PLAN OF REORGANIZATION AND DISTRIBUTION AGREEMENT
AMONG
WMS INDUSTRIES INC.,
▇▇▇▇▇▇▇▇ HOTEL CORPORATION
AND
WHG RESORTS & CASINOS INC.
DATED AS OF
MARCH 20, 1997
TABLE OF CONTENTS
PAGE(S)
-------
ARTICLE I
DEFINITIONS............................................. 2
1.1 General.......................................................................... 2
1.2 Terms Defined Elsewhere in this Agreement........................................ 7
1.3 Exhibits, Etc.................................................................... 7
ARTICLE II
The Reorganization and Related Transactions................................. 8
2.1 The Restructuring................................................................ 8
2.2 Transfer of Assets to Hotel...................................................... 8
2.3 Cash Management.................................................................. 8
2.4 Settlement of Intercompany Loan Accounts......................................... 9
2.5 Transfers Not Effected Prior to the Distribution................................. 9
2.6 Certain other Transaction Agreements............................................. 9
2.7 Cooperation Re: Assets........................................................... 9
2.8 No Representations or Warranties; Consents....................................... 10
2.9 Conveyancing and Assumption Instruments.......................................... 10
ARTICLE III
Assumption and Satisfaction of Liabilities.................................. 11
3.1 Assumption and Satisfaction of Liabilities....................................... 11
3.2 Company Guarantees............................................................... 11
ARTICLE IV
The Distribution............................................... 11
4.1 Cooperation Prior to the Distribution............................................ 11
4.2 Company Board Action; Conditions Precedent to the
Distribution..................................................................... 12
4.3 The Distribution................................................................. 13
4.4 Cash in Lieu of Fractional Shares................................................ 13
ARTICLE V
Indemnification............................................... 14
5.1 Indemnification by the Company................................................... 14
5.2 Indemnification by Hotel......................................................... 14
5.3 Insurance Proceeds............................................................... 15
5.4 Procedure for Indemnification.................................................... 15
(i)
5.5 Remedies Cumulative.............................................................. 17
5.6 Survival of Indemnities.......................................................... 17
5.7 After-Tax Indemnification Payments............................................... 17
5.8 Characterization of Payments..................................................... 18
ARTICLE VI
Certain Additional Matters.......................................... 18
6.1 The Hotel Board.................................................................. 18
6.2 Resignations..................................................................... 18
6.3 Hotel Charter and By-Laws........................................................ 18
6.4 Certain Post-Distribution Transactions........................................... 18
6.4.1 The Company......................................................... 18
6.4.2 Hotel............................................................... 19
6.5 Corporate Services............................................................... 19
6.5.1 Services to be Provided............................................. 19
6.5.2 Billing and Payment Procedures...................................... 19
6.6 Corporate Name................................................................... 19
6.7 Hotel Rights Plan................................................................ 20
6.8 Hotel Stock Option Plan.......................................................... 20
ARTICLE VII
Access to Information and Services...................................... 20
7.1 Provision of Corporate Records................................................... 20
7.2 Access to Information............................................................ 21
7.3 Production of Witnesses.......................................................... 21
7.4 Reimbursement.................................................................... 21
7.5 Retention of Records............................................................. 21
7.6 Confidentiality.................................................................. 22
7.7 Privileged Matters............................................................... 22
ARTICLE VIII
Miscellaneous................................................ 24
8.1 Expenses......................................................................... 24
8.2 Accounting Adjustments........................................................... 24
8.3 Complete Agreement; Construction................................................. 24
8.4 Survival of Agreements........................................................... 24
8.5 Governing Law.................................................................... 25
8.6 Notices.......................................................................... 25
8.7 Amendments....................................................................... 25
8.8 Successors and Assigns........................................................... 25
8.9 Termination...................................................................... 25
8.10 Subsidiaries..................................................................... 26
8.11 No Third Party Beneficiaries..................................................... 26
(ii)
8.12 Titles and Headings.............................................................. 26
8.13 Exhibits and Schedules........................................................... 26
8.14 Legal Enforceability............................................................. 26
8.15 Arbitration of Disputes.......................................................... 26
(iii)
SCHEDULES
A. Subsidiaries of Hotel
(iv)
PLAN OF REORGANIZATION AND DISTRIBUTION AGREEMENT
PLAN OF REORGANIZATION AND DISTRIBUTION AGREEMENT (this "Agreement"),
dated as of March 20, 1997 by and among WMS Industries Inc., a Delaware
corporation (the "Company"), ▇▇▇▇▇▇▇▇ Hotel Corporation, a Delaware corporation
("▇▇▇▇▇▇▇▇") and a wholly-owned subsidiary of the Company, and WHG Resorts &
Casinos Inc. (formerly known as WMS Hotel Corporation), a Delaware corporation
("Hotel") and a wholly-owned subsidiary of ▇▇▇▇▇▇▇▇.
WHEREAS, the Company, through its subsidiaries and affiliates, (i) owns
(a) a 95% interest in ▇▇▇▇▇▇▇ de Puerto Rico Associates, Incorporated ("PPRA"),
which owns the Condado Plaza Hotel & Casino; (b) a 50% interest in ▇▇▇▇▇▇▇ de
San ▇▇▇▇ Associates, which owns the El San ▇▇▇▇ Hotel & Casino; (c) a 23.3%
ownership interest in El Conquistador Partnership L.P., which owns the El
Conquistador Resort & Country Club ((a), (b) and (c) collectively, the
"Hotels"); and (d) a 62% interest in ▇▇▇▇▇▇▇▇ Hospitality Group Inc. ("WHGI"), a
management company which manages the Hotels (collectively, the "Hotel and Casino
Business"); and (ii) designs, publishes and markets interactive entertainment
software played in both the coin-operated and home video games markets; and
designs manufacturers and sells coin-operated pinball and novelty games and
video lottery terminals and slot gaming machines and multigame casino video
machines (the "Amusement Games Business"); and
WHEREAS, the Board of Directors of the Company has determined that it
is in the best interests of the Company and the stockholders of the Company to
separate the Hotel and Casino Business on the one hand and the Amusement Games
Business on the other hand, and, in order to effect such separation, to, among
other things, cause the merger of ▇▇▇▇▇▇▇▇ (the "Merger") with and into Hotel
with Hotel being the surviving corporation in the Merger, cause the merger of
WMS Property Inc. ("WPI") with and into ESJ Hotel Corporation ("ESJ"), after the
Merger to transfer to PPRA Hotel's interests in ESJ and WHGI in exchange for
additional shares of capital stock of PPRA, and thereafter to distribute all of
the outstanding shares of common stock of Hotel as the surviving corporation of
the Merger to the holders of the Company's common stock (the "Distribution");
and
WHEREAS, in connection with the Distribution, the Company, ▇▇▇▇▇▇▇▇ and
Hotel have determined that it is necessary and desirable to set forth the
principal corporate transactions required to effect the Distribution and to set
forth other agreements that will govern certain other matters following the
Distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.1 GENERAL. As used in this Agreement, the following terms shall have
the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
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: Means with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by, or under direct or indirect
common control with, such specified Person. For purposes for this definition,
"control," when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" shall have meanings correlative to the foregoing.
Notwithstanding the foregoing, (i) the Affiliates of the Company shall not
include ▇▇▇▇▇▇▇▇ or Hotel, the Hotel Subsidiaries or any other Person which
would be an Affiliate of the Company by reason of the Company's ownership of the
capital stock of Hotel prior to the Distribution or the fact that any officer or
director of Hotel or any of the Hotel Subsidiaries shall also serve as an
officer or director of the Company or any of the Company Subsidiaries and (ii)
the Affiliates of Hotel shall not include the Company or any other Person which
would be an Affiliate of Hotel by reason of the Company's ownership of the
capital stock of Hotel prior to the Distribution or the fact that any officer or
director of Hotel or any of the Hotel Subsidiaries shall also serve as an
officer or director of the Company or any of the Company Subsidiaries.
