EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 10, 2003
BY AND AMONG
▇▇▇▇▇▇'▇ ENTERTAINMENT, INC.,
HORSESHOE GAMING HOLDING CORP.
AND
EACH OF THE STOCKHOLDERS OF HORSESHOE GAMING HOLDING CORP.
TABLE OF CONTENTS
PAGE
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ARTICLE I. SALE AND TRANSFER OF SHARES; CLOSING................................................................ 1
Section 1.1 Basic Transaction................................................................... 1
Section 1.2 Closing............................................................................. 1
Section 1.3 Purchase Price...................................................................... 1
Section 1.4 Indemnification Escrow.............................................................. 4
Section 1.5 Deposit; Severance Escrow........................................................... 5
Section 1.6 Allocation of Purchase Price and Determination of Sellers' Tax Cost................. 5
Section 1.7 Closing Deliveries.................................................................. 6
ARTICLE II. EFFECT OF THE CLOSING ON OPTIONS OF THE COMPANY.................................................... 7
Section 2.1 The Company Equity Plans............................................................ 7
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................................... 8
Section 3.1 Organization of the Company and its Subsidiaries.................................... 8
Section 3.2 Capitalization...................................................................... 9
Section 3.3 Authority; No Conflict; Required Filings and Consents............................... 10
Section 3.4 Public Filings; Financial Statements................................................ 11
Section 3.5 No Undisclosed Liabilities.......................................................... 12
Section 3.6 Absence of Certain Changes or Events................................................ 12
Section 3.7 Taxes............................................................................... 13
Section 3.8 Real Property....................................................................... 16
Section 3.9 Title to Personal Property; Liens................................................... 18
Section 3.10 Intellectual Property............................................................... 19
Section 3.11 Agreements, Contracts and Commitments............................................... 19
Section 3.12 Litigation.......................................................................... 20
Section 3.13 Environmental Matters............................................................... 21
Section 3.14 Employee Benefit Plans.............................................................. 22
Section 3.15 Labor and Other Employment Matters.................................................. 25
Section 3.16 Compliance with Gaming Laws......................................................... 27
Section 3.17 Insurance........................................................................... 27
Section 3.18 Delaware Takeover Statute........................................................... 28
Section 3.19 Brokers............................................................................. 28
Section 3.20 Transactions With Affiliates........................................................ 28
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLERS.......................................................... 28
Section 4.1 Organization of Certain Sellers..................................................... 28
Section 4.2 Authority........................................................................... 28
Section 4.3 No Conflict; Required Filings and Consents.......................................... 29
Section 4.4 Brokers............................................................................. 29
Section 4.5 The Shares.......................................................................... 29
i
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT............................................................ 30
Section 5.1 Organization........................................................................ 30
Section 5.2 Authority; No Conflict; Required Filings and Consents............................... 30
Section 5.3 Brokers............................................................................. 31
ARTICLE VI. COVENANTS.......................................................................................... 31
Section 6.1 Conduct of Business of the Company.................................................. 31
Section 6.2 Cooperation; Notice; Cure........................................................... 35
Section 6.3 No Solicitation..................................................................... 35
Section 6.4 Access to Information............................................................... 36
Section 6.5 Governmental Approvals.............................................................. 37
Section 6.6 Public Announcements................................................................ 39
Section 6.7 Indemnification of Officers and Directors of Parent................................. 40
Section 6.8 Further Assurances and Actions...................................................... 40
Section 6.9 Section 338(h)(10) Election......................................................... 40
Section 6.10 Preparation and Filing of Tax Returns; Payment of Taxes............................. 41
Section 6.11 Cooperation on Tax Matters.......................................................... 42
Section 6.12 Transfer Taxes...................................................................... 43
Section 6.13 Refunds of Income Taxes............................................................. 43
Section 6.14 Q Sub Election...................................................................... 43
Section 6.15 Tax Reporting....................................................................... 43
Section 6.16 Employee Matters.................................................................... 44
Section 6.17 Insurance........................................................................... 45
ARTICLE VII. CONDITIONS TO CLOSING............................................................................. 46
Section 7.1 Conditions to Each Party's Obligation to Effect the Closing......................... 46
Section 7.2 Additional Conditions to Obligations of the Company................................. 46
Section 7.3 Additional Conditions to Obligations of Parent...................................... 47
ARTICLE VIII. TERMINATION AND AMENDMENT........................................................................ 48
Section 8.1 Termination......................................................................... 48
Section 8.2 Effect of Termination............................................................... 49
ARTICLE IX. SURVIVAL; INDEMNIFICATION.......................................................................... 50
Section 9.1 Survival of Representations, Warranties, Covenants and Agreements................... 50
Section 9.2 Indemnification..................................................................... 51
Section 9.3 Procedure for Claims between Parties................................................ 54
Section 9.4 Defense of Third Party Claims....................................................... 55
Section 9.5 Resolution of Conflicts and Claims.................................................. 56
Section 9.6 Limitations on Indemnity............................................................ 56
Section 9.7 Payment of Damages.................................................................. 57
Section 9.8 Sellers' Representative............................................................. 57
Section 9.9 Exclusive Remedy.................................................................... 59
Section 9.10 No Environmental Contribution....................................................... 59
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ARTICLE X. MISCELLANEOUS....................................................................................... 59
Section 10.1 Sellers Release..................................................................... 59
Section 10.2 Certain Definitions................................................................. 60
Section 10.3 Notices............................................................................. 66
Section 10.4 Interpretation...................................................................... 67
Section 10.5 Headings............................................................................ 67
Section 10.6 Entire Agreement; No Third Party Beneficiaries...................................... 68
Section 10.7 Severability........................................................................ 68
Section 10.8 Assignment.......................................................................... 68
Section 10.9 Parties of Interest................................................................. 68
Section 10.10 Mutual Drafting..................................................................... 68
Section 10.11 Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury..................... 68
Section 10.12 Counterparts........................................................................ 69
Section 10.13 Strict Performance.................................................................. 70
Section 10.14 Amendment........................................................................... 70
Section 10.15 Extension; Waiver................................................................... 70
EXHIBITS
Exhibit A Sellers
Exhibit B-1 Adjustment Escrow Agreement
Exhibit B-2 Indemnification Escrow Agreement
Exhibit B-3 Deposit Escrow Agreement
Exhibit B-4 Severance Escrow Agreement
Exhibit C Non-Competition
Exhibit D License Agreement
SCHEDULES
Schedule 1.3(a)(iii) Capital Expenditures
Schedule 1.3(b) Sellers' Representative Certificate
Schedule 1.7(a)(ii) Resigning Directors and Officers
Schedule 2.1 Equity Spreads
Schedule 3.7(d) Reference Balance Sheet
Schedule 6.16(c) Employees with payments due under Retention Bonus Plan
Schedule 6.16(d) Employees with Executive Severance Agreements
Schedule 7.3(d) Consents, Approvals and Authorizations
Schedule 9.2(a) Seller Indemnifying Parties
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TABLE OF DEFINED TERMS
CROSS REFERENCE
TERMS IN AGREEMENT
----- ------------
8.625% Indenture Section 10.2
AAA Section 9.5(b)
Actuarial Report Section 6.17(a)
Acquired Companies Section 10.2
Acquisition Proposal Section 6.3(a)
Adjustment Escrow Section 1.3(e)
Adjustment Escrow Agreement Section 1.3(e)
Affiliate Section 10.2
Agreement Preamble
Ancillary Agreement Section 10.2
Argosy Agreement Section 3.7(j)
Auditor Section 1.3(e)
Beginning of the Closing Gaming Day Section 10.2
Bossier Casino Section 10.2
Bossier Corp. Section 3.7(a)
Budget Section 6.1
Cap Section 9.6
Capital Expenditure Amount Section 1.3(a)
Cash Adjustment Amount Section 10.2
Casino Properties Section 6.1
CCPI Section 3.7(b)
Claim Section 10.1(a)
Closing Section 1.2
Closing Balance Sheet Section 1.3(e)
Closing Date Section 1.2
Closing Payment Section 1.3(d)
Code Section 10.2
Company Preamble
Company Benefit Plans Section 3.14(a)
Company Board Section 2.1
Company Class A Common Stock Section 3.2(a)
Company Class B Common Stock Section 3.2(a)
Company Common Stock Section 3.2(a)
Company Disclosure Letter Article III
Company Equity Plans Section 2.1
Company Gaming Laws Section 10.2
Company Leased Property Section 3.8(a)
Company Material Adverse Effect Section 10.2
Company Material Contracts Section 10.2
Company Owned Property Section 3.8(a)
Company Pension Plans Section 3.14(a)
Company Permits Section 3.16(a)
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CROSS REFERENCE
TERMS IN AGREEMENT
----- ------------
Company Real Property Section 3.8(a)
Company SEC Reports Section 3.4(a)
Company Welfare Plans Section 3.14(a)
Confidentiality Agreement Section 6.4(b)
Contract Section 10.2
D&O Indemnified Parties Section 6.7(a)
Damages Section 9.2(a)
Deferred Compensation Plan Section 6.16(e)
Deposit Section 1.5(a)
Deposit Escrow Account Section 1.5(a)
DGCL Section 3.18
Dispute Notice Section 1.3(e)
Disregarded Subsidiary Section 10.2
Domestic Corporate Subsidiary Section 10.2
Encumbrances Section 10.2
Environmental Laws Section 10.2
Environmental Permits Section 10.2
Equity Interest Section 10.2
Equity Spreads Section 2.1
ERISA Section 3.14(a)
ERISA Affiliate Section 3.14(a)
Escrow Agent Section 1.3(e)
Estimated Transaction Consideration Section 1.3(d)
Exchange Act Section 3.4(a)
Executive Severance Agreements Section 10.2
Final Allocation Section 1.6(b)
Final Closing Balance Sheet Section 1.3(e)
First Release Date Section 1.4
GAAP Section 3.4(b)
Gaming Authorities Section 10.2
Governmental Entity Section 3.3(c)
▇▇▇▇▇▇▇ Casino Section 10.2
Hammond Development Agreement Section 10.2
Hammond Expansion Project Section 6.1
Hammond License Agreement Section 10.2
Hammond Payments Section 1.3(a)
▇▇▇▇▇▇▇ Tax Indemnification Agreement Section 3.7(j)
Hazardous Substances Section 10.2
Horseshoe Employee Section 6.16(c)
Horseshoe License Section 3.1
HSR Act Section 3.3(c)
Income Tax Section 10.2
Income Tax Return Section 10.2
Indebtedness Section 10.2
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CROSS REFERENCE
TERMS IN AGREEMENT
----- ------------
Indemnification Escrow Agreement Section 1.4
Indemnification Escrow Section 1.4
Indemnified Parties Section 9.2(a)
Indemnifying Parties Section 9.2(a)
Insurance Policies Section 3.17
Intellectual Property Section 10.2
Intellectual Property License Agreement Section 3.10
IRS Section 10.2
"knowledge" Section 10.2
Law Section 10.2
Lease Documents Section 3.8(c)
Liabilities Section 10.2
License Agreement Section 1.7(a)
Liens Section 3.9
Material Intellectual Property Section 3.10
Multiemployer Plan Section 3.14(c)
Non-Competition Agreement Section 1.7(a)
Non-Income Tax Section 10.2
Non-Income Tax Return Section 10.2
Notice Section 9.3
Objection Notice Section 9.5(a)
Options Section 2.1
Organizational Documents Section 3.1
Outside Date Section 8.1(b)
Parent Preamble
Parent Gaming Laws Section 10.2
Parent Material Adverse Effect Section 10.2
Parent Plan Section 6.16(c)
Participant Section 6.16(e)
Partnership Subsidiary Section 10.2
Per Diem Taxes Section 9.2(b)
Person Section 3.10
Pre-Closing Tax Period Section 10.2
Post-Closing Tax Period Section 10.2
Proposed Allocation Section 1.6(a)
Red Oak Section 6.17(a)
Reference Balance Sheet Section 3.7(d)
Regulatory Conditions Section 8.1(b)
Releasee Section 10.1(a)
Releasor Section 10.1(a)
Representatives Section 6.3(a)
Retention Bonus Plan Section 10.2
SARs Section 2.1
SEC Section 10.2
vi
CROSS REFERENCE
TERMS IN AGREEMENT
----- ------------
Second Release Date Section 1.4
Section 338 Elections Section 6.9(a)
Section 338 Forms Section 6.9(b)
Securities Act Section 3.4(a)
Seller Disclosure Letter Article IV
Sellers Preamble
Sellers Majority Section 9.8(a)
Sellers' Representative Section 9.8(a)
Sellers' Representative Certificate Section 1.3(b)
Sellers' Tax Cost Section 10.2
Settlement Agreements Section 3.16(b)
Severance Escrow Section 1.5(b)
Severance Escrow Agreement Section 1.5(b)
Severance Escrow List Section 6.16(d)
Shares Preamble
Stockholders Agreement Section 3.2(b)
Straddle Period Section 10.2
Subsidiary Section 10.2
Survey Section 3.8(b)
Tax Claim Section 9.2(b)
Taxes Section 10.2
Tax Period Section 10.2
Tax Return Section 10.2
Third Party Claim Section 9.4
Threshold Section 9.6
Title Policies Section 3.8(b)
Total Transaction Consideration Section 1.3(a)
Transfer Taxes Section 10.2
Tunica Casino Section 10.2
Tunica CC&R's Section 10.2
VEBAs Section 3.14(a)
vii
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of September 10,
2003, by and among ▇▇▇▇▇▇'▇ ENTERTAINMENT, INC., a Delaware corporation
("Parent"), those parties listed on Exhibit A hereto (each, a "Seller" and,
collectively, the "Sellers") and HORSESHOE GAMING HOLDING CORP., a Delaware
corporation (the "Company").
WHEREAS, the Sellers are the owners of all the outstanding shares of Class
A Common Stock and Class B Common Stock of the Company (collectively, the
"Shares"); and
WHEREAS, the Sellers desire to sell, and Parent desires to purchase, the
Shares for the consideration and on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I.
SALE AND TRANSFER OF SHARES; CLOSING
Section 1.1 Basic Transaction. On the terms and subject to conditions of
this Agreement, Parent agrees to purchase from each Seller, and each Seller
agrees to sell to Parent, all of his, hers or its Shares for the consideration
specified below in this Article I.
Section 1.2 Closing. Unless this Agreement has been terminated pursuant to
Section 8.1, upon the terms and subject to the conditions set forth in this
Agreement, the purchase and sale of the Shares (the "Closing") shall take place
at 10:00 a.m., California time, on the third business day after the satisfaction
or (to the extent permitted by applicable law and this Agreement) waiver of the
conditions set forth in Article VII (other than those conditions to be satisfied
or waived at the Closing), at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other time,
date or place agreed to in writing by Parent and the Company. The date on which
the Closing occurs is referred to in this Agreement as the "Closing Date."
Section 1.3 Purchase Price.
(a) Transaction Consideration. The Sellers shall collectively be entitled
to a total transaction consideration equal to (i) $915,000,000, plus (ii) the
Cash Adjustment Amount, plus (iii) the aggregate amount of cash expended by the
Company and its Subsidiaries on or after the date hereof and up to the Beginning
of the Closing Gaming Day in accordance with the Budget for capital improvement
expenditures in respect of the ▇▇▇▇▇▇▇ Expansion Project (the "▇▇▇▇▇▇▇
Payments") and capital improvement expenditures at the Casino Properties, in
each case, which are listed on Schedule 1.3(a)(iii) and other growth oriented
capital expenditures that Parent has consented to in writing between the date
hereof and the Beginning of the Closing Gaming Day (together with the ▇▇▇▇▇▇▇
Payments, the "Capital Expenditure Amount") plus (iv) the Sellers' Tax Cost (the
"Total Transaction Consideration").
1
(b) Allocation. The Total Transaction Consideration, when and as received,
less the Equity Spreads, the Sellers' Tax Cost and the Severance Escrow, shall
be allocated among the Sellers holding Shares of Class A Common Stock and/or
Class B Common Stock on an equal per share basis, as evidenced by a certificate
signed by the Sellers' Representative in the form set forth as Schedule 1.3(b)
hereto (the "Sellers' Representative Certificate"), certifying as to the
allocation of the Total Transaction Consideration. The Sellers' Tax Cost that is
attributable to a Seller shall be allocated to such Seller.
(c) Equity Spreads. The holders of Options and SARs shall collectively be
entitled to the Equity Spreads and in the amount set forth on Schedule 2.1. The
Equity Spreads shall be allocated among the holders of Options and SARs based on
the equity spread for each such Option or SAR, as evidenced by the Sellers'
Representative Certificate (subject to Section 2.1 hereof). The amount of the
Equity Spreads are included within the Total Transaction Consideration and
nothing in this Agreement shall be interpreted to require Parent to make an
additional payment to the holders of SARs and/or Options.
(d) Estimated Transaction Consideration. For purposes of the Closing,
Parent shall, after consultation with the Company, make a good-faith estimate
(the "Estimated Transaction Consideration") of the Total Transaction
Consideration based on (i) the estimated amounts of (A) the Cash Adjustment
Amount after a review of the most recent ascertainable financial information of
the Company and its Subsidiaries presented by the Company three (3) business
days prior to the Closing Date and (B) the Capital Expenditure Amount for which
detailed records and a reconciliation to Schedule 1.3(a)(iii) are presented by
the Company and (ii) the Sellers' Tax Cost (as determined pursuant to Sections
1.6(a) and (c)). The Estimated Transaction Consideration minus the
Indemnification Escrow, the Severance Escrow and the Adjustment Escrow is
referred to herein as the "Closing Payment."
(e) Adjustment Escrow and Determination of Total Transaction
Consideration.
(i) Prior to the Closing, Parent shall appoint a bank or trust
company or other entity reasonably satisfactory to the Company to act as the
escrow agent (the "Escrow Agent") and on the Closing Date, each of Parent and
the Sellers' Representative shall execute and deliver an escrow agreement in
substantially the form attached hereto as Exhibit B-1 (the "Adjustment Escrow
Agreement"). On the Closing Date, an amount equal to twenty percent (20%) of the
estimated (A) Cash Adjustment Amount, (B) Capital Expenditure Amount and (C)
Sellers' Tax Cost included in the calculation of the Estimated Transaction
Consideration (said aggregate amount, is referred to as the "Adjustment Escrow")
shall be deposited by Parent with the Escrow Agent to be held in trust in
accordance with the Adjustment Escrow Agreement and the further provisions of
this Section 1.3(e).
(ii) Not later than thirty (30) calendar days after the Closing
Date, Parent shall prepare and deliver to the Sellers' Representative a
consolidated balance sheet of the Company and its Subsidiaries dated as of the
Closing Date (the "Closing Balance Sheet"), which shall set forth the Cash
Adjustment Amount and the Capital Expenditure Amount as of the Beginning of the
Closing Gaming Day. The Closing Balance Sheet shall be prepared in accordance
with GAAP, as applied in preparation of the Reference Balance Sheet, and in all
other respects consistent with the Reference Balance Sheet.
2
(iii) If Sellers' Representative agrees with the Cash Adjustment
Amount and the Capital Expenditure Amount as set forth on the Closing Balance
Sheet, then the Closing Balance Sheet as prepared by Parent shall be the final
and binding consolidated balance sheet of the Company and its Subsidiaries dated
as of the Closing Date (the "Final Closing Balance Sheet"). If Sellers'
Representative disagrees with the Cash Adjustment Amount or the Capital
Expenditure Amount as set forth on the Closing Balance Sheet, it shall notify
Parent of such disagreement in writing specifying in detail the amount of such
disagreement, the item or items disagreed with and the financial records or
information supporting his or her position (the "Dispute Notice") within thirty
(30) calendar days after receipt of the Closing Balance Sheet by the Sellers'
Representative. Parent and the Sellers' Representative shall use their
reasonable best efforts for a period of thirty (30) calendar days after Parent's
receipt of the Dispute Notice (or such longer period as Parent and Sellers'
Representative shall mutually agree upon) to resolve any disputes raised by
Sellers' Representative with respect to the calculation of the Cash Adjustment
Amount or the Capital Expenditure Amount, as applicable, as set forth on the
Closing Balance Sheet, and Sellers' Representative and Parent shall provide
information to the other party (as reasonably requested) related to the items of
disagreement set forth in the Dispute Notice, and Sellers' Representative and
its agents shall have all reasonable rights of access to the corporate records
of the Company and its Subsidiaries. If, at the end of such thirty-day period,
Parent and Sellers' Representative are unable to resolve such disagreements, the
Sellers' Representative and Parent jointly shall select an independent auditor
of recognized national standing (who is not rendering, and during the preceding
two (2) year period has not rendered, services to the Company or Parent or any
of their respective Affiliates) to resolve any remaining disagreements. If the
Sellers' Representative and Parent are unable to jointly select such independent
auditor within ten (10) calendar days after such thirty-day period, each party
shall select an independent auditor of recognized national standing and each
such selected independent auditor shall select a third independent auditor of
recognized national standing (who is not rendering, and during the preceding two
(2) year period has not rendered, services to the Company or Parent or any of
their respective Affiliates) (such selected independent auditor whether pursuant
to this or the preceding sentence, the "Auditor"). In connection with the
resolution of any dispute regarding the Final Closing Balance Sheet, each
Auditor shall have access to all documents, records, workpapers, facilities and
personnel reasonably necessary to perform its function as the Auditor. Parent
and the Sellers' Representative shall use their reasonable best efforts to cause
the Auditor to make its determination within thirty (30) calendar days of its
selection. The determination by the Auditor of the Final Closing Balance Sheet
shall be final, binding and conclusive on the parties. The fees and expenses of
the Auditor shall be borne by Parent and Sellers equally.
(iv) Within five (5) calendar days of the determination of the Total
Transaction Consideration (including Sellers' Tax Cost as determined pursuant to
Sections 1.6(b) and (c)):
(A) if the Total Transaction Consideration is in excess of the
Estimated Transaction Consideration, then (i) the Escrow Agent shall disburse
the funds held in the Adjustment Escrow to the Sellers and (ii) Parent shall
promptly pay the difference of the Total Transaction Consideration over the
Estimated Transaction Consideration to the Sellers; or
3
(B) if the Total Transaction Consideration is less than the
Estimated Transaction Consideration, then (i) the Escrow Agent shall pay the
difference between the Estimated Transaction Consideration and the Total
Transaction Consideration to Parent in accordance with the terms of the
Adjustment Escrow Agreement, (ii) the Escrow Agent shall disburse the remaining
balance, if any, of the Adjustment Escrow to Sellers and (iii) if there shall be
no remaining balance in the Adjustment Escrow and there shall be a deficiency
due to Parent, then the deficiency, if any, of (1) the difference between the
Estimated Transaction Consideration and the Total Transaction Consideration less
(2) the Adjustment Escrow, shall be paid promptly by the Sellers' Representative
to Parent.
In determining the amount to be paid to each Seller or each Seller's share
of the amount to be paid to Parent pursuant to this Section 1.3(e)(iv), due
effect will be given to each Seller's specific allocable share of the Sellers'
Tax Cost as determined pursuant to Sections 1.3(b) and 1.6.
(v) All payments to be made to Sellers pursuant to this Section 1.3
shall be made by wire transfer of immediately available funds to an account
designated by the Sellers' Representative and shall be allocated among the
Sellers as provided in Section 1.3(b). All payments to be made to Parent
pursuant to this Section 1.3 shall be made by wire transfer of immediately
available funds to an account designated by Parent.
Section 1.4 Indemnification Escrow. On the Closing Date, each of Parent
and the Sellers' Representative shall execute and deliver an escrow agreement in
substantially the form attached hereto as Exhibit B-2 (the "Indemnification
Escrow Agreement"). On the Closing Date, Parent shall deposit with the Escrow
Agent a portion of the Total Transaction Consideration otherwise payable to the
Sellers at the Closing equal to $91,500,000 (the "Indemnification Escrow"). The
Indemnification Escrow shall be held by the Escrow Agent pursuant to the terms
of the Indemnification Escrow Agreement. Pursuant to the Indemnification Escrow
Agreement, the Indemnification Escrow shall be released by the Escrow Agent as
follows:
(i) On the first anniversary of the Closing Date (the "First Release
Date"), in accordance with the terms of the Indemnification Escrow Agreement,
the Escrow Agent shall release from the Indemnification Escrow and pay to the
Sellers' Representative an amount equal to seventy-five percent (75%) of the
Indemnification Escrow minus any amounts of any indemnity claims made pursuant
to Article IX (whether or not such indemnity claims have been determined to be
valid) as of such First Release Date, which amount shall be distributed by the
Sellers' Representative to the Sellers on an equal per share basis; and
(ii) On the second anniversary of the Closing Date (the "Second
Release Date"), in accordance with the terms of the Indemnification Escrow
Agreement, the Escrow Agent shall release and pay to the Sellers' Representative
all remaining amounts then contained in the Indemnification Escrow minus any
amounts of any indemnity claims made pursuant to Article IX (whether or not such
indemnity claims have been determined to be valid) as of such Second Release
Date, which amount shall be distributed by the Sellers' Representative to the
Sellers on an equal per share basis. To the extent the Sellers' Representative
disagrees with the amounts determined under clauses (i) and (ii), the dispute
shall be submitted to mediation pursuant to Section 9.5. A portion of the
balance of the amounts remaining in the
4
Indemnification Escrow shall be paid to the Sellers' Representative as each
claim remaining after the Second Release Date is resolved, with the portion to
be repaid being equal to the amount retained in the Indemnification Escrow in
respect of the resolved claim. At such time as all remaining claims have been
resolved, all remaining amounts in the Indemnification Escrow shall be released
and paid to the Sellers' Representative.
Section 1.5 Deposit; Severance Escrow.
