Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ARGOSY GAMING COMPANY
JOLIET ACQUISITION CORPORATION
EMPRESS CASINO JOLIET CORPORATION
AND
HORSESHOE GAMING HOLDING CORP.
DATED AS OF APRIL 12, 2001
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of April 12,
2001, by and among ARGOSY GAMING COMPANY, a Delaware corporation ("Parent"),
JOLIET ACQUISITION CORPORATION, an Illinois corporation ("JAC", and collectively
with Parent, "Buyers"), and HORSESHOE GAMING HOLDING CORP., a Delaware
corporation ("HGHC"), and EMPRESS CASINO JOLIET CORPORATION, an Illinois
corporation ("Joliet", and collectively with HGHC, "Sellers").
WITNESSETH:
WHEREAS, Joliet, a wholly owned subsidiary of HGHC, is engaged
primarily in the business of casino gaming in Joliet, Illinois;
WHEREAS, the Board of Directors of each of JAC and Joliet, have
determined that a business combination between JAC and Joliet is in the best
interests of their respective companies and stockholders and accordingly have
agreed to effect the Merger provided for in this Agreement upon the terms and
subject to the conditions set forth herein;
WHEREAS, Parent, the sole shareholder of JAC, has determined the Merger
to be in the best interest of JAC and has approved the Merger; and
WHEREAS, HGHC, the sole shareholder of Joliet, has determined the
Merger to be in the best interest of Joliet and has approved the Merger.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises and mutual
covenants, representations and warranties contained in this Agreement, and for
the purpose of prescribing the terms and conditions of the Merger, and such
other provisions as are deemed necessary or desirable, the parties hereto do
hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 THE MERGER. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time, JAC shall be merged with and into Joliet
in accordance with the laws of the State of Illinois (the "Merger"). As a result
of the Merger, the separate corporate existence of JAC shall cease and Joliet
shall be the surviving corporation of the Merger (the "Surviving Corporation").
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SECTION 1.02 CLOSING. Subject to the terms and conditions of this
Agreement, the closing of the Merger shall take place (a) at the offices of
Winston & Xxxxxx, 00 Xxxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000 on such date as
is determined in accordance with SECTION 9.01 and upon the satisfaction or
waiver of the conditions set forth in ARTICLES VII AND VIII of this Agreement;
or (b) at such other place, time and/or date as the parties hereto may otherwise
agree.
SECTION 1.03 EFFECTIVE TIME. If all of the conditions to the Merger set
forth in this ARTICLE I have been fulfilled or waived as provided herein and
this Agreement shall not have been terminated as provided in ARTICLE X hereof,
the parties hereto shall cause a certificate of merger (the "Certificate of
Merger") to be properly executed and filed in accordance with the laws of the
State of Illinois and the terms of this Agreement on or before the Closing Date.
The parties hereto also shall take such further actions as may be required under
the laws of the State of Illinois in order to effect the Merger. The Merger
shall become effective at such time as the Certificate of Merger has been duly
filed with the Secretary of State of Illinois (the "Effective Time").
SECTION 1.04 LEGAL EFFECT. From and after the Effective Time, the Surviving
Corporation shall possess all of the rights, privileges, powers and franchises
and be subject to all of the restrictions, disabilities and duties of, the
merging corporations, as provided under applicable law and subject to the terms
and conditions set forth in this Agreement.
SECTION 1.05 MERGER CONSIDERATION. Subject to the terms and conditions set
forth in this Agreement, the consideration to be received by HGHC from Parent
upon the consummation of the Merger shall be an aggregate amount, calculated
consistent with the methodology set forth in the sample calculation attached as
SCHEDULE 1.05, (the "Merger Consideration") equal to: (a) FOUR HUNDRED SIXTY
FIVE MILLION DOLLARS ($465,000,000), plus (b) Net Working Capital (or the
deficit in Net Working Capital if a negative number), minus (c) Existing Debt,
plus (d) the aggregate amount of cash expended on or after April 1, 2001 and
prior to the Closing by Joliet for the purchase of assets or property that are
listed on SCHEDULE 1.05(d) ("Capital Expenses"). For purposes of the Closing,
the Buyers and the Sellers shall make a good-faith estimate of the Merger
Consideration based upon the anticipated amounts of (x) Net Working Capital and
Existing Debt after a review of the most recent ascertainable financial
information of Joliet available three (3) Business Days prior to the Closing
Date and (y) Capital Expenses (the "Estimated Merger Consideration"). The
Estimated Merger Consideration shall be paid by Parent at the Closing as
follows:
(i) TWO MILLION FOUR HUNDRED SEVENTY SIX THOUSAND TWO HUNDRED SIXTY
FOUR DOLLARS ($2,476,264) (the "Bonus Escrow"), which is equal to one hundred
percent (100%) of the amount to fund the Retention Bonus Plan, will be paid to
the Escrow Agent to be held in trust in accordance with SECTION 1.08 below;
(ii) THIRTEEN MILLION NINE HUNDRED FIFTY THOUSAND DOLLARS ($13,950,000)
(the "Indemnification Escrow") will be paid to the Escrow Agent to be held in
trust in accordance with SECTION 1.09 below; and
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(iii) The difference obtained by subtracting the amount paid as
described in clauses (i) and (ii) above from the Estimated Merger Consideration
will be paid to HGHC at the Closing by wire transfer of immediately available
funds in accordance with written wire instructions to be provided by HGHC to
Parent not later than one (1) Business Day prior to the Closing Date.
SECTION 1.06 MERGER CONSIDERATION DETERMINATION. The Surviving Corporation
shall prepare a statement of Net Working Capital, Existing Debt and Capital
Expenses as of the Closing Date (the "Closing Statement") within thirty (30)
days following the Closing Date so as to determine the Merger Consideration. The
Closing Statement shall be prepared in accordance with GAAP applied in a manner
consistent with the accounting principles applied in the preparation of the
historical financial statements of Joliet, based upon Joliet's historical
accounting principles and past practices including the use of Joliet's
methodology for establishing reserves for accounts receivable, slot club
liability, chip liability and any other account subject to estimate or judgment.
If, based on the Merger Consideration as finally determined by the parties in
accordance with this SECTION 1.06, (a) the Merger Consideration is in excess of
the Estimated Merger Consideration, then (i) Parent shall forthwith pay the
difference between the Merger Consideration and the Estimated Merger
Consideration to HGHC together with interest on the amount of such difference
from the Closing Date through the date of payment at a rate of nine percent (9%)
per annum; or (b) the Merger Consideration is less than the Estimated Merger
Consideration, then HGHC shall forthwith pay the difference between the
Estimated Merger Consideration and the Merger Consideration to Parent together
with interest on the amount of such difference from the Closing Date through the
date of payment at a rate of nine percent (9%) per annum.
HGHC shall have thirty (30) days after receipt of the Closing Statement
from Surviving Corporation (the "Dispute Period") to dispute any of the elements
of the Closing Statement (a "Dispute"). If HGHC does not give written notice of
a Dispute (a "Dispute Notice") within the Dispute Period to Parent, then the
Closing Statement shall be deemed to have been accepted and agreed to by HGHC in
the form in which it was delivered by the Surviving Corporation and shall be
final and binding upon the parties hereto. Any Dispute Notice issued by HGHC
shall set forth in reasonable detail the elements and amounts with which it
disagrees. During the fifteen (15) day period following receipt by Parent of
such Dispute Notice, Parent and HGHC shall attempt to resolve such Dispute and
agree in writing upon the final content of the disputed Closing Statement and
the appropriate Merger Consideration adjustment based thereon.
If Parent and HGHC are unable to resolve any Dispute within the fifteen
(15) day period after Parent's receipt of a Dispute Notice, then the parties
shall engage Deloitte & Touche LLP ("D&T"), or, if D&T is unable to serve , then
Parent and HGHC shall by mutual agreement select another nationally recognized
certified public accounting firm who is not rendering (and during the preceding
two (2) year period has not rendered) services to Parent or HGHC or any of their
respective Affiliates, to act as arbitrators (the "Arbitrating Accountant") to
settle such Dispute as soon as practicable. In connection with the resolution of
any Dispute, the Arbitrating Accountant shall have access to all documents,
records, work papers, facilities and personnel necessary to perform its function
as arbitrator and shall be authorized by both parties to follow such procedures
and the commercial arbitration rules of the American Arbitration Association
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which in the sole exercise of its professional judgment shall be deemed
appropriate. HGHC and Parent shall have all reasonable rights to discovery in
connection with the arbitration pursuant to the federal rules of civil
procedure. The Arbitrating Accountant's award with respect to any Dispute shall
be final and binding upon the parties hereto, and judgment may be entered on the
award. The costs and expenses of the Arbitrating Accountant shall be shared
equally between Parent and HGHC.
The chief financial officer of HGHC, on the one hand, and the chief
financial officer of the Parent, on the other hand, and their respective
designated agents, during the Dispute Period, shall have all rights of access to
corporate records of, with respect to HGHC, the Surviving Corporation and with
respect to Buyers, HGHC to the extent related to this Agreement or Joliet, if
HGHC provides Parent with a Dispute Notice during the Dispute Period, until such
time as the Dispute raised therein is resolved by the Arbitrating Accountant.
SECTION 1.07 DEPOSIT. On the third (3rd) Business Day after the date of
this Agreement, the Buyers shall deposit THIRTEEN MILLION NINE HUNDRED FIFTY
THOUSAND DOLLARS ($13,950,000) (the "Deposit"), with the Escrow Agent pursuant
to an escrow agreement to be substantially in the form attached hereto as
EXHIBIT A (the "Deposit Escrow Agreement"). If this Agreement is terminated
pursuant to SECTION 10.01, then the Deposit shall be paid as set forth in
SECTION 10.02. Upon fulfillment of the Buyers' obligations under SECTIONS
5.04(a) AND (b) and delivery of copies of the same to the Sellers pursuant to
SECTION 5.04(d), the Deposit shall be released to Parent promptly pursuant to
the terms of the Deposit Escrow Agreement.
SECTION 1.08 BONUS ESCROW. At the Closing and in accordance with SECTION
1.05(i), the Buyers will deposit the Bonus Escrow to fund the Retention Bonus
Plan from the Merger Consideration, which amount shall be held by the Escrow
Agent pursuant to an escrow agreement in the form attached hereto as EXHIBIT B
(the "Bonus Escrow Agreement"). The Bonus Escrow shall be used to pay the
employee bonuses under the Retention Bonus Plan pursuant to SECTION 6.02.
SECTION 1.09 INDEMNIFICATION ESCROW. At the Closing and in accordance with
SECTION 1.05(ii), the Buyers will deposit the Indemnification Escrow from the
Merger Consideration, which amount shall be held by the Escrow Agent pursuant to
an escrow agreement in the form attached hereto as EXHIBIT C (the
"Indemnification Escrow Agreement", together with the Deposit Escrow Agreement,
and the Bonus Escrow Agreement, the "Escrow Agreements"). The funds escrowed
pursuant to the Indemnification Escrow Agreement shall be used to satisfy
indemnification claims made pursuant to SECTION 12.01 and ARTICLE XI until such
time as the Indemnification Escrow is released in accordance with SECTION 13.01
and the Indemnification Escrow Agreement.
SECTION 1.10 CONVERSION OF SHARES.
(a) At the Effective Time: (i) each share of common stock of JAC,
outstanding at the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, shall be converted into and exchanged
for one newly issued share of common stock of the
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Surviving Corporation; and (ii) the shares of common stock, par value $0.01 per
share, of Joliet outstanding at the Effective Time (the "Shares"), by virtue of
the Merger and without any action on the part of the holders thereof, shall be
converted and exchanged into the right to receive the Merger Consideration
subject to amounts to be deposited into escrow pursuant to the Escrow
Agreements.
(b) As a result of the Merger and without any action on the part of the
holder thereof, at the Effective Time, all Shares shall cease to be outstanding
and shall be canceled and retired and shall cease to exist, and HGHC shall
thereafter cease to have any rights with respect to such Shares, except for the
right to receive, without interest, the Merger Consideration set forth in
SECTION 1.05 upon the surrender of certificates representing the Shares (the
"Certificates") in accordance with the provisions of this ARTICLE I.
(c) Each Share of Joliet held as treasury stock at the Effective Time shall
be canceled, and no payment shall be made with respect thereto.
SECTION 1.11 EXCHANGE OF CERTIFICATES REPRESENTING SHARES. Upon surrender
of the Certificates duly endorsed for transfer or accompanied by validly
executed stock powers, HGHC shall be entitled to receive in exchange therefor
the Merger Consideration. Until so surrendered, each Certificate that, at the
Effective Time, represented Shares will be deemed from and after the Effective
Time, for all corporate purposes, to evidence only the right to receive a
portion of the Merger Consideration.
SECTION 1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of the Buyers
and each of the Sellers shall take all such action as reasonably may be
necessary or appropriate in order to effectuate the transactions contemplated by
this Agreement which shall include but not be limited to the Sellers providing
reasonable assistance to the Buyers in the process of obtaining all necessary
Gaming Authority approvals and consents; provided that such actions do not
unreasonably increase the liability of such party. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Joliet (subject to any and all matters disclosed herein), the
officers and directors of Joliet are fully authorized in the name of Joliet or
otherwise to take, and will take, all such lawful and necessary action, so long
as such action is consistent with this Agreement.
SECTION 1.13 CERTAIN MATTERS RELATING TO THE SURVIVING CORPORATION.
(a) CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION. The
Certificate of Incorporation of Joliet in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation, and such certificate shall be amended and restated at and as of the
Effective Time to read as did the Certificate of Incorporation of JAC
immediately prior to the Effective Time (except that the name of the Surviving
Corporation will remain unchanged).
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(b) BY-LAWS OF THE SURVIVING CORPORATION. The By-Laws of Joliet in effect
immediately prior to the Effective Time shall be the By-Laws of the Surviving
Corporation, and such By-Laws shall be amended and restated at and as of the
Effective Time to read as did the By-Laws of JAC immediately prior to the
Effective Time (except that the name of the Surviving Corporation will remain
unchanged).
(c) DIRECTORS OF THE SURVIVING CORPORATION. The directors of the Surviving
Corporation immediately after the Effective Time shall be the same as the
directors of JAC immediately prior to the Effective Time to hold office until
their successors are duly appointed or elected in accordance with applicable law
and the By-Laws of the Surviving Corporation.
(d) OFFICERS OF THE SURVIVING CORPORATION. The officers of the Surviving
Corporation immediately after the Effective Time shall be the same as the
officers of JAC immediately prior to the Effective Time to hold such offices
until their successors are duly appointed or elected in accordance with
applicable law and the By-Laws of the Surviving Corporation.
SECTION 1.14 ALLOCATION OF MERGER CONSIDERATION. Parent and HGHC agree to
treat the Merger as a sale of assets of HGHC for income tax purposes and to take
all actions reasonably necessary to effect such result. The Merger Consideration
shall be allocated among the assets of Joliet in the manner required by Treasury
Regulations Section1.1060-1T (the "Allocation"). The Allocation shall be based
upon and consistent with the fair market values of the assets of Joliet as
determined by a third party independent appraiser experienced in the valuation
of similar businesses selected by Parent and approved by HGHC, which approval
shall not be unreasonably withheld. Parent shall bear the costs of such
appraisal. HGHC and Parent acknowledge and agree that none of the tangible
assets of Joliet have a fair market value in excess of their respective net book
values as reflected in HGHC's consolidated financial statements. Except as
otherwise required by law, Buyers and HGHC agree that: (i) the Allocation as
finally determined hereunder shall be binding on Buyers and HGHC for all
federal, state and local Tax purposes, (ii) Buyers and HGHC shall each execute a
writing memorializing the Allocation and (iii) Buyers and HGHC shall file with
their respective federal (and applicable state and local) income Tax Returns
consistent IRS Forms 8594-Asset Acquisition Statements under Section 1060,
including any required amendment thereto which shall reflect the allocations set
forth in the Allocation.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF HGHC
Except as set forth in the disclosure schedules attached to this Agreement
and referenced herein, each of the Sellers jointly and severally represent and
warrant to the Buyers that:
SECTION 2.01 ORGANIZATION; STANDING; AND QUALIFICATION. HGHC is duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority and, except as set
forth on SCHEDULE 2.01, all governmental licenses, authorizations, consents and
approvals necessary to own and operate Joliet and to carry on Joliet's business
as it is now being conducted. HGHC is duly qualified to transact business as a
foreign corporation and is in good standing under the laws of the State of
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Illinois. Joliet is duly organized, validly existing and in good standing under
the laws of the State of Illinois and has all requisite corporate power and
authority and, except as set forth on SCHEDULE 2.01, all governmental licenses,
authorizations, consents and approvals necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted. Joliet is
not qualified to transact business as a foreign corporation in any jurisdiction
and is not required to qualify in any jurisdiction, because of the nature of the
properties or assets owned, leased or operated by it or the nature of the
business conducted by it. Joliet does not have any subsidiaries and it does not
own any capital stock or other proprietary interest, directly or indirectly, in
any Person or have any agreement to acquire any such capital stock or other
proprietary interest. Complete and correct copies of the Certificate of
Incorporation, By-Laws or other organizational documents of each Seller, each as
amended to the date hereof, have been or, prior to the Closing, will be
delivered to the Buyers.
SECTION 2.02 AUTHORITY; POWER; AND NO VIOLATION. The execution and delivery
of this Agreement and all documents to be executed in connection with this
Agreement by the Sellers have been authorized by all necessary corporate action
on the part of each of the Sellers. Each of the Sellers has the requisite
corporate power and corporate authority to execute and deliver this Agreement
and all documents to be executed in connection with this Agreement, and to take
any and all other actions required to be taken, directly or indirectly, by it
pursuant to the provisions of this Agreement and all documents to be executed in
connection with this Agreement. This Agreement constitutes the legal, valid and
binding obligation of each Seller enforceable against each Seller in accordance
with its terms. Except as set forth on SCHEDULE 2.02, the execution and delivery
of this Agreement, the fulfillment and compliance with the terms and conditions
hereof and the consummation of the transactions contemplated by this Agreement
will not: (a) conflict with or result in a breach or violation of the
Certificate of Incorporation or By-Laws of either of the Sellers; (b) conflict
with or result in any material violation or material breach of or constitute a
material default (or an event which, with notice or lapse of time or both, would
constitute a material default) under, or give rise to any right of termination,
cancellation or acceleration of any obligation or result in a loss of any
material benefit under, or require a consent or waiver under, any of the terms,
conditions or provisions of any Contract; (c) violate in any material respect
any Law applicable to the Sellers or any of their respective properties, assets,
or outstanding shares of capital stock, or other securities; or (d) constitute
an event which, with or without notice, lapse of time, or action by a third
party, could result in the creation of any Lien upon any of the Shares or any of
the properties, assets or cash flows of Joliet, or cause the maturity of any
liability, obligation or debt of Joliet to be accelerated or increased.
SECTION 2.03 CAPITAL STRUCTURE OF JOLIET AND RELATED MATTERS. SCHEDULE 2.03
sets forth the following information for Joliet: (a) its name and jurisdiction
of incorporation; (b) the location of its principal office; (c) its authorized
capital stock; (d) the number of issued and outstanding shares of capital stock
and the owners thereof; and (e) a list of its officers and directors. The Shares
constitute all of the issued and outstanding shares of capital stock of Joliet,
all of which are owned by HGHC. Except as set forth on SCHEDULE 2.03, HGHC has
good and marketable title to the Shares, free and clear of all Adverse Claims,
Liens and rights of any other Person. There are no classes of capital stock of
Joliet authorized, issued or outstanding other than as set forth on SCHEDULE
2.03. All outstanding shares of capital stock of Joliet have been duly
authorized and validly issued and are fully paid and non-assessable. No class of
shares of
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capital stock of Joliet is entitled to preemptive rights. There are no
outstanding options, warrants or other rights of any kind to acquire any shares
of capital stock or equity interests of Joliet, nor are there any outstanding
securities convertible into or exchangeable for, or which otherwise confer on
the holder thereof any right to acquire, any shares of capital stock or equity
interests of Joliet, and Joliet has not entered into and is not a party to any
contract, commitment, agreement, understanding, arrangement or claim of any kind
to issue any securities. Except as set forth on SCHEDULE 2.03, Joliet is not a
party to any contract, commitment, agreement, understanding, arrangement or
claim involving stock appreciation rights or constituting a phantom stock plan.
All outstanding shares of capital stock of Joliet were issued in compliance with
all applicable federal, state and other securities laws and regulations.
SECTION 2.04 CONSENTS AND APPROVALS. The execution, delivery and
performance of this Agreement by the Sellers and the consummation by the Sellers
of the transactions contemplated hereby will not require any notice to, or
consent, authorization, or approval from any court or governmental authority or
any other third party, except for (i) the filing of the pre-merger notification
report under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended ("HSR Act"), (ii) the filing of the Certificate of Merger with respect
to the Merger with the Secretary of State of the State of Illinois, (iii) any
approvals and filing of notices required under any applicable gaming industry
regulation, (iv) such consents, approvals, orders, authorizations, permits,
filings or registrations related to, or arising out of, compliance with
statutes, rules or regulations regulating health, the consumption, sale or
serving of alcoholic beverages and food and the preparation of food, (v) those
notices, consents, authorizations and approvals set forth on SCHEDULE 2.04, and
(vi) such immaterial filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions described in this Agreement. Any and all notices, consents,
authorizations, and approvals referenced on SCHEDULE 2.02 (items 1-17) and "Real
Property" on SCHEDULE 2.04, required to be obtained by the Sellers prior to the
Closing, have been or, prior to the Closing, will have been made or obtained.
SECTION 2.05 AFFILIATE TRANSACTIONS. Except as disclosed in the Current SEC
Documents or as disclosed in SCHEDULE 2.05, (a) there are no contracts or
transactions that would be required to be disclosed by HGHC with respect to
Joliet by Item 404 of Regulation S-K of the Securities Act of 1933, as amended
to date, and the Securities Exchange Act of 1934, as amended to date, and (b)
there are no contracts or transactions between Joliet, on the one hand, and HGHC
or any of its Affiliates or subsidiaries, on the other.
