EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
Dated as of March 10, 1999
Among
INTERNATIONAL GAME TECHNOLOGY,
SAC, INC.
And
SODAK GAMING, INC.
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
SECTION 1.1 The Merger........................................................1
SECTION 1.2 Closing...........................................................2
SECTION 1.3 Effective Time....................................................2
SECTION 1.4 Effects of the Merger.............................................2
SECTION 1.5 Articles of Incorporation and By-laws.............................2
SECTION 1.6 Directors.........................................................2
SECTION 1.7 Officers..........................................................2
SECTION 1.8 Additional Actions................................................2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock...........................................3
SECTION 2.2 Exchange of Certificates..........................................4
SECTION 2.3 No Liability......................................................5
SECTION 2.4 Dissenters' Rights................................................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company.....................6
SECTION 3.2 Representations and Warranties of Parent and Sub.................18
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business..............................................21
SECTION 4.2 No Inconsistent Activities.......................................24
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Proxy Statement; Stockholders' Meeting........25
SECTION 5.2 Access to Information; Confidentiality...........................25
SECTION 5.3 Reasonable Efforts; Notification.................................26
SECTION 5.4 Gaming Approvals.................................................27
SECTION 5.5 Stock Options; Employee Benefits.................................30
SECTION 5.6 Takeover Statutes; Inconsistent Actions..........................32
SECTION 5.7 Indemnification, Exculpation and Insurance.......................32
SECTION 5.8 Letters of Accountants...........................................34
SECTION 5.9 Fees and Expenses................................................34
SECTION 5.10 Public Announcements............................................34
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligations to Effect the Merger......34
SECTION 6.2 Additional Conditions to Obligations of Parent and Sub...........35
SECTION 6.3 Additional Conditions to Obligations of the Company..............36
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination......................................................37
SECTION 7.2 Effect of Termination............................................38
SECTION 7.3 Amendment........................................................38
SECTION 7.4 Extension; Waiver................................................39
SECTION 7.5 Termination Fee..................................................39
SECTION 7.6 Procedure for Termination, Amendment, Extension or Waiver........40
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and Warranties....................40
SECTION 8.2 Notices..........................................................40
SECTION 8.3 Definitions......................................................41
SECTION 8.4 Interpretation...................................................42
SECTION 8.5 Counterparts.....................................................42
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries...................42
SECTION 8.7 Governing Law....................................................42
SECTION 8.8 Assignment.......................................................42
SECTION 8.9 Enforcement......................................................42
SCHEDULES
Company Disclosure Schedule
Parent Disclosure Schedule
EXHIBITS
Exhibit A Irrevocable Proxy and Voting Agreement
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 9, 1999, among
International Game Technology, a Nevada corporation ("Parent"), SAC, Inc., a
South Dakota corporation and a direct wholly-owned subsidiary of Parent ("Sub"),
and Sodak Gaming, Inc., a South Dakota corporation (the "Company").
BACKGROUND
A. The respective Boards of Directors of Parent, Sub and the Company have
determined that it is advisable and in the best interest of their respective
stockholders for Sub to merge with and into the Company (the "Merger") and have
approved the Merger, upon the terms and subject to the conditions set forth in
this Agreement and in accordance with the South Dakota Business Corporation Act
(the "SDBCA"), whereby each issued and outstanding share of common stock of the
Company, $.001 par value per share (the "Company Common Stock"), other than
shares to be cancelled in accordance with Section 2.1(b), will be converted into
the right to receive $10.00 in cash (the "Merger Consideration").
B. The Merger requires the approval of the holders of a majority of the
outstanding shares of the Company Common Stock (the "Stockholder Approval").
C. Parent, Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.
D. Concurrently with the execution and delivery of this Agreement and as a
condition and inducement to each of Parent's and Sub's willingness to enter into
this Agreement, Xxxxxx'x Operating Company, Inc., Xxxxxxx X. Xxxxxxxx, Xxxxxx
Xxxxxx and Xxxxxx X. Xxxxxxx, the significant stockholders of the Company (the
"Significant Stockholders"), have each entered into an Irrevocable Proxy and
Voting Agreement (collectively, the "Voting Agreement") with Parent dated as of
the date of this Agreement substantially in the form of Exhibit A attached
hereto, pursuant to which each Significant Stockholder has agreed, among other
things, to vote all voting securities of the Company beneficially owned by such
Significant Stockholder or for which such Significant Stockholder exercises
voting power pursuant to an irrevocable proxy in favor of approval and adoption
of this Agreement and the Merger.
AGREEMENT
In consideration of the representations, warranties, covenants and
agreements contained in this Agreement, the parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the SDBCA, Sub shall be merged
with and into the Company at the Effective Time (as defined in Section 1.3).
Following the Merger, the separate corporate existence of Sub shall cease and
the Company shall continue as the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and obligations of
the Company and of Sub in accordance with the SDBCA.
SECTION 1.2 Closing. The closing of the Merger will take place at 2:00 p.m.
on a date to be specified by the parties, which shall be no later than the
second business day after satisfaction or waiver of the conditions set forth in
Article VI (the "Closing Date"), at the offices of O'Melveny & Xxxxx LLP,
Embarcadero Center West, 000 Xxxxxxx Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx, unless
another time, date or place is agreed to by the parties hereto; provided that in
no event shall the Closing Date occur on or before May 24, 1999, unless agreed
to by Parent.
SECTION 1.3 Effective Time. Subject to the provisions of this Agreement, as
soon as practicable on or after the Closing Date, the parties shall prepare,
execute, acknowledge and file with the Secretary of State of South Dakota
articles of merger in such form as is required by the relevant provisions of the
SDBCA and shall make all other filings or recordings required under the SDBCA.
The Merger shall become effective at such time as such filing or filings are
made with the Secretary of State of the State of South Dakota, or at such other
time as Sub and the Company shall agree should be specified in such filings (the
date and time of such effectiveness, being the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the effects set
forth in 47-6-9 of the SDBCA and all other effects specified in the applicable
provisions of the SDBCA.
SECTION 1.5 Articles of Incorporation and By-laws. At the Effective Time,
the articles of incorporation and by-laws of Surviving Corporation shall be
amended to be identical to the articles of incorporation and by-laws,
respectively, of Sub as in effect immediately prior to the Effective Time
(except that the name of the Surviving Corporation shall be changed to a name
designated by Parent).
SECTION 1.6 Directors. The directors of Sub at the Effective Time shall
continue as the directors of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
SECTION 1.7 Officers. The officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation and
shall hold office until the earlier of their death, resignation or removal.
SECTION 1.8 Additional Actions. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Sub or the Company or otherwise to carry out this
Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of Sub or the
Company, all such deeds, bills of sale, assignments and assurances and to take
and do, in the name and on behalf of Sub or the Company, all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under such rights, properties or assets
in the Surviving Corporation or otherwise to carry out this Agreement.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Sub, the Company or the
holders of any shares of Company Common Stock or any shares of capital stock of
Sub:
(a) Capital Stock of Sub. Each share of the capital stock of Sub issued and
outstanding immediately prior to the Effective Time shall be converted into one
(or such other number as may be specified by Parent at any time prior to the
Closing) fully paid and nonassessable share of common stock of the Surviving
Corporation, which shall be owned by Parent.
(b) Cancellation of Treasury Stock and Parent Owned Stock. Each share of
Company Common Stock that is owned by the Company or by any subsidiary of the
Company and each share of Company Common Stock that is owned by Parent, Sub or
any other subsidiary of Parent immediately prior to the Effective Time shall
automatically be cancelled and retired without any conversion thereof and no
consideration shall be delivered with respect thereto.
(c) Conversion of Common Stock.
(i) At the Effective Time, each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time (other than shares of
Company Common Stock (A) owned by the Company or any subsidiary of the Company,
or Parent, Sub or any other subsidiary of Parent or (B) held by stockholders
("Dissenting Stockholders") duly exercising appraisal rights pursuant to
Sections 47-6-23 and 47-6-48 of the SDBCA ("Dissenting Shares" and, collectively
with the shares of Company Common Stock owned by the Company or any subsidiary
of the Company or Parent, Sub or any other subsidiary of Parent, the "Excluded
Shares")) shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into the right to receive, without interest,
the Merger Consideration.
(ii) As of the Effective Time, all shares of Company Common Stock
shall no longer be outstanding and shall automatically be cancelled and retired
and shall cease to exist, and each certificate previously representing any such
shares shall thereafter represent the right to receive cash upon surrender of
such certificates in accordance with Section 2.2 or the right, if any, to
require the Surviving Corporation to purchase such shares of Company Common
Stock for their "fair value" as determined in accordance with Section 47-6-46 of
the SDBCA. The holders of such certificates previously evidencing such shares of
Company Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such shares of Company Common Stock as
of the Effective Time except as otherwise provided herein or by law.
SECTION 2.2 Exchange of Certificates.
(a) Promptly after the Effective Time, the Exchange Agent (as defined
below) shall mail to each holder of record of Company Common Stock immediately
prior to the Effective Time (other than Excluded Shares) (i) a letter of
transmittal (the "Company Letter of Transmittal") (which shall specify that
delivery shall be effected, and risk of loss and title to the Company
certificates representing shares of the Company Common Stock (the
"Certificates") shall pass, only upon delivery of such Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Parent and the Company shall mutually agree) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration with respect to the shares of Company Common Stock formerly
represented thereby.
(b) At the Effective Time, Parent shall make available, or cause to be made
available to the party specified by Parent and reasonably acceptable to the
Company as the exchange agent (the "Exchange Agent"), amounts sufficient in the
aggregate to provide all funds necessary for the Exchange Agent to make payments
pursuant to Section 2.1(c)(i) hereof to holders of Company Common Stock issued
and outstanding immediately prior to the Effective Time who are to receive the
Merger Consideration. Any interest, dividends, or other income earned on the
investment of cash deposited by Parent with the Exchange Agent in accordance
with this Section 2.2(b) shall be for the account of and payable to Parent.
(c) Upon surrender to the Exchange Agent of Certificates, together with the
Company Letter of Transmittal, duly executed and completed in accordance with
the instructions thereto, and only upon such surrender, the holder of such
Certificate shall be entitled to receive, in exchange therefor, and Parent shall
promptly cause to be delivered to such holder a check in the amount to which
such holder is entitled, after giving effect to any required tax withholdings.
The Certificates surrendered pursuant to this Section 2.2(c) shall forthwith be
cancelled. If any Certificate shall have been lost, stolen, mislaid or
destroyed, then upon (1) receipt of an affidavit of that fact from the holder
claiming such Certificate to be lost, mislaid, stolen or destroyed and an
indemnity (each in form and substance reasonably satisfactory to Parent), and
(2) if required by Parent, the posting by such person of a bond in such
reasonable amount as the Company may direct as indemnity against any claim that
may be made against it with respect to such Certificate, the Exchange Agent
shall issue to such holder the Merger Consideration into which the shares
represented by such lost, stolen, mislaid or destroyed Certificate shall have
been converted.
(d) No interest will be paid or will accrue on the amount payable upon the
surrender of any Certificate. If payment is to be made to a person other than
the registered holder of the Certificate surrendered, it shall be a condition of
such payment that the Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer, as determined by the Exchange Agent or
Parent, and that the person requesting such payment shall pay any transfer or
other taxes required by reason of the payment to a person other than the
registered holder of the Certificate surrendered or establish to the
satisfaction of the Parent or the Exchange Agent that such tax has been paid or
is not payable. One year following the Effective Time, Parent shall be entitled
to cause the Exchange Agent to deliver to it any funds (including any interest
received with respect thereto) made available to the Exchange Agent which have
not been disbursed to holders of Certificates formerly representing shares of
Company Common Stock outstanding on the Effective Time, and thereafter such
holders shall be entitled to look to the Parent only as general creditors
thereof with respect to cash payable upon due surrender of their Certificates.
(e) In the event of a transfer of ownership of Company Common Stock which
is not registered in the transfer records of the Company, the Merger
Consideration may be paid or issued to a person other than the person in whose
name the Certificate so surrendered is registered, if such Certificate,
accompanied by all documents required to evidence and effect such transfer,
shall be properly endorsed with signature guarantee or otherwise be in proper
form for transfer, and the person requesting such payment shall pay any transfer
or other taxes required by reason of the payment of the Merger Consideration to
a person other than the registered holder of such Certificate or establish to
the satisfaction of Parent that such tax has been paid or is not applicable.
(f) The Merger Consideration paid upon the surrender for exchange of
Certificates in accordance with the terms of this Article II shall be deemed to
have been paid in full satisfaction of all rights pertaining to the shares of
Company Common Stock theretofore represented by such Certificates, subject,
however, to the Surviving Corporation's obligation to pay any dividends or make
any other distributions with a record date prior to the Effective Time which may
have been declared or made by the Company on such shares of Company Common Stock
in accordance with the terms of this Agreement or prior to the date of this
Agreement and which remain unpaid at the Effective Time and have not been paid
prior to surrender. At the Effective Time, the stock transfer books of the
Company shall be closed, and there shall be no further registrations of
transfers of shares of Company Common Stock thereafter on the records of the
Company.
