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EXHIBIT 10.1
DISTRIBUTION AGREEMENT
by and between
GRAND CASINOS, INC.
and
GCI LAKES, INC.
Dated as of [ ], 1998
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TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS....................................................... 2
Section 1.01. General.............................................. 2
Section 1.02. Terms Defined Elsewhere in Agreement................. 13
ARTICLE II TRANSFER OF ASSETS............................................... 13
Section 2.01. Transfer of Assets to Lakes.......................... 13
Section 2.02. Transfers of Assets from Non-Mississippi
Subsidiaries to Company or Mississippi Subsidiaries.. 14
Section 2.03. Transfers Not Effected Prior to the Distribution..... 14
Section 2.04. Cooperation Re: Assets.............................. 15
Section 2.05. No Representations or Warranties; Consents........... 15
Section 2.06. Conveyancing and Assumption Instruments.............. 16
Section 2.07. Cash Allocations After the Year-End.................. 16
Section 2.08. Cash Allocation; Cash Management..................... 16
Section 2.09. Allocation of Debt................................... 17
ARTICLE III ASSUMPTION AND SATISFACTION OF LIABILITIES....................... 18
Section 3.01. Assumption and Satisfaction of Mississippi Business
and Non-Mississippi Business Liabilities............. 18
Section 3.02 Assumption and Satisfaction of Contingent Company
Liabilities and Transaction Liabilities.............. 18
ARTICLE IV THE DISTRIBUTION................................................. 18
Section 4.01. Cooperation Prior to the Distribution................ 18
Section 4.02. Company Board Action; Conditions Precedent
to the Distribution ................................. 19
Section 4.03. The Distribution..................................... 21
ARTICLE V INDEMNIFICATION.................................................... 21
Section 5.01. Indemnification by Company........................... 21
Section 5.02. Indemnification by Lakes............................. 21
Section 5.03. Insurance Proceeds................................... 21
Section 5.04. Procedure for Indemnification........................ 22
Section 5.05. Remedies Cumulative.................................. 24
Section 5.06. Survival of Indemnities.............................. 24
ARTICLE VI CERTAIN ADDITIONAL MATTERS....................................... 25
Section 6.01. Lakes Board.......................................... 25
Section 6.02. Resignations; Company Board.......................... 25
Section 6.03. Lakes Certificate and Bylaws......................... 25
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Section 6.04. Certain Post-Distribution Transactions............... 25
Section 6.05. Sales and Transfer Taxes............................. 25
Section 6.06. Settlement of Intercompany Accounts. ............... 26
ARTICLE VII ACCESS TO INFORMATION AND SERVICES.............................. 26
Section 7.01. Provision of Corporate Records....................... 26
Section 7.02. Access to Information................................ 26
Section 7.03. Production of Witnesses.............................. 27
Section 7.04. Corporate Services................................... 27
Section 7.06. Retention of Records................................. 27
Section 7.07. Confidentiality...................................... 28
Section 7.08. Privileged Matters................................... 28
ARTICLE VIII INSURANCE...................................................... 30
Section 8.01. Policies and Rights Included Within the
Non-Mississippi Group Assets......................... 30
Section 8.02. Policies and Rights Included Within the
Mississippi Group Assets ............................ 30
Section 8.03. Administration and Reserves.......................... 31
Section 8.04. Agreement for Waiver of Conflict and Shared Defense.. 32
ARTICLE IX MISCELLANEOUS.................................................... 33
Section 9.01. Entire Agreement; No Third Party Beneficiaries....... 33
Section 9.02. Tax Allocation and Indemnity Agreement;
After-Tax Payments................................... 33
Section 9.03. Expenses............................................. 33
Section 9.04. Governing Law........................................ 33
Section 9.05. Notices.............................................. 33
Section 9.06. Amendments........................................... 34
Section 9.07. Assignments.......................................... 34
Section 9.08. Termination.......................................... 34
Section 9.09. Subsidiaries......................................... 34
Section 9.10. Specific Performance................................. 34
Section 9.11. Headings; References................................. 34
Section 9.12. Counterparts......................................... 35
Section 9.13. Severability; Enforcement............................ 35
Section 9.14. Arbitration of Disputes.............................. 35
Section 9.15. Prompt Payment....................................... 36
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INDEX OF SCHEDULES
Schedule 1 - Mississippi Subsidiaries
Schedule 2 - Non-Mississippi Subsidiaries
Schedule 3 - Retained Company Assets
Schedule 4 - Retained Company Liabilities
Schedule 5 - Assigned Lakes Assets
Schedule 6 - Assigned Lakes Liabilities
Schedule 7 - Transferred Corporate Functions
Schedule 8 - Mississippi Group Cash Accounts
Schedule 9 - Non-Mississippi Group Cash Accounts
Schedule 10- Contingent Company Liabilities
INDEX OF EXHIBITS
Exhibit A - Form of Employee Benefits Allocation Agreement
Exhibit B - Form of Lakes Bylaws
Exhibit C - Form of Lakes Articles
Exhibit D - Form of Intellectual Property License Agreement
Exhibit E - Form of Tax Allocation and Indemnity Agreement
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DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT (the "Agreement"), dated as of [ ], 1998, by and
between GRAND CASINOS, INC., a Minnesota corporation ("Company") and GCI LAKES,
INC., a Minnesota corporation and wholly owned subsidiary of Company ("Lakes").
WHEREAS, Company, directly and through certain wholly-owned
subsidiaries, (a) owns, operates and develops certain gaming and resort
facilities located in the State of Mississippi (as more specifically described
herein, the "Mississippi Business"), and (b) manages and develops certain gaming
facilities located outside the State of Mississippi (as more specifically
described herein, the "Non-Mississippi Business");
WHEREAS, it is necessary to separate the Mississippi Business from the
Non-Mississippi Business in order to satisfy conditions precedent contained in
that certain Agreement and Plan of Merger dated June 29, 1998 (the "Merger
Agreement") by and among Company, Lakes, Hilton Hotels Corporation, a Delaware
corporation ("Hilton"), Gaming Co., Inc., a Delaware corporation and a
wholly-owned subsidiary of Hilton ("Gaming Co."), and Gaming Acquisition Corp.,
a Minnesota corporation and a wholly-owned subsidiary of Gaming Co.
("MergerSub");
WHEREAS, the Board of Directors of Company has determined that it is in
the best interests of Company for Company to merge with MergerSub (the "Merger")
pursuant to the Merger Agreement;
WHEREAS, subject to Company shareholder ratification and certain other
conditions, the Board of Directors of Company has determined that it is in the
best interests of Company and the shareholders of Company to separate the
Non-Mississippi Business from the Mississippi Business through a distribution
(the "Distribution") to the holders of Company Common Stock (as defined herein)
of all of the outstanding shares of Lakes Common Stock (as defined herein) to
accomplish the Merger;
WHEREAS, in order to effect such separation, Company will contribute to
Lakes prior to the Distribution, all of the operations, assets and liabilities
of Company comprising the Non-Mississippi Business and such other assets,
liabilities and operations as are described below;
WHEREAS, in connection with the Distribution, Company and Lakes have
determined that it is necessary and desirable to set forth the principal
corporate transactions required to effect the Distribution, and to set forth the
agreements that will govern certain matters following the Distribution; and
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WHEREAS, for federal income tax purposes, it is intended that the
Distribution shall qualify as a tax-free distribution solely with respect to
Company's Shareholders within the meaning of Section 355 of the Internal Revenue
Code of 1986, as amended.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements set forth below, the parties agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. General. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
Action: Any action, claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
Affiliate: With respect to any specified Person, an affiliate of such
Person within the meaning of Rule 145 promulgated under the Securities Act.
Notwithstanding the foregoing (i) the Affiliates of Company shall not include
Lakes, the Non-Mississippi Subsidiaries or any other Person which otherwise
would be an Affiliate of Company solely by reason of Company's ownership of the
capital stock of Lakes or a Non-Mississippi Subsidiary prior to the Distribution
or the fact that any officer or director of Company or any of the Mississippi
Subsidiaries shall also serve as an officer or director of Lakes or any of the
Non-Mississippi Subsidiaries; and (ii) the Affiliates of Lakes shall not include
Company, the Mississippi Subsidiaries or any other Person which otherwise would
be an Affiliate of Lakes solely by reason of Company's ownership of the capital
stock of Lakes or a Non-Mississippi Subsidiary prior to the Distribution or the
fact that any officer or director of Lakes or any of the Non-Mississippi
Subsidiaries shall also serve as an officer or director of Company or any of the
Mississippi Subsidiaries.
Agent: Norwest Shareholder Services as distribution agent appointed by
Company to distribute the Lakes Common Stock pursuant to the Distribution.
Ancillary Agreements: The License Agreement, Employee Benefits
Allocation Agreement, and Tax Allocation and Indemnity Agreement.
Assigned Lakes Assets: The assets indicated on Schedule 5.
Assigned Lakes Assets Proceeds: The net proceeds of the sales, if any,
of the Assigned Lakes Assets after the date of the Merger Agreement but prior to
the Distribution Date, after deducting any costs and fees associated with such
sales, including, but not limited to, advertising,
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marketing and transportation costs and sales, transfer, income (if any) and
other taxes; provided, however, if such sale results in capital or ordinary
loss, than such loss shall also be allocated to Lakes along with the subject
Assigned Lakes Assets Proceeds.
Assigned Lakes Liabilities: The liabilities indicated on Schedule 6.
Assumed Debt: The Debt of Company and its Subsidiaries which is assumed
by Lakes and/or retained by the Non-Mississippi Group Subsidiaries in connection
with the Distribution, as determined pursuant to Section 2.09.
Bank of America Revolving Credit Facility: The $100 million Capital
Lease Facility with BA Leasing Capital Corporation, et al. dated September 29,
1997.
Code: The Internal Revenue Code of 1986, as amended, or any successor
thereto as in effect for the taxable year in question.
Company Board: The Board of Directors of Company as it is constituted
prior to the Distribution Date.
Company Common Stock: The common stock, par value $.01 per share, of
Company.
Company Notes: The First Mortgage Notes and the Senior Notes.
Company Group: The meaning specified in the Tax Allocation and
Indemnity Agreement.
Contingent Company Liability: The meaning set forth in Section 3.02.
Conveyancing and Assumption Instruments: Collectively, the various
agreements, instruments and other documents to be entered into to effect the
Preliminary Transfers and the assignment of assets and the assumption of
Liabilities contemplated by this Agreement and the Related Agreements in the
manner contemplated herein and therein.
Debt: All (i) indebtedness for borrowed money and obligations evidenced
by bonds, notes, debentures or similar instruments; (ii) obligations issued or
assumed as the deferred purchase price of property or services; (iii)
obligations under capital leases; and (iv) all guarantees of the obligations of
other persons described in the foregoing clauses (i) - (iii).
Distribution: The distribution to the holders of Company Common Stock
as of the Distribution Record Date of all of the outstanding shares of Lakes
Common Stock.
Distribution Date: The date on which the Distribution is effected.
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Distribution Record Date: The date established by Company Board as the
date for taking a record of the Holders of Company Common Stock entitled to
participate in the Distribution.
Employee Benefits Allocation Agreement: The Employee Benefits and Other
Employment Matters Allocation Agreement between Lakes and Company, which
agreement shall be entered into on or prior to the Distribution Date in
substantially the form attached hereto as Exhibit A.
Exchange Act: The Securities Exchange Act of 1934, as amended.
First Mortgage Notes: The $450 million 10.125% First Mortgage Notes of
Company due December 1, 2003.
