AGREEMENT AND PLAN OF MERGER
DATED AS OF
FEBRUARY 19, 1998
AMONG
CASINO MAGIC CORP.,
HOLLYWOOD PARK, INC.
AND
HP ACQUISITION II, INC.
TABLE OF CONTENTS
Page
Glossary of Defined Terms iv
1. THE MERGER AND RELATED MATTERS 1
1.1 The Merger 1
1.2 Effective Time of the Merger 1
1.3 Conversion of Common Shares 2
1.4 Dissenting Shares 2
1.5 [Reserved] 2
1.6 [Reserved] 2
1.7 Stock Options 2
1.8 Convertible Securities 3
1.9 Closing 4
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 4
2.1 Corporate Existence and Power 4
2.2 Corporate Authorization 5
2.3 Governmental Authorization 5
2.4 NonContravention 6
2.5 Capitalization 7
2.6 Subsidiaries 7
2.7 SEC Filings 8
2.8 Financial Statements 9
2.9 Disclosure Documents 10
2.10 Absence of Certain Changes 10
2.11 Licenses and Compliance 11
2.12 No Undisclosed Liabilities 13
2.13 Litigation and Administrative Matters 13
2.14 Taxes 13
2.15 ERISA 15
2.16 Material Contracts 18
2.17 Insurance Coverage 19
2.18 Finders' Fees 19
2.19 Employees 19
2.20 Other Information 21
2.21 Environmental Matters 21
2.22 Indebtedness to and from Officers, Directors and Shareholders
23
2.23 Vote Required 24
- i -
2.24 Intellectual Property Rights 24
2.25 Takeover Provisions Inapplicable 24
2.26 Fairness Opinion 25
2.27 No Excess Parachute Payments 25
2.28 Real Property 25
2.29 Title to Assets, Liens 27
3. REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUBSIDIARY 27
3.1 Corporate Existence and Power 27
3.2 Corporate Authorization 27
3.3 Governmental Authorization 28
3.4 NonContravention 28
3.5 Licenses 29
3.6 Litigation and Administrative Matters 30
3.7 Financing. 30
4. COVENANTS OF THE COMPANY 31
4.1 Conduct of the Company 31
4.2 Other Offers 33
4.3 Shareholder Meeting 34
5. COVENANTS OF BUYER 34
5.1 Obligations of Merger Subsidiary 34
5.2 Directors' and Officers' Indemnification and Insurance 34
5.3 Employee Benefit Plans 35
5.4 Employee Matters 35
6. COVENANTS OF BUYER, MERGER SUBSIDIARY AND THE COMPANY 36
6.1 Best Efforts 36
6.2 Certain Filings 36
6.3 Public Announcements 36
6.4 Further Assurances 37
6.5 Preparation of Proxy Statement 37
6.6 Access to Information 37
6.7 Notices of Certain Events 37
- ii -
7. CONDITIONS TO THE MERGER 38
7.1 Conditions to the Obligations of Each Party 38
7.2 Conditions to the Obligations of Buyer and Merger Subsidiary
39
7.3 Conditions to Obligations of the Company 40
8. TERMINATION 41
8.1 Termination 41
8.2 Effect of Termination 42
9. MISCELLANEOUS 42
9.1 Notices 42
9.2 No Survival of Representations and Warranties 43
9.3 Amendments; No Waivers 43
9.4 Expenses 44
9.5 Successors and Assigns 44
9.6 Governing Law 44
9.7 Counterparts; Effectiveness 44
9.8 Superseding Agreement, Parties in Interest 45
9.9 Schedules and Exhibits 45
9.10 Invalid Provisions 45
- iii -
GLOSSARY OF DEFINED TERMS
The following terms, when used in this Agreement, have the meanings
ascribed to them in the corresponding Sections of this Agreement listed below:
"Acquisition Proposal" Section 4.2
"Affiliate" Section 2.21.8.1
"Agreement" Preamble
"Argentina Authorities" Section 2.3.4
"Balance Sheet Date" Section 2.8
"Balance Sheet" Section 2.8
"best knowledge of the Company" Section 2.11
"Buyer" Preamble
"Buyer Common Stock" Section 1.7
"Buyer Gaming Laws" Section 3.3.4
"Buyer Permits" Section 3.5
"Buyer Plans" Section 5.3
"Buyer SEC Reports" Section 3.5
"Buyer Substitute Option" Section 1.7.1
"CERCLA" Section 2.21.8.3
"Closing" Section 1.9
"Closing Date" Section 1.9
"COBRA" Section 2.15.9
"Code" Section 2.14.10
"Company 10-K" Section 2.6.1
"Company" Preamble
"Company Financial Statements" Section 2.8
"Company Gaming Laws" Section 2.3.4
"Company Leased Property" Section 2.28
"Company Owned Property" Section 2.28
- iv -
"Company Permits" Section 2.11
"Company Real Property" Section 2.28
"Company SEC Reports" Section 2.7.1.4
"Company Securities" Section 2.5.3
"Confidentiality Agreement" Section 6.6
"Convertible Securities" Section 1.8
"Debt Instruments" Section 2.4.3
"Dissenting Shares" Section 1.4
"Effective Time" Section 1.2
"Encumbrance" Section 2.28.2
"Environmental Claim" Section 2.21.8.2
"Environmental Laws" Section 2.21.8.3
"ERISA" Section 2.15.1
"Exchange Act" Section 2.3.3
"GAAP" Section 2.8
"Governmental or Regulatory Authority" Section 2.4.2
"Hazardous Substance" Section 2.21.8.4
"HSR Act" Section 2.3.2
"Indemnified Party" Section 5.2.1
"Intellectual Property" Section 2.24
"IRS" Section 2.15.2
"Lease Documents" Section 2.28.3
"Lien" Section 2.4.4
"Louisiana Authorities" Section 2.3.4
"Magic Shares" Section 1.3.1
"Material Adverse Change" Section 2.10.1
"Material Adverse Effect" Section 2.1
"Material Contracts" Section 2.16.3
"Merger Consideration" Section 1.3.1
"Merger Subsidiary" Preamble
- v -
"Merger" Recitals
"Minnesota Law" Section 1.2
"Mississippi Authorities" Section 2.3.4
"Nevada Authorities" Section 3.3.4
"Non-Plan Options" Section 1.7.1
"Option Plan" Section 1.7.1
"Permitted Encumbrance" Section 2.28.2
"Person" Section 2.21.8.5
"Personnel" Section 4.2
"Plan" Section 2.15.1
"Plan of Merger" Section 1.1
"Proxy Statement" Section 2.9.1
"RCRA" Section 2.21.8.3
"Real Property" Section 2.21.2
"requesting party" Section 6.6
"Restrictions" Section 2.28.4
"Returns" Section 2.14.1
"Right-to-Know-Act" Section 2.21.8.3
"SEC" Section 1.7.2
"Securities Act" Section 2.7.2
"Signing Price" Section 1.7.1
"Subsidiary Securities" Section 2.6.2.2
"Subsidiary" or "Subsidiaries" Section 2.6.1
"Superior Proposal" Section 4.2
"Surviving Corporation" Section 1.1
"Tax" or "Taxes or "Taxable" Section 2.14.14
- vi -
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of February 19, 1998 (this
"Agreement") among CASINO MAGIC CORP., a Minnesota corporation (the
"Company"), HOLLYWOOD PARK, INC., a Delaware corporation ("Buyer"), and HP
ACQUISITION II, INC., a Minnesota corporation and a wholly-owned subsidiary of
Buyer ("Merger Subsidiary").
A. Buyer, the Company and Merger Subsidiary wish to provide for the
terms and conditions of the following described business combination in which
Merger Subsidiary will be merged (the "Merger") with and into the Company.
B. Simultaneously with the execution of this Agreement, certain
shareholders of the Company have agreed in writing to vote their respective
shares of capital stock of the Company in favor of the Merger.
C. The parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.
Accordingly, and in consideration of the representations, warranties,
agreements and conditions herein contained, the parties hereto agree as
follows:
1. THE MERGER AND RELATED MATTERS
1.1 The Merger
Subject to the terms and conditions of this Agreement, at the Effective
Time (as hereinafter defined), Merger Subsidiary shall be merged with and into
the Company pursuant to the terms and conditions set forth herein and in a
plan of merger (the "Plan of Merger"). At the Effective Time, the separate
existence of Merger Subsidiary shall cease and the Company shall continue as
the surviving corporation (the "Surviving Corporation").
1.2 Effective Time of the Merger.
As soon as practicable (but in no event later than three (3) business
days) after each of the conditions set forth in Section 7 hereof (other than
the condition that articles of merger be filed and become effective) have been
satisfied or waived, the Company and Merger Subsidiary will file, or cause to
be filed, articles of merger with the Secretary of State of Minnesota which
articles of merger shall be in the form required by and executed in accordance
with the applicable provisions of the Business Corporation Act of Minnesota
("Minnesota Law"). The Merger shall become effective at the time the articles
of merger for such merger is filed with the Secretary of State of Minnesota
(the "Effective Time").
- 1 -
1.3 Conversion of Common Shares.
At the Effective Time:
1.3.1 Except as otherwise provided herein, each share of common
stock of the Company, par value $0.01 per share (the "Magic Shares"), issued
and outstanding immediately prior thereto (except for Dissenting Shares as
defined in Section 1.4 hereof) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to
receive two dollars twenty-seven cents ($2.27) in cash (the "Merger
Consideration"); and
1.3.2 Each issued and outstanding share of capital stock of
Merger Subsidiary shall be converted into and become one fully paid and
nonassessable share of Common Stock, $.01 par value, of the Surviving
Corporation. Each stock certificate of Merger Subsidiary evidencing ownership
of any such shares shall continue to evidence ownership of such converted
shares of Common Stock of the Surviving Corporation.
1.4 Dissenting Shares
Any Magic Shares held by a holder who dissents from the Merger and
becomes entitled to obtain payment for the value of such Magic Shares pursuant
to the applicable provisions of Minnesota Law shall be herein called
"Dissenting Shares." Any Dissenting Shares shall not, after the Effective
Time, be entitled to vote for any purpose or receive any dividends or other
distributions and shall not be converted into the right to receive the Merger
Consideration; provided, however, that Magic Shares held by a dissenting
shareholder who subsequently withdraws a demand for payment, fails to comply
fully with the requirements of Minnesota Law, or otherwise fails to establish
the right of such shareholder to be paid the value of such shareholders'
shares under Minnesota Law shall be deemed to be converted into the right to
receive the Merger Consideration pursuant to the terms and conditions referred
to above.
1.5 [Reserved]
1.6 [Reserved]
1.7 Stock Options.
1.7.1 All options to acquire Magic Shares issued under the
Company's 1992 Incentive Stock Option Plan (the "Option Plan") and granted
outside of the Option Plan ("Non-Plan Options") outstanding at the Effective
Time shall be exchanged upon the Effective Time of the Merger and the holders
thereof shall be entitled to receive options to acquire the Buyer's Common
Stock, par value $.10 per share ("Buyer Common Stock"), at an exercise price
and on other terms as follows. All options issued under the Option Plan and
the Non-Plan Options shall be exchanged for options to purchase Buyer Common
Stock (the "Buyer Substitute Option") at an exercise price equal to the number
obtained by (i) dividing the current exercise price of such options to
purchase Magic Shares by the Merger Consideration, and (ii) multiplying the
resulting
amount by the Signing Price. As used herein, "Signing Price" shall mean the
average closing
- 2 -
sales price of the Buyer Common Stock for the ten trading days immediately
preceding the date on which this Agreement is executed. The number of shares
into which any such Buyer Substitute Option shall be exercisable shall be the
number obtained by (x) dividing the Merger Consideration by the Signing Price
and multiplying such quotient by (y) the number of Magic Shares subject to the
option to buy Magic Shares that was exchanged for such option to acquire
shares of Buyer Common Stock. For example, if (A) the exercise price of a
current Company option was $4.00, (B) the Merger Consideration was $2.00, (C)
the Signing Price was $16.00, and (D) the number of Company options held by a
holder was 1,000, then on the Effective Date the holder would receive in
exchange for his Company options, options to purchase an aggregate of 125
shares of Buyers' Common Stock (two dollars divided by sixteen dollars times
1,000 shares) at an exercise price of $32.00 per share (e.g., (four dollars
divided by two dollars) times sixteen dollars). The vesting of each Buyer
Substitute Option that is exchanged for options to purchase Magic Shares shall
be the same as the vesting with respect to the exchanged option to purchase
Magic Shares. In all other respects, the terms of the Buyer Substitute
Options shall be governed by the provisions of Buyer's stock option plan so
long as, compared to the provision of the Option Plan or the Non-Plan Options,
as applicable, the provisions of the Buyer Option Plan do not materially
adversely affect the rights of the holders of options to purchase Magic
Shares, in which case such provisions of the Buyer Substitute Options shall be
governed by the terms of the Option Plan or the Non-Plan Options,
respectively. As promptly as practicable after the Effective Time, Buyer
shall issue to each holder of an option under the Option Plan or a Non-Plan
Option a written instrument evidencing Buyer's assumption of such option on
the terms provided herein.
1.7.2 Buyer shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Buyer Common Stock for delivery
with respect to options to purchase Magic Shares issued under the Option Plan
and the Non-Plan Options, as adjusted in accordance with this Section 1.7. As
soon as practicable after the Effective Time, Buyer shall (a) file
registration statements on Form S-8 promulgated by the Securities and Exchange
Commission ("SEC") under the Securities Act (or any successor or other
appropriate form) with respect to the shares of Buyer Common Stock subject to
Buyer Substitute Options and shall use its best efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained
therein) for so long as such options remain outstanding and (b) cause the
shares of Buyer Common Stock issuable upon exercise of the Buyer Substitute
Options to be listed on the New York Stock Exchange. With respect to those
individuals who subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), where applicable, Buyer shall administer the
Buyer Substitute Options in a manner that complies with Rule 16b-3 promulgated
under the Exchange Act.
