under any contract
under which the Company (A) has or may acquire any rights, (B) has or may become
subject to any obligation or liability or
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(C) is or may, or any of the assets used or owned by it are or may, become
bound, except where the failure to be so duly qualified or licensed and in good
standing or to effect such performance would not, individually or in the
aggregate, have a Company Material Adverse Effect. When used in this Agreement,
the term "COMPANY MATERIAL ADVERSE EFFECT" means any change or effect that would
(i) be materially adverse to the business, assets (tangible or intangible),
results of operations, liabilities or financial condition of the Company, or
(ii) impair the ability of the Company to perform its obligations under this
Agreement or to consummate the transactions contemplated hereby.
(c) The Company has heretofore furnished or made available to Parent
complete and correct copies of the Company's articles of incorporation and
bylaws, each as amended to the date hereof, and all of such articles of
incorporation, bylaws and equivalent organizational documents are in full force
and effect. The Company is not in violation of any of the provisions of the
Company's articles of incorporation or bylaws.
4.2 Capitalization of the Company.
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(a) The authorized capital stock of the Company consists of (i)
50,000,000 shares of Company Common Stock, of which 7,179,429 shares are
currently issued and outstanding and (ii) 15,000,000 shares of preferred stock,
$.001 par value, of which 3,250 Preferred Shares are currently issued and
outstanding. All outstanding shares of capital stock of the Company have been
validly issued, and are fully paid, nonassessable and free of preemptive rights.
Set forth in Schedule 4.2(a) are all outstanding options, warrants, or other
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rights to purchase capital stock of the Company from the Company. Except as set
forth above or in Schedule 4.2(a), there are outstanding (A) no shares of
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capital stock or other voting securities of the Company, (B) no securities of
the Company convertible into or exchangeable for shares of capital stock or
voting securities of the Company, (C) no options, subscriptions, warrants,
convertible securities, calls or other rights to acquire from the Company, and
no obligation of the Company to issue, deliver or sell, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of the Company, and (D) no equity equivalents,
performance shares, interests in the ownership or earnings of the Company or
other similar rights issued by the Company (the items referred to in clauses
(A)-(D) are referred to herein as "COMPANY SECURITIES"). Except as set forth on
Schedule 4.2(a) hereto, (i) there are no outstanding obligations of the Company
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to repurchase, redeem or otherwise acquire any Company Securities, (ii) no
agreement or other document grants or imposes on any shares of the Company
Common Stock any right, preference, privilege or restriction with respect to the
transactions contemplated hereby (including without limitation any rights of
first refusal), other than the right to dissent from the Merger as provided in
Section 2.1(e) above and (iii) there are no bonds, debentures, notes or other
indebtedness having general voting rights (or convertible into securities having
such rights) of the Company issued and outstanding.
(b) The Company has no subsidiaries. Except for portfolio securities
with an aggregate fair market value not in excess of $50,000, the Company has
not made, directly or indirectly, any material investment or ownership interest
in (including without
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limitation any ownership of capital stock or other equity securities), advance
to or purchase or guaranty of any obligations of, any entity, nor is the Company
subject to any obligation or requirement to provide funds for or make any
investment (in the form of a loan, capital contribution or otherwise) in any
entity. For purposes of this Agreement, "SUBSIDIARY" shall mean, with respect to
any party, any corporation or other organization, whether incorporated or
unincorporated, of which (x) at least a majority of the securities or other
interests having by their terms voting power to elect a majority of the Board of
Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such party or by any one or more of its subsidiaries, or by such party and
one or more of its subsidiaries, or (y) such party or any other subsidiary of
such party is a general partner (excluding such partnerships where such party or
any subsidiary of such party do not have a majority of the voting interest in
such partnership).
(c) All issued and outstanding warrants, options and other rights to
acquire Company Securities (other than the stock options outstanding under the
Company's 1994 Stock Compensation Plan or the Company's Outside Directors Stock
Option Plan (each, a "COMPENSATION OPTION")), will, as of or prior to the
Effective Time, terminate or will thereafter constitute only the right to
receive the excess, if any, of the per share Merger Consideration over the per
share exercise price of such warrant, option or such other right, multiplied by
the number of shares for which such warrant or option is exercisable immediately
prior to the Effective Time (the "OPTION/WARRANT SPREAD"), without obligation of
any other payment. The termination of all Compensation Options will be governed
by the termination provisions contained in the Company's 1994 Stock Compensation
Plan or the Company's Outside Directors Stock Option Plan attached to Schedule
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4.2(a), as applicable.
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4.3 Power and Authority.
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(a) The Company has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Company's Board of Directors. This Agreement has been duly and validly executed
and delivered by the Company and is a valid and binding agreement of the
Company, enforceable against it in accordance with its terms, except (a) as such
enforcement may be subject to bankruptcy, insolvency or similar laws now or
hereafter in effect relating to creditors rights generally (collectively, the
"BANKRUPTCY EXCEPTIONS"), and (b) as the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(b) Except for the action contemplated by Section 1.5 hereof, the
Board of Directors of the Company has duly and validly approved and taken all
corporate action required to be taken by the Board of Directors for the
consummation by the Company of the transactions to which it is a party
contemplated by this Agreement, including the
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Merger and the acquisition of Shares pursuant to the Merger, the Stockholder
Agreements and any Other Transactions.
4.4 Board Recommendations; Anti-takeover Provisions.
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(a) The Company's Board of Directors, at a meeting duly held on
December 18, 1997 has (i) declared that as of such date it has not considered or
acted on any proposed agreement, arrangement, or understanding with Parent or
any other party with respect to the transactions contemplated by the Stockholder
Agreements and this Agreement, (ii) duly and validly taken all action necessary
to: (A) amend the Company's Bylaws in such a manner as is necessary to ensure
that the provisions of Sections 78.378 through 78.3793, inclusive, of the NRS do
not apply to the Company (and the provision of the Bylaws effecting the
foregoing shall be referred to as the "CONTROL SHARE OPT-OUT BYLAW"); and (B)
ensure that the prohibitions contained in Sections 78.411 through 78.444,
inclusive, of the NRS applicable to "combinations" (as defined in Section
78.416) would not apply to substantially contemporaneous purchasing by Parent
and/or its affiliates of (a) all of the outstanding voting shares of the Company
from the Selling Stockholders and (b) all the remaining outstanding voting
shares of the Company from the remaining stockholders, as contemplated by this
Agreement; and (iii) has received a written legal opinion, dated the date
hereof, of Xxxxx Xxxxxx, counsel to the Company, addressed to the Company,
Parent and Merger Sub, satisfactory in form and substance to Parent and its
counsel, to the effect described in clause (ii) above as to matters of Nevada
law.
(b) The Company's Board of Directors, at a meeting duly held on
December 22, 1997 has duly and validly: (i) determined that each of the Merger
and the transactions contemplated thereby is fair to and in the best interests
of the Company's stockholders; (ii) approved and adopted this Agreement and the
transactions contemplated hereby (including without limitation (x) the
acquisition of the Company by Parent or any of its affiliates, and any purchase
of Shares in connection therewith, by means of this Agreement, the Merger, the
Stockholder Agreements and/or any other transactions conducted to effectuate the
acquisition of the Company by Parent or its affiliates in accordance with this
Agreement ("OTHER TRANSACTIONS") and (y) any other transactions contemplated
hereby and by the foregoing clause (x)); (iii) resolved to recommend that the
stockholders of the Company approve and adopt this Agreement and the Merger;
(iii) resolved not to alter, amend, repeal, modify or otherwise restrict the
effect of the Control Share Opt-Out Bylaw for a period of not less than fourteen
(14) days following the date of such December 22, 1997 Board of Directors
meeting; and (iv) has received an opinion from its financial advisor that the
Merger Consideration is fair to the Company's stockholders from a financial
point of view.
4.5 Compliance.
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(a) Except as set forth in Schedule 4.5(a), since January 1, 1994,
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the Company and its affiliates, officers, directors, agents and employees have
been and are in compliance with (i) all applicable laws, rules, statutes,
orders, ordinances and regulations
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of foreign, Federal, state and local governmental authorities applicable to the
businesses conducted by the Company, and neither the Company nor any of its
affiliates, is aware of any claim of violation, or of any actual violation, of
any such laws, rules, statutes, orders, ordinances and regulations, by the
Company, except where such failure or violation (whether actual or claimed)
would not have a Company Material Adverse Effect and (ii) all applicable
federal, state, local or foreign statutes, ordinances, rules, regulations,
permits, consents, approvals, licenses, judgments, orders, decrees, injunctions
or other authorizations governing or relating to the Company's current or
contemplated casino, liquor related activities and gaming activities and
operations, including, without limitation, the Nevada Gaming Control Act, as
amended (the "NEVADA ACT"), and the rules and regulations promulgated
thereunder, or applicable to the properties owned or leased and used by the
Company (collectively, "GAMING LAWS"). None of the Company or any employee,
officer, director or stockholder or any affiliate thereof, has received any
written claim, demand, notice, complaint, court order or administrative order
from any governmental authority since January 1, 1994, asserting that a license
of the Company or of any such employee, officer, director or stockholder or
affiliate thereof, as applicable, under any Gaming Laws should be revoked or
suspended or that any such party is not in full compliance with such license
(with respect to such employee, officer, director or stockholder or affiliate
thereof, to the extent that such revocation or suspension or non-compliance
might result in the revocation or suspension of the Company's license).
(b) Except as set forth in Schedule 4.5(b), since January 1, 1994,
---------------
the Company has possessed and currently possesses, and is current on all fees
with regard to, all franchises, certificates, licenses, permits and other
authorizations from any governmental authorities and all patents, trademarks,
service marks, trade names, copyrights, licenses and other rights that are
necessary to the Company for the present ownership, maintenance and operation of
its business, properties and assets (including without limitation all gaming and
liquor licenses), except where the failure to possess such franchises,
certificates, licenses, permits, and other authorizations, patents, trademarks,
service marks, trade names, copyrights, licenses and other rights (other than
those required to be obtained from the Nevada Gaming Commission (the "GAMING
COMMISSION"), the Nevada State Gaming Control Board (the "CONTROL BOARD"), the
Xxxxx County Liquor and Gaming Licensing Board (the "CCB"), and the City of Las
Vegas ("LAS VEGAS") (the Gaming Commission, the Control Board, the CCB, and Las
Vegas are collectively referred to as the "GAMING AUTHORITIES"), including
approvals under the Gaming Laws) would not have a Company Material Adverse
Effect; and the Company is not in violation of any thereof, except where such
violation would not have a Company Material Adverse Effect.
(c) Except as set forth in Schedule 4.5(c), since January 1, 1994,
---------------
the Company has not violated (with or without notice or lapse of time) any
applicable provisions of (i) any laws, rules, statutes, orders, ordinances or
regulations, or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise, or other instrument or obligations to which
the Company is a party or by which the Company or any of its properties are
bound or affected, except as will not have a Company Material Adverse Effect.
-10-
(d) Except as set forth in Schedule 4.5(d), since January 1, 1994:
---------------
(i) the Company is, and has been, in full compliance with all of the terms and
requirements of each award, decision, injunction, judgment, order, ruling,
subpoena, or verdict (each, an "ORDER") entered, issued, made, or rendered by
any court, administrative agency, or other governmental entity, officer or
authority or by any arbitrator to which it, or any of the assets owned or used
by it, is or has been subject, and (ii) no event has occurred or circumstance
exists that may constitute or result in (with or without notice or lapse of
time) a violation of or failure to comply with any term or requirement of any
Order to which the Company, or any of the assets owned or used by the Company,
is subject, except where such non-compliance, violation or failure to comply
would not have a Company Material Adverse Effect.
(e) Except as set forth in Schedule 4.5(e), the Company has not
---------------
received, at any time since January 1, 1994, any notice or other communication
(whether oral or written) regarding any actual, alleged, possible, or potential
violation of, or failure to comply with, any term or requirement of any Order to
which the Company, or any of the assets owned or used by the Company, is or has
been subject, except as would not have a Company Material Adverse Effect.