SECTION 2.3 No Liability. None of Parent, Sub, the Company or the Exchange
Agent shall be liable to any holder of shares of Company Common Stock for any
cash otherwise payable to such holder of shares of Company Common Stock
delivered or paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
SECTION 2.4 Dissenters' Rights. If any Dissenting Stockholder shall be
entitled to require the Company to purchase such stockholder's shares for their
"fair value," as provided in Chapter 47-6-46 of the SDBCA, the Company shall
give Parent notice thereof and Parent shall have the right to participate in all
negotiations and proceedings with respect to any such demands. Neither the
Company nor the Surviving Corporation shall, except with the prior written
consent of Parent, voluntarily make any payment with respect to, or settle or
offer to settle, any such demand for payment. If any Dissenting Stockholder
shall fail to perfect or shall have effectively withdrawn or lost the right to
dissent, the shares held by such stockholder shall thereupon be entitled to be
surrendered in exchange for the Merger Consideration as provided by Sections 2.1
and 2.2 hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company. The Company
represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. The Company is and each of
its subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized and has the
requisite corporate power and authority to carry on its business as now being
conducted. The Company and each of its subsidiaries is duly qualified or
licensed to do business as a foreign corporation and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed would not
have a Material Adverse Effect (as defined in Section 8.3) on the Company. The
Company has made available to Parent complete and correct copies of its articles
of incorporation and by-laws and the articles of incorporation and by-laws or
other organizational documents of its subsidiaries, in each case as amended to
the date of this Agreement.
(b) Subsidiaries and Other Equity Interests. Section 3.1(b) of the
disclosure schedule delivered by the Company to Parent prior to execution of
this Agreement (the "Company Disclosure Schedule"), contains a list of each
subsidiary of the Company and its jurisdiction of incorporation or organization.
Except as set forth in Section 3.1(b) of the Company Disclosure Schedule, all
the outstanding shares of capital stock of each such subsidiary have been
validly issued and are fully paid and nonassessable and are owned as set forth
in Section 3.1(b) of the Company Disclosure Schedule, free and clear of all
pledges, claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever (collectively, "Liens"). Except as set forth in Section
3.1(b) of the Company Disclosure Schedule, the Company does not own, directly or
indirectly, any capital stock or other ownership interest in any corporation,
partnership, limited partnership, limited liability company, joint venture or
other entity.
(c) Capital Structure. The authorized capital stock of the Company consists
of as of the date hereof, and will consist of as of the Effective Time,
75,000,000 shares of Company Common Stock and 25,000,000 shares of preferred
stock, $.001 par value per share (the "Company Preferred Stock"). The rights,
privileges and preferences of the Company Common Stock and Company Preferred
Stock are as stated in the Company's Amended and Restated Articles of
Incorporation. As of the close of business on March 9, 1999, (i) 22,789,908
shares of the Company Common Stock and no shares of the Company Preferred Stock
were issued and outstanding, (ii) no shares of Company Common Stock were held by
the Company in its treasury, and (iii) 894,378 shares of Company Common Stock
were reserved for issuance upon exercise of the Stock Options (as hereinafter
defined). All issued and outstanding shares of Company Common Stock are, and all
shares which may be issued upon the exercise of Stock Options will be, duly
authorized, validly issued, fully paid and nonassessable, and are not subject to
and were not issued in violation of any preemptive rights. To the Knowledge (as
defined in Section 8.3) of the Company, there are no voting trusts, voting
agreements, irrevocable proxies or other agreements with respect to any voting
shares of capital stock of the Company. There are no bonds, debentures, notes or
other indebtedness of the Company or any of its subsidiaries having the right to
vote (or convertible into or exchangeable for other securities having the right
to vote) on any matters on which the stockholders of the Company may vote.
Except as set forth above and except as set forth in Section 3.1(c) of the
Company Disclosure Schedule, as of the date of this Agreement, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the Company or any
of its subsidiaries is a party or by which any of them is bound obligating the
Company or any of its subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other voting
securities of the Company or of any of its subsidiaries or obligating the
Company or any of its subsidiaries to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement, arrangement
or undertaking. There are no outstanding contractual obligations of the Company
or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock (or options to acquire any such shares) of the Company or any
of its subsidiaries. There are no agreements, arrangements or commitments of any
character (contingent or otherwise) pursuant to which any person is or may be
entitled to receive any payment based on the revenues, earnings or financial
performance of the Company or any of its subsidiaries or assets or calculated in
accordance therewith (other than ordinary course payments or commissions to
sales representatives of the Company based upon revenues generated by them
without augmentation as a result of the transactions contemplated hereby) or to
cause the Company or any of its subsidiaries to file a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), or which
otherwise relate to the registration of any securities of the Company.
(d) Authority; Noncontravention. The Company has the requisite corporate
power and authority to enter into this Agreement and, subject to the Stockholder
Approval, to consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of the Company, subject
to the Stockholder Approval of this Agreement. Assuming the due authorization,
execution and delivery of this Agreement by Parent and Sub, this Agreement has
been duly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms.
Except as set forth in Section 3.1(d) of the Company Disclosure Schedule,
the execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any violation
of or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to loss of a material benefit under, or result in the creation of any Lien
upon any of the properties or assets of the Company or any of its subsidiaries
under, (i) the articles of incorporation or by-laws of the Company or the
comparable charter or organizational documents of any of its subsidiaries, (ii)
any contract for the provision of any form of gaming services or products
between the Company or any of its subsidiaries and any third party, any loan or
credit agreement, note, bond, mortgage, indenture, lease, joint venture or other
agreement, instrument, permit, concession, franchise or license applicable to
the Company or any of its subsidiaries or their respective properties or assets
or (iii) subject to the governmental filings and other matters referred to in
the following sentence, any judgment, order, decree, statute, law, ordinance,
rule or regulation (including, without limitation, those of the National Indian
Gaming Commission, or any other tribal or governmental authority regulating any
form of gaming) applicable to the Company or any of its subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii) or
(iii), any such conflicts, violations, defaults or rights that individually or
in the aggregate would not (A) have a Material Adverse Effect on the Company,
(B) impair in any material respect the ability of the Company to perform its
obligations under this Agreement or (C) prevent or materially delay the
consummation of any of the transactions contemplated by this Agreement.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any federal, state or local government or any court,
administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign, including, without limitation, the
National Indian Gaming Commission, or any other tribal or governmental authority
regulating any form of gaming (a "Governmental Entity"), is required by the
Company or any of its subsidiaries in connection with the execution and delivery
of this Agreement by the Company or the consummation by the Company of the
transactions contemplated by this Agreement, except for (i) the filing with the
Federal Trade Commission and the Antitrust Division of the Department of Justice
(the "Specified Agencies") of a premerger notification and report form by the
Company under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000 (xxx "XXX
Xxx"), (xx) the filing with the Securities and Exchange Commission (the "SEC")
of (x) the Proxy Statement (as defined in Section 5.1) and (y) such reports
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
may be required in connection with this Agreement and the transactions
contemplated by this Agreement, (iii) the filing of the articles of merger with
the Secretary of State of the State of South Dakota and appropriate documents
with the relevant authorities of other states in which the Company is qualified
to do business, (iv) the approval by (A) the South Dakota Commission on Gaming
and South Dakota Lottery Commission and (B) other gaming regulatory bodies in
jurisdictions where the Company or its subsidiaries are engaged in business and
(v) such other consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made would not
have a Material Adverse Effect on the Company, impair in any material respect
the ability of the Company to perform its obligations under this Agreement or
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement. Neither the Company nor any subsidiary of the
Company nor, to the Knowledge of the Company, any director or officer of the
Company or of any subsidiary of the Company has received any written claim,
demand, notice, complaint, court order or administrative order from any
Governmental Entity in the past three years, asserting that a license of it or
them, as applicable, under any Gaming Laws (as defined in Section 3.1(o)) is
being or may be revoked or suspended other than such claims, demands, notices,
complaints, court orders or administrative orders which would not have a
Material Adverse Effect on the Company.
(e) SEC Documents; Financial Statements. Since January 1, 1997, the Company
has timely filed with the SEC all required reports and forms and other documents
(the "Company SEC Documents"). As of their respective dates, the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Company SEC
Documents and none of the Company SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Company SEC Documents comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles (except, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present the financial position of the Company as
of the dates thereof and the results of its operations and cash flows for the
periods then ended. Except as set forth in the Company SEC Documents filed prior
to the date of this Agreement and publicly available and as set forth in Section
3.1(e) of the Company Disclosure Schedule and except for liabilities and
obligations incurred in the ordinary course of business consistent with past
practice since the date of the most recent balance sheet included in the Company
SEC Documents, neither the Company nor any of its subsidiaries has any material
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) required by generally accepted accounting principles to be set
forth on a balance sheet of the Company and its consolidated subsidiaries or in
the notes thereto.
(f) Information Supplied. None of the information supplied or to be
supplied by the Company specifically for inclusion or incorporation by reference
in the Proxy Statement will, at the date it is first mailed to the Company's
stockholders or at the time of the Company Stockholders' Meeting (as defined in
Section 5.1(d)), contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation or warranty is made by the
Company with respect to statements made or incorporated by reference therein
based on information supplied by Parent or Sub specifically for inclusion or
incorporation by reference therein.
(g) Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Documents filed prior to the date of this Agreement and publicly
available, since December 31, 1997 and except as set forth in Section 3.1(g) of
the Company Disclosure Schedule, the Company has conducted its business only in
the ordinary course consistent with prior practice, and there has not been (i)
any Material Adverse Change in the Company, (ii) any declaration, setting aside
or payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of the Company's capital stock, (iii) any split,
combination or reclassification of any of its capital stock or any issuance or
the authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, (iv) any granting by the
Company or any of its subsidiaries to any officer or employee of the Company or
any of its subsidiaries of (A) any increase in compensation or (B) any right to
participate in (by way of bonus or otherwise) the profits of the Company or any
of its subsidiaries, except, in each case, in the ordinary course of business
consistent with prior practice or as was required under employment agreements or
salary or wage policies in effect as of the date of the most recent audited
financial statements included in the Company SEC Documents filed prior to the
date of this Agreement (a list of all such employment agreements being set forth
in Section 3.1(g) of the Company Disclosure Schedule), (v) any granting by the
Company or any of its subsidiaries to any such officer or employee of any
increase in severance or termination pay, except 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 Company SEC Documents
filed prior to the date of this Agreement and publicly available, (vi) any entry
into, or renewal or modification, by the Company or any of its subsidiaries, of
any employment, consulting, severance or termination agreement with any officer,
director or employee of the Company or any of its subsidiaries, (vii) any
damage, destruction or loss, whether or not covered by insurance, that has or
could have a Material Adverse Effect on the Company, (viii) any change in
accounting methods, principles or practices by the Company materially affecting
its assets, liabilities or business, or (ix) any other action taken since
September 30, 1998 by the Company or any of its subsidiaries which, if Section
4.1(a) had then been in effect, would have been prohibited by such Section if
taken without Parent's consent (and no agreement, understanding, obligation or
commitment to take any such action exists).
(h) Litigation. Except as disclosed in the Company SEC Documents filed
prior to the date of this Agreement and publicly available and except as set
forth in Section 3.1(h) of the Company Disclosure Schedule, there is no suit,
action, investigation, audit or proceeding pending or, to the Knowledge of the
Company, threatened against the Company or any of its subsidiaries that would
(i) have a Material Adverse Effect on the Company, (ii) impair in any material
respect the ability of the Company to perform its obligations under this
Agreement or (iii) prevent or delay the consummation of any of the transactions
contemplated by this Agreement, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against the
Company or any of its subsidiaries having, or which is reasonably likely to
have, any effect referred to in the foregoing clauses (i), (ii) or (iii).
(i) Brokers. Neither the Company nor any of its subsidiaries nor any of
their respective officers, directors or employees has employed any broker or
finder, other than Xxxxxxx Xxxxx Xxxxxx Inc., or incurred any liability for any
financial advisory fees, brokerage fees, commissions or finder's fees (other
than financial advisory fees paid to Xxxxxxx Xxxxx Barney Inc.), and no broker
or finder has acted directly or indirectly for the Company or any of its
subsidiaries in connection with this Agreement or the transactions contemplated
hereby. A true, correct and complete copy of the Company's definitive engagement
letter with Xxxxxxx Xxxxx Xxxxxx Inc. has been delivered to Parent.
(j) Voting Requirements. The Board of Directors of the Company at a meeting
duly called and held: (i) determined that the Merger is advisable and fair and
in the best interests of the Company and its stockholders; (ii) approved the
Merger and this Agreement and the transactions contemplated by this Agreement;
and (iii) recommended approval of this Agreement and the Merger by the holders
of Company Common Stock and directed that the Merger be submitted for
consideration by the Company's stockholders. The affirmative vote of the holders
of a majority of the outstanding shares of Company Common Stock entitled to vote
is the only vote of the holders of any class or series of the Company's capital
stock necessary to approve the Merger, this Agreement and the transactions
contemplated by this Agreement.