(a) Upon execution of this Agreement, Parent shall deposit $75,000,000
(the "Deposit") with the Escrow Agent pursuant to an escrow agreement in
substantially the form attached hereto as Exhibit B-3 (the "Deposit Escrow
Agreement") executed and delivered by each of Parent and the Sellers'
Representative. The Deposit shall be payable, in full or in part, to the Company
as set forth in Sections 8.2(e) and (f), if applicable. Upon the Closing or
termination of this Agreement in a manner which does not result in the full or
partial payment of the Deposit to the Company pursuant to Section 8.2(e) or (f),
the Deposit or the balance thereof, as applicable, shall be released to Parent
promptly pursuant to the terms of the Deposit Escrow Agreement.
(b) At the Closing, Parent shall deposit a portion of the Total
Transaction Consideration otherwise payable to the Sellers at the Closing equal
to $22,821,532 (the "Severance Escrow") with the Escrow Agent pursuant to an
escrow agreement in substantially the form attached hereto as Exhibit B-4 (the
"Severance Escrow Agreement") executed and delivered by each of Parent and the
Sellers' Representative (provided that to the extent the amount to be paid to
employees pursuant to the Retention Bonus Plan and the Executive Severance
Agreements, as calculated on the Closing Date, increases as a result of
increases in employee compensation prior to Closing (as permitted by Section
6.1(v)), then the amount of the Severance Escrow shall be correspondingly
increased). The Severance Escrow shall be released to Parent or Sellers'
Representative for the benefit of, and distribution to, the beneficiaries of the
Severance Escrow as set forth in Section 6.16(c) and (d) promptly pursuant to
the terms of the Severance Escrow Agreement.
Section 1.6 Allocation of Purchase Price and Determination of Sellers' Tax
Cost.
(a) At least thirty (30) calendar days prior to the Closing Date, Parent
shall prepare a proposed determination of the ADSP (as defined in applicable
Treasury Regulations under Section 338) and allocation of the ADSP to the assets
of the Company (and among the assets of the Acquired Companies, where
applicable) and other relevant items (the "Proposed Allocation") and shall
deliver the Proposed Allocation, along with a copy of the appraisals, if any, on
which such Proposed Allocation is based, to the Sellers' Representative. Parent
and the Sellers' Representative each agrees to consult in good faith with regard
to the proposed determination of the ADSP and the Proposed Allocation, provided
that the Sellers' Representative shall accept Parent's final determination of
the ADSP and the Proposed Allocation, to the extent that the ADSP and Proposed
Allocation are reasonable and consistent with applicable Law. At least fifteen
(15) calendar days prior to the Closing Date, the Sellers' Representative will
provide to the Parent a schedule illustrating the calculation of the Sellers'
Tax Cost, determined in a manner consistent with the Proposed Allocation. Parent
and the Sellers' Representative each agrees to consult in good faith with regard
to the calculation of the Sellers' Tax Cost; provided that Parent shall accept
Seller's Representative's determination of the aggregate and each individual
Sellers'
5
Tax Cost to the extent that such determination is reasonable and consistent with
applicable Law and the principles set forth in the definition of "Sellers' Tax
Cost" provided herein.
(b) Within ten (10) business days after delivery of the Final Closing
Balance Sheet, Parent shall deliver to the Sellers' Representative a schedule
illustrating any adjustments to the Proposed Allocation that are required as a
result of the Final Closing Balance Sheet and the actual amount of ADSP at the
Closing. The parties hereto agree to consult in good faith regarding any
proposed adjustments to the Proposed Allocation; provided that the Sellers'
Representative shall accept any such adjustments to the extent that such
adjustments are reasonable and consistent with applicable Law (the Proposed
Allocation, when finally accepted, shall be the "Final Allocation"). Within five
(5) business days of the Sellers' Representative's acceptance of the Final
Allocation, the Sellers' Representative shall prepare a schedule finalizing the
Sellers' Tax Cost based upon the Final Allocation and calculated in a manner
consistent with the calculation of the Sellers' Tax Cost made pursuant to
Section 1.6(a). The parties hereto agree to consult in good faith with each
other regarding any proposed adjustments to the Sellers' Tax Cost; provided,
however, Parent shall accept the final aggregate and each final individual
Sellers' Tax Cost as prepared by the Sellers' Representative to the extent such
determination is reasonable and consistent with applicable Law and the
principles set forth in the definition of "Sellers' Tax Cost" provided herein.
Once the parties agree on the calculation of the Sellers' Tax Cost pursuant to
this Section 1.6(b), the calculation shall be final, and there shall not be any
further payments made between the parties relating to the Sellers' Tax Cost
other than made pursuant to Section 1.3(e)(iv).
(c) Notwithstanding the foregoing, Parent and Sellers agree that the
portion of the ADSP that will be allocated in the Proposed Allocation and the
Final Allocation to each asset in Classes I - V (as described in the Treasury
Regulations) shall be the Acquired Companies' adjusted tax basis of such asset
on the Closing Date.
Section 1.7 Closing Deliveries.
(a) Sellers will deliver to Parent on the Closing Date:
(i) certificates representing all of the Shares, duly endorsed in
blank (or accompanied by duly executed stock powers), with signatures guaranteed
by a commercial bank, for transfer to Parent;
(ii) the resignations as the directors and officers of the Company
and each of its Subsidiaries of the persons named on Schedule 1.7(a)(ii);
(iii) the certificates required by Sections 7.3(a), (b) and (c);
(iv) Section 338 Forms, duly completed and executed by each of the
Sellers;
(v) (a) an IRS Form W-9 for each of the Sellers, duly completed and
executed; (b) a statement executed by each Seller, in form and substance
satisfactory to Parent, that satisfies Parent's obligations under Treasury
Regulation Section 1.1445-2(b)(2), and (c) state Tax clearance certificates or
any other document(s) which may be required by any Governmental
6
Entity in order to relieve Parent and its Affiliates of any obligation to
withhold any portion of the payments to Sellers pursuant to this Agreement;
(vi) the Adjustment Escrow Agreement, the Indemnification Escrow
Agreement and the Severance Escrow Agreement, duly executed by the Sellers'
Representative;
(vii) a non-competition and non-disclosure agreement in the form
attached hereto as Exhibit C, duly executed by ▇▇▇▇ ▇. ▇▇▇▇▇▇ (the
"Non-Competition Agreement");
(viii) a license and cooperation agreement in the form attached
hereto as Exhibit D, duly executed by ▇▇▇▇ ▇. ▇▇▇▇▇▇ (the "License Agreement");
(ix) the Note (as defined in that certain Note Purchase Agreement
dated as of the date hereof by and between ▇▇▇▇ ▇. ▇▇▇▇▇▇ and Parent); and
(x) the title policies required pursuant to Section 7.3(h).
(b) Parent will deliver to Sellers on the Closing Date:
(i) the Closing Payment by wire transfer of immediately available
funds to an account designated by the Sellers' Representative in writing at
least three business days prior to the Closing;
(ii) the certificates required by Sections 7.2(a) and 7.2(b);
(iii) Section 338 Forms, duly completed and executed by Parent; and
(iv) a copy of each of the Adjustment Escrow Agreement, the
Indemnification Escrow Agreement and the Severance Escrow Agreement, duly
executed by Parent and the Escrow Agent.
(c) On the Closing Date, Parent also will deliver by wire transfer of
immediately available funds to an account designated in writing by the Escrow
Agent, the Adjustment Escrows, the Indemnification Escrow and the Severance
Escrow.
ARTICLE II.
EFFECT OF THE CLOSING ON OPTIONS OF THE COMPANY
Section 2.1 The Company Equity Plans. Prior to the Closing, the Board of
Directors of the Company (the "Company Board") (or, if appropriate, any
committee thereof) shall adopt appropriate resolutions, amend such plans and
take all other actions necessary and appropriate to provide that, immediately
prior to the Closing, each unexpired and unexercised option or similar rights to
purchase Company Common Stock (the "Options") or "stock appreciation right" (the
"SARs"), under any stock option plan or stock appreciation right plan of the
Company, including without limitation the Company Equity Incentive Plan dated as
of January 1, 1999, or any other plan, agreement or arrangement (the "Company
Equity Plans"), whether or not then exercisable or vested, shall be cancelled
and, in exchange therefor, each former holder of any such cancelled Option or
SAR shall be entitled to receive from the Company in cancellation thereof a
payment in cash (subject to applicable Income Tax withholding, and other Taxes
required by applicable
7
Law to be withheld) in an amount equal to (i) the excess of (A) an amount equal
to (1) the sum of (x) the Estimated Transaction Consideration, less the Sellers'
Tax Cost included therein, less $50,000,000 to pay expenses incurred by the
Company and the Sellers' Representative in connection with the transactions
described in this Agreement and other Liabilities of the Company and the
Sellers' Representative, less the amount of the payments made to employees of
the Acquired Companies pursuant to Section 6.16(c), plus (y) the sum of the
aggregate per share strike price of each SAR (as defined or specified in the
agreement evidencing such SAR), divided by (2) the sum of (x) the total number
of shares of Class A Common Stock and Class B Common Stock outstanding on the
Closing Date plus (y) the number of shares of Company Common Stock subject to
SARs, over (B) the aggregate strike price of such SAR, multiplied by (ii) the
number of shares of the Company Common Stock subject to such cancelled Option or
cancelled SAR (such amount in the aggregate is referred to herein as the "Equity
Spreads"); provided, however, that a holder of a SAR which has been issued in
tandem with an Option shall receive the Equity Spread with respect to the SAR
only and not the Option. The amount of the Equity Spreads is set forth on
Schedule 2.1. The Equity Spreads shall be paid by the Sellers' Representative on
behalf of the Company in cash concurrently with the Closing, and shall be paid
from the Closing Payment; provided, that the Sellers' Representative shall have
the authority to retain all or a portion of the Equity Spreads until the final
calculation of the Total Transaction Consideration has been completed. From and
after the Closing, there shall be no outstanding and exercisable Options or
SARs. The Company Equity Plans and any and all other agreements, plans, programs
or arrangements of the Company and its Subsidiaries that provide for the
issuance or grant of Options or SARs or any other interest in respect of the
capital stock of the Company or capital stock of or other ownership interest in
any of its Subsidiaries shall terminate as of the Closing. Immediately following
the Closing, no holder of an Option or SAR or any participant in the Company
Equity Plans or any other agreement, plan, program or arrangement of the Company
shall have any right thereunder to acquire equity securities or other ownership
interests of the Company or any Subsidiary thereof.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent that the statements
contained in this Article III are true and correct except as set forth herein
and in the disclosure letter delivered by the Company to Parent on the date of
this Agreement (the "Company Disclosure Letter").
Section 3.1 Organization of the Company and its Subsidiaries. Each of the
Company and its Subsidiaries is duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its organization and has all
requisite power and authority to own, lease and operate its properties to carry
on its business as now being conducted and as proposed to be conducted prior to
the Closing. Except as set forth on Section 3.1 of the Company Disclosure
Letter, each of the Company and its Subsidiaries is duly qualified or licensed
to do business, and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification, licensing or good standing
necessary, except where the failure to be so qualified, licensed or in good
standing would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect. The Company has delivered to Parent a
true and correct copy of the Certificate of Incorporation, Bylaws, partnership
agreements or other operating agreements of the Company and each of its
Subsidiaries (collectively, the "Organizational Documents"), in each case as
8
amended to the date of this Agreement. Neither the Company nor any of its
Subsidiaries is in violation of its Organizational Documents. True and complete
copies of all minute books of the Company and its Subsidiaries have been made
available to Parent. Section 3.1 of the Company Disclosure Letter sets forth a
list of all of the Subsidiaries of the Company, and their respective
jurisdiction of organization. The Company holds of record and owns beneficially,
free and clear of all security interests, Liens and Encumbrances, 490 shares of
the common stock of Horseshoe License Company, a Nevada Corporation ("Horseshoe
License"), except as set forth in the Articles of Incorporation of Horseshoe
License. Neither the Organizational Documents of the Company or the Company's
Subsidiaries contain any provision that would limit or otherwise restrict the
ability of Parent, following the Closing, from owning or operating the Company,
or any Subsidiary of the Company, and such ownership or operation of a
Subsidiary of the Company shall be on the same basis as the Company immediately
prior to the date hereof. Except as set forth in the Company SEC Reports filed
prior to the date hereof or as disclosed in Section 3.1 of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries directly or
indirectly owns (other than ownership interests in the Company or in one or more
of its Subsidiaries) any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any corporation,
partnership, limited liability company, joint venture or other business
association or entity.
Section 3.2 Capitalization.
(a) The authorized capital stock of the Company consists of 50,000 shares
of the Company common stock, consisting of 40,000 shares of the Company's Class
A Common Stock, par value $0.01 per share ("Company Class A Common Stock"), and
10,000 shares of the Company's Class B Common Stock, par value $0.01 per share
("Company Class B Common Stock" and, together with the Company Class A Common
Stock, "Company Common Stock"). The Company does not have preferred stock
authorized. As of the date hereof, (i) 13,335.586180 shares of the Company Class
A Common Stock were issued and outstanding, all of which are validly issued,
fully paid, nonassessable and free of preemptive rights and (ii) 9,779.223079
shares of the Company Class B Common Stock were issued and outstanding, all of
which are validly issued, fully paid, nonassessable and free of preemptive
rights. Section 3.2(a) of the Company Disclosure Letter sets forth (i) the
number of shares of the Company Common Stock reserved for issuance upon exercise
of Options and (ii) the number of SARs granted and outstanding as of the date
hereof. Each SAR listed on Section 3.2(a) of the Company Disclosure Letter
represents the right to receive in cash a payment equal to the appreciation in a
number of units each representing one two thousandth (0.0005) of a share of
Company Class A Common Stock. Section 3.2(a) of the Company Disclosure Letter
also sets forth, for the Company Equity Plans, the dates on which Options or
SARs under such plans were granted, the number of Options and SARs granted on
each such date and the exercise price thereof. As of the date of this Agreement,
except as set forth on Section 3.2(a) of the Company Disclosure Letter, the
Company has not granted any stock appreciation rights or any other contractual
rights the value of which is derived from the financial performance of the
Company or the value of shares of the Company Common Stock. Except as set forth
on Section 3.2(a) of the Company Disclosure Letter, there are no obligations,
contingent or otherwise, of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of the Company Common Stock
or the Equity Interests of any Subsidiary of the Company or to provide funds to
or make any material investment (in the form of a loan, capital contribution or
9
otherwise) in any entity (other than a direct or indirect wholly-owned
Subsidiary of the Company) other than guarantees of bank obligations or
indebtedness for borrowed money entered into in the ordinary course of business.
All of the Equity Interests of each of the Company's Subsidiaries are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights and, except as disclosed in Section 3.2(a) of the Company Disclosure
Letter, all such Equity Interests are owned by the Company or another Subsidiary
of the Company free and clear of all rights of first refusal, Liens, limitations
on the Company's voting rights, charges or other encumbrances or restrictions on
transfer of any nature, other than imposed by the Company Gaming Laws.
(b) Except for Options, SAR and other arrangements and agreements set
forth in Section 3.2(a) of the Company Disclosure Letter, there are no (i)
options, warrants or other rights, agreements, arrangements or commitments to
which the Company or any of its Subsidiaries is a party, or by which the Company
or any of its Subsidiaries is bound, relating to the issued or unissued capital
stock or other Equity Interests of the Company or any of its Subsidiaries, (ii)
securities convertible into or exchangeable for such capital stock or other
Equity Interests of the Company or any of its Subsidiaries, (iii) obligations of
the Company or any of its Subsidiaries to issue or sell any shares of its
capital stock or other Equity Interests, or securities convertible into or
exchangeable for such capital stock of, or other Equity Interests in, the
Company or any of its Subsidiaries or (iv) bonds, debentures, notes or other
indebtedness of the Company or any of its Subsidiaries having voting rights (or
convertible into securities having such rights) issued and outstanding. Other
than the Stockholders Agreement between the Company and certain of its
stockholders dated as of April 29, 1999 (the "Stockholders Agreement"), there
are no voting trusts, proxies or other voting agreements or understandings to
which the Company or any of its Subsidiaries is a party or by which it or they
are bound with respect to the issued or unissued capital stock or other Equity
Interests of the Company or its Subsidiaries. All shares of the Company 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, nonassessable and free of preemptive rights.
(c) Section 3.2(c) of the Company Disclosure Letter sets forth all
stockholders of the Company and the number of shares of the Company Common Stock
owned by each Seller. The Sellers own all of the issued and outstanding shares
of Company Common Stock. Upon the Closing, Parent shall own all of the
outstanding shares of capital stock of the Company free and clear of all
Encumbrances.
Section 3.3 Authority; No Conflict; Required Filings and Consents.
(a) The Company has all necessary corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions to which it is a party that are contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and the
consummation by the Company contemplated by this Agreement have been duly and
validly authorized by all necessary corporate action and no other corporate
proceedings on the part of the Company, and no stockholder votes are necessary,
to authorize this Agreement and the Ancillary Agreement or to consummate the
transactions contemplated hereby or thereby. The Company Board has passed
resolutions that have (i) approved this Agreement and the Ancillary Agreement
and (ii) declared advisable the
10
transactions contemplated hereby and thereby. This Agreement has been duly
authorized and validly executed and delivered by the Company and, assuming this
Agreement constitutes the legal, valid and binding obligation of the other
parties hereto, constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
(b) Other than as disclosed in Section 3.3(b) of the Company Disclosure
Letter, the execution and delivery of this Agreement by the Company does not,
and the consummation by the Company of the transactions contemplated by this
Agreement will not, (i) conflict with, or result in any violation or breach of,
any provision of the Organizational Documents, (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 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
the Company 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, Law applicable to the
Company or any of its Subsidiaries or any of its or their properties or assets,
except in the cases of clauses (ii) or (iii) for any such violation, breach,
default, loss, conflict or failure to obtain a consent or waiver which would
not, individually or in the aggregate, be reasonably likely to have a Company
Material Adverse Effect.
(c) No consent, approval, permit, order or authorization of, or
registration, declaration or filing with, any court, administrative agency,
commission, gaming authority or other governmental entity or instrumentality
("Governmental Entity") is required by or with respect to the Company or any of
its Subsidiaries in connection with the execution and delivery of this Agreement
and the Ancillary Agreement by the Company or the consummation by the Company or
its Subsidiaries of the transactions contemplated hereby and thereby, except for
(i) the filing of the pre-merger notification report under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended ("HSR Act"), (ii) any approvals
and filing of notices required under the Company Gaming Laws, (iii) such
consents, approvals, orders, authorizations, permits, filings, declarations or
registrations related to, or arising out of, compliance with statutes, rules or
regulations regulating the consumption, sale or serving of alcoholic beverages,
(iv) such consents, approvals, orders, authorizations, permits, registrations,
declarations and filings as may be required under applicable federal and state
securities Laws, and (v) such other filings, consents, approvals, orders,
authorizations, permits, registrations and declarations as may be required under
the Laws of any jurisdiction or pursuant to any agreement with a Governmental
Entity in which the Company or any of its Subsidiaries conducts any business or
owns any assets the failure of which to make or obtain would not, individually
or in the aggregate, be reasonably likely to have a Company Material Adverse
Effect.
Section 3.4 Public Filings; Financial Statements.
(a) The Company has timely filed all registration statements,
prospectuses, forms, reports, definitive proxy statements, schedules and
documents required to be filed by it (i) under the Securities Act of 1933, as
amended (the "Securities Act"), (ii) the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or (iii) that certain indenture between the
Company and U.S. Trust Company, National Association, dated as of May 11, 1999,
as the case may be, since
11
January 1, 2000 (collectively, the "Company SEC Reports"). Each Company SEC
Report (A) as of its date, complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
(B) did not, at the time it was filed (or if amended by a filing made prior to
the date of this Agreement, then on the date of such amended filing), contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. As of the date of this Agreement, no Subsidiary of the Company is
subject to the periodic reporting requirements of the Exchange Act.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the Company SEC Reports filed prior to the
date hereof (i) complied as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto in effect at the
time of such filing, (ii) was prepared in accordance with generally accepted
accounting principles ("GAAP") in effect at the time of such preparation 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 (iii) fairly
presented in all material respects the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates, and the consolidated
results of its operations and cash flows for the periods, indicated (subject, in
the case of unaudited interim financial statements to the absence of footnotes
and normal and recurring year-end adjustments which did not, and would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect). The books and records of the Company and each
Subsidiary of the Company have been, and are being, maintained in accordance
with applicable legal and accounting requirements as necessary to permit
preparation of financial statements in accordance with GAAP and to maintain
asset accountability.
(c) The Company has previously provided to Parent a complete and correct
copy of any amendment or modification which has not yet been filed with the SEC
to any agreement, document or other instrument which previously had been filed
by the Company with the SEC pursuant to the Securities Act or the Exchange Act.
Section 3.5 No Undisclosed Liabilities. Except as and to the extent set
forth on the consolidated balance sheet of the Company and its consolidated
Subsidiaries as of December 31, 2002 included in the Company's Form 10-K for the
year ended December 31, 2002, including the notes thereto, none of the Company
or any of its consolidated Subsidiaries has any Liabilities of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on a balance sheet or in notes thereto prepared in accordance with
GAAP, except for Liabilities incurred in the ordinary course of business since
December 31, 2002 that would not, individually or in the aggregate, reasonably
be expected to have a Company Material Adverse Effect
Section 3.6 Absence of Certain Changes or Events. As of the date hereof,
except as disclosed in Section 3.6 of the Company Disclosure Letter, since
December 31, 2002, the Company and its Subsidiaries have conducted their
businesses only in the ordinary course consistent with past practice and, since
such date, there has not been (i) any event, development, state of affairs or
condition, or series or combination of events, developments, states of affairs
or conditions, which, individually or in the aggregate, has had or would be
reasonably likely to have
12
a Company Material Adverse Effect; (ii) any material damage, destruction or loss
(whether or not covered by insurance) with respect to the Company or any of its
Subsidiaries; (iii) any material change by the Company in its accounting
methods, principles or practices; (iv) any revaluation by the Company of any of
its material assets; (v) any split, combination or reclassification of any of
the Company's capital stock or Equity Interests of the Subsidiaries of the
Company or any issuance or the authorization of any issuance of any other Equity
Interest in respect of, in lieu of or in substitution for, shares of the
Company's capital stock or Equity Interests of the Subsidiaries of the Company;
(vi) any increase in or establishment of any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option, stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any officers or key employees of
the Company or any of its Subsidiaries other than increases which would not be
material, individually or in the aggregate, with respect to such officers or
employees receiving such benefit or compensation (based on a comparison to
benefits and compensation received in the year ended December 31, 2002); (vii)
any entry into, renewal, modification or extension of, any Company Material
Contract, or any other material Contract between the Company or its
Subsidiaries, on the one hand, and with any other party, on the other hand,
except for such Company Material Contract or other Contract made in the ordinary
course of business consistent with past practice or as contemplated by this
Agreement; (viii) any settlement of pending or threatened material litigation
involving the Company or any of its Subsidiaries (whether brought by a private
party or a Governmental Entity); or (ix) any event or development that would,
individually or in the aggregate, reasonably be expected to prevent or
materially delay the performance of this Agreement by the Company.
Section 3.7 Taxes.
(a) The Company has been an "S corporation" within the meaning of Section
1361(a)(1) of the Code (and any comparable provision of state and local Law in
each jurisdiction in which the Company is obligated to file income or franchise
Tax Returns) at all times during its existence. Each Domestic Corporate
Subsidiary (other than Bossier City Land Corp. ("Bossier Corp.")) has been a
"qualified subchapter S subsidiary" within the meaning of Section 1361(b)(3)(B)
of the Code (and any comparable provision of state and local Law in each
jurisdiction in which such Domestic Corporate Subsidiary is obligated to file
income or franchise Tax Returns) at all times since its acquisition by the
Company. Each Partnership Subsidiary has made a valid election under Section 754
of the Code and such election has not been revoked by the Partnership
Subsidiary. Each Disregarded Subsidiary (other than Casino Computer Programming,
Inc., an Indiana corporation ("CCPI")) has been "disregarded as an entity
separate from its owner" within the meaning of Treasury Regulation Section
301.7701-3(b)(ii) for federal Income Tax purposes at all times since its
acquisition by the Company.
(b) Other than Horseshoe GP, Inc., a Nevada corporation, and the Company
(in respect of the assets of Bossier Corp. and CCPI), none of the Acquired
Companies has any liability for Tax under Section 1374 of the Code (or any
comparable provision of state or local Law) in connection with the deemed sale
of assets of the Acquired Companies resulting from the Section 338 Elections.
Other than in respect of the assets of Bossier Corp. and CCPI, neither the
Company nor any Domestic Corporate Subsidiary has, in the past ten (10) years,
acquired assets from another corporation in a transaction in which the adjusted
Tax basis in the acquired assets was determined by reference (in whole or in
part) to the adjusted Tax basis of the acquired assets (or any other property)
in the hands of the transferor.
13
(c) All Tax Returns required to be filed with respect to the Acquired
Companies, either separately or as part of a consolidated, combined or unitary
group, have been timely filed with the appropriate Governmental Entity. All such
Tax Returns are true, correct and complete in all material respects. None of the
Acquired Companies is currently the beneficiary of any extension of time to file
any such Tax Return. The Acquired Companies have delivered or otherwise made
available to Parent complete and accurate copies of all Tax Returns of the
Acquired Companies relating to any open Tax Periods of the Acquired Companies.
