EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BETWEEN
JACKPOT ENTERPRISES, INC.
AND
CRC HOLDINGS, INC.
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of February
17, 1999, between Jackpot Enterprises Inc., a Nevada corporation whose address
is 0000 Xxxxx Xxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxx 00000-0000 ("JEI"), and CRC
Holdings, Inc., a Florida corporation whose address is 0000 Xxxx Xxxxxx, Xxxxx,
Xxxxxxx 00000 ("CRC"). JEI in its capacity as the surviving corporation is
herein sometimes called the "Surviving Corporation," and JEI and CRC are herein
sometimes called the "Constituent Corporations."
W I T N E S S E T H :
WHEREAS, the Boards of Directors of JEI and CRC have each determined
that it is advisable and in the best interests of their respective stockholders
for JEI, following the consummation of the Spinoff (as defined below) and
subject to certain consents and approvals, including but not limited to
approvals by certain appropriate governmental gaming regulatory authorities, to
acquire the businesses of CRC which CRC shall continue to own immediately
following the Spinoff (the "Acquired Businesses") and to effect such acquisition
through a merger of CRC with and into JEI (the "Merger") following the Spinoff;
WHEREAS, prior to Closing (as such term is defined in Section 1.04
below) CRC intends to (i) contribute the Spinco Businesses (as defined in the
Reorganization Agreement referred to below) to a Florida limited liability
company to be formed prior to the Closing ("Spinco"), and (ii) to distribute all
of the ownership interests in Spinco pro rata to the stockholders of CRC (the
"Spinoff"), all in accordance with that certain Reorganization Agreement between
CRC and Spinco substantially in the form attached hereto as Exhibit A (the
"Reorganization Agreement");
WHEREAS, concurrently with the execution of this Agreement and as a
condition and inducement to JEI's willingness to enter into this Agreement, the
three largest stockholders of CRC have entered into an agreement with JEI of
even date herewith (the "CRC Stockholders Agreement") pursuant to which such
stockholders have agreed to vote their shares of CRC Common Stock (as defined in
Section 2.01) in favor of the CRC Merger Proposal (as defined in Section 3.04),
and any other matter which may require approval by the stockholders of CRC in
order to consummate the transactions contemplated hereby.
WHEREAS, concurrently with the execution of this Agreement and as a
condition and inducement of CRC's willingness to enter into this Agreement,
certain stockholders of JEI have entered into an agreement with CRC of even date
herewith (the "JEI Stockholders Agreement") pursuant to which such stockholders
have agreed to vote their shares of JEI Common Stock (as defined in Section
2.01) in favor of the JEI Merger Proposal (as defined in Section 3.04), and any
other matter which may require approval by the stockholders of JEI in order to
consummate the transactions contemplated hereby.
WHEREAS, for United States Federal income tax purposes, it is intended
that the Merger qualify as a reorganization under the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended (together with the rules
and regulations promulgated thereunder, the "Code"), unless the parties agree to
modify the structure of the transaction in accordance with Section 1.08 of this
Agreement, in which case the parties intend that Section 351 of the Code apply
to the transaction; and
WHEREAS, JEI and CRC desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
I. THE MERGER.
1.01 The Merger.
At the Effective Time (as defined in Section 1.03), upon the terms and
subject to the conditions of this Agreement, CRC shall be merged with and into
JEI in accordance with the Nevada Revised Statutes ("NRS") and the Florida
Business Corporation Act (the "FBCA"). JEI shall be the surviving corporation
in the Merger. As a result of the Merger, the outstanding shares of capital
stock of CRC shall be converted or canceled, as the case may be, in the manner
provided in Article II.
1.02 Spinoff.
Immediately prior to the consummation of the Merger, CRC shall
contribute to Spinco the Spinco Businesses (the "Contribution"), in exchange for
all of the ownership interests in Spinco (the "Spinco Interests"). Immediately
following the Contribution, CRC shall distribute pro rata to its stockholders
and holders of CRC Options (as defined in Section 2.03(a)) all of the issued and
outstanding Spinco Interests. The businesses of CRC which CRC will continue to
own following the Spinoff (constituting the Acquired Businesses), including the
assets and liabilities in respect thereof, are listed on Schedule 1.02
1.03 Effective Time.
Subject to the terms and conditions hereof, on the Closing Date, CRC
and JEI shall file (a) Articles of Merger (the "Florida Articles") in the form
attached hereto as Exhibit 1.03(a) with the Secretary of State of the State of
Florida in accordance with the relevant provisions of the FBCA and (b) Articles
of Merger (the "Nevada Articles") in the form attached hereto as Exhibit 1.03(b)
with the Secretary of State of the State of Nevada in accordance with the
relevant provisions of the NRS. A form of the Nevada Articles, to the extent
practicable, shall be precleared with the Secretary of State of the State of
Nevada prior to the Closing Date and a form of the Florida Articles, to the
extent practicable, shall be precleared with the Secretary of State of the State
of Florida prior to the Closing Date. The Merger shall be effective at such
time as provided in the Nevada Articles (the "Effective Time") but in no event
later than the Release Time (as hereinafter defined).
1.04 Closing.
The closing of the Merger (the "Closing") will take place at the
offices of Camhy Karlinsky & Xxxxx LLP, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000-
4315, or at such other place as the parties hereto mutually agree, on a date and
at a time to be specified by the parties, which shall in no event be later than
10:00 a.m., local time, on the next business day following satisfaction of the
condition set forth in Section 5.01(a), provided that the other closing
conditions set forth in Article V have been satisfied or, if permissible, waived
in accordance with this Agreement, or on such other date as the parties hereto
mutually agree (the "Closing Date"). At the Closing there shall be delivered to
JEI and CRC the certificates and other documents and instruments required to be
delivered under Article V.
1.05 Directors of the Surviving Corporation.
At the Effective Time, each person who is a director of JEI
immediately prior to the Effective Time and each person who is listed on
Schedule 1.05 hereto shall be a director of the Surviving Corporation.
1.06 Certificate of Incorporation and Bylaws.
The articles of incorporation and Bylaws of JEI as in effect
immediately prior to the Effective Time shall be the articles of incorporation
and Bylaws of the Surviving Corporation until thereafter amended in accordance
with applicable law.
1.07 Effects of the Merger.
The separate corporate existence of JEI, as the Surviving Corporation,
shall continue unimpaired by the Merger. From and after the Effective Time, the
Surviving Corporation shall possess all the rights, privileges, powers,
immunities and franchises and be subject to all of the restrictions,
disabilities and duties of the Constituent Corporations, all as provided under
the NRS. The Surviving Corporation shall, except as otherwise specifically
provided herein, succeed to all the properties and assets of the Constituent
Corporations and to all debts, choses in action and other interests of, due to
or belonging to the Constituent Corporations with the effect and as more fully
set forth in Section 92A.250 of the NRS.
1.08 Modification of Structure.
Following execution of this Agreement and at any time prior to the
mailing of the Joint Proxy Statement (as defined in Section 4.01(i)), if
mutually agreed to by JEI and CRC, the parties may change the form of
transaction pursuant to which JEI will acquire the Acquired Businesses to a
transaction to which Section 351 of the Code will apply, and the parties agree,
in such circumstances, to use their best efforts to enter into an amendment to
this Agreement consistent with such change.
II. STATUS AND CONVERSION OF SECURITIES.
2.01 Conversion of CRC Common Stock and CRC Options.
(a) Share Merger Consideration. Except for Dissenting Shares (as
defined in Section 2.05 below) and except as provided in paragraph (c) of this
Section 2.01, each holder of shares of common stock, par value $0.005 per share,
of CRC ("CRC Common Stock") and each holder of CRC Options issued and
outstanding at the Effective Time shall, by virtue of the Merger and without any
action on the part of any such holder, be entitled to receive a portion of the
Share Merger Consideration as set forth in the last sentence of this paragraph,
except that shares of CRC Common Stock held in CRC's treasury or owned by JEI at
the Effective Time shall be canceled without payment of any consideration
thereof. The "Share Merger Consideration" means an aggregate of 3,516,530
shares of common stock, par value $.01 per share, of JEI ("JEI Common Stock"),
together with any and all rights attached thereto or associated therewith,
including but not limited to the rights to purchase Series A Junior Preferred
Stock of JEI as set forth in that certain Rights Agreement dated as of July 11,
1994, subject to (i) adjustment by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination, exchange or similar
stock event, (ii) reduction for any adjustment effected pursuant to Section 2.02
and (iii) a holdback of such number of shares of JEI Common Stock that would be
issuable in respect of all Dissenting Shares if such Dissenting Shares were
ultimately deemed to be converted into the right to receive the portion of the
Share Merger Consideration attributable to such Dissenting Shares (the "Withheld
Shares"). The Share Merger Consideration shall be distributed in accordance
with instructions delivered by CRC to JEI not less than three (3) business days
prior to the Closing Date. The Withheld Shares shall be distributed or canceled
as provided in paragraph (d) of this Section 2.01.
(b) Exchange of CRC Common Stock Pledged to Carnival for JEI
Assignable Notes. All shares of CRC Common Stock currently pledged by the
record holders of such shares to Carnival Corporation ("Carnival") to secure
notes payable by such holders to Carnival (collectively, the "CCL Notes") will,
by virtue of the Merger and without any action on the part of such record
holders, be exchanged for promissory notes of JEI (the "JEI Assignable Notes")
in the aggregate principal amount of $13,208,441 and having the terms set forth
on Exhibit 2.01(b). Such JEI Assignable Notes have been assigned by the holders
who will receive them, effective immediately following the Effective Time, to
Carnival in partial satisfaction of the CCL Notes. The aggregate principal
amount of the JEI Assignable Notes shall be subject to reduction in the
aggregate principal amount thereof for any adjustment effected pursuant to
Section 2.02. Upon the issuance by JEI (or any affiliate) for cash, pursuant to
Rule 144A of not less than $175,000,000 of indebtedness ("144A Notes") to
finance the Players Merger (as defined in Section 3.02(a)) as contemplated by
the merger agreement related thereto, JEI shall, at its option, either (i)
exchange the JEI Assignable Notes and the JEI Note (as defined in Section
2.01(c)) for an equal principal amount of 144A Notes (to be supplemented, if the
issue price of such 144A Notes is at a discount to the face amount thereof
(without regard to any applicable underwriting discount), by additional 144A
Notes having an aggregate face amount equal to the discount in respect of 144A
Notes having a face amount equal to the principal amount of the JEI Assignable
Notes) and concurrent therewith pay to Carnival all accrued and unpaid interest
under the JEI Assignable Notes and the JEI Note; or (ii) pay in cash to Carnival
all principal and accrued and unpaid interest on the JEI Assignable Notes and
the JEI Note.
(c) Exchange of CRC Common Stock held by Carnival for the JEI Note.
All shares of CRC Common Stock registered in the name of Carnival at the
Effective Time shall, by virtue of the Merger and without any action on the part
of Carnival, be exchanged for a promissory note of JEI in the principal amount
of $12,601,156 and having the same terms and conditions as the JEI Assignable
Notes (the "JEI Note", and, together with the Share Merger Consideration and the
JEI Assignable Notes, the "Merger Consideration"), subject to reduction in the
aggregate principal amount thereof for any adjustment effected pursuant to
Section 2.02.
(i) Distribution or Cancellation of Withheld Shares. To the
extent any holder (a "Dissenting Holder") of Dissenting Shares, following the
Effective Time, withdraws a demand for payment, fails to comply fully with the
requirements of Florida law, or otherwise fails to establish the right of such
Dissenting Holder to be paid the value of such Dissenting Holder's Dissenting
Shares under Florida law, that portion of the Withheld Shares relating to such
Dissenting Shares shall thereupon be delivered to such Dissenting Holder. In
the event a Dissenting Holder is paid the value of the Dissenting Shares, the
portion of the Withheld Shares attributable to such Dissenting Shares shall
thereupon be canceled.
2.02 Adjustments to the Merger Consideration.
(a) Adjustment Based on Assumed Assets and Liabilities.
(i) CRC has delivered to JEI an unaudited balance sheet of the
Acquired Businesses as of November 30, 1998 (the "Initial November 30 Balance
Sheet"), a copy of which is included as part of the CRC Financial Statements
attached as Schedule 4.01(e). The Initial November 30 Balance Sheet has been
prepared in accordance with generally accepted accounting principles ("GAAP"),
provided that the selection of certain categories of assets and liabilities to
be included and/or omitted from the Initial November 30 Balance Sheet may not be
in accordance with GAAP. Pursuant to Section 3.01(f)(i), CRC will deliver an
updated balance sheet of the Acquired Businesses as of November 30, 1998 (the
"Updated November 30 Balance Sheet") which shall have been prepared based on the
audited financial statements of the Acquired Businesses to be delivered pursuant
to Section 3.01(f), as adjusted on a basis consistent with the Initial November
30 Balance Sheet. The parties acknowledge and agree that, for purposes of
preparing the Initial November 30 Balance Sheet and Updated November 30 Balance
Sheet, (A) the amount accrued for redemption of warrants to purchase Common
Stock of Louisiana Casino Cruises, Inc., a Louisiana corporation ("LCC"), will
be fixed at $4,376,000, notwithstanding any determination after the date hereof
that the actual amount to be accrued or expended is more or less than that
amount and (B) the maximum amount which CRC may pay or accrue for bonuses for
the fiscal year ended November 30, 1998 shall not exceed $700,000. Subject to
the procedures set forth in Section 2.02(a)(ii) below in the event of any
dispute with respect to any item on the Updated November 30 Balance Sheet, if
the net worth of the Acquired Businesses as reflected in the Updated November 30
Balance Sheet is less than $74,000 (i.e., the net worth of the Acquired
Businesses as reflected on the Initial November 30 Balance Sheet), then the
Merger Consideration shall be reduced as follows:
(A) the Share Merger Consideration shall be reduced to the
number of shares of JEI Common Stock equal to the product of 55.758% and the
quotient of (x) the amount by which the net worth of the Acquired Businesses at
November 30, 1998 is less than $74,000 (the "Net Worth Deficit") and (y) $9.25.
(B) The aggregate principal amount of the JEI Assignable
Notes shall be reduced by an amount equal to 22.641% of the Net Worth Deficit.
(C) The aggregate principal amount of the JEI Note shall be
reduced by an amount equal to 21.601% of the Net Worth Deficit.
(ii) Within 30 days following receipt of the Updated November 30
Balance Sheet from CRC, JEI shall notify CRC in writing whether it accepts or
disputes the amounts set forth on said balance sheet. If the Updated November
30 Balance Sheet is acceptable to JEI, it shall be utilized to determine whether
an adjustment to the Merger Consideration pursuant to this Section 2.02(a) is
necessary and, if so, the amount of such adjustment. If JEI disputes any
amounts set forth on said balance sheet, it shall state its specific objections
in its notice, which objections must be made in good faith. If the parties and
their advisors cannot resolve the objections of JEI within 30 days following
delivery by JEI of its objections to CRC, then the Updated November 30 Balance
Sheet must be submitted to a nationally recognized accounting firm acceptable to
both CRC and JEI, which shall conduct a review of the items in said balance
sheet which are in dispute and determine whether, in each instance, the amount
of any item as proposed by CRC or JEI is more appropriate. Such determination
shall be final and binding on the parties hereto.
(iii) Notwithstanding (i) and (ii) above, the parties
acknowledge that any reduction in the line items entitled "Deferred Income
Taxes" on the Initial November 30 Balance Sheet which is reflected in the
Updated November 30 Balance Sheet shall, in lieu of a reduction in the Merger
Consideration, be offset, on a dollar-for-dollar basis, by a reduction in the
line items entitled "Due to CRC" on the Updated November 30 Balance Sheet
(referred to hereinafter as the "Due to CRC Line Items").
(iv) The parties further agree and acknowledge that any tax
savings realized by the Acquired Businesses from and after December 1, 1998
through the Closing Date which are attributable to expenses of the Spinco
Businesses (which expenses shall, for this purpose, be deemed allocated between
the Acquired Businesses and the Spinco Businesses in accordance with Schedule
3.01(f) attached hereto) shall be paid by JEI to Spinco within 10 business days
following the date on which the tax return for the period during which such tax
savings have been realized is filed by JEI; provided, however, if the Acquired
Businesses would not have generated taxable income during the period between
December 1, 1998 and the Closing Date without giving effect to the deductions
attributable to the expenses of the Spinco Businesses during that period, JEI
will have no obligation to pay Spinco pursuant to this clause (iv).
(b) Adjustments Based on Pre-November 30, 1998 Liabilities Not
Reflected on Updated November 30 Balance Sheet.
(i) In the event that, subsequent to delivery of the Updated
November 30 Balance Sheet for the Acquired Businesses and prior to the Closing,
CRC notifies JEI as set forth in clause (ii) below of the existence of
liabilities (whether absolute, accrued, contingent, estimated, deferred, fixed
or otherwise) of the Acquired Businesses, or an impairment of the carrying value
of any asset of the Acquired Businesses, relating to or arising out of events
or circumstances occurring on or before November 30, 1998 and which, had such
events and circumstances been known at the time of preparation of the Updated
November 30 Balance Sheet, would have been required, in accordance with GAAP as
modified to the extent provided in Section 2.02(a)(i) above, to have been
reflected or reserved against on the Updated November 30 Balance Sheet, there
shall be a reduction in the Merger Consideration at the Closing for the amount
of any Net Worth Deficit, if any, caused by such liability or impairment of
value or, if the Updated November 30 Balance Sheet prior to this adjustment
already reflected a Net Worth Deficit, by the amount of such liability or
impairment of value. Any such adjustment shall be determined in accordance with
the formulas set forth in Section 2.02(a) above for determining a reduction in
the Merger Consideration.
(ii) CRC shall notify JEI in writing if CRC becomes aware of any
liability or impairment of value that could result in an adjustment under
Section 2.02(b)(i). Such notice shall specify in reasonable detail the nature
and amount of such liability or impairment of value and the amount of the
proposed adjustments to the Share Merger Consideration, the aggregate principal
amount of the JEI Assignable Notes and the aggregate principal amount of the JEI
Note as a result thereof. Within 15 days following receipt of such notification,
JEI shall notify CRC in writing whether it accepts or disputes the proposed
adjustment. If JEI disputes the amount of the proposed adjustment, it shall
state its specific objection in its notice, which objection must be made in good
faith. If the parties cannot resolve such objection, the parties shall submit
their dispute to a nationally recognized accounting firm acceptable to JEI and
CRC (which shall be the same firm, if any, selected pursuant to Section
2.01(a)(ii)), which shall determine whether the adjustments are appropriate or
not. Such determination shall be binding on the parties hereto.
(c) Adjustments Based on Payments Made in Respect of Liabilities of
the Spinco Businesses Prior to Closing and Transaction Expenses.
(i) In the event that liabilities of the Spinco Businesses are
paid, discharged or otherwise satisfied by CRC or any of the CRC Acquired
Subsidiaries using assets of the Acquired Businesses from and after December 1,
1998, including cash from the operations of the Acquired Businesses from and
after December 1, 1998, there shall be a reduction in the Merger Consideration
as follows:
(A) The number of shares of JEI Common Stock constituting
the Share Merger Consideration shall be reduced by 55.758% of the quotient of
(x) the amount of all assets of the Acquired Businesses used to pay, discharge
or otherwise satisfy liabilities of the Spinco Businesses (the "Diverted Asset
Amount") and (y) $9.25.
(B) The aggregate principal amount of the JEI Assignable
Notes shall be reduced by an amount equal to 22.641% of the Diverted Asset
Amount.
(C) The aggregate principal amount of the JEI Note shall be
reduced by an amount equal to 21.601% of the Diverted Asset Amount.
The Diverted Asset Amount shall be determined as follows. Within five business
days prior to the Closing Date, the chief financial officer of CRC shall deliver
to JEI an income statement for the Acquired Businesses for the period from
December 1, 1998 through the last day of the most recent month preceding the
Closing Date for which such statements are available (the "Pre-Closing Income
Statement"), and a balance sheet for the Acquired Businesses as of the end of
such month (the "Pre-Closing Balance Sheet"), along with a certification that
(x) such Pre-Closing Income Statement and Pre-Closing Balance Sheet were
prepared in accordance with the books and records of CRC and the CRC Acquired
Subsidiaries and on a basis consistent with the Initial November 30 Balance
Sheet (without regard to any changes in accounting principles) and (y)
accurately reflect the items shown thereon. In addition, on the Closing Date,
CRC and JEI shall estimate the amount, if any, of assets of the Acquired
Businesses which have been used to satisfy any liabilities of the Spinco
Businesses since the date of the Pre-Closing Balance Sheet (the "Stub Period
Diverted Asset Amount"). The Diverted Asset Amount shall be equal to the sum of
(i) the amount, if any, by which net income for the period from December 1, 1998
to the date of the Pre-Closing Balance Sheet exceeds the increase in
"Stockholders' Equity" on the Pre-Closing Balance Sheet compared to
"Stockholders' Equity" on the Updated November 30 Balance Sheet (or, if there is
a net loss for the period from December 1, 1998 to the date of the Pre-Closing
Balance Sheet, the amount, if any, by which the net loss for such period is less
than the decrease in "Stockholders' Equity" on the Pre-Closing Balance Sheet
compared to "Stockholders' Equity" on the Updated November 30 Balance Sheet)
plus (ii) the Stub Period Diverted Asset Amount. Notwithstanding the foregoing,
the parties acknowledge and agree that (I) the calculation of Diverted Asset
Amount shall be made without regard to severance benefits paid to certain CRC
personnel on or prior to the Closing Date up to the amounts set forth in
Schedule 2.02(c) hereto, which payments (from whatever source) will in no event
result in a reduction to the Merger Consideration and (II) with respect to any
Diverted Asset Amount in excess of $800,000, in lieu of the reduction of the
Merger Consideration that would be effected pursuant to this subparagraph
(c)(i), CRC shall have the option (which option shall be exercised by written
notice delivered to JEI not less than three (3) business days prior to the
Closing Date) to have the Due to CRC Line Items reduced by the amount of such
excess; provided that the amount of such reduction, plus the amount of all other
reductions in the Due to CRC Line Items which CRC elects to make as permitted
hereunder, shall not cause the Due to CRC Line Items to be reduced below zero;
provided, further, that if any amount of such excess remains after the Due to
CRC Line Items have been reduced to zero, CRC shall have the further option to
satisfy such excess with cash.