SECTION 2.06 FINANCIAL STATEMENTS. True and complete copies of the audited
financial statements of Joliet as of and for each of the years ended December
31, 1998, 1999 and 2000 (collectively, the "Financial Statements") are attached
hereto as EXHIBIT A to SCHEDULE 2.06. The Financial Statements are true, correct
and complete, and have been prepared from the books and records of Joliet in
accordance with GAAP. The balance sheets included in the Financial Statements
fairly present the financial condition of Joliet, as of the respective dates
thereof, and the related statements of income and cash flows fairly present the
consolidated results of operations and cash flows of Joliet for the periods
indicated. The Financial Statements contain and reflect, in accordance with
GAAP, adequate provisions for all reasonably anticipated liabilities and
adequate reserves for all reasonably anticipated losses, costs, reimbursements
and
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expenses consistent with past practices, including reserves for uncollectible
accounts receivable. EXHIBIT B to SCHEDULE 2.06 sets forth certain projected
financial information (including balance sheets and statements of income and
cash flows) relating to operations of Joliet for 2001 (collectively, the
"Budgets"). The Budgets were prepared in good faith and in the ordinary course
based on assumptions considered reasonable at the time the Budgets were
prepared; provided, however, that Buyers acknowledge that the Budgets represent
a good faith estimate of the future performance of Joliet and that Sellers do
not represent or warrant that actual performance of Joliet in 2001 will be
consistent with the estimated performance reflected in the Budgets.
SECTION 2.07 ACCOUNTING CONTROLS. Joliet maintains a system of internal
accounting controls sufficient to provide reasonable assurance that: (a)
transactions are executed in accordance with management's general or specific
authorizations, (b) transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP and to maintain asset
accountability, and (c) Joliet is in compliance in all material respects with
the minimum internal control standards of the IGB in effect as of the date
hereof.
SECTION 2.08 OUTSTANDING DEBT AND RELATED MATTERS. SCHEDULE 2.08 sets forth
all outstanding Debt of Joliet. Except as set forth on SCHEDULE 2.08, there
exists no default under the provisions of any instrument evidencing any
outstanding Debt or of any agreement relating thereto. Except as set forth on
SCHEDULE 2.08, Joliet has not guaranteed any obligation of any Person, nor has
any other Person guaranteed any obligation of Joliet, including obligations with
respect to the outstanding Debt. Following the Closing, the Surviving
Corporation will not be liable for any of the outstanding Debt of the Sellers
included on SCHEDULE 2.08.
SECTION 2.09 TAXES. Except as disclosed in SCHEDULE 2.09:
(a) HGHC has qualified as an S corporation within the meaning of Section
1361 of the Code for each taxable year of its existence. Joliet qualifies as,
and HGHC has properly made an election to treat Joliet as, a qualified
subchapter S subsidiary within the meaning of Section 1361(b)(3)(B) of the Code,
and such election has been effective for the entire time that HGHC has owned
shares of Joliet. Joliet has qualified, and has taken such actions and filed
such elections or returns to elect, to be a qualified subchapter S subsidiary,
in each jurisdiction in which Joliet conducts its business or would otherwise be
taxable on its income for the entire time that HGHC has owned any shares of
Joliet. Neither HGHC nor Joliet has taken, or caused or permitted to be taken,
any action that would have caused a termination of the qualified subchapter S
subsidiary election with respect to Joliet for any period. Joliet will not be
liable for or subject to any Tax under Section 1374 of the Code.
(b) Each of Joliet and, to the extent a failure to do so could result in a
lien for Taxes on the assets of Joliet, HGHC, has properly and timely filed all
income Tax Returns and all other material Tax Returns (considered individually
or in the aggregate), and has timely paid all Taxes shown as due thereon. All
such income Tax Returns were true, correct and complete in all respects and all
other Tax Returns were true, correct in all material respects and were prepared
in accordance with applicable laws. Each of Joliet and, to the extent that a
failure to do so would result in a lien for Taxes on the assets of Joliet, HGHC,
has or will have filed prior to or on the
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Closing Date all income Tax Returns (including estimated Tax Returns and
reports) and all other material Tax Returns (considered individually or in the
aggregate) required to be filed by it or on its behalf on or before the Closing
Date in each jurisdiction in which such Tax Return is due. As of the time of
filing, all such income Tax Returns were or will be true, correct and complete
in all respects and all other Tax Returns were true, correct in all material
respects.
(c) Neither HGHC nor Joliet has requested an extension of time within which
to file any Tax Return described in the preceding paragraph. Neither HGHC nor
Joliet has granted any extension or waiver of the limitation period applicable
to any such Tax Return. There is no federal, state, local or foreign claim,
audit, action, suit, proceeding, or investigation pending or, to the knowledge
of the Sellers, threatened or asserted against or with respect to Joliet or, to
the extent that such action could result in a lien upon the assets of Joliet,
HGHC, in respect of any Tax. All Taxes not yet due and payable have been fully
accrued on the books of Joliet and adequate reserves have been established
therefor. There are no unpaid assessments for additional Taxes for any period
nor is there any basis therefor. There are no Liens for Taxes upon the assets of
Joliet except Liens for current Taxes not yet due. The federal income Tax
Returns of HGHC have been examined by the Internal Revenue Service (the "IRS"),
or have been closed by the applicable statute of limitations, for all periods
through December 31, 1994; the state income Tax Returns and other material Tax
Returns of HGHC and Joliet have been examined by the relevant state agencies or
such returns have been closed by the applicable statute of limitations for all
periods through December 31, 1994; and neither HGHC nor Joliet has entered into
any closing agreement or other agreement affecting Taxes of Joliet for any
taxable year ending after the Closing Date.
(d) Joliet is not currently under any contractual obligation (whether oral
or written) to indemnify any other person with respect to Taxes nor is Joliet a
party to any agreement (whether oral or written) providing for payments with
respect to Taxes.
(e) Neither Joliet nor HGHC has ever been a member of an affiliated group
(within the meaning of Section 1504 of the Code) filing a consolidated federal
income Tax Return or any consolidated, combined or unitary group for state,
local or foreign Tax purposes. Neither HGHC nor Joliet has any liability for
Taxes of any person (other than for Joliet) under Treasury Regulation Section
1.1502-6 or any similar provision of state, local or foreign law. Joliet has not
been a party to any joint venture, partnership or other arrangement that could
be treated as a partnership for federal income Tax purposes
(f) None of the assets of Joliet are required to be treated as being owned
by another person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately before the
enactment of the Tax Reform Act of 1986, or is "tax-exempt use property" within
the meaning of Section 168(h)(1) of the Code. No portion of the cost of any
asset of Joliet has been financed directly or indirectly from the proceeds of
any tax-exempt state or local government obligation described in Code Section
103(a).
(g) HGHC is not a foreign person within the meaning of Code Section 1445.
The assets to be acquired by the Surviving Corporation in the Merger are not
part of a permanent establishment or a trade or business in any foreign country.
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SECTION 2.10 COMPLIANCE WITH LAWS; NO DEFAULT OR LITIGATION. Except as set
forth in SCHEDULE 2.10 or the Current SEC Documents:
(a) HGHC is not in default or violation (nor is there any event which, with
notice or lapse of time or both would constitute a default or violation) in any
material respect of: (i) any contract, agreement, lease, consent, order, Permit
or other commitment to which it is a party or to which its properties, assets or
business is subject or bound; or (ii) any Law, that individually or in the
aggregate in the case of either clause (i) or clause (ii), would reasonably be
expected to have a Material Adverse Effect;
(b) Joliet is not in default or violation (nor is there any event which,
with notice or lapse of time or both would constitute a default of violation) in
any material respect of: (i) any contract, agreement, lease, consent, order,
Permit or other commitment to which it is a party or to which its properties,
assets or business is subject or bound; or (ii) any Law;
(c) There are no actions, suits, claims, investigations, notices of
violation, or legal, arbitration or administrative proceedings in progress,
pending or to the knowledge of Sellers threatened by or against HGHC (except for
such that do not relate to Joliet or the transactions contemplated by this
Agreement) or Joliet (or any of their respective properties, assets or
businesses) whether at law or in equity, whether civil or criminal in nature, or
whether before or by a federal, state, local or other governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign, or
any Person, and no event has occurred which could give rise to any such action,
suit, claim, investigation, notice of violation, or legal arbitration or
administrative proceeding;
(d) Neither HGHC nor Joliet has been charged with or received any notice of
any violation of any Law relating to (i) HGHC's ability in any material respect
to consummate the transactions described in this Agreement or (ii) Joliet's
properties, assets or businesses, or the transactions contemplated by this
Agreement;
(e) Neither HGHC nor Joliet is subject to any agreement, contract or decree
with any governmental entities arising out of any current or previously existing
violations of any Law applicable to (i) HGHC's ability in any material respect
to consummate the transactions described in this Agreement or (ii) Joliet; and
(f) No action, suit, or proceeding has been instituted or, to the knowledge
of the Sellers, threatened to restrain, prohibit, or otherwise challenge the
legality or validity of the transactions contemplated by this Agreement.
SECTION 2.11 REAL PROPERTY.
(a) SCHEDULE 2.11(a) sets forth an accurate, complete and correct list of
all real property owned by Joliet (the "Owned Real Property"), and all real
property leased by Joliet (the "Leased Real Property"). The Owned Real Property
and the Leased Real Property are referred to herein collectively as the "Real
Property." Joliet is not under contract to purchase any real
12
property and does not hold any options to acquire any real property. No other
real property is subleased or licensed to and/or operated by Joliet.
(b) Based on existing title insurance policies, Joliet has good and
marketable fee simple title to the Owned Real Property owned by it free and
clear of any and all Liens, encumbrances, restrictions, conditions, covenants,
assessments or exceptions, except for those matters set forth on SCHEDULE
2.11(b). The Owned Real Property is not encumbered by any options to purchase or
options to lease and none of the Owned Real Property is subject to any lease or
any grant to any Person of a right to the use, occupancy or enjoyment of the
Owned Real Property or any portion thereof, except for those matters set forth
in SCHEDULE 2.11(b). To the knowledge of Sellers, all Owned Real Property is in
good operating condition and repair (reasonable wear and tear excepted), and
suitable for the purposes for which it is presently being used.
(c) Joliet has not received any notice of any violation of any rule,
regulation, ordinance, law, order, decree, or requirement relating to the Real
Property. Each of the Leased Real Property leases and subleases, if any (and
leases underlying such subleases) contains no terms other than the terms
contained in the copies heretofore delivered to the Buyer.
(d) Joliet has a valid leasehold interest in the Leased Real Property
leased by it, free and clear of any and all liens, encumbrances, restrictions,
leases, options to purchase, options to lease, conditions, covenants,
assessments or exceptions and none of the Leased Real Property is subject to any
ground or underlying lease or, to the knowledge of Sellers, without inquiry, any
grant to any Person of a right to the use, occupancy or enjoyment of the Leased
Real Property or any portion thereof, except as set forth in the Lease Documents
and those matters set forth in SCHEDULE 2.11(d). To the knowledge of Sellers,
all Leased Real Property is in good operating condition and repair (reasonable
wear and tear excepted), and suitable for the purposes for which it is presently
being used.
(e) Except as disclosed in SCHEDULE 2.11(e), Sellers have received no
notice of any pending or proposed action, proceeding or litigation (i) to take
all or any portion of the Owned Real Property or, to the knowledge of the
Sellers, the Leased Real Property, or any interest therein, by eminent domain;
(ii) to modify the zoning of, or other governmental rules or restrictions
applicable to, the Owned Real Property or, to the knowledge of the Sellers, the
Leased Real Property or the use or development thereof; (iii) for any street
widening or changes in highway or traffic lanes or patterns in the immediate
vicinity of the Owned Real Property or, to the knowledge of the Sellers, the
Leased Real Property; or (iv) otherwise relating to the Owned Real Property, the
Leased Real Property or the interests of Joliet therein, or which otherwise
would materially interfere with the use, ownership, improvement, development
and/or operation of the Owned Real Property or, to the knowledge of the Sellers,
the Leased Real Property. Except as disclosed in SCHEDULE 2.11(e), Sellers have
received no notice of any violations of any Law affecting the Owned Real
Property or, to the knowledge of the Sellers, the Leased Real Property. Except
as disclosed in SCHEDULE 2.11(e) Sellers have received no notice of any
mechanics' or tax liens affecting the Owned Real Property or, to the knowledge
of the Sellers, the Leased Real Property, and all services or materials which
have been furnished to the Owned Real Property or, to the knowledge of the
Sellers, the Leased Real Property have been
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fully paid or provided for. SCHEDULE 2.11(e) lists all service contracts and to
Sellers' knowledge, without inquiry, all warranties and guarantees covering any
portion of the Owned Real Property, which scheduled items are and shall be at
the Closing in full force and effect in accordance with their terms. Sellers
have received no notice of, and to the knowledge of Sellers, without inquiry,
there are no assessments affecting the Owned Real Property or the Leased Real
Property. Sellers have received no notice of, and to Sellers' knowledge, without
inquiry, there are no tax abatements or tax exemptions affecting the Owned Real
Property. All public utilities required for the operation of the Owned Real
Property either enter the Owned Real Property through adjoining public streets,
or if they pass through adjoining private land do so in accordance with valid
public easements or private easements which will inure to the benefit of the
Buyers after the Closing.
(f) SCHEDULE 2.11(f) lists all the leases and other agreements affecting
the use or occupancy of the Leased Real Property now in effect (including,
without limitation, subleases, licenses, concession agreements, tenancy
agreements and other occupancy agreements covering or encumbering all or any
portion of the Leased Real Property), together with any guarantees, supplements,
amendments, modifications, extensions and renewals of the same (collectively,
the "Lease Documents"). Except as set forth on SCHEDULE 2.11(f), (i) the Sellers
have received no notice that Joliet is in breach of or in default under any of
the Lease Documents; (ii) Joliet has not given the other party notice of or made
a claim with respect to any breach or default under any of the Lease Documents;
and (iii) to knowledge of the Sellers, without inquiry, no events have occurred
which with or without notice or lapse of time or both would constitute a breach
or default under any of the Lease Documents. All of the Lease Documents are in
full force and effect and constitute legal, valid and binding obligations of
Joliet, enforceable in accordance with their terms, subject to bankruptcy,
insolvency, creditors rights generally, the availability of certain remedies and
matters of equity. Except as set forth on SCHEDULE 2.11(f), no consent of any
landlord, licensor or grantor of the Leased Real Property is required in
connection with the transactions contemplated by this Agreement.
(g) To the knowledge of Sellers, no portion of the Owned Real Property or
the roads immediately adjacent to the Owned Real Property: (i) was the public or
private landfill, dump site, retention basin or settling pond except as
identified in the Environmental Reports; (ii) was the site of any oil or gas
drilling operations; (iii) was the site of any experimentation, processing,
refining, reprocessing, recovery or manufacturing operation for any
petrochemicals; or (iv) was the site of any wetlands subject to regulation by
the Army Corps of Engineers.
(h) The Owned Real Property is connected to and served by water, sewage
disposal, storm drainage, telephone, gas and electricity facilities.
(i) There are no contracts or other obligations outstanding for the sale,
exchange, lease or transfer of any of the Owned Real Property, or any portion of
it, or the businesses operated by Joliet thereon, except as disclosed on
SCHEDULE 2.11(i). The general location agreed to with the City of Joliet
regarding the 20 buildable acres to be donated to the City of Joliet is depicted
on SCHEDULE 2.11(i) (the "Aquatic Park Area").
14
(j) The improvements owned, leased, subleased, licensed or occupied by or
to Joliet do not encroach on other property and the improvements of others do
not encroach onto the Owned Real Property, except as disclosed on updated
surveys of the Owned Real Property to be provided, at HGHC's expense as
specified in SECTION 4.14 hereinafter set forth, by the Sellers to the Buyers
prior to the Closing, provided that the Title Commitments contain encroachment
endorsements for any material encroachments.
(k) A certificate of occupancy exists for each building located on the
Owned Real Property, a true, correct and complete copy of which has been
delivered to the Buyers, and such certificate has not been amended and HGHC, at
its sole expense, has delivered or, prior to Closing, will deliver to the Buyer
updated as built ALTA surveys of each parcel of land comprising the Owned Real
Property as presently exists (any prior surveys shall be re-certified within
three (3) months of Closing to confirm that no new improvements have been
constructed since the date of the original survey), and, to the knowledge of
Sellers, without inquiry, all certificates of occupancy are valid and in full
force and effect.
(l) To the knowledge of the Sellers, without inquiry, there are no defaults
by the landlords under any of the Leased Real Property and such landlords have
performed all of their obligations thereunder. Joliet and HGHC have not waived
any material obligation of any such landlord or any right under any of the
Leased Real Property.
(m) With respect to the Lease ("Inter Track Lease") described in SCHEDULE
2.11(i) between Joliet, as landlord, and Inter-Track Partners ("Tenant"), a
complete, true and accurate copy of said Lease has been delivered to the Buyers;
Joliet is the current landlord of said Inter Track Lease; said Inter Track Lease
is valid and in full force and effect as to Joliet and represents the entire
agreement between the landlord and Tenant with respect to the leased premises
described therein and such Inter Track Lease has not been modified, changed,
altered, signed, supplemented or amended in any respect; the Inter Track Lease
has no outstanding options or rights of first refusal, in each case, to purchase
the leased premises or any part thereof or all or any part of the Owned Real
Property of which the leased premises are a part and no one except for the
Tenant occupies the leased premises; Tenant has paid all rent due under the
Inter Track Lease and, to the knowledge of the Sellers, without inquiry, no
event has occurred and no condition exists which, with the giving of notice or
lapse of time or both, would have constituted a default under the Inter Track
Lease by such Tenant.
(n) The Annexation Agreement ("Annexation Agreement") dated November 25,
1991, between the City of Joliet ("City") and Joliet (f/k/a Des Plaines River
Entertainment Corporation) is in full force and effect; all obligations to be
observed or performed under the Annexation Agreement by Joliet have been
observed and performed by Joliet; that all of the Owned Real Property subject to
the Annexation Agreement has been annexed by the City pursuant to said
Annexation Agreement; that all of the utilities to be installed and constructed
by Joliet under the Annexation Agreement have been installed and constructed and
such utilities have been dedicated to and accepted by the City; that the City
has adopted an ordinance classifying that portion of the Owned Real Property
annexed by the City as B-3 General Business and to Sellers' knowledge, without
inquiry, that such B-3 classification has not been amended or modified since the
date of the Annexation Agreement; that all improvements located
15
on the Owned Real Property comply with the applicable zoning classification;
that Joliet has constructed Empress Drive over and across the Owned Real
Property to gain ingress and egress from the Owned Real Property to a publicly
dedicated street or highway all as contemplated under the terms and conditions
of the Annexation Agreement.
SECTION 2.12 PERSONAL PROPERTY.
(a) SCHEDULE 2.12 lists or otherwise describes, in all material respects:
(i) all material equipment, machinery, furniture, fixtures and improvements,
tools, tooling, spare parts, boats, vessels, maritime equipment and vehicles
owned or leased by Joliet (including all leases of such property) or held for or
used in Joliet's business, (ii) all licenses received from manufacturers and
sellers of any of such items and (iii) any related claim, credit and right of
recovery with respect thereto (the "Personal Property"). SCHEDULE 2.12
identifies which Personal Property is subject to a lease. True and complete
copies of all such leases have been delivered to the Buyers, and each of such
leases is in full force and effect and constitutes a legal, valid and binding
obligation of Joliet and, to the knowledge of the Sellers, the other parties
thereto, in each case enforceable in accordance with its terms. Except as set
forth in SCHEDULE 2.12, no consent of any lessor of the Personal Property is
required in connection with the transactions contemplated by this Agreement.
(b) The use, installation, maintenance and storage of the Personal Property
is in material conformance with all applicable Laws.
(c) All of the Personal Property is free from material defects, fit for use
in the business of Joliet and has been installed and, to the knowledge of
Sellers, constructed in compliance with all applicable Laws and has been
approved where necessary by all of the requisite Persons.
SECTION 2.13 CONTRACTS.
(a) SCHEDULE 2.13 lists all written and oral contracts, agreements,
arrangements, commitments and leases, including all amendments thereto
(including, by reference, those listed on SCHEDULES 2.02 (AGREEMENTS), 2.10
(ITEM 4), 2.11, 2.16 (ITEMS 1 AND 2) AND 2.17, but not including insurance
policies which are listed on SCHEDULE 2.19), to which Joliet is a party or by
which any of its properties, assets or business are bound or subject to, which
meet any of the descriptions set forth below (the "Contracts"):
(i) All agreements, arrangements or commitments relating to loans,
lines of credit, security agreements, mortgages, guaranties, indemnifications or
other payment obligations;
(ii) All agreements, contracts, and commitments containing any
covenant limiting Joliet's right to engage in any line of business or compete
with any Person in any geographical area;
16
(iii) All employment agreements, contracts, policies, and commitments
with or between Joliet and any of its employees, directors, or officers, or
family members of any of them or entities' under their control or the control of
family members of any of them, including those relating to severance and payment
of commissions;
(iv) All joint venture or partnership agreements of any kind; and
(v) All contracts, agreements, arrangements or commitments of any kind
or nature (1) entered into outside the ordinary course of business of Joliet or
(2) involving the receipt or payment by Joliet of an amount in excess of
$25,000.
(b) All of the Contracts are valid and binding obligations of Joliet and,
to the knowledge of Sellers, the other parties thereto, in each case,
enforceable in accordance with their respective terms, are in full force and
effect and, except as otherwise specified in SCHEDULE 2.13, will continue in
full force and effect without the consent of any other party so that, after the
Closing, the Surviving Corporation will continue to be entitled to the full
benefits thereof. Except as set forth in SCHEDULE 2.13, none of the Contracts
contains any provision that is triggered by a change in control of Joliet or by
any of the transactions contemplated by this Agreement. Copies of the Contracts
in written form have been delivered to the Buyers.
SECTION 2.14 SUFFICIENCY OF ASSETS. Except as set forth on SCHEDULE 2.14,
Joliet owns all right, title and interest, or a valid leasehold interest in all
property of any type used in the operation of its business such that the Buyers
may operate the business of Joliet substantially in the manner conducted prior
to the Closing. Except as set forth on SCHEDULE 2.14, HGHC does not own or lease
any property of any type used in the operation of Joliet's business. To the
knowledge of the Sellers, the LSI Player Data Base of Joliet to be delivered to
the Buyers at the Closing contains the names of any and all rated or carded play
customers within the twelve (12) months immediately preceding the Closing Date
and the twelve (12) months immediately preceeding the date of this Agreement and
the most recent mailing address for each of such customers known to or used by
the Sellers.
SECTION 2.15 LICENSES AND PERMITS.
(a) except as set forth on SCHEDULE 2.15, Joliet possesses all the Permits
(as defined below) and other authorizations necessary to conduct its business as
now conducted, including, without limitation, all Permits required under the
Gaming Laws other than such Permits the absence of which would not, individually
or in the aggregate, have a Material Adverse Effect. All such Permits are
registered in the name of Joliet. Except as set forth on SCHEDULE 2.15, all such
Permits are in full force and effect and, where permitted by applicable Law,
will continue in full force and effect without the consent of any other party so
that, after the Closing, the Surviving Corporation will be entitled to the full
benefits of such Permits. There are no challenges, appeals or other proceedings
pending, or to the knowledge of the Sellers, threatened that would reasonably be
expected to result in the revocation, termination, modification or non-renewal
of any of the Permits. In the case of Permits relating to construction, dredging
or drainage work, Joliet has completed all such work in accordance with the
terms of such Permits and all applicable Laws.