Form 10: The Registration Statement on Form 10 under the Exchange Act
with respect to the Lakes Common Stock.
GAAP: Generally accepted accounting principles.
Gaming Laws: Indian Gaming Laws, Louisiana Gaming Laws, Minnesota
Gaming Laws, Mississippi Gaming Laws, and Nevada Gaming Laws.
Gaming Co.: A Delaware corporation whose wholly-owned subsidiary,
MergerSub, will be merged with Company pursuant to the Merger Agreement.
Governmental Authority: Any court, administrative agency or commission
or other governmental authority or instrumentality.
Hilton: A Delaware corporation which is a party to the Merger
Agreement.
Holders: The holders of record of Company Common Stock as of the
Distribution Record Date.
Indian Debt Guarantees: Shall mean (i) the guarantees of Company and
Grand Casinos of Louisiana, Inc. Tunica-Biloxi pursuant to the Guaranty
Agreement, dated as of August 7, 1994 in favor of Pitney Xxxxx Credit
Corporation, guaranteeing the debt obligations of the Tunica-Biloxi Tribe of
Louisiana; (ii) the guarantees of Company and Grand Casinos of Louisiana, Inc. -
Coushatta pursuant to the Guaranty Agreement, dated as of January 31, 1995 in
favor of PB Funding Corporation, guaranteeing the lease obligations of the
Coushatta Tribe of Louisiana; (iii) the guarantees of Company and Grand Casinos
of Louisiana, Inc. - Coushatta pursuant to the Guaranty Agreement, dated as of
January 31, 1995 in favor of Sentry Financial Corporation, guaranteeing the
lease obligations of the Coushatta Tribe of Louisiana; (iv) the guarantees of
Company and Grand Casinos of Louisiana, Inc. - Tunica-Biloxi pursuant to the
Commercial Guaranty Agreement, dated as of April 7, 1997 in favor of Cottonport
Bank, guaranteeing the debt obligations of the Tunica-Biloxi Tribe of Louisiana;
(v) the guarantees of Company and Grand Casinos of Louisiana, Inc. -
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Coushatta pursuant to the Commercial Guaranty Agreement, dated as of May 1, 1997
in favor of Hibernia National Bank, guaranteeing the debt obligations of the
Coushatta Tribe of Louisiana; and (vi) any other guarantees under which Company
or any of its subsidiaries has guaranteed the debt or lease obligations of any
Indian Tribes.
Indian Gaming Laws: Shall mean (i) the Indian Gaming Regulatory Act of
1988 and the rules and regulations promulgated thereunder; (ii) any state laws
and regulations governing gaming operations and facilities on Indian land; and
(iii) any tribal ordinances and regulations governing gaming on land within such
tribe's jurisdiction.
Indian Management Agreements: shall mean the management agreements and
related collateral and other agreements of the Indian tribes, or of Company or
any of its Subsidiaries, relating to (i) Grand Casino Avoyelles; (ii) Grand
Casino Coushatta; (iii) Grand Casino Hinckley; and (iv) any other Indian gaming
operations.
Insurance Administration: With respect to each Policy (including Self
Insurance Programs) shall include, but not be limited to, the accounting for
premiums, retrospectively rated premiums, defense costs, adjuster's fees,
indemnity payments, deductibles and retentions as appropriate under the terms
and conditions of each of the Policies; and the reporting to primary and excess
insurance carriers of any losses, claims and/or audit exposure in accordance
with Policy provisions, and the distribution of Insurance Proceeds as
contemplated by this Agreement.
Insurance Proceeds: Those moneys (i) received by an insured from an
insurance carrier or (ii) paid by an insurance carrier on behalf of the insured,
in either case net of any applicable premium adjustment, retrospectively rated
premium, deductible, retention, cost or reserve paid or held by or for the
benefit of such insured.
Insured Claims: Those Liabilities that, individually or in the
aggregate, are covered within the terms and conditions of any of the Policies,
whether or not subject to deductibles, co-insurance, uncollectibility or
retrospectively rated premium adjustments, but only to the extent that such
Liabilities are within applicable Policy limits, including aggregates.
IRS: The Internal Revenue Service or any successor thereto, including
but not limited to its agents, representatives and attorneys.
IRS Ruling: The letter ruling issued by the IRS in response to the
Ruling Request.
Lakes Board: The Board of Directors of Lakes.
Lakes Bylaws: The Bylaws of Lakes, substantially in the form of Exhibit
B, to be in effect at the Distribution Date.
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Lakes Articles of Incorporation: The Articles of Incorporation of
Lakes, substantially in the form of Exhibit C, to be in effect at the
Distribution Date.
Lakes Common Stock: The common stock, $.01 par value per share, of
Lakes.
Lakes Group: The meaning specified in the Tax Allocation and Indemnity
Agreement.
Liabilities: Any and all debts, liabilities and obligations, absolute
or contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, including all costs and expenses
relating thereto, and including, without limitation, those debts, liabilities
and obligations arising under any law, rule, regulation, Action, threatened
Action, order or consent decree of any governmental entity or any award of any
arbitrator of any kind, and those arising under any contract, commitment or
undertaking.
License Agreement: The Intellectual Property License Agreement between
Company and Lakes, which agreement shall be entered into on or prior to the
Distribution Date with substantially such terms as are attached hereto as
Exhibit D.
Louisiana Gaming Laws: The Louisiana Riverboat Economic Development and
Gaming Control Act and the rules and regulations promulgated thereunder.
Louisiana Gaming License: The Company's license to manage
Louisiana-based casinos issued pursuant to Louisiana Gaming Laws.
MBCA: shall mean the Minnesota Business Corporation Act, as amended
from time to time.
Minnesota Gaming Laws: shall mean the Minnesota Lawful Gambling and
Gambling Devices Act and the rules and regulations promulgated thereunder.
Mississippi Business: The business conducted by Company and its
Subsidiaries relating to the management, ownership, operation and development of
all of Company's casinos, hotels, related facilities and all other operations
located within the State of Mississippi, including the Grand Casino Tunica,
Grand Casino Biloxi and Grand Casino Gulfport properties and any operations
located outside the State of Mississippi which relate to the Mississippi Group
Assets.
Mississippi Gaming Laws: shall mean the Mississippi Gaming Control Act
and the rules and regulations promulgated thereunder.
Mississippi Group: Company and the Mississippi Subsidiaries,
collectively.
Mississippi Group Employees: The meaning specified in the Employee
Benefits Allocation Agreement.
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Mississippi Group Assets: (i) All outstanding capital stock of the
Mississippi Subsidiaries and all assets of the Mississippi Subsidiaries other
than the Non-Mississippi Group Assets; (ii) all cash or cash equivalents
generated or derived from the sale or disposition of Mississippi Group
Assets prior to the Distribution Date; (iii) the Mississippi Group Books and
Records; (iv) the rights of Company and the Mississippi Subsidiaries insured
under the Shared Policies; (v) all of the assets expressly to be retained by, or
assigned or allotted to, Company or any of the Mississippi Subsidiaries under
this Agreement or the Related Agreements; (vi) the Retained Company Assets; and
(vii) any other assets of Company and its Subsidiaries used principally in the
Mississippi Business; except, in each case, excluding the assets listed on
Schedule 5.
Mississippi Group Books and Records: The books and records (including
computerized records) of Company and the Mississippi Subsidiaries and any other
books and records of Company's Subsidiaries which relate principally to the
Mississippi Group, are necessary to conduct the Mississippi Business or are
required by law to be retained by Company or a Mississippi Subsidiary,
including, without limitation: (i) all such books and records relating to
Company Employees; (ii) all files relating to any Action being retained by
Company as part of the Mississippi Group Liabilities; and (iii) original
corporate minute books, stock ledgers and certificates and corporate seals, and
all licenses, leases, agreements and filings, relating to Company, the
Mississippi Subsidiaries or the Mississippi Business (but not including the
Non-Mississippi Group Books and Records, provided that Company shall have access
to, and shall have the right to obtain duplicate copies of, the Non-Mississippi
Group Books and Records in accordance with the provisions of Article VII).
Mississippi Group Cash Accounts: The bank accounts of the Mississippi
Group as set forth in Schedule 8 hereto.
Mississippi Group Liabilities: (i) All of the Liabilities of the
Mississippi Group under, or to be retained or assumed by Company or any of the
Mississippi Subsidiaries pursuant to, this Agreement (including Company's
portion of Contingent Company Liabilities and Transaction Liabilities as
provided in Section 3.02 herein) or any of the Related Agreements; (ii) all
Liabilities for payment of outstanding drafts of Company and its Subsidiaries
existing as of the Distribution Date; (iii) the Retained Debt; (iv) all
Liabilities of the Mississippi Subsidiaries, other than the Non-Mississippi
Group Liabilities; (v) all Actions against Company or its Subsidiaries arising
out of, or specifically associated with, any of the Mississippi Group Assets or
the Mississippi Business; (vi) the Retained Company Liabilities indicated on
Schedule 4; and (vii) all other Liabilities of Company and its Subsidiaries
arising out of, or specifically associated with, any of the Mississippi Group
Assets or the Mississippi Business; provided, however, that the Mississippi
Group Liabilities shall not include (1) the Assumed Debt or (2) any claims,
losses, damages, demands, costs, expenses or Liabilities for any Tax (which
shall be governed by Sections 6.05 and 9.02 hereof and by the Tax Allocation and
Indemnity Agreement).
Mississippi Subsidiaries: The Subsidiaries of Company specified in
Schedule 1 and any other Subsidiaries formed after the date hereof to conduct a
portion of the Mississippi Business.
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Nevada Gaming Laws: shall mean the Nevada Gaming Control Act and the
rules and regulations promulgated thereunder, the Xxxxx County, Nevada Code and
the rules and regulations promulgated thereunder, and other applicable local
regulations.
Net Cash: The sum of (i) net cash (used in) or provided by financing
activities; (ii) net cash (used in) or provided by operating activities; and
(iii) net cash (used in) or provided by investing activities.
Non-Mississippi Business: The business conducted by Company and its
Subsidiaries relating to the management, ownership, operation and development of
all Company's casinos, hotels, related facilities and all other operations
located outside the State of Mississippi which relates to the Non-Mississippi
Group Assets.
Non-Mississippi Group: Lakes and the Non-Mississippi Subsidiaries,
collectively.
Non-Mississippi Group Assets: (i) All outstanding capital stock of the
Non-Mississippi Subsidiaries; (ii) the Assigned Lakes Assets, to the extent in
existence on the Distribution Date; (iii) the Non-Mississippi Group Books and
Records; (iv) the rights of a Non-Mississippi Subsidiary insured under the
Shared Policies; (v) all of the assets expressly to be retained by, or assigned
or allocated to, Lakes or any of the Non-Mississippi Subsidiaries under this
Agreement or the Related Agreements; (vi) the Assigned Lakes Assets Proceeds;
and (vii) any other assets of Company and its Subsidiaries used principally in
the Non-Mississippi Business ; except, in each case excluding the assets
included on Schedule 3.
Non-Mississippi Group Books and Records: The books and records
(including computerized records) of Lakes and the Non-Mississippi Subsidiaries
and any other books and records of Company and its Subsidiaries which relate
principally to the Non-Mississippi Group, are necessary to conduct the
Non-Mississippi Business, or are required by law to be retained by Lakes or a
Non-Mississippi Subsidiary, including, without limitation: (i) all such books
and records relating to Transferred Employees; (ii) all files relating to any
Action being assumed by Lakes or retained by a Non-Mississippi Subsidiary as
part of the Non-Mississippi Group Liabilities; and (iii) original corporate
minute books, stock ledgers and certificates, and all licenses, leases,
agreements and filings, relating to Lakes, the Non-Mississippi Subsidiaries or
the Non-Mississippi Business (but not including the Mississippi Group Books and
Records, provided that Lakes shall have access to, and have the right to obtain
duplicate copies of, any of the Mississippi Group Books and Records which
pertain to the Non-Mississippi Business in accordance with the provisions of
Article VII).