(ii) In the event the aggregate expenses of the Merger and the
other transactions contemplated by this Agreement incurred by CRC and the CRC
Acquired Subsidiaries (inclusive of the amount reserved on the Updated November
30 Balance Sheet in respect thereof) exceed $800,000, there shall be a reduction
at Closing in the Merger Consideration as follows:
(A) The number of shares of JEI Common Stock constituting
the Share Merger Consideration shall be reduced by 55.758% of the quotient of
(y) the amount of expenses in excess of $800,000 (the "Excess Expenses") and (z)
$9.25.
(B) The aggregate principal amount of the JEI Assignable
Notes shall be reduced by an amount equal to 22.641% of the Excess Expenses.
(C) The aggregate principal amount of the JEI Note shall be
reduced by an amount equal to 21.601% of the Excess Expenses.
For purposes of this Section 2.02(c)(ii), CRC agrees that all expenses incurred
by CRC and the CRC Acquired Subsidiaries related to matters arising from the
merger of CHC International, Inc. with and into Patriot American Hospitality
Operating Company and the transactions consummated in connection therewith, or
in connection with the formation of Spinco and development of the Spinco
Businesses prior to the Effective Time, shall not be considered expenses of the
Merger. In lieu of the reduction of the Merger Consideration that would be
effected pursuant to this subparagraph (c)(ii), CRC shall have the option (which
option shall be exercised by written notice delivered to JEI not less than three
(3) business days prior to the Closing Date) to have the Due to CRC Line Items
reduced by the amount of such Excess Expenses; provided that the amount of such
reduction, plus the amount of all other reductions in the Due to CRC Line Items
which CRC elects to make as permitted hereunder, shall not cause the Due to CRC
Line Items to be reduced below zero; provided, further, that if any amount of
such Excess Expenses remains after the Due to CRC Line Items have been reduced
to zero, CRC shall have the further option to satisfy such Excess Expenses with
cash.
(d) Adjustment Based on Tax Liabilities Attributable to Spinoff.
(i) In the event there shall be a tax liability to CRC as a
result of the Contribution and Spinoff (the "Spinoff Tax Liability") as
calculated below, there shall be an adjustment at the Closing in the Merger
Consideration as follows:
(A) The number of shares of JEI Common Stock constituting
the Share Merger Consideration shall be reduced by 55.758% of the quotient of
(x) the Spinoff Tax Liability and (y) $9.25.
(B) The aggregate principal amount of the JEI Assignable
Notes shall be reduced by an amount equal to 22.641% of the Spinoff Tax
Liability.
(C) The aggregate principal amount of the JEI Note shall be
reduced by an amount equal to 21.601% of the Spinoff Tax Liability.
(ii) The Spinoff Tax Liability shall be calculated in accordance
with the following procedures:
(A) No later than 45 days prior to the expected Closing
Date, PricewaterhouseCoopers LLP ("PWC") shall make an estimate of the fair
market value of the Spinco Businesses as of the date of the Spinoff, taking into
account in the valuation the best estimate of the Spinco Businesses' share of
the expenses attributable to the transactions contemplated by this Agreement.
(B) PWC shall estimate the tax items of CRC which are
available to reduce such liability (including operating losses, net operating
and capital loss carryovers) (collectively, the "Tax Attributes"). The Tax
Attributes shall be calculated without taking into account the operations of the
Acquired Businesses for periods after November 30, 1998.
(C) PWC shall then calculate the difference between (i) the
estimated value of the Spinco Businesses and (ii) CRC's adjusted tax basis in
the stock of Spinco (assuming that the Contribution is a tax free transaction)
at such time and then subtract from that difference the Tax Attributes. It
shall then multiply such remainder, if any, by the applicable Federal, state,
foreign and local tax rates applicable to income of CRC, and the product shall
be the tentative Spinoff Tax Liability.
(D) The foregoing calculation shall be submitted in writing
by PWC (the "PWC Report") to JEI. JEI shall then have the opportunity to review
the determination of the tentative Spinoff Tax Liability.
(E) Within 15 business days of the receipt of the PWC
Report, JEI shall notify CRC as to whether it accepts or disputes the tentative
Spinoff Tax Liability reflected in the PWC Report. JEI must make such
determination in good faith.
(F) If the tentative Spinoff Tax Liability is acceptable to
JEI, it shall be deemed to be the Spinoff Tax Liability.
(G) If JEI disputes the tentative Spinoff Tax Liability, it
shall state its specific objections in its notice, which objections must be made
in good faith. If the parties and their respective advisors cannot resolve the
objections of JEI, then the PW Report must be submitted to a nationally
recognized accounting firm acceptable to both JEI and CRC (which shall be the
same firm, if any, selected pursuant to Section 2.02(a)(ii)). Such firm shall
then submit its determination of the Spinoff Tax Liability, which determination
will be binding on both parties. In lieu of the reduction of the Merger
Consideration that would be effected pursuant to this paragraph (d), CRC shall
have the option (which shall be exercised by written notice delivered to JEI not
less than three (3) business days prior to the Closing Date) to have the Due to
CRC Line Items reduced by the amount of such Spinoff Tax Liability; provided
that the amount of such reduction, along with the amount of all other reductions
to the Due to CRC Line Items as permitted hereunder, shall not cause the Due to
CRC Line Items to be reduced below zero; provided, further, if any amount of
such Spinoff Tax Liability remains after the Due to CRC Line Items have been
reduced to zero, CRC shall have the further option to satisfy such excess with
cash.
(e) No Reduction in Merger Consideration. Notwithstanding anything
in this Section 2.02 to the contrary, there shall not be an adjustment in any of
the Share Merger Consideration, the aggregate principal amount of the JEI
Assignable Notes or the aggregate amount of the JEI Note if and to the extent
the liability causing such adjustment is paid, discharged or assumed on or prior
to the Closing by Spinco or any stockholder of CRC (without liability to JEI or
any of the Acquired Businesses following the Effective Time and subject, in the
case of an assumption only, to Spinco or such assuming stockholder, as the case
may be, agreeing in writing to indemnify JEI with respect thereto) or is
otherwise paid or discharged from funds which are not assets of the Acquired
Businesses or funds other than revenues generated by operations of the Acquired
Businesses, in either case from and after December 1, 1998.
2.03 Stock Options.
(a) Schedule 2.03 sets forth a list of each outstanding
subscription, option, warrant, right (including "phantom" stock rights),
preemptive right or other contract, commitment, understanding or arrangement,
including any right of conversion or exchange under any outstanding security,
instrument or agreement (collectively, "Options"), obligating CRC to issue or
sell any shares of capital stock of CRC or to grant, extend or enter into any
Option with respect thereto to which CRC is a party ("CRC Options"), whether
granted under the CSMC Management Services Inc. Stock Option Plan (the "Stock
Plan") or otherwise, which has not been exercised by the date of this Agreement,
and for each CRC Option sets forth (i) the name of the holder of such CRC
Option, (ii) the maximum number of shares of CRC Common Stock for which such CRC
Option is exercisable, (iii) the exercise price per share of CRC Common Stock of
such CRC Option and (iv) the vesting schedule of such CRC Option.
(b) Prior to the Effective Time, CRC shall take all actions
(including, without limitation, amending the provisions of the Stock Plan or
option agreements issued thereunder to the extent permitted thereunder)
necessary to provide that:
(i) each CRC Option which has not previously been exercised,
canceled or otherwise satisfied shall, immediately prior to the Effective Time,
be canceled and each holder of such CRC Option shall be entitled to receive an
amount of consideration at the Closing as set forth in a schedule to be
delivered to JEI with the instructions referred to in the last sentence of
Section 2.01(a); and
(ii) as of the Effective Time, the Stock Plan shall be
terminated.
2.04 Affiliates of CRC.
CRC and JEI agree that each will use its best efforts so that the
Merger and other transactions contemplated hereby shall be consummated without
violating the securities laws of the United States or of any state or other
jurisdiction. Not later than twenty (20) days after the date of this Agreement,
CRC shall deliver to JEI a letter (the "Affiliates Letter") identifying all
persons who are "affiliates" of CRC for purposes of Rule 145 under the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations promulgated thereunder ("Affiliates"). CRC agrees that it will use
its best efforts to cause all persons identified in the Affiliates Letter to
enter into an agreement with JEI (and JEI hereby agrees to enter into such an
agreement with such persons) in the form attached hereto as Exhibit 2.04 (the
"Affiliates Agreement").
2.05 Dissenting Shares.
Any shares of CRC Common Stock held by a Dissenting Holder who demands
payment for his or her shares pursuant to and in accordance with the applicable
provisions of Florida law shall be herein called "Dissenting Shares." Any
Dissenting Shares shall not, after the Effective Time, be entitled to vote for
any purpose or receive any dividends or other distributions and shall not be
converted into the right to receive any portion of the Share Merger
Consideration; provided, however, that Dissenting Shares held by a Dissenting
Holder who subsequently withdraws a demand for payment, fails to comply fully
with the requirements of Florida law, or otherwise fails to establish the right
of such Dissenting Holder to be paid the value of such Dissenting Shares under
Florida law shall be deemed to be converted into the right to receive a portion
of the Share Merger Consideration pursuant to the terms and conditions referred
to above.
2.06 Section 16 Matters.
CRC and JEI shall take all such steps as may be required to provide
that, with respect to each Section 16 Affiliate (as defined below), (i) the
transactions contemplated by this Article II and (ii) any other dispositions of
CRC equity securities (including derivative securities) or other acquisitions of
JEI equity securities (including derivative securities) in connection with this
Agreement, shall be exempt under Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended, in accordance with the terms and conditions
set forth in that certain No-Action Letter, dated January 12, 1999, issued by
the SEC to Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP. For purposes of this
Agreement, "Section 16 Affiliate" shall mean each individual who (x) immediately
prior to the Effective Time is a director or officer of CRC or (y) at the
Effective Time will become a director or officer of JEI.
II. COVENANTS.
3.01 Covenants of CRC.
From and after the date hereof until the earlier of the Effective Time
and the termination of this Agreement pursuant to Article VI (the "Release
Time"), unless JEI otherwise agrees in writing, CRC agrees, and agrees to cause
the CRC Acquired Subsidiaries, to comply with the following covenants and
agreements (it being understood that (i) such covenants and agreements apply
solely with respect to the Acquired Businesses, (ii) such covenants and
agreements are subject to applicable gaming laws and (iii) with respect to LCC,
CRC shall only be required to use reasonable best efforts to cause LCC to comply
with the following covenants and agreements (and shall be subject to fiduciary
duties and contractual restrictions, in each case as they relate to the minority
shareholders of LCC)):
(a) Articles of Incorporation and By-laws. No amendment will be made
to the articles of incorporation or by-laws of CRC or of any CRC Acquired
Subsidiary.
(b) Shares and Options. No share of capital stock of any CRC
Acquired Subsidiary, or any option, warrant for, right to subscribe to or other
right to purchase any such share or security convertible into or exchangeable
for any such share (collectively, "CRC Subsidiary Options") shall be issued or
sold by CRC or any CRC Acquired Subsidiary, nor shall CRC or any CRC Acquired
Subsidiary enter into any agreement or commitment to effect any such issuance or
sale, except as set forth in Schedule 3.01(b) hereto.
(c) Dividends and Purchases of Stock. Except for the Spinoff and
except for any dividend or distribution consisting solely of funds generated by
the Spinco Businesses, no cash or non-cash dividend or liquidating or other
distribution shall be authorized, declared, paid, or effected by CRC in respect
of the outstanding shares of CRC Common Stock or any other shares of capital
stock of CRC. Except as set forth in Schedule 3.01(c) or as required by law or
the charter documents of CRC or any CRC Acquired Subsidiary as in effect on the
date hereof, no direct or indirect redemption, purchase, or other acquisition
shall be made by CRC or any CRC Acquired Subsidiary of shares of CRC Common
Stock, any capital stock of any CRC Acquired Subsidiary, any CRC Option or any
CRC Subsidiary Option.
(d) Access. Subject to the confidentiality letter agreement, dated
August 25, 1998, from CRC to JEI (the "CRC Confidentiality Agreement") and
reasonable notice to CRC, CRC will afford the officers, directors, employees,
counsel, agents, investment bankers, accountants, and other representatives of
JEI or any JEI Subsidiary (as defined in Section 3.02) and JEI's lenders and
prospective lenders (if any) reasonable access during normal business hours to
the plants, properties, books, and records of CRC and the CRC Acquired
Subsidiaries, will permit them to make extracts from and copies of such books
and records, and will from time to time furnish JEI with such additional
financial and operating data and other information as to the financial
condition, results of operations, businesses, properties, assets, liabilities,
or future prospects of CRC and the CRC Acquired Subsidiaries as are prepared by
CRC in the ordinary course consistent with past practice on a calendar month
basis, as well as the income statements and balance sheets of the Acquired
Businesses set forth in Section 3.01(f)(ii). CRC will use its reasonable best
efforts to cause the independent certified public accountants of CRC and the CRC
Acquired Subsidiaries to make available to JEI and its independent certified
public accountants the work papers relating to the financial statements of the
Acquired Businesses referred to in Sections 3.01(f) and 4.01(e); provided,
however, that the use of reasonable best efforts shall not require the payment
of a material amount of money not ordinarily incidental to such process. All
information furnished by or on behalf of CRC pursuant to this Section 3.01(d) or
otherwise obtained from CRC as contemplated by this Section 3.01(d) shall be
subject to the CRC Confidentiality Agreement.
(e) Conduct of Business. Except as specifically required or
contemplated by this Agreement, CRC shall and shall cause the CRC Acquired
Subsidiaries to carry on their respective businesses in the ordinary course of
business and use all reasonable efforts to preserve intact their current
business organizations, keep available the services of their current officers
and employees and preserve their relationships consistent with past practice
with desirable customers, suppliers, licensors, licensees, distributors and
others having business dealings with them to the end that their goodwill and
ongoing businesses shall be unimpaired in all material respects at the Effective
Time; provided, however, that the use of reasonable efforts shall not require
the payment of a material amount of money not ordinarily incidental to such
process. Except as expressly permitted or contemplated by the terms of this
Agreement, without limiting the generality of the foregoing, CRC shall not, and
shall not permit any of the CRC Acquired Subsidiaries to (without JEI's prior
written consent, which consent may not be unreasonably withheld):
(i) (A) reclassify any of its capital stock or issue or
authorize the issuance of any capital stock, other than (x) additional shares of
CRC Common Stock or (y) shares of LCC Common Stock issued upon the exercise of
warrants to purchase LCC Common Stock outstanding on the date hereof or (B)
amend any shares of capital stock of CRC or any of the CRC Acquired Subsidiaries
or any other securities thereof, or any CRC Options or CRC Subsidiary Options to
acquire any such shares or other securities;
(ii) issue, deliver or sell, or pledge or otherwise encumber
(unless such pledge or other encumbrance is released or eliminated at or prior
to Closing), any shares of capital stock or any other voting securities of CRC
or any CRC Acquired Subsidiary, or any CRC Options or CRC Subsidiary Options to
acquire any such shares, voting securities or convertible or exchangeable
securities (other than the issuance of (A) additional shares of CRC Common Stock
and (B) additional CRC Options);
(iii) develop, acquire or agree to develop or acquire any
projects, assets or lines of business which would be part of the Acquired
Businesses, including without limitation, by merging or consolidating with, or
by purchasing all or a substantial portion of the assets of, any corporation,
partnership, joint venture, association or other business organization or
division thereof, or make any capital expenditures relating to the Acquired
Businesses, except (u) purchases of inventory, furnishings and equipment in the
ordinary course of business and consistent with past practice, (v) expenditures
consistent with CRC's fiscal 1999 capital budget (the "Budget") unless expressly
otherwise limited hereby, (w) expenditures in excess of $200,000 in the
aggregate for the Kalispel project, $100,000 in the aggregate for the Wampanoag
project and $100,000 in the aggregate for the Lake Las Vegas project (provided
that JEI's consent to expenditures in excess of the respective maximum amounts
listed for each project will not be unreasonably withheld), (x) expenditures for
expansion projects involving either Casino Rama or LCC (provided that (1) JEI's
consent to such expenditures for such expansion projects will not be
unreasonably withheld and (2) the parties understand and agree that this clause
(x) as it relates to Casino Rama is intended only to limit expenditures by CRC
or any CRC Acquired Subsidiary and shall not in any manner whatsoever affect
existing contractual arrangements or the operation of the casino generally), (y)
any capital expenditures with respect to CRC's Miami office, other than those
expenditures which CRC is legally obligated to make as of the date hereof, or
(z) except as set forth on Schedule 3.01(e)(iii);
(iv) sell, lease, license, swap, barter, mortgage or otherwise
encumber or subject to any liens, claims, mortgages, encumbrances, pledges,
security interests, equities and charges of any kind (each a "Lien"), or
otherwise dispose of any of its properties or assets which are part of the
Acquired Businesses, except Liens for taxes not currently due or those currently
being contested in good faith or for transactions in the ordinary course of
business and consistent with past practice;
(v) (A) other than indebtedness available under any line of
credit or other lending arrangement existing on the date hereof which will be
for the benefit of the Acquired Businesses following the Closing Date, incur any
indebtedness (including any capital or operating lease which would be classified
as indebtedness on the financial statements of the Acquired Businesses), forgive
any debt obligations of any person to CRC or the CRC Acquired Subsidiaries,
issue or sell any debt securities or warrants or other rights to acquire any
debt securities of CRC or any of the CRC Acquired Subsidiaries, guarantee any
indebtedness of another person, enter into any "keep well" or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing or (B) other than
(1) advances to employees, suppliers or customers in the ordinary course of
business and consistent with past practice, and (2) expenditures consistent with
the Budget, make any loans, advances or capital contributions to, or investments
in, any other person, other than loans or advances to directors, officers,
employees, consultants, Affiliates or agents in accordance with clause (viii)
below.
(vi) (A) settle any claim, action, or lawsuit relating to
material Taxes (as hereinafter defined) pending as of the date hereof or arising
on or after the date hereof, (B) make any material Tax (as hereinafter defined)
election, or (C) amend any material Tax return in any respect (except, in each
case, to the extent relating solely to Spinco);
(vii) (A) pay, discharge, settle or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) (other than those relating to Taxes, which are covered
by clause (vi) above), other than the payment, discharge, settlement or
satisfaction of liabilities reflected or reserved against in the Updated
November 30 Balance Sheet (for an amount not in excess of the amount reflected
or reserved) or incurred by the Acquired Businesses in the ordinary course of
business and consistent with past practice after November 30, 1998, or (B)
waive the benefits of, or agree to modify in any manner, any confidentiality,
standstill or similar agreement to which CRC or any of the CRC Acquired
Subsidiaries is a party;
(viii) make any change in the compensation payable or to become
payable to any of its officers, directors, employees, agents or consultants or
other persons providing any services to the Acquired Businesses, or enter into
or amend any employment, severance, consulting, termination or similar agreement
or employee benefit plan or make any loans or advances to any of its officers,
directors, employees, Affiliates, agents or consultants that are not repaid on
or prior to Closing, or make any change in its existing borrowing or lending
arrangements for or on behalf of any of such persons pursuant to an employee
benefit plan or otherwise (other than (A) increases or other changes in wages to
employees who are not officers, directors or Affiliates in the ordinary course
of business and consistent with past practice, (B) payment of annual bonuses in
the ordinary course of business and consistent with past practice (provided,
however, that bonuses paid in respect of the fiscal year ended November 30, 1998
shall not exceed $700,000) and (C) increases or other modifications to salary
for officers pursuant to regular annual reviews in the ordinary course of
business and consistent with past practice and approved pursuant to Board
authority; provided, however, that no compensation described in this clause (C)
shall be in the form of capital stock of any CRC Acquired Subsidiary or any CRC
Subsidiary Options;
(ix) pay or make any accrual or arrangement for payment of any
pension, retirement allowance or other employee benefit pursuant to any existing
plan, agreement or arrangement to any officer, director, employee or Affiliate
or pay or agree to pay or make any accrual or arrangement for payment to any
officer, director, employee or Affiliate of any amount relating to unused
vacation days, except payments and accruals made in the ordinary course of
business and consistent with past practice; adopt or pay, grant, issue,
accelerate or accrue salary or other payments or benefits pursuant to any
pension, profit-sharing, bonus, extra compensation, incentive, deferred
compensation, stock purchase, stock option, stock appreciation right, group
insurance, severance pay, retirement or other employee benefit plan, agreement
or arrangement, or any employment or consulting agreement with or for the
benefit of any director, officer, employee, agent or consultant, whether past or
present, other than as required under applicable law or the current terms of any
plan or agreement identified in Schedule 4.01(n) or as permitted pursuant to
clause (viii) above, provided that CRC may establish and pay or accrue benefits
pursuant to bonus plan targets and incentive amounts consistent with past
practice (provided, however, that bonuses paid in respect of the fiscal year
ended November 30, 1998 shall not be considered in determining what is
consistent with past practice for this purpose) and, provided further, CRC shall
be entitled to pay severance or other separation payments up to the maximum
amounts provided for in the Reorganization Agreement; or amend in any material
respect any such existing plan, agreement or arrangement in a manner
inconsistent with the foregoing;
(x) enter into any collective bargaining agreement;
(xi) enter into any transaction, agreement or arrangement with,
any Affiliates, officers, directors, stockholders or their Affiliates,
associates or family members or do or enter into any of the foregoing with
respect to employees, agents or consultants except as permitted by clauses
(viii) and (ix) above;
(xii) modify or amend any CRC Material Contract (including any
CRC Material Contract relating to indebtedness), as such term is defined in
Section 4.01(x), if such modification or amendment is reasonably likely to have
a Material Adverse Effect, as such term is defined in Section 4.01(a), on the
Acquired Businesses taken as a whole;
(xiii) make any cash disbursement or series of related cash
disbursements, in excess of $100,000 in the aggregate, other than disbursements
(a) made in the ordinary course of business consistent with past practice, (b)
reflected in the Budget, unless expressly otherwise limited hereunder, (c)
otherwise permitted hereunder and (d) as may be required by any agreement
outstanding on the date hereof;
(xiv) make any change in accounting principles (except as may be
required by GAAP, in which event CRC shall fully disclose any such change to JEI
and the reasons therefor);
(xv) authorize any of, or commit or agree to take any of, the
foregoing actions, except as otherwise permitted or contemplated by this
Agreement.