17
(b) Joliet has obtained and currently maintains in full force and effect
all U.S. Coast Guard approvals (including all authorizations under the Merchant
Marine Act of 1920 and the Shipping Act of 1916 and Certificates of Inspection
issued by the U.S. Coast Guard), U.S. Army Corps of Engineers permits and
certifications, Illinois Department of Natural Resources permits, and Illinois
Environmental Protection Agency permits and all other material rights,
authorizations, certificates, certifications, licenses, consents, approvals and
permits necessary to construct the existing or planned improvements and to dock
the riverboats located in Joliet, Illinois. The riverboats are being operated in
compliance with their U.S. Coast Guard marine document, all applicable stability
letters and all applicable Permits.
(c) Except as set forth on SCHEDULE 2.15, Joliet and all its employees
holding licenses under the Gaming Laws are in compliance with all applicable
Gaming Laws.
(d) The term "Permits" means any federal, state, local or foreign, permit,
consent, registration, finding of suitability, approval, license or other
authorization, necessary for Joliet to operate either of the vessels or conduct
any business as currently being conducted, including the current casino and
gaming activities and operations of Joliet, including, without limitation,
permits issued pursuant to the Gaming Laws, the City of Joliet, Illinois
Ordinances, ordinances and resolutions and the Will County codes, ordinances and
resolutions and any applicable state gaming law and any federal or state laws
relating to gaming or currency transactions.
SECTION 2.16 LABOR RELATIONS; EMPLOYEES. As of February 28, 2001, Joliet
employed a total of approximately 1816 employees. Except as set forth in
SCHEDULE 2.16:
(a) Joliet has paid in full to, or accrued for the benefit of, all of its
employees all wages, salaries, commissions, bonuses, fringe benefit payments
(including vacation pay), and all other direct and indirect compensation of any
kind for all services performed by each of them;
(b) There is no unfair labor practice, safety, health, discrimination, wage
or other claim, charge, complaint, or suit pending or, to the knowledge of the
Sellers, threatened against or involving Joliet before the National Labor
Relations Board, Occupational Safety and Health Administration, Equal Employment
Opportunity Commission, Department of Labor, or any other federal, state, or
local agency;
(c) There is no labor dispute, strike, work stoppage, interference with
production, or slowdown in progress or, to the knowledge of the Sellers,
threatened against, or involving Joliet;
(d) To the knowledge of the Sellers, there is no labor organization, group,
association or union efforts to obtain the authorization of employees to become
represented by any such labor organization, group, association or union nor are
there any claims to represent the employees of Joliet;
(e) There is no question of representation under the National Labor
Relations Act, as amended, or any state equivalent thereof, pending with respect
to the employees of Joliet, nor is there any custom or practice recognizing any
labor organization, group, association or union as the representative of any
employees;
18
(f) There is no employee grievance or arbitration pending or, to the
knowledge of the Sellers, threatened which might have an adverse effect on
Joliet or on the conduct of its business;
(g) There exists no collective bargaining agreement to which Joliet is a
party, and there is no collective bargaining agreement currently being
negotiated, subject to negotiation, or renegotiation by Joliet;
(h) There is no dispute, claim, or proceeding pending with or, to the
knowledge of the Sellers, threatened by Immigration and Naturalization Service
with respect to Joliet;
(i) There is no policy or contract between Joliet and any employee that
would entitle any such employee to a severance benefit or payment of any kind
upon termination (either voluntary or involuntary) of the employment of such
employee;
(j) Every employee of Joliet is currently employed "at will" and, subject
to any rights granted by any applicable Law, may be terminated at any time
without notice; and
(k) There are no releases of liability or severance agreements obtained or
entered into by Joliet and any current or former employee under which Joliet is
presently liable.
SECTION 2.17 ERISA MATTERS; EMPLOYEE BENEFIT PLANS.
(a) SCHEDULE 2.17 annexed hereto sets forth an accurate, correct and
complete list of every Employee Program under which any employee or former
employee of Joliet has any present or future right to benefits or under which
Joliet has any present or future liability. Any Employee Program listed on
SCHEDULE 2.17 is referred to below as a "Joliet Program".
(b) The Sellers have made available to the Buyers with respect to each
Joliet Program current, accurate and complete copies of (i) all written
documents comprising such Joliet Program, (ii) the most recent annual return in
the Federal Form 5500 series filed with respect to such Joliet Program, (iii)
the most recent audited financial statements and actuarial reports, if any,
pertaining to such Joliet Program, (iv) the summary plan description currently
in effect and all material modifications thereto, if any, for such Joliet
Program, (v) the most recent IRS determination letter, if any, for such Joliet
Program, and (vi) a written description of the Joliet Program if there are no
written documents for such program.
(c) Each Joliet Program which is intended to qualify under Section 401(a)
of the Code is so qualified and, to the knowledge of the Sellers, no
circumstances have occurred that would adversely affect the tax-qualified status
of any such plan. Each such Joliet Program has received a favorable
determination letter from the Internal Revenue Service regarding its
qualification under such section on which Joliet may currently rely.
(d) Each Joliet Program has been maintained in all material respects in
accordance with its terms and with all applicable laws, and no failure to so
maintain any Joliet Program will result from the completion of the contemplated
transactions (either alone or in conjunction with any other event, such as a
termination of employment). Joliet has no unsatisfied material
19
liability, or any unpaid material fine, penalty or Tax, with respect to any
Joliet Program, or with respect to any other Employee Program. There has been no
"prohibited transaction," as defined in Section 406 of ERISA or Code Section
4975, or any breach of any duty under ERISA, any other applicable Law or any
agreement, with respect to any Joliet Program which could subject Joliet to
material liability either directly or indirectly (including, without limitation,
through any obligation of indemnification or contribution) for any damages,
penalties, Taxes or any other loss or expense. No individual who is a party to
an employment agreement or change-in-control agreement listed in SCHEDULE 2.13
has terminated employment or has been terminated. Joliet has made full and
timely payment of all contributions that it is required to make to each Joliet
Program by the terms of such plan or under the applicable Law. All contributions
which are so required to be made by Joliet to any Joliet Program for any period
ending prior to the Closing Date, but which are not due by the date of the
Closing Date, have been properly reserved or accrued in the Sellers' Financial
Statements to the extent required by GAAP.
(e) No litigation or claim (other than routine claims for benefits), and no
governmental administrative proceeding, audit or investigation, is pending or,
to the knowledge of the Sellers, threatened with respect to any Joliet Program.
(f) No Joliet Program, nor any plan of an ERISA Affiliate, is (i) a
"multiemployer plan", as defined in Section 3(37) of ERISA, and no withdrawal
liability has been incurred by or asserted against Joliet or any ERISA
Affiliate, a "multiple employer plan", as described in Section 413(c) of the
Code or a "multiple employer welfare arrangement", as defined in Section 3(40)
of ERISA, (ii) subject to the funding requirements of Section 302 of ERISA or
Section 412 of the Code, (iii) subject to Title IV of ERISA, or (iv) a
"voluntary employees' beneficiary association" described in Section 501(c)(9) of
the Code.
(g) No Joliet Program provides health or medical coverage to retired or
former employees, directors or officers, except for continuation coverage
required by Section 4980B of the Code or Sections 601 to 608 of ERISA or
applicable state law ("Continuation Coverage"). Any Continuation Coverage
provided under any Joliet Program is paid for solely by the individual receiving
such coverage. Joliet is in compliance in all material respects with the
requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA").
(h) To the knowledge of the Sellers, neither Joliet nor any ERISA Affiliate
is under any binding obligation to modify any Joliet Program, or to establish
any new Employee Program for the benefit of any employee of Joliet. Joliet or an
ERISA Affiliate thereof has reserved the right to amend, modify or terminate
each Joliet Program which is an "employee benefit plan" within the meaning of
Section 3(3) of ERISA. There has been no amendment to, written interpretation or
announcement (whether written or otherwise) by Joliet or any ERISA Affiliate
relating to, or change in participation or coverage under, any Joliet Program
that would materially increase the expense of maintaining such plan above the
level of expense incurred with respect to that plan for the most recent fiscal
quarter included in Joliet's financial statements.
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(i) No ERISA Affiliate has any unpaid material liability, fine, penalty or
Tax with respect to any Employee Program for which Joliet could be liable.
(j) For purposes of this SECTION 2.17, the term "Employee Program" shall
mean, including, without limitation, (i) any "employee benefit plan", within the
meaning of Section 3(3) of ERISA, whether or not it is subject to ERISA, or (ii)
any other employee benefit arrangement which is (1) an arrangement providing for
insurance coverage, (2) an incentive bonus or deferred bonus arrangement, (3) a
stock purchase or stock option arrangement, (4) a cafeteria plan, (5) a death
benefit arrangement, (6) an arrangement providing termination allowance, salary
continuation, severance or similar benefits, (7) an equity compensation plan,
(8) a deferred compensation plan, (9) a tuition reimbursement, dependent care
assistance, or legal assistance plan or arrangement, (10) a fringe benefit
arrangement (cash or noncash).
(k) For purposes of this SECTION 2.17, the term "ERISA Affiliate" shall
mean any entity which has ever been considered a single employer with Joliet
under Section 4001(b) of ERISA or Section 414(b), (c), (m) or (o) of the Code.
(l) No Employee Program exists that could result in the payment to any
present or former employee of Joliet of any money or other property or
accelerate or provide any other rights or benefits to any present or former
employee of Joliet as a result of the transaction contemplated by this
Agreement, which payment would constitute a parachute payment within the meaning
of Code Section 280G.
SECTION 2.18 ENVIRONMENTAL COMPLIANCE. Except as set forth in SCHEDULE
2.18:
(a) Joliet has complied with all applicable Environmental Requirements in
the use of the Real Property (including without limitation any on-site
construction) and operations of its business except where failure to comply
would not have a Material Adverse Effect;
(b) Except in compliance with applicable Environmental Requirements, Joliet
has never generated, manufactured, used, transported, treated, stored, handled,
disposed of, transferred, produced, or processed any Hazardous Material at, to,
or on the Real Property.
(c) There are no existing (or, to the knowledge of the Sellers, potential)
Environmental Claims relating to any Real Property, or operations of the
business nor any disposal, release, or threatened release of any Hazardous
Materials at the Real Property or, to the knowledge of the Sellers, anywhere,
with respect to Hazardous Materials generated at any Real Property;
(d) No underground storage tank (or associated equipment or piping) or
other underground storage receptacle containing Hazardous Materials is currently
located at or on the Real Property;
(e) There have been no releases by Joliet (or, to the knowledge of Sellers,
by anyone) of Hazardous Materials at, on, to or from the Real Property during
the period of time HGHC has
21
owned the Owned Real Property or leased the Leased Real Property (or, to the
knowledge of Sellers, at any time) that have or could potentially have a
Material Adverse Effect;
(f) No aboveground storage tank or other aboveground storage receptacle (or
associated equipment or piping) containing Hazardous Materials is currently
located at or on the Real Property;
(g) There are no polychlorinated biphenyls or friable asbestos located or
contained at, on or in the Real Property;
(h) HGHC has not received any notice issued pursuant to the citizen's suit
provision of any Environmental Requirement relating to the Real Property or
operations of the business;
(i) HGHC has not received any request for information notice, demand,
letter, administrative inquiry, formal complaint, or claim with respect to any
Environmental Requirement relating to the Real Property or operations of the
business; and
(j) There have been no environmental investigations, environmental site
assessments, environmental audits or soil or ground water sampling conducted at
the Owned Real Property during the period of time HGHC has owned the Owned Real
Property (or, to the knowledge of Sellers, at any time).
SECTION 2.19 INSURANCE.
(a) Joliet is insured by insurers with respect to all of its properties and
assets used in its business, including with respect to all Owned Real Property,
or its employees and business to the extent customary for persons conducting
businesses similar to those of Joliet. SCHEDULE 2.19 sets forth with respect to
Joliet a list of all policies of title, liability, theft, fidelity, life, fire,
product liability, workmen's compensation, health, and other forms of insurance
held by Joliet and specifies the insurer, amount of coverage, premiums,
deductibles, type of insurance and policy number.
(b) The policies listed in SCHEDULE 2.19 are in full force and effect, and
all premiums due and payable with respect to such policies are currently paid.
The insurance coverage provided by the policies listed in SCHEDULE 2.19
satisfies all contractual and statutory requirements applicable to Joliet. HGHC,
has delivered to the Buyers copies of all insurance policies listed on SCHEDULE
2.19.
SECTION 2.20 NO CHANGES. Except as set forth on SCHEDULE 2.20, since
December 31, 2000, Joliet has not, directly or indirectly: (a) incurred any
liability or obligation of any nature (whether accrued, absolute, contingent or
otherwise) except in the ordinary course of business and in a manner consistent
with past practices; (b) incurred any indebtedness for borrowed money or entered
into any commitment to borrow money or guarantee, assume or endorse any such
liability; (c) sold, transferred or otherwise disposed of any assets except as
permitted by this Agreement or in the ordinary course of business; (d) conducted
its business or entered into any transaction except in the ordinary course of
business and in a manner consistent with past
22
practices; (e) made any changes to its Articles of Incorporation, By-Laws, or
other organizational documents; (f) entered into any material contract to
purchase or lease any real property; or (g) entered into any contract, agreement
or arrangement of any kind not cancelable or terminable upon not more than sixty
(60) days notice without premium or penalty of any kind.
SECTION 2.21 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither Joliet nor any
Person acting on its behalf has given or agreed to give directly or indirectly,
any unlawful gift or similar benefit to any customer, supplier, governmental
employee, or other Person who is or may be in a position to help or hinder the
business of Joliet (or assist Joliet in connection with any actual or proposed
transaction relating to its business), which might subject Joliet to any damage
or penalty in any civil, criminal, or governmental litigation or proceeding.
SECTION 2.22 MINUTE BOOKS, STOCK RECORD BOOK. The minute books of Joliet
contain complete and accurate records of all official meetings and other
official corporate actions of its stockholders, board of directors and
committees of the board of directors. The stock record book of Joliet contains a
complete and accurate record of the current ownership of all outstanding shares
of capital stock of Joliet. All other books and records used by Joliet in the
conduct of its business or required by applicable Laws are complete and accurate
in all material respects.
SECTION 2.23 BROKERS' OR FINDERS' FEES. Except as set forth on SCHEDULE
2.23, no agent, broker, investment banker or other person or firm acting on
behalf of HGHC, Joliet and/or their respective directors, executive officers or
other representatives, or under their authority, is or will be entitled to any
broker's or finder's fee or any other commission or similar fee, directly or
indirectly, from HGHC or Joliet in connection with the negotiations leading to
this Agreement or the consummation of the transactions contemplated hereby.
SECTION 2.24 INTELLECTUAL PROPERTY.
(a) The patents and inventions, trademarks, service marks, trade names,
styles, logos, designs, trade secrets, technical information, engineering
procedures, know-how and processes (whether confidential or otherwise),
software, copyrights, MIS programs and other intellectual property (including
applications for any of the aforesaid), in each case used in the operation of
the business of Joliet as presently conducted, are collectively referred to
hereinafter as the "Intellectual Property."
(b) SCHEDULE 2.24(b) identifies any and all trademarks, service marks,
trade names, styles, logos, designs and copyrights except for (x) Intellectual
Property which is identified on SCHEDULE 2.24(c) and (y) standard software
license agreements of Joliet (the forms of which have been provided to the
Buyers). SCHEDULE 2.24(b) also identifies each license and other agreement that
relates to the granting by Joliet of any rights, including without limitation
rights of use and ownership, in any of the Intellectual Property. Joliet owns
all right, title and interest in and to, or otherwise licenses pursuant to valid
and enforceable license agreements, any and all Intellectual Property used in
the business of Joliet as presently conducted.
(c) SCHEDULE 2.24(c) identifies any and all Intellectual Property that will
not be retained by Joliet and as to which Joliet will have no continuing right
to use as of the Closing
23
Date. All the Intellectual Property identified on
SCHEDULE 2.24(c) shall be and will remain the exclusive property of HGHC as of
the Closing Date.
(d) Other than as disclosed on SCHEDULE 2.24(d), no person has a right to
receive a royalty, or has noticed a claim to Joliet of a right to receive a
royalty, with respect to any of the Intellectual Property. Other than as
disclosed on SCHEDULE 2.24(d), there are no claims or proceedings pending, or,
to the knowledge of Sellers, threatened, against Joliet asserting that its use
of any of the Intellectual Property infringes upon the rights of any other
person. To the knowledge of Sellers, there is no basis for any claim that the
use by Joliet of any of the Intellectual Property infringes upon the rights of
any other person.
(e) All patents, trademarks, trade names, service marks and copyrights
listed on SCHEDULE 2.24(b) are valid and in full force and effect. Other than as
disclosed on SCHEDULE 2.24(c), the rights of Joliet in and to the Intellectual
Property are, and at Closing will be, transferable as contemplated by this
Agreement.
SECTION 2.25 ABSENCE OF UNDISCLOSED LIABILITIES. Except (a) as disclosed in
the Financial Statements, (b) for trade and accrued liabilities incurred in the
ordinary course of business and in a manner consistent with past practices, (c)
for liabilities under or permitted by this Agreement and (d) as set forth on
SCHEDULE 2.25, Joliet does not have any indebtedness, liability or obligation of
any kind, whether accrued, contingent or otherwise (whether or not required by
GAAP to be reflected in the Financial Statements), and whether due or to become
due, which is not shown or provided for in the Financial Statements.
SECTION 2.26 CLAIMS AGAINST THIRD PARTIES. SCHEDULE 2.26 contains a list
and brief description of pending litigations, arbitrations or similar
proceedings initiated by Joliet, or by HGHC on behalf of Joliet, against third
parties related to the conduct of the business of Joliet (the "Claims").
SECTION 2.27 BANK ACCOUNTS. SCHEDULE 2.27 contains a list of all bank
accounts, escrow deposit accounts, money market accounts, brokerage accounts and
similar accounts and safe deposit boxes of Joliet, including all accounts or
other locations at which Joliet holds cash, cash equivalents or securities, with
an identification of the name of the bank or brokerage firm, account number and
the signatories thereto.
SECTION 2.28 DISCLOSURE. Neither this Agreement, nor the Exhibits and
Schedules attached hereto nor any other document to be provided to the Buyers in
connection with the transactions contemplated by this Agreement contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein and therein not
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
Each of the Buyers jointly and severally represent and warrant to HGHC that:
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SECTION 3.01 ORGANIZATION; QUALIFICATION. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and JAC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Illinois. Each of the Buyers has all
requisite corporate power and authority and all governmental licenses,
authorizations, consents and approvals necessary to own, lease and operate its
properties and to carry on its business as now being conducted. Parent is the
sole shareholder of JAC. There are no outstanding options, warrants or other
rights of any kind to acquire any shares of capital stock or equity interests of
JAC, nor are there any outstanding securities convertible into or exchangeable
for, or which otherwise confer on the holder thereof any right to acquire, any
shares of capital stock or equity interests of JAC, and JAC has not entered into
and is not a party to any contract, commitment, agreement, understanding,
arrangement or claim of any kind to issue any securities. Each of the Buyers is
duly qualified as a foreign entity and is in good standing to do business in
every jurisdiction in which such qualification is necessary because of the
nature of the properties or assets owned, leased or operated by it or the nature
of the business conducted by it, except where the failure to be so qualified,
licensed or in good standing would not have a material adverse effect on the
assets, properties, results of operations, cash flows or financial condition of
each of the Buyers.
SECTION 3.02 AUTHORITY; POWER; AND NO VIOLATION. The execution and delivery
of this Agreement and all documents to be executed in connection with this
Agreement by the Buyers have been authorized by all necessary corporate action
on the part of each of the Buyers. Each of the Buyers has the requisite
corporate power and corporate authority to execute and deliver this Agreement
and all documents to be executed in connection with this Agreement, and to take
any and all other actions required to be taken, directly or indirectly, by it
pursuant to the provisions of this Agreement and all documents to be executed in
connection with this Agreement. This Agreement constitutes the legal, valid and
binding obligation of each Buyer enforceable against each Buyer in accordance
with its terms. Except as set forth on SCHEDULE 3.02, the execution and delivery
of this Agreement, the fulfillment and compliance with the terms and conditions
hereof and the consummation of the transactions contemplated by this Agreement
will not (a) conflict with or result in a breach or violation of the
organizational documents of either of the Buyers; (b) conflict with or result in
any material violation or material breach of or constitute a material default
(or an event which, with notice or lapse of time or both, would constitute a
material default) under, or give rise to any right of termination, cancellation
or acceleration of any obligation or result in a loss of any material benefit
under, or require a consent or waiver under, any of the terms, conditions or
provisions of any contract to which the Buyers are subject; (c) violate in any
material respect any Law applicable to the Buyers or any of their respective
properties, assets, or outstanding shares of capital stock, or other securities;
or (d) constitute an event which, with or without notice, lapse of time, or
action by a third party, could result in the creation of any Lien upon any of
the assets or properties of any of the Buyers or cause the maturity of any
liability, obligation, or debt of any of the Buyers to be accelerated or
increased.
SECTION 3.03 CONSENTS AND APPROVALS. The execution, delivery, and
performance of this Agreement by the Buyers and the consummation by the Buyers
of the transactions contemplated hereby, will not require any notice to, or
consent, authorization or approval from any court or governmental authority or
any other third party, except for (i) the filing of the pre-
25
merger notification report under the HSR Act, (ii) the filing of the Certificate
of Merger with respect to the Merger with the Secretary of State of the State of
Illinois, (iii) any approvals and filing of notices required under any
applicable gaming industry regulation, (iv) such consents, approvals, orders,
authorizations, permits, filings or registrations related to, or arising out of,
compliance with statutes, rules or regulations regulating health, the
consumption, sale or serving of alcoholic beverages and food and the preparation
of food, (v) those notices, consents, authorizations and approvals set forth on
SCHEDULE 3.03, and (vi) such immaterial filings and consents as may be required
under any environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions described in this Agreement. Any and all notices, consents,
authorizations and approvals referenced on SCHEDULE 3.03 and required to be
obtained by the Buyers prior to the Closing, have been or, prior to the Closing,
will have been made or obtained.
SECTION 3.04 BROKERS' OR FINDERS' FEES. Except as set forth on SCHEDULE
3.04, no agent, broker, investment banker or other person or firm acting on
behalf of the Buyers and/or their directors, executive officers or other
representatives, or under their authority, is or will be entitled to any
broker's or finder's fee or any other commission or similar fee, directly or
indirectly, from Buyers in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby.