AGENT: The Bank of New York, a distribution agent appointed by the
Company to distribute shares of Hotel Common Stock and cash in lieu of
fractional shares pursuant to the Distribution.
ASSET: Is defined in the definition of Company Assets.
CODE: The Internal Revenue Code of 1986, as amended, or any successor
legislation.
COMMISSION: The Securities and Exchange Commission.
COMPANY ASSETS: Means collectively, all of the properties, assets,
claims, contract and other rights of every kind, character and description,
whether tangible or intangible, whether real, personal or mixed, whether
accrued, contingent or otherwise, and wherever located (each, an "Asset") of the
Company, other than the Hotel Assets, including, without limitation, (i) the
capital stock of the Company Subsidiaries, (ii) the Assets relating to the
Amusement Games Business, (iii) the Company Books and Records, (iv) all of the
Assets expressly to be retained
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by, or assigned or allocated to, the Company or any of the Company Subsidiaries
under this Agreement or the other Transaction Agreements and (v) any other
Assets, absolute or contingent, of the Company and the Company Subsidiaries not
comprising Hotel Assets.
COMPANY BOARD: The Board of Directors of the Company.
COMPANY BOOKS AND RECORDS: The books and records (including
computerized records) of the Company and the Company Subsidiaries and any other
books and records which relate principally to the Company Business, are
necessary to operate the Company Business, or are required by law to be retained
by the Company or a Company Subsidiary, including, without limitation, all such
books and records relating to the Company Employees, all files relating to any
Action pertaining to the Company Liabilities, original corporate minute books,
stock ledgers and certificates and corporate seals, and all licenses, leases,
agreements and filings relating to the Company, the Company Subsidiaries or the
Company Business (but not including the Hotel Books and Records, provided that
the Company shall have access to, and have the right to obtain duplicate copies
of, the Hotel Books and Records which pertain to the Company Business in
accordance with the provisions of Article VII hereof).
COMPANY BUSINESS: Means the Amusement Games Business and any other
businesses, other than the Hotel Business, conducted by the Company or any
Company Subsidiary on the date hereof or in the future.
COMPANY COMMON STOCK: The Company common stock, par value $.50 per
share.
COMPANY EMPLOYEE: Any individual who, on or prior to the Distribution
Date, was employed by the Company or any of the Company Subsidiaries and who, on
or after the Distribution Date, or otherwise in connection with the
Distribution, is intended to be employed by the Company or a Company Subsidiary
or in a Company Business.
COMPANY GUARANTEE: Any guarantee by the Company or any Company
Subsidiary of the payment or performance of any obligation of Hotel as the
surviving corporation in the Merger, of any of the owners of the Hotels or any
Hotel Subsidiary or Affiliate under any agreement or obligation to which Hotel
or any Hotel Subsidiary or Affiliate is a party; any credit enhancement made or
supplied by the Company or any Company Subsidiary relating to any of the
foregoing and any indemnification obligations undertaken by the Company or any
Company Subsidiary for the benefit of any of the foregoing.
COMPANY LIABILITIES: (i) All of the Liabilities of the Company under or
to be retained or assumed by the Company or any Company Subsidiary pursuant to
this Agreement or any other Transaction Agreement; (ii) any Financing Obligation
of the Company and/or the Company Subsidiaries other than those relating to the
Hotel and Casino Business; (iii) all Liabilities for payment of outstanding
drafts of the Company attributable to the conduct of the Hotel Business or the
Company Business to the extent not considered a Hotel Liability existing as of
the Distribution Date; (iv) all other Liabilities arising out of or in
connection with any of the
3
Company Assets or the Company Business; and (v) all other Liabilities of the
Company and the Company Subsidiaries not constituting Hotel Liabilities.
COMPANY SUBSIDIARIES: All of the Subsidiaries of the Company as of the
Distribution Date other than Hotel and the Hotel Subsidiaries.
CONVEYANCING AND ASSUMPTION INSTRUMENTS: Collectively, the instruments
of transfer, assignment and assumption to be entered into to effect the transfer
of title to assets and the assumption of liabilities in the manner contemplated
by this Agreement and the other Transaction Agreements.
DECLARATION DATE: The date of the Company Board's declaration of the
special dividend pursuant to which the Distribution will be effected.
DISTRIBUTION DATE: The date fixed by the Company Board as the date of
the Distribution, which date shall occur promptly following the satisfaction or
waiver of each of the conditions set forth in Section hereof and which has been
initially established as April 21, 1997.
DISTRIBUTION RECORD DATE: The date established by the Company Board as
the date for the taking of a record of the holders of the Company Common Stock
entitled to participate in the Distribution, which Distribution Record Date has
been established as March 31, 1997.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
FINANCING OBLIGATIONS: All (i) indebtedness for borrowed money; (ii)
obligations evidenced by bonds, notes, debentures or similar instruments; (iii)
obligations under capitalized leases and deferred purchase arrangements; (iv)
reimbursement or other obligations relating to letters of credit or similar
arrangements; and (v) obligations to guarantee, directly or indirectly, any of
the foregoing types of obligations on behalf of others.
FORM 10: The registration statement on Form 10, and any amendments
thereto, filed by Hotel with the Commission to effect the registration of Hotel
Common Stock pursuant to the Exchange Act.
HOLDERS: The holders of record of the Company Common Stock as of the
Distribution Record Date.
HOTEL ASSETS: Means collectively, all of the Assets of Hotel including,
without limitation, (i) the capital stock of the Hotel Subsidiaries, (ii) the
Assets relating to the Hotel Business, whether now owned by the Company or any
of its subsidiaries or owned by Hotel or any of its Affiliates, (iii) the Hotel
Books and Records, (iv) all of the Assets expressly to be retained by, or
assigned or allocated to, Hotel or any of the Hotel Subsidiaries under this
Agreement or the other Transaction Agreements and (v) any other Assets, absolute
or contingent, of Hotel and the Hotel Subsidiaries not comprising Company
Assets.
4
HOTEL BOARD: The Board of Directors of Hotel.
HOTEL BOOKS AND RECORDS: The books and records (including computerized
records) of Hotel and the Hotel Subsidiaries and any other books and records
which relate principally to the Hotel Business, are necessary to operate the
Hotel Business, or are required by law to be retained by Hotel or a Hotel
Subsidiary, including, without limitation, all such books and records relating
to the Hotel Employees, all files relating to any Action pertaining to the Hotel
Liabilities, original corporate minute books, stock ledgers and certificates and
corporate seals, and all licenses, leases, agreements and filings relating to
Hotel, the Hotel Subsidiaries or the Hotel Business (but not including the
Company Books and Records, provided that Hotel shall have access to, and have
the right to obtain duplicate copies of, the Company Books and Records which
pertain to the Hotel Business in accordance with the provisions of Article VII
hereof).
HOTEL BUSINESS: The Hotel and Casino Business and any other businesses
conducted by Hotel or any Hotel Subsidiary on the date hereof or in the future.
HOTEL BY-LAWS: The by-laws of Hotel, substantially in the form of Annex
IV to the Information Statement, to be in effect on the Distribution Date.
HOTEL CHARTER: The Amended and Restated Certificate of Incorporation of
Hotel, substantially in the form of Annex III to the Information Statement, to
be in effect on the Distribution Date.
HOTEL COMMON STOCK: The Hotel voting common stock, par value $.01 per
share.
HOTEL EMPLOYEE: Any individual who, on or prior to the Distribution
Date, was employed by Hotel or any of the Hotel Subsidiaries and who, on or
after the Distribution Date, or otherwise in connection with the Distribution,
is intended to be employed by Hotel or a Hotel Subsidiary or in a Hotel
Business.