(f) Financial Statements.
(i) CRC shall furnish to JEI, within 45 days following the date
of this Agreement, the following financial statements: (i) audited financial
statements, including balance sheets, statements of income and shareholders'
equity and statements of cash flows, of CRC for the fiscal year ended November
30, 1998, (ii) audited financial statements of the Acquired Businesses for the
three fiscal years ended November 30, 1998, which shall include balance sheets
as of November 30, 1998 and 1997 and statements of income, shareholders' equity
and cash flows for each of the three years ended November 30, 1998, and (iii)
the Updated November 30 Balance Sheet.
(ii) CRC shall prepare a monthly balance sheet and income
statement for the Acquired Businesses, beginning with the month ended December
31, 1998, and a report detailing the allocation of overhead expenses between the
Acquired Businesses and the Spinco Businesses, with such allocations being made
in the manner set forth in Schedule 3.01(f) attached hereto. Each monthly
balance sheet, income statement and allocation report shall be certified by
CRC's chief financial officer as being true and correct and shall be delivered
to JEI within 30 days following each month, except that the monthly balance
sheet and income statement for the month ended December 31, 1998 shall be
delivered by no later than the fifteenth day following the date of this
Agreement.
(g) Advice of Changes. CRC will, as promptly as practicable, advise
JEI in a reasonably detailed written notice of any fact or occurrence or any
pending or threatened occurrence of which it obtains knowledge and which
either: (i) would reasonably be expected to have a Material Adverse Effect on
the Acquired Businesses, taken as a whole or (ii) if existing and known at the
Effective Time, would cause a condition to any party's obligations under this
Agreement not to be fully satisfied.
(h) Public Statements. Before CRC releases any information
concerning this Agreement, the Merger, or any of the other transactions
contemplated by this Agreement which is intended for or is reasonably expected
to result in public dissemination thereof, CRC shall cooperate with JEI, shall
furnish drafts of all documents or proposed oral statements to JEI for comments,
and shall not release any such information without the prior consent of JEI;
provided, however, that the foregoing shall not be deemed to prevent CRC from
(i) releasing any information or making any disclosure to the extent that CRC
reasonably determines that it is required to do so by law or (ii) complying with
its periodic reporting obligations under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), with respect to LCC.
(i) Consents. CRC will use its reasonable best efforts to obtain or
cause to be obtained prior to the Closing Date all necessary consents and
approvals to the performance of the obligations of CRC under this Agreement,
including, without limitation, the consents and approvals described in Schedule
4.01(d); provided, however, that the use of reasonable best efforts shall not
require the payment of a material amount of money not otherwise or ordinarily
incidental to such process. CRC will cooperate in all reasonable respects with
JEI with a view toward obtaining timely satisfaction of the conditions to the
Closing set forth herein. CRC shall use its reasonable best effort to make all
filings, document submissions, applications, statements and reports to all
Federal, state or local government agencies or entities which are required to be
made by it prior to the Closing Date pursuant to any applicable statute, rule or
regulation in connection with the Agreement and the transactions contemplated
hereby, including any filings with any Governmental or Regulatory Authority (as
defined in Section 4.01(d)); provided, however, that the use of reasonable best
efforts shall not require the payment of a material amount of money not
ordinarily incidental to such process. CRC shall (i) furnish to JEI copies of
all filings and such necessary information and assistance as may be requested by
JEI in connection with its preparation of required filings or submissions to any
Governmental or Regulatory Authority and (ii) as promptly as practicable upon
CRC becoming aware of any inquiries made of it or any CRC Acquired Subsidiary by
any Federal, state or local agency or authority with respect to this Agreement
or the transactions contemplated hereby, shall give detailed written notice
thereof to JEI and shall use its reasonable best efforts to update JEI of the
status of such inquiries. CRC shall not make any agreement or reach any
understanding, not approved in writing by JEI, as a condition for obtaining any
consent, authorization, approval, order, license, certificate, or permit
required for the consummation of the transactions contemplated by this
Agreement, unless such agreement or understanding shall not require the payment
of a material amount of money and could not otherwise reasonably be expected to
have a Material Adverse Effect on the Acquired Businesses taken as a whole.
(j) Lake Las Vegas. CRC shall use commercially reasonable efforts to
obtain an extension with respect to the contracts listed on Schedule 3.01(j)
related to Lake Las Vegas until the later of July 1, 1999 and sixty (60) days
after the Closing.
(k) Budget. JEI hereby acknowledges that CRC has previously
delivered to JEI the Budget for fiscal 1999 for CRC and each of the CRC Acquired
Subsidiaries, which includes all capital expenditures with appropriate details
and back-up schedules and assumptions for CRC and each CRC Acquired Subsidiary.
3.02 Covenants of JEI.
From and after the date hereof until the earlier of the Effective Time
and the Release Time, unless CRC otherwise agrees in writing, JEI agrees, and
agrees to cause each direct and indirect subsidiary of JEI (collectively, the
"JEI Subsidiaries"), to comply with the following covenants and agreements
(subject to applicable gaming laws):
(a) Certificate of Incorporation and By-laws; Ratification of Prior
Acts. No amendment will be made to the certificate of incorporation of JEI,
other than to change the corporate name of JEI and other than as may be required
to consummate the merger (the "Players Merger") contemplated by that certain
Agreement and Plan of Merger dated as of February 8, 1999 among JEI, JEI Merger
Corp. and Players International, Inc. (the "Players Merger Agreement"); provided
that any amendment to the certificate of incorporation which is proposed in
connection with the Players Merger, other than amendments to change the
capitalization of JEI to accommodate such transaction, shall require the prior
consent of CRC (which consent shall not be unreasonably withheld) and no
amendment will be made to the by-laws of JEI unless CRC has been afforded the
opportunity to review such proposed amendment and such amendment is consented to
by CRC (which consent shall not be unreasonably withheld). The by-laws of all
applicable JEI Subsidiaries will be amended to delete the requirement therein
that contracts for goods or services involving payments in excess of a fixed
amount be authorized and approved by the board of directors of such JEI
Subsidiary, and the board of directors of each such JEI Subsidiary will take all
necessary action to confirm and ratify any contract heretofore entered into by
such JEI Subsidiary in violation of said requirement.
(b) Dividends. No cash or non-cash dividend or liquidating or other
distribution shall be authorized, declared, paid, or effected by JEI in respect
of the outstanding shares of JEI Common Stock or any other capital stock of JEI
or any JEI Subsidiary.
(c) Access. Subject to the confidentiality letter agreement, dated
November 3, 1998, from JEI to CRC (the "JEI Confidentiality Agreement") and
reasonable notice to JEI, JEI will afford the officers, directors, employees,
counsel, agents, investment bankers, accountants, and other representatives of
CRC or any CRC Acquired Subsidiary reasonable access, during normal business
hours, to the plants, properties, books, and records of JEI and the JEI
Subsidiaries, will permit them to make extracts from and copies of such books
and records (except for the agreements listed on Schedule 3.02(c), as to which
agreements CRC will not be entitled to make extracts or copies thereof), and
will from time to time furnish CRC with such additional financial and operating
reports as are prepared by JEI in the ordinary course of business on a calendar
month basis. JEI will use its reasonable best efforts to cause the independent
certified public accountants of JEI Subsidiaries to make available to CRC and
its independent certified public accountants the work papers relating to the
financial statements of JEI and the JEI Subsidiaries; provided, however, that
the use of reasonable best efforts shall not require the payment of a material
amount of money not ordinarily incidental to such process. All information
furnished by or on behalf of JEI pursuant to this Section 3.02(c) or otherwise
obtained from JEI as contemplated by this Section 3.02(c) shall be subject to
the JEI Confidentiality Agreement.
(d) Conduct of Business. JEI shall, and shall cause the JEI
Subsidiaries to, carry on their respective businesses in the ordinary course
(except as otherwise contemplated by the Players Merger Agreement) and will use
all reasonable efforts to preserve intact their current business organizations,
keep available the services of their current officers and employees, and
preserve their relationships consistent with past practice with desirable
customers, suppliers, licensors, licensees, distributors and others having
business relations with any of them to the end that their goodwill and ongoing
businesses shall be unimpaired in all material respects at the Effective Time.
Without limiting the generality of the foregoing, JEI will not (without the
consent of CRC, which consent may not be unreasonably withheld) (i) issue any
JEI Option (as defined in Section 4.02(b)(i)) at an exercise price which is less
than 100% of the closing sale price of the JEI Common Stock as reported on the
New York Stock Exchange on the date of grant and which is not otherwise granted
in the ordinary course of business consistent with past practice or as may be
granted to employees of Players International, Inc. and its subsidiaries
(collectively referred to herein as "Players") following consummation of the
Players Merger or (ii) modify or amend any JEI Material Contract (as defined in
Section 4.02(v)), unless such modification or amendment is reasonably likely to
have no material adverse effect on the rights and benefits of JEI under such JEI
Material Contract.
(e) Advice of Changes. JEI will, as promptly as practicable, advise
CRC in a reasonably detailed written notice of any fact or occurrence or any
pending or threatened occurrence of which it obtains knowledge and which either
(i) would reasonably be expected to have a Material Adverse Effect on JEI and
the JEI Subsidiaries, taken as a whole, or (ii) if existing and known at the
time of the Effective Time, would cause a condition to any party's obligations
under this Agreement not to be fully satisfied.
(f) Public Statements. Before JEI releases any information
concerning this Agreement, the Merger, or any of the other transactions
contemplated by this Agreement which is intended for or is reasonably expected
to result in public dissemination thereof, JEI shall cooperate with CRC, shall
furnish drafts of all documents or proposed oral statements to CRC for comments,
and shall not release any such information without the prior consent of CRC;
provided, however, that the foregoing shall not be deemed to prevent JEI from
(i) releasing any information or making any disclosure to the extent that JEI
reasonably determines that it is required to do so by law or (ii) complying with
its periodic reporting obligations under the Exchange Act.
(g) Consents. JEI will use its reasonable best efforts to obtain or
cause to be obtained prior to the Closing Date all necessary consents and
approvals to the performance of the obligations of JEI under this Agreement,
including, without limitation, the consents and approvals required under Section
4.02(d); provided, however, that the use of reasonable best efforts shall not
require the payment of a material amount of money not otherwise or ordinarily
incidental to such process. JEI will cooperate in all reasonable respects with
CRC and the CRC Acquired Subsidiaries with a view toward obtaining timely
satisfaction of the conditions to the Closing set forth herein. JEI shall use
its reasonable best efforts to make all filings, document submissions,
applications, statements and reports to all Federal, state or local government
agencies or entities which are required to be made by it prior to the Closing
Date pursuant to any applicable statute, rule or regulation in connection with
this Agreement and the transactions contemplated hereby, including any filings
with any Governmental or Regulatory Authority; provided, however, that the use
of reasonable best efforts shall not require the payment of a material amount of
money not otherwise or ordinarily incidental to such process. JEI shall (i)
furnish to CRC copies of all filings and such necessary information and
assistance as may be requested by CRC in connection with its preparation of
required filings or submissions to any Governmental or Regulatory Authority and
(ii) as promptly as practicable upon JEI becoming aware of any inquiries made of
it by any Federal, state or local agency or authority with respect to this
Agreement or the transactions contemplated hereby, shall give detailed written
notice thereof to CRC and shall use its reasonable best efforts to update CRC of
the status of such inquiries.
(h) JEI will not consummate the Players Merger on terms which are
materially less favorable to JEI than those which are set forth in the Players
Merger Agreement as in effect on the date hereof.
3.03 Preparation of Registration Statement and Joint Proxy Statement.
(a) CRC and JEI shall prepare and file with the Securities and
Exchange Commission (the "SEC"), as soon as reasonably practicable after the
date hereof, the Joint Proxy Statement (as defined in Section 4.01(i)) and JEI
shall prepare and file with the SEC, as soon as practicable after the date
hereof, a Registration Statement on Form S-4 in connection with the issuance of
the JEI Common Stock in the Merger, as amended and supplemented from time to
time (as so amended and supplemented, the "Registration Statement"), in which
the Joint Proxy Statement will be included as part of the Registration
Statement. JEI will use its best efforts (and CRC will use its best efforts to
cooperate, to the extent necessary), to have the Registration Statement declared
effective by the SEC as promptly as practicable after such filing. JEI also
shall take any action (other than qualifying as a foreign corporation or taking
any action that would subject it to service of process in any jurisdiction where
JEI is not now so qualified or subject) required to be taken under applicable
state blue sky or securities laws in connection with the issuance of JEI Common
Stock in connection with the Merger. JEI and CRC shall cooperate with each
other in the preparation of the Registration Statement and the Joint Proxy
Statement and any amendment or supplement thereto, and each shall notify the
other of the receipt of any comments of the SEC with respect to the Registration
Statement or the Joint Proxy Statement and of any requests by the SEC for any
amendment or supplement thereto or for additional information, and shall
promptly provide to the other copies of all correspondence between JEI or CRC,
as the case may be, or any of its representatives with respect to the
Registration Statement or the Joint Proxy Statement. Each of CRC and JEI agrees
to use its best efforts, after consultation with the other party hereto, to
respond promptly to all such comments of and requests by the SEC and to cause
the Registration Statement to be declared effective by the SEC and the Joint
Proxy Statement to be mailed to the holders of JEI Common Stock and, to the
extent a separate information statement is not prepared by CRC for use in
soliciting CRC Stockholders' Approval (as defined below), holders of CRC Common
Stock entitled to vote at the meetings of the stockholders of JEI and CRC,
respectively, at the earliest practicable time.
(b) CRC and JEI shall each use its best efforts to cause to be
delivered to the other a letter of their respective independent auditors, dated
a date within two business days before the date on which the Registration
Statement shall become effective and addressed to the other, customary in form,
scope and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration Statement,
and JEI shall use its best efforts to cause any similar letter of the
independent auditors of Players International Inc. which is delivered in
connection with the Players Merger to also be addressed and delivered to CRC or,
if required by internal procedures of such auditors, a substantially identical
letter prepared under the "agreed upon procedures" guidelines.
3.04 Approval of Stockholders.
(a) JEI shall, through its Board of Directors, duly call, give notice
of, convene and hold a meeting of its stockholders (the "JEI Stockholders'
Meeting") for the purpose of voting on the ratification and approval of this
Merger Agreement and the issuance of the shares of JEI Common Stock pursuant to
the Merger (the "JEI Merger Proposal"), as soon as reasonably practicable
following the date hereof. Subject to the exercise of fiduciary obligations
under applicable law as advised by independent legal counsel, JEI shall, through
its Board of Directors, include in the Joint Proxy Statement the recommendation
of the Board of Directors of JEI that the stockholders of JEI vote in favor of
the JEI Merger Proposal (the "JEI Stockholders' Approval") and shall use its
best efforts to obtain such approval.
(b) (i) CRC shall, through its Board of Directors, duly call, give
notice of, convene and hold a meeting of its stockholders (the "CRC
Stockholders' Meeting" and, together with the JEI Stockholders' Meeting, the
"Stockholders' Meetings") for the purpose of approving this Agreement and the
approval of the Merger (the "CRC Merger Proposal") as soon as reasonably
practicable after the date hereof; and (ii) subject to the exercise of fiduciary
obligations under applicable law as advised by independent counsel, CRC shall,
through its Board of Directors, include in the Joint Proxy Statement (or, if
applicable, a separate information statement prepared by CRC for use in
soliciting the CRC Stockholders' Approval) the recommendation of the Board of
Directors of CRC that the stockholders of CRC vote in favor of the CRC Merger
Proposal (the "CRC Stockholders' Approval"), and shall use its best efforts to
obtain such approval.
(c) JEI and CRC shall coordinate and cooperate with respect to the
timing of the Stockholders' Meetings and shall use their reasonable best efforts
to cause the Stockholders' Meetings to be held by no later than July 15, 1999.
3.05 Certain Filings.
CRC and JEI shall (a) cooperate with one another as soon as
practicable in determining whether any action by or in respect of, or filing
with, any Governmental or Regulatory Authority (including, without limitation,
any filing requirements under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended ("HSR Act")), or any actions, consents, approvals or waivers
are required to be obtained from parties to any CRC Material Contracts or JEI
Material Contracts, as the case may be, in connection with the consummation of
the transactions contemplated by this Agreement and (b) promptly take all
actions necessary or make filings with any Governmental or Regulatory Authority
and third parties. JEI will endeavor in good faith and use all reasonable best
efforts to cause any Governmental or Regulatory Authority in the State of
Louisiana which is to review the transactions with CRC contemplated hereby to
review such transactions separately from the Players Merger.
3.06 Directors' and Officers' Indemnification.
(a) From and after the Effective Time, JEI shall indemnify, defend
and hold harmless each person who is now, or has been at any time prior to the
date hereof or who becomes prior to the Effective Time, a director or officer of
CRC or any of the CRC Acquired Subsidiaries (the "Indemnified Parties") against
(i) all losses, claims, damages, costs, and expenses (including reasonable
attorneys' fees), liabilities, judgments, and settlement amounts that are paid
or incurred in connection with any claim, action, suit, proceeding, or
investigation (whether civil, criminal, administrative or investigative and
whether asserted or claimed prior to, at, or after the Effective Time) that is
(x) based in whole or in part on, or arises in whole or in part out of, the fact
that such Indemnified Party is or was a director or officer of CRC or any of the
CRC Acquired Subsidiaries, (y) relates to or arises out of an action or
omission occurring at or prior to the Effective Time relating to the Acquired
Businesses ("Indemnified Liabilities"), and (z) is asserted on or before the
third anniversary of the Effective Time and (ii) all Indemnified Liabilities
which are asserted on or before the third anniversary of the Effective Time
based in whole or in part on, or arising in whole or in part out of or
pertaining to, this Agreement or the transactions contemplated hereby,
including, without limitation, any statement or omission in the Registration
Statement or the Joint Proxy Statement, in each case to the fullest extent a
corporation is permitted to indemnify its own directors, officers, employees or
agents, as the case may be, under Nevada law; provided, however, that JEI shall
not be liable for any settlement of any claim effected without its written
consent, which consent shall not be unreasonably withheld. Without limiting the
foregoing, in the event that any such claim, action, suit, proceeding, or
investigation is brought against any Indemnified Party (whether arising prior to
or after the Effective Time), (w) JEI will pay expenses in advance of the final
disposition of any such claim, action, suit, proceeding, or investigation to
each Indemnified Party to the full extent permitted by applicable law, provided
that the person to whom expenses are advanced provides an undertaking to repay
such advance if it is ultimately determined that such person is not entitled to
indemnification; (x) the Indemnified Parties shall retain counsel reasonably
satisfactory to JEI; (y) JEI shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties (subject to the final sentence of this
paragraph) promptly as statements therefor are received; and (z) JEI shall use
all commercially reasonable efforts to assist in the vigorous defense of any
such matter. Any Indemnified Party wishing to claim indemnification under this
Section 3.06, upon learning of any such claim, action, suit, proceeding, or
investigation, shall notify JEI, but the failure to so notify JEI shall not
relieve it from any liability which it may have under this paragraph except to
the extent such failure irreparably prejudices such party. The Indemnified
Parties as a group may retain only one law firm to represent them with respect
to each such matter unless there is a conflict of defenses or positions among
the Indemnified Parties (including any impleaded parties), in which case the
Indemnified Parties who have a conflict shall each have the right to retain one
separate counsel, reasonably satisfactory to JEI, and JEI shall be responsible
for the reasonable fees and expenses of each such counsel.