SECTION 3.05 NO ADVERSE FACTS FOR GAMING APPROVALS. To the knowledge of the
Buyers, there are no facts relating to the Buyers, shareholders holding five
percent (5%) or more of Parent, or officers, directors or employees required to
obtain Level I occupational gaming licenses ("Level One Employees") that would
prevent the Buyers, shareholders holding five percent (5%) or more of Parent, or
officers, directors or Level One Employees of the Buyers from obtaining from the
applicable Gaming Authorities gaming licenses or the approvals necessary for the
Buyers to consummate the Merger.
SECTION 3.06 LITIGATION. Except as set forth on SCHEDULE 3.06, no action,
suit or proceeding has been instituted or, to the knowledge of the Buyers,
threatened to restrain, prohibit, or otherwise challenge the legality or
validity of the transactions described in this Agreement.
ARTICLE IV
PRECLOSING COVENANTS OF THE SELLERS
HGHC covenants and agrees that between the date of this Agreement and the
earlier of the Closing Date or the termination of this Agreement in accordance
with the terms hereof, HGHC shall comply, and HGHC shall cause Joliet to comply,
with the following provisions:
SECTION 4.01 EXCLUSIVITY. Neither HGHC or Joliet nor any of their
respective officers, directors, stockholders, representatives or other agents,
directly or indirectly shall (for so long as Buyers shall not have breached
their obligations under this Agreement): (a) solicit, initiate or encourage
submission of any inquiry, proposal or offer from any potential investor or
acquirer relating to any transaction involving any debt or equity securities of
Joliet (currently outstanding
26
or to be issued) or any sale or transfer of any of the assets of Joliet other
than in the ordinary course of business; (b) enter into, participate in or
continue any discussions or negotiations (except with the Buyers) regarding, or
furnish any information to or cooperate with any Person (other than the Buyers)
with respect to, any transaction involving any debt or equity securities of
Joliet (currently outstanding or to be issued) or any sale or transfer of any
assets of Joliet, other than in the ordinary course of business; or (c) enter
into any agreement (except with the Buyers) relating in any manner to any
transaction involving any debt or equity securities of Joliet (currently
outstanding or to be issued) or any sale or transfer of any assets of Joliet,
other than in the ordinary course of business; PROVIDED, HOWEVER, that
notwithstanding any other provision in this Agreement, including this SECTION
4.01, a sale of HGHC or all or substantially all of the assets of HGHC or its
subsidiaries in which either HGHC retains, or such purchaser assumes, all of the
obligations of HGHC under this Agreement (an "HGHC Sale") is not prohibited;
provided that, in the case of an assumption of this Agreement by the purchaser,
the credit rating for the subordinated debt of such purchaser issued by S&P's or
Xxxxx'x is not less than B+ or B2, respectively. If any Seller receives, or any
officer, director, stockholder, representative or agent of Seller receives and
notifies any Seller, directly or indirectly, of an offer or proposal to enter
into any transaction involving any debt or equity securities of Joliet
(currently outstanding or to be issued) or any sale or transfer of any assets of
Joliet, other than in the ordinary course of business, HGHC shall notify Buyers
by the close of business on the third following Business Day. HGHC or Joliet, as
the case may be, shall, and each shall cause its officers, directors,
stockholders, agents and representatives to immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any Person
conducted heretofore with respect to any of the matters referred to in this
SECTION 4.01. Notwithstanding any other provision in this Agreement, including
this SECTION 4.01, Joliet shall be able to (1) sell or transfer twenty (20)
buildable acres of real estate described on SCHEDULE 2.11(i); in Joliet,
Illinois to either the City of Joliet and/or the Joliet Park District, without
having any effect on the Merger Consideration; and (2) sell, transfer or
otherwise dispose of any asset of Joliet as permitted by SECTION 4.05.
SECTION 4.02 SUPPLEMENTS AND UPDATES TO REPRESENTATIONS AND WARRANTIES.
HGHC shall promptly deliver to the Buyers written notice of any material
supplemental information updating the information set forth in the
representations and warranties set forth in Article II of this Agreement;
provided that no supplemental information added to or deleted from the
representations and warranties of the Sellers and the updated disclosure
schedules after the date hereof shall impair the Buyers' rights to assert or
recover damages for a breach of the Sellers' representations and warranties made
on the date hereof, and any damages accruing to the Buyers shall be paid as
provided in ARTICLE XII. Any supplemental information delivered pursuant to this
SECTION 4.02 shall not be considered in determining whether the condition set
forth in SECTION 8.02 with respect to representations and warranties has been
met. Prior to the Effective Time, the Sellers shall advise the Buyers of any
facts which would constitute a breach of a representation or warranty as of the
date made or a default in a covenant contained herein.
SECTION 4.03 MAINTENANCE OF STATUS. Joliet will be maintained at all times
as an entity validly existing and in good standing under the laws of the State
of Illinois.
SECTION 4.04 OPERATION OF BUSINESS. Joliet shall operate its business only
in the ordinary course in a manner consistent with past practices and in
accordance with existing
27
agreements, and shall use commercially reasonable efforts (subject to the Gaming
Board Consent) to (a) keep available the services of its present officers and
employees, (b) continue and preserve good relationships with suppliers,
customers, lenders and others having business dealings with it, and (c) maintain
in full force and effect all Permits. Joliet, without the prior written consent
of the Buyers, which consent may not be unreasonably withheld or delayed, shall
not: (i) grant, confer or award any option, warrant, conversion right or other
right not existing on the date hereof to acquire any shares of its capital
stock; (ii) increase any compensation or enter into or amend any employment
agreement with any of its present or future officers, directors or employees,
except for normal increases in compensation or bonuses paid consistent with past
practices in the ordinary course of business; (iii) grant any severance or
termination package to any Joliet Employee or Joliet consultant; (iv) adopt any
new Employee Program or amend any existing Joliet Program in any material
respect outside the ordinary course of business, except as contemplated by the
terms of this Agreement; (v) enter into any agreement or transaction, or agree
to enter into any agreement or transaction, outside the ordinary course of
business, including without limitation any transaction involving a merger,
consolidation, joint venture, complete liquidation or dissolution,
reorganization, recapitalization, or restructuring or a purchase, sale, lease or
other disposition of, a material portion of its assets or capital stock, other
than its use of its Current Assets for any purpose whatsoever (other than a
purpose which, directly or indirectly, materially interferes with or is
materially detrimental to the operation of the business of Joliet); (vi) incur
any Debt or guarantee any Debt or issue or sell any debt or equity securities or
warrants or rights to acquire any debt securities of others other than pursuant
to the current bank credit agreement of HGHC; (vii) make any loans, advances or
capital contributions to, or investments in, any Person; provided, that Joliet
shall be able to loan, advance, contribute or invest Current Assets in any
Person so long as such loan, advance, capital contribution or investment does
not directly or indirectly materially interfere with or be materially
detrimental to the operations of the business of Joliet; (ix) alter in any
material respect the manner of keeping its books, accounts or records, or change
in any material respect the accounting practices therein reflected; (x) grant or
make any mortgage or pledge of its assets or stock or subject it or any of its
material properties or assets to any Lien of any kind, except (A) Liens for
Taxes not currently due or (B) Liens which arise in the ordinary course of
business in connection with permitted capital expenditures and which encumber
only the property for which the capital expenditure is made; (xi) fail in any
material respect to comply or continue to comply with all applicable Laws; (xii)
amend or modify in any manner its Certificate of Incorporation, By-Laws or other
organizational documents, except as required by the Gaming Board Consent; (xiii)
change in any manner the process by which any reserves are determined except as
required or necessary to comply with GAAP or on order from the IGB; (xiv) enter
into any collective bargaining agreement, union agreement or any amendment of
any existing collective bargaining agreement or union agreement including,
without limitation, the agreements listed on SCHEDULE 2.13 hereto; or (xv) enter
into any contract, agreement, commitment or other arrangement extending beyond
one year or involving consideration in excess of $25,000 in the aggregate,
provided, that, capital expenditures listed on SCHEDULE 4.09 are not subject to
this subclause (xv), unless such contract, agreement, commitment or other
arrangement may be terminated by the Buyers upon the Closing without the Buyers
being subject to any obligation, expense or other liability as a result of such
termination. The Sellers agree that on the Closing Date there shall be an amount
of cash in the Joliet "cage vault" equal to or greater than the average daily
balance maintained in the Joliet "cage vault" during the first three (3) months
of the 2001 calendar year.
28
SECTION 4.05 MAINTENANCE OF ASSETS AND PROPERTIES. Joliet shall maintain
all of its properties and assets in their present order and condition (including
routine or necessary maintenance), subject to normal wear and tear and normal
obsolescence and loss by casualty and the requirements of its business, and will
maintain insurance upon all of its properties, assets and operations of the kind
and in the amounts existing as of the date of this Agreement. Except for assets
sold or disposed of in the ordinary course of business or as a result of a
casualty and except as otherwise permitted herein, Joliet shall not sell,
transfer or otherwise dispose of any assets without the prior written consent of
the Buyers.
SECTION 4.06 ACCESS; COOPERATION. Joliet shall grant to the Buyers and
their accountants, attorneys and other authorized representatives including,
without limitation, environmental consultants, upon reasonable notice and during
normal business hours, access to its offices and to any of the Real Property
(subject to the terms of the applicable lease agreements, in the case of Leased
Real Property) in order to inspect, investigate and audit its records and
business operations and to consult with its officers, key employees, attorneys,
accountants, representatives and agents and to conduct a Phase I environmental
site assessment report (and, to the extent recommended in such environmental
site assessment report, any additional environmental investigations subject to
the Sellers' consent which shall not be unreasonably withheld) so long as such
actions do not materially interfere with the business of Joliet. HGHC shall
cooperate with the Buyers and their officers, directors, employees, attorneys,
accountants and other agents and do such other acts and things in good faith as
may be necessary to timely effectuate the purposes of this Agreement.
SECTION 4.07 PERFORMANCE OF OBLIGATIONS UNDER AGREEMENTS. Joliet shall
timely perform in all respects all of the obligations and covenants set forth in
the Contracts and all other binding commitments and agreements to which it is a
party, except to the extent such Contracts, commitments and agreements are
terminated or amended in the ordinary course of business or are not performed in
the good faith reasonable judgment of HGHC and which nonperformance does not
have a Material Adverse Effect and will not adversely affect the Buyers' ability
to obtain the necessary gaming permits or approvals.
SECTION 4.08 GOVERNMENTAL: APPROVALS AND CONSENTS. Promptly after execution
of this Agreement, the Sellers shall file all applications and reports which are
required to be filed by them with any governmental agency or authority in
connection with the transactions described in this Agreement; provided, that
concurrently with Buyers' HSR filing in accordance with Section 5.04(c), HGHC
shall file all reports, applications, notices and other documents required to be
filed by HGHC under the HSR Act. The Sellers shall also promptly provide all
information that any governmental agency may require in connection with any such
application, report, notice or other document. The Sellers shall use all
commercially reasonable efforts to obtain all consents and approvals of any kind
from any Person in connection with the transactions described herein.
SECTION 4.09 CAPITAL EXPENDITURES. Joliet is permitted to undertake all
capital expenditure projects specifically provided for on SCHEDULE 4.09. In no
event shall capital expenditures exceed the amounts provided for on SCHEDULE
4.09 by $25,000 in the aggregate without the Parent's prior written consent.
29
SECTION 4.10 FIRE OR CASUALTY. In the event that prior to the Closing any
material asset or property of Joliet should be damaged or destroyed as a result
of fire, casualty or other occurrence, no settlement shall be made with any
insurance company and no decision with regard to restoration or rebuilding of
any properties shall be made, except in accordance with commercially reasonable
business practices and with the prior written consent of the Parent which shall
not be unreasonably withheld or delayed.
SECTION 4.11 COOPERATION. Each of the Sellers shall generally cooperate
with the Buyers and their officers, directors, employees, attorneys, accountants
and other agents and, generally, do such other acts and things in good faith as
may be reasonable to timely effectuate the purposes of this Agreement and the
consummation of the transactions described herein in accordance with the
provisions of this Agreement. Subject to IGB approval, any meetings relating to
the approval of this Agreement or with respect to the transfer of the Joliet
gaming license to Buyers with any governmental agencies or officials by HGHC or
Joliet or any of their representatives shall be in the presence of a
representative of the Buyers; all written communications between HGHC or Joliet
or any of their representatives and any Illinois governmental agency or
officials relating to the approval of this Agreement or with respect to the
transfer of the Joliet gaming license to Buyers promptly shall be delivered to
the Buyers; and a written summary of any telephonic communications relating to
the approval of this Agreement or with respect to the transfer of the Joliet
gaming license to Buyers between HGHC or Joliet or any of their representatives
and any governmental agencies or officials promptly shall be delivered to the
Buyers.
SECTION 4.12 INTERCOMPANY BALANCES. All intercompany accounts receivable
and payable and any other intercompany balances between (a) Joliet and (b) HGHC
or any of its subsidiaries, shall be eliminated prior to the Closing.
SECTION 4.13 TITLE INSURANCE. On or before Closing, HGHC shall obtain from
Chicago Title Insurance Company (the "Title Company"), title insurance
commitments for ALTA owner's title insurance policies (Policy form 1992)
covering the Owned Real Property, (the "Title Commitments"), with title
endorsements including, without limitation, Zoning 3.1, Access, Contiguity,
Single Tax Parcel, Subdivision, Owner's Comprehensive, Non-Imputation, Survey
and with an extended coverage endorsement over the all general title exceptions,
("Required Title Policy Endorsements") and showing all matters affecting title
to each parcel of the Owned Real Property, but subject only to the title
exceptions enumerated in SCHEDULE 2.11(b) hereof other than the Liens to be
removed pursuant to SECTION 9.02(l) (the "Permitted Exceptions") and those
additional items listed on SCHEDULE 4.13 hereof and binding the Title Company to
issue at Closing Owner's Policies of Title Insurance (each a "Title Policy",
collectively, the "Title Policies"), inclusive of the Required Title Policy
Endorsements, in the aggregate amount of $51,250,000. Each Title Policy shall
include any easements benefiting the subject Owned Real Property as insured
parcels. The cost of the Title Policies and the Required Title Policy
Endorsements shall be for the account of HGHC.
SECTION 4.14 SURVEYS. On or before Closing, HGHC shall obtain and deliver
to Buyers updated surveys for the Owned Real Property, certified to Joliet,
Buyer and the Title Company in accordance with Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys
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meeting the 1999 requirements of a Class A Survey (each a "Survey" and
collectively, the "Surveys"). The Surveys shall be certified as of a current
date by a registered engineer or surveyor reasonably satisfactory to Parent, and
show the exact location of all improvements, parking lots, building setback
lines of record, easements, rights-of-way and encroachments affecting the Owned
Real Property, and other matters apparent thereon, the relation of the Owned
Real Property to all adjacent public thoroughfares and all utilities as they
service the Owned Real Property from their respective main lines. The surveyor
must certify that the real estate depicted on the Survey does not lie in an
"area of special flood hazard" for purposes of the National Flood Insurance
Program. In any event, the Survey shall be sufficient to cause the Title Company
to delete the standard survey exceptions from the Title Policy and enable the
Title Company to issue a 3.1 Zoning Endorsement for the Owned Real Property
described in the Title Policy.
SECTION 4.15 CONFIDENTIALITY. In addition to SECTION 5.03, each party hereby
agrees (on behalf of itself and each of its subsidiaries) to use reasonable
precautions to keep confidential, in accordance with its customary procedures
for handling confidential information of this nature, any non-public information
supplied to it pursuant to this Agreement; PROVIDED THAT nothing herein shall
limit the disclosure of any such information (i) to the extent required by
statute, rule, regulation or judicial process, (ii) to counsel for any of the
parties hereto, (iii) to potential lenders, auditors or accountants, (iv) in
connection with any litigation to which any one or more of the parties hereto is
a party relating to the transactions contemplated by this Agreement or (v) to an
Affiliate of the parties hereto. HGHC hereto agrees (on behalf of itself and
each of its subsidiaries) to use reasonable precautions to keep confidential, in
accordance with its customary procedures for handling confidential information
of this nature, all confidential information related to the assets acquired by
Buyers, including, without limitation, any data bases and any customer
information, of Joliet and to Joliet's business and operations; provided,
however, that nothing herein shall limit the disclosure of any such information
to the extent required by statute, rule, regulation or judicial process. The
obligation to maintain confidentiality in accordance with the preceding sentence
will continue in full force and effect from and after the Closing Date for a
period of two (2) years.
SECTION 4.16 HGHC BOARD OF DIRECTORS. The Empress Casino Joliet Settlement
Agreement dated as of January 31, 2001 (the "Settlement Agreement") obligates
HGHC under certain circumstances to nominate new directors for Joliet. HGHC
agrees to consult with Parent prior to selecting any nominee director pursuant
to the Settlement Agreement and to use its reasonable best efforts to select a
nominee director reasonably acceptable to Parent prior to submitting the name of
such nominee director to the IGB; PROVIDED, HOWEVER, that the final decision as
to the selection of the nominee directors is made by HGHC.
SECTION 4.17 XXXXXXX LAWSUIT. In recognition of the potential impact of the
XxXxxxx Lawsuit on the Sellers' obligations to the Buyers hereunder, the Sellers
and their legal counsel shall provide to the Buyers as set forth below: (i)
copies of all pleadings, motions or other materials filed with the court
promptly after filing or receipt by either Seller (but in any event within two
(2) Business Days after filing or receipt by either Seller); (ii) copies of all
nonministerial correspondence between the parties to the XxXxxxx Lawsuit to the
extent that such disclosure will not violate any attorney client or similar
privilege of either Seller with any
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third party or any confidentiality agreement or joint defense agreement to which
either Seller is a party; (iii) notice of all hearings and depositions relating
to the XxXxxxx Lawsuit at least five (5) Business Days prior to such hearing or
deposition; and (iv) to the extent permitted by applicable law, copies of all
deposition transcripts. All notices to be given pursuant to this SECTION 4.17
shall be given to the following recipients:
RECIPIENTS:
Xxxxxx X. Xxxxxx, Esq.
Senior Vice President and
General Counsel
Argosy Gaming Company
000 Xxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Xxxxxx X. Xxxxxx, Esq.
Goldberg, Kohn, Bell, Black,
Xxxxxxxxxx & Xxxxxx, Ltd.
00 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
SECTION 4.18 EXTENSION OF WAIVER. Prior to May 31, 2001, HGHC will obtain
an extension of the existing waiver under HGHC's current Credit Facility
referenced in item 3 of SCHEDULE 2.02 to a date not earlier than July 31, 2001
which extension shall be in form and substance reasonably acceptable to Parent,
it being agreed that an extension of the existing waiver in its present form
(other than with respect to the May 31, 2001 date referenced therein) shall be
acceptable.
ARTICLE V
PRECLOSING COVENANTS OF THE BUYERS
SECTION 5.01 GOVERNMENTAL APPROVALS. Promptly after execution of this
Agreement, and in accordance with SECTION 5.04 below, the Buyers shall file all
applications and reports which are required to be filed by the Buyers with any
governmental agency or authority in connection with the transactions described
in this Agreement. The Buyers also shall promptly provide all information that
any governmental agency may reasonably request in connection with any such
application or report.
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SECTION 5.02 COOPERATION. The Buyers shall generally cooperate with the
Sellers and their respective officers, directors, employees, attorneys,
accountants and other agents and, generally, do such other acts and things in
good faith as may be necessary to timely effectuate the purposes of this
Agreement and the consummation of the transactions described herein in
accordance with the provisions of this Agreement.
SECTION 5.03 CONFIDENTIALITY. The parties hereby acknowledge that HGHC and
Parent previously executed a confidentiality agreement (the "Confidentiality
Agreement") dated as of November 16, 2000 and JAC hereby adopts the
Confidentiality Agreement and agrees to be bound by the terms and conditions
thereof, which shall remain in full force and effect. Any information supplied
to the Buyers after the date of execution of this Agreement shall remain subject
to the provisions of the Confidentiality Agreement.
SECTION 5.04 TIMING COMMITMENTS.
(a) Within twenty (20) Business Days after the date of this Agreement,
Buyers shall: (i) file all required applications for Buyers and all "key
persons" to obtain the necessary approvals from the Illinois Gaming Board
("IGB") in order to consummate the transactions contemplated herein; and (ii)
request an accelerated review from IGB in connection with such filing; provided,
however, that if Buyers are proceeding in good faith to make such filings,
Buyers may have an additional ten (10) Business Days to complete the filings
described in this SECTION 5.04(a) by providing written notice to such effect to
Sellers.
(b) Within thirty (30) Business Days after the date of this Agreement,
Buyers shall: (i) file all necessary applications for Buyers and all "key
persons" to obtain the necessary approval from any other Gaming Authority, or
any jurisdiction other than Illinois in which approval is required, in order for
Buyers to fulfill their obligations to consummate the transactions contemplated
herein; and (ii) where applicable and available, request an accelerated review
from all such other Gaming Authorities and jurisdictions in connection with such
filings; provided, however, that if Buyers are proceeding in good faith to make
such filings, then such time periods shall be extended an additional ten (10)
Business Days upon Buyers providing written notice to such effect to Sellers.
(c) Promptly after the filings with the IGB described in SECTION 5.04(a)
above, the Buyers shall file concurrently with the filing by HGHC all reports
and notices required to be filed by the Buyers under the HSR Act.
(d) Subject to IGB approval, Parent agrees to notify the contact person of
Ice Xxxxxx and Xxxxxxx Berlin Shereff Xxxxxxxx, LLP (pursuant to the notice
provisions contained in SECTION 13.07 of this Agreement) in advance of any
meetings with any Illinois governmental agencies or officials by any
representative of the Buyers relating to the approval of this Agreement or with
respect to the transfer of the Joliet gaming license to the Buyers and provide a
representative of HGHC an opportunity to attend such meetings. In addition, the
Buyers agree to promptly provide to HGHC a copy of all written communications,
including any application or acceleration request pursuant to SECTIONS 5.04(a)
or (b) between the Buyers and any Illinois governmental agency or officials
relating to the approval of this Agreement or with respect to the
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transfer of the Joliet gaming license to the Buyers and a written summary of any
telephone communications relating to the approval of this Agreement or with
respect to the transfer of the Joliet gaming license to the Buyers.
(e) The Buyers agree to use their reasonable good faith efforts to take all
actions necessary or desirable and in good faith to obtain regulatory approvals
of the Merger and applicable licensure, in a timely fashion. Toward that end,
Buyers promptly shall provide all information in their control that the IGB, any
other Gaming Authority or governmental agency may request in connection with the
transactions contemplated hereby.
