EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF MAY 11, 2006
BY
AND
AMONG
MORGANS HOTEL GROUP CO.,
MHG HR ACQUISITION CORP.,
HARD ROCK HOTEL, INC.
AND
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER
SECTION 1.1 The Merger.......................................................1
SECTION 1.2 Effective Time...................................................1
SECTION 1.3 Closing of the Merger............................................2
SECTION 1.4 Effects of the Merger............................................2
SECTION 1.5 Articles of Incorporation and Bylaws.............................2
SECTION 1.6 Directors........................................................2
SECTION 1.7 Officers.........................................................2
ARTICLE II
CONVERSION OF SHARES; CONSIDERATION
SECTION 2.1 Conversion of Shares.............................................2
SECTION 2.2 Total Transaction Consideration; Adjustments.....................3
SECTION 2.3 Merger Fund; Exchange of Certificates............................8
SECTION 2.4 Dissenters' Rights..............................................11
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company...................11
SECTION 3.2 Representations and Warranties of Parent and Merger Sub.........18
ARTICLE IV
COVENANTS
SECTION 4.1 Conduct of Business.............................................20
SECTION 4.2 Access to Information; Confidentiality..........................22
SECTION 4.3 Consents and Governmental Approvals.............................23
SECTION 4.4 Company Bonds; Credit Agreement.................................24
SECTION 4.5 Employee Benefit Plans..........................................25
SECTION 4.6 [INTENTIONALLY OMITTED].........................................27
SECTION 4.7 Financial Information...........................................27
SECTION 4.8 [INTENTIONALLY OMITTED].........................................27
SECTION 4.9 Publicity.......................................................27
SECTION 4.10 Certain Understandings..........................................27
SECTION 4.11 Taxes...........................................................28
SECTION 4.12 Certain Notifications...........................................28
SECTION 4.13 Indemnification of Directors and Officers.......................28
SECTION 4.14 Debt Financing..................................................29
SECTION 4.15 Further Assurances..............................................29
SECTION 4.16 Selected Memorabilia............................................30
SECTION 4.17 Termination of Affiliate Agreements.............................30
SECTION 4.18 Other Transaction Documents.....................................30
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ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.1 Conditions Precedent to Each Party's Obligations................30
SECTION 5.2 Conditions Precedent to Parent's and Merger Sub's Obligations...31
SECTION 5.3 Conditions Precedent to the Company's Obligations...............31
ARTICLE VI
TERMINATION
SECTION 6.1 Termination.....................................................32
SECTION 6.2 Effect of Termination...........................................33
SECTION 6.3 Specific Performance............................................36
ARTICLE VII
SURVIVAL; INDEMNIFICATION
SECTION 7.1 Survival of Representations, Warranties and Covenants...........36
SECTION 7.2 Obligation of Stockholders......................................36
SECTION 7.3 Obligation of Parent............................................37
SECTION 7.4 Minimum Losses..................................................37
SECTION 7.5 Maximum Indemnification.........................................37
SECTION 7.6 No Tax Attribute Indemnity......................................37
SECTION 7.7 Notice; Procedure for Third-Party Claims........................37
SECTION 7.8 Survival of Indemnity...........................................38
SECTION 7.9 No Consequential Damages........................................39
SECTION 7.10 No Double Recovery..............................................39
ARTICLE VIII
DEFINITIONS
SECTION 8.1 Definitions.....................................................39
SECTION 8.2 Interpretation..................................................42
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Notices.........................................................42
SECTION 9.2 Severability....................................................44
SECTION 9.3 Counterparts....................................................44
SECTION 9.4 Mutual Drafting.................................................44
SECTION 9.5 Entire Agreement................................................44
SECTION 9.6 Governing Law; Jurisdiction.....................................44
SECTION 9.7 Amendment; Waiver...............................................44
SECTION 9.8 Assignment......................................................44
SECTION 9.9 No Third-Party Beneficiaries....................................45
SECTION 9.10 Stockholders' Representative....................................45
SECTION 9.11 Arbitration.....................................................45
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EXHIBITS
Exhibit A Copy of PMR Purchase and Sale Agreement
Exhibit B Form of Trademark Agreement
Exhibit C Copy of Escrow Agreement
Exhibit D Form of License Agreement
Exhibit E Form of ▇▇▇▇▇▇ Trademark Assignment
Exhibit F Copy of Action by Written Consent
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TABLE OF DEFINITIONS
DEFINED TERM INITIAL SECTION REFERENCE
Accountants...........................................................2.2(c)(ii)
Additional Consideration...............................................2.2(a)(i)
Affected Employee.........................................................4.5(a)
Affiliate....................................................................8.1
Affiliate Agreements........................................................4.17
Agreement........................................................First Paragraph
Applicable First Call Date...................................................8.1
Applicable Percentage.................................................2.2(a)(ii)
Articles of Merger...........................................................1.2
Business Day.................................................................8.1
Cage Cash.............................................................2.2(a)(ix)
Class A Company Common Stock...........................................2.1(a)(i)
Class B Company Common Stock...........................................2.1(a)(i)
Closing......................................................................1.3
Closing Balance Sheet.....................................................2.2(c)
Closing Date.................................................................1.3
Closing Date Cage Cash....................................................2.2(c)
Closing Date Working Capital..............................................2.2(c)
Closing Schedule..........................................................2.2(c)
Company..........................................................First Paragraph
Company Bonds................................................................8.1
Company Common Stock...................................................2.1(a)(i)
Company Condition Failure.................................................6.1(c)
Company Consents..........................................................3.1(e)
Company Disclosure Letter....................................................8.1
Company Intellectual Property.............................................3.1(q)
Company Junior Notes.........................................................8.1
Company SEC Report........................................................3.1(f)
Company SEC Reports.......................................................3.1(f)
Company Second Lien Notes....................................................8.1
Confidentiality Agreement.................................................4.2(c)
Contract.....................................................................8.1
Credit Agreement.............................................................8.1
Deposit...................................................................2.2(d)
Disputed Holdback Amount..............................................2.2(c)(ii)
Dissenting Shares............................................................2.4
Effective Time...............................................................1.2
Employee Benefit Plan.....................................................3.1(m)
Enterprise Price.....................................................2.2(a)(vii)
Environmental Laws........................................................3.1(s)
ERISA.................................................................3.1(o)(ii)
ERISA Affiliate........................................................3.1(o)(v)
Escrow Agent..............................................................2.2(d)
Escrow Agreement..........................................................2.2(d)
Escrow Costs..............................................................2.2(e)
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Estimated Cage Cash....................................................2.2(b)(i)
Estimated Working Capital..............................................2.2(b)(i)
Exchange Act..............................................................3.1(f)
Expense Reimbursement.................................................6.2(b)(iv)
Expiration Date..............................................................7.1
Final Adjustments....................................................2.2(c)(iii)
Final Adjustment Consideration........................2.2(c)(iv), 2.2(c)(iii)(2)
Final Adjustment Date................................................2.2(c)(iii)
Final Balance Sheet Adjustment....................................2.2(c)(iii)(2)
Final Determination Date..............................................2.2(c)(ii)
Final Holdback Amount................................................2.2(c)(iii)
Financial Statements......................................................3.1(f)
Financing.................................................................3.2(e)
Financing Commitments.....................................................3.2(e)
GAAP......................................................................3.1(f)
Gaming Approvals.............................................................8.1
Gaming Authorities...........................................................8.1
Gaming Laws..................................................................8.1
Gaming Operator..............................................................8.1
Governmental Authority.......................................................8.1
hazardous substance.......................................................3.1(s)
herein.......................................................................8.1
hereof.......................................................................8.1
hereto.......................................................................8.1
hereunder....................................................................8.1
herewith.....................................................................8.1
Holdback Amount......................................................2.2(a)(iii)
Holdback Shortfall...................................................2.2(c)(iii)
HSR Act...................................................................3.1(e)
include......................................................................8.1
include, without limitation..................................................8.1
including....................................................................8.1
including, without limitation................................................8.1
Indemnification Escrow Amount.............................................2.2(e)
Indemnification Escrow Final Balance......................................2.2(e)
Indemnification Escrow Fund...............................................2.2(e)
Indemnification Escrow Net Earnings.......................................2.2(e)
Indemnification Escrow Surplus............................................2.2(e)
Indemnified Parties......................................................4.13(a)
Indemnified Party.........................................................7.7(a)
Indemnifying Party........................................................7.7(a)
Indemnity Threshold..........................................................7.4
Inspection................................................................4.2(a)
Junior Note First Call Date..................................................8.1
Knowledge of the Company.....................................................8.1
License Agreement............................................................8.1
Liens........................................................................8.1
Losses.......................................................................7.2
New Plans..............................................................4.5(e)(i)
Material Adverse Effect......................................................8.1
Material Contracts........................................................3.1(m)
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Merger.......................................................................1.1
Merger Consideration..................................................2.2(a)(iv)
Merger Fund...............................................................2.3(a)
Merger Sub.......................................................First Paragraph
Minimum Cage Cash............................................................8.1
Minimum Working Capital......................................................8.1
▇▇▇▇▇▇ Trademark Assignment..................................................8.1
▇▇▇▇▇▇ Trademarks............................................................8.1
NRS..........................................................................1.1
Old Plans..............................................................4.5(e)(i)
Obligations..................................................................8.1
Other Parties.........................................................6.1(f)(ii)
Other Transaction Closings...................................................8.1
Other Transaction Documents..................................................8.1
Outside Date..............................................................6.1(d)
Owned Real Property.......................................................3.1(k)
Parent...........................................................First Paragraph
Parent Condition Failure..................................................6.1(d)
Parent Indemnitees...........................................................7.2
Parties.....................................................................9.11
Party.......................................................................9.11
Paying Agent..............................................................2.3(a)
Per Share Merger Consideration.........................................2.2(a)(v)
Per Share Transaction Consideration....................................2.1(a)(i)
Permits...................................................................3.1(i)
Person.......................................................................8.1
PMR..........................................................................8.1
PMR Asset Purchase Agreement.................................................8.1
PMR/RWB Escrow Agreement.....................................................8.1
PMR/RWB Escrow Funds.........................................................8.1
Preliminary Cage Cash Adjustment.....................................2.2(b)(iii)
Preliminary Closing Balance Sheet......................................2.2(b)(i)
Preliminary Closing Schedule...........................................2.2(b)(i)
Preliminary Working Capital Adjustment................................2.2(b)(ii)
Pro Rata Portion......................................................2.2(a)(vi)
PSV Policies..............................................................4.5(g)
Remaining Holdback Amount.............................................2.2(c)(ii)
Retention Bonus Adjustment............................................2.2(c)(iv)
SEC.......................................................................3.1(f)
Second Lien Note First Call Date.............................................8.1
Securities Act............................................................3.1(f)
Selected Memorabilia........................................................4.16
Stockholders.....................................................Third Paragraph
Stockholder Indemnitees......................................................7.3
Stockholders' Representative.............................................9.10(a)
Surviving Corporation........................................................1.1
Taxes....................................................................15, 8.1
Termination Agreement........................................................8.1
Termination Amount...........................................................8.1
Third-Party Claim.........................................................7.7(b)
Total Transaction Consideration......................................2.2(a)(vii)
vi
Trademark Agreement..........................................................8.1
transactions contemplated by this Agreement..................................8.1
transactions contemplated hereby.............................................8.1
transactions under this Agreement............................................8.1
Transfer Tax................................................................4.11
Transfer Taxes..............................................................4.11
Treasury Calculation Amount..................................................8.1
Undisputed Holdback Amount............................................2.2(c)(ii)
WARN Act..................................................................4.5(h)
Working Capital.....................................................2.2(a)(viii)
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of May
11, 2006, is by and among HARD ROCK HOTEL, INC., a Nevada corporation (the
"COMPANY"), ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual (solely with respect to SECTIONS
4.18(B) and 6.3 and ARTICLe IX), MORGANS HOTEL GROUP CO., a Delaware corporation
("PARENT"), and MHG HR ACQUISITION CORP., a Nevada corporation and a direct
wholly owned subsidiary of Parent ("MERGER SUB").
WHEREAS, (i) the Board of Directors of each of Parent and Merger Sub
have, upon the terms and subject to the conditions set forth in this Agreement,
determined that this Agreement and the transactions contemplated hereby,
including the Merger, taken together, are advisable and fair to, and in the best
interests of, its respective stockholders, (ii) the Board of Directors of Merger
Sub has recommended acceptance and approval by its sole stockholder of this
Agreement, the Merger and the other transactions contemplated hereby, and (iii)
this Agreement and the transactions contemplated hereby have been approved by
the respective Boards of Directors of each of Parent and Merger Sub and by
Parent, in its capacity as the sole stockholder of Merger Sub;
WHEREAS, the Board of Directors of the Company has, upon the terms
and subject to the conditions set forth in this Agreement, (i) determined that
this Agreement and the transactions contemplated hereby, including the Merger,
taken together, are advisable and fair to, and in the best interests of, its
stockholders and has approved this Agreement and (ii) recommended acceptance and
approval by the holders of shares of Company Common Stock (as herein defined)
(the "STOCKHOLDERS") of this Agreement, the Merger and the other transactions
contemplated hereby; and
WHEREAS, this Agreement and the transactions contemplated hereby have
been approved by the holder of 100% of the issued and outstanding shares of
Company Class A Common Stock (as herein defined) and by the holder of a majority
of the issued and outstanding shares of Company Class B Common Stock (as herein
defined), in each case, pursuant to an Action by Written Consent, a copy of
which is attached hereto as EXHIBIT F.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, each of the Company, Parent and Merger Sub
hereby agrees as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. At the Effective Time and upon the terms and
subject to the conditions of this Agreement and in accordance with the
applicable provisions of the Nevada Revised Statutes (as amended from time to
time, the "NRS"), Merger Sub shall be merged with and into the Company (the
"MERGER"). At the Effective Time, the separate corporate existence of Merger Sub
shall cease, and the Company shall continue as the surviving corporation (the
"SURVIVING CORPORATION") and a wholly owned subsidiary of Parent.
SECTION 1.2 EFFECTIVE TIME. Subject to the provisions of this
Agreement, Parent, Merger Sub and the Company shall cause the Merger to be
consummated by filing appropriate Articles of Merger or other appropriate
documents (the "ARTICLES OF MERGER") with the Secretary of State of the State of
Nevada in such form as required by, and executed in accordance with, the
applicable provisions of the
NRS, as soon as practicable on the Closing Date. The Merger shall become
effective upon such filing or at such time thereafter as is provided in the
Articles of Merger (the "EFFECTIVE TIME").
SECTION 1.3 CLOSING OF THE MERGER. The closing of the Merger (the
"CLOSING") shall take place at a time and on a date to be specified by the
parties (the "CLOSING DATE"), which shall be no later than the fifth Business
Day (as herein defined) after satisfaction or waiver of the conditions set forth
in Article V (other than those conditions, including the occurrence of the Other
Transaction Closings, that by their nature are to be satisfied at the Closing,
but subject to the fulfillment or waiver of those conditions), at the offices of
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇▇▇-▇▇▇▇, or at such other time, date or place as agreed to in writing by the
parties hereto.
SECTION 1.4 EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in this Agreement and in the applicable provisions of the NRS,
including Section 92A.250 of the NRS. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
SECTION 1.5 ARTICLES OF INCORPORATION AND BYLAWS. The articles of
incorporation of the Company shall be amended in the Merger to be the same as
the articles of incorporation of Merger Sub immediately prior to the Effective
Time and shall be the articles of incorporation of the Surviving Corporation
until amended in accordance therewith and with applicable law. The bylaws of
Merger Sub in effect at the Effective Time shall be the bylaws of the Surviving
Corporation until amended in accordance therewith, with the articles of
incorporation and with applicable law.
SECTION 1.6 DIRECTORS. The directors of Merger Sub at the Effective
Time shall be the initial directors of the Surviving Corporation, to hold office
in accordance with the articles of incorporation and bylaws of the Surviving
Corporation until their successors are duly elected or appointed and qualified
or until their earlier death, resignation or removal.
SECTION 1.7 OFFICERS. The officers of Merger Sub at the Effective
Time shall be the initial officers of the Surviving Corporation, to hold office
in accordance with the articles of incorporation and bylaws of the Surviving
Corporation until their successors are duly elected or appointed and qualified
or until their earlier death, resignation or removal.
ARTICLE II
CONVERSION OF SHARES; CONSIDERATION
SECTION 2.1 CONVERSION OF SHARES.
(a) At the Effective Time, by virtue of the Merger and without
any action on the part of any holder of any shares of capital stock of the
Company, Parent or Merger Sub, each of the following shall occur:
(i) (A) each share of Class A voting common stock, no par
value, of the Company (the "CLASS A COMPANY COMMON STOCK") issued and
outstanding immediately prior to the Effective Time (other than any shares of
Class A Company Common Stock to be canceled pursuant to SECTION 2.1(A)(II)) and
all rights in respect thereof, and (B) each share of Class B non-voting common
stock, no par value, of the Company (the "CLASS B COMPANY COMMON STOCK" and,
together with the Class A Common Stock, the "COMPANY COMMON STOCK") issued and
outstanding immediately prior to the Effective Time (other than any shares of
Class B Company Common Stock to be canceled pursuant
2
to SECTION 2.1(A)(II)) and all rights in respect thereof, shall be canceled and
shall be converted automatically into the right to receive (x) the Per Share
Merger Consideration and (y) the Pro Rata Portion of any Additional
Consideration that is released or paid to the Paying Agent in accordance with
SECTIONS 2.2(C)(II), 2.2(C)(III), 2.2(C)(IV) and 2.2(E) (the sum of clauses (x)
and (y), the "PER SHARE TRANSACTION CONSIDERATION"). As of the Effective Time,
all such shares of Company Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares of Company Common Stock shall
cease to have any rights with respect thereto, except for the right to receive
upon surrender of the certificate (or delivery of a duly executed affidavit of
lost certificate) that formerly evidenced such share of Company Common Stock, in
the manner provided in SECTION 2.3, the Per Share Transaction Consideration
without interest (other than any interest or other income accrued on the
Indemnification Escrow Fund and distributed to the Stockholders as part of the
Indemnification Escrow Surplus, which is included as part of the calculation of
Additional Consideration);
(ii) each share of Company Common Stock held by Parent,
Merger Sub, any other subsidiary of Parent, or the Company immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of Parent, Merger Sub, the Company or any holder of such share, be
canceled, retired and cease to exist and no payment shall be made with respect
thereto; and
(iii) each outstanding share of the common stock, no par
value per share, of Merger Sub shall, by virtue of the Merger and without any
action on the part of Parent, Merger Sub or the Company, be converted into one
fully paid and non-assessable share of common stock, no par value per share, of
the Surviving Corporation.