(b) The provisions of this Section 3.06 (i) are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and legal representatives, (ii) and shall be in addition to any other
rights an Indemnified Party may have under the Articles of Incorporation or
Bylaws of JEI, CRC or any of the CRC Acquired Subsidiaries, under the NRS, FBCA
or otherwise and (iii) shall survive the Closing.
(c) In the event JEI (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of JEI shall assume
the obligations set forth in this Section 3.06.
3.07 Election of Directors.
(a) Effective as of the Closing Date, JEI will take all necessary and
appropriate actions to cause (i) the number of directors comprising the Board of
Directors of JEI to be increased by two (2) members, (ii) two (2) persons
selected by CRC (who are identified on Schedule 1.05) to be elected or appointed
as directors of JEI to fill the positions resulting from such increase, and
(iii) Xxxxxxxx X. Xxxxxx to be elected as Co-chairman of the Board of
Directors. At JEI's next regular meeting of stockholders after the Closing Date
at which directors are elected, JEI shall use its best efforts to ensure that
the slate of persons nominated by the Board of Directors for election as
directors of JEI at that meeting includes any such persons whose term on the
Board of Directors has or would expire at that meeting. The Board of Directors
will solicit proxies from the stockholders of JEI for such persons and will vote
all such proxies in favor of such nominees, except for such proxies that
specifically indicate to the contrary.
(b) In the event the Players Merger is not consummated and the
Players Merger Agreement is terminated, the Board of Directors of JEI shall be
increased following the Closing Date by an additional one (1) member, who shall
be designated by the persons identified in Schedule 1.05 after consultation with
the existing JEI Board of Directors.
(c) In the event any of the persons elected or appointed as a
director of JEI pursuant to Section 3.07 is unable to continue to serve as a
director during the remainder of that person's term, there will be no right to
designate any successor for such director.
3.08 Employee Matters.
(a) Any severance or other separation payments in respect of
terminated employees of CRC or any CRC Acquired Subsidiaries to be paid by CRC
(or JEI following the Effective Time) will not exceed the amount set forth in
Schedule 2.02(c).
(b) On the Closing Date, JEI shall enter into three year consulting
agreements with each of Xxxxxxxx Xxxxxx and Xxxxxx Xxxxxx having the terms set
forth on Exhibit 3.08.
3.09 Further Action.
CRC and JEI each shall, and each shall cause the their respective
subsidiaries to, subject to the fulfillment at or before the Effective Time of
each of the conditions of performance set forth herein or the waiver thereof,
perform such further acts and execute such documents as may reasonably be
required to effect the Merger and the transactions contemplated by this
Agreement; provided, however, that the performance of such further acts and the
execution of such further documents shall not require the payment of a material
amount of money not otherwise or ordinarily incidental to such process.
IV. REPRESENTATIONS AND WARRANTIES.
4.01 Certain Representations and Warranties of CRC.
Except as disclosed in the LCC SEC Reports (as defined below), CRC
represents and warrants, solely with respect to the Acquired Businesses, to JEI
as follows:
(a) Organization and Qualification. Each of CRC and each direct or
indirect subsidiary of CRC which is to become a direct or indirect subsidiary of
JEI as a result of the Merger (the "CRC Acquired Subsidiaries"), as listed on
Schedule 4.01 (a), is a corporation duly organized, validly existing, and in
good standing under the laws of its jurisdiction of incorporation and has full
corporate power and authority to conduct its business as and to the extent now
conducted and to own, use, and lease its assets and properties. Each of CRC and
the CRC Acquired Subsidiaries is duly qualified, licensed, or admitted to do
business and is in good standing in each jurisdiction listed on Schedule
4.01(a), which is each jurisdiction in which the ownership, use, or leasing of
its assets and properties, or the conduct or nature of its businesses, makes
such qualification, licensing, or admission necessary, except for such failures
to be so qualified, licensed, or admitted and in good standing which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a Material Adverse Effect on CRC and the CRC Acquired
Subsidiaries taken as a whole. As used in this Agreement, a "Material Adverse
Effect" shall mean a material adverse effect on the businesses, properties,
assets, liabilities, condition (financial or otherwise) or results of operations
of an entity (or group of entities taken as a whole). Except as disclosed in
Schedule 4.01(a) hereto, CRC does not directly or indirectly own any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
(b) Capital Stock.
(i) The authorized capital stock of CRC consists solely of
20,000,000 shares of CRC Common Stock and 1,000,000 shares of preferred stock,
par value $.01 per share, of CRC ("CRC Preferred Stock"). As of December 31,
1998, 10,741,802 shares of CRC Common Stock were issued and outstanding, no
shares were held in the treasury of CRC and 1,700,000 shares were reserved for
issuance pursuant to the Stock Plan. No CRC Options have been issued other than
pursuant to the Stock Plan. As of the date hereof, there has been no change in
the number of issued and outstanding shares of CRC Common Stock or shares of CRC
Common Stock held in treasury or reserved for issuance since such date, other
than changes arising from the exercise of CRC Options. As of the date hereof, no
shares of CRC Preferred Stock are issued and outstanding. All of the issued and
outstanding shares of CRC Common Stock are, and all shares reserved for issuance
will be, upon issuance in accordance with the terms specified in the instruments
or agreements pursuant to which they are issuable, duly authorized, validly
issued, fully paid, and nonassessable. As of the date hereof, except as set
forth in Schedule 2.03, there are no outstanding CRC Options.
(ii) Except as disclosed in Schedule 4.01(b) hereto, there are no
outstanding contractual obligations of CRC or any CRC Acquired Subsidiary to
repurchase, redeem, or otherwise acquire any shares of CRC Common Stock or any
capital stock of any CRC Acquired Subsidiary, or any CRC Options or CRC
Subsidiary Options, or to provide funds to, or make any investment (in the form
of a loan, capital contribution or otherwise) in, any CRC Acquired Subsidiary or
any other person in which CRC or any CRC Acquired Subsidiary owns an interest.
(c) Authority Relative to this Agreement. CRC has full corporate
power and authority to enter into this Agreement and, subject to obtaining the
CRC Stockholders' Approval and the approvals of any Governmental or Regulatory
Authority as identified on Schedule 4.01(c) hereto, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution, delivery, and performance of this Agreement by CRC and the
consummation by CRC of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of CRC, the Board of Directors of
CRC has adopted a resolution recommending approval of this Agreement and the
Merger by the stockholders of CRC and directing that this Agreement be submitted
to the stockholders of CRC for their consideration, and no other corporate
proceedings on the part of CRC or its stockholders are necessary to authorize
the execution, delivery and performance of this Agreement by CRC and the
consummation by CRC of the transactions contemplated hereby, except for the CRC
Stockholders' Approval. This Agreement has been duly and validly executed and
delivered by CRC and, subject to obtaining the CRC Stockholders' Approval and
any required approvals of any Governmental or Regulatory Authority, constitutes
a legal, valid, and binding obligation of CRC enforceable against CRC in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and except to the extent that indemnification
provisions may be unenforceable due to public policy. Stockholders of CRC who
are parties to the CRC Stockholders Agreement own not less than a majority of
the outstanding shares of CRC Common Stock.
(d) Non-Contravention; Approvals and Consents.
(i) Subject to obtaining the CRC Stockholders' Approval and the
taking of the actions described in paragraph (ii) of this Section 4.01(d), the
execution and delivery of this Agreement by CRC do not, and the performance by
CRC of its obligations hereunder and the consummation of the transactions
contemplated hereby will not, conflict with, result in a violation or breach of,
constitute (with or without notice or lapse of time or both) a default under,
result in or give to any person any right of payment or reimbursement,
termination, cancellation, modification or acceleration of, or result in the
creation or imposition of any Lien upon any of the assets or properties of CRC
or any of the CRC Acquired Subsidiaries under, any of the terms, conditions or
provisions of (x) the certificates or articles of incorporation or by-laws (or
other comparable charter documents) of CRC or any of the CRC Acquired
Subsidiaries, (y) any statute, law, rule, regulation, or ordinance
(collectively, "Laws"), or any judgment, decree, order, writ, permit, or license
(collectively, "Orders"), of any court, tribunal, arbitrator, authority, agency,
commission, official, or other instrumentality of the United States, any foreign
country, or any domestic or foreign state, county, city, or other political
subdivision (a "Governmental or Regulatory Authority"), applicable to CRC or any
of the CRC Acquired Subsidiaries or any of their respective assets or properties
which are part of the Acquired Businesses or (z) any note, bond, mortgage,
security agreement, indenture, license (except for the license agreement with
Carnival, which shall terminate at Closing), franchise, permit, concession,
contract, lease (capital or operating) or other instrument, obligation or
agreement of any kind (collectively, "Contracts") to which CRC or any of the CRC
Acquired Subsidiaries is a party or by which CRC or any of the CRC Acquired
Subsidiaries or any of their respective assets or properties which are part of
the Acquired Businesses is bound, except for any of the foregoing matters which,
individually or in the aggregate, would not reasonably be expected to have
Material Adverse Effect on the Acquired Business, taken as a whole, or on the
ability of CRC to consummate the transactions contemplated by this Agreement.
(ii) Except for (v) the filing of a premerger notification and
report form by CRC under the HSR Act, (w) the filing of the Joint Proxy
Statement with the SEC pursuant to the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder (the "Exchange
Act"), and filings with various state securities authorities that may be
required in connection with the transactions contemplated by this Agreement, (x)
the filing of the Nevada Articles and Florida Articles and other appropriate
merger documents pursuant to and in accordance with the laws of the States of
Nevada and Florida, and appropriate documents with the relevant authorities of
other states in which CRC is qualified to do business, (y) the licensing,
permitting, registration or other approval of, or written consent or no action
letter from, each Governmental or Regulatory Authority with regulatory control
or jurisdiction over the conduct of lawful gaming or gambling by CRC and the CRC
Acquired Subsidiaries, including, without limitation the Louisiana State Police,
the Louisiana Gaming Control Board, the Ontario Casino Corporation, the Alcohol
and Gaming Commission of Ontario, the State of Washington Gambling Commission
and the U.S. National Indian Gaming Commission (a "CRC Gaming Authority"),
within each municipality, state or commonwealth, or subdivision thereof, wherein
CRC or any of the CRC Acquired Subsidiaries conducts business on the date hereof
and (z) obtaining the consents and approvals described in Schedule 4.01(d)
hereto (which shall include, but not be limited to, consents to the assignment
of Contracts with the Wampanoag and Kalispel Tribes), no consent, approval, or
action of, filing with, or notice to any Governmental or Regulatory Authority or
other public or private third party is necessary or required under any of the
terms, conditions or provisions of any Law or Order of any Governmental or
Regulatory Authority or any Contract to which CRC or any of the CRC Acquired
Subsidiaries is a party or by which CRC or any of the CRC Acquired Subsidiaries
or any of their respective assets or properties which are part of the Acquired
Businesses is bound for the execution and delivery of this Agreement by CRC, the
performance by CRC of its obligations hereunder or the consummation of the
transactions contemplated hereby, except for such consents, approvals, or
actions of, filings with or notices to any Governmental or Regulatory Authority
or other public or private third party the failure of which to make or obtain
could not be reasonably expected to have a Material Adverse Effect on the
Acquired Businesses taken as a whole or on the ability of CRC to consummate the
transactions contemplated by this Agreement.
(e) Financial Statements; SEC Reports.
(i) Attached hereto as Schedule 4.01(e) are (A) the audited
financial statements of CHC International, Inc. for the three fiscal years ended
November 30, 1997, (B) the unaudited consolidated balance sheet and statements
of income (excluding footnotes) of CRC as, of and for the fiscal year ended
November 30, 1998 and (C) the Initial November 30 Balance Sheet for the Acquired
Businesses (collectively, the "CRC Financial Statements"). The CRC Financial
Statements (including the notes thereto, to the extent not excluded therefrom)
have been prepared in accordance with GAAP applied on a consistent basis during
the periods involved (except as may be indicated therein or in the notes
thereto), and except that the selection of categories of assets and liabilities
included in the Initial November 30 Balance Sheet may not be made in accordance
with GAAP and fairly present (subject to normal, recurring year-end audit
adjustments which are not expected to be, individually or in the aggregate,
materially adverse to the entities and businesses to which they relate) the
consolidated financial position of the entities and businesses, as the case may
be, as of the respective dates thereof and the results of their operations and
cash flows for the respective periods then ended. Each CRC Acquired Subsidiary
is treated as a consolidated subsidiary of CRC in the CRC Financial Statements.
(ii) Other than LCC, none of CRC or the CRC Acquired
Subsidiaries files or is required to file any reports, or registration
statements with the SEC. CRC delivered to JEI prior to the execution of this
Agreement a true, correct, and complete copy (exclusive of schedules or
exhibits) of each form, report, schedule, registration statement, definitive
proxy statement and other document (together with all amendments thereof and
supplements thereto) filed by LCC with the SEC since January 1, 1996 (as such
documents have since the time of their filing been amended or supplemented, the
"LCC SEC Reports"), which are all the documents (other than preliminary
material) that LCC was required to file with the SEC since such date. As of
their respective dates, to CRC's knowledge the LCC SEC Reports (consisting of
periodic reports on Forms 10-K, 10-Q and 8-K filed under the Exchange Act and
registration statements filed under the Securities Act and/or the Exchange Act)
(i) complied as to form in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited financial statements and unaudited interim financial
statements (including, in each case, the notes, if any, thereto) included in the
LCC SEC Reports complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto and except with
respect to unaudited statements as permitted by Form 10-Q) and fairly present in
all material respects (subject, in the case of the unaudited interim financial
statements, to normal, recurring year-end audit adjustments which are not
expected to be, individually or in the aggregate, materially adverse to LCC) the
financial position of LCC as at the respective dates thereof and the results of
its operations and cash flows for the respective periods then ended.
(f) Events Subsequent to November 30, 1998. Since November 30, 1998,
except as disclosed in the LCC SEC Reports or as described in Schedule 4.01(f),
there has not been any adverse change in the business, financial condition,
operations, results of operations, or future prospects of any of the Acquired
Businesses (other than any change as a consequence of the economy generally or
in the industries in which CRC and the CRC Acquired Subsidiaries operate not
specific to the Acquired Businesses) which could, individually or the aggregate,
reasonably be expected to have a Material Adverse Effect on the Acquired
Businesses taken as a whole (a "Material Adverse Change in the Acquired
Businesses"). Without limiting the generality of the foregoing, except as set
forth on Schedule 4.01(f), or as otherwise permitted elsewhere in this
agreement, since that date through the date hereof (it being understood that any
exceptions to (i) through (xii) below which are required to be set forth on
Schedule 4.01(f) shall only relate to activities, assets and liabilities of the
Acquired Businesses):
(i) none of CRC or any of the CRC Acquired Subsidiaries has
sold, leased, transferred, or assigned any of its assets, tangible or
intangible, other than in the ordinary course of business consistent with past
practice;
(ii) none of CRC or any of the CRC Acquired Subsidiaries has
entered into any agreement, contract, lease, or license involving the payment or
receipt of more than $50,000 (or series of related agreements, contracts, leases
and licenses) other than in the ordinary course of business consistent with past
practice;
(iii) none of CRC or any of the CRC Acquired Subsidiaries has
permitted any security interest to be imposed upon any of its assets, tangible
or intangible;
(iv) none of CRC or any of the CRC Acquired Subsidiaries has
made any capital expenditure (or series of related capital expenditures);
(v) none of CRC or any of the CRC Acquired Subsidiaries
has made any capital investment in, any loan to, or any acquisition of the
securities or assets of, any other person (or series of related capital
investments, loans, and acquisitions) except in the ordinary course consistent
with past practice;
(vi) none of CRC or any of the CRC Acquired Subsidiaries has
declared, set aside, or paid any dividend or made any distribution with respect
to its capital stock (whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its capital stock;
(vii) none of CRC or any of the CRC Acquired Subsidiaries has
entered into any employment contract or collective bargaining agreement, written
or oral, or modified the terms of any existing such contract or agreement;
(viii) none of CRC or any of the CRC Acquired Subsidiaries has
made any loan to, or entered into any other transaction with any of its
directors, officers and employees;
(ix) none of CRC or any of the CRC Acquired Subsidiaries has
granted any increase in the base compensation of any of its directors, officers,
and employees, except in the ordinary course of business consistent with past
practice;
(x) none of CRC or any of the CRC Acquired Subsidiaries has
adopted, amended, modified, or terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan, as defined in Section 4.01(n) below);
(xi) none of CRC or any of the CRC Acquired Subsidiaries has
made any other change in employment terms for any of its directors, officers,
and employees outside the ordinary course of business; and
(xii) none of CRC or any of the CRC Acquired Subsidiaries
has committed to any of the foregoing.
(g) Absence of Undisclosed Liabilities. Except for liabilities which
will not be liabilities of the Acquired Businesses after the Merger,
neither CRC nor any of the CRC Acquired Subsidiaries has any liabilities or
obligations (whether absolute, accrued, contingent or otherwise, or whether due
or to become due) of any nature that would be required by GAAP to be reflected
or reserved against on a consolidated balance sheet of the Acquired Businesses,
other than liabilities or obligations reflected or reserved against on the
Initial November 30 Balance Sheet and liabilities incurred since November 30,
1998 in the ordinary course of business consistent with past practice on behalf
of the Acquired Businesses.
(h) Legal Proceedings. Except as disclosed in Schedule 4.01(h),
(i) there are no actions, suits, arbitrations or proceedings involving a claim
in excess of $10,000 pending or, to the knowledge of CRC, threatened against
nor, to the knowledge of CRC, are there any Governmental or Regulatory Authority
investigations or audits pending or threatened against, any of CRC or any of the
CRC Acquired Subsidiaries or any of their respective assets and properties which
are part of the Acquired Businesses, including, without limitation, any
affecting their licenses, permits, registrations or other gaming approvals under
any CRC Gaming Laws (as defined in Section 4.01(j)), (ii) neither CRC nor any of
the CRC Acquired Subsidiaries is subject to any Order of any Governmental or
Regulatory Authority and (iii) neither CRC, any of the CRC Acquired
Subsidiaries nor, to the knowledge of CRC (without specific inquiry), any
director, officer, gaming manager or key employee of CRC or any CRC Acquired
Subsidiary has received any written claim, demand, notice, complaint, or Order
from any Governmental or Regulatory Authority in the past three years asserting
that a license of it or them as applicable under CRC Gaming Laws should be
revoked or suspended. None of any of the actions, suits, arbitrations or
proceedings, investigations, audits, claims, demands, notices, complaints or
Orders disclosed on Schedule 4.01(h) could reasonably be expected to have a
Material Adverse Effect on the Acquired Businesses taken as a whole or on the
ability of CRC to consummate the transactions contemplated by this Agreement.
(i) Information Supplied. The information furnished by CRC for use
in connection with joint proxy statement/prospectus relating to the
Stockholders' Meetings, as amended or supplemented from time to time (as so
amended and supplemented, the "Joint Proxy Statement"), and the Registration
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the Securities Act and will not, on the date of filing
of the Registration Statement or, in the case of the Joint Proxy Statement, at
the date it is mailed to stockholders of JEI, at the time of the JEI
Stockholders Meetings and at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
(j) Compliance with Laws, Orders, etc. CRC, the CRC Acquired
Subsidiaries and, to the knowledge of CRC (without specific inquiry), each of
their respective directors, officers and gaming managers hold all permits,
licenses, variances, exemptions, orders and approvals of all Governmental and
Regulatory Authorities necessary for the lawful conduct of the Acquired
Businesses, including all authorizations under applicable CRC Gaming Laws (the
"CRC Permits"), except where the failure to obtain such CRC Permits would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Acquired Businesses taken as a whole, and no event has
occurred which permits, or upon the giving of notice or passage of time or both
would permit, revocation, non-renewal, modification, suspension or termination
(other than expiration of any CRC Permit in the ordinary course) of any CRC
Permit that currently is in effect with respect to any of the Acquired
Businesses. CRC and the CRC Acquired Subsidiaries and, to the knowledge of CRC
(without specific inquiry), each of their respective directors, officers and
gaming managers, are in compliance in all material respects with the material
terms of the CRC Permits relating to the Acquired Businesses. Except as
disclosed in Schedule 4.01(j), CRC and the CRC Acquired Subsidiaries are not in
violation of or default under any Law or Order of any Governmental or Regulatory
Authority applicable to the Acquired Businesses, including all applicable CRC
Gaming Laws, except for violations or defaults which, individually or in the
aggregate, are not having and could not reasonably be expected to have a
Material Adverse Effect on the Acquired Businesses taken as a whole. The term
"CRC Gaming Laws" means any Federal, state, local or foreign statute, ordinance,
rule, regulation, permit, consent, registration, finding of suitability,
approval, license, judgment, order, decree, injunction or other authorization,
including any condition or limitation placed thereon, governing or relating to
the current or contemplated casino activities and operations of CRC and the CRC
Acquired Subsidiaries, including without limitation the rules and regulations of
all applicable state or local casino commissions.
(k) Compliance with Charter Documents and Certain Agreements.
Except as disclosed in Schedule 4.01(k), neither CRC nor any of the CRC Acquired
Subsidiaries nor, to the knowledge of CRC (without specific inquiry), any other
party thereto is in breach or violation of, or in default in the performance or
observance of any term or provision of, and no event has occurred which, with
notice or lapse of time or both, could be reasonably expected to result in a
default under (x) the certificate or articles of incorporation or by-laws (or
other comparable charter documents) of CRC or any of the CRC Acquired
Subsidiaries or (y) any CRC Material Contract to which CRC or any of the CRC
Acquired Subsidiaries is a party or by which CRC or any of the CRC Acquired
Subsidiaries or any of their respective assets or properties is bound, which
breach, violation or default could reasonably be expected to have a Material
Adverse Effect on the Acquired Businesses taken as a whole.