(k) Title to Properties. The Company and its subsidiaries have good and
marketable title to, or valid leasehold interests in, all their properties and
assets except where such failure would not have a Material Adverse Effect on the
Company.
The Company or Gamblers Supply Management Company ("GSMC") has good and
marketable title to the Xxxx Xxxxxxxxx riverboat casino, together with all
related shore-based facilities, including, without limitation, the barge, the
motel, the enclosed walkway, the parking lot, the restaurant, the administrative
offices and other entertainment facilities (collectively, the "Riverboat
Complex") free and clear of any Liens other than those set forth in Section
3.1(k) of the Company Disclosure Schedule. The Company or GSMC has all licenses,
approvals, rights of way, easements, privileges, permits and certificates from
all governmental or quasi-governmental authorities (including without limitation
from the United States Coast Guard) necessary to own and operate the Riverboat
Complex as it is currently being operated. The Riverboat Complex is not in
violation in any material respect of any applicable zoning ordinance, building
code, use or occupancy restrictions, or health and safety codes. The Riverboat
Complex is in good operating condition subject to ordinary wear and tear, and
the plumbing, electrical, heating, ventilation, air conditioning, and other
mechanical systems on the Riverboat Complex are in good working order and have
been maintained in accordance with good commercial maintenance practice. Except
as set forth in Section 3.1(k) of the Company Disclosure Schedule, to the
Knowledge of the Company, there are no material physical, mechanical or
structural defects in the Riverboat Complex, and there are no material repairs
which need to be made to the Riverboat Complex which have not been made. The
financial information delivered by the Company to Parent with respect to the
operation of the Riverboat Complex (including without limitation the EBITDA
(earnings before interest, taxes, depreciation and amortization)) from the
Riverboat Complex for the last two fiscal years, is true and correct in all
material respects.
(l) ERISA Compliance. Except as set forth in Section 3.1(l) of the Company
Disclosure Schedule,
(i) The Company has delivered to, or made available for review by,
Parent true, complete and correct copies of all "employee pension benefit plans"
(as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) (sometimes referred to herein as "Pension Plans"),
"employee welfare benefit plans" (as defined in Section 3(1) of ERISA) and all
other collective bargaining agreements or bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plans, arrangements or understandings
(whether or not legally binding) (collectively, "Benefit Plans") currently
maintained, or contributed to, or required to be maintained or contributed to,
by the Company or any other person or entity that, together with the Company, is
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code
(each a "Commonly Controlled Entity"), including all employment, termination,
severance or other contracts for the benefit of any current or former employees,
officers or directors of the Company or any of its subsidiaries. The Company has
delivered to, or made available for review by, Parent true, complete and correct
copies of (A) the most recent annual report on Form 5500 filed with the Internal
Revenue Service ("IRS") with respect to each of its Benefit Plans (if any such
report was required), (B) the most recently prepared actuarial report for each
such Benefit Plan, (C) the most recent summary plan description for each such
Benefit Plan for which such summary plan description is required, (D) the most
recently received IRS determination letter for each such Benefit Plan and (E)
each trust agreement and group annuity contract relating to any such Benefit
Plan.
(ii) Each of the Company's and its subsidiaries' Benefit Plans has
been administered in all material respects in accordance with its terms. The
Company, each of its subsidiaries and all such Benefit Plans are in compliance
in all material respects with applicable provisions of ERISA and the Code.
(iii) All of the Company's and its subsidiaries' Pension Plans
intended to be qualified under Section 401(a) of the Code have been the subject
of determination letters from the IRS to the effect that such Pension Plans are
qualified under Section 401(a) of the Code and no such determination letter has
been revoked nor, to the best knowledge of the Company, has revocation been
threatened, nor has any such Pension Plan been amended since the date of its
most recent determination letter or application therefor in any respect that
would adversely affect its qualification or materially increase its costs.
(iv) No Pension Plan that the Company or any of its subsidiaries
maintains is subject to Title IV of ERISA. No Pension Plan to which the Company
or any of its subsidiaries contributes or is required to contribute is a
multiemployer plan (within the meaning of Section 3(37) of ERISA).
(v) None of the Company, any of its subsidiaries, any officer of the
Company or any of its subsidiaries or any of the Company's or its subsidiaries'
Benefit Plans which are subject to ERISA, including, without limitation, its
Pension Plans, any trusts created thereunder or any trustee or administrator
thereof, has engaged in a non-exempt "prohibited transaction" (as such term is
defined in Section 406 of ERISA or Section 4975 of the Code) or any other breach
of fiduciary responsibility that will subject the Company, or any of its
subsidiaries or any officer of the Company or any of its subsidiaries, to tax or
penalty under ERISA, the Code or other applicable law that is material to the
business of the Company and that has not been corrected. Neither any of such
Benefit Plans nor any of such trusts has been terminated, nor has there been any
"reportable event" (as that term is defined in Section 4043 of ERISA) with
respect thereto, during the last five years.
(vi) Except as expressly set forth in this Agreement, the consummation
of the transactions contemplated by this Agreement will not result in an
increase in the amount of compensation or benefits or accelerate the vesting or
timing of payment of any benefits payable to or in respect of any employee or
former employee of the Company or any subsidiary of the Company or the
beneficiary or dependent of any such employee or former employee.
(vii) With respect to any of the Company's or any of its subsidiaries'
Benefit Plans that is an employee welfare benefit plan, (A) no such Benefit Plan
is funded through a "welfare benefit fund," as such term is defined in Section
419(e) of the Code, (B) each such Benefit Plan that is a "group health plan," as
such term is defined in Section 5000(b)(1) of the Code, complies in all material
respects with the applicable requirements of Section 4980B(f) of the Code and
(C) each such Benefit Plan (including any such Benefit Plan covering retirees or
other former employees) may be amended or terminated without material liability
to the Company or any of its subsidiaries on or at any time after the Effective
Time.
(viii) No Commonly Controlled Entity has incurred any material
liability to a Pension Plan of the Company or any of its subsidiaries (other
than for contributions not yet due).
(m) Taxes.
(i) Each of the Company and its subsidiaries has timely filed all
federal, state, local and foreign tax returns, declarations, estimates,
information returns, statements and reports (collectively, "Returns") required
to be filed by it through the date hereof and shall timely file all such Returns
required to be filed on or before the Effective Time. All such Returns are and
will be true, complete and correct in all material respects. The Company and
each of its subsidiaries has paid and discharged (or the Company has paid and
discharged on such subsidiary's behalf) all material taxes due from them, other
than such taxes as are being contested in good faith by appropriate proceedings
and are adequately reserved for on the most recent financial statements
contained in the SEC Documents filed prior to the date of this Agreement and
publicly available. There are no material liens for taxes upon the assets of the
Company or any subsidiary except liens for taxes not yet due.
(ii) No claim or deficiency for any taxes has been proposed,
threatened, asserted or assessed by the IRS or any other taxing authority or
agency against the Company, or any of its subsidiaries which, if resolved
against the Company or any of its subsidiaries, would have a Material Adverse
Effect upon the Company. No requests for waivers of the time to assess any taxes
are pending. No power of attorney has been granted by the Company or any of its
subsidiaries with respect to taxes which is currently in force. None of the
Company and its Subsidiaries has waived any statute of limitations in respect of
federal or state income taxes or agreed to any extension of time with respect to
a tax assessment or deficiency, except as set forth in Section 3.1(m) of the
Company Disclosure Schedule, no Returns in respect of federal or state income
taxes for any taxable years are being examined by the Internal Revenue Service
or by any applicable state tax authority; no material deficiency for any taxes
has been proposed, asserted or assessed by any taxing authority against the
Company or its subsidiaries, which has not been resolved or paid in full, other
than such deficiency which is being contested in good faith or is set forth in
Section 3.1(m) of the Company Disclosure Schedule. Except as set forth in
Section 3.1(m) of the Company Disclosure Schedule, neither the Company nor any
of its subsidiaries has made any election under Section 341(f) of the Code.
(iii) As used in this Agreement, "taxes" shall include all federal,
state, local and foreign income, property, sales, excise and other taxes, of any
nature whatsoever (whether payable directly or by withholding), together with
any interest and penalties, additions to tax or additional amounts imposed with
respect thereto. As used in this Section 3.1(m) only and without impact on the
term "material" as used elsewhere in the Agreement, "material" means amounts in
excess of $75,000. Notwithstanding the definition of "subsidiary" set forth in
Section 8.3 of this Agreement, for the purposes of this Section 3.1(m),
references to the Company and each of its subsidiaries shall include former
subsidiaries of the Company for the periods during which any such corporations
were included in the consolidated federal income tax return of the Company.
(iv) The Company and each subsidiary have established (and until the
Effective Time will establish) on its respective books and records reserves (to
be specifically designated as an increase to current liabilities) that are
adequate for the payment of all taxes not yet due and payable, except where
failure to establish reserves would not reasonably be expected to be material.
(v) Except as set forth in Section 3.1(m) of the Company Disclosure
Schedule, the Company is not a party to any tax-sharing or allocation agreement,
nor does the Company owe any amount under any tax-sharing or allocation
agreement, and any entity that is disposed of in connection with the disposition
of the Riverboat Complex shall not have any binding contractual rights or
obligations pursuant to any tax-sharing or similar arrangement.
(vi) The Company and its subsidiaries have complied (and until the
Effective Time will comply) in all material respects with all applicable laws,
rules and regulations relating to the payment and withholding of taxes
(including, without limitation, withholding of taxes pursuant to Sections 1441
or 1442 of the Code or similar provisions under any foreign laws) and have,
within the time and in the manner prescribed by law, withheld from employee
wages and paid over to the proper governmental authorities all amounts required
to be so withheld and paid over under all applicable laws.
(vii) The Company and its subsidiaries have never been (or has any
liability for unpaid taxes because it once was) a member of an "affiliated
group" (within the meaning of Section 1502 of the Code) during any part of any
consolidated return year within any part of which year any corporation other
than the Company or its current subsidiaries was also a member of such
affiliated group.
(n) No Excess Parachute Payments. Except as set forth in Section 3.1(n) of
the Company Disclosure Schedule, no amount required to be paid (whether in cash
or property or the vesting of property) in connection with any of the
transactions contemplated by this Agreement to any employee, officer or director
of the Company or any of its affiliates who is a "disqualified individual" (as
such term is defined in proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement or other compensation arrangement
of the Company or Benefit Plan currently in effect or in effect as of the
Closing Date is reasonably expected to be characterized as an "excess parachute
payment" (as such term is defined in Section 280G(b)(1) of the Code).
(o) Compliance with Applicable Laws.
(i) Each of the Company and its subsidiaries has in effect all
federal, state, local and foreign governmental approvals, authorizations,
certificates, filings, franchises, licenses, notices, permits and rights
("Permits") necessary for it to own, lease or operate its properties and assets
and to carry on its business as now conducted, and there has occurred no default
under any such Permit, except for the lack of Permits and for defaults under
Permits, which lack or default would not have a Material Adverse Effect on the
Company. The Company does not have any reason to believe any Governmental Entity
is considering limiting, suspending or revoking any of the Company's or its
subsidiaries' Permits. Except as disclosed in the Company SEC Documents filed
prior to the date of this Agreement and publicly available, the Company and its
subsidiaries are in compliance with all applicable statutes, laws, ordinances,
rules, orders and regulations of any Governmental Entity, except for
noncompliance which would not have a Material Adverse Effect on the Company.
(ii) The Company and each of its subsidiaries are, and each of their
respective directors, officers, and persons performing management functions
similar to officers are, in compliance with all applicable Gaming Laws, except
for any immaterial events of non-compliance, which have been corrected prior to
the Closing Date to the satisfaction of the applicable Governmental Entity. The
term "Gaming Laws" means any Federal, state, local, tribal or foreign statute,
ordinance, rule, regulation, permit, consent, registration, qualification,
finding of suitability, approval, license, judgment, order, decree, injunction
or other authorization, including any condition of limitation placed thereon,
governing or relating to the current or contemplated casino and gaming
activities and operations of the Company or the Parent, as the case may be, or
any of their respective subsidiaries.
(p) Environmental.
(i) The Company and each of its subsidiaries are, and have been, and
each of the Company's former subsidiaries, while subsidiaries of the Company,
was, in compliance with all applicable Environmental Laws, except for
noncompliance which would not have a Material Adverse Effect on the Company. The
term "Environmental Laws" means any federal, state, local or foreign statute,
code, ordinance, rule, regulation, policy, guideline, permit, consent, approval,
license, judgment, order, writ, decree, injunction or other authorization,
including the requirement to register underground storage tanks, relating to:
(A) emissions, discharges, releases or threatened releases of Hazardous Material
(as defined below) into the environment, including, without limitation, into
ambient air, soil, sediments, land surface or subsurface, buildings or
facilities, surface water, groundwater, publicly owned treatment works, septic
systems or land; (B) the generation, treatment, storage, disposal, use,
handling, manufacturing, transportation or shipment of Hazardous Material; (C)
protection of the environment; or (D) employee health and safety.