(f) Except as set forth on Schedule 4.5(f), no investigation or
---------------
review by any government entity, officer or authority, including without
limitation any investigation or review by Gaming Authorities or relating to
compliance with Gaming Laws, with respect to the Company is pending or, to the
knowledge of the Company, threatened, nor has any government entity, officer or
authority indicated an intention to conduct the same.
4.6 Consents and Approvals; No Violation. The execution and delivery of
------------------------------------
this Agreement do not, and the consummation of the transactions contemplated
hereby and the performance by the Company of its obligations hereunder will not:
(a) subject to the obtaining of any requisite approvals of the
Company's stockholders as contemplated by Section 15 hereof, conflict with or
violate any provision of the Company's articles of incorporation or bylaws;
(b) require any consent, approval, order, authorization or permit of,
or registration, filing or notification to, any governmental or regulatory
authority or agency (a "GOVERNMENTAL ENTITY"), except for (i) the filing of a
premerger notification and report form by the Company under the Xxxx-Xxxxx-
Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), (ii) the
filing with the SEC of (x) the Company Proxy Statement relating to the approval
and adoption by the Company's stockholders of the Merger and this Agreement, if
such approval and adoption is required by law, and (y) such reports under
Sections 13 and 16 of the Securities Exchange Act of 1934, as amended ("EXCHANGE
ACT"), as may be required in connection with this Agreement, the Stockholder
Agreements and the transactions contemplated hereby and thereby, (iii) obtaining
all necessary approvals under applicable Gaming Laws, including those required
by the Gaming Authorities, (iv) the filing of the Articles of Merger with the
Secretary of
-11-
State of the State of Nevada, and (v) such additional actions or filings which,
if not taken or made, would not, individually or in the aggregate, have a
Company Material Adverse Effect;
(c) except as disclosed on Schedule 4.6(c), result in any conflict
---------------
with or violation of or the breach of or constitute a default (with notice or
lapse of time or both) under, or give rise to any right of termination,
cancellation or acceleration or guaranteed payments under or to a loss of a
material benefit under, any of the terms, conditions or provisions of any note,
bond, indenture, lease, mortgage, license, franchise, agreement or other
instrument or obligation to which the Company is a party or by which the Company
or any of its properties or assets may be bound, except for such conflicts,
violations, breaches, defaults, or rights of termination, cancellation or
acceleration, or losses as to which requisite waivers or consents have been
obtained or will be obtained prior to the Effective Time or which, individually
or in the aggregate, would not result in a Company Material Adverse Effect;
(d) violate the provisions of any order, writ, injunction, judgment,
decree, statute, rule or regulation applicable to the Company, in such a manner
as to result in a Company Material Adverse Effect; or
(e) result in the creation of any lien, charge or encumbrance upon
any shares of capital stock, properties or assets of the Company under any
agreement or instrument to which the Company is a party or by which the Company
is bound.
4.7 Assignment of MOU. The Company has consented (and hereby reaffirms
-----------------
such consent) to the termination and release of any rights and obligations of
the Company under that certain Memorandum of Understanding, dated October 29,
1997 between, among others, the Company and Xxxxxx, Xxxxxx Entertainment Nevada,
Inc. and Diversified Opportunities Group Ltd.
4.8 SEC Reports; Financial Statements, Absence of Undisclosed Liabilities.
---------------------------------------------------------------------
(a) The Company has filed all forms, reports and documents required
to be filed with the SEC since February 11, 1994. The Company has made available
to Parent, in the form filed with the SEC, the Company's (i) Annual Reports on
Form 10-KSB for the fiscal years ended September 30, 1996, 1995 and 1994, (ii)
all Quarterly Reports on Form 10-QSB filed by the Company with the SEC since
February 11, 1994, (iii) all proxy statements relating to meetings of the
Company's stockholders since February 11, 1994 and (iv) all Current Reports on
Form 8-K and registration statements and other forms, reports and documents,
filed by the Company with the SEC since February 11, 1994 (collectively and as
amended, the "SEC REPORTS"). As of their respective dates, the SEC Reports
complied in all material respects with all applicable requirements of the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder, and the Exchange Act, as the case may be, each as in effect on the
dates such SEC Reports were filed. As of their respective dates, none of the SEC
Reports, including, without limitation, any financial statements or schedules
included
-12-
therein, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements and unaudited
consolidated interim financial statements of the Company included in the SEC
Reports fairly present, in all material respects, in conformity with GAAP (as
defined below) applied on a consistent basis (except as may be indicated in the
notes thereto), the consolidated financial position of the Company as of the
dates thereof and its consolidated results of operations and cash flows for the
periods then ended (subject to normal year-end adjustments in the case of any
unaudited interim financial statements). The Company has heretofore made
available or promptly will make available to Parent a complete and correct copy
of any amendments or modifications, which are required to be filed with the SEC
but have not yet been filed with the SEC, to the SEC Reports. As used in this
Agreement, "GAAP" means United States generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession in the United States as in effect on the date hereof.
(b) Except as set forth in Schedule 4.8(b) hereto, the Company has no
---------------
liabilities of any nature (whether accrued, absolute, contingent or otherwise),
except for (i) liabilities set forth in the balance sheet of the Company dated
September 30, 1997 or on the notes thereto, contained in the Company's draft
Annual Report on Form 10-KSB for the fiscal year ended September 30, 1997
attached to Schedule 4.8(b) (the "DRAFT SEPTEMBER 30, 1997 FORM 10-KSB") (which
---------------
balance sheet is subject to normal year end adjustments which individually or in
the aggregate will not be material) (the "DRAFT SEPTEMBER 30, 1997 BALANCE
SHEET"), (ii) liabilities incurred in the ordinary course of business consistent
with past practice since September 30, 1997 and (iii) liabilities to financial
advisors in connection with the transactions contemplated by this Agreement
which, in the aggregate, do not and will not exceed $600,000.
4.9 Absence of Certain Changes. Since October 1, 1996, except as set
--------------------------
forth in Schedule 4.9 hereto or as disclosed in the SEC Reports since that date
------------
or as disclosed in the Draft September 30, 1997 Form 10-KSB, the Company has
conducted its business only in the ordinary course, and there has not been (i)
any declaration, setting aside or payment of any dividend or other distribution
with respect to its capital stock, (ii) any incurrence, assumption or guarantees
by the Company of any indebtedness for borrowed money other than in the ordinary
course of business, (iii) any making of any loan, advance or capital
contributions to, or investments in, any other person, (iv) any split,
combination or reclassification of any of its capital stock or any issuance or
the authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, (v) (x) any granting by
the Company to any officer of the Company of any increase in compensation,
except in the ordinary course of business consistent with past practice or as
was required under employment agreements in effect as of the date of the most
recent audited financial statements included in the SEC Reports filed and
publicly available prior to the date of this Agreement, (y) any granting by the
Company to any such officer of any increase in severance or termination pay,
except as part of a standard employment package to any person promoted or hired,
or as was required under employment, severance or termination agreements in
effect as of the date of the most recent audited financial statements included
in the SEC
-13-
Reports filed and publicly available prior to the date of this Agreement or (z)
except termination arrangements in the ordinary course of business consistent
with past practice with employees other than any executive officer of the
Company, any entry by the Company into any employment, severance or termination
agreement with any such officer, (vi) any damage, destruction or loss, whether
or not covered by insurance, that would be expected to have a Company Material
Adverse Effect, (vii) any transaction or commitment made, or any contract or
agreement entered into, by the Company relating to its assets or business
(including without limitation the acquisition or disposition of any assets), or
any relinquishment by the Company of any contractual or other right, in either
case, material to the Company, other than transactions and commitments in the
ordinary course of business and those contemplated by this Agreement, (viii) any
change in accounting methods, principles or practices by the Company materially
affecting its assets, liabilities or business, except insofar as may have been
required by a change in GAAP, (ix) any transaction, payment or commitment made,
or any contract or agreement entered into, by the Company with or to any
affiliate of the Company; (x) any transaction, payment or commitment made, or
any contract or agreement entered into, by the Company relating to the Merger or
the transactions contemplated by this Agreement or the negotiation thereof
(including without limitation obligations to pay any agent, broker, investment
banker, financial advisor or other firm or person any brokers' or finders' fee
or any other commission or similar fee) other than the obligations to the
Company's advisors described in Section 48(b)(iii) above, or (xi) any other
event, development or change which is reasonably likely to have a Company
Material Adverse Effect.
4.10 Company Proxy Statement. The Company Proxy Statement, including any
-----------------------
amendments or supplements thereto, shall not, at the time filed with the SEC, as
of the date mailed to the Company's stockholders or at the time of the Special
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. Notwithstanding the foregoing, the Company makes no representation
or warranty with respect to any information provided by Parent or Merger Sub
specifically for use in the Company Proxy Statement. The Company Proxy
Statement will comply as to form in all material respects with the provisions of
the Exchange Act.
4.11 Absence of Litigation. Except as disclosed in Schedule 4.11 hereto,
--------------------- -------------
since January 1, 1997, there has not been any action, suit, claim, investigation
or proceeding pending against, or to the knowledge of the Company, threatened
against, the Company or any of its directors or officers (in their capacities as
such) or properties, before any court or arbitrator or any administrative,
regulatory or governmental body, or any agency or official which, individually
or in the aggregate, if decided adversely, would have a Company Material Adverse
Effect. Except as disclosed in Schedule 4.11 hereto, since
-------------
-14-
January 1, 1997, there has not been any action, suit, claim, investigation or
proceeding pending against, or to the knowledge of the Company, threatened
against, the Company or any of its directors or officers (in their capacities as
such) or properties, before any court or arbitrator or any administrative,
regulatory or governmental body, or any agency or official which (i) challenges
or seeks to prevent, enjoin, alter or delay the Merger or any of the other
transactions contemplated hereby or (ii) alleges any criminal action or
inaction. Except as disclosed in Schedule 4.11 hereto, since January 1, 1997,
-------------
neither the Company nor any of its properties has been subject to any order,
writ, judgment, injunction, decree, determination or award having, or which
would have a Company Material Adverse Effect or which would prevent or delay the
consummation of the transactions contemplated hereby.
4.12 Taxes. Except as set forth in Schedule 4.12 hereto:
----- -------------
(a) the Company has filed or sent, all material returns, material
declarations and reports and information returns and statements required to be
filed or sent by or relating to the Company relating to any Taxes (as defined
herein) with respect to any material income, properties or operations of the
Company (collectively, "RETURNS"); (b) as of the time of filing, the Returns
correctly reflected in all material respects the facts regarding the income,
business, assets, operations, activities and status of the Company and any other
material information required to be shown therein; (c) the Company has timely
paid or made provision for all material Taxes that have been shown as due and
payable on the Returns that have been filed; (d) the Company has made or will
make provision for all material Taxes payable for any periods that end before
the Effective Time for which no Returns have yet been filed and for any periods
that begin before the Effective Time and end after the Effective Time to the
extent such Taxes are attributable to the portion of any such period ending at
the Effective Time; (e) the charges, accruals and reserves for Taxes reflected
on the books of the Company are adequate under GAAP to cover the Tax liabilities
accruing or payable by the Company; (f) the Company is not delinquent in the
payment of any material Taxes and has requested any extension of time within
which to file or send any material Return (other than extensions granted to the
Company for the filing of its Returns as set forth in Schedule 4.12), which
-------------
Return has not since been filed or sent; (g) no material deficiency for any
Taxes has been proposed, asserted or assessed in writing against the Company
other than those Taxes being contested in good faith by appropriate proceedings
and set forth in Schedule 4.12 (which shall set forth the nature of the
-------------
proceeding, the type of return, the deficiencies proposed, asserted or assessed
and the amount thereof, and the taxable year in question); (h) the Company has
not granted any extension of the limitation period applicable to any material
Tax claims other than those Taxes being contested in good faith by appropriate
proceedings; and (i) the Company is not subject to liability for Taxes of any
person (other than the Company).
For purposes of this Agreement, "TAX" or "TAXES" means all Federal, state,
local and foreign taxes, and other assessments of a similar nature (whether
imposed directly or through withholding), including any interest, additions to
tax, or penalties applicable thereto, imposed by any Tax Authority. "TAX
AUTHORITY" means the Internal Revenue
-15-
Service and any other domestic or foreign governmental authority responsible for
the administration of any Taxes.