(b) At the Effective Time, in accordance with SECTION 2.3,
Parent shall wire or cause to be wired to an account designated by the Paying
Agent an amount equal to (i) the Total Transaction Consideration (not including
clause (H) of the definition thereof, which shall be determined following the
Closing in accordance with SECTION 2.2(C)(IV)) MINUS (ii)(A) the Deposit as of
such time and (B) the Indemnification Escrow Amount, which Indemnification
Escrow Amount Parent shall deliver in escrow at the Closing to the Escrow Agent,
as provided in SECTION 2.2(E).
SECTION 2.2 TOTAL TRANSACTION CONSIDERATION; ADJUSTMENTS.
(a) CERTAIN DEFINITIONS. As used in this Agreement, the
following terms have the following respective meanings:
(i) "ADDITIONAL CONSIDERATION" means the sum of: (A) any
Undisputed Holdback Amount, (B) any Final Adjustment Consideration, (C) any
Final Holdback Amount and (D) any Indemnification Escrow Surplus.
(ii) "APPLICABLE PERCENTAGE" of any Stockholder means the
quotient (expressed as a percentage) obtained by dividing (A) the aggregate
number of shares of Company Common Stock held by such Stockholder immediately
prior to the Effective Time, by (B) the aggregate number of shares of Company
Common Stock outstanding immediately prior to the Effective Time.
(iii) "HOLDBACK AMOUNT" means an amount equal to
$2,500,000.
3
(iv) "MERGER CONSIDERATION" means the dollar amount in cash
equal to (A) the Total Transaction Consideration MINUS (B) the Holdback Amount
MINUS (C) the Indemnification Escrow Amount minus (D) the Termination Amount.
(v) "PER SHARE MERGER CONSIDERATION" means the dollar
amount in cash equal to the quotient obtained by dividing (A) the Merger
Consideration by (B) the aggregate number of shares of Company Common Stock
outstanding immediately prior to the Effective Time.
(vi) "PRO RATA PORTION" means an amount equal to the
quotient obtained by dividing (A) one by (B) the aggregate number of shares of
Company Common Stock outstanding immediately prior to the Effective Time.
(vii) "TOTAL TRANSACTION CONSIDERATION" means the dollar
amount in cash determined as follows: (A) Four Hundred Twenty-One Million
Dollars ($421,000,000.00) (the "ENTERPRISE PRICE"), MINUS (B) the sum of (1) the
principal amount of, and any accrued and unpaid interest on, the outstanding
Company Bonds and (2) the principal amount of, and any accrued and unpaid
interest on, outstanding borrowings under the Credit Agreement, in each case, as
of the Closing Date, MINUS (C) the sum of (1) the dollar amount of any premium
(or, if the Company Bonds are being defeased, the amount necessary to defease
the Company Bonds pursuant to the respective indentures governing the Company
Bonds) paid or to be paid by Parent or one of its Affiliates to holders of the
Company Bonds to repurchase (or defease) the Company Bonds in accordance with
SECTION 4.4 (up to an aggregate dollar amount for each $1,000 principal amount
of Company Bonds tendered (or defeased) as of the Closing Date not to exceed (x)
the Treasury Calculation Amount LESS (y) the dollar amount set forth in clause
(B)(1) above), and (2) any amounts payable upon or after the Closing to
investment bankers, financial advisors and counsel of the Company with respect
to services rendered in connection with the transactions contemplated by this
Agreement, PLUS (D) the amount of cash and cash equivalents (other than Cage
Cash) as of the Closing Date, PLUS (E) the Preliminary Working Capital
Adjustment in accordance with SECTION 2.2(B), PLUS (F) the Preliminary Cage Cash
Adjustment in accordance with SECTION 2.2(B), PLUS (G) the amount of any
expenditures made by the Company after the date hereof and on or prior to the
Closing Date that require Parent's consent under this Agreement and that have
been made with the consent of Parent, PLUS (H) the amount of any retention
bonuses paid by the Company at Closing to any employees that are then terminated
by the Surviving Corporation within forty-five days following the Closing, which
amount shall be determined following the Closing in accordance with SECTION
2.2(C)(IV), MINUS (I) the amount of any related party payables as of the Closing
Date (which amount if a credit balance shall be subtracted from Enterprise Price
and, which amount if a debit balance, shall be added to Enterprise Price).
Notwithstanding any change with respect to the Company's accounting policies or
procedures subsequent to the date hereof, the accounting policies and procedures
used to calculate Total Transaction Consideration and the components thereof,
including Working Capital, shall be the same as those in effect on the date
hereof. By way of example only and for purposes of clarification, SCHEDULE
2.2(A)(VII) of the Company Disclosure Letter sets forth a calculation of the
Total Transaction Consideration using the Company's balance sheet as of March
31, 2006.
(viii) "WORKING CAPITAL" means a dollar amount equal to (A)
the sum of accounts receivable (net of reserves), inventory and prepaid and
other current assets, MINUS (B) the sum of accounts payable, insurance payable
and accrued expenses (provided that any liabilities with respect to the
Company's deferred bonus plan that are included in clause (B) shall be offset by
the cash surrender value of the related life insurance assets to the extent that
4
such assets have not previously been converted to cash), other than, in the case
of this clause (B), related party payables, it being expressly agreed for
purposes of avoiding any double counting that any amount or item which would
otherwise be included in the calculation of Working Capital but is otherwise an
addition or deduction pursuant to the calculation of Total Transaction
Consideration shall be excluded from the calculation of Working Capital for
purposes of the Preliminary Closing Balance Sheet, the Closing Balance Sheet,
the example set forth on SCHEDULE 2.2(A)(VII) of the Company Disclosure Letter
or otherwise. "Working Capital" shall be calculated in the manner set forth on
SCHEDULE 2.2(A)(VIII) of the Company Disclosure Letter.
(ix) "CAGE CASH" shall be calculated in the manner set
forth on SCHEDULE 2.2(A)(IX) of the Company Disclosure Letter.
(b) PRELIMINARY CLOSING SCHEDULE; PRELIMINARY ADJUSTMENTS.
(i) No later than five Business Days prior to the Closing,
the Company shall deliver to Parent a preliminary calculation of the Total
Transaction Consideration (the "PRELIMINARY CLOSING SCHEDULE"), together with an
estimated balance sheet of the Company as of the Closing Date (immediately prior
to the Effective Time) (the "PRELIMINARY CLOSING BALANCE SHEET"). The
Preliminary Closing Balance Sheet shall be prepared in accordance with GAAP and
in accordance with the accounting policies and procedures of the Company in
effect on the date hereof. The Preliminary Closing Schedule shall set forth a
good faith estimate of the amount of Working Capital of the Company as of the
Closing Date (immediately prior to the Effective Time) (such estimate, the
"ESTIMATED WORKING CAPITAL") and a good faith estimate of the amount of Cage
Cash of the Company as of the Closing Date (such estimate, the "ESTIMATED CAGE
CASH"), in each case based on the Preliminary Closing Balance Sheet.
(ii) The "PRELIMINARY WORKING CAPITAL ADJUSTMENT" (which
may be positive or negative) shall equal (x) Estimated Working Capital MINUS (y)
Minimum Working Capital.
(iii) The "PRELIMINARY CAGE CASH ADJUSTMENT" (which may be
positive or negative) shall equal (x) Estimated Cage Cash MINUS (y) Minimum Cage
Cash.
(c) POST-CLOSING ADJUSTMENTS.
(i) As soon as reasonably practical following (but not more
than 30 days after) the Closing Date, the Surviving Corporation shall deliver to
the Stockholders' Representative a calculation of the Total Transaction
Consideration (the "CLOSING SCHEDULE"), together with an unaudited balance sheet
of the Company as of the Closing Date (immediately prior to the Effective Time)
(the "CLOSING BALANCE SHEET"). The Closing Balance Sheet shall be prepared in
accordance with GAAP and in accordance with the accounting policies and
procedures of the Company in effect on the date hereof. The Closing Schedule
shall set forth the Working Capital of the Company as of the Closing Date
(immediately prior to the Effective Time) (the "CLOSING DATE WORKING CAPITAL")
and the amount of Cage Cash of the Company as of the Closing Date (the "CLOSING
DATE CAGE CASH").
(ii) The Closing Schedule, including the Closing Balance
Sheet, the Closing Date Working Capital and the Closing Date Cage Cash, shall
become final and binding upon the parties, and not subject to any appeal, unless
within 30 days following the date of delivery of the Closing Schedule by the
Surviving Corporation to the Stockholders' Representative, the Stockholders'
Representative and the Surviving Corporation have been unable to agree on a
final Closing Schedule, including the Closing Balance Sheet, the Closing Date
5
Working Capital and the Closing Date Cage Cash, in which case (A) the
Stockholders' Representative shall provide instructions to the Escrow Agent, in
accordance with the Escrow Agreement, to release any portion of the Holdback
Amount that is not in dispute (such amount, LESS any expenses of the
Stockholders' Representative to be paid from, or reimbursed through deduction
from, the Holdback Amount in accordance with SECTION 9.10(D)), the "UNDISPUTED
HOLDBACK AMOUNT," and the amount of any remaining Holdback Amount, the "DISPUTED
HOLDBACK AMOUNT") to the Paying Agent, as agent for the Stockholders, for
distribution to the Stockholders in accordance with the Escrow Agreement and
their Applicable Percentages and (B) the Stockholders' Representative and Parent
shall submit all differences and disputes between the Stockholders'
Representative and Parent relating to the Closing Schedule, including the
Closing Balance Sheet, the Closing Date Working Capital and the Closing Date
Cage Cash, to the Las Vegas, Nevada office of Deloitte & Touche LLP, the
Company's accountants (the "ACCOUNTANTS"), to be resolved by such firm, and such
firm's opinion thereon and the resulting Closing Schedule, including the Closing
Balance Sheet, the Closing Date Working Capital and the Closing Date Cage Cash,
shall be final and binding on the parties and not subject to any appeal. The
Stockholders' Representative and Parent agree to request that the Accountants
resolve all such difference and disputes within 15 days of submission to the
Accountants. Parent and the Stockholders' Representative shall each pay (solely,
in the case of the Stockholders' Representative, by deduction from the Disputed
Holdback Amount prior to the making of any payments to Parent pursuant to
SECTION 2.2(C)(III)) the percentage of the amount of the fees and expenses of
the Accountants equal to (A) the aggregate amount of the disputed matters
submitted to the Accountants that are not settled in favor of such party (as
finally determined by the Accountants), divided by (B) the aggregate amount of
all disputed matters submitted to the Accountants. The Disputed Holdback Amount,
less (x) any fees and expenses of the Accountants and (y) any expenses of the
Stockholders' Representative, in the case of each of clauses (x) and (y), to be
paid from, or reimbursed by deduction from, the Holdback Amount pursuant to this
SECTION 2.2(C)(II)or SECTION 9.10(D) and not previously paid from the Holdback
Amount, is referred to as the "REMAINING HOLDBACK AMOUNT." The date that the
Closing Date Schedule, including the Closing Balance, the Closing Date Working
Capital and the Closing Date Cage Cash, become final and binding on the parties
and not subject to any appeal is referred to as the "FINAL DETERMINATION DATE."
(iii) Within 10 days following the Final Determination Date
pursuant to SECTION 2.2(C)(II), final adjustments to the Enterprise Price (the
"FINAL ADJUSTMENTS") shall be made and paid as follows (the date the Final
Adjustments are so made and paid, the "FINAL ADJUSTMENT DATE"):
(1) if (A) the sum of (x) the Closing Date Working
Capital and (y) the Closing Date Cage Cash is less than (B) the sum of (x)
the Estimated Working Capital and (y) the Estimated Cage Cash, then a
portion of the Remaining Holdback Amount equal to such difference shall be
released by the Escrow Agent, pursuant to the Escrow Agreement, and paid to
Parent; , PROVIDED, HOWEVER, that in the event that the amount of the
Remaining Holdback Amount is less than the amount of such difference (the
amount by which the Remaining Holdback Amount is less than the amount of
such difference, the "HOLDBACK SHORTFALL"), then a portion of the
Indemnification Escrow Fund equal to such Holdback Shortfall (up to the
amount of the Indemnification Escrow Fund), shall be released by the Escrow
Agent, pursuant to the Escrow Agreement, and paid to Parent; and
(2) if the sum of (x) the Closing Date Working
Capital and (y) the Closing Date Cage Cash is greater than (B) the sum of
(x) the Estimated
6
Working Capital and (y) the Estimated Cage Cash, then Parent shall promptly
pay, or cause to be paid to the Paying Agent, as agent for the
Stockholders, an amount in cash equal to such difference (such amount, the
"FINAL BALANCE SHEET ADJUSTMENT") for distribution to the Stockholders in
accordance with the Escrow Agreement and their Applicable Percentages.
Upon the instruction of the Stockholders' Representative in accordance
with the Escrow Agreement, any Holdback Amount that remains after making (A) any
payment required to be made to Parent pursuant to SECTION 2.2(C)(III)(1) and (B)
any payment of any expenses of the Stockholders' Representative to be paid from,
or reimbursed by deduction from, the Holdback Amount in accordance with SECTION
9.10(D) and not previously paid from the Holdback Amount (such remaining
Holdback Amount, the "FINAL HOLDBACK AMOUNT") shall be promptly released by the
Escrow Agent to the Paying Agent for distribution to the Stockholders in
accordance with the Escrow Agreement and their Applicable Percentages.
(iv) On the later of (x) the Final Adjustment Date and (y)
the 46th day following the Closing, Parent shall pay, or cause to be paid to the
Paying Agent, as agent for the Stockholders, an amount in cash equal to the
amount of any retention bonuses paid by the Company at Closing to any employees
that have been terminated by the Surviving Corporation within forty-five days
following the Closing (such amount, the "RETENTION BONUS ADJUSTMENT" and,
together with the Final Balance Sheet Adjustment, the "FINAL ADJUSTMENT
CONSIDERATION") for distribution to the Stockholders in accordance with the
Escrow Agreement and their Applicable Percentages.
(v) Nothing in this SECTION 2.2(C) shall preclude any party
from exercising, or shall adversely affect or otherwise limit in any respect the
exercise of, any right or remedy available to it hereunder for any
misrepresentation or breach of warranty hereunder, but none of Parent, Merger
Sub or the Company shall have any right to dispute the Closing Schedule,
including Closing Balance Sheet, the Closing Date Working Capital or the Closing
Date Cage Cash, or any portion thereof, once it has been finally determined in
accordance with SECTION 2.2(C)(II).
(d) DEPOSIT; ESCROW. On the date hereof, Parent shall deposit
in readily available funds of Thirty Million Dollars ($30,000,000) (such amount,
including the interest accrued, and any other income earned, thereon, the
"DEPOSIT"), with Chicago Title Company of Nevada, Inc. (the "ESCROW AGENT"),
pursuant to an escrow agreement dated as of the date hereof, a copy of which is
attached hereto as EXHIBIT C (as it may be amended from time to time, the
"ESCROW AGREEMENT"), executed and delivered by Parent, the Stockholders'
Representative and the Escrow Agent. At the Closing, (i) the Deposit (less the
Holdback Amount) shall be released by the Escrow Agent to the Paying Agent
pursuant to SECTION 2.3(A)(I) and in accordance with the terms of the Escrow
Agreement, and (ii) the Holdback Amount shall continue to be held by the Escrow
Agent in accordance with the Escrow Agreement until released pursuant to the
terms of the Escrow Agreement and SECTION 2.2(C) of this Agreement. Upon the
termination of this Agreement, the Deposit shall be payable pursuant to SECTION
6.3, and thereafter shall be promptly released by the Escrow Agent to Parent or
the Company, as applicable, pursuant to SECTION 6.3 and the terms of the Escrow
Agreement. In the event of any inconsistency between the terms and provisions of
the Escrow Agreement and the terms and provisions of this Agreement, the terms
and provisions of this Agreement shall control, absent an express written
agreement between the parties hereto to the contrary which acknowledges this
SECTION 2.2(D).
(e) INDEMNIFICATION ESCROW FUND. Subject to the terms and
conditions hereof, on the Closing Date, Parent shall deposit in escrow a portion
of the Total Transaction Consideration equal to Fifteen Million ($15,000,000)
(the "INDEMNIFICATION ESCROW AMOUNT"), in readily available funds
7
(the Indemnification Escrow Amount, together with the interest accrued and any
other income earned thereon, the "INDEMNIFICATION ESCROW FUND") with the Escrow
Agent, pursuant to the Escrow Agreement. The Indemnification Escrow Fund shall
be held and disbursed as provided in the Escrow Agreement, which shall provide,
among other things, that (i) any fees or expenses payable to the Escrow Agent
under the Escrow Agreement on account of, in connection with or related to the
Indemnification Escrow Fund (the "ESCROW COSTS") shall first be paid out of any
income and interest accrued on the Indemnification Escrow Amount in the
Indemnification Escrow Fund; (ii) the Indemnification Escrow Fund shall be
disbursed (A) to Parent to satisfy any Holdback Shortfall pursuant to SECTION
2.2(C)(III)(1) and (B) to the Parent Indemnitees to satisfy any indemnification
obligation of the Stockholders under SECTION 7.2, in the case of this clause (B)
only, when the conditions for indemnification set forth in SECTION 7.2 have been
satisfied; PROVIDED, HOWEVER, that to the extent that the balance of the
Indemnification Escrow Fund is not sufficient to satisfy any indemnification
obligations of the Stockholders to the Parent Indemnitees under SECTION 7.2 when
the conditions for indemnification set forth in SECTION 7.2 have been satisfied,
then such shortfall shall be satisfied from any balance remaining in the PMR/RWB
Escrow Funds pursuant to, and in accordance with the terms and subject to the
conditions of, the PMR/RWB Escrow Agreement; (iii) any income or interest on the
Indemnification Escrow Amount (net of any Escrow Costs) shall be distributed to
the Stockholders as provided in the Escrow Agreement (such net amount, the
"INDEMNIFICATION ESCROW NET EARNINGS"); and (iv) as of the one year anniversary
of the Closing Date, any amount of cash remaining in the Indemnification Escrow
Fund (other than any amount of cash required to satisfy the maximum amount of
the aggregate of any claims for indemnification for which written notice has
been given to the Indemnifying Party in accordance with ARTICLE VII and which as
of such one-year anniversary have not been finally determined), including any
income or interest accrued thereon but less any Escrow Costs and less any
amounts then due and payable from the Indemnification Escrow Fund to any Parent
Indemnitee pursuant to SECTION 7.2, shall be distributed by the Escrow Agent to
the Paying Agent in accordance with the Escrow Agreement (any such remaining
amounts, the "INDEMNIFICATION ESCROW FINAL BALANCE") and, together with the
Indemnification Escrow Net Earnings, the "INDEMNIFICATION ESCROW SURPLUS").
Parent shall be treated as the owner of the Indemnification Escrow Fund for all
tax purposes.
SECTION 2.3 MERGER FUND; EXCHANGE OF CERTIFICATES.