(d) The Acquired Companies have timely paid all Taxes (whether or not
shown on a Tax Return) that have become due. The accruals and reserves with
respect to Taxes (other than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on the
consolidated balance sheet of the Acquired Companies as of July 31, 2003 (the
"Reference Balance Sheet") attached hereto as Schedule 3.7(d) are adequate (as
determined in accordance with GAAP) to cover all Taxes accrued or payable by the
Acquired Companies with respect to Tax Periods (or portions thereof) ending on
or before the date thereof, irrespective of whether such Taxes have been
disclosed in Section 3.7(e) of the Company Disclosure Letter. All Taxes
attributable to the period commencing on the day following the date of the
Reference Balance Sheet have arisen in the ordinary course of business, and the
Acquired Companies have no Liability for such Taxes in excess of the amounts
paid, or the reserves established, for such Taxes, in each case, irrespective of
whether such Taxes have been disclosed in Section 3.7(e) of the Company
Disclosure Letter. The Acquired Companies are in compliance with, and their
records contain all information and documents necessary to comply with, all
applicable information reporting and Tax withholding requirements under federal,
state and local Laws. All Taxes that the Acquired Companies are or were required
by Law to withhold or collect have been duly withheld or collected and, to the
extent required, have been timely paid to the proper Governmental Entity. The
Acquired Companies have properly requested, received and retained all necessary
exemption certificates and other documentation supporting any claimed exemption
or waiver of Taxes on sales or other transactions as to which the Acquired
Companies would have been obligated to collect or withhold Taxes.
(e) Except as set forth in Section 3.7(e) of the Company Disclosure
Letter, there are currently no deficiencies for Taxes that have been claimed,
proposed or assessed against any of the Acquired Companies, nor are there any
ongoing, pending or threatened claims, audits, investigations, examinations, or
subpoenas or requests for information relating to any Liability in respect of
Taxes of any Acquired Company, nor are there any matters under discussion with
any Governmental Entity with respect to Taxes of any Acquired Company. Except as
set forth in Section 3.7(e) of the Company Disclosure Letter, no power of
attorney has been executed by or on behalf of the Acquired Companies with
respect to any matters relating to Taxes that is currently in force, and no
extension or waiver of a statute of limitations relating to Taxes is in effect
with respect to the Acquired Companies. No claim has ever been made by any
Governmental Entity in a jurisdiction where an Acquired Company does not file
Tax Returns that such Acquired Company is or may be subject to taxation in that
jurisdiction.
(f) None of the Acquired Companies has made an election, or is required,
to treat any of its assets as tax-exempt bond financed property or tax-exempt
use property within the meaning of Section 168 of the Code or under any
comparable provision of foreign, state or local Law. None of the assets of the
Acquired Companies is required to be treated for Tax purposes as being owned by
any other Person (other than another of the Acquired Companies). None of the
14
Acquired Companies has filed a consent pursuant to the collapsible corporation
provisions of Section 341(f) of the Code (or any corresponding provision of
state or local Law) or agreed to have Section 341(f)(2) of the Code (or any
corresponding provision of state or local Law) apply to any disposition of any
asset of the Acquired Companies.
(g) None of the Acquired Companies has requested or received any ruling
from any Governmental Entity, or signed any binding agreement with any
Governmental Entity, that would increase the Tax liability of any of the
Acquired Companies for any Post-Closing Tax Period. None of the Acquired
Companies will be required to recognize for Tax purposes in a Post-Closing Tax
Period any income or gain that would otherwise have been required to be
recognized under the accrual method of accounting in a Pre-Closing Tax Period as
a result of any of the Acquired Companies making a change in method of
accounting or otherwise deferring the recognition of income or gain to a
Post-Closing Tax Period as a result of the accounting method used in a
Pre-Closing Tax Period.
(h) There are no Liens for Taxes (other than for current Taxes not yet due
and payable) upon any of the assets of the Acquired Companies.
(i) None of the Acquired Companies has been a member of any affiliated
group of corporations which has filed a combined, consolidated or unitary income
Tax Return for federal, state, local or foreign Tax purposes. None of the
Acquired Companies is liable for the Taxes of any Person (other than another
Acquired Company) under Treasury Regulation Section 1.1502-6 or any similar
provision of state, local or foreign Law, as a transferee or successor, by
contract, or otherwise.
(j) Except for (1) the Agreement and Plan of Merger By and Among Argosy
Gaming Company, Joliet Acquisition Corporation, Empress Casino Joliet
Corporation and Horseshoe Gaming Holding Corp. dated as of April 12, 2001 (the
"Argosy Agreement"), and (2) the Tax Sharing and Indemnification Agreement,
dated August 13, 1998, by and among the Company, Empress Entertainment, Inc. and
its stockholders a party thereto (the "▇▇▇▇▇▇▇ Tax Indemnification Agreement"),
there are no Tax sharing, indemnity, allocation or similar agreements in effect
as between any of the Acquired Companies (or any predecessors thereof), on the
one hand, and any other Person, on the other hand. Except for (1) the Argosy
Agreement and the (2) the ▇▇▇▇▇▇▇ Tax Indemnification Agreement, none of the
Acquired Companies has any contractual obligations to indemnify any other Person
with respect to Taxes.
(k) The transactions contemplated herein are not subject to the Tax
withholding provisions of Section 3406 of the Code, or of Subchapter A of
Chapter 3 of the Code or of any other provision of federal, state, local or
foreign Law.
(l) Other than Bossier Corp., none of the Acquired Companies has been a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(m) Except as set forth in Section 3.7(m) of the Company Disclosure Letter
and other than pursuant to its Organizational Documents, none of the Acquired
Companies is subject to any joint venture, partnership or other Contract that is
treated as a partnership for Tax purposes.
15
Section 3.8 Real Property.
(a) Section 3.8(a) of the Company Disclosure Letter identifies all real
property owned or used by the Company and each Subsidiary of the Company (each
such property, a "Company Owned Property") and all real property on which any
casino operations, casino support operations, office or administrative
operations are conducted or which are otherwise material to the operation of the
Company's business leased or operated by the Company and each Subsidiary of the
Company (each such leased property, a "Company Leased Property"). Company Owned
Property and Company Leased Property is referred to herein collectively as the
"Company Real Property."
(b) The Company and each Subsidiary of the Company have fee simple title
(or a valid license to use) to each Company Owned Property, and a valid
leasehold interest in each Company Leased Property. To the knowledge of the
Company, such title is good and marketable title and the only Liens,
Encumbrances, restrictions, leases, options to purchase, options to lease,
covenants, assessments, defects, claims or exceptions with respect to the
Company Owned Property or the Company Leased Property are (A) the exceptions
described in the Lease Documents, (B) the exceptions described in the Company
SEC Reports, (C) Liens or other exceptions to title set forth in Title Policies
or in the public title records or (D) set forth on Section 3.8(b) of the Company
Disclosure Letter. For purposes of this Agreement, "Title Policies" shall mean
such valid owner's and lessee's policies of title insurance covering the Company
Owned Property or Company Leased Property (as the case may be) as have been
issued to the Company and are in full force and effect on the date hereof.
Section 3.8(b) of the Company Disclosure Letter identifies each Company Real
Property for which the Company possesses survey(s) (each, a "Survey") and
identifies the Company Real Property which is the subject of each such Title
Policy and Survey.
(c) True, correct and complete copies of the documents under which the
Company Leased Property is leased (the "Lease Documents") have been provided to
Parent. The Lease Documents are unmodified and in full force and effect, and
there are no other agreements, written or oral, between the Company or any
Subsidiary of the Company in the Company Leased Property or otherwise relating
to the use and occupancy of the Company Leased Property. None of the Company,
its Subsidiaries or, to the Company's knowledge, any other party, is in material
default under the Lease Documents, and, to the Company's knowledge, no defaults
(whether or not subsequently cured) by the Company, its Subsidiaries or any
other party have been alleged in writing thereunder. To the knowledge of the
Company, (A) each landlord named in any of the Lease Documents is not in default
thereunder, and (B) no defaults (whether or not subsequently cured) by such
landlord have been alleged thereunder.
(d) (A) To the knowledge of the Company, no Company Real Property is in
material violation of any applicable Laws, regulations or restrictions; and (B)
there are no material defects in the physical condition of the Company Real
Property or the improvements located on the Company Real Property, except to the
extent that any such violation or defect would not be reasonably expected to
have a material adverse effect on such individual Company Owned Property or
Company Leased Property.
(e) Except as set forth in Section 3.8(e) of the Company Disclosure
Letter, neither the Company nor any Subsidiary of the Company has received any
written notice of, or has any
16
knowledge of, any action, proceeding or litigation pending, or, to the knowledge
of the Company, threatened (A) to take all or any portion of the Company Real
Property, or any interest therein, by eminent domain; (B) to modify the zoning
of, or other governmental rules or restrictions applicable to, the Company Real
Property or the use or development thereof; (C) otherwise relating to the
Company Real Property or the interests of the Company and any Subsidiary of the
Company therein, which would, individually or in the aggregate, be reasonably be
expected to have a Company Material Adverse Effect on the ability of the Company
or its Subsidiaries to use, own, improve, develop and/or operate any individual
Company Owned Property or Company Leased Property.
(f) Except as set forth in Section 3.8(f) of the Company Disclosure
Letter, to the knowledge of the Company, no portion of the Company Real Property
or the roads immediately adjacent to and currently utilized to access the
Company Real Property: (A) was the former site of any public or private
landfill, dump site, retention basin or settling pond; (B) was the former site
of any oil or gas drilling operations; (C) was the former site of any
experimentation, processing, refining, reprocessing, recovery or manufacturing
operation for any petrochemicals; (D) based on title reports and surveys, is in
a flood zone or (E) is a wetland restricted against use and development.
(g) The parcels constituting the Company Owned Property are assessed
separately from all other adjacent property not constituting the Company Owned
Property for purposes of real property taxes assessed to, or paid by, the
Company. To the knowledge of the Company, each of the parcels of the Company
Owned Property complies with all applicable subdivision, land parcelization and
local governmental taxation or separate assessment requirements, without
reliance on property not constituting Company Real Property.
(h) The Company Real Property is connected to and serviced by water,
sewage disposal, gas and electricity facilities which are adequate for the
current use of such Company Real Property and all material systems (including,
without limitation, heating, air conditioning, electrical, plumbing and
fire/life safety systems) for the current use of the Company Real Property are
operable and in good condition (ordinary wear and tear excepted), except to the
extent that the lack of any such system or the failure of the property to be in
good condition would not reasonably be expected to be materially adverse to any
individual Company Owned Property or Company Leased Property.
(i) There are no commitments to or agreements with any Governmental Entity
or agency (federal, state or local) affecting the use or ownership of the
Company Real Property which are not described in the Company SEC Reports, the
Company Disclosure Letter or herein.
(j) Except as set forth in Section 3.8(j) of the Company Disclosure
Letter, there are no Contracts outstanding for the sale, exchange, encumbrance,
lease or transfer of any of the Company Real Property, or any portion of it, or
the businesses operated by the Company or any of its Subsidiaries thereon.
Except as set forth in Section 3.8(j) of the Company Disclosure Letter, there
are no material agreements relating to the use and occupancy of the Company
Owned Property.
(k) The Company has delivered or made available for review to Parent
copies of (A) all Title Policies and/or any updated preliminary title reports,
commitments or lender's policies
17
of title insurance in the Company's possession or control relating to the
Company Real Property, (B) all Surveys and (C) all building condition or
engineering property reports with respect to the Company Real Property that the
Company has in its possession.
(l) The Company and each Subsidiary of the Company has in all material
respects performed all past and current obligations required to be performed by
it under the ▇▇▇▇▇▇▇ Development Agreement, the ▇▇▇▇▇▇▇ License Agreement and
the Tunica CC&R's, together with any and all amendments thereto. There is no
material breach or violation of or default by the Company or any of its
Subsidiaries under the ▇▇▇▇▇▇▇ Development Agreement, the ▇▇▇▇▇▇▇ License
Agreement and the Tunica CC&R's, together with any and all amendments thereto,
whether or not such breach, violation or default has been waived, and no event
has occurred with respect to the Company or any of its Subsidiaries which, with
notice or lapse of time or both, would constitute a material breach, violation
or default of, or give rise to a right of termination, modification,
cancellation, foreclosure, imposition of a lien, prepayment or acceleration
under, the ▇▇▇▇▇▇▇ Development Agreement, the ▇▇▇▇▇▇▇ License Agreement and the
Tunica CC&R's, together with any and all amendments thereto.
(m) The Company and each of its Subsidiaries has obtained all appropriate
certificates of occupancy, easements and rights of way, including proofs of
dedication, required to use and operate the Company Real Property in the manner
in which the Company Real Property is currently being used and operated, except
for such certificates, easements or rights of way that are ministerial in nature
and normally issued in due course upon the application therefor without further
action of the applicant. True and complete copies of all such certificates,
permits and licenses have been provided to Parent. The Company and each of its
Subsidiaries has all approvals, permits and licenses (including without
limitation all Environmental Permits) necessary to own and operate the Company
Real Property as currently owned and operated, and no such approvals, permits or
licenses necessary to own and operate the Company Real Property (except for such
approvals, permits or licenses that are ministerial in nature and are normally
issued in due course upon the application therefor without any further action by
the applicant) will be required (A) as a result of the transactions contemplated
by this Agreement or any of the Ancillary Agreement or (B) except for the
Company Permits, for the Company and each of its Subsidiaries to continue to own
and operate the Company Real Property in the same manner as of the date of this
Agreement.
Section 3.9 Title to Personal Property; Liens. The Company and each of its
Subsidiaries has sufficiently good and valid title to, or an adequate leasehold
interest in, its tangible personal properties and assets (including all
riverboats and slot machines operated by the Company and its Subsidiaries) in
order to allow it to conduct, and continue to conduct, its business as and where
currently conducted. All security interest, mortgages, leases or other monetary
liens or encumbrances with respect to any such riverboats, slot machines or
other tangible personal property or assets are disclosed in Section 3.9 of the
Company Disclosure Letter. Such tangible personal assets and properties are
sufficiently free of non-monetary Liens and encumbrances to allow each of the
Company and its Subsidiaries to conduct, and continue to conduct, its business
as and where currently conducted and the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreement will not alter or
impair such ability in any material respect. There are no defects in the
physical condition or operability of such tangible personal assets and
properties which would impair the use of such assets and properties as and where
such assets and properties are currently used in any material respects.
18
Section 3.10 Intellectual Property. The Company owns or has the defensible
right to use, whether through ownership, licensing or otherwise, all material
Intellectual Property used in the businesses of the Company and each Subsidiary
of the Company in substantially the same manner as such businesses are conducted
on the date hereof ("Material Intellectual Property"). Except as set forth in
Section 3.10 of the Company Disclosure Letter and except as would not,
individually or in the aggregate, reasonably be expected to have a material
adverse impact on the validity or value of any Material Intellectual Property,
(A) no written claim of invalidity or conflicting ownership rights with respect
to any Material Intellectual Property has been made by a third party and no such
Material Intellectual Property is the subject of any pending or, to the
Company's knowledge, threatened action, suit, claim, investigation, arbitration
or other proceeding, (B) no individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
"group" (as defined in Rule 13d-5(b)(1) under the Exchange Act) (each, a
"Person") has given written notice to the Company or any Subsidiary of the
Company that the use of any Material Intellectual Property by the Company, any
Subsidiary of the Company or any licensee is infringing or has infringed any
domestic or foreign patent, trademark, service ▇▇▇▇, trade name, or copyright or
design right, or that the Company, any Subsidiary of the Company or any licensee
has misappropriated or improperly used or disclosed any trade secret,
confidential information or know-how, (C) the making, using, selling,
manufacturing, marketing, licensing, reproduction, distribution, or publishing
of any process, machine, manufacture or product related to any Material
Intellectual Property, does not and will not infringe any domestic or foreign
patent, trademark, service ▇▇▇▇, trade name, copyright or other intellectual
property right of any third party, and does not and will not involve the
misappropriation or improper use or disclosure of any trade secrets,
confidential information or know-how of any third party of which the Company has
knowledge, (D) (i) neither the Company nor any Subsidiary of the Company has
performed prior acts or is engaged in current conduct or use, or (ii) to the
knowledge of the Company, there exists no prior act or current use by any third
party, that would void or invalidate any Material Intellectual Property, and (E)
the execution, delivery and performance of this Agreement and the Ancillary
Agreement by the Company and the consummation of the transactions contemplated
hereby and thereby will not breach, violate or conflict with any instrument or
agreement that the Company is party to and that concerns any Material
Intellectual Property, will not cause the forfeiture or termination or give rise
to a right of forfeiture or termination of any of the Material Intellectual
Property or impair the right of Parent to make, use, sell, license or dispose
of, or to bring any action for the infringement of, any Material Intellectual
Property. Pursuant to that certain Exclusive License Agreement dated as of July
2, 1998, by and between Horseshoe Gaming, L.L.C. and Horseshoe License (the
"Intellectual Property License Agreement"), the Company has an exclusive,
irrevocable, fully paid license to use the Property (as defined in the
Intellectual Property License Agreement) in perpetuity anywhere in the world,
except for the State of Nevada.
Section 3.11 Agreements, Contracts and Commitments.
(a) Except as disclosed in the Company SEC Reports filed prior to the date
of this Agreement, as disclosed in Section 3.11(a) of the Company Disclosure
Letter or as contemplated by this Agreement, neither the Company nor any of its
Subsidiaries is a party to any oral or written (i) Contract instrument relating
to Indebtedness in an amount exceeding $50,000, (ii) partnership, joint venture
or limited liability or management or operating agreement with any Person (other
than as between the Company and its wholly-owned Subsidiaries), (iii) Contract
19
relating to any merger, stock purchase, consolidation, business combination,
share exchange, business acquisition, or for the purchase, acquisition, sale or
disposition of any assets of the Company or any of its Subsidiaries outside the
ordinary course of business, other than any confidentiality agreement entered
into in connection therewith, (iv) other Contract to be performed after the date
hereof which would be a "material contract" (as defined in Item 601(b)(10) of
Regulation S-K of the SEC), (v) Contract relating to any "strategic alliances"
(i.e., cross-marketing, affinity relationships, etc.), (vi) Contract which
restricts (geographically or otherwise) the conduct of any line of business by
the Company or any of its Subsidiaries, or contains a non-compete or exclusivity
provision, (vii) Contract which any of the benefits to any party of which will
be increased, or the vesting of the benefits to any party of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or any Ancillary Agreement, or the value of any benefits to any party
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement or any Ancillary Agreement, (viii) Contract that involves
annual expenditures in excess of $50,000 and is not cancelable within twelve
(12) months or (ix) Contract which is between (A) the Company or any of its
Subsidiaries, on the one hand, and (B) any of its executive officers or
directors (or any relative or immediate family member of any executive officer
or director of the Company or any Subsidiary of the Company), on the other hand.
(b) Except as disclosed in Section 3.11(b) of the Company Disclosure
Letter, (i) each of the Company Material Contracts is valid and binding upon the
Company or any of its Subsidiaries, as the case may be (and, to the Company's
knowledge, on all other parties thereto), in accordance with its terms and is in
full force and effect, (ii) the Company and each Subsidiary of the Company has
in all respects performed all obligations required to be performed by it as of
the date hereof under each Company Material Contract and, to the Company's
knowledge, each other party to each Company Material Contract has in all
respects performed all obligations required to be performed by it under such
Company Material Contract, (iii) there is no breach or violation of or default
by the Company or any of its Subsidiaries under any of the Company Material
Contracts, whether or not such breach, violation or default has been waived, and
(iv) no event has occurred with respect to the Company or any of its
Subsidiaries which, with notice or lapse of time or both, would constitute a
breach, violation or default of, or give rise to a right of termination,
modification, cancellation, foreclosure, imposition of a lien, prepayment or
acceleration under, any of the Company Material Contracts, except for such
breaches, violations, defaults, terminations, modifications, cancellations,
foreclosures, impositions of a Lien, prepayments or accelerations referred to in
clause (ii), (iii) or (iv), alone or in the aggregate with other such breaches,
violations, defaults, terminations, modifications, cancellations, foreclosures,
impositions of a lien, prepayments or accelerations referred to in clause (ii),
(iii) or (iv), would be reasonably likely to have a Company Material Adverse
Effect.
Section 3.12 Litigation. Except as disclosed in the Company SEC Reports
filed prior to the date of this Agreement or in Section 3.12 of the Company
Disclosure Letter, (a) there is no action, suit or proceeding, claim,
arbitration or investigation against the Company, or any of its Subsidiaries
pending, or as to which the Company, or any of its Subsidiaries has received any
written notice of assertion or, to the knowledge of the Company, threatened
against, the Company or any of its Subsidiaries or any property or asset of the
Company or any of its Subsidiaries, before any court, arbitrator, or
administrative, governmental or regulatory authority or body, domestic or
foreign, or for which the Company or any of its Subsidiaries is obligated to
20
indemnify a third party, that, individually or in the aggregate, would be
reasonably likely to (i) be material to the Company or any of its Subsidiaries
or (ii) prevent the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreement; and (b) there is no judgment, order,
injunction or decree of any Governmental Entity outstanding against the Company
or any of its Subsidiaries that would be reasonably likely to have any effect
referred to in clauses (i) or (ii) above.
Section 3.13 Environmental Matters. Except as disclosed on Section 3.13 of
the Company Disclosure Letter:
(a) The Company and each Subsidiary of the Company is now and always has
been in compliance with all Environmental Laws in all material respects.
(b) The Company and each Subsidiary of the Company holds all Environmental
Permits necessary to conduct their current operations, all the Environmental
Permits are in full force and effect, and the Company and each Subsidiary of the
Company is now and always has been in compliance with all the Environmental
Permits, except where any failure to comply, individually or in the aggregate,
would not be reasonably likely to have a Company Material Adverse Effect.
(c) Neither the Company nor any of its Subsidiaries, and to the knowledge
of the Company, no third party, has used, generated, treated, stored,
transported, disposed of, released or handled any Hazardous Substances and, to
the knowledge of the Company, no Hazardous Substance is otherwise existing on,
under, about, or emanating from or to, any property that has been owned, leased
or operated by either the Company or by any Subsidiary of the Company except in
full compliance with all applicable Environmental Laws.
(d) Neither the Company nor any Subsidiary of the Company has received any
notice of alleged, actual or potential responsibility for, or any inquiry or
investigation regarding, any release or threatened release of Hazardous
Substances or alleged violation of, or non-compliance with, any Environmental
Law, nor, to the knowledge of the Company, is there any information that could
reasonably likely form the basis of any such notice or any claim.
(e) Neither the Company nor any Subsidiary of the Company (1) has entered
into or agreed to any consent decree or order or is subject to any judgment,
decree or judicial order relating to compliance with Environmental Laws,
Environmental Permits or the investigation, sampling, monitoring, treatment,
remediation, removal or cleanup of Hazardous Substances and, to the knowledge of
the Company or any Subsidiary of the Company, no investigation, litigation or
other proceeding is pending or threatened in writing with respect thereto, or
(2) has received written notice from any third party of any pending or
threatened claim by such third party against the Company or any Subsidiary of
the Company for any Liability under any Environmental Law (or otherwise relating
to any Hazardous Substance) arising under any indemnity or other agreement.
(f) None of the real property owned or leased by the Company or any
Subsidiary of the Company is listed or, to the knowledge of the Company,
proposed for listing on the "National Priorities List" under the Comprehensive
Environmental Response, Compensation and
21
Liability Act of 1980, as amended as of the date hereof, or any similar state or
foreign list of sites requiring investigation or cleanup.
(g) There is no site to which the Company or any Subsidiary of the Company
has transported or arranged for the transport of Hazardous Substances that, to
the knowledge of the Company, is the subject of any environmental action.
(h) True, complete and correct copies of the written reports, and all
parts thereof, of all environmental audits or assessments which have been
conducted by (or on behalf or for the benefit of) the Company or any Subsidiary
of the Company respecting any Company Real Property, or such other reports, if
any, conducted by third parties with respect to any Company Real Property which
are in the possession or control of the Company or any Subsidiary of the
Company, have been provided to Parent.
Section 3.14 Employee Benefit Plans.
(a) Section 3.14(a) of the Company Disclosure Letter sets forth an
accurate and complete list of all (i) "employee welfare benefit plans" ("Company
Welfare Plans"), within the meaning of Section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended, and the rules and regulations
thereunder ("ERISA"); (ii) "employee pension benefit plans" ("Company Pension
Plans"), within the meaning of Section 3(2) of ERISA; (iii) bonus, stock option,
stock purchase, restricted stock, incentive, fringe benefit, "voluntary
employees' beneficiary associations" ("VEBAs"), under Section 501(c)(9) of the
Code, profit-sharing, pension or retirement, deferred compensation, medical,
life insurance, disability, accident, salary continuation, severance, accrued
leave, vacation, sick pay, sick leave, supplemental retirement and unemployment
benefit plans, programs, arrangements, commitments and/or practices (whether or
not insured); and (iv) employee benefit provisions in employment or consulting
Contracts, termination and severance contracts or agreements, in each case for
active, retired or former employees or directors, whether or not any such plans,
programs, arrangements, commitments, contracts, agreements and/or practices
(referred to in (i), (ii), (iii) or (iv) above) are in writing or are otherwise
exempt from the provisions of ERISA, that are maintained or contributed to (or
with respect to which an obligation to contribute has been undertaken) or with
respect to which any potential liability is borne by the Company or any of its
Subsidiaries (including, for this purpose and for the purpose of all of the
representations in this Section 3.14, all employers (whether or not
incorporated) that would be treated together with the Company or any of its
Subsidiaries as a single employer within the meaning of Section 414 of the Code
("ERISA Affiliate") (all of the foregoing plans, programs, arrangements,
commitments, practices, contracts and agreements referred to in (i), (ii), (iii)
and (iv) above are collectively referred to as "Company Benefit Plans"). None of
the Company or, to the knowledge of the Company, any other Person or entity, has
any legally enforceable commitment to modify, change or terminate any Company
Benefit Plan, other than with respect to a modification, change or termination
required by ERISA or the Code.