(l) Tax Matters. For the purposes of this Agreement: "Audit"
means any audit, assessment, or other examination relating to Taxes by any Tax
Authority or any judicial or administrative proceedings relating to Taxes; "Tax"
or "Taxes" means all Federal, state, local, and foreign taxes, and other
assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties applicable
thereto, imposed by any Tax Authority including, without limitation, liability
imposed pursuant to Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law) which may be imposed upon an entity as
a transferee or successor; "Tax Authority" means the Internal Revenue Service
and any other domestic or foreign governmental authority responsible for the
administration of any Taxes; and "Tax Returns" mean all Federal, state, local
and foreign tax returns, declarations, statements, reports, schedules, forms,
and information returns and any amendments thereto.
Except as set forth in Schedule 4.01(l) hereto:
(i) CRC and each of the CRC Acquired Subsidiaries and any
combined, consolidated, unitary or affiliated group of which CRC and each of the
CRC Acquired Subsidiaries have been a member prior to the Closing Date have
timely filed, or have had timely filed on their behalf, or will timely file or
cause to be timely filed, all Tax Returns required by applicable law to be filed
by any of them prior to or as of the Closing Date. All such Tax Returns and
amendments thereto are or will be true, complete and correct in all material
respects. CRC and each of the CRC Acquired Subsidiaries have established (and
until the Closing Date will maintain) on their books and records reserves
adequate to pay all Taxes not yet due and payable.
(ii) CRC and each of the CRC Acquired Subsidiaries have
paid, or have had paid on their behalf, or where payment is not yet due, have
established, or have had established on their behalf and for their sole benefit
and recourse, or will establish or cause to be established on or before the
Closing Date, an adequate accrual for the payment of all Taxes due with respect
to any period ending prior to or as of the Closing Date.
(iii) No Audit is pending with respect to any Tax Returns
filed by, or Taxes due from, CRC or any of the CRC Acquired Subsidiaries. No
deficiency or adjustment for any Taxes has been proposed, asserted, or assessed
against CRC or any of the CRC Acquired Subsidiaries. There are no material
liens for Taxes upon the assets of CRC or any of the CRC Acquired Subsidiaries,
except for statutory liens for current Taxes not yet due and those being
contested in good faith.
(iv) Neither CRC nor any of the CRC Acquired Subsidiaries
has given or been requested to give any waiver of statutes of limitations
relating to the payment of Taxes or have executed powers of attorney with
respect to Tax matters, which will be outstanding as of the Closing Date.
(v) Neither CRC nor any of the CRC Acquired Subsidiaries
is a party to, is bound by, or has any obligation to any other member of an
affiliated or combined group of which CRC or any of the CRC Acquired
Subsidiaries is or has been a member, for Taxes under any tax sharing, cost
sharing, or similar agreement or policy.
(vi) CRC and each of the CRC Acquired Subsidiaries have
delivered to JEI correct and complete copies of all Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by CRC and
each of the CRC Acquired Subsidiaries that were requested by JEI.
(vii) To the knowledge of CRC, no claim has been made by
an authority in a jurisdiction where CRC or any of the CRC Acquired Subsidiaries
does not file a Tax Return that it is or may be subject to taxation in that
jurisdiction.
(viii) Neither CRC nor any of the CRC Acquired
Subsidiaries has made any payments, is obligated to make any payments, or is
party to anyagreement that under certain circumstances could obligate it to make
any payments that will not be deductible under Section 280G of the Code.
(ix) There has been no written assertion of a Tax due from
CRC or any of the CRC Acquired Subsidiaries for the Taxes of any person under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign law) as a transferee or successor.
(x) The federal Tax Return of CHC International, Inc. and
subsidiaries for the period from December 1, 1997 through June 30, 1998 to be
filed by CRC with the IRS will not be materially different
from the draft form of such Tax Return previously furnished to JEI.
(m) Environmental Matters.
(i) As of the date hereof, to the knowledge of CRC, no
underground storage tanks are present under any property that CRC or any CRC
Acquired Subsidiaries has at any time owned, operated, occupied or leased and
which is part of the Acquired Businesses. To the knowledge of CRC, as of the
date hereof no material amount of any substance that has been designated by any
Governmental or Regulatory Authority or by applicable Federal, state or local
law to be radioactive, toxic, hazardous or otherwise a danger to health or other
environment, including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde, and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, a ("Hazardous Material"), but excluding
office and janitorial supplies, are present, as a result of the actions of CRC
or any of the CRC Acquired Subsidiaries in, on or under any property, including
the land and the improvements, ground water and surface water, that CRC or any
of the CRC Acquired Subsidiaries has at any time owned, operated, occupied or
leased and which is part of the Acquired Businesses.
(ii) At no time has CRC or any of the CRC Acquired Subsidiaries
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any Law in effect on
or before the Effective Time, which has had or is reasonably likely to have a
Material Adverse Effect on the CRC Acquired Businesses taken as a whole, nor has
CRC or any of the CRC Acquired Subsidiaries disposed of, transported, sold, or
manufactured any product containing a Hazardous Material (collectively,
"Hazardous Materials Activities") in violation of any Law or Order promulgated
by any Governmental or Regulatory Authority to prohibit, regulate or control
Hazardous Materials or any Hazardous Materials Activity, which has or is
reasonably likely to have a Material Adverse Effect on the CRC Acquired
Businesses taken as a whole.
(iii) CRC and any of the CRC Acquired Subsidiaries currently
hold all environmental approvals, permits, licenses, clearances and consents
(the "Environmental Permits") necessary for the conduct of its Hazardous
Materials Activities and other businesses of CRC or any of the CRC Acquired
Subsidiaries which are part of the Acquired Businesses as such activities and
businesses are currently being conducted, the absence of which would be
reasonable likely to have a Material Adverse Effect on the Acquired Businesses
taken as a whole.
(iv) No action, proceeding, revocation proceeding, amendment
procedure, writ, injunction or claim is pending or, to the knowledge of CRC as
of the date hereof, threatened concerning any Environmental Permit or any
Hazardous Materials Activity of CRC or any of the CRC Acquired Subsidiaries
which would be reasonably likely to have a Material Adverse Effect on the
Acquired Businesses taken as a whole. Except as set forth on Schedule 4.01(m)
or as otherwise would not be reasonably likely to have a Material Adverse Effect
on the Acquired Businesses as a whole, CRC is not aware of any fact or
circumstance which would involve CRC or any of the CRC Acquired Subsidiaries in
any environmental litigation or impose upon CRC or any of the CRC Acquired
Subsidiaries any environmental liability. None of the items disclosed on
Schedule 4.01(m) would be reasonably likely to have a Material Adverse Effect on
the Acquired Businesses taken as a whole.
(n) Employee Benefit Plans.
(i) Neither CRC nor any CRC Acquired Subsidiaries (A) sponsors,
maintains or contributes to any pension, retirement, profit-sharing, deferred
compensation, stock option, other incentive plan, or any other type of employee
benefit plan (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) ("Employee Benefit Plan"), or (B)
has any obligation to or customary arrangement with employees for bonuses,
incentive compensation, vacations, severance pay, sick pay, sick leave,
insurance, service award, relocation, disability, tuition refund, or other
benefits, whether oral or written ("Benefit Obligation"), except, in each case
(a "CRC Employee Benefit Plan" or "CRC Benefit Obligation," as the case may be),
as set forth in Schedule 4.01(n) or except as shall be transferred in its
entirety to Spinco (which Employee Benefit Plan or Benefit Obligation being
transferred to Spinco shall be separately identified on Schedule 4.01(n)). CRC
has furnished to JEI: (A) true, correct, and complete copies of all documents
evidencing plans, obligations, or arrangements referred to in Schedule 4.01(n)
(or true, correct, and complete written summaries of such plans, obligations, or
arrangements to the extent not evidenced by documents) and true, correct, and
complete copies of all documents evidencing trusts related to such plans or
arrangements, and all summary plan descriptions of such plans or arrangements;
(B) the two most recent annual reports (Form 5500's), if any, including all
schedules thereto and the most recent annual and periodic accounting of related
plan assets, if any, with respect to each CRC Employee Benefit Plan; (C) the two
most recent actuarial valuations with respect to each pension plan (as defined
in Section 3(2) of ERISA) (a "Pension Plan") sponsored or contributed to by CRC
or any CRC Acquired Subsidiary (a "CRC Pension Plan") subject to Title IV of
ERISA; and (D) the most recent determination letter issued by the Internal
Revenue Service (the "IRS") with respect to each CRC Pension Plan.
(ii) All material liabilities for contributions of CRC or any CRC
Acquired Subsidiary to each CRC Employee Benefit Plan (including any CRC Pension
Plan) and with respect to each CRC Benefit Obligation that in each case are due
on or prior to November 30, 1998, have been paid or accrued in the financial
records of CRC or such CRC Acquired Subsidiary.
(iii) Except as has not had and could not be reasonably expected
to have a Material Adverse Effect on the Acquired Businesses taken as a whole,
(A) there has been no violation of the reporting and disclosure requirements
imposed under either ERISA or the Code for which a penalty has been or may be
imposed with respect to any CRC Employee Benefit Plan; (B) there has been no
breach of fiduciary duty or responsibility with respect to any CRC Employee
Benefit Plan; (C) no CRC Employee Benefit Plan or related trust has any material
liability of any nature, accrued or contingent, including without limitation
liabilities for Taxes, other than for routine payments to be made in due course
to participants and beneficiaries, except as set forth in Schedule 4.01(n); (D)
neither CRC nor any CRC Acquired Subsidiary has any formal plan or commitment to
create any additional, or modify in any material respect any existing, CRC
Employee Benefit Plan or Benefit Obligation described in Section 4.01(n)(i); (E)
each CRC Employee Benefit Plan which is a group health plan within the meaning
of Section 5000(b)(1) of the Code is and has been maintained in full compliance
in all material respects with the applicable requirements of Section 4980B of
the Code; (F) other than the health care continuation requirements of Section
4980B of the Code, neither CRC nor any CRC Acquired Subsidiary has any
obligation to provide post-retirement medical benefits or life insurance
coverage or any deferred compensation benefits to any present or former
employees; (G) there is no litigation, arbitration, claim (other than routine
claims for benefits), governmental or other proceeding (formal or informal), or
investigation pending or, to the knowledge of CRC, threatened with respect to
any CRC Employee Benefit Plan or related trust or with respect to any fiduciary,
administrator, or sponsor (in its capacity as such) of any CRC Employee Benefit
Plan; (H) no CRC Employee Benefit Plan or related trust and no Benefit
Obligation is in material violation of, or in default in any material respect
with respect to, any Law or Order, nor is CRC, any CRC Acquired Subsidiary, any
CRC Employee Benefit Plan or any related trust required to take any action in
order to avoid such a violation or default; and (I) no event has occurred or, to
the knowledge of CRC, is threatened or about to occur which would constitute a
prohibited transaction under Section 406 of ERISA.
(iv) Except as set forth on Schedule 4.01(n), a determination
letter of the IRS has been issued with respect to each CRC Pension Plan to the
effect that such CRC Pension Plan is qualified under Section 401(a) of the Code,
and to the knowledge of CRC, no event has occurred that would materially
adversely affect such determination. Each CRC Pension Plan has been operated in
accordance with its terms in all material respects. No CRC Pension Plan which is
subject to Title IV of ERISA has a material accumulated or waived funding
deficiency within the meaning of Section 412 of the Code. No investigation or
review by the Internal Revenue Service is currently pending or, to the knowledge
of CRC, is threatened in which the IRS has asserted or may reasonably be
expected to assert that any CRC Pension Plan is not qualified under Section
401(a) of the Code or that any related trust is not exempt under Section 501 of
the Code. Neither CRC nor any CRC Acquired Subsidiary, nor any organization to
which CRC or any CRC Acquired Subsidiary is a successor or parent corporation,
within the meaning of Section 4069(b) of ERISA, has, at any time within the
immediately preceding three years, divested itself of any entity maintaining or
with an obligation to contribute to any CRC Pension Plan which had an "amount of
unfunded benefit liabilities," as defined in Section 4001(a)(18) of ERISA, at
the time of such divestiture. No material assessment of any Federal Taxes with
respect to any Employee Benefit Plan has been made and remains unpaid or, to the
knowledge of CRC, is threatened against CRC, any CRC Acquired Subsidiary, or any
related trust of any CRC Employee Benefit Plan and nothing has occurred which
could reasonably be expected to result in a material assessment of unrelated
business taxable income under the Code with respect to any Employee Benefit
Plan. Form 5500's for the immediately preceding three years have been timely
filed with respect to all CRC Pension Plans. No event has occurred or (to the
knowledge of CRC) is threatened or about to occur which would constitute a
reportable event within the meaning of Section 4043(b) of ERISA with respect to
any CRC Pension Plan. No notice of termination has been filed by the plan
administrator pursuant to Section 4041 of ERISA or issued by the Pension Benefit
Guaranty Corporation pursuant to Section 4042 of ERISA with respect to any CRC
Pension Plan.
(v) Neither CRC nor any CRC Acquired Subsidiary has at any time
within the immediately preceding five years contributed to or effectuated either
a complete or partial withdrawal from any multiemployer pension plan within the
meaning of Section 3(37) of ERISA.
(o) Patents, Trademarks, Etc. Schedule 4.01(o) sets forth all
patents, patent applications, trademarks, trademark applications, trade names,
service marks, copyrights, copyright applications, franchises, trade secrets,
computer programs (in object or source code form), or other intangible property
or asset (collectively, "Intangibles") which are individually or in the
aggregate material to the conduct of the business of the Acquired Businesses
taken as a whole. Except as set forth on Schedule 4.01(o), CRC and the CRC
Acquired Subsidiaries have all right, title and interest in, or a valid and
binding license to use all such Intangibles. Neither CRC nor any CRC Acquired
Subsidiary is in default (or with the giving of notice or lapse of time or both,
would be in default) in any material respect under any license to use such
Intangible, such Intangible is not, to the knowledge of CRC, being infringed by
any third party, and neither CRC nor any CRC Acquired Subsidiary is infringing
any Intangible of any third party, except for such defaults and infringements
which, individually or in the aggregate, are not having and could not reasonably
be expected to have a Material Adverse Effect on the Acquired Businesses taken
as a whole.
(p) Insurance. Schedule 4.01(p) is a true and complete list of
all liability, property, workers' compensation, directors' and officers'
liability and other insurance policies currently in effect on the date hereof
that insure the business, operations, properties, assets, or employees of CRC or
any of the CRC Acquired Subsidiaries that relates to any of the Acquired
Businesses, as well as any self-insurance arrangements affecting any of CRC or
any of the CRC Acquired Subsidiaries. Such insurance policies are placed with
financially sound and reputable insurers and, in light of the respective
business, operations, assets, and properties of CRC and the CRC Acquired
Subsidiaries, are in amounts and have coverages that are reasonable and
customary for persons engaged in such businesses and operations and having such
assets and properties.
(q) Labor Matters. Except as disclosed in Schedule 4.01(q)
hereto, there are no material controversies pending or, to the knowledge of CRC,
threatened between CRC or any of the CRC Acquired Subsidiaries and any
representatives of its employees, and, to the knowledge of CRC, there are no
material organizational efforts presently being made involving any of the now
unorganized employees of CRC or any of the CRC Acquired Subsidiaries. There is
no work stoppage, strike or similar concerted action by employees of CRC or any
of the CRC Acquired Subsidiaries currently pending or, to the knowledge of CRC,
threatened.
(r) Property and Assets. Except as disclosed in Schedule
4.01(r), CRC and the CRC Acquired Subsidiaries have good and marketable title
to, or have valid leasehold interests in or valid rights under contract to use,
all property and assets used in the conduct of the CRC Acquired Businesses, free
and clear of all Liens other than (i) any statutory Lien arising in the ordinary
course of business by operation of Law with respect to a liability that is not
yet due or delinquent, (ii) Liens for Taxes not delinquent or being contested in
good faith, (iii) deposits or pledges for goods or services made in the ordinary
course of business, (iv) customary Liens in favor of mechanics, materialmen and
landlords which arise by operation of Law and which are incurred in the ordinary
course of business and (v) any minor imperfection of title or similar Lien which
individually or in the aggregate with other such Liens does not materially
impair the value of the property or asset subject to such Lien or the use of
such property or asset in the conduct of the business of CRC or any such CRC
Acquired Subsidiary, as the case may be (collectively, "Permitted Liens"). To
the best knowledge of CRC, the facilities, structures, and equipment of CRC and
the CRC Acquired Subsidiaries which are part of the Acquired Businesses are
structurally sound with no known defects and are in good operating condition and
repair and are adequate for the uses to which they are being put; and none of
such facilities, structures, or equipment is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs. Except as set forth on
Schedule 4.01(r), neither CRC nor any of the CRC Acquired Subsidiaries has
received notification that it is in violation of any applicable building,
zoning, anti-pollution, health, or other Laws in respect of its facilities or
structures or their operations and no such violation exists.
(s) Vote Required. The affirmative vote of the holders of
record of a majority of the outstanding shares of CRC Common Stock entitled to
vote on the CRC Merger Proposal is the only vote of the holders of any class or
series of the capital stock of CRC required to approve the Merger and the other
transactions contemplated hereby, including but not limited to the Spinoff.
(t) Subsidiaries. Schedule 4.01(t) sets forth for each CRC Acquired
Subsidiary (i) its name and jurisdiction of incorporation, (ii) the number of
shares of authorized capital stock of each class of its capital stock, (iii)
the number of issued and outstanding shares of each class of its capital stock,
the names of the holders thereof, and the number of shares held by each such
holder, (iv) the number of shares of its capital stock held in treasury, and (v)
its directors and officers. CRC has delivered to JEI correct and complete
copies of the charter and by-laws of each CRC Acquired Subsidiary (as amended to
date). All of the issued and outstanding shares of capital stock of each CRC
Acquired Subsidiary have been duly authorized and are validly issued, fully
paid, and nonassessable. Except as set forth on Schedule 4.01(t), CRC or one of
the CRC Acquired Subsidiaries holds of record and owns beneficially all of the
outstanding shares of each such CRC Acquired Subsidiary, free and clear of any
Liens (other than Permitted Liens) or any restrictions on transfer (other than
restrictions under the Securities Act and state securities laws), security
interests, options, warrants, purchase rights, contracts, commitments, equities,
claims, and demands. There are no outstanding or authorized CRC Subsidiary
Options that could require any of CRC or the CRC Acquired Subsidiaries to sell,
transfer, or otherwise dispose of any capital stock of any of the CRC Acquired
Subsidiaries or that could require any such subsidiary to issue, sell, or
otherwise cause to become outstanding any of its own capital stock. There are
no outstanding stock appreciation, phantom stock, profit participation, or
similar rights with respect to any capital stock of any CRC Acquired
Subsidiary. Except as disclosed in Schedule 4.01(t), there are no voting
trusts, proxies, or other commitments, undertakings, restrictions or
arrangements in favor of any person other than CRC or a CRC Acquired
Subsidiary with respect to the voting of, or the right to participate in,
dividends or other earnings on any capital stock of any CRC Acquired
Subsidiary. The minute books (containing the records of meetings of the
stockholders, the board of directors and any committees of the board of
directors), the stock certificate books, and the stock record books of each
CRC Acquired Subsidiary are correct and complete in all material
respects. None of the CRC Acquired Subsidiaries is in default under or in
violation of any provision of its charter or bylaws. Schedule 4.01(t) also sets
forth any direct or indirect control or equity participation in any corporation,
partnership, trust, or other business association of CRC and each CRC Acquired
Subsidiary which is not one of the CRC Acquired Subsidiaries. CRC is the owner,
free and clear of any Liens (other than Permitted Liens), of approximately
fifty-nine (59%) of the outstanding capital stock of LCC on a fully diluted
basis.
(u) Brokers. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by CRC directly with
JEI without the intervention of any person on behalf of CRC in such manner as to
give rise to any valid claim by any person against CRC, any CRC Acquired
Subsidiaries or JEI for a finder's fee, brokerage commission or similar payment.
(v) Agreements Not to Compete. CRC has delivered to JEI true,
complete and accurate copies of all Contracts in full force and effect as of the
date hereof between CRC or any CRC Acquired Subsidiary and its respective
directors, officers, employees, agents (including sales agents), dealers or
distributors which prevent or restrict any such person from competing with CRC
or any CRC Acquired Subsidiary in any manner.
(w) Notes and Accounts Receivable. All notes and accounts
receivable of CRC and the CRC Acquired Subsidiaries shown on the Initial
November 30 Balance Sheet included with the CRC Financial Statements are
reflected properly on their books and records, are valid receivables subject to
no setoff or counterclaims, and are current and collectible, subject only to the
reserve for bad debts set forth on the face of such balance sheet (rather than
in any notes thereto).
