EXHIBIT 99.13
DISTRIBUTION AGREEMENT
BY AND BETWEEN
GRAND CASINOS, INC.
AND
LAKES GAMING, INC.
DATED AS OF DECEMBER 31, 1998
TABLE OF CONTENTS
PAGE
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ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.01. General. . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.02. Terms Defined Elsewhere in Agreement . . . . . . . . .13
ARTICLE II. TRANSFER OF ASSETS. . . . . . . . . . . . . . . . . . . . . . .14
Section 2.01. Transfer of Assets to Lakes. . . . . . . . . . . . . .14
Section 2.02. Transfers of Assets from Non-Mississippi Subsidiaries to
Company or Mississippi Subsidiaries. . . . . . . . . . . . . . . . .15
Section 2.03. Transfers Not Effected Prior to the Distribution . . .15
Section 2.04. Cooperation Re: Assets. . . . . . . . . . . . . . . .15
Section 2.05. No Representations or Warranties; Consents . . . . . .16
Section 2.06. Conveyancing and Assumption Instruments. . . . . . . .16
Section 2.07. Cash Allocations After the Year-End. . . . . . . . . .17
Section 2.08. Cash Allocation; Cash Management . . . . . . . . . . .17
Section 2.09. Allocation of Debt . . . . . . . . . . . . . . . . . .18
ARTICLE III. ASSUMPTION AND SATISFACTION OF LIABILITIES. . . . . . . . . . .19
Section 3.01. Assumption and Satisfaction of Mississippi Business and
Non-Mississippi Business Liabilities . . . . . . . . . . . . . . . .19
Section 3.02 Assumption and Satisfaction of Contingent Company
Liabilities and Transaction Liabilities. . . . . . . . . . . . . . .19
ARTICLE IV. THE DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . .19
Section 4.01. Cooperation Prior to the Distribution. . . . . . . . .19
Section 4.02. Company Board Action; Conditions Precedent to the
Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Section 4.03. The Distribution . . . . . . . . . . . . . . . . . . .21
ARTICLE V. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . .22
Section 5.01. Indemnification by Company . . . . . . . . . . . . . .22
Section 5.02. Indemnification by Lakes . . . . . . . . . . . . . . .22
Section 5.03. Insurance Proceeds . . . . . . . . . . . . . . . . . .22
Section 5.04. Procedure for Indemnification. . . . . . . . . . . . .23
Section 5.05. Remedies Cumulative. . . . . . . . . . . . . . . . . .26
Section 5.06. Survival of Indemnities. . . . . . . . . . . . . . . .26
ARTICLE VI. CERTAIN ADDITIONAL MATTERS . . . . . . . . . . . . . . . . . . . .26
Section 6.01. Lakes Board. . . . . . . . . . . . . . . . . . . . . .26
Section 6.02. Resignations; Company Board. . . . . . . . . . . . . .26
Section 6.03. Lakes Certificate and Bylaws . . . . . . . . . . . . .26
Section 6.04. Certain Post-Distribution Transactions . . . . . . . .26
Section 6.05. Sales and Transfer Taxes . . . . . . . . . . . . . . .27
Section 6.06. Settlement of Intercompany Accounts. . . . . . . . .27
ARTICLE VII. ACCESS TO INFORMATION AND SERVICES. . . . . . . . . . . . . . . .27
Section 7.01. Provision of Corporate Records . . . . . . . . . . . .27
Section 7.02. Access to Information. . . . . . . . . . . . . . . . .28
Section 7.03. Production of Witnesses. . . . . . . . . . . . . . . .28
Section 7.04. Corporate Services . . . . . . . . . . . . . . . . . .29
Section 7.06. Retention of Records . . . . . . . . . . . . . . . . .29
Section 7.07. Confidentiality. . . . . . . . . . . . . . . . . . . .29
Section 7.08. Privileged Matters . . . . . . . . . . . . . . . . . .30
ARTICLE VIII. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Section 8.01. Policies and Rights Included Within the Non-Mississippi
Group Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Section 8.02. Policies and Rights Included Within the Mississippi
Group Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Section 8.03. Administration and Reserves. . . . . . . . . . . . . .32
Section 8.04. Agreement for Waiver of Conflict and Shared Defense. .34
ARTICLE IX. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . .34
Section 9.01. Entire Agreement; No Third Party Beneficiaries . . . .34
Section 9.02. Tax Allocation and Indemnity Agreement; After-Tax
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Section 9.03. Expenses . . . . . . . . . . . . . . . . . . . . . . .35
Section 9.04. Governing Law. . . . . . . . . . . . . . . . . . . . .35
Section 9.05. Notices. . . . . . . . . . . . . . . . . . . . . . . .35
Section 9.06. Amendments . . . . . . . . . . . . . . . . . . . . . .35
Section 9.07. Assignments. . . . . . . . . . . . . . . . . . . . . .35
Section 9.08. Termination. . . . . . . . . . . . . . . . . . . . . .36
Section 9.09. Subsidiaries . . . . . . . . . . . . . . . . . . . . .36
Section 9.10. Specific Performance . . . . . . . . . . . . . . . . .36
Section 9.11. Headings; References . . . . . . . . . . . . . . . . .36
Section 9.12. Counterparts . . . . . . . . . . . . . . . . . . . . .36
Section 9.13. Severability; Enforcement. . . . . . . . . . . . . . .36
Section 9.14. Arbitration of Disputes. . . . . . . . . . . . . . . .37
Section 9.15. Prompt Payment . . . . . . . . . . . . . . . . . . . .38
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT (the "AGREEMENT"), dated as of December 31, 1998, by
and between GRAND CASINOS, INC., a Minnesota corporation ("COMPANY") and LAKES
GAMING, INC., a Minnesota corporation and wholly owned subsidiary of Company
("LAKES").
WHEREAS, Company, directly and through certain wholly-owned subsidiaries,
(a) owns, operates and develops certain gaming and resort facilities located in
the State of Mississippi (as more specifically described herein, the
"MISSISSIPPI BUSINESS"), and (b) manages and develops certain gaming facilities
located outside the State of Mississippi (as more specifically described herein,
the "NON-MISSISSIPPI BUSINESS");
WHEREAS, it is necessary to separate the Mississippi Business from the
Non-Mississippi Business in order to satisfy conditions precedent contained in
that certain Agreement and Plan of Merger dated June 30, 1998 (the "Merger
Agreement") by and among Company, Lakes, Hilton Hotels Corporation, a Delaware
corporation ("Hilton"), Gaming Co., Inc. (n/k/a Park Place Entertainment
Corporation), a Delaware corporation and a wholly-owned subsidiary of Hilton
("Gaming Co."), and Gaming Acquisition Corp., a Minnesota corporation and a
wholly-owned subsidiary of Gaming Co. ("MergerSub");
WHEREAS, the Board of Directors of Company has determined that it is in the
best interests of Company for Company to merge with MergerSub (the "Merger")
pursuant to the Merger Agreement;
WHEREAS, subject to Company shareholder ratification and certain other
conditions, the Board of Directors of Company has determined that it is in the
best interests of Company and the shareholders of Company to separate the
Non-Mississippi Business from the Mississippi Business through a distribution
(the "DISTRIBUTION") to the holders of Company Common Stock (as defined herein)
of all of the outstanding shares of Lakes Common Stock (as defined herein) to
accomplish the Merger;
WHEREAS, in order to effect such separation, Company will contribute to
Lakes prior to the Distribution, all of the operations, assets and liabilities
of Company comprising the Non-Mississippi Business and such other assets,
liabilities and operations as are described below;
WHEREAS, in connection with the Distribution, Company and Lakes have
determined that it is necessary and desirable to set forth the principal
corporate transactions required to effect the Distribution, and to set forth the
agreements that will govern certain matters following the Distribution; and
WHEREAS, for federal income tax purposes, it is intended that the
Distribution shall
qualify as a tax-free distribution solely with respect to Company's Shareholders
within the meaning of Section 355 of the Internal Revenue Code of 1986, as
amended.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements set forth below, the parties agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. GENERAL . For purposes of this Agreement, the following terms
shall have the meanings set forth below:
ACTION: Any action, claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
AFFILIATE: With respect to any specified Person, an affiliate of such
Person within the meaning of Rule 145 promulgated under the Securities Act.
Notwithstanding the foregoing (i) the Affiliates of Company shall not include
Lakes, the Non-Mississippi Subsidiaries or any other Person which otherwise
would be an Affiliate of Company solely by reason of Company's ownership of the
capital stock of Lakes or a Non-Mississippi Subsidiary prior to the Distribution
or the fact that any officer or director of Company or any of the Mississippi
Subsidiaries shall also serve as an officer or director of Lakes or any of the
Non-Mississippi Subsidiaries; and (ii) the Affiliates of Lakes shall not include
Company, the Mississippi Subsidiaries or any other Person which otherwise would
be an Affiliate of Lakes solely by reason of Company's ownership of the capital
stock of Lakes or a Non-Mississippi Subsidiary prior to the Distribution or the
fact that any officer or director of Lakes or any of the Non-Mississippi
Subsidiaries shall also serve as an officer or director of Company or any of the
Mississippi Subsidiaries.
AGENT: Norwest Shareholder Services as distribution agent appointed by
Company to distribute the Lakes Common Stock pursuant to the Distribution.
ANCILLARY AGREEMENTS: The License Agreement, Employee Benefits Allocation
Agreement, and Tax Allocation and Indemnity Agreement.
ASSIGNED LAKES ASSETS: The assets indicated on Schedule 5.
ASSIGNED LAKES ASSETS PROCEEDS: The net proceeds of the sales, if any, of
the Assigned Lakes Assets after the date of the Merger Agreement but prior to
the Distribution Date, after deducting any costs, fees and taxes (calculated
using the highest marginal Tax rate for the relevant taxable period) associated
with such sales, including, but not limited to, costs and fees related to
advertising, marketing and transportation and sales, transfer, income (if any)
and other taxes; PROVIDED, HOWEVER, if such sale results in a capital or
ordinary loss, then such loss shall also be allocated to Lakes along with the
subject Assigned Lakes Assets Proceeds.
ASSIGNED LAKES LIABILITIES: The liabilities indicated on Schedule 6.
ASSUMED DEBT: The Debt of Company and its Subsidiaries which is assumed by
Lakes and/or retained by the Non-Mississippi Group Subsidiaries in connection
with the Distribution, as determined pursuant to Section 2.09.
BANK OF AMERICA REVOLVING CREDIT FACILITY: The $100 million Capital Lease
Facility with BA Leasing Capital Corporation, et al. dated September 29, 1997.
CODE: The Internal Revenue Code of 1986, as amended, or any successor
thereto as in effect for the taxable year in question.
COMPANY BOARD: The Board of Directors of Company as it is constituted
prior to the Distribution Date.
COMPANY COMMON STOCK: The common stock, par value $.01 per share, of
Company.
COMPANY NOTES: The First Mortgage Notes and the Senior Notes.
COMPANY GROUP: The meaning specified in the Tax Allocation and Indemnity
Agreement.
CONTINGENT COMPANY LIABILITY: The meaning set forth in Section 3.02.
CONVEYANCING AND ASSUMPTION INSTRUMENTS: Collectively, the various
agreements, instruments and other documents to be entered into to effect the
Preliminary Transfers and the assignment of assets and the assumption of
Liabilities contemplated by this Agreement and the Related Agreements in the
manner contemplated herein and therein.
DEBT: All (i) indebtedness for borrowed money and obligations evidenced by
bonds, notes, debentures or similar instruments; (ii) obligations issued or
assumed as the deferred purchase price of property or services; (iii)
obligations under capital leases; and (iv) all guarantees of the obligations of
other persons described in the foregoing clauses (i) - (iii).
DISTRIBUTION: The distribution to the holders of Company Common Stock as of
the Distribution Record Date of all of the outstanding shares of Lakes Common
Stock.
DISTRIBUTION DATE: The date on which the Distribution is effected.