With respect to each Company Benefit Plan, the Company has delivered to
Parent true, correct and complete copies of (A) each Company Benefit Plan (or,
if not written a written summary of its material terms), including without
limitation all plan documents, trust agreements, insurance contracts or other
funding vehicles and all amendments thereto currently in effect, (B) the most
recent summaries and summary plan descriptions, including any summary
22
of material modifications, (C) the most recent annual reports (Form 5500 or 990
series) filed with the IRS with respect to such Company Benefit Plan (and, if
the most recent annual report is a Form 5500R, the most recent Form 5500C filed
with respect to such Company Benefit Plan), (D) the most recent actuarial report
or other financial statement, if any, relating to such Company Benefit Plan, (E)
the most recent determination or opinion letter, if any, issued by the IRS with
respect to any Company Benefit Plan and any pending request for such a
determination letter, (F) the most recent nondiscrimination tests performed
under the Code (including 401(k) and 401(m) tests) for each Company Benefit
Plan, and (G) any filings under the IRS' Employee Plans Compliance Resolution
System Program or any of its predecessors or the Department of Labor Delinquent
Filer Program.
(b) Each Company Benefit Plan (including any related trust) complies in
all material respects in form with the requirements of applicable law, including
ERISA and the Code and has been administered in all material respects in
accordance with its terms and all applicable Laws, including ERISA and the Code,
and all contributions required to be made under the terms of any of the Company
Benefit Plans required to be made as of the date of this Agreement have been
timely made or, if not yet due, have been properly reflected on the most recent
consolidated balance sheet filed or incorporated by reference in the Company SEC
Reports prior to the date of this Agreement. With respect to the Company Benefit
Plans, no event has occurred and, to the knowledge of the Company, there exists
no condition or set of circumstances in connection with which the Company could
be subject to any material Liability (other than for liabilities with respect to
routine benefit claims) under the terms of, or with respect to, such Company
Benefit Plans, ERISA, the Code or any other applicable Law.
(c) (A) Each Company Pension Plan which is a Company Benefit Plan and
which is intended to qualify under Section 401(a) of the Code, has either
received a favorable determination letter from the IRS as to its qualified
status or the remedial amendment period for such Company Pension Plan has not
yet expired, and each trust established in connection with any Company Benefit
Plan which is intended to be exempt from federal income taxation under Section
501(a) of the Code is so exempt, and each VEBA which is a Company Benefit Plan
has been determined by the IRS to be exempt from federal income tax under
Section 501(c)(9) of the Code, and to the Company's knowledge, no fact or event
has occurred that could adversely affect the qualified status of any such
Company Pension Plan or the exempt status of any such trust or VEBA, (B) to the
Company's knowledge, there has been no prohibited transaction (within the
meaning of Section 406 of ERISA or Section 4975 of the Code, other than a
transaction that is exempt under a statutory or administrative exemption) with
respect to any Company Benefit Plan that could result in material Liability to
the Company or an ERISA Affiliate, (C) each Company Benefit Plan can be amended,
terminated or otherwise discontinued after the Closing in accordance with its
terms, without material Liability (other than (i) Liability for ordinary
administrative expenses typically incurred in a termination event or (ii) if
such plan is subject to Part 2 of Subtitle B of Title I of ERISA, Liability for
the accrued benefits as of the date of such termination (if and to the extent
required by ERISA) to the extent that either there are sufficient assets set
aside in a trust or insurance contract to satisfy such Liability or such
Liability is reflected on the most recent consolidated balance sheet filed or
incorporated by reference in the Company SEC Reports prior to the date of this
Agreement), (D) no suit, administrative proceeding, action or other litigation
has been brought, or to the knowledge of the Company is threatened, against or
with respect to any such Company Benefit Plan, including any audit or
23
inquiry by the IRS or United States Department of Labor (other than routine
benefits claims) that could result in material Liability to the Company or any
ERISA Affiliate, (E) no Company Benefit Plan is subject to Title IV of ERISA
(other than a "multiemployer pension plan" (as defined in Section 3(37) of
ERISA) ("Multiemployer Plan")) and neither the Company nor any ERISA Affiliate
has sponsored or contributed to or been required to contribute to any Company
Benefit Plan that is subject to Title IV of ERISA (other than Multiemployer
Plan), (F) no material Liability under Title IV of ERISA has been incurred by
the Company or any ERISA Affiliate that has not been satisfied in full, and, to
the knowledge of the Company, no condition exists that presents a material risk
to the Company or any ERISA Affiliate of incurring or being subject (whether
primarily, jointly or secondarily) to a material Liability thereunder, (G) none
of the assets of the Company or any ERISA Affiliate is, or may reasonably be
expected to become, the subject of any material Lien arising under Section 302
of ERISA or Section 412(n) of the Code, (H) neither the Company nor any ERISA
Affiliate has any material Liability under ERISA Section 502, (I) with respect
to each Company Benefit Plan, all material tax, annual reporting and other
governmental filings required by ERISA and the Code have been timely filed with
the appropriate Governmental Entity and material notices and disclosures have
been timely provided to participants, (J) no assets of any Company Benefit Plan
are subject to a material amount of Tax as unrelated business taxable income
under Section 511 of the Code, and (K) no excise tax in a material amount could
be imposed upon the Company under Chapter 43 of the Code.
(d) With respect to each Company Benefit Plan that is a Multiemployer
Plan, (A) neither the Company nor any ERISA Affiliate has incurred any
withdrawal liability under Section 4201 of ERISA nor does the Company or any
ERISA Affiliate expect to withdraw in a "complete withdrawal" or "partial
withdrawal" within the meaning of Sections 4203 and 4205 of ERISA, (B) all
contributions required to be made to any such Multiemployer Plan have been
timely made, and (C) to the knowledge of the Company, no such Multiemployer Plan
has been terminated or has been in or is about to be in reorganization under
ERISA so as to result directly or indirectly in any increase in contributions
under Section 4243 of ERISA or in liability contingent or otherwise to the
Company or any ERISA Affiliate.
(e) The Company is, and will be immediately prior to the Closing, a "small
business corporation," as defined in Section 1361(b) of the Code but without
regard to paragraph 1(c) thereof, and, except as disclosed in Section 3.14(e) of
the Company Disclosure Letter no amount that could be received (whether in cash
or property or the vesting of property) as a result of the consummation of the
transactions contemplated by this Agreement or any Ancillary Agreement by any
employee, officer or director of the Company or any Subsidiary of the Company
who is a "disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) is or will be subject to Section 280G of the Code.
(f) Except as required by Law, no Company Benefit Plan provides any of the
following retiree or post-employment benefits to any Person: medical,
disability, life insurance benefits and/or other welfare benefits and neither
the Company nor any of its Subsidiaries has any obligation to provide any such
benefits. The Company and each ERISA Affiliate are in material compliance with
(A) the requirements of the applicable health care continuation and notice
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended and the regulations (including proposed regulations) thereunder and any
similar state law and (B) the applicable requirements of the Health Insurance
Portability and Accountability Act of 1996, as amended, and the regulations
(including the proposed regulations) thereunder.
24
(g) The Company has no employee benefit plans, programs, and other
arrangements providing incentive compensation or other benefits similar to those
provided under any Company Benefit Plan to any employee or former employee or
dependent thereof, which plan, program or arrangement is subject to the laws of
any jurisdiction outside of the United States.
(h) The covenants not to compete, solicit or hire and the confidentiality
provisions set forth in each Company Benefit Plan referred to in clause (iv) of
Section 3.14(a) shall survive the termination of such Company Benefit Plan and
any termination of employment following the Closing of the individual subject to
such covenants and provisions.
Section 3.15 Labor and Other Employment Matters.
(a) Each of the Company and each Subsidiary of the Company is in material
compliance with all applicable Laws respecting labor, employment, fair
employment practices, terms and conditions of employment, workers' compensation,
occupational safety, plant closings, and wages and hours. None of Company or any
Subsidiary of the Company is liable for any payment to any trust or other fund
or to any Governmental Entity, with respect to unemployment compensation
benefits, social security or other governmentally mandated benefits or
obligations for employees (other than routine payments to be made in the normal
course of business and consistent with past practice). Except as set forth in
Section 3.15(a) of the Company Disclosure Letter, none of the Company or any
Subsidiary of the Company is a party to any collective bargaining or other labor
union contract, agreement or other instrument applicable to Persons employed by
the Company or any Subsidiary of the Company, and no collective bargaining
agreement or other labor union contract, agreement or other instrument is being
negotiated by the Company or any Subsidiary of the Company. There is no labor
dispute, strike, slowdown or work stoppage against the Company or any Subsidiary
of the Company pending or, to the knowledge of the Company, threatened which may
interfere in any material respect with the respective business activities of the
Company or any Subsidiary of the Company. To the knowledge of the Company, no
labor union or similar organization has otherwise been certified to represent
any Persons employed by the Company or any Subsidiary of the Company or has
applied to represent such employees or is attempting to organize so as to
represent such employees. None of the Company or any Subsidiary of the Company
has committed any unfair labor practices in connection with the operation of the
respective businesses of the Company or any Subsidiary of the Company, and there
is no charge or complaint against the Company or any Subsidiary of the Company
by the National Labor Relations Board or any comparable state or foreign agency
pending or, to the knowledge of the Company, threatened, except where such
unfair labor practice, charge or complaint would not, individually or in the
aggregate, be reasonably likely to have a Company Material Adverse Effect. None
of the Company or any Subsidiary of the Company is delinquent in payments to any
of its employees for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed for it or amounts required to be
reimbursed to such employees. Each of the Company and each Subsidiary of the
Company has withheld all amounts required by Law or by agreement to be withheld
from the wages, salaries, and other payments to employees, and is not liable for
any arrears of wages or any Taxes or any penalty for failure to comply with any
of the foregoing. There are no material pending claims against the Company or
any Subsidiary of the Company under any workers' compensation plan or policy or
for long term disability. Except as set forth in Section 3.15(a) of the Company
Disclosure Letter, there are no material controversies pending or, to the
knowledge of the Company, threatened, between the Company
25
or any Subsidiary of the Company and any of their current or former employees,
which controversies have or could reasonably be expected to result in an action,
suit, proceeding, claim, arbitration or investigation before any Governmental
Entity. To the Company's knowledge, no employee of the Company or any Subsidiary
of the Company is in any material respect in violation of any term of any
employment contract, agreement or other instrument, non-disclosure agreement,
noncompetition agreement, or any restrictive covenant to a former employer
relating to the right of any such employee to be employed by the Company or any
Subsidiary of the Company because of the nature of the business conducted or
presently proposed to be conducted by it or to the use of trade secrets or
proprietary information of others. No key employee of the Company or any
Subsidiary of the Company has given notice, that such employee intends to
terminate his or her employment with the Company or any Subsidiary of the
Company.
(b) The Company has identified in Section 3.15(b) of the Company
Disclosure Letter and has made available to Parent true and complete copies as
in effect as of the date of this Agreement of (A) all severance and employment
agreements with directors, officers or employees of or consultants to the
Company or any Subsidiary of the Company; (B) all severance programs and
policies of the Company and each Subsidiary of the Company with or relating to
its employees; and (C) all plans, programs, agreements and other arrangements of
the Company and each Subsidiary of the Company with or relating to its
directors, officers, employees or consultants which contain change in control
provisions. Except as set forth in Section 3.15(b) of the Company Disclosure
Letter, none of the execution and delivery of this Agreement or any Ancillary
Agreement or the consummation of the transactions contemplated hereby or thereby
will (either alone or in conjunction with any other event, such as termination
of employment) (A) result in any payment (including, without limitation,
severance, unemployment compensation, parachute or otherwise) becoming due to
any director or any employee of the Company or any Subsidiary of the Company or
Affiliate from the Company or any Subsidiary of the Company or Affiliate under
any Company Benefit Plan or otherwise, (B) significantly increase any benefits
otherwise payable under any Company Benefit Plan or (C) result in any
acceleration of the time of payment or vesting of any material benefits. No
individual who is a party to an employment agreement listed in Section 3.15(b)
of the Company Disclosure Letter or any agreement incorporating change in
control provisions with the Company has terminated employment or been
terminated, nor, to the knowledge of the Company, has any event occurred that
could give rise to a termination event, in either case under circumstances that
have given, or could give, rise to a severance obligation on the part of the
Company under such agreement. Schedules 6.16(c) and (d) set forth the Company's
best estimates of the amounts payable to the employees listed therein, as a
result of the transactions contemplated by this Agreement, any Ancillary
Agreement and/or any subsequent employment termination (including any cash-out
or acceleration of options and restricted stock and any "gross-up" payments with
respect to any of the foregoing), based on compensation data applicable as of
the date of this Agreement and the assumptions stated in Schedules 6.16(c) and
(d).
(c) There are no pending claims (other than claims for benefits in the
ordinary course), lawsuits or arbitrations which have been asserted or
instituted against any Company Benefit Plan, any fiduciaries thereof with
respect to their duties to the Company Benefit Plans or the assets of any of the
trusts thereunder, nor are any such claims, lawsuits or arbitrations, to the
knowledge of the Company, threatened, which could reasonably be expected to
result in any
26
material Liability of the Company or any Subsidiary of the Company to the
Department of Treasury, the Department of Labor or any Multiemployer Plan.
Section 3.16 Compliance with Gaming Laws.
(a) Each of the Company and its Subsidiaries, and, to the knowledge of the
Company, each of their respective directors, officers and Persons performing
management functions similar to officers hold all permits, registrations,
findings of suitability, licenses, variances, exemptions, certificates of
occupancy, orders and approvals of all Governmental Entities (including without
limitation all authorizations under the Company Gaming Laws, the Merchant Marine
Act of 1920 and the Shipping Act of 1916 and Certificates of Inspection issued
by the U.S. Coast Guard), necessary to conduct the business and operations of
the Company and each of its Subsidiaries as currently conducted and as proposed
to be conducted, each of which is in full force and effect in all material
respects (each, a "Company Permit" and collectively, the "Company Permits") and
no event has occurred which could reasonably be likely to result in the
revocation, non-renewal, modification, suspension, limitation or termination of
any Company Permit that currently is in effect. Each of the Company and its
Subsidiaries, and, to the knowledge of the Company, each of their respective
directors, officers and Persons performing management functions similar to
officers are in compliance with the terms of the Company Permits in all material
respects. Except as disclosed in Section 3.16(a) of the Company Disclosure
Letter, the businesses of the Company and its Subsidiaries are not being
conducted in material violation of any Law (including, without limitation, any
the Company Gaming Laws). The Company has received no written notice of any
investigation or review by any Governmental Entity with respect to the Company
or any of its Subsidiaries that is pending, and, to the knowledge of the
Company, no investigation or review is threatened.
(b) Except as disclosed in Section 3.16(b) of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries, nor, to the knowledge
of the Company, any of their respective directors, officers, key employees or
persons performing management functions similar to officers 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 of any the Company Gaming Laws which resulted in fines or penalties of
$50,000 or more. Neither the Company nor any of its Subsidiaries has suffered a
suspension or revocation of any Company Permit held under the Company Gaming
Laws. The Company and its Subsidiaries are in compliance in all material
respects with the Empress Casino Joliet Settlement Agreement dated January 30,
2001 between the Illinois Gaming Board, the Company and Empress Casino Joliet
Corporation and the Stipulation dated March 18, 2003 before the Louisiana Gaming
Control Board between Horseshoe Entertainment, a Louisiana limited partnership,
and the Louisiana State Police, Casino Gaming Division (together, the
"Settlement Agreements"), and no event has occurred which permits, or upon the
giving of notice or passage of time or both would permit, revocation,
modification, suspension, limitation or termination of, or the imposition of any
penalty or fine under, the Settlement Agreements. There are no facts or events
which, if known to the regulators under the Settlement Agreements, would be
reasonably likely to result in an action materially adverse to the Company.
Section 3.17 Insurance. The Company has provided to Parent accurate and
complete copies of all material fire and casualty, general liability, business
interruption, product liability, and sprinkler and water damage insurance
policies maintained by the Company or any of its
27
Subsidiaries or, if policies have been issued to, but not received by, the
Company, binders relating to such policies (the "Insurance Policies"). The
Insurance Policies are in full force and effect and the Company does not
maintain self-insurance practices.
Section 3.18 Delaware Takeover Statute. The Company has taken all
appropriate actions so that the restrictions on business combinations contained
in Section 203 of the Delaware General Corporation Law (the "DGCL") will not
apply with respect to or as a result of this Agreement or any Ancillary
Agreement and the transactions contemplated hereby and thereby, without any
further action on the part of the stockholders of the Company or the Company
Board. True and complete copies of all resolutions of the Company Board
reflecting such actions have been previously provided to Parent. No other state
takeover statute or similar statute or regulation is applicable to or purports
to be applicable to the transactions contemplated by this Agreement or any
Ancillary Agreement.
Section 3.19 Brokers. Except as disclosed on Section 3.19 of the Company
Disclosure Letter, none of the Company, any of its Subsidiaries, or, to the
knowledge of the Company, 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 or finder's fees in connection
with the transactions contemplated by this Agreement.
Section 3.20 Transactions With Affiliates. Other than the transactions
contemplated by this Agreement and except to the extent disclosed in the Company
SEC Reports or as disclosed in Section 3.20 of the Company Disclosure Letter,
from January 1, 2001 through the date of this Agreement, there have been no
transactions, agreements, arrangements or understandings between the Company or
any of its Subsidiaries, on the one hand, and any Affiliate of the Company or
any of its Subsidiaries, on the other hand, that would be required to be
disclosed under Item 404 of Regulation S-K under the Securities Act.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller represents and warrants to Parent, severally and not jointly,
as to itself that the statements contained in this Article IV are true and
correct except as set forth herein and in the disclosure letter delivered by the
Sellers' Representative to Parent on the date of this Agreement (the "Seller
Disclosure Letter").
Section 4.1 Organization of Certain Sellers. If such Seller is a
corporation, limited liability company, limited partnership or trust, it is duly
organized, validly existing and in good standing under the Laws of the
jurisdiction of its organization.
Section 4.2 Authority. Such Seller, and if such Seller is a trust, the
trustee of such Seller, has the requisite power and authority to execute and
deliver this Agreement, to perform his, her or its obligations hereunder and to
consummate the transactions to which it is a party that are contemplated by this
Agreement or any Ancillary Agreement. This Agreement and the Ancillary Agreement
to which such Seller is a party have been duly executed and delivered by such
Seller and, assuming such agreements constitute the valid and binding obligation
of the other parties thereto, constitutes the legal, valid and binding
obligation of such Seller, enforceable against such Seller in accordance with
its terms.
28
Section 4.3 No Conflict; Required Filings and Consents
(a) Neither the execution and delivery of this Agreement by such Seller,
nor the consummation by such Seller of the transactions to which it is a party
that are contemplated by this Agreement will, (i) if such Seller is a
corporation, limited liability company, limited partnership or trust, conflict
with, or result in any violation or breach of, any provision of the certificate
or articles of incorporation, bylaws, limited liability or operating agreement ,
partnership agreement or trust agreement of such Seller, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of time,
or both) a material 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, trust agreement, mortgage, indenture, lease,
contract or other agreement, instrument or obligation to which such Seller is a
party or by which such Seller or any of its properties or assets may be bound,
or (iii) subject to the governmental filings and other matters referred to in
Section 4.3(b), conflict with or violate in any material respect any permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to such Seller or any of its properties
or assets.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to such Seller in connection with the execution and delivery of this
Agreement or the Ancillary Agreement or the consummation by such Seller of the
transactions contemplated hereby or thereby, except for (i) filings under the
Exchange Act, the HSR Act or the Company Gaming Laws or (ii) such consents,
approvals, orders, authorizations, registrations, declarations, or filings
required by or with respect to Parent or the Company or any of its Subsidiaries
(including, without limitation, under the HSR Act and the Company Gaming Laws).
Section 4.4 Brokers. Such Seller has not employed any broker, financial
advisor or finder or incurred any liability for any brokerage fees, commissions
or finder's fees in connection with the transactions contemplated by this
Agreement.
Section 4.5 The Shares. Such Seller holds of record and owns beneficially
the number of the Shares set forth next to such Seller's name in Section 3.2(c)
of the Company Disclosure Letter free and clear of all security interests, Liens
and Encumbrances other than those imposed by the Securities Act, state
securities Laws or applicable gaming Laws. Such Seller is not party to any
option, warrant, purchase right, or other contract or commitment (other than
this Agreement) obligating such Seller to sell, transfer, pledge or otherwise
dispose of any capital stock of the Company other than pursuant to the
Stockholders Agreement or, with respect to any Options or SARs, the agreement in
which such Options or SARs were granted. Such Seller is not a party to any
voting trust, proxy or other agreement or understanding with respect to the
voting of any capital stock of the Company other than pursuant to the
Stockholders Agreement. Upon the Closing, Parent shall own all of such Seller's
shares of capital stock of the Company free and clear of all security interests,
Liens and Encumbrances.
29
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company that the statements
contained in this Article V are true and correct.
Section 5.1 Organization. Parent is duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to carry on its business as now being
conducted and as proposed to be conducted prior to the Closing. Parent is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of the business conducted by it makes such qualification,
licensing or good standing necessary, except where the failure to be so
qualified, licensed or in good standing would not, individually or in the
aggregate, have a Parent Material Adverse Effect.
Section 5.2 Authority; No Conflict; Required Filings and Consents.
(a) Parent has all requisite corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions to which it is a party that are contemplated by this
Agreement. The execution and delivery of this Agreement by Parent and the
consummation by Parent of the transactions to which it is a party that are
contemplated by this Agreement by Parent have been duly authorized by all
necessary corporate action on the part of Parent and no other corporate
proceedings on the part of the Company, and no stockholder votes are necessary,
to authorize this Agreement and the Ancillary Agreement or to consummate the
transactions contemplated hereby or thereby. This Agreement has been duly
executed and delivered by Parent and constitutes the valid and binding
obligation of Parent, enforceable against Parent in accordance with its terms.
(b) The execution and delivery of this Agreement by Parent does not,
and the consummation by Parent of the transactions to which it is a party that
are contemplated by this Agreement will not, (i) conflict with, or result in any
violation or breach of, any provision of the Certificate of Incorporation or
Bylaws of Parent, (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 Parent 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 5.2(c), conflict with or violate any permit,
concession, franchise, license, judgment, order, decree, statute, Law,
ordinance, rule or regulation applicable to Parent 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 materially or in the aggregate,
reasonably likely to have a Parent Material Adverse Effect or (y) would not
materially impair or delay the Closing.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Parent or any of its Subsidiaries in connection with the execution
and delivery of this Agreement and the Ancillary
30
Agreement by Parent or the consummation by Parent or its Subsidiaries of the
transactions to which it is or they are a party that are contemplated hereby or
thereby, except for (i) the filing of the pre-merger notification report under
the HSR Act, (ii) any approvals and filing of notices required under any Law,
including the Company Gaming Laws and the Parent Gaming Laws, (iii) 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, (iv) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state securities Laws
and (v) such other filings, consents, approvals, orders, registrations and
declarations as may be required under the Laws of any jurisdiction in which the
Company or any of its Subsidiaries conducts any business or owns any assets the
failure of which to make or obtain would not, individually or in the aggregate,
be reasonably likely to have a Parent Material Adverse Effect.
Section 5.3 Brokers. None of Parent, any of its Subsidiaries, or 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 or finder's fees in connection with the transactions contemplated by
this Agreement, except that Parent has retained Bear, ▇▇▇▇▇▇▇ & Co. Inc. and
▇.▇. ▇▇▇▇▇▇ Securities Inc. as financial advisors.
ARTICLE VI.