(ii) During the period of ownership or operation by the Company and
its subsidiaries of any of their respective current or previously owned or
leased properties, there have been no releases of Hazardous Material in, on,
under or affecting such properties or, to the best Knowledge of the Company, any
surrounding site, except in each case for those which would not have a Material
Adverse Effect on the Company. The Company has not shipped any Hazardous
Material to any disposal site for which it is or will be subject to any
liability, except for such liabilities which would not have a Material Adverse
Effect on the Company. To the Knowledge of the Company, prior to the period of
ownership or operation by the Company and its subsidiaries of any of their
respective current or previously owned or leased properties, no Hazardous
Material was generated, treated, stored, disposed of, used, handled, released or
manufactured at, or transported, shipped or disposed of from, such current or
previously owned or leased properties, and there were no releases of Hazardous
Material in, on, under or affecting any such property or any surrounding site,
except in each case for those which would not have a Material Adverse Effect on
the Company. The term "Hazardous Material" means (A) hazardous materials,
contaminants, constituents, medical wastes, hazardous or infectious wastes and
hazardous substances as those terms are defined in the following statutes and
their implementing regulations: the Hazardous Materials Transportation Act, 49
U.S.C. ss. 1801 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
ss. 6901 et seq., the Comprehensive Environmental Response, Compensation and
Liability Act, as amended by the Superfund Amendments and Reauthorization Act,
42 U.S.C. ss. 9601 et seq., the Clean Water Act, 33 U.S.C. ss. 1251 et seq. and
the Clean Air Act, 42 U.S.C. ss. 7401 et seq., (B) petroleum, including crude
oil and any fractions thereof, (C) natural gas, synthetic gas and any mixtures
thereof, (D) asbestos and/or asbestos-containing material and (E)
polychlorinated biphenyls ("PCBs") or materials or fluids containing PCBs in
excess of 50 ppm.
(q) Contracts; Debt Instruments. Except as disclosed in the Company SEC
Documents filed prior to the date of this Agreement or set forth in Section
3.1(q) of the Company Disclosure Schedule, there is no contract or agreement
that is material to the business, financial condition or results of operations
of the Company and its subsidiaries taken as a whole. Except as set forth in
Section 3.1(q) of the Company Disclosure Schedule, neither the Company nor any
of its subsidiaries is in violation of or in default under (nor does there exist
any condition which upon the passage of time or the giving of notice, or both,
would cause such a violation or default under) any loan or credit agreement,
note, bond, mortgage, indenture, lease or any other contract, agreement,
arrangement or understanding to which it is a party or by which it or any of its
properties or assets is bound, except for violations or defaults that would not
have a Material Adverse Effect on the Company.
The Louisiana Joint Venture Agreements (as defined in 5.4(a)(iii) hereof)
constitute all of the agreements pertaining to the joint venture described
therein (the "Joint Venture") to which the Company or any of its subsidiaries is
a party, and true and complete copies of the Louisiana Joint Venture Agreements,
and all amendments thereto, have been delivered to Parent. Except for the
performance of its express duties, undertakings and obligations under the
Louisiana Joint Venture Agreements and any duties implied under Louisiana law,
neither the Company nor any subsidiary has any obligations, contingent or
otherwise, with respect to the Joint Venture. Neither the Company nor any
subsidiary has any obligation to make any loans or capital contributions to the
Joint Venture.
Section 3.1(g) of the Company Disclosure Schedule sets forth all of the
employment, consulting, severance or termination agreements of the Company with
any officer, director or employee of the Company or any of its subsidiaries.
(r) Intellectual Property.
(i) Except as would not have a Material Adverse Effect on the Company,
(A) the Company and each of its subsidiaries owns, has the right to acquire or
is licensed or otherwise has the right to use (in each case, free and clear of
any Liens), all Intellectual Property (as defined below) used in or necessary
for the conduct of its business as currently conducted, (B) no claims are
pending or, to the Knowledge of the Company, threatened, that the Company or any
of its subsidiaries is infringing on or otherwise violating the rights of any
person with regard to any Intellectual Property, and (C) to the Knowledge of the
Company, no person is infringing on or otherwise violating any right of the
Company or any of its subsidiaries with respect to any Intellectual Property
owned by and/or licensed to the Company or its subsidiaries.
(ii) For purposes of this Agreement, "Intellectual Property" shall
mean patents, copyrights, trademarks (registered or unregistered), service
marks, brand names, trade dress, trade names, the goodwill associated with the
foregoing and registrations in any jurisdiction of, and applications in any
jurisdiction to register, the foregoing; and trade secrets and rights in any
jurisdiction to limit the use or disclosure thereof by any person.
(s) Insider Interests. Except as set forth in Section 3.1(s) of the Company
Disclosure Schedule, to the Knowledge of the Company, no stockholder, officer,
director, employee or agent of the Company or any of its subsidiaries or any
affiliate of any officer or director of the Company or any of its subsidiaries
(as the term "affiliate" is defined in Rule 12b-2 under the Exchange Act), (i)
has any interest in any assets or property (whether real or personal, tangible
or intangible) of or used in the business of the Company or any subsidiary of
the Company (other than as an owner of outstanding securities of the Company),
or (ii) is indebted or otherwise obligated to the Company in an amount in excess
of $50,000, individually, or, for all such persons, $250,000 in the aggregate.
The Company is not indebted or otherwise obligated to any such person, except
for amounts not in excess of $50,000 or amounts due under normal arrangements
applicable to directors, officers or employees generally as to salary or fees or
reimbursement of ordinary business expenses not unusual in amount or
significance. As of the date hereof, to the Knowledge of the Company there are
no material losses, claims, damages, costs, expenses, liabilities or judgments
which would entitle any director, officer or employee of the Company or any of
its subsidiaries to indemnification by the Company or its subsidiaries under
applicable law, the articles of incorporation or bylaws of the Company or any of
its subsidiaries or any insurance policy maintained by the Company or any of its
subsidiaries. Section 3.1(s) of the Company Disclosure Schedule sets forth all
outstanding loans to stockholders, officers, directors, employees or agents of
the Company or any of its subsidiaries or any affiliate of any officer or
director of the Company or any of its subsidiaries, and all such loans are
payable on demand.
(t) Noncompetition. Except as set forth in Section 3.1(t) of the Company
Disclosure Schedule, the Company and its subsidiaries are not, and after the
Effective Time neither the Surviving Corporation nor Parent will be (by reason
of any agreement to which the Company is a party), subject to any
non-competition or similar restriction on their respective businesses.
(u) Fairness Opinion. The Company has received an opinion from Xxxxxxx
Xxxxx Xxxxxx Inc. to the effect that the Merger Consideration is, as of the date
of this Agreement, fair from a financial point of view to the stockholders of
the Company, and copies of such opinion shall be delivered to Parent when
available.
(v) Non-competition Agreements. Each of Xxxxxxx X. Xxxxxxxx and Xxxxxx X.
Xxxxxxx has entered into a non-competition agreement dated the date hereof with
the Company and Parent (together, the "Non-Competition Agreements"), and copies
of such executed agreements have been delivered to Parent.
(w) Employment Agreements. Each of Xxxxxx X. Xxxxxxx and those employees of
the Company identified in a letter provided by Parent to the Company on the date
hereof has entered into an employment agreement dated the date hereof with the
Company (collectively, the "Employment Agreements"), and copies of such executed
agreements have been delivered to Parent.
SECTION 3.2 Representations and Warranties of Parent and Sub. Parent and
Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Parent is and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized and has the
requisite corporate power and authority to carry on its business as now being
conducted. Parent is and each of its subsidiaries is duly qualified or licensed
to do business as a foreign corporation and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed would not
have a Material Adverse Effect on Parent. Parent has delivered to the Company
complete and correct copies of its articles of incorporation and by-laws and the
articles of incorporation and by-laws or other organizational documents of its
subsidiaries of Sub, in each case as amended to the date of this Agreement.
(b) Authority; Noncontravention. Parent and Sub have the requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of Parent and Sub. Assuming the due authorization, execution and delivery
of this Agreement by the Company, this Agreement has been duly executed and
delivered by Parent and Sub and constitutes a valid and binding obligation of
each such party, enforceable against each such party in accordance with its
terms.
Except as set forth in Section 3.2(b) of the disclosure schedule delivered
by Parent and Sub to the Company (the "Parent Disclosure Schedule"), the
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any Lien upon any
of the properties or assets of Parent or any of its subsidiaries under, (i) the
articles of incorporation or by-laws of Parent or Sub or the comparable charter
or organizational documents of any other subsidiary of Parent, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, or material lease or other
agreement, instrument, permit, concession, franchise or license applicable to
Parent or any of its subsidiaries or their respective properties or assets or
(iii) subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation (including, without limitation, those of the National Indian
Gaming Commission, or any other tribal or governmental authority regulating any
form of gaming) applicable to Parent or any of its subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii) or
(iii), any such conflicts violations, defaults or rights that individually or in
the aggregate would not (x) have a Material Adverse Effect on Parent, (y) impair
in any material respect the ability of Parent and Sub to perform their
respective obligations under this Agreement or (z) prevent or materially delay
the consummation of any of the transactions contemplated by this Agreement.
No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by Parent or any
of its subsidiaries in connection with the execution and delivery of this
Agreement or the consummation by Parent or Sub, as the case may be, of any of
the transactions contemplated by this Agreement, except for (i) the filing with
the Specified Agencies of a premerger notification and report form under the HSR
Act, (ii) the filing with the SEC of such reports under Sections 13(a), 13(d)
and 16(a) of the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated by this Agreement, (iii) the filing
of the articles of merger with the Secretary of State of the State of South
Dakota and appropriate documents with the relevant authorities of other states
in which Parent is qualified to do business, (iv) the approval by (A) the Nevada
State Gaming Control Board and the Nevada Gaming Commission under the Nevada
Gaming Control Act and the rules and regulations promulgated thereunder, (B)
South Dakota Commission on Gaming and South Dakota Lottery Commission, (C) the
National Indian Gaming Commission under the Indian Gaming Regulatory Act of 1988
and the rules and regulations promulgated thereunder, and (D) other gaming
regulatory bodies in jurisdiction where Parent or its subsidiaries are engaged
in business (including, without limitation, the State of Mississippi) and (v)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings, the failure of which to be obtained or made would not
have a Material Adverse Effect on Parent, impair in any respect the ability of
Parent to perform its obligations under this Agreement, or prevent or materially
delay the consummation of any of the transactions contemplated by this
Agreement. Neither Parent nor any subsidiary of Parent nor, to the Knowledge of
Parent, any director or officer of Parent or of any subsidiary of Parent has
received any written claim, demand, notice, complaint, court order or
administrative order from any Governmental Entity in the past three years,
asserting that a license of it or them, as applicable, under any Gaming Laws (as
defined in Section 3.1(o)) is being or may be revoked or suspended other than
such claims, demands, notices, complaints, court orders or administrative orders
which would not have a Material Adverse Effect on Parent.
(c) Information Supplied. None of the information supplied or to be
supplied by Parent or Sub for inclusion or incorporation by reference in the
Proxy Statement will, at the date the Proxy Statement is first mailed to the
Company's stockholders or at the time of the Company Stockholders' Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
(d) Brokers. Neither Parent nor any of its subsidiaries nor any of their
respective officers, directors or employees has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions or finder's fees, and no broker or finder has acted directly or
indirectly for Parent or any of its subsidiaries in connection with this
Agreement or the transactions contemplated hereby.
(e) Voting Requirements. The Board of Directors of Parent at a meeting duly
called and held: (i) determined that the Merger is advisable and fair and in the
best interests of Parent and its stockholders; and (ii) approved the Merger and
this Agreement and the transactions contemplated by this Agreement. No vote of
the holders of any class or series of the Parent's capital stock is necessary to
approve the Merger, this Agreement or the transactions contemplated by this
Agreement.
(f) Compliance with Gaming Laws. Parent and each of its subsidiaries, and
each of their respective directors, officers, and persons performing management
functions similar to officers, are in compliance with all applicable Gaming
Laws, except for any immaterial events of non-compliance, which have been
corrected prior to the Closing Date to the satisfaction of the applicable
Governmental Entity.
(g) Interim Operations of Sub.
(i) Sub was formed solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other business activities
and has conducted its operations only as contemplated hereby.
(ii) As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its incorporation or
organization and the transactions contemplated by this Agreement, Sub has not
and will not have incurred, directly or indirectly, through any subsidiary, any
obligations or liabilities or engaged in any business activities of any type or
kind whatsoever or entered into any agreements or arrangements with any person.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business.