(x) Contracts. Schedule 4.01(x)(i) lists the following
contracts and other agreements to which any of CRC and the CRC Acquired
Subsidiaries is a party which relate in any way to any of the Acquired
Businesses (each a "CRC Material Contract"):
(i) any agreement (or group of related agreements) for
the lease of personal property to or from any person providing for lease
payments in excess of $50,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year, result in a loss to
any of CRC and the CRC Acquired Subsidiaries, or involve consideration in excess
of $50,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of $50,000 or
under which it has granted a Lien on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any collective bargaining agreement;
(vii) any agreement for the employment of any individual on a
full-time, part-time, consulting or other basis providing annual
compensation in excess of $50,000 or providing severance benefits;
(viii) any agreement under which it has advanced or
loaned in excess of $10,000 to any of its directors, officers or employees;
(ix) any agreement with, or plan covering, any officer or
employee of CRC or any CRC Acquired Subsidiary the benefits of which are
contingent or vest, or the terms of which are materially altered, upon the
occurrence of a transaction involving CRC or any of the CRC Acquired
Subsidiaries of the nature contemplated by this Agreement;
(x) any agreement under which the consequences of a
default or termination could have a Material Adverse Effect on the Acquired
Businesses;
(xi) any other agreement (or group of related
agreements) the performance of which involves consideration in excess of $50,000
during any consecutive 12 month period.
CRC has delivered to JEI (i) a correct and complete copy of each CRC
Material Contract (as amended to date) and (ii) a written summary setting forth
the terms and conditions of each oral agreement referred to in Schedule
4.01(x)(i). With respect to each such agreement: (A) the agreement is legal,
valid, binding, enforceable and in full force and effect, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, or other similar laws affecting the enforcement of creditors' rights
generally, by general equitable principals (regardless of whether such
enforceability is considered in a proceeding in equity or as law), and except to
the extent that indemnification provisions may be unenforceable due to public
policy; (B) subject to the receipt of any necessary approvals and consents for
the transfer of the rights thereunder to JEI (which approvals and consents are
listed on Schedule 4.01(d)), the agreement will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby; (C) except as
otherwise set forth on Schedule 4.01(x)(ii)(C) and except for the license
agreement with Carnival, which will be terminated at the Closing, no party is in
breach or default, and no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement, except for any of the foregoing matters
which, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on the Acquired Businesses taken as a whole; and
(D) to the best of CRC's knowledge, no party has repudiated any provision of the
agreement.
(y) Inventory. The inventory of CRC and the CRC Acquired
Subsidiaries which is part of the Acquired Businesses is merchantable and fit
for the purpose for which it was procured or manufactured, and none of such
inventory is slow-moving, obsolete, damaged, or defective.
(z) Product Liability. None of CRC and the CRC Acquired
Subsidiaries has any liability (and there is no basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of them giving rise to any liability) arising out of any
injury to individuals or property as a result of the ownership, possession or
use of any product manufactured, sold, leased, or delivered by CRC or any of the
CRC Acquired Subsidiaries.
4.02 Certain Representations and Warranties of JEI.
JEI represents and warrants to CRC as follows (it being understood
that any representation or warranty which relates to a JEI Subsidiary shall not
be deemed to apply to Players or any of its subsidiaries):
(a) Organization and Qualification. Each of JEI and the JEI
Subsidiaries, as listed on Schedule 4.02(a), is a corporation duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
incorporation and has full corporate power and authority to conduct its business
as and to the extent now conducted and to own, use, and lease its assets and
properties. Each of JEI and the JEI Subsidiaries is duly qualified, licensed,
or admitted to do business and is in good standing in each jurisdiction listed
on Schedule 4.02 (a), which is each jurisdiction in which the ownership, use, or
leasing of its assets and properties, or the conduct or nature of its
businesses, makes such qualification, licensing or admission necessary, except
for such failures to be so qualified, licensed, or admitted and in good standing
which, individually or in the aggregate, are not having and could not be
reasonably expected to have a Material Adverse Effect on JEI and the JEI
Subsidiaries taken as a whole. Except as disclosed in Schedule 4.02(a) hereto,
JEI does not directly or indirectly own any equity or similar interest in, or
any interest convertible into or exchangeable or exercisable for, any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity.
(b) Capital Stock.
(i) The authorized capital stock of JEI consists solely of
30,000,000 shares of JEI Common Stock and 1,000,000 shares of preferred stock,
par value $1.00 per share, of JEI ("JEI Preferred Stock"). As of December 31,
1998, 8,616,680 shares of JEI Common Stock were issued and outstanding,
1,243,572 shares of JEI Common Stock were held in the treasury of JEI and
1,753,972 shares of JEI Common Stock were reserved for issuance pursuant to
Options to acquire JEI Common Stock (the "JEI Options"). All JEI Options
currently issued and outstanding are described in Schedule 4.02(b)(i). As of
the date hereof, there has been no change in the number of issued and
outstanding shares of JEI Common Stock or shares of JEI Common Stock held in
treasury or reserved for issuance since such date, other than changes arising
from the conversion or exercise of the JEI Options described in Schedule
4.02(b)(i) hereto and other than as contemplated to be issued pursuant to the
Players Merger Agreement. As of the date hereof, no shares of JEI Preferred
Stock are issued and outstanding. All of the issued and outstanding shares of
JEI Common Stock are, and all shares reserved for issuance will be, upon
issuance in accordance with the terms specified in the instruments or agreements
pursuant to which they are issuable, duly authorized, validly issued, fully paid
and nonassessable. Except pursuant to this Agreement and except as set forth in
Schedule 4.02(b)(i) hereto, there are no outstanding JEI Options. The shares of
JEI Common Stock issuable to the holders of CRC Common Stock pursuant to Article
II hereof will be, when issued in accordance with this Agreement, duly
authorized, validly issued, fully paid and nonassessable. JEI has reserved for
issuance the number of shares of JEI Common Stock required to be issued at the
Closing to the holders of the CRC Common Stock and CRC Options.
(ii) Except as disclosed in Schedule 4.02(b)(ii) and except for
cancellation of shares of JEI Merger Corp. as contemplated by the Players Merger
Agreement, there are no outstanding contractual obligations of JEI or any JEI
Subsidiary to repurchase, redeem, or otherwise acquire any shares of JEI Common
Stock or any capital stock of any JEI Subsidiary or any JEI Options or any
Options to purchase any capital stock of any JEI Subsidiary or to provide funds
to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any JEI Subsidiary or any other person.
(c) Authority Relative to this Agreement. JEI has full
corporate power and authority to enter into this Agreement and, subject to
obtaining the JEI Stockholders' Approval and the approvals of any Governmental
or Regulatory Authority identified in Schedule 4.02(c), to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by JEI and the
consummation by JEI of the transactions contemplated hereby have been duly and
validly authorized by its Board of Directors. The Board of Directors of JEI has
adopted a resolution recommending approval of the JEI Merger Proposal by the
stockholders of JEI, declaring the advisability of the issuance of JEI Common
Stock in connection with the Merger and directing that the JEI Merger Proposal
be submitted for consideration by the stockholders of JEI. Except for the
review by JEI's Compliance Committee (the "Compliance Committee") of this
Agreement, the transactions identified herein, and the principals of CRC and the
CRC Acquired Subsidiaries as required by JEI's internal reporting system and no
exception taken to any of the foregoing by said Compliance Committee, and except
for the JEI Stockholders Approval, no other corporate proceedings on the part of
JEI or its stockholders are necessary to authorize the execution, delivery and
performance of this Agreement by JEI and the consummation by JEI of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by JEI and, subject to obtaining the JEI Stockholders'
Approval and any required approvals of any Governmental or Regulatory Authority,
constitutes a legal, valid, and binding obligation of JEI enforceable against
JEI in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except to the extent that indemnification
provisions may be unenforceable due to public policy.
(d) Non-Contravention; Approvals and Consents.
(i) Subject to obtaining the JEI Stockholders' Approval and the
taking of the actions described in paragraph (ii) of this Section 4.02(d), the
execution and delivery of this Agreement by JEI do not, and the performance by
JEI of its obligations hereunder and the consummation of the transactions
contemplated hereby will not, conflict with, result in a violation or breach of,
constitute (with or without notice or lapse of time or both) a default under,
result in or give to any person any right of payment or reimbursement,
termination, cancellation, modification or acceleration of, or result in the
creation or imposition of any Lien upon any of the assets or properties of JEI
or any of the JEI Subsidiaries under, any of the terms, conditions or provisions
of (x) the certificates or articles of incorporation or Bylaws (or other
comparable charter documents) of JEI or any of the JEI Subsidiaries, or (y) any
Law or Order of any Governmental or Regulatory Authority applicable to JEI or
any of the JEI Subsidiaries or any of their respective assets or properties, or
(z) any Contracts to which JEI or any of the JEI Subsidiaries is a party or by
which JEI or any of the JEI Subsidiaries or any of their respective assets or
properties is bound, except for any of the foregoing matters which, individually
or in the aggregate, could not be reasonably expected to have a Material Adverse
Effect on JEI and the JEI Subsidiaries taken as a whole or on the ability of JEI
to consummate the transactions contemplated by this Agreement.
(ii) Except for (v) the filing of a premerger notification and
report form by JEI under the HSR Act, (w) the filing of the Registration
Statement and Joint Proxy Statement with the SEC pursuant to the Securities Act
and the Exchange Act, respectively, and filings with various state securities
authorities that may be required in connection with the transactions
contemplated by this Agreement, (x) the filing of the Nevada Articles and
Florida Articles and other appropriate merger documents pursuant to and in
accordance with the laws of the States of Nevada and Florida and appropriate
documents with the relevant authorities of other states in which CRC is
qualified to do business, (y) the licensing, permitting, registration or other
approval of, or written consent or no action letter from, each Governmental or
Regulatory Authority with regulatory control or jurisdiction over the conduct of
lawful gaming or gambling by JEI and the JEI Subsidiaries, including, without
limitation the Nevada Gaming Commission (a "JEI Gaming Authority"), within each
municipality, state or commonwealth, or subdivision thereof, wherein JEI or any
of the JEI Subsidiaries conducts business on the date hereof and (z) obtaining
the consents and approvals described in Schedule 4.02(d) hereto, no consent,
approval, or action of, filing with, or notice to any Governmental or Regulatory
Authority or other public or private third party is necessary or required under
any of the terms, conditions or provisions of any Law or Order of any
Governmental or Regulatory Authority or any Contract to which JEI or any of the
JEI Subsidiaries is a party or by which JEI or any of the JEI Subsidiaries or
any of their respective assets or properties is bound for the execution and
delivery of this Agreement by JEI, the performance by JEI of its obligations
hereunder or the consummation of the transactions contemplated hereby, except
for such consents, approvals, or actions of, filings with or notices to any
Governmental or Regulatory Authority or other public or private third party the
failure of which to make or obtain could not be reasonably expected to have a
Material Adverse Effect on the JEI and the JEI Subsidiaries taken as a whole or
on the ability of JEI to consummate the transactions contemplated by this
Agreement.
(e) SEC Reports and Financial Statements. JEI delivered to CRC prior
to the execution of this Agreement a true, correct, and complete copy of each
form, report, schedule, registration statement, definitive proxy statement and
other document (together with all amendments thereof and supplements thereto)
filed by JEI or any of the JEI Subsidiaries with the SEC since January 1, 1996
(as such documents have since the time of their filing been amended or
supplemented, the "JEI SEC Reports"), which are all the documents (other than
preliminary material) that JEI and the JEI Subsidiaries were required to file
with the SEC since such date. As of their respective dates, the JEI SEC Reports
(i) complied as to form in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations promulgated thereunder and (ii) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim consolidated financial
statements (including, in each case, the notes, if any, thereto) included in the
JEI SEC Reports (the "JEI Financial Statements") complied as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated therein or in the
notes thereto and except with respect to unaudited statements as permitted by
Form 10-Q) and fairly present (subject, in the case of the unaudited interim
financial statements, to normal, recurring year-end audit adjustments which are
not expected to be, individually or in the aggregate, materially adverse to JEI
and the JEI Subsidiaries taken as a whole) the consolidated financial position
of JEI and its consolidated subsidiaries as at the respective dates thereof and
the consolidated results of their operations and cash flows for the respective
periods then ended. Each JEI Subsidiary is treated as a consolidated subsidiary
of JEI in the JEI Financial Statements for all periods covered thereby.
(f) Absence of Certain Changes or Events. Except as disclosed in the
JEI SEC Reports filed prior to the date of this Agreement, since September 30,
1998 there has not been any adverse change in the business, financial condition,
operations or results of operations of JEI or the JEI Subsidiaries (other than
any change as a consequence of the economy generally or in the industries in
which JEI and the JEI Subsidiaries operate not specific to JEI and the JEI
Subsidiaries) which could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on JEI and the JEI Subsidiaries
taken as a whole (a "Material Adverse Change in JEI").
(g) Absence of Undisclosed Liabilities. Except for matters
reflected or reserved against in the balance sheet for the period ended
September 30, 1998 included in the JEI Financial Statements or as filed
pursuant to a more recently filed JEI SEC Report which includes a consolidated
balance sheet of JEI and the JEI Subsidiaries, neither JEI nor any of the JEI
Subsidiaries had at such date, or has incurred since that date, any liabilities
or obligations (whether absolute, accrued, contingent or otherwise, asserted or
unasserted, or whether due or to become due) of any nature that would be
required by GAAP to be reflected or reserved against on a consolidated balance
sheet of JEI and the JEI Subsidiaries, except liabilities or obligations which
were incurred in the ordinary course of business consistent with past practice
since such date.
(h) Legal Proceedings. Except as disclosed in the JEI SEC
Reports filed prior to the date of this Agreement or pursuant to Schedule
4.02(h), (i) there are no actions, suits, arbitrations or proceedings pending
or, to the knowledge of JEI, threatened against, nor to the knowledge of JEI are
there any Governmental or Regulatory Authority investigations or audits pending
or threatened against JEI or any of the JEI Subsidiaries or any of their
respective assets and properties, including any affecting its licenses, permits,
registrations or other gaming approvals under JEI Gaming Laws (as defined in
Section 4.01(l)), (ii) neither JEI nor any of the JEI Subsidiaries is subject to
any Order of any Governmental or Regulatory Authority and (iii) neither JEI nor
any JEI Subsidiary nor, to the knowledge of JEI (without specific inquiry), any
director, officer, gaming manager or key employee of JEI or any JEI Subsidiary
has received any written claim, demand, notice, complaint, or Order from any
Governmental or Regulatory Authority in the past three years asserting that a
license of it or them under JEI Gaming Laws should be revoked or suspended.
None of any of the actions, suits, arbitrations or proceedings, investigations,
audits, claims, demands, notices, complaints or Orders disclosed on Schedule
4.02(h) could reasonably be expected to have a Material Adverse Effect on JEI
and the JEI Subsidiaries taken as a whole or on the ability of CRC to consummate
the transactions contemplated by this Agreement.
(i) Vote Required. The affirmative vote of the holders of record of
at least a majority of the outstanding shares of JEI Common Stock with respect
to the JEI Merger Proposal and the approval of the issuance of JEI Common Stock
in connection with the Merger is the only vote of the holders of any class or
series of the capital stock of JEI required to approve the Merger and the other
transactions contemplated hereby.
(j) State Securities Laws. No state securities or "Blue Sky" permits
or other authorizations are necessary to issue the Share Merger Consideration
pursuant to the Merger.
(k) Joint Proxy Statement and Registration Statement. The Joint
Proxy Statement and the Registration Statement and any other document to be
filed by JEI with the SEC under the Exchange Act or the Securities Act will
comply as to form in all material respects with the requirements of the Exchange
Act and the Securities Act, as the case may be, and will not, on the date of its
filing or, in the case of the Joint Proxy Statement, at the date it is mailed to
stockholders of JEI, at the time of the JEI Stockholders Meetings and at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading, except that no representation is made by JEI with respect to
information supplied by or on behalf of CRC expressly for inclusion therein and
information incorporated by reference therein from documents filed by CRC or any
of the CRC Acquired Subsidiaries with the SEC.
(l) Compliance with Laws, Orders, etc. JEI, the JEI
Subsidiaries and, to the knowledge of JEI (without specific inquiry), each of
their respective directors, officers and gaming managers hold all permits,
licenses, variances, exemptions, orders and approvals of all Governmental and
Regulatory Authorities necessary for the lawful conduct of their businesses,
including all authorizations under applicable JEI Gaming Laws (the "JEI
Permits"), except where the failure to obtain such JEI Permits would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on JEI and the JEI Subsidiaries taken as a whole, and no event
has occurred which permits, or upon the giving of notice or passage of time or
both would permit, revocation, non-renewal, modification, suspension or
termination (other than expiration of any JEI Permit in the ordinary course) of
any JEI Permit that currently is in effect with respect to any of the businesses
of JEI or any of the JEI Subsidiaries. JEI and the JEI Subsidiaries and, to the
knowledge of JEI (without specific inquiry), each of their respective directors,
officers and gaming managers, are in compliance in all material respects with
the material terms of the JEI Permits relating to their businesses. Except as
disclosed in Schedule 4.02(l), JEI and the JEI Subsidiaries are not in violation
of or default under any Law or Order of any Governmental or Regulatory Authority
applicable to JEI or any of the JEI Subsidiaries, including all applicable JEI
Gaming Laws, except for violations or defaults which, individually or in the
aggregate, are not having and could not reasonably be expected to have a
Material Adverse Effect on JEI and the JEI Subsidiaries taken as a whole. The
term "JEI Gaming Laws" means any Federal, state, local or foreign statute,
ordinance, rule, regulation, permit, consent, registration, finding of
suitability, approval, license, judgment, order, decree, injunction or other
authorization, including any condition or limitation placed thereon, governing
or relating to the current or contemplated casino activities and operations of
JEI and the JEI Subsidiaries, including without limitation the rules and
regulations of all applicable state or local casino commissions.
(m) Tax Matters. Except as set forth in Schedule 4.02(m) hereto:
(i) JEI and each of the JEI Subsidiaries and any combined,
consolidated, unitary or affiliated group of which JEI and the JEI Subsidiaries
have been a member prior to the Closing Date have timely filed, or have had
timely filed on their behalf, or will timely file or cause to be timely filed,
all Tax Returns required by applicable law to be filed by any of them prior to
or as of the Closing Date. All such Tax Returns and amendments thereto are or
will be true, complete and correct, in all material respects. JEI and each of
the JEI Subsidiaries have established (and until the Closing Date will maintain)
on their books and records reserves adequate to pay all Taxes not yet due and
payable.
(ii) JEI and each of the JEI Subsidiaries have paid, or
have hadpaid on their behalf, or where payment is not yet due, have established,
or have had established on their behalf and for their sole benefit and recourse,
or will establish or cause to be established on or before the Closing Date, an
adequate accrual for the payment of all Taxes due with respect to any period
ending prior to or as of the Closing Date.
(iii) No Audit is pending with respect to any Tax Returns
filed by, or Taxes due from JEI or any JEI Subsidiary. No deficiency or
adjustment for any Taxes has been proposed, asserted, or assessed against JEI or
any of the JEI Subsidiaries. There are no material liens for Taxes upon the
assets of JEI or any of the JEI Subsidiaries, except for statutory liens for
current Taxes not yet due and those being contested in good faith.
(iv) Neither JEI nor any of the JEI Subsidiaries has
given or been requested to give any waiver of statutes of limitations relating
to the payment of Taxes or have executed powers of attorney with respect to Tax
matters, which will be outstanding as of the Closing Date.
(v) Neither JEI nor any of the JEI Subsidiaries is a party
to, is bound by, or has any obligation to any other member of an affiliated or
combined group of which JEI or any of the JEI Subsidiaries is or has been a
member, for Taxes under any tax sharing, cost sharing, or similar agreement or
policy.
(vi) JEI and each of the JEI Subsidiaries have delivered to
CRC correct and complete copies of all Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by JEI and each of the
JEI Subsidiaries that were requested by CRC.
(vii) To the knowledge of JEI, no claim has been made by
an authority in a jurisdiction where JEI or any of the JEI Subsidiaries does not
file a Tax Return that it is or may be subject to taxation in that jurisdiction.
(viii) Neither JEI nor any of the JEI Subsidiaries has
made any payments, is obligated to make any payments, or is party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Section 280G of the Code.
(ix) There has been no written assertion of a Tax due
from JEI nor any of the JEI Subsidiaries for the Taxes of any person under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign law) as a transferee or successor.
(n) Environmental Matters.
(i) As of the date hereof, to the knowledge of JEI, no
underground storage tanks are present under any property that JEI or any JEI
Subsidiary has at any time owned, operated, occupied or leased. To the
knowledge of JEI, as of the date hereof no material amount of any substance that
has been designated by any Governmental or Regulatory Authority or by applicable
Federal, state or local law to be radioactive, toxic, hazardous or otherwise a
danger to health or other environment, including, without limitation, PCBs,
asbestos, petroleum, urea-formaldehyde, and all Hazardous Material, but
excluding office and janitorial supplies, are present, as a result of the
actions of JEI or any of the JEI Subsidiaries in, on or under any property,
including the land and the improvements, ground water and surface water, that
JEI or any of the JEI Subsidiaries has at any time owned, operated, occupied or
leased.
(ii) At no time has JEI or any of the JEI Subsidiaries
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any Law in effect on
or before the Effective Time, which has had or is reasonably likely to have a
Material Adverse Effect on JEI and the JEI Subsidiaries taken as a whole, nor
has JEI or any of the JEI Subsidiaries engaged in Hazardous Materials Activities
in violation of any Law or Order promulgated by any Governmental or Regulatory
Authority to prohibit, regulate or control Hazardous Materials or any Hazardous
Materials Activity, which has or is reasonably likely to have a Material Adverse
Effect on JEI and the JEI Subsidiaries taken as a whole.