COVENANTS
Section 6.1 Conduct of Business of the Company. During the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Closing, subject to the limitations set forth below,
the Company agrees as to itself and each of its Subsidiaries (except to the
extent that Parent shall otherwise consent in writing, which consent shall not
be withheld without a business justification) to carry on its business in the
usual, regular and ordinary course consistent with past practice, to pay its
debts and Taxes when due (including without limitation the making of cash
distributions for the payment of Taxes to the Sellers in a manner consistent
with past practices), to pay or perform its other material obligations when due,
and 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 other Persons having
business dealings with it. The Company has delivered concurrently herewith its
capital improvement expenditures budget (the "Budget"), including a detailed
description of all capital improvement expenditures for the Horseshoe Casino
▇▇▇▇▇▇▇ pavilion renovation, the Horseshoe Casino Hammond parking garage
development (together, the "Hammond Expansion Project") and other planned
capital improvement expenditures at Bossier Casino, ▇▇▇▇▇▇▇ Casino and Tunica
Casino (together, the "Casino Properties"). The Company shall use commercially
reasonable efforts to make in all material respects the capital expenditures
reflected in the Budget, subject to the reasonable judgment of the Company after
consultation with Parent. Without limiting the generality of the foregoing and
as an extension thereof and except as (i) expressly contemplated by this
Agreement or (ii) disclosed on Section 6.1 of the Company Disclosure Letter,
during the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Closing, without the written
consent of Parent (which consent shall not be withheld without a business
justification), the Company shall not and shall not permit any of its
Subsidiaries to:
31
(i) amend or otherwise change its Organizational Documents;
(ii) (A) issue, sell, pledge, dispose of, grant, transfer,
encumber or authorize the issuance, sale, pledge, disposition, grant, transfer
or encumbrance of any shares of its capital stock of, or other Equity Interests
in, the Company or any Subsidiary of the Company of any class, or securities
convertible or exchangeable or exercisable for any shares of such capital stock
or other Equity Interests, or any options, phantom stock, stock appreciation
rights, stock based performance units, warrants or other rights of any kind to
acquire any shares of such capital stock or other Equity Interests or such
convertible or exchangeable securities of the Company or any Subsidiary of the
Company, other than in connection with the vesting or exercise of Options or
SARs issued prior to the date hereof or (B) amend, waive or otherwise modify any
of the terms of any employee option, warrant or stock option plan of the Company
or any of its Subsidiaries, including without limitation, the Options, SARs or
the Company Equity Plans, other than any such amendments, waivers or
modifications with respect to Options, SARs (or stock option plans in connection
with such Options or SARs) or warrants which shall be cancelled at the Closing;
(iii) (A) declare, set aside, make or pay any dividend,
distribution, (whether payable in cash, securities or property or any
combination thereof), contribution, loan or any other payment out of the
ordinary course of business in respect of any class or series of its capital
stock or (B) enter into any agreement with respect to the voting of its capital
stock or any Equity Interests held by the Company or any Subsidiary of the
Company; provided, however, that the Company may take the actions prohibited by
subclause (A) if such dividend, distribution, contribution, loan or payment
would not violate the terms of any note, bond, mortgage, indenture, lease,
contract or other agreement, instrument or obligation to which the Company or
any of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound;
(iv) split, combine, subdivide or reclassify, or issue or
authorize the issuance of any other Equity Interests in respect of, in lieu of
or in substitution for shares of its Capital Stock or other Equity Interests,
any shares of its capital stock, or any of its other Equity Interests;
(v) increase the compensation or benefits payable or to become
payable to its directors, officers or employees (whether from the Company or any
of its Subsidiaries), or pay any benefit not required by any existing plan or
arrangement (including, without limitation, the granting of stock options, stock
appreciation rights, shares of restricted stock or performance units) or grant
any rights to severance, retention or termination pay to or enter into any
employment or severance agreement with, any director, officer or employee of the
Company or any of its Subsidiaries or establish, adopt, enter into or amend any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, savings, welfare, deferred
compensation, employment, termination, severance or other employee benefit plan,
agreement, trust, fund, policy or arrangement for the benefit or welfare of any
directors, officers or current or former employees, including any Benefit
Arrangement, Pension Plan or Welfare Plan, except (A) to the extent required by
applicable Law, (B) pursuant to any Company Benefit Plans as in effect on the
date of this Agreement consistent with past practices, (C) for salary and other
benefit increases (other than those set forth in (D) below which are governed by
(D)), grants, payments or modifications in the ordinary course of business
consistent with past practice to employees other than officers of the Company,
(D) bonuses, severance benefits or
32
other similar payments paid in full by the Company prior to the Closing Date,
(E) extensions of employment agreements on substantially similar terms for up to
six months at a time (with normal increases consistent with past practices) with
respect to employees other than officers of the Company, provided that such
employment agreements terminate upon the Closing and do not give rise to payment
or benefit obligations which are not satisfied in full by the Company prior to
the Closing, (F) with respect to any such salary and other benefits increases,
grants, payments or modifications which terminate at, and are paid in full by
the Company prior to, the Closing or (G) amendments to employment, non-compete,
severance and termination or other similar agreements as necessary to clarify
that any employee of the Company presently bound by a non-compete covenant that
survives post-Closing would continue to be bound only in respect of those casino
properties owned by the Company immediately prior to the Closing Date to which
such employee's present non-compete covenant is tied;
(vi) (A) sell, pledge, transfer, lease, dispose of, grant,
encumber, or otherwise authorize the sale, pledge, lease, transfer, disposition,
grant or Encumbrance of any of the properties or assets (including without
limitation Intellectual Property) of the Company or any of its Subsidiaries with
a fair market value in excess of $50,000, except for sales of current assets in
the ordinary course of business and consistent with past practice, (B) acquire
(i) any corporation, partnership, other business organization or any division
thereof, or a substantial portion of the assets thereof (including, without
limitation, by merger, consolidation, lease or acquisition of stock or assets)
or (ii) any other assets outside of the ordinary course of business, or (C)
enter into any other commitment, transaction, agreement, contract or instrument
outside the ordinary course of business consistent with past practices;
(vii) (A) incur or assume any Indebtedness, except as will be
repaid in full prior to or at the Closing by the Company, (B) accelerate or
delay collection of notes or accounts receivable in advance of or beyond their
regular due dates or the dates when the same would have been collected in the
ordinary course of business consistent with past practice, (C) delay or
accelerate in any material respect payment of any account payable in advance of
its due date or the date such liability would have been paid in the ordinary
course of business consistent with past practice, (D) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person except in the ordinary course
of business consistent with past practice, (E) vary the Company's inventory
practices in any material respect from the Company's past practices, or (F)
except as required to do so pursuant to any written agreements in existence on
the date of this Agreement, make or authorize any loans, advances or capital
contributions to, or investments in, any other Person (including advances to
employees) except in the ordinary course of business consistent with past
practice; provided, each of the Company and its Subsidiaries shall be permitted
to loan, advance, contribute or invest any of its cash or cash equivalents in
any Person in the ordinary course of business consistent with past practice so
long as such loan, advance, capital contribution or investment does not directly
or indirectly materially interfere with, and is not materially detrimental to,
the operation of the business of the Company and its Subsidiaries;
(viii) (A) make or rescind any material election relating to
Taxes (other than an election by Bossier Corp. pursuant to Section 1361(b)(3)(B)
of the Code), (B) settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to Taxes, or (C) except as may be required by applicable Law, make any
change to any of its material methods of reporting income or deductions for
Federal Income
33
Tax purposes from those employed in the preparation of its Federal income Tax
Return for the taxable years ending December 31, 2001 and 2002;
(ix) pay, discharge or satisfy any material claims or
Liabilities (absolute, accrued, asserted, unasserted, contingent or otherwise),
other than in the ordinary course of business and consistent with past practice
of Liabilities reflected or reserved against in the consolidated financial
statements of the Company;
(x) other than in the ordinary course of business and
consistent with past practice, waive any rights with respect to, or make any
payment of any material Liability (other than Indebtedness permitted by
paragraph (vii) above) of the Company or of any of its Subsidiaries before the
same comes due in accordance with its terms, other than any Liability which the
Sellers would have been required to bear at the Closing;
(xi) fail to maintain its existing insurance coverage in all
material respects of all types in effect as of the date hereof; provided,
however, in the event any such coverage shall be terminated or lapse, to the
extent available at reasonable cost, the Company or any of its Subsidiaries may
procure substantially similar substitute insurance policies which in all
material respects are in at least such amounts and against such risks as are
currently covered by such policies;
(xii) enter into any collective bargaining agreement or any
successor collective bargaining agreement;
(xiii) make any change with respect to accounting policies or
procedures, other than required by GAAP or any Governmental Entity, or in the
ordinary course of business and consistent with past practice;
(xiv) other than as otherwise permitted in this Section 6.1,
cancel, terminate or adversely modify or amend any of the Company Material
Contracts, or waive, release, assign, settle or compromise any material rights
or claims, or any material litigation or arbitration;
(xv) take, or agree to commit to take, any action that would
make any representation or warranty of the Company contained herein inaccurate
in any respect at, or as of any time prior to, the Closing so as to cause the
conditions to Parent to consummate the transactions contemplated herein not to
be satisfied;
(xvi) write up, write down or write off the book value of any
assets of the Company and its Subsidiaries, in excess of $2,000,000 in the
aggregate, except in the ordinary course of business consistent with past
practice and for depreciation and amortization in accordance with GAAP
consistently applied;
(xvii) make or authorize any capital expenditure in excess of
the aggregate amount set forth in the Budget or, without double counting, on
Schedule 1.3(a)(iii), other than repairs and maintenance in the ordinary course
of business consistent with past practice; provided, however, that it shall not
make any capital expenditure otherwise permitted by this Section 6.1(xvii) if
such capital expenditure would violate the terms of any note, bond, mortgage,
indenture, lease, contract or other agreement, instrument or obligation to which
the Company or
34
any of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound;
(xviii) substantially change the manner in which it
administers the Company Benefit Plans or make any changes that would materially
impact the cost of administration of the Company Benefit Plans; or
(xix) enter into an agreement, contract, commitment or
arrangement to do any of the foregoing, or to authorize or announce an intention
to do any of the foregoing.
Notwithstanding anything herein to the contrary in this Section 6.1,
the Company shall be permitted to make cash distributions to the Sellers for
Taxes to the fullest extent permitted under the 8.625% Indenture and to
establish reserves therefor.
Section 6.2 Cooperation; Notice; Cure. Subject to compliance with
applicable Law (including, without limitation, antitrust Laws and the Company
Gaming Laws), from the date hereof until the Closing, the Company shall confer,
on a regular and frequent basis as reasonably requested, with Parent and one or
more Representatives of Parent to report on the general status of the Company's
ongoing operations. Each of Parent, the Company and the Sellers 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
of its respective covenants or agreements under this Agreement to be breached in
any material respect or that renders or will render untrue in any material
respect any of its respective representations or warranties contained in this
Agreement. No notice given, or investigation made, pursuant to this paragraph
shall affect or be deemed to modify or limit any representation or warranty
contained in this Agreement or the conditions to the obligations of the parties
to consummate the transactions contemplated herein.
Section 6.3 No Solicitation.
(a) None of the Company, Sellers or any Subsidiary of the Company or
Sellers (as applicable) shall, directly or indirectly, take (and shall not
authorize or permit, as applicable, each of their respective directors,
officers, employees, accountants, consultants, legal counsel, advisors, agents
and other representatives (collectively, "Representatives") or, to the extent
within the Company's or the Sellers' control, other Affiliates to take) any
action to (A) encourage, solicit, initiate or induce any inquiry with respect
to, or the making, submission or announcement of, any Acquisition Proposal, (B)
enter into any letter of intent or similar document, agreement, commitment or
understanding contemplating or otherwise relating to any Acquisition Proposal or
enter into any agreement, arrangement or understanding requiring it to abandon,
terminate or fail to consummate the purchase and sale of the Shares hereunder or
any other transaction contemplated by this Agreement, (C) approve, endorse or
recommend any Acquisition Proposal, or (D) participate in any way in discussions
or negotiations with, or furnish any non-public information of the Company and
its Subsidiaries to any Person in connection with, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or
could reasonably be expected to lead to, any Acquisition Proposal. Upon
execution of this Agreement, (i) the Company shall, and shall cause its
Subsidiaries and Representatives to, cease immediately and cause to be
terminated any and all existing
35
discussions or negotiations with any parties conducted heretofore with respect
to an Acquisition Proposal and promptly request that all confidential
information with respect thereto furnished on behalf of the Company be returned,
destroyed or retained in confidence as provided in the respective
confidentiality agreement with such party and (ii) each Seller shall, and shall
cause its Subsidiaries (if any) and Representatives to, cease immediately and
cause to be terminated any and all existing discussions or negotiations with any
parties conducted heretofore with respect to an Acquisition Proposal. For
purposes of this Agreement, "Acquisition Proposal" means any offer or proposal
from any Person relating to, or that would reasonably be expected to lead to,
any direct or indirect (A) merger, consolidation, business combination or
similar transaction involving the Company or any Subsidiary of the Company, (B)
sale, lease or other disposition directly or indirectly by merger,
consolidation, business combination, share exchange, joint venture or otherwise
of assets of the Company or any Subsidiary of the Company representing 10% or
more of the consolidated assets of the Company and the Company's Subsidiaries,
(C) issuance, sale, or other disposition of (including by way of merger,
consolidation, business combination, share exchange, joint venture or any
similar transaction) securities (or options, rights or warrants to purchase, or
securities convertible into or exchangeable for such securities) representing
10% or more of the voting power of the Company other than shares issued upon
exercise of Options and transfers to family members of stockholders of the
Company as of the date of this Agreement or trusts for such family members which
agree to be bound by the terms of this Agreement, (D) transaction (including
tender offer or exchange offer) in which any Person shall acquire beneficial
ownership, or the right to acquire beneficial ownership or any "group" (as
defined in Rule 13d-5(b)(1) under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of 10% or
more of the outstanding voting capital stock of the Company or (E) any
combination of the foregoing (other than the purchase and sale of the Shares
pursuant to this Agreement).
(b) The Company and the Sellers shall, as promptly as practicable (and
in no event later than 24 hours after receipt thereof), advise Parent of any
inquiry received by it relating to any potential Acquisition Proposal and of the
material terms of any proposal or inquiry, including the identity of the Person
and its Affiliates making the same, that it may receive in respect of any such
potential Acquisition Proposal, or of any information requested from it or of
any negotiations or discussions being sought to be initiated with it, shall
furnish to Parent a copy of any such proposal or inquiry, if it is in writing,
or a written summary of any such proposal or inquiry, if it is not in writing
and shall keep Parent fully informed on a prompt basis with respect to any
developments with respect to the foregoing.
Section 6.4 Access to Information.
(a) Upon reasonable notice, the Company shall (and shall cause its
Subsidiaries, and its and their respective Representatives, to) (A) provide
Parent's Representatives reasonable access, during normal business hours, to all
its personnel (subject to the last three sentences of this Section 6.4),
properties, books, contracts, commitments and records (other than those which
the Company may not provide due to confidentiality agreements) and (B) furnish
promptly to Parent's Representatives (i) copies of monthly financial reports and
development reports prepared by the Company in the ordinary course of business,
(ii) 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 securities Laws and (iii) all other information concerning its business,
properties and personnel as Parent may reasonably request, in each case, so long
as such actions
36
(1) do not materially interfere with the business of the Company or its
Subsidiaries, (2) would not, after consultation with counsel, violate any Law in
such counsel's reasonable judgment and (3) do not comprise strategic marketing
materials in the form of names and/or addresses of customers of the Company or
the means by which the Company determines when and how to solicit such customers
by direct mail offers. Notwithstanding the foregoing, the Company shall not be
required to provide any information which (i) it reasonably believes (after
consultation with outside legal counsel) it may not provide to Parent by reason
of applicable Law, or (ii) constitutes information protected by the
attorney/client and/or attorney work product privilege. No information or
knowledge obtained in any investigation pursuant to this Section 6.4, 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
transactions contemplated herein. Parent and the Company agree that the Company
shall not be obligated to provide Parent access to the Company's property-level
casino employees at any level, until the condition in Section 7.1(b) shall have
been satisfied. Following the satisfaction of the condition set forth in Section
7.1(b), Parent shall have access to (i) the General Manager of each of the
Tunica Casino, ▇▇▇▇▇▇▇ Casino and Bossier Casino (without any requirement to
provide prior notice to the Company or opportunity to participate in
communications and meetings) and (ii) each employee of Tunica Casino, ▇▇▇▇▇▇▇
Casino and Bossier Casino other than the General Managers so long as Parent
shall have provided prior notice to the Company and an opportunity to
participate in any communication or meeting with such employee. Parent agrees
that the Company shall have the right to reschedule the time and place of any
such communication or meeting as reasonably necessary to allow the Company to
participate.
(b) With respect to the information disclosed pursuant to Section
6.4(a), Parent shall comply with, and shall use its reasonable best efforts to
cause Parent's Representatives to comply with, all of their respective
obligations under the Confidentiality Agreement dated July 7, 2003, between
Parent and the Company and the letter dated July 8, 2003 from Bear, ▇▇▇▇▇▇▇ &
Co. Inc. to Parent (together, the "Confidentiality Agreement"); provided,
however, that the terms of the Confidentiality Agreement shall not apply to the
"tax treatment" and "tax structure," each as defined in Treasury Regulation
Section 1.6011-4, of the transactions contemplated by this Agreement upon the
earlier to occur of (A) the date of the public announcement of discussions
relating to the transactions contemplated herein, (B) the date of the public
announcement of the transactions contemplated herein or (C) the date of the
execution of this Agreement.
Section 6.5 Governmental Approvals.
(a) Subject to the proviso contained in Section 6.5(b)(ii), the Company
and Parent shall use their reasonable best efforts to (i) take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise to consummate
and make effective the transactions contemplated by this Agreement as promptly
as practicable, (ii) obtain from any Governmental Entities any consents,
licenses, permits, waivers, approvals, authorizations or orders required (A) to
be obtained or made by Parent or the Company or any of their Subsidiaries or any
of their respective officers or directors, (B) to avoid any action or proceeding
by any Governmental Entity (including, without limitation, those in connection
with the HSR Act and antitrust and competition Laws of any other applicable
jurisdiction), in connection with the authorization, execution and delivery of
this Agreement and the consummation of the transactions contemplated herein,
including, without limitation, the purchase and sale of the Shares, and (C) to
prevent a Company Material Adverse Effect from
37
occurring prior to or after the Closing or a Parent Material Adverse Effect from
occurring after the Closing, and (iii) make all necessary filings, and
thereafter make any other required submissions, with respect to this Agreement
and the purchase and sale of the Shares required under (A) the Securities Act
and the Exchange Act, and any other applicable federal or state securities Laws,
(B) the HSR Act and antitrust and competition Laws of any other applicable
jurisdiction, (C) the Company Gaming Laws and Parent Gaming Laws and (D) any
other applicable Law, which filings shall be made within thirty (30) calendar
days of the date hereof. Parent and the Company shall cooperate with each other
in connection with the making of all filings referenced in the preceding
sentence, including providing copies of all such documents to the non-filing
party and its advisors prior to filing and, if requested, to accept all
reasonable additions, deletions or changes suggested in connection therewith.
The Company and Parent shall have the right to review in advance, and to the
extent practicable each shall consult the other on, all the information relating
to the Company and its Subsidiaries or Parent and its Subsidiaries, as the case
may be, that appears in any filing made with, or written materials submitted to,
any third party and/or any Governmental Entity in connection with the Closing
and the other transactions contemplated by this Agreement. Parent and the
Company may, as each deems reasonably advisable and necessary, designate any
competitively sensitive information provided to the other under this Section
6.5(a) as "outside counsel only." Such information shall be given only to
outside counsel of the recipient. In addition, Parent and the Company may redact
any information from such documents shared with the other party or its counsel
that is not pertinent to the subject matter of the filing or submission,
including personal information of individual applicants.
(b) Without limiting Section 6.5(a), Parent and the Company shall:
(i) each use its reasonable best efforts to avoid the entry
of, or to have vacated or terminated, any decree, order, or judgment that would
restrain, prevent or delay the Closing, on or before the Outside Date, including
defending through litigation on the merits any claim asserted in any court by
any person; and
(ii) each use its reasonable best efforts to avoid or
eliminate each and every impediment under any antitrust, competition or trade
regulation Law that may be asserted by any Governmental Entity with respect to
the Closing so as to enable the Closing to occur as soon as reasonably possible
(and in any event no later than the Outside Date), including implementing,
contesting or resisting any litigation before any court or quasi-judicial
administrative tribunal seeking to restrain or enjoin the Closing; provided,
however, that the Company shall not commit to any divestitures, licenses or hold
separate or similar arrangements with respect to its or its Subsidiaries' assets
or conduct of business arrangements, whether as a condition to obtaining any
approval from a Governmental Entity or any other person or for any other reason,
without the prior written consent of Parent (which consent may be withheld by
Parent in its sole and absolute discretion).
(c) Subject to the proviso contained in Section 6.5(b)(ii) and the
proviso contained in the following sentence of this Section 6.5(c), the Company
and Parent shall give (or shall cause their respective Subsidiaries to give) any
notices to third parties, and use, and cause their respective Subsidiaries to
use, reasonable best efforts to obtain any non-governmental third party
consents, (i) necessary, proper or advisable to consummate the transactions
contemplated in this Agreement, (ii) required to be disclosed in the Company
Disclosure Letter, or (iii) required to
38
prevent a Company Material Adverse Effect from occurring prior to or after the
Closing or a Parent Material Adverse Effect from occurring after the Closing. In
the event that either party shall fail to obtain any third party consent
described in the first sentence of this Section 6.5(c), such party shall use
reasonable best efforts, and shall take any such actions reasonably requested by
the other party hereto, to minimize any adverse effect upon the Company and
Parent, their respective Subsidiaries, and their respective businesses
resulting, or which could reasonably be expected to result after the Closing,
from the failure to obtain such consent; provided, that no obligation to make a
material payment or grant a material right not conditioned upon the consummation
of the Closing shall be imposed by this Section 6.5(c).
(d) From the date of this Agreement until the Closing, each party shall
promptly notify the other party in writing of any pending or, to the knowledge
of the Company or Parent, as appropriate, threatened action, suit, arbitration
or other proceeding or investigation by any Governmental Entity or any other
person (i) challenging or seeking damages in connection with the Closing or the
purchase and sale of the Shares or (ii) seeking to restrain or prohibit the
consummation of the Closing or otherwise limit the right of Parent or its
Subsidiaries to own or operate all or any portion of the businesses or assets of
the Company or its Subsidiaries.
(e) Parent shall give reasonable notice to the Company of any and all
actions and assistance, including, without limitation, attendance at meetings
and presentations, production of documents, testimony or otherwise it requires
of the Company in obtaining the approvals of Governmental Entities of the date
such document production, attendance, testimony or other participation is
required and specific instructions as to documents required to be produced, the
deadline for production and the persons to whom they shall be delivered and the
names of the persons required to attend meetings, presentations or to provide
testimony and the timing thereof.
(f) Parent shall reimburse the Company for all reasonable out-of-pocket
expenses (not including management time and internal Company charges, but
including reasonable legal fees billed at standard, non-premium rates) incurred
by the Company in complying with any formal Request for Additional Information
that may be issued under the HSR Act by the Antitrust Division of the U.S.
Department of Justice or the U.S. Federal Trade Commission in connection with
the transactions contemplated by this Agreement. Such expenses shall be
reimbursed to the Company in full immediately prior to the Closing or upon
termination of this Agreement in addition to any amounts to be paid by Parent to
the Company pursuant to Section 8.2 hereof.
Section 6.6 Public Announcements. Parent and the Company will consult
with each other before issuing, and provide each other the opportunity to review
and make reasonable comment upon, any press release or making any public
statement with respect to this Agreement and the transactions contemplated
hereby and, except as may be required by applicable law or any listing agreement
with the New York Stock Exchange, will not issue any such press release or make
any such public statement prior to such consultation; provided, however, that
Parent and the Company may make any public statement in response to specific
questions by the press, analysts, investors or those attending industry
conferences or financial analyst conference calls, so long as any such
statements are not inconsistent with previous press releases, public disclosures
or public statements made jointly by Parent and the Company and do not reveal
non-public information regarding the Company.
39
Section 6.7 Indemnification of Officers and Directors of Parent.
(a) From and after the Closing, Parent agrees that it will, and will
cause the Company to, indemnify and hold harmless each present and former
director and officer of the Company and its Subsidiaries (the "D&O 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
Closing, whether asserted or claimed prior to, at or after the Closing, to the
fullest extent that the Company would have been permitted under its
Organizational Documents and any indemnification agreements or arrangements in
effect on the date hereof to indemnify such Indemnified Party subject to
applicable Laws.
(b) In the event that the Company, its Subsidiaries or Parent or any of
its respective, successors or assigns (i) consolidates with or merges into any
other person and is not the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any person, then, and in each such case,
proper provision will be made so that the successors and assigns of the Company
or Parent will assume the obligations thereof set forth in this Section 6.7.
(c) The provisions of this Section 6.7 are intended to be an addition
to the rights otherwise available to the current officers and directors of the
Company and its Subsidiaries by Law, charter, statute, bylaw or agreement, and
shall operate for the benefit of, and shall be enforceable by, each of the D&O
Indemnified Parties, their heirs and their representatives.
Section 6.8 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 reasonably
necessary, proper or advisable under applicable Laws to consummate and make
effective the transactions contemplated by this Agreement, including, without
limitation, to fulfill all conditions precedent applicable to such party
pursuant to this Agreement and to execute, acknowledge and deliver in proper
form any further documents, certificates, agreements and other writings, and
take such other action as such other party may reasonably require, in order to
effectively carry out the intent of this Agreement.
(b) In case at any time after the Closing any further action is
necessary to carry out the purposes of this Agreement or to vest Parent with
full title to all properties, assets, rights, approvals, immunities, franchises
of any of the parties to the Closing, the proper officers and/or directors of
Parent and the particular Seller shall take all such necessary action and such
individual Seller shall bear the cost of any such necessary action; provided,
that if such action is necessary due to events or circumstances particular to
Parent, Parent shall bear the cost of such action.
Section 6.9 Section 338(h)(10) Election.
(a) With respect to the purchase of Shares hereunder, Sellers (and to
the extent necessary, the Acquired Companies) and Parent (or an Affiliate of
Parent) shall jointly make
40
timely and irrevocable elections under Section 338(h)(10) of the Code, and if
permissible, similar elections under any applicable state and local Tax Laws
(collectively, the "Section 338 Elections"). Sellers and Parent agree not to
take any action that could cause such Section 338 Elections to be invalid, and
shall take no position contrary thereto unless required to do so pursuant to a
determination (as defined in Section 1313(a) of the Code or any similar
provision of any state, foreign or local Law).
(b) As soon as practicable hereafter, Parent shall prepare (and shall
be solely responsible for preparing) any and all forms necessary to effectuate
the Section 338 Elections (including, without limitation, IRS Form 8023 and any
similar forms under applicable state and local Laws (collectively, the "Section
338 Forms")). Sellers shall cooperate with Parent in the preparation of the
Section 338 Forms and shall deliver duly completed final copies of such Section
338 Forms executed by each of the Sellers (and to the extent necessary, the
Acquired Companies) on the Closing Date. Sellers and Parent shall also cooperate
with each other to take all actions necessary and appropriate (including,
without limitation, filing such additional forms, Tax Returns, elections,
schedules and other documents as may be required) to effect and preserve the
Section 338 Elections in accordance with the provisions of Treasury Regulation
Section 1.338(h)(10)-1 (and comparable provisions of applicable state and local
Law) or any successor provisions.