4.13 Employee Benefits.
-----------------
(a) Existence of Plans. For purposes of this Agreement, the term
------------------
"PLANS" shall mean (i) all "EMPLOYEE BENEFIT PLANS" (as such term is defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), of which the Company or any member of the same controlled group of
businesses as the Company within the meaning of Section 4001(a)(14) of ERISA (an
"ERISA AFFILIATE") is or ever was a sponsor or participating employer or as to
which the Company or any of its ERISA Affiliates makes contributions or is
required to make contributions and (ii) any similar employment, severance or
other arrangement or policy of the Company or of any of its ERISA Affiliates
(whether written or oral) providing for insurance coverage (including self-
insured arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits or retirement benefits, or for profit
sharing, deferred compensation, bonuses, stock options, stock appreciation or
other forms of incentive compensation or post-retirement insurance, compensation
or benefits. Except as is disclosed on Schedule 4.13, (i) neither the Company
-------------
nor any of its ERISA Affiliates maintains or sponsors (or ever maintained or
sponsored), or makes or is required to make contributions to, any Plans, (ii)
none of the Plans is or was a "multi-employer plan", as defined in Section 3(37)
of ERISA, (iii) none of the Plans is or was a "defined benefit pension plan"
within the meaning of Section 3(35) of ERISA, (iv) none of the Plans provides or
provided post-retirement medical or health benefits, (v) none of the Plans is or
was a "welfare benefit fund," as defined in Section 419(e) of the Internal
Revenue Code of 1986, as amended ("CODE"), or an organization described in
Sections 501(c)(9) or 501(c)(20) of the Code, (vi) neither the Company nor any
of its ERISA Affiliates is or was a party to any collective bargaining
agreement, and (vii) neither the Company nor any of its ERISA Affiliates has
announced or otherwise made any commitment to create or amend any Plan.
Notwithstanding any statement or indication in this Agreement to the contrary,
there are no Plans (a) as to which Parent or Merger Sub will be required to make
any contributions or with respect to which Parent or Merger Sub shall have any
obligation or liability whatsoever, whether on behalf of any of the current
employees of the Company or on behalf of any other Person, after the Closing, or
(b) which Parent or Merger Sub will not be able to terminate immediately after
the Closing in accordance with their terms and ERISA. With respect to each of
such Plans, at the Closing there will be no unrecorded liabilities with respect
to the establishment, implementation, operation, administration or termination
of any such Plan, or the termination of the participation in any such Plan by
the Company or any of its ERISA Affiliates. The Company has delivered/will
deliver within five business days of the date hereof to Parent true and complete
copies of: (i) each of the Plans and any related funding agreements thereto
(including insurance contracts) including all amendments, all of which are
legally valid and binding and in full force and effect and there are no defaults
thereunder, (ii) the currently effective Summary Plan Description pertaining to
each of the Plans, (iii) the three most recent annual reports for each of the
Plans (including all relevant schedules), (iv) the most recently filed PBGC Form
1 (if
-16-
applicable), (v) the most recent Internal Revenue Service determination letter
for each Plan which is intended to constitute a qualified plan under Section 401
of the Code and each amendment to each of the foregoing documents, and (vi) for
each funded Plan, financial statements consisting of (A) the consolidated
statement of assets and liabilities of such Plan as of its most recent valuation
date, and (B) the statement of changes in fund balance and in financial position
or the statement of changes in net assets available for benefits under such Plan
for the most recently-ended plan year, which such financial statements shall
fairly present the financial condition and the results of operations of such
Plan in accordance with GAAP as of such dates.
(b) Present Value of Benefits. The present value of all accrued
-------------------------
benefits under any Plans subject to Title IV of ERISA shall not, as of the
Closing Date, exceed the value of the assets of such Plans allocated to such
accrued benefits, based upon the applicable provisions of the Code and ERISA,
and each such Plan shall be capable of being terminated as of the Closing Date
in a "standard termination" under Section 4041(b) of ERISA. With respect to
each Plan that is subject to Title IV of ERISA, (i) no amount is due or owing
from the Company or any of its ERISA Affiliates to the Pension Benefit Guaranty
Corporation or to any "multi-employer Plan" as defined in Section 3(37) of ERISA
on account of any withdrawal therefrom and (ii) no such Plan has been terminated
other than in accordance with ERISA or at a time when the plan was not
sufficiently funded. The transactions contemplated hereunder, including without
limitation the termination of the Plans at or prior to the Closing, shall not
result in any material such withdrawal or other liability under any applicable
Laws.
(c) Penalties; Reportable Events. Neither the Company nor any of its
----------------------------
ERISA Affiliates is subject to any material liability, tax or penalty whatsoever
to any Person or agency whomsoever as a result of engaging in a prohibited
transaction under ERISA or the Code, and neither the Company nor any of its
ERISA Affiliates has any knowledge of any circumstances which reasonably might
result in any material liability, tax or penalty, including, but not limited to,
a penalty under Section 502 of ERISA, as a result of a breach of any duty under
ERISA or under other Laws. Each Plan which is required to comply with the
provisions of Section 4980B of the Code has complied in all material respects.
No event has occurred which could subject any Plan to material tax liability
under Section 511 of the Code. None of the Plans subject to Title IV of ERISA
has, since September 2, 1974, been completely or partially terminated nor has
there been any "reportable event", as such term is defined in Section 4043(b) of
ERISA, with respect to any of the Plans since the effective date of ERISA nor
has any notice of intent to terminate been filed or given with respect to any
such Plan. There has been no (i) withdrawal by the Company or any of its ERISA
Affiliates that is a substantial employer from a single-employer plan which is a
Plan and which has two or more contributing sponsors at least two of whom are
not under common control, as referred to in Section 4063(b) of ERISA, or (ii)
cessation by the Company or any of its respective ERISA Affiliates of operations
at a facility causing more than 20% of Plan participants to be separated from
employment, as referred to in Section 4062(f) of ERISA. Neither the Company nor
any of its ERISA Affiliates, nor any other organization of which any of
-17-
them are a successor or parent corporation as defined in Section 4069(b) of
ERISA, have engaged in any transaction described in Section 4069(a) of ERISA.
(d) Deficiencies; Qualification. None of the Plans nor any trust
---------------------------
created thereunder has incurred any "accumulated funding deficiency" as such
term is defined in Section 412 of the Code, whether or not waived, since the
effective date of such Section 412, and no condition has occurred or exists
which by the passage of time could be expected to result in an accumulated
funding deficiency as of the last day of the current plan year of any such Plan.
Furthermore, neither the Company nor any of its respective ERISA Affiliates has
any unfunded liability under ERISA in respect of any of the Plans. Each of the
Plans which is intended to be a qualified plan under Section 401(a) of the Code
has received a favorable determination letter from the Internal Revenue Service,
and has been operated in accordance with its terms and with the provisions of
the Code. All of the Plans have been administered and maintained in substantial
compliance with ERISA, the Code and all other applicable Laws. All
contributions required to be made to each of the Plans under the terms of that
Plan, ERISA, the Code or any other applicable Laws have been timely made. Each
Plan intended to meet the requirements for tax-favored treatment under
Subchapter B of Chapter 1 of the Code meets such requirements. There are no
liens against the property of the Company (including the Transferred Assets) or
any of its ERISA Affiliates under Section 412(n) of the Code or Sections 302(f)
or 4068 of ERISA. The Financial Statements properly reflect all material
amounts required to be accrued as liabilities to date under each of the Plans.
There is no contract, agreement or benefit arrangement covering any employee of
the Company which, individually or collectively, could give rise to the payment
of any amount which would constitute an "excess parachute payment" (as defined
in Section 280G of the Code). The execution and performance of this Agreement
will not (i) result in any obligation or liability (with respect to accrued
benefits or otherwise) of Parent or Merger Sub or any subsidiary of Parent to
the PBGC, any Plan, or any present or former employee of the Company, (ii) be a
trigger event under any Plan that will result in any material payment (whether
of severance pay or otherwise) becoming due to any present or former employee,
officer, director, stockholder, contractor, or consultant, or any of their
dependents, or (iii) accelerate the time of payment or vesting, or increase the
amount, of compensation due to any employee, officer, director, stockholder,
contractor, or consultant of the Company. With respect to any insurance policy
which provides, or has provided, funding for benefits under any Plan, (A) there
is and will be no material liability of the Company or Parent or Merger Sub in
the nature of a retroactive or retrospective rate adjustment, loss sharing
arrangement, or actual or contingent liability as of the Closing Date, nor would
there be any such liability if such insurance policy were terminated as of the
Closing Date, and (B) no insurance company issuing any such policy is in
receivership, conservatorship, bankruptcy, liquidation, or similar proceeding,
and, to the knowledge of the Company, no such proceedings with respect to any
insurer are imminent.
(e) Litigation. Other than routine claims for benefits under the
----------
Plans, there are no pending, or, to the best knowledge of the Company,
threatened, investigations, proceedings, claims, lawsuits, disputes, actions,
audits or controversies
-18-
involving the Plans, or the fiduciaries, administrators, or trustees of any of
the Plans or the Company or any of its ERISA Affiliates as the employer or
sponsor under any Plan, with any of the Internal Revenue Service, the Department
of Labor, the Pension Benefit Guaranty Corporation, any participant in or
beneficiary of any Plan or any other Person whomsoever. The Company knows of no
reasonable basis for any such claim, lawsuit, audit, dispute, action or
controversy.
4.14 Intellectual Property. Except as disclosed in the SEC Reports filed
---------------------
prior to the date of this Agreement or as set forth in Schedule 4.14 hereto, the
-------------
Company owns, or is licensed or has the right to use (in each case, free and
clear of any security interests, liens, claims, pledges, charges, voting
agreements or other encumbrances of any nature whatsoever (collectively,
"LIENS"), all Intellectual Property (as defined below) used in or necessary for
the conduct of its business substantially as currently conducted; to the
knowledge of the Company, the use of any Intellectual Property by the Company
does not infringe on or otherwise violate the rights of any person; and, to the
knowledge of the Company, no person is challenging, infringing on or otherwise
violating any right of the Company with respect to any Intellectual Property
owned by and/or licensed to the Company, except in each case for such
infringements or failures to own or be licensed as would not, individually or in
the aggregate, have a Company Material Adverse Effect. For purposes of this
Agreement, "INTELLECTUAL PROPERTY" means trademarks, service marks, brand names,
certification marks, trade dress, assumed names, trade names and other
indications of origin, the goodwill associated with the foregoing and any
registration in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of any
such registration or application; inventions, discoveries and ideas, whether
patentable or not in any jurisdiction; patents, applications for patents
(including without limitation divisions, continuations, continuations in part
and renewal applications), and any renewals, extensions or reissues thereof, in
any jurisdiction; non-public information, trade secrets and confidential
information and rights in any jurisdiction to limit the use or disclosure
thereof by any person; writings and other works, whether copyrightable or not in
any jurisdiction; registrations or applications for registration of copyrights
in any jurisdiction, and any renewals or extensions thereof; and any similar
intellectual property or proprietary rights. The Company has received no notice
from Holiday Inns Franchising, Inc. ("HIFI"), alleging any current or uncured
grounds for termination of the Company's License Agreement with HIFI, and the
Company has no knowledge of any currently-existing or anticipated grounds for
such termination other than HIFI's contractual right under the License Agreement
to approve a change of control of the Company.
4.15 Material Contracts. Except as set forth in Schedule 4.15 hereto,
------------------ -------------
there are no (i) agreements of the Company containing an unexpired covenant not
to compete or similar restriction applying to the Company, (ii) interest rate,
currency or commodity hedging, swap or similar derivative transactions to which
the Company is a party or (iii) other contracts or amendments thereto that would
be required to be filed and have not been filed as an exhibit to the Company's
Annual Report on Form 10-KSB for the fiscal year ended September 30, 1996 (the
"1996 FORM 10-KSB") and to the Company's SEC Reports filed subsequent thereto
and prior to the date of this Agreement (collectively,
-19-
along with agreements or contracts or amendments thereto filed as exhibits to
the 1996 Form 10-KSB and to such subsequently filed SEC Reports, the "MATERIAL
CONTRACTS"). Assuming each Material Contract constitutes a valid and binding
obligation of each other party thereto, each Material Contract is a valid and
binding obligation of the Company. To the Company's knowledge, each Material
Contract is a valid and binding obligation of each other party thereto, and each
such Material Contract is in full force and effect and is enforceable by the
Company in accordance with its terms, except as such enforcement may be limited
by the Bankruptcy Exceptions and subject to the general principles of equity.