(a) Prior to the Effective Time, Parent shall appoint a
commercial bank or trust company reasonably acceptable to the Company to act as
paying agent under this Agreement (the "PAYING AGENT") for the purpose of
exchanging shares of Company Common Stock for the Merger Consideration and, as
applicable, the Additional Consideration. At the Effective Time, (i) the Deposit
(less the Holdback Amount) shall be released by the Escrow Agent and deposited
with the Paying Agent, as agent for the Stockholders, subject to and in
accordance with the terms of the Escrow Agreement, (ii) Parent shall irrevocably
deposit or cause to be deposited with the Paying Agent, as agent for the
Stockholders, cash in an aggregate amount equal to the Total Transaction
Consideration minus (1) the Deposit, (2) the Indemnification Escrow Amount and
(3) the Termination Amount (the sum of the immediately preceding clauses (i) and
(ii), together with any Additional Consideration deposited with or paid to the
Paying Agent pursuant to SECTION 2.2(C)(II), 2.2(C)(III) or 2.2(C)(IV), the
"MERGER FUND") and (iii) Parent shall pay the Termination Amount in accordance
with the instructions of the Company and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇. Pending distribution
pursuant to SECTION 2.3(B), the Merger Fund, the Deposit and the Indemnification
Escrow Fund shall be held in trust pursuant to the Escrow Agreement and shall
not be used except as permitted by the Escrow Agreement; PROVIDED, HOWEVER, that
the Surviving Corporation may direct the Paying Agent to invest the Merger Fund,
PROVIDED that such investments (i) shall be in obligations of or guaranteed by
the United States of America, in commercial paper obligations receiving the
highest rating from either ▇▇▇▇▇'▇ Investors Services, Inc. or Standard & Poor's
Corporation, in certificates of deposit, bank repurchase agreements or bankers
acceptances of domestic commercial banks with equity capital exceeding
$500,000,000 or in money market funds and (ii) shall have maturities that
8
will not prevent or delay payments to be made pursuant to SECTION 2.3(B) and
that do not exceed, in any event, 90 days. Each holder of a certificate or
certificates representing shares of Company Common Stock canceled and
extinguished at the Effective Time pursuant to SECTION 2.1 may thereafter in
accordance with the provisions of SECTION 2.3(B), surrender such certificate or
certificates to the Paying Agent, as agent for such Stockholder, to effect the
exchange of such certificate or certificates for the Per Share Transaction
Consideration on such holder's behalf for a period ending twelve months after
the Effective Time.
(b) (i) At the Closing, the Stockholders may surrender the
certificate or certificates representing their shares of Company Common Stock to
the Paying Agent (or such other agent or agents as may be appointed by the
Surviving Corporation), as agent for the Stockholders, for cancellation. Upon
surrender of such certificate or certificates for cancellation to the Paying
Agent (or such other agent or agents as may be appointed by the Surviving
Corporation), the certificate or certificates so surrendered shall be cancelled
and the Paying Agent shall pay (A) on the Closing Date (by check or wire
transfer as directed by such Stockholder in writing delivered to the Paying
Agent (or such other agent or agents as may be appointed by the Surviving
Corporation)) as soon as practicable prior to the Closing Date to the
Stockholder who surrendered such certificate or certificates an amount of cash
equal to the product of (x) the Per Share Merger Consideration and (y) the
number of shares of Company Common Stock represented by the certificate or
certificates so surrendered and (B) thereafter, promptly following the release
of any Additional Consideration by the Escrow Agent to the Paying Agent in
accordance with SECTION 2.2(C) and the Escrow Agreement, an amount in cash equal
to the product of (x) the Pro Rata Portion of any such Additional Consideration
(as determined pursuant to SECTIONS 2.2(C)(II), 2.2(C)(III), 2.2(C)(IV) and
2.2(E) and (y) the number of shares of Company Common Stock represented by the
certificate or certificates so surrendered.
(ii) With respect to any certificates not so surrendered at
the Closing, the Surviving Corporation, as soon as reasonably practicable after
the Effective Time, shall cause the Paying Agent to mail to each holder of
record of Company Common Stock represented by such certificates, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to such certificates shall pass, only upon delivery of such
certificates to the Paying Agent and shall be in such form and have such other
provisions not inconsistent with this Agreement as the Surviving Corporation may
specify) and (ii) instructions for use in effecting the surrender of such
certificates in exchange for payment of the Per Share Transaction Consideration.
Upon surrender of a certificate or certificates for cancellation to the Paying
Agent or to such other agent or agents as may be appointed by the Surviving
Corporation, together with such letter of transmittal, duly executed and
completed, the holder of such certificate or certificates shall be entitled to
receive in exchange therefor, for each share of Company Common Stock, formerly
represented by such certificate or certificates, an amount in cash equal to the
product of (x) the Per Share Merger Consideration and (y) the number of shares
of Company Common Stock represented by the certificate or certificates so
surrendered and (B) thereafter, promptly following the release of any Additional
Consideration by the Escrow Agent to the Paying Agent in accordance with SECTION
2.2(C) and the Escrow Agreement, an amount in cash equal to the product of (x)
the Pro Rata Portion of any such Additional Consideration (as determined
pursuant to SECTIONS 2.2(C)(II), 2.2(C)(III), 2.2(C)(IV) and 2.2(E) and (y) the
number of shares of Company Common Stock represented by the certificate or
certificates so surrendered, and the certificate or certificates so surrendered
shall forthwith be canceled.
(iii) After the Effective Time, until so surrendered in
accordance with SECTION 2.3(B)(I) or 2.3(B)(II), each certificate representing
shares of Company Common Stock shall be deemed, for all corporate purposes
thereafter, to evidence only the right to receive an amount of cash equal to the
product of (x) the Per Share Transaction Consideration
9
and (y) the number of shares of Company Common Stock evidenced by such
certificate. No consideration will be paid to, or delivered on behalf of the
holder of any unsurrendered certificate with respect to shares of Company Common
Stock formerly represented thereby until the holder of record of such
certificate shall surrender such certificate pursuant hereto.
(c) If payment is to be made to a Person other than the
registered holder of the shares of Company Common Stock represented by the
certificate or certificates surrendered in exchange therefor, it shall be a
condition to such payment that the certificate or certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the Person requesting such payment shall pay to the Paying Agent any transfer or
other Taxes required as a result of such payment to a Person other than the
registered holder of such shares of Company Common Stock or establish to the
satisfaction of the Paying Agent that such Tax has been paid or is not payable.
(d) After the Effective Time, there shall be no further
transfers on the stock transfer books of the Surviving Corporation of the shares
of Company Common Stock that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, certificates representing shares of Company
Common Stock are presented to the Surviving Corporation, they shall be canceled
and exchanged for the consideration provided for, and in accordance with the
procedures set forth, in this Agreement.
(e) If any cash deposited with the Paying Agent for purposes of
payment in exchange for shares of Company Common Stock remains unclaimed twelve
months after the Effective Time, such cash, together with all interest and
earnings thereon, shall be returned to the Surviving Corporation, upon demand,
and any such holder who has not converted his, her or its shares of Company
Common Stock into the Per Share Transaction Consideration prior to that time
shall thereafter look only to the Surviving Corporation for payment of the Per
Share Transaction Consideration. Notwithstanding the foregoing, the Surviving
Corporation shall not be liable to any holder of shares of Company Common Stock
for any amount paid to a public official pursuant to applicable unclaimed
property laws. Any amounts remaining unclaimed by holders of shares of Company
Common Stock five years after the Effective Time (or such earlier date
immediately prior to such time as such amounts would otherwise escheat to or
become property of any Governmental Authority) shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation free and clear
of any claims or interest of any Person previously entitled thereto.
(f) Following the Final Adjustment Date, the Surviving
Corporation shall have the right to demand that the Paying Agent return to the
Surviving Corporation such portion of the cash deposited with the Paying Agent
pursuant to SECTION 2.3(A) that represents the Per Share Transaction
Consideration in respect of shares of Company Common Stock for which dissenters'
rights have been perfected in accordance with the NRS.
(g) No dividends or other distributions with respect to capital
stock of the Surviving Corporation with a record date after the Effective Time
shall be paid to the holder of any unsurrendered certificate for shares of
Company Common Stock.
(h) In the event that any certificate representing shares of
Company Common Stock shall have been lost, stolen or destroyed, upon Parent's
receipt of evidence reasonably satisfactory to Parent of that fact by the Person
claiming such certificate representing shares of Company Common Stock to be
lost, stolen or destroyed, the Paying Agent shall issue, in exchange for such
lost, stolen or destroyed certificate, (i) an amount in cash equal to the
product of (x) the Per Share Merger Consideration and (y) the number of shares
of Company Common Stock represented by such certificate, and (ii) thereafter,
promptly following the release of any Additional Consideration by the Escrow
Agent to the
10
Paying Agent in accordance with SECTION 2.2(C) or 2.2(E) and the Escrow
Agreement, an amount in cash equal to the product of (x) the Pro Rata Portion of
any Additional Consideration (as determined pursuant to SECTIONS 2.2(C)(II),
2.2(C)(III), 2.2(C)(IV) and 2.2(E)) and (y) the number of shares of Company
Common Stock represented by such certificate.
SECTION 2.4 DISSENTERS' RIGHTS. Notwithstanding anything in this
Agreement to the contrary, any shares of Company Common Stock that are issued
and outstanding immediately prior to the Effective Time and that are held by a
Stockholder who has properly exercised his, her or its dissenter's rights under
the NRS (the "DISSENTING SHARES") shall not be converted into the right to
receive the Per Share Transaction Consideration pursuant to SECTION 2.1(A), but,
instead, such shares shall be converted into the right to receive such
consideration as may be determined to be due with respect to such Dissenting
Shares pursuant to and subject to the requirements of the NRS. If any such
holder shall have failed to perfect, or shall have effectively withdrawn or
lost, his, her or its right to dissent from the Merger under the NRS, each share
of such holder's Company Common Stock shall thereupon be deemed to have been
converted, as of the Effective Time, into the right to receive, without any
interest thereon, the Per Share Transaction Consideration. The Company shall
give Parent prompt notice of any notice or demands for appraisal or payment for
shares of Company Common Stock received by the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to each of Parent and Merger Sub, except (i) as
set forth herein, (ii) as set forth in the Company SEC Reports (other than as
set forth in "forward-looking statements" for purposes of the Securities Act and
the Exchange Act) filed prior to the date hereof, (iii) as set forth in the
Company Disclosure Letter, and (iv) with respect to the Selected Memorabilia, as
follows:
(a) ORGANIZATION, STANDING AND POWER. The Company (i) is duly
organized, validly existing and in good standing under the laws of the State of
Nevada, (ii) has all requisite corporate power and authority to own, lease or
operate the assets it now owns, leases or operates, as applicable, and (iii) is
duly qualified or licensed to do business in each jurisdiction in which the
ownership or use of its assets or conduct of its business requires it to be so
qualified, except, in the case of each of clauses (ii) and (iii), for such
failures that would not reasonably be expected to have a Material Adverse
Effect.
(b) SUBSIDIARIES. Except as set forth in SCHEDULE 3.1(B) of the
Company Disclosure Letter, the Company does not own any equity in any
corporation, association or other entity.
(c) STOCK. The entire authorized and outstanding capital stock
of the Company is as set forth in SCHEDULE 3.1(C) of the Company Disclosure
Letter. The outstanding shares of Company Common Stock are duly authorized, have
been validly issued and are fully paid and nonassessable and have not been
issued in violation of any preemptive rights. Except as set forth in SCHEDULE
3.1(C) of the Company Disclosure Letter, there are no options, warrants or other
rights, agreements, arrangements or commitments of any kind relating to the
issued or unissued capital stock of the Company.
(d) AUTHORITY. The execution and delivery of this Agreement by
the Company, and the performance by the Company of its obligations under this
Agreement, have been duly authorized by all necessary corporate action on the
part of the Company and by all necessary action on the part of the Stockholders.
This Agreement has been duly executed and delivered by the Company and, assuming
the due execution and delivery of this Agreement by each other party hereto,
this Agreement constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its
11
terms, except as such enforcement may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium (whether general or specific) or similar
laws now or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity (regardless of whether such enforcement is sought
in a proceeding in equity or at law).
(e) NO CONFLICT. The consummation of the transactions under
this Agreement will not require the consent, waiver or approval of any party to
any Material Contract, or the consent, approval, order or authorization of, or
the registration, declaration or filing with, any Governmental Authority, except
for (i) any approvals or filing of notice under, or in connection with, the
Gaming Laws and the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), (ii) the filing and recordation of the Articles of
Merger as required by the NRS, (iii) those consents, waivers and approvals set
forth in SCHEDULE 3.1(E) of the Company Disclosure Letter, (iv) those consents,
waivers and approvals that relate to or are applicable to Parent, Merger Sub or
any of their Affiliates but not to the Company or any of its Affiliates or (v)
those consents, waivers and approvals the failure of which to make or obtain
would not reasonably be expected to have a Material Adverse Effect (the
immediately preceding clauses (i) through (v), collectively, the "COMPANY
CONSENTS"). Except as set forth in SCHEDULE 3.1(E) of the Company Disclosure
Letter, and assuming the Company Consents are timely obtained or made, as
applicable, the execution, delivery and performance by the Company of this
Agreement will not (i) violate any law applicable to the Company, (ii) result in
a breach or violation of any provision of, or constitute a default under, any
Material Contract or (iii) conflict with any provision of the charter or bylaws
of the Company, except, in the case of each of clauses (i) and (ii), except for
any such violation, breach, default or conflict which would not reasonably be
expected to have a Material Adverse Effect.
(f) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed
all required forms, statements, reports and documents with the Securities and
Exchange Commission (the "SEC") since January 1, 2005 (each, a "COMPANY SEC
REPORT," collectively, the "COMPANY SEC REPORTS"), each of which complied in all
material respects with all applicable requirements of the Securities Act of
1933, as amended (the "SECURITIES ACT"), the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), or both, as the case may be, each as in effect on
the date such Company SEC Report was filed. Except as and to the extent amended,
modified, restated or revised in any subsequent Company SEC Report filed prior
to the date of this Agreement, none of the Company SEC Reports contained, when
filed, any untrue statement of a material fact or omitted to state a material
fact required to be stated or incorporated by reference therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company
contained in the Company SEC Reports (the "FINANCIAL STATEMENTS") complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP"), except as may be indicated, and fairly present in all
material respects (i) the financial position of the Company as of the dates
thereof, and (ii) the Company's results of operations, cash flows and changes in
stockholders' equity for the periods then ended (subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments).
(g) NO UNDISCLOSED LIABILITIES. The Company does not have any
liabilities of a nature required by GAAP to be reflected on a balance sheet or
in the notes thereto, except (i) as set forth or reflected on the Financial
Statements (or described in the notes thereto), (ii) as disclosed in SCHEDULE
3.1(G) of the Company Disclosure Letter, (iii) for liabilities (other than for
borrowed money) incurred in the ordinary course of business since December 31,
2005 or (iv) for liabilities that would not reasonably be expected to have a
Material Adverse Effect.
(h) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in SCHEDULE 3.1(H) of the Company Disclosure Letter and except for this
Agreement and the transactions contemplated
12
hereby, since December 31, 2005 there has not been any event that, after taking
into account any insurance recoveries payable in respect thereof, has had or
would reasonably be expected to have a Material Adverse Effect.
(i) COMPLIANCE WITH APPLICABLE LAWS; GAMING PERMITS. To the
Knowledge of the Company, except as set forth in SCHEDULE 3.1(I) of the Company
Disclosure Letter and except for environmental matters (which are addressed in
SECTION 3.1(S) hereof), the conduct of the Company's business complies with all
statutes, laws, regulations and ordinances applicable thereto, except where the
failure to so comply would not reasonably be expected to have a Material Adverse
Effect. The Company holds all permits, registrations, findings of suitability,
licenses, variances, exemptions, orders and approvals of all Governmental
Authorities (including all authorizations under Gaming Laws) (collectively
"PERMITS"), necessary to conduct its business and operations as currently
conducted, except for such Permits, the failure of which to hold would not
reasonably be expected to have a Material Adverse Effect.
(j) LITIGATION. Except as set forth in SCHEDULE 3.1(J) of the
Company Disclosure Letter and except for environmental matters (which are
addressed in SECTION 3.1(S) hereof), (i) there is no suit, action or proceeding
pending or, to the Knowledge of the Company, threatened against the Company
before any Governmental Authority that would reasonably be expected to have a
Material Adverse Effect, and (ii) the Company is not in default under any
judgment, order or decree of any Governmental Authority applicable to its
business, except for any such default which would not reasonably be expected to
have a Material Adverse Effect.
(k) PROPERTIES. SCHEDULE 3.1(K)(I) of the Company Disclosure
Letter sets forth a list of all real property locations in which the Company
owns a fee interest (collectively, "OWNED REAL PROPERTY"). SCHEDULE 3.1(K)(II)
of the Company Disclosure Letter contains a complete and correct list of all
material leases, subleases, licenses or similar other agreements (other than
transient occupancy arrangements) to which the Company is a party (and all
amendments, modifications or supplements thereto), which are for the use or
occupancy of real estate.
(l) TITLE TO PROPERTIES. Except as set forth in SCHEDULE 3.1(L)
of the Company Disclosure Letter, the Company has title to, or valid fee simple
title to or valid leasehold interests in, all of its material properties and
assets, including the Owned Real Property, except for such as are no longer used
or useful in the conduct of its businesses or as have been disposed of in the
ordinary course of business and except for defects in title, easements,
restrictive covenants, and other encumbrances or impediments that, in the
aggregate, do not materially interfere with its ability to conduct its business
as currently conducted. All such assets and properties, other than assets and
properties in which the Company has a leasehold interest, are free and clear of
all Liens other than (i) those set forth in SCHEDULE 3.1(L) of the Company
Disclosure Letter, (ii) matters of record, (iii) those that will be released in
connection with the Closing and (iv) Liens that, in the aggregate, do not
materially interfere with the existing use of the applicable property or the
ability of the Company to conduct its business as currently conducted.
(m) CONTRACTS. Except for the Contracts listed in SCHEDULE
3.1(M)(I) of the Company Disclosure Letter and those Contracts filed (including
through incorporation by reference) as an exhibit to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 2005 (collectively,
"MATERIAL CONTRACTS"), the Company is not a party to any contracts or agreements
that would be required to be filed as an exhibit to a Form 10-K if such Form
10-K were filed by the Company with the SEC on the date hereof. Except as
disclosed in SCHEDULE 3.1(M)(II) of the Company Disclosure Letter, the Company
is not in breach of any Material Contract and to the Knowledge of the Company,
no other party thereto is in breach of or default under any Material Contract,
except for such breaches and
13
defaults as to which requisite waivers or consents have been or will be obtained
prior to the Closing Date or which would not reasonably be expected to have a
Material Adverse Effect.