1.8 Convertible Securities.
On the Effective Time, the sole right of the holders of those certain
warrants to purchase an aggregate of 980,000 Magic Shares prior to October 22,
1998 at a price of $2.75 per share and 50,000 Magic Shares prior to October 5,
1999 at a price of $7.35 per share (the "Convertible Securities") which are
outstanding at the Effective Time shall be the right to receive the Merger
Consideration upon payment of the exercise price of the Convertible
Securities.
- 3 -
1.9 Closing.
Subject to the provisions of Section 7 hereof, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place
as soon as practicable (but in no event later than three (3) business days)
after satisfaction of all of the conditions to Closing at the offices of Irell
& ▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, or such other place and time as the parties may mutually agree. The
date on which the Closing actually occurs is herein referred to as the
"Closing Date."
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer that:
2.1 Corporate Existence and Power.
The Company is a corporation duly incorporated, validly existing and in
active status under the laws of the State of Minnesota, and has all corporate
powers and authority required to carry on its business as now conducted. The
Company is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the character of the property
owned or leased by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions in which the failure to be so
qualified, individually or in the aggregate, are not and could not be
reasonably expected to have a Material Adverse Effect on the Company. As used
herein, "Material Adverse Effect" with respect to any person means a material
adverse effect on the financial condition, business, assets or results of
operations of such person and its Subsidiaries (as defined in Section 2.6)
taken as a whole; provided however, that, with respect to the Company,
Material Adverse Effect shall not include any state of facts, event, change or
effect (i) disclosed in this Agreement (excluding matters disclosed in the
Company's SEC Reports (as defined herein) unless such matters are specifically
disclosed in this Agreement or the Schedules hereto) or any schedule to this
Agreement to the extent of the Company's estimate of the liability or
obligation associated with such matters (but to such extent, only if an
estimate has been made) and excluding the matter disclosed under the heading
"Louisiana Gaming Control Board" on Schedule 2.13 or (ii) generally affecting
companies in the gaming industry nationally (e.g., imposition of a national
gaming tax). The Company has heretofore delivered to Buyer true and complete
copies of the articles of incorporation and bylaws (or equivalent charter
documents) of the Company and each Subsidiary of the Company in each case as
currently in effect. Neither the Company nor any of its Subsidiaries is in
violation of any term or provision of its charter, bylaws, or other
organizational document where the consequence of such violation could
reasonably be expected to have a Material Adverse Effect on the Company.
- 4 -
2.2 Corporate Authorization.
The execution, delivery and performance by the Company of this Agreement
and the consummation by the Company of the transactions contemplated hereby
are within the Company's corporate powers and, except for any required
approval by the Company's shareholders in connection with the consummation of
the Merger, have been duly authorized by all necessary corporate action. This
Agreement has been duly and validly executed by the Company and, subject to
obtaining the approval of the Merger by the Company's shareholders,
constitutes a valid and binding agreement of the Company enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
enforcement of creditors rights generally and by general equitable principles,
regardless of whether such enforcement is considered in a proceeding in equity
or at law. The Board of Directors of the Company (at a meeting duly called
and held) has by the requisite vote of the directors present (a) determined
that the Merger is advisable and fair and in the best interests of the Company
and its stockholders, (b) approved the Merger and this Agreement in accordance
with the provisions of Sections 302A.613 of the Minnesota Law and the
Company's Articles of Incorporation and Bylaws, (c) recommended the adoption
and approval of this Agreement, the Merger and the other transactions
contemplated hereby to the holders of the Magic Shares and directed that the
Merger and this Agreement may be submitted for consideration by the Company's
shareholders at the meeting of the Company's shareholders, and (d) taken all
necessary steps to render the restrictions of Sections 302A.671 of the
Minnesota Law inapplicable to the Merger and the transactions contemplated by
this Agreement. The affirmative vote of the holders of a majority of all
outstanding Magic Shares entitled to vote approving this Agreement is the only
vote of the holders of any class or series of the Company's capital stock
necessary to approve this Agreement and the transactions contemplated by this
Agreement.
2.3 Governmental Authorization.
The execution, delivery and performance by the Company of this Agreement
and the consummation of the Merger by the Company require no action by or in
respect of, or filing with, any governmental body, agency, official or
authority, other than such consents, approvals, actions, filings and notices
which the failure to make or obtain could not be reasonably expected to have a
Material Adverse Effect on the Company or on the ability of the Company to
consummate the transactions contemplated hereby and:
2.3.1 the filing of articles of merger in accordance with
Minnesota Law and the filing of appropriate documents with relevant
authorities of other states in which the Company is qualified to do business;
2.3.2 compliance with any applicable requirements of the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇");
2.3.3 compliance with any applicable requirements of the
Exchange Act, and the rules and regulations promulgated thereunder; and
- 5 -
2.3.4 compliance with any applicable requirements of the
Mississippi Gaming Control Act and the rules and regulations promulgated
thereunder (the "Mississippi Authorities") and the Louisiana Gaming Control
Act and the rules and regulations promulgated thereunder (the "Louisiana
Authorities") and, with respect to the Provincial Government of Neuquen,
Argentina (the "Argentina Authorities"), no approval or consent (but merely
notice) is required (collectively, the "Company Gaming Laws"); provided, that
no representation or warranty is made herein with respect to any requirement
to obtain any consent or approval of the Argentina Authorities in connection
with the transactions contemplated hereby as a result of the condition of or
any action taken by Buyer or Merger Subsidiary.
2.4 Non-Contravention.
Except as set forth on Schedule 2.4 hereto, the execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby do not and will not:
2.4.1 contravene or conflict with the articles of incorporation
or bylaws of the Company or any Subsidiary of the Company;
2.4.2 subject to obtaining the consents and approvals described
in Section 2.3, contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree of any
court, tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States; any foreign country; any sovereign
nation, or any domestic, foreign or other state, country, city of other
political subdivision (a "Governmental or Regulatory Authority") binding upon
or applicable to the Company or any Subsidiary of the Company, except such
contraventions, conflicts and violations which could not, individually or in
the aggregate, be reasonably expected to have a Material Adverse Effect on the
Company or its ability to consummate the transactions contemplated hereby;
2.4.3 subject to obtaining the consents and approvals described
in Section 2.3, constitute a breach or violation of or default under (with or
without notice or lapse of time or both) or give rise to a right of
termination, cancellation or acceleration of any right or obligation of the
Company or any Subsidiary of the Company or to a loss of any benefit to which
the Company or any Subsidiary of the Company is entitled under any provision
of any agreement, contract, lease, indenture or other instrument binding upon
the Company or any Subsidiary of the Company, or their respective properties
or assets, including the Company's 13% Series B First Mortgage Notes due 2003
with contingent interest and 11.5% First Mortgage Notes due 2001
(collectively, the "Debt Instruments") or any license, franchise, permit or
other similar authorization held by the Company or any Subsidiary of the
Company except such defaults, terminations, cancellations or accelerations
which could not, individually or in the aggregate, be reasonably expected to
have a Material Adverse Effect on the Company or its ability to consummate the
transactions contemplated hereby; or
- 6 -
2.4.4 subject to obtaining the consents and approvals described
in Section 2.3, result in the creation or imposition of any Lien on any asset
of the Company or any Subsidiary of the Company, except such Liens which could
not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect on the Company or its ability to consummate the
transactions contemplated hereby. For purposes of this Agreement, "Lien"
means, with respect to any asset, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset.
2.5 Capitalization.
The authorized capital stock of the Company consists of 50,000,000 shares
of common stock, $0.01 par value per share, and 2,500,000 shares of
undesignated stock. As of February 17, 1998, there were 35,722,124 issued and
outstanding Magic Shares and no issued and outstanding shares of undesignated
stock. All outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. As of the
date of this Agreement, there were qualified employee stock options to
purchase an aggregate of 1,274,200 Magic Shares pursuant to the Option Plan,
non-qualified director options to purchase an aggregate of 60,000 Magic Shares
pursuant to the Option Plan, stock options to purchase an aggregate of
1,027,500 Magic Shares outside of the Option Plan as indicated in Schedule
2.5, and warrants to purchase an aggregate of 1,030,000 Magic Shares. Except
as set forth in this Section or in Schedule 2.5, there are outstanding:
2.5.1 no shares of capital stock or other voting securities of
the Company;
2.5.2 no securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company;
and
2.5.3 no options or other rights to acquire from the Company,
and no obligation of the Company to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of the Company (the items in Sections 2.5.1, 2.5.2 and 2.5.3
being referred to collectively as the "Company Securities"). There are no
outstanding contractual obligations of the Company or any Subsidiary of the
Company to repurchase, redeem or otherwise acquire any Company Securities.
2.6 Subsidiaries.
2.6.1 Each Subsidiary of the Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all corporate powers and authority required
to carry on its business as now conducted and is duly qualified to do business
as a foreign corporation and is in good standing and licensed in each
jurisdiction in which the character of the property owned or leased by it or
the nature of its activities make such qualification or licensing necessary,
except for those jurisdictions in which failure to be so qualified or licensed
could not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect on the Company. For purposes of this Agreement, as to
any person, "Subsidiary" or "Subsidiaries" means an entity or entities of
which securities or
- 7 -
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are
directly or indirectly owned by such person and which is a "significant
subsidiary," or are significant subsidiaries, as defined in Rule 1-02 of
Regulation S-X promulgated under the Securities Act. All Subsidiaries of the
Company and their respective jurisdictions of incorporation are identified in
the Company's annual report on Form 10-K for the fiscal year ended December
31, 1996, as amended (the "Company 10-K").
2.6.2 Except as set forth in Schedule 2.6.2 hereto, all of the
outstanding capital stock of, or other ownership interests in, each Subsidiary
of the Company is owned by the Company, directly or indirectly, free and clear
of any Lien and free of any other limitation or restriction including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests, other than limitations or restrictions
pursuant to applicable gaming laws and regulations. Except as set forth on
Schedule 2.6.2 hereto, as of the date of this Agreement, there are no
outstanding:
2.6.2.1 Company Securities, or Subsidiary Securities (as
defined herein), which are convertible into or exchangeable for shares of
capital stock or other voting securities or ownership interests in any
Subsidiary; and
2.6.2.2 Options or other rights to acquire from the Company
or any Subsidiary of the Company, or other obligation of the Company or any
Subsidiary of the Company to issue, any capital stock, voting securities or
other ownership interests in, or any securities convertible into or
exchangeable for any capital stock, voting securities or ownership interests
in, any Subsidiary (the items in Sections 2.6.2.1 and 2.6.2.2 being referred
to collectively as the "Subsidiary Securities"). There are no outstanding
obligations of the Company or any Subsidiary of the Company to repurchase,
redeem or otherwise acquire any outstanding Subsidiary Securities or to
provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any Subsidiary of the Company or other person.
2.6.2.3 Voting trusts, proxies or other commitments,
understanding restrictions or arrangements in favor of any person other than
the Company or a Subsidiary that is wholly-owned, directly or indirectly, by
the Company with respect to the voting of or right to participate in dividends
or other earnings or any capital stock of any Subsidiary of the Company.
2.6.2.4 Interests of the Company in any other corporation,
partnership, joint venture or other business association or entity.
2.7 SEC Filings.
2.7.1 The Company has delivered or made available to Buyer:
- 8 -
2.7.1.1 the annual reports on Form 10-K for its fiscal
years ended December 31, 1995 and 1996 and all amendments thereto;
2.7.1.2 the quarterly reports on Form 10-Q for its fiscal
quarters ending March 31, 1997, June 30, 1997 and September 30, 1997;
2.7.1.3 its proxy or information statements relating to
meetings of, or actions taken without a meeting by, the shareholders of the
Company held since December 31, 1996; and
2.7.1.4 all of its other reports, statements, schedules and
registration statements filed with the SEC (the "Company SEC Reports") since
December 31, 1996 (as such reports and documents have been supplemented or
amended since the time of their filing).
2.7.2 As of their respective dates, the Company SEC Reports
complied in all material respects with all applicable requirements of the
Securities Act of 1933, as amended, (the "Securities Act") and the Securities
Exchange Act of 1934, as amended, and the respective rules and regulations
promulgated thereunder, as the case may be, each in effect on the dates such
Company SEC Reports were filed. As of their respective dates, each of the
Company SEC Reports did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
2.7.3 The Company has filed all required material reports, proxy
statements and registration statements with the SEC and under any Company
Gaming Laws since December 31, 1995.
2.8 Financial Statements.
The audited consolidated financial statements of the Company included in
its annual reports on Form 10-K referred to in Section 2.7.1 and the unaudited
interim consolidated financial statements (including in each case the notes
thereto) included in the Company SEC Reports (collectively, the "Company
Financial Statements") were prepared in accordance with the books and records
of the Company and its Subsidiaries, fairly present (subject, in the case of
the unaudited interim financial statements, to normal, recurring year-end
audit adjustments (which are not expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company)), the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and their consolidated results of operations, shareholders'
equity and cash flows for the periods then ended and were prepared in
conformity with generally accepted accounting principles applied on a
consistent basis ("GAAP") (except as may be indicated in the notes thereto and
except with respect to unaudited statements as permitted by Form 10-Q of the
SEC) and comply as to form in all material respects with the published rules
and regulations of the SEC applicable to such statements. For purposes of
this Agreement, "Balance Sheet" means
- 9 -
the consolidated balance sheets of the Company as of September 30, 1997 set
forth in the Company's 10-Q for the fiscal quarter ended September 30, 1997
and "Balance Sheet Date" means September 30, 1997.
2.9 Disclosure Documents.
2.9.1 The Proxy Statement of the Company (as amended and
supplemented from time to time, the "Proxy Statement") to be filed with the
SEC in connection with the Merger, and any amendments or supplements thereto
will, when filed, comply as to form in all material respects with the
applicable requirements of the Exchange Act.
2.9.2 None of the information supplied or to be supplied by the
Company in writing for inclusion or incorporation by reference in the Proxy
Statement will, (i) at the time the Proxy Statement is filed with the SEC,
(ii) at the date of mailing to shareholders and (iii) at the times of the
meeting of Company's shareholders to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, except that no representation is made by the Company in this
Section 2.9 with respect to information supplied in writing by or on behalf of
Buyer or any of its Subsidiaries for inclusion in such documents or
information incorporated by reference therein from documents filed by Buyer or
any of its Subsidiaries with the SEC.
2.10 Absence of Certain Changes.
Except as disclosed in the Company SEC Reports filed and publicly
available prior to the date hereof, or in Schedule 2.10 hereto, since the
Balance Sheet Date, the Company and Subsidiaries have conducted their business
in the ordinary course consistent with past practice and there has not been:
2.10.1 any Material Adverse Change (as defined herein) or any
event, occurrence or development of a state of circumstances or facts which
alone or together with another fact could reasonably be expected to result in
a Material Adverse Change. As used in this Agreement, with respect to any
person, "Material Adverse Change" means any material adverse change in the
business, assets, financial condition or results of operations of the Company
or any of its Subsidiaries which would have a Material Adverse Effect;
2.10.2 any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of the
Company or any repurchase, redemption or other acquisition by the Company or
any Subsidiary of the Company of any outstanding shares of capital stock or
other securities of, or other ownership interests in, the Company or any
Subsidiary of the Company;
2.10.3 any amendment of any material term of any outstanding
security of the Company or any Subsidiary of the Company;
- 10 -
2.10.4 any incurrence, assumption or guarantee by the Company or
any Subsidiary of the Company of any indebtedness in excess of $1,000,000,
other than in the ordinary course of business and in amounts and on terms
consistent with past practices;
2.10.5 any creation or assumption by the Company or any
Subsidiary of the Company of any material Lien on any material asset other
than in the ordinary course of business consistent with past practices;
2.10.6 any making of any loan, advance or capital contributions
to or investment in excess of $500,000 in any person, other than loans,
advances or capital contributions to or investments in wholly-owned
Subsidiaries made in the ordinary course of business consistent with past
practices;
2.10.7 any damage, destruction or other casualty loss (other
than damage, destruction or loss that is covered by insurance) affecting the
business or assets of the Company or any Subsidiary of the Company which,
individually or in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect on the Company;
2.10.8 any change in any method of accounting or accounting
practice by the Company or any Subsidiary of the Company, except for any such
change required by reason of a concurrent change in generally accepted
accounting principles;
2.10.9 any (i) grant of any severance or termination pay to any
director, officer or employee of the Company or any Subsidiary of the Company,
(ii) entering into of any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any director,
officer or employee of the Company or any Subsidiary of the Company, (iii) any
increase in benefits payable under any existing severance or termination pay
policies or employment agreements, or (iv) any increase in compensation, bonus
or other benefits payable to directors, officers or employees of the Company
or any Subsidiary of the Company, other than in the ordinary course of
business consistent with past practice; or
2.10.10 any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or representative
thereof to organize any employees of the Company or any Subsidiary of the
Company, which employees were not subject to a collective bargaining agreement
at the Balance Sheet Date, or any lockouts, strikes, slowdowns, work stoppages
or threats thereof by or with respect to such employees which, individually or
in the aggregate, has had or could reasonably be expected to have a Material
Adverse Effect on the Company.
2.11 Licenses and Compliance.
- 11 -
The Company and each of its Subsidiaries and each of their respective
directors, officers, gaming managers and other key employees possess all
licenses (including gaming licenses issued pursuant to the Mississippi
Authorities, the Louisiana Authorities and the Argentina Authorities),
permits, authorizations, approvals, findings of suitability, franchises, and
orders ("Company Permits") of any Governmental or Regulatory Authority which
are necessary for the Company to engage in the business of owning and
operating the casino facilities and the businesses and operations owned and
operated by the Company and such Subsidiary, each of which is in full force
and effect in all material respects, except such permits, licenses, variances,
exemptions, orders and approvals which the failure to hold, individually or in
the aggregate, is not having and could not reasonably be expected to have a
Material Adverse Effect on the Company. The Company and each of its
Subsidiaries are in compliance with the terms of the Company Permits, and all
other Federal, state, local or foreign statutes, rules, regulations, findings
of suitability, license, registration or other authorization, including any
condition or limitation thereon (including any Federal, foreign or state laws
relating to currency transactions), except failures to so comply which,
individually or in the aggregate, are not having and could not reasonably be
expected to have a Material Adverse Effect on the Company. Except as
disclosed in the Company SEC Reports filed prior to the date of this
Agreement, the Company and any of its Subsidiaries are not in violation of or
default under any law, regulation or order of any Governmental or Regulatory
Authority, except for such violations or defaults which, individually or in
the aggregate, do not and could not reasonably be expected to have a Material
Adverse Effect on the Company. To the best knowledge of the Company, no event
has occurred which permits, or upon the giving of notice or passage of time or
both would permit, revocation, non-renewal, modification, suspension or
termination of any Company Permit that currently is in effect the loss of
which either individually or in the aggregate would reasonably be expected to
have a Material Adverse Effect on the Company. As used in this Agreement,
"best knowledge of the Company" shall mean the actual knowledge of ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇ or Juris Basins. To the best knowledge of the
Company, the Company and its Subsidiaries and each of their respective
directors, officers, gaming managers and other key employees are in compliance
with the terms of the Company Permits, except for such failures to comply,
which singly or in the aggregate, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. No investigation or
review by any Governmental or Regulatory Authority with respect to the Company
or any of its Subsidiaries is pending, or, to the best knowledge of the
Company, threatened, nor has any governmental entity indicated to the Company
an intention to conduct the same, other than those the outcome of which would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company. Except as disclosed in this Section
2.11, to the best knowledge of the Company, neither the Company nor any
Subsidiary nor any director, officer, gaming manager or key employee of the
Company or any Subsidiary has received any written claim, demand, notice,
complaint, court order or administrative order from any governmental entity in
the past three years, asserting that a license of it or them, as applicable,
under any Company Gaming Laws, should be revoked or suspended except such
revocations or suspensions as could not be reasonably expected to have a
Material Adverse Effect on the Company. Neither the Company nor any of its
Subsidiaries knows of any facts, which, if known to the regulators under the
Company Gaming Laws, could reasonably be expected to result in the revocation
or suspension of a license of its or them, or of any officer, directors,
gaming manager, or key employee under any Company Gaming Laws or would be
- 12 -
reasonably expected to disqualify it or them from licensing under the Company
Gaming Laws, except such revocations, suspensions or disqualifications as
could not be reasonably expected to have a Material Adverse Effect on the
Company. Neither the Company nor any of its Subsidiaries has suffered a
suspension or revocation of any material license held under the Company Gaming
Laws.
2.12 No Undisclosed Liabilities.
There are no liabilities of the Company or any Subsidiary of the Company
of any nature (whether accrued, contingent, absolute, determined, determinable
or otherwise) that would be required by generally accepted accounting
principles to be reflected on a consolidated balance sheet of the Company and
its consolidated Subsidiaries or in the notes thereto, other than:
2.12.1 liabilities disclosed or provided for in the Company SEC
Reports filed and publicly available prior to the date hereof or in the
Balance Sheet or in the notes thereto;
2.12.2 liabilities incurred in the ordinary course of business
consistent with past practice since the Balance Sheet Date, or which in the
aggregate could not be reasonably expected to have a Material Adverse Effect
on the Company; and
2.12.3 liabilities under this Agreement.
2.13 Litigation and Administrative Matters.
Except as disclosed in the Company SEC Reports filed prior to the
date of this Agreement or as set forth in Schedule 2.13 hereto:
2.13.1 There is no action, suit or proceeding pending or, to the
best knowledge of the Company, threatened against, relating to or affecting,
nor are there any Governmental or Regulatory Authority investigations or
audits pending or threatened to the knowledge of the Company, against,
relating to or affecting, the Company or any of its Subsidiaries (or any
director, officer, gaming manager, or key employee) or any of their respective
assets or properties before any court or governmental agency, authority or
body or arbitrator (nor to the best knowledge of the Company is there any
reasonable basis for any such proceeding, claim, action or investigation)
which, individually or in the aggregate, could be reasonably expected to have
a Material Adverse Effect on the Company or its ability to consummate the
transactions contemplated by this Agreement; and
2.13.2 Neither the Company nor any Subsidiary of the Company
(nor any director, officer, gaming manager or key employee) is subject to any
order, judgment or decree of any Governmental or Regulatory Authority which,
individually or in the aggregate, is having or could reasonably be expected to
have a Material Adverse Effect on the Company.
2.14 Taxes.
Except as set forth in Schedule 2.14 hereto:
- 13 -
2.14.1 the Company and its Subsidiaries have timely filed, been
included in or sent, and will, prior to the Closing, timely file, be included
in or send all returns, declarations and reports and information returns and
statements required to be filed or sent by or relating to any of them prior to
the Closing relating to any Taxes (as defined below) with respect to any
income, properties or operations of the Company or any Subsidiary of the
Company prior to the Closing (collectively, the "Returns");
2.14.2 as of the time of filing, the Returns:
2.14.2.1 correctly reflected (and, as to any Returns not
filed as of the date hereof, will correctly reflect) the facts regarding the
income, business, assets, operations, activities and status of the Company and
its Subsidiaries and any other information required to be shown therein;
2.14.2.2 constitute (and, as to any Returns not filed as of
the date hereof, will constitute) complete and accurate representations of the
Tax liabilities for the periods covered; and
2.14.2.3 accurately set forth all items (to the extent
required to be included or reflected in the Returns) relevant to future Tax
liabilities, including the Tax bases of properties and assets;
2.14.3 the Company and its Subsidiaries have timely paid or made
provision for all Taxes that have been shown as due and payable on the Returns
that have been filed;
2.14.4 the Company and its Subsidiaries have made or will make
provision for all Taxes payable for any periods that end before the Closing
for which no Returns have yet been filed and for any periods that begin before
the Closing and end after the Closing to the extent such Taxes are
attributable to the portion of any such period ending at the Closing;
2.14.5 the charges, accruals and reserves for Taxes reflected on
the Company Financial Statements are adequate to cover the Tax liabilities
accruing or payable by the Company and its Subsidiaries in respect of periods
prior to the date of the Company Financial Statements;
2.14.6 neither the Company nor any Subsidiary of the Company is
delinquent in the payment of any Taxes or has requested any extension of time
within which to file or send any Return, which Return has not since been filed
or sent;
2.14.7 no deficiency for any Taxes has been asserted or assessed
against the Company or any Subsidiary of the Company (or any member of any
affiliated or combined group of which the Company or any Subsidiary of the
Company is or has been a member for which either the Company or any Subsidiary
of the Company could be liable for which the Company has not provided adequate
reserves in accordance with GAAP;
- 14 -
2.14.8 neither the Company nor any Subsidiary of the Company has
granted any extension of the limitation period applicable to any Tax claims
and neither the Company nor any Subsidiary of the Company has waived any such
limitation period;
2.14.9 neither the Company nor any Subsidiary of the Company is
or has been a party to any tax sharing agreement with any corporation which,
as of the Closing, is not a member of the affiliated group of which the
Company is a member;
2.14.10 neither the Company nor any Subsidiary of the Company
has made any election under Section 341(f) of the Internal Revenue Code of
1986, as amended (the "Code");
2.14.11 the Company has not, for the 5-year period preceding the
Closing, been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code;
2.14.12 no Tax is required to be withheld pursuant to Section
1445 of the Code as a result of the transactions contemplated in this
Agreement;
2.14.13 neither the Company nor any Subsidiary has made any
disclosure under Section 6662 of the Code (or under any comparable provision
of state law); and
2.14.14 "Tax" (and with the corresponding meaning "Taxes" and
"Taxable") shall include (i) any net income, gross income, gross receipts,
sales, use, ad valorem, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property or
windfall profit tax, custom duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest and
any penalty, addition to tax or additional amount imposed by any taxing
authority (domestic or foreign) and (ii) any liability for the payment of any
amount of the type described in clause (i) as a result of being a member of an
affiliated or combined group.
2.15 ERISA.
2.15.1 Schedule 2.15 lists all employee welfare benefit plans
and all employee pension benefit plans within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") maintained,
contributed or required to be contributed to by the Company or any Subsidiary
of the Company, any similar employment, severance or other arrangement or
policy of the Company or any Subsidiary (whether written or oral) providing
for insurance coverage (including self-insured arrangements), worker's
compensation, disability benefits, supplemental unemployment benefits,
vacation benefits or retirement benefits, or for profit sharing, deferred
compensation, bonuses, stock options, stock appreciation or other forms of
incentive compensation or post-retirement insurance, compensation or benefits
(a "Plan"). No trust funds are maintained or required to be maintained in
connection with any Plan which is not an employee pension benefit plan within
the meaning of ERISA. There are no Plans which Buyer or the Surviving
Corporation will not be able to terminate within a reasonable period of time
after the Closing Date (except as such termination may be prohibited by
Section 401(k)(10)
of the Code) in accordance with their terms and ERISA. The Company has
delivered or made
- 15 -
available to Buyer true and complete copies of: (i) each of the Plans and any
related funding agreements thereto (including insurance contracts) including
all amendments, all of which are legally valid and binding and in full force
and effect and there are no defaults thereunder, (ii) the currently effective
Summary Plan Description pertaining to each of the Plans, (iii) the most
recent annual report on a form of the 5500 Series for each of the Plans
(including all relevant schedules), and (iv) as to each such Plan that is
funded, the Company has delivered or made available to Buyer a true, correct
and complete copy of the most recent annual financial report with respect to
such plan, and any subsequent interim report. Each such financial report and
interim report is a materially accurate description of the financial status of
the subject Plan, and there have been no Material Adverse Changes in the
financial status of any such Plan since the date of the most recent report
provided with respect thereto.
2.15.2 Schedule 2.15 specifically identifies each Plan which is
represented to be a qualified plan under Section 401(a) of the Code. With
respect to each Plan so identified, the following are true: (i) to the
knowledge of the Company, the plan, in form and operation, currently
satisfies, and for all years subsequent to the establishment of such plan has
satisfied, the qualification requirements of Section 401(a) or 403(a) of the
Code, as applicable; and (ii) except as identified on Schedule 2.15, the
Internal Revenue Service (the "IRS") has issued a favorable letter of
determination with respect to the Plan as amended to date, and all amendments
required by the Code as a condition of retention of such qualified status as
of the date hereof have been or will be adopted within time limits required to
maintain such status. To the knowledge of the Company, each plan is and has
been operating in compliance with its terms, ERISA and all amendments required
by the Tax Reform Act of 1986 and subsequent legislation and regulations,
except for such failures to comply which, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on the
Company. The Company has delivered or will deliver a true, correct and
complete copy of all letters of determination with respect to all such Plans
as amended to date. No event has occurred which could subject any Plan to tax
under Section 511 of the Code. Each Plan intended to meet the requirements
for tax-favored treatment under Sections 79, 104, 105, 106, 125 and 129 of
Subchapter B of Chapter 1 of the Code meets such requirements.
2.15.3 The Company and each of its Subsidiaries do not now
maintain, contribute to, or been required to contribute to, and is not
required to contribute to, nor, except as set forth on Schedule 2.15 have any
of them at any time maintained, contributed to, or been required to contribute
to any Plan which is subject to Title IV of ERISA. Except as set forth in
Schedule 2.15, all contributions payable to any Plan for any plan year ending
prior to the date hereof have been paid in full on a timely basis or reserves
adequate for such contributions or other payments have been or will be
reflected in the applicable financial statements of the Company, and no
accumulated funding deficiency (as defined in Section 302(a)(2) of ERISA) has
been incurred.
2.15.4 No event has occurred, and there exists no condition or
set of circumstances in connection with any Plan of the Company, under which
the Company or any Subsidiary of the Company, directly or indirectly (through
any indemnification agreement or otherwise), could reasonably be expected to
be subject to any risk of material liability under
- 16 -
Section 409 of ERISA, Section 502(i) of ERISA, Section 502(l) of ERISA, Title
IV of ERISA or Section 4975 of the Code.
2.15.5 To the knowledge of the Company, the Company and each of
its Subsidiaries have (i) filed or caused to be filed each and every return,
report, statement, notice, declaration and other document required to be filed
by any governmental agency, federal, state and local (including, without
limitation, the IRS, the United States Department of Labor, the Pension
Benefit Guaranty Corporation) with respect to each Plan sponsored or
maintained by the Company or any Subsidiary of the Company, and the Company
delivered or made available to Buyer all records with respect to such plans as
are required for their proper administration and proper continued reporting
and disclosure; and (ii) complied with all applicable participant disclosure
requirements of ERISA, except for such failures to comply with (i) and (ii)
hereof, which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Company.
2.15.6 Except in connection with their Subsidiaries, the Company
and each of its Subsidiaries is not and has never been a member of a
controlled group of corporations, an unincorporated trade or business under
common control, or a member of an affiliated service group (as such terms are
defined in Sections 414(b), 414(c) and 414(m) of the Code), involving any
other entity.
2.15.7 Except as described in Schedule 2.15, there are no
"leased employees" (as defined in Section 414(n) of the Code) who performed
services for the Company or any Subsidiary of the Company, nor are there any
persons who are anticipated to become leased employees before the Effective
Time.
2.15.8 Except as described on Schedule 2.15, the Company and its
Subsidiaries do not maintain any Plan providing medical, health or insurance
benefits to former employees other than health coverage mandated by Section
4980B of the Code. Except as described on Schedule 2.15, there is no
contract, agreement or benefit arrangement covering any employee of the
Company, which, individually or collectively, could give rise to the payment
of any amount which would constitute an "excess parachute payment" (as defined
in Section 280G of the Code). Except as described on Schedule 2.15, the
execution and performance of this Agreement will not (i) result in any
obligation or liability (with respect to accrued benefits or otherwise) of the
Company, Buyer or the Surviving Corporation to any Plan or to any present or
former employee of the Company, (ii) be a trigger event under any Plan that
will result in any payment (whether of severance pay or otherwise) becoming
due to any present or former employee, officer, director, shareholder,
contractor, or consultant, or any of their dependents, or (iii) accelerate the
time of payment or vesting, or increase the amount, or any compensation due to
any employee, officer, director, shareholder, contractor, or consultant of the
Company. The Company has not announced, seriously contemplated, or made any
commitment to making any amendment of any existing Plan or any creation of any
new Plan which would result in a binding obligation of the Company.
- 17 -
2.15.9 To the knowledge of the Company, the Company and its
Subsidiaries have complied in all material respects with the "COBRA"
requirements of Section 4980B of the Code, except for such failures to comply
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on the Company.
2.15.10 Other than routine claims for benefits under the Plans,
there are no pending, or to the best knowledge of the Company, threatened,
investigations, proceedings, claims, lawsuits, disputes, actions, audits or
controversies involving the Plans, or the fiduciaries, administrators, or
trustees of any of the Plans or the Company or any Subsidiary as the employer
or sponsor under any Plan, with any of the IRS, the Department of Labor, the
Pension Benefit Guarantee Corporation, any participant in or beneficiary of
any Plan, or any other person whomsoever. The Company knows of no reasonable
basis for any such claim, lawsuit, dispute, action or controversy.
2.16 Material Contracts.
2.16.1 Except as disclosed in the Company SEC Reports filed
prior to the date hereof or in Schedule 2.16, neither the Company nor any of
its Subsidiaries is a party on the date of this Agreement to any oral or
written (i) agreement, contract, indenture or other instrument relating to
Indebtedness in an amount exceeding $500,000, (ii) other contract, agreement
or commitment to be performed after the date hereof which would be a material
contract (as defined in Item 601(b)(10) of Regulation S-K of the Commission),
or (iii) contract, agreement, or commitment which materially restricts the
conduct of any line of business by the Company.
2.16.2 Except as disclosed in Schedule 2.16, neither the Company
nor any of its Subsidiaries is a party on the date hereof to any oral or
written agreement which, by its terms, directly obligates any parent (i.e.,
any entity owning more than 50% of the Company's voting securities) of the
Company with respect to any of the Company's obligations under such agreement
(it being understood that a "successors and assigns" provision in any such
agreement shall not be deemed to be such a term).
2.16.3 Except as disclosed in the Company SEC Reports filed
prior to the date hereof or in Schedule 2.16 hereto, all agreements,
contracts, plans, leases, arrangements and commitments disclosed or required
to be disclosed in the Company's SEC filings referred to in Section 2.7 (the
"Material Contracts"), including the Debt Instruments, are valid and binding
agreements of the Company or a Subsidiary, are in full force and effect, and
neither the Company, any Subsidiary of the Company, nor, to the knowledge of
the Company, any other party thereto is in breach or violation of, or in
default in the performance of any term or provision and no event has occurred
which, with notice or lapse of time or both could be reasonably expected to
result in a default under (i) the certificate of incorporation or bylaws (or
other comparable charter documents) of the Company or any of its Subsidiaries
or (ii) any Material Contract, except, in the case of clause (ii), such
breaches, violations and defaults that, individually or in the aggregate, are
not having and could not be reasonably expected to have Material Adverse
Effect on the Company or any Subsidiary.
- 18 -
2.17 Insurance Coverage.
2.17.1 The Company and its Subsidiaries have obtained and, as of
the date of this Agreement, maintain in full force and effect insurance
policies, which are of the type and in amounts customarily carried by persons
conducting businesses similar to those of the Company and its Subsidiaries in
the locations in which the Company and its Subsidiaries conduct their
respective businesses.
2.17.2 The Company has furnished to Buyer a list of, and true
and complete copies of, all insurance policies and fidelity bonds covering the
assets, business, equipment, properties, operations, employees, officers and
directors of the Company and its Subsidiaries. Except as set forth on
Schedule 2.17.2, there is no claim by the Company or any Subsidiary of the
Company pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds, except such claims that, individually and in the aggregate, are not
having and could not reasonably be expected to have a Material Adverse Effect
on the Company. All premiums payable under all such policies and bonds have
been paid by the Company and its Subsidiaries. The Company does not know of
any threatened termination of, or premium increase with respect to, any of
such policies or bonds, except such terminations or premium increases that,
individually and in the aggregate could not reasonably be expected to have a
Material Adverse Effect on the Company. Except as set forth on Schedule
2.17.2, the Company does not know of any pending or threatened uninsured
claims which individually or in the aggregate could be reasonably expected to
have a Material Adverse Effect on the Company.
2.18 Finders' Fees.
Except for ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc. and ▇▇▇▇▇▇ ▇▇▇▇ LLC whose fees
(which have been disclosed to Buyer separately in writing) will be paid by the
Company, there is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf, of the Company
or any Subsidiary of the Company who might be entitled to any fee or
commission from Buyer or the Company or any of their respective affiliates
upon consummation of the transactions contemplated by this Agreement.
2.19 Employees.
As of the date of this Agreement, except as set forth in Schedule 2.19
hereto or as otherwise provided in this Agreement:
2.19.1 the Company and each of its Subsidiaries have paid in
full, or fully accrued for in the Financial Statements, all wages, salaries,
commissions, bonuses, severance payments, vacation payments, holiday pay, sick
pay, pay in lieu of compensatory time and other compensation due or to become
due to all current and former employees of the Company and each of its
Subsidiaries for all services performed by any of them; and all withholding
required with regard to employees has been properly withheld and transmitted
to the appropriate entity.
- 19 -
2.19.2 (a) except for requirements to give notice of termination
of employment at least 30 days prior to such date of termination, upon the
Effective Time and the date of termination of the employment of any employees
of the Company or any Subsidiary of the Company, none of the Company, any
Subsidiary of the Company, Buyer nor the Merger Subsidiary will be liable to
such employee for "severance pay" or similar payment in excess of an amount
equal to three months salary for such employee, (b) those employees entitled
to severance in the event of termination, the circumstances requiring the
payment of severance pay and the amount of such severance are listed in
Schedule 2.19(a);
2.19.3 to the knowledge of the Company, the Company and its
Subsidiaries are in material compliance with all federal, state, local and
foreign laws, rules and regulations relating to the employment of labor,
including without limitation, laws, rules and regulations relating to payment
of wages, employment and employment practices, terms and conditions of
employment, hours, immigration, discrimination, child labor, occupational
health and safety, collective bargaining and the payment and withholding of
Taxes and other sums required by governmental authorities, except such
violations of such laws, rules and regulations as are not having and could
not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect on the Company;
2.19.4 there is no unfair labor practice charge pending or, to
the best knowledge of the Company, threatened against the Company or any
Subsidiary of the Company before the National Labor Relations Board or any
other federal, state or local agency or department, except such charges as are
not having and could not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect on the Company;
2.19.5 in the immediately preceding two years there have not
been and there are no labor strike, dispute, slowdown, sympathy strike,
lockout or other form of work stoppages pending, to the knowledge of the
Company, against or involving the Company or Subsidiary and there have not
been in the immediately preceding two years and there is currently no
recognitional picketing at any of the Company or any Subsidiary of the
Company's locations, or outstanding demand by any labor organization for
representation;
2.19.6 no grievance or any arbitration proceeding arising out of
or under collective bargaining agreements is pending or, to the best knowledge
of the Company, threatened against the Company or any Subsidiary of the
Company except such proceedings as are not having and could not, individually
or in the aggregate, be reasonably expected to have a Material Adverse Effect
on the Company;
2.19.7 no collective bargaining agreement is currently being
negotiated by the Company or any Subsidiary of the Company or due to expire
within six (6) months of the Effective Date;
2.19.8 as of the date hereof, no executive officer or general
manager of the Company or any Subsidiary of the Company or group of such
employees has given notice to the Company or any Subsidiary of the Company of
his or her intent to terminate his or her employment;
- 20 -
2.19.9 as of the date hereof, there are no employment agreements
in effect, or contemplated, with regard to any employees of the Company or any
Subsidiary of the Company; and
2.19.10 all employees of the Company or any Subsidiary of the
Company are employed "at will."
2.20 Other Information.
The documents and information delivered to Buyer in connection with the
transactions contemplated by this Agreement together with this Agreement and
the schedules and exhibits hereto and the Company's SEC Documents, taken as a
whole, do not contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements contained therein
not misleading with respect to the Company and its Subsidiaries taken as a
whole.
2.21 Environmental Matters.
Except as disclosed on Schedule 2.21, or with respect to facts,
circumstances or conditions that, to the Company's knowledge, could not
reasonably be expected to result in costs or expenses exceeding $1,000,000 in
the aggregate:
2.21.1 the Company and its Subsidiaries are conducting and have
conducted their respective businesses and operations in compliance with all
applicable Environmental Laws (as herein defined) and pursuant to all
necessary government permits. There is no Environmental Claim (as herein
defined) pending or threatened, against the Company or any Subsidiary of the
Company or with respect to any of their respective current or former
properties or assets;
2.21.2 there are no circumstances, events or incidents,
including, without limitation, the presence, release, emission, discharge,
storage, generation, treatment or disposal of any Hazardous Substance (as
herein defined), that could form the basis of any valid Environmental Claim
against the Company or any Subsidiary of the Company with respect to any
current or former parcel of real property owned by or leased to the Company or
any Subsidiary of the Company (collectively, the "Real Property"). No Real
Property, or other real property or previously owned or leased by the Company
or any Subsidiary of the Company, is listed or proposed for listing, as sites
requiring investigation or clean-up;
2.21.3 neither the Company nor any Subsidiary of the Company has
transported or arranged for the transportation (directly or indirectly) of any
Hazardous Substance to any location which is listed or proposed for listing
under CERCLA or any other similar Environmental Law, or which is the subject
of docketed federal, state, local or foreign enforcement actions or other
investigation which could reasonably be expected to lead to claims against the
Company or any Subsidiary of the Company for clean-up costs, remedial work,
damages to natural resources or for personal injury claims;
- 21 -
2.21.4 there have been no environmental audits, reports or
reviews conducted by or which are in the possession of the Company or any
Subsidiary of the Company in relation to the Real Property, and there have
been no administrative or consent orders of any kind to which the Company or
any Subsidiary of the Company is or has been a party, in relation to any
property or facility now or previously owned or leased by the Company or any
Subsidiary of the Company which have not been delivered to Buyer prior to the
date hereof;
2.21.5 no Hazardous Substance has been generated, treated,
stored, released, disposed or otherwise placed or located on or deposited in
the Real Property or any real property previously owned, leased or used by the
Company or any Subsidiary of the Company during or prior to the ownership, or
during the lease or use, of such real property by the Company or any
Subsidiary of the Company in an amount which could reasonably be expected to
require cleanup or other remedial action under Environmental Laws;
2.21.6 no above-ground or underground tanks are or have ever
been located under, in or about the Real Property or any real property
previously owned, leased or used by the Company or any Subsidiary of the
Company, which tanks were located on such real property during or prior to the
ownership, lease or use of such real property by the Company or any Subsidiary
of the Company; and
2.21.7 no Real Property or any real property previously owned,
leased or used by the Company or any Subsidiary of the Company is listed or is
proposed for listing, on the National Priorities List promulgated pursuant to
CERCLA, or any other similar Environmental Laws.
2.21.8 The following terms shall have the meanings set forth
below:
2.21.8.1 "Affiliate", as applied to any Person, shall mean
any other Person directly or indirectly controlling, controlled by or under
common control with that Person, except for entities controlled by any
directors of such Person, which entities are otherwise unaffiliated with or
unrelated to such Person.
2.21.8.2 "Environmental Claim", as applied to any Person,
shall mean any notice alleging liability (including, without limitation,
liability for investigatory costs, clean-up costs, monitoring costs,
governmental response costs, natural resources damages, property damages,
liability for nuisance or damage to property values, personal injuries or
penalties) arising out of, based on or resulting from: (a) noncompliance with
Environmental Laws by such Person, or by any of its respective employees or
agents, or (b) the presence or release into the environment of any Hazardous
Substance, or both.
- 22 -
2.21.8.3 "Environmental Laws" shall mean all applicable
Federal, state, local, foreign or other statutes, laws, regulations,
ordinances, rules, orders, consent decrees, judicial or administrative
decisions, agreements or directives having the force of law, issued or enacted
relating to: (a) pollution or protection of the environment, including natural
resources; (b) exposure of any individual, including employees of the Company
and its Subsidiaries, to any Hazardous Substance or other products, materials
or chemicals; (c) protection of human health or welfare from the effects of
products, by-products, wastes, emissions, discharges or releases of chemical
or other substances from industrial or commercial activities; (d) regulation
of the manufacture, use or introduction into commerce of substances,
including, without limitation, use of or rights with respect to their
manufacture, formulation, packaging, labeling, distribution, transportation,
handling, storage and disposal; and (e) regulation generally of the use of the
environment, including, without limitation, ambient air, surface water, ground
water, and surface or subsurface strata. For purposes of this definition, the
term "Environmental Laws" shall include, without limitation, the following
statutes: (a) the Clean Air Act, as amended, 42 U.S.C. 7401 et seq.; (b)
the Federal Water Pollution Control Act, as amended, 33 U.S.C. 1251 et
seq.; (c) the Resource Conservation and Recovery Act of 1976, as amended, 42
U.S.C. 6901 et seq. ("RCRA"); (d) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. 9601 et seq.,
("CERCLA"); (e) the Toxic Substances Control Act, as amended, 15 U.S.C.
2601 et seq.; (f) the Occupational Safety and Health Act, as amended, 29
U.S.C. 651; (g) the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. 801 et seq. ("Right-to-Know-Act"); (h) the Mine Safety and
Health Act of 1977, as amended, 30 U.S.C. 801 et seq.; (i) the Safe
Drinking Water Act, 42 U.S.C. 3008 et seq.; and (j) all applicable United
States, state, local and foreign laws, statutes, rules, regulations,
judgments, orders, decrees, stipulations or charges.
2.21.8.4 "Hazardous Substance" shall mean: (a) any
"hazardous substance" as defined in CERCLA, 42 U.S.C. 9601(14); (b) any
"pollutant or contaminant" as defined in CERCLA, 42 U.S.C. 9601(33); (c) any
"hazardous waste" as defined in RCRA, 42 U.S.C. 6903(5); (d) any asbestos,
dioxins, polychlorinated biphenyls, uranium, radioactive isotopes and other
nuclear by-products, toxic substances or petroleum products, by-products or
derivatives; and (e) any other substance, material or waste, whether liquid,
solid or gas, that is, or could reasonably be expected to have, a significant
adverse effect upon human health of the property of third parties regulated
pursuant to or under any Environmental Law.
2.21.8.5 "Person" shall mean any individual, corporation,
partnership, firm, joint venture, association, joint stock company, trust,
unincorporated organization, governmental or regulatory body or other entity.
2.22 Indebtedness to and from Officers, Directors and Shareholders.
Except as disclosed in the Company SEC Reports or Schedule 2.22 hereto,
to the
- 23 -
knowledge of the Company, neither the Company nor any Subsidiary of the
Company is indebted, directly or indirectly, to any person who is an officer,
director or shareholder of any of the foregoing or any affiliate of any such
person in any amount whatsoever, other than for salaries or bonuses for
services rendered or reimbursable business expenses incurred in the ordinary
course of business, nor is any such officer, director, shareholder or
affiliate indebted to the Company or any Subsidiary of the Company except for
advances made to employees of the Company or any Subsidiary of the Company in
the ordinary course of business consistent with past practice to meet
reimbursable business expenses anticipated to be incurred by such obligor.
2.23 Vote Required.
The affirmative vote of the holders of the majority of the outstanding
Magic Shares entitled to vote thereon is the only vote of the holders of any
class or series of the Company's capital stock necessary to approve this
Agreement and the transactions contemplated hereby.
2.24 Intellectual Property Rights. Except as set forth in Schedule
2.24, the Company and its Subsidiaries have all right, title and interest in,
or a valid and binding license to use, all Intellectual Property (as defined
below) individually or in the aggregate material to the conduct of the
businesses of the Company and its Subsidiaries taken as a whole, except for
such failures to have right, title, interest in or license as could not be
reasonably expected to have a Material Adverse Effect on the Company. Except
as set forth in Schedule 2.24, to the knowledge of the Company neither the
Company nor any Subsidiary of the Company is in default (or with the giving of
notice or lapse of time or both, would be in default) under any license to use
such Intellectual Property, such Intellectual Property is not being infringed
by any third party, and neither the Company nor any Subsidiary of the Company
is infringing any Intellectual Property of any third party, except for such
defaults and infringements which, individually or in the aggregate, are not
having and could not be reasonably expected to have a Material Adverse Effect
on the Company and its Subsidiaries taken as a whole. For purposes of this
Agreement, "Intellectual Property" means patents and patent rights, trademarks
and trademark rights, trade names and trade name rights, service marks and
service ▇▇▇▇ rights, service names and service name rights, copyrights and
copyright rights and other proprietary intellectual property rights and all
pending applications for and registrations of any of the foregoing.
2.25 Takeover Provisions Inapplicable. As of the date hereof and at
all times on or prior to the Effective Date, the restrictions of Sections
302A.671 of the Minnesota Law are, and shall be, inapplicable to the Merger
and the transactions contemplated by this Agreement. Prior to the execution
and approval of this Agreement, (i) the Board of Directors of the Company
appointed a committee of one under Section 302A.673 Subd. 1(d) of the
Minnesota Law (the "Committee"), (ii) the Committee reviewed the proposed
business combination set forth in this Agreement, a proposed agreement between
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and Buyer whereby ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ would agree to vote
his shares in favor of the proposed merger (the "Agreement to Vote"), and a
proposed proxy to be granted by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ to Buyer in connection
therewith (the "Proxy") and (iii) the Committee, following such review,
approved the Merger, the Agreement to Vote and the Proxy. The Company has
not, and will not prior to the Effective Date, take any action which would
cause the restrictions of Section 302A.673 of the Minnesota Law to become
applicable to the Merger.
- 24 -
2.26 Fairness Opinion. The Company has received the written opinions
of ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. and ▇▇▇▇▇▇ ▇▇▇▇ LLC financial advisors to the
Company, dated the date hereof, to the effect that the consideration to be
received by the Company's stockholders is fair to the stockholders of the
Company from a financial point of view.
2.27 No Excess Parachute Payments. To the best knowledge of the
Company, no amount that could be received (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated by
this Agreement by any employee, officer or director of the Company or any of
its affiliates who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any employment, severance
or termination agreement, other compensation arrangement or Plan currently in
effect constitutes an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Code and the proposed regulations thereunder).
2.28 Real Property.
2.28.1 Schedule 2.28 of the Company Disclosure Schedule
identifies all real property owned by the Company and its Subsidiaries (the
"Company Owned Property") and all real property leased by the Company and its
Subsidiaries (the "Company Leased Property"). The Company Owned Property and
Company Leased Property shall be referred to collectively as the "Company Real
Property."
2.28.2 The Company and its Subsidiaries have good and marketable
title to the Company Owned Property, and a leasehold estate in the Company
Leased Property, and their interests in the Company Real Property are held
free and clear of any and all liens, encumbrances, restrictions, leases,
options to purchase, option to lease, conditions, covenants, assessments,
defects, claims or exceptions (an "Encumbrance"); except in each case for (i)
the Encumbrances described on Schedule 2.28, (ii) liens for current taxes not
yet due and payable or being contested in good faith by appropriate
proceedings or (iii) such liens, encumbrances, restrictions, leases, options
to purchase, options to lease, conditions, covenants, assessments, defects,
claims or exceptions as are set forth in the Company Financial Statements or
that could not reasonably be expected to, either individually or in the
aggregate, materially impair the current use, occupancy, value, financeability
or marketability of title of the Company Real Property subject thereto or as
would not be reasonably expected to have a Material Adverse Effect on the
Company (the exceptions set forth in subsections (i), (ii) and (iii) above are
collectively referred to herein as the "Permitted Encumbrances").
2.28.3 True and correct copies of the documents under which the
Company Leased Property is leased (the "Lease Documents"), as set forth in
Schedule 2.28, have been delivered to Buyer. The Lease Documents are
unmodified and in full force and effect. There are no other agreements,
written or oral, between the Company or any of its Subsidiaries and any third
parties claiming an interest in the Company Real Property other than the
Permitted Encumbrances. Neither the Company, any of its Subsidiaries nor, to
the best knowledge of the Company, any other party is in default under the
Lease Documents which defaults would, either individually or in the aggregate,
have a Material Adverse Effect on the Company, and, to the best
- 25 -
knowledge of the Company, no defaults which would, either individually or in
the aggregate, have a Material Adverse Effect on the Company (whether or not
subsequently cured) by the Company, any of its Subsidiaries nor any other
party have been alleged under the Lease Documents.
2.28.4 Except as disclosed in Schedule 2.28, to the best
knowledge of the Company, (i) the Company Real Property complies with, and is
operated in accordance with, all applicable laws affecting the Company Real
Property or the ownership, improvement, development, possession, use,
occupancy or operation thereof, and with any and all liens, encumbrances,
agreements, covenants, conditions and restrictions (collectively
"Restrictions") affecting the Company Real Property, except where the failure
to comply with such laws or Restrictions, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect on the
Company; (ii) there are no material defects in the physical condition of the
Company Real Property or the improvements located on the Company Real
Property, except for defects which, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect on the Company;
and (iii) neither the Company nor any Subsidiary of the Company has received
any notice from any Governmental or Regulatory Authority (a) requiring it to
make any material repairs or changes to the Company Real Property or the
improvements located on the Company Real Property or (b) giving notice of any
material governmental actions against the Company, except for such repairs,
changes or actions which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on the Company.
2.28.5 Except as disclosed in Schedule 2.28 or for such matters
as could not be reasonably expected to have a Material Adverse Effect on the
Company as of the date of this Agreement, to the best knowledge of the
Company, there is no action, proceeding or litigation pending, contemplated or
threatened: (i) to take all or any portion of the Company Real Property, or
any interest therein, by eminent domain; (ii) to modify the zoning of, or
other governmental rules or restrictions applicable to, the Company Real
Property or the use of development thereof; (iii) for any street widening or
changes in highway or traffic lanes or patterns in the immediate vicinity of
the Company Real Property; or (iv) otherwise relating to the Company Real
Property or the interests of the Company and its Subsidiaries therein, or
which otherwise would interfere with the use, ownership, improvement,
development and/or operation of the Company Real Property.
2.28.6 The Company Real Property is connected to and serviced by
adequate water, sewage disposal, gas and electricity facilities and material
systems (heating, air conditioning, electrical, plumbing and the like) for the
basic operation of the Company Real Property in its current use and such
systems are operable and in good condition (ordinary wear and tear excepted)
except for such lack of service, connection or failures to be operable or in
good condition as could not reasonably be expected to have a Material Adverse
Effect on the Company.
- 26 -
2.28.7 Except for contracts or obligations entered into the
ordinary course of business consistent with past practices or such sales
transfers or exchanges as could not be reasonably expected to have a Material
Adverse Effect on the Company, there are no contracts or other obligations
outstanding for the sale, exchange or transfer of any of the Company Real
Property, or any portion of it, or the business operated thereon, except as
disclosed on Schedule 2.28 of the Company Disclosure Schedule.
2.29 Title to Assets, Liens. To the best knowledge of the Company,
each of the Company and each of its Subsidiaries has sufficiently good and
valid title to, or an adequate leasehold interest in, its material tangible
personal properties and assets in order to allow it to conduct, and continue
to conduct, its business as currently conducted. Such material tangible
personal assets and properties are sufficiently free of liens to allow each of
the Company and each of its Subsidiaries to conduct, and continue to conduct,
its business as currently conducted, except such liens as could not be
reasonably expected to have a Material Adverse Effect on the Company, and, to
the knowledge of the Company, the consummation of the transactions
contemplated by this Agreement will not alter or impair such ability in any
respect which individually or in the aggregate would be reasonably likely to
have a Material Adverse Effect on the Company.
3. REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUBSIDIARY
Buyer and Merger Subsidiary represent and warrant to the Company that:
3.1 Corporate Existence and Power.
Each of Buyer and Merger Subsidiary is a corporation duly incorporated,
validly existing and in active status under the laws of the State of Delaware,
and has all corporate powers and authority required to carry on its business
as now conducted. Buyer is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the
character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for those jurisdictions
in which the failure to be so qualified, individually or in the aggregate, are
not and could not be reasonably expected to have a Material Adverse Effect on
Buyer. Merger Subsidiary was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement, has engaged in no other business
activities and has conducted its operations only as contemplated hereby. Each
of Buyer and Merger Subsidiary has heretofore delivered to the Company true
and complete copies of each of its respective articles of incorporation and
bylaws as currently in effect.
3.2 Corporate Authorization.
The execution, delivery and performance by Buyer and Merger Subsidiary of
this Agreement and the consummation by Buyer and Merger Subsidiary of the
transactions contemplated hereby are within the corporate powers of Buyer and
Merger Subsidiary and have
- 27 -
been duly authorized by all necessary corporate action on the part of Buyer
and Merger Subsidiary. This Agreement has been duly and validly executed by
Buyer and Merger Subsidiary and constitutes a valid and binding agreement of
Buyer and Merger Subsidiary enforceable in accordance with its terms.
3.3 Governmental Authorization.
The execution, delivery and performance by Buyer and Merger Subsidiary of
this Agreement and the consummation of the transactions contemplated hereby by
Buyer and Merger Subsidiary require no action by or in respect of, or filing
with, any governmental body, agency, official or authority, other than such
consents, approvals, actions, filings and notices which the failure to make or
obtain could not be reasonably expected to have a Material Adverse Effect on
Buyer and Merger Subsidiary or on the ability of Buyer and Merger Subsidiary
to consummate the transactions contemplated hereby and:
3.3.1 the filing of articles of merger in accordance with the
applicable laws of the state of Delaware and the filing of appropriate
documents with relevant authorities of other states in which Merger Subsidiary
is qualified to do business;
3.3.2 compliance with any applicable requirements of the HSR
Act;
3.3.3 compliance with any applicable requirements of the
Exchange Act;
3.3.4 compliance with any applicable requirements of the Nevada
Gaming Control Board and the Nevada Gaming Commission (the "Nevada
Authorities") and the Louisiana Authorities, the Mississippi Authorities and
the Argentina Authorities and the rules and regulations promulgated under each
of the foregoing (the "Buyer Gaming Laws").
3.4 Non-Contravention.
The execution, delivery and performance by Buyer and Merger Subsidiary of
this Agreement and the consummation by Buyer and Merger Subsidiary of the
transactions contemplated hereby do not and will not:
3.4.1 contravene or conflict with the articles of incorporation
or bylaws of Buyer or Merger Subsidiary;
3.4.2 subject to obtaining the consents and approvals described
in Section 3.3, contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree of any
Governmental or Regulatory Authority binding upon or applicable to Buyer,
Merger Subsidiary or any other Subsidiary of Buyer, except such
contraventions, conflicts and violations which could not, individually or in
the aggregate, be reasonably expected to have a Material Adverse Effect on
Buyer or its ability to consummate the transactions contemplated hereby;
- 28 -
3.4.3 subject to obtaining the consents and approvals described
in Section 3.3, constitute a default under or give rise to a right of
termination, cancellation or acceleration of any right or material obligation
of Buyer and Merger Subsidiary or to a loss of any material benefit to which
Buyer and Merger Subsidiary is entitled under any provision of any agreement,
contract or other instrument binding upon Buyer and Merger Subsidiary or any
license, franchise, permit or other similar authorization held by Buyer and
Merger Subsidiary, except such defaults, terminations, cancellations or
accelerations which could not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect on Buyer or its ability to
consummate the transactions contemplated hereby; or
3.4.4 subject to obtaining the consents and approvals described
in Section 3.3, result in the creation or imposition of any Lien on any asset
of Buyer and Merger Subsidiary, except such Liens which could not,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect on Buyer or its ability to consummate the transactions
contemplated hereby.
3.5 Licenses.
The Buyer and each of its Subsidiaries and each of their respective
directors, officers, gaming managers and other key employees possess all
licenses (including gaming licenses issued pursuant to the Mississippi
Authorities, the Louisiana Authorities and the Nevada Authorities), permits,
authorizations, approvals, findings of suitability, franchises, and orders
("Buyer Permits") of any Governmental or Regulatory Authority which are
necessary for the Buyer to engage in the business of owning and operating the
casino facilities and the businesses and operations owned and operated by the
Buyer and such Subsidiary, each of which is in full force and effect in all
material respects, except such permits, licenses, variances, exemptions,
orders and approvals which the failure to hold, individually or in the
aggregate, is not having and could not reasonably be expected to have a
Material Adverse Effect on the Buyer. The Buyer and each of its Subsidiaries
are in compliance with the terms of the Buyer Permits, and all other Federal,
state, local or foreign statutes, rules, regulations, findings of suitability,
license, registration or other authorization, including any condition or
limitation thereon (including any Federal, foreign or state laws relating to
currency transactions), except failures to so comply which, individually or in
the aggregate, are not having and could not reasonably be expected to have a
Material Adverse Effect on the Buyer. Except as disclosed in the annual
reports on Form 10-K with respect to the year ended December 31, 1996 and the
quarterly reports on Form 10-Q for the fiscal quarters ended March 31, 1997,
June 30, 1997 and September 30, 1997 (the "Buyer SEC Reports") filed prior to
the date of this Agreement, neither the Buyer nor any of its Subsidiaries are
in violation of or default under any law, regulation or order of any
Governmental or Regulatory Authority, except for such violations or defaults
which, individually or in the aggregate, do not and could not reasonably be
expected to have a Material Adverse Effect on the Buyer. To the best
knowledge of the Buyer, no event has occurred which permits, or upon the
giving of notice or passage of time or both would permit, revocation,
non-renewal, modification, suspension or termination of any Buyer Permit that
currently is in effect the loss of which either individually or in the
aggregate would reasonably be expected to have a Material Adverse Effect on
the Buyer. To the best knowledge of the Buyer, the Buyer and its Subsidiaries
and each of their respective directors, officers, gaming managers and other
key employees are in compliance
- 29 -
with the terms of the Buyer Permits, except for such failures to comply, which
singly or in the aggregate, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Buyer. No
investigation or review by any Governmental or Regulatory Authority with
respect to the Buyer or any of its Subsidiaries is pending, or, to the best
knowledge of the Buyer, threatened, nor has any governmental entity indicated
to the Buyer an intention to conduct the same, other than those the outcome of
which would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Buyer. Except as disclosed in this
Section 3.5, to the best knowledge of the Buyer, neither the Buyer nor any
Subsidiary nor any director, officer, gaming manager or key employee of the
Buyer or any Subsidiary has received any written claim, demand, notice,
complaint, court order or administrative order from any governmental entity in
the past three years, asserting that a license of it or them, as applicable,
under any Buyer Gaming Laws, should be revoked or suspended except such
revocations or suspensions as could not be reasonably expected to have a
Material Adverse Effect on the Buyer. Neither the Buyer nor any of its
Subsidiaries knows of any facts, which, if known to the regulators under the
Buyer Gaming Laws, could reasonably be expected to result in the revocation or
suspension of a license of its or them, or of any officer, directors, gaming
manager, or key employee under any Buyer Gaming Laws or would be reasonably
expected to disqualify it or them from licensing under the Buyer Gaming Laws,
except such revocations, suspensions or disqualifications as could not be
reasonably expected to have a Material Adverse Effect on the Buyer. Neither
the Buyer nor any of its Subsidiaries has suffered a suspension or revocation
of any material license held under the Buyer Gaming Laws that has had or could
be reasonably expected to have a Material Adverse Effect on the Buyer.
3.6 Litigation and Administrative Matters.
Except as disclosed in the Buyer SEC Reports filed prior to the date of
this Agreement, there is no action, suit or proceeding pending or, to the best
knowledge of Buyer, threatened against, relating to or affecting, nor, to the
knowledge of Buyer, are there any Governmental or Regulatory Authority
investigations or audits pending before any court or governmental agency,
authority or body or arbitrator against, relating to or affecting, Buyer or
any of its Subsidiaries or any of their respective assets or properties which,
individually or in the aggregate, could be reasonably expected to have a
Material Adverse Effect the ability of Buyer of Merger Subsidiary to
consummate the transactions contemplated by this Agreement.
3.7 Financing
Buyer has sufficient cash on hand or available through credit facilities
to acquire at the Buyer's request all issued and outstanding Magic Shares in
accordance with this Agreement and to make all other necessary payments of
fees and expenses in connection with the transactions contemplated by this
Agreement.
- 30 -
4. COVENANTS OF THE COMPANY
The Company agrees that:
4.1 Conduct of the Company.
From the date hereof until the Effective Time, except with the prior
written consent of Buyer, each of the Company and its Subsidiaries shall
conduct its business in the ordinary course consistent with past practice and,
to the extent consistent therewith, shall use its best efforts to preserve
intact its business organization and relationships with third parties and to
keep available the services of its present officers and employees. Without
limiting the generality of the foregoing and except as contemplated by this
Agreement and the Schedules hereto, from the date hereof until the Effective
Time neither the Company nor any of its Subsidiaries will take any of the
following actions, except in the ordinary course of business consistent with
past practice, without the prior written consent of Buyer, which shall not be
unreasonably withheld:
4.1.1 amend its articles of incorporation or bylaws as in force
and effect on the date hereof;
4.1.2 fail to make any scheduled principal or interest payment
on indebtedness evidenced by its Debt Instruments;
4.1.3 issue any capital stock or options, warrants or other
rights to purchase any capital stock or any securities convertible or
exchangeable for shares of such stock or commit to do any of the foregoing,
other than the issuance of Magic Shares upon the exercise of stock options,
warrants or convertible securities outstanding on the date of this Agreement;
4.1.4 in any twelve-month period, borrow more than $5,000,000 or
incur, assume or guarantee any debt for borrowed money in excess of $5,000,000
or prepay any indebtedness, except in the ordinary course of business;
provided that the Company agrees that it will notify Buyer prior to borrowing
more than $1,000,000 or incurring, assuming or guaranteeing any debt for
borrowed money in excess of $1,000,000 in any twelve-month period;
4.1.5 enter into any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with any
existing or prospective director, officer, employee or consultant of or to the
Company or any Subsidiary of the Company;
4.1.6 except to the extent required by written employment
agreements existing or Company policies in effect on the date of this
Agreement, increase benefits payable under any existing severance or
termination pay policies or employment agreements, nor adopt any new severance
or termination policy, not enter into agreements respecting the foregoing;
- 31 -
4.1.7 increase compensation, bonus or other benefits payable to
directors, officers or employees of the Company or any of its Subsidiaries,
except to the extent required under the terms of any agreements existing on
the date of this Agreement;
4.1.8 make any loan, advance or capital contribution to or
investment in any person or otherwise pledge the credit of the Company or any
Subsidiary of the Company, or mortgage, pledge or subject to any of their
respective assets to any Liens, claims or encumbrances, except for employee
advances, sales to customers on credit or loans, or advances or investments in
Subsidiaries of the Company consistent with past practices and only in the
ordinary course of business;
4.1.9 fail to comply in any material respect with any laws,
ordinances, regulations or other governmental restrictions applicable to the
Company or any Subsidiary of the Company, including, but not limited to, any
Environmental Law, which failure would reasonably be expected to have a
Material Adverse Effect on the Company;
4.1.10 declare or pay any dividend or distribution on any share
of capital stock or other securities of the Company or any Subsidiary of the
Company;
4.1.11 repurchase, redeem or otherwise acquire any outstanding
capital stock or other securities of, or other ownership interests in the
Company or any Subsidiary of the Company;
4.1.12 merge or consolidate with, purchase substantially all or
any substantial part of the assets of, or otherwise acquire any business or
any proprietorship, firm, association, corporation or other business
organization or division thereof except as contemplated hereby, or in
connection with the exercise of fiduciary obligations in accordance with
applicable law upon the consummation of a transaction that is deemed to be a
Superior Proposal (as defined herein);
4.1.13 grant any powers of attorney (other than special powers
of attorney granted in the ordinary course of business);
4.1.14 make, or make any commitments for, capital expenditures
except as set forth in the budget attached hereto as Schedule 4.1 plus an
amount in excess of 10% of the aggregate amount set forth therein, and except,
in addition to such capital expenditures, amounts not to exceed $1,000,000 for
any individual commitment or $5,000,000 for all such commitments taken in the
aggregate in any twelve-month period, without the prior written consent of
Buyer, which consent shall not be unreasonably withheld; provided, however,
said written consent shall not be necessary in the event of a bona-fide
emergency wherein the Company will suffer irreparable harm if it does not make
the capital expenditure immediately, provided, further, however, that the
incurrence of such capital expenditure without consent in excess of the
limitations provided herein shall nonetheless constitute a failure of
condition; and provided further that the Company agrees that it will notify
Buyer prior to making any capital
- 32 -
expenditure in excess of $500,000 or aggregate capital expenditures in excess
of $1,000,000 in any twelve-month period;
4.1.15 adopt, amend or terminate or propose to adopt, amend or
terminate any welfare plan, retirement plan or benefit arrangements, other
than such adoptions, amendments, or terminations disclosed in this Agreement
or a Schedule to this Agreement or otherwise required by applicable law;
4.1.16 enter into any transaction, commitment, contract or
agreement relating to the disposition of any material portion of its assets or
business or relinquishment of any contract or other right, in either case,
material to the Company and its Subsidiaries taken as a whole, other than
transactions and commitments in the ordinary course of business consistent
with past practice; or
4.1.17 change any method of accounting or accounting practice by
the Company or any of its Subsidiaries, except for any such change required by
reason of a concurrent change in generally accepted accounting principles.
4.2 Other Offers.
From the date hereof until the termination hereof, the Company and its
Subsidiaries and the officers, directors, employees or other agents of the
Company and its Subsidiaries including, without limitation, its respective
counsel, accountants, investment advisors or other advisors or representatives
("Personnel"), will not, directly or indirectly, (a) take any action to
solicit, initiate or encourage, or take any other action to facilitate, any
Acquisition Proposal (as hereinafter defined) or (b) discuss or engage in
negotiations with, or disclose any non-public information relating to the
Company or any Subsidiary of the Company or afford access to the properties,
books or records of the Company or any Subsidiary of the Company to, any
Person that may be considering making, or has made, an Acquisition Proposal or
(c) agree to approve, recommend or enter into any agreement regarding, an
Acquisition Proposal unless, in each of (a) through (c), all of the following
events have occurred: (1) the Company has received an unsolicited, written,
bona fide Acquisition Proposal from a third party; (2) the Company's Board of
Directors shall conclude in good faith, after consultation with its legal and
financial advisers, that such Acquisition Proposal, after taking into account
whether it is reasonably likely to be financeable, is superior from a
financial point of view to the terms of the transaction set forth in this
Agreement; and (3) the Company's Board of Directors shall have determined,
after consultation with its outside legal counsel, that the failure to take
such action in respect of such Acquisition Proposal would result in a
substantial risk of liability for a breach of fiduciary duties of the members
of the Company's Board of Directors under applicable law (a "Superior
Proposal"). The Company will promptly notify Buyer after receipt of any
Acquisition Proposal, including a Superior Proposal, or any indication that
any person is considering making an Acquisition Proposal, including a Superior
Proposal, or any request for non-public information relating to the Company or
any Subsidiary of the Company or for access to the properties, books or
records of the Company or any Subsidiary of the Company by any Person that may
be considering making, or has made, an Acquisition Proposal, including a
Superior Proposal, (including the terms thereof and the identity of the third
party) and will keep Buyer fully informed of the status and details of
- 33 -
any such Acquisition Proposal, including a Superior Proposal, indication or
request including furnishing Buyer a copy of any such Acquisition Proposal,
including a Superior Proposal, indication or request. The term "Acquisition
Proposal" as used herein means any offer or proposal for, or any indication of
interest in, a tender offer or a merger or other business combination
involving the Company or any Subsidiary of the Company or the acquisition of
any equity interest in, or a substantial portion of the assets of, the Company
or any Subsidiary of the Company, other than the transactions contemplated by
this Agreement.
4.3 Shareholder Meeting.
The Company shall call a meeting of its shareholders to be held as
promptly as practicable for the purpose of voting upon the approval of this
Agreement. Unless the Company receives a Superior Proposal, the Company will,
through its board of directors, recommend to its shareholders approval of such
matters and shall not withdraw, modify or change its recommendation in a
manner adverse to Buyer.
5. COVENANTS OF BUYER
Buyer agrees that:
5.1 Obligations of Merger Subsidiary.
Buyer will take all action necessary to cause Merger Subsidiary to
perform its obligations under this Agreement and to consummate the Merger on
the terms and conditions set forth in this Agreement.
5.2 Directors' and Officers' Indemnification and Insurance.
5.2.1 Except to the extent required by law, until the fifth
anniversary of the Effective Time, neither Buyer nor the Surviving Corporation
will take any action so as to amend, modify or repeal the provisions for
indemnification of directors, officers, employees or agents contained in the
certificates or articles of incorporation or bylaws (or other comparable
charter documents) of the Company or any of its Subsidiaries as of the date of
this Agreement in such a manner as would adversely affect the rights of any
individual who shall have served as a director, officer, employee or agent of
the Company or any of its Subsidiaries prior to the Effective Time (each an
"Indemnified Party") to be indemnified by the Company or its Subsidiaries or
the Surviving Corporation in respect of their serving in such capacities prior
to the Effective Time.
5.2.2 Buyer shall, until the second anniversary of the
Effective Time, cause the Surviving Corporation to maintain in effect, to the
extent available, the policies of directors' and officers' liability insurance
maintained by the Company and its Subsidiaries as of the date hereof (or
policies of at least the same coverage and amounts containing terms that are
no less advantageous to the insured parties) with respect to claims arising
from facts or events that occurred on or prior to the Effective Time.
- 34 -
5.2.3 In the event the Surviving Corporation (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any person,
then, and in each such case, proper provision shall be made so that the
successors and assigns of the Company shall assume the obligations set forth
in Sections 5.2.1 and 5.2.2.
5.2.4 The provisions of this Section 5.2 are intended to be for
the benefit of, and shall be enforceable by, each party entitled to insurance
coverage under Section 5.2.2 above, respectively, and his or her heirs and
legal representatives, and shall be in addition to any other rights such party
may have under the certificate or articles of incorporation or bylaws of the
Surviving Corporation or any of its Subsidiaries, under Minnesota Law or
otherwise.
5.3 Employee Benefit Plans.
For a period of no less than twelve months following the Closing
Date, Buyer shall provide each employee of the Surviving Corporation or its
Subsidiaries with benefits that are at least substantially equivalent in the
aggregate to those provided under the Plans in effect on the Closing Date,
provided, that Buyer, in providing such substantially equivalent benefits,
shall not be required to provide or maintain any particular Plan or benefit
which was provided to or maintained for such employee prior to the Closing.
Buyer agrees that, for purposes of all employee benefit plans (including, but
not limited to, all "employee benefit plans" within the meaning of Section
3(3) of ERISA, all deferred compensation arrangements, all policies and
employee fringe benefit programs, vacation policies, etc.) of Buyer (such
plans, programs, policies and arrangements, the "Buyer Plans") in which such
employees may participate following the Closing under which an employee's
eligibility or benefits depends, in whole or in part, on length of service,
credit will be given to the employees of the Surviving Corporation for service
previously credited with the Company prior to the Closing, provided that such
crediting of service shall not be given for benefit accrual purposes under any
Buyer Plan. Such employees shall also be given credit for any deductible or
copayment amounts paid in respect of a plan year in which the Closing Date
occurs. Buyer shall also cause each Buyer Plan to waive (a) any preexisting
condition restrictions or (b) any waiting period limitations for all employees
of the Surviving Corporation or its Subsidiaries hired or employed as of the
Closing Date.
5.4 Employee Matters.
Buyer agrees to cause the Surviving Corporation to employ for a
period of six months following the Effective Date each employee of the Company
or any of its Subsidiaries who is employed by the Company or its Sub-sidiaries
in one or more of the positions listed on Schedule 5.4 attached hereto at the
Effective Time and to provide such employee at least the same compensation
during such six-month period as the Company provided such employee at the
Effective Time. In the event that Buyer or the Surviving Corporation
terminates the employment of any such employee prior to the expiration of such
six-month period for any reason other than "for cause," Buyer will, or will
cause the Surviving Corporation to, pay severance to such employee in an
amount equal to the compensation that such employee would have received if he
had been employed for the remainder of such six-month period at the level of
compensation paid
- 35 -
to such employee at the Effective Time. As used herein, "for cause" shall
mean (a) the material failure of an employee to perform the duties
commensurate with such employee's position and assigned to such employee by
his supervisor, (b) habitual intoxication or inexcusable, repeated or
prolonged absence from work, (c) perpetration by the employee of a fraud
against the Surviving Corporation or Buyer, (d) commission of a felony by the
employee or (e) the loss or suspension of a license or finding of suitability
from any Governmental or Regulatory Authority.
6. COVENANTS OF BUYER, MERGER SUBSIDIARY AND THE COMPANY
The parties hereto agree that:
6.1 Best Efforts.
Subject to the terms and conditions of this Agreement, each party will
use its best efforts promptly to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate the transactions contemplated by
this Agreement.
6.2 Certain Filings.
The Company and Buyer and Merger Subsidiary shall (a) cooperate with one
another as soon as practicable in determining whether any action by or in
respect of, or filing with, any governmental body, agency or official, or
authority is required (including, without limitation, any filing requirements
under the HSR Act), or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, in connection
with the consummation of the transactions contemplated by this Agreement, and
(b) in seeking any such actions, consents, approvals or waivers or making any
such filings, promptly take all actions necessary to make filings required by
the Company, Merger Subsidiary and Buyer or their affiliates with all
applicable Governmental and Regulatory Authorities and third parties
furnishing at the earliest practicable date information required in connection
therewith and seek to obtain all such actions, consents, approvals or waivers.
6.3 Public Announcements.
Each of the parties hereto agree that all press releases and other
announcements, whether written or oral, to be made by any of them with respect
to the Merger shall be subject to mutual agreement and consent prior to the
dissemination thereof; provided, however, either party may make any
announcements required by applicable law, New York Stock Exchange or NASDAQ
Stock Market rules so long as the party so required notifies the other party
promptly upon learning such requirement and in good faith attempts to comply
with this Section.
- 36 -
6.4 Further Assurances.
At and after the Effective Time, the officers and directors of the
Surviving Corporation will be authorized to execute and deliver, in the name
and on behalf of the Company or Merger Subsidiary, any deeds, bills of sale,
assignments or assurances and to take and do, in the name and on behalf of the
Company or Merger Subsidiary, any other actions and things to vest, perfect or
confirm of record or otherwise in the Surviving Corporation any and all right,
title and interest in, to and under any of the rights, properties or assets of
the Company acquired or to be acquired by the Surviving Corporation as a
result of, or in connection with, the Merger.
6.5 Preparation of Proxy Statement.
The Company shall promptly prepare and file with the SEC the Proxy
Statement and shall use its best efforts to have such statement reviewed by
the SEC and distributed to shareholders of the Company as soon as practicable
after such filing. Buyer and Merger Subsidiary shall, cooperate with the
Company in the preparation of the Proxy Statement and provide the Company with
such information as the Company reasonably requests for preparation of and
inclusion in the Proxy Statement.
6.6 Access to Information.
From the date hereof until the Effective Time, each of the Company and
Buyer will give the other party (for purposes of this Section 6.6, the
"requesting party") and the requesting party's counsel, financial advisors,
auditors and other authorized representatives full access during business
hours and upon reasonable notice to its offices, properties, books and records
and the offices, properties, books and records of its Subsidiaries, will
furnish to the requesting party and the requesting party's counsel, financial
advisors, auditors and other authorized representatives such financial and
operating data and other information as such persons may reasonably request
and will instruct the its employees, counsel and financial advisors to
cooperate with the requesting party in the requesting party's investigation of
the business of the other party and the business of the other party's
Subsidiaries; provided that no investigation pursuant to this Section shall
affect any representation or warranty given hereunder by the any party hereto
to any other party hereto. Any such information or material obtained pursuant
to this Section 6.6 that constitutes Evaluation Materials (as such term is
defined in the letter agreement dated as of March 20, 1997, between Company
and Buyer (the "Confidentiality Agreement")) shall be governed by the terms of
the Confidentiality Agreement.
6.7 Notices of Certain Events.
Each party hereto shall promptly notify the other of:
6.7.1 any material notice or other communication from any person
alleging that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement;
- 37 -
6.7.2 any material notice or other communication to or from any
Governmental or Regulatory Authority in connection with the transactions
contemplated by this Agreement; and
6.7.3 any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to or
involving or otherwise affecting such party or any Subsidiary of such party
which, if pending on the date of this Agreement, would have been required to
have been disclosed pursuant to Section 2.13 or Section 3.6, as appropriate,
or which relate to the consummation of the transactions contemplated by this
Agreement.
7. CONDITIONS TO THE MERGER
7.1 Conditions to the Obligations of Each Party.
The obligations of the Company, Buyer and Merger Subsidiary to consummate
the Merger are subject to the satisfaction of the following conditions:
7.1.1 any applicable waiting period (and any extension thereof)
under the HSR Act relating to the Merger shall have expired;
7.1.2 no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prevent or prohibit the
consummation of the Merger, except for any such law, regulation, injunction,
order or decree of the Argentina Authorities that prevents or prohibits the
consummation of the Merger because of the condition of or actions by Buyer or
Merger Subsidiary;
7.1.3 other than the filing of the Certificate of Merger, (i)
all approvals, consents, waivers, and filings with and notices to any
Governmental or Regulatory Authority to consummate the transactions
contemplated hereby, the failure of which to be obtained or taken could be
reasonably expected to have a Material Adverse Effect on Buyer and its
Subsidiaries, taken as a whole, or on the ability of Buyer and the Company to
consummate transactions, (except such consents or approvals as may be required
to be obtained from the Argentina Authorities in connection with the
transactions contemplated hereby as a result of the condition of or actions by
Buyer or Merger Subsidiary), and (ii) all approvals, consents, waivers,
filings and notices listed on Schedule 7.1.3 hereto shall have been obtained
(and each party hereto shall have received copies thereof) without the
imposition of any conditions which are not reasonably satisfactory to Buyer or
the Company; such approvals, consents and waivers shall be in effect and no
proceeding shall have been initiated or threatened with respect thereto; all
applicable waiting periods with respect to such approvals, consents and
waivers shall have expired; all conditions and requirements prescribed by law
or by such approvals, consents and waivers shall have been satisfied; and any
approvals, consents and waivers shall not impose regulatory conditions under
decisions or interpretations in effect as of the date of this Agreement which
would jeopardize the gaming licenses presently issued to the Company or its
Subsidiaries by the Mississippi Gaming Commission, the Louisiana Control Board
or the Argentina Authorities or any of the gaming licenses issued to Buyer or
its Subsidiaries by the Nevada Control Board or jeopardize any of the
contracts by and between the Company or the Buyer with any of the foregoing in
a manner that
- 38 -
would be reasonably expected to have a Material Adverse Effect on the Company
or Buyer, respectively, except such regulatory conditions as may be imposed by
the Argentina Authorities as a result of the condition of or actions by Buyer
or Merger Subsidiary;
7.1.4 this Agreement shall have been approved and adopted by the
affirmative vote of the holders of a majority of the issued and outstanding
Magic Shares;
7.1.5 no court, arbitrator or governmental body, agency or
official shall have issued any order, and there shall not be any statute, rule
or regulation, restraining or prohibiting the consummation of the Merger or
the effective operation of the business of the Company and its Subsidiaries or
the Buyer and its Subsidiaries after the Effective Time, and no proceeding
challenging this Agreement or the transactions contemplated hereby or seeking
to prohibit, alter, prevent or materially delay the Merger shall have been
instituted by any person before any court, arbitrator or governmental body,
agency or official and be pending;
7.2 Conditions to the Obligations of Buyer and Merger Subsidiary.
The obligations of Buyer and Merger Subsidiary to consummate the Merger
are subject to the satisfaction of the following further conditions:
7.2.1 except, in the case of representations and warranties, for
any matters that individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect on the Company, the Company shall
have performed in all material respects all of its obligations hereunder
required to be performed by it at or prior to the Effective Time, the
representations and warranties of the Company contained in this Agreement and
in any certificate or other writing delivered by the Company pursuant hereto
shall be true in all material respects at and as of the Effective Time as if
made at and as of such time, or in the case of representations and warranties
made as of a specified date earlier than the Closing Date, on or as of such
earlier date, and Buyer shall have received a certificate signed by the Chief
Executive Officer and Chief Financial Officer of the Company attesting to the
matters set forth in this Section 7.2.1;
7.2.2 Buyer shall have received all documents it may reasonably
request relating to the existence of the Company and its Subsidiaries and the
authority of the Company for this Agreement, all in form and substance
reasonably satisfactory to Buyer;
7.2.3 Buyer shall have been furnished at the Closing with the
opinions of Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, special counsel to the Company,
and ▇▇▇▇▇▇▇▇ & ▇▇▇▇, Ltd., counsel to the Company, each dated the Closing
Date, addressed to Buyer in a form reasonably acceptable to Buyer;
7.2.4 there shall not have occurred between the date hereof and
the Effective Time any Material Adverse Change in the consolidated results of
operations, financial condition, assets, liabilities (whether absolute,
accrued, contingent or otherwise), or business of the
- 39 -
Company and its Subsidiaries, taken as a whole, which Material Adverse Change
has not been adequately reserved for in the Company Financial Statements;
7.2.5 holders of no more than 10% of the issued and outstanding
Magic Shares shall have made the demands and given the notices required under
Minnesota Law to assert dissenters' appraisal rights;
7.2.6 Buyer shall have received all regulatory approval for the
Merger and the transactions contemplated thereby from the Mississippi Gaming
Commission, the Louisiana Gaming Control Board, the Argentina Authorities and
Nevada Authorities, except for such consents and approvals as may be required
to be obtained from the Argentina Authorities in connection with the
transactions contemplated hereby as a result of the condition of or actions by
Buyer or Merger Subsidiary; and
7.2.7 if requested by Buyer, the Effective Time shall occur on
or after October 15, 1998.
7.3 Conditions to Obligations of the Company
The obligations of the Company to consummate the Merger are subject to
the satisfaction of the following further conditions:
7.3.1 Each of Buyer and Merger Subsidiary shall have performed
in all material respects all of its respective obligations hereunder required
to be performed by it at or prior to the Effective Time, the representations
and warranties of Buyer and Merger Subsidiary contained in this Agreement and
in any certificate or other writing delivered by the Company pursuant hereto
shall be true in all material respects at and as of the Effective Time as if
made at and as of such time, or, in the case of representations and warranties
made as of a specified date earlier than the Closing Date, on or as of such
earlier date and the Company shall have received a certificate signed by the
Chief Executive Officer and Chief Financial Officer of Buyer attesting to the
matters set forth in this Section 7.3.1;
7.3.2 The Company shall have received all documents it may
reasonably request relating to the existence of Buyer and its subsidiaries and
the authority of Buyer for this Agreement, all in form and substance
satisfactory to the Company; and
7.3.3 The Company shall have been furnished at the Closing with
an opinion of Irell & ▇▇▇▇▇▇▇ LLP, counsel to Buyer, dated the Closing Date,
addressed to the Company in a form reasonably acceptable to the Company.
- 40 -
8. TERMINATION
8.1 Termination.
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time (notwithstanding any approval of this
Agreement by the shareholders of the Company):
8.1.1 by mutual written consent of the parties hereto duly
authorized by action taken by or on behalf of their respective boards of
directors; or
8.1.2 by either the Company or Buyer, if the Merger has not been
consummated by October 31, 1998 (subject to Section 8.1.11) and the failure to
consummate the Merger is not caused by a breach of this Agreement by the
terminating party; or
8.1.3 at the election of the Company if any one or more of the
conditions to the obligation of the Company to close as set forth in Section
7.1 or 7.3 has not been fulfilled as of October 31, 1998 (subject to Section
8.1.11); or
8.1.4 at the election of Buyer if any one or more of the
conditions to the obligation of Buyer to close as set forth in Section 7.1 or
7.2 has not been fulfilled as of October 31, 1998 (subject to Section 8.1.11);
or
8.1.5 at the election of the Company if Buyer or Merger
Subsidiary has breached in any material respect any representation, warranty,
covenant or agreement contained in this Agreement, which breach cannot be or
is not cured within thirty (30) days following receipt by Buyer or Merger
Subsidiary of written notice of such breach; or
8.1.6 at the election of Buyer if the Company has breached in
any material respect any representation, warranty, covenant or agreement
contained in this Agreement (so long as, in the case of representations and
warranties, such breach relates to matters that could reasonably be expected
to have a Material Adverse Effect), which breach cannot be or is not cured
within thirty (30) days following receipt of the Company of written notice of
such breach; or
8.1.7 by either the Company or Buyer, if there shall be any law
or regulation that makes consummation of the Merger illegal or otherwise
prohibited or if any judgment, injunction, order or decree enjoining Buyer or
the Company from consummating the Merger is entered and such judgment,
injunction, order or decree shall become final and nonappealable, except for
such laws, regulations, judgments, injunctions, orders or decrees of the
Argentina Authorities that render the consummation of the Merger illegal or
otherwise prohibited or enjoined because of the condition of or actions by
Buyer or Merger Subsidiary; or
8.1.8 by the Company or Buyer if the shareholders of the Company
have not approved the Merger on or before October 31, 1998; or
- 41 -
8.1.9 by the Company if (i) the Company shall receive a Superior
Proposal, (ii) the Company has given Buyer at least five business days notice
of the Superior Proposal and the determination of the Board of Directors
pursuant to this section, and (iii) the Company shall not have received a
proposal from Buyer believed by the Board of Directors of the Company, upon
consultation with financial advisors and counsel, to be the equivalent of or
superior to the Superior Proposal; or
8.1.10 by Buyer, if the Company's Board of Directors shall have
withdrawn or modified in a manner adverse to Buyer its approval or
recommendation of this Agreement or the Merger or shall have approved or
recommended an Acquisition Proposal.
8.1.11 Notwithstanding anything to the contrary contained in
clauses 8.1.2, 8.1.3 or 8.1.4, the termination date provided in such clauses
shall automatically be extended to March 31, 1999 (and neither party shall
have rights of termination under such clauses until such date) so long as the
parties are proceeding in good faith to effectuate the consummation of the
Merger and the sole unsatisfied condition as of October 31, 1998 is receipt of
regulatory consents and approvals required to consummate the Merger.
8.2 Effect of Termination.
If this Agreement is terminated and the transactions contemplated hereby
are not consummated pursuant to Section 8.1, this Agreement shall become void
and of no further force and effect, except for the provisions of Section 6.6
hereof relating to confidentiality and the provisions of Section 6.3, 8.2 and
9.4. Except as provided in Section 9.4 hereof, if this Agreement is properly
terminated as provided herein, no party to this Agreement shall have any
liability; provided however, that nothing in this Section 8.2 shall relieve
any party from liability hereunder in respect of a termination due to willful
breach of this Agreement by it or willful failure by it to perform its
obligations hereunder.
9. MISCELLANEOUS
9.1 Notices.
Any notice or other communication required or which may be given
hereunder shall be in writing and shall be delivered personally, telegraphed
or sent by facsimile transmission with telephone confirmation, or sent by
certified, registered or express mail, postage prepaid, and shall be deemed
given when so delivered personally, upon receipt if telegraphed or sent by
facsimile transmission, or if mailed, three days after the date of mailing, as
follows:
If to Buyer or Hollywood Park, Inc.
Merger Subsidiary: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: G. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
- 42 -
With a copy to: Irell & ▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Company: Casino Magic Corp.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇ & ▇▇▇▇, Ltd.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any party can change notice address, facsimile number or other
information for proposal notice by specifying such change to the parties
hereto.
9.2 No Survival of Representations and Warranties.
The representations, warranties, covenants and agreements contained
herein (other than the covenants and agreements set forth in Section 1.7, 1.8,
5.2, 5.3, 5.4 and this Article 9) and in any certificate or other writing
delivered pursuant hereto shall not survive the Effective Time of this
Agreement.
9.3 Amendments; No Waivers.
9.3.1 Any provision of this Agreement may be amended or waived
prior to the Effective Time if, and only if, such amendment or waiver is in
writing and signed, in the case of an amendment, by the Company, Buyer and
Merger Subsidiary or in the case of a waiver, by the party against whom the
waiver is to be effective; provided that after the adoption of this Agreement
by the shareholders of the Company, no such amendment or waiver shall, without
the further approval of such shareholders, alter or change:
- 43 -
9.3.1.1 The amount or kind of consideration to be received
in exchange for any shares of capital stock of the Company; or
9.3.1.2 Any material term of the certificate of
incorporation of the Surviving Corporation.
9.3.2 No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights
and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
9.4 Expenses.
9.4.1 Each of the parties hereto will bear and pay their
respective fees and expenses incurred in connection with the proposed
transaction, whether incurred prior to or after the date hereof, including,
without limitation, accounting, legal, broker, investment banking and
appraisal fees.
9.4.2 The Company shall pay Buyer in immediately available funds
the sum of $3,500,000 in the event that this Agreement is terminated, pursuant
to Sections 8.1.6, 8.1.8, 8.1.9 or 8.1.10; provided that in any such event the
payment of such amount shall constitute the sole recourse and remedy of Buyer
and Merger Subsidiary with respect to any breach of a representation,
warranty, covenant, or agreement by the Company. Payment of such funds shall
occur within five business days after such termination of this Agreement.
9.5 Successors and Assigns.
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
provided that no party may assign, delegate or otherwise transfer any of its
rights or obligations under this Agreement without the consent of the other
parties hereto.
9.6 Governing Law.
Except to the extent that the laws of the province of Neuquen, Argentina
and the States of Mississippi, Louisiana, Nevada and Delaware or other
sovereign states or nations are mandatorily applicable to the Merger, this
Agreement shall be construed in accordance with and governed by the law of the
State of Minnesota.
9.7 Counterparts; Effectiveness.
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement shall become effective
when each party hereto shall have received counterparts hereof signed by all
of the other parties hereto.
- 44 -
9.8 Superseding Agreement, Parties in Interest.
This Agreement, the exhibits hereto and the Schedules hereto delivered
pursuant to this Agreement contain the entire agreement between the parties
hereto with respect to the transactions contemplated herein and, except as
provided herein, supersede all previous oral and written and all
contemporaneous oral negotiations, commitments, writings and understandings
other than Confidentiality Agreement, which shall remain in full force and
effect. This Agreement is not intended to confer upon any other persons any
rights or remedies hereunder, except Section 1.7, 1.8, 5.2, 5.3 and 5.4 hereof
which shall inure to the benefit of and be enforceable by Indemnified Parties
and the officers, directors, agents and employees of the Company.
9.9 Schedules and Exhibits. All Schedules and Exhibits attached
hereto or referred to herein are hereby incorporated in and made a part of
this Agreement as if set forth in full herein. An exception to a
representation or warranty disclosed in any Schedule or elsewhere this
Agreement shall constitute an exception to all other representations and
warranties made in this Agreement even if such exception is not included in
each such other representation, warranty or applicable Schedule.
9.10 Invalid Provisions.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any present or future law, and if the rights or
obligations of any party hereto under this Agreement will not be materially
and adversely affected thereby, (i) such provision will be fully severable,
(ii) this Agreement will be construed and enforced as if such illegal, invalid
or unenforceable provision had never comprised a part hereof, (iii) the
remaining provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal, invalid or unenforceable provision or
by its severance herefrom and (iv) in lieu of such illegal, invalid or
unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
- 45 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
HOLLYWOOD PARK, INC.
By /s/ G. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name: G. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: CFO
CASINO MAGIC CORP.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman of the Board
HP ACQUISITION II, INC.
By /s G. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name: G. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: CEO & CFO
- 46 -
Schedules to
Agreement and Plan of Merger
dated as of February 19, 1998 among
Casino Magic Corp., Hollywood Park, Inc. and
HP Acquisition II, Inc.
Schedule 2.4 Non-Contravention Exceptions
Schedule 2.5 Capitalization/Stock Options
Schedule 2.6.2 Liens/Restrictions on Stock of Subsidiaries
Schedule 2.10 Absence of Certain Changes
Schedule 2.13 Litigation and Arbitration Matters
Schedule 2.14 Taxes
Schedule 2.15 ERISA Matters
Schedule 2.16 Undisclosed Breach or Violations of Material Contracts
Schedule 2.17.2 Insurance Coverage
Schedule 2.19 Employee Matters
Schedule 2.21 Environmental Matters
Schedule 2.22 Indebtedness to Officers/Shareholders
Schedule 2.24 Intellectual Property
Schedule 2.28 Real Property
Schedule 4.1 Conduct of Company
Schedule 5.4 Employment of Existing Employees
Schedule 7.1.3 Approvals/Waivers to the Merger