There are no existing defaults (or circumstances or events that, with the giving
of notice or lapse of time or both would become defaults) of the Company (or, to
the knowledge of the Company, any other party thereto) under any of the Material
Contracts except for defaults that would not, individually or in the aggregate,
have a Company Material Adverse Effect.
4.16 Insurance. The Company has obtained and maintained in full force and
---------
effect insurance with responsible and reputable insurance companies or
associations in such amounts, on such terms and covering such risks, including
fire and other risks insured against by extended coverage, as is consistent with
industry practice for companies (i) engaged in similar businesses and (ii) of at
least similar size to that of the Company, and has maintained in full force and
effect public liability insurance, insuring against claims for personal injury
or death or property damage occurring in connection with any of the activities
of the Company or any of the properties owned, occupied or controlled by the
Company, in such amount as reasonably deemed necessary by the Company. Schedule
--------
4.16 hereto sets forth a complete and correct list of all material insurance
----
policies (including a brief summary of the nature and terms thereof and any
amounts paid or payable to the Company) providing coverage in favor of the
Company or any of its properties. Each such policy is in full force and effect,
no notice of termination, cancellation or reservation of rights has been
received with respect to any such policy, there is no default with respect to
any provision contained in any such policy, and there has not been any failure
to give any notice or present any claim under any such policy in a timely
fashion or in the manner or detail required by any such policy, except for any
such failures to be in full force and effect, any such terminations,
cancellations, reservations or defaults, or any such failures to give notice or
present claims which would not, individually or in the aggregate, have a Company
Material Adverse Effect.
4.17 Labor Matters.
-------------
(a) Except as set forth in Schedule 4.17(a) hereto, the Company is
----------------
not a party to any collective bargaining or other labor union contract
applicable to persons employed by the Company, no collective bargaining
agreement is being negotiated by the Company and the Company has no knowledge of
any material activities or proceedings (i) involving any unorganized employees
of the Company seeking to certify a collective bargaining unit or (ii) of any
labor union to organize any of the employees of the Company. There is no labor
dispute, strike or work stoppage against the Company pending or, to the
Company's knowledge, threatened which may interfere with the
-20-
business activities of the Company, except where such dispute, strike or work
stoppage would not have a Company Material Adverse Effect.
(b) Except as set forth in Schedule 4.17(b) hereto, the Company has
----------------
paid in full, or fully accrued for in their financial statements, all wages,
salaries, commissions, bonuses, severance payments, vacation payments, holiday
pay, sick pay, pay in lieu of compensatory time and other compensation due or to
become due to all current and former employees of the Company for all services
performed by any of them on or prior to the date hereof. The Company is in
compliance in all material respects with all applicable federal, state, local
and foreign laws, rules and regulations relating to the employment of labor,
including without limitation, laws, rules and regulations relating to payment of
wages, employment and employment practices, terms and conditions of employment,
hours, immigration, discrimination, child labor, occupational health and safety,
collective bargaining and the payment and withholding of Taxes and other sums
required by governmental authorities.
4.18 Real Property.
-------------
(a) Schedule 4.18 identifies all real property owned by the Company
-------------
(the "OWNED PROPERTY") and all real property leased or operated (or leased and
subleased) by the Company (the "LEASED PROPERTY"). The Owned Property and the
Leased Property shall be referred to collectively as the "REAL PROPERTY."
(b) The Company has good and marketable fee simple absolute title to
the Owned Property, and the right to use the Leased Property, free and clear of
any and all liens, encumbrances, easements, restrictions, leases, subleases,
concession agreements, options to purchase, options to lease, options to joint
venture or jointly develop, conditions, covenants, assessments, defects, claims
or exceptions, except for the exceptions described on Schedule 4.18 or as shown
-------------
on the policies of title insurance or preliminary title reports (if more recent)
attached as part of such schedule. Except as set forth on Schedule 4.18(b)
----------------
hereto, all leases, subleases and licenses on the Owned Property or Leased
Property, including renewal rights or other options, are terminable by the
Company without penalty on not more than 30 days notice.
(c) True and correct copies of the documents under which the Owned
Property and Leased Property is leased, subleased (to or by the Company or
otherwise) or operated (the "LEASE DOCUMENTS") have been delivered to Parent.
The Lease Documents are unmodified and in full force and effect, and there are
no other agreements, written or oral, between the Company and any third parties,
or by and amongst any third parties, claiming an interest in the interest of the
Company in the Owned Property, Leased Property or otherwise relating to the use
and occupancy of the Owned Property or Leased Property. Without limiting the
generality of the foregoing, except as set forth on Schedule 4.18, no person or
-------------
entity other than the Company has any right to occupancy, or right to acquire
any occupancy right, to any portion of the Real Property (whether pursuant to a
lease, sublease, license or otherwise) for any period of time beyond June 30,
1998. Neither the Company nor any other party is in material default under the
Lease
-21-
Documents, and no defaults (which have not been cured) by the Company nor any
other party have been asserted thereunder. To the best knowledge of the Company,
each landlord or other party (e.g., a subtenant or concessionaire) named in any
of the Lease Documents is not in material default thereunder, and no material
defaults (whether or not subsequently cured) by such landlord or other parties
have been alleged thereunder.
(d) Except as disclosed in Schedule 4.18, (i) the Real Property
-------------
complies with, and is operated in accordance with, all applicable laws
(including without limitation all Environmental Laws to the extent stated in
Section 4.19) affecting the Real Property or the ownership, improvement,
------------
development, possession, use, occupancy or operation thereof, and with any and
all liens, encumbrances, easements, agreements, covenants, conditions and
restrictions (collectively, "RESTRICTIONS") affecting the Real Property, except
where the failure to comply, individually or in the aggregate, would not result
in a Company Material Adverse Effect; (ii) to the best knowledge of the Company,
no land or property adjacent to the Real Property is in material violation of
any applicable laws, regulations or Restrictions, except for such violations
which, individually or in the aggregate, would not result in a Company Material
Adverse Effect; (iii) there are no material defects in the physical condition of
the Real Property or the improvements located on the Real Property, except for
defects which, individually or in the aggregate, would not have a Company
Material Adverse Effect; and (iv) the Company has not received any notice from
any governmental body (a) requiring it to make any material repairs or changes
to the Real Property or the improvements located on the Real Property or (b)
giving notice of any material governmental actions pending, except for such
repairs, changes or actions which, individually or in the aggregate, would not
have a Company Material Adverse Effect.
(e) Except as disclosed in Schedule 4.18, there is no action,
-------------
proceeding or litigation pending (or, to the best knowledge of the Company,
contemplated or threatened): (i) to take all or any portion of the Real
Property, or any interest therein, by eminent domain; (ii) to modify the zoning
of, or other governmental rules or restrictions applicable to, the Real Property
or the use or development thereof; (iii) for any street widening or changes in
highway or traffic lanes or patterns in the immediate vicinity of the Real
Property; or (iv) otherwise relating to the Real Property or the interests of
the Company therein, or which otherwise would interfere with the use, ownership,
improvement, development and/or operation of the Real Property.
(f) Except as disclosed in Schedule 4.18, no portion of the Real
-------------
Property or the roads immediately adjacent to the Real Property: (i) is
situated in a "Special Flood Hazard Area," as set forth on a Federal Emergency
Management Agency Flood Insurance Rate Map or Flood Hazard Boundary Map; (ii) to
the best knowledge of the Company, was the former site of any public or private
landfill, dump site, retention basin or settling pond; (iii) to the best
knowledge of the Company, was the former site of any oil or gas drilling
operations; (iv) to the best knowledge of the Company, was the former site of
any experimentation, processing, refining, reprocessing, recovery or
manufacturing operation for any petrochemicals; or (v) has any defect or
condition which
-22-
would materially impair either (a) the current use of the Real Property or (b)
the use of the Real Property for gaming or other currently contemplated
activities, as applicable.
(g) The parcels constituting the Real Property are assessed
separately from all other adjacent property for purposes of real property taxes.
(h) Except as disclosed in Schedule 4.18, (i) all improvements on the
-------------
Real Property are in compliance with current building codes, to the extent
applicable and (ii) the Company has not received any written notices of any
material violations of any applicable building codes relating to the Real
Property which have not been remedied.
(i) The Real Property is connected to and serviced by adequate water,
sewage disposal, gas and electricity facilities in accordance with all
applicable laws, statutes, ordinances, rules and regulations of all public or
quasi-public authorities having or claiming jurisdiction there over. All
material systems (heating, air conditioning, electrical, plumbing and the like)
for the basic operation of the Real Property are operable and in good condition
(ordinary wear and tear excepted).
(j) There are no material commitments to or agreements with any
governmental authority or agency (federal, state or local) affecting the Real
Property which are not listed in Schedule 4.18 or described in the SEC Reports.
-------------
(k) Except as disclosed in Schedule 4.18 or as shown in the policies
-------------
of title insurance or preliminary title reports (if more recent) delivered
previously to Parent, there are no commitments, agreements, understandings or
other Restrictions materially adversely affecting Company's ability to utilize
the Real Property for its intended purposes or to improve or develop or effect
expansion of the Company's business on the Real Property.
(l) There are no contracts or other obligations outstanding for the
sale, exchange or transfer of any of the Real Property or any interest therein,
or any portion of it or the business operated thereon, except as disclosed on
Schedule 4.18.
-------------
4.19 Environmental Matters.
---------------------
(a) "CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"ENVIRONMENTAL CLAIM" means, with respect to any Person, any written
notice, claim, demand or other communication (collectively, a "CLAIM") by any
other Person alleging or asserting such Person's liability for investigatory
costs, cleanup costs, Governmental Authority response costs, damages to natural
resources or other property, personal injuries, fines or penalties arising out
of, based on or resulting from (a) the
-23-
presence, or release into the environment, of any Hazardous Material at any
location, whether or not owned by such Person, or (b) circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law. The term
"ENVIRONMENTAL CLAIM" shall include, without limitation, any claim by any
Governmental Authority for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law, and any
claim by any third party (other than workers compensation claims arising from
isolated incidents) seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence of
Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
"ENVIRONMENTAL LAW" means any law, regulation or order relating to the
regulation or protection of human health, safety or the environment or to
emissions, discharges, releases or threatened releases of Hazardous Materials
into the environment (including without limitation ambient air, soil, surface
water, ground water, wetlands, land or subsurface strata), or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
"GOVERNMENTAL AUTHORITY" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
any governmental or quasi-governmental unit, whether federal, state, county,
district, city or other political subdivision, foreign or otherwise and whether
now or hereafter in existence, or any officer or official of any thereof.
"HAZARDOUS MATERIALS" includes (a) any "hazardous substance", as
defined by CERCLA or any other similar substance or waste regulated pursuant to
any similar state or local law, regulation or ordinance; (b) any "waste" or
"hazardous waste", as defined by the Resource Conservation and Recovery Act, as
amended, or any other similar substance or waste regulated pursuant to any
similar state or local law, regulation or ordinance; (c) any pollutant,
contaminant, material, substance or waste regulated by the Clean Water Act, as
amended, or any other similar substance or waste regulated pursuant to any
similar state or local law, regulation or ordinance; (d) any pollutant,
contaminant, material, substance or waste regulated by the Clean Air Act, as
amended, or any other similar substance or waste regulated pursuant to any
similar state or local law, regulation or ordinance; (e) any petroleum product;
(f) any polychorinated biphenyls; or (g) any radioactive materials or
substances.
"RELEASE" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment or into or out of any real or personal property or any
fixture, including the movement of Hazardous Materials through or in the air,
soil, surface water or groundwater.