DISTRIBUTION RECORD DATE: The date established by Company Board as the date
for taking a record of the Holders of Company Common Stock entitled to
participate in the Distribution.
EMPLOYEE BENEFITS ALLOCATION AGREEMENT: The Employee Benefits and Other
Employment Matters Allocation Agreement between Lakes and Company, which
agreement shall be entered into on or prior to the Distribution Date in
substantially the form attached hereto as Exhibit A.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
FIRST MORTGAGE NOTES: The $450 million 10.125% First Mortgage Notes of
Company due December 1, 2003.
FORM 10: The Registration Statement on Form 10 under the Exchange Act with
respect to the Lakes Common Stock.
GAAP: Generally accepted accounting principles.
GAMING LAWS: Indian Gaming Laws, Louisiana Gaming Laws, Minnesota Gaming
Laws, Mississippi Gaming Laws, and Nevada Gaming Laws.
GAMING CO.: A Delaware corporation whose wholly-owned subsidiary,
MergerSub, will be merged with Company pursuant to the Merger Agreement.
GOVERNMENTAL AUTHORITY: Any court, administrative agency or commission or
other governmental authority or instrumentality.
HILTON: A Delaware corporation which is a party to the Merger Agreement.
HOLDERS: The holders of record of Company Common Stock as of the
Distribution Record Date.
INDIAN DEBT GUARANTEES: Shall mean (i) the guarantees of Company and Grand
Casinos of Louisiana, Inc. Tunica-Biloxi pursuant to the Guaranty Agreement,
dated as of August 7, 1994 in favor of Pitney ▇▇▇▇▇ Credit Corporation,
guaranteeing the debt obligations of the Tunica-Biloxi Tribe of Louisiana; (ii)
the guarantees of Company and Grand Casinos of Louisiana, Inc. - Coushatta
pursuant to the Guaranty Agreement, dated as of January 31, 1995 in favor of PB
Funding Corporation, guaranteeing the lease obligations of the Coushatta Tribe
of Louisiana; (iii) the guarantees of Company and Grand Casinos of Louisiana,
Inc. - Coushatta pursuant to the Guaranty Agreement, dated as of January 31,
1995 in favor of Sentry Financial Corporation, guaranteeing the lease
obligations of the Coushatta Tribe of Louisiana; (iv) the guarantees of Company
and Grand Casinos of Louisiana, Inc. - Tunica-Biloxi pursuant to the Commercial
Guaranty Agreement, dated as of April 7, 1997 in favor of Cottonport Bank,
guaranteeing the debt obligations of the Tunica-Biloxi Tribe of Louisiana; (v)
the guarantees of Company and Grand Casinos of Louisiana, Inc. - Coushatta
pursuant to the Commercial Guaranty Agreement, dated as of May 1, 1997 in favor
of Hibernia National Bank, guaranteeing the debt obligations of
the Coushatta Tribe of Louisiana; and (vi) any other guarantees under which
Company or any of its subsidiaries has guaranteed the debt or lease obligations
of any Indian Tribes.
INDIAN GAMING LAWS: Shall mean (i) the Indian Gaming Regulatory Act of 1988
and the rules and regulations promulgated thereunder; (ii) any state laws and
regulations governing gaming operations and facilities on Indian land; and (iii)
any tribal ordinances and regulations governing gaming on land within such
tribe's jurisdiction.
INDIAN MANAGEMENT AGREEMENTS: shall mean the management agreements and
related collateral and other agreements of the Indian tribes, or of Company or
any of its Subsidiaries, relating to (i) Grand Casino Avoyelles; (ii) Grand
Casino Coushatta; (iii) Grand Casino Hinckley; and (iv) any other Indian gaming
operations.
INSURANCE ADMINISTRATION: With respect to each Policy (including Self
Insurance Programs) shall include, but not be limited to, the accounting for
premiums, retrospectively rated premiums, defense costs, adjuster's fees,
indemnity payments, deductibles and retentions as appropriate under the terms
and conditions of each of the Policies; and the reporting to primary and excess
insurance carriers of any losses, claims and/or audit exposure in accordance
with Policy provisions, and the distribution of Insurance Proceeds as
contemplated by this Agreement.
INSURANCE PROCEEDS: Those moneys (i) received by an insured from an
insurance carrier or (ii) paid by an insurance carrier on behalf of the insured,
in either case net of any applicable premium adjustment, retrospectively rated
premium, deductible, retention, cost or reserve paid or held by or for the
benefit of such insured.
INSURANCE RECEIVABLE AGREEMENT: The Insurance Receivable Agreement between
the Company and Lakes which shall be entered into on or prior to the
Distribution Date in substantially the form attached hereto as Exhibit E.
INSURED CLAIMS: Those Liabilities that, individually or in the aggregate,
are covered within the terms and conditions of any of the Policies, whether or
not subject to deductibles, co-insurance, uncollectibility or retrospectively
rated premium adjustments, but only to the extent that such Liabilities are
within applicable Policy limits, including aggregates.
IRS: The Internal Revenue Service or any successor thereto, including but
not limited to its agents, representatives and attorneys.
IRS RULING: The letter ruling issued by the IRS in response to the Ruling
Request.
LAKES BOARD: The Board of Directors of Lakes.
LAKES BYLAWS: The Bylaws of Lakes, substantially in the form of Exhibit B,
to be in effect at the Distribution Date.
LAKES ARTICLES OF INCORPORATION: The Articles of Incorporation of Lakes,
substantially in the form of Exhibit C, to be in effect at the Distribution
Date.
LAKES COMMON STOCK: The common stock, $.01 par value per share, of Lakes.
LAKES GROUP: The meaning specified in the Tax Allocation and Indemnity
Agreement.
LIABILITIES: Any and all debts, liabilities and obligations, absolute or
contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, including all costs and expenses
relating thereto, and including, without limitation, those debts, liabilities
and obligations arising under any law, rule, regulation, Action, threatened
Action, order or consent decree of any governmental entity or any award of any
arbitrator of any kind, and those arising under any contract, commitment or
undertaking.
LICENSE AGREEMENT: The Intellectual Property License Agreement between
Company and Lakes, which agreement shall be entered into on or prior to the
Distribution Date with substantially such terms as are attached hereto as
Exhibit D.
LOUISIANA GAMING LAWS: The Louisiana Riverboat Economic Development and
Gaming Control Act and the rules and regulations promulgated thereunder.
LOUISIANA GAMING LICENSE: The Company's license to manage Louisiana-based
casinos issued pursuant to Louisiana Gaming Laws.
MBCA: shall mean the Minnesota Business Corporation Act, as amended from
time to time.
MINNESOTA GAMING LAWS: shall mean the Minnesota Lawful Gambling and
Gambling Devices Act and the rules and regulations promulgated thereunder.
MISSISSIPPI BUSINESS: The business conducted by Company and its
Subsidiaries relating to the management, ownership, operation and development of
all of Company's casinos, hotels, related facilities and all other operations
located within the State of Mississippi, including the Grand Casino Tunica,
Grand Casino Biloxi and Grand Casino Gulfport properties and any operations
located outside the State of Mississippi which relate to the Mississippi Group
Assets.
MISSISSIPPI GAMING LAWS: shall mean the Mississippi Gaming Control Act and
the rules and regulations promulgated thereunder.
MISSISSIPPI GROUP: Company and the Mississippi Subsidiaries, collectively.
MISSISSIPPI GROUP EMPLOYEES: The meaning specified in the Employee
Benefits Allocation Agreement.
MISSISSIPPI GROUP ASSETS: (i) All outstanding capital stock of the
Mississippi Subsidiaries and all assets of the Mississippi Subsidiaries other
than the Non-Mississippi Group Assets; (ii) all cash or cash equivalents
generated or derived from the sale or disposition of Mississippi Group Assets
prior to the Distribution Date; (iii) the Mississippi Group Books and Records;
(iv) the rights of Company and the Mississippi Subsidiaries insured under the
Shared Policies; (v) all of the assets expressly to be retained by, or assigned
or allotted to, Company or any of the Mississippi Subsidiaries under this
Agreement or the Related Agreements; (vi) the Retained Company Assets ; and
(vii) any other assets of Company and its Subsidiaries used principally in the
Mississippi Business; except, in each case, excluding the assets listed on
Schedule 5.
MISSISSIPPI GROUP BOOKS AND RECORDS: The books and records (including
computerized records) of Company and the Mississippi Subsidiaries and any other
books and records of Company's Subsidiaries which relate principally to the
Mississippi Group, are necessary to conduct the Mississippi Business or are
required by law to be retained by Company or a Mississippi Subsidiary,
including, without limitation: (i) all such books and records relating to
Company Employees; (ii) all files relating to any Action being retained by
Company as part of the Mississippi Group Liabilities; and (iii) original
corporate minute books, stock ledgers and certificates and corporate seals, and
all licenses, leases, agreements and filings, relating to Company, the
Mississippi Subsidiaries or the Mississippi Business (but not including the
Non-Mississippi Group Books and Records, provided that Company shall have access
to, and shall have the right to obtain duplicate copies of, the Non-Mississippi
Group Books and Records in accordance with the provisions of Article VII).
MISSISSIPPI GROUP CASH ACCOUNTS: The bank accounts of the Mississippi Group
as set forth in Schedule 8 hereto.
MISSISSIPPI GROUP LIABILITIES: (i) All of the Liabilities of the
Mississippi Group under, or to be retained or assumed by Company or any of the
Mississippi Subsidiaries pursuant to, this Agreement (including Company's
portion of Contingent Company Liabilities and Transaction Liabilities as
provided in Section 3.02 herein) or any of the Related Agreements; (ii) all
Liabilities for payment of outstanding drafts of Company and its Subsidiaries
existing as of the Distribution Date; (iii) the Retained Debt; (iv) all
Liabilities of the Mississippi Subsidiaries, other than the Non-Mississippi
Group Liabilities; (v) all Actions against Company or its Subsidiaries arising
out of, or specifically associated with, any of the Mississippi Group Assets or
the Mississippi Business; (vi) the Retained Company Liabilities indicated on
Schedule 4; and (vii) all other Liabilities of Company and its Subsidiaries
arising out of, or specifically associated with, any of the Mississippi Group
Assets or the Mississippi Business; PROVIDED, HOWEVER, that the Mississippi
Group Liabilities shall not include (1) the Assumed Debt or (2) any claims,
losses, damages, demands, costs, expenses or Liabilities for any Tax (which
shall be governed by Sections 6.05 and 9.02 hereof and by the Tax Allocation and
Indemnity Agreement).
MISSISSIPPI SUBSIDIARIES: The Subsidiaries of Company specified in Schedule
1 and any other Subsidiaries formed after the date hereof to conduct a portion
of the Mississippi Business.
NEVADA GAMING LAWS: shall mean the Nevada Gaming Control Act and the rules
and regulations promulgated thereunder, the ▇▇▇▇▇ County, Nevada Code and the
rules and regulations promulgated thereunder, and other applicable local
regulations.
NET CASH: The sum of (i) net cash (used in) or provided by financing
activities; (ii) net cash (used in) or provided by operating activities; and
(iii) net cash (used in) or provided by investing activities.
NON-MISSISSIPPI BUSINESS: The business conducted by Company and its
Subsidiaries relating to the management, ownership, operation and development of
all Company's casinos, hotels, related facilities and all other operations
located outside the State of Mississippi which relate to the Non-Mississippi
Group Assets.
NON-MISSISSIPPI GROUP: Lakes and the Non-Mississippi Subsidiaries,
collectively.
NON-MISSISSIPPI GROUP ASSETS: (i) All outstanding capital stock of the
Non-Mississippi Subsidiaries; (ii) the Assigned Lakes Assets, to the extent in
existence on the Distribution Date; (iii) the Non-Mississippi Group Books and
Records; (iv) the rights of a Non-Mississippi Subsidiary insured under the
Shared Policies; (v) all of the assets expressly to be retained by, or assigned
or allocated to, Lakes or any of the Non-Mississippi Subsidiaries under this
Agreement or the Related Agreements; (vi) the Assigned Lakes Assets Proceeds;
and (vii) any other assets of Company and its Subsidiaries used principally in
the Non-Mississippi Business ; except, in each case excluding the assets
included on Schedule 3.