Non-Mississippi Group Cash Accounts: The bank accounts of
Non-Mississippi Group as set forth in Schedule 9 hereto.
Non-Mississippi Group Liabilities: (i) All of the Liabilities of the
Non-Mississippi Group under, or to be retained or assumed by Lakes or any of the
Non-Mississippi Subsidiaries pursuant to, this Agreement (including Lakes'
portion of Contingent Company Liabilities and Transaction
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Liabilities as provided in Section 3.02 herein) or any of the Related Agreements
(including the Assumed Debt); (ii) the Stratosphere Liabilities; (iii) all
Liabilities of Lakes and the Non-Mississippi Subsidiaries, other than the
Mississippi Group Liabilities; (iv) all Actions against Company or its
Subsidiaries arising out of, or specifically associated with, any of the
Non-Mississippi Group Assets or the Non-Mississippi Business; (v) the Indian
Debt Guarantees; (vi) all other Liabilities of Company and its Subsidiaries
arising out of, or specifically associated with, any of the Non-Mississippi
Group Assets or the Non-Mississippi Business (including Debt secured by the
Non-Mississippi Group Assets); and (vii) the Assigned Lakes Liabilities
indicated on Schedule 6; provided, however, that the Non-Mississippi Group
Liabilities shall not include (x) any Retained Debt, or (y) any claims, losses,
damages, demands, costs, expenses or Liabilities for any Tax (which shall be
governed by Sections 6.05 and 9.02 hereof and by the Tax Allocation and
Indemnity Agreement).
Non-Mississippi Subsidiaries: The Subsidiaries of Company specified in
Schedule 2 and any other Subsidiaries formed after the date hereof to conduct a
portion of the Non-Mississippi Business.
Non-Mississippi Subsidiaries Note Guarantees: The guarantees of the
Non-Mississippi Subsidiaries of Company Notes and the Bank of America Revolving
Credit Facility.
Non-Mississippi Subsidiaries Note Pledge: The pledge of the outstanding
capital stock of the Non-Mississippi Subsidiaries pursuant to Grand Casinos,
Inc. Security and Pledge Agreement dated November 30, 1995 by Grand Casinos,
Inc. in favor of American Bank National Association (n/k/a Firstar Bank of
Minnesota, National Association) and Grand Casinos Resorts, Inc. Security and
Pledge Agreement dated November 30, 1995 by Grand Casinos Resorts, Inc. in favor
of American Bank National Association (n/k/a Firstar Bank of Minnesota, National
Association) relating to the Notes.
Person: Any individual, corporation, partnership, firm, joint venture,
association, joint-stock company, trust, estate, unincorporated organization,
governmental or regulatory body or other entity.
Policies: Insurance policies and insurance contracts of any kind
relating to the Non-Mississippi Business or the Mississippi Business as
conducted prior to the Distribution Date, including without limitation primary
and excess policies, comprehensive general liability policies, automobile,
aircraft, workers' compensation, property insurance, crime insurance policies
and self-insurance and captive insurance company arrangements, together with the
rights and benefits thereunder.
Preliminary Transfers: The contribution by Company and its Subsidiaries
to Lakes and the Non-Mississippi Subsidiaries, prior to the Distribution, of all
of the assets and liabilities of Company and its Subsidiaries comprising the
Non-Mississippi Business and such other assets, liabilities and operations as
are described herein.
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Privileged Information: All information as to which Company, Lakes or
any of their Subsidiaries are entitled to assert the protection of a Privilege.
Privileges: All privileges that may be asserted under applicable law
including, without limitation, privileges arising under or relating to the
attorney-client relationship (including but not limited to the attorney-client
and work product privileges), the accountant-client privilege, and privileges
relating to internal evaluative processes.
Related Agreements: All of the agreements, instruments, understandings,
assignments or other arrangements set forth in writing, which are entered into
in connection with the transactions contemplated hereby, including, without
limitation, the Conveyancing and Assumption Instruments and the Ancillary
Agreements.
Restricted Payment: (i) the declaration or payment of any dividend or
any distribution on account of Lakes' or any of its Subsidiaries' equity
interests; or (ii) the purchase, redemption, defeasance or other acquisition or
retirement for value of any equity interests of Lakes, without the written
consent of Company, which consent can be given or withheld in Company's sole and
absolute discretion.
Retained Company Assets: The assets indicated in Schedule 3.
Retained Company Liabilities: The liabilities indicated on Schedule 4.
Retained Debt: The Debt of Company and its Subsidiaries which is to be
retained by Company and/or the Mississippi Group Subsidiaries in connection with
the Distribution, as determined pursuant to Section 2.09 and not otherwise
assigned by or transferred to the Non-Mississippi Group.
Ruling Request: The private letter ruling request to be filed by
Company with the Internal Revenue Service as supplemented and amended from time
to time, with respect to certain tax matters relating to the Distribution, the
Merger and other related matters.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended.
Self Insurance Programs: Those self insured programs maintained by
Company and/or any of its Subsidiaries prior to the Distribution for the benefit
of employees, properties and operating businesses, including without limitation
such programs that utilize "fronted policies."
Senior Notes: The $115 million 9% Series B Notes of Company due 2004.
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Shared Policies: All Policies (including Self Insurance Programs),
current or past, which are owned or maintained by or on behalf of Company and/or
any of its Subsidiaries or their respective predecessors which insure both the
Mississippi Business and the Non-Mississippi Business.
Stratosphere: Shall mean Stratosphere Corporation and any of its
Subsidiaries or Affiliates, including Stratosphere Gaming Corp., and any
business or operations conducted by or related to such entities, including the
Stratosphere Tower, Casino & Hotel and adjoining retail-entertainment center.
Stratosphere Contracts: Shall mean any and all contracts, loan
agreements, leases, guaranty agreements, notes, mortgages, indentures,
obligations and other agreements relating to Stratosphere, including, without
limitation, (a) the Standby Equity Commitment, dated as of March 9, 1995, by and
between Company and Stratosphere, (b) the Limited Guaranty, dated as of March
28, 1997, by Company for the benefit of each of the beneficiaries listed
therein, (c) the Indemnification Agreement, dated as of May 1, 1997, by and
between Company and Xxxxxx X. Xxxx, (d) the Indemnification Agreement, dated as
of May 1, 1997, by and between Company and Xxxxxx X. Xxxxxx, (e) the
Indemnification Agreement, dated as of May 1, 1997, by and between Company and
Xxxxxx X. Xxxxx, (f) the Indemnification Agreement, dated as of May 1, 1997, by
and between Company and Xxxxx X. Xxxxxxxx, and (g) the indemnification
arrangement described in the Minutes of Company's Board of Directors, dated May
3, 1995, relating to the indemnification of Xxxx Xxxxxx, Xxxx Sell and Xxxxxxx
Xxxxx in connection with their service on the Stratosphere Board of Directors.
Stratosphere Liabilities: Shall mean any and all Liabilities relating
to or arising from Stratosphere, Company's investment in or relationship to
Stratosphere and/or the Stratosphere Litigation and/or the Stratosphere
Contracts.
Stratosphere Litigation: Shall mean any and all actions, suits,
proceedings, claims, arbitrations or investigations relating to Stratosphere,
including the Stratosphere shareholders litigation in the U.S. District Court
for the District of Nevada (In re Stratosphere Corporation Securities Litigation
-- Master File No. CV-5-96-00708PMP), Grand Casinos, Inc. shareholders
litigation in the U.S. District Court for the District of Minnesota (In Re:
Grand Casinos, Inc. Securities Litigation -- Master Filed No. 4-96-890), the
Stratosphere shareholders litigation in the Nevada State Court (Xxxxxx X. Xxxxx,
et. al. v. Xxxxxx X. Xxxxxx, et. al. -- Case No. A363019), the Xxxxx litigation
in the U.S. District Court for the District of Nevada (Xxxxx Xxxxx, et al. v.
Stratosphere Corporation, et. al.-- Case No. A349985), the Stratosphere vacation
club litigation in the District Court in Xxxxx County, Nevada (Xxxxxxx Xxxxxx,
et al. v. Xxx and Xxxx Xxx Xxxxxx, et al. -- Case No. A370127), the Standby
Equity Commitment litigation in the U.S. District Court for the District of
Nevada (IBJ Xxxxxxxxx Bank & Trust Company, Inc. v. Grand Casinos, Inc. -- File
No. CV-S-97-01252-DWH), the Stratosphere Noteholder Committee bankruptcy court
action in the U.S. Bankruptcy Court for the District of Nevada, Stratosphere
Plan of Reorganization in the U.S. Bankruptcy Court for the District of Nevada,
the Las Vegas Downtown Redevelopment Agency litigations in the Nevada Supreme
Court (City of Las Vegas
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Downtown Redevelopment Agency x. Xxxxxxxx, et al. and City of Las Vegas Downtown
Redevelopment Agency v. Mouldo, et. al.), a derivative litigation in Hennepin
County, Minnesota District Court (Xxxxx Drilling, et al. v. Xxxx Xxxxxx, et al.
--Court File No. MC97- 002807), and a Stratosphere action for Recovery of
Preferential Transfers Pursuant to Sections 547 and 550 of the Bankruptcy Court
filed with the Bankruptcy Court against Company, and including any actions,
suits, proceedings, claims, arbitrations or investigations relating to the
Litigation LLC described in Stratosphere Corporation's Restated Second Amended
Plan of Reorganization dated February 26, 1998.
Subsidiary: With respect to any Person, (i) each corporation,
partnership, joint venture, limited liability company or other legal entity of
which such Person owns, either directly or indirectly, 50% or more of the stock
or other equity interests the holders of which are generally entitled to vote
for the election of the board of directors or similar governing body of such
corporation, partnership, joint venture or other legal entity; and (ii) each
partnership or limited liability company in which such Person or another
Subsidiary of such Person is the general partner, managing partner or otherwise
controls.
"Tax" or "Taxes": Shall mean all actual taxes and estimated payment of
taxes, charges, fees, imposts, levies and gaming or other assessments, including
all income, gross receipts, capital, sales, use, ad valorem, value added,
transfer, franchise, profits, inventory, capital stock, license, withholding,
payroll, employment, social security, unemployment excise, severance, stamp,
occupation, property, premium, windfall profits, environmental, disability,
registration, alternative or add-on minimum taxes, custom duties, fees,
assessments and charges of any kind whatsoever, together with any interest and
any penalties, fines, additions to tax or additional amounts imposed by any
taxing authority (domestic or foreign), and including any transferee liability
in respect of Taxes and any liability in respect of Taxes imposed by contract,
tax sharing agreement, tax indemnity agreement or any similar agreement.
Tax Allocation and Indemnity Agreement: The Tax Allocation and
Indemnity Agreement between Company and Lakes pursuant to which such parties
will provide for the allocation of, and indemnification against, certain tax
liabilities, the preparation and filing of certain tax returns and the payment
of taxes related thereto and certain related matters, which agreement shall be
entered into on or prior to the Distribution Date substantially in the form
attached hereto as Exhibit E.
Tax Returns: The meaning specified in the Tax Allocation and Indemnity
Agreement.
Transaction Liabilities: All liabilities relating to any Action or
threatened Action arising out of or pertaining to the transaction contemplated
by the Merger Agreement or this Distribution Agreement.