(b) Except as set forth in Schedule 4.19 (with paragraph references
-------------
corresponding to those set forth below):
-24-
(i) all facilities and property owned or leased by the Company at
any time have been, and continue to be, operated by the Company in material
compliance with all Environmental Laws;
(ii) there have been no past, and there are no pending or, to the
best knowledge of the Company, threatened (x) claims, complaints, notices,
requests for information or investigations with respect to any alleged material
violation of any Environmental Law by the Company, or (y) complaints, notices or
inquiries to or investigations of the Company regarding potential liability
under any Environmental Law by the Company;
(iii) there have not been, at any facilities or property presently or
formerly owned or leased by the Company, any Releases of Hazardous Materials and
there are no citations, notices or orders of noncompliance issued and
outstanding to the Company under any Environmental Law, except as would not,
individually or in the aggregate, be reasonably expected to have a Company
Material Adverse Effect;
(iv) the Company has been issued and is in material compliance with
all permits, certificates, approvals, licenses and other governmental
authorizations relating to environmental matters and necessary for their
businesses, and no order has been issued, no Environmental Claim has been made,
no penalty has been assessed and no investigation or review has occurred or is
pending or, to the best knowledge of the Company, threatened, by any Person with
respect to any alleged failure by the Company to have any license or permit
required under applicable Environmental Laws in connection with the conduct of
its business or operations or to comply with any Environmental Laws or with
respect to any generation, treatment, storage, recycling, transportation,
discharge, disposal or release of any Hazardous Material generated by the
Company;
(v) neither any property now or previously owned or leased by the
Company nor any property to which wastes generated at any such property have
been disposed of, is listed or proposed for listing on the National Priorities
List pursuant to CERCLA, or on the CERCLIS or on any similar federal or state
list of sites requiring investigation or clean-up;
(vi) there are no underground storage tanks, active or abandoned,
including petroleum storage tanks, under any property now owned or leased by the
Company; and
(vii) there are no facts upon which the Company may reasonably be
expected to become liable under any Environmental Law in any material respect.
4.20 Representations Complete. None of the representations or warranties
------------------------
made by the Company herein or in any Schedule or Exhibit hereto contains or will
contain at the Effective Time any untrue statement of a material fact, or omits
or will omit at the Effective Time any material fact necessary in order to make
the statements contained
-25-
herein or therein, in light of the circumstances under which they are made, not
misleading.
4.21 Disclosure Schedules. Disclosure of a matter on a Schedule called for
--------------------
under one Section or subsection of this Article IV shall be deemed to be
disclosure for any other Schedule under another Section or subsection of this
Article IV provided that the statements in the Schedule relating to the matter
can be clearly identified as relating to the Schedule to be delivered under such
other Section or subsection. Notwithstanding the preceding sentence, the
listing of a security interest on a title report does not constitute disclosure
of the associated indebtedness or liability under a representation and warranty
where disclosure of such indebtedness or liability was required.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
5.1 Organization. Each of Parent and Merger Sub is a corporation duly
------------
organized, validly existing and in good standing under the laws of their
jurisdiction of incorporation and has the requisite corporate power to carry on
its business. Merger Sub has made available to the Company a complete and
correct copy of its articles of incorporation and bylaws, each as amended to
date and as in full force and effect. Merger Sub is not in default in any
material respect in the performance, observation or fulfillment of any provision
of its articles of incorporation or bylaws.
5.2 Authority Relative to this Agreement. Each of Parent and Merger Sub
------------------------------------
has all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby on the part of Parent and Merger Sub have been duly and
validly authorized by the Boards of Directors of Parent and Merger Sub and by
Parent as the sole stockholder of Merger Sub and no other corporate proceedings
on the part of Parent and Merger Sub are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby, except as contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Parent and Merger Sub and, assuming this Agreement constitutes a valid and
binding obligation of the Company and the requisite approval of the Company's
stockholders has been obtained, this Agreement constitutes a valid and binding
agreement of Parent and Merger Sub, enforceable against each of them in
accordance with its terms, except (a) as such enforcement may be subject to the
Bankruptcy Exceptions, and (b) as the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
5.3 Consent and Approvals; No Violation. Neither the execution and
-----------------------------------
delivery of this Agreement by Parent and Merger Sub, nor the consummation of the
transactions contemplated hereby, will:
-26-
(a) conflict with any provision of the respective articles of
incorporation or bylaws of Parent or Merger Sub;
(b) require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority, except
(i) the filing of a premerger notification and report form under the HSR Act,
(ii) the filing with the SEC of the Company Proxy Statement relating to the
approval and adoption by the Company's stockholders of the Merger and this
Agreement as contemplated by Section 1.5 of this Agreement, if such approval is
required by law, and such reports under Sections 13 and 16 of the Exchange Act
as may be required in connection with this Agreement, the Stockholder Agreements
and the transactions contemplated hereby and thereby, (iii) obtaining all
necessary approvals under the Gaming Laws, including those required by the
Gaming Authorities, (iv) the filing of the Articles of Merger with the Secretary
of State of the State of Nevada, and (v) where the failure to obtain such
consents, approvals, authorizations or permits or the failure to make such
filings or notifications would not have a material adverse effect on the ability
of Parent and Merger Sub to consummate the transactions contemplated hereby; or
(c) conflict with or violate the provisions of any order, writ,
injunction, judgment, decree, statute, rule or regulation applicable to Parent
or Merger Sub, or any contract or agreement to which Parent or Merger Sub is a
party, in such a manner as to result in a material adverse effect on the ability
of Parent and Merger Sub to consummate the transactions contemplated hereby.
5.4 Information Supplied. None of the information supplied or to be
--------------------
supplied by Parent or Merger Sub expressly for inclusion in the Company Proxy
Statement will, at the time filed with the SEC, as of the date mailed to the
Company's stockholders or at the time of the Special Meeting, contain any untrue
statement of a material fact or will 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 in which they are made, not misleading.
5.5 Merger Sub's Operations. Merger Sub was formed solely for the purpose
-----------------------
of engaging in the transactions contemplated hereby and has not engaged in any
business activities or conducted any operations other than in connection with
the transactions contemplated hereby.
5.6 Capitalization. The authorized capital stock of Merger Sub consists
--------------
of 1,000 shares of common stock. All of the issued and outstanding shares of
Merger Sub's common stock have been duly and validly issued and are held of
record and beneficially by Parent.
5.7 Financing. Parent has available to it funds necessary to purchase all
---------
of the Shares, to pay the Merger Consideration and to pay all of its fees and
expenses related to the transactions contemplated by this Agreement.
-27-
ARTICLE VI
CONDUCT OF BUSINESS BY THE COMPANY
PRIOR TO EFFECTIVE DATE
The Company agrees, except (i) as expressly contemplated by this Agreement,
or (ii) as agreed in writing by Parent, from the date hereof and prior to the
Effective Time, as follows:
6.1 Ordinary Course. The Company shall carry on its business in the
---------------
usual, regular and ordinary course, in substantially the same manner as
heretofore conducted, and use its reasonable efforts consistent with past
practice and policies to preserve intact its present business organization, keep
available the services of its present officers and employees and preserve its
existing relationships with customers, suppliers, lessors, lessees, creditors
and others having business dealings with it. The Company will continue to
maintain a standard system of accounting established and administered in
accordance with GAAP.
6.2 Dividends; Changes in Stock. The Company shall not (a) declare, set
---------------------------
aside or pay any dividends on or make other distributions in respect of any
shares of its capital stock, (b) split, combine or reclassify any shares of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for any shares of its capital stock or
(c) propose to do any of the foregoing.
6.3 Issuance, Repurchase or Repricing of Securities. The Company shall
-----------------------------------------------
not issue, pledge, deliver, sell or transfer or authorize or propose the
issuance, pledge, delivery, sale or transfer of, or repurchase, redeem or
otherwise acquire directly or indirectly, or propose the repurchase, redemption
or other acquisition of, any shares of capital stock of any class of the
Company, or any options, warrants or other rights exercisable for or securities
convertible into or exchangeable for, any such shares (or enter into any
agreements, arrangements, plans or understandings with respect to any of the
foregoing), other than pursuant to the exercise of outstanding options or
warrants pursuant to the terms thereof as of the date hereof or amend any of the
terms of any of such securities. The Company shall take no action to reduce or
alter the consideration to be paid to the Company upon the exercise of any
outstanding options, warrants or other rights exercisable for, or securities
convertible into or exchangeable for, any shares of the Company's capital stock,
nor shall it enter into any agreements, arrangements, plans or understandings
with respect to any such reduction or alteration.
6.4 Governing Documents; Board of Directors. The Company shall not
---------------------------------------
propose or adopt any amendment to its articles of incorporation or bylaws (or
similar charter documents) or take any action to alter the size or composition
of its Board of Directors.
6.5 No Dispositions. The Company shall not transfer, sell, lease,
---------------
license, mortgage or otherwise dispose of or encumber any material assets, or
enter into any
-28-
commitment to do any of the foregoing, other than in the ordinary and usual
course of business, consistent with past practice.
6.6 Indebtedness.
------------
(a) The Company shall not incur, become subject to, or agree to incur
any debt for borrowed money or incur or become subject to any other obligation
or liability (absolute or contingent), except current liabilities incurred, and
obligations under contracts entered into, in the ordinary course of business
consistent with prior practice.
(b) The Company shall not pay or be liable for prepayment or other
penalties in connection with the early retirement of any Company indebtedness
for borrowed money.
6.7 Employees and Affiliates. The Company shall not make any change in
------------------------
the compensation payable or to become payable to any of its officers, directors,
employees, agents, affiliates or consultants, enter into or amend any
employment, severance, termination or other agreement or make any loans to any
of its officers, directors, employees, agents, affiliates or consultants or make
any change in its existing borrowing or lending arrangements for or on behalf of
any of such persons, or otherwise enter into any transactions with or make any
payment to or for any affiliate of the Company, in each case whether contingent
on consummation of the Merger or otherwise, except for increases in the
compensation payable to non-management salaried employees in the ordinary course
of business and consistent with past practice.
6.8 Benefit Plans. The Company shall not, except as required by law, (a)
-------------
pay, agree to pay or make any accrual or arrangement for payment of any pension,
retirement allowance or other employee benefit pursuant to any existing plan,
agreement or arrangement to any officer, director or employee except in the
ordinary course of business and consistent with past practice or as permitted by
this Agreement; (b) pay or agree to pay or make any accrual or arrangement for
payment to any employees of the Company of any amount relating to unused
vacation days; (c) commit itself or themselves to adopt or pay, grant, issue,
accelerate or accrue salary or other payments or benefits pursuant to any
pension, profit-sharing, bonus, extra compensation, incentive, deferred
compensation, stock purchase, stock option, stock appreciation right, group
insurance, severance pay, retirement or other employee benefit plan, agreement
or arrangement, or any employment or consulting agreement with or for the
benefit of any director, officer, employee, agent or consultant, whether past or
present; or (d) amend in any material respect any such existing plan, agreement
or arrangement.
6.9 Taxes. The Company shall (i) properly prepare and file all material
-----
reports or Tax Returns required by the Company to be filed with any governmental
or regulatory authorities with respect to its business, operations, or affairs,
and (ii) pay in full and when due all Taxes indicated on such Tax Returns or
otherwise levied or assessed upon the Company or any of its assets and
properties unless such Taxes are being contested in good faith by appropriate
proceedings and reasonable reserves therefor have been
-29-
established in accordance with GAAP. The preparation of any such Tax Returns
filed by the Company shall be subject to the timely review and approval of
Parent, which approval shall not be unreasonably withheld.
6.10 Consultation and Cooperation. The Company shall (i) report on a
----------------------------
regular basis, at reasonable times, to a representative designated by Parent
regarding material operational matters and financial matters (including monthly
unaudited financial information); (ii) promptly and regularly notify Parent of
any change in the normal course of operation of its business or its properties
and of any material development in the business or operations of the Company
(including without limitation any Company Material Adverse Effect or any
governmental or third party claims, complaints, investigations or hearings, or
communications indicating that the same may be forthcoming or contemplated);
and (iii) cooperate with Parent and its affiliates and representatives in
arranging for an orderly transition in connection with the transfer of control
of the Company.