SECTION 5.05 FINANCING. On or before July 31, 2001, the Buyers shall obtain
any and all financing necessary to consummate the Merger; provided, however,
that if a FM Event occurs at any time after July 1, 2001, the Buyers shall have
an additional thirty (30) days from the commencement of such FM Event (such
thirty (30) day period being herein referred to as the "FM Extension Period") to
obtain such financing. Parent hereby agrees to make an equity contribution to
JAC in such amount as Gaming Authorities may require in order to approve the
consummation of the Merger. The Buyers acknowledge that the obligations of the
Buyers to consummate the transactions described in this Agreement are not
contingent on the Buyers obtaining financing of any kind.
ARTICLE VI
OTHER MATTERS
SECTION 6.01 EMPLOYEE OBLIGATIONS. All severance payments of any kind to be
paid to employees of Joliet as a result of the termination of such employees
after the Closing Date shall be and remain the sole obligation of the Surviving
Corporation. Nothing in this Agreement shall prevent, prohibit or limit the
Surviving Corporation's right after the Closing Date to cause the termination of
any at-will employee of Joliet.
SECTION 6.02 RETENTION BONUS PLAN. Pursuant to the terms of the Bonus
Escrow Agreement, the Surviving Corporation agrees to provide HGHC with a list
of the employees listed on Schedule 6.02 who either (a) remain employed by the
Surviving Corporation as of such date, (b) shall have terminated his or her
employment with the Surviving Corporation solely as a result of death or
disability or, (c) shall have had his or her employment with the Surviving
Corporation terminated by the Surviving Corporation for any reason other than
for cause. Following receipt of such list, HGHC and Parent agree that the Bonus
Escrow shall be paid to each of such persons in the respective amount set forth
opposite such employee's name on Schedule 6.02 in accordance with the terms of
the Bonus Escrow Agreement.
SECTION 6.03 ACTIONS RELATING TO EMPLOYEE BENEFIT PLANS. The Buyers will provide
to employees of Joliet who continue employment with the Surviving Corporation
following the Closing Date (the "Joliet Employees") a level of benefits, that is
similar to the level of benefits provided to similarly situated employees of the
Buyers. The Buyers will provide each Joliet Employee with credit for all service
with Joliet for purposes of eligibility and vesting to the extent possible under
each employee pension benefit plan (as defined in ERISA Section 3(2)) or
34
group health plan of the Buyers in which such Joliet Employee is eligible to
participate. HGHC shall retain, and the Buyers shall not assume or be
responsible for, any liability with respect to group health continuation
coverage under COBRA for employees or former employees of Joliet who do not
continue employment with the Surviving Corporation after the Closing Date, and
their dependents, based on the coverage of such employee and former employee
under HGHC's group health plans.
SECTION 6.04 HGHC'S 401(k) PLAN PLANS. HGHC shall take all action required
under the Horseshoe Gaming Holding Corp. 401(k) Plan ("HGHC's 401(k) Plan") to
(i) make all contributions required of it for each participating Joliet Employee
for all periods of time up to and including the Closing Date and (ii) if
permitted by the terms of HGHC's 401(k) Plan and by law, make distribution of
accounts available to each such Joliet Employee upon termination of Joliet's
status as a subsidiary of HGHC.
SECTION 6.05 TRANSITION SERVICES AGREEMENT. Buyers and Sellers shall
execute a Transition Services Agreement in the form of Exhibit D (the
"Transition Services Agreement") which shall provide, among other things, for
the licensing and use of trademarks following Closing by the Buyers, the use of
certain software by the Buyers and the use of Joliet office space by HGHC.
SECTION 6.06 HGHC'S DEFERRED COMPENSATION PLAN. HGHC agrees (i) that the
consummation of the transactions contemplated by this Agreement will result in
the payment of the entire account balance under the Horseshoe Gaming Holding
Corp. Deferred Compensation Plan ("HGHC's Deferred Compensation Plan") becoming
due to each participating employee or former employee of Joliet and (ii) to pay
each such person the balance of his or her account under HGHC's Deferred
Compensation Plan as soon as reasonably practicable following the Closing Date.
HGHC shall retain, and neither Buyer nor Surviving Corporation shall assume or
be responsible for, any liability with respect to the payment of any amounts to
any employee or former employee of Joliet under HGHC's Deferred Compensation
Plan.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
The obligations of Sellers under this Agreement are subject to the
fulfillment, prior to or at the Closing Date, of the following conditions:
SECTION 7.01 DELIVERIES OF THE BUYERS. The Buyers shall have made delivery
to the Sellers of the documents and items specified in Section 9.03 of this
Agreement.
SECTION 7.02 REPRESENTATIONS AND WARRANTIES OF EACH OF THE BUYERS. Each of
the representations and warranties of each of the Buyers contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same force and effect as though made on and as of the Closing
Date.
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SECTION 7.03 COMPLIANCE. Each of the Buyers shall have performed, complied
with and fulfilled all of the covenants, agreements, obligations and conditions
required by this Agreement to be performed, complied with or fulfilled by them
on or prior to the Closing Date, except to the extent that any failure to do so
will not have a material adverse effect on the ability of any of the Buyers to
consummate the transactions contemplated herein.
SECTION 7.04 COMPLIANCE CERTIFICATE. The Buyers shall have delivered to
HGHC a certificate, dated as of the Closing Date, as to the fulfillment of the
conditions specified in SECTIONS 7.02 and 7.03 hereof, in a form reasonably
acceptable to HGHC.
SECTION 7.05 LEGAL PROCEEDINGS. None of the Sellers or the Buyers shall be
subject to any injunction, preliminary restraining order or other similar decree
of a court of competent jurisdiction preventing or restraining the consummation
of the transactions contemplated by this Agreement.
SECTION 7.06 CONSENTS AND APPROVALS. All governmental and third party
consents and approvals necessary to permit the consummation of the transactions
contemplated by this Agreement shall have been received, shall be in full force
and effect and shall not have been revoked as of the Closing Date, including,
without limitation, satisfaction of all filing, waiting and other requirements
under the HSR Act and receipt of all necessary approvals to consummate the
transaction from the Gaming Authorities.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYERS
The obligations of the Buyers under this Agreement are subject to the
fulfillment, prior to or at the Closing, of the following conditions:
SECTION 8.01 DELIVERIES OF THE SELLERS. The Sellers shall have made
delivery to the Buyers of the documents and items specified in SECTION 9.02 of
this Agreement.
SECTION 8.02 REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each of the
representations and warranties made by the Sellers contained in this Agreement
shall be true and correct in all material respects as of the Closing Date as if
made on such date.
SECTION 8.03 COMPLIANCE. Each of the Sellers shall have performed, complied
with and fulfilled all of the covenants, agreements, obligations and conditions
required by this Agreement to be performed, complied with or fulfilled by them
on or prior to the Closing Date, except to the extent that any failure to do so
will not have a Material Adverse Effect or a material adverse effect on the
ability of the Sellers or the Buyers to consummate the transactions contemplated
herein.
SECTION 8.04 COMPLIANCE CERTIFICATE. The Sellers shall have delivered to
the Buyers a certificate, dated as of the Closing Date, as to the fulfillment of
the conditions specified in SECTIONS 8.02 and 8.03 hereof, in a form reasonably
acceptable to the Buyers.
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SECTION 8.05 LEGAL PROCEEDINGS. None of the Sellers or the Buyers shall be
subject to any injunction, preliminary restraining order or other similar decree
of a court of competent jurisdiction preventing or restraining the consummation
of the transactions contemplated by this Agreement.
SECTION 8.06 CONSENTS AND APPROVALS. All governmental and third party
consents, agreements and approvals necessary to permit the consummation of the
transactions contemplated by this Agreement and the operation of the business of
Joliet following the Closing Date in the ordinary course shall have been
received, shall be in full force and effect and shall not have been revoked as
of the Closing Date, including, without limitation, satisfaction of all filing,
waiting and other requirements of the HSR Act and receipt of all necessary
approvals to consummate the transactions from the Gaming Authorities.
SECTION 8.07 NO MATERIAL ADVERSE CHANGE. No Material Adverse Change shall
have occurred since the date of the Financial Statement for the year ended
December 31, 2000, other than any change arising out of, or resulting from,
general economic conditions in the United States.
SECTION 8.08 UCC RELEASES. The Sellers shall have delivered to the Buyers
prior to Closing, releases in form and substance satisfactory to the Buyers and
Uniform Commercial Code termination statements, executed by the appropriate
secured parties and in a form appropriate for recording and filing that are
sufficient to release any and all Liens securing or otherwise relating to the
outstanding Debt of Joliet, including, but not limited to, items 1-17,
inclusive, on SCHEDULE 2.02 hereof.
ARTICLE IX
CLOSING
SECTION 9.01 CLOSING DATE. The closing of the transactions described in
this Agreement (the "Closing") shall take place on June 29, 2001, which date may
be extended by either Buyers or Sellers to another date to be mutually agreed
upon by Buyers and Sellers, which shall be no later than the third business day
after satisfaction, or, if permissible, waiver of the conditions set forth in
ARTICLES VII and VIII and in no event later than July 31, 2001 (the "Closing
Date").
SECTION 9.02 DELIVERIES OF THE SELLERS. At the Closing, the Sellers shall
deliver to the Buyers the following duly executed documents and other items in a
form reasonably satisfactory to the Buyers:
(a) A compliance certificate executed by a duly authorized officer of each
Seller, as specified in SECTION 8.04;
(b) A written opinion of Sellers' Counsel in a form to be mutually agreed
upon prior to the Closing Date;
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(c) A duly executed copy of each of the Bonus Escrow Agreement and the
Indemnification Escrow Agreement;
(d) An agreement terminating Joliet's rights in certain intangible property
executed by a duly authorized officer of each of HGHC and Joliet;
(e) Certificates of Good Standing of each Seller, issued by the Secretary
of State of its respective jurisdiction of incorporation, dated within ten (10)
days of the Closing Date;
(f) Certified copies of the Articles of Incorporation with all amendments,
of each Seller, issued by the Secretary of State of its jurisdiction of
incorporation, dated within ten (10) days of the Closing Date;
(g) Copies of the By-Laws, as applicable, of each Seller as in effect on
the Closing Date, certified by the Secretary of each company;
(h) Copies of all the corporate resolutions adopted by the Board of
Directors of each Seller authorizing and approving the execution and delivery of
this Agreement and the consummation of the transactions contemplated herein,
certified to be true and complete and in full force and effect by the Secretary
of each Seller;
(i) The certificates representing the Shares, duly endorsed in blank or
accompanied by stock powers duly executed in blank with appropriate transfer
stamps, if any, and any other documents that are necessary to transfer title to
the Shares from the Sellers to the Buyers, free and clear of all Adverse Claims,
Liens and rights of any other Person;
(j) A receipt executed by HGHC acknowledging receipt of the Estimated
Merger Consideration, as specified in SECTION 1.05;
(k) Evidence of all consents and approvals required to be obtained by the
Sellers pursuant to SECTION 4.08;
(l) Releases, in form and substance satisfactory to the Buyers, of all
Liens against Joliet and/or the Real Property evidencing, securing or otherwise
relating to the outstanding Debt of Joliet, including, but not limited to items
1-17, inclusive, on SCHEDULE 2.02, hereof;
(m) The Title Policies with the Required Title Policy Endorsements;
(n) The Surveys;
(o) A duly executed copy of the Transition Services Agreement;
(p) A duly executed withholding certificate substantially in the form of
EXHIBIT 9.02(p) hereto; and
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(q) LSI Player Data Base, pursuant to SECTION 2.14.
SECTION 9.03 DELIVERIES OF THE BUYERS. At the Closing, the Buyers shall
deliver to HGHC the following duly executed documents and other items in form
reasonably satisfactory to the Sellers:
(a) A compliance certificate executed by a duly authorized officer of each
Buyer as specified in SECTION 7.04;
(b) A written opinion of Buyers' counsel in a form to be mutually agreed
upon prior to the Closing Date;
(c) The Estimated Merger Consideration, as specified in SECTION 1.05;
(d) Certificates of Good Standing of Parent, issued by the Secretary of
State of Delaware, and of JAC, issued by the Secretary of State of Illinois, in
each case dated within ten (10) days of the Closing Date;
(e) Certified copies of the Articles of Incorporation, of Parent, issued by
the Secretary of State of Delaware, and of JAC, issued by the Secretary of State
of Illinois, in each case dated within ten (10) days of the Closing Date;
(f) Copies of the By-Laws of Parent and JAC as in effect on the Closing
Date, certified by the secretary of each company;
(g) Copies of all the corporate resolutions adopted by the Board of
Directors of each Buyer authorizing and approving the execution and delivery of
this Agreement and the consummation of the transactions contemplated herein,
certified to be true and complete and in full force and effect by the Secretary
of each Buyer;
(h) Evidence of all consents and approvals required to be obtained by the
Buyers, including but not limited to gaming approvals;
(i) A duly executed copy of the Transition Services Agreement; and
(j) A duly executed copy of each of the Bonus Escrow Agreement and the
Indemnification Escrow Agreement.
ARTICLE X
TERMINATION
SECTION 10.01 EVENTS OF TERMINATION. This Agreement, by notice given in the
manner hereinafter provided, may be terminated and abandoned at any time prior
to the completion of the Closing; provided, however, that any right to
terminate, other than pursuant to SUBPARAGRAPHS
39
(b), (e), (f) OR (g), must be exercised within thirty (30) days after the
terminating party receives written notice of the event giving rise to such right
of termination:
(a) By HGHC if there has been a material default or material breach by any
of the Buyers with respect to the representations and warranties of the Buyers
in this Agreement or the due and timely performance of any of the covenants and
agreements of the Buyers contained in this Agreement where such default, breach
or failure to perform has a Material Adverse Effect or a material adverse effect
on the Sellers' or Buyers' ability to consummate the transactions described in
this Agreement, and such default, breach or failure to perform shall not have
been cured within ten (10) days after receipt by the Buyers (but not later than
July 31, 2001, except as provided herein in the case of a FM Event) of written
notice specifying particularly such default, breach or failure to perform;
provided, however, that such cure period is not applicable to a breach by the
Buyers of SECTION 5.05; or
(b) By HGHC if the Buyers (i) have not filed their applications for all
necessary approvals from the IGB within the time frame required under SECTION
5.04(a) (including any extension period provided therein) or (ii) have not filed
their applications for all necessary approvals with all other Gaming Authorities
and jurisdictions within the time frame required under SECTION 5.04(b)
(including any extension period provided therein); or
(c) By the Buyers if there has been a material default or material breach
by any of the Sellers with respect to the representations and warranties of the
Sellers in this Agreement or the due and timely performance of any of the
covenants and agreements of the Sellers contained in this Agreement where such
default, breach or failure to perform has a Material Adverse Effect or a
material adverse effect on the Sellers' or the Buyers' ability to consummate the
transactions described in this Agreement and such default, breach or failure to
perform shall not have been cured within ten (10) days after receipt by the
Sellers (but not later than July 31, 2001, except as provided herein in the case
of a FM Event) of written notice specifying particularly such default, breach or
failure to perform; or
(d) By the Buyers if (i) a Material Adverse Change has occurred since the
date of this Agreement; or (ii) a Material Adverse Change has occurred since the
date of the Financial Statement for the year ended December 31, 2000 (but with
respect to the XxXxxxx Lawsuit, since the date of this Agreement); or
(e) By mutual agreement of the Buyers and the Sellers; or
(f) By either the Sellers or the Buyers, (i) if the Closing has not
occurred on or prior to July 31, 2001; PROVIDED, HOWEVER, that the right to
terminate this Agreement under this SECTION 10.01(f)(i) will not be available to
any party whose failure to timely fulfill any obligation under this Agreement
has been the cause of, or resulted in, the failure of the Closing to occur on or
before such date or (ii) if a FM Event has occurred and the Closing has not
occurred on or prior to the expiration of the FM Extension Period; PROVIDED,
HOWEVER, that the right to terminate this Agreement under this Section
10.01(f)(ii) will not be available to any party whose failure to timely fulfill
any obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date; or
40
(g) By either the Sellers or Buyers if a court of competent jurisdiction or
a governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other final action not subject to
appeal, in each case having the effect of permanently restraining, enjoining or
otherwise prohibiting the transactions described in this Agreement; or
(h) By the Buyers if HGHC or any of its Affiliates shall agree to an HGHC
Sale which does not meet the conditions of SECTION 4.01.
SECTION 10.02 REMEDIES FOR BREACH; EFFECT OF TERMINATION.
(a) If a breach of SECTION 4.01 occurs and the Buyers do not elect to
terminate this Agreement pursuant to Section 10.01(h), if applicable, and the
Sellers fail to close the Merger on the terms and conditions set forth herein,
then the Buyers' remedies shall be limited to (i) seeking specific performance
of the transactions described in this Agreement and after the Closing seeking
indemnification for any Indemnity Loss suffered by the Buyers pursuant to and
subject to the applicable limitations contained in ARTICLE XII, or (ii) as an
alternative to the remedy provided in clause (i) above or if the Buyers are
unsuccessful in seeking specific performance, as liquidated damages, recovering
damages in an amount equal to the difference between (x) the aggregate value (if
greater than the Merger Consideration) received by HGHC, Joliet and the
Stockholders and their respective Affiliates in connection with an acquisition
of Joliet that is consummated at any time within twenty four (24) months of such
breach, and (y) the Merger Consideration; provided, however, that such
liquidated damages shall in no event be less than $13,950,000. Sellers
acknowledge that Buyers may not have an adequate remedy at law in the event of
such breach, and, if Buyers are seeking specific performance or to recover the
preceding amount as liquidated damages, Sellers will not assert that monetary
damages are an adequate remedy. The parties hereto expressly acknowledge and
agree that, in light of the difficulty of accurately determining actual damages,
with respect to the foregoing, the right to payment of the amount set forth
above as liquidated damages constitutes a reasonable estimate of the damages
that will be suffered by reason of any such termination and shall be in full and
complete satisfaction of any and all damages arising as a result of the
foregoing.
(b) Except for a breach of SECTION 4.01, if the circumstances described in
SECTION 10.01(c) shall have occurred, then the Buyers' remedies shall be either
to (i) terminate this Agreement in accordance with the provisions of SECTION
10.01(c) and the Sellers shall reimburse the Buyers for their actual damages
(i.e., costs and expenses, including without limitation, legal fees and
financing costs) or (ii) close the transactions described in this Agreement and
after the Closing seek indemnification for any Indemnity Losses suffered by the
Buyers pursuant to and subject to the applicable limitations contained in
ARTICLE XII.
(c) If the circumstances described in Section 10.01(a) shall have occurred
which involves a breach by Buyers of SECTION 5.05, then the Sellers' rights and
remedies shall be limited to terminating this Agreement in accordance with the
provisions of SECTION 10.01(a) and receiving from the Buyers as liquidated
damages an amount equal to $13,950,000. The parties hereto expressly acknowledge
and agree that, in light of the difficulty of accurately determining actual
damages, with respect to the foregoing, the right to payment of the amount set
forth above
41
as liquidated damages constitutes a reasonable estimate of the damages that will
be suffered by reason of any such termination and shall be in full and complete
satisfaction of any and all damages arising as a result of the foregoing.
(d) If the circumstance described in SECTION 10.01(a) shall have occurred
for reasons other than a breach of SECTION 5.05, then the Sellers' remedies
shall be limited to terminating this Agreement in accordance with the provisions
of SECTION 10.01(a) and pursuing against the Buyers such remedies as are
available at Law or in equity, provided that in no event shall the Sellers be
entitled to recover, and in no event shall the Buyers be obligated to pay to the
Sellers, any amount in excess of, in the aggregate, Fifty Million Dollars
($50,000,000).
(e) If this Agreement is terminated pursuant to any provision of SECTION
10.01, then all obligations of the parties shall terminate without any liability
of a party to any other party except as otherwise set forth in this SECTION
10.02 and in no event shall any party be entitled to seek or obtain any other
damages of any kind, including, without limitation, consequential, indirect or
punitive damages; provided, however, that the obligations of the parties set
forth in SECTIONS 4.15, 5.03, 13.04 and 13.06 of this Agreement and the Sellers'
indemnification obligations pursuant to clauses (b) and (c) of SECTION 12.01
shall indefinitely survive the termination of this Agreement.
(f) If this Agreement is terminated by the Sellers pursuant to SECTION
10.01(b) (provided that in such case Buyers do not also have the right to
terminate this Agreement, in which case the second sentence of this SECTION
10.02(f) shall govern), then the Deposit shall be paid to the Sellers. If this
Agreement is terminated for any reason other than termination by the Sellers
pursuant to SECTIONS 10.01(b), (or if the Buyers also have the right to
terminate this Agreement pursuant to Section 10.01) then the Deposit shall be
paid to Parent.
ARTICLE XI
TAX MATTERS
SECTION 11.01 TRANSFER TAXES. The Sellers shall prepare and attend to the
filing of any and all returns, applications or other documents regarding any
transfer, transfer gains or similar Taxes which become payable in connection
with, or by virtue of, the Merger and the other transactions described in this
Agreement (collectively, "Transfer Taxes"), and the Buyers shall reasonably
cooperate with the Sellers with respect to the preparation and filing of such
returns, applications or other documents. The Sellers shall pay (and shall
indemnify and hold the Buyers harmless against) all Transfer Taxes payable with
respect to the Merger and the other transactions described herein.
SECTION 11.02 TAX MATTERS.
(a) HGHC shall, or shall cause Joliet to, prepare and timely file all Tax
Returns of or including the income, assets or operations of Joliet that are
required to be filed (with extensions) on or before the Closing Date and shall
timely pay, or cause to be paid, all Taxes shown as due on such Tax Returns. All
such Tax Returns and information statements will be prepared and
42
filed by HGHC or Joliet in a manner consistent with the prior practice of HGHC
or Joliet, as applicable. Parent or the Surviving Corporation shall prepare and
timely file all Tax Returns of or including the income, assets or operations of
the Surviving Corporation (other than Tax Returns that are the responsibility of
HGHC as described in the preceding sentence or Tax Returns of HGHC covering
taxable periods (or portions thereof) ending on or before the Closing Date on
which Joliet properly is treated as a disregarded entity) that are required to
be filed (with extensions) after the Closing Date and shall timely pay, or cause
to be paid, all Taxes shown as due on such Tax Returns.