(c) Parent, the Acquired Companies and Sellers shall file all Tax
Returns (including but not limited to the Section 338 Forms) consistent with the
Final Allocation and shall not voluntarily take any action inconsistent
therewith upon examination of any Tax Return, in any refund claim, in any
litigation, or otherwise with respect to such Tax Returns, unless required to
pursuant to a determination (as defined in Section 1313(a) of the Code or any
similar provision of any foreign, state or local Law).
(d) Parent shall bear all of the costs and expenses of preparing the
Section 338 Elections and the Proposed and Final Allocations other than costs
and expenses incurred by the Sellers' Representative in connection with the
review of the Proposed Allocation or any Section 338 Form or the execution of
any Section 338 Form.
Section 6.10 Preparation and Filing of Tax Returns; Payment of Taxes.
(a) The Company shall prepare, consistent with the past practices and
customs of the Acquired Companies (unless a contrary position is required by
applicable Law), and timely file with the appropriate Governmental Entity, all
Tax Returns of the Acquired Companies relating to any Tax Period ending prior to
the Closing Date that are required to be filed prior to the Closing Date.
(b) Sellers' Representative shall prepare at its own expense,
consistent with the past practices and customs of the Acquired Companies (unless
a contrary position is required by applicable Law), all Income Tax Returns of
the Acquired Companies for any Tax Period ending on or before the Closing Date.
Sellers' Representative shall permit Parent at least thirty (30) days to review
and comment on such Income Tax Returns, and to the extent the treatment of any
item on such Income Tax Return may increase the Tax liability of Parent or the
Acquired Companies in Post-Closing Tax Periods by more than $50,000, then the
treatment of such item on such Income Tax Return shall be subject to the
approval of Parent (which approval shall not
41
be unreasonably withheld). At least three (3) business days prior to the due
date of such Income Tax Returns, the Sellers' Representative shall deliver such
Income Tax Returns to Parent for filing.
(c) Parent shall prepare, or cause to be prepared, and timely file with
the appropriate Governmental Entity all Income Tax Returns of the Acquired
Companies relating to Tax Periods beginning after the Closing Date and all
Non-Income Tax Returns of the Acquired Companies that are required (with all
extensions) to be filed after the Closing Date. Parent shall prepare, consistent
with the past practices and customs of the Acquired Companies (unless a contrary
position is required by Law), and shall permit Sellers' Representative at least
seven (7) calendar days to review and comment on, all material Non-Income Tax
Returns that relate to a Pre-Closing Tax Period, and the treatment of any items
on such Tax Returns shall, to the extent they relate to a Pre-Closing Tax
Period, be subject to the reasonable approval of Sellers' Representative (which
approval shall not be unreasonably withheld).
(d) Sellers' Representative may prepare at its own expense, consistent
with the past practices and customs of the Acquired Companies (unless a contrary
position is required by applicable Law), any amended Income Tax Returns of the
Acquired Companies for any Tax Period ending on or before the Closing Date.
Sellers' Representative shall permit Parent at least thirty (30) days to review
and comment on such Income Tax Returns, and to the extent the treatment of any
item on such Income Tax Return may increase the Tax liability of Parent or the
Acquired Companies in Post-Closing Tax Periods by more than $50,000, then the
treatment of such item on such Income Tax Return shall be subject to the
approval of Parent (which approval shall not be unreasonably withheld). The
Sellers' Representative shall deliver such Income Tax Returns to Parent for
filing, and Sellers' Representative shall reimburse Parent for its out-of-pocket
costs and expenses incurred in connection with the review and filing of such
Income Tax Returns. Parent shall be responsible for preparing and filing any
amended Non-Income Tax Returns for any of the Acquired Companies for Tax Periods
ending on or prior to the Closing Date. Parent shall not, and after the Closing
Date shall not permit any of the Acquired Companies to, amend, refile or
otherwise modify any Income Tax Return relating to any Tax Period ending on or
before the Closing Date without the prior written consent of Sellers'
Representative, which consent may not be unreasonably withheld.
(e) To the extent required by applicable Law, each of the Sellers shall
include any income, gain, loss, deduction or other Tax items for Pre-Closing Tax
Periods on their Tax Returns in a manner consistent with the Company's Schedule
K-1's for such Tax Periods (including any income, gain, loss, deduction or other
Tax items resulting from the Section 338 Elections).
Section 6.11 Cooperation on Tax Matters. Sellers' Representative and
Parent shall, and shall cause the Acquired Companies and their respective
Affiliates to, reasonably cooperate in preparing and filing all Tax Returns,
including maintaining and making available to each other all records or
information and personnel that may be relevant for the preparation of any Tax
Returns, the determination of amounts due or payable hereunder in respect of
Taxes, any audit or other examination by any Governmental Entity, the filing of
any claim for a refund of Tax or for the allowance of any Tax credit, or any
judicial or administrative proceedings relating to liability for Taxes with
respect to all Tax Periods. Sellers and Parent agree, and Parent following the
Closing Date agrees to cause each of the Acquired Companies to, (i) retain all
books and records
42
with respect to Income Tax matters pertinent to any of the Acquired Companies
relating to any Pre-Closing Tax Period until the applicable statute of
limitations with respect to Income Taxes for such Acquired Company has expired
and to abide by all record retention agreements entered into with any
Governmental Entity; (ii) allow such party, at times and dates mutually
acceptable to the parties, to inspect, review and make copies of such records as
such party may deem necessary or appropriate from time to time, such activities
to be conducted during normal business hours at such party's expense; and (iii)
give the Sellers' Representative reasonable written notice prior to
transferring, destroying or discarding any books and records relating to Income
Taxes for any Pre-Closing Tax Period of any of the Acquired Companies and, if
Sellers' Representative so requests, to allow Sellers' Representative to take
possession of such books and records.
Section 6.12 Transfer Taxes. All Transfer Taxes, if any, arising out of
or in connection with the transactions contemplated by this Agreement shall be
borne equally by the Sellers and Parent. Sellers shall cause all appropriate
stock Transfer Tax stamps to be affixed to the certificate or certificates
representing the Shares so sold and delivered. Sellers' Representative and
Parent shall reasonably cooperate in the preparation, execution and filing of,
all Tax Returns, applications or other documents regarding any Transfer Taxes
that become payable in connection with the sale of the Shares, as a result of
the Section 338 Elections or otherwise.
Section 6.13 Refunds of Income Taxes. Any refund of Income Taxes paid
or collected by any of the Acquired Companies, including without limitation the
Indiana adjusted gross income tax and county adjusted gross income tax
withholdings in respect of the income of the Acquired Companies, that is
attributable to any Pre-Closing Tax Period or the portion of any Straddle Period
ending on the Closing Date shall be for the account of the Sellers. To the
extent that the Parent, the Acquired Companies or any Affiliate thereof receives
any refund of such Income Taxes after the Closing Date with respect to such
taxable period (or portion thereof), the amount of such refund (or the allocable
portion thereof) shall be paid to the Sellers' Representative within five (5)
business days of the receipt thereof.
Section 6.14 Q Sub Election. Prior to the Closing Date, the Company
shall make an election pursuant to Section 1361(b)(3)(B)(ii) of the Code (or any
equivalent provision of state or local Law) to treat Bossier Corp. as a
"qualified subchapter S subsidiary."
Section 6.15 Tax Reporting. For the avoidance of doubt, for Income Tax
purposes, Sellers, Parent and the Acquired Companies agree to treat (unless
otherwise required pursuant to a determination (as defined in Section 1313(a) of
the Code or any similar provision of state or local Law)):
(a) all compensation items payable on the Closing Date, including
payments under the Deferred Compensation Plan and the Company Equity Plans, as
paid and deductible in a Tax Period ending on or before the Closing Date; and
(b) all compensation items payable after the Closing Date pursuant to
the Retention Bonus Plan, the Executive Severance Agreements, and other similar
agreements, as paid and deductible in a Tax Period beginning after the Closing
Date.
43
Section 6.16 Employee Matters.
(a) Parent shall provide each Horseshoe Employee that remains in the
employ of the Company or Parent following the Closing with employee benefits,
which are substantially comparable to those provided by Parent to its similarly
situated employees, subject to the terms and conditions of any applicable plans
or arrangements. Nothing in this Agreement shall prevent, prohibit or limit the
right of the Acquired Companies to terminate, after the Closing, the employment
of any Horseshoe Employee who is an at-will employee. On and after the Closing,
the Acquired Companies shall continue to have all of the duties, obligations and
responsibilities imposed on them under each of the employment agreements between
any of the Acquired Companies and any of the Horseshoe Employees.
(b) Parent shall provide, or cause the provision of, each employee of
the Acquired Companies employed on the Closing Date (each, a "Horseshoe
Employee") with full credit, for purposes of eligibility and vesting under any
employee benefit plan, program, policy, practice or arrangement maintained by
the Acquired Companies in which such Horseshoe Employee may be eligible to
participate after the Closing (each such plan, program, policy, practice or
arrangement, a "Parent Plan"), for the Horseshoe Employees' pre-Closing service
with the Acquired Companies to the same extent recognized by the Acquired
Companies under the corresponding Company Benefit Plan immediately prior to the
Closing. Parent shall cause each Parent Plan which is a welfare plan, and in
which any Horseshoe Employee may be eligible to participate after the date of
Closing, to (i) waive all limitations as to preexisting conditions, exclusions
and waiting periods with respect to participation and coverage requirements
applicable to such Horseshoe Employee other than limitations or waiting periods
that are already in effect with respect to such employees and that have not been
satisfied as of the Closing under any Company Benefit Plan immediately prior to
the Closing and (ii) provide such Horseshoe Employee with credit for any
co-payments and deductibles paid under such Parent Plan or the corresponding
Company Benefit Plan, as applicable, prior to the date of Closing in satisfying
any applicable deductible or out-of-pocket requirements under such Parent Plan.
Parent also shall arrange for any former employees of any of the Acquired
Companies that is as of the Closing Date receiving COBRA benefits to continue to
be entitled to such benefits following the Closing Date for the remainder of the
applicable COBRA period.
(c) The Acquired Companies shall provide Parent and the Sellers'
Representative with a list (the "Severance Escrow List") of the employees from
those listed on Schedules 6.16(c) and (d) who were employed by the Acquired
Companies on the Closing and who either (i) remained employed by the Acquired
Companies 90 days following the Closing, (ii) shall have terminated his or her
employment with the Acquired Companies solely as a result of death or Disability
prior to the expiration of such 90 day period, or (iii) shall have had his or
her employment with the Acquired Companies terminated by the Parent or any of
the Acquired Companies for any reason other than for Cause prior to the
expiration of such 90 day period. Upon the expiration of such 90 day period, the
Sellers' Representative shall cause such amount of the Severance Escrow as is
necessary to pay all amount due under the Retention Bonus Plan and the Executive
Severance Agreements to be released to Parent. Pursuant to the terms of the
Severance Escrow Agreement, Parent shall pay to each employee on the Severance
Escrow List that is entitled to a payment under the Retention Bonus Plan or the
Executive Severance Agreements, as applicable, the respective amount set forth
opposite such employee's name on Schedules 6.16(c) and (d), as applicable, in
accordance with the terms of the Retention Bonus
44
Plan or the Executive Severance Agreements, as applicable. Alternatively, the
Sellers' Representative may arrange for such payments to be made directly by the
Sellers' Representative or the Escrow Agent upon the expiration of such 90 day
period. For these purposes, the terms "Disability" and "Cause" shall have the
meanings assigned to such terms in the Retention Bonus Plan, with respect to
employees on Schedules 6.16(c), and in the Executive Severance Agreements, with
respect to the employees listed on Schedule 6.16(d). Any amounts remaining in
the Severance Escrow shall be paid to the Sellers' Representative for the
benefit of the Sellers on a per share equal basis.
(d) Notwithstanding any other provision of this Agreement to the
contrary, (i) the consummation of the transactions contemplated by this
Agreement will result in the payment of the entire account balance under the
Horseshoe Gaming Holding Corp. Deferred Compensation Plan (the "Deferred
Compensation Plan") becoming due to each person then participating therein (each
person, a "Participant") and (ii) the Acquired Companies shall pay, or provide
for the payment to, each Participant the balance of his or her account under the
Deferred Compensation Plan as of the Closing Date.
(e) The Company agrees to use its reasonable best efforts to obtain,
prior to the Closing, the written consents of the holders of Options and SARs
with respect to the determination, allocation and payment of the Equity Spreads
pursuant to Sections 1.3(c) and 2.1.
(f) Notwithstanding any other provision of this Agreement to the
contrary, the Company shall take all actions necessary to terminate the
Company's Supplemental Bonus Plan 2003 effective immediately prior to the
Closing, and all payments required to be made under such Supplemental Bonus Plan
2003 shall be the obligations of the Company and shall be paid prior to the
Closing.
Section 6.17 Insurance.
(a) The Company shall obtain an actuarial report (the "Actuarial
Report") issued by an independent, nationally recognized actuarial service,
which service shall be reasonably acceptable to Parent, that assesses and
calculates the current and future Liabilities of Red Oak Insurance Company Ltd,
a wholly-owned subsidiary of the Company ("Red Oak"), and the ability of Red Oak
to pay such Liabilities when due with the cash and cash equivalents on its
balance sheet as of the date of the Actuarial Report. Each of the Company and
Parent will use commercially reasonable efforts to take, in good faith, all
actions, and to do all things necessary, proper or advisable to assist such
actuarial service in connection with its duties, and each will cooperate fully
with, and furnish information to, the other party and the actuarial service to
that end.
(b) As of the Closing, Red Oak shall have cash and cash equivalents on
its balance sheet at least equal to the amount necessary to meet its current and
future Liabilities as set forth in the Actuarial Report. If Red Oak does not
have sufficient cash and cash equivalents on its balance sheet, the Company
shall prior to the Beginning of the Closing Gaming Day contribute cash to Red
Oak in the amount of such shortfall.
45
ARTICLE VII.
CONDITIONS TO CLOSING
Section 7.1 Conditions to Each Party's Obligation to Effect the
Closing. The respective obligations of each party to this Agreement to effect
the Closing shall be subject to the satisfaction or waiver by each party prior
to the Closing of the following conditions:
(a) 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 (whether
temporary, preliminary or permanent) and which prevents or prohibits the
consummation of the transactions contemplated by the Agreement.
(b) HSR Act. Any applicable waiting periods, together with any
extensions thereof, under the HSR Act and the antitrust or competition Laws of
any other applicable jurisdiction shall have expired or been terminated.
(c) Governmental Consents. All consents, approvals, findings of
suitability, licenses, permits, orders or authorizations of and registrations,
declarations or filings with any Governmental Entity with jurisdiction in
respect of the Company Gaming Laws or the Parent Gaming Laws, in each case,
required or necessary in connection with the transactions contemplated by this
Agreement (including, but not limited to, approval, licensing or registration of
Parent and its officers and stockholders, as necessary), shall have been
obtained and made and shall be in full force and effect.
Section 7.2 Additional Conditions to Obligations of the Company. The
obligation of the Company to effect the Closing is subject to the satisfaction
of each of the following conditions prior to the Closing, any of which may be
waived in writing exclusively by the Company:
(a) Representations and Warranties. The representations and warranties
of Parent contained in this Agreement shall be true and correct (without giving
effect to any limitation as to "materiality" or "Parent Material Adverse Effect"
set forth therein) at and as of the Closing as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as of
such earlier date), except where the failure of such representations and
warranties to be true and correct (without giving effect to any limitation as to
"materiality" or "Parent Material Adverse Effect" set forth therein) would not,
individually or in the aggregate, result in a Parent Material Adverse Effect.
The Company shall have received a certificate signed on behalf of Parent by the
chief executive officer and the chief financial officer of Parent to such
effect.
(b) Performance of Obligations of Parent. Parent shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing, and the Company shall have received a
certificate signed on behalf of Parent by the chief executive officer and the
chief financial officer of Parent to such effect.
(c) Closing Deliveries. Parent shall have delivered to the Sellers the
documents and agreements set forth in Section 1.7.
46
Section 7.3 Additional Conditions to Obligations of Parent. The
obligations of Parent to effect the Closing are subject to the satisfaction of
each of the following conditions prior to the Closing, any of which may be
waived in writing exclusively by Parent:
(a) Representations and Warranties of the Company. The representations
and warranties of the Company contained in this Agreement shall be true and
correct (without giving effect to any limitation as to "materiality" or "Company
Material Adverse Effect" set forth therein) at and as of the Closing as if made
at and as of such time (except to the extent expressly made as of an earlier
date, in which case as of such earlier date), except where the failure of such
representations and warranties to be true and correct (without giving effect to
any limitation as to "materiality" or "Company Material Adverse Effect" set
forth therein) would not, individually or in the aggregate, result in a Company
Material Adverse Effect, except for the representations contained in Section 3.2
shall be true in all respects. Parent shall have received a certificate signed
on behalf of the Company by the chief executive officer and the chief financial
officer of the Company to such effect.
(b) Representations and Warranties of the Sellers. The representations
and warranties of each of the Sellers contained in this Agreement shall be true
and correct in all material respects at and as of the Closing as if made at and
as of such time (except to the extent expressly made as of an earlier date, in
which case as of such earlier date), except for the representations contained in
Section 4.5 shall be true in all respects. The Company shall have received a
certificate signed on behalf of each Seller to such effect.
(c) Performance of Obligations of the Company and Sellers. The Company
and Sellers shall have performed in all material respects all obligations
required to be performed by it or them under this Agreement at or prior to the
Closing, including without limitation delivery of items listed in Section 1.7
hereof. Parent shall have received a certificate signed on behalf of the Company
by the chief executive officer and the chief financial officer of the Company to
such effect and a certificate signed on behalf of each Seller to such effect.
(d) Consents and Approvals. All consents, approvals and authorizations
listed on Schedule 7.3(d) hereto shall have been obtained, in each case, without
(A) the imposition of material conditions, or (B) the requirement of expenditure
of a material amount of money by Parent or the Company to a third party in
exchange for any such consent.
(e) Material Adverse Effect. Since the date of this Agreement, there
shall not have occurred any Company Material Adverse Effect or any event,
condition, state of facts or development that would, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
(f) Closing Deliveries. The Sellers shall have delivered to Parent the
documents and agreements set forth in Section 1.7.
(g) Title Insurance. The Company shall have delivered to Parent, at the
Company's sole cost and expense, (i) a survey for each Company Owned Property
(other than a licensed property) and each property ground leased by the Company
(such survey, form of survey certification and date of such survey to be
reasonably satisfactory to Parent) and (ii) a title policy for each Company
Owned Property (other than a licensed property) and each property ground
47
leased by the Company (such policies to be ALTA extended owner's or leasehold
(as applicable) policies), together with copies of the underlying documents
referenced in each such title policy. The issuer, reinsurers, form of policy,
endorsements, and scheduled exceptions for each such title policy shall all be
reasonably satisfactory to Parent. In the case where the Company possesses a
valid Title Policy, the requirement set forth herein may be satisfied, at the
sole discretion of Parent, by the obtaining of an endorsement to such Title
Policy dating down the coverage thereunder to the date of the Closing.
ARTICLE VIII.
TERMINATION AND AMENDMENT
Section 8.1 Termination. This Agreement may be terminated at any time
prior to the Closing (with respect to Sections 8.1(b) through 8.1(e), by written
notice by the terminating party to the other party), whether before or after
approval of the matters presented in connection with the Closing by the
stockholders of the Company:
(a) by mutual written consent of the Company and Parent;
(b) by either Parent or the Company, if the transactions contemplated
hereby shall not have been consummated on or prior to June 11, 2004; provided,
however, that such date may, from time to time, be extended by Parent or the
Company (by written notice thereof to the other party), from time to time, up to
and including September 11, 2004, in the event all conditions set forth in
Article VII hereof, other than those set forth in Sections 7.1(a) and 7.1(c)
(the "Regulatory Conditions"), have been or are capable of being satisfied at
the time of each such extension and the Regulatory Conditions have been or are
reasonably capable of being satisfied on or prior to September 11, 2004 (such
earlier date, as it may be so extended, shall be referred to herein as the
"Outside Date"); provided that the right to terminate this Agreement under this
Section 8.1(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of or resulted in the failure
of the Closing to occur on or before such date;
(c) by either Parent or the Company, if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, decree or ruling or taken any other nonappealable final action, in
each case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Closing and the transactions contemplated hereby;
(d) by Parent, (A) if since the date of this Agreement, there shall
have been any event, development or change of circumstance that constitutes, has
had or would reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect and such Company Material Adverse Effect is not
cured, or cannot be cured, in all material respects within thirty (30) calendar
days after written notice thereof, (B) if the Company has breached any
representation, warranty, covenant or agreement on the part of the Company set
forth in this Agreement which (i) would result in a failure of a condition set
forth in Section 7.3(a) or (c) and (ii) is not cured, or cannot be cured, in all
material respects within thirty (30) calendar days after written notice thereof,
or (C) if any Seller has breached any representation, warranty, covenant or
agreement on the part of such Seller set forth in this Agreement which (i) would
result in a failure of a condition set forth in Section 7.3(b) or (c) and (ii)
is not cured, or cannot be cured, in all material respects within thirty (30)
calendar days after written notice thereof; provided,
48
however, that Parent's right to terminate this Agreement under subclauses (B)
and (C) of this Section 8.1(d) shall not be available if, at the time of such
intended termination, the Company has the right to terminate this Agreement
under Section 8.1(b), (c) or (e); or
(e) by the Company, if Parent has breached any representation,
warranty, covenant or agreement on the part of Parent set forth in this
Agreement which (i) would result in a failure of a condition set forth in
Section 7.2(a) or (b) and (ii) is not cured, or cannot be cured, in all material
respects within thirty (30) calendar days written notice thereof; provided,
however, that the Company's right to terminate this Agreement under this Section
8.1(e) shall not be available if, at the time of such intended termination,
Parent has the right to terminate this Agreement under Section 8.1(d).
Section 8.2 Effect of Termination.
(a) In the event of termination of this Agreement as provided in
Section 8.1, this Agreement shall immediately become void and there shall be no
liability or obligation on the part of Parent or the Company, or their
respective officers, directors, stockholders or Affiliates, except as set forth
in Sections 6.4(b), 6.5(f), 8.2, 9.2, 9.3, 9.5 and 9.6 and Article X and except
that such termination shall not limit liability for a willful breach of this
Agreement; provided that, the provisions of Sections 6.4(b), 6.5(f), 8.2, 9.2,
9.3, 9.5 and 9.6 and Article X of this Agreement and the Confidentiality
Agreement shall remain in full force and effect and survive any termination of
this Agreement.
(b) Except as set forth in Section 8.2(c), 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
Closing is consummated; provided, Parent shall be liable for all expenses
relating to regulatory investigations performed by the Gaming Authorities in
connection with any investigation by Gaming Authorities in connection with the
consummation of the transactions contemplated herein; provided, further, the
filing fee under the HSR Act shall be paid by Parent.
(c) Parent and the Company agree that if this Agreement is terminated
pursuant to Section 8.1(d), then the Company shall pay Parent an amount equal to
$27,450,000. The parties acknowledge and agree that the payment under this
Section 8.2(c) shall be in full and complete satisfaction of any and all claims
for Damages and shall be the sole and exclusive remedy under this Agreement,
except in the event of a fraudulent or willful breach of the representations,
warranties, covenants or agreements contained herein by the Company or any
Seller, in which case, Parent shall have all remedies available at law or in
equity (including for tort) with respect thereto.
(d) Parent and the Company agree that if this Agreement is terminated
pursuant to Section 8.1(e) (except for a termination as a result of Parent's
breach of its obligations under Sections 6.5(a) or (b), which is addressed in
Section 8.2(e) below), then Parent shall pay the Company an amount equal to
$27,450,000. The parties acknowledge and agree that the payment under this
Section 8.2(d) shall be in full and complete satisfaction of any and all claims
for Damages and shall be the sole and exclusive remedy under this Agreement,
except in the event of a fraudulent or willful breach of the representations,
warranties, covenants or agreements
49
contained herein by Parent, in which case, the Company shall have all remedies
available at law or in equity (including for tort) with respect thereto.
(e) Parent and the Company agree that if this Agreement is terminated
by the Company pursuant to Section 8.1(e) as a result of Parent's breach of its
obligations under Sections 6.5(a) or (b), then the Deposit shall be promptly
released to the Company pursuant to the terms of the Deposit Escrow Agreement.
The parties acknowledge and agree that the payment of the Deposit pursuant to
this Section 8.2(e) shall be in full and complete satisfaction of any and all
claims for Damages, and shall be the sole and exclusive remedy under this
Agreement.
(f) Parent and the Company agree that if this Agreement is terminated
by the Company pursuant to Section 8.1(b) as a result of the failure of the
conditions set forth in Sections 7.1(b) and 7.1(c) to be satisfied on or before
the Outside Date, then Parent shall pay to the Company an amount equal to
$40,000,000, which amount shall be deducted from the Deposit pursuant to the
terms of the Deposit Escrow Agreement. The parties acknowledge and agree that
the payment of the fee pursuant to this Section 8.2(f) shall be in full and
complete satisfaction of any and all claims for Damages, and shall be the sole
and exclusive remedy under this Agreement.
ARTICLE IX.
SURVIVAL; INDEMNIFICATION
Section 9.1 Survival of Representations, Warranties, Covenants and
Agreements.