(n) TAXES.
(i) The Company has filed (taking into account any
extension of time within which to file) all material Tax Returns required to be
filed by it and all such filed Tax Returns are complete and accurate in all
material respects.
(ii) Other than Taxes not yet due and payable or for which
adequate reserves have been provided on the Financial Statements, the Company
has paid or caused to be paid all Taxes that are required to be paid and has
withheld and paid all Taxes required to have been withheld and paid in
connection with any amounts paid or owing to any employee, independent
contractor, stockholder, creditor or other third party, except for any such
amounts which individually or in the aggregate are not material. Other than
amounts not yet due and payable or for which adequate reserves have been
provided on the Financial Statements in accordance with GAAP, all amounts
required to be collected and remitted to a taxing authority from customers with
respect to hotel occupancy, gaming and similar taxes and charges have been
collected and remitted, except for such amounts which are not, individually or
in the aggregate, material.
(iii) All deficiencies asserted in writing or assessments
made as a result of any examinations or other audits by federal, state, local or
foreign taxing authorities have been paid in full, settled, or adequately
provided for in accordance with GAAP in the most recent Financial Statements
filed on or prior to the date of this Agreement. The Company has not executed
any unexpired waiver of any statute of limitations on or extension of any period
for the assessment or collection of any Tax. No audit or other examination of
any Tax Return of the Company by any Tax authority is presently in progress, nor
has the Company been notified in writing of any request for such an audit or
other examination and no material adjustment relating to any Tax Returns filed
or required to be filed by the Company has been proposed in writing by any Tax
authority to the Company.
(iv) The Company has never been a member of a group filing
a consolidated, unitary, combined or similar Tax Return under any federal,
state, local or foreign law. The Company is not a party to or bound by any
material Tax sharing, allocation or indemnification agreement or arrangement. No
written claim has ever been made by a Tax authority in a jurisdiction where the
Company does not file Tax returns that the Company is or may be subject to a
material Tax liability in that jurisdiction.
(v) The Company has not constituted either a "distributing
corporation" or a "controlled corporation" in a distribution of stock intended
to qualify for tax-free treatment under Section 355 of the Code in the two years
prior to the date of this Agreement.
(vi) The Company has not been a party to a "reportable
transaction," as such term is defined in Treasury Regulations Section
1.6011-4(b)(1), a transaction that is or is substantially similar to a "listed
transaction," as such term is defined in Treasury Regulations Section
1.6011-4(b)(2) or any other transaction requiring disclosure under analogous
provisions of state or local Tax law.
(vii) SCHEDULE 3.1(N)(VII) of the Company Disclosure Letter
sets forth an estimate as of the tax year ended December 31, 2005, of the amount
and expiration date of all federal income tax net operating loss carryforwards,
capital loss carryforwards and credit carryforwards of the Company. Except with
respect to the transactions contemplated by this Agreement, to the Knowledge
14
of the Company after inquiry, such carryforwards are not subject to any
restrictions on their use, by reason of the Code or otherwise.
(viii) The Company will not be required to include any item
of income in, or exclude any item of deduction from, taxable income for any Tax
Period (or portion thereof) ending after the Closing Date as a result of any (i)
change in method of accounting for a Tax Period ending on or prior to the
Closing Date, (ii) material prepaid amount received on or prior to the Closing
Date to the extent that such amount did not reduce Working Capital or Total
Transaction Consideration, (iii) installment sale or open transaction
disposition made on or prior to the Closing Date or (iv) closing agreement,
settlement, or similar agreement executed on or prior to the Closing Date.
(ix) For purposes of this Agreement (i) the term "TAX" or
"TAXES" means all federal, state, local and foreign income, profits, franchise,
gross receipts, stamp, payroll, hotel occupancy, gaming, employment, use,
property, withholding, excise, and other taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties and additions imposed
with respect to such amounts, and (ii) the term "TAX RETURN" means all returns
and reports required to be filed with, or supplied to, any federal, state, local
or foreign tax authority with respect to Taxes.
(o) EMPLOYEE BENEFIT PLANS.
(i) Set forth in SCHEDULE 3.1(O)(I) of the Company
Disclosure Letter is a list of each "EMPLOYEE BENEFIT PLAN." Employee Benefit
Plan means any material employee benefit or compensation plan, agreement or
other arrangement providing compensation or benefits to any current or former
consultant, employee, officer or director of the Company that is sponsored by
the Company or to which the Company contributes.
(ii) The Company has heretofore made or, promptly following
the date of this Agreement, will make available to Parent copies of each of the
Employee Benefit Plans and each of the following, if applicable: (A) each
writing constituting a part of such Employee Benefit Plan, including all plan
documents, material employee communications, benefit schedules, trust
agreements, and insurance contracts and other funding vehicles; (B) the
actuarial report for each of the last two years; (C) the most recent
determination letter from the IRS for each Employee Benefit Plan; (D) the
summary plan description and any material modifications thereto, if any (in each
case whether or not required to be furnished by the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"); and (E) the Form 5500 (if
applicable) for each of the last two years.
(iii) Each of the Employee Benefit Plans has been operated
and administered in all material respects in compliance with its terms
(including contribution requirements) and applicable laws, including, but not
limited to, ERISA and the Code, and to the extent an Employee Benefit Plan is
intended to be tax-qualified under Section 401(a) of the Code, the IRS has
issued a favorable determination letter for such plan, and, except as set forth
in SCHEDULE 3.1(O)(III) of the Company Disclosure Letter, to the Knowledge of
the Company, no circumstances exist and no events have occurred that would be
reasonably expected to adversely affect the qualified status of any such plan or
any related trust.
(iv) Except as set forth in SECTION 3.1(O)(IV) of the
Company Disclosure Letter, no Employee Benefit Plan provides welfare benefits,
with respect to current or former employees or directors of the Company or any
of their dependents beyond their retirement or other termination of service,
other than health continuation coverage as required by Section 4980B of the Code
or Part 6 of Title I of ERISA and there has been no communication to employees
by the Company
15
which could reasonably be interpreted to promise or guarantee employees retiree
health or life insurance or other retiree death benefits on a permanent basis.
(v) No Employee Benefit Plan is a "multiemployer plan" (as
defined in section 4001(a)(3) of ERISA), a "multiple employer plan" (within the
meaning of section 413(c) of the Code) or subject to Title IV of ERISA and none
of the Company, or any trade or business which together with the Company would
be deemed a "single employer" within the meaning of Section 4001 of ERISA (an
"ERISA AFFILIATE") has at any during the last six (6) years contributed to any
such plan. No event has occurred with respect to the Company in connection with
which the Company could be subject to any material liability with respect to any
Employee Benefit Plan under ERISA or the Code.
(vi) SECTION 3.1(O)(VI) of the Company Disclosure Letter
sets forth (i) a list of any Employee Benefit Plan under which the execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby or any related event would (either alone or in conjunction with any other
event) result in, cause the accelerated vesting, funding or delivery of, or
increase the amount or value of, any payment or benefit to any employee, officer
or director of the Company or any of its subsidiaries, and (ii) the maximum
amount of the "excess parachute payments" within the meaning of Section 280G of
the Code that could become payable by the Company or any of its subsidiaries in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
(vii) There are no pending or, to the Knowledge of the
Company, threatened or anticipated claims by, on behalf of or against any
Employee Benefit Plan or any trusts related thereto, except (i) routine claims
for benefits and (ii) claims that would not be expected to be, individually or
in the aggregate, material. Except as set forth in SCHEDULE 3.1(O)(VII) of the
Company Disclosure Letter, with respect to any Employee Benefit Plan, to the
Knowledge of the Company, no administrative investigation, audit or other
administrative proceeding by the Department of Labor, the Internal Revenue
Service or other United States governmental agencies is pending or threatened.
(p) LABOR MATTERS.
(i) Except as set forth in SCHEDULE 3.1(P) of the Company
Disclosure Letter, (A) the Company does not have any agreements with labor
unions or associations representing employees of the Company, (B) no labor
strike, lock-out, slowdown or work stoppage against the Company is pending or,
to the Knowledge of the Company, threatened, (C) no grievance or arbitration
proceeding arising out of or under collective bargaining agreements or
employment relationships (involving more than one employee) is pending, or, to
the Knowledge of the Company, threatened (D) as of the date of this Agreement,
no labor organization or group of employees of the Company has made a demand
(which demand is pending as of the date of this Agreement) for recognition or
certification, and (E) to the Knowledge of the Company, there are no unfair
labor practice charges or complaints pending or threatened against the Company
before the National Labor Relations Board or any other comparable foreign or
domestic authority or any workers' council, except, in the case of each of
clauses (B) and (C), as would not reasonably be expected to have a Material
Adverse Effect.
(ii) The Company complies and has complied in all material
respects with all applicable laws respecting employment and employment
practices, and except as set forth in SCHEDULE 3.1(P) no claims or
investigations are pending or, to the Company's knowledge, threatened with
respect to such law, either by private individuals or by governmental agencies.
(q) INTELLECTUAL PROPERTY. Except as set forth in SCHEDULE
3.1(Q)(I) of the Company Disclosure Letter, the Company owns or possesses
licenses or other rights in or under all
16
intellectual property and know-how necessary to conduct its business as
currently conducted, including patents, trademarks, service marks, trade names,
logos and designs, all goodwill symbolized thereby and associated therewith,
copyrights, confidential or proprietary technical and business information,
processes and trade secrets, computer software, and technical manuals and
documentation used in connection with the foregoing (collectively, the "COMPANY
INTELLECTUAL PROPERTY"), free and clear of all Liens, except where the failure
to so own or possess such Company Intellectual Property would not reasonably be
expected to have a Material Adverse Effect. Except as set forth in SCHEDULE
3.1(Q)(II) of the Company Disclosure Letter, there are no pending, or, to the
Knowledge of the Company, threatened, claims based on the use by, or challenging
the ownership by, the Company of any Company Intellectual Property that would
reasonably be expected to have a Material Adverse Effect. Except as set forth in
SCHEDULE 3.1(Q)(III) of the Company Disclosure Letter, to the Knowledge of the
Company, no third party has infringed any Company Intellectual Property, except
where such infringement would not reasonably be expected to have a Material
Adverse Effect. The Company has taken reasonable actions to maintain and protect
the Company Intellectual Property. Set forth in SCHEDULE 3.1(Q)(IV) of the
Company Disclosure Letter is a list of all Company Intellectual Property that is
owned by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
(r) INSURANCE. SCHEDULE 3.1(R) of the Company Disclosure Letter
sets forth a list of all material insurance policies held by the Company as of
the date hereof. Such policies are in full force and effect, the Company is not
in material breach under such policies, and such policies, (together with
self-insurance programs in effect) provide coverage for the Company's business
in amounts and against risks consistent with past practice. No representation or
warranty is made by the Company that any such policy will not lapse or terminate
by reason of consummation of the transactions contemplated by this Agreement.
(s) ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE
3.1(S) of the Company Disclosure Letter or as would not reasonably be expected
to have a Material Adverse Effect, to the Knowledge of the Company, (i) the
Company is in compliance with all applicable federal, state and local laws
governing pollution or the protection of the environment ("ENVIRONMENTAL LAWS"),
(ii) the Company has not received any written notice or claim from any
Governmental Authority or third party alleging that the Company is not in
compliance with any Environmental Law, and (iii) neither the Company nor any of
its entity predecessors has caused any release of a "hazardous substance", as
that term is defined in the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. ▇▇.▇▇. 9601 et seq., as amended from time to time,
that would require investigation or remediation on any of the Owned Real
Property.
(t) BROKERS, FINDERS, ETC. Except as set forth in SCHEDULE
3.1(T) of the Company Disclosure Letter, the Company is not subject to any valid
claim of any broker, investment banker, finder or other intermediary in
connection with the transactions contemplated by this Agreement.
(u) SUFFICIENCY OF ASSETS. The assets held by the Company are
in all material respects sufficient for the conduct of its business following
the Closing in substantially the same manner as currently conducted.
(v) NO OTHER REPRESENTATIONS OR WARRANTIES. Other than the
representations and warranties expressly set forth in this SECTION 3.1, the
Company shall not be deemed to have made any other representation or warranty in
connection with this Agreement or the transactions contemplated hereby, and no
other Person (including any Stockholder or any officer, director, employee or
Affiliate of the Company) shall be deemed to have made any representation or
warranty to Parent or Merger Sub in connection with this Agreement or the
transactions contemplated hereby.
17
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.
Each of Parent and Merger Sub hereby jointly and severally represents and
warrants to the Company as follows:
(a) ORGANIZATION AND STANDING. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and Merger Sub is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada. Each of Parent and
Merger Sub has the requisite power and authority to carry on its business as now
being conducted, to own or use the properties and assets that it purports to own
or use, and to perform its obligations under this Agreement and its other
material contracts, in each case, except as would not reasonably be expected to
prevent consummation of the Merger.
(b) AUTHORITY. The execution and delivery of this Agreement by
each of Parent and Merger Sub and the performance by each of Parent and Merger
Sub of its obligations under this Agreement have been duly authorized by all
necessary action on the part of each of Parent and Merger Sub. This Agreement
has been duly executed and delivered by each of Parent and Merger Sub and,
assuming the due execution and delivery of this Agreement by the Company, this
Agreement constitutes a valid and binding obligation of each of Parent and
Merger Sub, enforceable against each of Parent and Merger Sub in accordance with
its terms, except as such enforcement may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general principles of
equity (regardless of whether such enforcement is sought in a proceeding in
equity or at law).
(c) NO CONFLICT. The consummation of the transactions under
this Agreement and the Escrow Agreement will not require the consent, waiver or
approval of any party to any material contract to which Parent, Merger Sub or
any of their Affiliates is a party or by which any of them is bound, or the
consent, approval, order or authorization of, or the registration, declaration
or filing with, any Governmental Authority, except for (i) any approvals or
filings of notice under, or in connection with, the Gaming Laws and the HSR Act,
(ii) the filing and recordation of the Articles of Merger as required by the
NRS, and (iii) those consents, waivers and approvals that relate to or are
applicable to the Company or any of its Affiliates but not to Parent, Merger Sub
or any of their Affiliates. Assuming the consents, waivers and approvals set
forth in the immediately preceding clauses (i) and (ii) are obtained or made, as
applicable, the execution, delivery and performance by each of Parent and Merger
Sub of this Agreement, and the execution, delivery and performance by Parent of
the Escrow Agreement, will not (x) violate any law applicable to Parent, Merger
Sub or any of their Affiliates, (y) result in a breach or violation of any
provision of, or constitute a default under, any contract to which Parent,
Merger Sub or any of their Affiliates is a party or by which any of them is
bound, or (z) conflict with any provision of the charter, bylaws or other
organizational documents of Parent or Merger Sub, except in the case of clauses
(x) and (y) above, for any such breach, violation or default which would not
reasonably be expected to delay or prevent consummation of the Merger.
(d) LITIGATION. There is no suit, action or proceeding pending
or, to the knowledge of Parent, threatened against Parent, Merger Sub or, if
applicable, the Gaming Operator, or any of their Affiliates before any
Governmental Authority, which could prevent or delay the transactions
contemplated by this Agreement.
(e) FINANCING. Parent has obtained written commitments (the
"FINANCING COMMITMENTS") for any and all financing (whether equity financing,
debt financing or otherwise) necessary to pay the Enterprise Price and all fees,
costs and expenses related to the Merger and the other transactions contemplated
by this Agreement (the "FINANCING"). Parent has provided true, accurate and
complete copies of the Financing Commitments to the Company, and Parent has paid
all commitment fees and any other fees and amounts due at or prior to the date
hereof under the Financing Commitments.
18
None of the Financing Commitments has been amended, modified or terminated, and
the respective commitments contained in the Financing Commitments have not been
withdrawn or rescinded in any respect in any way materially adverse to the
Company. The Financing Commitments are in full force and effect and no event has
occurred which, with or without notice, lapse of time (other than the expiration
of the term thereof) or both, would constitute a default on the part of Parent
under any of the Financing Commitments. There are no conditions precedent or
other contingencies related to the funding of the full amount of the Financing,
other than as set forth in or contemplated by the Financing Commitments. The
aggregate proceeds to be disbursed pursuant to the agreements contemplated by
the Financing Commitments, together with Parent's cash and cash equivalents,
will be sufficient for Parent to pay the Enterprise Price and all fees, costs
and expenses related to the Merger and the other transactions contemplated by
this Agreement. Parent has no reason to believe that any of the conditions to
the Financing contemplated by the Financing Commitments will not be satisfied or
that Parent will not receive the proceeds of the Financing on or prior the
Closing Date.
(f) NO VOTE REQUIRED. No vote of the stockholders of Parent is
required by law, Parent's certificate of incorporation or bylaws or otherwise
for Parent and Merger Sub to consummate the transactions contemplated by this
Agreement.
(g) OPERATIONS OF MERGER SUB. Merger Sub is a direct wholly
owned subsidiary of Parent, was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement and has engaged in no other business
activities.
(h) BROKERS, FINDERS, ETC. Except for ▇▇▇▇▇▇▇▇▇ & Company,
Inc., neither Parent nor Merger Sub is subject to any valid claim of any broker,
investment banker, finder or other intermediary in connection with the
transactions under this Agreement. Parent is solely responsible for any payment,
fee or commission that may be due to ▇▇▇▇▇▇▇▇▇ & Company, Inc. in connection
with the transactions contemplated by this Agreement.
(i) LICENSABILITY OF PRINCIPALS. None of Parent, Merger Sub or,
if applicable, the Gaming Operator, or any of their directors, officers,
employees or Affiliates, or other related Persons subject to licensure by a
Gaming Authority, has ever been denied, or had revoked or suspended, a gaming
license by any Gaming Authority. There are no facts, which if known to the
Gaming Authorities, would (a) be reasonably likely to result in the denial,
revocation, limitation or suspension of a gaming license or (b) result in a
negative outcome to any finding of suitability proceedings currently pending, or
under the suitability proceedings necessary for the consummation of the
transactions contemplated by this Agreement.
(j) INVESTIGATION BY PARENT AND MERGER SUB. Each of Parent and
Merger Sub acknowledges and agrees that it has conducted its own independent
investigation, review and analysis of the business, operations, assets,
liabilities, results of operations, financial condition, software, technology
and prospects of the Company, which investigation, review and analysis was done
by Parent and its Affiliates and, to the extent Parent deemed appropriate, by
Parent's agents and representatives. Without limitation of the foregoing, each
of Parent and Merger Sub acknowledges that the Total Transaction Consideration
has been negotiated based on Parent's express agreement that there would be no
contingencies (financial or otherwise) to Closing other than the conditions set
forth in ARTICLE V. Each of Parent and Merger Sub acknowledges that, should the
Closing occur, except as otherwise set forth in this Agreement, each of Parent
and Merger Sub will acquire the Company and its business, properties, assets and
liabilities in an "as is" condition and on a "where is" basis, without any
representation or warranty of any kind, express or implied, except such
representations and warranties expressly set forth in this Agreement. Further,
without limiting any representation, warranty or covenant of the Company
expressly set forth herein, except as otherwise set forth in ARTICLE V, each of
Parent and Merger Sub acknowledges
19
that it has waived and hereby waives as a condition to Closing any further due
diligence reviews, inspections or examinations with respect to the Company,
including, without limitation, with respect to engineering, environmental,
title, survey, financial, operational, regulatory and legal compliance matters.