(a) Conduct of Business by the Company. Except as expressly set forth in
this Agreement, as set forth in Section 4.1 of the Company Disclosure Schedule
or as consented to in writing by Parent during the period from the date of this
Agreement to the Effective Time, the Company shall, and shall cause its
subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and in
compliance in all material respects with all applicable laws and regulations
and, to the extent consistent therewith, use all commercially reasonable efforts
to preserve intact their current business organizations, keep available the
services of their current officers and employees and preserve their
relationships with customers, suppliers and others having business dealings with
them. Without limiting the generality of the foregoing, and except as expressly
set forth in this Agreement, as set forth in Section 4.1 of the Company
Disclosure Schedule or as consented to in writing by Parent between the date of
this Agreement and the Effective Time or until the earlier termination of this
Agreement pursuant to its terms, the Company shall not, and shall not permit any
of its subsidiaries to:
(i) (A) declare, set aside or pay (whether in cash, stock, property or
otherwise) any dividends on, or make any other distributions in respect of, any
of its capital stock, other than dividends and distributions by any direct or
indirect wholly owned subsidiary of the Company to its parent, (B) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (C) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such shares
or other securities (other than pursuant to the Stock Purchase Plan (as defined
in Section 5.5));
(ii) other than the issuance of Company Common Stock upon the exercise
of the stock options to purchase shares of Company Common Stock outstanding on
the date of this Agreement (each a "Stock Option" and collectively the "Stock
Options") in accordance with their present terms or in accordance with the
present terms of any employment agreements existing on the date of this
Agreement, (A) issue, deliver, sell, award, pledge, dispose of or otherwise
encumber or authorize or propose the issuance, delivery, grant, sale, award,
pledge or other encumbrance (including limitations in voting rights) or
authorization of, any shares of its capital stock, any other voting securities
or any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities, (B)
amend, waive or otherwise modify the terms of any such rights, warrants or
options or (C) accelerate the vesting of any of the Stock Options, except
pursuant to the terms thereof as in effect on the date hereof;
(iii) amend its articles of incorporation, by-laws or other comparable
charter or organizational documents, or alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate structure or
ownership of any material subsidiary of the Company;
(iv) acquire or agree to acquire (for cash or shares of stock or
otherwise) (A) by merging or consolidating with, or by purchasing a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, limited liability company, joint venture, association
or other business organization or division thereof or (B) any assets with a fair
market value in excess of $75,000 in the aggregate, except purchases of
inventory, fixtures, furniture, supplies, vehicles and equipment in the ordinary
course of business consistent with past practice;
(v) commence or undertake or agree to commence the operation or
development of a casino or other gaming operations of any nature (other than (A)
the existing gaming operations of the Company, which includes obligations under
the Louisiana Joint Venture Agreements (as hereinafter defined), provided that
the Company shall not make or commit to make any loans, advances or capital
contributions to, or investments in, the Joint Venture or Sodak Louisiana L.L.C.
("Sodak LA") without the written consent of Parent, and (B) additional wide area
progressive systems);
(vi) mortgage or otherwise encumber or subject to any Lien, or sell,
lease, exchange or otherwise dispose of any of, its properties or assets, except
for sales of its properties or assets in the ordinary course of business
consistent with past practice;
(vii) (A) incur any indebtedness for borrowed money except in the
ordinary course of business consistent with past practices or guarantee any such
indebtedness of another person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities of the Company or any of its
subsidiaries, guarantee any debt securities of another person, enter into any
"keep well" or other agreement to maintain any financial statement condition of
another person or enter into any arrangement having the economic effect of any
of the foregoing, or (B) make any loans, advances or capital contributions to,
or investments in, any other person, other than (1) to the Company or any direct
or indirect wholly-owned subsidiary of the Company, (2) loans or advances to
employees of the Company or any of its subsidiaries for travel or business
expenses in the ordinary course of business or (3) loans or advances to
operators of casinos or gaming operations to finance the purchase of furniture,
fixtures and equipment in the ordinary course of business consistent with past
practice, provided such loans or advances do not exceed the fair market value of
such furniture, fixtures and equipment;
(viii) make or agree to make any new capital expenditures other than
those consistent with the budget set forth in Section 4.1(a) of the Company
Disclosure Schedule;
(ix) make or rescind any express or deemed election relating to
material taxes, settle or compromise any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to
material taxes, or change any of its methods of reporting income or deductions
for federal income tax purposes from those employed in the preparation of its
federal income tax return for the taxable year ending December 31, 1998, except
as may be required by applicable law;
(x) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge, settlement or satisfaction, in the ordinary course of
business consistent with past practice or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated by, the most
recent consolidated financial statements (or the notes thereto) of the Company
included in the Company SEC Documents or incurred in the ordinary course of
business consistent with past practice;
(xi) (A) increase the rate of compensation payable or to become
payable generally to any of the Company's or any of its subsidiaries' directors,
officers or employees other than usual and customary increases to employees who
are not officers, (B) pay or agree to pay any pension, retirement allowance,
severance, continuation or termination benefit or other material employee
benefit not provided for by any existing Pension Plan, Benefit Plan or
employment agreement described in the Company SEC Documents filed prior to the
date of this Agreement and publicly available, (C) establish, adopt or commit
itself to any additional pension, profit sharing, bonus, incentive, deferred
compensation, stock purchase, stock option, stock appreciation right, group
insurance, severance pay, continuation pay, termination pay, retirement or other
material employee benefit plan, agreement or arrangement, or amend or modify or
increase the benefits under or take any action to accelerate the rights or
benefits under any collective bargaining agreement or any employee benefit plan,
agreement or arrangement, including the Stock Option Plans or other Benefit
Plan, (D) enter into any severance or employment agreement with or for the
benefit of any person, or (E) increase the rate of compensation under or
otherwise change the terms of any existing employment agreement;
(xii) except in the ordinary course of business consistent with past
practice, modify, or amend in any material respect, or renew, fail to renew or
terminate, any material contract or agreement to which the Company or any
subsidiary is a party or waive, release or assign any material rights or claims;
(xiii) change fiscal years;
(xiv) authorize, recommend, propose or announce an intention to adopt
a plan of complete or partial liquidation or dissolution of the Company;
(xv) enter into any collective bargaining agreement;
(xvi) engage in any transaction with, or enter into any agreement,
arrangement or understanding with, directly or indirectly, any of the Company's
affiliates other than pursuant to such agreements existing on the date hereof
and disclosed on the Company Disclosure Schedule;
(xvii) amend, modify or waive in any manner any of the provisions of
any of the Non-Competition Agreements or Employment Agreements; or
(xviii) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Other Actions. The Company and Parent shall not, and shall not
permit any of their respective subsidiaries to, take any action that would
result in (i) any of the representations and warranties of such party set forth
in this Agreement that are qualified as to materiality becoming untrue or (ii)
any of such representations and warranties that are not so qualified becoming
untrue in any material respect.
SECTION 4.2 No Inconsistent Activities.
(a) In light of the consideration given by the Board of Directors of the
Company prior to the execution of this Agreement to, among other things, the
transactions contemplated hereby, and in light of the Company's representations
contained in Section 3.1(u), the Company agrees that it shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of its subsidiaries to, directly or
indirectly, solicit or initiate, or encourage the submission of, any Takeover
Proposal (as defined below), or participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take any
other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Takeover Proposal;
provided, however, that nothing in this Section 4.2 shall prevent the Company or
its Board of Directors from furnishing non-public information to, or entering
into discussions or negotiations with, another person in connection with an
unsolicited bona fide Takeover Proposal by such person, if and only to the
extent that (i) such person has made a proposal to the Board of Directors of the
Company to consummate a Takeover Proposal, which proposal identifies a price or
range of values to be paid for the outstanding securities or all or
substantially all of the assets of the Company, (ii) the Board of Directors of
the Company determines in good faith, after consultation with a financial
advisor of nationally recognized reputation, that such proposal would, if so
completed, result in a transaction that would provide greater value to the
holders of Company Common Stock than the Merger (a "Superior Proposal") and that
the party making the proposal has demonstrated that the funds necessary for its
proposal are reasonably likely to be available, (iii) the Board of Directors of
the Company determines in good faith, after consultation with outside counsel,
that such action is necessary in order to comply with its fiduciary duties to
the Company's stockholders under applicable law, and (iv) prior to furnishing
such information to, or entering into discussions or negotiations with, such
person or entity, the Board of Directors receives from such person an executed
confidentiality agreement in form and substance similar to the Confidentiality
Agreement dated March 13, 1998 (the "Confidentiality Agreement") between the
Company and Parent.
(b) The Company shall notify Parent orally and in writing of any inquiries,
offers or proposals with respect to a Takeover Proposal (including without
limitation the terms and conditions of such proposal, the identity of the person
or entity making it and all other information reasonably requested by Parent),
within 24 hours of the receipt thereof by an officer or director of the Company
or any advisor to the Company, shall keep Parent informed of the status and
details of any such inquiry, offer or proposal and answer Parent's questions
with respect thereto. For purposes of this Agreement, "Takeover Proposal" means
any proposal (whether or not in writing and whether or not delivered to the
Company's stockholders generally) for a merger, consolidation, purchase of
assets, tender offer or other business combination involving the Company or any
of its subsidiaries or any proposal or offer to acquire in any manner, directly
or indirectly, an equity interest in, any voting securities of, or a substantial
portion of the assets of, the Company or any of its subsidiaries, other than the
transactions contemplated by this Agreement. Neither the Company nor any of its
subsidiaries shall directly or indirectly, release any third party from any
confidentiality agreement, except in connection with a Superior Proposal if the
Company's Board of Directors shall have determined in good faith, after
consultation with outside counsel, that such release of any third party is
necessary in order to comply with its fiduciary duties to the Company's
stockholders under applicable law. Nothing contained herein shall prohibit the
Company from disclosing to its stockholders the statement required by Rule
14e-2(a) under the Exchange Act with respect to a Takeover Proposal by means of
a tender offer.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Proxy Statement; Stockholders' Meeting.
(a) As soon as practicable following the date of this Agreement, the
Company shall call and hold a meeting of its stockholders (the "Company
Stockholders' Meeting"), for the purpose of obtaining the Stockholder Approval.
Subject to the fiduciary duties of its Board of Directors, the Company shall use
its best efforts to solicit from its stockholders proxies, and shall take all
other action necessary or advisable to secure the vote or consent of
stockholders required by applicable law or otherwise to obtain the Stockholder
Approval, and through its Board of Directors, shall recommend to its
stockholders the obtaining of the Stockholder Approval. As promptly as
practicable after the execution of this Agreement, the Company shall prepare and
file with the SEC a proxy statement relating to the Company's Stockholders'
Meeting (together with any amendments thereof or supplements thereto, the "Proxy
Statement"). Parent shall furnish all information concerning itself to the
Company as the Company may reasonably request in connection with such actions
and the preparation of the Proxy Statement. As soon as reasonably practicable
after clearance from the SEC, the Company shall mail the Proxy Statement to its
stockholders. The Proxy Statement shall not be filed, and no amendment or
supplement to the Proxy Statement will be made by the Company, without prior
consultation with Parent and its counsel.
(b) Parent agrees promptly to advise the Company if at any time prior to
the Company Stockholders' Meeting (as defined above) any information provided by
it in the Proxy Statement is or becomes incorrect or incomplete in any material
respect and to provide the Company with the information needed to correct such
inaccuracy or omission.
SECTION 5.2 Access to Information; Confidentiality. The Company shall, and
shall cause its subsidiaries to, afford Parent, and the officers, employees,
accountants, counsel, financial advisors and other representatives of Parent,
reasonable access during normal business hours during the period prior to the
Effective Time to all their respective properties, books, contracts,
commitments, personnel and records and, during such period, the Company shall,
and shall cause each of its subsidiaries to, furnish promptly to Parent, (a) a
copy of each report, schedule, registration statement and other document filed
by it during such period pursuant to the requirements of federal or state
securities laws and (b) all other information concerning its business,
properties and personnel as Parent may reasonably request. Except as required by
law, each of the Company and Parent will hold, and will cause its respective
officers, employees, accountants, counsel, financial advisers and other
representatives and affiliates to hold, any confidential information in
accordance with the Confidentiality Agreement.
SECTION 5.3 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the Company, Parent and Sub agrees to use commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including (i) the making of all necessary
applications, registrations and filings (including filings with Governmental
Entities, if any), (ii) the obtaining of all necessary actions or nonactions,
licenses, consents, approvals or waivers from Governmental Entities and other
third parties and (iii) taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement, (v) the defending of any
lawsuits or other legal proceedings, judicial or administrative, challenging
this Agreement or the consummation of the transactions contemplated hereby or
thereby, including the using of all commercially reasonable efforts necessary to
lift, rescind or mitigate the effect of any injunction or restraining order or
other order adversely affecting the ability of any party hereto to consummate
the transactions contemplated hereby, (vi) the using of all commercially
reasonable efforts to fulfill all conditions to the obligations of Parent
(including obtaining any financing necessary to consummate the Merger), Sub or
the Company pursuant to this Agreement, and (vii) the using of all commercially
reasonable efforts to prevent, with respect to a threatened or pending
temporary, preliminary or permanent injunction or other order, decree or ruling
or statute, rule, regulation or executive order, the entry, enactment or
promulgation thereof, as the case may be; provided, however, that Parent shall
not be obligated to take any action pursuant to the foregoing if the taking of
such action or the obtaining of any waiver, license, consent, approval or
exemption is reasonably likely to be materially burdensome to Parent and its
subsidiaries taken as a whole or to impact in a materially adverse manner the
economic or business benefits of the transactions contemplated by this Agreement
so as to render inadvisable the consummation of the Merger.