HOTEL LIABILITIES: (i) All of the Liabilities of Hotel under or to be
retained or assumed by Hotel or any Hotel Subsidiary pursuant to this Agreement
or any other Transaction Agreement; (ii) any Financing Obligation of Hotel
and/or the Hotel Subsidiaries; (iii) all Liabilities for payment of outstanding
drafts of Hotel or the Company attributable to the conduct of the Hotel Business
to the extent not considered a Company Liability existing as of the Distribution
Date; (iv) all Liabilities transferred to or assumed by Hotel or the Hotel
Subsidiaries in the Restructuring; (v) all other Liabilities arising out of or
in connection with any of the Hotel Assets or the Hotel Business; and (vi) all
other Liabilities of Hotel and the Hotel Subsidiaries not constituting Company
Liabilities including, without limitation, the obligations of the Company to
purchase shares of WHGI upon exercise of a put option agreement by American
National Bank and Trust Company.
HOTEL SUBSIDIARIES: All of the Subsidiaries listed on Schedule A
annexed hereto and any predecessors thereof.
5
IRS: The Internal Revenue Service.
INFORMATION STATEMENT: The information statement to be distributed to
the Holders pursuant to Regulation 14C promulgated under the Exchange Act.
INSURANCE PROCEEDS: Those moneys (i) received by an insured from an
insurance carrier or (ii) paid by an insurance carrier on behalf of an 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.
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.
NYSE: The New York Stock Exchange.
NO-ACTION LETTER: The No-Action Letter in response to the amended
request letter filed on behalf of the Company with the Commission on February
21, 1997 with respect to certain federal securities law matters pertaining to
the Distribution.
PERSON: Any individual, corporation, partnership, limited liability
company, association, trust, estate or other entity or organization, including
any governmental entity or authority.
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.
PRIVILEGED INFORMATION: All information as to which the Company, Hotel
or any of their Subsidiaries are entitled to assert the protection of a
Privilege.
RULING REQUEST: The private letter ruling request filed on behalf of
the Company with the IRS on October 9, 1996, as supplemented and amended from
time to time, with respect to certain tax aspects of the Distribution.
SECURITIES ACT: The Securities Act of 1933, as amended.
SUBSIDIARIES: The term "subsidiary" of an entity shall, unless
otherwise indicated, be deemed to refer to any other entity at least 50% of the
stock or other voting interests of which are owned directly or indirectly by
such entity.
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TAX SHARING AGREEMENT: The Tax Sharing Agreement to be executed by the
Company and Hotel and dated as of the Distribution Date.
TRANSACTION AGREEMENTS: All of the written agreements, instruments,
understandings, assignments or other arrangements entered into in connection
with the transaction contemplated hereby, including, without limitation, this
Agreement, the Conveyancing and Assumption Instruments and the Tax Sharing
Agreement.
1.2 TERMS DEFINED ELSEWHERE IN THIS AGREEMENT. Each of the following
terms is defined in the Section of this Agreement set forth opposite such term
below:
TERM SECTION
Agreement Page 1, Preamble
Amusement Games Business Page 1, 1st Recital
Company Page 1, Preamble
Company Indemnifiable Loss 5.2
Company Indemnifiable Losses 5.2
Company Indemnitees 5.2
Condado Plaza Preferred Stock 2.1
Distribution Page 1, 2nd Recital
ESJ Page 1, 2nd Recital
Hotel Page 1, Preamble
Hotels Page 1, 1st Recital
Hotel and Casino Business Page 1, 1st Recital
Hotel Indemnifiable Loss 5.1
Hotel Indemnifiable Losses 5.1
Hotel Indemnitees 5.1
Hotel Rights 6.7
Hotel Rights Plan 6.7
Indemnifiable Losses 5.2
Indemnifying Party 5.3
Indemnitee 5.3
Information 7.2
Merger Page 1, 2nd Recital
PPRA Page 1, 1st Recital
Restructuring 2.1
Third-Party Claim 5.4.1
WHGI Page 1, 1st Recital
WPI Page 1, 2nd Recital
1.3 EXHIBITS, ETC. References to an "Exhibit" or to a "Schedule" are,
unless otherwise specified, to one of the Exhibits or Schedules attached to this
Agreement, and references to a "Section" are, unless otherwise specified, to one
of the Sections of this Agreement.
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ARTICLE II
THE REORGANIZATION AND RELATED TRANSACTIONS
2.1 THE RESTRUCTURING. Prior to the Distribution, the Company will
cause the following transactions to occur, but not necessarily in the order
listed: (i) the Merger of ▇▇▇▇▇▇▇▇ with and into Hotel; (ii) the Company to
contribute to Hotel's capital $4,100,000 of 8% Class A Preferred Stock of PPRA
(the "Condado Plaza Preferred Stock"), together with accrued and unpaid
dividends and net intercompany accounts due the Company from the Hotel and
Casino Business (approximately $4,500,000 as of December 31, 1996) excluding the
amount due from the Company to ESJ; (iii) the Company to pay its outstanding
intercompany receivable due ESJ (approximately $5,077,000 at December 31, 1996);
(iv) the Company to make a capital contribution to Hotel of an amount when added
to the amount of the intercompany receivable due ESJ equals $6,000,000; (v) PPRA
to pay all accrued and unpaid dividends on the Condado Plaza Preferred Stock and
redeem a portion of such shares for an aggregate redemption price exclusive of
dividends of approximately $2,050,000 (vi) WHGI to pay dividends of not less
than $3,500,000 to the holders of WHGI common stock (vii) WPI to merge with and
into ESJ; and (viii) Hotel to transfer to PPRA all of the common stock of ESJ
and the capital stock of WHGI owned by it in consideration of the issuance of
additional shares of capital stock of PPRA. The foregoing transactions are
hereinafter collectively referred to as the "Restructuring."
2.2 TRANSFER OF ASSETS TO HOTEL. Following the Restructuring and prior
to the Distribution, the Company shall take or cause to be taken all actions
necessary to cause the transfer, assignment, delivery and conveyance to Hotel of
all of the Company's right, title and interest in and to any Assets which are to
become Hotel Assets and which are owned by Hotel or any Hotel Subsidiary.
2.3 CASH MANAGEMENT. The Company maintains separate cash management
systems, bank accounts, lockboxes, cash balances and other investments with
respect to the Hotel Business and the Company Business. From and after the
Distribution Date, Hotel shall be entitled to all such accounts, lockboxes,
balances and investments related to the Hotel Business and the Company shall be
entitled to all such accounts, lockboxes, balances and investments related to
the Company Business. Following the Distribution Date, (i) the Company shall,
and shall cause its Subsidiaries and Affiliates to, remit to Hotel, no less
frequently than weekly, any amounts (net of returned checks and similar items)
received by any of them on or after the Distribution Date which constitute Hotel
Assets and (ii) Hotel shall, and shall cause its Subsidiaries and Affiliates to,
remit to the Company, no less frequently than weekly, any amounts (net of
returned checks and similar items) received by any of them on or after the
Distribution Date which constitute Company Assets.
8
2.4 SETTLEMENT OF INTERCOMPANY LOAN ACCOUNTS. All intercompany loan
accounts between the Company and Hotel or any Hotel Subsidiary will be settled
and discharged, effective as of the Distribution Date, as set forth in the
Information Statement.
2.5 TRANSFERS NOT EFFECTED PRIOR TO THE DISTRIBUTION. To the extent
that any transfers contemplated by this Article II shall not have been
consummated on or prior to the Distribution Date, the parties hereto 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; provided, however, that the Company and
Hotel and their respective Subsidiaries shall cooperate to seek to obtain any
necessary consents or approvals for the transfer of all Assets contemplated to
be transferred or assumed pursuant to this Article II. In the event that such
transfer of Assets or the assumption of any Liabilities has not been
consummated, effective as of the Distribution Date, the party retaining such
Asset shall 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 action as may be required, in order to
place the parties, insofar as is reasonably possible, in the same position as
would have existed had such Asset been transferred or such Liability assumed as
contemplated hereby. As and when any such Asset becomes transferable or
Liability becomes assumable, such transfer shall be effected forthwith. The
parties agree that, except as set forth in this Section 2.5, 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, privileges, duties, obligations and responsibilities incident 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.