(iii) JEI and any of the JEI Subsidiaries currently
hold all Environmental Permits necessary for the conduct of its Hazardous
Materials Activities and other businesses of JEI or any of the JEI
Subsidiaries as such activities and businesses are currently being conducted,
the absence of which would be reasonably likely to have a Material Adverse
ffect on JEI and the JEI Subsidiaries taken as a whole.
(iv) No action, proceeding, revocation proceeding,
amendment procedure, writ, injunction or claim is pending or, to the
knowledge of JEI as of the date hereof, threatened concerning any
Environmental Permit or any Hazardous Materials Activity of JEI or any of the
JEI Subsidiaries which would be reasonably likely to have a Material Adverse
Effect on JEI or the JEI Subsidiaries taken as a whole. JEI is not aware of
any fact or circumstance which would involve JEI or any of the JEI
Subsidiaries in any environmental litigation or impose upon JEI or any of
the JEI Subsidiaries any environmental liability which in either case would
be reasonably likely to have a Material Adverse Effect on JEI and the JEI
Subsidiaries taken as a whole.
(o) Patents, Trademarks, Etc. JEI and the JEI Subsidiaries have all
right, title and interest in, or a valid and binding license to use all
Intangibles which are individually or in the aggregate material to the conduct
of the business of JEI and the JEI Subsidiaries taken as a whole. Neither JEI
nor any JEI Subsidiary is in default (or with the giving of notice or lapse of
time or both, would be in default) in any material respect under any license to
use such Intangible, such Intangible is not, to the knowledge of JEI, being
infringed by any third party, and neither JEI nor any JEI Subsidiary is
infringing any Intangible of any third party, except for such defaults and
infringements which, individually or in the aggregate, are not having and could
not reasonably be expected to have a Material Adverse Effect on JEI and the JEI
Subsidiaries taken as a whole.
(p) Insurance. The insurance maintained by JEI and the JEI
Subsidiaries on its business, operations, properties, assets and employees is
placed with financially sound and reputable insurers and, in light of the
respective business, operations, assets, and properties of JEI and the JEI
Subsidiaries, are in amounts and have coverages that are reasonable and
customary for persons engaged in such businesses and operations and having such
assets and properties.
(q) Property and Assets. JEI and the JEI Subsidiaries have good
and marketable title to, or have valid leasehold interests in or valid rights
under contract to use, all property and assets used in the conduct of the
businesses of JEI and the JEI Subsidiaries, free and clear of all Liens other
than (i) any statutory Lien arising in the ordinary course of business by
operation of Law with respect to a liability that is not yet due or delinquent,
(ii) Liens for Taxes not delinquent or being contested in good faith, (iii)
deposits or pledges for goods or services made in the ordinary course of
business, (iv) customary Liens in favor of mechanics, materialmen and landlords
which arise by operation of Law and which are incurred in the ordinary course of
business and (v) any minor imperfection of title or similar Lien which
individually or in the aggregate with other such Liens does not materially
impair the value of the property or asset subject to such Lien or the use of
such property or asset in the conduct of the business of JEI or any such JEI
Subsidiary. To the best knowledge of JEI, the facilities, structures and
equipment of JEI and the JEI Subsidiaries are structurally sound with no known
defects and are in good operating condition and repair and are adequate for the
uses to which they are being put; and none of such facilities, structures or
equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs. Except as set forth on Schedule 4.02(r), neither JEI
nor any of the JEI Subsidiaries has received notification that it is in
violation of any applicable building, zoning, anti-pollution, health, or other
Laws in respect of its facilities or structures or their operations and no such
violation exists.
(r) Brokers. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by JEI directly with
CRC without the intervention of any person on behalf of JEI in such manner as to
give rise to any valid claim by any person against JEI, any JEI Subsidiaries or
CRC for a finder's fee, brokerage commission or similar payment.
(s) Labor Matters. Except as disclosed in Schedule 4.02(s)
hereto, there are no material controversies pending or, to the knowledge of JEI,
threatened between JEI or any of the JEI Subsidiaries and any representatives
of its employees, and, to the knowledge of JEI, there are no material
organizational efforts presently being made involving any of the now unorganized
employees of JEI or any of the JEI Subsidiaries. There is no work stoppage,
strike or similar concerted action by employees of JEI or any of the JEI
Subsidiaries currently pending or, to the knowledge of JEI, threatened.
(t) Compliance with Charter Documents and Certain Agreements. Except
as disclosed in Schedule 4.02(t), neither JEI nor any of the JEI Subsidiaries
nor, to the knowledge of JEI (without specific inquiry), any other party thereto
is in breach or violation of, or in default in the performance or observance of
any term or provision of, and no event has occurred which, with notice or lapse
of time or both, could be reasonably expected to result in a default under, (x)
the certificate or articles of incorporation or by-laws (or other comparable
charter documents) of JEI or any of the JEI Subsidiaries or (y) any JEI
Material Contract to which JEI or any of the JEI Subsidiaries is a party or by
which JEI or any of the JEI Subsidiaries or any of their respective assets or
properties is bound which breach, violation or default could reasonably be
expected to have a Material Adverse Effect on JEI and the JEI Subsidiaries taken
as a whole.
(u) Employee Benefit Plans.
(i) Neither JEI nor any JEI Subsidiaries (A) sponsors, maintains
or contributes to any Employee Benefit Plan or has any Benefit Obligation
except, in each case (a "JEI Employee Benefit Plan" or "JEI Benefit Obligation,"
as the case may be) as set forth in Schedule 4.02(u). JEI has furnished to CRC:
(A) true, correct, and complete copies of all documents evidencing plans,
obligations, or arrangements referred to in Schedule 4.02(u) (or true, correct,
and complete written summaries of such plans, obligations, or arrangements to
the extent not evidenced by documents) and true, correct, and complete copies of
all documents evidencing trusts related to such plans or arrangements, and all
summary plan descriptions of such plans or arrangements; (B) the two most recent
annual reports (Form 5500's), if any, including all schedules thereto and the
most recent annual and periodic accounting of related plan assets, if any, with
respect to each JEI Employee Benefit Plan; (C) the two most recent actuarial
valuations with respect to each Pension Plan sponsored or contributed to by JEI
subject to Title IV of ERISA (a "JEI Pension Plan"); and (D) the most recent
determination letter issued by the IRS with respect to each JEI Pension Plan.
(ii) All material liabilities for contributions of JEI or any JEI
Subsidiary to each JEI Employee Benefit Plan (including any JEI Pension Plan)
and with respect to each Benefit Obligation that in each case are due on or
prior to September 30, 1998, have been paid or accrued in the financial records
of JEI or such JEI Subsidiary.
(iii) Except as has not had and could not be reasonably expected
to have a Material Adverse Effect on JEI and the JEI Subsidiaries taken as a
whole, (A) there has been no violation of the reporting and disclosure
requirements imposed under either ERISA or the Code for which a penalty has been
or may be imposed with respect to any JEI Employee Benefit Plan; (B) there has
been no breach of fiduciary duty or responsibility with respect to any JEI
Employee Benefit Plan; (C) no JEI Employee Benefit Plan or related trust has any
material liability of any nature, accrued or contingent, including without
limitation liabilities for Taxes, other than for routine payments to be made in
due course to participants and beneficiaries, except as set forth in Schedule
4.02(u); (D) neither JEI nor any JEI Subsidiary has any formal plan or
commitment to create any additional, or modify in any material respect any
existing, JEI Employee Benefit Plan or JEI Benefit Obligation described in
Section 4.02(u); (E) each JEI Employee Benefit Plan which is a group health plan
within the meaning of Section 5000(b)(1) of the Code is and has been maintained
in full compliance in all material respects with the applicable requirements of
Section 4980B of the Code; (F) other than the health care continuation
requirements of Section 4980B of the Code, neither JEI nor any JEI Subsidiary
has any obligation to provide post-retirement medical benefits or life insurance
coverage or any deferred compensation benefits to any present or former
employees; (G) there is no litigation, arbitration, claim (other than routine
claims for benefits), governmental or other proceeding (formal or informal), or
investigation pending or, to the knowledge of JEI, threatened with respect to
any JEI Employee Benefit Plan or related trust or with respect to any fiduciary,
administrator, or sponsor (in its capacity as such) of any JEI Employee Benefit
Plan; (H) no JEI Employee Benefit Plan or related trust and no Benefit
Obligation is in material violation of, or in default in any material respect
with respect to, any Law or Order, nor is JEI, any JEI Subsidiary, any JEI
Employee Benefit Plan or any related trust required to take any action in order
to avoid such a violation or default; and (I) no event has occurred or, to the
knowledge of JEI, is threatened or about to occur which would constitute a
prohibited transaction under Section 406 of ERISA.
(iv) Except as set forth on Schedule 4.02(u), a determination
letter of the IRS has been issued with respect to each JEI Pension Plan to the
effect that such JEI Pension Plan is qualified under Section 401(a) of the Code,
and to the knowledge of JEI, no event has occurred that would materially
adversely affect such determination. Each JEI Pension Plan has been operated in
accordance with its terms in all material respects. No JEI Pension Plan which is
subject to Title IV of ERISA has a material accumulated or waived funding
deficiency within the meaning of Section 412 of the Code. No investigation or
review by the Internal Revenue Service is currently pending or, to the knowledge
of JEI, is threatened in which the IRS has asserted or may reasonably be
expected to assert that any JEI Pension Plan is not qualified under Section
401(a) of the Code or that any related trust is not exempt under Section 501 of
the Code. Neither JEI nor any JEI Subsidiary, nor any organization to which JEI
or any JEI Subsidiary is a successor or parent corporation, within the meaning
of Section 4069(b) of ERISA, has, at any time within the immediately preceding
three years, divested itself of any entity maintaining or with an obligation to
contribute to any JEI Pension Plan which had an "amount of unfunded benefit
liabilities," as defined in Section 4001(a)(18) of ERISA, at the time of such
divestiture. No material assessment of any Federal Taxes with respect to any
JEI Employee Benefit Plan has been made or remains unpaid, or, to the knowledge
of JEI, is threatened against JEI, any JEI Subsidiary, or any related trust of
any JEI Employee Benefit Plan and nothing has occurred which could reasonably be
expected to result in a material assessment of unrelated business taxable income
under the Code with respect to any JEI Employee Benefit Plan. Form 5500's for
the immediately preceding three years have been timely filed with respect to all
JEI Pension Plans. No event has occurred or (to the knowledge of JEI) is
threatened or about to occur which would constitute a reportable event within
the meaning of Section 4043(b) of ERISA with respect to any JEI Pension Plan. No
notice of termination has been filed by the plan administrator pursuant to
Section 4041 of ERISA or issued by the Pension Benefit Guaranty Corporation
pursuant to Section 4042 of ERISA with respect to any JEI Pension Plan.
(v) Neither JEI nor any JEI Subsidiary has at any time within
the immediately preceding five years contributed to or effectuated either a
complete or partial withdrawal from any multiemployer JEI Pension Plan within
the meaning of Section 3(37) of ERISA.
(v) Contracts. Schedule 4.02(v) lists the following contracts
and other agreements to which any of JEI and the JEI Subsidiaries is a party
(each a "JEI Material Contract"):
(i) any agreement (or group of related agreements) for
the lease of personal property to or from any person providing for lease
payments in excess of $50,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year, result in a loss to
any of JEI and the JEI Subsidiaries, or involve consideration in excess of
$50,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of $50,000 or
under which it has granted a Lien on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any collective bargaining agreement;
(vii) any agreement for the employment of any
individual on a full-time, part-time, consulting or other basis providing annual
compensation in excess of $50,000 or providing severance benefits;
(viii) any agreement under which it has advanced or loaned
in excess of $10,000 to any of its directors, officers or employees;
(ix) any agreement with, or plan covering, any officer or
employee of JEI or any JEI Subsidiary, the benefits of which are contingent or
vest, or the terms of which are materially altered upon the occurrence of a
transaction involving JEI or any of the JEI Subsidiaries of the nature
contemplated by this Agreement.
(x) any agreement under which the consequences of a
default or termination could have a Material Adverse Effect on JEI;
(xi) any other agreement (or group of related agreements)
the performance of which involves consideration in excess of $50,000 during any
consecutive 12 month period.
JEI has delivered to CRC (i) a correct and complete copy of each JEI
Material Contract (as amended to date), other than those for which a written
summary has been prepared, (ii) a written summary setting forth the terms and
conditions of each oral agreement referred to in Schedule 4.02(v) and (iii) in
the case of JEI Material Contracts summarized under clause (i) above, a written
confirmation of the accuracy of the summary of such JEI Material Contract. With
respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable and in full force and effect, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium, or other similar
laws affecting the enforcement of creditors' rights generally, by general
equitable principals (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and except to the extent that indemnification
provisions may be unenforceable due to public policy; (B) the agreement will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (C) no party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration (unless such right of termination,
modification or acceleration has been waived in connection with the transactions
contemplated hereby) under the agreement, except for any of the foregoing
matters which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on JEI and the JEI Subsidiaries taken
as a whole; and (D) to the best of JEI's knowledge, no party has repudiated any
provision of the agreement.
V. CONDITIONS.
5.01 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is
subject to the fulfillment, at or prior to the Closing, of each of the following
conditions:
(a) Stockholder Approval. The CRC Merger Proposal shall have been
duly approved by the requisite vote of the stockholders of CRC and the JEI
Merger Proposal shall have been duly approved by the requisite vote of the
stockholders of JEI.
(b) HSR Act. Any waiting period (and any extension thereof) under
the HSR Act applicable to the transactions contemplated by this Agreement shall
have expired or been terminated.
(c) NYSE Listing Application. JEI shall have received approval
of an amendment to the New York Stock Exchange listing application filed by JEI
with respect to the JEI Common Stock.
(d) No Injunctions or Restraints. No court of competent jurisdiction
or other competent Governmental or Regulatory Authority shall have enacted,
issued, promulgated, enforced or entered any Law or Order (whether temporary,
preliminary or permanent) which is then in effect and has the effect of making
illegal or otherwise restricting, preventing or prohibiting consummation of the
Merger or the other transactions contemplated by this Agreement; provided, in
the case of any such Order, each of the parties shall have used its best efforts
to prevent the entry of any such Order and to appeal as promptly as possible any
Order that may be entered.
(e) Consents and Approvals. Other than the filing provided for by
Section 1.03, all consents, approvals and actions of, filings with and notices
to any Governmental or Regulatory Authority (other than any CRC Gaming Authority
or JEI Gaming Authority, which is covered by paragraph (f) below) or any other
person required of JEI, CRC or any of their respective subsidiaries to
consummate the Merger and the other matters contemplated hereby (including,
without limitation, those listed on Schedules 4.01(d) and 4.02(d)), the failure
of which to be obtained or taken could be reasonably expected to have a Material
Adverse Effect either on JEI and the JEI Subsidiaries taken as a whole or the
Acquired Businesses taken as a whole, or on the ability of JEI and CRC to
consummate the transactions contemplated hereby shall have been obtained, all in
form and substance reasonably satisfactory to JEI and CRC, and no such consent,
approval or action shall contain any term or condition which could be reasonably
expected to result in a material diminution of the benefits of the Merger to the
stockholders of JEI and CRC.
(f) Gaming Authority Approval. All licenses, permits, registrations,
authorizations, consents, waivers, orders, finding of suitability or other
approvals required to be made with or given by any CRC Gaming Authority or JEI
Gaming Authority to permit the Merger to be consummated and to permit the
Surviving Corporation and each of its subsidiaries to conduct their businesses
in the jurisdictions regulated by such Gaming Authorities after the Effective
Time in the same manner as conducted by JEI and the JEI Subsidiaries, on the one
hand, and the Acquired Businesses, on the other hand, prior to the Effective
Time shall have been obtained or made, as applicable.
(g) Registration Statement. The Registration Statement shall
have been declared effective by the SEC under the Securities Act and no stop
order suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and no proceeding for that purpose shall have been initiated
by the SEC and not concluded or withdrawn.
(h) Spinoff. The Spinoff shall have been consummated in
accordance with the Reorganization Agreement.
5.02 Conditions to Obligation of JEI to Effect the Merger.
The obligation of JEI to effect the Merger is further subject to the
fulfillment, at or prior to the Closing, of each of the following additional
conditions (all or any of which may be waived in whole or in part by JEI in its
sole discretion):
(a) Representations and Warranties. The representations and
warranties made by CRC in this Agreement that are qualified as to materiality
shall be true and correct and such representations and warranties that are not
so qualified shall be true and correct in all material respects as of the
Closing Date, in each case as though made on and as of the Closing Date or, in
the case of representations and warranties made as of a specified date earlier
than the Closing Date, on and as of such earlier date, and CRC shall have
delivered to JEI a certificate, dated the Closing Date and executed on behalf of
CRC by its Chairman of the Board or Chief Financial Officer, to such effect.
Notwithstanding the foregoing, a representation and warranty shall not be
required to be true and correct on the Closing Date or such specified date
earlier than the Closing Date if and to the extent failure of such
representation and warranty to be true and correct shall have resulted in an
adjustment to the Merger Consolidation under Section 2.02 hereof.
(b) Performance of Obligations. CRC shall have performed and
complied with, in all material respects, each agreement, covenant, and
obligation required by this Agreement to be so performed or complied with by CRC
at or prior to the Closing, and CRC shall have delivered to JEI a certificate
dated the Closing Date and executed on behalf of the Company by its Chairman of
the Board or Chief Financial Officer, to such effect.
(c) Other Closing Documents. CRC shall have delivered to JEI at
or prior to the Effective Time such other documents as JEI may reasonably
request in order to enable JEI to determine whether the conditions to their
obligations under this Agreement have been met and otherwise to carry out the
provisions of this Agreement.
(d) No Governmental Action. There shall not have been any action
taken, or any Law or Order proposed, promulgated, enacted, entered, enforced or
deemed applicable to the transactions contemplated by this Agreement by any
Governmental or Regulatory Authority (excluding any CRC Gaming Authority or JEI
Gaming Authority), including the entry of a preliminary or permanent injunction,
which, in the reasonable judgment of JEI, either (i) requires the divestiture by
JEI of a material portion of the business of either JEI and the JEI Subsidiaries
taken as a whole, or of the Acquired Businesses taken as a whole, or (ii)
otherwise materially impairs the contemplated benefits to JEI of this Agreement,
the Merger, or any of the other transactions contemplated by this Agreement.
(e) Affiliates of CRC. JEI shall have received the Affiliates
Agreement from each Affiliate.
(f) Cancellation of CRC Options. Prior to the Effective Time, JEI
shall have received evidence of the cancellation of all of CRC Options, as
detailed in Section 2.03 above.
(g) Material Adverse Change. There shall not have been a
Material Adverse Change in the Acquired Businesses since November 30, 1998.
(h) Relicensing of Louisiana Facility. JEI shall have received
evidence reasonably satisfactory to it that the license held by LCC with respect
to the Louisiana facility has been renewed on terms no less favorable to LCC
than the terms contained in the license in effect on the date hereof, except
that such renewal shall be for a term specified under applicable Louisiana law
as in effect on the date of such renewal (it being understood and agreed that
such license renewal may be subject to certain conditions as provided by Law,
including without limitation, suitability investigations of one or more
directors, officers and key employees of the Surviving Corporations and/or LCC).
(i) Business Plan. CRC shall have delivered to JEI a business plan,
acceptable to JEI, related to the Acquired Businesses, which, upon
implementation, would result in a permanent reduction of cash expenses of the
Acquired Businesses of at least $2 million per annum without a Material Adverse
Effect on the Acquired Businesses taken as a whole.
(j) Indemnification Agreement. Except for Dissenting Holders, each
of the stockholders of CRC set forth on Schedule 5.02(j) shall enter into an
indemnification agreement with JEI in the form attached hereto as Exhibit
5.02(j) ("Indemnification Agreement").
(k) Lockup Agreements. The recipients of the Share Merger
Consideration shall enter into the Registration Rights and Lockup Agreement with
JEI in the form attached hereto to as Exhibit 5.02(k).
(l) Opinion of CRC's Counsel. On the Closing Date, JEI shall
have received an opinion of special Florida counsel for CRC (who shall be
reasonably acceptable to JEI and shall not be an employee of CRC), dated as of
such date, addressed to JEI in form and substance reasonably satisfactory to JEI
regarding various customary corporate matters and JEI shall have received an
opinion of Xxxxx Xxxxx, Esq., CRC's General Counsel (or such other counsel to
CRC, who may be an employee of CRC), regarding information furnished by CRC to
JEI for use in the Joint Proxy Statement and Registration Statement.
(m) Tax Sharing Agreement. CRC and Spinco shall have entered
into the Tax Sharing Agreement in the form attached hereto as Exhibit 5.02(m)
("Tax Sharing Agreement").
5.03 Conditions to Obligation of CRC to Effect the Merger.
The obligation of CRC to effect the Merger is further subject to the
fulfillment, at or prior to the Closing, of each of the following additional
conditions (all or any of which may be waived in whole or in part by CRC in its
sole discretion):
(a) Representations and Warranties. The representations and
warranties made by JEI in this Agreement that are qualified as to materiality
shall be true and correct and such representations and warranties that are not
so qualified shall be true and correct in all material respects as of the
Closing Date as though made on and as of the Closing Date or, in the case of
representations and warranties made as of a specified date earlier than the
Closing Date, on and as of such earlier date, and JEI shall have delivered to
CRC a certificate, dated the Closing Date and executed on behalf of JEI by its
Chairman of the Board or President to such effect.