(b) The Company shall give prompt written notice to Parent, and Parent
shall give prompt written notice to the Company, of (i) any representation or
warranty made by it contained in this Agreement that is qualified as to
materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement or (iii) the occurrence of
any change or event having, or which insofar as can reasonably be foreseen to
have, a Material Adverse Effect on the Company; provided, however, that no such
notification shall (A) affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement or (B) limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 5.4 Gaming Approvals.
(a) Gaming Approvals.
(i) Upon the terms and subject to the conditions set forth in this
Agreement, each of the Company and Parent agrees to promptly prepare and file
all necessary documentation, to effect all applications, notices, petitions and
filings, to obtain as promptly as practicable all permits, registrations,
licenses, findings of suitability, qualifications, consents, waivers, variances,
exemptions, orders, approvals and authorizations of all Governmental Entities
which are necessary in connection with the consummation of the transactions
contemplated by this Agreement (whether required to be made or obtained prior to
or after the Effective Time) (all of the foregoing, collectively "Gaming
Approvals") and to comply with the terms and conditions of all such Gaming
Approvals. Each of the Company and Parent shall use all commercially reasonable
efforts to, and to cause their respective officers, directors and affiliates to,
file within thirty days after the date hereof, and in all events shall file
within sixty days after the date hereof, all required initial applications and
documents in connection with obtaining the Gaming Approvals and shall act
reasonably and promptly thereafter in responding to additional requests in
connection therewith. Parent and the Company shall have the right to review in
advance, and to the extent practicable, each will consult with the other on, in
each case subject to applicable laws relating to the exchange of information,
all the information relating to the Company or Parent 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
Governmental Entity in connection with the transactions contemplated by this
Agreement. The Company and Parent agree to promptly advise each other upon
receiving any communication from any Governmental Entity which causes such party
to believe that there is a reasonable likelihood that any Gaming Approval
required from such Governmental Entity will not be obtained or that the receipt
of any such approval will be materially delayed.
(ii) Promptly following the execution of this Agreement, the Company
shall use its commercially reasonable efforts to cause the sale of the Riverboat
Complex for cash in a stock or asset sale transaction (including a transaction
where the riverboat is first contributed to GSMC and the stock of GSMC is sold),
such disposition to (i) include the termination of, or the assignment and
assumption by the purchaser of the Riverboat Complex of, any leases (including,
without limitation, leases relating to furniture, fixtures and equipment used
thereon) or any guaranties thereof or other agreements relating to the Riverboat
Complex or its operation, (ii) be effected for a price (including but not
limited to provisions relating to the allocation of the purchase price among the
assets sold) satisfactory to Parent and (iii) be made in a manner, to the extent
possible, that is, after consultation with Parent, tax efficient.
Notwithstanding the foregoing, if the Company presents to Parent a proposed sale
of the Riverboat Complex, Parent shall, within five business days thereof,
either (i) subject to Parent having obtained, or representing to the Company
that it has been advised by the applicable Governmental Entity that it is likely
to receive within thirty (30) days or less, all Gaming Approvals required to
acquire the Riverboat Complex, give notice to the Company that it is withholding
its approval of such sale and in such event the condition specified in Section
6.2(f) hereof and Parent's right to approve the price shall be deemed waived by
Parent, or (ii) give notice to the Company that it either approves of the
proposed sale or approves of the proposed sale subject to the receipt of an
opinion of an investment banking firm designated by Parent and approved by the
Company, such approval not to be unreasonably withheld, that the consideration
received for the Riverboat Complex is fair to the Company from a financial point
of view, such opinion to be given without taking into consideration the
existence of this Agreement or the proposed Merger (the "Fairness Opinion"). In
the event that Parent approves of the sale subject to the receipt of a Fairness
Opinion and such opinion cannot for any reason be obtained, then the Company
shall not proceed with the sale and the condition specified in Section 6.2(f)
hereof and Parent's right to approve the price shall remain effective. In all
events, Parent shall have the right to review and approve the terms of the sale
other than the price received, such approval not to be unreasonably withheld.
The Company shall, as part of its efforts to sell the Riverboat Complex, consult
with Parent regarding its sales efforts and shall use commercially reasonable
efforts to obtain the best terms for the sale of the Riverboat Complex. If
requested by Parent, the Company shall use its commercially reasonable efforts
to assist Parent in obtaining all Gaming Approvals necessary to permit Parent to
acquire the Riverboat Complex as part of the Merger (it being understood that
any conditions that may be imposed by regulatory authorities must be acceptable
to Parent).
(iii) The Company shall use its commercially reasonable efforts to
sell or terminate (by means of withdrawal or otherwise) all of the Company's
direct or indirect interests under that certain Amended and Restated Joint
Venture Agreement of QNOV, dated July 31, 1998, by and among Shreveport
Paddlewheels, LLC ("SPL"), Sodak LA and HWCC-Louisiana, Inc. ("Hollywood"); that
certain Amended and Restated Assignment of Joint Venture Interest, dated
September 22, 1998, by and among Sodak LA and Hollywood, as Assignees and SPL
and New Orleans Paddlewheels Inc. ("NOP"), as assignors; that certain Amended
and Restated Master Agreement, dated July 31, 1998, by and among NOP, SPL,
Hollywood and Sodak LA; that certain Consulting Agreement, dated July 31, 1998,
by and between the Queen of New Orleans at the Hilton Joint Venture ("QNOV") and
the Company; that certain Loan and Settlement Agreement, dated January 16, 1998,
by and among NOP, SPL, Hollywood, Sodak LA and Hilton New Orleans Corporation
("HNOC"); that certain Indemnity Agreement, dated January 16, 1998 by and among
NOP, HNOC, Sodak LA, SPL and Hollywood; that certain Loan and Settlement
Agreement, dated January 16, 1998, by and among NOP, Hollywood, Sodak LA, SPL
and HNOC; that certain Compromise Agreement, dated January 16, 1998, by and
among HNOC, NOP, QNOV and the City of New Orleans; that certain Side Agreement,
dated January 16, 1998, by and among QNOV, Hollywood and Sodak LA; that certain
Indemnity Agreement - Physical Inspections, by and among NOP, SPL, Sodak LA,
Hollywood and Red River Entertainment of Shreveport Partnership in Commendam;
those certain Loan Agreement, Security Agreement, Guaranty Agreement and Marine
Services Agreement contemplated to be entered into by and among SPL, Hollywood
and Sodak LA (collectively, the "Louisiana Joint Venture Agreements") (either
directly and/or through the sale of all of the Company's interests in Sodak LA)
pursuant to documentation in form and substance (other than as to price)
reasonably satisfactory to Parent; provided that the minimum price shall be an
amount equal to all loans, advances and additional capital contributions to, or
investments in, Sodak LA, the Joint Venture or any Joint Venture partner made
with the consent of Parent after the date hereof (it being understood that $2.5
million has been contributed by the Company as of the date hereof). The Company
shall not provide any consideration in connection with such sale or termination
other than a forfeiture of the $2.5 million capital contribution made by the
Company as of the date hereof. Upon the consummation of such sale, neither the
Company nor any of its subsidiaries shall have any further liabilities or
obligations of any nature whatsoever relating to the Louisiana Joint Venture
Agreements or the sale or termination thereof. The Company shall, as part of its
efforts to sell its interests in the Louisiana Joint Venture Agreements, consult
with the Parent regarding its sales efforts and shall use commercially
reasonable efforts to obtain the best terms for the sale of its interests in the
Louisiana Joint Venture Agreements.
Parent shall have the right, at any time during the period commencing
on the date 90 days after the date of this Agreement and ending on the date 180
days after the date of this Agreement, if the Company has not prior thereto
entered into a definitive agreement with a third party purchaser to sell its
interests in the Louisiana Joint Venture Agreements in accordance with the
preceding paragraph, to require Xxxxxx Xxxxxx and Xxxxxx X. Xxxxxxx, or an
entity wholly-owned by them, to purchase all of the Company's interests under
the Louisiana Joint Venture Agreements (either directly and/or through the
purchase of all the Company's interests in Sodak LA) and as consideration
therefor Xxxxxx Xxxxxx and Xxxxxx X. Xxxxxxx shall assume all of the Company's
obligations under the Louisiana Joint Venture Agreements and, in addition, pay
to Parent the consideration specified in that certain letter to Xxxxxx Xxxxxx
and Xxxxxx X. Xxxxxxx dated as of the date hereof; provided that such
consideration shall be increased by an amount equal to all loans, advances and
additional capital contributions to, or investments in, Sodak LA, the Joint
Venture or any Joint Venture partner made with the consent of Parent after the
date hereof (it being understood that $2.5 million has been contributed by the
Company as of the date hereof). Xxxxxx Xxxxxx and Xxxxxx X. Xxxxxxx agree to
promptly prepare and file all necessary documentation, to effect all
applications, notices, petitions and filings, and to use best efforts to obtain
as promptly as practicable all Gaming Approvals necessary for Xxxxxx Xxxxxx and
Xxxxxx X. Xxxxxxx to effect such transaction. The documentation to effect such
transaction shall be prepared by Parent, shall not contain any representations
or warranties by the Company other than with respect to the Company's ownership
of the interests being purchased and shall not provide for any continuing
obligations on the part of the Company or any of its subsidiaries in connection
with such purchase or with respect to the Louisiana Joint Venture Agreements.
Upon the request of Parent, the Company shall promptly undertake any actions
required under the Louisiana Joint Venture Agreements in connection with such
sale.
(iv) Nothing in this Agreement, including but not limited to the
provisions of Section 5.4(a)(ii) hereof, shall obligate Parent to take any
action which may require or result in the voluntary surrender, forfeiture or
other termination by Parent of, or otherwise have any material adverse impact
on, any permits, registrations, licenses, findings of suitability,
qualifications, consents, waivers, variances, exemptions, orders, approvals and
authorizations of all Governmental Entities which are then held by Parent or any
of its subsidiaries.
(b) Denial of License; Individuals. If any person shall become an
Ineligible Person prior to the Closing, then (i) each Ineligible Person shall,
and the Company shall cause each Ineligible Person to, immediately and
permanently, resign from any position, including as director or officer, in the
Company, Parent or Sub and each Ineligible Person shall have no further
management role in Parent, Sub or the Company, (ii) if required to do so by any
Governmental Entity as a condition to receipt of any Gaming Approval, each
Ineligible Person shall, and the Company shall cause each Ineligible Person to,
dispose of all of its securities or other ownership interests in the Company,
and (iii) each Ineligible Person shall, and the Company shall cause each
Ineligible Person to, cooperate with the Company, Parent and Sub in their
efforts to obtain and retain in full force and effect the Gaming Approval.
"Ineligible Person" shall mean any person who owns any capital stock or other
interest in the Company (i) who is denied a Gaming Approval, disqualified from
eligibility for a Gaming Approval or found unsuitable by any Governmental Entity
before the Closing Date, (ii) whose continued involvement in the business of the
Company as an employee, director, officer or otherwise, may, in Parent's
reasonable opinion after consultation with counsel, have a Material Adverse
Effect on the likelihood that any Governmental Entity will issue a Gaming
Approval to the Company, the Surviving Corporation, Sub or Parent or (iii) is
expressly precluded from having any continuing interest in the Company, the
Surviving Corporation, Sub or Parent in any Gaming Approval granted by a
Governmental Entity as a condition to the issuance or continued validity of any
Gaming Approval by any Governmental Entity.
SECTION 5.5 Stock Options; Employee Benefits.
(a) Stock Option Plans.
(i) Any Stock Option outstanding immediately prior to the Effective
Time which is then exercisable or becomes exercisable as a result of an
acceleration triggered by the Merger pursuant to any existing option agreements
and all Stock Options outstanding immediately prior to the Effective Time that
were granted to members of the Board of Directors of the Company pursuant to the
1993 Directors' Stock Option Plan (all such Stock Options being the "Vested
Options"), shall be cancelled and, subject to the Company's receipt of the
acknowledgement described in Section 6.2(i) from the holder of such Vested
Options, shall entitle the holder thereof, upon surrender thereof, to receive,
for each share of Company Common Stock subject to such Vested Option, an amount
(subject to any applicable withholding tax) in cash equal to the Merger
Consideration minus the per share exercise or purchase price of such Vested
Option as of the date hereof.
(ii) Any restricted shares of Company Common Stock granted to any
employee of the Company outstanding immediately prior to the Effective Time
("Restricted Shares"), whether or not then vested and transferable by such
employee, shall be converted, by virtue of the Merger and without any action on
the part of the holder thereof, into the right to receive, without interest, the
Merger Consideration.