NON-MISSISSIPPI GROUP BOOKS AND RECORDS: The books and records (including
computerized records) of Lakes and the Non-Mississippi Subsidiaries and any
other books and records of Company and its Subsidiaries which relate principally
to the Non-Mississippi Group, are necessary to conduct the Non-Mississippi
Business, or are required by law to be retained by Lakes or a Non-Mississippi
Subsidiary, including, without limitation: (i) all such books and records
relating to Transferred Employees; (ii) all files relating to any Action being
assumed by Lakes or retained by a Non-Mississippi Subsidiary as part of the
Non-Mississippi Group Liabilities; and (iii) original corporate minute books,
stock ledgers and certificates, and all licenses, leases, agreements and
filings, relating to Lakes, the Non-Mississippi Subsidiaries or the
Non-Mississippi Business (but not including the Mississippi Group Books and
Records, provided that Lakes shall have access to, and have the right to obtain
duplicate copies of, any of the Mississippi Group Books and Records which
pertain to the Non-Mississippi Business in accordance with the provisions of
Article VII).
NON-MISSISSIPPI GROUP CASH ACCOUNTS: The bank accounts of Non-Mississippi
Group as
set forth in Schedule 9 hereto.
NON-MISSISSIPPI GROUP LIABILITIES: (i) All of the Liabilities of the
Non-Mississippi Group under, or to be retained or assumed by Lakes or any of the
Non-Mississippi Subsidiaries pursuant to, this Agreement (including Lakes'
portion of Contingent Company Liabilities and Transaction Liabilities as
provided in Section 3.02 herein) or any of the Related Agreements (including the
Assumed Debt); (ii) the Stratosphere Liabilities; (iii) all Liabilities of Lakes
and the Non-Mississippi Subsidiaries, other than the Mississippi Group
Liabilities; (iv) all Actions against Company or its Subsidiaries arising out
of, or specifically associated with, any of the Non-Mississippi Group Assets or
the Non-Mississippi Business; (v) the Indian Debt Guarantees; (vi) all other
Liabilities of Company and its Subsidiaries arising out of, or specifically
associated with, any of the Non-Mississippi Group Assets or the Non-Mississippi
Business (including Debt secured by the Non-Mississippi Group Assets); and (vii)
the Assigned Lakes Liabilities indicated on Schedule 6; PROVIDED, HOWEVER, that
the Non-Mississippi Group Liabilities shall not include (x) any Retained Debt,
or (y) any claims, losses, damages, demands, costs, expenses or Liabilities for
any Tax (which shall be governed by Sections 6.05 and 9.02 hereof and by the Tax
Allocation and Indemnity Agreement).
NON-MISSISSIPPI SUBSIDIARIES: The Subsidiaries of Company specified in
Schedule 2 and any other Subsidiaries formed after the date hereof to conduct a
portion of the Non-Mississippi Business.
NON-MISSISSIPPI SUBSIDIARIES NOTE GUARANTEES: The guarantees of the
Non-Mississippi Subsidiaries of Company Notes and the Bank of America Revolving
Credit Facility.
NON-MISSISSIPPI SUBSIDIARIES NOTE PLEDGE: The pledge of the outstanding
capital stock of the Non-Mississippi Subsidiaries pursuant to Grand Casinos,
Inc. Security and Pledge Agreement dated November 30, 1995 by Grand Casinos,
Inc. in favor of American Bank National Association (n/k/a Firstar Bank of
Minnesota, National Association) and Grand Casinos Resorts, Inc. Security and
Pledge Agreement dated November 30, 1995 by Grand Casinos Resorts, Inc. in favor
of American Bank National Association (n/k/a Firstar Bank of Minnesota, National
Association) relating to the Notes.
PERSON: Any individual, corporation, partnership, firm, joint venture,
association, joint-stock company, trust, estate, unincorporated organization,
governmental or regulatory body or other entity.
POLICIES: Insurance policies and insurance contracts of any kind relating
to the Non-Mississippi Business or the Mississippi Business as conducted prior
to the Distribution Date, including without limitation primary and excess
policies, comprehensive general liability policies, automobile, aircraft,
workers' compensation, property insurance, crime insurance policies and
self-insurance and captive insurance company arrangements, together with the
rights and benefits thereunder.
PRELIMINARY TRANSFERS: The contribution by Company and its Subsidiaries to
Lakes and the Non-Mississippi Subsidiaries, prior to the Distribution, of all of
the assets and liabilities of Company and its Subsidiaries comprising the
Non-Mississippi Business and such other assets, liabilities and operations as
are described herein.
PRIVILEGED INFORMATION: All information as to which Company, Lakes or any
of their Subsidiaries are entitled to assert the protection of a Privilege.
PRIVILEGES: All privileges that may be asserted under applicable law
including, without limitation, privileges arising under or relating to the
attorney-client relationship (including but not limited to the attorney-client
and work product privileges), the accountant-client privilege, and privileges
relating to internal evaluative processes.
RELATED AGREEMENTS: All of the agreements, instruments, understandings,
assignments or other arrangements set forth in writing, which are entered into
in connection with the transactions contemplated hereby, including, without
limitation, the Conveyancing and Assumption Instruments and the Ancillary
Agreements.
RESTRICTED PAYMENT: (i) the declaration or payment of any dividend or any
distribution on account of Lakes' or any of its Subsidiaries' equity interests;
or (ii) the purchase, redemption, defeasance or other acquisition or retirement
for value of any equity interests of Lakes, without the written consent of
Company, which consent can be given or withheld in Company's sole and absolute
discretion.
RETAINED COMPANY ASSETS: The assets indicated in Schedule 3.
RETAINED COMPANY LIABILITIES: The liabilities indicated on Schedule 4.
RETAINED DEBT: The Debt of Company and its Subsidiaries which is to be
retained by Company and/or the Mississippi Group Subsidiaries in connection with
the Distribution, as determined pursuant to Section 2.09 and not otherwise
assigned by or transferred to the Non-Mississippi Group.
RULING REQUEST: The private letter ruling request to be filed by Company
with the Internal Revenue Service as supplemented and amended from time to time,
with respect to certain tax matters relating to the Distribution, the Merger and
other related matters.
SEC: The Securities and Exchange Commission.
SECURITIES ACT: The Securities Act of 1933, as amended.
SELF INSURANCE PROGRAMS: Those self insured programs maintained by Company
and/or
any of its Subsidiaries prior to the Distribution for the benefit of employees,
properties and operating businesses, including without limitation such programs
that utilize "fronted policies."
SENIOR NOTES: The $115 million 9% Series B Notes of Company due 2004.
SHARED POLICIES: All Policies (including Self Insurance Programs), current
or past, which are owned or maintained by or on behalf of Company and/or any of
its Subsidiaries or their respective predecessors which insure both the
Mississippi Business and the Non-Mississippi Business.
STRATOSPHERE: Shall mean Stratosphere Corporation and any of its
Subsidiaries or Affiliates, including Stratosphere Gaming Corp., and any
business or operations conducted by or related to such entities, including the
Stratosphere Tower, Casino & Hotel and adjoining retail-entertainment center.
STRATOSPHERE CONTRACTS: Shall mean any and all contracts, loan agreements,
leases, guaranty agreements, notes, mortgages, indentures, obligations and other
agreements relating to Stratosphere, including, without limitation, (a) the
Standby Equity Commitment, dated as of March 9, 1995, by and between Company and
Stratosphere, (b) the Limited Guaranty, dated as of March 28, 1997, by Company
for the benefit of each of the beneficiaries listed therein, (c) the
Indemnification Agreement, dated as of May 1, 1997, by and between Company and
▇▇▇▇▇▇ ▇. ▇▇▇▇, (d) the Indemnification Agreement, dated as of May 1, 1997, by
and between Company and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, (e) the Indemnification Agreement,
dated as of May 1, 1997, by and between Company and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, (f) the
Indemnification Agreement, dated as of May 1, 1997, by and between Company and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, and (g) the indemnification arrangement described in the
Minutes of Company's Board of Directors, dated May 3, 1995, relating to the
indemnification of ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ Sell and ▇▇▇▇▇▇▇ ▇▇▇▇▇ in connection with
their service on the Stratosphere Board of Directors.
STRATOSPHERE LIABILITIES: Shall mean any and all Liabilities relating to or
arising from Stratosphere, Company's investment in or relationship to
Stratosphere and/or the Stratosphere Litigation and/or the Stratosphere
Contracts.
STRATOSPHERE LITIGATION: Shall mean any and all actions, suits,
proceedings, claims, arbitrations or investigations relating to Stratosphere,
including the Stratosphere shareholders litigation in the U.S. District Court
for the District of Nevada (In re Stratosphere Corporation Securities Litigation
-- Master File No. CV-5-96-00708PMP), Grand Casinos, Inc. shareholders
litigation in the U.S. District Court for the District of Minnesota (In Re:
Grand Casinos, Inc. Securities Litigation -- Master Filed No. 4-96-890), the
Stratosphere shareholders litigation in the Nevada State Court (▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
et. al. v. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, et. al. -- Case No. A363019), the ▇▇▇▇▇ litigation
in the U.S. District Court for the District of Nevada (▇▇▇▇▇ ▇▇▇▇▇, et al. v.
Stratosphere Corporation, et. al.-- Case No. A349985), the Stratosphere vacation
club litigation in the District Court in ▇▇▇▇▇ County, Nevada (▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
et al. v. ▇▇▇ and ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, et al. -- Case No. A370127), the Standby
Equity Commitment litigation in the
U.S. District Court for the District of Nevada (IBJ ▇▇▇▇▇▇▇▇▇ Bank & Trust
Company, Inc. v. Grand Casinos, Inc. -- File No. CV-S-97-01252-DWH), the
Stratosphere Noteholder Committee bankruptcy court action in the U.S. Bankruptcy
Court for the District of Nevada, Stratosphere Plan of Reorganization in the
U.S. Bankruptcy Court for the District of Nevada, the Las Vegas Downtown
Redevelopment Agency litigations in the Nevada Supreme Court (City of Las Vegas
Downtown Redevelopment Agency ▇. ▇▇▇▇▇▇▇▇, et al. and City of Las Vegas Downtown
Redevelopment Agency v. Mouldo, et. al.), a derivative litigation in Hennepin
County, Minnesota District Court (▇▇▇▇▇ Drilling, et al. v. ▇▇▇▇ ▇▇▇▇▇▇, et al.
--Court File No. MC97-002807), and a Stratosphere action for Recovery of
Preferential Transfers Pursuant to Sections 547 and 550 of the Bankruptcy Court
filed with the Bankruptcy Court against Company, and including any actions,
suits, proceedings, claims, arbitrations or investigations relating to the
Litigation LLC described in Stratosphere Corporation's Restated Second Amended
Plan of Reorganization dated February 26, 1998.
SUBSIDIARY: With respect to any Person, (i) each corporation, partnership,
joint venture, limited liability company or other legal entity of which such
Person owns, either directly or indirectly, 50% or more of the stock or other
equity interests the holders of which are generally entitled to vote for the
election of the board of directors or similar governing body of such
corporation, partnership, joint venture or other legal entity; and (ii) each
partnership or limited liability company in which such Person or another
Subsidiary of such Person is the general partner, managing partner or otherwise
controls.
"TAX" OR "TAXES": Shall mean all actual taxes and estimated payment of
taxes, charges, fees, imposts, levies and gaming or other assessments, including
all income, gross receipts, capital, sales, use, ad valorem, value added,
transfer, franchise, profits, inventory, capital stock, license, withholding,
payroll, employment, social security, unemployment excise, severance, stamp,
occupation, property, premium, windfall profits, environmental, disability,
registration, alternative or add-on minimum taxes, custom duties, fees,
assessments and charges of any kind whatsoever, together with any interest and
any penalties, fines, additions to tax or additional amounts imposed by any
taxing authority (domestic or foreign), and including any transferee liability
in respect of Taxes and any liability in respect of Taxes imposed by contract,
tax sharing agreement, tax indemnity agreement or any similar agreement.