6.11 Additional Matters. The Company shall not:
------------------
(a) enter into, amend or terminate any agreements, commitments or
contracts which, individually or in the aggregate, are material to the financial
condition, business, assets, properties or results of operations of the Company,
or waive, release, assign or relinquish any material rights or claims
thereunder, except in the ordinary course of business, consistent with past
practice;
(b) discharge or satisfy any lien or encumbrance or payment of any
obligation or liability (absolute or contingent) other than current liabilities
in the ordinary course of business;
(c) cancel or agree to cancel any material debts or claims, except in
each case in the ordinary course of business;
(d) waive any rights of substantial value;
(e) pay, discharge, satisfy or settle any litigation or other claims,
liabilities or obligations (absolute, accrued, asserted, unasserted, contingent
or otherwise) involving the payment by the Company of more than $50,000;
(f) make any equity investments in third parties;
(g) create any subsidiaries;
(h) (i) incur, pay, or be subject to any material obligation to make
any payment of, or in respect of, any Tax on or before the Effective Time,
except in the ordinary course of business consistent with past practice, (ii)
settle any material audit, make or change any material Tax election or file any
amended Tax Returns, or (iii) agree to extend or waive any statute of
limitations on the assessment or collection of Tax;
-30-
(i) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company (other than the Merger) or otherwise make any material change in
the conduct of the business or operations of the Company; or
(j) agree in writing or otherwise to take any of the foregoing
actions or any other action which would constitute a Company Material Adverse
Effect in any of the items and matters covered by the representations and
warranties of the Company set forth in Article , or make any representation or
warranty of the Company in this Agreement materially inaccurate in any respect.
6.12 Consent to Stockholder Agreements and Release.
---------------------------------------------
(a) By the execution of this Agreement, the Company hereby consents
to the entry into the Stockholder Agreements by Diversified Opportunites Group
Ltd., Xxxxxx Entertainment, Inc., Xxxxxx, and Xxxxxx (collectively the
"Memorandum Parties") and to the termination and release of all of the rights,
title and interest of the Memorandum Parties under that certain Option and Proxy
Agreement (the "Option Agreement") dated September 24, 1996,and the Memorandum
of Understanding (the "Memorandum") dated as October 29, 1997.
(b) Effective at the Closing (and contingent on the occurrence of the
Closing), the Company terminates and releases any and all rights, title and
interest which it may have under or pursuant to that certain Purchase Agreement
dated as of September 24, 1996 ("Purchase Agreement"), the Option Agreement, or
the Memorandum, including any and all claims for breaches or violations of those
agreements that may have occurred on or prior to the date of the Closing. The
Company expressly agrees that, effective at the Closing, the Purchase Agreement,
the Option Agreement, and the Memorandum shall be terminated and of no further
force and effect. Effective at the Closing (and contingent on the occurrence of
the Closing), the Company releases the Memorandum Parties from any and all
obligations, charges or claims arising out of or in connection with the Purchase
Agreement, the Option Agreement, or the Memorandum. The Memorandum Parties shall
each be a third party beneficiary with respect to the consents, releases, and
agreements contained in this Section 6.12.
ARTICLE VII
ADDITIONAL COVENANTS
7.1 No Solicitation.
---------------
(a) The Company and its affiliates will not, and the Company and its
affiliates will use their reasonable efforts to ensure that their respective
officers, directors, employees, investment bankers, attorneys, accountants and
other representatives and agents do not, directly or indirectly, initiate,
solicit, encourage or participate in negotiations or discussions relating to, or
provide any information to any Person (as defined below) concerning, or take any
action to facilitate the making of, any offer or
-31-
proposal which constitutes or is reasonably likely to lead to any Acquisition
Proposal (as defined below) of the Company or any affiliate, or any inquiry with
respect thereto, or agree to approve or recommend any Acquisition Proposal. The
Company shall, and shall cause its affiliates, and their respective officers,
directors, employees, investment bankers, attorneys, accountants and other
agents to, immediately cease and cause to be terminated all existing activities,
discussions and negotiations, if any, with any parties conducted heretofore with
respect to any of the foregoing. Notwithstanding the foregoing, the Company may,
directly or indirectly, provide access and furnish information concerning its
business, properties or assets to any corporation, partnership, person or other
entity or group pursuant to an appropriate confidentiality agreement, and may
negotiate and participate in discussions and negotiations with such entity or
group concerning an Acquisition Proposal if (x) such entity or group has
submitted an unsolicited bona fide written proposal to the Board of Directors of
the Company relating to an Acquisition Proposal which contemplates the
acquisition of all of the stock, assets or business of the Company and (i) in
which the offeror demonstrates proof of its financial capability and authority
to consummate the transactions contemplated by such offer (including without
limitation the payments required by Section 10.1(b) hereof); and (ii) which
provides for (x) net aggregate cash proceeds to the Company or all of its
stockholders in an amount greater than that provided for hereunder, at a per
Share purchase price greater than the Merger Consideration (or, in the event the
Merger Consideration has been increased by Parent, such greater amount), (y) the
Company's financial advisers have advised the Board of Directors of the Company
that such Acquisition Proposal is more favorable to the Company's stockholders,
from a financial point of view, than the transactions contemplated hereby, and
(z) in the opinion of the Board of Directors of the Company, after consultation
with independent legal counsel to the Company, the failure to provide such
information or access or to engage in such discussions or negotiations would
result in a substantial risk of liability for a breach of fiduciary duties of
the members of the Board of Directors. Except with Parent's consent, the Company
shall not release any third party from, or waive any provisions of, any
confidentiality or standstill agreement to which the Company is a party.
(b) The Company shall immediately notify Parent of any such offers,
proposals or Acquisition Proposals (including without limitation the terms and
conditions thereof and the identity of the Person making it), and will keep
Parent apprised of all developments with respect to any such Acquisition
Proposal, including without limitation any modifications thereof.
(c) Nothing contained in this Section 7.1 shall prohibit the Company
or its Board of Directors from (i) taking and disclosing to the Company's
stockholders a position with respect to a tender offer by a third party pursuant
to Rules 14d-9 and 14e-2 promulgated under the Exchange Act, or (ii) making such
disclosure to the Company's stockholders which, in the opinion of the Board of
Directors of the Company, after consultation with independent legal counsel to
the Company, may be required under applicable law.
-32-
(d) As used in this Agreement, "ACQUISITION PROPOSAL" shall mean any
tender or exchange offer involving the Company or its securities, any proposal
for a merger, consolidation or other business combination involving the Company,
any proposal or offer to acquire in any manner a substantial equity interest in,
or a substantial portion of the business or assets of, the Company, any proposal
or offer with respect to any recapitalization or restructuring with respect to
the Company or any proposal or offer with respect to any other transaction
similar to any of the foregoing with respect to the Company; provided, however,
-------- -------
that, as used in this Agreement, the term "ACQUISITION PROPOSAL" shall not apply
to (i) any transaction of the type described in this subsection (d) involving
Parent, Merger Sub or their affiliates.
(e) The Company shall continue to be obligated to hold the Special
Meeting notwithstanding the existence of an Acquisition Proposal and shall take
all further action in furtherance of the consummation of the transactions
contemplated under this Agreement.
7.2 Access to Information; Confidentiality.
--------------------------------------
(a) Between the date of this Agreement and the Effective Time, upon
reasonable notice the Company shall (i) give Parent, Merger Sub and their
respective officers, employees, accountants, counsel, financing sources and
other agents and representatives full access to all buildings, offices, and
other facilities and to all contracts, internal reports, data processing files
and records, Federal, state, local and foreign tax returns and records,
commitments, books, records and affairs of the Company, whether located on the
premises of the Company or at another location; (ii) furnish promptly to Parent
a copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to the requirements of Federal
securities laws or regulations; (iii) permit Parent and Merger Sub to make such
inspections as they may require; (iv) cause its officers to furnish Parent and
Merger Sub such financial, operating, technical and product data and other
information with respect to the business and properties of the Company as Parent
and Merger Sub from time to time may request, including without limitation
financial statements and schedules; (v) allow Parent and Merger Sub the
opportunity to interview such employees and other personnel and affiliates of
the Company with the Company's prior written consent, which consent shall not be
unreasonably withheld; and (vi) assist and cooperate with Parent and Merger Sub
in the development of integration plans for implementation by Parent and the
Surviving Corporation following the Effective Time; provided, however, that no
-------- -------
investigation pursuant to this Section 7.2 shall affect or be deemed to modify
any representation or warranty made by the Company herein. Materials furnished
to Parent pursuant to this Section 7.2 may be used by Parent for strategic and
integration planning purposes relating to accomplishing the transactions
contemplated hereby.
(b) Except as otherwise provided below, until Parent or Merger Sub
acquires Shares pursuant to the Stockholder Agreements, Parent and Merger Sub
shall, and shall cause their affiliates, agents and representatives to, keep
secret and retain in confidence, and not use for the benefit of any such person
or others (other than in
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connection with this Agreement and the transactions contemplated hereby), any
confidential information of the Company which Parent or Merger Sub obtained from
the Company pursuant to this Section 7.2. The restrictions on use and disclosure
contained herein shall not apply if and to the extent any such information (i)
is publicly available or becomes publicly available (through no action or fault
of Parent or Merger Sub), (ii) was or is obtained by Parent or Merger Sub from a
third party, provided that to the recipient's knowledge, such third party was
--------
not bound by a contractual, legal or fiduciary obligation of confidentiality to
the Company or any other party with respect to such information or material,
(iii) was already in the possession of Parent or Merger Sub or known to Parent
or Merger Sub prior to being disclosed or provided to them by or on behalf of
the Company, provided that, to the recipient's knowledge, the source of such
--------
information or material was not bound by a contractual, legal or fiduciary
obligation of confidentiality to the Company or any other party with respect
thereto, or (iv) is required to be disclosed in a legal proceeding or pursuant
to applicable law, gaming regulations or the rules or regulations of any
national securities exchange or over-the-counter market. In the event that
Parent or Merger Sub is requested or required (by oral questions,
interrogatories, request for information or documents in legal proceedings,
subpoena, civil investigative demand or other similar process) to disclose any
of the confidential information provided under this Section 7.2, such party
shall provide the Company with prompt written notice of any such request or
requirement so that the Company may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this Section 7.2. If, in
the absence of a protective order or other remedy or the receipt of a waiver by
the Company, Parent or Merger Sub is nonetheless, based on advice of its
counsel, legally compelled to disclose the confidential information to any
tribunal or else stand liable to contempt or suffer other censure or penalty,
such party may, without liability hereunder, disclose to such tribunal only that
portion of the confidential information which such counsel advises such party is
legally required to be disclosed, provided that such party shall use its
reasonable efforts to preserve the confidentiality of the confidential
information, including without limitation by cooperating with the Company to
obtain an appropriate protective order or other reliable assurance that
confidential treatment will be afforded the confidential information by such
tribunal. The restrictions on use and disclosure of confidential information
under this Section 7.2 shall expire three years from the date hereof.
7.3 HSR Act. The Company and Parent shall take all reasonable actions
-------
necessary to file as soon as practicable notifications under the HSR Act and to
respond as promptly as practicable to any inquiries received from the Federal
Trade Commission and the Antitrust Division of the Department of Justice for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any state attorney
general or other Governmental Entity in connection with antitrust matters.
7.4 Consents and Approvals.
----------------------
(a) The parties hereto shall cooperate with each other and use
reasonable best efforts (and, with respect to Gaming Laws, shall use reasonable
best
-34-
efforts to cause their respective directors, officers and (if required)
stockholders to do so) to promptly prepare and file all necessary documentation,
to effect all applications, notices, petitions and filings, to obtain as
promptly as practicable all permits, consents, approvals and authorizations of
all third parties and Governmental Entities which are necessary or advisable to
consummate the transactions contemplated by this Agreement (including without
limitation the Merger) ("GOVERNMENTAL APPROVALS"), and to comply (and, with
respect to Gaming Laws, to cause their respective directors, officers and (if
required) stockholders to so comply) with the terms and conditions of all such
permits, consents, approvals and authorizations of all such Governmental
Entities. Each of the parties hereto and their respective officers, directors
and affiliates shall use their reasonable best efforts to file within 30 days
after the date hereof, and in all events shall file within 60 days after the
date hereof, all required initial applications and documents in connection with
obtaining the Governmental Approvals (including without limitation under
applicable Gaming Laws) and shall act reasonably and promptly thereafter in
responding to additional requests in connection therewith; and each party will
use its reasonable best efforts to secure such Governmental Approvals as
expeditiously as practicable. Parent and the Company shall have the right to
review in advance, and to the extent practicable each will consult the other on,
in each case subject to applicable laws relating to the exchange of information,
all the information relating to Parent or the Company, as the case may be, and
any of their respective subsidiaries, directors, officers and stockholders which
appear in any filing made with, or written materials submitted to, any third
party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. Without limiting the foregoing, each of Parent
and the Company (the "NOTIFYING PARTY") will notify the other promptly of the
receipt of comments or requests from Governmental Entities relating to
Governmental Approvals, and will supply the other party with copies of all
correspondence between the Notifying Party or any of its representatives and
Governmental Entities with respect to Governmental Approvals; provided, however,
-------- -------
that it shall not be required to supply the other party with copies of
correspondence relating to the personal applications of individual applicants
except for evidence of filing.