(iii) Amounts contributed to the Company's Employee Stock Purchase
Plan (the "Stock Purchase Plan") for the purchase of Company Common Stock that,
prior to the Effective Time, have not yet been applied to the purchase of
Company Common Stock shall be applied to the purchase of Company Common Stock
immediately prior to the Effective Time at a purchase price per share equal to
the purchase price that would have been paid pursuant to the terms of the Stock
Purchase Plan had the date on which the Effective Time occurs been the last day
of an investment cycle under the Stock Purchase Plan. Each share of Company
Common Stock purchased pursuant to this Section 5.5(a)(iii) shall be converted
into the Merger Consideration in accordance with Section 2.1(c)(i) of this
Agreement. The Company will amend the Stock Purchase Plan to provide that no
contributions can be made to the Stock Purchase Plan after a date that is no
later than the last day of the Company's regular payroll period ending
immediately prior to the Effective Time, and no such contributions shall
actually be made.
(b) Employee Benefits. From and after the Effective Time, Parent shall, or
cause the Surviving Corporation to, provide all of the employees of the
Surviving Corporation and its subsidiaries with all employee benefit plans,
programs, policies or arrangements (the "Parent Benefit Plans") as are provided
by Parent and its subsidiaries to their own employees who are similarly
situated. From and after the Effective Time, if any director, officer or other
employee of the Company or its subsidiaries becomes eligible to participate in
any compensation or benefit plan, agreement or arrangement maintained by Parent,
the Surviving Corporation or any of their respective subsidiaries, Parent shall
cause (i) all service of such director, officer or employee completed prior to
the Effective Time with Company or any of its subsidiaries to be recognized
under such plan, agreement or arrangement for all purposes except, in the case
of a defined benefit retirement plan, for benefit accrual purposes, (ii) to be
waived any waiting or eligibility periods or exclusions for pre-existing
conditions (except that the waiver of the exclusions for pre-existing conditions
shall not require coverage of any condition which would not have been covered
under Parent's medical benefit plans had the condition not been pre-existing)
of, any such director, officer or employee and his or her dependents and (iii)
to be recognized all co-payments, deductibles or similar amounts or costs
incurred by any such director, officer or employee under a comparable plan,
agreement or arrangement of the Company or any of its subsidiaries during the
plan year in which such director, officer or employee commences participation in
an applicable benefit plan, agreement or arrangement of Parent, the Surviving
Corporation or any of their respective subsidiaries. The foregoing shall not
constitute any commitment, contract, understanding or undertaking, guarantee
(express or implied) on the part of the Surviving Corporation to continue the
employment of any employee of the Company for any term of duration or on any
terms other than those as the Surviving Corporation may establish.
(c) Continuation of Agreements. The Surviving Corporation and its
subsidiaries shall honor, pay and perform all of their respective covenants and
obligations under, and in accordance with the existing terms of, all employment,
severance, termination and similar agreements identified in Section 3.1(g) of
the Company Disclosure Schedule between the Company or any such subsidiary and
any officer, director or employee thereof, from and after the Effective Time to
and including the earlier of (i) the termination of such agreement and (ii) one
year after the Effective Time.
SECTION 5.6 Takeover Statutes; Inconsistent Actions. If any "fair price,"
"moratorium," "control share," "business combination," "shareholder protection"
or similar or other anti-takeover statute or regulation enacted under any state
or Federal law shall become applicable to the Merger or any of the other
transactions contemplated hereby, the Company and the Board of Directors of the
Company shall grant such approvals and take all such actions as are within its
authority so that the Merger and the other transactions contemplated hereby and
thereby may be consummated as promptly as practicable on the terms contemplated
hereby and thereby and otherwise use all commercially reasonable efforts to
eliminate the effects of such statute or regulation on the Merger and the
transactions contemplated hereby and thereby. The Company has not and, during
the term of this Agreement shall not, adopt, effect or implement any
"shareholders' rights plan," "poison pill" or similar arrangement.
SECTION 5.7 Indemnification, Exculpation and Insurance.
(a) The articles of incorporation and the by-laws of the Surviving
Corporation shall contain the provisions with respect to indemnification and
exculpation from liability set forth in the Company's articles of incorporation
and by-laws on the date of this Agreement, which provisions shall not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who on or prior to the Effective Time were directors, officers,
employees or agents of the Company, unless such modification is required by law.
(b) For six years from the Effective Time, Parent shall maintain in effect
directors' and officers' liability insurance covering those persons who are
currently covered by the Company's directors' and officers' liability insurance
policy (a copy of which has been heretofore made available to Parent) on terms
no less favorable to such indemnified parties than the terms of such current
insurance coverage; provided, however, that (i) in lieu of the purchase of such
insurance by the Surviving Corporation or Parent, the Company, with Parent's
written consent, may purchase a five-year extended reporting period endorsement
("reporting tail coverage") under its existing directors' and officers'
liability insurance coverage and (ii) if the cost of such insurance in any year
during such six-year period shall exceed 150% of the premium cost for such
policy for the year ended June 30, 1999 (such premium being the "Current
Premium"), then Parent shall cause the Surviving Corporation to, and the
Surviving Corporation shall, provide coverage affording the same protection as
maintained by Parent as of such date for its officers and directors. The Company
represents to Parent that the Current Premium is $270,500.
(c) In addition to the other rights provided for in this Section 5.7 and
not in limitation thereof, for six years from and after the Effective Time,
Parent and the Surviving Corporation shall, to the fullest extent permitted by
applicable law, (i) indemnify and hold harmless the individuals who on or prior
to the Effective Time were officers or directors of the Company (collectively,
the "Indemnitees") against all losses, Expenses (as hereinafter defined),
claims, damages, liabilities, judgments, or amounts paid in settlement
(collectively, "Costs") in respect to any claim, action, suit or proceeding,
whether criminal, civil, administrative or investigative based on, or arising
out of or relating to the fact that such person is or was a director or officer
of the Company and arising out of acts or omissions occurring on or after July
1, 1998 and on or prior to the Effective Time (including, without limitation, in
respect of acts or omissions in connection with this Agreement and the
transactions contemplated hereby) to the fullest extent that the Company would
have been permitted under the SDBCA and its articles of incorporation and
by-laws in effect on the date hereof to indemnify such person (an "Indemnifiable
Claim") and (ii) advance to such Indemnitees all Expenses incurred in connection
with any Indemnifiable Claim promptly after receipt of reasonably detailed
statements therefor; provided, that the person to whom Expenses are to be
advanced provides an undertaking to repay such advances if it is ultimately
determined that such person is not entitled to indemnification from the
Surviving Corporation. In the event any Indemnifiable Claim is asserted or made
within such six year period, all rights to indemnification and advancement of
Expenses in respect of any such Indemnifiable Claim shall continue until such
Indemnifiable Claim is disposed of or all judgments, orders, decrees or other
rulings in connection with such Indemnifiable Claim are fully satisfied. For the
purposes of this Section 5.7, "Expenses" shall include reasonable attorneys'
fees and all other costs, charges and expenses paid or incurred in connection
with investigating, defending, being a witness in or participating in (including
on appeal), or preparing to defend, be a witness in or participate in any
Indemnifiable Claim.
(d) Any Indemnitee wishing to claim indemnification under paragraph (c) of
this Section 5.7, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Surviving Corporation thereof, but the
failure to so notify shall not relieve the Surviving Corporation of any
liability it may have to such Indemnitee if such failure does not materially
prejudice the indemnifying party. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) the Surviving Corporation shall have the right to assume the defense
thereof and the Surviving Corporation shall not be liable to such Indemnitees
for any legal expenses of other counsel or any other expenses subsequently
incurred by such Indemnitees in connection with the defense thereof, except that
if the Surviving Corporation does not elect to assume such defense or counsel
for the Indemnitees advises that there are issues which raise conflicts of
interest between the Surviving Corporation and any Indemnitees or between any
two or more Indemnitees, such Indemnitees may retain counsel satisfactory to
them, and the Surviving Corporation shall pay all reasonable fees and expenses
of such counsel for the Indemnitees promptly as statements therefor are
received; provided, however, that the Surviving Corporation shall be obligated
pursuant to this paragraph (d) to pay for only one firm of counsel for all
Indemnitees in any jurisdiction (unless there is a conflict of interest as
provided above), (ii) the Indemnitees will cooperate in the defense of any such
matter and (iii) the Surviving Corporation shall not be liable for any
settlement effected without the prior written consent of the Surviving
Corporation, which consent shall not be unreasonably withheld.
(e) The obligations of the Company, the Surviving Corporation and Parent
contained in this Section 5.7 shall be binding on the successors and assigns of
Parent and the Surviving Corporation. If Parent, the Surviving Corporation or
any of their successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 5.7.
SECTION 5.8 Letters of Accountants. The Company shall use its commercially
reasonable efforts to cause to be delivered to Parent a "comfort" letter of KPMG
Peat Marwick LLP, the Company's independent public accountants, dated and
delivered on the date on which the Proxy Statement is mailed to stockholders of
the Company and dated the Closing Date, each addressed to Parent, in form and
substance reasonably satisfactory to Parent and reasonably customary in scope
and substance for letters delivered by independent public accountants in
connection with transactions such as those contemplated by this Agreement.
SECTION 5.9 Fees and Expenses. Except as provided in Section 7.5, whether
or not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expenses; provided, however, that those expenses
incurred in connection with printing and mailing the Proxy Statement, including
the filing fee paid to the SEC, and all filing fees related to compliance with
the HSR Act in connection with the transactions contemplated hereby shall be
shared equally by Parent and the Company.
SECTION 5.10 Public Announcements. Parent and Sub, on the one hand, and the
Company, on the other hand, will consult with each other before issuing, and
provide each other the opportunity to review and comment upon, any press release
or other public statements with respect to the transactions contemplated by this
Agreement, including the Merger, including without limitation those press
releases that may be required by applicable law, court process or by obligations
pursuant to any listing agreement with any national securities exchange.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligations to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. The Stockholder Approval shall have been
obtained.
(b) No Injunctions or Restraints. No litigation brought by a Governmental
Entity shall be pending, and no litigation shall be threatened by any
Governmental Entity, which seeks to enjoin or prohibit the consummation of the
Merger, and no temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect.
(c) HSR Act. The applicable waiting period (and any extension thereof)
under the HSR Act shall have expired or been terminated.
SECTION 6.2 Additional Conditions to Obligations of Parent and Sub. The
obligations of Parent and Sub to effect the Merger are also subject to the
following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement that is qualified by
materiality shall be true and correct at and as of the Closing Date as though
made on and as of the Closing Date, and each of such representations and
warranties that is not so qualified shall be true and correct in all material
respects at and as of the Closing Date as if made at and as of the Closing Date,
provided that those representations and warranties which address matters only as
of a particular date shall remain true and correct at and as of such date.
Parent shall have received a certificate of the Chief Executive Officer and
Chief Financial Officer of the Company to such effect.
(b) Agreements and Covenants. The Company shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date. Parent shall have received a certificate of the Chief Executive Officer
and Chief Financial Officer of the Company to that effect. The Significant
Stockholders shall have performed all of their obligations under the Voting
Agreements at or prior to the Closing Date.
(c) Certificates and Other Deliveries. The Company shall have delivered, or
caused to be delivered, to Parent (i) a certificate of good standing from the
Secretary of State of the State of South Dakota and of comparable authority in
other jurisdictions in which the Company and its subsidiaries are incorporated
or qualified to do business stating that each is a validly existing corporation
in good standing; (ii) duly adopted resolutions of the Board of Directors and
stockholders of the Company approving the execution, delivery and performance of
this Agreement and the instruments contemplated hereby, certified by the
Secretary of the Company; and (iii) a true and complete copy of the articles of
incorporation or comparable governing instruments, as amended, of the Company
and its subsidiaries certified by the Secretary of State of the state of
incorporation or comparable authority in other jurisdictions, and a true and
complete copy of the by-laws or comparable governing instruments, as amended, of
the Company and its subsidiaries certified by the Secretary of the Company and
its subsidiaries, as applicable.
(d) No Material Adverse Change. From and including the date hereof, there
shall not have occurred a Material Adverse Change with respect to the Company.
(e) Consents and Approvals. Parent shall have received evidence, in form
and substance reasonably satisfactory to it, that such licenses, permits,
consents, approvals, waivers, findings of suitability, authorizations,
qualifications and orders of, and declarations, registrations and filings
(including, without limitation, all Gaming Approvals) (collectively, "Consents
and Filings") required to be made or obtained by the Company or Parent from all
Governmental Entities and parties to loan or credit agreements, notes,
mortgages, indentures, leases or other contracts, agreements or instruments to
which the Company, Parent or any of their respective subsidiaries is a party or
by which the Company, Parent or any of their respective subsidiaries or their
respective assets are bound or affected, as are required in connection with the
Merger and the consummation of the transactions contemplated hereby, have been
obtained or made, as applicable, by the Company or Parent, as the case may be,
without the imposition of any limitations, prohibitions or requirements and are
in full force and effect, other than those Consents and Filings (excluding
Gaming Approvals) which, if not obtained or made, or those limiting prohibitions
or requirements which would not, either have (i) a material adverse effect on
the transactions contemplated hereby, (ii) a Material Adverse Effect on the
Surviving Corporation or Parent after the Effective Time, or (iii) a Material
Adverse Effect on the continuation of the operations and business of the Company
and its subsidiaries by the Surviving Corporation after the consummation of the
transactions contemplated hereby.