TAX ALLOCATION AND INDEMNITY AGREEMENT: The Tax Allocation and Indemnity
Agreement between Company and Lakes pursuant to which such parties will provide
for the allocation of, and indemnification against, certain tax liabilities, the
preparation and filing of certain tax returns and the payment of taxes related
thereto and certain related matters, which agreement shall be entered into on or
prior to the Distribution Date substantially in the form attached hereto as
Exhibit E.
TAX RETURNS: The meaning specified in the Tax Allocation and Indemnity
Agreement.
TRANSACTION LIABILITIES: All liabilities relating to any Action or
threatened Action arising
out of or pertaining to the transaction contemplated by the Merger Agreement or
this Distribution Agreement. " \l 2
TRANSFERRED CORPORATE FUNCTIONS: The corporate level and support functions
of Company to be contributed to Lakes in connection with the Distribution, as
set forth in Schedule 7 hereto. Currently expected to include corporate
treasury, accounting (including payroll), internal audit, tax, corporate
affairs, legal, human resources and risk management functions (including claims
administration), as well as certain purchasing and procurement functions.
TRANSFERRED EMPLOYEES: The meaning specified in the Employee Benefits
Allocation Agreement.
Section 1.02. TERMS DEFINED ELSEWHERE IN AGREEMENT . Each of the
following terms is defined in the Recitals or Section set forth opposite such
term:
Term Section
---- -------
Agreement Recitals
Consents 4.01
Dispute 9.14
Company Indemnitees 5.02
Gaming Co. Recitals
Hilton Recitals
Indemnifiable Loss 5.01
Indemnifying Party 5.03
Indemnified Person 5.03
Information 7.02
Insurance Charges 8.03
Lakes Recitals
Lakes Indemnities 5.01
Merger Recitals
MergerSub Recitals
Third Party Claim 5.04
Transaction Taxes 6.05
ARTICLE II.
TRANSFER OF ASSETS
Section 2.01. TRANSFER OF ASSETS TO LAKES . Prior to the Distribution Date,
Company shall take or cause to be taken all actions necessary to cause the
transfer, assignment, delivery and conveyance to Lakes and/or the appropriate
Non-Mississippi Subsidiaries designated by Lakes of all of Company's and its
Subsidiaries' right, title and interest in any Non-Mississippi Group Assets
held, on or prior to the Distribution Date, by Company or any Mississippi
Subsidiary including:
(a) a contribution to Lakes of all of the outstanding capital stock of
the Non-Mississippi Subsidiaries indicated on Schedule 2;
(b) subject to the provisions of Section 2.07 and the Insurance
Receivable Agreement, transfer of $24 million dollars of cash by Company or any
Mississippi Subsidiary to Lakes in order to provide necessary and needed levels
of working capital and appropriate reserve for business investment purposes;
PROVIDED, HOWEVER, that;
(i) such amount will be DECREASED by any amount paid by the
Company prior to the Distribution Date in connection with Stratosphere up
to a maximum of $8 million, and
(ii) such amount shall be INCREASED by the Assigned Lakes Assets
Proceeds as indicated on Schedule 11.
(iii) such amount shall be increased by $9,292,339 representing
the proceeds received by the Company pursuant to that certain Agreement to
Terminate Management Agreement dated as of December 7, 1998 by and between
Mille Lacs Gaming Corporation, a Minnesota corporation and wholly-owned
subsidiary of the Company and Corporate Commission of the Mille Lacs Bank
of Ojibwe relating to the termination of that certain Amended and Restated
Management Construction Agreements by and between the Mille Lacs Band of
Chippewa Indians and Mille Lacs Gaming Corporation Hinckley Operations
dated as of September 10, 1990.
(c) transfer of the Assigned Lakes Assets, as indicated on Schedule 5,
which have not been sold prior to the Distribution Date; and
(d) transfer of the Transferred Corporate Functions as indicated on
Schedule 7; Section 2.02. TRANSFERS OF ASSETS FROM NON-MISSISSIPPI SUBSIDIARIES
TO COMPANY OR MISSISSIPPI SUBSIDIARIES . Prior to the Distribution Date, Lakes
shall take or cause to be taken all actions necessary to cause the transfer,
assignment, delivery and conveyance to Company and/or the applicable
Mississippi Subsidiaries designated by Company of all of Lakes's and the
Non-Mississippi Subsidiaries' right, title and interest in any Mississippi Group
Assets held, on or prior to the Distribution Date, by Lakes or any of the
Non-Mississippi Subsidiaries, if any.
Section 2.03. TRANSFERS NOT EFFECTED PRIOR TO THE DISTRIBUTION . To the
extent that any transfers contemplated by this Article II shall not have been
fully effected as of the Distribution Date, the parties shall cooperate to
effect such transfers as promptly as shall be practicable following the
Distribution Date. Nothing herein shall be deemed to require the transfer of any
assets or the assumption of any Liabilities which by their terms or operation of
law cannot be transferred or assumed including, without limitation, pursuant to
Gaming Laws; provided, however, that Company and Lakes and their respective
Subsidiaries and Affiliates shall
cooperate in seeking to obtain any necessary consents or approvals for the
transfer of all assets and Liabilities contemplated to be transferred pursuant
to this Agreement including, without limitation, pursuant to Gaming Laws.
In the event that any such transfer of assets or Liabilities has not been
consummated effective as of the Distribution Date, the party retaining such
asset or Liability shall thereafter hold such asset in trust for the use and
benefit of the party entitled thereto (at the expense of the party entitled
thereto) and retain such Liability for the account of the party by whom such
Liability is to be assumed pursuant hereto, and take such other actions as may
be reasonably required in order to place the parties, insofar as reasonably
possible, in the same position as would have existed had such asset been
transferred or such Liability been assumed as contemplated hereby. As and when
any such asset or Liability becomes transferable, such transfer and assumption
shall be effected forthwith. The parties agree that, except as set forth in this
Section 2.03, as of the Distribution Date, each party hereto shall be deemed to
have acquired complete and sole beneficial ownership over all of the assets,
together with all rights, powers and privileges incidental thereto, and shall be
deemed to have assumed in accordance with the terms of this Agreement all of the
Liabilities, and all duties, obligations and responsibilities incidental
thereto, which such party is entitled to acquire or required to assume pursuant
to the terms of this Agreement.
Section 2.04. COOPERATION RE: ASSETS . In the case that at any time after
the Distribution Date, Lakes reasonably determines that any of the Mississippi
Group Assets (other than the assets set forth in Schedule 3) are essential for
the conduct of the Non-Mississippi Business, or Company reasonably determines
that any of the Non-Mississippi Group Assets (other than the assets set forth in
Schedule 5) are essential for the conduct of the Mississippi Business, and the
nature of such assets makes it impracticable for Lakes or Company, as the case
may be, to obtain substitute assets or to make alternative arrangements on
commercially reasonable terms to conduct their respective businesses, and
reasonable provisions for the use thereof are not already
included in the Related Agreements, then Lakes (with respect to the
Non-Mississippi Group Assets) and Company (with respect to the Mississippi Group
Assets) shall cooperate to make such assets available to the other party on
commercially reasonable terms, as may be reasonably required for such party to
maintain normal business operations. However, (a) the usage of such assets by
the other party shall not materially interfere with the use of such assets by
the party holding such assets; and (b) such assets shall be required to be made
available only until such time as the other party can reasonably obtain
substitute assets or make alternative arrangements on commercially reasonable
terms to permit it to maintain normal business operations.
Section 2.05. NO REPRESENTATIONS OR WARRANTIES; CONSENTS . Each of the
parties hereto understands and agrees that no party hereto is, in this
Agreement, in any Related Agreement, or otherwise, representing or warranting in
any way (a) as to the value or freedom from encumbrance of, or any other matter
concerning, any assets of such party; or (b) as to the legal sufficiency to
convey title to any asset transferred pursuant to this Agreement or any Related
Agreement. IT IS ALSO AGREED AND UNDERSTOOD THAT THERE ARE NO WARRANTIES,
EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY OR FITNESS OF ANY OF THE ASSETS
EITHER TRANSFERRED TO OR RETAINED BY THE PARTIES, AS THE CASE MAY BE, AND ALL
SUCH ASSETS SHALL BE "AS IS, WHERE IS" AND "WITH ALL FAULTS"; provided, however,
that the absence of warranties shall have no effect upon the allocation of
Liabilities under this Agreement.
Each party hereto understands and agrees that no party hereto is, in this
Agreement, in any Related Agreement or otherwise, representing or warranting in
any way that the obtaining of any consents or approvals, the execution and
delivery of any amendatory agreements and the making of any filings or
applications contemplated by this Agreement, any Related Agreement or otherwise
will satisfy the provisions of any or all applicable laws or judgments or other
instruments or agreements relating to such assets, including without limitation,
the Gaming Laws. Notwithstanding the foregoing, the parties shall use their good
faith efforts to obtain all consents and approvals, including, without
limitation, pursuant to the Gaming Laws, to enter into all reasonable amendatory
agreements and to make all filings and applications which may be reasonably
required for the consummation of the transactions contemplated by this Agreement
and the Related Agreements, and shall take all such further reasonable actions
as shall be necessary to preserve for each of the Non-Mississippi Group and the
Mississippi Group, to the greatest extent feasible, the economic and operational
benefits of the allocation of assets and liabilities provided for in this
Agreement. In case at any time after the Distribution Date any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement shall take all such
necessary or desirable action.
Section 2.06. CONVEYANCING AND ASSUMPTION INSTRUMENTS . In connection with
the Preliminary Transfers described in Article II and Article III hereof, and
the assignment of assets and the assumption of Liabilities contemplated by any
Related Agreements, the parties shall execute, or cause to be executed by the
appropriate entities, the Conveyancing and Assumption Instruments in such forms
as the parties shall reasonably agree. The transfer of capital stock and other
equity interests shall be effected by means of delivery of stock certificates
and executed stock powers and notation on the stock record books of the
corporation or other legal entity involved and, to the extent required by
applicable law, by notation on public registries.
Section 2.07. CASH ALLOCATIONS AFTER THE YEAR-END . Notwithstanding
anything to the contrary herein, (i) Net Cash generated after December 31, 1998
from operations of the Mississippi Business (regardless of whether the
Distribution has occurred) shall be retained by Company; (ii) Net Cash generated
after December 31, 1998 from operations of the Non-Mississippi Business
(regardless of whether the Distribution has occurred) shall be retained by
Lakes; and (iii) the allocations of cash set forth in Section 2.08 (a) shall be
made as of December 31, 1998.
Section 2.08. CASH ALLOCATION; CASH MANAGEMENT .
(a) CASH ALLOCATION ON THE DISTRIBUTION DATE. Subject to the
provisions of Section 2.01(b) hereof, the allocation between Company and Lakes
of all cash bank balances, short-term investments and outstanding checks and
drafts of Company and its Subsidiaries recorded per the books of Company and its
Subsidiaries shall be in accordance with the following:
(i) all deposits of cash, checks, drafts or short-term
investments made to accounts, other than the Non-Mississippi Group Cash
Accounts, after the close of business on the Distribution Date shall be remitted
to Company; PROVIDED, HOWEVER, that any such deposits that are erroneously made
to such accounts shall be redeposited to the correct accounts as promptly as
possible;
(ii) all deposits of cash, checks, drafts or short-term
investments made to the Non-Mississippi Group Cash Accounts after the close of
business on the Distribution Date shall be remitted to Lakes and/or the
appropriate Non-Mississippi Subsidiary; PROVIDED, HOWEVER, that any such
deposits that are erroneously made to such accounts shall be redeposited to the
correct accounts as promptly as possible;
(iii) all cash, other than cash allocated pursuant to Sections
2.01(b), 2.07, 2.08(i) and 2.08(ii), shall be retained by or remitted to Company
and/or the appropriate Mississippi Subsidiaries.