ARTICLE IV
COVENANTS
SECTION 4.1 CONDUCT OF BUSINESS. From the date of this Agreement
through to the Effective Time, the Company agrees that, except (i) as disclosed
in SCHEDULE 4.1 of the Company Disclosure Letter, (ii) as otherwise provided for
in this Agreement or the Other Transaction Documents, (iii) as approved in
writing by Parent (such approval not to be unreasonably withheld or delayed) or
(iv) with respect to the Selected Memorabilia:
(a) the Company shall carry on and operate its business in the
ordinary course consistent with past practice (which may include contracting for
and booking entertainment, conferences and other events, any of which may take
place after the Closing Date) and in compliance in all material respects with
applicable law;
(b) the Company shall not directly or indirectly take any of
the following actions:
(i) amend, restate, modify or repeal or add any provisions
to its certificate of incorporation or bylaws;
(ii) pay or declare or set aside for payment any dividend
or other distribution, payable in cash, stock or property, with respect to any
shares of any class or series of its capital stock;
(iii) redeem, purchase or otherwise acquire directly or
indirectly any of its securities (including equity securities, debt securities,
securities convertible into or exchangeable or exercisable for debt securities
or equity securities, phantom stock, stock appreciation rights, options,
warrants, calls, commitments or rights of any kind to acquire any equity or debt
securities) or any instrument or security which consists of or includes a right
to acquire such securities;
(iv) other than in the ordinary course of business, create,
incur, issue, assume, guarantee, permit, suffer to exist or otherwise become
directly or indirectly liable with respect to any indebtedness or Liens other
than indebtedness and Liens not to exceed $1,000,000 in the aggregate for all
such indebtedness and Liens;
(v) other than as required by applicable law or the terms
of a Material Contract, or in a connection with the transactions contemplated by
SECTION 4.4, modify, amend or repeal any Material Contract (other than an
Affiliate Agreement) (or waive compliance with the terms of or breaches
thereunder);
(vi) in a single transaction or through a series of similar
or related transactions, consolidate with or merge with or into any other
Person, or transfer (by lease, assignment, sale or otherwise) any material
portion of its assets to another Person or group of Affiliated Persons;
(vii) in a single transaction or through a series of
similar or related transactions, sell, lease, sublease, convey, transfer,
mortgage, subject to a Lien or otherwise dispose of
20
any assets material to the operation of the Company, other than transient
occupancy arrangements and gaming equipment in the ordinary course of business;
(viii) in a single transaction or through a series of
similar or related transactions, acquire any real property;
(ix) consummate any acquisition of the stock or assets of
any other Person, in a single transaction or series of similar or related
transactions, involving consideration in excess of $1,000,000 in the aggregate
(other than acquisitions of inventory and equipment in the ordinary course of
business);
(x) other than in the ordinary course of business or as set
forth in the Company's 2006 capital expenditure budget (a copy of which is
attached to SCHEDULE 4.1(B)(X) of the Company Disclosure Letter), make any
capital expenditures in excess of $1,000,000 in the aggregate; PROVIDED,
HOWEVER, that the Company may make capital expenditures pursuant to the terms of
contracts which have been executed prior to the date hereof;
(xi) effect a complete or partial liquidation, dissolution,
winding-up, recapitalization, reclassification or reorganization in any form of
transaction;
(xii) amend any Tax Return in any material respect;
(xiii) fail to maintain with financially responsible
insurance companies insurance coverage substantially similar to the insurance
coverage maintained by the Company on the date hereof, to the extent available
at reasonable cost;
(xiv) except as otherwise required by the terms of any
written agreement, as such agreement is in existence as of the date hereof, or
in the ordinary course of business consistent with past practice (including
customary annual changes in compensation that do not result in a material
increase in benefit or compensation expense to the Company), or except as set
forth in SCHEDULE 4.1(B)(XIV) of the Company Disclosure Letter, (A) make any
change in the compensation or benefits payable or to become payable to any of
its directors, officers or employees, (B) pay any severance or retirement
benefits not required by any existing plan or agreement to any such employees,
directors or officers, (C) accelerate the vesting of, or the lapsing of
restriction with respect to, any stock options or other stock-based compensation
or cause the funding of any rabbi trust or similar arrangement, or (D) make any
loan or advance to, any of such Persons or make any change in its existing
borrowing or lending arrangements for or on behalf of any of such Persons
pursuant to an employee benefit plan or otherwise; or
(xv) (A) except as set forth in SCHEDULE 4.1(B)(XV) of the
Company Disclosure Letter, enter into any new employment, severance or
compensatory agreements or arrangements with any officer or director of the
Company or with any employee of the Company (except with respect to any such
agreements or agreements pursuant to which the Company or any of its
subsidiaries would not reasonably be expected to have any obligation to provide
compensation and/or benefits (including without limitation severance pay or
benefits or payments related to change in control of the Company) in any amount
or having a value in excess of $150,000 per year or $250,000 in the aggregate);
PROVIDED, that the hiring of an at will employee shall not be construed as
entering into or amending an employment agreement; (B) promote any employee,
other than promotions on terms that are not materially more favorable (in terms
of compensation, severance, duration and other matters) than the terms upon
which any employee previously serving in the applicable capacity was entitled;
or (C) hire or appoint any officer or director, except in connection with the
replacement of an officer whose
21
employment has terminated, PROVIDED the overall compensatory package of such
newly hired officer or director is not materially more favorable than that of
the replaced officer or director;
(xvi) settle or compromise any material litigation other
than settlement or compromises for litigation providing (A) solely for the
payment of money damages in all events paid prior to the Closing Date or
reserved for in the balance sheet of the Company as of the Closing Date
(immediately prior to the Effective Time) and (B) a complete release of the
Company of all claims and which do not provide for any admission of liability by
the Company;
(xvii) enter into any agreement, contract, commitment or
arrangement (oral or written) to do any of the foregoing, or authorize,
recommend, propose or announce an intention to do any of the foregoing actions;
and
(xviii) make any expenditures with respect to the
renovation of the suites at the Hard Rock Hotel.
(c) except as required by law or regulation, the Company shall
not knowingly perform any act, or omit to perform any act within its reasonable
control, which will cause a breach of any representation, warranty or obligation
contained in this Agreement.
SECTION 4.2 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Subject to any restrictions imposed by the Gaming Laws or
the antitrust laws, the Company shall afford to representatives of Parent,
including its counsel, accountants and lenders, reasonable access during normal
business hours during the period prior to the Closing Date to all the
properties, books, Contracts and records of the Company (collectively, the
"INSPECTION"); PROVIDED, HOWEVER, that (i) Parent shall provide the Company with
at least twenty-four hours' prior written notice of any Inspection; (ii) if the
Company so requests, Parent's representatives shall be accompanied by a
representative of the Company; (iii) Parent shall not initiate contact with
employees or other representatives of the Company without the prior written
consent of the Company; (iv) Parent's representatives shall not be entitled to
perform any physical testing of any nature with respect to any of the Company's
properties or assets or any portion thereof without the Company's prior written
consent, which consent may be withheld if in the judgment of the Company's
representatives such testing would interfere with the operation of the Company's
business; (v) Parent shall not interfere with the operation of the Company's
business; (vi) Parent shall, at its sole cost and expense, promptly repair any
damage to any of the Company's properties or assets or any portion thereof or
any other property owned by a Person other than Parent, as the case may be,
arising from or caused by such Inspection, and shall promptly reimburse the
Company for any loss arising from or caused by any Inspection, and restore the
Company's properties and assets or such other third-party property, as the case
may be, to substantially the same condition as existed prior to such Inspection,
and shall indemnify, defend and hold harmless the Company, the Stockholders and
their respective Affiliates from and against any personal injury or property
damage claims, liabilities, judgments or expenses (including reasonable
attorneys' fees) incurred by any of them arising or resulting from any
Inspection of the Company's real property; and (vii) in no event shall the
results of any such Inspection or Parent's satisfaction therewith be a condition
to Parent's obligations hereunder, it being the intent of Parent to purchase the
Company and its business, properties, assets and liabilities on an "as is, where
is" basis as set forth in SECTION 4.10. If, in the course of any investigation
pursuant to this SECTION 4.2(A), Parent discovers any breach of any
representation or warranty contained in this Agreement or any circumstance or
condition that, upon Closing, would constitute such a breach, Parent shall
promptly inform the Company in writing and any failure to notify the Company
shall constitute a waiver of any such breach.
22
(b) Nothing in this SECTION 4.2 shall require the Company to
permit any inspection, or to disclose any information, that in the reasonable
judgment of the Company would (i) result in the disclosure of any trade secrets
of third parties or violate any of its respective obligations with respect to
confidentiality, PROVIDED that the Company shall use its commercially reasonable
efforts to obtain the consent of such third party to such inspection or
disclosure, or (ii) result in a violation of applicable law, including the
Gaming Laws and the antitrust laws.
(c) Each of Parent and Merger Sub acknowledges that the
information being provided to Parent, Merger Sub and their representatives by
the Company is subject to the terms of a confidentiality agreement, dated April
20, 2006, among the Company, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, HR Condominium Investors (Vegas),
L.L.C., a Delaware limited liability company, PMR and Parent (as it may be
amended, the "CONFIDENTIALITY AGREEMENT"), the terms of which are incorporated
herein by reference.
SECTION 4.3 CONSENTS AND GOVERNMENTAL APPROVALS
(a) Subject to the terms and conditions of this Agreement, and
except as otherwise set forth in this Agreement, each of the Company, Parent and
Merger Sub agrees (in all cases, without being obligated to make any payment to
any third party (other than filing fees to Governmental Authorities)) to use its
reasonable best efforts to, and each of Parent and Merger Sub agrees to use its
reasonable best efforts to cause the Gaming Operator to, take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective as promptly as practicable the
transactions under this Agreement and to cooperate with the others in connection
with the foregoing, including using its reasonable best efforts to:
(i) obtain all necessary waivers, consents and approvals
from other parties to Material Contracts (to which the Company is a party) and
other material contracts (to which Parent, Merger Sub or the Gaming Operator, if
applicable, is a party);
(ii) obtain, and cause (with respect to the Company) the
Company's and (with respect to Parent or Merger Sub) Parent's, Merger Sub's and
the Gaming Operator's directors, officers, employees or Affiliates or other
related Persons as may be so required to obtain, all material consents,
approvals and authorizations that are required to be obtained under any Federal,
state, local or foreign law or regulations;
(iii) prevent the entry, enactment or promulgation of any
threatened or pending injunction or order that could materially adversely affect
the ability of the parties hereto to consummate the transactions under this
Agreement;
(iv) lift or rescind any injunction or order that could
materially adversely affect the ability of the parties hereto to consummate the
transactions under this Agreement; and
(v) effect all necessary registrations and filings and
submissions of information requested by any Governmental Authorities.
(b) In furtherance and not in limitation of the foregoing, each
party hereto agrees to make any required filing of a Notification and Report
Form pursuant to the HSR Act, with respect to the transactions contemplated by
this Agreement as promptly as practicable and to supply as promptly as
practicable any additional information and documentary material that may be
requested pursuant to the HSR Act and use its reasonable best efforts to take,
or cause to be taken, as promptly as
23
practicable all other actions consistent with this SECTION 4.3 necessary to
cause the expiration or termination of the applicable waiting periods under the
HSR Act as soon as practicable. Parent shall pay all fees incurred in connection
with all notices and filings under the HSR Act.
(c) In addition to and not in limitation of the foregoing,
Parent shall, and shall, if applicable, cause the Gaming Operator to, use its
reasonable best efforts (i) to as promptly as practicable, obtain, and cause
Parent's, and, if applicable, the Gaming Operator's directors, officers,
employees or Affiliates or other related Persons as may be so required to
obtain, all Gaming Approvals, (ii) to avoid any action or proceeding by any
Gaming Authority challenging the consummation of the transactions contemplated
hereby, (iii) to make or cause to be made all necessary filings, and thereafter
make or cause to be made any other required submissions with respect to this
Agreement, as required under the Gaming Laws, (iv) to schedule and attend (or
cause to be scheduled and attended) any hearings or meetings with Gaming
Authorities to obtain the Gaming Approvals as promptly as possible and (v) to
comply with the terms and conditions of any and all of the foregoing. Parent and
its representatives and Affiliates shall (i) file or cause to be filed as
promptly as practicable all required applications and documents in connection
with obtaining the Gaming Approvals, (ii) request or cause to be requested an
accelerated review from the Gaming Authorities in connection with such filings,
(iii) act diligently and promptly to pursue the Gaming Approvals, (iv) cooperate
with the Company in connection with the making of all filings referenced in the
preceding sentence, including providing copies of all such documents to the
Company and its advisors prior to filing and, if requested, accepting all
reasonable additions, deletions or changes suggested in connection therewith,
(v) notify the Company of the receipt of comments or requests from Gaming
Authorities relating to Gaming Approvals, (vi) upon reasonable request of the
Company, supply the Company with copies of all such correspondence, and (vii)
keep the Company informed of the status of Parent's and, if applicable, the
Gaming Operator's application for Gaming Approvals and its activities related to
obtaining the Gaming Approvals, as applicable.
SECTION 4.4 COMPANY BONDS; CREDIT AGREEMENT.
(a) Parent shall use its best efforts, at its expense, to (i)
repay or otherwise satisfy on or prior to the Closing Date all outstanding
borrowings under the Credit Agreement, all accrued and unpaid interest thereon
and all other Obligations under the Credit Agreement, and (ii) subject to
SECTION 4.4(B) below, on or prior to the Closing Date, to defease, repay or
otherwise satisfy the entire outstanding aggregate principal amount of the
Company Bonds, all accrued and unpaid interest thereon and all other Obligations
under the Company Bonds (it being understood that any amounts repaid or
otherwise satisfied by Parent pursuant to this SECTION 4.4 shall be deemed to be
outstanding as of the Closing Date for purposes of SECTION 2.2(A)(VII)(B)).
Parent shall indemnify the Company, the Stockholders and their respective
directors, officers, employees, Affiliates and representatives for any and all
liabilities arising out of or in connection with any action taken by the Company
or any of the foregoing Persons at the request of Parent and pursuant to this
SECTION 4.4 to the maximum extent permitted by law. For the avoidance of doubt,
nothing in this SECTION 4.4 shall supersede SECTION 2.2(A)(VII)(C).
(b) Notwithstanding any provision to the contrary in this
Agreement, including, without limitation, SECTIONS 4.4(A) and 5.3(C), if (i)
allowing a portion of the Company Junior Notes to remain outstanding would not
violate any provision of law or regulation applicable to the Company or Parent
or their respective shareholders, and (ii) such portion of the Company Junior
Notes may remain outstanding without breaching the Financing Commitments or
causing a condition to the Financing Commitments not to be satisfied, then (A)
Parent shall not be obligated to pay, defease, redeem, purchase or otherwise
satisfy such portion of the Company Junior Notes and (B) the fact that Parent
has not caused such portion of Company Junior Notes to be paid, defeased,
redeemed, purchased or otherwise satisfied shall not affect or impair the
obligations of Parent or the Company hereunder.
24
SECTION 4.5 EMPLOYEE BENEFIT PLANS. Parent hereby agrees that:
(a) For a period of one year following the Closing Date, Parent
shall, or shall cause the Surviving Corporation or one of its subsidiaries, to
provide each employee of the Company who was an employee of the Company (other
than employees subject to collective bargaining or similar agreements)
immediately prior to the Closing (each, an "AFFECTED EMPLOYEE") compensation and
benefits that are substantially similar, in the aggregate, to those benefits
provided by the Company Benefit Plans; PROVIDED, HOWEVER, that, in lieu of the
foregoing, Parent at its sole option may provide such Affected Employee with
employee benefits that, in the aggregate, are substantially similar to those
applicable to similarly situated employees of Parent.
(b) With respect to each employee benefit plan, practice or
policy of Parent or any of its Affiliates, each Affected Employee shall be given
credit under such plan for all service prior to the Closing Date with the
Company or any predecessor employer (to the extent such credit was given by the
Company or any predecessor employer under a comparable plan, practice or
policy), for purposes of determining eligibility and vesting and levels of
benefits; PROVIDED, HOWEVER, such service need not be credited to the extent (i)
it would result in a duplication of benefits or for benefit accrual under
defined benefit plans or (ii) is prohibited by applicable law.
(c) If any Affected Employee is discharged by the Company as of
or after the Closing, then Parent shall be responsible for any and all severance
costs for such Affected Employee, including payments owing under those
agreements, plans or arrangements listed in SCHEDULE 3.1(O) of the Company
Disclosure Letter. Parent shall be responsible and assume all liability for all
notices or payments due to any Affected Employees, and all notices, payments,
fines or assessments due to any governmental entity, pursuant to any applicable
foreign, federal, state or local law, common law, statute, rule or regulation
with respect to the employment, discharge or layoff of employees by the Company
on or after the Closing Date, including the WARN Act or similar state statute,
Section 4980B of the Code and any rules or regulations as have been issued in
connection with the foregoing; PROVIDED, however, that prior to the Closing
Date, the Company shall cooperate with Parent (including giving notices if
requested by Parent) in the giving of notices pursuant to the immediately
preceding sentence, if any such notices are to be given.
(d) Parent shall take all action as may be necessary and
appropriate to cause a tax-qualified 401(k) plan in which it or any of its
subsidiaries sponsors to accept the rollovers of all Affected Employees who
elect such rollovers of their 401(k) plan accounts and to provide the Affected
Employees with a tax-qualified 401(k) type plan effective immediately as of the
Closing Date, which plan shall recognize service with the Company and any
predecessor employer for purposes of eligibility, participation and vesting.
(e) In addition, and without limiting the generality of the
foregoing, except as prohibited by applicable law:
(i) at the Effective Time, each Affected Employee
immediately shall be eligible to participate, without any waiting time, in any
and all employee benefit plans of Parent and its Affiliates (other than the
Company and its subsidiaries) providing benefits to any Affected Employees after
the Effective Time (the "NEW PLANS") to the extent coverage under such New Plan
replaces coverage under a similar or comparable Company Benefit Plans in which
such Affected Employee participated immediately before the Effective Time (such
plans, collectively, the "OLD PLANS");
25
(ii) for purposes of each New Plan providing welfare
benefits to any Affected Employee, Parent shall cause all pre-existing condition
exclusions of such new Plan to be waived for such Affected Employee and his or
her covered dependents to the extent such pre-existing condition exclusions were
in applicable to or had been satisfied by such Affected Employee and his or her
covered dependents immediately prior to the Effective Time under the relevant
Old Plan; and
(iii) each Affected Employee and their eligible dependents
shall receive credit for the plan year in which the Effective Time (or
commencement of participation in a New Plan) occurs towards applicable
deductibles and annual out-of-pocket limits for expenses incurred prior to the
Effective Time (or the date of commencement of participation in a New Plan).