2.6 CERTAIN OTHER TRANSACTION AGREEMENTS. Prior to the Distribution
Date, the Company and Hotel shall enter into, and/or (where applicable) shall
cause their respective Subsidiaries to enter into, the Tax Sharing Agreement and
any other Transaction Agreements necessary or appropriate in connection with the
transactions contemplated hereby and thereby. In the event of a conflict between
the terms of this Agreement and the terms of any of such other Transaction
Agreements, the terms of such other Transaction Agreements shall govern.
2.7 COOPERATION RE: ASSETS. In the case that at any time after the
Distribution Date, Hotel reasonably determines that any of the Company Assets
are essential for the conduct of the Hotel Business, or the Company reasonably
determines that any of the Hotel Assets are essential for the conduct of the
Company Business, and the nature of such Assets makes it impracticable for Hotel
or the 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 Transaction Agreements, then Hotel (with respect to the
Hotel Assets) and the Company (with respect to the Company Assets) shall
cooperate to make such Assets available to the other party on commercially
9
reasonable terms, as may be reasonably required for such party to maintain
normal business operations (provided that such Assets shall be required to be
made available only until such time as the other party may reasonably obtain
substitute Assets or make alternative arrangements on commercially reasonable
terms to permit it to maintain normal business operations). The parties do not
anticipate that there are any such Assets at this time.
2.8 NO REPRESENTATIONS OR WARRANTIES; CONSENTS. Each of the parties
hereto understands and agrees that, except as expressly provided to the contrary
in this Agreement or any other Transaction Agreement, no party hereto is, in
this Agreement or in any other Transaction Agreement contemplated by this
Agreement or otherwise, representing or warranting in any way (i) as to the
value or freedom from encumbrance of, or any other matter concerning, any Assets
of such party or (ii) as to the legal sufficiency to convey title to any Asset
transferred pursuant to this Agreement or any other Transaction Agreement
including, without limitation, any Conveyancing and Assumption Instrument. It is
also agreed and understood that there are no warranties whatsoever, express or
implied, given by either party to this Agreement, as to the condition, quality,
merchantability or fitness of any of the Assets, businesses or other rights
either transferred to or retained by the parties, as the case may be, and all
such Assets, businesses or other rights shall be "as is, where is" and "with all
faults"; provided, however, that the absence of warranties given by the parties
shall not negate the allocation of Liabilities under this Agreement and shall
have no effect on any manufacturers', sellers' or other third parties'
warranties which are intended to be transferred with such Assets. Each party
hereto understands and agrees that, except as expressly provided to the contrary
in any other Transaction Agreement, no party hereto is, in this Agreement or in
any other agreement or document contemplated by this 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 or any
other agreement or document contemplated by this Agreement or otherwise will
satisfy the provisions of any or all applicable laws or judgments or other
instruments relating to such Assets, it being agreed and understood that the
party to which any Assets are transferred shall bear the economic and legal risk
that any necessary consents or approvals are not obtained or that any
requirements of laws or judgments are not complied with. Notwithstanding the
foregoing, the parties shall use good faith efforts to obtain all consents and
approvals, 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, including, without
limitation, all applicable regulatory filings. In case at any time after the
Distribution Date any further actions are 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 actions.
2.9 CONVEYANCING AND ASSUMPTION INSTRUMENTS. In connection with the
Restructuring, the assignment of Assets and the assumption of Liabilities
contemplated by this Agreement and any other Transaction Agreement, 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 shall be effected by
10
means of delivery of stock certificates and executed stock powers and notation
on the stock record books of the corporation or other legal entities involved
and, to the extent required by applicable law, by notation on public registries.
ARTICLE III
ASSUMPTION AND SATISFACTION OF LIABILITIES
3.1 ASSUMPTION AND SATISFACTION OF LIABILITIES. Except as set forth in
any of the Transaction Agreements, effective as of and after the Distribution
Date, (i) the Company shall, and/or shall cause the Company Subsidiaries to
assume, pay, perform and discharge in due course all of the Company Liabilities
and (ii) Hotel shall, and/or shall cause the Hotel Subsidiaries, to assume, pay,
perform and discharge in due course all of the Hotel Liabilities.
3.2 COMPANY GUARANTEES.
3.2.1 Hotel shall use its reasonable best efforts to obtain
the release of any Company Guarantee existing prior to the Distribution Date.
3.2.2 As set forth in Section hereof, Hotel will indemnify and
hold harmless any Company Indemnitees (as hereinafter defined) from and against
any Liability arising under any Company Guarantee. In connection with the
foregoing, in the event Hotel indemnifies any Company Indemnitee with respect to
any Liability arising under any Company Guarantee, the Company hereby agrees to
take all actions necessary to cause the transfer, assignment, delivery and
conveyance to Hotel of any and all collateral which has been pledged to, and all
security interests in any collateral granted to, the Company which secure any
third party obligations to indemnify the Company for any Liability arising under
the Company Guarantees.
ARTICLE IV
THE DISTRIBUTION
4.1 COOPERATION PRIOR TO THE DISTRIBUTION.
4.1.1 The Company and Hotel shall prepare, and Hotel shall
file with the Commission, the Form 10, which shall include the portions of the
Information Statement relating to the Distribution and to Hotel. The Company and
Hotel shall also prepare, and the Company shall mail to the Holders, the
Information Statement which shall set forth appropriate disclosure concerning
the Company, Hotel, the Distribution and other matters. The Company and Hotel
11
shall use their reasonable best efforts to cause the Form 10 to become effective
under the Exchange Act.
4.1.2 The Company and Hotel 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 other Transaction
Agreements.
4.1.3 The Company and Hotel shall prepare, and Hotel shall
file and pursue, an application to permit the listing of Hotel Common Stock on
the NYSE or any stock exchange mutually acceptable to the Company and Hotel.
4.1.4 The Company and Hotel shall use their reasonable best
efforts to obtain the rulings contemplated by the Ruling Request in form and
substance satisfactory to the Company Board as advised by counsel.
4.1.5 The Company and Hotel shall use their reasonable best
efforts to obtain the No-Action Letter in form and substance satisfactory to the
Company Board as advised by counsel.
4.1.6 The Company and Hotel shall use their reasonable best
efforts to obtain any third-party consents or approvals necessary or desirable
in connection with the transactions contemplated by this Agreement and the other
Transaction Agreements.
4.1.7 The Company and Hotel shall use their 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 by this Agreement and the other Transaction
Agreements.