Transferred Corporate Functions: The corporate level and support
functions of Company to be contributed to Lakes in connection with the
Distribution, as set forth in Schedule 7 hereto.
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Currently expected to include corporate treasury, accounting (including
payroll), internal audit, tax, corporate affairs, legal, human resources and
risk management functions (including claims administration), as well as certain
purchasing and procurement functions.
Transferred Employees: The meaning specified in the Employee Benefits
Allocation Agreement.
Section 1.02. Terms Defined Elsewhere in Agreement. Each of the
following terms is defined in the Recitals or Section set forth opposite such
term:
Term Section
---- -------
Agreement Recitals
Consents 4.01
Dispute 9.14
Company Indemnitees 5.02
Gaming Co. Recitals
Hilton Recitals
Indemnifiable Loss 5.01
Indemnifying Party 5.03
Indemnified Person 5.03
Information 7.02
Insurance Charges 8.03
Lakes Recitals
Lakes Indemnities 5.01
Merger Recitals
MergerSub Recitals
Third Party Claim 5.04
Transaction Taxes 6.05
ARTICLE II.
TRANSFER OF ASSETS
Section 2.01. Transfer of Assets to Lakes. Prior to the Distribution
Date, Company shall take or cause to be taken all actions necessary to cause the
transfer, assignment, delivery and conveyance to Lakes and/or the appropriate
Non-Mississippi Subsidiaries designated by Lakes of all of Company's and its
Subsidiaries' right, title and interest in any Non-Mississippi Group
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Assets held, on or prior to the Distribution Date, by Company or any Mississippi
Subsidiary including:
(a) a contribution to Lakes of all of the outstanding capital
stock of the Non-Mississippi Subsidiaries indicated on Schedule 2;
(b) subject to the provisions of Section 2.07, transfer of $33
million dollars of cash by Company or any Mississippi Subsidiary to Lakes in
order to provide necessary and needed levels of working capital and appropriate
reserve for business investment purposes; provided, however, that;
(i) such amount will be decreased by any amount paid
by the Company prior to the Distribution Date in connection with
Stratosphere up to a maximum of $8 million, and
(ii) such amount shall be increased by the Assigned
Lakes Assets Proceeds.
(c) transfer of the Assigned Lakes Assets, as indicated on
Schedule 5, which have not been sold prior to the Distribution Date; and
(d) transfer of the Transferred Corporate Functions as
indicated on Schedule 7;
Section 2.02. Transfers of Assets from Non-Mississippi Subsidiaries to
Company or Mississippi Subsidiaries. Prior to the Distribution Date, Lakes shall
take or cause to be taken all actions necessary to cause the transfer,
assignment, delivery and conveyance to Company and/or the applicable Mississippi
Subsidiaries designated by Company of all of Lakes's and the Non-Mississippi
Subsidiaries' right, title and interest in any Mississippi Group Assets held, on
or prior to the Distribution Date, by Lakes or any of the Non-Mississippi
Subsidiaries, if any.
Section 2.03. Transfers Not Effected Prior to the Distribution. To the
extent that any transfers contemplated by this Article II shall not have been
fully effected as of the Distribution Date, the parties shall cooperate to
effect such transfers as promptly as shall be practicable following the
Distribution Date. Nothing herein shall be deemed to require the transfer of any
assets or the assumption of any Liabilities which by their terms or operation of
law cannot be transferred or assumed including, without limitation, pursuant to
Gaming Laws; provided, however, that Company and Lakes and their respective
Subsidiaries and Affiliates shall cooperate in seeking to obtain any necessary
consents or approvals for the transfer of all assets and Liabilities
contemplated to be transferred pursuant to this Agreement including, without
limitation, pursuant to Gaming Laws.
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In the event that any such transfer of assets or Liabilities has not
been consummated effective as of the Distribution Date, the party retaining such
asset or Liability shall thereafter hold such asset in trust for the use and
benefit of the party entitled thereto (at the expense of the party entitled
thereto) and retain such Liability for the account of the party by whom such
Liability is to be assumed pursuant hereto, and take such other actions as may
be reasonably required in order to place the parties, insofar as reasonably
possible, in the same position as would have existed had such asset been
transferred or such Liability been assumed as contemplated hereby. As and when
any such asset or Liability becomes transferable, such transfer and assumption
shall be effected forthwith. The parties agree that, except as set forth in this
Section 2.03, as of the Distribution Date, each party hereto shall be deemed to
have acquired complete and sole beneficial ownership over all of the assets,
together with all rights, powers and privileges incidental thereto, and shall be
deemed to have assumed in accordance with the terms of this Agreement all of the
Liabilities, and all duties, obligations and responsibilities incidental
thereto, which such party is entitled to acquire or required to assume pursuant
to the terms of this Agreement.
Section 2.04. Cooperation Re: Assets. In the case that at any time
after the Distribution Date, Lakes reasonably determines that any of the
Mississippi Group Assets (other than the assets set forth in Schedule 3) are
essential for the conduct of the Non-Mississippi Business, or Company reasonably
determines that any of the Non-Mississippi Group Assets (other than the assets
set forth in Schedule 5) are essential for the conduct of the Mississippi
Business, and the nature of such assets makes it impracticable for Lakes or
Company, as the case may be, to obtain substitute assets or to make alternative
arrangements on commercially reasonable terms to conduct their respective
businesses, and reasonable provisions for the use thereof are not already
included in the Related Agreements, then Lakes (with respect to the
Non-Mississippi Group Assets) and Company (with respect to the Mississippi Group
Assets) shall cooperate to make such assets available to the other party on
commercially reasonable terms, as may be reasonably required for such party to
maintain normal business operations. However, (a) the usage of such assets by
the other party shall not materially interfere with the use of such assets by
the party holding such assets; and (b) such assets shall be required to be made
available only until such time as the other party can reasonably obtain
substitute assets or make alternative arrangements on commercially reasonable
terms to permit it to maintain normal business operations.
Section 2.05. No Representations or Warranties; Consents. Each of the
parties hereto understands and agrees that no party hereto is, in this
Agreement, in any Related Agreement, or otherwise, representing or warranting in
any way (a) as to the value or freedom from encumbrance of, or any other matter
concerning, any assets of such party; or (b) as to the legal sufficiency to
convey title to any asset transferred pursuant to this Agreement or any Related
Agreement. IT IS ALSO AGREED AND UNDERSTOOD THAT THERE ARE NO WARRANTIES,
EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY OR FITNESS OF ANY OF THE ASSETS
EITHER TRANSFERRED TO OR RETAINED BY THE PARTIES, AS THE CASE MAY BE, AND ALL
SUCH ASSETS SHALL BE "AS IS, WHERE IS" AND "WITH ALL FAULTS"; provided, however,
that the absence of warranties shall have no effect upon the allocation of
Liabilities under this Agreement.
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Each party hereto understands and agrees that no party hereto is, in
this Agreement, in any Related Agreement or otherwise, representing or
warranting in any way that the obtaining of any consents or approvals, the
execution and delivery of any amendatory agreements and the making of any
filings or applications contemplated by this Agreement, any Related Agreement or
otherwise will satisfy the provisions of any or all applicable laws or judgments
or other instruments or agreements relating to such assets, including without
limitation, the Gaming Laws. Notwithstanding the foregoing, the parties shall
use their good faith efforts to obtain all consents and approvals, including,
without limitation, pursuant to the Gaming Laws, to enter into all reasonable
amendatory agreements and to make all filings and applications which may be
reasonably required for the consummation of the transactions contemplated by
this Agreement and the Related Agreements, and shall take all such further
reasonable actions as shall be necessary to preserve for each of the
Non-Mississippi Group and the Mississippi Group, to the greatest extent
feasible, the economic and operational benefits of the allocation of assets and
liabilities provided for in this Agreement. In case at any time after the
Distribution Date any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of each party to
this Agreement shall take all such necessary or desirable action.
Section 2.06. Conveyancing and Assumption Instruments. In connection
with the Preliminary Transfers described in Article II and Article III hereof,
and the assignment of assets and the assumption of Liabilities contemplated by
any Related Agreements, the parties shall execute, or cause to be executed by
the appropriate entities, the Conveyancing and Assumption Instruments in such
forms as the parties shall reasonably agree. The transfer of capital stock and
other equity interests shall be effected by means of delivery of stock
certificates and executed stock powers and notation on the stock record books of
the corporation or other legal entity involved and, to the extent required by
applicable law, by notation on public registries.
Section 2.07. Cash Allocations After the Year-End. Notwithstanding
anything to the contrary herein, (i) Net Cash generated after December 31, 1998
from operations of the Mississippi Business (regardless of whether the
Distribution has occurred) shall be retained by Company; (ii) Net Cash generated
after December 31, 1998 from operations of the Non-Mississippi Business
(regardless of whether the Distribution has occurred) shall be retained by
Lakes; and (iii) the allocations of cash set forth in Section 2.08 (a) shall be
made as of December 31, 1998.
Section 2.08. Cash Allocation; Cash Management.
(a) Cash Allocation on the Distribution Date. Subject to the
provisions of Section 2.01(b) hereof, the allocation between Company and Lakes
of all cash bank balances, short-term investments and outstanding checks and
drafts of Company and its Subsidiaries recorded per the books of Company and its
Subsidiaries shall be in accordance with the following:
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(i) all deposits of cash, checks, drafts or
short-term investments made to accounts, other than the Non-Mississippi Group
Cash Accounts, after the close of business on the Distribution Date shall be
remitted to Company; provided, however, that any such deposits that are
erroneously made to such accounts shall be redeposited to the correct accounts
as promptly as possible;
(ii) all deposits of cash, checks, drafts or
short-term investments made to the Non-Mississippi Group Cash Accounts after the
close of business on the Distribution Date shall be remitted to Lakes and/or the
appropriate Non-Mississippi Subsidiary; provided, however, that any such
deposits that are erroneously made to such accounts shall be redeposited to the
correct accounts as promptly as possible;
(iii) all cash, other than cash allocated pursuant to
Sections 2.01(b), 2.07, 2.08(i) and 2.08(ii), shall be retained by or remitted
to Company and/or the appropriate Mississippi Subsidiaries.
(b) Cash Management After the Distribution Date. All xxxxx
cash, depository and disbursement accounts of Company (other than the
Non-Mississippi Group Cash Accounts) shall be retained by Company. The
Non-Mississippi Group Cash Accounts shall be transferred to Lakes, and Lakes
shall establish and maintain a separate cash management system and separate
accounting records with respect to the Non-Mississippi Group Business effective
as of 12:01 a.m. Minneapolis time on the day following the Distribution Date.
(c) Ordinary Course Operations. The parties contemplate and
agree that the Non-Mississippi Business and the Mississippi Business, including,
but not limited to, the administration, payment and collection of accounts
payable and accounts receivable, will be conducted in the ordinary course of
business and consistent with past practice prior the Distribution Date.
Section 2.09. Allocation of Debt. Debt will be allocated as follows:
(a) Debt secured by Mississippi Group Assets, or otherwise
specifically associated with the Mississippi Business, will be retained by
Company and/or the appropriate Mississippi Subsidiaries. As of the date of this
Agreement, such Debt consists of the First Mortgage Notes.
(b) The Senior Notes will be retained by Company and/or the
appropriate Mississippi Subsidiary.
(c) Debt relating to the Bank of America Revolving Credit
Facility will be retained by Company and/or the appropriate Mississippi
Subsidiary.
(d) Any other of Company's unsecured Debt will be Retained
Debt.