(f) From and after the Closing, Parent shall be responsible
for, and shall indemnify and hold harmless the Company, the Stockholders and
their respective directors, officers, Affiliates, representatives and agents,
and the fiduciaries (including plan administrators) of the Employee Benefit
Plans of the Company, from and against, any and all claims, losses, damages,
costs and expenses (including attorneys' fees and expenses) and other
liabilities and obligations relating to or arising out of (i) all salaries,
wages, commissions, employee incentive or other compensation, severance,
holiday, vacation, or retirement benefits earned but unpaid as of the Closing
and post-Closing bonuses due to any Affected Employee; and (ii) any claims of,
or damages or penalties sought by, any Affected Employee, or any Governmental
Authority on behalf of or concerning any Affected Employee, with respect to any
act or failure to act by Parent to the extent arising from the employment,
discharge, layoff or termination of any Affected Employee, including any failure
to perform or breach by Parent under this SECTION 4.5.
(g) With respect to any accrued but unused personal, sick or
vacation time to which any Affected Employee is entitled pursuant to the
personal, sick or vacation policies applicable to such Affected Employee
immediately prior to the Closing Date (the "PSV POLICIES"), such Affected
Employee shall be allowed to use such accrued personal, sick or vacation time
following the Closing Date, in accordance with such PSV Policies.
(h) Parent acknowledges and agrees that any employment loss
within the meaning of the Worker Adjustment and Retraining Notification Act (the
"WARN ACT"), 29 U.S.C. ▇▇.▇▇. 2101 et seq., suffered by any employee immediately
upon or within 90 days of the Closing, shall have been caused by Parent's
decision not to continue the employment of such employee, and not by the sale of
the Company. The Company acknowledges and agrees that, at Parent's request, it
shall give any notices required by the WARN Act if necessary prior to the
Closing Date and otherwise cooperate with Parent. Parent shall be responsible to
and shall indemnify and hold harmless the Company and its Affiliates for any and
all claims asserted under the WARN Act because of a "plant closing" or "mass
layoff," as defined therein, occurring on or after the Closing Date, unless the
Company does not cooperate with Parent or provide requested notices as required
by immediately preceding sentence. For purposes of this Agreement, the Closing
Date is and shall be the same as the "effective date" of the sale within the
meaning of the WARN Act. Effective as of the Closing, Parent shall (i) assume
liability for all active workers' compensation cases attributable to any
employee and (ii) provide employees with coverage for all workers' compensation
benefits and, from and after Closing, Parent shall be responsible for all
workers' compensation claims filed by employees, regardless of whether the
underlying event of such claims occurred prior to the Closing.
(i) Nothing herein expressed or implied shall confer upon any
current or former employee of the Company or upon any representative of any such
person, or upon any collective bargaining agent, any rights or remedies,
including any third party beneficiary rights or any right to employment or
continued employment for any specified period, of any nature or kind whatsoever
under or by reason of this Agreement.
26
SECTION 4.6 [INTENTIONALLY OMITTED]
SECTION 4.7 FINANCIAL INFORMATION
(a) After the Closing, upon reasonable written notice, Parent
and the Company shall furnish or cause to be furnished to the Stockholders and
their respective accountants, counsel and other representatives access to,
during normal business hours, such information (including records pertinent to
the Company) as is reasonably necessary for financial reporting and accounting
matters.
(b) Parent shall retain all of the books and records of the
Company for a period of five years after the Closing Date or such longer time as
may be required by law. After the end of such period, before disposing of such
books or records, Parent shall give notice to such effect to the Stockholders
and give the Stockholders an opportunity to remove and retain all or any part of
such books or records as the Stockholders may select.
SECTION 4.8 [INTENTIONALLY OMITTED].
SECTION 4.9 PUBLICITY. Each of Parent and Merger Sub agrees that no
public release or announcement concerning the transactions under this Agreement
shall be issued by Parent, Merger Sub or any of their Affiliates, agents or
representatives without the prior written consent and approval of the Company
and prior notice by the Company to the Gaming Authorities in accordance with the
Gaming Laws and consistent with the Company's responsibilities as a gaming
licensee and until after the Company and its Affiliates have been given an
opportunity to first issue such a public release or announcement.
SECTION 4.10 CERTAIN UNDERSTANDINGS.
(a) Each of Parent and Merger Sub acknowledges that it has
received from the Company certain projections, forecasts and information
relating to the Company. Each of Parent and Merger Sub acknowledges that (i)
there are uncertainties inherent in attempting to make such projections and
forecasts and in such information, (ii) each of Parent and Merger Sub is
familiar with such uncertainties and is taking full responsibility for making
its own evaluation of the adequacy and accuracy of all projections, forecasts
and information so furnished and (iii) neither Parent nor Merger Sub or any of
their Affiliates shall have any claim against the Company, the Stockholders or
any of their respective directors, officers, Affiliates, agents or
representatives with respect thereto. Accordingly, without limiting the
generality of SECTION 3.1(U), the Company makes no representation or warranty
with respect to such projections, forecasts or information.
(b) Parent acknowledges that, except as expressly set forth
herein, without limiting the generality of SECTION 3.1(U), neither the Company
nor any other Person has made any representation or warranty, express or
implied, as to the accuracy or completeness of any information regarding the
Company, and neither the Company nor any other Person will be subject to any
liability to Parent, Merger Sub or any other Person resulting from the
distribution to Parent or Merger Sub, or the use of, any such information. Each
of Parent and Merger Sub acknowledges that, should the Closing occur, each of
Parent and Merger Sub will acquire the Company and its business, properties,
assets and liabilities in an "as is" condition and on a "where is" basis,
without any representation or warranty of any kind, express or implied, except
such representations and warranties expressly set forth in this Agreement.
Further, without limiting any representation, warranty or covenant of the
Company expressly set forth herein, each of Parent and Merger Sub acknowledges
that it has waived and hereby waives as a condition to Closing any further due
diligence reviews, inspections or examinations with respect to the Company,
27
including, without limitation, with respect to engineering, environmental,
title, survey, financial, operational, regulatory and legal compliance matters.
SECTION 4.11 TAXES. All Taxes arising out of, in connection with, or
attributable to any preparatory act or the transactions effected pursuant to
this Agreement shall be borne (directly or, if a Company level tax, indirectly)
by Parent. In the case of any Transfer Tax, Parent shall pay all such Transfer
Taxes (whether imposed on Parent, the Surviving Corporation or any Stockholder),
shall prepare and timely file all relevant Transfer Tax returns required to be
filed in respect of such Transfer Tax and shall pay the Transfer Tax shown on
such Transfer Tax return. For purposes of this Agreement, "TRANSFER TAX" or
"TRANSFER TAXES" means all sales (including, without limitation, bulk sales),
use, transfer, recording, ad valorem, privilege, documentary, gross receipts,
registration, conveyance, excise, license, stamp, duties, or similar taxes and
fees.
SECTION 4.12 CERTAIN NOTIFICATIONS. From the date of this Agreement
until the Closing, the Company, on one hand, and Parent, on the other hand,
shall promptly notify the other in writing regarding (a) any breach of any
covenant or obligation of such party hereunder, as applicable, and (b) any fact,
circumstance, event or action which will result in, or would reasonably be
expected to result in, the failure of such party to timely satisfy any of the
closing conditions specified in ARTICLE V, as applicable.
SECTION 4.13 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) Parent agrees that (i) all rights to indemnification
existing in favor of any director, officer, employee or agent of the Company
(the "INDEMNIFIED PARTIES") as provided in its charter or bylaws or in
indemnification agreements with the Company or any other Person, or otherwise in
effect as of the date hereof, shall survive the Closing and shall continue in
full force and effect for a period of not less than six years from the Closing
Date and (ii) Parent shall guarantee the performance by the Company of its
obligations referred to in immediately preceding clause (i); PROVIDED that, in
the event any claim or claims are asserted or made within such six-year period,
all rights to indemnification in respect of any such claim or claims, and
Parent's guarantee with respect thereto, shall continue until final disposition
of any and all such claims. Parent also agrees to indemnify all Indemnified
Parties to the fullest extent permitted by applicable law with respect to all
acts and omissions arising out of such individuals' services as directors,
officers, employees or agents of the Company or as trustees or fiduciaries of
any plan for the benefit of employees or directors of, or otherwise on behalf
of, the Company, occurring prior to the Closing Date including, without
limitation, the transactions under this Agreement. Without limiting the
generality of the foregoing, if any such Indemnified Party is or becomes
involved in any capacity in any action, proceeding or investigation in
connection with any matter, arising out of such individuals' services as
directors, officers, employees or agents of the Company or as trustees or
fiduciaries of any plan for the benefit of employees or directors of, or
otherwise on behalf of, the Company, including the transactions under this
Agreement, occurring prior to or at the Closing, Parent shall pay as incurred
such Indemnified Party's reasonable out-of-pocket legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith. From and after the Closing, Parent shall pay all reasonable
out-of-pocket expenses, including attorneys' fees, that may be incurred by any
Indemnified Party in enforcing the indemnity and other obligations provided for
in this SECTION 4.13.
(b) Parent agrees that, from and after the Closing, the Company
shall cause to be maintained in effect for not less than six years from the
Closing Date the current policies of the directors' and officers' liability
insurance maintained by the Company; PROVIDED that the Company may substitute
therefor policies of at least the same coverage containing terms and conditions
which are no less advantageous to the directors and officers covered by such
policies and PROVIDED that such substitution shall not result in any gaps or
lapses in coverage with respect to matters occurring prior to the
28
Closing; PROVIDED, FURTHER, that the Company shall not be required to pay an
annual premium in excess of 300% of the last annual premium paid by the Company
prior to the date hereof, and if the Company is unable to obtain the insurance
required by this SECTION 4.13(B) it shall obtain as much comparable insurance as
possible for an annual premium equal to such maximum amount.
SECTION 4.14 DEBT FINANCING
(a) From the date hereof until the Effective Time, the
Company shall, and shall use its reasonable best efforts to cause each of their
respective officers, directors, employees and representatives to, provide such
cooperation as is reasonably requested by Parent in connection with the
arrangement of the Financing, including (A) causing appropriate officers and
employees to be available, on a customary basis and on reasonable advance
notice, to meet with prospective lenders and investors in meetings, drafting
sessions, due diligence sessions, management presentations, road shows and
sessions with rating agencies, (B) assisting with the preparation of materials
for rating agency presentations, business projections and financial statements
(including those required by the SEC), and assisting Parent in preparing
offering memoranda, private placement memoranda, prospectuses and similar
documents, (C) requesting its independent accountants to provide reasonable
assistance to Parent, including requesting such accountants to provide consent
to Parent to prepare and use their audit reports relating to the Company and any
necessary "comfort letters," (D) forming, on or prior to the Closing Date, new
wholly owned subsidiaries, and transferring assets into those subsidiaries, to
the extent not prohibited by law or any contracts to which the Company is a
party or is bound (provided that in the event a contract prohibits such transfer
and the transfer cannot otherwise be structured in a manner to avoid conflict
with the terms of such contract, the Company agrees to use reasonable efforts to
obtain consents necessary to effectuate such transfers), and (E) provide
reasonable access to the Owned Real Property, in accordance with SECTION 4.2,
during normal business hours to the extent necessary for Parent to obtain
surveys, engineering reports, zoning reports, environmental reports and
appraisals required by the Financing Commitments with respect to the Owned Real
Property. Parent shall pay to the Company any costs or expenses incurred by the
Company in connection with the foregoing.
(b) Notwithstanding the foregoing or SECTION 4.4 or 5.3(C),
the parties acknowledge and agree that nothing in this Agreement shall (i)
require the Company, any of the Stockholders or any of their respective
officers, directors or Affiliates to (x) enter into or execute any commitment
letter, underwriting or placement agreement, pledge or security document, loan
agreement, note purchase agreement, registration rights agreement, indenture or
any other Contract, or any registration statement or other filing with the SEC,
or any certificate or other document in connection with any financing or other
funds sought by Parent, (y) commence or take any other action with respect to
any tender offer for, or any consent with respect to, or any repayment of, or
amendment or modification to, any debt securities or other indebtedness of the
Company (other than ministerial actions, including facilitating access to the
trustee with respect to, or providing a list of the holders of, any such debt
securities), or (z) obtain any rating agency confirmations or approvals, (ii)
require counsel to the Company or the Stockholders to deliver any legal opinion
in connection with any financing or funds sought by Parent, or (iii) require the
Company or any of the Stockholders, or any officer, director, employee, counsel
or advisor thereof, to make any representation or warranty, incur any liability
or provide for any indemnification or expense reimbursement in connection with
any financing or funds sought by Parent.
SECTION 4.15 FURTHER ASSURANCES. Subject to the terms and conditions
of this Agreement, each party will use its commercially reasonable efforts
(except where a different efforts standard is specifically contemplated by this
Agreement, in which case such different standard shall apply) to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary,
proper or
29
advisable under applicable laws and orders to consummate the transactions
contemplated by this Agreement.
SECTION 4.16 SELECTED MEMORABILIA. Notwithstanding anything in this
Agreement to the contrary, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have the right to purchase, or
otherwise acquire, from the Company on an "as is, where is," no representation
basis, such items of rock and roll or other memorabilia owned by the Company, as
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ may select, in his sole discretion, up to an aggregate appraised
value of $100,000 (the "SELECTED MEMORABILIA"), and there shall not be sold,
assigned, transferred, conveyed or delivered to Parent or Merger Sub any right,
title or interest in or to any of the Selected Memorabilia. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
shall have the right to take all actions he deems necessary or desirable to
remove, transfer, sever or otherwise separate such right, title and interest in
or to the Selected Memorabilia from the other assets of the Company on or prior
to the Closing Date.
SECTION 4.17 TERMINATION OF AFFILIATE AGREEMENTS. The Company shall
use its best efforts to terminate or cancel, as applicable, effective at the
Closing, all Contracts between the Company and ▇▇▇▇▇ ▇▇▇▇▇▇ (including the
Amended and Restated Supervisory Agreement, dated as of October 21, 1997, by and
between the Company and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇), and all other Contracts between the
Company and an Affiliate of the Company, except for (i) this Agreement and (ii)
the Contracts listed in SCHEDULE 4.17 of the Company Disclosure Letter
(collectively, the "AFFILIATE AGREEMENTS").
SECTION 4.18 OTHER TRANSACTION DOCUMENTS.
(a) The Company shall use its best efforts to cause ▇▇▇▇▇ ▇.
▇▇▇▇▇▇ to execute the Trademark Agreement, the License Agreement and the ▇▇▇▇▇▇
Trademark Assignment on or prior to the Closing Date.
(b) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ agrees to execute the Trademark
Agreement, the License Agreement and the ▇▇▇▇▇▇ Trademark Assignment on or prior
to the Closing Date.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.1 CONDITIONS PRECEDENT TO EACH PARTY'S OBLIGATIONS. The
respective obligations of each party to effect the Merger and the other
transactions contemplated by this Agreement are subject to the satisfaction, or
waiver by Parent and the Company, on or before the Closing Date of the following
conditions precedent (which shall not be construed as covenants):
(a) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining
order or preliminary or permanent injunction of any court or administrative
agency of competent jurisdiction prohibiting the Merger or any of the other
transactions contemplated by this Agreement shall be in effect;
(b) HSR ACT. Any waiting period under the HSR Act applicable
to the Merger or any of the other transactions contemplated by this Agreement
shall have expired or early termination thereof shall have been granted without
limitation, restriction or condition that has had or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
(after giving effect to the Merger and the other transactions contemplated by
this Agreement); and
(c) OTHER TRANSACTION CLOSINGS. All conditions to each of the
Other Transaction Closings shall have been satisfied or, if permissible, waived
by the party entitled to make such a waiver, and each of the Other Transaction
Closings shall occur simultaneously with the Closing.
30
SECTION 5.2 CONDITIONS PRECEDENT TO PARENT'S AND MERGER SUB'S
OBLIGATIONS. The obligation of each of Parent and Merger Sub to effect the
Merger and the other transactions contemplated by this Agreement are subject to
the satisfaction or waiver by Parent on or before the Closing Date of the
following conditions precedent (which shall not be construed as covenants):
(a) REPRESENTATIONS AND WARRANTIES. (i) The representations
and warranties of the Company set forth in this Agreement shall be true and
correct in all respects on and as of the Closing Date, as though made on and as
of the Closing Date (except for representations and warranties made as of a
specified date which shall be true and correct in all respects as of such date),
except where the failure of such representations and warranties to be so true
and correct would not reasonably be expected to have a Material Adverse Effect;
PROVIDED, HOWEVER, that notwithstanding the preceding, the representations and
warranties of the Company contained in SECTION 3.1(D) shall be true and correct
in all material respects; and (ii) between the date of this Agreement and the
Closing, there shall have been no Material Adverse Effect;
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company
shall have performed in all material respects the obligations required to be
performed by it under this Agreement on or prior to the Closing Date;
(c) GOVERNMENTAL CONSENTS. Each of Parent and Merger Sub
shall have obtained (or the Gaming Operator shall have obtained) any and all
Gaming Approvals and other Governmental Approvals required to be obtained in
connection with the transactions under this Agreement (which Gaming Approvals
and other Governmental Approvals shall have been granted to Parent or Merger Sub
(or, if applicable, the Gaming Operator) without the imposition of limitations,
restrictions or conditions materially detrimental to the Company); and
(d) AFFILIATE AGREEMENTS. The Affiliate Agreements shall have
been terminated or cancelled.
SECTION 5.3 CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS. The
obligations of the Company to effect the Merger and the other transactions
contemplated by this Agreement are subject to the satisfaction or waiver on or
before the Closing Date of each of the following conditions precedent (which
shall not be construed as covenants):
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each of Parent and Merger Sub set forth in this Agreement shall be
true and correct in all respects on and as of the Closing Date, as though made
on and as of the Closing Date (except for representations and warranties made as
of a specified date which shall be true and correct in all respects as of such
date), except where the failure of such representations and warranties to be so
true and correct (without giving effect to any limitation as to "materiality"
set forth therein) would not reasonably be expected to have a material adverse
effect on the ability of Parent or Merger Sub to consummate the Merger and the
other transactions contemplated by this Agreement; PROVIDED, HOWEVER, that
notwithstanding the preceding, the representations and warranties of Parent
contained in SECTION 3.2(B) shall be true and correct in all material respects;
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND MERGER SUB. Each
of Parent and Merger Sub shall have performed in all material respects the
obligations required to be performed by it under this Agreement on or prior to
the Closing Date; and
(c) COMPANY BONDS; CREDIT AGREEMENT. Parent shall have paid
in full, defeased or otherwise satisfied all Obligations under the Credit
Agreement and the Company Bonds.
