AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PENN NATIONAL GAMING, INC.,
PNG ACQUISITION COMPANY INC.
AND
PNG MERGER SUB INC.
June 15, 2007
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement ") is made
and entered into as of this 15th day of June, 2007 by and among PENN NATIONAL GAMING,
INC., a Pennsylvania corporation (the "Company "), PNG ACQUISITION COMPANY
INC., a Delaware corporation ( "Parent "), and PNG MERGER SUB INC., a Pennsylvania
corporation and a wholly owned subsidiary of Parent ( "Merger Sub ").
RECITALS
A. The parties intend that Merger Sub be merged with and into the
Company (the "Merger "), with the Company surviving the Merger as a direct
or indirect wholly owned subsidiary of Parent (the "Surviving Corporation
"). The Surviving Corporation shall retain the name of the Company.
B. The Board of Directors of the Company has (i) determined that
the Merger and this Agreement are fair to and in the best interests of the Company
and its shareholders, (ii) approved this Agreement and (iii) resolved to recommend
that shareholders of the Company approve this Agreement.
C. The respective Boards of Directors of Parent and Merger Sub have
unanimously approved this Agreement.
D. In the Merger, subject to the terms of Article II hereof, each
share of common stock, $.01 par value per share, of the Company, including any Rights
associated therewith (the "Shares "), other than those shares held by Parent,
will be converted into the right to receive $67.00 per share in cash, subject to
possible increase as provided herein.
E. The Company, Parent and Merger Sub desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to prescribe
certain conditions to the Merger, as set forth herein.
F. This Agreement is intended to constitute the plan of merger required
by Section 1927 of the PBCL (as hereinafter defined) for the Merger.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained herein, intending to be legally bound,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. For purposes of this Agreement, the following
terms have the respective meanings set forth below:
"2007 Budget " has the meaning set forth in Section 6.1(f)
.
"Adjustment Date " has the meaning set forth in Section 2.2(c)
.
"Affiliate " means, with respect to any Person, any other
Person, directly or indirectly, controlling, controlled by, or under common control
with, such Person. For purposes of this definition, the term "control " (including
the correlative terms "controlling ", "controlled by " and "under
common control with ") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise. For purposes
of this Agreement, Parent and Merger Sub shall be deemed not to be Affiliates of
the Company.
"Agreement " has the meaning set forth in the Preamble.
"Articles of Merger " has the meaning set forth in Section
2.1(b) .
"Book-Entry Share " has the meaning set forth in Section 2.2(c)
.
"Business Day " means any day other than the days on which
banks in New York, New York are required or authorized to close.
"CCB " has the meaning set forth in Section 7.2(b) .
"Certificate " has the meaning set forth in Section 2.2(c)
.
"Closing " has the meaning set forth in Section 2.1(d) .
"Closing Date " has the meaning set forth in Section 2.1(d)
.
"Code " means the Internal Revenue Code of 1986, as amended.
"Company " has the meaning set forth in the Preamble.
"Company Acquisition Proposal " has the meaning set forth
in Section 7.4(g)(i) .
"Company Benefit Plan " means each Employee Benefit Plan (other
than any multiemployer plan within the meaning of ERISA Section 3(37)) and all stock
ownership, stock purchase, stock option, phantom stock or other equity-based retirement,
vacation, severance, disability, death benefit, employment, change-in-control, fringe
benefit, bonus, incentive, pension, profit sharing, medical, deferred compensation
and other material Employee Benefit Plans, agreements, programs, policies, practices
or other arrangements, whether or not subject to ERISA, under which any Company
Employee has any present or future right to benefits, maintained or contributed
to by the Company or any of its Subsidiaries or under which the Company or any of
its Subsidiaries has any present or future liability.
"Company Disclosure Letter " has the meaning set forth in
the preamble to Article IV.
"Company Employees " means any current, former or retired
employee, officer, consultant, independent contractor or director of the Company
or any of its Subsidiaries.