(b) HGHC shall be liable and indemnify Parent and the Surviving Corporation
for all Taxes of Sellers (including any Taxes of the Sellers imposed upon the
deemed sale of assets contemplated pursuant to this Agreement) to the extent
such Taxes are not adequately provided for as current Taxes on the Closing
Statement for (i) taxable periods ending on or before the Closing Date and (ii)
for any taxable period not ending on or before the Closing Date, for the portion
of any Taxes attributable to the portion of such period ending on the Closing
Date. For the purpose of Taxes determined by reference to income, capital gains,
gross income, gross receipts, sales, net profits, windfall profits or similar
items or resulting from a transfer of assets, HGHC, Parent and the Surviving
Corporation agree that the taxable period of Joliet shall be terminated or
deemed terminated as of the close of business on the Closing Date and items of
income, gain, loss, expense, deduction or credit shall be apportioned between
HGHC, Parent and the Surviving Corporation based upon a closing of the books of
Joliet for Tax purposes in a manner consistent with prior Tax Returns of Joliet
and with the methods employed on the Closing Statement. In applying the
foregoing sentences (A) HGHC's liability for Illinois gaming tax shall be
determined by assuming an effective tax rate for the current fiscal year equal
to the blended annual Illinois gaming tax rate derived from adding the actual
casino revenues for the period of time from the beginning of the current taxable
year to the month end closest to the Closing Date and the estimated casino
revenues for the remainder of the year, and (B) liability for any penalties,
interest, or additional amounts relating to a failure to timely comply with any
information reporting requirements of the Code or any analogous requirements
under foreign, state or local law shall be allocated based on the date such
failure occurred. Any other Taxes imposed upon the assets, property or
operations of Joliet and allocable to a period that begins before, but ends
after, the Closing Date, shall be apportioned between HGHC and Parent, or the
Surviving Corporation, by multiplying such Tax by a fraction, the numerator of
which is the number of days in the taxable period prior to, and including, the
Closing Date, or the number of days subsequent to the Closing Date (as
applicable) and the denominator of which is the total number of days in the
relevant taxable period. The amount of any indemnity payment in respect of Taxes
(and related expenses described in Section 11.04(c)) shall be reduced to take
account of any net Tax benefit realized by the Buyers arising from the
incurrence or payment of any such Taxes (or related expenses). In computing the
amount of any such Tax benefit, the Buyers shall be deemed to recognize all
other items of income, gain, loss, deduction or credit before recognizing any
item arising from the receipt of any indemnity payment hereunder or the
incurrence or payment of any indemnified Taxes (or related expenses). Any
indemnification payment hereunder shall be made without regard to any net Tax
benefit until after the Buyers has realized such benefit. For purposes of this
Agreement, Buyers shall be deemed to have "realized" a net Tax benefit to the
extent that, and at such time as, the amount of Taxes payable by Buyers is
increased above the amount of Taxes Buyers would be required to pay but for the
43
receipt of the indemnity payment or the incurrence of payment of such Taxes (or
expenses), as the case may be. The amount of any reduction hereunder shall be
adjusted to reflect any final determination with respect to the Buyer's
liability for Taxes and payments among the parties to reflect such adjustment
shall be made if necessary. HGHC and Buyers agree to treat all payments made
pursuant to this ARTICLE XI as adjustments of the Merger Consideration.
(c) For each taxable year of HGHC for which the operations, income or
assets of Joliet are required to be included for all or any part of such taxable
year on a Tax Return or other information statement of HGHC which is due (with
all extensions) to be filed after the Closing Date, Parent shall prepare, or
shall cause the Surviving Corporation to prepare, in a manner consistent with
the prior practice of Joliet, and deliver to HGHC no later than February 15th,
all relevant Tax schedules, forms and information relating to Joliet, complete
in all material respects, to permit the inclusion of Joliet's income and
operations in such Tax Returns or other information statements of HGHC for each
such taxable year.
SECTION 11.03 COOPERATION, ACCESS TO RECORDS.
(a) Parent and the Surviving Corporation will provide HGHC (and its
attorneys, accountants and agents) with the right, at reasonable times and upon
reasonable notice, to have access to, and to copy and use, any records or
information and personnel which may be relevant for the preparation of any Tax
Returns, any audit or other examination by any Taxing Authority, the filing of
any claim for a refund of Tax or for the allowance of any Tax credit, or any
judicial or administrative proceedings relating to liability for Taxes. Any
information obtained pursuant to this SECTION 11.03(a) shall be held in strict
confidence and shall be used solely in connection with the reason for which it
was requested.
(b) HGHC shall cause any tax sharing agreement or similar arrangement with
respect to Taxes involving Joliet to be terminated effective as of the Closing
Date. To the extent any such agreement or arrangement obligates Joliet to make
any payments with respect to Taxes after the Closing Date, none of the Surviving
Corporation or Parent shall have any obligation under any such agreement or
arrangement for any past, present or future period.
SECTION 11.04 DETERMINATION OF TAX ALLOCATION; TAX CONTESTS.
(a) In the case of any Tax Return filed by the Buyers or the Surviving
Corporation for any taxable period for which HGHC could be held liable for Taxes
pursuant to SECTION 11.02(b), the Buyers shall provide HGHC with copies of the
completed Tax Return for such taxable period, together with such related work
papers and other documents as HGHC shall reasonably request, no later than
thirty (30) days before the due date for the filing of such Tax Return, along
with a statement allocating the aggregate Tax liability shown on such Tax Return
between the Buyers and HGHC pursuant to the principles of SECTION 11.02(b). HGHC
shall have no right to review any such Tax Returns unless and until the
aggregate Taxes shown on all such Tax Returns for taxable periods (or portions
thereof) ending on the Closing Date exceeds the relevant accrual for such Taxes
on the Closing Statement; following such time, HGHC may reasonably request to
review previously filed Tax Returns in the event a deficiency is proposed or
assessed with respect to such Tax Returns to determine HGHC's liability for
Taxes pursuant to SECTION
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11.02(b). HGHC and its authorized representatives shall have the right to review
the Tax Returns and statements received from the Buyers pursuant to the terms of
this SECTION 11.04(a). HGHC and the Buyers agree to consult each other and
resolve in good faith any issues arising under the terms of this SECTION
11.04(a) as a result of the review of any such Tax Returns or statement received
from the Buyers. If the parties are unable to resolve any dispute within sixty
(60) business days after the receipt of any such Tax Returns or statement, the
parties shall refer the dispute to a nationally-recognized independent
accounting firm mutually agreed upon by the parties for resolution. The
accounting firm's determination shall be final and binding upon the parties, and
all fees and expenses relating to the engagement of the accounting firm shall be
shared equally by HGHC and the Buyers. If such disputes have not been resolved
prior to the due date for the filing of such Tax Return, such Tax Return, to the
extent issues thereon remain unresolved, shall be filed in accordance with the
positions taken by the Buyers, and HGHC will pay to Buyers at least three (3)
days prior to the due date for such Tax Return the amount of Taxes shown as
allocable to HGHC on the statement; PROVIDED THAT the fact that the Tax Return
was filed in accordance with the Buyer's position shall not be taken into
account for purposes of any dispute resolution. If a determination is made by
the accounting firm after a Tax Return is filed that the Buyer's position was
incorrect, the Buyers shall promptly file an amended Tax Return (to the extent
permitted by applicable law) reflecting the final decision of the accounting
firm, and the Buyers shall pay the amount of any refund of Tax (or the portion
thereof attributable to HGHC) shown on such amended Tax Return to HGHC no later
than three (3) days after the date of the filing of such amended Tax Return.
(b) Any refund of Taxes (other than a refund that is reflected on the
Closing Statement) with respect to Joliet or the Surviving Corporation that is
received with respect to any taxable period (or portion thereof) ending on or
before the Closing Date shall be for the account of HGHC. To the extent that the
Buyers, the Surviving Corporation, or any affiliate thereof receives any refund
of such Taxes after the Closing Date with respect to such taxable period (or
portion thereof), the amount of such refund of Taxes allocable to such taxable
period (or portion thereof) shall be promptly paid to HGHC.
(c) If a claim is made or threatened by any Taxing Authority that, if
successful, may result in an indemnity payment under SECTION 11.02(b) hereof (a
"Tax Claim"), the Buyers shall notify HGHC stating the nature and basis of such
claim, and the amount thereof, to the extent known. Failure to give such notice
shall not relieve HGHC from any liability that it may have on account of this
indemnification or otherwise, except to the extent that HGHC is materially
prejudiced in the defense of such claim thereby. HGHC will have the right, at
its option, upon timely notice to the Buyers, to assume at its own expense
control of any audit or other defense of any Tax Claim (other than a Tax Claim
relating solely to Taxes of Joliet or the Surviving Corporation for taxable
periods (or portions thereof) beginning after the Closing Date) with its own
counsel. If HGHC elects not to control any audit or other defense of a Tax
Claim, the Buyers shall have the authority to settle without HGHC's consent such
Tax Claim provided that the amount of such settlement does not exceed the amount
initially proposed in respect of such Tax Claim. The Buyer's will not settle any
such Tax Claim for an amount greater than initially proposed without HGHC's
consent, which consent shall not be unreasonably withheld. So long as HGHC has
provided the Buyers with timely notice of its intent to control any audit or
other defense of a Tax Claim and HGHC is actively contesting such claim in good
faith, the Buyers
45
shall not settle or otherwise resolve such Tax Claim. HGHC's right to control a
Tax Claim will be limited to issues in respect of which amounts in dispute would
be paid by HGHC or for which HGHC would be liable pursuant to SECTION 11.02(b)
hereof, which determination shall be made by HGHC in its sole discretion. Costs
of contesting such issues are to be borne solely by HGHC. To the extent
reasonable, the Buyers shall cooperate with HGHC in contesting any Tax Claim,
which cooperation shall include the retention for seven years and, upon HGHC's
request, providing of retained records and information that are reasonably
relevant to such Tax Claim and making employees available on a mutually
convenient basis to provide additional information or explanation of any
material provided hereunder. HGHC shall promptly reimburse the Buyers for the
reasonable costs of complying with the foregoing sentence and shall not make any
requests pursuant to the foregoing sentence that result in an unreasonable
disruption of the Buyers' businesses. Notwithstanding the foregoing, (i) HGHC
shall not have the right to control any issue involved in a Tax Claim unless
HGHC first acknowledges in writing its obligation to fully indemnify the Buyers
for the Taxes asserted in connection with such issue, (ii) no settlement or
disposition of any Tax Claim shall be made without the Buyers' prior written
consent (which consent shall not be unreasonably withheld), (iii) the Buyers
shall control all proceedings involving any claims for Taxes assessed in respect
of a taxable period beginning before and ending after the Closing Date (a
"Straddle Period") unless HGHC's share of the proposed deficiency in respect of
a Tax Claim exceeds Buyer's share of the proposed deficiency, in which case
Buyers and HGHC shall jointly control such proceedings. The Buyers will not be
obligated to settle or resolve and HGHC will not settle or resolve any issue
related to Taxes, which, if so settled or resolved, could or would have an
adverse effect on the Buyers for periods after the Closing Date, unless HGHC
agrees in writing with the Buyers, in terms reasonably satisfactory to the
Buyers, to indemnify the Buyers, any affiliate of the Buyers, and Joliet from
any cost, damage, loss or expense relating to such settlement or resolution. The
Buyers agree not to settle a Tax Claim in respect of a Straddle Period without
HGHC's prior written consent, which consent shall not be unreasonably withheld.
(d) If there is an adjustment to any return or report of Taxes for Joliet
or the Surviving Corporation which creates a deficiency in any Taxes for which
HGHC is liable under the provisions of SECTION 11.02 hereof, HGHC shall pay to
Buyers the amount of such deficiency in Taxes together with HGHC's share of any
expenses under Section 11.04(c). No liability of HGHC under this SECTION
11.04(d) shall be payable until the occurrence of any action by any Tax
authority that is final or, if not final, is acquiesced in by HGHC during the
course of any audit or any proceeding relating to Taxes. All payments required
to be made by HGHC pursuant to this SECTION 11.04(d) shall be made within ten
(10) Business Days of this occurrence of the event described in the immediately
preceding sentence.
SECTION 11.05 INTERACTION WITH ARTICLE XII. HGHC's obligations under this
Article XI shall not be subject to any of the limitations contained in Article
XII, including, without limitation, the Basket, the Cap and the time limitations
contained in Section 12.06. Any amounts paid to the Buyers under this Article XI
shall not be applied against the Basket or the Cap (each as defined in Section
12.06(b)) contained in Article XII. To the extent of any inconsistency between
this ARTICLE XI and ARTICLE XII, the provisions of this ARTICLE XI shall
control.
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SECTION 11.06 PROTECTIVE SECTION 338(h)(10) ELECTION. HGHC and Parent agree
to join in a timely manner in making elections on a protective basis under
section 338(h)(10) of the Code (and to the extent necessary to allow for an
election under Section 338(h)(10) of the Code, an election under Section 338(g)
of the Code) and any corresponding election under foreign, state or local law
with respect to Parent's acquisition of Joliet. Parent shall prepare, at its own
expense, all forms necessary for such protective elections and shall allocate
the aggregate deemed sales price (as defined in applicable Treasury Regulations)
in accordance with the allocation agreed upon by the parties pursuant to SECTION
1.14.
ARTICLE XII
INDEMNIFICATION
SECTION 12.01 INDEMNIFICATION. Each of the Buyers and their respective
successors, stockholders, officers, directors, Affiliates, representatives and
agents (collectively, the "Buyer Indemnitees") shall be indemnified and held
harmless by HGHC against, any and all damages (including punitive damages),
losses, obligations, demands, liabilities, claims, administrative or other
fines, encumbrances, penalties, costs, and expenses, including reasonable
attorneys' fees which shall be advanced (including advances on a monthly basis
of reasonable attorneys' fees to be incurred by the Buyers in connection with
the XxXxxxx Lawsuit prior to and after the Closing for which the foregoing
undertaking shall not be required) subject to an undertaking to repay such
advances if it is finally determined by a court of competent jurisdiction that
the indemnified party was not entitled to indemnification under this Agreement
(and costs and reasonable attorneys' fees in respect of any suit to enforce this
provision) (each an "Indemnity Loss") (which shall not include consequential
damages or claims for lost profits), arising from or related to (a) any breach
of any representation or warranty by the Sellers contained in ARTICLE II of this
Agreement or any breach or failure by any of the Sellers to perform or fulfill
any covenant, agreement or obligation of the Sellers contained in this Agreement
or any related agreement, instrument, document, exhibit, schedule or certificate
furnished or required to be furnished by the Sellers pursuant to this Agreement
or in connection with the transactions described herein, to the extent such
breach has not been cured as of the Closing Date; PROVIDED, HOWEVER, that the
Buyers shall not be entitled to any recovery pursuant to SECTION 12.01(a) to the
extent that any Buyer had actual knowledge as of the Closing Date, of a breach
of any representation or warranty in ARTICLE II, did not disclose such breach to
the Sellers prior to the Closing Date and the liability is not a liability which
would have fallen within the definition of Current Liabilities if originally
disclosed; PROVIDED, FURTHER, that for purposes of Buyers' right to
indemnification pursuant to SECTION 12.01(a) for a breach of SECTION 2.11(g) or
SECTION 2.18, such representation and warranty shall be deemed to have been made
without reference to SCHEDULE 2.18 or the Environmental Reports and without the
attachment of SCHEDULE 2.18 to this Agreement or the Environmental Reports;
PROVIDED, FINALLY, that the Sellers shall not be obligated to indemnify the
Buyer Indemnitees for any liabilities resulting from a breach (except
liabilities set forth on the Closing Statement in accordance with SECTION 1.06
hereof) if such liabilities arose out of obligations incurred in the ordinary
course of business to the extent (i) the benefit thereof accrues to the Buyers
or their Affiliates, (ii) such liabilities do not arise from a transaction with
an Affiliate of the Sellers, (iii) such liabilities were incurred in an arms
length
47
transaction and (iv) such liabilities do not exceed $50,000 in the aggregate;
(b) any fees or other costs of investment bankers or third parties representing
the Sellers, or claiming to represent the Sellers, in connection with the
transactions contemplated hereby (a "Broker Claim"); (c) the XxXxxxx Lawsuit
and/or any other action, suit or proceeding relating thereto or arising
therefrom, directly or indirectly, seeking rescission or to enjoin or otherwise
prohibit the transactions contemplated hereby and/or any action, suit or
proceeding initiated by any former stockholder or director of Joliet or its
predecessor entities (the "Prior Owner/Directors") relating to or arising from,
directly or indirectly, the prior merger and related transactions pursuant to
which HGHC acquired Joliet and actions, transactions, agreements or arrangements
whatsoever between or among any of Sellers and the Prior Owner/Directors, the
Merger Agreement or the transactions contemplated by the Merger Agreement (any
and all matters referenced in this clause (c) shall be referred to herein as
"Merger Lawsuits"), it being specifically agreed and acknowledged that all
matters relating to or arising from the Merger Lawsuits are the responsibility
of HGHC, and not the Buyers or Joliet; (d) any event occurring prior to the
Closing and involving any employment related claims, demands or charges for or
related to breach of contract, tortious interference with contract, implied
contract, wrongful discharge, sexual or other harassment, discrimination, equal
employment opportunity laws, unfair labor practice charges, violations of 42 USC
Section 2000e et. seq. or 42 USC Section 1981, the National Labor Relations Act,
or any collective bargaining agreement or employment agreement; and (e) any and
all suits, actions, investigations, proceedings, demands, assessments,
penalties, settlements, compromises, audits and judgments arising out of any of
the foregoing.
SECTION 12.02 INDEMNIFICATION BY THE BUYERS. The Buyers shall jointly and
severally indemnify and hold harmless HGHC and its successors, stockholders,
officers, directors, Affiliates, representatives, and agents (collectively, the
"HGHC Indemnitees") from and against any and all Indemnity Losses (which shall
not include consequential damages or claims for lost profits) resulting from or
relating to (a) any breach of any representation or warranty, or any breach or
failure of any of the Buyers to perform or fulfill any covenant, agreement or
obligation of the Buyers contained in this Agreement or any related agreement,
instrument, document, exhibit, schedule or certificate furnished or required to
be furnished by any of the Buyers pursuant to this Agreement or in connection
with the transactions described in this Agreement and (b) any and all suits,
actions, investigations, proceedings, demands, assessments, penalties,
settlements, compromises, audits and judgments arising out of any of the
foregoing, it being specifically agreed and acknowledged that all matters
relating to or arising from the Merger Lawsuits are the responsibility of HGHC,
and not the Buyers or Joliet.
SECTION 12.03 NOTICE. If an indemnified party (the "Claimant") believes
that it has suffered or incurred any Indemnity Loss, it shall so notify the
indemnifying party (the "Indemnifying Party") promptly in writing describing
such loss or expense, the amount thereof, if known, and the method of
computation of such loss or expense, all with reasonable particularity (the
"Indemnification Notice"). If any action at law, suit in equity, or
administrative action is instituted by or against a third party with respect to
which the Claimant intends to claim any liability or expense as an Indemnity
Loss under this ARTICLE XII, it shall promptly notify the Indemnifying Party in
writing of such action or suit describing such loss or expenses, the amount
thereof, if known, and the method of computation of such loss or expense, all
with reasonable particularity (the "Litigation Notice") in lieu of an
Indemnification Notice. After delivering the
48
Indemnification Notice or the Litigation Notice, as the case may be, the
Claimant shall provide to the Indemnifying Party such information as is
reasonably requested by the Indemnifying Party, including all documents filed
with any court or governmental agency, to assist the Indemnifying Party in
determining whether the Claimant shall be indemnified against such Indemnity
Loss.
SECTION 12.04 ARBITRATION.
(a) Subject to the limitations on indemnification contained in this ARTICLE
XII if the Indemnifying Party does not agree that the Claimant is entitled to
full reimbursement for the amount specified in the Indemnification Notice or the
Litigation Notice, the Indemnifying Party shall notify the Claimant (the
"Disagreement Notice") within twenty (20) days of its receipt of the
Indemnification Notice or Litigation Notice, as the case may be. Failure to
deliver a Disagreement Notice in a timely manner shall be considered an express
acknowledgment by the Indemnifying Party of the Claimant's right to
indemnification with respect to the Indemnity Loss set forth in the
Indemnification Notice or the Litigation Notice, as the case may be in
accordance with the terms of this ARTICLE XII. At any time after delivery of the
Disagreement Notice, either the Claimant or the Indemnifying Party may notify
the other that the determination as to whether and in what amount the Claimant
is entitled to indemnification from the Indemnifying Party shall be made by an
arbitration tribunal (the "Arbitration Notice"). The arbitration tribunal shall
consist of three arbitrators, one to be selected by the Claimant, one to be
selected by the Indemnifying Party, and the third arbitrator to be selected by
the other two arbitrators. The arbitrators shall each be reasonably experienced
in conducting arbitration proceedings and all arbitrators shall be selected
within fifteen (15) days of the delivery of the Arbitration Notice. If either
party fails to appoint an arbitrator within the specified time period, the
arbitration hearing shall be conducted by the arbitrator appointed by the party
hereto which selected an arbitrator within the required time period. An
arbitration hearing shall then be held within thirty (30) days of the selection
of the third arbitrator, or the failure of one party to select an arbitrator, in
Chicago, Illinois and the arbitration tribunal shall render its determination as
to whether and in what amount the Claimant is entitled to indemnification within
thirty (30) days of such hearing. All procedures with respect to the arbitration
proceeding provided for in this SECTION 12.04(a) shall be in accordance with the
rules of the American Arbitration Association, except as otherwise specifically
set forth in this Agreement.
(b) All costs and expenses incurred in conducting the arbitration
proceeding provided for in SECTION 12.04(a), including attorneys' fees, shall be
borne exclusively by the losing party as determined by the arbitration tribunal;
provided, however, that the arbitration tribunal may determine that more than
one party is a losing party in which event the arbitrational tribunal shall
allocate the costs and expenses of the arbitration among such losing parties as
they determine to be just and fair.
(c) The parties hereby irrevocably consent to be bound by the decision of
the arbitration tribunal with respect to indemnification determinations.