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ARTICLE VI
TERMINATION
SECTION 6.1 TERMINATION. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time:
(a) by mutual written consent of the Company and Parent;
(b) [INTENTIONALLY OMITTED]
(c) by the Company, by written notice to Parent, if (i)
Parent or Merger Sub shall have breached or failed to perform in any material
respect any of its representations, warranties, covenants or other agreements
contained in this Agreement, which breach or failure to perform would give rise
to the failure of a condition set forth in SECTION 5.1 or 5.3 (the "COMPANY
CONDITION FAILURE"), and (ii) such Company Condition Failure is incapable of
being cured by Parent or Merger Sub or, if curable, is not cured by Parent or
Merger Sub within 120 days following receipt of written notice from the Company
of such Company Condition Failure;
(d) by Parent, by written notice to the Company, if (i) the
Company shall have breached or failed to perform in any material respect any of
its representations, warranties, covenants or other agreements contained in this
Agreement, which breach or failure to perform would give rise to the failure of
a condition set forth in SECTION 5.1 or 5.2 (the "PARENT CONDITION FAILURE"),
and (ii) such Parent Condition Failure is incapable of being cured by the
Company or, if curable, is not cured by the Company within 120 days following
receipt of written notice from Parent of such Parent Condition Failure;
(e) by either the Company or Parent, by written notice to the
other, if the Closing has not occurred by (i) the earlier of (x) seven (7)
Business Days following the receipt by Parent or Merger Sub (or, if applicable,
the Gaming Operator) of all Gaming Approvals (which Gaming Approvals shall have
been granted to Parent or Merger Sub (or, if applicable, the Gaming Operator)
without the imposition of limitations, restrictions or conditions materially
detrimental to the Company); and (y) February 11, 2007, or (ii) such later date,
as is agreed to by the Company (the later of (i) and (ii), the "OUTSIDE DATE");
or
(f) by the Company or Parent, by written notice to the other,
if there shall be any law or regulation that makes consummation of the Merger or
any of the other transactions contemplated by this Agreement illegal or
otherwise prohibited or if any judgment, injunction, order or decree enjoining
the Company or Parent from consummating the Merger or any of the other
transactions contemplated by this Agreement is entered and such judgment,
injunction, order or decree shall become final and nonappealable.
Notwithstanding anything contained in this Agreement to the contrary,
except as provided in SECTIONS 6.1(A) and (F) in no event shall:
(i) a party that has breached or failed to perform in any material
respect any of its representations, warranties, covenants or other agreements
contained (A) in this Agreement, which breach or failure to perform would give
rise to the failure of, in the case of a breach of failure to perform by Parent,
a condition set forth in SECTION 5.1, 5.2(C) or 5.3, and, in the case of a
breach or failure to perform by the Company, a condition set forth in SECTION
5.1 or 5.2, in each case, to be satisfied on or before the Closing Date, or (B)
in the Other Transaction Documents, terminate this Agreement under this SECTION
6.1; or
32
(ii) the Company terminate this Agreement under this SECTION 6.1 if
any of the parties to the Other Transaction Documents (other than Parent or any
Affiliate of Parent and the Escrow Agent) (collectively, the "OTHER PARTIES")
has breached or failed to perform in any material respect any of its
representations, warranties, covenants or other agreements contained herein or
therein, as applicable.
SECTION 6.2 Effect of Termination.
(a) EFFECT OF TERMINATION. In the event of termination of
this Agreement in accordance with SECTION 6.1, this Agreement shall forthwith
become void and have no effect, except (i) as set forth in SECTIONS 6.2(B),
6.2(C) and 6.3; (ii) as otherwise set forth in any written termination
agreement; and (iii) that SECTIONS 4.2(A)(VI) and 4.2(C), this SECTION 6.2 and
ARTICLE IX shall survive termination of this Agreement.
(b) APPLICATION OF DEPOSIT.
(i) If this Agreement is terminated pursuant to SECTION
6.1(A), then the Escrow Agent shall deliver to Parent the Deposit pursuant to
Parent's instructions, and the sole remedy of Parent and Merger Sub against the
Company shall be the amount of the Deposit, which Deposit shall be compensation
and liquidated damages as provided in SECTION 6.2(C).
(ii) [INTENTIONALLY OMITTED]
(iii) If this Agreement is terminated by the Company
pursuant to SECTION 6.1(C), then the Escrow Agent shall deliver the Deposit to
the Stockholders' Representative pursuant to the Stockholders' Representative's
instructions, and the sole remedy of the Company against Parent and Merger Sub
shall be such delivery by the Escrow Agent of the amount of the Deposit, which
Deposit shall be compensation and liquidated damages as provided in SECTION
6.2(C).
(iv) If this Agreement is terminated by Parent pursuant
to SECTION 6.1(D), then the Escrow Agent shall deliver to Parent the Deposit
pursuant to Parent's instructions, and the sole remedy of Parent and Merger Sub
against the Company shall be such delivery by the Escrow Agent of the amount of
the Deposit, which Deposit shall be compensation and liquidated damages as
provided in SECTION 6.2(C).
(v) If this Agreement is terminated by the Company or
Parent pursuant to SECTION 6.1(E), then the Escrow Agent shall deliver the
Deposit to the Stockholders' Representative pursuant to the Stockholders'
Representative's instructions, and the sole remedy of the Company against Parent
and Merger Sub shall be such delivery by the Escrow Agent of the amount of the
Deposit, which Deposit shall be compensation and liquidated damages as provided
in SECTION 6.2(C); PROVIDED, HOWEVER, that if the Company has breached, or has
failed to perform its obligations or satisfy its conditions under, this
Agreement or any of the Other Parties has breached, or has failed to perform its
obligations or satisfy its conditions under, the Other Transaction Documents,
and such breach or failure caused or resulted in the failure of the Closing to
occur on or before the Outside Closing Date, then the Escrow Agent shall deliver
to Parent the Deposit pursuant to Parent's instructions, and the sole remedy of
Parent and Merger Sub against the Company shall be such delivery by the Escrow
Agent of the amount of the Deposit, which Deposit shall be compensation and
liquidated damages as provided in SECTION 6.2(C).
(vi) If this Agreement is terminated by the Company or
Parent pursuant to SECTION 6.1(F), then the Escrow Agent shall deliver the
Deposit to the Parent pursuant to Parent's instructions, and the sole remedy of
Parent and Merger Sub against the Company shall be such
33
delivery by the Escrow Agent of the amount of the Deposit, which Deposit shall
be compensation and liquidated damages as provided in SECTION 6.2(C); PROVIDED,
HOWEVER, that if the actions or inaction of Parent or Merger Sub (but not the
Company or the Other Parties) have been the cause of, or have materially
contributed to, such judgment, injunction, order or decree, then the Escrow
Agent shall instead deliver the Deposit to the Stockholders' Representative
pursuant to the Stockholders' Representative's instructions, and the sole remedy
of the Company against Parent and Merger Sub shall be such delivery by the
Escrow Agent to the Stockholders' Representative of the amount of the Deposit,
which amount shall be compensation and liquidated damages as provided in SECTION
6.2(C).
34
(c) LIQUIDATED DAMAGES. BY INITIALLING BELOW,
ON BEHALF OF PARENT: ON BEHALF OF THE COMPANY:
INITIALS: /s/ ▇.▇.▇ INITIALS: /s/ B.O.
NAME: ------------ NAME: ------------
TITLE: TITLE:
ON BEHALF OF MERGER SUB:
INITIALS: /s/ ▇.▇.▇
NAME: ------------
TITLE:
EACH OF THE PARTIES HERETO AGREES THAT IT WOULD BE IMPRACTICAL OR EXTREMELY
DIFFICULT TO FIX ACTUAL DAMAGES IF THIS AGREEMENT IS TERMINATED PURSUANT TO
SECTION 6.1, AND, THEREFORE, EACH OF PARENT AND THE COMPANY AGREES THAT THE
PAYMENTS PROVIDED IN SECTION 6.2(b) SHALL BE THE SOLE AND EXCLUSIVE REMEDY OF
THE PARTIES UPON, AND LIQUIDATED DAMAGES FOR, TERMINATION OF THIS AGREEMENT
PURSUANT TO ARTICLE VI, AND SUCH REMEDY SHALL BE LIMITED TO THE PAYMENTS
STIPULATED IN SECTION 6.2(b).
35
SECTION 6.3 SPECIFIC PERFORMANCE. NOTWITHSTANDING ANYTHING HEREIN TO
THE CONTRARY, IN THE EVENT THAT THE MERGER FAILS TO CLOSE AS A RESULT OF (a) THE
DEFAULT OF THE COMPANY OR ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ IN THE PERFORMANCE OF ITS OBLIGATIONS
UNDER THIS AGREEMENT, OR (b) A DEFAULT OF ANY OTHER PARTY (AS DEFINED IN SECTION
6.1) IN THE PERFORMANCE OF ITS OBLIGATIONS UNDER ANY OF THE OTHER TRANSACTION
DOCUMENTS, THEN IN LIEU OF PARENT'S REMEDIES SET FORTH IN SECTION 6.1 AND 6.2,
PARENT MAY ELECT TO PURSUE THE REMEDY OF SPECIFIC PERFORMANCE AGAINST THE
COMPANY AND ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, IT BEING AGREED THAT IRREPARABLE DAMAGE WOULD OCCUR
IN THE EVENT THAT THE COMPANY OR ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ FAILS TO CONSUMMATE THE
TRANSACTIONS CONTEMPLATED HEREBY TO WHICH IT IS A PARTY AS A RESULT OF THE
COMPANY'S OR ▇▇▇▇▇ ▇. ▇▇▇▇▇▇'▇ DEFAULT HEREUNDER.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
SECTION 7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
The representations and warranties of the Company contained in this Agreement
shall survive the Closing until the first anniversary of the Closing Date (the
"EXPIRATION DATE"). The covenants and agreements contained in this Agreement
shall not survive the Closing, other than those covenants and agreements that
are expressly required to remain in full force and effect after the Closing.
SECTION 7.2 OBLIGATION OF STOCKHOLDERS. As provided in the Escrow
Agreement and the PMR/RWB Escrow Agreement, the Stockholders shall, jointly and
severally, indemnify, defend and hold harmless Parent and the Surviving
Corporation and each of their predecessors and successors, stockholders,
employees, officers, directors, agents and representatives (collectively, the
"PARENT INDEMNITEES") from and against, and pay or reimburse the Parent
Indemnitees for, any and all damages, liabilities, losses, claims, obligations,
Liens, assessments, judgments, fines and penalties (collectively, "LOSSES") that
any of them may suffer, incur or sustain, directly or indirectly, arising out
of, attributable to, relating to or resulting from:
(a) (i) any inaccuracy in or breach of any representation
and warranty made by the Company in this Agreement; and
(ii) any inaccuracy in or breach of any representation
and warranty (without giving effect to any qualifiers or exceptions relating to
knowledge, Knowledge of the Company, materiality or Material Adverse Effect)
made by the Company in this Agreement if such inaccuracy or breach, individually
or together with all such other inaccuracies or breaches, would be reasonably
expected to have a Material Adverse Effect,
in each case, by virtue of the failure of such representation or warranty to be
true and correct (i) on and as of the Closing Date with the same effect as
though made on and as of the Closing Date (other than any such representation or
warranty that speaks as of a specific date or time other than the Closing Date)
or (ii) on and as of the date or time when made, in the case of any
representation or warranty that speaks as of a specific date or time other than
the Closing Date;
(b) any breach or nonperformance of any of the covenants or
other agreements made and to be performed by the Company pursuant to this
Agreement; and
(c) the exercise by any Stockholder of dissenters' rights with
respect to the Merger pursuant to the NRS.
36
SECTION 7.3 OBLIGATION OF PARENT. Parent and Merger Sub shall
indemnify, defend and hold harmless the Stockholders and each of their
predecessors and successors, stockholders, employees, officers, directors,
agents and representatives (collectively, the "STOCKHOLDER INDEMNITEES") from
and against, and pay or reimburse the Stockholder Indemnitees for, any and all
Losses that any of them may suffer, incur or sustain, directly or indirectly,
arising out of, attributable to, relating to or resulting from:
(a) any inaccuracy in or breach of any representation and
warranty (without giving effect to any qualifiers or exceptions relating to
knowledge, Knowledge of Parent, materiality or Material Adverse Effect) made by
Parent or Merger Sub in this Agreement by virtue of its failure to be true and
correct (i) on and as of the Closing Date with the same effect as though made on
and as of the Closing Date (other than any such representation or warranty that
speaks as of a specific date or time other than the Closing Date) or (ii) on and
as of the date or time when made, in the case of any representation or warranty
that speaks as of a specific date or time other than the Closing Date; and
(b) any breach or nonperformance of any of the covenants or
other agreements made and to be performed by Parent or Merger Sub pursuant to
this Agreement.
SECTION 7.4 MINIMUM LOSSES. No Parent Indemnitee shall have any
right to indemnification under SECTION 7.2 until aggregate Losses incurred by
all Parent Indemnitees would exceed Two Million Five Hundred Thousand Dollars
($2,500,000) (the "INDEMNITY THRESHOLD"), after which there may only be
recovered those Losses in excess of the Indemnity Threshold, subject to the
conditions of this ARTICLE VII, including the limitations set forth in SECTION
7.5.
SECTION 7.5 MAXIMUM INDEMNIFICATION. The Stockholders shall not be
obligated to provide indemnification pursuant to SECTION 7.2 exceeding, in the
aggregate, the Indemnification Escrow Amount. Notwithstanding anything in this
Agreement, any indemnification obligation of the Stockholders under SECTION 7.2
shall be satisfied solely from the Indemnification Escrow Fund, except that to
the extent that the balance of the Indemnification Escrow Fund is not sufficient
to satisfy any indemnification obligations of the Stockholders to the Parent
Indemnitees under SECTION 7.2 when the conditions for indemnification set forth
in SECTION 7.2 have been satisfied, then such shortfall shall be satisfied from
any balance remaining in the PMR/RWB Escrow Funds pursuant to, and in accordance
with the terms and subject to the conditions of, the PMR/RWB Escrow Agreement.
SECTION 7.6 NO TAX ATTRIBUTE INDEMNITY. Notwithstanding anything in
this Agreement to the contrary, no indemnification shall be provided for the
absence or loss of any tax attributes, including by reason of a breach of
SECTION 3.1(N)(I) and/or SECTION 3.1(N)(VII); provided, that for the avoidance
of doubt, the Parent Indemnitees shall be, subject to the limitations on
indemnification otherwise set forth in this ARTICLE VII, indemnified for (and
this SECTION 7.6 does not limit), a breach of SECTION 3(N)(I) that gives rise to
a liability for Taxes of the Company for pre-Closing periods (as opposed to a
reduction of tax attributes carried forward to a post-Closing period).
SECTION 7.7 NOTICE; PROCEDURE FOR THIRD-PARTY CLAIMS.
(a) Any Person entitled to indemnification under Article
VII (an "INDEMNIFIED PARTY") may seek indemnification for any Loss or potential
Loss by giving written notice to the applicable party or parties from whom
indemnification is sought (the "INDEMNIFYING PARTY") before, if applicable, the
Expiration Date. Written notice to such Indemnifying Party of the existence of a
claim shall be given by the Indemnified Party as soon as practicable after the
Indemnified Party first receives notice of the potential claim, PROVIDED that
any failure to provide such prompt notice of the existence of a claim to the
applicable Indemnifying Party shall not affect the Indemnified Party's right to
37
seek indemnification pursuant to this ARTICLE VII except and only to the extent
that such failure results in such Indemnifying Party actually incurring an
expense or otherwise being prejudiced as a result of such delay. In the case of
a claim involving a Third Party Claim (as hereinafter defined), (i) the notice
of claim shall describe in reasonable detail the facts known to the Indemnified
Party giving rise to such indemnification claim and the amount, or good faith
estimate of the amount, of Losses arising therefrom, and (ii) the Indemnified
Party shall deliver to the Stockholders' Representative (if the Indemnified
Party is a Parent Indemnitee) or to Parent (if the Indemnified Party is a
Stockholder Indemnitee), as applicable, promptly after the Indemnified Party's
receipt thereof, copies of all notices and documents (including court papers)
received by the Indemnified Party relating to such Third Party Claim.
(b) In the case of any claim asserted by a Person that is not
a party to this Agreement against an Indemnified Party (a "THIRD-PARTY CLAIM"),
the Indemnified Party shall permit the Indemnifying Party (at the expense of
such Indemnifying Party) to assume the defense of such Third-Party Claim and any
litigation or proceeding resulting therefrom; provided that (i) counsel for the
Indemnifying Party who shall conduct the defense of such claim or litigation
shall be reasonably satisfactory to the Indemnified Party and (ii) the
Indemnified Party may participate in such defense at such Indemnified Party's
expense. Notwithstanding the election of the Indemnifying Party to assume
control of such defense, the Indemnified Party shall be entitled to retain or
assume the defense of such Third-Party Claims (at such Indemnified Party's
expense) if (A) the amount of Losses from such claim (x) if the Indemnified
Party is a Parent Indemnitee, could reasonably be expected to exceed, when
aggregated with all other pending claims and unpaid claims for indemnification
from such Indemnifying Party (together with, in the case of any Stockholder as
the Indemnifying Party, pending claims and unpaid claims for indemnification
from each such other Indemnifying Party), the Indemnification Escrow Fund, and
(y) if the Indemnified Party is a Stockholder Indemnitee, otherwise may not, in
the good faith judgment of the Indemnified Party, be capable of being satisfied
in full by such Indemnifying Party; (B) the claim for indemnification relates to
or arises in connection with any criminal proceeding, action, indictment,
allegation or investigation that could reasonably be expected to adversely
affect the business of Parent or the Surviving Corporation; or (C) the
Indemnified Party has been advised in writing by counsel that a conflict of
interest exists between the Indemnifying Party and the Indemnified Party with
respect to such claim (including the defense thereof). No Indemnifying Party, in
the defense of any Third-Party Claim, shall consent to entry of any judgment or
enter into any settlement without the consent of the Indemnified Party, which
consent may be withheld in the Indemnified Party's sole discretion (unless the
terms of such judgment or settlement include an unconditional full release of
the Indemnified Party from all liability with respect to such Third-Party Claim
and solely the payment of money and all such moneys shall be paid by the
Indemnifying Party, in which case such consent shall not be unreasonably
withheld). In the event that the Indemnifying Party does not accept the defense
of any matter as above provided, the Indemnified Party shall have the right to
defend against any such claim or demand, and shall be entitled to settle or
agree to pay in full such claim or demand. In any event, the parties to this
Agreement shall cooperate in the defense of any Third-Party Claim subject to
this ARTICLE VII and the records of each shall be made reasonably available to
the other with respect to such defense.