4.2 COMPANY BOARD ACTION; CONDITIONS PRECEDENT TO THE DISTRIBUTION. The
Company Board shall, in its discretion, establish the Declaration Date, the
Distribution 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 have been satisfied:
4.2.1 The Ruling Request shall have been granted in form and
substance satisfactory to the Company Board, in its sole discretion, and shall
be in full force and effect;
4.2.2 The transactions contemplated by Section 2.1 hereof
shall have been consummated in all material respects;
4.2.3 The No-Action Letter shall have been issued in form and
substance satisfactory to the Company Board, in its sole discretion, and shall
be in full force and effect;
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4.2.4 The Form 10 shall have been declared effective by the
Commission under the Exchange Act and no stop order shall be in effect with
respect thereto;
4.2.5 The Hotel Common Stock shall have been approved for
listing on the NYSE or other exchange subject to official notice of issuance;
4.2.6 The Hotel Board, comprised as contemplated by Section
6.1 hereof, shall have been elected by the Company as sole stockholder of Hotel,
and the Hotel Certificate and the Hotel By-Laws, as each will be in effect after
the Distribution, shall have been adopted and shall be in effect;
4.2.7 ▇▇▇▇▇▇▇▇▇▇▇ & Co., Inc. shall have delivered an opinion
to the Company Board, dated as of the Declaration Date, substantially in the
form of Annex I to the Information Statement and such opinion shall not have
been withdrawn;
4.2.8 Houlihan, Lokey, ▇▇▇▇▇▇ & Zukin, Inc. shall have
delivered an opinion to the Company Board, dated as of the Declaration Date,
substantially in the form of Annex II to the Information Statement and such
opinion shall not have been withdrawn;
4.2.9 The Company and Hotel shall have entered into the other
Transaction Agreements; and
4.2.10 There shall not be in effect any statute, rule,
regulation or order of any court, or governmental or regulatory authority which
prohibits or makes illegal the transactions contemplated by this Agreement and
the other Transaction Agreements;
provided, however, that (i) any such condition may be waived by the Company
Board in its sole discretion, and (ii) the satisfaction of such conditions shall
not create any obligation on the part of the Company or Hotel to effect the
Distribution, in any way limit the Company's power of amendment and termination
set forth in Sections 8.7 and 8.9 hereof or alter the consequences of any
such termination from those specified in Section 8.9 hereof.
4.3 THE DISTRIBUTION. On the Distribution Date, subject to the
conditions and rights of termination set forth in this Agreement, the Company
shall endorse in blank and deliver to the Agent share certificates representing
all of the then outstanding shares of Hotel Common Stock owned by the Company.
The Company shall instruct the Agent to distribute to the Holders, on or as soon
as practicable following the Distribution Date, certificates representing one
(1) share of Hotel Common Stock for every four (4) shares of Company Common
Stock held by such Holders and cash in lieu of fractional shares of Hotel Common
Stock as provided in Section hereof. Hotel agrees to provide all share
certificates that the Agent shall require in order to effect the Distribution.
4.4 CASH IN LIEU OF FRACTIONAL SHARES. No certificates or scrip
representing fractional interests in shares of Hotel Common Stock shall be
issued as part of the Distribution
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and in lieu thereof, each Holder who would otherwise be entitled to receive a
fractional share of Hotel Common Stock will receive cash for such fractional
share. The Company shall instruct the Agent to determine the number of whole
shares and fractional shares of Hotel Common Stock allocable to each Holder. The
Company shall instruct the Agent to aggregate all such fractional shares into
whole shares and sell the whole shares obtained thereby in the open market as
soon as practicable following the Distribution Date at the then prevailing
prices on behalf of the Holders who otherwise would be entitled to receive
fractional share interests and to distribute to each such Holder such Holder's
ratable share of the proceeds of such sale as soon as practicable after the
Distribution Date. The Company shall bear the costs of commissions, fees and
expenses of the Agent incurred in connection with such sales.
ARTICLE V
INDEMNIFICATION
5.1 INDEMNIFICATION BY THE COMPANY. Except as otherwise expressly set
forth in any other Transaction Agreement, the Company shall indemnify, defend
and hold harmless Hotel and each of the Hotel Subsidiaries, and each of their
respective directors, officers, employees, agents and Affiliates and each of the
heirs, executors, successors and assigns of any of the foregoing (the "Hotel
Indemnitees") from and against the Company Liabilities and any and all losses,
Liabilities and damages, including, without limitation, the costs and expenses
of any and all Actions, threatened Actions, demands, assessments, judgments,
settlements and compromises relating thereto and attorneys' fees and any and all
expenses whatsoever reasonably incurred in investigating, preparing or defending
against any such Actions or threatened Actions (collectively, "Hotel
Indemnifiable Losses" and, individually, a "Hotel Indemnifiable Loss") of the
Hotel Indemnitees arising out of or due to the failure or alleged failure of the
Company or any of its Subsidiaries or Affiliates to (i) pay, perform or
otherwise discharge in due course any of the Company Liabilities or (ii) comply
with the provisions of Section 5.4 hereof.
5.2 INDEMNIFICATION BY HOTEL. Except as otherwise expressly set forth
in any other Transaction Agreement, Hotel shall indemnify, defend and hold
harmless the Company and each of the Company Subsidiaries, and each of their
respective 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 the Hotel Liabilities, any Liability arising
under any Company Guarantee and any and all losses, Liabilities, damages,
including, without limitation, the costs and expenses of any and all Actions,
threatened Actions, demands, assessments, judgments, settlements and compromises
relating thereto and attorneys' fees and any and all expenses whatsoever
reasonably incurred in investigating, preparing or defending against any such
Actions or threatened Actions (collectively, "Company Indemnifiable Losses" and,
individually, a "Company Indemnifiable Loss") of the Company Indemnitees arising
out of or due to the failure or alleged failure of Hotel or any of its
Subsidiaries or Affiliates to (i) pay, perform or otherwise discharge in due
course any of the Hotel Liabilities or (ii) comply
14
with the provisions of Section 5.4 hereof. The Hotel Indemnifiable Losses and
the Company Indemnifiable Losses are collectively referred to as the
"Indemnifiable Losses."
5.3 INSURANCE PROCEEDS. The amount which any party (an "Indemnifying
Party") is or may be required to pay to any other Person (an "Indemnitee")
pursuant to Sections 5.1 and 5.2 hereof shall be reduced (including, without
limitation, retroactively) by any Insurance Proceeds or other amounts actually
recovered by or on behalf of such Indemnitee in reduction of the related
Indemnifiable Loss. If an Indemnitee 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 Indemnitee
shall pay to such Indemnifying Party a sum equal to the amount of such Insurance
Proceeds or other amounts actually received.
5.4 PROCEDURE FOR INDEMNIFICATION.
5.4.1 Except as may be set forth in any other Transaction Agreement, if
an Indemnitee shall receive notice or otherwise learn of the assertion by a
Person who is not a party to this Agreement or to any of the Transaction
Agreements of any claim or of the commencement by any such Person of any Action
(a "Third-Party Claim") with respect to which an Indemnifying Party may be
obligated to provide indemnification pursuant to this Agreement, such Indemnitee
shall give such Indemnifying Party written notice thereof promptly after
becoming aware of such Third-Party Claim; provided, that the failure of any
Indemnitee to give notice as required by this Section 5.4 shall not relieve the
Indemnifying Party of its obligations under this Article V, except to the extent
that such Indemnifying Party is 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 or may be sustained by such Indemnitee.
5.4.2 An Indemnifying Party may elect to defend or to seek to
settle or compromise, at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third-Party Claim, provided that the
Indemnifying Party must confirm in writing that it agrees that the Indemnitee is
entitled to indemnification hereunder in respect of such Third-Party Claim.
Within 30 days after the receipt of notice from an Indemnitee in accordance with
Section 5.4.1 hereof (or sooner, if the nature of such Third-Party Claim so
requires), the Indemnifying Party shall notify the Indemnitee of its election
whether to assume responsibility for such Third-Party Claim (provided that if
the Indemnifying Party does not so notify the Indemnitee of its election within
30 days after receipt of such notice from the Indemnitee, the Indemnifying Party
shall be deemed to have elected not to assume responsibility for such Third-
Party Claim), and such Indemnitee shall cooperate in the defense, settlement or
compromise of such Third-Party Claim. After notice from an Indemnifying Party to
an Indemnitee of its election to assume responsibility for a Third-Party Claim,
such Indemnifying Party shall not be liable to such Indemnitee under this
Article V for any legal or other expenses (except expenses approved in advance
by the Indemnifying Party) subsequently incurred by such Indemnitee in
connection with the defense thereof; provided, however, that if the defendants
or parties against
15
which relief is sought in any such claim include both the Indemnifying Party and
one or more Indemnitees and in such Indemnitees' reasonable judgment a conflict
of interest between such Indemnitees and such Indemnifying Party exists in
respect of such claim, such Indemnitees 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. If an Indemnifying
Party elects not to assume responsibility for a Third-Party Claim (which
election may be made only in the event of a good faith dispute that a claim was
inappropriately tendered under Section 5.1 or 5.2 hereof, as the case may be)
such Indemnitee may defend or (subject to the following sentence) seek to
compromise or settle such Third-Party Claim. Notwithstanding the foregoing, an
Indemnitee 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 assume all past
and future responsibility for the claim, including reimbursing the Indemnitee
for prior expenditures in connection with the claim, or (ii) to disapprove the
settlement and continue to refrain from participation in the defense of the
claim, in which event the Indemnifying Party shall have no further right to
contest the amount or reasonableness of the settlement if the Indemnitee elects
to proceed therewith, or (iii) to approve the amount of the settlement,
reserving the Indemnifying Party's right to contest the Indemnitee's right to
indemnity, or (iv) to approve and agree to pay the settlement. In the event the
Indemnifying Party makes no response to such written notice from the Indemnitee,
the Indemnifying Party shall be deemed to have elected option (ii).