SECTION 12.05 DEFENSE OF CLAIMS. The Indemnifying Party shall have thirty
(30) days after receipt of the Litigation Notice to notify the Claimant that it
acknowledges its obligation to
49
indemnify and hold harmless the Claimant with respect to the Indemnity Loss set
forth in the Litigation Notice and that it elects to conduct and control any
legal or administrative action or suit with respect to an indemnifiable claim
(the "Election Notice"). If the Indemnifying Party fails to give a Disagreement
Notice or does not give the foregoing Election Notice, the Claimant shall have
the right to defend, contest, settle, or compromise such action or suit in the
exercise of its exclusive discretion. If the Indemnifying Party gives the
foregoing Election Notice, the Indemnifying Party shall have the right to
undertake, conduct, and control, through counsel of its own choosing and at its
sole expense, the conduct and settlement of such action or suit, and the
Claimant shall cooperate with the Indemnifying Party in connection therewith;
provided, however, that: (a) the Indemnifying Party shall not thereby consent to
the imposition of any injunction against the Claimant, or pay or settle any
action or suit that affects the Claimant, any Seller or any Buyer, without the
written consent of the Claimant and such affected Seller or Buyer, if
applicable, which consents shall not be unreasonably withheld; (b) the
Indemnifying Party shall permit the Claimant to participate in such conduct or
settlement through counsel chosen by the Claimant, but the fees and expenses of
such counsel shall be borne by the Claimant except as provided in clause (c);
(c) upon a final determination of such action or suit, the Claimant, to the
extent required under and in accordance with this Article XII, shall be paid for
the full amount of any Indemnity Loss incurred by the Claimant except for fees
and expenses of counsel that the Claimant incurred after the assumption of the
conduct and control of such action or suit by the Indemnifying Party in good
faith; and (d) the Claimant shall have the right to pay or settle any such
action or suit, provided that in such event the Claimant shall waive any right
to indemnity therefor by the Indemnifying Party and no amount in respect thereof
shall be claimed as an Indemnity Loss under this ARTICLE XII.
SECTION 12.06 LIMITATIONS ON INDEMNIFICATION.
(a) The Buyer Indemnitees shall not be entitled to recover under SECTION
12.01 unless a claim has been asserted by written notice, specifying the details
of the matter giving rise to the indemnity claim to HGHC on or prior to the two
(2) year anniversary of the Closing Date; provided, however that there shall be
no limitation on the time for submitting a claim for or arising out of or
related to (i) the Merger Lawsuits, or (ii) an allegation of breach of the
representations in the first two sentences of SECTION 2.02, clause (a) of the
fourth sentence in SECTION 2.02 and SECTION 2.03; provided, further, that the
indemnity claim made pursuant to SECTION 2.09 must be asserted within sixty (60)
days of the end of the applicable statute of limitations period, after giving
effect to any extensions thereof (and including any applicable statute of
limitations for a taxable year of the Surviving Corporation for which a breach
of SECTION 2.09(a) could result in an increased liability for Taxes of the
Surviving Corporation).
(b) The Buyer Indemnitees shall not be entitled to recover under SECTION
12.01: (i) to the extent the aggregate claims for Indemnity Losses of the Buyer
Indemnitees are less then $1,000,000 (the "Basket") or exceed $13,950,000
(whether such amounts have been paid directly by HGHC or out of the
Indemnification Escrow, collectively, the "Cap"), except as otherwise provided
in SECTION 12.08; PROVIDED THAT if the aggregate of all claims for Indemnity
Losses equals or exceeds the Basket, then Buyers shall be entitled to recover
for all such Indemnity Losses subject to the limitations in this SECTION
12.06(b) or (ii) to the extent the subject matter of the claim is covered by
insurance (including title insurance) and such insurance is collected by
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the Buyer Indemnitees; or (iii) to the extent that the matter in question, taken
together with all similar matters, does not exceed the amount of any reserves
with respect to such matters which are reflected in the Financial Statements; or
(iv) to the extent the matter in question was taken into account in the
computation of the Merger Consideration pursuant to ARTICLE I. To the extent the
subject matter of a claim is covered by a reserve reflected in the Financial
Statements, the value of such claim shall not be included in determining whether
the aggregate Indemnity Losses equal or exceed the Basket. If HGHC pays Buyer
Indemnitees for a claim and subsequently insurance in respect of such claim is
collected by the Buyer Indemnitees then Buyer Indemnitees shall remit the money
back to HGHC. In addition, if HGHC pays Buyer Indemnitees for a claim and
subsequently the Buyer Indemnitees or their shareholders realize a net Tax
benefit as a result of any expense, payment or other item giving rise to such
indemnification payment, the Buyers shall pay to HGHC the aggregate amount of
such net Tax benefit as soon as practicable following the realization of such
benefit. The guidelines for determining the amount and timing of the
realization, and the provision for subsequent adjustments, of net Tax benefits
set forth in SECTION 11.02(b) shall apply for purposes of this SECTION 12.06(b).
HGHC and the Buyers agree to treat any payments in respect of Indemnity Losses
as adjustments to the Merger Consideration.
SECTION 12.07 PAYMENT OF LOSSES. The Claimant shall be paid in cash by the
Indemnifying Party the amount to which the Claimant may become entitled by
reason of the provisions of this ARTICLE XII, within fifteen (15) days after
such amount is determined either by mutual agreement of the parties or pursuant
to the arbitration proceeding described in SECTION 12.04 of this Agreement or on
the date on which both such amount and Claimant's obligation to pay such amount
have been determined by a final judgment of a court or administrative body
having jurisdiction over such proceeding.
SECTION 12.08 LIMITATIONS IN SECTION 12.06(b) INAPPLICABLE. Notwithstanding
any provision in this Agreement to the contrary, there shall be no limitation on
the aggregate amount for which a Claimant may be indemnified pursuant to this
ARTICLE XII (i) in the event of fraud by the Indemnifying Party in connection
with the matter for which indemnification is sought (a "Fraud Claim"), (ii) for
any claim whatsoever relating in any way to or arising out of the Merger
Lawsuits (a "Merger Claim"), (iii) for any claim arising out of a breach of the
representations set forth in the first two sentences of SECTION 2.02, clause (a)
of the fourth sentence in SECTION 2.02 or SECTION 2.03 or SECTION 2.09, (iv) for
any claim relating to any casino or enterprise directly or indirectly owned or
operated by HGHC other than the riverboat operated by Joliet, including without
limitation the employee claims listed on Schedule 2.10 as items numbered 1 and 3
and items 1 and 4 of Exhibit C thereto (a "Non-Joliet Claim") or (v) for any
claim arising out of a breach of SECTION 13.16 (a "13.16 Claim"). In addition,
the Basket and the Cap shall not apply to a Fraud Claim, a Broker Claim, a
Merger Claim, a Non-Joliet Claim or a 13.16 Claim and none of such claims shall
be included in determining whether the aggregate Indemnity Losses equal or
exceed the Basket and shall not count against the Cap.
SECTION 12.09 NO ENVIRONMENTAL CONTRIBUTION. The Buyers shall not be able
to seek contribution from any of the Sellers under any Environmental
Requirements and hereby waive all statutory rights against the Sellers under the
Environmental Requirements, provided, that this
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shall not limit in any manner the right of the Buyers or the Buyer Indemnitees
to seek and obtain indemnification pursuant to the other provisions of this
Agreement.
SECTION 12.10 INDEMNIFICATION EXCLUSIVE REMEDY. Except as otherwise
provided in SECTIONS 10.02 or 12.08 or ARTICLE XI, indemnification pursuant to
the provisions of this ARTICLE XII shall be the exclusive remedy of the parties
for any misrepresentation or breach of any warranty or covenant contained herein
or in any closing document executed and delivered pursuant to the provisions
hereof. Except as otherwise provided in SECTIONS 10.02 or 12.08 or ARTICLE XI,
the only legal action which may be asserted by any party with respect to any
matter which is the subject of this ARTICLE XII shall be a contract action to
enforce, or to recover damages for the breach of, this ARTICLE XII. Without
limiting the generality of the preceding sentence, except as otherwise provided
in SECTIONS 10.02 or 12.08 or ARTICLE XI, no legal action sounding in tort,
statute or strict liability may be maintained by any party.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01 ESCROW ACCOUNT. The funds remaining in the Indemnification
Escrow shall be released in accordance with the terms of the Indemnification
Escrow Agreement upon the earlier of (i) the second year anniversary of the
Closing and (ii) the dismissal of the XxXxxxx Lawsuit with prejudice unless any
matters to which Indemnification Notices and Litigation Notices received by HGHC
prior to the expiration of the two year period or the dismissal of the XxXxxxx
Lawsuit with prejudice, as the case may be, have not been resolved by such
expiration date, in which case the Buyers shall determine at their reasonable
discretion the amount of the funds then remaining in the Indemnification Escrow
that shall be retained in the Indemnification Escrow until such matters are
finally resolved but all other funds shall be disbursed pursuant to the terms of
the Indemnification Escrow Agreement. To the extent that HGHC disagrees with the
amount determined by the Buyers under the immediately preceding sentence the
dispute shall be submitted to arbitration pursuant to Section 12.04.
SECTION 13.02 COUNTERPARTS. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
SECTION 13.03 COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and
conditions of this Agreement, each party shall use all commercially reasonable
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 laws and regulations to
consummate the transactions described in this Agreement. The parties each agree
to execute and deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be necessary or desirable in
order to consummate or implement expeditiously the transactions described in
this Agreement, and from time to time, upon the request of any other party to
this Agreement and without further consideration, to execute, acknowledge and
deliver in proper form any further instruments, and take such other action as
such other party may reasonably require, in order to effectively carry
52
out the intent of this Agreement so long as the performance of such obligations
does not increase either party's liabilities.
SECTION 13.04 EXPENSES. Whether or not the Closing occurs, each of the
parties hereto shall pay their own expenses incurred in connection with the
transactions provided for in this Agreement, including, but not limited to, the
fees and expenses of their respective counsel, investment bankers, accountants
and other advisors; provided, that the Buyers shall be liable for all expenses
relating to regulatory investigations performed by the IGB in connection with
any investigation by IGB into the licenseability of Buyers in connection with
the consummation of the Merger; provided, further, that the filing fee for the
HSR Act filing shall be paid by the Buyers. The expenses of the Sellers incurred
in connection with the transactions described herein shall be paid by HGHC.
SECTION 13.05 INDEX AND CAPTIONS. The index and the captions of the
Articles and Sections of this Agreement are solely for convenient reference and
shall not be deemed to affect the meaning or interpretation of this Agreement.
SECTION 13.06 PUBLIC DISCLOSURE. Prior to the Closing Date, none of the
Sellers or the Buyers nor any of their respective representatives shall make any
public release of information regarding the matters described herein, except (a)
the Buyers and the Sellers may each continue communications with employees,
customers, suppliers, lenders and shareholders and other particular groups as
may be legally required or necessary or appropriate and not inconsistent with
the best interests of the other party or the prompt consummation of this
Agreement, (b) as required by law or SEC regulations and practice, (c) upon the
mutual written agreement of the parties hereto and (d) disclosures to applicable
gaming and other regulatory authorities. Each of the Buyers and the Sellers
shall provide the other party with the opportunity to review and comment on any
press release prior to release thereof.
SECTION 13.07 NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given and received (a) upon delivery, if personally delivered; (b) on the
third day after being deposited with the U.S. Postal Service (postage prepaid);
(c) on the next day after being deposited with a reliable overnight delivery
service (postage prepaid); or (d) on the date a facsimile is sent (as confirmed
by return facsimile transmission), addressed to the other party at the following
addresses, or facsimile numbers in the case of a facsimile:
If to the Buyers:
Argosy Gaming Company
000 Xxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxx, Esq.
Xxxx Xxxxx
Telecopy: (000) 000-0000
Phone: (000) 000-0000
Copies to:
00
Xxxxxxx & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. XxXxxxxxx, Esq.
R. Xxxxxx Xxxxxx, Esq.
Telecopy: (000) 000-0000
Phone: (000) 000-0000
If to the Sellers:
PRIOR TO MAY 1, 2001
Horseshoe Gaming Holding Corp.
0000 Xxxxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxx, Esq.
Xxxx X. Xxxxxx
Telecopy: (000) 000-0000
Phone: (000) 000-0000
ON OR AFTER MAY 1, 2001
Horseshoe Gaming Holding Corp.
00000 X. Xxxx Xxxxx Xxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxx, Esq.
Xxxx X. Xxxxxx
Copies to:
Ice Xxxxxx
Xxx Xxxxxxxx Xxxxxx
Xxx 00000
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxx Xxxxxxx, Esq.
Telecopy: (000) 000-0000
Phone: (000) 000-0000
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
Phone: (000) 000-0000
Any party may change its address for purposes of this SECTION 13.07 by giving
the other parties
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written notice of the new address in the manner set forth above.
SECTION 13.08 ENTIRE AGREEMENT. This Agreement and the agreements expressly
described herein, including the Exhibits and Schedules referred to herein which
form a part of this Agreement, contain the entire understanding of the parties
with respect to the transactions provided for in this Agreement and supersedes
all prior agreements and understandings, written or oral, between the parties
with respect to the transactions described in this Agreement.
SECTION 13.09 GOVERNING LAW. This Agreement and all transactions
contemplated hereby shall be governed, construed and enforced in accordance with
the laws of the State of Illinois, notwithstanding any state's choice of law
rules to the contrary. Each of the Sellers and the Buyers hereby agrees and
covenants to be subject to the jurisdiction of the federal and state courts of
the State of Illinois in any suit, action or proceeding arising out of this
Agreement or the transactions described herein.
SECTION 13.10 WAIVER OF COMPLIANCE; MODIFICATIONS. The party for whose
benefit a warranty, representation, covenant or condition is intended may in
writing waive any inaccuracies in the warranties and representations contained
in this Agreement or waive compliance with any of the covenants or conditions
contained herein and so waive performance of any of the obligations of the other
party hereto, and any defaults hereunder; provided, however, that such waiver
shall not affect or impair the waiving party's rights with respect to any other
warranty, representation or covenant or any default hereunder. No supplement,
modification or amendment of this Agreement shall be binding unless it is in
writing and executed by all of the parties hereto.
SECTION 13.11 VALIDITY OF PROVISIONS. Should any part of this Agreement be
declared by any court of competent jurisdiction to be invalid, such decision
shall not affect the validity of the remaining portions of this Agreement, which
shall continue in full force and effect as if this Agreement had been executed
with the invalid portion thereof eliminated therefrom, it being the intent of
the parties that they would have executed the remaining portions of this
Agreement without including any such part or portion which may be declared
invalid.
SECTION 13.12 NO INTENTION TO BENEFIT THIRD PARTIES. The provisions of this
Agreement are not intended to, and shall not, benefit any Person other than the
parties to this Agreement and any agent bank or other lender and any Person or
Persons which have agreed to provide financing as their interests may appear for
the consummation of the Merger, including without limitation their successors
and assigns, and the provisions hereof are not intended to, and shall not create
any third party beneficiary right in any other Person.
SECTION 13.13 SUCCESSORS AND ASSIGNS; ASSIGNMENT. No party to this
Agreement may assign any of its rights or obligations under this Agreement
without the prior written consent of all other parties, which consent shall not
be unreasonably withheld. Subject to the preceding sentence, this Agreement is
binding upon, inures to the benefit of and is enforceable by the parties hereto
and their respective successors and assigns. Sellers hereby consent to the
assignment by Buyers of Buyers' rights under this Agreement, including without
limitation their
55
rights to indemnification under this Agreement, including without limitation
with respect to the XxXxxxx Lawsuit or any Merger Lawsuit, to any agent bank or
other comparable lender and any Person or Persons who have agreed to provide
financing as their interests may appear, for the consummation of the Merger or
any replacement or successor financing, and to such Person's or Persons'
respective successors and assigns.
SECTION 13.14 CONSTRUCTION.
(a) As used herein, "knowledge of the Sellers" and words of similar import
shall mean the actual knowledge of Xxxx X. Xxxxxx, Xxxxx Xxxxxx, Xxxx Xxxxxxx,
Xxxxxxx X. Xxxxxxxxxx or Xxxx X. Xxxxxx, as well as the knowledge any of such
Persons could be reasonably presumed to possess if such Person had performed a
reasonable investigation with respect to the matter to be confirmed (I.E.,
reviewed the subject matter with the Sellers' purchasing managers responsible
for Joliet with respect to SECTION 2.10 and the Sellers' risk managers
responsible for Joliet with respect to SECTION 2.19).
(b) As used herein, "knowledge of the Buyers" or words of similar import
shall mean the actual knowledge of Xxxxx Xxxxx, Xxxx Xxxxx or Xxxxxx Xxxxxx, as
well as the knowledge of any such Persons could be reasonably presumed to
possess if such Person had performed a reasonable investigation with respect to
the matter to be confirmed.
(c) The words "hereof", "herein", "hereto", "hereunder" and "hereinafter"
and words of similar import, when used in this Agreement, shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
(d) The parties have participated jointly in the negotiation and drafting
of this Agreement, and, in the event of an ambiguity or a question of intent or
a need for interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
(e) Any reference to any federal, state, local, or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise.
(f) The word "including" means "including, without limitation."
(g) Words of any gender used in this Agreement shall be held and construed
to include any other gender; words in the singular shall be held to include the
plural; and words in the plural shall be held to include the singular; unless
and only to the extent the context indicates otherwise.
SECTION 13.15 TIME OF ESSENCE. Time is of the essence under this Agreement.
SECTION 13.16 NON-COMPETITION AND NON-SOLICITATION.
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(a) In consideration of the Buyers entering into this Agreement, HGHC and
its Affiliates undertake that for one (1) year after the Closing Date it will
not:
(i) participate, assist or otherwise be directly or indirectly involved
or concerned, financially or otherwise, as a member, shareholder, unit holder,
director, consultant, adviser, contractor, principal, agent, manager,
beneficiary, partner, associate, trustee, financier or otherwise (other than as
a five percent (5%) or less shareholder, member, unitholder, beneficiary,
partner or associate, in each case, of a public company) in any business that
owns and/or operates one or more casinos in the State of Illinois, provided,
that this SECTION 13.16(a)(i) shall not apply to any Person which acquires
substantially all of the outstanding voting securities of HGHC or substantially
all of the assets of HGHC and its subsidiaries;
(ii) purchase, conduct or otherwise engage in, directly or indirectly,
any billboard advertising within a ten (10) mile radius of the Joliet casino and
any print advertising in any newspapers or similar print media publications
based in Joliet;
(iii) solicit, canvass, induce or encourage directly or indirectly any
employee of Joliet to leave the employment of Joliet (which shall not prohibit
general advertising in newspaper or print media other than those which are based
in Joliet);
(iv) subject to the succeeding sentence, interfere or attempt to
interfere, directly or indirectly, with any relationship between Joliet and any
customer of Joliet who is included on the Joliet LSI Player Data Base delivered
at Closing. Subject to the succeeding sentence, the Buyers acknowledge that HGHC
and its Affiliates may engage in marketing to certain customers on the Joliet
LSI Player Data Base delivered at Closing who have also been rated or carded
play customers (including inactive players) of any of HGHC's other indirectly
owned casinos during the period from the Closing Date and going back twelve (12)
months prior to the Closing Date and such marketing activity with respect to
such customers shall not be a violation of this SECTION 13.16; provided, that
the Sellers have provided the Buyers with an accurate list of all customers of
Joliet meeting the criteria described in SECTION 2.14. In no event shall HGHC
and its Affiliates engage in direct or targeted marketing of or providing
"comps" to customers on the Joliet LSI Player Data Base provided to the Buyers
at the Closing who are not also rated or carded players (including inactive
players) of one of HGHC's other indirectly owned casinos during the period from
the Closing Date and going back twelve (12) months prior to the Closing Date;
provided, however that HGHC's other indirectly owned casinos may engage in
direct or targeted marketing and the provision of "comps" to customers on the
Joliet LSI Player Data Base provided at Closing if such customers visit one of
such other indirectly owned casinos and meet the criteria for marketing and the
provision of "comps" of such other indirectly owned casinos.
(b) If any of the separate and independent covenants and restraints
referred to in clause (a) of this SECTION 13.16 are or become invalid or
unenforceable for any reason then that invalidity or unenforceability will not
affect the validity or enforceability of any other separate and independent
covenants and restraints.
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(c) If any prohibition or restriction contained in clause (a) of this
SECTION 13.16 is judged to go beyond what is reasonable in the circumstances,
but would be judged reasonable if that activity was deleted or that period or
area was reduced, then the prohibitions or restrictions apply with that activity
deleted or period or area reduced by the minimum amount necessary.
(d) The Sellers acknowledge that:
(i) the prohibitions and restrictions contained in clause (a) of this
SECTION 13.16 are reasonable and necessary; and
(ii) the Sellers have received valuable consideration for agreeing to
the covenants in clause (a) of this SECTION 13.16.
(e) The Sellers and the Buyers acknowledge and agree that it will be
difficult to compute the amount of damage or loss to the Buyers if HGHC violated
any of its agreements under this SECTION 13.16, that the Buyers will be without
an adequate legal remedy if HGHC violated the provisions of this SECTION 13.16,
and that any such violation may cause substantial irreparable injury and damage
to the Buyers not fully compensable by monetary damages. Therefore, the Sellers
and the Buyers agree that in the event of any violation by HGHC of this SECTION
13.16, the Buyers shall be entitled (i) to recover from HGHC monetary damages,
(ii) to obtain specific performance, injunctive or other equitable relief, of
either a preliminary or permanent type, and (iii) to seek any other available
rights or remedies at law or in equity which may be exercised concurrently with
the rights granted hereunder.
ARTICLE XIV
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings (such meanings applicable to both the singular and plural
forms of the terms defined):
"Adverse Claim" means any claim the IGB may have against Joliet.
"Affiliate" means, with respect to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by or is under common
control with such Person.
"Agreement" has the meaning set forth in the Preamble.
"Allocation" has the meaning set forth in SECTION 1.14 hereof.
"Annexation Agreement" has the meaning set forth in SECTION 2.11(n) hereof.
"Aquatic Park Area" has the meaning set forth in SECTION 2.11(i).
"Arbitrating Accountant" has the meaning set forth in SECTION 1.06 hereof.
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"Arbitration Notice" has the meaning set forth in SECTION 12.04(a) hereof.
"Basket" has the meaning set forth in SECTION 12.06 hereof.
"Bonus Escrow Agreement" has the meaning set forth in SECTION 1.08 hereof.
"Bonus Escrow " has the meaning set forth in SECTION 1.05(i) hereof.
"Broker Claim" has the meaning set forth in SECTION 12.01 hereof.
"Budgets" has the meaning set forth in SECTION 2.06.
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the State of Illinois or is a day on which
banking institutions located in such state are authorized or required by law or
other governmental action to close.
"Buyer Indemnitees" has the meaning set forth in SECTION 12.01 hereof.
"Buyers" has the meaning set forth in the Preamble.
"Buyers Counsel" means Winston & Xxxxxx.
"Cap" has the meaning set forth in SECTION 12.06 hereof.
"Capital Expenses" has the meaning set forth in SECTION 1.05 hereof.
"Certificates" has the meaning set forth in SECTION 1.10(b) hereof.
"Certificates of Merger" has the meaning set forth in SECTION 1.03 hereof.
"City" has the meaning set forth in SECTION 2.11(n) hereof.
"Claimant" has the meaning set forth in SECTION 12.03 hereof.
"Claims" has the meaning set forth in SECTION 2.26 hereof.
"Closing" has the meaning set forth in SECTION 9.01 hereof.
"Closing Date" has the meaning set forth in SECTION 9.01 hereof.