SECTION 7.8 SURVIVAL OF INDEMNITY. Any matter as to which a claim
has been asserted in good faith by an Indemnified Party, by formal notice
satisfying the requirements of SECTION 7.7, and prior to the Expiration Date,
that is pending or unresolved as of the Expiration Date, by law or otherwise
shall continue to be covered by this Article VII notwithstanding such limitation
(which the parties hereby waive solely with respect to such circumstances),
until such matter is finally terminated or otherwise resolved by the parties
under this Agreement, by an arbitration or by a court of competent jurisdiction
and any amounts payable hereunder are finally determined and paid.
38
SECTION 7.9 NO CONSEQUENTIAL DAMAGES. Notwithstanding anything to
the contrary contained in this Agreement, no person shall be liable to or
otherwise responsible for consequential, incidental or punitive damages.
SECTION 7.10 NO DOUBLE RECOVERY. Notwithstanding anything herein to
the contrary, no Indemnified Party shall be entitled to indemnification under
any provision of this Agreement for any amount to the extent such Indemnified
Party has been indemnified or reimbursed for such amount under any other
provision of this Agreement (including, (i) to the extent that such amount
reduced Total Transaction Consideration or Working Capital, if the Indemnified
Party is a Parent Indemnitee, and (ii) to the extent that such amount increased
Total Transaction Consideration or Working Capital, if the Indemnified Party is
a Stockholder Indemnitee) or any other agreement or action at law or equity or
otherwise.
ARTICLE VIII
DEFINITIONS
SECTION 8.1 DEFINITIONS. As used in this Agreement and the Exhibits
and Schedules delivered pursuant to this Agreement, the following terms shall
have the following respective meanings.
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first-mentioned Person. The
term "Affiliated" shall have a corresponding meaning.
"BUSINESS DAY" means a day that is not a Saturday, Sunday, federal
holiday or legal holiday in both ▇▇▇▇▇ County, Nevada and New York, New York. In
the event that the date for the performance of any covenant or obligation under
this Agreement shall fall on a Saturday, Sunday or legal holiday, the date for
performance thereof shall be extended to the next Business Day.
"COMPANY BONDS" means both (i) the Company Second Lien Notes and (ii)
the Company Junior Notes.
"COMPANY DISCLOSURE LETTER" means the Disclosure Letter delivered by
the Company to Parent on the date of this Agreement.
"COMPANY JUNIOR NOTES" means the Company's Junior
Subordinated Notes due 2014.
"COMPANY SECOND LIEN NOTES" means the Company's 8 7/8% Second Lien
Notes due 2013.
"CONTRACT" means any contract, lease, mortgage, indenture or other
agreement to which the Company is a party or is bound, but shall not include the
Employee Benefit Plans referred to in SECTION 3.1(O).
"CREDIT AGREEMENT" means the Credit Agreement, dated as of May 30,
2003 (as it may be amended, supplemented or modified from time to time), among
the Company, as borrower, the lenders referred to therein and Bank of America,
N.A., as administrative agent.
"GAMING APPROVALS" means all licenses, permits, approvals,
authorizations, registrations, findings of suitability, franchises,
entitlements, waivers and exemptions issued by any Gaming Authority required to
permit the parties hereto to consummate the transactions contemplated by this
Agreement or necessary to permit Parent to own and operate the Company.
39
"GAMING AUTHORITIES" means any governmental authority or agency with
regulatory control or jurisdiction over the conduct of lawful gaming or
gambling, including the Nevada Gaming Commission, the Nevada State Gaming
Control Board and the ▇▇▇▇▇ County Liquor and Gaming Licensing Board.
"GAMING LAWS" means any federal, state, local or foreign statute,
ordinance, rule, regulation, permit, consent, registration, finding of
suitability, approval, license, judgment, order, decree, injunction or other
authorization (including any condition or limitation placed thereon and
including liquor laws) governing or relating to the current or contemplated
casino and gaming activities and operations of the Company.
"GAMING OPERATOR" means any Person which is experienced in the gaming
business and is reasonably likely to obtain, prior to the Outside Date, all
Gaming Approvals required to consummate the transactions contemplated by this
Agreement, which Person Parent and Merger Sub may select prior to the Closing.
"GOVERNMENTAL AUTHORITY" means any court, administrative agency,
commission, Gaming Authority or other governmental authority or instrumentality.
"KNOWLEDGE OF THE COMPANY" means the actual knowledge of ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇; and the knowledge of no other Person
shall be imputed to any such individual.
"LICENSE AGREEMENT" means the License Agreement, to be dated as of
the Closing Date, substantially in the form attached hereto as EXHIBIT D.
"LIENS" means any lien, pledge, claim, mortgage, security interest,
encumbrance or restriction (except for any transfer restriction generally
arising under any applicable federal or state securities laws or licenses of or
other agreements related to Company Intellectual Property that are not intended
to secure Obligations) other than Liens (x) that will be released in connection
with the Closing, (y) for Taxes not yet due and payable, or (z) that are set
forth in SCHEDULE 8.1 of the Company Disclosure Letter.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, assets, financial condition or results of operations of the Company;
PROVIDED, that none of the following, individually or in the aggregate, shall be
deemed to have a Material Adverse Effect itself or be considered in any
determination as to whether a Material Adverse Effect has occurred or is
continuing: (i) changes in international or national political or regulatory
conditions generally, (ii) changes, events or conditions generally affecting the
U.S. economy or financial markets or affecting any of the travel, hospitality or
gaming industries generally or in Las Vegas, Nevada, (iii) any change in law,
tax rates or GAAP, (iv) any change, event or effect resulting from the entering
into or public announcement of the transactions contemplated by this Agreement
(including any facts or circumstances relating to Parent, its equity owners or
investors, its financing sources or their respective Affiliates (including their
respective identities)), and (v) any change, event or effect resulting from any
act of terrorism, commencement, escalation, continuation or cessation of armed
hostilities in the United States or internationally or declaration of war by or
against or otherwise involving the United States. Further, no event or condition
that results primarily from such events shall be deemed to have, individually or
in the aggregate, a Material Adverse Effect.
"MINIMUM CAGE CASH" means $5,500,000.
40
"MINIMUM WORKING CAPITAL" means $(2,700,000).
"▇▇▇▇▇▇ TRADEMARK ASSIGNMENT" means that assignment to be dated as of
the Closing Date, substantially in the form attached here to as EXHIBIT E.
"▇▇▇▇▇▇ TRADEMARKS" means those trademarks set forth on Schedule A to
the ▇▇▇▇▇▇ Trademark Assignment.
"OBLIGATIONS" means, with respect to any indebtedness, any principal,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities and obligations payable under the documentation governing such
indebtedness, including, without limitation, interest after the commencement of
any bankruptcy proceeding at the rate specified in the applicable instrument
governing or evidencing such indebtedness.
"OTHER TRANSACTION CLOSINGS" means (i) the "Closing," as such term is
defined in Section 7 of the PMR Asset Purchase Agreement, (ii) the execution by
the parties thereto of the Trademark Agreement, (iii) the execution by the
parties thereto of the License Agreement and (iv) the assignment of the ▇▇▇▇▇▇
Trademarks pursuant to the ▇▇▇▇▇▇ Trademark Assignment in accordance with the
terms thereof.
"OTHER TRANSACTION DOCUMENTS" means (i) the PMR Asset Purchase
Agreement, (ii) the Trademark Agreement, (iii) the License Agreement and (iv)
the ▇▇▇▇▇▇ Trademark Assignment.
"PERSON" means an individual, partnership, corporation, limited
liability company, trust or unincorporated organization or a government or
agency or political subdivision thereof.
"PMR" means PM Realty, LLC, a Nevada limited-liability company.
"PMR Asset Purchase Agreement" means the Purchase and Sale Agreement
and Joint Escrow Instructions, dated as of the date hereof, by and between
Parent and PMR, a copy of which is attached hereto as EXHIBIT A.
"PMR/RWB ESCROW AGREEMENT" means the Escrow Agreement, dated as of
the date hereof, by and among PMR, Parent, Red, White and Blue Pictures, Inc., a
California corporation, and the Escrow Agent, as it may be amended from time to
time.
"PMR/RWB ESCROW FUNDS" has the meaning given to "Escrow Funds" in the
PMR/RWB Escrow Agreement.
"TERMINATION AGREEMENT" means the Termination Agreement and Mutual
Release by and between ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and the Company to be entered into on or
prior to the Closing Date.
"TERMINATION AMOUNT" means an aggregate amount in cash equal to Forty
Million Dollars ($40,000,000).
"TRADEMARK AGREEMENT" means the Agreement, to be dated as of the
Closing Date, substantially in the form attached hereto as EXHIBIT B.
"TREASURY CALCULATION AMOUNT" means an amount equal to the sum of (a)
the present value on the Closing Date of $1,000 principal amount of Company
Notes calculated in accordance with standard market practice, assuming each
$1,000 principal amount of the Company Second Lien Notes would be repaid at
$1,044.38 on June 1, 2008 (the "SECOND LIEN NOTE FIRST CALL DATE"), and each
41
$1,000 principal amount of the Company Subordinated Notes would be repaid at
$1,049.38 on January 15, 2009 (the "JUNIOR NOTE FIRST CALL DATE" and, together
with the Second Lien Note First Call Date, the "APPLICABLE FIRST CALL DATE"),
PLUS (b) the present value of the interest that would be payable on, or accrue
from, the most recent interest payment date on $1,000 principal amount of Notes
until the Applicable First Call Date determined on the basis of a yield to the
Applicable First Call Date equal to the sum of (x) the bid-side yield on the
5.625% U.S. Treasury Note due May 15, 2008, PLUS (y) 50 basis points.
SECTION 8.2 INTERPRETATION. For all purposes of this Agreement,
except as otherwise expressly provided,
(a) defined terms have the meanings assigned to them in this
Agreement and include the plural as well as the singular,
(b) all accounting terms not otherwise defined herein have
the meanings assigned under GAAP, as in effect on the date hereof, unless
otherwise stated,
(c) all references in this Agreement to designated Articles,
Sections, Exhibits or Schedules are to the designated Article, Section, Exhibit
or Schedule to this Agreement, unless otherwise indicated, and all Exhibits and
Schedules to this Agreement are incorporated herein by reference; when a
reference is made in this Agreement to a specific Schedule, such reference shall
be deemed to include, to the extent applicable, all the other Schedules; all
references to Schedules herein shall be deemed to be a reference to such
Schedule as it may be amended prior to the Closing,
(d) the table of contents, table of definitions and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement,
(e) pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms,
(f) the words "TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,"
"TRANSACTIONS UNDER THIS AGREEMENT," "TRANSACTIONS CONTEMPLATED HEREBY" and
words of similar import shall not be deemed or construed to include any of the
transactions contemplated by the Other Transaction Documents,
(g) the words "HEREIN," "HEREOF," "HEREWITH," "HEREUNDER" and
"HERETO" and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision, and
(h) the words "INCLUDE," "INCLUDING" and other words of
similar import mean "INCLUDE, WITHOUT LIMITATION" OR "INCLUDING, WITHOUT
LIMITATION," regardless of whether any reference to "without limitation" or
words of similar import is made.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given (i) upon actual receipt by the
recipient, if delivered personally, (ii) one business day after deposit with an
overnight courier, as shown on the records of such overnight courier, if
delivered by overnight courier or (iii) on the business day of transmission (or
if such day is not a business
42
day or if such notice is transmitted after 5:00 p.m., Pacific Time, then on the
next succeeding business day) if by facsimile and the sender receives electronic
confirmation of receipt by the recipient, in each case to the parties at the
following addresses or facsimile numbers (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent or Merger Sub:
Morgans Hotel Group Co.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: W. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
(b) if to the Company:
Hard Rock Hotel, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
and
▇▇▇▇▇▇ & Silver, Ltd.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Silver
(c) if to the Stockholders' Representative:
Lily Pond Investments, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
SECTION 9.2 SEVERABILITY. If any provision of this Agreement or the
application of any such provision shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement. In lieu of any such invalid, illegal or unenforceable
provision, the parties hereto agree to negotiate in good faith to add to this
Agreement a provision as similar in terms to such invalid, illegal or
unenforceable provision as may be possible and be valid, legal and enforceable.
SECTION 9.3 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties. Faxed signatures shall
be valid and binding for all purposes.
SECTION 9.4 MUTUAL DRAFTING. Each party hereto has participated in
the drafting of this Agreement, which each party acknowledges is the result of
extensive negotiations between the parties. In the event any ambiguity or
question of intent arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
SECTION 9.5 ENTIRE AGREEMENT. This Agreement (including the
Confidentiality Agreement and the Escrow Agreement), the Company Disclosure
Letter and the Schedules hereto and thereto constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement.
SECTION 9.6 GOVERNING LAW; JURISDICTION. Except to the extent that
the laws of the State of Nevada are mandatorily applicable to the Merger, this
Agreement shall be governed by, and construed and interpreted in accordance
with, the laws of the State of New York without regard to the conflict of laws
rules thereof other than Sections 5-1401 and 5-1402 of the New York General
Obligations Law and Rule 327(b) of the New York Civil Practice Laws and Rules.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction
and venue of any state or federal district court within New York County, The
City of New York, New York in connection with any matter based upon or arising
out of this Agreement or the transactions under this Agreement, agrees that
process may be served upon them in any manner authorized by the laws of the
State of New York and waives and covenants not to assert or plead any objection
that they might otherwise have to such jurisdiction, venue and process.
SECTION 9.7 AMENDMENT; WAIVER. This Agreement may not be amended
except by an instrument in writing signed by the party against whom enforcement
of any such amendment is sought. Any party hereto may, only by an instrument in
writing, waive compliance by any other party hereto with any term or provision
of this Agreement on the part of such other party hereto to be performed or
complied with. The waiver by any party hereto of a breach of any term or
provision of this Agreement shall not be construed as a waiver of any subsequent
breach.
SECTION 9.8 ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned or delegated by any of the parties hereto without
the prior written consent of the other parties, except that Parent or Merger Sub
may assign and delegate its rights, interests and obligations hereunder to any
subsidiary of Parent; PROVIDED that no such assignment or delegation shall
release Parent from any of its obligations under this Agreement.
44
SECTION 9.9 NO THIRD-PARTY BENEFICIARIES. Except as provided in
Sections 4.5 and 4.13, nothing herein expressed or implied shall be construed to
give any Person other than the parties hereto (and their successors and assigns
permitted by SECTION 9.8) any legal or equitable rights hereunder.
SECTION 9.10 STOCKHOLDERS' REPRESENTATIVE.
(a) Lily Pond Investments, Inc. is hereby appointed,
effective as of the Effective Time, as agent and representative (in such
capacities, the "STOCKHOLDERS' REPRESENTATIVE"), of the Stockholders and shall
have exclusive power and authority, on behalf of the Stockholders, to give and
receive notices and communications to or from Parent, Merger Sub and/or the
Escrow Agent relating to this Agreement, the Escrow Agreement or any of the
transactions and other matters contemplated hereby or thereby (except to the
extent that this Agreement or the Escrow Agreement expressly contemplates that
any such notice or communication shall be given or received by the Stockholders
individually).
(b) A decision, act, consent or instruction of the
Stockholders' Representative shall constitute a decision of all of the
Stockholders and shall be final, binding and conclusive upon each Stockholder
and the Escrow Agent, and Parent may rely upon any decision, act, consent or
instruction of the Stockholders' Representative as being the decision, act,
consent or instruction of each and every Stockholder. The Escrow Agent and
Parent are hereby relieved from any liability to any person for any acts done by
them in accordance with such decision, act, consent or instruction of the
Stockholders' Representative.
(c) The Stockholders' Representative shall not be liable to
any Stockholder for any act done or omitted hereunder as the Stockholders'
Representative while acting in good faith, and any act done or omitted pursuant
to the advice of counsel shall be conclusive evidence of such good faith. No
bond shall be required of the Stockholders' Representative, and the
Stockholders' Representative shall receive no compensation for its services.
(d) If Lily Pond Investments, Inc. incurs any out-of-pocket
expenses (including, without limitation, any reasonable fees and expenses of
counsel) in its capacity as Stockholders' Representative under this Agreement or
the Escrow Agreement or in connection with any of the transactions contemplated
hereby or thereby, such out-of-pocket expenses shall be paid from, or reimbursed
through deduction from, the Holdback Amount in accordance with SECTION 2.2(c)
hereof and the Escrow Agreement, prior to making any payments or distributions
pursuant to SECTION 2.2(C)(II) or 2.2(C)(III) hereof.
SECTION 9.11 ARBITRATION. Any dispute that may arise between the
Indemnifying Parties and the Indemnified Parties (collectively, the "PARTIES,"
and each, a "PARTY") with respect to the performance, interpretation or
enforcement of this Agreement (other than a dispute in which specific
performance is sought under the terms of SECTION 6.3) shall be submitted to
arbitration conducted in Los Angeles, California pursuant to the rules and
procedures of the American Arbitration Association, and, to the maximum extent
applicable, the Federal Arbitration Act (Title 9 of the United States Code). The
arbitrator shall be a retired judge of the Federal District Court, or some
similarly qualified, mutually agreeable individual. The arbitration of such
issues shall be final and binding upon the Parties. The arbitrator shall be
entitled to impose sanctions and to take such other actions as the arbitrator
deems necessary to the same extent as a judge could under the Federal Rules of
Civil Procedure and applicable law. Notwithstanding the foregoing, the
arbitrator shall not be authorized to award punitive damages with respect to any
dispute(s) arising under this Agreement, nor shall any Party seek punitive
damages relating to any such dispute(s) in any other forum. The cost of any
arbitration hereunder, including the cost, if any, of the record or transcripts
thereof, administrative fees, and all other fees involved, including reasonable
attorneys' fees incurred by the party determined by the arbitrator to be the
prevailing party, shall be paid
45
by the party determined by the arbitrator not to be the prevailing party. The
parties to the arbitration shall instruct the arbitrator to render its decision
no later than sixty (60) days after the submission of the dispute(s). The
Company shall use its commercially reasonable efforts to cause each Stockholder
to execute an acknowledgment of and agreement to this SECTION 9.11 and a consent
to the Merger and the transactions contemplated by this Agreement.
[SIGNATURE PAGE FOLLOWS]
46
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the Company, Parent and Merger Sub, all as of the date first written
above.
HARD ROCK HOTEL, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: Senior Vice President
MORGANS HOTEL GROUP CO.
By: /s/ W. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
Name: W. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Executive Officer
MHG HR ACQUISITION CORP.
By: /s/ W. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
Name: W. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(solely with respect to SECTIONS
4.18(B) and 6.3 and ARTICLE IX)