(b) Parent and the Company shall promptly advise each other upon
receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement which causes such party to believe that there is a reasonable
likelihood that any Requisite Regulatory Approval (as defined below) will not be
obtained or that the receipt of any such approval will be materially delayed.
7.5 Closing of Stockholder Agreements; Parent Obligation to Effect Merger
---------------------------------------------------------------------
Once Stockholder Agreements Fully Consummated. To the extent the Stockholder
---------------------------------------------
Agreements otherwise permit Parent to do so, Parent shall not waive the
condition to its closing obligation in the Stockholder Agreement(s) with one
Selling Stockholder that the Stockholder Agreement(s) with the other Selling
Stockholder shall have been consummated or consummated concurrently. In the
event the transactions contemplated by the Stockholder Agreements are fully
consummated, including without limitation the acquisition by Parent of the
Shares owned by the Selling Stockholders and the purchase
-35-
of Xxxxxx'x real estate contemplated thereunder, then all of the conditions to
Parent's obligations to effect the Merger under Sections 8.1 and 8.2 shall be
deemed satisfied or waived.
7.6 Notification of Certain Matters. The Company will give prompt notice
-------------------------------
to Parent of (a) any notice of default received by it subsequent to the date of
this Agreement and prior to the Effective Time under any material instrument or
material agreement to which it is a party or by which it is bound, which default
would, if not remedied, result in a Company Material Adverse Effect or which
would render materially incomplete or untrue any representation or warranty made
herein, (b) any suit, action or proceeding instituted or, to the knowledge of
the Company, threatened against or affecting the Company subsequent to the date
of this Agreement and prior to the Effective Time which, if adversely
determined, would have a Company Material Adverse Effect or which would render
materially incorrect any representation or warranty made herein and (c) any
material breach of the Company's covenants hereunder or the occurrence of any
event that is reasonably likely to cause any of its representations and
warranties hereunder to become incomplete or untrue in any material respect.
7.7 Additional Actions. Subject to the terms and conditions of this
------------------
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations, or
to remove any injunctions or other impediments or delays, to consummate and make
effective the Merger and the other transactions contemplated by this Agreement,
subject, however, to the appropriate vote of stockholders of the Company
required so to vote as described in Section 1.5 hereof. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation with
full title to all properties, assets, rights, approvals, immunities and
franchises of either of Merger Sub or the Company, the proper officers and
directors of each corporation which is a party to this Agreement shall take all
such necessary action.
7.8 Interference with Transactions. The Company, prior to the Effective
------------------------------
Date shall not (a) take any action which, in the reasonable judgment of Parent,
would impede, interfere with or attempt to discourage the transactions
contemplated by this Agreement or the Stockholder Agreements, (b) amend, revoke,
withdraw or modify the approval of Parent's and Merger Sub's acquisition of the
Company Common Stock, the Merger and the other transactions contemplated hereby
so as to render the prohibitions contained in Sections 78.411 to 78.444 of the
NRS applicable to the Merger or the other transactions contemplated hereby as a
result of the failure to satisfy the requirements of Section 78.438 or 78.439
thereof, or (c) without limiting the generality of Section 6.4, amend, revoke,
repeal, withdraw, restrict or modify the Control Share Opt-Out Bylaw for any
reason whatsoever, or permit (whether by action of the Company's Board of
Directors or stockholders or otherwise) the Control Share Opt-Out Bylaw to be
amended, revoked, repealed, withdrawn, restricted or modified for any reason
whatsoever, or take any other action which might be expected to render the
provisions of NRS Sections 78.378 through 78.3793 applicable to the Company or
which would otherwise jeopardize
-36-
the right of Parent and Merger Sub to exercise all voting and other rights with
respect to Shares acquired by them.
7.9 Publicity. So long as this Agreement is in effect and subject to
---------
Section 7.1 hereof, neither the Company nor any of its affiliates shall issue or
cause the publication of any press release or other announcement with respect to
the Merger, this Agreement or the other transactions contemplated hereby without
prior consultation with Parent, except as may be required by law or by any
listing agreement with a national securities exchange.
7.10 Opinion of Company Counsel. Prior to the Effective Time, the Company
--------------------------
shall cause to be delivered to Parent an opinion, dated the Closing Date, of
Xxxxx Xxxxxx, counsel for the Company, with respect to matters customarily
covered in legal opinions in transactions of this type, in form and substance
reasonably satisfactory to Parent and its counsel.
7.11 Resignation of Directors. Prior to the Effective Time, the Company
------------------------
shall deliver to Parent evidence satisfactory to Parent of the resignation of
such directors of the Company as Parent shall specify, which resignations shall
be effective at the Effective Time.
7.12 Parent Consent to Merger. Parent, in its capacity as holder of all of
------------------------
the Company's 16.5% First Mortgage Notes Due March 31, 2005 (the "FIRST MORTGAGE
NOTES") (and as holder of that certain Convertible Subordinated Note dated
September 24, 1996, originally made by the Company in favor of Diversified
Opportunities Group Ltd. when it acquires such Convertible Note pursuant to the
Stockholder Agreement with Xxxxxx), hereby consents to the Merger and the other
transactions contemplated hereby, all subject to the terms set forth herein.
7.13 Parent Consent to Deferral of March Interest Payment on First
-------------------------------------------------------------
Mortgage Notes. At the request of the Company, Parent, in its capacity as
--------------
holder of all the First Mortgage Notes hereby agrees that the Company may, at
its option, defer payment of all or any portion of the March 31, 1998 interest
payment that will become due on the First Mortgage Notes (the "Deferred
Interest"); provided, however that (i) the Deferred Interest will become due and
payable on September 30, 1998 along with the regular September 30, 1998 interest
payment and (ii) the Deferred Interest will accrue interest at the same rate
that interest accrues on the principal amount of the First Mortgage Notes and
such accrued interest on the Deferred Interest shall be due and payable on
September 30, 1998. The Company may pay the Deferred Interest and any interest
thereon at any time prior to September 30, 1998.
-37-
ARTICLE VIII
CONDITIONS
8.1 Conditions to each Party's Obligations to Effect the Merger. The
-----------------------------------------------------------
respective obligations of the parties to effect the Merger shall be subject to
the satisfaction or waiver, on or prior to the Closing Date, of the following
conditions:
(a) Regulatory Approvals. Other than the filing of the Articles of
--------------------
Merger in accordance with the NRS, all licenses, permits, registrations,
authorizations, consents, waivers, orders or other approvals of Governmental
Authorities required to be obtained, and all filings, notices or declarations
required to be made by the parties and their subsidiaries, officers, directors
and affiliates in order to consummate the Merger and the transactions
contemplated by this Agreement, and in order to permit the Company to conduct
its business in the jurisdictions regulated by the Gaming Authorities after the
Effective Time in the same manner as conducted by the Company or its
subsidiaries prior to the Effective Time (all such approvals and the expiration
of all such waiting periods being referred to herein as the "REQUISITE
REGULATORY APPROVALS") shall have been obtained or made, and no such approval
shall contain any conditions, limitations or restrictions which Parent
reasonably determines in good faith will have or reasonably be expected to have
a Company Material Adverse Effect.
(b) Legal Action. No temporary restraining order, preliminary
------------
injunction or permanent injunction or other order precluding, restraining,
enjoining, preventing or prohibiting the consummation of the Merger shall have
been issued by any Federal, state or foreign court or other governmental or
regulatory authority and remain in effect.
(c) Statutes. No Federal, state, local or foreign statute, rule or
--------
regulation shall have been enacted which prohibits, restrains, enjoins or
restricts the consummation of the Merger, would limit Surviving Corporation's
conduct of its business or would make the consummation of the Merger illegal.
(d) Stockholder Approval. Subject to Section 1.6, this Agreement and
--------------------
the transactions contemplated hereby shall have been approved and adopted by the
requisite affirmative vote of the holders of the Company Common Stock as
described in Section 15, in accordance with applicable law.
(e) HSR Waiting Period. All waiting periods applicable to the
------------------
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(f) Parent to Fund Paying Agent. On or prior to the Effective Time,
---------------------------
Parent shall have deposited with the Paying Agent the funds to which holders of
Company Common Stock shall become entitled pursuant to Section 2.1(c) hereof.
8.2 Conditions to Obligations of Parent and Merger Sub to Effect the
----------------------------------------------------------------
Merger. The obligations of Parent and Merger Sub to effect the Merger shall be
------
subject to the
-38-
fulfillment at or prior to the Effective Date of the additional following
conditions, unless waived by Parent:
(a) Representations and Warranties Accurate. The representations and
---------------------------------------
warranties of the Company set forth in this Agreement shall be true and correct
in all material respects (i) as of the date hereof and (ii) as of the date of
the Closing (provided that in the cases of clauses (i) and (ii) any such
representation and warranty made as of a specific date shall be true and correct
as of such specific date), and Parent and Merger Sub shall have received a
certificate signed by the president and the chief financial officer of the
Company to such effect.
(b) No Material Breach. The Company shall have performed in all
------------------
material respects all obligations and covenants required to be performed by it
under this Agreement prior to or as of the date of the Closing, and Parent and
Merger Sub shall have received a certificate signed by the president and the
chief financial officer of the Company to such effect.
(c) No Material Adverse Change. There shall have been no material
--------------------------
adverse change in the business, assets (tangible or intangible), results of
operations, liabilities, prospects or financial condition of the Company after
the date hereof through the Effective Date.
(d) Consents Received. Parent and the Company shall have received
-----------------
all third-party consents and approvals required to be obtained by the Company or
Parent in connection with the transactions contemplated hereby, under any
contract to which the Company or Parent (or any of their respective
subsidiaries) may be a party, except for such third-party consents and approvals
as to which the failure to obtain, either individually or in the aggregate,
would not reasonably be expected to result in a Company Material Adverse Effect.
(e) Consent Under Holiday Inn License Agreement. Without limiting
-------------------------------------------
the generality of Section 8.2(d) hereof, within sixty (60) days of the date
hereof Parent shall have received the written consent to the Merger and the
transactions contemplated hereby (including without limitation Parent's
acquisition of Shares pursuant to the Stockholder Agreements) of the licensor
under that certain Holiday Inn Conversion License Agreement dated December 16,
1993, as amended, between HIFI and the Company, which consent shall be obtained
without any payment required of, or penalty imposed on, Parent, Merger Sub or
the Company.
(f) Termination of Options and Warrants. Parent shall be satisfied,
-----------------------------------
in its sole discretion, that, without payment made in respect thereof, all
warrants, options and other rights to purchase Company Securities either have
been terminated or will terminate at the Effective Time or will constitute only
the right to receive the Option/Warrant Spread, other than the Compensation
Options which will continue in accordance with their terms.
-39-
(g) Title Policy. Parent shall have obtained the unconditional
------------
commitment of Nevada Title Company to issue its ALTA form of owner's policy of
title insurance with endorsements designated by Parent (the "TITLE POLICY") in
favor of the Company and Parent insuring that the Company is the fee owner of
the Company Owned Property in the amount of $101 million, subject to no
exceptions or exclusions other than those (i) of the exceptions or exclusions
shown on Schedule 4.18 hereof which in the reasonable judgment of Parent do not
-------------
materially adversely affect the use or value of the Owned Properties, or (ii)
which are created subsequently to the date hereof with the consent of Parent, or
(iii) which are reflected as indebtedness of the Company on the Draft September
30, 1997 Balance Sheet.