5.4.3 If an Indemnifying Party chooses to defend or to seek to
compromise any Third-Party Claim, the Indemnitee shall make available to such
Indemnifying Party any personnel and any books, records or other documents
within its control or which it otherwise has the ability to make available that
are necessary or appropriate for such defense or compromise.
5.4.4 Notwithstanding anything else in this Section 5.4 to the
contrary, an Indemnifying Party shall not settle or compromise any Third-Party
Claim unless such settlement or compromise contemplates as an unconditional term
thereof the giving by such claimant or plaintiff to the Indemnitee of a written
release from all liability in respect of such Third-Party Claim (and provided
further that such settlement may not provide for any non-monetary relief by
Indemnitee without the written consent of Indemnitee) and unless such settlement
or compromise does not involve any new or additional contractual or other
burdens on the Indemnitee. In the event the Indemnitee shall notify the
Indemnifying Party in writing that such Indemnitee declines to accept any such
settlement or compromise, such Indemnitee may continue to contest such
Third-Party Claim, free of any participation by such Indemnifying Party, at such
Indemnitee's sole expense. In such event, the obligation of such Indemnifying
Party to such Indemnitee with respect to such Third-Party Claim shall be equal
to (i) the costs and expenses of such Indemnitee prior to the date such
Indemnifying Party notifies such Indemnitee of the offer to settle or compromise
(to the extent such costs and expenses are otherwise indemnifiable hereunder)
plus (ii) the lesser of (a) the amount of any offer of settlement or compromise
which such Indemnitee declined to accept and (b) the actual out-of-pocket amount
such Indemnitee is
16
obligated to pay subsequent to such date as a result of such Indemnitee's
continuing to pursue such Third-Party Claim.
5.4.5 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 Indemnitee 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
Indemnitee shall be free to pursue such remedies as may be available to such
party under applicable law or under this Agreement.
5.4.6 In addition to any adjustments required pursuant to
Section 5.3 hereof, 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 Indemnitee to
the Indemnifying Party.
5.4.7 In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third-Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right
or claim relating to such Third-Party Claim against any claimant or plaintiff
asserting such Third-Party Claim. Such Indemnitee 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.
5.5 REMEDIES CUMULATIVE. The remedies provided in this Article V shall
be cumulative and shall not preclude assertion by any Indemnitee of any other
rights or the seeking of any and all other remedies against any Indemnifying
Party.
5.6 SURVIVAL OF INDEMNITIES. The obligations of each of the Company and
Hotel 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.
5.7 AFTER-TAX INDEMNIFICATION PAYMENTS. Except as otherwise expressly
provided herein or in any other Transaction Agreement, any indemnification
payment made by either party under this Article V shall give effect to, and be
reduced by the value of, any and all applicable deductions, losses, credits,
offsets or other items for federal, state or other tax purposes attributable to
the payment of the indemnified liability by the Indemnitee in a manner
consistent with the treatment of tax indemnity payments under the Tax Sharing
Agreement.
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5.8 CHARACTERIZATION OF PAYMENTS. Any payment (other than interest
thereon) made by either party under this Article V shall be treated by all
parties for tax purposes to the extent permitted by law, and for accounting
purposes to the extent permitted by generally accepted accounting principles, as
non-taxable dividend distributions or capital contributions made prior to the
close of business on the Distribution Date.
ARTICLE VI
CERTAIN ADDITIONAL MATTERS
6.1 THE HOTEL BOARD. Hotel and the Company shall take all actions which
may be required to elect or otherwise appoint, as of the Distribution Date, the
following five persons as directors of Hotel:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
6.2 RESIGNATIONS. Hotel shall cause all of its directors, officers and
Hotel Employees to resign, effective as of the Distribution Date, from all
boards of directors or similar governing bodies of the Company and the Company
Subsidiaries or Affiliates on which they serve, and from all positions as
officers and/or employees of the Company and the Company Subsidiaries on which
they serve, except that (i) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall continue to serve as a
director and chairman of the Company, as a director of Midway Games Inc., as a
director, chairman and an executive officer of Hotel and as a director, chairman
and/or executive officer of one or more of the Hotel Subsidiaries and Affiliates
and (ii) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ shall serve as a consultant to the Company. The Company
shall cause all of its directors, officers and Company Employees to resign from
all boards of directors or similar governing bodies of Hotel or any Hotel
Subsidiary or Affiliate on which they serve and from all positions as officers
and/or employees of Hotel and the Hotel Subsidiaries except to the extent
specified in the preceding sentence and except to the extent specifically
requested by Hotel.
6.3 HOTEL CHARTER AND BY-LAWS. Prior to the Distribution Date, the
Company shall approve and Hotel shall adopt the Hotel Charter and the Hotel
By-Laws and shall file the Hotel Charter with the Secretary of State of the
State of Delaware.
6.4 CERTAIN POST-DISTRIBUTION TRANSACTIONS.
6.4.1 THE COMPANY. The Company shall, and shall cause each of
the Company Subsidiaries to, comply with each representation and statement made,
or to be made, to any taxing authority in connection with the Ruling Request
granted by the IRS or any other
18
ruling obtained, by Hotel and the Company acting together, from any such taxing
authority with respect to any transaction contemplated by this Agreement or any
other Transaction Agreement.
6.4.2 HOTEL. Hotel shall, and shall cause each of the Hotel
Subsidiaries to, comply with each representation and statement made, or to be
made, to any taxing authority in connection with the Ruling Request granted by
the IRS or any other ruling obtained, by Hotel and the Company acting together,
from any such taxing authority with respect to any transaction contemplated by
this Agreement.
6.5 CORPORATE SERVICES.
6.5.1 SERVICES TO BE PROVIDED. For a period of one year from
and after the Distribution Date, the Company will provide such corporate
secretarial, financial and administrative advice and assistance as may be
reasonably requested by Hotel and the Hotel Subsidiaries regarding the Hotel
Business. Hotel will retain its own attorneys to perform all of its other
required legal work, including its public company compliance work. The cost of
any financial services and other administrative services, including corporate
secretarial services, will be charged to Hotel based upon the Company's estimate
of the time devoted to these matters and the actual cost thereof to the Company
based upon the individual's base salary.
6.5.2 BILLING AND PAYMENT PROCEDURES. Within 15 days after the
end of each month, the Company shall provide Hotel with a statement of estimated
charges for services rendered to Hotel during the preceding month under this
Agreement, together with a reasonably detailed explanation of such charges.
Hotel shall pay such charges within five days after receipt of such statement.
If Hotel disputes the accuracy of any explanation submitted by the Company,
Hotel shall nevertheless pay the invoiced charges on a timely basis, but Hotel
may advise the Company that it disputes such charges. If the parties cannot come
to a satisfactory agreement concerning the charges within 60 days of the invoice
with respect thereto, the dispute shall be submitted to a "Big Six" accounting
firm mutually acceptable to Hotel and the Company for resolution, whose decision
shall be final. If Hotel fails to advise the Company of such dispute within 30
days after receipt of the invoice, Hotel shall be deemed to accept such charges.