(b) CASH MANAGEMENT AFTER THE DISTRIBUTION DATE. All ▇▇▇▇▇ cash,
depository and disbursement accounts of Company (other than the Non-Mississippi
Group Cash Accounts) shall be retained by Company. The Non-Mississippi Group
Cash Accounts shall be transferred to Lakes, and Lakes shall establish and
maintain a separate cash management system and separate accounting records with
respect to the Non-Mississippi Group Business effective as of 12:01 a.m.
Minneapolis time on the day following the Distribution Date.
(c) ORDINARY COURSE OPERATIONS. The parties contemplate and agree that
the Non-Mississippi Business and the Mississippi Business, including, but not
limited to, the administration, payment and collection of accounts payable and
accounts receivable, will be conducted in the ordinary course of business and
consistent with past practice prior the Distribution Date.
Section 2.09. ALLOCATION OF DEBT . Debt will be allocated as follows:
(a) Debt secured by Mississippi Group Assets, or otherwise
specifically associated with the Mississippi Business, will be retained by
Company and/or the appropriate Mississippi Subsidiaries. As of the date of this
Agreement, such Debt consists of the First Mortgage Notes.
(b) The Senior Notes will be retained by Company and/or the
appropriate Mississippi Subsidiary.
(c) Debt relating to the Bank of America Revolving Credit Facility
will be retained by Company and/or the appropriate Mississippi Subsidiary.
(d) Any other of Company's unsecured Debt will be Retained Debt.
(e) Debt secured by any Non-Mississippi Group Assets will be assumed
by Lakes and/or the appropriate Non-Mississippi Subsidiaries.
(f) Notwithstanding anything to the contrary herein, (i) increases
(decreases) in Debt incurred (repaid) after December 31, 1998 arising out of
operations of the Mississippi Business (regardless of whether the Distribution
has occurred) shall be allocated to Company and (ii) increases (decreases) in
Debt incurred (repaid) after December 31, 1998 arising out of operations of the
Non-Mississippi Business (regardless of whether the Distribution has occurred)
shall be allocated to Lakes; and, to the extent such increases (decreases) are
not already given effect in the definition of Net Cash, such increases
(decreases) shall increase or decrease (as applicable) the Debt allocated to
Company or Lakes (as applicable).
Section 2.10. ANCILLARY AGREEMENTS BETWEEN COMPANY AND LAKES. On or prior
to the Distribution Date, Company and Lakes shall enter into the Ancillary
Agreements.
ARTICLE III.
ASSUMPTION AND SATISFACTION OF LIABILITIES
Section 3.01. ASSUMPTION AND SATISFACTION OF MISSISSIPPI BUSINESS AND
NON-MISSISSIPPI BUSINESS LIABILITIES . From and after the Distribution Date, (a)
Lakes shall, and/or shall cause the Non-Mississippi Subsidiaries to, assume,
pay, perform and discharge in due course all of the Non-Mississippi Group
Liabilities (including the Indian Guarantees and the Stratosphere Liabilities);
and; (b) Company shall, and/or shall cause the Mississippi Subsidiaries to,
assume, pay, perform and discharge in due course all of the Mississippi Group
Liabilities (including the Non-Mississippi Subsidiaries Note Guarantees).
Section 3.02 ASSUMPTION AND SATISFACTION OF CONTINGENT COMPANY LIABILITIES
AND TRANSACTION LIABILITIES . From and after the Distribution Date, to the
extent that there is a Company liability occurring prior to the
Distribution Date that is neither a Mississippi Group Liability nor a
Non-Mississippi Group Liability and cannot in good faith be allocated by the
parties hereto as either a Mississippi Group Liability or a Non-Mississippi
Group Liability, including, but not limited to the Liabilities set forth on
Schedule 10 attached hereto (all such Liabilities, "Contingent Company
Liabilities"), then such Contingent Company Liabilities and all Transaction
Liabilities shall be allocated between Company and Lakes on a pro rata basis as
provided in Section 3.1(c)(1) of the Merger Agreement and shall be assumed,
paid, performed and discharged by each such party based upon such allocation.
ARTICLE IV.
THE DISTRIBUTION
Section 4.01. COOPERATION PRIOR TO THE DISTRIBUTION .
(a) Lakes and Company shall cooperate in preparing, filing with the
SEC and causing to become effective any registration statements or amendments
thereof which are appropriate to reflect the establishment of, or amendments to,
any employee benefit plans, and other plans contemplated by the Employee
Benefits Allocation Agreement.
(b) Lakes and Company shall take all such action as may be necessary
or appropriate under the securities or blue sky laws of states or other
political subdivisions of the United States in connection with the transactions
contemplated by this Agreement and the Related Agreements.
(c) Lakes and Company shall use all reasonable best efforts to obtain
any governmental or third-party consents or approvals necessary or desirable in
connection with the transactions contemplated hereby, including, without
limitation, pursuant to the Gaming Laws ("CONSENTS").
(d) Lakes and Company will use all reasonable best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary or desirable under applicable law, to consummate the transactions
contemplated under this Agreement and the Related Agreements including, but not
limited to, actions relating to the satisfaction of the conditions indicated in
Section 4.02 hereof.
Section 4.02. COMPANY BOARD ACTION; CONDITIONS PRECEDENT TO THE
DISTRIBUTION . Company Board shall, in its sole discretion, establish the Record
Date and the Distribution Date and any appropriate procedures in connection with
the Distribution. In no event shall the Distribution occur unless the following
conditions shall have been satisfied:
(a) the transactions contemplated in Article II and Article III shall
have been consummated in all material respects;
(b) the Lakes Board, comprised as contemplated by Section 6.01, shall
have been elected by Company, as sole shareholder of Lakes, and the Lakes
Articles and Lakes Bylaws shall have been adopted and shall be in effect;
(c) Company shall have received shareholder ratification of the
Distribution at
a meeting of shareholders.
(d) the Merger Agreement shall be in full force and effect and no
material breach shall exist thereunder;
(e) each condition to the consummation of the Merger, other than the
condition set forth in Section 8.1(g) of the Merger Agreement relating to the
consummation of the Distribution, shall have been fulfilled or waived by the
party for whose benefit such condition exists;
(f) with respect to the Louisiana Gaming License:
(i) the Louisiana Gaming License is transferred to Lakes or a
Non-Mississippi Subsidiary;
(ii) the Non-Mississippi Subsidiaries are licensed pursuant to
Louisiana Gaming Laws; or
(iii) Lakes is licensed pursuant to Louisiana Gaming Laws.
(g) the IRS Ruling shall have been granted in form and substance
satisfactory to Company Board, the IRS Ruling shall not have been withdrawn by
the IRS and the representations made to the IRS therein shall be true in all
material respects;
(h) the Form 10 shall have been declared effective by the SEC;
(i) the Lakes Common Stock shall have been approved for trading on the
NASDAQ National Market (or such other securities exchange comprising the
principal securities exchange or market on which the Lakes Common Stock is
listed or traded), subject to official notice of issuance;
(j) each of Lakes and Company shall have executed and delivered the
Related Agreements to which it is a party and each of the transactions
contemplated by the Related Agreements to be consummated on or prior to the
Distribution Date shall have been consummated;
(k) all necessary regulatory approvals and consents of third parties
shall have been received, including, without limitation, pursuant to the Gaming
Laws, except for any such approvals or consents the failure of which to obtain
would not have a material adverse effect on the business, operations or
condition (financial or otherwise) of either Company or Lakes;
(l) the Board of Directors of Company shall be satisfied that (i) at
the time of the Distribution and after giving effect to the Distribution and the
transactions contemplated under the Related Agreements, Company will not be
insolvent (in that, both before and
immediately following the Distribution, (1) the fair market value of Company's
assets would exceed Company's liabilities, (2) Company would be able to pay its
liabilities as they mature and become absolute and (3) Company would not have
unreasonably small capital with which to engage in its business); and (ii) the
Distribution would be permitted under the MBCA; and at the Board of Directors'
discretion, Company shall have received the opinion of a financial advisor or
other appraisal or valuation expert selected by Company, in form and substance
satisfactory to Company, as to the matters set forth in clauses (1) through (3)
above, and such opinion shall not have been withdrawn;
PROVIDED, HOWEVER, that (x) any such condition may be waived by Company Board in
its sole discretion, and (y) the satisfaction of such conditions shall not
create any obligation on the part of Company or any other party hereto to effect
the Distribution or in any way limit Company's power of termination set forth in
Section 9.08 or alter the consequences of any such termination from those
specified in such Section.
Section 4.03. THE DISTRIBUTION . On the Distribution Date, or as soon
thereafter as practicable, subject to the conditions and rights of termination
set forth in this Agreement, Company shall deliver to the Agent, for the benefit
of the Holders, a share certificate representing all of the then outstanding
shares of Lakes Common Stock owned by Company, endorsed in blank, and shall
instruct the Agent to distribute to each Holder, on or as soon as practicable
following the Distribution Date, a certification, or if requested by such
Holder, a certificate, representing one share of Lakes Common Stock for every
four shares of Company Common Stock so held or, such number of shares that may
be issued pursuant to a stock split, stock or dividend, of the Lakes Common
Stock prior to, or simultaneously with, the Distribution Date. Lakes agrees to
provide all share certificates that the Agent shall require in order to effect
the Distribution.
ARTICLE V.
INDEMNIFICATION
Section 5.01. INDEMNIFICATION BY COMPANY . Company shall indemnify, defend
and hold harmless Lakes and each of the Non-Mississippi Subsidiaries, and each
of their respective past or present directors, officers, employees, agents and
Affiliates and each of the heirs, executors, successors and assigns of any of
the foregoing (the "LAKES INDEMNITEES") from and against any and all losses,
Liabilities, damages and expenses (including, without limitation, the reasonable
costs and expenses, including reasonable attorneys' fees in connection with any
such investigations, Actions, or threatened Actions) (collectively,
"INDEMNIFIABLE LOSSES" and, individually, an "INDEMNIFIABLE LOSS") incurred or
suffered by any of the Lakes Indemnitees and arising out of or due to the
failure or alleged failure of Company, any Mississippi Subsidiary, or any of
their respective Affiliates to (a) pay, perform or otherwise discharge in due
course any of the Mississippi Group Liabilities, or (b) comply with the
provisions of Section 6.04 hereof.
Section 5.02. INDEMNIFICATION BY LAKES . Lakes shall indemnify, defend and
hold
harmless Company and each of the Mississippi Subsidiaries, and each of their
respective past or present directors, officers, employees, agents and Affiliates
and each of the heirs, executors, successors and assigns of any of the foregoing
(the "COMPANY INDEMNITEES") from and against any and all Indemnifiable Losses
incurred or suffered by any of Company Indemnitees and arising out of or due to
the failure or alleged failure of Lakes, any Non-Mississippi Subsidiaries, or
any of their respective Affiliates to (a) pay, perform or otherwise discharge in
due course any of the Non-Mississippi Group Liabilities; or (b) comply with the
provisions of Section 6.04 hereof.
Section 5.03. INSURANCE PROCEEDS . The amount which any party (an
"INDEMNIFYING PARTY") is or may be required to pay to any other Person (an
"INDEMNIFIED PERSON") pursuant to Section 5.01 or Section 5.02 shall be reduced
(including, without limitation, retroactively) by any Insurance Proceeds or
other amounts actually recovered by or on behalf of such Indemnified Person in
reduction of the related Indemnifiable Loss. If an Indemnified Person shall have
received the payment required by this Agreement from an Indemnifying Party in
respect of an Indemnifiable Loss and shall subsequently actually receive
Insurance Proceeds, or other amounts in respect of such Indemnifiable Loss as
specified above, then such Indemnified Person shall pay to such Indemnifying
Party a sum equal to the amount of such Insurance Proceeds or other amounts
actually received.
Section 5.04. PROCEDURE FOR INDEMNIFICATION .