(f) Riverboat Operations. If so required by any Governmental Entity as a
condition to the receipt by the Company, Parent or Sub of any of the Consents
and Filings or in order for Parent to comply with applicable Gaming Laws, the
Company shall have disposed of the Riverboat in accordance with Section
5.4(a)(ii).
(g) Louisiana Joint Venture Agreements. The Company shall have sold or
terminated (by withdrawal or otherwise) all of the Company's direct or indirect
interests in the Louisiana Joint Venture Agreements in accordance with Section
5.4(a)(iii).
(h) Employment. Each of Xxxxxx Xxxxxxx and the minimum number of persons
specified in the letter (such number to include those persons specifically
designated as included in such minimum number in such letter) delivered by
Parent to the Company pursuant to Section 3.1(w) shall have continued in the
employment of the Company through, and be employed by the Company on, the
Effective Time.
(i) Other Agreements. Parent shall have received acknowledgements from the
holders of all outstanding Stock Options that such Stock Options shall be
cancelled as of the Effective Time and that such holder is only entitled to
receive the per share Merger Consideration minus the per share exercise price of
such Stock Options.
(j) Financing. The funds necessary to pay the aggregate Merger
Consideration shall have been obtained by Parent on terms reasonably acceptable
to Parent.
(k) Dissenting Shares. The Dissenting Shares shall comprise less than 10%
of the outstanding Company Common Stock.
SECTION 6.3 Additional Conditions to Obligations of the Company. The
obligations of the Company to effect the Merger are also subject to the
following conditions:
(a) Representations and Warranties. Each of the representations of Parent
and Sub contained in this Agreement that is qualified by materiality shall be
true and correct at and as of the Closing Date as though made on and as of the
Closing Date and each of such representations and warranties that is not so
qualified shall be true and correct in all material respects at and as of the
Closing Date as if made at and as of the Closing Date, provided that those
representations and warranties which address matters only as of a particular
date shall remain true and correct at and as of such date. The Company shall
have received a certificate of the Chief Executive Officer and Chief Financial
Officer of Parent to such effect.
(b) Agreements and Covenants. Parent shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date. The Company shall have received a certificate of the Chief Executive
Officer and Chief Financial Officer of Parent to such effect.
(c) Certificates and Other Deliveries. Parent shall have delivered to the
Company (i) a certificate of existence from the Secretary of State of the State
of Nevada stating that Parent is a validly existing corporation together with a
certificate of good standing from the Secretary of State of the State of South
Dakota stating that Sub is a validly existing corporation in good standing; (ii)
duly adopted resolutions of the Board of Directors of each of Parent and Sub
approving the execution, delivery and performance of this Agreement and the
instruments contemplated hereby, and of the stockholders of Sub approving the
Merger, each certified by the Secretary or the Assistant Secretary of the
relevant party; and (iii) a true and complete copy of the articles of
incorporation, as amended, of Parent and Sub certified by the Secretary of State
of the state of each of their incorporation, and a true and complete copy of the
by-laws, as amended, of Parent and Sub certified by the Secretary or Assistant
Secretary of Sub or Parent, as applicable.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval by the stockholders of
the Company:
(a) by mutual written consent of Parent and the Company, if the Board of
Directors of each so determines by the affirmative vote of a majority of the
members of its entire Board of Directors;
(b) by Parent (provided that Parent is not then in material breach of any
representation, warranty, covenant or other agreement contained herein), upon a
material breach of any representation, warranty, covenant or agreement on the
part of the Company set forth in this Agreement, or if any representation or
warranty of the Company shall have become untrue, in either case such that the
conditions set forth in Section 6.2(a) or Section 6.2(b), as the case may be,
would be incapable of being satisfied by December 31, 1999;
(c) by the Company (provided that the Company is not then in material
breach of any representation, warranty, covenant or other agreement contained
herein), upon a material breach of any representation, warranty, covenant or
agreement on the part of Parent or Sub set forth in this Agreement, or if any
representation or warranty of Parent or Sub shall have become untrue, in either
case such that the conditions set forth in Section 6.3(a) or Section 6.3(b), as
the case may be, would be incapable of being satisfied by December 31, 1999;
(d) by either Parent or the Company if any Governmental Entity shall have
issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the consummation of the Merger
and such order, decree or ruling or other action shall have become final and
nonappealable;
(e) by either Parent or the Company, if the Merger shall not have occurred
by December 31, 1999, unless the failure to consummate the Merger is the result
of a breach of covenant set forth in this Agreement or a material breach of any
representation or warranty set forth in this Agreement by the party seeking to
terminate this Agreement and provided that if the Merger has not been
consummated because of a failure to obtain approval from a Governmental Entity
and such approval is still pending, then Parent or the Company may extend such
date to March 31, 2000 by providing written notice thereof to the other party on
or before December 31, 1999;
(f) by either Parent or the Company (provided that the terminating party is
not in material breach of any of its obligations hereunder), if any approval of
the stockholders of the Company required for the consummation of the Merger
shall not have been obtained by reason of the failure to obtain the required
vote at a duly held meeting of the Company's stockholders or at any adjournment
or postponement thereof;
(g) by Parent, if the Board of Directors of the Company (i) withdraws or
modifies adversely its recommendation of the Merger following the receipt by the
Company of a Takeover Proposal, (ii) recommends a Takeover Proposal to Company
stockholders or (iii) fails to call or hold the Company Stockholders' Meeting by
reason of the receipt by the Company of a Takeover Proposal; or
(h) by the Company if, prior to approval of the Merger by its stockholders
and as a result of a Superior Proposal, the Board of Directors of the Company
determines in good faith after consultation with outside counsel, that the
termination of this Agreement and acceptance of such Superior Proposal is
necessary in order to comply with its fiduciary duties; provided, however, that
before the Company may terminate this Agreement pursuant to this subsection
7.1(h), the Company shall give notice to Parent of the proposed termination
under subsection 7.1(h) and Parent, within five (5) business days of receipt of
such notice, shall have the right, in its sole discretion, to offer to amend
this Agreement to provide for terms substantially similar to those of the
Superior Proposal and the Company shall negotiate in good faith with Parent with
respect to such proposed amendment; provided, further, that if Parent and the
Company are unable to reach an agreement with respect to the Parent's proposed
amendment within the five (5) business day period described above, the Company
may terminate this Agreement pursuant to this subsection 7.1(h).
SECTION 7.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company or their respective
officers or directors, except as set forth in the last sentence of Section 5.2,
Section 5.9, Section 7.5 and Article VIII which shall survive termination and
except to the extent that such termination results from the breach by a party of
any of its representations, warranties, covenants or agreements set forth in
this Agreement.
SECTION 7.3 Amendment. This Agreement may be amended by the parties at any
time before or after approval hereof by the stockholders of the Company;
provided, however, that after such stockholder approval there shall not be made
any amendment that by law requires further approval by the stockholders of the
Company without the further approval of such stockholders. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties.
SECTION 7.4 Extension; Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
7.3, waive compliance with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing, signed on behalf
of such party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of those
rights.
SECTION 7.5 Termination Fee.
(a) In the event (i) Company terminates this Agreement pursuant to Section
7.1(h), (ii) Parent terminates this Agreement pursuant to Section 7.1(g) or
Parent terminates this Agreement as a result of the Company's willful and
material breach of Section 4.2, or (iii) any Significant Stockholder fails to
vote in favor of the Merger and Stockholder Approval is not received, then the
Company shall pay Parent an amount equal to Eight Million Dollars ($8,000,000)
(the "Termination Fee") by wire transfer of immediately available funds upon the
occurrence of such event.
(b) In the event (i) Stockholder Approval is not received, (ii) prior to
the Company Stockholders' Meeting there shall have been a Takeover Proposal made
(whether or not such Takeover Proposal shall have been rejected or shall have
been withdrawn prior to the time of the Company Stockholders' Meeting) and (iii)
within twelve (12) months from the termination of this Agreement, the Company
shall have entered into an agreement for, and within twenty-four (24) months
from such termination shall have consummated, a transaction substantially in the
form proposed in such Takeover Proposal then the Company shall pay Parent an
amount equal to the Termination Fee by wire transfer of immediately available
funds, payable upon consummation of such transaction.
(c) Parent shall pay to the Company by wire transfer Two Million Dollars
($2,000,000) (the "Parent Termination Fee") if this Agreement is terminated by
Parent or the Company pursuant to Section 7.1(e) and at the time of such
termination (i) the conditions specified in Section 6.2(j) to the obligations of
Parent shall not have been satisfied or waived and (ii) each of the other
conditions set forth in Article VI to the obligations of the Company, Parent and
Sub shall have been satisfied or waived; provided that the conditions set forth
in Sections 6.2(a) through 6.2(c) and 6.3(a) through 6.3(c) will be deemed to be
satisfied if the certificates or documents required to be delivered pursuant to
such sections are capable of being delivered on the termination date.
(d) The parties agree that the agreements contained in Section 7.5 are an
integral part of the transactions contemplated by this Agreement. If the Company
fails to promptly pay to Parent any fee due under this Section 7.5, the Company
shall pay the costs and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other legal
action, taken to collect payment, together with interest on the amount of any
unpaid fee at the publicly announced prime rate of Bank of America from the date
such fee was first due. If Parent fails to promptly pay to the Company any fee
due under this Section 7.5, Parent shall pay the costs and expenses (including
legal fees and expenses) in connection with any action, including the filing of
any lawsuit or other legal action, taken to collect payment, together with
interest on the amount of any unpaid fee at the publicly announced prime rate of
Bank of America from the date such fee was first due.
(e) The payment by the Company of the Termination Fee pursuant to this
Section 7.5 shall be Parent's and Sub's exclusive remedy against the Company
other than for a willful breach by the Company of Section 4.2. The payment by
the Parent of the Parent Termination Fee pursuant to this Section 7.5 shall be
the Company's exclusive remedy against the Parent if this Agreement is
terminated by Parent or the Company pursuant to Section 7.1(e) as a result of
Parent's failure to satisfy the condition set forth in Section 6.2(j).
SECTION 7.6 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver of this Agreement
pursuant to Section 7.4 shall, in order to be effective, require in the case of
Parent, Sub or the Company, action by its Board of Directors, acting by the
affirmative vote of a majority of the members of the entire Board of Directors.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time of the Merger (including
without limitation the provisions of Section 5.4 hereof).
SECTION 8.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
International Game Technology
0000 Xxxxxxxxx Xxxxx
Xxxx, Xxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxx XxXxx
with copies to:
O'Melveny & Xxxxx LLP
000 Xxxxxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: J. Xxx Xxxxxx
O'Melveny & Xxxxx LLP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxxxx X. Xxxxxx
(b) if to the Company, to:
Sodak Gaming, Inc.
0000 Xxxxx Xxxxxxx 00
Xxxxx Xxxx, Xxxxx Xxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxx
with a copy to:
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
SECTION 8.3 Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) "Knowledge" means a fact, event, circumstance or occurrence actually
known by any of the officers or directors of the Company or Parent, as the case
may be.
(c) "Material Adverse Change" or "Material Adverse Effect" means, when used
in connection with the Company, the Surviving Corporation or Parent, any change
or effect (or any development that insofar as can reasonably be foreseen, is
likely to result in any change or effect) that is or is likely to be,
individually or in the aggregate, materially adverse to the business, assets,
properties, financial condition or results of operations of such party and its
subsidiaries taken as a whole, excluding any such adverse change that is due to
events, occurrences, facts, conditions, changes, developments or effects which
affect the economy generally.
(d) "person" means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity; and
(e) a "subsidiary" with respect to any person means ownership directly or
indirectly of an amount of the voting securities, other voting ownership or
voting partnership interests of another person which is sufficient to elect at
least a majority of its board of directors or other governing body or, if there
are no such voting interests, more than 50% of the equity interests.
SECTION 8.4 Interpretation. When a reference is made in this Agreement to a
Section, Exhibit or Schedule, such reference shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" and "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 8.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries. This Agreement
and the Confidentiality Agreements constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement and except for
the provisions of Article II and Sections 5.5 and 15.7 are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
SECTION 8.7 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Nevada,
regardless of the laws that might otherwise govern under applicable principles
of conflict of laws thereof.
SECTION 8.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
SECTION 8.9 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Nevada or in Nevada state court, this being in addition
to any other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto (a) consents to submit itself to the personal
jurisdiction of any federal court located in the State of Nevada or any Nevada
state court in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that it will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a federal or state court sitting in the State
of Nevada.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
PARENT:
INTERNATIONAL GAME TECHNOLOGY, a Nevada corporation
By: /s/ G. Xxxxxx Xxxxx
-----------------------------------------
Name: G. Xxxxxx Xxxxx
-----------------------------------------
Its: President and Chief Operating Officer
-----------------------------------------
SUB:
SAC, INC., a South Dakota corporation
By: /s/ Xxxxxxx Xxxx
------------------------------------------
Name: Xxxxxxx Xxxx
------------------------------------------
Its: Treasurer
------------------------------------------
THE COMPANY:
SODAK GAMING, INC., a South Dakota corporation
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxxx
------------------------------------------
Its: President and Chief Executive Officer
------------------------------------------