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(e) Debt secured by any Non-Mississippi Group Assets will be
assumed by Lakes and/or the appropriate Non-Mississippi Subsidiaries.
(f) Notwithstanding anything to the contrary herein, (i)
increases (decreases) in Debt incurred (repaid) after December 31, 1998 arising
out of operations of the Mississippi Business (regardless of whether the
Distribution has occurred) shall be allocated to Company and (ii) increases
(decreases) in Debt incurred (repaid) after December 31, 1998 arising out of
operations of the Non-Mississippi Business (regardless of whether the
Distribution has occurred) shall be allocated to Lakes; and, to the extent such
increases (decreases) are not already given effect in the definition of Net
Cash, such increases (decreases) shall increase or decrease (as applicable) the
Debt allocated to Company or Lakes (as applicable).
Section 2.10. Ancillary Agreements Between Company and Lakes. On or
prior to the Distribution Date, Company and Lakes shall enter into the Ancillary
Agreements.
ARTICLE III.
ASSUMPTION AND SATISFACTION OF LIABILITIES
Section 3.01. Assumption and Satisfaction of Mississippi Business and
Non-Mississippi Business Liabilities. From and after the Distribution Date, (a)
Lakes shall, and/or shall cause the Non-Mississippi Subsidiaries to, assume,
pay, perform and discharge in due course all of the Non-Mississippi Group
Liabilities (including the Indian Guarantees and the Stratosphere Liabilities);
and; (b) Company shall, and/or shall cause the Mississippi Subsidiaries to,
assume, pay, perform and discharge in due course all of the Mississippi Group
Liabilities (including the Non-Mississippi Subsidiaries Note Guarantees).
Section 3.02 Assumption and Satisfaction of Contingent Company
Liabilities and Transaction Liabilities. From and after the Distribution Date,
to the extent that there is a Company liability occurring prior to the
Distribution Date that is neither a Mississippi Group Liability nor a
Non-Mississippi Group Liability and cannot in good faith be allocated by the
parties hereto as either a Mississippi Group Liability or a Non-Mississippi
Group Liability, including, but not limited to the Liabilities set forth on
Schedule 10 attached hereto (all such Liabilities "Contingent Company
Liabilities"), then (i) such Contingent Company Liabilities and (ii) all
Transaction Liabilities shall be allocated between Company and Lakes on a pro
rata basis as provided in Section 3.1(c)(1) of the Merger Agreement and shall be
assumed, paid, performed and discharged by each such party based upon such
allocation.
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ARTICLE IV.
THE DISTRIBUTION
Section 4.01. Cooperation Prior to the Distribution.
(a) Lakes and Company shall cooperate in preparing, filing
with the SEC and causing to become effective any registration statements or
amendments thereof which are appropriate to reflect the establishment of, or
amendments to, any employee benefit plans, and other plans contemplated by the
Employee Benefits Allocation Agreement.
(b) Lakes and Company shall take all such action as may be
necessary or appropriate under the securities or blue sky laws of states or
other political subdivisions of the United States in connection with the
transactions contemplated by this Agreement and the Related Agreements.
(c) Lakes and Company shall use all reasonable best efforts to
obtain any governmental or third-party consents or approvals necessary or
desirable in connection with the transactions contemplated hereby, including,
without limitation, pursuant to the Gaming Laws ("Consents").
(d) Lakes and Company will use all reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary or desirable under applicable law, to consummate the
transactions contemplated under this Agreement and the Related Agreements
including, but not limited to, actions relating to the satisfaction of the
conditions indicated in Section 4.02 hereof.
Section 4.02. Company Board Action; Conditions Precedent to the
Distribution. Company Board shall, in its sole discretion, establish the Record
Date and the Distribution Date and any appropriate procedures in connection with
the Distribution. In no event shall the Distribution occur unless the following
conditions shall have been satisfied:
(a) the transactions contemplated in Article II and
Article III shall have been consummated in all material respects;
(b) the Lakes Board, comprised as contemplated by Section
6.01, shall have been elected by Company, as sole shareholder of Lakes, and the
Lakes Articles and Lakes Bylaws shall have been adopted and shall be in effect;
(c) Company shall have received shareholder ratification of
the Distribution at a meeting of shareholders.
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(d) the Merger Agreement shall be in full force and effect and
no material breach shall exist thereunder;
(e) each condition to the consummation of the Merger, other
than the condition set forth in Section 8.1(g) of the Merger Agreement relating
to the consummation of the Distribution, shall have been fulfilled or waived by
the party for whose benefit such condition exists;
(f) with respect to the Louisiana Gaming License:
(i) the Louisiana Gaming License is transferred to
Lakes or a Non-Mississippi Subsidiary;
(ii) the Non-Mississippi Subsidiaries are licensed
pursuant to Louisiana Gaming Laws; or
(iii) Lakes is licensed pursuant to Louisiana Gaming
Laws.
(g) the IRS Ruling shall have been granted in form and
substance satisfactory to Company Board, the IRS Ruling shall not have been
withdrawn by the IRS and the representations made to the IRS therein shall be
true in all material respects;
(h) the Form 10 shall have been declared effective by the SEC;
(i) the Lakes Common Stock shall have been approved for
trading on the NASDAQ National Market (or such other securities exchange
comprising the principal securities exchange or market on which the Lakes Common
Stock is listed or traded), subject to official notice of issuance;
(j) each of Lakes and Company shall have executed and
delivered the Related Agreements to which it is a party and each of the
transactions contemplated by the Related Agreements to be consummated on or
prior to the Distribution Date shall have been consummated;
(k) all necessary regulatory approvals and consents of third
parties shall have been received, including, without limitation, pursuant to the
Gaming Laws, except for any such approvals or consents the failure of which to
obtain would not have a material adverse effect on the business, operations or
condition (financial or otherwise) of either Company or Lakes;
(l) the Board of Directors of Company shall be satisfied that
(i) at the time of the Distribution and after giving effect to the Distribution
and the transactions contemplated under the Related Agreements, Company will not
be insolvent (in that, both before and immediately following the Distribution,
(1) the fair market value of Company's assets would
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exceed Company's liabilities, (2) Company would be able to pay its liabilities
as they mature and become absolute and (3) Company would not have unreasonably
small capital with which to engage in its business); and (ii) the Distribution
would be permitted under the MBCA; and at the Board of Directors' discretion,
Company shall have received the opinion of a financial advisor or other
appraisal or valuation expert selected by Company, in form and substance
satisfactory to Company, as to the matters set forth in clauses (1) through (3)
above, and such opinion shall not have been withdrawn;
provided, however, that (x) any such condition may be waived by Company Board in
its sole discretion, and (y) the satisfaction of such conditions shall not
create any obligation on the part of Company or any other party hereto to effect
the Distribution or in any way limit Company's power of termination set forth in
Section 9.08 or alter the consequences of any such termination from those
specified in such Section.
Section 4.03. The Distribution. On the Distribution Date, or as soon
thereafter as practicable, subject to the conditions and rights of termination
set forth in this Agreement, Company shall deliver to the Agent, for the benefit
of the Holders, a share certificate representing all of the then outstanding
shares of Lakes Common Stock owned by Company, endorsed in blank, and shall
instruct the Agent to distribute to each Holder, on or as soon as practicable
following the Distribution Date, a certification, or if requested by such
Holder, a certificate, representing one share of Lakes Common Stock for each
share of Company Common Stock so held, or such number of shares that may be
issued pursuant to a stock split, stock or dividend, of the Lakes Common Stock
prior to, or simultaneously with, the Distribution Date. Lakes agrees to provide
all share certificates that the Agent shall require in order to effect the
Distribution.
ARTICLE V.
INDEMNIFICATION
Section 5.01. Indemnification by Company. Company shall indemnify,
defend and hold harmless Lakes and each of the Non-Mississippi Subsidiaries, and
each of their respective past or present directors, officers, employees, agents
and Affiliates and each of the heirs, executors, successors and assigns of any
of the foregoing (the "Lakes Indemnitees") from and against any and all losses,
Liabilities, damages and expenses (including, without limitation, the reasonable
costs and expenses, including reasonable attorneys' fees in connection with any
such investigations, Actions, or threatened Actions) (collectively,
"Indemnifiable Losses" and, individually, an "Indemnifiable Loss") incurred or
suffered by any of the Lakes Indemnitees and arising out of or due to the
failure or alleged failure of Company, any Mississippi Subsidiary, or any of
their respective Affiliates to (a) pay, perform or otherwise discharge in due
course any of the Mississippi Group Liabilities, or (b) comply with the
provisions of Section 6.04 hereof.
Section 5.02. Indemnification by Lakes. Lakes shall indemnify, defend
and hold harmless Company and each of the Mississippi Subsidiaries, and each of
their respective past or
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present directors, officers, employees, agents and Affiliates and each of the
heirs, executors, successors and assigns of any of the foregoing (the "Company
Indemnitees") from and against any and all Indemnifiable Losses incurred or
suffered by any of Company Indemnitees and arising out of or due to the failure
or alleged failure of Lakes, any Non-Mississippi Subsidiaries, or any of their
respective Affiliates to (a) pay, perform or otherwise discharge in due course
any of the Non-Mississippi Group Liabilities; or (b) comply with the provisions
of Section 6.04 hereof.
Section 5.03. Insurance Proceeds. The amount which any party (an
"Indemnifying Party") is or may be required to pay to any other Person (an
"Indemnified Person") pursuant to Section 5.01 or Section 5.02 shall be reduced
(including, without limitation, retroactively) by any Insurance Proceeds or
other amounts actually recovered by or on behalf of such Indemnified Person in
reduction of the related Indemnifiable Loss. If an Indemnified Person shall have
received the payment required by this Agreement from an Indemnifying Party in
respect of an Indemnifiable Loss and shall subsequently actually receive
Insurance Proceeds, or other amounts in respect of such Indemnifiable Loss as
specified above, then such Indemnified Person shall pay to such Indemnifying
Party a sum equal to the amount of such Insurance Proceeds or other amounts
actually received.
Section 5.04. Procedure for Indemnification.
(a) If an Indemnified Person shall receive written notice of
the assertion by a Person (including, without limitation, any Governmental
Authority) who is not a party to this Agreement or to any of the Related
Agreements of any claim or of the commencement by any such Person of any Action
with respect to which an Indemnifying Party may be obligated to provide
indemnification pursuant to this Agreement (a "Third-Party Claim"), such
Indemnified Person shall give the Indemnifying Party written notice thereof
promptly after becoming aware of such Third-Party Claim; provided, that the
failure of any Indemnified Person to give notice as required by this Section
5.04 shall not relieve the Indemnifying Party of its obligations under this
Article V, except to the extent that such Indemnifying Party is materially
prejudiced by such failure to give notice. Such notice shall describe the
Third-Party Claim in reasonable detail, and shall indicate the amount (estimated
if necessary) of the Indemnifiable Loss that has been claimed against or may be
sustained by such Indemnified Person.
(b) Within 15 days of the receipt of notice from an
Indemnified Person in accordance with Section 5.04(a) (or sooner, if the nature
of such Third-Party Claim so requires), the Indemnifying Party shall notify the
Indemnified Person of its election whether to assume responsibility for such
Third-Party Claim (provided that if the Indemnifying Party does not so notify
the Indemnified Person of its election within 15 days after receipt of such
notice from the Indemnified Person, the Indemnifying Party shall be deemed to
have elected not to assume responsibility for such Third-Party Claim). An
election not to assume responsibility for such Third-Party Claim may only be
made in the event of a good faith dispute that a Third-Party Claim is not
covered as an Indemnifiable Loss under the grounds specified in Section 5.01 or
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5.02, as the case may be. Subject to Section 5.04(e) hereof, an Indemnifying
Party may elect to defend or to seek to settle or compromise, at such
Indemnifying Party's own expense and by counsel reasonably satisfactory to the
Indemnified Person, any Third-Party Claim, provided that (i) the Indemnifying
Party must confirm in writing that it agrees that the Indemnified Person is
entitled to indemnification hereunder in respect of such Third-Party Claim; and
(ii) no compromise or settlement shall be made without the prior written consent
of the Indemnified Person, which consent shall not be reasonably withheld.