(h) No Breach of Stockholder Agreements. None of the other parties
-----------------------------------
to either of the Stockholder Agreements shall have breached any representation,
warranty or covenant set forth in such agreements.
(i) Maximum Number of Dissenting Shares. The number of shares of
-----------------------------------
Company Common Stock as to which the holders thereof have purported to exercise
dissenters' rights, if any, with respect to the Merger shall not exceed ten
percent (10%) of the total number of shares of Company Common Stock outstanding
as of the record date for the Special Meeting.
ARTICLE IX
TERMINATION
9.1 Termination. Anything herein or elsewhere to the contrary
-----------
notwithstanding, this Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
stockholder approval thereof:
(a) By Mutual Consent. By mutual consent of Parent and the Company.
-----------------
(b) By Any Party. By Parent or Merger Sub, or by the Board of
------------
Directors of the Company:
(i) if the Merger shall not have been consummated on or prior to
June 30, 1998; provided, however, that the right to terminate this Agreement
-------- -------
under this Section 9.1(b)(i) shall not be available to any party whose failure
to fulfill any material obligation under this Agreement has been the cause of,
or resulted in, the failure of the Merger to be consummated on or prior to such
date; or
(ii) if a court of competent jurisdiction or other governmental
or regulatory authority shall have issued an order, decree or ruling or taken
any other action (which order, decree, ruling or other action the parties hereto
shall use their reasonable efforts to lift), in each case permanently
restraining, enjoining or otherwise
-40-
prohibiting the transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and non-appealable.
(c) By Parent or Merger Sub. By Parent or Merger Sub:
-----------------------
(i) if neither Parent nor Merger Sub is in material breach of
this Agreement and the Board of Directors of the Company shall have withdrawn,
modified or changed in a manner adverse to Parent or Merger Sub its approval or
recommendation of this Agreement or the Merger or shall have approved or
recommended an Acquisition Proposal; or
(ii) if any approval of the stockholders of the Company
contemplated by this Agreement shall not have been obtained by reason of the
failure to obtain the required vote at the Special Meeting or at any adjournment
or postponement thereof; or
(iii) if any person or group (other than Parent or any of its
affiliates) acquires beneficial ownership (as such term is defined in Rule 13d-3
under the Exchange Act), or the right to acquire beneficial ownership, of 25% or
more of the outstanding Company Common Stock or the voting power of the
Company's equity securities, whether by purchase of outstanding shares from
third parties or by exercise of currently-existing or newly-issued options or
warrants; or
(iv) if the Company breaches or fails in any material respect to
perform or comply with any of its material covenants and agreements contained
herein (including without limitation the covenants in Article ), or breaches any
of its representations or warranties contained herein, in any material respect;
or
(v) if the Control Share Opt-Out Bylaw is amended, revoked,
repealed, withdrawn, restricted or modified in any respect; or
(vi) if any of the other parties to either of the Stockholder
Agreements commits any material breach of, or fails in any material respect to
perform or comply with any of its material covenants and agreements contained
in, such agreement, or breaches any of its representations or warranties
contained therein in any material respect.
(d) By the Company. By the Company, if Parent or Merger Sub breaches
--------------
or fails in any material respect to perform or comply with any of their
respective material covenants and agreements contained herein, or breaches any
of their respective representations or warranties contained herein, in any
material respect, which breach shall not have been cured in the case of a
representation or warranty, prior to the Closing or, in the case of a covenant
or agreement, within ten (10) days following receipt by Parent of written notice
specifying such breach from the Company.
9.2 Effect of Termination. In the event of termination of this Agreement
---------------------
as provided in Section 9.1 above, written notice thereof shall forthwith be
given to the other
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party or parties specifying the provision hereof pursuant to which such
termination is made, and this Agreement shall forthwith become null and void and
there shall be no liability or obligation on the part of Parent and Merger Sub,
or either of them, or the Company, or their respective officers, directors or
employees, except (a) for fraud or for willful material breach of this Agreement
and (b) as set forth in this Section 9.2 and in Sections 7.2(b) and 10.1 hereof.
ARTICLE X
GENERAL PROVISIONS
10.1 Fees and Expenses.
-----------------
(a) Except as contemplated by this Agreement, including Section
10.1(b) and (c) hereof, all costs and expenses incurred in connection with this
Agreement and the consummation of the transactions contemplated hereby shall be
paid by the party incurring such expenses.
(b) If Parent or Merger Sub shall terminate this Agreement pursuant
to Section 9.1(c)(iii) or 9.1(c)(iv) hereof, then (i) the Company shall pay or
cause to be paid to Parent a fee in the amount equal to One Million Dollars
($1,000,000); provided, however, that if Parent or Merger Sub terminate this
-----------------
Agreement pursuant to Section 9.1(c)(iv) by reason of a breach of the
representation and warranty contained in Section 4.2(c) and there remain
outstanding warrants, options (other than Compensation Options) and other rights
to purchase not more than 500,000 shares of Company Common Stock which have not
been terminated or otherwise constitute only the right to receive the
Option/Warrant Spread, then Parent shall not be entitled to the payment
described in this Section 10.1(b).
(c) If Parent or Merger Sub shall terminate this Agreement:
(x) pursuant to Section 9.1(c)(ii), 9.1(c)(iii) or 9.1(c)(iv)
hereof and any of the following events (a "SUBSEQUENT TRANSACTION") occur prior
to the date which is nine (9) months after the termination of this Agreement:
any person or group (other than Parent) shall have entered into a definitive
agreement or agreement in principle with the Company or any person holding at
least ten percent (10%) of the Company's then outstanding voting securities with
respect to an Acquisition Proposal or other business combination with the
Company (including a transaction in which the then outstanding shares of the
Company Common Stock would, after such business combination, represent less than
a majority of the then outstanding common shares of the Company) or any person
or group (other than Parent) shall have acquired beneficial ownership (as such
terms is defined in Rule 13d-3 under the Exchange Act) of a majority of the
voting power of the Company's equity securities, or
(y) pursuant to Section 9.1(c)(i) or 9.1(c)(v) hereof,
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then (i) the Company shall pay or cause to be paid to Parent an amount equal to
Two Million Dollars ($2,000,000) plus all costs and expenses of Parent and
Merger Sub relating to this Agreement and the transactions contemplated hereby
(including without limitation fees and expenses of Parent's counsel, accountants
and financial advisors). In the event that Parent shall have terminated this
Agreement pursuant to Section 9.1(c)(iii) or 9.1(c)(iv) hereof and become
entitled to receive the $1,000,000 payment described in Section 10.1(b) hereof,
and a Subsequent Transaction occurs prior to the date which is nine (9) months
after the termination of this Agreement, then Parent shall be entitled to the
payment described in this Section 10.1(c), less any amounts received pursuant to
Section 10.1(b) hereof.
(d) Any payments to which Parent may become entitled pursuant to
Section 10.1(b) hereof shall be payable in equal quarterly installments with the
first installment being due three months following the relevant triggering
event; provided, however, that, in the event the Company issues shares of
-----------------
capital stock following the date hereof (whether through private placements,
public offerings, the exercise of Company Securities or otherwise), the Company
shall make additional payments of the fee described in Section 10.1(b) hereof
equal to the net cash proceeds of such issuance to Parent within two business
days after the later of such issuance or such triggering event and such payment
shall be credited against the installment payments due hereunder in reverse
order of maturity. Any payments to which Parent may become entitled pursuant to
Section 10.1(c) hereof shall be payable by the Company within two business days
after the relevant triggering event.
10.2 Amendment and Modification. Subject to applicable law, this Agreement
--------------------------
may be amended, modified and supplemented in any and all respects, whether
before or after any vote of the stockholders of the Company contemplated hereby,
by written agreement of the parties hereto, by action taken by their respective
Boards of Directors (which in the case of the Company shall include approvals as
contemplated in Section 4.3 hereof), at any time prior to the Closing Date with
respect to any of the terms contained herein; provided, however, that after the
-------- -------
approval of this Agreement by the stockholders of the Company, no such
amendment, modification or supplement shall reduce or change the Merger
Consideration.
10.3 Nonsurvival of Representations and Warranties. None of the
---------------------------------------------
representations and warranties in this Agreement shall survive the Effective
Time.
10.4 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given upon personal delivery, facsimile transmission
(which is confirmed), telex or delivery by an overnight express courier service
(delivery, postage or freight charges prepaid), or on the fourth day following
deposit in the United States mail (if sent by registered or certified mail,
return receipt requested, delivery, postage or freight charges prepaid),
addressed to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
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(a) if to Parent or Merger Sub, to:
Mirage Resorts, Incorporated
0000 Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Telecopy No.: (000) 000-0000
Attn: Xxxxxx Xxx and Xxxxx Xxxxx, Esq.
with a copy to:
Irell & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: C. Xxxxx XxXxxxxx, Esq.
and
Xxxxx X. Xxxxxx, Esq.
Bernhard & Xxxxxx, Chtd.
0000 Xxxxxx Xxxxxx Xxxxxxx . Xxxxx 000
Xxx Xxxxx, Xxxxxx 00000
Telecopy No.: (000) 000-0000
(b) if to the Company, to:
Boardwalk Casino, Inc.
0000 Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Telecopy No: (000) 000-0000
with a copy to:
Xxxxx Xxxxxx
0000 Xxxxxx Xxxxxx Xxxxxxx, 0xx Xxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Attention: Xxxx Xxxxxxxxx, Esq. and Xxxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
10.5 Definitions; Interpretation. As used in this Agreement, the term
---------------------------
"AFFILIATE(S)" shall have the meaning set forth in Rule 12b-2 under the Exchange
Act. When a reference is made in this Agreement to an Article, Section, Exhibit
or Schedule, such reference shall be to an Article, Section, Exhibit or Schedule
to this Agreement unless otherwise indicated. The words "include," "includes"
and "including" when used
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herein shall be deemed in each case to be followed by the words "without
limitation." 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.
10.6 Specific Performance. The parties hereto 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 hereof (including without limitation
Section 7.1(e) hereof) in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
10.7 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10.8 Entire Agreement; No Third Party Beneficiaries. This Agreement
----------------------------------------------
(including the documents and the instruments referred to herein and therein) (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
10.9 No Control of the Company by Parent Under Gaming Laws.
-----------------------------------------------------
Notwithstanding any provision contained in this Agreement, Parent shall not have
the power, directly or indirectly, to direct or cause the direction of the
management and policies of the Company until Parent receives all Requisite
Regulatory Approvals under applicable Gaming Laws to acquire control of the
Company pursuant to the terms of this Agreement. To the extent that any
provision contained in this Agreement would purport to give Parent such power
prior to the receipt of all such Requisite Regulatory Approvals, such provision
shall be deemed amended to the extent necessary, but only to the extent
necessary, so as not to give Parent such power.
10.10 Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void, unenforceable or against its regulatory policy, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
10.11 Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the State of Nevada (without giving effect to the
principles of conflicts of law thereof).
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10.12 Assignment. Neither this Agreement nor any of the rights, interests
----------
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties, except that Merger Sub may assign, in its sole discretion, any or all
of its rights, interests and obligations hereunder to Parent or to any direct or
indirect subsidiary of Parent. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by,
the parties and their respective successors and assigns.
10.13 No Prior Agreements. Each of the parties hereto acknowledges and
-------------------
agrees that, prior to the execution of this Agreement on the date hereof, there
was no agreement, arrangement or understanding among the parties with respect to
the acquisition, disposition, holding or voting of Company Common Stock.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
COMPANY: PARENT:
Boardwalk Casino, Inc. Mirage Resorts, Incorporated
/s/ Xxxxxxx X. Xxxxxxxx, XX /s/ Xxxxxx Xxx
_____________________________ ________________________________
Name: Xxxxxxx X. Xxxxxxxx, XX Name: Xxxxxx Xxx
Title: President Title: Chief Financial Officer
MERGER SUB:
Mirage Acquisition Sub, Inc.
/s/ Xxxxxx Xxx
________________________________
Name: Xxxxxx Xxx
Title: Chief Financial Officer
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