(a) If an Indemnified Person shall receive written notice of the
assertion by a Person (including, without limitation, any Governmental
Authority) who is not a party to this Agreement or to any of the Related
Agreements of any claim or of the commencement by any such Person of any Action
with respect to which an Indemnifying Party may be obligated to provide
indemnification pursuant to this Agreement (a "THIRD-PARTY CLAIM"), such
Indemnified Person shall give the Indemnifying Party written notice thereof
promptly after becoming aware of such Third-Party Claim; PROVIDED, that the
failure of any Indemnified Person to give notice as required by this Section
5.04 shall not relieve the Indemnifying Party of its obligations under this
Article V, except to the extent that such Indemnifying Party is materially
prejudiced by such failure to give notice. Such notice shall describe the
Third-Party Claim in reasonable detail, and shall indicate the amount (estimated
if necessary) of the Indemnifiable Loss that has been claimed against or may be
sustained by such Indemnified Person.
(b) Within 15 days of the receipt of notice from an Indemnified Person
in accordance with Section 5.04(a) (or sooner, if the nature of such Third-Party
Claim so requires), the Indemnifying Party shall notify the Indemnified Person
of its election whether to assume responsibility for such Third-Party Claim
(provided that if the Indemnifying Party does not so notify the Indemnified
Person of its election within 15 days after receipt of such notice from the
Indemnified Person, the Indemnifying Party shall be deemed to have elected not
to assume responsibility for such Third-Party Claim). An election not to assume
responsibility for such Third-Party Claim may only be made in the event of a
good faith dispute that a Third-Party
Claim is not covered as an Indemnifiable Loss under the grounds specified in
Section 5.01 or 5.02, as the case may be. Subject to Section 5.04(e) hereof, an
Indemnifying Party may elect to defend or to seek to settle or compromise, at
such Indemnifying Party's own expense and by counsel reasonably satisfactory to
the Indemnified Person, any Third-Party Claim, PROVIDED that (i) the
Indemnifying Party must confirm in writing that it agrees that the Indemnified
Person is entitled to indemnification hereunder in respect of such Third-Party
Claim; and (ii) no compromise or settlement shall be made without the prior
written consent of the Indemnified Person, which consent shall not be reasonably
withheld.
(c) In the event that the Indemnifying Party elects to assume
responsibility for the Third-Party Claim, pursuant to Section 5.04(b) above, (i)
the Indemnified Person shall cooperate in the defense or settlement or
compromise of such Third-Party Claim, including making available to the
Indemnifying Party any personnel and any books, records or other documents
within the Indemnified Person's control or which it otherwise has the ability to
make available that are necessary or appropriate for the defense of the
Third-Party Claim; (ii) the Indemnifying Party shall keep the Indemnified Person
reasonably informed regarding the strategy, status and progress of the defense
of the Third-Party claim; and (iii) the Indemnifying Party shall consider, in
good faith, the opinions and suggestions of the Indemnified Person with respect
to the Third-Party Claim.
After notice from an Indemnifying Party to an Indemnified Person
of its election to assume responsibility for a Third-Party Claim, such
Indemnifying Party shall not be liable to such Indemnified Person under this
Article V for any legal or other costs or expenses (except costs or expenses
approved in advance by the Indemnifying Party) subsequently incurred by such
Indemnified Person in connection with the defense thereof; provided, that if the
defendants in any such claim include both the Indemnifying Party and one or more
Indemnified Persons and in such Indemnified Persons' reasonable judgment a
conflict of interest between such Indemnified Persons and such Indemnifying
Party exists in respect of such claim, such Indemnified Persons shall have the
right to employ separate counsel and in that event the reasonable fees and
expenses of such separate counsel (but not more than one separate counsel
reasonably satisfactory to the Indemnifying Party) shall be paid by such
Indemnifying Party.
(d) If an Indemnifying Party elects not to assume responsibility for a
Third-Party Claim the Indemnified Person may defend or (subject to the following
sentence) seek to compromise or settle such Third-Party Claim. Notwithstanding
the foregoing, an Indemnified Person may not settle or compromise any claim
without prior written notice to the Indemnifying Party, which shall have the
option within ten days following the receipt of such notice (i) to disapprove
the settlement, and to then assume all past and future responsibility for the
claim, including immediately reimbursing the Indemnified Person for prior
expenditures in connection with the claim; (ii) to disapprove the settlement and
continue to refrain from participation in the defense of the claim, in which
event the Indemnified Person may, in its sole discretion, proceed with the
settlement and the Indemnifying Party shall have no further right to contest the
amount or reasonableness of the settlement; (iii) to approve and pay the amount
of the settlement,
reserving the Indemnifying Party's right to contest the Indemnified Person's
right to indemnity; or (iv) to approve and pay the settlement. In the event the
Indemnifying Party makes no response to such written notice, the Indemnifying
Party shall be deemed to have elected option (ii). When the Indemnifying Party
chooses or is deemed to have chosen option (ii) or (iii), the issue of whether
the Indemnified Person has a right to indemnity under this Article V shall be
resolved by arbitration pursuant to the provisions of Section 9.14 hereof. If
the Indemnifying Party does not prevail at such arbitration, the Indemnifying
Party shall promptly reimburse the Indemnified Person for all Indemnifiable
Losses, plus interest on such amounts at the lower of (i) 10% or (ii) the
highest legal interest rate, accruing from the date of payment by the
Indemnified Person.
(e) Notwithstanding the foregoing, if an Indemnified Person reasonably
and in good faith determines that (i) the Indemnifying Party is not financially
capable to defend a Third-Party Claim and to provide full indemnification with
respect to any settlement thereof or (ii) the Indemnifying Party or such
Indemnifying Party's attorney is not adequately representing the Indemnified
Person's interests with respect to such Third-Party Claim, the Indemnified
Person may, by notice to the Indemnifying Party, assume the exclusive right to
defend, compromise or settle such Third-Party Claim and the Indemnifying Party
shall remain responsible for, and be bound by the resolution of, such
Third-Party Claim.
(f) Any claim on account of an Indemnifiable Loss which does not
result from a Third-Party Claim shall be asserted by written notice given by the
Indemnified Person to the applicable Indemnifying Party. Such Indemnifying Party
shall have a period of 15 days after the receipt of such notice within which to
respond thereto. If such Indemnifying Party does not respond within such 15-day
period, such Indemnifying Party shall be deemed to have refused to accept
responsibility to make payment. If such Indemnifying Party does not respond
within such 15-day period or rejects such claim in whole or in part, such
Indemnified Person shall be free to pursue such remedies as may be available to
such party under applicable law or under this Agreement.
(g) In addition to any adjustments required pursuant to Section 5.03,
if the amount of any Indemnifiable Loss shall, at any time subsequent to the
payment required by this Agreement, be reduced by recovery, settlement or
otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the Indemnified Person to the
Indemnifying Party.
(h) In the event of payment by an Indemnifying Party to any
Indemnified Person in connection with any Third-Party Claim, such Indemnifying
Party shall be subrogated to and shall stand in the place of such Indemnified
Person as to any events or circumstances in respect of which such Indemnified
Person may have any right or claim relating to such Third-Party Claim against
any claimant or plaintiff asserting such Third-Party Claim or against any other
party that may be liable. Such Indemnified Person shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or claim.
(i) For so long as Surviving Corporation (as defined in the Merger
Agreement) is required to provide indemnification to any of the Indemnified
Persons (as defined in the Merger Agreement), Lakes shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, make any Restricted
Payment. If Lakes is unable, within 15 days of request, to repay in full any
claim made for indemnification by Company or any of its Affiliates pursuant to
this Agreement or the Merger Agreement, then for so long as any such claim or
any other claim for indemnification made by Company or any of its Affiliates
remains unpaid, Lakes shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guaranty or otherwise
become directly or indirectly liable with respect to any indebtedness.
(j) Prior to the Distribution Date, Company and Lakes shall enter into
a Collateral Trust Agreement and a Pledge and Security Agreement. Company is
hereby entitled to all the rights and benefits under those agreements in order
to secure Lakes' indemnification obligations under this Agreement, the Related
Agreements and the Merger Agreement.
Section 5.05. REMEDIES CUMULATIVE . The remedies provided in this Article V
shall be cumulative and shall not preclude assertion by any Indemnified Person
of any other rights or the seeking of any and all other remedies against any
Indemnifying Party.
Section 5.06. SURVIVAL OF INDEMNITIES . The obligations of each of Lakes
and Company under this Article V shall survive the sale or other transfer by it
of any assets or businesses or the assignment by it of any Liabilities, with
respect to any Indemnifiable Loss of the other related to such assets,
businesses or Liabilities.
ARTICLE VI.
CERTAIN ADDITIONAL MATTERS
Section 6.01. LAKES BOARD . Lakes and Company shall take all actions which
may be required to appoint as officers and directors of Lakes those persons
named in the Form 10 (as may be altered or supplemented prior to the date hereof
by Company Board and the Lakes Board) to constitute, effective as of the
Distribution Date, the officers and the directors of Lakes.
Section 6.02. RESIGNATIONS; COMPANY BOARD . Lakes shall cause all of its
directors and the Transferred Employees to resign, effective as of the
Distribution Date, from all boards of directors or similar governing bodies of
Company or any of the Mississippi Subsidiaries on which they serve, and from all
positions as officers or employees of Company or any of the Mississippi
Subsidiaries in which they serve. Company shall cause all of its directors and
the Mississippi Group Employees to resign from all boards of directors or
similar governing bodies of Lakes or any of the Non-Mississippi Subsidiaries on
which they serve, and from all positions as officers or employees of Lakes or
any of the Non-Mississippi Subsidiaries in which they serve.
Section 6.03. LAKES CERTIFICATE AND BYLAWS . On or prior to the
Distribution Date, Lakes shall adopt the Lakes Articles and the Lakes Bylaws,
and shall file the Lakes Articles with the Secretary of State of the State of
Minnesota. Company shall provide all necessary shareholder approvals for the
Lakes Articles prior to the filing of the Lakes Articles with the Secretary of
State of the State of Minnesota.
Section 6.04. CERTAIN POST-DISTRIBUTION TRANSACTIONS . Each of Company and
Lakes shall, and shall cause each of their respective Subsidiaries to, comply in
all material respects with each representation, covenant and statement made, or
to be made, to any taxing authority in connection with the IRS Ruling or any
other ruling obtained, or to be obtained, by Company and Lakes acting together,
from any such taxing authority with respect to any transaction contemplated by
this Agreement.
Section 6.05. SALES AND TRANSFER TAXES . Company and Lakes agree to
cooperate to determine the amount of sales, transfer or other Taxes (including,
without limitation, all real estate, patent, trademark and transfer taxes and
recording fees, but excluding any Income Taxes, as defined in the Tax Allocation
and Indemnity Agreement) incurred in connection with the Distribution and other
transactions contemplated by the Agreement (the "TRANSACTION TAXES"). Company
agrees to file promptly and timely the Tax Returns for such Transaction Taxes
and Lakes will join in the execution of any such Tax Returns or other
documentation. Financial responsibility for payment of all such Transaction
Taxes shall be allocated between Company and Lakes on a pro rata basis as
provided in Section 3.1(c)(1) of the Merger Agreement.
Section 6.06. SETTLEMENT OF INTERCOMPANY ACCOUNTS. All accounts between the
Company and the Non-Mississippi Subsidiaries and accounts between Mississippi
Subsidiaries and the Non-Mississippi Subsidiaries shall be paid in full and
settled prior to the Distribution Date and to the extent that such accounts
exist prior to the Distribution Date, shall be deemed to be a capital
contribution or dividend to such entity, PROVIDED, HOWEVER, that nothing
contained in this Section 6.06 shall affect the (i) transfer of assets pursuant
to Article II, (ii) the assumption and satisfaction of Liabilities pursuant to
Article III or (iii) the indemnification provisions related to the parties
pursuant to this Agreement and the Merger Agreement.
ARTICLE VII.