(c) In the event that the Indemnifying Party elects to assume
responsibility for the Third-Party Claim, pursuant to Section 5.04(b) above, (i)
the Indemnified Person shall cooperate in the defense or settlement or
compromise of such Third-Party Claim, including making available to the
Indemnifying Party any personnel and any books, records or other documents
within the Indemnified Person's control or which it otherwise has the ability to
make available that are necessary or appropriate for the defense of the
Third-Party Claim; (ii) the Indemnifying Party shall keep the Indemnified Person
reasonably informed regarding the strategy, status and progress of the defense
of the Third-Party claim; and (iii) the Indemnifying Party shall consider, in
good faith, the opinions and suggestions of the Indemnified Person with respect
to the Third-Party Claim.
After notice from an Indemnifying Party to an Indemnified
Person of its election to assume responsibility for a Third-Party Claim, such
Indemnifying Party shall not be liable to such Indemnified Person under this
Article V for any legal or other costs or expenses (except costs or expenses
approved in advance by the Indemnifying Party) subsequently incurred by such
Indemnified Person in connection with the defense thereof; provided, that if the
defendants in any such claim include both the Indemnifying Party and one or more
Indemnified Persons and in such Indemnified Persons' reasonable judgment a
conflict of interest between such Indemnified Persons and such Indemnifying
Party exists in respect of such claim, such Indemnified Persons shall have the
right to employ separate counsel and in that event the reasonable fees and
expenses of such separate counsel (but not more than one separate counsel
reasonably satisfactory to the Indemnifying Party) shall be paid by such
Indemnifying Party.
(d) If an Indemnifying Party elects not to assume
responsibility for a Third-Party Claim the Indemnified Person may defend or
(subject to the following sentence) seek to compromise or settle such
Third-Party Claim. Notwithstanding the foregoing, an Indemnified Person may not
settle or compromise any claim without prior written notice to the Indemnifying
Party, which shall have the option within ten days following the receipt of such
notice (i) to disapprove the settlement, and to then assume all past and future
responsibility for the claim, including immediately reimbursing the Indemnified
Person for prior expenditures in connection with the claim; (ii) to disapprove
the settlement and continue to refrain from participation in the defense of the
claim, in which event the Indemnified Person may, in its sole discretion,
proceed with the settlement and the Indemnifying Party shall have no further
right to contest the amount or reasonableness of the settlement; (iii) to
approve and pay the amount of the settlement, reserving the Indemnifying Party's
right to contest the Indemnified Person's right to indemnity;
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or (iv) to approve and pay the settlement. In the event the Indemnifying Party
makes no response to such written notice, the Indemnifying Party shall be deemed
to have elected option (ii). When the Indemnifying Party chooses or is deemed to
have chosen option (ii) or (iii), the issue of whether the Indemnified Person
has a right to indemnity under this Article V shall be resolved by arbitration
pursuant to the provisions of Section 9.14 hereof. If the Indemnifying Party
does not prevail at such arbitration, the Indemnifying Party shall promptly
reimburse the Indemnified Person for all Indemnifiable Losses, plus interest on
such amounts at the lower of (i) 10% or (ii) the highest legal interest rate,
accruing from the date of payment by the Indemnified Person.
(e) Notwithstanding the foregoing, if an Indemnified Person
reasonably and in good faith determines that (i) the Indemnifying Party is not
financially capable to defend a Third-Party Claim and to provide full
indemnification with respect to any settlement thereof or (ii) the Indemnifying
Party or such Indemnifying Party's attorney is not adequately representing the
Indemnified Person's interests with respect to such Third-Party Claim, the
Indemnified Person may, by notice to the Indemnifying Party, assume the
exclusive right to defend, compromise or settle such Third-Party Claim and the
Indemnifying Party shall remain responsible for, and be bound by the resolution
of, such Third-Party Claim.
(f) Any claim on account of an Indemnifiable Loss which does
not result from a Third-Party Claim shall be asserted by written notice given by
the Indemnified Person to the applicable Indemnifying Party. Such Indemnifying
Party shall have a period of 15 days after the receipt of such notice within
which to respond thereto. If such Indemnifying Party does not respond within
such 15-day period, such Indemnifying Party shall be deemed to have refused to
accept responsibility to make payment. If such Indemnifying Party does not
respond within such 15-day period or rejects such claim in whole or in part,
such Indemnified Person shall be free to pursue such remedies as may be
available to such party under applicable law or under this Agreement.
(g) In addition to any adjustments required pursuant to
Section 5.03, if the amount of any Indemnifiable Loss shall, at any time
subsequent to the payment required by this Agreement, be reduced by recovery,
settlement or otherwise, the amount of such reduction, less any expenses
incurred in connection therewith, shall promptly be repaid by the Indemnified
Person to the Indemnifying Party.
(h) In the event of payment by an Indemnifying Party to any
Indemnified Person in connection with any Third-Party Claim, such Indemnifying
Party shall be subrogated to and shall stand in the place of such Indemnified
Person as to any events or circumstances in respect of which such Indemnified
Person may have any right or claim relating to such Third-Party Claim against
any claimant or plaintiff asserting such Third-Party Claim or against any other
party that may be liable. Such Indemnified Person shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or claim.
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(i) For so long as Surviving Corporation (as defined in the
Merger Agreement) is required to provide indemnification to any of the
Indemnified Persons (as defined in the Merger Agreement), Lakes shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, make any
Restricted Payment. If Lakes is unable, within 15 days of request, to repay in
full any claim made for indemnification by Company or any of its Affiliates
pursuant to this Agreement or the Merger Agreement, then for so long as any such
claim or any other claim for indemnification made by Company or any of its
Affiliates remains unpaid, Lakes shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guaranty
or otherwise become directly or indirectly liable with respect to any
indebtedness.
(j) Prior to the Distribution Date, Company and Lakes shall
enter into a Collateral Trust Agreement and a Pledge and Security Agreement.
Company is hereby entitled to all the rights and benefits under those agreements
in order to secure Lakes' indemnification obligations under this Agreement, the
Related Agreements and the Merger Agreement.
Section 5.05. Remedies Cumulative. The remedies provided in this
Article V shall be cumulative and shall not preclude assertion by any
Indemnified Person of any other rights or the seeking of any and all other
remedies against any Indemnifying Party.
Section 5.06. Survival of Indemnities. The obligations of each of Lakes
and Company under this Article V shall survive the sale or other transfer by it
of any assets or businesses or the assignment by it of any Liabilities, with
respect to any Indemnifiable Loss of the other related to such assets,
businesses or Liabilities.
ARTICLE VI.
CERTAIN ADDITIONAL MATTERS
Section 6.01. Lakes Board. Lakes and Company shall take all actions
which may be required to appoint as officers and directors of Lakes those
persons named in the Form 10 (as may be altered or supplemented prior to the
date hereof by Company Board and the Lakes Board) to constitute, effective as of
the Distribution Date, the officers and the directors of Lakes.
Section 6.02. Resignations; Company Board. Lakes shall cause all of its
directors and the Transferred Employees to resign, effective as of the
Distribution Date, from all boards of directors or similar governing bodies of
Company or any of the Mississippi Subsidiaries on which they serve, and from all
positions as officers or employees of Company or any of the Mississippi
Subsidiaries in which they serve. Company shall cause all of its directors and
the Mississippi Group Employees to resign from all boards of directors or
similar governing bodies of Lakes or any of the Non-Mississippi Subsidiaries on
which they serve, and from all positions as officers or employees of Lakes or
any of the Non-Mississippi Subsidiaries in which they serve.
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Section 6.03. Lakes Certificate and Bylaws. On or prior to the
Distribution Date, Lakes shall adopt the Lakes Articles and the Lakes Bylaws,
and shall file the Lakes Articles with the Secretary of State of the State of
Minnesota. Company shall provide all necessary shareholder approvals for the
Lakes Articles prior to the filing of the Lakes Articles with the Secretary of
State of the State of Minnesota.
Section 6.04. Certain Post-Distribution Transactions. Each of Company
and Lakes shall, and shall cause each of their respective Subsidiaries to,
comply in all material respects with each representation, covenant and statement
made, or to be made, to any taxing authority in connection with the IRS Ruling
or any other ruling obtained, or to be obtained, by Company and Lakes acting
together, from any such taxing authority with respect to any transaction
contemplated by this Agreement.
Section 6.05. Sales and Transfer Taxes. Company and Lakes agree to
cooperate to determine the amount of sales, transfer or other Taxes (including,
without limitation, all real estate, patent, trademark and transfer taxes and
recording fees, but excluding any Income Taxes, as defined in the Tax Allocation
and Indemnity Agreement) incurred in connection with the Distribution and other
transactions contemplated by the Agreement (the "Transaction Taxes"). Company
agrees to file promptly and timely the Tax Returns for such Transaction Taxes
and Lakes will join in the execution of any such Tax Returns or other
documentation. Financial responsibility for payment of all such Transaction
Taxes shall be allocated between Company and Lakes on a pro rata basis as
provided in Section 3.1(c)(1) of the Merger Agreement.
Section 6.06. Settlement of Intercompany Accounts. All accounts between
the Company and the Non-Mississippi Subsidiaries and accounts between
Mississippi Subsidiaries and the Non-Mississippi Subsidiaries shall be paid in
full and settled prior to the Distribution Date, provided, however, that nothing
contained in this Section 6.06 shall affect the (i) transfer of assets pursuant
to Article II; (ii) the assumption and satisfaction of Liabilities pursuant to
Article III; or (iii) the indemnification provisions related to the parties
pursuant to this Agreement and the Merger Agreement.
ARTICLE VII.
ACCESS TO INFORMATION AND SERVICES
Section 7.01. Provision of Corporate Records.
(a) Except as may otherwise be provided in a Related
Agreement, Company shall arrange as soon as practicable following the
Distribution Date, to the extent not previously delivered in connection with the
transactions contemplated in Article II, for the transportation (at Lake's cost)
to Lakes of the Non-Mississippi Group Books and Records in its possession,
except to the extent such items are already in the possession of Lakes or a
Non-Mississippi Subsidiary. The Non-Mississippi Group Books and Records shall be
the property of Lakes, but the Xxx-
00
00
Mississippi Group Books and Records that reasonably relate to Company or the
Mississippi Business shall be available to Company for review and duplication
until Company shall notify Lakes in writing that such records are no longer of
use to Company.
(b) Except as may otherwise be provided in a Related
Agreement, Lakes shall arrange as soon as practicable following the Distribution
Date, to the extent not previously delivered in connection with the transactions
contemplated in Article II, for the transportation (at Company's cost) to
Company of the Mississippi Group Books and Records in its possession, except to
the extent such items are already in the possession of Company or a Mississippi
Subsidiary. The Mississippi Group Books and Records shall be the property of
Company, but the Mississippi Group Books and Records that reasonably relate to
Lakes or the Non-Mississippi Business shall be available to Lakes for review and
duplication until Lakes shall notify Company in writing that such records are no
longer of use to Lakes.