"Company Equity Awards " means Company Options and Company
Restricted Shares.
"Company Intellectual Property " has the meaning set forth
in Section 4.19.
"Company Options " means outstanding options to acquire Shares
from the Company granted to Company Employees under the Company Stock Plans or otherwise.
"Company Proxy Statement " means the proxy statement, together
with any amendments or supplements thereto and any other related proxy materials,
relating to the approval of this Agreement by the Companys shareholders prepared
in accordance with applicable Law.
"Company Restricted Shares " has the meaning set forth in
Section 2.2(e) .
"Company SEC Reports " has the meaning set forth in Section
4.6(a) .
"Company Securities " has the meaning set forth in Section
4.5(b) .
"Company Shareholder Meeting " has the meaning set forth in
Section 7.1(a) .
"Company Stock Plans " means the 2007 Employees Long Term
Incentive Compensation Plan, 2007 Long Term Incentive Compensation Plan For Non-Employee
Directors, 2003 Long Term Incentive Compensation Plan and 1994 Stock Option Plan.
"Compensation " has the meaning set forth in Section 7.8(a)
.
"Confidentiality Agreements " means the Confidentiality Agreement,
dated April 23, 2007, between the Company and Fortress Investment Group LLC and
the Confidentiality Agreement, dated April 23, 2007, between the Company and Centerbridge
Associates, L.P.
"Consent Solicitation " has the meaning set forth in Section
7.13(a) .
"Contract " has the meaning set forth in Section 4.4.
"Current Employee " has the meaning set forth in Section 7.8(a)
.
"Current Policies " has the meaning set forth in Section 7.5(a)
.
"Damages " has the meaning set forth in Section 7.5(a) .
"Debt Financing " has the meaning set forth in Section 5.7.
"Debt Financing Commitments " has the meaning set forth in
Section 5.7.
"Debt Tender Offer " has the meaning set forth in Section
7.13(a) .
"Disbursing Agent " has the meaning set forth in Section 2.3(a)
.
"DOJ " has the meaning set forth in Section 7.2(b) .
"Dual Voting Structure " has the meaning set forth in Section
5.8.
"Effective Time " has the meaning set forth in Section 2.1(b)
.
"Employee Benefit Plan " has the meaning set forth in Section
3(3) of ERISA.
"Employment Agreement " means any employment, severance, retention,
termination, indemnification, change in control or similar agreement between the
Company or any of its Subsidiaries, on the one hand, and any current or former employee
of the Company or any of its Subsidiaries, on the other hand.
"End Date " has the meaning set forth in Section 9.1(b)(i)
.
"Environment " has the meaning set forth in Section 4.18(b)
.
"Environmental Law " has the meaning set forth in Section
4.18(b) .
"Environmental Permits " has the meaning set forth in Section
4.18(a) .
"Equity Financing " has the meaning set forth in Section 5.7.
"Equity Financing Commitments " has the meaning set forth
in Section 5.7.
"ERISA " means the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate " has the meaning set forth in Section 4.14(c)
.
"Exchange Act " means the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
"Excluded Party " has the meaning set forth in Section 7.4(b)
.
"Financing " has the meaning set forth in Section 5.7.
"Financing Commitments " has the meaning set forth in Section
5.7.
"FTC " has the meaning set forth in Section 7.2(b) .
"Gaming Approvals " has the meaning set forth in Section 7.2(e)
.
"Gaming Authority " means any Governmental Authority with
regulatory control or jurisdiction over casino, pari-mutuel, lottery or other gaming
activities and operations.
"Gaming Law " means, with respect to any Person, any Law governing
or relating to any current or contemplated casino, pari-mutuel, lottery or other
gaming activities and operations of such Person and its Subsidiaries, including,
the rules and regulations established by any Gaming Authority.
"GAAP " means United States generally accepted accounting
principles.
"Governmental Authority " means any nation or government or
any agency, public or regulatory authority, instrumentality, department, commission,
court, arbitrator, ministry, tribunal or board of any nation or any government or
political subdivision thereof, in each case, whether national, federal, tribal,
provincial, state, regional, local or municipal.