(a) Except as set forth in Section 9.1(b) and Article VIII of this
Agreement, the representations, warranties, covenants and agreements of each
party hereto shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any other party hereto, any Person
controlling any such party or any of their Representatives whether prior to or
after the execution of this Agreement.
(b) The representations and warranties made by the Company and any
Seller in this Agreement, the Ancillary Agreement or in any exhibit, schedule,
the Company Disclosure Letter or certificate delivered by the Company or any
Seller pursuant hereto shall survive the Closing until (and claims based upon or
arising out of such representations and warranties may be asserted at any time
before) the second anniversary of the Closing Date; provided, however, that the
representations and warranties contained in Sections 3.2, 3.3(a), 3.7, 3.14,
3.16, 4.2 and 4.5 (or in any related exhibit, schedule (including the Company
Disclosure Letter) or certificate) shall survive until sixty (60) calendar days
after the expiration of the applicable period of limitations (giving effect to
any waivers or extensions thereof). The termination of the representations and
warranties provided herein shall not affect Parent in respect of any claim made
by Parent in reasonable detail in a writing received by the Sellers'
Representative prior to the expiration of the applicable survival period
provided herein. All of the representations and warranties made by Parent in
this Agreement, the Ancillary Agreement or in any exhibit or certificate
delivered by Parent pursuant hereto shall not survive the Closing. The covenants
and agreements of the parties hereto in this Agreement shall survive the Closing
without any contractual limitation on the period of survival (other than those
covenants and agreements that are expressly required to remain in full force and
effect for a specified period time).
Section 9.2 Indemnification.
(a) From and after the Closing, the individuals listed on Schedule 9.2(a)
shall, jointly and severally, and each Seller not listed on Schedule 9.2(a)
shall, severally and not jointly (in the case of such Sellers not listed on
Schedule 9.2(a), on a pro rata basis in proportion to the number of Shares held
by each immediately prior to the Closing) (in such capacity, each an
"Indemnifying Party" and collectively, the "Indemnifying Parties"), indemnify,
save and hold harmless Parent and its Affiliates and their respective
Representatives (each, an "Indemnified Party" and collectively, the "Indemnified
Parties") from and against any and all costs, losses, Liabilities, obligations,
damages, claims, demands and expenses (whether or not arising out of third-party
claims), including interest, penalties, costs of mitigation, reasonable
attorneys' fees and all amounts paid in investigation, defense or settlement of
any of the foregoing (herein, "Damages"), incurred in connection with, arising
out of, resulting from or incident to:
(i) any breach of any representation or warranty made by the Company
or any Seller in this Agreement, any Ancillary Agreement or any exhibit,
schedule, the Disclosure Letter or certificate delivered by the Company or any
Seller pursuant hereto (other than breaches of Section 3.7 to the extent such
representation or warranty relates to Income Taxes, which are governed
exclusively by Section 9.2(b));
(ii) any breach of any covenant or agreement made, or to be
performed, by the Company or any Seller in this Agreement, any Ancillary
Agreement or any exhibit, schedule, the Disclosure Letter or certificate
delivered by the Company or any Seller pursuant hereto, including, without
limitation, the agreement set forth in Section 1.3(a) hereof that the holders of
Company A Common Stock and Company B Common Stock shall receive the same per
share consideration for the sale of their respective Shares pursuant to this
Agreement (other than breaches of Sections 6.9 through 6.15 to the extent such
covenant or agreement relates to Income Taxes, which are governed exclusively by
Section 9.2(b));
(iii) any claim arising from the Sellers' Representative's
performance of his or her obligations under this Agreement;
(iv) any claim by a participant in the Retention Bonus Plan for any
payments or benefits as a result of the termination of his or her employment
with the Company or its successors under any Contract to which the Company and
such participant are parties or under any severance policy, practice or plan of
the Company if such participant has been paid the retention bonus to which he or
she is entitled under the Retention Bonus Plan;
(v) any claim asserting a breach of the ▇▇▇▇▇▇▇ Development
Agreement based on the Company's failure to construct the "Hotel Facilities" (as
such term is defined in the ▇▇▇▇▇▇▇ Development Agreement)), except for
obligations to construct improvements arising under the Fourth Amendment to
▇▇▇▇▇▇▇ Riverboat Gaming Project Development Agreement dated October 26, 2001;
provided, that, for purposes of this Section 9.2(a)(v), Damages shall not
include the cost of constructing the Hotel Facilities;
(vi) any claims arising from the Agreement dated April 21, 1999,
among Horseshoe Gaming, L.L.C., Horseshoe Gaming, Inc., Horseshoe Entertainment
and New Gaming Capital Partnership and ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇ and the
51
Agreement dated April 21, 1999, among Horseshoe Gaming, L.L.C., Horseshoe
Gaming, Inc., Horseshoe Entertainment and New Gaming Capital Partnership and
▇▇▇▇ ▇▇▇▇▇▇, The ▇▇▇▇▇ Group, Inc. and August ▇▇▇▇▇; and
(vii) any claims arising from the Company's failure to obtain the
consents of the holders of Options and SARs pursuant to Section 6.16(e).
(b) Income Tax Indemnification.
(i) From and after the Closing, the Indemnifying Parties shall (on
the same terms as set forth in the first sentence of Section 9.2(a)) indemnify,
save and hold harmless the Indemnified Parties (including for this purpose, the
Acquired Companies) from and against any and all Damages, including lost
federal, state and local Income Tax benefits of the Acquired Companies after the
Closing Date resulting from Parent (or an Affiliate of Parent) not being
entitled to make an effective election under Section 338(h)(10) of the Code with
respect to the purchase of the Shares under this Agreement, incurred in
connection with, arising out of, resulting from or incident to:
(A) Income Taxes of each of the Acquired Companies for all
Pre-Closing Tax Periods;
(B) Income Taxes of the Sellers imposed on any Acquired
Company;
(C) any breach of any covenant or agreement made, or to be
performed, by the Company or any Seller in Sections 6.9 through 6.15, (to the
extent such covenant or agreement relates to Income Taxes, including, for the
avoidance of doubt, Sections 6.9 and 6.14); and
(D) any breach of any representation or warranty or the
inaccuracy of any representation or warranty, made by the Company in Section 3.7
(to the extent such representation or warranty relates to Income Taxes,
including, for the avoidance of doubt, Sections 3.7(a) and (b)), except to the
extent that any such Damages are otherwise indemnified pursuant to the foregoing
clauses (A) through (C) above.
For purposes of this Section 9.2(b), Taxes shall include the amount of Taxes
which would have been paid but for the application of any credit or net
operating loss or capital loss deduction attributable to Post-Closing Tax
Periods.
(ii) From and after the Closing, Parent shall indemnify, save and
hold harmless Sellers from and against any and all Damages incurred in
connection with, arising out of, resulting from or incident to (A) Income Taxes
of the Acquired Companies for any Post-Closing Tax Period, except to the extent
such Taxes are attributable to a breach by the Company or Sellers of any
covenant referenced in Section 9.2(b)(i)(C) or a representation or warranty
referenced in Section 9.2(b)(i)(D), and (B) any breach of any covenant or
agreement made, or to be performed, by Parent in Sections 6.9 through 6.15, to
the extent such covenant or agreement relates to Income Taxes.
(iii) In the case of any Straddle Period:
52
(A) real, personal and intangible property Taxes or other
Taxes levied on a per diem basis (collectively, "Per Diem Taxes") of the
Acquired Companies for a Pre-Closing Tax Period shall be equal to the amount of
such Per Diem Taxes for the entire Straddle Period multiplied by a fraction, the
numerator of which is the number of calendar days during the Straddle Period
that are in the Pre-Closing Tax Period and the denominator of which is the total
number of calendar days in the Straddle Period; and
(B) Taxes of the Acquired Companies (other than Per Diem
Taxes) for any Pre-Closing Tax Period shall be computed as if such Tax Period
ended as of the end of the day on the Closing Date.
Notwithstanding anything to the contrary in this Agreement, this Section
9.2(b)(iii) shall apply to all Taxes (and not be construed as only applying to
Income Taxes).
(iv) The Indemnifying Parties' indemnity obligation in respect of
Income Taxes for a Pre-Closing Tax Period shall initially be effected by a
withdrawal of funds from the Indemnification Escrow payable to Parent in the
amount of the excess of (a) any such Income Taxes for a Pre-Closing Tax Period
(as may be evidenced by any Tax Return prepared by Parent in accordance with
Section 6.10 or as otherwise indicated in a written notice prepared by Parent)
over (ii) the amount of such Income Taxes paid by Sellers at any time plus the
amount of such Income Taxes paid by the Acquired Companies on or prior to the
Closing Date. To the extent not paid out of the Indemnification Escrow, the
Indemnifying Parties shall pay such excess to Parent within ten (10) calendar
days after written demand is made by Parent (but in no event does such payment
have to be made earlier than five (5) calendar days before the date on which
Income Taxes for the relevant Tax Period are required to be paid to the relevant
Governmental Entity). If the amount of any such Taxes paid by Sellers at any
time and/or the amount of such Income Taxes paid by the Acquired Companies on or
prior to the Closing Date exceeds the amount of such Income Taxes for the
Pre-Closing Tax Period, Parent shall pay to Sellers the amount of such excess
within ten (10) calendar days after the Tax Return with respect to the final
Liability for such Taxes is required to be filed with the relevant Governmental
Entity.
(v)
(A) If a claim shall be made by any Governmental Entity,
which, if successful, might result in an indemnity payment relating to Taxes,
Parent or Sellers' Representative, as the case may be, shall promptly and in any
event no more than thirty (30) calendar days following receipt of such claim,
give written notice to the other party of such claim (a "Tax Claim"); provided,
however, the failure to give such notice shall only relieve a party from its
indemnification obligations hereunder to the extent it is materially and
adversely prejudiced by such failure; and provided, further, that irrespective
of whether such party is materially or adversely prejudiced, such party shall be
permitted to recover its actual, out-of-pocket monetary damages that are caused
by the other party's failure to timely give the notice required pursuant to this
Section 9.2(b)(v)(A). Such notice shall contain factual information describing
in reasonable detail the nature and basis of such claim and the amount thereof,
to the extent known, and shall include copies of any notice or other document
received from any Governmental Entity in respect of any such asserted Tax
liability.
53
(B) With respect to any Tax Claim relating to any Tax Period
ending on or prior to the Closing Date, the Sellers' Representative shall, upon
written notification to Parent, control all audits or other proceedings at its
own expense, whether administrative or judicial, and may make all decisions
taken in connection with any such Tax Claim (including selection of counsel) at
its own expense; provided, however, that the Sellers' Representative and Parent
shall jointly control any Tax Claims (or the portion of any Tax Claim) the
resolution of which may increase the Taxes of the Acquired Companies for Tax
Periods ending after the Closing Date by more than $50,000. The Sellers'
Representative and Parent shall jointly control all proceedings taken in
connection with any Tax Claim relating solely to Taxes of the Acquired Companies
for a Straddle Period, and Parent shall control at its own expense all
proceedings with respect to any Tax Claim relating to a Tax Period beginning
after the Closing Date. A party shall promptly notify the other party if it
decides not to control the defense or settlement of any Tax Claim which it is
entitled to control pursuant to this Agreement, and the other party shall
thereupon be permitted to defend and settle such proceeding in its sole and
absolute discretion.
(C) Sellers, Parent, the Acquired Companies and the Sellers'
Representative shall reasonably cooperate with each other in contesting any Tax
Claim. Such cooperation shall include the retention and, upon the request of the
party or parties controlling proceedings relating to such Tax Claim, the
provision to such party or parties of records and information that are
reasonably relevant to such Tax Claim, and making employees available on a
mutually convenient basis to provide additional information or explanation of
any material provided hereunder or to testify at proceedings relating to such
Tax Claim.
Notwithstanding anything to the contrary in this Agreement, this Section
9.2(b)(v) shall apply to claims in respect of all Taxes (and not be construed as
only applying to Income Taxes).
(c) Interpretation.
(i) The term "Damages" as used in this Section 9.2 is not limited to
matters asserted by third parties against an indemnified Person, but includes
Damages incurred or sustained by the indemnified Person in the absence of third
party claims. Notwithstanding anything in this Agreement to the contrary, the
term "Damages" shall not include any consequential damages, claims for lost
profits or punitive damages, except where such Damages are incurred due to fraud
or willful misconduct.
(ii) For purposes of this Article IX, Damages incurred or suffered
by a party arising out of any breach of any representation, warranty, covenant
or agreement shall be determined without deduction on account of any materiality
or Company Material Adverse Effect qualification contained in any
representation, warranty, covenant or agreement giving rise to the claim for
indemnification hereunder.
Section 9.3 Procedure for Claims between Parties. Except as otherwise
provided in Section 9.2(b)(iv), if a claim for Damages is to be made by a
Indemnified Party entitled to indemnification hereunder, such party shall give
written notice briefly describing the claim and the total monetary damages
sought (each, a "Notice") to the Sellers' Representative and the Escrow Agent as
soon as practicable after such Indemnified Party becomes aware of any fact,
condition or event which may give rise to Damages for which indemnification may
be sought under this Article IX. Any failure to submit any such notice of claim
to the Sellers'
54
Representative shall not relieve any Indemnifying Party of any liability
hereunder, except to the extent that the Sellers' Representative demonstrates
that an Indemnifying Party was actually prejudiced by such failure. The Sellers'
Representative shall be deemed to have accepted the Notice and Sellers shall be
deemed to have agreed to pay the Damages at issue, and the parties shall
promptly instruct the Escrow Agent to disburse funds from the Indemnification
Escrow in an amount sufficient to pay the Damages, if the Sellers'
Representative does not send a notice of disagreement to the Indemnified Party
within thirty (30) calendar days after receiving the Notice pursuant to Section
9.5.
Section 9.4 Defense of Third Party Claims. Except as otherwise provided in
Section 9.2(b)(v) with respect to Tax Claims, if any lawsuit or enforcement
action is filed against a Indemnified Party by any third party (each, a "Third
Party Claim") for which indemnification under this Article IX may be sought,
Notice thereof shall be given to the Sellers' Representative as promptly as
practicable. The failure of any Indemnified Party to give timely Notice
hereunder shall not affect rights to indemnification hereunder, except to the
extent that the Sellers' Representative demonstrates that an Indemnifying Party
was actually prejudiced by such failure. Except as otherwise provided in Section
9.2(b)(v) with respect to Tax Claims, after such Notice, if the Sellers'
Representative acknowledges in writing to an Indemnified Party that the
Indemnifying Parties are liable and have indemnity obligations for any Damages
resulting from any such Third Party Claim, then the Sellers' Representative
shall be entitled, if it so elects at its own cost, risk and expense, (i) to
take control of the defense and investigation of such Third Party Claim, (ii) to
employ and engage attorneys of its own choice (provided that such attorneys are
reasonably acceptable to Parent) to handle and defend the same, unless the named
parties to such action or proceeding include both one or more Indemnifying
Parties and a Indemnified Party, and the Indemnified Party has been advised in
writing by counsel that there may be one or more legal defenses available to
such Indemnified Party that are different from or additional to those available
to an applicable Indemnifying Party, in which event such Indemnified Party shall
be entitled, at the Indemnifying Parties' cost, risk and expense, to separate
counsel of its own choosing, and (iii) to compromise or settle such claim, which
compromise or settlement shall be made only with the written consent of the
Indemnified Party, such consent not to be unreasonably withheld. If the Sellers'
Representative elects to assume the defense of a Third Party Claim, the
Indemnified Party shall cooperate in all reasonable respects with the Sellers'
Representative and its attorneys in the investigation, trial and defense of such
Third Party Claim and any appeal arising therefrom; provided, however, that the
Indemnified Party may, at its own cost, participate in the investigation, trial
and defense of such lawsuit or action and any appeal arising therefrom. The
parties shall cooperate with each other in any notifications to insurers. If the
Sellers' Representative fails to assume the defense of such claim within fifteen
(15) calendar days after receipt of the Notice, the Indemnified Party against
which such claim has been asserted will have the right to undertake, at the
Indemnifying Parties' cost, risk and expense, the defense, compromise or
settlement of such Third Party Claim on behalf of and for the account and risk
of the Indemnifying Parties; provided, however, that such claim shall not be
compromised or settled without the written consent of the Sellers'
Representative, which consent shall not be unreasonably withheld. If the
Indemnified Party assumes the defense of the claim, the Indemnified Party will
keep the Sellers' Representative reasonably informed of the progress of any such
defense, compromise or settlement. The Indemnifying Parties shall be liable for
any settlement of any Third Party Claim effected pursuant to and in accordance
with this Section 9.4 (subject to Section 9.2(a))and for any final judgment
(subject to any right of appeal), and each
55
Seller agrees to indemnify and hold harmless the Indemnified Party from and
against any Damages by reason of such settlement or judgment.
Section 9.5 Resolution of Conflicts and Claims.
(a) If the Sellers' Representative objects in writing to any claim for
indemnification made by a Indemnified Party in any written Notice of a claim (an
"Objection Notice"), the Sellers' Representative and Parent shall attempt in
good faith to agree upon the rights of the respective parties with respect to
each of such claims, and the Sellers' Representative and Parent shall provide
information to the other party (as reasonably requested) related to the issues
set forth in the Objection Notice. If the Sellers' Representative and Parent
should so agree, a memorandum setting forth such agreement shall be prepared and
signed by both parties and shall be furnished to the Escrow Agent. The Escrow
Agent shall be entitled to rely on any such memorandum and distribute funds from
the Indemnification Escrow in accordance with the terms thereof.
(b) If no such agreement is reached after good faith negotiation, either
Parent or the Sellers' Representative may demand mediation of the dispute,
unless the amount of the damage or loss is at issue in a pending action or
proceeding involving a Third Party Claim, in which event mediation shall not be
commenced until such amount is ascertained or both parties agree to mediation.
In any such mediation, Parent and Sellers' Representative agree to employ a
mediator from the American Arbitration Association (the "AAA") to assist them in
reaching resolution of such dispute according to the Commercial Mediation Rules
of the AAA. The mediator shall be a corporate attorney practicing in Las Vegas,
Nevada, with at least fifteen (15) years experience in acquisitions. The fees
and expenses of the mediator shall be shared equally by Parent and the Sellers'
Representative. If, after mediation efforts, the Sellers' Representative and
Parent should agree as to all or a portion of a claim, a memorandum setting
forth such agreement shall be prepared and signed by both parties and shall be
furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on any
such memorandum and distribute funds from the Indemnification Escrow in
accordance with the terms thereof. If after reasonable efforts, and over a
period of sixty (60) calendar days, the parties are unable to reach agreement on
such dispute utilizing the mediator, the parties shall be permitted to proceed
with any other remedy available to such party.
(c) Notwithstanding anything to the contrary in this Agreement, (a) and
(b) of this Section 9.5 shall not apply to any claims for indemnification under
Section 9.2(b) with respect to Taxes.
Section 9.6 Limitations on Indemnity. No Indemnified Party shall seek, or
be entitled to, indemnification from any of the Indemnifying Parties pursuant to
Sections 9.2(a): (i) to the extent the aggregate claims for Damages of the
Indemnified Parties are less than $2,000,000 (the "Threshold") or exceed an
amount equal to $91,500,000 (the "Cap"); provided, that, if the aggregate of all
claims for Damages equals or exceeds the Threshold, then the Parent shall be
entitled to recover for Damages subject to the limitations in this Section 9.6
only to the extent such Damages exceed the Threshold; or (ii) to the extent the
subject matter of the claim is covered by insurance (including title insurance),
and such insurance proceeds have been actually received by the Indemnified Party
(net of any costs and expenses incurred in obtaining such insurance proceeds).
If the Indemnifying Parties pay the Indemnified Parties for a claim and
56
subsequently insurance proceeds in respect of such claim is collected by the
Indemnified Parties, then the Indemnified Parties promptly shall remit the
insurance proceeds (net of any costs and expenses incurred in obtaining such
insurance proceeds) to the Sellers' Representative on behalf of the Sellers. The
Indemnified Parties shall use reasonable efforts to obtain from any applicable
insurance company any insurance proceeds in respect of any claim for which the
Indemnified Parties seek indemnification under this Article IX. Notwithstanding
anything to the contrary herein, if the Indemnified Parties are seeking, or are
entitled to seek, indemnification from any of the Indemnifying Parties for
Damages due to (i) the Company's or any Seller's fraud or willful misconduct,
(ii) the Company's or any Seller's breach of the representations or warranties
set forth in Section 3.2, Section 3.9 (to the extent relating to the Company's
material assets) and Section 4.5, as applicable, and/or (iii) any of the matters
set forth Sections 9.2(a)(iii), (iv), (v), (vi) or (vii), the limitations in
this Section 9.6 (including the Threshold and the Cap) shall not be applicable
to, or otherwise limit an Indemnified Party's recovery for, such claim.
Section 9.7 Payment of Damages.. The Indemnified Party shall be paid in
cash by the Indemnifying Party the amount to which the Indemnified Party may
become entitled by reason of the provisions of this Article IX, within five (5)
days after such amount is determined either by mutual agreement of the parties
or pursuant to the arbitration proceeding described in Section 9.5 of this
Agreement or on the date on which both such amount and the Indemnified Party's
obligation to pay such amount have been determined by a final judgment of a
court or administrative body having jurisdiction over such proceeding.
Section 9.8 Sellers' Representative.
(a) ▇▇▇▇ ▇. ▇▇▇▇▇▇ shall be the sellers' representative (the "Sellers'
Representative") and, as such, shall serve as and have all powers as agent and
attorney-in-fact of each Seller, for and on behalf of each Seller: (i) to give
and receive notices and communications; (ii) to have authority to agree to,
negotiate, enter into settlements and compromises of, and demand mediation and
arbitration and comply with orders of courts and awards of arbitrators with
respect to any disputes related to the indemnification provisions of this
Article IX; (iii) to litigate, mediate, arbitrate, defend, enforce or to take
any other actions and execute the Indemnification Escrow Agreement, the
Severance Escrow Agreement, the Adjustment Escrow Agreement, the Deposit Escrow
Agreement and any other documents that the Sellers' Representative deems
advisable in connection with enforcing any rights or obligations or defending
any claim or action under this Agreement on behalf of the Sellers; (iv) to sign
receipts, consents or other documents to effect the transactions contemplated
hereby; and (v) to take any and all actions necessary or appropriate in the
judgment of the Sellers' Representative for the accomplishment of the foregoing.
If ▇▇▇▇ ▇. ▇▇▇▇▇▇ ceases to act as a Sellers' Representative for any reason,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall be deemed to have been substituted and appointed as the
Sellers' Representative. If ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ceases to act as a Sellers'
Representative for any reason, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ shall be deemed to have been
substituted and appointed as the Sellers' Representative. If ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
ceases to act as a Sellers' Representative for any reason, such Sellers'
Representative or his agent or his legal representative shall notify Parent of
such Sellers' Representative's intent to resign or inability to serve as
Sellers' Representative, and Sellers holding a majority of the Total Transaction
Consideration (determined as of the date hereof) (a "Sellers Majority") shall,
by written notice to Parent, appoint a successor Sellers' Representative within
thirty (30) calendar days. At any time, the Sellers acting by a Sellers Majority
with the consent of the then acting Sellers' Representative shall have the right
to amend the succession
57
provision described above and upon such amendment shall so notify Parent and all
Sellers. Notice or communications to or from the Sellers' Representative shall
constitute notice to or from the Sellers.
(b) Subject to Section 9.8(a), in the event of (i) the death or permanent
disability of the Sellers' Representative, or (ii) his, her or its resignation
as a Sellers' Representative (in the case of both (i) and (ii), with no named
successor as provided in Section 9.8(a)), a successor Sellers' Representative
shall be elected by a Sellers Majority. Each successor Sellers' Representative
shall have all of the power, authority, rights and privileges conferred by this
Agreement upon the original Sellers' Representative, and the term "Sellers'
Representative" as used herein shall be deemed to include any successor Sellers'
Representative.
(c) The Sellers' Representative may, in all questions arising under this
Agreement, rely on the advice of counsel, and shall not be liable to Sellers for
any action taken or not taken as a Sellers' Representative in the absence of
such Sellers' Representative's willful misconduct or fraud.
(d) A decision, act, consent or instruction of the Sellers' Representative
shall constitute a decision of the Sellers, and shall be final, binding and
conclusive upon the Sellers, and Parent, the Escrow Agent and any Indemnified
Party may rely upon any decision, act, consent or instruction of the Sellers'
Representative as being the decision, act, consent or instruction of the
Sellers. Although the Sellers' Representative shall not be obligated to obtain
instructions from the Sellers prior to any decision, act, consent or
instruction, if, and to the extent that, the Sellers' Representative receives
any written instructions from a Sellers Majority, the Sellers' Representative
shall comply with such instructions.
(e) The Sellers shall share, on a pro rata basis in proportion to the
number of Shares held by them immediately prior to the Closing, the professional
fees and expenses of any attorney, accountants or other advisors retained by the
Sellers' Representative in connection with any action taken or not taken as the
Sellers' Representative. The Sellers' Representative shall be entitled to
request in writing payment from each Seller its ratable portion of amounts
payable to attorney, accountants or other advisors, which amounts shall be paid
upon such request to such individuals or the Sellers' Representative, as set
forth in the request submitted by the Sellers' Representative. In addition, the
Sellers' Representative shall be entitled to retain up to $30,000,000 of the
Total Transaction Consideration to pay the professional fees and expenses of any
attorneys, accountants, financial advisors, brokers and other advisors retained
by the Sellers' Representative and other expenses of the Sellers' Representative
incurred in connection with any action taken or not taken as the Sellers'
Representative under this Agreement, including expenses for offices of the
Sellers' Representative. Any portion of such retained amount that the Sellers'
Representative has determined is not necessary to cover such fees and expenses
shall be distributed to the Sellers in accordance with Section 1.3(b).