Section 7.02. Access to Information. Except as otherwise provided in a
Related Agreement, from and after the Distribution Date, Company shall afford to
Lakes and its authorized accountants, counsel and other designated
representatives reasonable access (including using reasonable efforts to give
access to persons or firms possessing information) and duplicating rights during
normal business hours to all records, books, contracts, instruments, computer
data and other data and information relating to pre-Distribution operations
(collectively, "Information") within Company's possession or control, insofar as
such access is reasonably required by Lakes for the conduct of its business,
subject to appropriate restrictions for classified or Privileged Information.
Similarly, except as otherwise provided in a Related Agreement, Lakes
shall afford to Company and its authorized accountants, counsel and other
designated representatives reasonable access (including using reasonable efforts
to give access to persons or firms possessing information) and duplicating
rights during normal business hours to Information within Lakes's possession or
control, insofar as such access is reasonably required by Company for the
conduct of its business, subject to appropriate restrictions for classified or
Privileged Information. Information may be requested under this Article VII for
the legitimate business purposes of either party, including without limitation,
audit, accounting, claims (including claims for indemnification hereunder),
litigation and tax purposes, as well as for purposes of fulfilling disclosure
and reporting obligations and for performing this Agreement and the transactions
contemplated hereby.
Section 7.03. Production of Witnesses. At all times from and after the
Distribution Date, each of Lakes and Company shall use reasonable efforts to
make available to the other, upon written request, its and its Subsidiaries'
present and past officers, directors, employees and agents as witnesses to the
extent that such persons may reasonably be required in connection with any
Action.
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Section 7.04. Corporate Services. The parties hereto shall enter into a
corporate services agreement to the extent Lakes requires corporate services to
be provided to it following the Distribution Date. The services shall be
provided for up to one year following the Distribution Date at a fee equal to
the fair value for such services. The corporate services agreement shall be
negotiated on an arms-length basis. The final cost, types and scope of services
to be provided shall be subject to the approval of Company, such approval not to
be unreasonably withheld.
Section 7.05. Reimbursement. Except to the extent otherwise
contemplated in any Related Agreement, a party providing Information or
witnesses to the other party under this Article VII shall be entitled to receive
from the recipient, upon the presentation of invoices therefor, payments of such
amounts, relating to supplies, disbursements and other out-of-pocket expenses
(at cost) of employees who are witnesses or otherwise furnish assistance (at
cost), as may be reasonably incurred in providing such Information or witnesses.
Notwithstanding the foregoing, the parties acknowledge that a party providing
Information or witnesses shall not be entitled to receive reimbursement of
salary or other compensation expenses relating to any employees providing such
Information or acting as such witnesses.
Section 7.06. Retention of Records. Except as otherwise required by law
or agreed to in a Related Agreement or otherwise in writing, each of Lakes and
Company may destroy or otherwise dispose of any of the Information which is
material Information and is not contained in other Information retained by the
other, only after the later to occur of (a) all applicable statutes of
limitations (including any waivers or extensions thereof) with respect to Tax
Returns which Company or Lakes, as the case may be, may be obligated to file on
behalf of any member of the Lakes Group or any member of Company Group, as the
case may be; and (b) any retention period required by law or pursuant to any
record retention agreement, provided, however, that prior to such destruction or
disposal, (x) it shall provide no less than 90 or more than 120 days advance
written notice to the other, specifying in reasonable detail the Information
proposed to be destroyed or disposed of and (y) if a recipient of such notice
shall request in writing prior to the scheduled date for such destruction or
disposal that any of the Information proposed to be destroyed or disposed of be
delivered to such requesting party, the party proposing the destruction or
disposal shall promptly arrange for the delivery of such of the Information as
was requested at the expense of the party requesting such Information.
Section 7.07. Confidentiality. Each of Company and its Subsidiaries on
the one hand, and Lakes and its Subsidiaries on the other hand, shall hold, and
shall cause its consultants and advisors to hold, in strict confidence, all
Information concerning the other in its possession or furnished by the other or
the other's representatives pursuant to this Agreement (except to the extent
that such Information has been (i) in the public domain through no fault of such
party; or (ii) later lawfully acquired from other sources by such party), and
each party shall not release or disclose such Information to any other person,
except its auditors, attorneys, financial advisors, rating agencies, bankers and
other consultants and advisors, unless compelled to disclose by judicial or
administrative process or, as reasonably advised by its counsel, by other
requirements of law, or unless such Information is reasonably required to be
disclosed in connection with (x)
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any litigation with any third-parties or litigation between the Mississippi
Group and the Non-Mississippi Group, (y) any contractual agreement to which
members of the Mississippi Group or the Non-Mississippi Group are currently
parties, or (z) in exercise of either party's rights hereunder.
Section 7.08. Privileged Matters. Lakes and Company recognize that
certain legal and other professional services that have been and will be
provided prior to the Distribution Date have been and will be rendered for the
benefit of both the Mississippi Group and the Non-Mississippi Group and that
both the Mississippi Group and the Non-Mississippi Group should be deemed to be
the client for the purposes of asserting all Privileges. To allocate the
interests of each party in the Privileged Information, the parties agree as
follows:
(a) Company shall be entitled, in perpetuity, to control the
assertion or waiver of all Privileges in connection with Privileged Information
which relates solely to the Mississippi Group, whether or not the Privileged
Information is in the possession of or under the control of Company or Lakes.
Company shall also be entitled, in perpetuity, to control the assertion or
waiver of all Privileges in connection with Privileged Information that relates
solely to the subject matter of any claims constituting Mississippi Group
Liabilities, now pending or which may be asserted in the future, in any lawsuits
or other proceedings initiated against or by Company or a Mississippi
Subsidiary, whether or not the Privileged Information is in the possession of or
under the control of Company or Lakes.
(b) Lakes shall be entitled, in perpetuity, to control the
assertion or waiver of all Privileges in connection with Privileged Information
which relates solely to the Non-Mississippi Group, whether or not the Privileged
Information is in the possession of or under the control of Company or Lakes.
Lakes shall also be entitled, in perpetuity, to control the assertion or waiver
of all Privileges in connection with Privileged Information which relates solely
to the subject matter of any claims constituting Non-Mississippi Group
Liabilities, now pending or which may be asserted in the future, in any lawsuits
or other proceedings initiated against or by Lakes or a Non-Mississippi
Subsidiary, whether or not the Privileged Information is in the possession of or
under the control of Company or Lakes.
(c) Lakes and Company agree that they shall have a shared
Privilege, with equal right to assert or waive, subject to the restrictions in
this Section 7.07, with respect to all Privileges not allocated pursuant to the
terms of Sections 7.07(a) and (b). All Privileges relating to any claims,
proceedings, litigation, disputes, or other matters which involve both Lakes and
Company, or in respect of which both Lakes and Company retain any responsibility
or liability under this Agreement, shall be subject to a shared Privilege.
(d) No party may waive any Privilege which could be asserted
under any applicable law, and in which the other party has a shared Privilege,
without the consent of the other party, except to the extent reasonably required
in connection with any litigation with third-parties or as provided in
subsection (e) below. Consent shall be in writing, or shall be deemed to
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be granted unless written objection is made within twenty (20) days after
written notice upon the other party requesting such consent.
(e) In the event of any litigation or dispute between a member
of the Mississippi Group and a member of the Non-Mississippi Group, either party
may waive a Privilege in which the other party has a shared Privilege, without
obtaining the consent of the other party, provided that such waiver of a shared
Privilege shall be effective only as to the use of Information with respect to
the litigation or dispute between the Mississippi Group and the Non-Mississippi
Group, and shall not operate as a waiver of the shared Privilege with respect to
third-parties.
(f) If a dispute arises between the parties regarding whether
a Privilege should be waived to protect or advance the interest of either party,
each party agrees that it shall negotiate in good faith, shall endeavor to
minimize any prejudice to the rights of the other party, and shall not
unreasonably withhold consent to any request for waiver by the other party. Each
party specifically agrees that it will not withhold consent to waiver for any
purpose except to protect its own legitimate interests.
(g) Upon receipt by any party of any subpoena, discovery or
other request which arguably calls for the production or disclosure of
Information subject to a shared Privilege or as to which the other party has the
sole right hereunder to assert a Privilege, or if any party obtains knowledge
that any of its current or former directors, officers, agents or employees have
received any subpoena, discovery or other requests which arguably calls for the
production or disclosure of such Privileged Information, such party shall
promptly notify the other party of the existence of the request and shall
provide the other party a reasonable opportunity to review the Information and
to assert any rights it may have under this Section 7.07 or otherwise to prevent
the production or disclosure of such Privileged Information.
(h) The transfer of the Non-Mississippi Group Books and
Records and the Mississippi Group Books and Records and other Information
between Company and its Subsidiaries and Lakes and its Subsidiaries is made in
reliance on the agreement of Lakes and Company, as set forth in Sections 7.06
and 7.07, to maintain the confidentiality of Privileged Information and to
assert and maintain all applicable Privileges. The access to Information being
granted pursuant to Sections 7.01 and 7.02 hereof, the agreement to provide
witnesses and individuals pursuant to Section 7.03 hereof and the transfer of
Privileged Information between Company and its Subsidiaries and Lakes and its
Subsidiaries pursuant to this Agreement shall not be deemed a waiver of any
Privilege that has been or may be asserted under this Agreement or otherwise.
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ARTICLE VIII.
INSURANCE
Section 8.01. Policies and Rights Included Within the Non-Mississippi
Group Assets. Without limiting the generality of the definition of the
Non-Mississippi Group Assets or the effect of Section 2.01, the Non-Mississippi
Group Assets shall include any and all rights of an insured party under each of
the Shared Policies, specifically including rights of indemnity and the right to
be defended by or at the expense of the insurer, where applicable, with respect
to all injuries, losses, liabilities, damages and expenses incurred or claimed
to have been incurred on or prior to the Distribution Date by any party in or in
connection with the conduct of the Non-Mississippi Business or, to the extent
any claim is made against Lakes or any of its Subsidiaries, the Mississippi
Businesses, and which injuries, losses, liabilities, damages and expenses may
arise out of insured or insurable occurrences or events under one or more of the
Shared Policies.
Section 8.02. Policies and Rights Included Within the Mississippi Group
Assets. Without limiting the generality of the definition of the Mississippi
Group Assets or the effect of Section 2.01, the Mississippi Group Assets shall
include any and all rights of an insured party under each of the Shared
Policies, specifically including rights of indemnity and the right to be
defended by or at the expense of the insurer, where applicable, with respect to
all injuries, losses, liabilities, damages and expenses incurred or claimed to
have been incurred on or prior to the Distribution Date by any party in or in
connection with the conduct of the Mississippi Business or, to the extent any
claim is made against Company or any of the Mississippi Subsidiaries, the
Non-Mississippi Business, and which injuries, losses, liabilities, damages and
expenses may arise out of insured or insurable occurrences or events under one
or more of the Shared Policies.
Section 8.03. Administration and Reserves.
(a) General. Notwithstanding the provisions of Article III,
but subject to any contrary provisions of any Related Agreement, from and after
the Distribution Date:
(i) Company shall be responsible for the Insurance
Administration of the Shared Policies; provided, however, that the
administration of the Shared Policies by Company is in no way intended to limit,
inhibit, or preclude any right to insurance coverage for any Insured Claim of a
named insured under the Shared Policies including, but not limited to, Lakes or
any of its Subsidiaries or Affiliates;
(ii) Lakes shall be entitled to any reserves
established by Company or any of its Subsidiaries, or the benefit of reserves
held by any insurance carrier, with respect to the Non-Mississippi Group
Liabilities; and
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(iii) Company shall be entitled to any reserves
established by Company or any of its Subsidiaries, or the benefit of reserves
held by any insurance carrier, with respect to the Mississippi Group
Liabilities.