"Hazardous Materials " has the meaning set forth in Section
4.18(b) .
"HSR Act " means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indenture " has the meaning set forth in Section 7.13(a)
.
"Law " means applicable statutes, common laws, rules, ordinances,
regulations, codes, licensing requirements, orders, judgments, injunctions, writs,
decrees, licenses, governmental guidelines or interpretations having the force of
law, Permits, rules and bylaws, in each case, of a Governmental Authority.
"Lazard " has the meaning set forth in Section 4.10.
"Licensed Persons " has the meaning set forth in Section 7.2(f)
.
"Liens " means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset.
"Limited Guarantee Provisions " has the meaning set forth
in Section 5.7.
"Material Adverse Effect on the Company " means a material
adverse event, change, effect, development, condition or occurrence on or with respect
to the business, operations or financial condition of the Company and its Subsidiaries,
taken as a whole; provided, however, except (other than in clauses (A), (B), (C),
(D), (H), (I) and (J) below) to the extent such changes have a materially disproportionate
effect on the Company and its Subsidiaries, taken as a whole, when compared to other
companies operating in the same industries in which the Company or its Subsidiaries
operate, that Material Adverse Effect on the Company shall not be deemed to include
any event, change, effect, development, condition or occurrence to the extent resulting
from any one or more of the following: (A) changes in general economic conditions,
the securities or financial markets, the gaming industry generally or in any specific
jurisdiction or regulatory, legislative or other political conditions or developments;
(B) public disclosure of this Agreement or the transactions contemplated hereby,
including the identity and/or structure of Parent and its Affiliates; (C) any taking
of any action specifically required by this Agreement; (D) changes in Law (other
than a change in Law enacted by the State of Illinois, the State of Indiana, the
State of West Virginia or the Commonwealth of Pennsylvania prohibiting all gaming
activities which are currently permitted therein) or GAAP, or the interpretation
thereof; (E) any outbreak or escalation of hostilities or war or any act of terrorism;
(F) any weather-related or other force majeure event; (G) any outbreak of illness
or other public health-related event; (H) any divestiture or disposition of any
assets or operations of the Company or any of its Subsidiaries which, as of the
date hereof, the Company and its Subsidiaries have committed to make to satisfy
any Gaming Authority or which is disclosed in the Company Disclosure Letter; (I)
changes in the share price or trading volume of the Shares or the failure of the
Company to meet projections or forecasts (unless due to a circumstance which would
separately constitute a Material Adverse Effect on the Company); or (J) any litigation
alleging breach of fiduciary duty or other violation of applicable Law relating
to this Agreement or the transactions contemplated by this Agreement.
"Material Contract " has the meaning set forth in Section
4.21(a) .
"Merger " has the meaning set forth in the Recitals.
"Merger Consideration " has the meaning set forth in Section
2.2(c) .
"Merger Shares " has the meaning set forth in Section 2.2(c)
.
"Merger Sub " has the meaning set forth in the Preamble.
"New Financing Commitments " has the meaning set forth in
Section 7.9(c) .
"No-Shop Period Start Date " has the meaning set forth in
Section 7.4(a) .
"Notes " has the meaning set forth in Section 7.13(a) .
"Owned Real Property " has the meaning set forth in Section
4.20(a) .
"Parent " has the meaning set forth in the Preamble.
"Parent Disclosure Letter " has the meaning set forth in the
preamble to Article V.
"Parent Expenses " has the meaning set forth in Section 9.2(e)
.
"Parent Plan " has the meaning set forth in Section 7.8(b)
.
"PBCL " has the meaning set forth in Section 2.1(a) .
"Permits " means any licenses, franchises, permits, certificates,
consents, approvals or other similar authorizations of, from or by a Governmental
Authority (including any Gaming Authority) possessed by or granted to or necessary
for the ownership of the material assets or conduct of the business of the Company
or its Subsidiaries.