6.6 CORPORATE NAME. Effective as of the Distribution Date, the Company
shall cause the Hotel Subsidiaries to eliminate any reference to the names "WMS"
from their respective corporate names. Effective [45 days] following the
Distribution Date, Hotel shall cause the Hotel Subsidiaries to remove or
obliterate all trade names, trademarks and logos related to such name from all
signs, purchase orders, invoices, sales orders, labels, letterheads, and other
materials used by the Hotel Subsidiaries. Notwithstanding anything herein to the
contrary, Hotel and the Hotel Subsidiaries shall have the right to continue to
use the "▇▇▇▇▇▇▇▇" name in connection with the ownership and management of
hotels and casinos but will not use the "▇▇▇▇▇▇▇▇" name as a corporate name,
except WHGI, and will not use the "▇▇▇▇▇▇▇▇" name outside its business of owning
and managing hotels and casinos. The Company hereby agrees not to use the
"▇▇▇▇▇▇▇▇" name in the future in connection with the ownership and management of
hotels and casinos.
19
6.7 HOTEL RIGHTS PLAN. Prior to the Distribution Date, the Hotel Board
may elect, in its sole discretion, to recommend that Hotel adopt a stockholder
rights plan (the "Hotel Rights Plan"). The Hotel Rights Plan will provide for
the distribution of preferred share purchase rights ("Hotel Rights") with
respect to each share of Hotel Common Stock. The Hotel Rights will be attached
to the Hotel Common Stock, unless and until certain events occur. If certain
events occur relating to the acquisition by an acquiring person of Hotel Common
Stock, or a merger or other combination of Hotel with an acquiring person, the
Hotel Rights will entitle holders of Hotel Common Stock (other than the
acquiring person) to purchase either Hotel Common Stock or common stock of the
acquiring person at a discount. The specific terms of the Hotel Rights will be
determined by the Hotel Board consistent with the description thereof in the
Information Statement.
6.8 HOTEL STOCK OPTION PLAN. Prior to the Distribution Date, the
Company Board shall, and shall cause the Board of Directors of ▇▇▇▇▇▇▇▇ to,
authorize and approve the 1997 Stock Option Plan of Hotel in the form of Annex V
to the Information Statement.
ARTICLE VII
ACCESS TO INFORMATION AND SERVICES
7.1 PROVISION OF CORPORATE RECORDS.
7.1.1 The Company shall arrange as soon as practicable
following the Distribution Date for the delivery to Hotel, at Hotel's cost, of
the Hotel Books and Records in its possession, except to the extent such items
are already in the possession of Hotel or a Hotel Subsidiary or on premises
included in the Hotel Assets. Such records shall be the property of Hotel, but
shall be available to the Company for review and duplication until the Company
shall notify Hotel in writing that such records are no longer of use to the
Company. The Company may also retain copies of any of such records relating to
Actions commenced against the Company and its Affiliates.
7.1.2 Hotel shall arrange as soon as practicable following the
Distribution Date for the delivery to the Company, at the Company's cost, of the
Company Books and Records in its possession (if any) to the extent such items
are not already in the possession of the Company or on premises included in the
Company Assets. Such records shall be the property of the Company, but shall be
available to Hotel for review and duplication until Hotel shall notify the
Company in writing that such records are no longer of use to Hotel. Hotel may
also retain copies of any of such records relating to Actions commenced against
Hotel and its Affiliates.
7.1.3 The originals of any documents containing information
with respect to the Company and its Subsidiaries on a consolidated basis
(including accounting, tax and financial records) shall be retained by the
Company. Copies of any such documents shall be delivered
20
to Hotel in accordance with Section 7.1.1 hereof. Costs of duplicating such
documents shall be allocated 50% to Hotel and 50% to the Company.
7.2 ACCESS TO INFORMATION. From and after the Distribution Date, the
Company shall afford to Hotel and its authorized accountants, counsel and other
designated representatives reasonable access and duplicating rights during
normal business hours to all records, books, contracts, instruments, computer
data and other data and information (collectively, "Information") within the
Company's possession and shall use reasonable efforts to give to Hotel and its
authorized accountants, counsel and other designated representatives access to
persons or firms possessing Information, insofar as such access is reasonably
required by Hotel and subject to appropriate restrictions for confidential
Information. Similarly, Hotel shall afford to the Company and its authorized
accountants, counsel and other designated representatives reasonable access and
duplicating rights during normal business hours to Information within Hotel's
possession and shall use reasonable efforts to give to the Company and its
authorized accountants, counsel and other designated representatives access to
persons or firms possessing Information, insofar as such access is reasonably
required by the Company and subject to appropriate restrictions for confidential
Information. Information may be requested under this Article VII for the
legitimate business purpose of either party including, without limitation,
audit, accounting, claims, 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.
7.3 PRODUCTION OF WITNESSES. At all times from and after the
Distribution Date, each of the Company and Hotel shall use reasonable efforts to
make available to the other, upon written request its and its Subsidiaries'
officers, directors, employees and agents as witnesses to the extent that such
persons may reasonably be required in connection with any Action.
7.4 REIMBURSEMENT. Except to the extent otherwise contemplated by any
other Transaction Agreement, a party providing Information or witness services
to the other party under this Article VII shall be entitled to receive from the
recipient, upon the presentation of invoices therefor, payments for such amounts
(at cost), relating to salaries, supplies, disbursements and other direct
out-of-pocket expenses and direct and indirect expenses of employees who are
witnesses or otherwise furnish assistance (at cost) as may be reasonably
incurred in providing such Information or witness services.
7.5 RETENTION OF RECORDS. Except as otherwise required by law or agreed
to in writing, each of the Company and Hotel may destroy or otherwise dispose of
any of the Information at any time after the tenth anniversary of this
Agreement, provided that, prior to such destruction or disposal, (a) it shall
provide not less than 90 days' prior written notice to the other, specifying in
reasonable detail the Information proposed to be destroyed or disposed of and
(b) 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
21
arrange for the delivery of such of the Information as was requested at the
expense of the party requesting such Information.
7.6 CONFIDENTIALITY. Each of the Company and the Company Subsidiaries
on the one hand, and Hotel and the Hotel Subsidiaries on the other hand, shall
hold, and shall cause its directors, employees, agents, Affiliates, 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
(a) in the public domain through no fault of such party or (b) 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, bankers and other consultants and advisors, unless compelled to
disclose by judicial or administrative process or, as 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 Company and Hotel, (y) any contractual agreement to which
the Company or Hotel are currently parties or (z) in exercise of either party's
rights hereunder.
7.7 PRIVILEGED MATTERS. Hotel and the Company recognize that 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 Hotel
and the Company and that both Hotel and the Company 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:
7.7.1 Hotel shall be entitled, in perpetuity, to control the
assertion or waiver of all Privileges in connection with Privileged Information
which relates solely to the Hotel Business, whether or not the Privileged
Information is in the possession of or under the control of Hotel or the
Company. Hotel 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 Hotel
Liabilities, now pending or which may be asserted in the future, in any Actions
initiated against or by Hotel, whether or not the Privileged Information is in
the possession of or under the control of Hotel or the Company.
7.7.2 The 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 Company Business, whether or not the
Privileged Information is in the possession of or under the control of Hotel or
the Company. The Company 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 Company
Liabilities, now pending or which may be asserted in the future, in any Actions
initiated against or by the Company, whether or not the Privileged Information
is in the possession of or under the control of Hotel or the Company.
7.7.3 Hotel and the Company agree that they shall have a
shared Privilege, with equal right to assert or waive, subject to the
restrictions in this Section 7.7 with respect to
22
Privileges not allocated pursuant to the terms of Sections 7.7.1 and 7.7.2
hereof. All Privileges relating to any Actions or other matters which involve
both Hotel and the Company in respect of which Hotel and the Company retain any
responsibility or liability under this Agreement, shall be subject to a shared
Privilege.