(f) The power of attorney granted by the Sellers to the Sellers'
Representative pursuant to this Section 9.8 is coupled with an interest and is
irrevocable and shall not terminate or otherwise be affected by the death,
disability, incompetence, bankruptcy or insolvency of any Seller.
58
(g) Upon reasonable notice, Parent shall, and shall cause its Subsidiaries
and its and their respective Representatives to, provide the Sellers'
Representative reasonable access to all its personnel that were formerly
employees of the Company and all properties, books, Contracts, commitments and
records of the Company and its Subsidiaries to the extent such access is
reasonably required for Sellers' Representative to fulfill its obligations under
this Agreement.
Section 9.9 Exclusive Remedy. After the Closing, the indemnities provided
in this Article IX shall constitute the sole and exclusive remedy of any
Indemnified Party for Damages arising out of, resulting from or incurred in
connection with the breach of any representation, warranty or agreement made by
the parties in this Agreement; provided, however; that this exclusive remedy for
Damages does not preclude a party from bringing an action for specific
performance or other equitable remedy to require a party to perform its
obligations under this Agreement. Without limiting the generality of the
preceding sentence, no legal action sounding in tort, statute or strict
liability may be maintained by any party. Notwithstanding anything to the
contrary in this Section 9.9, in the event of a fraudulent or willful breach of
the representations, warranties, covenants or agreements contained herein by the
Company or any Seller, the Indemnified Parties shall have all remedies available
at law or in equity (including for tort) with respect thereto.
Section 9.10. No Environmental Contribution. The Indemnified Parties shall
not be able to seek contribution from the Sellers under any requirements of or
obligations imposed by any Environmental Laws and hereby waive all statutory
rights against the Sellers under the Environmental Laws; provided, this shall
not limit in any manner the right of the Indemnified Parties to seek and obtain
indemnification pursuant to the other provisions of this Agreement.
ARTICLE X.
MISCELLANEOUS
Section 10.1. Sellers Release.
(a) As an inducement to Parent to enter into this Agreement and consummate
the transactions contemplated hereby and for other good and sufficient
consideration, subject to delivery by Parent of the items listed in Section
1.7(b) hereof, each of the Sellers, with the intention of binding himself and
each of such Sellers' heirs, executors, administrators and assigns (the
"Releasors"), does hereby release, acquit and forever discharge Parent and the
Company, and each of their past and present Affiliates, Subsidiaries, and
Representatives, and all Persons acting by, through, under, or in concert with
such Persons (the "Releasees"), of and from any and all manner of action or
actions, cause or causes of action, suits, arbitrations, demands, debts, Liens,
contracts, agreements, promises, Liability, damages, or loss of any nature
whatsoever, known or unknown, suspected or unsuspected, fixed or contingent,
direct, derivative, vicarious or otherwise, whether based in contract, tort, or
other legal, statutory, or equitable theory of recovery, each as though fully
set forth at length herein, (hereinafter, a "Claim"), which the Releasors now
have or may hereafter have against the Releasees, or any of them, by reason of
any matter, cause, act, omission or thing whatsoever in any way arising out of,
based upon, or relating to Seller's ownership of an Equity Interest in the
Company or any of its Subsidiaries or the Shares; provided, however, that
nothing set forth in this Section 10.1 shall (i) affect the ability of any of
the Sellers to bring a Claim under this Agreement or (ii) release, acquit or
discharge any rights to indemnification to which any Seller may be entitled
under the Organizational Documents as in effect on the date hereof or under any
indemnification
59
agreement between such Seller and the Company or any of its Subsidiaries in
existence as of the date hereof. Notwithstanding the foregoing, nothing in this
Agreement shall be interpreted to release Parent from any of its obligations to
Sellers under this Agreement.
(b) Each Seller represents and warrants to the Company and Parent that
there has been no assignment or other transfer of any interest in any Claim
which such Seller may have against the any of the Releasees, and each Seller
agrees to indemnify and hold the Releasees harmless from any Liability, Claims
or attorneys' fees or expenses incurred as a result of any Person asserting any
such assignment or transfer of any rights or Claims under any such assignment or
transfer from such party.
(c) Each Seller represents and warrants to the Company and Parent that it
has not filed, nor has as of the date hereof, any Claims against any of the
Releasees. Each Seller agrees that if such Seller hereafter commences, joins in,
or in any manner seeks relief through any suit arising out of, based upon, or
relating to any of the Claims released hereunder, or in any manner asserts
against the Releasees any of the Claims released hereunder, including, without
limitation, through any motion to reconsider, reopen or appeal the dismissal of
the suit or action, then such Seller will pay to the Releasees against whom such
claim(s) is asserted, in addition to any other damages caused thereby, all
expenses and costs (including, without limitation, attorneys' fees) incurred by
such Releasees in defending or otherwise responding to said Claim.
(d) Notwithstanding anything to the contrary herein, the release set forth
in this Section 10.1 shall have no force and effect until the Closing.
(e) EACH SELLER ACKNOWLEDGES THAT HE, SHE OR IT IS FAMILIAR WITH THE
PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH, IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED
HIS SETTLEMENT WITH THE DEBTOR.
EACH SELLER, BEING AWARE OF SAID CODE SECTION, HEREBY EXPRESSLY WAIVES ANY
RIGHTS HE, SHE OR IT MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR
COMMON LAW PRINCIPLES OF SIMILAR EFFECT.
Section 10.2. Certain Definitions. For purposes of this Agreement, the
term:
"8.625% Indenture" means the Indenture dated May 11, 1999 by and between
the Company and U.S. Trust Company, National Association regarding 8.625% Senior
Subordinated Notes due 2009.
"Acquired Companies" means the Company and all of its Subsidiaries.
60
"Affiliate" means a Person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, the first-mentioned Person.
"Ancillary Agreement" means the License Agreement.
"Beginning of the Closing Gaming Day" means 4:01 AM local time on the
Closing Date for Tunica Casino, 5:01 AM local time on the Closing Date for
Bossier Casino and 6:01 AM local time on the Closing Date for ▇▇▇▇▇▇▇ Casino.
"Bossier Casino" means the business operations owned and operated by the
Company or any of its Subsidiaries located in Bossier City, Louisiana.
"Cash Adjustment Amount" means an amount equal to the cash and cash
equivalents on hand of the Company at the Beginning of the Closing Gaming Day
and as set forth on the Closing Balance Sheet.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company 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 and manufacturing and distributing operations of the Company or any
of its Subsidiaries.
"Company Material Adverse Effect" means any change, event or effect that
(A) is materially adverse to the business, properties, financial condition,
results of operations or prospects of (1) the Company and its Subsidiaries,
taken as a whole or (2) any of the separate gaming facilities operated by the
Company or its Subsidiaries, except, in each case, for any such change, event or
effect resulting from or arising out of (i) changes in or affecting the (w) the
gaming industry generally in the United States or the gaming industry in the
states of Louisiana, Indiana and Mississippi (which changes do not
disproportionately affect the Company relative to other participants in such
industries in any material respect), (x) financial, banking, currency or capital
markets or other economic conditions in the United States in general, (y) the
enactment of any Laws or any regulatory approvals or consents permitting gaming
activities any jurisdictions in which gaming activities are, as of the date of
this Agreement, prohibited or granting additional licenses to conduct gaming
activities or otherwise increasing the type or volume of gaming activities
permitted in such jurisdictions or (z) the imposition of any new or additional
Taxes on any operations of the Company or its Subsidiaries or on any other
gaming activities, or (ii) the execution or public announcement of this
Agreement and the transactions contemplated hereby, (B) has, or would be
reasonably likely to, materially delay the consummation of the transactions
contemplated by this Agreement or (C) prevents the Company or any of its
Subsidiaries from retaining or, if such licenses are revoked for any reason,
obtaining or renewing gaming licenses currently held by the Company or its
Subsidiaries under Company Gaming Laws.
"Company Material Contract" means any Contract (A) filed or listed as an
exhibit to the Company SEC Reports or (B) disclosed in Section 3.11(a) of the
Company Disclosure Letter.
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"Contract" means any agreement, contract, lease, power of attorney, note,
loan, evidence of indebtedness, purchase order, letter of credit, settlement
agreement, franchise agreement, undertaking, covenant not to compete, employment
agreement, license, instrument, obligation, commitment, understanding, policy,
purchase and sales order, quotation and other executory commitment to which any
Person is a party or to which any of the assets of such Person are subject,
whether oral or written, express or implied.
"Disregarded Subsidiary" shall mean any Subsidiary that is not organized
as a corporation and for federal income tax purposes has only a single owner.
"Domestic Corporate Subsidiary" shall mean each Subsidiary (other than
License) that is created or organized in the United States as a corporation
under the laws of its organizational State.
"Encumbrances" means claims, pledges, agreements, limitations on voting
rights, charges or other encumbrances or restrictions on transfer of any nature.
"Environmental Laws" means any and all applicable Laws which (1) regulate
or relate to the protection or clean up of the environment; the use, treatment,
storage, transportation, handling, disposal or release of Hazardous Substances,
the preservation or protection of waterways, groundwater, drinking water, air,
wildlife, plants or other natural resources; or the health and safety of Persons
or property, including without limitation protection of the health and safety of
employees; or (2) impose liability or responsibility with respect to any of the
foregoing, including without limitation the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.), or
any other law of similar effect.
"Environmental Permits" means any permit, approval, identification number,
license or other authorization required under any applicable Environmental Law.
"Equity Interest" means any share, capital stock, partnership, member or
similar interest in any entity, and any option, warrant, right or security
(including debt securities) convertible, exchangeable or exercisable therefor.
"Executive Severance Agreements" means, collectively, the individual
Executive Severance Agreements between the Company and each of the employees
listed on Schedule 6.16(d).
"Gaming Authorities" means any governmental authority or agency with
regulatory control or jurisdiction over the conduct of lawful gaming or
gambling, including, without limitation, the Indiana Gaming Commission, the
Louisiana Riverboat Gaming Commission, the Louisiana Gaming Control Board, the
Riverboat Gaming Enforcement Division of Louisiana State Police and the
Mississippi Gaming Commission and, in the case of Parent, also shall include all
governmental authorities or agencies charged with enforcing Parent Gaming Laws.
"Hammond Casino" means the business operations owned and operated by the
Company or any of its Subsidiaries located in Hammond, Indiana.
"▇▇▇▇▇▇▇ Development Agreement" means that certain Hammond Riverboat
Gaming Project Development Agreement by and among City of Hammond, Indiana, City
of Hammond,
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Department of Redevelopment and Empress Casino ▇▇▇▇▇▇▇ Corporation dated as of
June 21, 1996, as amended by that certain First Amendment to Hammond Riverboat
Gaming Project Development Agreement dated August, 1999, as further amended by
that certain Second Amendment to Hammond Riverboat Gaming Project Development
Agreement dated August, 1999, as further amended by that certain Third Amendment
to Hammond Riverboat Gaming Project Development Agreement dated December, 2000,
as amended by that certain Fourth Amendment to Hammond Riverboat Gaming Project
Development Agreement dated October 26, 2001.
"Hammond License Agreement" means that certain License Agreement by and
between Hammond Port Authority and Empress Casino ▇▇▇▇▇▇▇ Corporation dated as
of June 21, 1996, as amended by that certain Amendment to License Agreement
dated as of December 19, 2002.
"Hazardous Substances" means any pollutant, chemical, substance and any
toxic, infectious, carcinogenic, reactive, corrosive, ignitable or flammable
chemical, or chemical compound, or hazardous substance, material or waste,
whether solid, liquid or gas, that is subject to regulation, control or
remediation under any Environmental Laws, including without limitation, any
quantity of asbestos in any form, urea, formaldehyde, PCBs, radon gas, crude oil
or any fraction thereof, all forms of natural gas, petroleum products or
by-products or derivatives.
"Income Tax" shall mean any federal, state, local or foreign income Tax,
alternative minimum Tax or other similar Tax (but only if determined with
respect to net income).
"Income Tax Return" shall mean any Tax Return relating to Income Taxes.
"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 the
Company or any of its Subsidiaries
"Intellectual Property" means all intellectual property or other
proprietary rights of every kind, foreign or domestic, including all patents,
patent applications, inventions (whether or not patentable), processes,
products, technologies, discoveries, copyrightable and copyrighted works,
apparatus, trade secrets, trademarks, trademark registrations and applications,
domain names, service marks, service ▇▇▇▇ registrations and applications, trade
names, trade secrets, know-how, trade dress, copyright registrations, customer
lists, confidential marketing and customer information, licenses, confidential
technical information, software, and all documentation thereof.
"IRS" means the Internal Revenue Service, a division of the United States
Treasury Department, or any successor thereto.
"knowledge" means, when used in the phrase "knowledge of the Company" or
"the Company's knowledge" and words of similar import, the actual knowledge of
▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ or ▇▇▇▇ ▇. ▇▇▇▇▇▇, after due
inquiry.
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"Law" means any foreign or domestic law, statute, code, ordinance, rule,
regulation, order, judgment, writ, stipulation, award, injunction, decree or
arbitration award, policies, guidance, court decision , rule of common law or
finding.
"Liabilities" mean any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
or by any Person of any type, whether accrued, absolute, contingent, matured,
unmatured, liquidated, unliquidated, known or unknown.
"Liens" means any mortgage, pledge, lien, security interest, conditional
or installment sale agreement, charge or other claims of third parties of any
kind.
"Non-Income Tax" shall mean any Tax other than an Income Tax.
"Non-Income Tax Return" shall mean any Tax Return relating to a Non-Income
Tax.
"Parent 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 and manufacturing and distributing operations of Parent or any of its
Subsidiaries.
"Parent Material Adverse Effect" means any change, event or effect that
(A) is materially adverse to the business, properties, financial condition,
results of operations or prospects of Parent and its Subsidiaries, taken as a
whole, except, in each case, for any such change, event or effect resulting from
or arising out of (i) changes in or affecting the (w) the gaming industry
generally in the United States or the gaming industry in the states of
Louisiana, Nevada, Indiana and Mississippi (which changes do not
disproportionately affect Parent relative to other participants in such
industries in any material respect), (x) financial, banking, currency or capital
markets or other economic conditions in the United States in general, (y) the
enactment of any Laws or any regulatory approvals or consents permitting gaming
activities any jurisdictions in which gaming activities are, as of the date of
this Agreement, prohibited or granting additional licenses to conduct gaming
activities or otherwise increasing the type or volume of gaming activities
permitted in such jurisdictions or (z) the imposition of any new or additional
Taxes on any operations of Parent or its Subsidiaries or on any other gaming
activities, or (ii) the execution or public announcement of this Agreement and
the transactions contemplated hereby, (B) has, or would be reasonably likely to,
materially delay the consummation of the transactions contemplated by this
Agreement or (C) prevents Parent or any of its Subsidiaries from retaining or,
if such licenses are revoked for any reason, obtaining or renewing gaming
licenses currently held by Parent or its Subsidiaries under applicable gaming
Laws.
"Partnership Subsidiary" shall mean a Subsidiary that for federal Income
Tax purposes is treated as a partnership.
"Pre-Closing Tax Period" means any Tax Period ending on or before the
Closing Date and that portion of any Straddle Period ending on the Closing Date.
"Post-Closing Tax Period" means any Tax Period beginning after the Closing
Date and that portion of any Straddle Period beginning after the Closing Date.
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"Retention Bonus Plan" means the Amended and Restated Horseshoe Gaming
Holding Corp. Retention Bonus Plan.
"SEC" means the Securities and Exchange Commission.
"Sellers' Tax Cost" shall mean the additional amount of consideration that
would need to be received by the Sellers so that the net after-Tax Total
Transaction Consideration (calculated including the Sellers' Tax Cost, but
excluding the Equity Spreads) collectively received by the Sellers from the sale
of the Shares and the making of the Section 338 Elections is equal to the amount
of the net-after-Tax proceeds the Sellers collectively would have received had
the Sellers sold their Shares for the Total Transaction Consideration
(calculated exclusive of Sellers' Tax Cost and of the Equity Spreads) and no
Section 338 Elections had been made. The Sellers' Tax Cost shall be calculated
assuming that the entire amount of income realized by a Seller if no Section 338
Elections had been made would have been taxable only in the State or locality in
which such Seller (or, in the case of a Seller that is a trust, the beneficiary
of such trust) was a resident (for State or local Tax purposes) on the Closing
Date. In determining the amount of additional Tax that a Seller would be subject
to as a result of the making of the Section 338 Elections, the parties hereto
agree that (A) no Transfer Taxes imposed on (or economically borne by) the
Seller shall be taken into account, (B) the actual facts regarding the residence
of each Seller (or, in the case of a Seller that is a trust, the beneficiary of
such trust), the filing status for Tax purposes of each Seller under federal and
applicable state and local Tax Laws, the applicable holding period of each
Seller in its Shares, and other reasonably ascertainable matters, shall be taken
into account, and (C) reasonable assumptions with respect to (i) the applicable
rate of Tax, (ii) the availability of deductions attributable to any part of the
Sellers' Tax Cost, and (iii) the applicability of the alternative minimum Tax,
shall be employed in order to equitably compensate each Seller for the
additional Tax cost associated with the making of the Section 338 Elections.
"Straddle Period" means any Tax Period beginning before the Closing Date
and ending after the Closing Date.
"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 managing member or
(ii) at least 50% of the securities or other Equity Interests having by their
terms voting power to elect a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization that 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.
"Taxes" means any and all taxes, charges, fees, levies, tariffs, duties,
liabilities, impositions or other assessments of any kind (together with any and
all interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Entity or domestic or foreign
taxing authority, including, without limitation, income, gross receipts,
profits, gaming, excise, real or personal property, environmental, sales, use,
value-added, ad valorem, withholding, social security, retirement, employment,
unemployment, workers' compensation, occupation, service, license, net worth,
capital stock, payroll, franchise, gains, stamp, transfer and recording taxes,
charges and fees, and shall include any Liability for the Taxes of any other
Person under Treasury Regulation Section 1.1502-6 (or
65
any similar provision of state, local, or foreign law) or as a transferee or
successor, by contract, or otherwise.
"Tax Period" means any period prescribed by any Governmental Entity for
which a Tax Return is required to be filed or a Tax is required to be paid.
"Tax Return" means any report, return (including any information return),
claim for refund, election, estimated Tax filing or payment, request for
extension, document, declaration or other information or filing required to be
supplied to any Governmental Entity with respect to Taxes, including attachments
thereto and amendments thereof.
"Transfer Taxes" shall mean any and all transfer, documentary, sales, use,
gross receipts, stamp, registration, value added, recording, escrow and other
similar Taxes and fees (including any out-of-pocket filing expenses, penalties
and interest) incurred in connection with the transactions contemplated by this
Agreement (including recording and escrow fees and any real property or
leasehold interest transfer or gains tax and any similar Tax).
"Tunica Casino" means the business operations owned and operated by the
Company or any of its Subsidiaries located in Tunica County, Mississippi.
"Tunica CCR's" means (i) that certain Declaration of Restriction dated
December 14, 2001, by ▇▇▇▇▇▇▇▇ Property Group Limited Partnership, which was
filed for record in Book A 6, Page 601 in the office of the Chancery Clerk of
Tunica, County, Mississippi, (ii) that certain Grant of Easements and
Declaration of Covenants executed by ▇▇▇▇▇▇▇▇ Property Group Limited
Partnership, a Mississippi limited partnership, formerly a Nevada limited
partnership dated January 21, 1994, recorded in Book B-5, Page 013 in the office
of the Chancery Clerk of Tunica County, Mississippi, which was amended by First
Amendment to Grant of Easements and Declaration of Covenants executed by
▇▇▇▇▇▇▇▇ Property Group Limited Partnership, a Mississippi limited partnership,
dated July 28, 1994, filed on September 26, 1994 at 3:35 P.M. and recorded in
Book D-5 at Page 479, in the office of the Chancery Clerk of Tunica County,
Mississippi, and (iii) that certain Declaration executed by ▇▇▇▇▇▇▇▇ Property
Group Limited Partnership, a Mississippi limited partnership, formerly a Nevada
limited partnership dated January 21, 1994, recorded in Book B-5, Page 102, in
the office of the Chancery Clerk of Tunica County, Mississippi.
Section 10.3 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to Parent, addressed to it at:
▇▇▇▇▇▇'▇ Entertainment, Inc.
▇▇▇ ▇▇▇▇▇▇'▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: General Counsel
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with a mandated copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
If to the Company, addressed to it at:
Prior to the Closing Date:
Horseshoe Gaming Holding Corp.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: General Counsel
On and after the Closing Date:
Sellers' Representative
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇
with a mandated copy to:
▇▇▇▇▇▇▇ Berlin Shereff ▇▇▇▇▇▇▇▇, LLP
The Chrysler Building
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Section 10.4 Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section or Exhibit
or Schedule 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.
Section 10.5 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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Section 10.6 Entire Agreement; No Third Party Beneficiaries. This Agreement and
all documents and instruments referred to herein constitute the entire agreement
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof; provided that the
Confidentiality Agreement shall remain in full force and effect until the
Closing. Each party hereto agrees that, except for the representations and
warranties contained in this Agreement and the respective Disclosure Letters,
none of Parent or the Company makes any other representations or warranties, and
each hereby disclaims any other representations and warranties made by itself or
any of its respective Representatives 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 10.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
Section 10.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by operation of Law
(including, without limitation, by merger or consolidation) or otherwise, except
Parent may, without prior consent of any other party hereto, transfer or assign
by operation of law or otherwise this Agreement to any Affiliate or Subsidiary
of Parent, provided that Parent shall remain liable for all of its obligations
hereunder. Any assignment in violation of the preceding sentence shall be void.
Section 10.9 Parties of Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and their respective successors
and assigns, and nothing in this Agreement, express or implied, other than
pursuant to Section 6.7, is intended to or shall confer upon any other Person
any right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
Section 10.10 Mutual Drafting. Each party hereto has participated in the
drafting of this Agreement, which each party acknowledges is the result of
extensive negotiations between the parties. In the event of any ambiguity or
question of intent arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
Section 10.11 Governing Law; Consent to Jurisdiction; Waiver of Trial by
Jury.
(a) This Agreement and the transactions contemplated hereby, and all
disputes between the parties under or related to the Agreement or the facts and
circumstances leading to its execution, whether in contract, tort or otherwise,
shall be governed by and construed in
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accordance with the Laws of the State of New York, applicable to contracts
executed in and to be performed entirely within the State of New York.
(b) Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the exclusive jurisdiction of any New
York State court, or Federal court of the United States of America, sitting in
New York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement or the agreements delivered in
connection herewith or the transactions contemplated hereby or thereby or for
recognition or enforcement of any judgment relating thereto, and each of the
parties hereby irrevocably and unconditionally (A) agrees not to commence any
such action or proceeding except in such courts, (B) agrees that any claim in
respect of any such action or proceeding may be heard and determined in such New
York State court or, to the extent permitted by law, in such Federal court, (C)
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any such
action or proceeding in any such New York State or Federal court, (D) waives, to
the fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such New York State or Federal
court, and (E) to the extent such party is not otherwise subject to service of
process in the State of New York, appoints Corporation Service Company, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, as such party's agent in the State of New York for
acceptance of legal process and agrees that service made on any such agent shall
have the same legal force and effect as if served upon such party personally
within such state. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Each party to this Agreement irrevocably consents to service of process in the
manner provided for notices in Section 10.3. Nothing in this Agreement will
affect the right of any party to this Agreement to serve process in any other
manner permitted by law.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE
AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.11(c).
Section 10.12 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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Section 10.13 Strict Performance. The parties hereto agree that
irreparable damage would occur in the event that this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
Section 10.14 Amendment. This Agreement may be amended by Parent, the
Company and the Sellers' Representative, except that Section 9.8 may be amended
as set forth in the second to last sentence of Section 9.8. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
Parent, the Company and the Sellers' Representative.
Section 10.15 Extension; Waiver. At any time prior to the Closing, Parent,
the Company and the Sellers, by action taken or authorized by their respective
boards of directors (in the case of the Sellers, by the Sellers' Representative)
may, to the extent legally allowed (i) extend the time for or waive 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 (or, in the
case of Sellers, by the Sellers' Representative).
[Signature Page Follows]
70
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
signed by their respective duly authorized officers as of the date first written
above.
▇▇▇▇▇▇'▇ ENTERTAINMENT, INC.,
By:
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President, Chief
Financial Officer and
Treasurer
HORSESHOE GAMING HOLDING CORP.
By:
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▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman and Chief Executive
Officer
S-1
EXHIBIT A
Sellers
EXHIBIT B-1
Adjustment Escrow Agreement
2
EXHIBIT B-2
Indemnification Escrow Agreement
3
EXHIBIT B-3
Deposit Escrow Agreement
4
EXHIBIT B-4
Severance Escrow Agreement
5
EXHIBIT C
Non-Competition Agreement
6
EXHIBIT D
License Agreement
7
SCHEDULE 1.3(A)(III)
Capital Expenditures
8
SCHEDULE 1.3(B)
Sellers' Representative Certificate
9
SCHEDULE 1.7(A)(II)
Resigning Directors and Officers
SCHEDULE 2.1
Equity Spreads
SCHEDULE 3.7(D)
Reference Balance Sheet
2
SCHEDULE 6.16(C)
Employees with payments due under Retention Bonus Plan
SCHEDULE 6.16(D)
Employees with Executive Severance Agreements
SCHEDULE 7.3(D)
Consents, Approvals and Authorizations
SCHEDULE 9.2(A)
Seller Indemnifying Parties