"Closing Statement" has the meaning set forth in SECTION 1.06 hereof.
"COBRA" has the meaning set forth in SECTION 2.17(g) hereof.
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"Confidentiality Agreement" has the meaning as set forth in SECTION 5.03
hereof.
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"Continuation Coverage" has the meaning as set forth in SECTION 2.17(g)
hereof.
"Contracts" has the meaning set forth in SECTION 2.13 hereof.
"Current Assets" means with respect to the financial information of Joliet
the aggregate of the following assets to the extent that such assets are
classified as current under GAAP and are acquired by the Buyers pursuant to the
terms of this Agreement: (a) cash plus cash equivalents, except for cash or cash
equivalents held in connection with the defeasance of any Debt; (b) marketable
securities, except for any such securities held in connection with the
defeasance of any Debt; (c) accounts receivable generated in the ordinary course
of business of Joliet, less a reasonable reserve for doubtful accounts; (d)
inventories held for use in the ordinary course of business; (e) prepaid
expenses; and (f) all other assets of any kind classified as current under GAAP.
"Current Liabilities" means with respect to the financial information of
Joliet, the aggregate of the following liabilities (without duplication) which
are assumed by Buyers in accordance with the terms of this Agreement: (a) all
accounts payable; (b) all accrued liabilities of any kind shown on a balance
sheet prepared in accordance with GAAP, including but not limited to contingent
obligations, accrued vacation pay, accrued employee bonuses, litigation
reserves, liabilities for outstanding gaming chips and accrued payroll and
related liabilities and accrued Illinois gaming tax for the current fiscal year;
and (c) all other liabilities of any kind classified as current under GAAP.
"Current SEC Documents" means HGHC's annual report on Form 10-K for the
fiscal year ended December 31, 2000.
"D&T" has the meaning set forth in SECTION 1.06 hereof.
"Debt" means with respect to the financial information of Joliet, the
aggregate of (a) any obligation for borrowed money (and any notes payable and
drafts accepted representing extensions of credit whether or not representing
obligations for borrowed money) or any obligation under any capital lease, and
(b) interest payable or accrued with respect to any obligation identified in (a)
which, in each case, is assumed by Buyers in accordance with the terms of this
Agreement. For the avoidance of doubt, Debt shall not include trade debt, slot
club liability or chip liability.
"Deposit" has the meaning set forth in SECTION 1.07 hereof.
"Deposit Escrow Agreement" has the meaning set forth in SECTION 1.07
hereof.
"Disagreement Notice" has the meaning set forth in SECTION 12.04 hereof.
"Dispute" has the meaning set forth in SECTION 1.06 hereof.
"Dispute Notice" has the meaning set forth in SECTION 1.06 hereof.
"Dispute Period" has the meaning set forth in SECTION 1.06 hereof.
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"EBITDA" means earnings before interest income, interest expense on
indebtedness, taxes, depreciation, amortization and corporate overhead, such
amounts to be calculated in accordance with GAAP, adjusted to exclude all costs
and expenses incurred in connection with the transactions contemplated hereby.
"Effective Time" has the meaning set forth in SECTION 1.03 hereof.
"Election Notice" has the meaning set forth in SECTION 12.05 hereof.
"Employee Program" has the meaning set forth in SECTION 2.17(j) hereof.
"Environmental Claims" means all notice letters, notices of violations,
orders, claims, liens, demands, suits, or administrative or judicial actions or
governmental investigations for any injunctive relief, penalties or
environmental response costs arising out of Environmental Requirements.
"Environmental Reports" shall mean collectively the Phase I Environmental
Site Assessment Report prepared by Xxxxxx Engineers, Inc. dated June, 1998 and
the Phase I Environmental Site Assessment Update Report prepared by Xxxxxx
Engineers, Inc. and dated June, 1999.
"Environmental Requirements" means all laws and regulations of the United
States, the states or any municipal, local, regional, intrastate, foreign or
international governmental authority relating to protection of the environment.
Environmental Requirements shall include, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("XXXX"),
the Toxic Substances Control Act, as amended, the Resource Conservation and
Recovery Act, as amended ("RCRA"), the Clean Water Act, as amended, the Safe
Drinking Water Act, as amended, the Clean Air Act, as amended, and other
analogous laws or regulations promulgated or issued by any federal or state
authority.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder.
"ERISA Affiliate" has the meaning as set forth in SECTION 2.17(k) hereof.
"Escrow Agent" means American National Bank and Trust Company of Chicago.
"Escrow Agreements" has the meaning set forth in SECTION 1.09 hereof.
"Estimated Merger Consideration" has the meaning set forth in SECTION 1.05
hereof.
"Existing Debt" means all Debt of Joliet as of the Closing Date.
"Financial Statements" has the meaning set forth in SECTION 2.06 hereof.
"FM Extension Period" has the meaning set forth in SECTION 5.05 hereof.
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"FM Event" means the occurrence between the date of this Agreement and the
Closing Date of any of the following events: (i) trading in securities generally
on the New York Stock Exchange shall have been suspended or materially limited
or minimum prices shall have been established on such Exchange; (ii) a general
banking moratorium shall have been declared either by Federal or New York State
authorities; or (iii) there shall have occurred any outbreak or escalation of
hostilities involving the United States, or a declaration by the United States
of a national emergency, war or other calamity or crisis involving a prospective
change in national or international political, financial or economic conditions;
provided, however, that an event described in clause (i), (ii) or (iii) above
shall only constitute an FM Event if such event results in the Buyers being
unable to finance the Merger. A FM Event shall not constitute a Material Adverse
Change and shall not be deemed to have had a Material Adverse Effect.
"Fraud Claim" has the meaning set forth in SECTION 12.08 hereof.
"GAAP" shall mean United States generally accepted accounting principles
and practices in effect from time to time as consistently applied.
"Gaming Authorities" means any governmental authority or agency with
regulatory control or jurisdiction over the conduct of lawful gaming or
gambling, including, without limitation, the IGB.
"Gaming Board Consent" means Empress Casino Joliet Settlement Agreement,
dated January 31, 2001, among IGB, HGHC, Joliet and Xxxx X. Xxxxxx.
"Gaming Laws" shall mean any Federal, state, local or foreign statute,
ordinance, rule, regulation, permit, consent, approval, registration, finding of
suitability, license, judgment, order, decree, injunction or other authorization
governing or relating to the current or, in the case of HGHC and Joliet,
contemplated manufacturing, distribution, casino gambling and gaming activities
and operations of Joliet, including without limitation the Illinois Gambling Act
and the rules and regulations promulgated thereunder.
"Hazardous Materials" means any substance that has been defined as a
"hazardous substance," "hazardous waste," "hazardous material," pollutant or
contaminant under any Environmental Requirements, including, but not limited to,
CERCLA, XXXX, RCRA, and any other analogous federal or state law. "Hazardous
Materials" include, without limitation, petroleum (including crude oil and any
fraction thereof).
"HGHC" means Horseshoe Gaming Holding Corp., a Delaware corporation.
"HGHC Indemnitees" has the meaning set forth in SECTION 12.02 hereof.
"HGHC Sale" has the meaning set forth in SECTION 4.01 hereof.
"HGHC's Deferred Compensation Plan" has the meaning set forth in SECTION
6.06 hereof.
"HGHC's 401(k) Plan" has the meaning set forth in SECTION 6.04 hereof.
"HSR Act" has the meaning set forth in SECTION 2.04 hereof.
62
"IGB" has the meaning set forth in SECTION 5.04(a) hereof.
"Illinois Gambling Act" means 230 ILCS 10/1 et. seq.
"Indemnification Escrow" has the meaning set forth in SECTION 1.05(ii)
hereof.
"Indemnification Escrow Agreement" has the meaning set forth in SECTION
1.09 hereof.
"Indemnification Notice" has the meaning set forth in SECTION 12.03 hereof.
"Indemnifying Party" has the meaning set forth in SECTION 12.03 hereof.
"Indemnity Loss" has the meaning set forth in SECTION 12.01 hereof.
"Intellectual Property" has the meaning set forth in SECTION 2.24 hereof.
"Inter Track Lease" has the meaning set forth in SECTION 2.11(m) hereof.
"IRS" has the meaning set forth in SECTION 2.09(c).
"JAC" has the meaning set forth in the Preamble.
"Joliet" has the meaning set forth in the Preamble.
"Joliet Employees" has the meaning set forth in SECTION 6.03 hereof.
"Joliet Program" has the meaning set forth in SECTION 2.17(a) hereof.
"Law" or "Laws" shall mean any law, statute, ordinance, rule, regulation,
writ, Permit, injunction, restriction, order, judgment or decree of any federal,
state, local or foreign court or any federal, state, local, foreign or other
governmental department, commission, board, bureau, agency or instrumentality,
and any other executive or legislative proclamation, including any and all laws
to the extent affecting real or tangible personal property such as zoning
ordinances, building and fire codes and environmental laws.
"Lease Documents" has the meaning set forth in SECTION 2.11(f) hereof.
"Leased Real Property" has the meaning set forth in SECTION 2.11(a) hereof.
"Level One Employees" has the meaning set forth in SECTION 3.05 hereof.
"Lien" means any mortgage, deed of trust, lien, pledge, charge, claim,
option, right of first refusal or call, encumbrance, easement, encroachment,
right of a third party, security interest or other interest or restriction of
any kind or character.
"Litigation Notice" has the meaning set forth in SECTION 12.03 hereof.
"Material Adverse Change" means a material adverse change in the business,
prospects, assets, properties, results of operations, cash flows or financial
condition of Joliet, taken as a
63
whole (other than any effect arising out of, or resulting from, general economic
conditions in the United States).
"Material Adverse Effect" means a material adverse effect on the business,
prospects, assets, properties, results of operations, cash flows or financial
condition of Joliet, taken as a whole (other than any effect arising out of, or
resulting from, general economic conditions in the United States).
"XxXxxxx Lawsuit" means the lawsuit described in Item 3 of SCHEDULE 2.10.
"Merger" has the meaning set forth in SECTION 1.01 hereof.
"Merger Agreement" means that certain Agreement and Plan of Merger by and
among Horseshoe Gaming, L.L.C., Horseshoe Gaming (Midwest), Inc., Empress
Acquisition Illinois, Inc., Empress Acquisition Indiana, Inc., Empress Casino
Joliet Corporation, Empress Casino Xxxxxxx Corporation and Empress
Entertainment, Inc., dated as of September 2, 1998, as amended.
"Merger Claim" has the meaning set forth in SECTION 12.08 hereof.
"Merger Consideration" has the meaning set forth in SECTION 1.05 hereof.
"Merger Lawsuits" has the meaning set forth in SECTION 12.01 hereof.
"Net Working Capital" means, as of the Closing Date, the Current Assets of
Joliet less the Current Liabilities of Joliet.
"Non-Joliet Claim" has the meaning set forth in SECTION 12.08 hereof.
"Owned Real Property" has the meaning set forth in SECTION 2.11(a) hereof.
"Parent" means Argosy Gaming Company, a Delaware corporation.
"Permits" has the meaning set forth in SECTION 2.15(d) hereof.
"Permitted Exceptions" has the meaning set forth in SECTION 4.13 hereof.
"Person" means an individual, a corporation, a partnership, a limited
liability company, a joint venture, an association, a trust or any other entity
or organization including a government or political subdivision or an agency or
instrumentality thereof.
"Personal Property" has the meaning set forth in SECTION 2.12(a) hereof.
"Preamble" means that portion of this Agreement preceding ARTICLE I.
"Prior Owners/Directors" has the meaning set forth in SECTION 12.01 hereof.
"Real Property" has the meaning set forth in SECTION 2.11(a) hereof.
64
"Required Title Policy Endorsements" has the meaning set forth in SECTION
4.13 hereof.
"Retention Bonus Plan" means the Retention Bonus Plan of HGHC.
"Sellers" has the meaning set forth in the Preamble.
"Sellers' Counsel" means Xxxxxxx Berlin Shereff Xxxxxxxx, LLP.
"Settlement Agreement" has the meaning set forth in SECTION 4.16 hereof.
"Shares" has the meaning set forth in SECTION 1.10 hereof.
"Stockholders" means the stockholders of HGHC.
"Straddle Period" has the meaning set forth in SECTION 11.04(c).
"Survey" has the meaning set forth in SECTION 4.14 hereof.
"Surviving Corporation" has the meaning set forth in SECTION 1.01 hereof.
"Tax" means any and all taxes, charges, fees, levies, customs duties or
other assessments, including, without limitation, all net income, capital gains,
gross income, gross receipts, premium, sales, use, ad valorem, transfer,
franchise, profits, license, capital, withholding, payroll, employment, excise,
goods and services, estimated, severance, stamp, occupation, property, windfall
profits or other taxes, fees, assessments or charges of any kind whatsoever, and
any interest, fines and any penalties (including penalties for failure to file
in accordance with applicable information reporting requirements), additions to
tax, or additional amounts imposed by any Taxing Authority, whether federal,
state, or local or domestic or foreign; provided that for purposes of the
definition of Tax, any interest, penalties, additions to Tax or additional
amounts that relate to Taxes or information reporting requirements for any
period, or a portion of any period, ended on or before the Closing Date shall
include any interest, penalties, additions to Tax, or additional amounts
relating to Taxes or information reporting requirements for such periods,
regardless of whether such items are incurred, accrued, assessed or similarly
charged on, before or after the Closing Date.
"Tax Claim" has the meaning set forth in SECTION 11.04(c).
"Tax Return" shall mean any report, return, form, declaration or other
document or information required to be supplied to any authority in connection
with Taxes.
"Taxing Authority" means any domestic or foreign governmental authority
having responsibility for the imposition of any Tax.
"Tenant" has the meaning set forth in SECTION 2.11(m) hereof.
"13.16 Claim" has the meaning set forth in SECTION 12.08 hereof.
"Title Commitments" has the meaning set forth in SECTION 4.13 hereof.
65
"Title Company" has the meaning set forth in SECTION 4.13 hereof.
"Title Policy" has the meaning set forth in SECTION 4.13 hereof.
"Transfer Taxes" has the meaning set forth in SECTION 11.01 hereof.
"Transition Services Agreement" has the meaning set forth in SECTION 6.04
hereof.
66
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
HORSESHOE GAMING HOLDING CORP.,
a Delaware corporation
By: /s/ Xxxx Xxxxxx
---------------------------
Name: Xxxx Xxxxxx
Title: President
EMPRESS CASINO JOLIET CORPORATION,
an Illinois corporation
By: /s/
---------------------------
Name:
Title:
ARGOSY GAMING COMPANY,
a Delaware corporation
By: /s/ Xxxx X. Xxxxx
---------------------------
Name: Xxxx X. Xxxxx
Title: Senior Vice President and CFO
JOLIET ACQUISITION CORPORATION,
an Illinois corporation
By: /s/ Xxxx X. Xxxxx
---------------------------
Name: Xxxx X. Xxxxx
Title: Treasurer
TABLE OF CONTENTS
Page
ARTICLE I. THE MERGER............................................................2
Section 1.01 The Merger............................................................2
Section 1.02 Closing...............................................................3
Section 1.03 Effective Time........................................................3
Section 1.04 Legal Effect..........................................................3
Section 1.05 Merger Consideration..................................................3
Section 1.06 Merger Consideration Determination....................................4
Section 1.07 Deposit...............................................................5
Section 1.08 Bonus Escrow..........................................................5
Section 1.09 Indemnification Escrow................................................5
Section 1.10 Conversion of Shares..................................................5
Section 1.11 Exchange of Certificates Representing Shares..........................6
Section 1.12 Taking of Necessary Action; Further Action............................6
Section 1.13 Certain Matters Relating to the Surviving Corporation.................6
Section 1.14 Allocation of Merger Consideration....................................7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF HGHC................................7
Section 2.01 Organization; Standing; and Qualification.............................7
Section 2.02 Authority; Power; and No Violation....................................8
Section 2.03 Capital Structure of Joliet and Related Matters.......................8
Section 2.04 Consents and Approvals................................................9
Section 2.05 Affiliate Transactions................................................9
Section 2.06 Financial Statements..................................................9
Section 2.07 Accounting Controls..................................................10
Section 2.08 Outstanding Debt and Related Matters.................................10
Section 2.09 Taxes................................................................10
Section 2.10 Compliance with Laws; No Default or Litigation.......................12
Section 2.11 Real Property........................................................12
Section 2.12 Personal Property....................................................16
Section 2.13 Contracts............................................................16
Section 2.14 Sufficiency of Assets................................................17
Section 2.15 Licenses and Permits.................................................17
Section 2.16 Labor Relations; Employees...........................................18
Section 2.17 ERISA Matters; Employee Benefit Plans................................19
Section 2.18 Environmental Compliance.............................................21
Section 2.19 Insurance............................................................22
Section 2.20 No Changes...........................................................22
Section 2.21 Absence of Certain Business Practices................................23
Section 2.22 Minute Books, Stock Record Book......................................23
Section 2.23 Brokers' or Finders' Fees............................................23
Section 2.24 Intellectual Property................................................23
Section 2.25 Absence of Undisclosed Liabilities...................................24
Section 2.26 Claims Against Third Parties.........................................24
i
Section 2.27 Bank Accounts........................................................24
Section 2.28 Disclosure...........................................................24
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYERS.........................24
Section 3.01 Organization; Qualification..........................................25
Section 3.02 Authority; Power; and No Violation...................................25
Section 3.03 Consents and Approvals...............................................25
Section 3.04 Brokers' or Finders' Fees............................................26
Section 3.05 No Adverse Facts for Gaming Approvals................................26
Section 3.06 Litigation...........................................................26
ARTICLE IV PRECLOSING COVENANTS OF THE SELLERS..................................26
Section 4.01 Exclusivity..........................................................26
Section 4.02 Supplements and Updates to Representations and Warranties............27
Section 4.03 Maintenance of Status................................................27
Section 4.04 Operation of Business................................................27
Section 4.05 Maintenance of Assets and Properties.................................29
Section 4.06 Access; Cooperation..................................................29
Section 4.07 Performance of Obligations Under Agreements..........................29
Section 4.08 Governmental Approvals and Consents..................................29
Section 4.09 Capital Expenditures.................................................29
Section 4.10 Fire or Casualty.....................................................30
Section 4.11 Cooperation..........................................................30
Section 4.12 Intercompany Balances................................................30
Section 4.13 Title Insurance......................................................30
Section 4.14 Surveys..............................................................30
Section 4.15 Confidentiality......................................................31
Section 4.16 HGHC Board of Directors..............................................31
Section 4.17 XxXxxxx Lawsuit......................................................31
Section 4.18 Extension of Waiver..................................................32
ARTICLE V PRECLOSING COVENANTS OF THE BUYERS...................................32
Section 5.01 Governmental Approvals...............................................32
Section 5.02 Cooperation..........................................................33
Section 5.03 Confidentiality......................................................33
Section 5.04 Timing Commitments...................................................33
Section 5.05 Financing............................................................34
ARTICLE VI.. OTHER MATTERS........................................................34
Section 6.01 Employee Obligations.................................................34
Section 6.02 Retention Bonus Plan.................................................34
Section 6.03 Actions Relating to Employee Benefit Plans...........................34
Section 6.04 HGHC's 401(k) Plan Plans.............................................35
Section 6.05 Transition Services Agreement........................................35
Section 6.06 HGHC's Deferred Compensation Plan....................................35
ARTICLE VII. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS...................35
ii
Section 7.01 Deliveries of the Buyers.............................................35
Section 7.02 Representations and Warranties of Each of the Buyers.................35
Section 7.03 Compliance...........................................................36
Section 7.04 Compliance Certificate...............................................36
Section 7.05 Legal Proceedings....................................................36
Section 7.06 Consents and Approvals...............................................36
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYERS....................36
Section 8.01 Deliveries of the Sellers............................................36
Section 8.02 Representations and Warranties of the Sellers........................36
Section 8.03 Compliance...........................................................36
Section 8.04 Compliance Certificate...............................................36
Section 8.05 Legal Proceedings....................................................37
Section 8.06 Consents and Approvals...............................................37
Section 8.07 No Material Adverse Change...........................................37
Section 8.08 UCC Releases.........................................................37
ARTICLE IX CLOSING..............................................................37
Section 9.01 Closing Date.........................................................37
Section 9.02 Deliveries of the Sellers............................................37
Section 9.03 Deliveries of the Buyers.............................................39
ARTICLE X TERMINATION..........................................................39
Section 10.01 Events of Termination................................................39
Section 10.02 Remedies for Breach; Effect of Termination...........................41
ARTICLE XI TAX MATTERS..........................................................42
Section 11.01 Transfer Taxes.......................................................42
Section 11.02 Tax Matters..........................................................42
Section 11.03 Cooperation, Access to Records.......................................44
Section 11.04 Determination of Tax Allocation; Tax Contests........................44
Section 11.05 Interaction with Article XII.........................................46
Section 11.06 Protective Section 338(h)(10) Election...............................47
ARTICLE XII INDEMNIFICATION......................................................47
Section 12.01 Indemnification......................................................47
Section 12.02 Indemnification by the Buyers........................................48
Section 12.03 Notice...............................................................48
Section 12.04 Arbitration..........................................................49
Section 12.05 Defense of Claims....................................................49
Section 12.06 Limitations on Indemnification.......................................50
Section 12.07 Payment of Losses....................................................51
Section 12.08 Limitations in Section 12.06(b)(i) Inapplicable......................51
Section 12.09 No Environmental Contribution........................................51
Section 12.10 Indemnification Exclusive Remedy.....................................52
ARTICLE XIII MISCELLANEOUS........................................................52
iii
Section 13.01 Escrow Account.......................................................52
Section 13.02 Counterparts.........................................................52
Section 13.03 Commercially Reasonable Efforts......................................52
Section 13.04 Expenses.............................................................53
Section 13.05 Index and Captions...................................................53
Section 13.06 Public Disclosure....................................................53
Section 13.07 Notices..............................................................53
Section 13.08 Entire Agreement.....................................................55
Section 13.09 Governing Law........................................................55
Section 13.10 Waiver of Compliance; Modifications..................................55
Section 13.11 Validity of Provisions...............................................55
Section 13.12 No Intention to Benefit Third Parties................................55
Section 13.13 Successors and Assigns; Assignment...................................55
Section 13.14 Construction.........................................................56
Section 13.15 Time of Essence......................................................56
Section 13.16 Non-Competition and Non-Solicitation.................................56
ARTICLE XIV DEFINITIONS..........................................................58
iv
EXHIBITS
Exhibit A Deposit Escrow Agreement
Exhibit B Bonus Escrow Agreement
Exhibit C Indemnification Escrow Agreement
Exhibit D Transition Services Agreement
Exhibit 9.02(p) Tax Withholding Certificate
v