ACCESS TO INFORMATION AND SERVICES
Section 7.01. PROVISION OF CORPORATE RECORDS .
(a) Except as may otherwise be provided in a Related Agreement,
Company shall arrange as soon as practicable following the Distribution Date, to
the extent not previously delivered in connection with the transactions
contemplated in Article II, for the transportation (at Lake's cost) to Lakes of
the Non-Mississippi Group Books and Records in its possession, except to the
extent such items are already in the possession of Lakes or a Non-Mississippi
Subsidiary. The Non-Mississippi Group Books and Records shall be the property of
Lakes, but the Non-Mississippi Group Books and Records that reasonably relate to
Company or the Mississippi Business shall be available to Company for review and
duplication until Company shall notify Lakes in writing that such records are no
longer of use to Company.
(b) Except as may otherwise be provided in a Related Agreement, Lakes
shall arrange as soon as practicable following the Distribution Date, to the
extent not previously delivered in connection with the transactions contemplated
in Article II, for the transportation (at Company's cost) to Company of the
Mississippi Group Books and Records in its possession, except to the extent such
items are already in the possession of Company or a Mississippi Subsidiary. The
Mississippi Group Books and Records shall be the property of Company, but the
Mississippi Group Books and Records that reasonably relate to Lakes or the
Non-Mississippi Business shall be available to Lakes for review and duplication
until Lakes shall notify Company in writing that such records are no longer of
use to Lakes.
Section 7.02. ACCESS TO INFORMATION . Except as otherwise provided in a
Related Agreement, from and after the Distribution Date, Company shall afford to
Lakes and its authorized accountants, counsel and other designated
representatives reasonable access (including using reasonable efforts to give
access to persons or firms possessing information) and duplicating rights during
normal business hours to all records, books, contracts, instruments, computer
data and other data and information relating to pre-Distribution operations
(collectively, "INFORMATION") within Company's possession or control, insofar as
such access is reasonably required by Lakes for the conduct of its business,
subject to appropriate restrictions for classified or Privileged Information.
Similarly, except as otherwise provided in a Related Agreement, Lakes shall
afford to Company and its authorized accountants, counsel and other designated
representatives reasonable access (including using reasonable efforts to give
access to persons or firms possessing information) and duplicating rights during
normal business hours to Information within Lakes's possession or control,
insofar as such access is reasonably required by Company for the conduct of its
business, subject to appropriate restrictions for classified or Privileged
Information. Information may be requested under this Article VII for the
legitimate business purposes of
either party, including without limitation, audit, accounting, claims (including
claims for indemnification hereunder), litigation and tax purposes, as well as
for purposes of fulfilling disclosure and reporting obligations and for
performing this Agreement and the transactions contemplated hereby.
Section 7.03. PRODUCTION OF WITNESSES . At all times from and after the
Distribution Date, each of Lakes and Company shall use reasonable efforts to
make available to the other, upon written request, its and its Subsidiaries'
present and past officers, directors, employees and agents as witnesses to the
extent that such persons may reasonably be required in connection with any
Action.
Section 7.04. CORPORATE SERVICES . The parties hereto shall enter into a
corporate services agreement to the extent Lakes requires corporate services to
be provided to it following the Distribution Date. The services shall be
provided for up to one year following the Distribution Date at a fee equal to
the fair value for such services. The corporate services agreement shall be
negotiated on an arms-length basis. The final cost, types and scope of services
to be provided shall be subject to the approval of Company, such approval not to
be unreasonably withheld.
Section 7.05. REIMBURSEMENT. Except to the extent otherwise contemplated in
any Related Agreement, a party providing Information or witnesses to the other
party under this Article VII shall be entitled to receive from the recipient,
upon the presentation of invoices therefor, payments of such amounts, relating
to supplies, disbursements and other out-of-pocket expenses (at cost) of
employees who are witnesses or otherwise furnish assistance (at cost), as may be
reasonably incurred in providing such Information or witnesses. Notwithstanding
the foregoing, the parties acknowledge that a party providing Information or
witnesses shall not be entitled to receive reimbursement of salary or other
compensation expenses relating to any employees providing such Information or
acting as such witnesses.
Section 7.06. RETENTION OF RECORDS . Except as otherwise required by law or
agreed to in a Related Agreement or otherwise in writing, each of Lakes and
Company may destroy or otherwise dispose of any of the Information which is
material Information and is not contained in other Information retained by the
other, only after the later to occur of (a) all applicable statutes of
limitations (including any waivers or extensions thereof) with respect to Tax
Returns which Company or Lakes, as the case may be, may be obligated to file on
behalf of any member of the Lakes Group or any member of Company Group, as the
case may be; and (b) any retention period required by law or pursuant to any
record retention agreement, provided, however, that prior to such destruction or
disposal, (x) it shall provide no less than 90 or more than 120 days advance
written notice to the other, specifying in reasonable detail the Information
proposed to be destroyed or disposed of and (y) if a recipient of such notice
shall request in writing prior to the scheduled date for such destruction or
disposal that any of the Information proposed to be destroyed or disposed of be
delivered to such requesting party, the party proposing the destruction or
disposal shall promptly arrange for the delivery of such of the Information as
was
requested at the expense of the party requesting such Information.
Section 7.07. CONFIDENTIALITY . Each of Company and its Subsidiaries on the
one hand, and Lakes and its Subsidiaries on the other hand, shall hold, and
shall cause its consultants and advisors to hold, in strict confidence, all
Information concerning the other in its possession or furnished by the other or
the other's representatives pursuant to this Agreement (except to the extent
that such Information has been (i) in the public domain through no fault of such
party; or (ii) later lawfully acquired from other sources by such party), and
each party shall not release or disclose such Information to any other person,
except its auditors, attorneys, financial advisors, rating agencies, bankers and
other consultants and advisors, unless compelled to disclose by judicial or
administrative process or, as reasonably advised by its counsel, by other
requirements of law, or unless such Information is reasonably required to be
disclosed in connection with (x) any litigation with any third-parties or
litigation between the Mississippi Group and the Non-Mississippi Group, (y) any
contractual agreement to which members of the Mississippi Group or the
Non-Mississippi Group are currently parties, or (z) in exercise of either
party's rights hereunder.
Section 7.08. PRIVILEGED MATTERS . Lakes and Company recognize that certain
legal and other professional services that have been and will be provided prior
to the Distribution Date have been and will be rendered for the benefit of both
the Mississippi Group and the Non-Mississippi Group and that both the
Mississippi Group and the Non-Mississippi Group should be deemed to be the
client for the purposes of asserting all Privileges. To allocate the interests
of each party in the Privileged Information, the parties agree as follows:
(a) Company shall be entitled, in perpetuity, to control the assertion
or waiver of all Privileges in connection with Privileged Information which
relates solely to the Mississippi Group, whether or not the Privileged
Information is in the possession of or under the control of Company or Lakes.
Company shall also be entitled, in perpetuity, to control the assertion or
waiver of all Privileges in connection with Privileged Information that relates
solely to the subject matter of any claims constituting Mississippi Group
Liabilities, now pending or which may be asserted in the future, in any lawsuits
or other proceedings initiated against or by Company or a Mississippi
Subsidiary, whether or not the Privileged Information is in the possession of or
under the control of Company or Lakes.
(b) Lakes shall be entitled, in perpetuity, to control the assertion
or waiver of all Privileges in connection with Privileged Information which
relates solely to the Non-Mississippi Group, whether or not the Privileged
Information is in the possession of or under the control of Company or Lakes.
Lakes shall also be entitled, in perpetuity, to control the assertion or waiver
of all Privileges in connection with Privileged Information which relates solely
to the subject matter of any claims constituting Non-Mississippi Group
Liabilities, now pending or which may be asserted in the future, in any lawsuits
or other proceedings initiated against or by Lakes or a Non-Mississippi
Subsidiary, whether or not the Privileged Information is in the possession of or
under the control of Company or Lakes.
(c) Lakes and Company agree that they shall have a shared Privilege,
with equal right to assert or waive, subject to the restrictions in this Section
7.07, with respect to all Privileges not allocated pursuant to the terms of
Sections 7.07(a) and (b). All Privileges relating to any claims, proceedings,
litigation, disputes, or other matters which involve both Lakes and Company, or
in respect of which both Lakes and Company retain any responsibility or
liability under this Agreement, shall be subject to a shared Privilege.
(d) No party may waive any Privilege which could be asserted under any
applicable law, and in which the other party has a shared Privilege, without the
consent of the other party, except to the extent reasonably required in
connection with any litigation with third-parties or as provided in subsection
(e) below. Consent shall be in writing, or shall be deemed to be granted unless
written objection is made within twenty (20) days after written notice upon the
other party requesting such consent.
(e) In the event of any litigation or dispute between a member of the
Mississippi Group and a member of the Non-Mississippi Group, either party may
waive a Privilege in which the other party has a shared Privilege, without
obtaining the consent of the other party, provided that such waiver of a shared
Privilege shall be effective only as to the use of Information with respect to
the litigation or dispute between the Mississippi Group and the Non-Mississippi
Group, and shall not operate as a waiver of the shared Privilege with respect to
third-parties.
(f) If a dispute arises between the parties regarding whether a
Privilege should be waived to protect or advance the interest of either party,
each party agrees that it shall negotiate in good faith, shall endeavor to
minimize any prejudice to the rights of the other party, and shall not
unreasonably withhold consent to any request for waiver by the other party. Each
party specifically agrees that it will not withhold consent to waiver for any
purpose except to protect its own legitimate interests.
(g) Upon receipt by any party of any subpoena, discovery or other
request which arguably calls for the production or disclosure of Information
subject to a shared Privilege or as to which the other party has the sole right
hereunder to assert a Privilege, or if any party obtains knowledge that any of
its current or former directors, officers, agents or employees have received any
subpoena, discovery or other requests which arguably calls for the production or
disclosure of such Privileged Information, such party shall promptly notify the
other party of the existence of the request and shall provide the other party a
reasonable opportunity to review the Information and to assert any rights it may
have under this Section 7.07 or otherwise to prevent the production or
disclosure of such Privileged Information.
(h) The transfer of the Non-Mississippi Group Books and Records and
the Mississippi Group Books and Records and other Information between Company
and its Subsidiaries and Lakes and its Subsidiaries is made in reliance on the
agreement of Lakes and Company, as set forth in Sections 7.06 and 7.07, to
maintain the confidentiality of Privileged
Information and to assert and maintain all applicable Privileges. The access to
Information being granted pursuant to Sections 7.01 and 7.02 hereof, the
agreement to provide witnesses and individuals pursuant to Section 7.03 hereof
and the transfer of Privileged Information between Company and its Subsidiaries
and Lakes and its Subsidiaries pursuant to this Agreement shall not be deemed a
waiver of any Privilege that has been or may be asserted under this Agreement or
otherwise.
ARTICLE VIII.
INSURANCE
Section 8.01. POLICIES AND RIGHTS INCLUDED WITHIN THE NON-MISSISSIPPI GROUP
ASSETS . Without limiting the generality of the definition of the
Non-Mississippi Group Assets or the effect of Section 2.01, the Non-Mississippi
Group Assets shall include any and all rights of an insured party under each of
the Shared Policies, specifically including rights of indemnity and the right to
be defended by or at the expense of the insurer, where applicable, with respect
to all injuries, losses, liabilities, damages and expenses incurred or claimed
to have been incurred on or prior to the Distribution Date by any party in or in
connection with the conduct of the Non-Mississippi Business or, to the extent
any claim is made against Lakes or any of its Subsidiaries, the Mississippi
Businesses, and which injuries, losses, liabilities, damages and expenses may
arise out of insured or insurable occurrences or events under one or more of the
Shared Policies.