(b) Performance of Obligations. JEI shall have performed and
complied with, in all material respects, each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by JEI at or
prior to the Closing, and JEI shall have delivered to CRC a certificate, dated
the Closing Date and executed on behalf of JEI by its Chairman of the Board or
President to such effect.
(c) Other Closing Documents. JEI shall have delivered to CRC
at or prior to the Effective Time such other documents as CRC may reasonably
request in order to enable CRC to determine whether the conditions to its
obligations under this Agreement have been met and otherwise to carry out the
provisions of this Agreement.
(d) No Governmental Action. There shall not have been any action
taken, or any Law or Order proposed, promulgated, enacted, entered, enforced, or
deemed applicable to the transactions contemplated by this Agreement by any
Governmental or Regulatory Authority (excluding any CRC Gaming Authority or JEI
Gaming Authority), including the entry of a preliminary or permanent injunction.
which, in the reasonable judgment of CRC, materially impairs the contemplated
benefits to CRC and the stockholders of CRC of this Agreement, the Merger, or
any of the other transactions contemplated by this Agreement.
(e) Registration Rights Agreement. At the Effective Time, JEI shall
have entered into the Registration Rights and Lockup Agreement with the
recipients of the Share Merger Consideration in the form attached hereto as
Exhibit 5.02(k).
(f) Material Adverse Change. There shall not have been a Material
Adverse Change in JEI since September 30, 1998.
(g) Tax Opinion. CRC shall have received at the Effective Time
an opinion of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, special counsel to CRC,
to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code (or, if the parties elect to restructure
the transaction as contemplated by Section 1.08 of this Agreement, to the effect
that the Merger constitutes a transaction to which Section 351 of the Code
applies).
(h) Opinion of JEI's Counsel. CRC and Carnival shall each have
received on the Closing Date an opinion of Camhy Xxxxxxxxx & Xxxxx LLP, counsel
for JEI, dated as of such date, addressed to CRC and Carnival (except with
respect to the information in the Joint Proxy Statement and Registration
Statement) in form and substance reasonably satisfactory to CRC regarding
customary corporate matters, enforceability of the JEI Assignable Notes and the
JEI Note and certain information set forth in the Joint Proxy Statement and
Registration Statement.
VI. TERMINATION.
6.01 Termination.
This Agreement may be terminated, and the transactions contemplated
hereby may be abandoned, at any time prior to the Effective Time, whether prior
to or after the CRC Stockholders' Approval or the JEI Stockholders' Approval:
(a) by mutual written agreement of the parties hereto duly authorized
by action taken by or on behalf of their respective Boards of Directors; or
(b) by either CRC or JEI upon written notification to the
non-terminating party by the terminating party:
(i) at any time after December 31, 1999 if the Merger
shall not have been consummated on or prior to such date and such failure to
consummate the Merger is not caused by a breach of this Agreement by the
terminating party;
(ii) if the JEI Stockholders' Approval shall not be
obtained on or before December 31, 1999 by reason of the failure to obtain
the requisite vote upon a vote held at a meeting of such stockholders, or any
adjournment thereof, called therefor; or
(iii) if facts exist which render impossible the
satisfaction of one or more of the conditions set forth in Section 5.01 and
such are not waived by CRC and JEI; provided that Section 5.01(f) is not
subject to waiver by either CRC or JEI.
(c) by CRC upon written notification to JEI, if:
(i) there has been a material breach of any
representation, warranty, covenant or agreement on the part of JEI set forth
in this Agreement which breach has not been cured within ten (10) business
days following receipt by JEI of notice of such breach from CRC or assurance
of such cure reasonably satisfactory to CRC shall not have been given by or
on behalf of JEI within such ten (10) business day period; or
(ii) facts exist which render impossible the satisfaction
of one or more of the conditions set forth in Section 5.03 and such are not
waived by CRC.
(d) by JEI, upon written notification to CRC, if:
(i) there has been a material breach of any
representation, warranty, covenant or agreement on the part of CRC set forth
in this Agreement which breach has not been cured within ten (10) business
days following receipt by CRC of notice of such breach from JEI or assurance
of such cure reasonably satisfactory to JEI shall not have been given by or
on behalf of CRC within such ten (10) business day period; or
(ii) stockholders of CRC who own more than 10% of the
issued and outstanding CRC Common Stock in the aggregate have dissented from
the Merger pursuant to Florida law; or
(iii) facts exists which render impossible the
satisfaction of one or more of the conditions set forth in Section 5.02 and
such are not waived by JEI.
6.02 Effect of Termination.
If this Agreement is validly terminated by either CRC or JEI pursuant
to Section 6.01;
(a) This Agreement shall forthwith become null and void and there
shall be no liability or obligation on the part of either CRC or JEI (or any of
their respective officers, directors, representatives or affiliates), except
that (i) the provisions of this Section 6.02, and the CRC Confidentiality
Agreement and the JEI Confidentiality Agreement (collectively, the
"Confidentiality Agreements"), will continue to apply following any such
termination, and (ii) nothing contained herein shall relieve CRC or JEI from
liability to the extent that such termination results from the wilful or grossly
negligent and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement or in the
Confidentiality Agreement, in which case the other party shall be entitled to
recover all damages allowable at law and all relief available in equity.
(b) Subject to paragraph (a) of this Section 6.02 above and Section
2.02(c)(ii), and except as provided in paragraph (c) of this Section 6.02 below,
each of JEI and CRC shall pay and bear its own fees and expenses incident to the
negotiation, preparation, and execution of this Agreement, its meeting of
stockholders and the transactions contemplated by this Agreement, including fees
and expenses of its counsel, accountants, investment banking firms, and other
experts; provided, however, that JEI and CRC shall each pay and bear 50% of all
printing costs, including the cost of printing this Agreement, the Proxy
Statement, the Registration Statement, and any amendment or supplement thereto.
(c) In the event CRC or JEI terminates this Agreement pursuant
to Section 6.01(b)(ii), JEI shall pay to CRC all of CRC's actual out-of-pocket,
reasonably documented expenses, plus $1,000,000.
VII. MISCELLANEOUS.
7.01 Further Actions.
Each party hereto will execute such further documents and instruments
and take such further actions as may reasonably be requested by the other party
to consummate the Merger, to vest the Surviving Corporation with full title to
all assets, properties, rights, approvals, immunities, and franchises of either
of the Constituent Corporations or to effect the other purposes of this
Agreement.
7.02 Availability of Equitable Remedies.
Since a breach of the provisions of this Agreement could not
adequately be compensated by money damages, any party shall be entitled, either
before or after the Effective Time, in addition to any other right or remedy
available to it, to an injunction restraining such breach or threatened breach
and to specific performance of any such provision of this Agreement, and, in
either case, no bond or other security shall be required in connection
therewith, and the parties hereby consent to the issuance of such an injunction
and to the ordering of specific performance.
7.03 Survival of Representations, Warranties, Etc.
All representations and warranties in this Agreement shall terminate
as of the Effective Time. This Section 7.03 shall not limit any covenant or
agreement set forth herein which by its terms contemplates performance after the
Effective Time.
7.04 Modification.
This Agreement may be amended, supplemented or modified by action
taken by or on behalf of the respective Board of Directors of each of the
parties hereto at any time prior to the Effective Time, whether prior to or
after adoption of this Agreement at the CRC Stockholders' Meeting or at the JEI
Stockholders' Meeting, but after such adoption and approval only to the extent
permitted by applicable law. No such amendment, supplement or modification shall
be effective unless set forth in a written instrument duly executed by or on
behalf of each party hereto. Notwithstanding the foregoing, no amendment,
supplement or modification to this Agreement which would have an adverse effect
on Carnival shall be made without the written consent of Carnival.
7.05 Notices.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested or by Federal Express, express mail, or similar overnight
delivery or courier service or delivered (in person or by telecopy, telex, or
similar telecommunications equipment) against receipt to the party to which it
is to be given at the address of such party set forth in the preamble to this
Agreement (or to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 7.05), provided that, from and
after the Closing Date, notices to CRC shall be given to Spinco at the address
given in the preamble for CRC, with copies as follows:
If to JEI:
Camhy Xxxxxxxxx & Xxxxx LLP
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxx X. Annex, Esq.
Fax No.: (000) 000-0000
If to CRC:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxxxx, Esq.
Fax No.: (000) 000-0000
Any notice shall be addressed to the attention of the Chairman. Any notice or
other communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which will
be deemed given at the time of receipt thereof. Any notice given by other means
permitted by this Section 7.05 shall be deemed given at the time of receipt
thereof.
7.06 Waiver.
Any waiver by any party of a breach of any term of this Agreement
shall not operate as or be construed to be a waiver of any other breach of that
term or of any breach of any other term of this Agreement. The failure of a
party to insist upon strict adherence to any term of this Agreement on one or
more occasions will not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing and be authorized by a
resolution of the Board of Directors or by an officer of the waiving party.
7.07 Binding Effect.
The provisions of this Agreement shall be binding upon and inure to
the benefit of JEI and CRC and their respective successors and assigns.
7.08 No Third-Party Beneficiaries.
This Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person not a party to this Agreement,
except for the CRC stockholders and the holders of CRC Options with respect to
Section 2.01, the Indemnified Parties with respect to Section 3.06 and Carnival
with respect to the last sentence of Section 7.04.
7.09 Severability.
If any provision of this Agreement is hereafter held to be invalid,
illegal, or unenforceable for any reason, such provision shall be reformed to
the maximum extent permitted so as to preserve the parties' original intent,
failing which, it shall be severed from this Agreement, with the balance of this
Agreement continuing in full force and effect. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable. If any provision is inapplicable to any
person or circumstance, it shall nevertheless remain applicable to all other
persons and circumstances.
7.10 Headings.
The headings in this Agreement are solely for convenience of reference
and shall be given no effect in the construction or interpretation of this
Agreement.
7.11 Counterparts; Governing Law.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. It shall be governed by, and construed in
accordance with, the laws of the State of Nevada, without giving effect to the
rules governing conflict of laws. Any action, suit, or proceeding arising out
of, based on, or in connection with this Agreement, any document relating hereto
or delivered in connection with the transactions contemplated hereby, any
statement, certificate, or other instrument delivered by or on behalf of, or
delivered to, any party hereto or thereto in connection with the transactions
contemplated hereby or thereby, any breach of this Agreement or such other
document, the Merger, or the other transactions contemplated hereby or thereby
may be brought only in the United States District Court for the District of
Nevada and each party covenants and agrees not to assert, by way of motion, as a
defense, or otherwise, in any such action, suit, or proceeding, any claim that
it is not subject personally to the jurisdiction of such court if it has been
duly served with process, that its property is exempt or immune from attachment
or execution, that the action, suit, or proceeding is brought in an inconvenient
forum, that the venue of the action, suit, or proceeding is improper, or that
this Agreement or the subject matter hereof may not be enforced in or by such
court.
VIII. CROSS REFERENCES
8.01 Cross References for Defined Terms..
Definitions for the following defined terms can be found as follows:
"Acquired Businesses" shall have the meaning set forth in the first "Whereas"
clause;
"Affiliates" shall have the meaning set forth in Section 2.04;
"Affiliates Agreement" shall have the meaning set forth in Section 2.04;
"Affiliates Letter" shall have the meaning set forth in Section 2.04;
"Agreement" shall have the meaning set forth in the Preamble;
"Audit" shall have the meaning set forth in Section 4.01(l);
"Benefit Obligation" shall have the meaning set forth in Section 4.01(n)(i);
"Budget" shall have the meaning set forth in Section 3.01(e)(iii);
"Carnival" shall have the meaning set forth in Section 2.01(b);
"CCL Notes" shall have the meaning set forth in Section 2.01(b);
"Closing" shall have the meaning set forth in Section 1.04;
"Closing Date" shall have the meaning set forth in Section 1.04;
"Code" shall have the meaning set forth in the fifth "Whereas" clause;
"Compliance Committee" shall have the meaning set forth in Section 4.02(c);
"Confidentiality Agreements" shall have the meaning set forth in Section
6.02(a);
"Constituent Corporations" shall have the meaning set forth in the Preamble;
"Contracts" shall have the meaning set forth in Section 4.01(d)(i);
"Contribution" shall have the meaning set forth in Section 1.02;
"CRC" shall have the meaning set forth in the Preamble;
"CRC Acquired Subsidiaries" shall have the meaning set forth in Section 4.01(a);
"CRC Benefit Obligations" shall have the meaning set forth in Section
4.01(n)(i);
"CRC Common Stock" shall have the meaning set forth in Section 2.01(a);
"CRC Confidentiality Agreement" shall have the meaning set forth in Section
3.01(d);
"CRC Employee Benefit Plans" shall have the meaning set forth in Section
4.01(n)(i);
"CRC Financial Statements" shall have the meaning set forth in Section
4.01(e)(i);
"CRC Gaming Authority" shall have the meaning set forth in Section 4.01(d)(ii);
"CRC Gaming Laws" shall have the meaning set forth in Section 4.01(j);
"CRC Material Contracts" shall have the meaning set forth in Section 4.01(x);
"CRC Merger Proposal" shall have the meaning set forth in Section 3.04(b);
"CRC Options" shall have the meaning set forth in Section 2.03(a);
"CRC Pension Plans" shall have the meaning set forth in Section 4.01(n)(i);
"CRC Permits" shall have the meaning set forth in Section 4.01(j);
"CRC Preferred Stock" shall have the meaning set forth in Section 4.01(b);
"CRC Stockholders Agreement" shall have the meaning set forth in the third
"Whereas" clause;
"CRC Stockholders' Approval" shall have the meaning set forth in Section
3.04(b);
"CRC Stockholders' Meeting" shall have the meaning set forth in Section 3.04(b);
"Dissenting Holder" shall have the meaning set forth in Section 2.01(c);
"Dissenting Shares" shall have the meaning set forth in Section 2.05;
"Diverted Asset Amount" shall have the meaning set forth in Section
2.02(c)(i)(A);
'Due to CRC Line Items" shall have the meaning set forth in Section
2.02(a)(iii);
"Effective Time" shall have the meaning set forth in Section 1.03;
"Employee Benefit Plan" shall have the meaning set forth in Section 4.01(n)(i);
"Environmental Permits" shall have the meaning set forth in Section
4.01(m)(iii);
"ERISA" shall have the meaning set forth in Section 4.01(n)(i);
"Excess Expenses" shall have the meaning set forth in Section 2.02(c)(ii)(A);
"Exchange Act" shall have the meaning set forth in Section 3.01(h);
"FBCA" shall have the meaning set forth in Section 1.01;
"Florida Articles" shall have the meaning set forth in Section 1.03;
"GAAP" shall have the meaning set forth in Section 2.02(a)(i);
"Governmental or Regulatory Authority" shall have the meaning set forth in
Section 4.01(d)(i);
"Hazardous Material" shall have the meaning set forth in Section 4.01(m)(i);
"Hazardous Materials Activities" shall have the meaning set forth in Section
4.01(m)(ii);
"HSR Act" shall have the meaning set forth in Section 3.05;
"Indemnified Liabilities" shall have the meaning set forth in Section 3.06(a);
"Indemnified Parties" shall have the meaning set forth in Section 3.06(a);
"Initial November 30 Balance Sheet" shall have the meaning set forth in Section
2.02(a)(i);
"Intangibles" shall have the meaning set forth in Section 4.01(o);
"IRS" shall have the meaning set forth in Section 4.01(n)(i);
"JEI" shall have the meaning set forth in the Preamble;
"JEI Assignable Notes" shall have the meaning set forth in Section 2.01(b);
"JEI Benefit Obligations" shall have the meaning set forth in Section
4.01(n)(i);
"JEI Common Stock" shall have the meaning set forth in Section 2.01(a);
"JEI Confidentiality Agreement" shall have the meaning set forth in Section
3.02(c);
"JEI Employee Benefit Plans" shall have the meaning set forth in Section
4.01(n)(i);
"JEI Financial Statements" shall have the meaning set forth in Section 4.02(e);
"JEI Gaming Authority" shall have the meaning set forth in Section 4.02(d)(ii);
"JEI Gaming Laws" shall have the meaning set forth in Section 4.02(l);
"JEI Material Contracts" shall have the meaning set forth in Section 4.02(v);
"JEI Merger Proposal" shall have the meaning set forth in Section 3.04(a);
"JEI Note" shall have the meaning set forth in Section 2.01(c)(i);
"JEI Options" shall have the meaning set forth in Section 4.02(b)(i);
"JEI Pension Plans" shall have the meaning set forth in Section 4.01(n)(i);
"JEI Permits" shall have the meaning set forth in Section 4.02(l);
"JEI Preferred Stock" shall have the meaning set forth in Section 4.02(b)(i);
"JEI SEC Reports" shall have the meaning set forth in Section 4.02(e);
"JEI Stockholders Agreement" shall have the meaning set forth in the fourth
"Whereas" clause;
"JEI Stockholders' Approval" shall have the meaning set forth in Section
3.04(a);
"JEI Stockholders' Meeting" shall have the meaning set forth in Section 3.04(a);
"JEI Subsidiaries" shall have the meaning set forth in Section 3.02;
"Joint Proxy Statement" shall have the meaning set forth in Section 4.01(i);
"Laws" shall have the meaning set forth in Section 4.01(d)(i);
"LCC" shall have the meaning set forth in Section 2.02(a)(i);
"LCC Notes" shall have the meaning set forth in Section 5.02(k);
"LCC SEC Reports" shall have the meaning set forth in Section 4.01(e)(ii);
"Lien" shall have the meaning set forth in Section 3.01(e)(iv);
"Material Adverse Effect" shall have the meaning set forth in Section 4.01(a);
"Material Adverse Change in JEI" shall have the meaning set forth in Section
4.02(f);
"Material Adverse Change in the Acquired Businesses" shall have the meaning set
forth in Section 4.01(f);
"Merger" shall have the meaning set forth in the first "Whereas" clause;
"Merger Consideration" shall have the meaning set forth in Section 2.01(c)(i);
"Net Worth Deficit" shall have the meaning set forth in Section 2.02(a)(i)(A);
"Nevada Articles" shall have the meaning set forth in Section 1.03;
"NRS" shall have the meaning set forth in Section 1.01;
"144A Notes" shall have the meaning set forth in Section 2.01(b);
"Options" shall have the meaning set forth in Section 2.03(a);
"Option Transaction Value" shall have the meaning set forth in Section
2.03(b)(i);
"Orders" shall have the meaning set forth in Section 4.01(d)(i);
"Pension Plan" shall have the meaning set forth in Section 4.01(n)(i);
"Permitted Liens" shall have the meaning set forth in Section 4.01(f);
"Players" shall have the meaning set forth in Section 3.02(d);
"Players Merger" shall have the meaning set forth in Section 3.02(a);
"Players Merger Agreement" shall have the meaning set forth in Section 3.02(a);
"Pre-Closing Balance Sheet" shall have the meaning set forth in Section
2.02(c)(i);
"Pre-Closing Income Statement" shall have the meaning set forth in Section
2.02(c)(i);
"PWC" shall have the meaning set forth in Section 2.02(d)(i)(A);
"PWC Report" shall have the meaning set forth in Section 2.02(d)(i)(D);
"Registration Statement" shall have the meaning set forth in Section 3.03(a);
"Release Time" shall have the meaning set forth in Section 3.01;
"Reorganization Agreement" shall have the meaning set forth in the second
"Whereas" clause.
"SEC" shall have the meaning set forth in Section 3.03(a);
"Section 16 Affiliate" shall have the meaning set forth in Section 2.06;
"Securities Act" shall have the meaning set forth in Section 2.04;
"Share Merger Consideration" shall have the meaning set forth in Section
2.01(a);
"Spinco" shall have the meaning set forth in the second "Whereas" clause;
"Spinco Businesses" shall have the meaning set forth in the second "Whereas"
clause;
"Spinco Interests" shall have the meaning set forth in Section 1.02;
"Spinoff" shall have the meaning set forth in the second "Whereas" clause;
"Spinoff Tax Liability" shall have the meaning set forth in Section 2.02(d)(i);
"Stockholders' Meetings" shall have the meaning set forth in Section 3.04(b);
"Stock Plan" shall have the meaning set forth in Section 2.03(a);
"Stub Period Diverted Asset Amount" shall have the meaning set forth in Section
2.02(c)(i)(A);
"Surviving Corporation" shall have the meaning set forth in the Preamble;
"Tax" or "Taxes" shall have the meaning set forth in Section 4.01(l);
"Tax Attributes" shall have the meaning set forth in Section 2.02(d)(ii)(B);
"Tax Authority" shall have the meaning set forth in Section 4.01(l);
"Tax Returns" shall have the meaning set forth in Section 4.01(l);
"Tax Sharing Agreement" shall have the meaning set forth in Section 5.02(m);
"Updated November 30 Balance Sheet" shall have the meaning set forth in Section
2.02(a)(i);
"Withheld Shares" shall have the meaning set forth in Section 2.01(a).
IN WITNESS WHEREOF, this Agreement has been executed by duly
authorized officers of each of the parties hereto as of the date first above
written.
JACKPOT ENTERPRISES INC.
By /s/ Xxx X. Xxxxxxxxx
___________________________________________
Name: Xxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
Attest:
CRC HOLDINGS, INC.
By /s/ Xxxxxxxx X. Xxxxxx
___________________________________________
Name: Xxxxxxxx X. Xxxxxx
Title: Chariman and CEO
Attest:
