EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
dated as of October 5, 1999
among
ISLE OF CAPRI CASINOS, INC.,
ISLE MERGER CORP.
AND
LADY LUCK GAMING CORPORATION
TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER
Section 1.1. The Merger......................................................1
Section 1.2. Effective Time of the Merger....................................2
Section 1.3. Closing.........................................................2
Section 1.4. Effect of the Merger............................................2
Section 1.5. Certificate of Incorporation and Bylaws of the Surviving
Corporation...................................................2
Section 1.6. Directors and Officers of the Surviving Corporation.............2
Section 1.7. Subsidiaries of the Surviving Corporation.......................2
ARTICLE II EFFECT OF THE MERGER ON SECURITIES OF THE CONSTITUENT
CORPORATIONS
Section 2.1. Conversion of Securities........................................3
Section 2.2. Exchange of Certificates........................................4
Section 2.3. Acceleration and Payment for Lady Luck Options..................5
Section 2.4. Dissenting Shares...............................................6
Section 2.5. Lady Luck Preferred Stock.......................................6
Section 2.6. Lady Luck Debt Securities.......................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF LADY LUCK
Section 3.1. Organization of Lady Luck and its Subsidiaries..................7
Section 3.2. Capitalization..................................................8
Section 3.3. Authority; No Conflict; Required Filings and Consents...........9
Section 3.4. Public Filings; Financial Statements...........................11
Section 3.5. No Undisclosed Liabilities.....................................11
Section 3.6. Absence of Certain Changes or Events...........................12
Section 3.7. Taxes..........................................................12
Section 3.8. Real Property, Title and Related Matters.......................14
Section 3.9. Title to Personal Property; Liens..............................15
Section 3.10. Intellectual Property..........................................16
Section 3.11. Agreements, Contracts and Commitments..........................16
Section 3.12. Litigation.....................................................17
Section 3.13. Environmental Matters..........................................17
Section 3.14. Employee Benefit Plans.........................................18
Section 3.15. Compliance.....................................................20
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Section 3.16. Labor Matters..................................................21
Section 3.17. Insurance......................................................22
Section 3.18. Information in Proxy Statement.................................22
Section 3.19. State Takeover Statute.........................................22
Section 3.20. Voting Requirements............................................22
Section 3.21. Year 2000......................................................22
Section 3.22. Opinion of Financial Advisor...................................23
Section 3.23. Brokers........................................................23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
Section 4.1. Organization of Buyer and Merger Sub...........................24
Section 4.2. Capitalization of Merger Sub...................................24
Section 4.3. Authority; No Conflict; Required Filings and Consents..........24
Section 4.4. Brokers........................................................25
Section 4.5. Ownership of Securities........................................26
Section 4.6. Proxy Statement................................................26
Section 4.7. Litigation.....................................................26
Section 4.8. Financing......................................................26
ARTICLE V COVENANTS
Section 5.1. Conduct of Business of Lady Luck...............................27
Section 5.2. Cooperation; Notice; Cure......................................31
Section 5.3. No Solicitation................................................31
Section 5.4. Proxy Statement................................................32
Section 5.5. Special Meeting................................................32
Section 5.6. Access to Information..........................................32
Section 5.7. Governmental Approvals.........................................33
Section 5.8. Publicity......................................................34
Section 5.9. Indemnification................................................34
Section 5.10. Stockholder Litigation.........................................35
Section 5.11. Employee Benefits..............................................35
Section 5.12. Other Agreements...............................................35
Section 5.13. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Loans...........................................35
Section 5.14. Further Assurances and Actions.................................36
Section 5.15. Pending Acquisitions...........................................36
Section 5.16. Allocation of Funds............................................36
ARTICLE VI CONDITIONS TO MERGER
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Section 6.1. Conditions to Each Party's Obligation to Effect the Merger.....36
Section 6.2. Additional Conditions to Obligations of Lady Luck..............37
Section 6.3. Additional Conditions to Obligations of Buyer..................38
ARTICLE VII TERMINATION AND AMENDMENT
Section 7.1. Termination....................................................39
Section 7.2. Effect of Termination..........................................42
Section 7.3. Fees and Expenses..............................................42
Section 7.4. Amendment......................................................43
Section 7.5. Extension; Waiver..............................................43
ARTICLE VIII MISCELLANEOUS
Section 8.1. Nonsurvival of Representations, Warranties, Covenants and
Agreements...................................................43
Section 8.2. Notices........................................................44
Section 8.3. Interpretation.................................................45
Section 8.4. Counterparts...................................................45
Section 8.5. Entire Agreement; No Third Party Beneficiaries.................45
Section 8.6. Governing Law..................................................45
Section 8.7. Assignment.....................................................45
Section 8.8. Severability; Enforcement......................................46
Section 8.9. Specific Performance...........................................46
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Index of Defined Terms
The following terms have the respective meanings specified in the
indicated Sections of the Agreement:
Term Agreement Section
---- -----------------
Acquisition Proposal 5.3(a)
Agreement Recitals
best knowledge Article III
Buyer Recitals
Buyer Disclosure Schedule Article IV
Buyer Material Adverse Effect 4.1
Certificate of Merger 1.2
CIBC 4.4
Closing 1.3
Closing Date 1.3
Code 2.2(f)
Confidentiality Agreement 5.6
DGCL 1.1
Dissenting Shares 2.4
Due Diligence Period 6.3
Effective Time 1.2
Encumbrances 3.8(b)
Environmental Law 3.13(b)
ERISA 3.14(a)
ERISA Affiliate 3.14(a)
Exchange Act 3.3(c)
Exchange Agent 2.2(a)
Exchange Fund 2.2(a)
foreign person 3.7(i)
GAAP 3.4(b)
Gemini 5.1(n)
Gemini Trademark Assets 5.1(n)
Governmental Approvals 5.7(a)
Governmental Entity 3.3(c)
GSMC 3.7(e)
Hazardous Substance 3.13(c)
HSR Act 3.3(c)
IMPS 5.1(n)
include, includes or including 8.3
Indebtedness 3.11(a)
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Term Agreement Section
---- -----------------
Indemnified Parties 5.9(a)
IRS 3.7(c)
knowledge Article III
Lady Luck Recitals
Lady Luck Balance Sheet 3.4(b)
Lady Luck Common Stock 2.1(a)
Lady Luck Disclosure Schedule Article III
Lady Luck Employee Plans 3.14(a)
Lady Luck Gaming Laws 3.15(b)
Lady Luck Interim Financial Statements 3.4(b)
Lady Luck Las Vegas Agreement 5.1(n)
Lady Luck Material Contracts 3.11(a)
Lady Luck Material Adverse Effect 3.1
Lady Luck Notes 5.1(p)
Lady Luck Option 2.3
Lady Luck Option Plan 2.3
Lady Luck Permits 3.15(a)
Lady Luck Preferred Stock 3.2(a)
Lady Luck Series A Preferred Stock 2.1(c)
Lady Luck Series A Preferred Stock
Redemption Amount 2.5
Lady Luck SEC Reports 3.4(a)
Lady Luck Special Meeting 5.5
Lady Luck Stockholder Approval 3.20
Lady Luck Welfare Plan 3.14(g)
Las Vegas Hotel 5.1(n)
Leased Real Property 3.8(b)
Liens 3.1
made available 8.3
Merger Recitals
Merger Consideration 2.1(a)
Merger Sub Recitals
Merger Sub Common Stock 4.2
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Agreement 5.1(d)
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Credit Agreement 5.13
Multiemployer Plan 3.14(e)
Nevada Approval 6.1(c)
Notifying Party 5.7(a)
Onyx Partners 3.23
Outside Date 7.1(b)
Owned Real Property 3.8(b)
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Term Agreement Section
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PBGC 3.14(f)
Permitted Encumbrances 3.8(b)
Physical Inspection and Review 6.3(d)
prohibited transactions 3.14(c)
Proxy Statement 5.4(a)
Redemption Agent 2.5
SEC 3.3(c)
Securities Act 3.4(a)
Services 3.21
single employer 3.14(a)
Sodak 3.7(e)
strategic alliances 3.11(a)
Stockholder Support Agreement Recitals
Subsidiary 3.1
Superior Proposal 5.3(a)
Surviving Corporation 1.1
Tax or Taxes 3.7(a)
Terminating Buyer Breach 7.1(h)
Terminating Lady Luck Breach 7.1(g)
the date of this Agreement, the date hereof 8.3
Third Party 5.3(a)
▇▇▇▇▇▇▇▇ 5.1(m)
Voting Debt 3.2(b)
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 3.22
without limitation 8.3
Year 2000 Ready 3.21
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of October 5,
1999, by and among ISLE OF CAPRI CASINOS, INC., a Delaware corporation
("Buyer"), ISLE MERGER CORP., a Delaware corporation and a wholly owned
subsidiary of Buyer ("Merger Sub"), and LADY LUCK GAMING CORPORATION, a Delaware
corporation ("Lady Luck").
WHEREAS, the Board of Directors of Lady Luck has determined that the
merger of Merger Sub with and into Lady Luck, upon the terms and subject to the
conditions set forth in this Agreement (the "Merger"), is fair to, and in the
best interests of, Lady Luck and its stockholders;
WHEREAS, the Boards of Directors of Buyer and Merger Sub have
determined that the Merger is in the best interests of Buyer and Merger Sub and
their respective stockholders;
WHEREAS, the Boards of Directors of Buyer, Merger Sub and Lady Luck
have each approved and adopted this Agreement and approved the Merger and the
other transactions contemplated hereby; and
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition and inducement to each of Buyer's and Merger Sub's
willingness to enter into this Agreement, the principal stockholder of Lady Luck
will enter into a Stockholder Support Agreement with Buyer, dated as of the date
of this Agreement in the form attached hereto as Exhibit A (the "Stockholder
Support Agreement"), pursuant to which such stockholder will agree, among other
things, to vote all voting securities of Lady Luck owned by him beneficially or
of record in favor of approval of the transactions contemplated by this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to the provisions
of this Agreement and in accordance with Section 251 of the Delaware General
Corporation Law (the "DGCL"), at the Effective Time (as defined in Section 1.2),
Merger Sub shall be merged with and into Lady Luck. As a result of the Merger,
the separate corporate existence of Merger Sub shall cease and Lady Luck shall
continue as the surviving corporation (the "Surviving Corporation").
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Section 1.2. Effective Time of the Merger. Subject to the provisions of
this Agreement (including Section 7.1 hereof), a certificate of merger with
respect to the Merger in appropriate form (the "Certificate of Merger") shall be
duly prepared, executed and acknowledged and thereafter delivered to the
Secretary of State of the State of Delaware for filing, as provided in the DGCL,
as early as practicable on the Closing Date (as defined in Section 1.3). The
Merger shall become effective at the later of the date of filing of the
Certificate of Merger or at such time within 90 days of the date of filing as is
specified in the Certificate of Merger (the "Effective Time").
Section 1.3. Closing. The closing of the Merger (the "Closing") will
take place at such time and place to be agreed upon by the parties hereto, on a
date to be specified by Buyer and Lady Luck, which shall be no later than the
third business day after satisfaction or, if permissible, waiver of the
conditions set forth in Article VI (the "Closing Date") and no earlier than
January 4, 2000, unless another date is agreed to by Buyer and Lady Luck.
Section 1.4. Effect of the Merger. Upon becoming effective, the Merger
shall have the effects set forth in the DGCL. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all properties,
rights, privileges, powers and franchises of Merger Sub and Lady Luck shall vest
in the Surviving Corporation, and all debts, liabilities and duties of Merger
Sub and Lady Luck shall become the debts, liabilities and duties of the
Surviving Corporation.
Section 1.5. Certificate of Incorporation and Bylaws of the Surviving
Corporation. At the Effective Time, the Certificate of Incorporation and Bylaws
of the Surviving Corporation shall be amended to be substantially identical to
the Certificate of Incorporation and Bylaws, respectively, of Merger Sub as in
effect immediately prior to the Effective Time, in each case until duly amended
in accordance with applicable law; provided the name of the Surviving
Corporation as set forth in its Certificate of Incorporation shall be changed to
a new name to be determined by Merger Sub prior to the Effective Time.
Section 1.6. Directors and Officers of the Surviving Corporation. The
directors of Merger Sub immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation. The directors of Lady Luck immediately prior to the Effective Time
shall each have resigned as of the Effective Time. The officers of Merger Sub
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation.
Section 1.7. Subsidiaries of the Surviving Corporation. The Surviving
Corporation may distribute shares of stock of the Subsidiaries of the Surviving
Corporation to the Buyer, or
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undertake similar transactions having the effect of reorganizing the corporate
structure of Buyer and its Subsidiaries, from time to time after the Effective
Time.
ARTICLE II
EFFECT OF THE MERGER ON SECURITIES OF
THE CONSTITUENT CORPORATIONS
Section 2.1. Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of any of the parties hereto or
the holders of any of the following:
(a) Lady Luck Common Stock. Each share of common stock, par value
$0.006 per share, of Lady Luck ("Lady Luck Common Stock") issued and
outstanding immediately prior to the Effective Time (other than shares
to be canceled and retired in accordance with Section 2.1(b) and any
Dissenting Shares (as defined in Section 2.4), together with all rights
in respect thereto, shall be converted, subject to Section 2.1(e), into
the right to receive from the Surviving Corporation a net amount of
$12.00 in cash (the "Merger Consideration"). As of the Effective Time,
all shares of Lady Luck Common Stock upon which the Merger
Consideration is payable pursuant to this Section 2.1(a) shall no
longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing
any such shares shall cease to have any ownership or other rights with
respect thereto, except the right to receive the Merger Consideration
in exchange for such shares upon the surrender of such certificate in
accordance with Section 2.2.
(b) Cancellation of Treasury Stock and Buyer-Owned Stock. All
shares of Lady Luck Common Stock that are owned by Lady Luck as
treasury stock and any shares of Lady Luck Common Stock owned by Buyer
or any wholly-owned Subsidiary (as defined in Section 3.1) of Buyer
shall be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(c) Capital Stock of Merger Sub. Each issued and outstanding share
of the common stock, par value $.01 per share, of Merger Sub shall be
converted into and become one fully paid and nonassessable share of
common stock, par value $.01 per share, of the Surviving Corporation.
(d) Adjustments to Merger Consideration. The Merger Consideration
shall be adjusted to reflect fully the effect of any stock split,
reverse split, stock dividend (including any dividend or distribution
of securities convertible into Lady Luck Common Stock, as applicable),
reorganization, recapitalization or any other like change with
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respect to Lady Luck Common Stock occurring after the date hereof and
prior to the Effective Time.
Section 2.2. Exchange of Certificates.
(a) Exchange Agent. At or prior to the Effective Time, Buyer shall
deposit with a bank or trust company designated by Buyer and reasonably
acceptable to Lady Luck (the "Exchange Agent"), for the benefit of the
holders of shares of Lady Luck Common Stock outstanding immediately
prior to the Effective Time, for exchange in accordance with this
Section 2.2, through the Exchange Agent, cash in an aggregate amount
sufficient to pay the Merger Consideration (the cash so deposited being
hereinafter referred to as the "Exchange Fund"). Any interest,
dividends or other income earned on the investment of cash or other
property held in the Exchange Fund shall be for the account of and
payable to Buyer.
(b) Exchange Procedures. Promptly after the Effective Time, Buyer
will instruct the Exchange Agent to mail to each holder of record of
Lady Luck Common Stock (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to a
Certificate shall pass, only upon proper delivery of the Certificate to
the Exchange Agent and shall be in such form and have such other
provisions as Buyer may reasonably specify), and (ii) instructions to
effect the surrender of the Certificate in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the
Exchange Agent together with such letter of transmittal, duly executed,
and such other customary documents as may be required pursuant to such
instructions, the holder of such Certificate shall be entitled to
receive in exchange therefor cash in an amount equal to the Merger
Consideration multiplied by the number of shares represented by such
Certificate, and the Certificate so registered shall forthwith be
canceled. In the event of a transfer of ownership of shares of Lady
Luck Common Stock which is not registered in the transfer records of
Lady Luck as of the Effective Time, the Merger Consideration may be
issued and paid in accordance with this Article II to a transferee if
the Certificate evidencing such shares of Lady Luck Common Stock is
presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer pursuant to this Section 2.2(b)
and by evidence that any applicable stock transfer taxes have been
paid. Until so surrendered, each outstanding Certificate that prior to
the Effective Time represented shares of Lady Luck Common Stock (other
than Certificates representing Dissenting Shares) will be deemed from
and after the Effective Time for all corporate purposes (other than the
payment of dividends and subject to Section 2.1(e)), to evidence the
right to receive the Merger Consideration without interest. No interest
will be paid or will accrue on the cash payable upon the surrender of
any Certificate.
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(c) Transfers of Ownership. At the Effective Time, the stock
transfer books of Lady Luck shall be closed, and there shall be no
further registration of transfers of Lady Luck Common Stock thereafter
on the records of Lady Luck.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the former stockholders of Lady Luck as
of the date which is twelve months after the Effective Time shall be
delivered to Buyer, upon demand, and thereafter such former
stockholders of Lady Luck who have not theretofore complied with this
Section 2.2 shall be entitled to look only to Buyer for payment of the
Merger Consideration to which they are entitled pursuant hereto.
(e) No Liability. None of Buyer, Merger Sub, Lady Luck or the
Exchange Agent shall be liable to any holder of Lady Luck Common Stock
for any Merger Consideration delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law. If any
Certificates shall not have been surrendered immediately prior to the
date on which the Merger Consideration or any dividends or
distributions with respect to Lady Luck Common Stock in respect of such
Certificate would otherwise escheat to or become the property of any
Governmental Entity, any such Merger Consideration, dividends or
distributions in respect of such Certificate shall, to the extent
permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person
previously entitled thereto on such date prior to the time such escheat
laws become applicable.
(f) Withholding Rights. Buyer or the Exchange Agent shall be
entitled to deduct and withhold from the Merger Consideration otherwise
payable pursuant to this Agreement to any holder of Certificates which
prior to the Effective Time represented shares of Lady Luck Common
Stock such amounts as Buyer or the Exchange Agent is required to deduct
and withhold with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended (the "Code"), or any
provision of state, local or foreign tax law. To the extent that
amounts are so withheld by Buyer or the Exchange Agent and remitted to
the proper authority, such withheld amounts thereafter shall be treated
for all purposes of this Agreement as having been paid to the holder of
the shares of Lady Luck Common Stock in respect of which such deduction
and withholding was made by Buyer or the Exchange Agent.
(g) Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange
Agent shall pay in exchange for such lost, stolen or destroyed
Certificates, upon the making of an affidavit of that fact by the
holder thereof such Merger Consideration as may be required pursuant to
Section 2.2; provided, however, that Buyer may, in its discretion, and
as a condition precedent to the issuance thereof, require the owner of
such lost, stolen or destroyed Certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may
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be made against Buyer, the Surviving Corporation or the Exchange
Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
Section 2.3. Acceleration and Payment for Lady Luck Options. Following
the execution of this Agreement, the Board of Directors of Lady Luck (or, if
appropriate, any committee administering the Lady Luck Stock Option Plan (as
defined below)) shall adopt such resolutions or use its best efforts to take
such other actions as are required to provide that each then outstanding stock
option to purchase shares of Lady Luck Common Stock (a "Lady Luck Option")
heretofore granted under any stock option or other stock-based incentive plan,
program or arrangement of Lady Luck, including the 1993 Stock Option Plan and
the 1996 Director Stock Option Plan (collectively, the "Lady Luck Option Plan")
shall be accelerated and canceled immediately prior to the Effective Time in
exchange for payment of an amount of cash equal to the product of (x) the number
of shares of Lady Luck Common Stock subject to such Lady Luck Option immediately
prior to the consummation of the Merger and (y) the excess, if any, of the
Merger Consideration over the per share exercise price of such Lady Luck Option;
provided, however, that such excess shall not be less than zero. Notwithstanding
anything in this Section 2.3 to the contrary, with respect to any Lady Luck
Option granted under the Lady Luck Stock Option Plan having a per share exercise
price that is greater than the Merger Consideration, whether or not vested and
exercisable, the Board of Directors of Lady Luck (or, if appropriate, any
committee administering the Lady Luck Stock Option Plan), shall adopt such
resolutions or use its best efforts to take such other actions as are required
to provide that each such Lady Luck Option shall be accelerated and, if not
exercised before the Effective Time, shall be canceled as of the Effective Time
and shall have no further force or effect as of the Effective Time, without
regard to the fact that the holder of such Lady Luck Option shall have received
no payment for the Lady Luck Option.
Section 2.4. Dissenting Shares. Notwithstanding Section 2.1, all shares
of Lady Luck Common Stock issued and outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of the Merger or
consented thereto in writing and who has demanded appraisal for such shares of
Lady Luck Common Stock in accordance with the DGCL (collectively, the
"Dissenting Shares") shall not be converted into a right to receive the Merger
Consideration, unless such holder fails to perfect or withdraws or otherwise
loses such holder's right to appraisal. If after the Effective Time such holder
fails to perfect or withdraws or loses such holder's right to appraisal, such
shares of Lady Luck Common Stock shall be treated as if they had been converted
as of the Effective Time into a right to receive the Merger Consideration
without interest thereon. Lady Luck shall give Buyer prompt notice of any
demands received by Lady Luck for appraisal of shares of Lady Luck Common Stock,
and Buyer shall have the right to participate in all negotiations and
proceedings with respect to such demands. Lady Luck shall not, except with the
prior written consent of Buyer, make any payment with respect to, or settle or
offer to settle, any such demands.
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Section 2.5. Lady Luck Preferred Stock. Each share of Series A
Mandatory Cumulative Redeemable Preferred Stock, par value $25.00 per share, of
Lady Luck ("Lady Luck Series A Preferred Stock") issued and outstanding
immediately prior to the Effective Time, shall be redeemed in connection with
the transactions contemplated hereby immediately prior to the Effective Time
pursuant to its terms at its liquidation preference. Immediately prior to the
Effective Time, Buyer shall deposit with a bank or trust company designated by
Lady Luck and reasonably acceptable to Buyer (the "Redemption Agent") for the
benefit of the holders of shares of Lady Luck Series A Preferred Stock
outstanding immediately prior to the Effective Time, for redemption by Lady Luck
through the Redemption Agent, cash in an aggregate amount sufficient to redeem
all outstanding shares of Lady Luck Series A Preferred Stock at the liquidation
preference as of such date (the "Lady Luck Series A Preferred Stock Redemption
Amount"). Lady Luck shall call the Lady Luck Series A Preferred Stock for
redemption pursuant to its terms at the Lady Luck Series A Preferred Stock
Redemption Price at the direction of Buyer and conditioned upon closing of the
Merger. Any interest, dividends or other income earned on the investment of cash
or other property held in the Exchange Fund shall be for the account of and
payable to Buyer.
Section 2.6. Lady Luck Debt Securities. Except as otherwise repaid,
redeemed or purchased in connection with the transactions contemplated hereby,
all notes and other debt instruments of Lady Luck that are outstanding at the
Effective Time shall continue to be outstanding subsequent to the Effective Time
as debt instruments of the Surviving Corporation, subject to their respective
terms and provisions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LADY LUCK
Lady Luck represents and warrants to Buyer and Merger Sub that the
statements contained in this Article III are true and correct except as set
forth herein and in the disclosure schedule delivered by Lady Luck to Buyer and
Merger Sub on or before the date of this Agreement (the "Lady Luck Disclosure
Schedule"). Any reference in the Merger Agreement to Lady Luck's "knowledge" or
"best knowledge," or to "the best of Lady Luck's knowledge," or words of similar
import, shall be deemed a reference to the actual knowledge of any of the (i)
corporate officers of Lady Luck or any of its Subsidiaries and (ii) general
managers of any gaming property of Lady Luck or any of its Subsidiaries for all
purposes. The Lady Luck Disclosure Schedule has been prepared based upon the
foregoing definition.
Section 3.1. Organization of Lady Luck and its Subsidiaries. Each of
Lady Luck and its Subsidiaries (as defined below) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and has all requisite corporate, partnership or limited liability
company power and authority to carry on its business as now being conducted.
Each of Lady Luck and its Subsidiaries is duly qualified or licensed to do
business and is in good
7
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so qualified, licensed or in
good standing would not have a material adverse effect on the business,
properties, condition (financial or otherwise), prospects or results of
operations of Lady Luck and its Subsidiaries, taken as a whole other than any
effect arising out of, or resulting from, general economic conditions in the
United States or conditions generally affecting the gaming industry in the
United States (a "Lady Luck Material Adverse Effect"). Lady Luck has delivered
to Buyer a true and correct copy of the Certificate of Incorporation and Bylaws
of Lady Luck, in each case as amended to the date of this Agreement. Assuming
regulatory compliance by Buyer, the respective organizational documents of Lady
Luck's Subsidiaries do not contain any provision that would limit or otherwise
restrict the ability of Buyer, following the Effective Time, from owning or
operating such Subsidiaries on the same basis as Lady Luck. Except as set forth
on the Lady Luck Disclosure Schedule, all the outstanding shares of capital
stock of, or other equity interests in, each such Subsidiary have been validly
issued and are fully paid and nonassessable and are owned directly or indirectly
by Lady Luck, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens") and free of any other restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests). As used in this Agreement, the word
"Subsidiary" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party or
any other Subsidiary of such party is a general partner or (ii) at least fifty
percent (50%) of the securities or other interests having by their terms
ordinary voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
Section 3.2. Capitalization.
(a) The authorized capital stock of Lady Luck consists of
75,000,000 shares of Lady Luck Common Stock, $0.006 par value per
share, and 4,000,000 shares of preferred stock, $25.00 par value per
share ("Lady Luck Preferred Stock"). As of the date hereof, (i)
4,881,003 shares of Lady Luck Common Stock were issued and outstanding,
all of which are validly issued, fully paid and nonassessable, (ii) no
shares of Lady Luck Common Stock were held in the treasury of Lady Luck
or by Subsidiaries of Lady Luck, and (iii) 433,638 shares of Lady Luck
Series A Preferred Stock were the only Lady Luck Preferred Stock issued
and outstanding. Section 3.2(a)(i) of the Lady Luck Disclosure Schedule
sets forth the number of shares of Lady Luck Common Stock reserved for
future issuance upon exercise of Lady Luck Options granted and
outstanding as of the date hereof and under the Lady Luck Stock Option
Plans.
8
Section 3.2(a)(i) of the Lady Luck Disclosure Schedule also sets
forth as of the date hereof, for each Lady Luck Stock Option Plan,
the dates on which Options which are still outstanding under such plan
were granted, the number of outstanding Options granted on each such
date and the exercise price thereof. Except as disclosed in Section
3.2(a)(i) of the Lady Luck Disclosure Schedule, since December 31, 1998
through the date of this Agreement, Lady Luck has not made any grants
under any of the Lady Luck Stock Option Plans. Except as disclosed in
Section 3.2(a)(i) of the Lady Luck Disclosure Schedule, as of the date
of this Agreement, Lady Luck has not granted any contractual rights the
value of which is derived from the financial performance of Lady Luck
or from the value of shares of Lady Luck Common Stock. Except as
disclosed in Section 3.2(a)(ii) of the Lady Luck Disclosure Schedule,
there are no obligations, contingent or otherwise, of Lady Luck or any
of its Subsidiaries to repurchase, redeem or otherwise acquire any
shares of Lady Luck Common Stock or the capital stock or ownership
interests of any Subsidiary or to provide funds to or make any
investment in an amount greater than $250,000 in the aggregate (in the
form of a loan, capital contribution or otherwise) in any such
Subsidiary or any other entity other than guarantees of bank
obligations or indebtedness for borrowed money of Subsidiaries entered
into in the ordinary course of business. All of the outstanding shares
of capital stock (including shares which may be issued upon exercise of
outstanding options) or other ownership interests of each of Lady
Luck's Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable and, except as disclosed in Section 3.2(a)(iii) of the
Lady Luck Disclosure Schedule and except as required by gaming industry
regulations, all such shares and ownership interests are owned by Lady
Luck or another Subsidiary of Lady Luck, free and clear of all security
interests, liens, claims, pledges, agreements, limitations on Lady
Luck's voting rights, charges or other encumbrances or restrictions on
transfer of any nature.
(b) There are no bonds, debentures, notes or other indebtedness
having voting rights (or convertible into securities having such
rights) in connection with the Merger or the transactions contemplated
by this Agreement ("Voting Debt") of Lady Luck or any of its
Subsidiaries issued and outstanding, other than the debt securities
disclosed in Section 3.2(b) of the Lady Luck Disclosure Schedule.
Except as set forth in Section 3.2(a) or in this Section 3.2(b) or as
reserved for future grants of options under the Lady Luck Stock Option
Plans as of the date hereof, (i) there are no shares of capital stock
of any class of Lady Luck, or any security exchangeable into or
exercisable for such equity securities, issued, reserved for issuance
or outstanding; (ii) except as set forth in Section 3.2(b) of the Lady
Luck Disclosure Schedule, there are no options, warrants, equity
securities, calls, rights, commitments or agreements of any character
to which Lady Luck or any of its Subsidiaries is a party or by which it
is bound obligating Lady Luck or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other ownership interests (including Voting
Debt) of Lady Luck or any of its Subsidiaries or obligating Lady Luck
or any of its Subsidiaries to
9
grant, extend, accelerate the vesting of or enter into any such
option, warrant, equity security, call, right, commitment or agreement;
and (iii) except for the Stockholder Support Agreement being entered
into on the date hereof, there are no voting trusts, proxies or other
voting agreements or understandings with respect to the shares of
capital stock of Lady Luck. All shares of Lady Luck Common Stock
subject to issuance as specified in this Section 3.2(b) are duly
authorized and, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, shall be validly
issued, fully paid and nonassessable.
Section 3.3. Authority; No Conflict; Required Filings and
Consents.
(a) Lady Luck has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
by Lady Luck have been duly authorized by all necessary corporate
action on the part of Lady Luck, subject only to the approval and
adoption of this Agreement and the Merger by Lady Luck's common
stockholders holding at least 75% of the outstanding shares of Lady
Luck Common Stock. This Agreement has been duly executed and delivered
by Lady Luck and constitutes the valid and binding obligation of Lady
Luck, enforceable against Lady Luck in accordance with its terms.
(b) Other than as disclosed in Section 3.3(b) of the Lady Luck
Disclosure Schedule, the execution and delivery of this Agreement by
Lady Luck does not, and the consummation of the transactions
contemplated hereby will not, (i) conflict with, or result in any
violation or breach of, any provision of the Certificate of
Incorporation or Bylaws of Lady Luck or the comparable charter or
organizational documents of any of its Subsidiaries, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse
of time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any material
benefit) under, or require a consent or waiver under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease,
contract or other agreement, instrument or obligation to which Lady
Luck or any of its Subsidiaries is a party or by which any of them or
any of their properties or assets may be bound, or (iii) subject to the
governmental filings and other matters referred to in Section 3.3(c),
conflict with or violate any permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Lady Luck or any of its Subsidiaries or any of its or
their properties or assets, except in the case of clauses (ii) and
(iii) for any such conflicts, violations, defaults, terminations,
cancellations or accelerations which (x) are not, individually or in
the aggregate, reasonably likely to have a Lady Luck Material Adverse
Effect or (y) would not prevent or materially delay the consummation of
the Merger.
10
(c) Except as disclosed in Section 3.3(c) of the Lady Luck
Disclosure Schedule, no consent, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative
agency, commission, gaming authority or other governmental authority or
instrumentality ("Governmental Entity") is required by or with respect
to Lady Luck or any of its Subsidiaries in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) the filing of the
pre-merger notification report under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended ("HSR Act"), (ii) the filing of
the Certificate of Merger with respect to the Merger with the Secretary
of State of the State of Delaware, (iii) the filing of any Proxy
Statement (as such term is defined in Section 5.4(a) below) with the
Securities and Exchange Commission (the "SEC") in accordance with the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iv)
any approvals and filing of notices required under any applicable
gaming industry regulation, (v) such consents, approvals, orders,
authorizations, permits, filings or registrations related to, or
arising out of, compliance with statutes, rules or regulations
regulating the consumption, sale or serving of alcoholic beverages, and
(vi) such immaterial filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger.
Section 3.4. Public Filings; Financial Statements.
(a) None of Lady Luck's Subsidiaries is required to file forms,
reports and documents with the SEC. Lady Luck has filed with the SEC
all reports, schedules, forms, statements and other documents required
to be filed by the Securities Act of 1933, as amended (the "Securities
Act") and the Exchange Act since December 31, 1998. Except as set forth
in Section 3.4(a) of the Lady Luck Disclosure Schedule and except for
matters otherwise corrected by the subsequent filing with the SEC of an
appropriate amendment prior to the date of this Agreement, the reports,
forms, documents filed by Lady Luck with the SEC prior to the date of
this Agreement (the "Lady Luck SEC Reports") (including any financial
statements filed as a part thereof or incorporated by reference
therein) (i) at the time filed, complied in all material respects with
the applicable requirements of the Securities Act and the Exchange Act,
as the case may be, and (ii) did not, at the time they were filed (or
if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing), contain any untrue
statement of a material fact or omit to state a material fact required
to be stated in such Lady Luck SEC Reports or necessary in order to
make the statements in such Lady Luck SEC Reports, in the light of the
circumstances under which they were made, not misleading.
(b) Except as set forth in Section 3.4(a), each of the
consolidated financial statements (including, in each case, any related
notes) of Lady Luck contained in the Lady Luck SEC Reports complied as
to form in all material respects with the applicable rules and
regulations of the SEC with respect thereto; was prepared in accordance
with
11
generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements or, in the case of
unaudited statements, as permitted by Form 10-Q under the Exchange
Act), and fairly presented the consolidated financial position of Lady
Luck and its Subsidiaries as of the dates, and the consolidated results
of its operations and cash flows for the periods, indicated, except
that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which, with respect to
interim periods since December 31, 1998, were not or are not expected
to be material in amount. The audited balance sheet of Lady Luck as of
December 31, 1998 is referred to herein as the "Lady Luck Balance
Sheet." The unaudited consolidated balance sheet and consolidated
income statement of Lady Luck as of and for the period ended June 30,
1999 are referred to herein as the "Lady Luck Interim Financial
Statements."
Section 3.5. No Undisclosed Liabilities. Except as disclosed in the
Lady Luck SEC Reports or in Section 3.5 of the Lady Luck Disclosure Schedule,
and except for liabilities and obligations incurred since the date of the Lady
Luck Balance Sheet in the ordinary course of business consistent with past
practices, Lady Luck and its consolidated Subsidiaries do not have any
liabilities accrued, contingent or otherwise, of the type required to be
reflected in financial statements, including the notes thereto, in accordance
with GAAP, and whether due or to become due.
Section 3.6. Absence of Certain Changes or Events. Except as disclosed
in the Lady Luck SEC Reports or in Section 3.6 of the Lady Luck Disclosure
Schedule, since the date of the Lady Luck Balance Sheet, Lady Luck and its
Subsidiaries have conducted their respective businesses only in the ordinary
course consistent with past practice, and there has not been (a) any event,
series of events, condition or series of conditions that has had a Lady Luck
Material Adverse Effect; (b) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to any of Lady Luck's capital stock; (c) any split, combination or
reclassification of any of its capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock; (d) (i) any granting by Lady
Luck or any of its Subsidiaries to any director or officer of Lady Luck or its
Subsidiaries of any increase in compensation, except in the ordinary course of
business consistent with prior practice, or as was required under employment
agreements in effect as of the date of the most recent financial statements
included in the Lady Luck SEC Reports, (ii) any granting by Lady Luck or any of
its Subsidiaries to any director or officer of any stock options, (iii) any
granting by Lady Luck or any of its Subsidiaries to any officer of any increase
in severance or termination pay, or (iv) any entry by Lady Luck or any of its
Subsidiaries into any employment, severance or termination agreement with any
director, officer or other employee, consultant or independent contractor; (e)
any material change in accounting methods, principles or practices of Lady Luck,
except insofar as may have been required by a change in GAAP; (f) any tax
election that individually or in the aggregate would be reasonably likely to
have a Lady Luck Material Adverse Effect; or (g) any settlement of pending
12
or threatened litigation involving Lady Luck or any of its Subsidiaries (whether
brought by a private party or a Governmental Entity) in amounts of $10,000 or
more.
Section 3.7. Taxes.
(a) For the purposes of this Agreement, a "Tax" or, collectively,
"Taxes," means any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad
valorem, transfer, gains, franchise, withholding, payroll, recapture,
employment, excise, unemployment insurance, social security, business
license, occupation, business organization, stamp, environmental and
property taxes, together with all interest, penalties and additions
imposed with respect to such amounts.
(b) Lady Luck and each of its Subsidiaries have: (i) filed all
federal, state, local and foreign Tax returns and reports required to
be filed by them prior to the date of this Agreement (taking into
account all applicable extensions), and such Tax returns and reports
(taking into account all amendments thereto) are true, correct and
complete in all material respects; (ii) paid or accrued all Taxes due
and payable; and (iii) paid or accrued all Taxes for which a notice of
assessment or collection has been received (other than amounts being
contested in good faith by appropriate proceedings with the relevant
taxing authority and for which adequate reserves in accordance with
GAAP are being maintained).
(c) Except as set forth in Section 3.7(c) of the Lady Luck
Disclosure Schedule, no Tax return of Lady Luck or any of its
Subsidiaries is under examination by the Internal Revenue Service (the
"IRS") nor any other taxing authority and neither the IRS nor any other
taxing authority has asserted any claim for Taxes, or to the actual
knowledge of the executive officers of Lady Luck, is threatening to
assert any claims for Taxes. No material issues relating to Taxes were
raised by the relevant taxing authority in any completed audit or
examination that can reasonably be expected to recur in a later taxable
period.
(d) Lady Luck and its Subsidiaries have withheld or collected and
paid over to the appropriate governmental authorities (or are properly
holding for such payment) all Taxes required by law to be withheld or
collected. There are no liens for Taxes upon the assets of Lady Luck or
any of its Subsidiaries (other than liens for Taxes that are not yet
due or delinquent or that are being contested in good faith by
appropriate proceedings, with the relevant taxing authority and for
which adequate reserves in accordance with GAAP are being maintained).
13
(e) Except as disclosed in Section 3.7(c) of the Lady Luck
Disclosure Schedule and Gamblers Supply Management Company ("GSMC"),
which currently is a subsidiary of Sodak Gaming, Inc. ("Sodak"), and
which is expected to be acquired by Lady Luck after the date hereof but
prior to Closing pursuant to the ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Agreement (as herein
defined), neither Lady Luck nor any of its Subsidiaries is or has been
a member of an affiliated group of corporations filing a consolidated
federal income tax return (or a group of corporations filing a
consolidated, combined or unitary income tax return under comparable
provisions of state, local or foreign tax law) other than a group the
common parent of which is or was Lady Luck or any Subsidiary of Lady
Luck.
(f) Neither Lady Luck nor any of its Subsidiaries has any
obligation under any agreement or arrangement with any other person
with respect to Taxes of such other person (including pursuant to
Treas. Reg. Section 1.1502-6 or comparable provisions of state, local
or foreign tax law) and including any liability for Taxes of any
predecessor entity.
(g) Except as disclosed in Section 3.7(g) of the Lady Luck
Disclosure Schedule, neither Lady Luck nor any of its Subsidiaries
shall be required to include in a taxable period ending after the
Effective Time taxable income attributable to income that accrued in a
Tax period prior to the Effective Time but that was not recognized in
any such prior Tax period as a result of the installment method of
accounting, the completed contract or percentage contract methods of
accounting (including the look-back method under Section 460(b)(2) of
the Code), the cash method of accounting or Section 481 of the Code or
any comparable provision of state, local, or foreign Tax law, or for
any other reason. Neither Lady Luck nor any of its Subsidiaries has
made an election under Section 341(f) of the Code.
(h) Except as disclosed in Section 3.7(h) of the Lady Luck
Disclosure Schedule, (i) there are no outstanding agreements or waivers
extending, or having the effect of extending, the statutory period of
limitation applicable to any Tax returns required to be filed with
respect to Lady Luck or any of its Subsidiaries, (ii) neither Lady Luck
nor any of its Subsidiaries, nor any affiliated group, within the
meaning of Section 1504 of the Code, of which Lady Luck or any of its
Subsidiaries is or has ever been a member, has requested any extension
of time within which to file any Tax return, which return has not yet
been filed, and (iii) no power of attorney with respect to any Taxes
has been executed or filed with any taxing authority by or on behalf of
Lady Luck or any of its Subsidiaries which is still in effect.
(i) Except as set forth in Section 3.7(i) of the Lady Luck
Disclosure Schedule, no person who holds five percent or more of the
stock of Lady Luck is a "foreign person" as defined in Section 1445 of
the Code.
14
Section 3.8. Real Property, Title and Related Matters.
(a) Real Property. Section 3.8(a) of the Lady Luck Disclosure
Schedule sets forth a true and complete list as of the date of this
Agreement of (i) all contracts or agreements (including leases, ground
leases, licenses, options and other agreements) relating to Leased Real
Property, and (ii) a brief description of each piece of Owned Real
Property. Lady Luck or a Subsidiary of Lady Luck, as the case may be,
has (A) good and marketable title to all Owned Real Property and to all
fixtures thereon, free and clear of any Encumbrances, except for
Permitted Encumbrances, and (B) except as set forth in Section 3.8(a)
of the Lady Luck Disclosure Schedule, the right to quiet enjoyment of
the Leased Real Property for the full term of the leases. Each lease or
other contract referred to in Section 3.8(a) of the Lady Luck
Disclosure Schedule relating to Leased Real Property is a valid
contract or agreement enforceable against Lady Luck or its Subsidiary,
as the case may be, in accordance with its terms and, to the knowledge
of Lady Luck, against the other parties thereto. To the knowledge of
Lady Luck, there are no rights or options of any third party to acquire
such Leased Real Property or any ownership therein. Neither Lady Luck
nor any of its Subsidiaries are in default, nor have received any
written notice alleging that it or they are in default, under the
leases, ground leases, subleases, licenses, options or other agreements
set forth in Section 3.8(a) of the Lady Luck Disclosure Schedule
relating to Leased Real Property. To the knowledge of Lady Luck, no
other party to any such leases, ground leases, licenses, options or
other agreements is in default thereunder.
(b) Definitions. As used in this Section 3.8, the following terms
shall have the following meanings:
"Encumbrances" means all leases, mortgages, liens, pledges,
charges, options, encumbrances or defects of any kind or character.
"Leased Real Property" means all of the real property leased or
subleased by Lady Luck or a Subsidiary of Lady Luck as tenant, together
with, to the extent leased by Lady Luck, all buildings and other
structures, facilities or improvements currently or hereafter located
thereon, all fixtures, systems, equipment and personal property of Lady
Luck attached or appurtenant thereto, and all easements, licenses,
rights and appurtenances related to the foregoing.
"Owned Real Property" means all of the real property owned by Lady
Luck or any of its Subsidiaries, together with all buildings and other
structures, facilities or improvements currently or hereafter located
thereon, all fixtures, systems, equipment and personal property
attached or appurtenant thereto, and all easements, licenses, rights
and appurtenances relating to the foregoing.
15
"Permitted Encumbrances" means such of the following as to which
no enforcement, collection, execution, levy or foreclosure proceeding
shall have been commenced: (i) Encumbrances that are disclosed in
Section 3.8(a) of the Lady Luck Disclosure Schedule, except for (A) any
Encumbrance which would prevent or impair in any way the use of the
subject property for its current use or (B) any Encumbrance which
secures any indebtedness (other than indebtedness that is otherwise
permitted by this Agreement), (ii) liens for taxes, assessments, fees
and other governmental charges or levies which are not yet due, payable
or delinquent, (iii) such survey exceptions or reciprocal easement
agreements that do not prevent Lady Luck or its Subsidiaries, and would
not prevent the Surviving Corporation, from conducting Lady Luck's
business as applicable as currently conducted and which would not have
a Lady Luck Material Adverse Effect, (iv) the provisions of any
federal, state or local law, ordinance or regulation, provided the same
are not violated by the current use of the property, (v) Encumbrances
imposed by law, such as materialmen's, mechanics', carriers', workmen's
and repairmen's liens and other similar liens arising in the ordinary
course of business, securing obligations that are not in excess of
$50,000 in the aggregate at any time, and (vi) pledges or deposits to
secure obligations under workers' compensation laws or similar
legislation or to secure public or statutory obligations.
Section 3.9. Title to Personal Property; Liens. Lady Luck 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
(including all river boats operated by Lady Luck and its Subsidiaries) in order
to allow it to conduct, and continue to conduct, its business as and where
currently conducted. Section 3.9 of the Lady Luck Disclosure Schedule is a full
and complete list of all leases, licenses and similar agreements relating to all
tangible personal property used by Lady Luck and its Subsidiaries in the conduct
of their business that is not owned by them. Except as disclosed in Section 3.9
of the Lady Luck Disclosure Schedule, all such material tangible personal assets
and properties are sufficiently free of liens to allow each of Lady Luck and its
Subsidiaries to conduct, and continue to conduct, its business as currently
conducted, and 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 have a Lady Luck Material Adverse
Effect.
Section 3.10. Intellectual Property. Section 3.10 of the Lady Luck
Disclosure Schedule lists all (i) trademark and service ▇▇▇▇ registrations and
applications owned by Lady Luck or any of its Subsidiaries, and (ii) trademark,
service ▇▇▇▇ and trade name license agreements to which Lady Luck or any of its
Subsidiaries is a party. Except as disclosed in Section 3.10 of the Lady Luck
Disclosure Schedule, all material trademarks, trademark applications, trade
names, service marks, trade secrets (including customer lists and customer
databases), copyrights, patents, licenses, know-how and other proprietary
intellectual property rights used in connection with the businesses of Lady Luck
and its Subsidiaries as currently conducted are without material restrictions or
material conditions on use, and there is no conflict with the intellectual
property rights of Lady Luck and its Subsidiaries therein or any conflict by
them with the intellectual
16
property rights of others therein which, individually or in the aggregate, would
be reasonably likely to have a Lady Luck Material Adverse Effect.
Section 3.11. Agreements, Contracts and Commitments.
(a) Except as listed as an exhibit to the Lady Luck SEC Reports or
as disclosed in Section 3.11(a) of the Lady Luck Disclosure Schedule,
as of the date of this Agreement, neither Lady Luck nor any of its
Subsidiaries is a party to any oral or written (i) agreement, contract,
indenture or other instrument relating to Indebtedness (as defined
below) in an amount exceeding $100,000, (ii) partnership, joint venture
or limited liability or management agreement with any person, (iii)
agreement, contract or other instrument relating to any merger,
consolidation, business combination, share exchange or business
acquisition, or for the purchase, acquisition, sale or disposition of
any material assets, of Lady Luck or any of its Subsidiaries outside
the ordinary course of business, (iv) agreement, contract or other
instrument relating to any "strategic alliances" (i.e.,
cross-marketing, affinity relationship, etc.), (v) contract, agreement
or commitment which materially restricts (geographically or otherwise)
the conduct of any line of business by Lady Luck or any of its
Subsidiaries, (vi) any contract, agreement or other instrument having
as a party a partnership, joint venture or limited liability company in
which Lady Luck or any of its Subsidiaries is a partner, joint venture
party or member which would otherwise satisfy the criteria in clauses
(i), (iii), (iv) or (v) if Lady Luck or any of its Subsidiaries were a
party to such contract, agreement or other instrument, (vii) any other
contract, agreement or commitment that requires annual or remaining
payments in excess of $50,000 after the date hereof or (viii) any other
contract, agreement or commitment that is not cancelable by Lady Luck
or its Subsidiaries without penalty on 30 days' notice or less
(collectively, the "Lady Luck Material Contracts"). "Indebtedness"
means any liability in respect of (A) borrowed money, (B) capitalized
lease obligations, (C) the deferred purchase price of property or
services (other than trade payables in the ordinary course of
business), and (D) guarantees of any of the foregoing incurred by any
other person other than Lady Luck or any of its Subsidiaries. Except as
set forth in Section 3.11(a) of the Lady Luck Disclosure Schedule and
except for the Lady Luck Las Vegas Agreement and the Consulting,
Advisory and Non-Competition Agreement described in Section 5.12, from
and after the Effective Time there will be no contract, agreement,
other instrument or commitment, written or oral, between the Surviving
Corporation or any of its Subsidiaries, on the one hand, and any former
or present officer, director, shareholder or employee of Lady Luck or
any of its Subsidiaries.
(b) Except as disclosed in Section 3.11(b) of the Lady Luck
Disclosure Schedule, as of the date of this Agreement, (i) each of the
Lady Luck Material Contracts is valid and binding upon Lady Luck or any
of its Subsidiaries (and, to Lady Luck's best knowledge, on all other
parties thereto) in accordance with its terms and is in full force and
effect, (ii) there is no breach or violation of or default by Lady Luck
or any of its
17
Subsidiaries under any of the Lady Luck Material Contracts,
whether or not such breach, violation or default has been waived, and
(iii) no event has occurred with respect to Lady Luck or any of its
Subsidiaries which, with notice or lapse of time or both, would
constitute a breach, violation or default, or give rise to a right of
termination, modification, cancellation, foreclosure, imposition of a
lien, prepayment or acceleration under any of the Lady Luck Material
Contracts.
Section 3.12. Litigation. Except as specifically disclosed in the Lady
Luck SEC Reports or in Section 3.12 of the Lady Luck Disclosure Schedule, (a)
there is no action, suit or proceeding, claim, arbitration or investigation
against or affecting Lady Luck or any of its Subsidiaries pending, or as to
which Lady Luck or any of its Subsidiaries has received any written notice of
assertion against or affecting, Lady Luck or any of its Subsidiaries, or any
property or asset of Lady Luck or any of its Subsidiaries, before any court,
arbitrator, or administrative, governmental or regulatory authority or body,
domestic or foreign that is not fully covered by insurance subject to deductible
amounts under the applicable insurance policies; and (b) there is no judgment,
order, injunction or decree of any Governmental Entity outstanding against Lady
Luck or any of its Subsidiaries.
Section 3.13. Environmental Matters.
(a) Except as disclosed in Section 3.13(a) of the Lady Luck
Disclosure Schedule: (i) Lady Luck and its Subsidiaries have complied
with all applicable Environmental Laws (as defined in Section 3.13(b));
(ii) the properties currently owned, leased or operated by Lady Luck
and its Subsidiaries (including soils, groundwater, surface water,
buildings or other structures) are not contaminated with any Hazardous
Substances (as defined in Section 3.13(c)); (iii) neither Lady Luck nor
its Subsidiaries are subject to liability for any Hazardous Substance
disposal or contamination on any third party property; (iv) neither
Lady Luck nor any of its Subsidiaries has been associated with any
release or threat of release of any Hazardous Substance; (v) neither
Lady Luck nor any of its Subsidiaries has received any notice, demand,
letter, claim or request for information alleging that Lady Luck or any
of its Subsidiaries may be in violation of or liable under any
Environmental Law; (vi) neither Lady Luck nor any of its Subsidiaries
is subject to any orders, decrees, injunctions or other arrangements
with any Governmental Entity or is subject to any indemnity or other
agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances; and (vii) there
are no circumstances or conditions involving Lady Luck or any of its
Subsidiaries that could reasonably be expected to result in any claims,
liability, investigations, costs or restrictions on the ownership, use
or transfer of any property of Lady Luck or any of its Subsidiaries
pursuant to any Environmental Law.
(b) For purposes of this Agreement, the term "Environmental Law"
means any federal, state, local or foreign law, regulation, order,
decree, permit, authorization,
18
opinion, common law or agency requirement relating to: (A) the
protection, investigation or restoration of the environment, health and
safety, or natural resources, (B) the handling, use, presence,
disposal, release or threatened release of any Hazardous Substance, or
(C) noise, odor, wetlands, pollution, contamination or any injury or
threat of injury to persons or property.
(c) For purposes of this Agreement, the term "Hazardous Substance"
means any substance that is: (A) listed, classified or regulated
pursuant to any Environmental Law; (B) any petroleum product or
by-product, asbestos-containing material, lead-containing paint or
plumbing, polychlorinated biphenyls, radioactive materials or radon; or
(C) any other substance which is the subject of regulatory action by
any Governmental Entity pursuant to any Environmental Law.
Section 3.14. Employee Benefit Plans.
(a) Section 3.14(a) of the Lady Luck Disclosure Schedule contains
a true and complete list of all employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), all employment, retention, change of control and
severance agreements, and all bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, severance
and other similar employee benefit plans, programs, policies and
agreements, written or otherwise, in each case that is sponsored,
maintained, contributed to or required to be contributed to by Lady
Luck or any of its Subsidiaries or any trade or business (whether or
not incorporated) which, together with Lady Luck or any of its
Subsidiaries, would be deemed a "single employer" under Section 4001(b)
of ERISA (an "ERISA Affiliate"), or to which Lady Luck, any of its
Subsidiaries or any ERISA Affiliate is a party for the benefit of any
current or former employee, consultant, director or independent
contractor of Lady Luck or any of its Subsidiaries (together, the "Lady
Luck Employee Plans").
(b) Lady Luck has delivered or made available to Buyer all
documents related to the Lady Luck Employee Plans, including, without
limitation: (i) true and complete copies of all Lady Luck Employee Plan
documents and any summary plan descriptions, summary annual reports and
insurance contracts relating thereto, (ii) detailed summaries of all
unwritten Lady Luck Employee Plans, (iii) true and complete copies of
the most recent financial statements, actuarial reports and annual
reports with respect to all Lady Luck Employee Plans for which
financial statements, actuarial reports or annual reports are required
or have been prepared, (iv) the most recent determination letter from
the IRS (if applicable) for any such Lady Luck Employee Plan, and (v)
true and complete copies of any correspondence during the twenty-four
month period which ends on the date of this Agreement between any
Governmental Entity and Lady Luck or any of its Subsidiaries relating
to any of the documents described above.
19
(c) All Lady Luck Employee Plans conform in all material respects
to, and are being administered and operated in all material respects in
compliance with, the requirements of ERISA, the Code and all other
applicable laws, including applicable laws of foreign jurisdictions.
Except as set forth in Section 3.14(c) of the Lady Luck Disclosure
Schedule, there have not been any "prohibited transactions," as such
term is defined in Section 4975 of the Code or Section 406 of ERISA,
involving any of the Lady Luck Employee Plans that could subject Lady
Luck or any of its Subsidiaries to any penalties or taxes imposed under
the Code or ERISA. Section 3.14(c) of the Lady Luck Disclosure Schedule
sets forth a true and complete list of all outstanding loans from Lady
Luck or any of its Subsidiaries to any current or former director,
officer, employee or consultant which exceeds $3,500 per employee.
Loans to employees in the aggregate do not exceed $25,000.
(d) Except as set forth in Section 3.14(d) of the Lady Luck
Disclosure Schedule, any Lady Luck Employee Plan that is intended to be
qualified under Section 401(a) of the Code and exempt from tax under
Section 501(a) of the Code has been determined by the IRS to be so
qualified, has received a favorable determination letter from the IRS
covering any provision for which the remedial amendment period (within
the meaning of Section 401(b) of the Code) has not expired, and such
determination remains in effect and has not been revoked. Nothing has
occurred since the date of any such determination that is reasonably
likely to affect adversely such qualification or exemption in any
material respect or result in the imposition of material excise taxes
or income taxes on unrelated business income under the Code or ERISA
with respect to any Lady Luck Employee Plan. Except as set forth in
Section 3.14(d) of the Lady Luck Disclosure Schedule, all contributions
or other amounts payable by Lady Luck or any of its Subsidiaries with
respect to each Lady Luck Employee Plan have been paid or accrued in
accordance with GAAP, ERISA, the Code and the terms of each such plan.
(e) Except as set forth in Section 3.14(e) of the Lady Luck
Disclosure Schedule, none of Lady Luck, any of its Subsidiaries nor any
ERISA Affiliate (i) at any time in the past has had a current or
contingent obligation to contribute to any multiemployer plan (as
defined in Section 3(37) of ERISA) ("Multiemployer Plan"), or (ii) at
any time in the past has had any liability, contingent or otherwise,
under Title IV of ERISA or Section 412 of the Code. As of the date of
this Agreement, no Lady Luck Employee Plan is subject to Title IV of
ERISA and no Lady Luck Employee Plan is a Multiemployer Plan.
(f) There are no pending, or to Lady Luck's knowledge, any
threatened or anticipated claims by or on behalf of any Lady Luck
Employee Plan, or by or on behalf of any individual participants or
beneficiaries of any Lady Luck Employee Plan, alleging any breach of
fiduciary duty on the part of Lady Luck or any of its Subsidiaries or
any of the officers, directors or employees of Lady Luck or any of its
Subsidiaries under ERISA
20
or any other applicable Regulations, or claiming benefit payments
other than those made in the ordinary operation of such plans, or
alleging any violation of any other applicable laws. The Lady Luck
Employee Plans are not the subject of any investigation, audit or
action by the Internal Revenue Service, the Department of Labor or the
Pension Benefit Guaranty Corporation ("PBGC").
(g) With respect to any Lady Luck Employee Plan that is an
employee welfare benefit plan (within the meaning of Section 3(l) of
ERISA) (a "Lady Luck Welfare Plan"), (i) each Lady Luck Welfare Plan
for which contributions are claimed as deductions under any provision
of the Code is in compliance in all material respects with all
applicable requirements pertaining to such deductions, and (ii) any
Lady Luck Employee Plan that is a group health plan (within the meaning
of Section 4980B(g)(2) of the Code) complies, and in each and every
case has complied, in all material respects with all of the
requirements of ERISA and Section 4980B of the Code. No welfare benefit
fund (within the meaning of Section 419(e)(1) of the Code) or voluntary
employees' beneficiary association (within the meaning of Section
501(c)(9) of the Code) has been established or maintained in connection
with a Lady Luck Welfare Plan.
Section 3.15. Compliance.
(a) Except as disclosed in Section 3.15(a) of the Lady Luck
Disclosure Schedule, each of Lady Luck and its Subsidiaries, and each
of their respective directors, officers, persons performing management
functions similar to officers and, to Lady Luck's best knowledge,
partners, hold all permits, registrations, findings of suitability,
licenses, variances, exemptions, certificates of occupancy, orders and
approvals of all Governmental Entities (including all authorizations
under Environmental Laws, the Merchant Marine Act of 1920 and the
Shipping Act of 1916, Certificates of Inspection issued by the US Coast
Guard and permits and approvals issued by the United States Army Corps
of Engineers and pursuant to the Lady Luck Gaming Laws (as defined
below)), necessary to conduct the business and operations of Lady Luck
and each of its Subsidiaries as currently conducted, each of which is
in full force and effect in all material respects, and no notice of
revocation has been received in respect thereof, (the "Lady Luck
Permits") except where the failure to hold such permits, registrations
certificates of occupancy, findings of suitability, licenses, variances
not issued or required pursuant to any Lady Luck Gaming Law would not,
individually or in the aggregate, be reasonably likely to have a Lady
Luck Material Adverse Effect. Except as disclosed in the Lady Luck SEC
Reports or as disclosed in Section 3.15(a) of the Lady Luck Disclosure
Schedule or as would not reasonably be likely to have a Lady Luck
Material Adverse Effect, the businesses of Lady Luck and its
Subsidiaries are not being conducted in violation of any law, ordinance
or regulation of any Governmental Entity. Except as disclosed in
Section 3.15(a) of the Lady Luck Disclosure Schedule, no investigation
or review by any Governmental Entity with respect to Lady Luck or any
of its Subsidiaries
21
is pending or, to Lady Luck's best knowledge, threatened, nor has
any Governmental Entity indicated any intention to conduct the same.
(b) The term "Lady Luck Gaming Laws" means any federal, state,
local or foreign statute, ordinance, rule, regulation, permit, consent,
registration, finding of suitability, approval, license, judgment,
order, decree, injunction or other authorization, including any
condition or limitation placed thereon, governing or relating to the
current or contemplated casino and gaming activities and operations of
Lady Luck or any of its Subsidiaries, including any applicable state
gaming law and any federal or state laws relating to currency
transactions.
(c) Except as disclosed in Section 3.15(c) of the Lady Luck
Disclosure Schedule, (i) neither Lady Luck nor any of its Subsidiaries,
nor any director, officer, key employee or, to Lady Luck's best
knowledge, partners of Lady Luck or any of its Subsidiaries, has
received any written claim, demand notice, complaint, court order or
administrative order from any Governmental Entity in the past three
years under, or relating to any violation or possible violation of, any
Lady Luck Gaming Laws which did or would be reasonably likely to result
in fines or penalties of $10,000 or more; (ii) to the best knowledge of
Lady Luck, there are no facts, which, if known to the regulators under
the Lady Luck Gaming Laws, could reasonably be expected to result in
the revocation, limitation or suspension of a license, finding of
suitability, registration, permit or approval of it or them, or any
officer, director or other person performing management functions
similar to an officer or partner, under any Lady Luck Gaming Laws; and
(iii) neither Lady Luck nor any of its Subsidiaries has suffered a
suspension or revocation of any material license, finding of
suitability, registration, permit or approval held under the Lady Luck
Gaming Laws.
Section 3.16. Labor Matters. Except as disclosed in Section 3.16 of the
Lady Luck Disclosure Schedule, (i) there are no proceedings pending between Lady
Luck or any of its Subsidiaries and any of their respective employees before the
Equal Employment Opportunity Commission, Department of Labor or any other
Governmental Entity; (ii) to the best knowledge of Lady Luck, there are no
activities or proceedings of any labor union to organize any non-unionized
employees; (iii) neither Lady Luck nor any of its Subsidiaries has received
notice of any alleged unfair labor practice charges and/or complaints pending
against Lady Luck or any of its Subsidiaries or any of their respective
representatives or employees before the National Labor Relations Board or any
current union representation questions involving employees of Lady Luck or any
of its Subsidiaries; (iv) Lady Luck's employment policies and practices comply
in all material respects with applicable law; and (v) there is no strike,
slowdown, work stoppage, labor dispute or lockout or, to the best knowledge of
Lady Luck, threat thereof, by or with respect to any employees of Lady Luck or
any of its Subsidiaries. Lady Luck and its Subsidiaries are not parties to any
collective bargaining agreements or other labor union contracts applicable to
individuals employed or previously employed by Lady Luck
22
or any of its Subsidiaries and, except as disclosed in Section 3.16 of the Lady
Luck Disclosure, no collective bargaining agreement or labor union contract is
being negotiated by Lady Luck or any such Subsidiary.
Section 3.17. Insurance. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by Lady Luck or any of its Subsidiaries are
listed on Section 3.17 of the Lady Luck Disclosure Schedule. At the Effective
Time, all such insurance policies, or replacements thereof, will be outstanding
and duly in force. To Lady Luck's knowledge, no notice of termination or
non-renewal of any such insurance policy has been received by Lady Luck.
Section 3.18. Information in Proxy Statement. The Proxy Statement, as
such term is defined in Section 5.4(a) below (or any amendment thereof or
supplement thereto), at the date mailed to Lady Luck's stockholders and at the
time of the Lady Luck Special Meeting, will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading; provided, however, that
no representation is made by Lady Luck with respect to statements made therein
based on information supplied in writing by Buyer or Merger Sub for inclusion in
the Proxy Statement. The Proxy Statement will comply with the provisions of the
Exchange Act and the rules and regulations thereunder.
Section 3.19. State Takeover Statute. The Board of Directors of Lady
Luck has approved the Merger, this Agreement and the Stockholder Support
Agreement and, assuming the accuracy of the representations contained in Section
4.5 hereof (without giving effect to the knowledge qualification therein), such
approval is sufficient to render inapplicable to the Merger, this Agreement, the
Stockholder Support Agreement and the transactions contemplated hereby and
thereby the provisions of Section 203 of the DGCL to the extent, if any, that
such Sections are applicable to the Merger, this Agreement, the Stockholder
Support Agreement and the transactions contemplated hereby and thereby. Except
for Section 203 of the DGCL, no "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation enacted under
any federal or state law applicable to Lady Luck is applicable to the Merger or
the other transactions contemplated hereby.
Section 3.20. Voting Requirements. The affirmative vote of the holders
of at least 75% of the outstanding shares of Lady Luck Common Stock entitled to
vote thereon at the Lady Luck Special Meeting with respect to the approval of
the Merger (the "Lady Luck Stockholder Approval") is the only vote of the
holders of any class or series of Lady Luck's capital stock necessary to approve
and adopt this Agreement and the transactions contemplated by this Agreement.
Section 3.21. Year 2000. Lady Luck has conducted an initial review of
whether its systems, processes, products, equipment and services are "Year 2000
Ready." Interim results of
23
such review are disclosed in Section 3.21 of the Lady Luck Disclosure Schedule.
Lady Luck has provided to Buyer all reports prepared by it or its outside
consultants regarding its Year 2000 Readiness. "Year 2000 Ready" means that the
systems, processes, products, equipment and services of Lady Luck and each of
its Subsidiaries (including any software embedded in any products) ("Services"),
will correctly identify, recognize and process four-digit year dates, and the
Services will: (a) continue to function properly with regard to dates before,
during and after the transition to year 2000 including, but not limited to, the
ability to roll dates from December 31, 1999 to January 1, 2000 and beyond with
no errors or system interruptions; (b) accurately perform calculations and
comparisons on dates that span centuries; (c) accept and properly process dates
that could span more than 100 years (e.g., calculating a person's age from their
birth date and the current date); (d) properly sort and sequence dates that span
centuries; (e) understand that the year 2000 starts on a Saturday; (f) recognize
that February 29, 2000 is a valid date and that the year 2000 has 366 days; (g)
prohibit use of date fields for any purpose other than to store valid dates; (h)
preclude the use of 12/31/99 or any other valid date to indicate something other
than a date (e.g., 12/31/99 in a date field means "do not ever cancel"); and (i)
comply with and conform to the specifications of American National Standard ANSI
X3.30-1985, Representation for Calendar Date and Ordinal Date for Information
Interchange. Each of Lady Luck and its Subsidiaries has made no express or
implied warranties regarding the Year 2000 Readiness of themselves, or any of
their Services, except as disclosed in Section 3.21 of the Lady Luck Disclosure
Schedule.
Section 3.22. Opinion of Financial Advisor. Lady Luck has received the
written opinion of ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc. ("▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇") as of
the date of this Agreement to the effect that the Merger Consideration is fair
to the holders of Lady Luck Common Stock from a financial point of view.
Section 3.23. Brokers. None of Lady Luck, any of its Subsidiaries nor
any of their respective officers, directors or employees have employed any
broker, financial advisor or finder, or incurred any liability for any brokerage
fees, commissions, finder's or other fees or expenses in connection with any
pending capital markets or strategic transaction or the transactions
contemplated by this Agreement, except, as disclosed in Section 3.23 of the Lady
Luck Disclosure Schedule and except that Lady Luck has retained ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ and Onyx Partners, Inc. ("Onyx Partners") as its financial advisors and
has delivered to Buyer copies of all written agreements, and written
descriptions of any oral agreements, with ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and Onyx Partners.
24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
Buyer and Merger Sub represent and warrant to Lady Luck that the
statements contained in this Article IV are true and correct, except as set
forth herein and in the disclosure schedule delivered by Buyer and Merger Sub to
Lady Luck on or before the date of this Agreement (the "Buyer Disclosure
Schedule"). Any reference in the Merger Agreement to Buyer's "knowledge" or
"best knowledge," or to "the best of Buyer's knowledge," or words of similar
import, shall be deemed a reference to the actual knowledge of any of the
corporate officers of Buyer or any of its Subsidiaries for all purposes. The
Buyer Disclosure Schedule has been prepared based upon the foregoing definition.
Section 4.1. Organization of Buyer and Merger Sub. Each of Buyer and
Merger Sub is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has all requisite corporate,
partnership or limited liability company power and authority to carry on its
business as now being conducted and as proposed to be conducted. Each of Buyer
and Merger Sub is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so qualified, licensed or in
good standing would not have a material adverse effect on the business,
properties, condition (financial or otherwise), prospects or results of
operations of Buyer and its Subsidiaries, taken as a whole (a "Buyer Material
Adverse Effect"). Buyer has delivered to Lady Luck a true and correct copy of
the Certificate of Incorporation and Bylaws of Buyer, in each case as amended to
the date of this Agreement.
Section 4.2. Capitalization of Merger Sub. The authorized capital stock
of Merger Sub consists of 2,500 shares of common stock, par value $.01 per share
("Merger Sub Common Stock"), of which 1,000 shares are issued and outstanding.
Buyer owns directly all the outstanding shares of Merger Sub Common Stock. The
outstanding shares of Merger Sub Common Stock are duly authorized, validly
issued, fully paid and assessable and free of any preemptive rights.
Section 4.3. Authority; No Conflict; Required Filings and Consents.
(a) Buyer and Merger Sub have all requisite corporate power and
authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby by Buyer and Merger Sub have been duly authorized by all
necessary corporate action on the part of Buyer and Merger Sub. This
Agreement has been duly executed and delivered by Buyer and Merger Sub
and constitutes the valid and
25
binding obligation of Buyer and Merger Sub, enforceable against
each of them in accordance with its terms.
(b) Other than as disclosed in Section 4.3(b) of the Buyer
Disclosure Schedule, the execution and delivery of this Agreement by
Buyer and Merger Sub do not, and the consummation of the transactions
contemplated hereby will not, (i) conflict with, or result in any
violation or breach of, any provision of the Certificate of
Incorporation or Bylaws of Buyer or the comparable charter or
organizational documents of any of its Subsidiaries, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse
of time, or both), a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any material
benefit) under, or require a consent or waiver under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease,
contract or other agreement, instrument or obligation to which Buyer or
any of its Subsidiaries is a party or by which any of them or any of
their properties or assets may be bound, or (iii) subject to the
governmental filings and other matters referred to in Section 4.3(c),
conflict with or violate any permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Buyer or any of its Subsidiaries or any of its or their
properties or assets, except in the case of clauses (ii) and (iii) for
any such conflicts, violations, defaults, terminations, cancellations
or accelerations which (x) are not, individually or in the aggregate,
reasonably likely to have a Buyer Material Adverse Effect, or (y) would
not impair or materially delay the consummation of the Merger.
(c) Except as disclosed in Section 4.3(c) of the Buyer Disclosure
Schedule, no consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to Buyer or any of its Subsidiaries in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, other than (i)
the filing of the pre-merger notification report under the HSR Act,
(ii) the filing of the Certificate of Merger with respect to the Merger
with the Secretary of State of the State of Delaware, (iii) any
approvals and filing of notices required under any applicable gaming
industry regulation, (iv) such consents, approvals, orders,
authorizations, permits, filings or registrations related to, or
arising out of, compliance with statutes, rules or regulations
regulating the consumption, sale or serving of alcoholic beverages, (v)
such immaterial filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger
or the transactions contemplated by this Agreement, and (vi) such other
filings, consents, approvals, orders, registrations and declarations as
may be required under the laws of any jurisdiction in which Buyer or
any of its Subsidiaries conducts any business or owns any assets the
failure of which to obtain would not have a Buyer Material Adverse
Effect.
26
Section 4.4. Brokers. None of Buyer, any of its Subsidiaries, nor any
of their respective officers, directors or employees have employed any broker,
financial advisor or finder or incurred any liability for any brokerage fees,
commissions, finder's or other fees, in connection with the transactions
contemplated by this Agreement, except that Buyer has retained CIBC World
Markets Corp. ("CIBC") as its financial advisor.
Section 4.5. Ownership of Securities. As of the date hereof, neither
Buyer nor, to Buyer's knowledge, any of its affiliates or associates (as such
terms are defined under the Exchange Act), (i) beneficially owns, directly or
indirectly, or (ii) is party to an agreement, arrangement or understanding
(other than this Agreement and the Stockholder Support Agreement) for the
purpose of acquiring, holding or disposing of, in each case, shares of Lady Luck
Common Stock representing at least 15% of the total number of outstanding shares
of Lady Luck Common Stock.
Section 4.6. Proxy Statement. The information supplied by Buyer for
inclusion in the Proxy Statement (as defined in Section 5.4(a) below) shall not,
on the date the Proxy Statement is first mailed to stockholders of Lady Luck, at
the time of the Lady Luck Special Meeting (as defined in Section 5.5) and at the
Effective Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, omit to state any material fact necessary in order to make
the statements made in the Proxy Statement not false or misleading, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Lady Luck
Special Meeting which has become false or misleading.
Section 4.7. Litigation. Except as specifically disclosed by Buyer in
the reports, forms or documents filed by the Buyer with the SEC prior to the
date of this Agreement or as set forth in Section 4.7 of the Buyer Disclosure
Schedule, there is no (i) claim, action, suit or proceeding pending or, to the
best of the Buyer's knowledge, threatened against the Buyer or any of its
Subsidiaries or their respective properties, assets or operations before any
court or governmental or regulatory authority or body or arbitration tribunal or
(ii) outstanding judgment, order, writ, injunction or decree of any court,
governmental agency or arbitration tribunal in a proceeding to which the Buyer,
any of its Subsidiaries or any of their respective assets was or is a party,
which would prevent, impair or materially alter, delay or impair the Buyer's
ability to consummate the Merger or the other transactions contemplated hereby.
Section 4.8. Financing. Attached under Section 4.8 of the Buyer
Disclosure Schedule are copies of all commitment letters from external financing
sources with respect to financing of the Merger and the transactions
contemplated thereby. Assuming that the external financing sources loan the
amounts designated for the transactions contemplated by this Agreement to the
Buyer as described in the commitment letter, the Buyer will have sufficient
funds to complete the transactions contemplated by this Agreement including the
repayment of the Lady Luck Notes and redemption of the Lady Luck Series A
Preferred Stock.
27
ARTICLE V
COVENANTS
Section 5.1. Conduct of Business of Lady Luck. Except as set forth in
Section 5.1 of the Lady Luck Disclosure Schedule, during the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, Lady Luck agrees as to itself and its
respective Subsidiaries (except to the extent that Buyer shall otherwise consent
in writing) to carry on its business in the usual, regular and ordinary course
in substantially the same manner as previously conducted, to pay its debts and
taxes when due subject to good faith disputes over such debts or taxes, to pay
or perform its other obligations when due, and, to the extent consistent with
such business, use all commercially reasonable efforts consistent with past
practices and policies to preserve intact its present business organization,
keep available the services of its present officers and key employees and
preserve its relationships with customers, suppliers, distributors and others
having business dealings with it. Without limiting the generality of the
foregoing, during the period from the date of this Agreement until the Effective
Time, Lady Luck agrees (except as otherwise contemplated by this Agreement or to
the extent that Buyer shall otherwise consent in writing) as follows:
(a) Dividends; Changes in Stock. Lady Luck shall not, and shall
cause its Subsidiaries not to, other than dividends and distributions
by a direct or indirect wholly owned Subsidiary of Lady Luck to its
parent, (x) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, stock or property) in respect of,
any of its capital stock, (y) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock (other than the issuance of shares of Lady Luck
Common Stock upon the exercise of Lady Luck Options outstanding on the
date of this Agreement and in accordance with their present terms), or
(z) purchase, redeem or otherwise acquire any shares of capital stock
of Lady Luck or any of its Subsidiaries or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities.
(b) Issuance of Securities. Lady Luck shall not, and shall cause
its Subsidiaries not to, issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock, any other voting securities
or any securities convertible into, or any rights, warrants or options
to acquire, any such shares, voting securities or convertible
securities (other than the issuance of shares of Lady Luck Common Stock
upon the exercise of Lady Luck Options outstanding on the date of this
Agreement and in accordance with their present terms).
28
(c) Governing Documents. Lady Luck shall not, and shall cause its
Subsidiaries not to, amend its Certificate of Incorporation, Bylaws or
other comparable charter or organizational documents.
(d) No Acquisitions. Lady Luck shall not, and shall cause its
Subsidiaries not to, (i) enter into any agreement to acquire, or (ii)
subject to the provisions of Section 5.15, except for the transactions
contemplated by (x) the Stock Purchase Agreement by and among Lady
Luck, Sodak and GSMC (the "▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Agreement") and (y) the Lady
Luck Las Vegas Agreement (which if consummated in accordance with the
terms of the Lady Luck Las Vegas Agreement shall be consummated
immediately prior to the Effective Time), acquire (including, without
limitation, by merger, consolidation or acquisition of stock or
assets), any business or any interest therein, including through the
acquisition of any interest in any corporation, partnership, joint
venture, association or other business organization or division
thereof.
(e) No Dispositions. Lady Luck shall not, and shall cause its
Subsidiaries not to, sell, lease, license, mortgage or otherwise
encumber or otherwise dispose of any of its properties or assets.
(f) Indebtedness. Lady Luck shall not, and shall cause its
Subsidiaries not to, (y) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt
securities of Lady Luck or any of its Subsidiaries, or guarantee any
debt securities of another person, other than short-term bank financing
in the ordinary course of business consistent with past practice and
loans to employees in the amount of no more than $3,500 per employee
which are subject to a documented repayment obligation and which for
all employees of Lady Luck do not exceed an aggregate of $25,000
outstanding at any time, or (z) make any loans, advances or capital
contributions to, or investments in, any other person.
(g) Employee Benefits. Lady Luck shall not, and shall cause its
Subsidiaries not to, (A) adopt, enter into, terminate or amend any
employment, severance, retention or similar agreement or contract; (B)
negotiate or enter into any collective bargaining agreement or labor
union contract; (C) increase, in any manner, the compensation or fringe
benefits of, or pay any bonus to, any director, officer or employee
(except for normal increases of cash compensation or cash bonuses in
the ordinary course of business, consistent with past practice); (D)
adopt or establish any new benefit plan; or amend any existing benefit
plan, including, without limitation, the Lady Luck Employee Plans and
the Lady Luck Welfare Plan, except as required by law; or pay any
benefit not provided for under any Lady Luck Employee Plan or Lady Luck
Welfare Plan; (E) adopt, establish or amend any severance pay plan; or
increase in any manner the severance or termination pay of any officer
or employee; (F) modify the provisions of any Lady Luck
29
Stock Option Plan, adjust or modify the terms of any outstanding
Lady Luck Options; or take any action to accelerate the vesting of, or
cash out rights associated with, any Lady Luck Option; or remove
existing restrictions in any Lady Luck Stock Option Plan or other plan
or arrangement; (G) grant any new awards under any Lady Luck Stock
Option Plan or other bonus, incentive, performance or compensation plan
or arrangement, including the grant of Lady Luck Options, stock
appreciation rights, stock-based or stock-related awards, performance
units or restricted stock; (H) take any action to fund or, in any other
way secure, the payment of compensation or benefits under any Lady Luck
Employee Plan, Lady Luck Welfare Plan or other employee plan,
agreement, contract or arrangement; (I) hire any individual as an
employee who will be paid an annual base salary that equals or exceeds
$75,000 or who will be other than an "at will" employee; or (J) hire
any independent contractor or consultant, in each case without the
prior written consent of the Buyer.
(h) Leases or Material Contracts. Lady Luck shall not, and shall
cause its Subsidiaries not to, (i) enter into any lease or agreement of
any nature that would obligate Lady Luck or its Subsidiary to pay
$50,000 or more, (ii) enter into any lease or agreement of any nature
that is not terminable by Lady Luck or its Subsidiary upon 90 days'
notice without penalty, or (iii) modify, amend or terminate any
existing agreement of such type or waive, release or assign any
material rights or claims contained therein, except in the ordinary
course of business consistent with past practice.
(i) Accounting Matters. Lady Luck shall not, and shall cause its
Subsidiaries not to, make any material change in accounting methods,
principles or practices, except as required by GAAP or the applicable
regulations under the Securities Act and the Exchange Act.
(j) Tax Matters. Lady Luck shall not, and shall cause its
Subsidiaries not to, make any material tax election, enter into any
settlement or compromise with respect to any material income tax
liability or waive or extend the statute of limitations in respect of
any Taxes.
(k) Settlement. Lady Luck shall not, and shall cause its
Subsidiaries not to, settle any pending or threatened litigation
involving Lady Luck or any of its Subsidiaries (whether brought by or
against a private party or a Government Entity), except for settlements
that, in the aggregate, involve payments not covered by insurance, by
Lady Luck or any Subsidiaries, of less than $50,000 and which settle
entire claims or causes of action arising out of the same or similar
facts and circumstances or do not impose any restrictions on the
business or operations of Lady Luck or any of its Subsidiaries.
30
(l) Capital Expenditures. Except as set forth in Section 5.1(l) of
the Lady Luck Disclosure Schedule, Lady Luck, together with its
Subsidiaries, shall not make capital expenditures in excess of $50,000
individually or $100,000 in the aggregate.
(m) Related Party Transactions. Except pursuant to Section 5.1(n),
Lady Luck shall not, and shall cause its Subsidiaries not to, enter
into or amend the terms of any transaction of any nature whatsoever
with its or its Subsidiaries' directors, officers, employees,
stockholders or their respective affiliates.
(n) Lady Luck Hotel & Casino. Lady Luck agrees, pursuant to the
Amended and Restated Purchase Agreement dated as of August 31, 1999, by
and among Lady Luck and Gemini, Inc. (d/b/a Lady Luck Casino Hotel)
("Gemini"), International ▇▇▇▇▇ ▇▇▇▇'▇ Services, Inc. ("IMPS"), and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"), that such agreement will be amended
concurrently with the execution of this Agreement and with the approval
of Buyer (as so amended, the "Lady Luck Las Vegas Agreement") to
provide that (i) the sale of all of the outstanding capital stock of
IMPS and the sale of those certain trademarks, mailing lists and other
intellectual property owned by Gemini (the "Gemini Trademark Assets")
that are related to the operation of the Lady Luck Casino & Hotel
located in Las Vegas, Nevada (the "Las Vegas Hotel") can be consummated
immediately prior to the Effective Time without consummating the
acquisition of the Las Vegas Hotel and related real property and leases
and Gemini stock, which provision shall become effective only upon
consummation of the Merger; (ii) the Lady Luck Las Vegas Agreement will
not be amended without the prior approval of Buyer; (iii) pursuant to
the Lady Luck Las Vegas Agreement, Lady Luck will provide an exclusive
perpetual royalty free license agreement to Gemini to use the Gemini
Trademark Assets in connection with the Las Vegas Hotel and will enter
into a marketing agreement with Gemini until such time as it is
acquired by Lady Luck pursuant to the Lady Luck Las Vegas Agreement,
which provision shall become effective only with consummation of the
Merger; (iv) Lady Luck will not consummate the transactions
contemplated by the Lady Luck Las Vegas Agreement prior to the
Effective Time; and (v) for a period of thirty (30) days following the
date of this Agreement, Buyer shall have the opportunity to conduct due
diligence on Gemini and the Las Vegas Hotel; at the end of that period,
and effective if the Merger is consummated, Buyer may determine that
Lady Luck shall not acquire Gemini, IMPS, the Las Vegas Hotel or the
Gemini Trademark Assets. In the event this Agreement is terminated, the
provisions of the Lady Luck Las Vegas Agreement included as a result of
the amendment described above will be of no effect except as expressly
stated therein and the original Lady Luck Las Vegas Agreement shall
continue in effect. ▇▇▇▇▇▇▇▇ shall, however, have the right to require
Buyer to consummate the acquisition of the Gemini Trademark Assets at
the price and on the terms provided in the Lady Luck Las Vegas
Agreement and the Lady Luck license agreement with IMPS shall be
amended to give effect to Lady Luck's ownership of the Gemini Trademark
Assets.
31
(o) Maintenance of Las Vegas Hotel. Pursuant to the amendment of
the Lady Luck Las Vegas Agreement referred to in Section 5.1(n), Lady
Luck shall be afforded the right to require, and pursuant to the Lady
Luck Las Vegas Agreement as so amended, Lady Luck shall use its best
efforts to cause, the owners and operators of the Las Vegas Hotel to
maintain, at no expense to Lady Luck or any of its Subsidiaries, the
condition of the Las Vegas Hotel and its related facilities such that
upon the purchase and sale of the Las Vegas Hotel, the condition of the
Las Vegas Hotel and related facilities is at least as good as on the
date hereof.
(p) Indebtedness and Preferred Stock. As directed by Buyer, Lady
Luck will, from time to time, take all actions (including the
transmittal of notices) as may be required from time to time in order
to enable Buyer to repay Lady Luck's outstanding 11-7/8% First
Mortgage Notes due 2001 (the "Lady Luck Notes") (and to obtain releases
of the collateral securing the Lady Luck Notes) and redeem Lady Luck's
outstanding Lady Luck Preferred Stock, in each case as of the Effective
Time.
(q) General. Lady Luck shall not, and shall cause its Subsidiaries
not to, authorize any of, or commit or agree to take any of, the
foregoing actions.
Section 5.2. Cooperation; Notice; Cure. Subject to compliance with
applicable law, from the date hereof until the Effective Time, each of Buyer and
Lady Luck shall confer on a regular and frequent basis with one or more
representatives of the other party to report on the general status of ongoing
operations. Each of Lady Luck and Buyer shall promptly notify the other in
writing of, and will use all commercially reasonable efforts to cure before the
Closing Date, any event, transaction or circumstance, as soon as practical after
it becomes known to such party, that causes or will cause any covenant or
agreement of Lady Luck or Buyer under this Agreement to be breached in any
material respect or that renders or will render untrue in any material respect
any representation or warranty of Lady Luck or Buyer contained in this
Agreement.
Section 5.3. No Solicitation.
(a) From and after the date hereof, Lady Luck shall not, directly
or indirectly, through any officer, director, employee, financial
advisor, representative or agent of such party (i) solicit, initiate,
or encourage (including by way of furnishing information) or take any
other action to facilitate any inquiries or proposals that constitute,
or could reasonably be expected to lead to, a proposal or offer for a
merger, consolidation, business combination, sale of substantial
assets, sale of shares of capital stock (including, without limitation,
by way of a tender or exchange offer) or similar transaction involving
Lady Luck or any of its Subsidiaries, other than the transactions
contemplated by this Agreement (any of the foregoing inquiries or
proposals being referred to in this Agreement as an "Acquisition
Proposal"), (ii) engage in negotiations or discussions with
32
any person (or group of persons) other than Buyer or its
respective affiliates (a "Third Party") concerning, or provide any
non-public information to any person or entity relating to, any
Acquisition Proposal, or (iii) agree to or recommend any Acquisition
Proposal; provided, however, that until approval of the Merger at the
Lady Luck Special Meeting (as defined below), nothing contained in this
Agreement shall prevent Lady Luck or its Board of Directors from
furnishing non-public information to, or entering into discussions or
negotiations with, any person or entity in connection with an
unsolicited bona fide written Acquisition Proposal by such person or
entity or recommending an unsolicited bona fide written Acquisition
Proposal to the stockholders of Lady Luck, if (and only if) the Board
of Directors of Lady Luck reasonably believes in good faith that (i)
such Acquisition Proposal, after consultation with and receipt of
advice from ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, is reasonably capable of being
completed on substantially the terms proposed and if consummated, would
result in a transaction that would be superior from a financial point
of view to the holders of Lady Luck Common Stock including
consideration of the financial terms of the ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Credit
Agreement provided to Lady Luck by Buyer (a "Superior Proposal"), and
(ii) after receipt of advice to such effect from outside legal counsel
(who may be Lady Luck's regularly engaged outside legal counsel), the
Board of Directors of Lady Luck, in the exercise of its fiduciary
duties, determines in good faith that the failure to take such action
would be contrary to the best interests of holders of Lady Luck Common
Stock. Nothing in this Agreement shall prevent Lady Luck from complying
with the provisions of Rule 14e-2 promulgated under the Exchange Act
with respect to an Acquisition Proposal.
(b) Lady Luck shall notify Buyer promptly (and no later than 48
hours) after receipt by Lady Luck, or any officer, director, employee,
financial advisor, representative or agent of Lady Luck, of any
Acquisition Proposal or any request for non-public information in
connection with an Acquisition Proposal or for access to the
properties, books or records of Lady Luck or its Subsidiaries by any
Third Party that informs Lady Luck that it is considering making, or
has made, an Acquisition Proposal. Such notice shall be made orally and
shall indicate the identity of the Third Party and the terms and
conditions of such proposal, inquiry or contract.
Section 5.4. Proxy Statement.
(a) As promptly as practicable after the execution of this
Agreement, Lady Luck shall prepare and file with the SEC, in
preliminary form, a proxy statement to be sent to Lady Luck's common
stockholders in connection with, and for their consideration of, this
Agreement and the Merger (the "Proxy Statement").
(b) Lady Luck shall make all other necessary filings with respect
to the Merger under the Exchange Act, applicable state blue sky laws
and the rules and regulations thereunder.
33
Section 5.5. Special Meeting. Lady Luck shall duly call, give notice
of, convene and hold a special meeting of its common stockholders for the
purpose of voting upon this Agreement and the Merger (the "Lady Luck Special
Meeting") as promptly as reasonably practicable after the date hereof. Except as
expressly otherwise provided in Section 5.3 hereof or as otherwise required to
comply with the fiduciary duties of the Board of Directors of Lady Luck, Lady
Luck shall, through its Board of Directors, recommend to its stockholders
adoption and approval of this Agreement and the Merger and shall use all
reasonable efforts to solicit from its stockholders proxies in favor of such
matters.
Section 5.6. Access to Information. Upon reasonable notice, Lady Luck
(and each of its Subsidiaries) shall afford to Buyer, and its officers,
employees, accountants, counsel and other representatives, reasonable access,
during normal business hours during the period prior to the Effective Time, to
all its personnel, properties, books, contracts, commitments and records, and
during such period, Lady Luck shall, and shall cause each of its Subsidiaries
to, furnish promptly to Buyer (a) copies of monthly financial reports and
development reports, (b) a copy of each report, schedule, registration statement
and other document filed or received by it during such period pursuant to the
requirements of federal or state securities laws, and (c) all other information
concerning its business, properties and personnel as Buyer may reasonably
request. Buyer will hold any such information furnished to it by Lady Luck in
confidence in accordance with the confidentiality agreement between the parties
(the "Confidentiality Agreement"). No information or knowledge obtained in any
investigation pursuant to this Section 5.6 shall affect or be deemed to modify
any representation or warranty contained in this Agreement or the conditions to
the obligations of the parties to consummate the Merger.
Section 5.7. Governmental Approvals.
(a) The parties hereto shall cooperate with each other and use all
commercially reasonable efforts to promptly prepare and file all
necessary documentation, to effect all applications, notices, petitions
and filings, to obtain as promptly as practicable without conditions,
restrictions or limitations that are more restrictive than those
conditions, restrictions and limitations applicable to Lady Luck on the
date hereof, all permits, registrations, licenses, findings of
suitability, consents, variances, exemptions, orders, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by
this Agreement ("Governmental Approvals"). Each of the parties hereto
and their respective officers, directors and affiliates shall file
within 60 days after the date hereof (without the applicability of any
grace periods set forth elsewhere in this Agreement and with Buyer's
efforts to complete and file regulatory applications under Lady Luck
Gaming Laws focused on expeditiously complying with the requirements to
obtain the Nevada approval), all required initial applications and
documents in connection with obtaining approvals under the Lady Luck
Gaming Laws and shall file initial
34
applications and documents related to all other Governmental
Approvals within such time as necessary for such Governmental Approvals
to be granted on or before the effective date of the respective
approvals required under the Lady Luck Gaming Laws and shall act
reasonably and promptly thereafter in responding to additional requests
in connection therewith. Each of Lady Luck and Buyer (the "Notifying
Party") will notify the other reasonably promptly of the receipt of
material comments or requests from Governmental Entities relating to
Governmental Approvals, and will supply the other party with copies of
all material correspondence documents or descriptions of communications
between the Notifying Party or any of its representatives and
Governmental Entities with respect to Governmental Approvals; provided,
however, that it shall not be required to supply the other party with
copies of correspondence, documents or descriptions of communications
relating to the personal applications of individual applicants except
for evidence of filing.
(b) Lady Luck and Buyer shall promptly advise each other upon
receiving any communication from any Governmental Entity whose consent
or approval is required for consummation of the transactions
contemplated by this Agreement which causes such party to believe that
there is a reasonable likelihood that any approval needed from a
Governmental Entity will not be obtained or that the receipt of any
such approval will be materially delayed. Lady Luck and Buyer shall
take any and all actions reasonably necessary to vigorously defend,
lift, mitigate and rescind the effect of any litigation or
administrative proceeding adversely affecting this Agreement or the
transactions contemplated hereby or thereby, including, without
limitation, promptly appealing any adverse court or administrative
order or injunction to the extent reasonably necessary for the
foregoing purposes.
(c) Notwithstanding any other provision of this Agreement (but
without limiting the obligations set forth in Sections 5.7(a) and (b)),
Buyer shall have no obligation or affirmative duty under this Section
5.7 to cease or refrain from the ownership of any assets or properties
(including any of the assets and properties to be acquired from Lady
Luck) or the association with any person or entity which association is
material to the operations of Buyer, whether on the date hereof or at
any time in the future.
Section 5.8. Publicity. Lady Luck and Buyer shall agree on the form and
content of the initial press release regarding the transactions contemplated
hereby and thereafter shall consult with each other before issuing, and use all
reasonable efforts to agree upon, any press release or other public statement
with respect to any of the transactions contemplated hereby and shall not issue
any such press release or make any such public statement prior to such
consultation, except as may be required by law or in connection with
presentations or discussions with or before gaming regulators.
35
Section 5.9. Indemnification.
(a) From and after the Effective Time, Buyer agrees that it will,
and will cause the Surviving Corporation to, indemnify and hold
harmless each present and former director and officer of Lady Luck (the
"Indemnified Parties"), against any costs or expenses (including
attorneys' fees), judgments, fines, losses, claims, damages,
liabilities or amounts paid in settlement incurred in connection with
any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time,
whether asserted or claimed prior to, at or after the Effective Time,
to the fullest extent that Lady Luck would have been permitted under
the DGCL and its Certificate of Incorporation or Bylaws in effect on
the date hereof to indemnify and to provide advancement of expenses to
such Indemnified Party.
(b) The provisions of this Section 5.9 are intended to be in
addition to the rights otherwise available to the current officers and
directors of Lady Luck by law, charter, statute, bylaw or agreement,
and shall operate for the benefit of, and shall be enforceable by, each
of the Indemnified Parties, their heirs and their representatives.
(c) For a period of six years after the Effective Time, Buyer
shall maintain or shall cause the Surviving Corporation to maintain in
effect a directors' and officers' liability insurance policy covering
those persons who are currently covered by Lady Luck's directors' and
officers' liability insurance policy (copies of which have been
heretofore delivered by Lady Luck to Buyer) with coverage in amount and
scope at least as favorable as Lady Luck's existing coverage; provided
that in no event shall Buyer or the Surviving Corporation be required
to expend in the aggregate in excess of 200% of the annual premium
currently paid by Lady Luck for such coverage; and if such premium
would at any time exceed 200% of the such amount, then Buyer or the
Surviving Corporation shall maintain insurance policies which provide
the maximum and best coverage available at an annual premium equal to
200% of such amount.
Section 5.10. Stockholder Litigation. Lady Luck shall give Buyer the
reasonable opportunity to participate in the defense or settlement of any
stockholder litigation against Lady Luck and its directors relating to the
transactions contemplated hereby; provided, however, that no such settlement
shall be agreed to without Buyer's consent.
Section 5.11. Employee Benefits.
(a) Buyer shall cause the Surviving Corporation to honor all
written employment, severance and termination agreements (including
change in control provisions) of the employees of Lady Luck and its
Subsidiaries provided to Buyer on or prior to the date of this
Agreement and which are identified in Section 3.14(a) of the Lady
36
Luck Disclosure Schedule or which may be otherwise agreed to by
Buyer after the date hereof. Buyer agrees to confer with Lady Luck and
evaluate the appropriateness of severance and stay bonuses for key
employees of Lady Luck and its Subsidiaries.
(b) For purposes of determining eligibility for participation and
vesting under any employee benefit plan or arrangement of Buyer or the
Surviving Corporation, employees of Lady Luck and its Subsidiaries as
of the Effective Time shall receive service credit for service with
Lady Luck and any of its Subsidiaries as if such service had been
rendered to the Buyer or Surviving Corporation, but not for purposes of
determining benefit accruals. This Section 5.11 shall not obligate the
Buyer or Surviving Corporation to provide duplicate benefits to
employees of Lady Luck and its Subsidiaries.
(c) Nothing in this Agreement is intended to create any right of
employment for any person or to create any obligation for Buyer or the
Surviving Corporation to continue any Plan of Lady Luck following the
Effective Time.
Section 5.12. Other Agreements. Buyer and ▇▇▇▇▇▇▇▇ shall enter into a
Consulting, Advisory and Non-Competition Agreement in the form attached hereto
as Exhibit B, which shall become effective at the Effective Time.
Section 5.13. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Loans. Immediately prior to the
consummation of the transactions contemplated by the ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Agreement,
the parties shall enter into a credit agreement in the form attached as Exhibit
C (the "▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Credit Agreement"), relating to the making of a secured
bridge loan by Buyer in the principal amount of $16.3 million, for the purpose
of enabling Lady Luck to consummate the transactions contemplated by the ▇▇▇▇
▇▇▇▇▇▇▇▇▇ Agreement.
Section 5.14. Further Assurances and Actions.
(a) Subject to the terms and conditions herein, each of the
parties hereto agrees to use its reasonable best efforts to take, or
cause to be taken, all appropriate action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws
and regulations to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, (i)
using their respective reasonable best efforts to obtain all licenses,
permits, consents, approvals, authorizations, qualifications and orders
of Governmental Entities and parties to contracts with each party
hereto as are necessary for consummation of the transactions
contemplated by this Agreement, and (ii) to fulfill all conditions
precedent applicable to such party pursuant to this Agreement.
(b) In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving
37
Corporation with full title to all properties, assets, rights,
approvals, immunities and franchises of any of the parties to the
Merger, the proper officers and/or directors of Buyer, Lady Luck and
the Surviving Corporation shall take all such necessary action.
Section 5.15. Pending Acquisitions. To the extent not prohibited by
applicable law, Lady Luck shall consult with Buyer as to any pre-closing and
post-closing determinations and actions related to the ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Agreement
and the Lady Luck Las Vegas Agreement, and agrees to exercise any rights it has,
and take or omit to take all actions to be taken or not taken by it, under such
agreements in accordance with the Buyer's reasonable directions and requests.
Section 5.16. Allocation of Funds. Subject to the financing contingency
set forth in Section 6.3(c) and Buyer's and Lady Luck's obligations under the
terms of the Las Vegas Agreement, immediately prior to the Effective Time, Buyer
agrees to allocate sufficient funds (i) to close both the transactions
contemplated thereunder or, (ii) if all approvals necessary to acquire the Las
Vegas Hotel and the capital stock of Gemini have not been granted at or before
the Effective Time, then to consummate at the Effective Time the acquisition of
the Gemini Trademark Assets and, at such times as permitted, the Las Vegas Hotel
and the capital stock of Gemini.
ARTICLE VI
CONDITIONS TO MERGER
Section 6.1. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the satisfaction or waiver by each party prior to the
Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have
been approved by the stockholders of Lady Luck in the manner required
under the DGCL and the Certificate of Incorporation of Lady Luck.
(b) No Injunctions. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any order, executive order,
stay, decree, judgment or injunction or statute, rule, regulation which
is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(c) Governmental Approvals. All Governmental Approvals required to
consummate the transactions contemplated by this Agreement shall have
been obtained, all such approvals shall remain in full force and
effect, all statutory waiting periods in respect thereof (including,
without limitation, under the HSR Act) shall have expired and no such
approval shall contain any conditions, limitations or restrictions
which Buyer reasonably determines in good faith will have or would
reasonably be expected to have a
38
Lady Luck Material Adverse Effect or a Buyer Material Adverse
Effect. Notwithstanding the foregoing, Lady Luck agrees that if the
Nevada Gaming Commission has not issued all approvals necessary to be
obtained in connection with the purchase and sale of the Las Vegas
Hotel pursuant to the terms of the Lady Luck Las Vegas Agreement (the
"Nevada Approval") on or before the fulfillment or waiver of all other
conditions precedent to the parties' obligations to effect the Merger,
it will, at Buyer's request, for purposes of Section 6.1(c), consummate
the purchase of the Gemini Trademark Assets pursuant to the terms of
the Lady Luck Las Vegas Agreement for which the Nevada Approval is not
required as described in Section 5.1(n) and proceed with its
obligations to effect the Merger.
Section 6.2. Additional Conditions to Obligations of Lady Luck. The
obligations of Lady Luck to effect the Merger is subject to the satisfaction of
each of the following conditions prior to the Effective Time, any of which may
be waived in writing exclusively by Lady Luck:
(a) Representations and Warranties. The representations and
warranties of Buyer and Merger Sub set forth in this Agreement shall be
true and correct in all material respects (except for those qualified
as to materiality or a Buyer Material Adverse Effect, which shall be
true and correct) as of the date of this Agreement and, except to the
extent such representations explicitly speak as of an earlier date, as
of the Closing Date as though made on and as of the Closing Date. Lady
Luck shall have received a certificate signed on behalf of Buyer by the
Chief Executive Officer and the Chief Financial Officer of Buyer to
such effect.
(b) Performance of Obligations of Buyer. Buyer shall have
performed in all material respects all material obligations required to
be performed by it under this Agreement at or prior to the Closing Date
including, without limitation, that Buyer shall not be in default under
the ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Credit Agreement, and Lady Luck shall have received
a certificate signed on behalf of Buyer by the Chief Executive Officer
the Chief Financial Officer of Buyer to such effect. Immediately prior
to the Effective Time (i) Buyer shall have, and shall have made
available to Lady Luck, funds sufficient under the Lady Luck Las Vegas
Agreement (x) to close both the transactions contemplated thereunder
or, (y) if all approvals necessary to acquire the Las Vegas Hotel and
the capital stock of Gemini have not been granted on or before the
Effective Time, then to acquire the Gemini Trademark Assets and, at
such times as permitted, the Las Vegas Hotel and the capital stock of
Gemini and (ii) Buyer shall have caused Lady Luck to have consummated
at the Effective Time the acquisition of the Gemini Trademark Assets
and, if all necessary approvals have been obtained, the Las Vegas Hotel
and the capital stock of Gemini.
Section 6.3. Additional Conditions to Obligations of Buyer. The
obligations of Buyer and Merger Sub to effect the Merger are subject to the
satisfaction of each of the following
39
conditions prior to the Effective Time, any of which may be waived in writing
exclusively by Buyer:
(a) Representations and Warranties. The representations and
warranties of Lady Luck set forth in this Agreement shall be true and
correct in all material respects (except for those qualified as to
materiality or a Lady Luck Material Adverse Effect, which shall be true
and correct) as of the date of this Agreement and, except to the extent
such representations and warranties explicitly speak as of an earlier
date, as of the Closing Date as though made on and as of the Closing
Date. Buyer shall have received a certificate signed on behalf of Lady
Luck by the Chief Executive Officer and a senior financial officer of
Lady Luck to such effect.
(b) Performance of Obligations of Lady Luck. Lady Luck shall have
performed in all material respects all material obligations required to
be performed by it under this Agreement at or prior to the Closing
Date. Buyer shall have received a certificate signed on behalf of Lady
Luck by the Chief Executive Officer and a senior financial officer of
Lady Luck to each such effect.
(c) Financing. Buyer shall have obtained financing on terms
satisfactory to it and sufficient to allow Buyer to complete the
transactions contemplated by this Agreement, including the consummation
of the transactions contemplated in the Las Vegas Agreement the
repayment of the Lady Luck Notes and the redemption of the Lady Luck
Series A Preferred Stock.
(d) Due Diligence Review.