7.7.4 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 Section 7.7.5 hereof. Consent shall be in writing, or shall be deemed to
be granted unless written objection is made within 20 days after notice upon
the other party requesting such consent.
7.7.5 In the event of any litigation or dispute between Hotel
or the Hotel Subsidiaries and the Company or the Company Subsidiaries, 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 or counsel
with respect to the litigation or dispute between Hotel or the Hotel
Subsidiaries and the Company or the Company Subsidiaries, and shall not operate
as a waiver of the shared Privilege with respect to third parties.
7.7.6 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.
7.7.7 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 request which arguably calls for the
production or disclosure of such Privileged Information, such party shall
promptly notify the other party of the existence of such subpoena, discovery or
other 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
7.7 or otherwise to prevent the production or disclosure of such Privileged
Information.
7.7.8 The transfer of the Company Books and Records and the
Hotel Books and Records and other Information between Hotel and its Subsidiaries
and the Company and its Subsidiaries, is made in reliance on the agreement of
Hotel and the Company, as set forth in Sections 7.6 and 7.7 hereof to maintain
the confidentiality of Privileged Information and to assert and maintain all
applicable Privileges with respect to third parties. The access to information
being granted pursuant to Sections 7.1 and 7.2 hereof, the agreement to provide
witnesses and individuals pursuant to Section 7.3 hereof and certain services
pursuant to Section 6.5 hereof and
23
the transfer of Privileged Information between Hotel and its Subsidiaries and
the Company and its Subsidiaries pursuant to this Agreement shall not be deemed
a waiver of the Privilege that has been or may be asserted under this Agreement
or otherwise.
ARTICLE VIII
MISCELLANEOUS
8.1 EXPENSES. Except as otherwise set forth in this Agreement or any
other Transaction Agreement, all costs and expenses incurred through the
Distribution Date in connection with the preparation, execution, delivery and
implementation of this Agreement, the other Transaction Agreements, the
Distribution and with the consummation of the transactions contemplated by this
Agreement and the other Transaction Agreements shall be charged to the Company.
Except as otherwise set forth in this Agreement or any other Transaction
Agreement, all costs and expenses incurred following the Distribution Date in
connection with the implementation of the transactions contemplated in this
Agreement and the other Transaction Agreements shall be charged to the party for
whose benefit the expenses are incurred, with any expenses which cannot be
allocated on such basis to be split equally between the parties.
8.2 ACCOUNTING ADJUSTMENTS. Except as otherwise set forth in this
Agreement or any other Transaction Agreement, Hotel and the Company shall
(i) after the Distribution Date, cooperate in finalizing any adjustments
required to finalize accounting allocations and entries made to account for the
transactions contemplated by this Agreement and the Transaction Agreements and
(ii) use best efforts to finalize any such adjustments before completion of the
audits of their respective financial statements for the fiscal year ending June
30, 1997. This Section 8.2 is not intended to impact any other sections of this
Agreement or any of the other Transaction Agreements.
8.3 COMPLETE AGREEMENT; CONSTRUCTION. This Agreement, including the
Schedules and Exhibits hereto, the other Transaction Agreements and the other
agreements and documents referred to herein, shall constitute the entire
agreement between the parties with respect to the subject matter hereof and
shall supersede all previous negotiations, commitments and writings with respect
to such subject matter. Notwithstanding any other provisions in this Agreement
to the contrary, in the event and to the extent that there shall be a conflict
between the provisions of this Agreement and the provisions of any other
Transaction Agreements, then such other Transaction Agreements shall control.
8.4 SURVIVAL OF AGREEMENTS. Except as otherwise contemplated by this
Agreement, all covenants and agreements of the parties contained in the
Agreement shall survive the Distribution Date.
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8.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
principles of conflicts of law thereof.
8.6 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if signed by an authorized
officer of the party giving such notice or other communication upon receipt of
hand delivery, certified or registered mail (return receipt requested) or
telecopy transmission with confirmation of receipt:
To the Company:
WMS Industries Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
To Hotel:
WHG Resorts & Casinos Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chairman of the Board
Such names and addresses may be changed from time to time by such notice.
8.7 AMENDMENTS. This Agreement may not be modified or amended except by
an agreement in writing signed by the parties hereto.
8.8 SUCCESSORS AND ASSIGNS. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
8.9 TERMINATION. This Agreement may be terminated and the Distribution
abandoned, modified or deferred at any time prior to the Distribution Date by,
and in the sole discretion of, the Company Board without the approval of Hotel
or of the Company's stockholders. In the event of such termination, no party
shall have any liability of any kind to the other party pursuant to this
Agreement.
25
8.10 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 on
and after the Distribution Date.
8.11 NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties hereto and their respective Subsidiaries and Affiliates
and should not be deemed to confer upon third parties any remedy, Liability,
claim, right of reimbursement or other right in excess of those existing without
reference to this Agreement.
8.12 TITLES AND HEADINGS. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
8.13 EXHIBITS AND SCHEDULES. The Exhibits and Schedules shall be
construed with and as an integral part of this Agreement to the same extent as
if the same had been set forth verbatim herein.
8.14 LEGAL ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Without prejudice to any
rights or remedies otherwise available to any party hereto, each party hereto
acknowledges that damages would be an inadequate remedy for any breach of the
provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
8.15 ARBITRATION OF DISPUTES. Any dispute, claim or controversy
relating to or arising out of this Agreement shall be exclusively resolved by
arbitration in accordance with this Section 8.15. Any party may initiate
arbitration by giving written notice to the other parties hereto of an intention
to arbitrate and by filing with the regional office of the American Arbitration
Association located in Chicago, Illinois, three copies of such notice and three
copies of this Agreement together with the appropriate filing fee. Such notice
shall contain a statement setting forth the nature of the dispute and the remedy
sought. The arbitration shall be conducted before a single arbitrator selected
by the parties from the Panel of Arbitrators submitted to the parties by the
American Arbitration Association. The arbitration shall be conducted in Chicago,
Illinois in accordance with the rules of the American Arbitration Association in
effect at the time the notice to arbitrate is served. The arbitrator's decision
will be final and binding on the parties and may be enforced in any court of
competent jurisdiction. The arbitrator may grant any legal and/or equitable
relief to which a party may be entitled under the law or any legal theory under
which the party seeks relief. The award shall not serve as precedent or
authority in any subsequent proceeding, provided that if the losing party should
fail to comply with the award, the prevailing party may apply to any court
having jurisdiction for an order confirming the award in accordance with
applicable law. Unless otherwise required by law or court order, the substance
of any arbitration proceedings pursuant hereto, including the content and result
of the
26
award, shall be kept confidential by all parties and by the arbitrator. The fact
that such a proceeding exists or that an award has been rendered, need not be
kept confidential. Each party shall bear its own costs of the proceeding,
including costs of witnesses. The compensation of the arbitrator and any other
costs of the proceeding shall be shared equally by the parties thereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
WMS INDUSTRIES INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President and Chief Executive Officer
WHG RESORTS & CASINOS INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chairman of the Board and
Chief Executive Officer
▇▇▇▇▇▇▇▇ HOTEL CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chairman of the Board and
Chief Executive Officer
27
SCHEDULE A
El Conquistador Ferryboat Inc.
ESJ Hotel Corporation
Isla Verde Tourism Parking Corporation
▇▇▇▇▇▇▇ de San ▇▇▇▇ Associates
▇▇▇▇▇▇▇ de Puerto Rico Associates, Incorporated
▇▇▇▇▇▇▇ Finance Corporation
▇▇▇▇▇▇▇▇ Hospitality Group Inc.
WKA Development S.E.
WMS Property Inc.
WMS El Con Corp.
28