(b) Insurance Premiums.
(i) Lakes shall have the right but not the
obligation to pay the premiums, to the extent that Company does not pay premiums
with respect to Mississippi Group Liabilities (retrospectively-rated or
otherwise), with respect to Shared Policies as required under the terms and
conditions of the respective Policies, whereupon Company shall forthwith
reimburse Lakes for that portion of such premiums paid by Lakes as are
attributable to the Mississippi Group Liabilities.
(ii) Company shall have the right but not the
obligation to pay the premiums, to the extent that Lakes does not pay premiums
with respect to Non-Mississippi Group Liabilities (retrospectively-rated or
otherwise), with respect to Shared Policies as required under the terms and
conditions of the respective Policies, whereupon Lakes shall forthwith reimburse
Company for that portion of such premiums paid by Company as are attributable to
the Non-Mississippi Group Liabilities.
(c) Allocation of Insurance Proceeds. Insurance Proceeds
received with respect to claims, costs and expenses under the Policies shall be
paid to Lakes with respect to the Non-Mississippi Group Liabilities and to
Company with respect to the Mississippi Group Liabilities. Payment of the
allocable portions of indemnity costs of Insurance Proceeds resulting from the
liability policies will be made to the appropriate party upon receipt from the
insurance carrier. In the event that the aggregate limits on any Policies are
exceeded, the parties agree to provide an equitable allocation of Insurance
Proceeds received after the Distribution Date based upon their respective bona
fide claims taking into account their relative contributions towards premiums
and the Insurance Proceeds used by each party to satisfy Insured Claims. The
parties agree to use their reasonable best efforts to cooperate with respect to
insurance matters.
(d) Insurance Charges.
(i) Notwithstanding anything to the contrary
contained herein, Lakes or an appropriate Non-Mississippi Subsidiary assumes
responsibility for and shall pay to the appropriate insurance carriers or
otherwise any premiums, retrospectively rated premiums, defense costs, indemnity
payments, deductibles, retentions or other charges as appropriate (collectively
"Insurance Charges"), whenever arising, which become due and payable upon the
terms and conditions of any applicable Policy in respect of any Insured Claims
against Lakes or a Non-Mississippi Subsidiary for charges which relate to the
period before the Distribution Date. In the event that Lakes or a
Non-Mississippi Subsidiary fails to pay any insurance charges when due and
payable, whether at the request of the party entitled to payment or upon demand
by Company or a Mississippi Subsidiary, Company or a Mississippi Subsidiary may
(but shall not
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be required to) pay such Insurance Charges for and on behalf of Lakes or a
Non-Mississippi Subsidiary and thereafter Lakes shall forthwith reimburse
Company or such Mississippi Subsidiary for such payment.
(ii) Notwithstanding anything to the contrary
contained herein, Company or an appropriate Mississippi Subsidiary assumes
responsibility for and shall pay to the appropriate insurance carriers or
otherwise any Insurance Charges, whenever arising, which become due and payable
upon the terms and conditions of any applicable Policy in respect of any Insured
Claims against Company or a Mississippi Subsidiary for charges which relate to
the period before the Distribution Date. In the event that Company or a
Mississippi Subsidiary fails to pay any Insurance Charges when due and payable,
whether at the request of the party entitled to payment or upon demand by Lakes
or a Non-Mississippi Subsidiary, Lakes or a Non-Mississippi Subsidiary may (but
shall not be required to) pay such Insurance Charges for and on behalf of
Company or a Mississippi Subsidiary and thereafter Company shall forthwith
reimburse Lakes or such Non-Mississippi Subsidiary for such payment.
Section 8.04. Agreement for Waiver of Conflict and Shared Defense. In
the event that Insured Claims of both Lakes and Company exist relating to the
same occurrence, Lakes and Company agree to jointly defend and to waive any
conflict of interest necessary to the conduct of that joint defense. Nothing in
this paragraph shall be construed to limit or otherwise alter in any way the
indemnity obligations of the parties to this Agreement, including those created
by this Agreement, by operation of law or otherwise.
ARTICLE IX.
MISCELLANEOUS
Section 9.01. Entire Agreement; No Third Party Beneficiaries. This
Agreement and all documents and instruments referred to herein constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
and are not intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder.
Section 9.02. Tax Allocation and Indemnity Agreement; After-Tax
Payments.
(a) Other than as provided in this Section 9.02 and Section
6.05, this Agreement shall not govern any Tax matter, and any and all claims,
losses, damages, demands, costs, expenses, liabilities, refunds, deductions,
write-offs, or benefits relating to Taxes shall be exclusively governed by the
Tax Allocation and Indemnity Agreement.
(b) If, at the time Lakes is required to make any payment to
Company under this Agreement, Company owes Lakes any amount under the Tax
Allocation and Indemnity Agreement, then such amounts shall be offset and the
excess shall be paid by the party liable for
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such excess. Similarly, if, at the time Company is required to make any payment
to Lakes under this Agreement, Lakes owes Company any amount under the Tax
Allocation and Indemnity Agreement, then such amounts shall be offset and the
excess shall be paid by the party liable for such excess.
Section 9.03. Expenses. Except as specifically provided in this
Agreement or in a Related Agreement, all fees and expenses incurred in
connection with this Agreement and the consummation of the transactions
contemplated hereby shall be paid by the party incurring such expenses. In
addition, it is understood and agreed that Lakes shall pay the legal, filing,
accounting, printing and other accountable and out-of-pocket expenditures in
connection with the preparation, printing and filing of the Form 10.
Section 9.04. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York, without regard
to any applicable conflicts of laws.
Section 9.05. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
if to Company, to
Gaming Co., Inc.
0000 Xxxxxx Xxxxxx Xxxxxxx, 0xx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Attn: General Counsel
Facsimile: (000) 000-0000
if to Lakes, to
Lakes
000 Xxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attn: Chief Executive Officer
Facsimile: (000) 000-0000
Section 9.06. Amendments. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties hereto.
Section 9.07. Assignments. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by either of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party. 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.
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Section 9.08. Termination. This Agreement may be terminated and the
Distribution abandoned at any time prior to the Distribution Date by and in the
sole discretion of Company Board without the approval of Lakes's or of Company's
stockholders. In the event of such termination, no party shall have any
liability to any other party pursuant to this Agreement.
Section 9.09. Subsidiaries. Each of the parties hereto shall cause to
be performed, and hereby guarantees the performance of, all actions, agreements
and obligations set forth herein to be performed by any Subsidiary of such party
which is contemplated to be a Subsidiary of such party on and after the
Distribution Date.
Section 9.10. Specific Performance. The parties hereto agree that the
remedy at law for any breach of this Agreement will be inadequate and that any
party by whom this Agreement is enforceable shall be entitled to specific
performance in addition to any other appropriate relief or remedy. Such party
may, in its sole discretion, apply to a court of competent jurisdiction for
specific performance or injunctive or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable laws, each party waives any
objection to the imposition of such relief.
Section 9.11. Headings; References. The article, section and paragraph
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. All
references herein to "Article", "Sections" or "Exhibits" shall be deemed to be
references to Articles or Sections hereof or Exhibits hereto unless otherwise
indicated.
Section 9.12. Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section 9.13. Severability; Enforcement. The invalidity of any portion
hereof shall not affect the validity, force or effect of the remaining portions
hereof. If it is ever held that any restriction hereunder is too broad to permit
enforcement of such restriction to its fullest extent, each party agrees that a
court of competent jurisdiction may enforce such restriction to the maximum
extent permitted by law, and each party hereby consents and agrees that such
scope may be judicially modified accordingly in any proceeding brought to
enforce such restriction.
Section 9.14. Arbitration of Disputes.
(a) Any dispute, controversy or disagreement ("Dispute")
between the Parties related to the obligations of the parties under this
Agreement in respect of which an amicable resolution cannot be reached shall be
submitted for mediation to a committee made up of an equal number of non-common
members of each company's Board of Directors ("Committee"). If the parties are
unable to reach an amicable resolution of a Dispute within thirty days after
submission to the Committee, then, to the maximum extent allowed by law, the
Dispute shall be
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submitted and resolved by final and binding arbitration in Minnesota or
Mississippi or as the parties may agree upon; provided, however, that any party
may seek injunctive relief and enforcement of any award rendered pursuant to the
arbitration provisions of this Section 9.14 by bringing a suit in any court of
competent jurisdiction. Any award issued as a result of such arbitration shall
be final and binding between the parties thereto and shall be enforceable by any
court having jurisdiction over the party against whom enforcement was sought and
application may be made to such court for judicial acceptance of the award and
order of enforcement. The fees and expenses of arbitration (including reasonable
attorneys' fees) shall be paid by the party that does not prevail in such
arbitration.
(b) Attorneys' Fees. If any party to this Agreement brings an
action to enforce its rights under this Agreement, the prevailing party shall be
entitled to recover its costs and expenses, including without limitation
reasonable attorneys' fees, incurred in connection with such action, including
any appeal of such action.
(c) Specific Performance. Nothing contained in this Section
9.14 shall limit or restrict in any way the right or power of a party at any
time to seek injunctive relief in any court and to litigate the issues relevant
to such request for injunctive relief before such court (i) to restrain the
other party from breaching this Agreement or (ii) for specific enforcement of
this Section 9.14. The parties agree that any legal remedy available to a party
with respect to a breach of this Section 9.14 will not be adequate and that, in
addition to all other legal remedies, each party is entitled to an order
specifically enforcing this Section 9.14.
(d) Consent to Jurisdiction. The Parties hereby consent to the
jurisdiction of the federal and state courts located in the State of Minnesota
for all purposes under this Agreement.
(e) Confidentiality. Neither party nor the arbitrators may
disclose the existence or results of any arbitration under this Agreement or any
evidence presented during the course of the arbitration without the prior
written consent of both parties, except as required to fulfill applicable
disclosure and reporting obligations, or as otherwise required by law.
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Section 9.15. Prompt Payment. Where the terms of this Agreement require
payment of an amount "as promptly as possible," "as soon as practicable," or "as
soon as possible," following a specified event, occurrences or date, such
payment shall be made no later than five (5) business days after such event,
occurrence or date.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, Company and Lakes have caused this Agreement to be
signed by their respective duly authorized officers as of the date first above
written.
GRAND CASINOS, INC.
____________________________________
By:
Its:
GCI LAKES, INC.
____________________________________
By:
Its:
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Pursuant to Item 601(b)(2) of Regulation S-K, certain Schedules and Exhibits
have been omitted from this Agreement. The Registrant will furnish a copy of any
omitted Schedule or Exhibit to the Commission upon request.
Schedules:
Schedule 1 list of Mississippi and GCA Acquisition Subsidiaries
Schedule 2 list of Non-Mississippi Subsidiaries
Schedule 3 Retained company assets
Schedule 4 Retained company liabilities
Schedule 5 Assigned Lakes assets
Schedule 6 Assigned Lakes liabilities
Schedule 7 Transferred Corporate functions
Schedule 8 Mississippi Group cash accounts
Schedule 9 Non-Mississippi Group cash accounts
Schedule 10 Contingent Company Liabilities
The following is a list and description of the omitted Exhibits:
Exhibit A (Filed as Exhibit 10.2 to this Form 10-Q.)
Exhibit B Form of Lakes Bylaws
Exhibit C Form of Lakes Articles
Exhibit D (Filed as Exhibit 10.3 to this Form 10-Q.)
Exhibit E (Filed as Exhibit 10.4 to this Form 10-Q.)