(i) Buyer shall have been reasonably satisfied with the
results of the Physical Investigation and Review (as defined
below) of the properties of Lady Luck and its Subsidiaries
described below. Buyer and its consultants shall have the right
for a period of forty five (45) days after the date hereof (the
"Due Diligence Period") to enter all properties of Lady Luck and
its Subsidiaries during reasonable hours for the purpose of
inspection of the physical condition of the properties including
hull inspections, engine inspections, engineering surveys
(including inspection of the structural integrity of all
improvements to such properties) and environmental reports and
such other environmental and structural integrity tests and
inspections as the Buyer may reasonably desire, including a Phase
II environmental inspection, that includes sampling and report
(collectively, the "Physical Investigation and Review"). Any such
inspections and tests shall be performed at the sole cost of the
Buyer. The Buyer will not create or cause to be created any claim
against or Lien for third party contractors upon the properties,
nor otherwise impair Lady Luck's estate or unreasonably interfere
in any manner with the regular conduct or business upon the
properties. The Buyer shall repair
40
and restore to its original condition any portion of the
properties physically damaged, altered or disturbed as a result of
such inspections and shall indemnify and hold Lady Luck harmless
from any and all liability damage, claims or injury lawsuits
resulting from the acts or omissions of the Buyer, its employees,
agents or contractors related to such inspection of the
properties. The Buyer's obligations under this Section 6.3(d)
shall survive the termination of this Agreement;
(ii) Lady Luck shall, as promptly as practicable after the
execution of this Agreement, to the extent not previously provided
and to the extent in Lady Luck's possession or control, provide or
cause to be provided to the Buyer copies of all documents
reasonably related to the Physical Investigation and Review.
(e) No Material Adverse Change. No material adverse change shall
have occurred in the business, properties, condition (financial or
otherwise), prospects or results of operations of Lady Luck and its
Subsidiaries, taken as a whole, since the date of the Lady Luck Interim
Financial Statements other than any change arising out of, or resulting
from, general economic conditions in the United States or conditions
generally affecting the gaming industry in the United States.
ARTICLE VII
TERMINATION AND AMENDMENT
Section 7.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time (with respect to Sections 7.1(b) through 7.1(l), by
written notice by the terminating party to the other party), whether before or
after approval of the matters presented in connection with the Merger by the
stockholders of Lady Luck:
(a) by mutual written consent of Lady Luck and Buyer; or
(b) by either Buyer or Lady Luck if the Merger shall not have been
consummated by December 31, 2000 (the "Outside Date"); provided that
either Buyer or Lady Luck may extend the Outside Date to June 30, 2001
by providing written notice thereof to the other party between three
(3) and five (5) business days prior to and including December 31, 2000
if (i) the Merger shall not have been consummated by such date because
the requisite Governmental Approvals required under Section 6.1(c) (not
including the Nevada Approval) have not been obtained and are still
being pursued, (ii) the party requesting such extension has not
violated any of its obligations under this Agreement in a manner that
was the cause of or resulted in the failure of the Merger to occur on
or before December 31, 2000, and (iii) it is reasonably probable, based
on, among other things, the status of completed regulatory filings,
scheduled regulatory
41
meetings and the advice of regulatory counsel to such party, that
the requisite Governmental Approvals will be obtained within such
extension period; provided, further, that the right to terminate this
Agreement under this Section 7.1(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been
the cause or resulted in the failure of the Merger to occur on or
before such date; or
(c) by either Buyer or Lady Luck if a court of competent
jurisdiction or other Governmental Entity shall have issued an order,
decree or ruling or taken any other final action not subject to appeal,
in each case having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger; or
(d) by Buyer or Lady Luck, if, at the Lady Luck Special Meeting
(including any adjournment or postponement), the requisite vote of the
stockholders of Lady Luck in favor of the approval and adoption of this
Agreement and the Merger shall not have been obtained; or
(e) by Buyer, if the Board of Directors of Lady Luck shall have
(i) withdrawn or modified its recommendation of this Agreement or the
Merger, (ii) recommended an Acquisition Proposal to the stockholders of
Lady Luck, or (iii) failed to reaffirm its recommendation of this
Agreement and the Merger upon the request of Buyer at any time, in the
case of (i), (ii) and (iii) in accordance with the proviso in Section
5.3; or
(f) by Lady Luck, as a result of the exercise of fiduciary duties
by its Board of Directors in accordance with Section 5.3; provided that
no termination under this Section 7.1(f) shall be effective until (i)
the termination fee required by Section 7.3(b) shall be paid, and (ii)
at least three Business Days shall have elapsed after delivery to Buyer
of a written notice from Lady Luck providing a complete and accurate
description of material terms of the Superior Proposal, including the
identity of all parties thereto; or
(g) by Buyer, upon breach of any representation, warranty,
covenant or agreement on the part of Lady Luck set forth in this
Agreement, or if any representation or warranty of Lady Luck shall have
become untrue, in either case such that the conditions set forth in
Section 6.3(a) or Section 6.3(b) would not be satisfied ("Terminating
Lady Luck Breach"); provided, however, that, if such Terminating Lady
Luck Breach is curable by Lady Luck through reasonable best efforts
within 30 days and for so long as Lady Luck continues to exercise such
reasonable best efforts during such 30 day period, Buyer may not
terminate this Agreement under this Section 7.1(g); or
(h) by Lady Luck, upon breach of any representation, warranty,
covenant or agreement on the part of Buyer set forth in this Agreement,
or if any representation or warranty of Buyer shall have become untrue,
in either case such that the conditions set forth in Section 6.2 would
not be satisfied ("Terminating Buyer Breach"); provided,
42
however, that, if such Terminating Buyer Breach is curable by
Buyer through reasonable best efforts within 30 days and for so long as
Buyer continues to exercise such reasonable best efforts during such 30
day period, Lady Luck may not terminate this Agreement under this
Section 7.1(h); or
(i) by Buyer, if (A) any state gaming authority revokes any of
Lady Luck's licenses or permits to operate any of its casino river
boats, or (B) one or more gaming regulatory authorities imposes fines
or penalties against, or requires other payments by, Lady Luck and/or
any of its current or former directors, officers, employees, agents or
representatives (to the extent that Lady Luck is responsible for any
such fines, penalties or other payments and such fines, penalties or
other payments are not covered by insurance policies of Lady Luck)
relating to the actions of Lady Luck and/or its current or former
directors, officers, agents or representatives in an aggregate amount
or which impose restrictions upon operations in the case of (A) or (B),
as applicable, that would reasonably be expected to have a material
adverse effect on the business of any Lady Luck casino (with
materiality determined with respect to the enterprise value of such
business); or
(j) by Buyer, if a material adverse change as described in Section
6.3(e) has occurred; or
(k) by Lady Luck, if Buyer has not filed its initial applications
with the Mississippi, Iowa and Nevada gaming authorities in connection
with obtaining required approvals within 60 days after the date of this
Agreement; provided, however, that Lady Luck shall not be permitted to
terminate the Agreement pursuant to this Section 7.1(k) until it has
given Buyer 30 days' notice of its intent to terminate this Agreement
pursuant to this Section 7.1(k), setting forth the initial applications
that it believes have not been filed, or if Buyer has filed all such
initial applications and documents; or
(l) by Buyer, if Lady Luck has not filed any required applications
with the Mississippi, Iowa and Nevada gaming authorities in connection
with obtaining any approvals required for Lady Luck within 60 days
after the date of this Agreement; provided, however, that Buyer shall
not be permitted to terminate this Agreement pursuant to this Section
7.1(l) until it has given Lady Luck 30 days' notice of its intent to
terminate this Agreement pursuant to this Section 7.1(l), setting forth
the initial applications that it believes have not been filed, or if
Lady Luck has filed all such initial applications and documents; or
(m) by Buyer, if it is not satisfied with the Physical
Investigation and Review as described in Section 6.3(d).
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Section 7.2. Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of Buyer, Merger
Sub or Lady Luck, or their respective officers, directors, stockholders or
affiliates, except as set forth in Section 7.3, and except that such termination
shall not limit liability for a willful breach of this Agreement; provided that
the provisions of this Section 7.2 and Section 7.3 of this Agreement and the
Confidentiality Agreement shall remain in full force and effect and survive any
termination of this Agreement.
Section 7.3. Fees and Expenses.
(a) Except as set forth in this Section 7.3, all fees and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses,
whether or not the Merger is consummated. Fees and expenses payable
under this Section 7.3 to any party hereunder shall include all costs
of collection and interest from the date such payment is due at a rate
per annum of London Interbank Offered Rate plus 2%.
(b) Where an Acquisition Proposal exists or where an intention
(whether or not conditional) to make an Acquisition Proposal has been
communicated to Lady Luck or shall have been communicated directly to a
director, Lady Luck's counsel or financial advisors, Lady Luck shall
pay Buyer a termination fee of $2,500,000 via wire transfer of same-day
funds on the date of the earliest to occur one of the following events:
(i) the termination of this Agreement by Buyer or Lady Luck
pursuant to Section 7.1(d) provided the Acquisition Proposal has
been communicated to stockholders of Lady Luck generally;
(ii) the termination of this Agreement by Buyer pursuant to
Section 7.1(e); or
(iii) the termination of this Agreement by Lady Luck pursuant
to Section 7.1(f).
Lady Luck's payment of a termination fee pursuant to this
subsection shall be the sole and exclusive remedy of Buyer against Lady
Luck and any of its Subsidiaries and their respective directors,
officers, employees, agents, advisors or other representatives with
respect to the occurrences giving rise to such payment; provided that
this limitation shall not apply in the event of a willful breach of
this Agreement by Lady Luck.
(c) In addition to the provisions of Section 7.3(b), if (i) Buyer
or Lady Luck terminates this Agreement pursuant to Section 7.1(d), (ii)
Buyer terminates this Agreement pursuant to Section 7.1(g) or Section
7.1(l), (iii) Lady Luck or Buyer
44
terminates this Agreement pursuant to Section 7.1(b) and the
condition specified in Section 6.1(c) shall not have been satisfied
because of facts or circumstances relating to Lady Luck, its employees
or operations, or (iv) Buyer terminates this Agreement pursuant to
Section 7.1(j), Lady Luck shall immediately thereafter reimburse Buyer
and Merger Sub all fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby plus, in the case of
(ii) or (iii) above, a termination fee of $1,500,000.
(d) If (i) Lady Luck terminates this Agreement pursuant to Section
7.1(h) or Section 7.1(k) or (ii) Lady Luck or Buyer terminates this
Agreement pursuant to Section 7.1(b) and the condition specified in
Section 6.1(c) shall not have been satisfied because of facts or
circumstances relating to Buyer, its employees or operations, Buyer
shall immediately thereafter reimburse Lady Luck all fees and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby plus a termination fee of $1,500,000.
Section 7.4. Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of Lady Luck; but, after any such approval, no
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 7.5. Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed (i) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, and (iii) waive
compliance with any of the agreements or conditions contained here. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Nonsurvival of Representations, Warranties, Covenants and
Agreements. None of the representations, warranties, covenants and agreements in
this Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for the agreements contained in Sections 1.4,
1.5, 1.6, 1.7, 2.1, 2.2, 2.3, 2.4, 5.9, 5.11, 5.14 and the last sentence Section
6.3(d)(i) and Article VIII. The Confidentiality Agreement shall survive the
execution and delivery of this Agreement.
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Section 8.2. Notices. Any and all notices, demands or other
communications required or desired to be given hereunder by any party shall be
in writing and shall be validly given or made to another party if served
personally, or by facsimile or air courier, or deposited in the United States
mail, certified or registered, postage prepaid, return receipt requested. If
such notice, demand or other communications be served personally, or by
facsimile or air courier, service shall be conclusively deemed made at the time
of such service. If such notice, demand or other communications be given by
mail, it shall be conclusively deemed given three (3) days after the deposit
thereof in the United States mail, addressed to the party to whom such notice,
demand or other communication is to be given as hereinafter set forth:
(a) if to Lady Luck, to:
Lady Luck Gaming Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
with a copy to:
▇▇▇▇▇▇▇ Berlin Shereff ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
(b) if to Buyer or Merger Sub, to:
Isle of Capri Casinos, Inc.
711 ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇. Boulevard
Biloxi, Mississippi 39530
Attention: Chief Executive Officer
with copies to:
Isle of Capri Casinos, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
46
▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Section 8.3. Interpretation. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
phrases "the date of this Agreement," "the date hereof," and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to
October 5, 1999.
Section 8.4. Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section 8.5. Entire Agreement; No Third Party Beneficiaries. This
Agreement and all documents and instruments referred to herein (a) constitute
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (b) except as provided in Section 5.9, are not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder;
provided that the Confidentiality Agreements shall survive the execution and
delivery of this Agreement. Each party hereto agrees that, except for the
representations and warranties contained in this Agreement, none of Buyer,
Merger Sub or Lady Luck makes any other representations or warranties, and each
hereby disclaims any other representations and warranties made by itself or any
of its officers, directors, employees, agents, financial and legal advisors or
other representatives, with respect to the execution and delivery of this
Agreement or the transactions contemplated hereby, notwithstanding the delivery
or disclosure to any of them or their respective representatives of any
documentation or other information with respect to any one or more of the
foregoing.
Section 8.6. Governing Law. This Agreement shall be governed by and
construed, and the obligations, rights and remedies of the parties hereunder
shall be determined, in accordance with the laws of the State of Delaware
without reference to the conflicts of law or choice of law doctrine of such
state.
47
Section 8.7. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party, except that Merger Sub may assign its rights and
obligations hereunder to any direct or indirect wholly-owned subsidiary of
Buyer; provided that no such assignment shall relieve Buyer of its obligations
hereunder. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
Section 8.8. Severability; Enforcement. Except to the extent that the
application of this Section 8.8 would have a Buyer Material Adverse Effect with
respect to Buyer or a Lady Luck Material Adverse Effect with respect to Lady
Luck, the invalidity of any portion hereof shall not affect the validity, force
or effect of the remaining portions hereof. If it is ever held that any covenant
hereunder is too broad to permit enforcement of such covenant to its fullest
extent, each party agrees that a court of competent jurisdiction may enforce
such covenant to the maximum extent permitted by law, and each party hereby
consents and agrees that such scope may be judicially modified accordingly in
any proceeding brought to enforce such covenant.
Section 8.9. Specific Performance. Except as provided in Section
7.3(b), the parties hereto agree that the remedy at law for any breach of this
Agreement will be inadequate and that any party by whom this Agreement is
enforceable shall be entitled to specific performance in addition to any other
appropriate relief or remedy. Such party may, in its sole discretion, apply to a
court of competent jurisdiction for specific performance or injunctive or such
other relief as such court may deem just and proper in order to enforce this
Agreement or prevent any violation hereof and, to the extent permitted by
applicable laws, each party hereto waives any objection to the imposition of
such relief.
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IN WITNESS WHEREOF, Isle of Capri Casinos, Inc., Isle Merger Corp. and
Lady Luck Gaming Corporation have caused this Agreement to be signed by their
respective duly authorized officers as of the date first written above.
ISLE OF CAPRI CASINOS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Its: Executive Vice President,
General Counsel and Secretary
ISLE MERGER CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Its: Executive Vice President,
General Counsel and Secretary
LADY LUCK GAMING CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
Its: Senior Vice President
49