Section 8.02. POLICIES AND RIGHTS INCLUDED WITHIN THE MISSISSIPPI GROUP
ASSETS . Without limiting the generality of the definition of the Mississippi
Group Assets or the effect of Section 2.01 and except as provided in the
Insurance Receivable Agreement, the Mississippi Group Assets shall include any
and all rights of an insured party under each of the Shared Policies,
specifically including rights of indemnity and the right to be defended by or at
the expense of the insurer, where applicable, with respect to all injuries,
losses, liabilities, damages and expenses incurred or claimed to have been
incurred on or prior to the Distribution Date by any party in or in connection
with the conduct of the Mississippi Business or, to the extent any claim is made
against Company or any of the Mississippi Subsidiaries, the Non-Mississippi
Business, and which injuries, losses, liabilities, damages and expenses may
arise out of insured or insurable occurrences or events under one or more of the
Shared Policies.
Section 8.03. ADMINISTRATION AND RESERVES .
(a) GENERAL. Notwithstanding the provisions of Article III, but
subject to any contrary provisions of any Related Agreement, from and after the
Distribution Date:
(i) Company shall be responsible for the Insurance Administration
of the Shared Policies; provided, however, that the administration of the Shared
Policies by Company is in no way intended to limit, inhibit, or preclude any
right to insurance coverage for any Insured Claim of a named insured under the
Shared Policies including, but not limited to, Lakes or any of its Subsidiaries
or Affiliates;
(ii) Lakes shall be entitled to any reserves established by
Company or any of its Subsidiaries, or the benefit of reserves held by any
insurance carrier, with respect to the Non-Mississippi Group Liabilities; and
(iii) Company shall be entitled to any reserves established by
Company or any of its Subsidiaries, or the benefit of reserves held by any
insurance carrier, with respect to the Mississippi Group Liabilities.
(b) INSURANCE PREMIUMS.
(i) Lakes shall have the right but not the obligation to pay the
premiums, to the extent that Company does not pay premiums with respect to
Mississippi Group Liabilities (retrospectively-rated or otherwise), with respect
to Shared Policies as required under the terms and conditions of the respective
Policies, whereupon Company shall forthwith reimburse Lakes for that portion of
such premiums paid by Lakes as are attributable to the Mississippi Group
Liabilities.
(ii) Company shall have the right but not the obligation to pay
the premiums, to the extent that Lakes does not pay premiums with respect to
Non-Mississippi Group Liabilities (retrospectively-rated or otherwise), with
respect to Shared Policies as required under the terms and conditions of the
respective Policies, whereupon Lakes shall forthwith reimburse Company for that
portion of such premiums paid by Company as are attributable to the
Non-Mississippi Group Liabilities.
(c) ALLOCATION OF INSURANCE PROCEEDS. Except as provided in the
Insurance Receivable Agreement, Insurance Proceeds received with respect to
claims, costs and expenses under the Policies shall be paid to Lakes with
respect to the Non-Mississippi Group Liabilities and to Company with respect to
the Mississippi Group Liabilities. Payment of the allocable portions of
indemnity costs of Insurance Proceeds resulting from the liability policies will
be made to the appropriate party upon receipt from the insurance carrier. In the
event that the aggregate limits on any Policies are exceeded, the parties agree
to provide an equitable allocation of Insurance Proceeds received after the
Distribution Date based upon their respective bona fide claims taking into
account their relative contributions towards premiums and the Insurance Proceeds
used by each party to satisfy Insured Claims. The parties agree to use their
reasonable best efforts to cooperate with respect to insurance matters.
(d) INSURANCE CHARGES.
(i) Notwithstanding anything to the contrary contained herein,
Lakes or an appropriate Non-Mississippi Subsidiary assumes responsibility for
and shall pay to the appropriate insurance carriers or otherwise any premiums,
retrospectively rated premiums, defense costs, indemnity payments, deductibles,
retentions or other charges as appropriate (collectively "INSURANCE CHARGES"),
whenever arising, which become due and payable upon the terms and conditions of
any applicable Policy in respect of any Insured Claims against Lakes or a
Non-Mississippi Subsidiary for charges which relate to the period before the
Distribution Date. In the event that Lakes or a Non-Mississippi Subsidiary fails
to pay any insurance charges when due and payable, whether at the request of the
party entitled to payment or upon demand by Company or a Mississippi Subsidiary,
Company or a Mississippi Subsidiary may (but shall not be required to) pay such
Insurance Charges for and on behalf of Lakes or a Non-Mississippi Subsidiary and
thereafter Lakes shall forthwith reimburse Company or such Mississippi
Subsidiary for such payment.
(ii) Notwithstanding anything to the contrary contained herein,
Company or an appropriate Mississippi Subsidiary assumes responsibility for and
shall pay to the appropriate insurance carriers or otherwise any Insurance
Charges, whenever arising, which become due and payable upon the terms and
conditions of any applicable Policy in respect of any Insured Claims against
Company or a Mississippi Subsidiary for charges which relate to the period
before the Distribution Date. In the event that Company or a Mississippi
Subsidiary fails to pay any Insurance Charges when due and payable, whether at
the request of the party entitled to payment or upon demand by Lakes or a
Non-Mississippi Subsidiary, Lakes or a Non-Mississippi Subsidiary may (but shall
not be required to) pay such Insurance Charges for and on behalf of Company or a
Mississippi Subsidiary and thereafter Company shall forthwith reimburse Lakes or
such Non-Mississippi Subsidiary for such payment.
Section 8.04. AGREEMENT FOR WAIVER OF CONFLICT AND SHARED DEFENSE . In the
event that Insured Claims of both Lakes and Company exist relating to the same
occurrence, Lakes and Company agree to jointly defend and to waive any conflict
of interest necessary to the conduct of that joint defense. Nothing in this
paragraph shall be construed to limit or otherwise alter in any way the
indemnity obligations of the parties to this Agreement, including those created
by this Agreement, by operation of law or otherwise.
ARTICLE IX.
MISCELLANEOUS
Section 9.01. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES . This
Agreement and all documents and instruments referred to herein constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
and are not intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder.
Section 9.02. TAX ALLOCATION AND INDEMNITY AGREEMENT; AFTER-TAX PAYMENTS .
(a) Other than as provided in this Section 9.02 and Section 6.05, this
Agreement shall not govern any Tax matter, and any and all claims, losses,
damages, demands, costs, expenses, liabilities, refunds, deductions, write-offs,
or benefits relating to Taxes shall be exclusively governed by the Tax
Allocation and Indemnity Agreement.
(b) If, at the time Lakes is required to make any payment to Company
under this Agreement, Company owes Lakes any amount under the Tax Allocation and
Indemnity Agreement, then such amounts shall be offset and the excess shall be
paid by the party liable for such excess. Similarly, if, at the time Company is
required to make any payment to Lakes under this Agreement, Lakes owes Company
any amount under the Tax Allocation and Indemnity Agreement, then such amounts
shall be offset and the excess shall be paid by the party liable for such
excess.
Section 9.03. EXPENSES . Except as specifically provided in this Agreement
or in a Related Agreement, all fees and expenses incurred in connection with
this Agreement and the consummation of the transactions contemplated hereby
shall be paid by the party incurring such expenses. In addition, it is
understood and agreed that Lakes shall pay the legal, filing, accounting,
printing and other accountable and out-of-pocket expenditures in connection with
the preparation, printing and filing of the Form 10.
Section 9.04. GOVERNING LAW . This Agreement shall be governed and
construed in accordance with the laws of the State of New York, without regard
to any applicable conflicts of laws.
Section 9.05. NOTICES . All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
if to Company, to
Gaming Co., Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to Lakes, to
Lakes
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Section 9.06. AMENDMENTS . This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 9.07. ASSIGNMENTS . Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
Section 9.08. TERMINATION . This Agreement may be terminated and the
Distribution abandoned at any time prior to the Distribution Date by and in the
sole discretion of Company Board without the approval of Lakes's or of Company's
stockholders. In the event of such termination, no party shall have any
liability to any other party pursuant to this Agreement.
Section 9.09. SUBSIDIARIES . Each of the parties hereto shall cause to be
performed, and hereby guarantees the performance of, all actions, agreements and
obligations set forth herein to be performed by any Subsidiary of such party
which is contemplated to be a Subsidiary of such party on and after the
Distribution Date.
Section 9.10. SPECIFIC PERFORMANCE . The parties hereto agree that the
remedy at law for any breach of this Agreement will be inadequate and that any
party by whom this Agreement is enforceable shall be entitled to specific
performance in addition to any other appropriate relief or remedy. Such party
may, in its sole discretion, apply to a court of competent jurisdiction for
specific performance or injunctive or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable laws, each party waives any
objection to the imposition of such relief.
Section 9.11. HEADINGS; REFERENCES . The article, section and paragraph
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. All
references herein to "Article", "Sections" or
"Exhibits" shall be deemed to be references to Articles or Sections hereof or
Exhibits hereto unless otherwise indicated.
Section 9.12. COUNTERPARTS . This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 9.13. SEVERABILITY; ENFORCEMENT . The invalidity of any portion
hereof shall not affect the validity, force or effect of the remaining portions
hereof. If it is ever held that any restriction hereunder is too broad to permit
enforcement of such restriction to its fullest extent, each party agrees that a
court of competent jurisdiction may enforce such restriction to the maximum
extent permitted by law, and each party hereby consents and agrees that such
scope may be judicially modified accordingly in any proceeding brought to
enforce such restriction.
Section 9.14. ARBITRATION OF DISPUTES .
(a) Any dispute, controversy or disagreement ("DISPUTE") between the
Parties related to the obligations of the parties under this Agreement in
respect of which an amicable resolution cannot be reached shall be submitted for
mediation to a committee made up of an equal number of non-common members of
each company's Board of Directors ("COMMITTEE"). If the parties are unable to
reach an amicable resolution of a Dispute within thirty days after submission to
the Committee, then, to the maximum extent allowed by law, the Dispute shall be
submitted and resolved by final and binding arbitration in Minnesota or
Mississippi or as the parties may agree upon; provided, however, that any party
may seek injunctive relief and enforcement of any award rendered pursuant to the
arbitration provisions of this Section 9.14 by bringing a suit in any court of
competent jurisdiction. Any award issued as a result of such arbitration shall
be final and binding between the parties thereto and shall be enforceable by any
court having jurisdiction over the party against whom enforcement was sought and
application may be made to such court for judicial acceptance of the award and
order of enforcement. The fees and expenses of arbitration (including reasonable
attorneys' fees) shall be paid by the party that does not prevail in such
arbitration.
(b) ATTORNEYS' FEES. If any party to this Agreement brings an action
to enforce its rights under this Agreement, the prevailing party shall be
entitled to recover its costs and expenses, including without limitation
reasonable attorneys' fees, incurred in connection with such action, including
any appeal of such action.
(c) SPECIFIC PERFORMANCE. Nothing contained in this Section 9.14 shall
limit or restrict in any way the right or power of a party at any time to seek
injunctive relief in any court and to litigate the issues relevant to such
request for injunctive relief before such court (i) to restrain the other party
from breaching this Agreement or (ii) for specific enforcement of this Section
9.14. The parties agree that any legal remedy available to a party with respect
to a
breach of this Section 9.14 will not be adequate and that, in addition to all
other legal remedies, each party is entitled to an order specifically enforcing
this Section 9.14.
(d) CONSENT TO JURISDICTION. The Parties hereby consent to the
jurisdiction of the federal and state courts located in the State of Minnesota
for all purposes under this Agreement.
(e) CONFIDENTIALITY. Neither party nor the arbitrators may disclose
the existence or results of any arbitration under this Agreement or any evidence
presented during the course of the arbitration without the prior written consent
of both parties, except as required to fulfill applicable disclosure and
reporting obligations, or as otherwise required by law.
Section 9.15. PROMPT PAYMENT . Where the terms of this Agreement require
payment of an amount "as promptly as possible," "as soon as practicable," or "as
soon as possible," following a specified event, occurrences or date, such
payment shall be made no later than five (5) business days after such event,
occurrence or date.
[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, Company and Lakes have caused this Agreement to be
signed by their respective duly authorized officers as of the date first above
written.
GRAND CASINOS, INC.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: President and Chief Executive Officer
LAKES GAMING, INC.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Its: Chief Financial Officer