"Permitted Liens " means (i) Liens for Taxes, assessments
and governmental charges or levies not yet due and payable or that are being contested
in good faith and by appropriate proceedings; (ii) mechanics, carriers, workmens,
repairmens, materialmens or other Liens or security interests that secure a liquidated
amount that are being contested in good faith and by appropriate proceedings or
with respect to which there remains an opportunity to contest; or (iii) the Real
Property Leases; (iv) Liens imposed by applicable Law; (v) pledges or deposits to
secure obligations under workers compensation Laws or similar legislation or to
secure public or statutory obligations; (vi) pledges and deposits to secure the
performance of bids, trade contracts, leases, surety and appeal bonds, performance
bonds and other obligations of a similar nature, in each case in the ordinary course
of business; (vii) easements, covenants and rights of way (unrecorded and of record)
and other similar restrictions of record, and zoning, building and other similar
restrictions, in each case that do not adversely affect in any material respect
the current use of the applicable property owned, leased, used or held for use by
the Company or any of its Subsidiaries; (viii) Liens the existence of which are
specifically disclosed in the notes to the consolidated financial statements of
the Company included in any Company SEC Report filed prior to the date of this Agreement;
and (ix) any other Liens that do not secure a liquidated amount and that would not
be reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on the Company.
"Person " means any individual, corporation, company, limited
liability company, partnership, association, trust, joint venture, group or any
other entity or organization, including any government or political subdivision
or any agency or instrumentality thereof.
"Real Property Leases " has the meaning set forth in Section
4.20(b) .
"Recommendation " has the meaning set forth in Section 7.1(a)
.
"Recommendation Withdrawal " has the meaning set forth in
Section 7.4(d) .
"Release " has the meaning set forth in Section 4.18(b) .
"Representatives " has the meaning set forth in Section 7.4(a)
.
"Required Financial Information " has the meaning set forth
in Section 7.9(a) .
"Requisite Shareholder Vote " has the meaning set forth in
Section 4.2(a) .
"Restraint " has the meaning set forth in Section 8.1(d) .
"Reverse Termination Fee " means $200 million.
"Rights " has the meaning set forth in the Rights Agreement.
"Rights Agreement " has the meaning set forth in Section 4.12.
"Sarbanes-Oxley Act " has the meaning set forth in Section
4.6(a) .
"SEC " means the U.S. Securities and Exchange Commission.
"Securities Act " means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Shares " has the meaning set forth in the Recitals.
"Subsidiary " means, with respect to any Person, any other
Person of which the first Person owns, directly or indirectly, securities or other
ownership interests having voting power to elect a majority of the board of directors
or other persons performing similar functions (or, if there are no such voting interests,
more than 50% of the equity interests of the second Person).
"Subsidiary Securities " has the meaning set forth in Section
4.5(c) .
"Superior Proposal " has the meaning set forth in Section
7.4(g)(ii) .
"Surviving Corporation " has the meaning set forth in the
Recitals.
"Takeover Statute " has the meaning set forth in Section 4.12.
"Tax " means all U.S. Federal, state, local, foreign and other
taxes (including withholding taxes), assessments, levies, imposts and other governmental
charges of any kind or nature whatsoever, together with any interest, penalties
or additions imposed with respect thereto.
"Tax Return " means any return, declaration, report, statement,
information statement or other document required to be filed with a Governmental
Authority with respect to Taxes, including any amendments or supplements to any
of the foregoing.
"Termination Fee " means $100 million if the Termination Fee
becomes payable in connection with a transaction with an Excluded Party and $200
million in all other circumstances.
"Vessels " means the vessels owned by the Company or any of
its Subsidiaries and listed on Section 4.20(a) of the Company Disclosure Letter.
Section 1.2. Terms Generally. The definitions in Section 1.1 shall
apply equally to both the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include ", "includes " and
"including " shall be deemed to be followed by the phrase "without limitation
", unless the context expressly provides otherwise. All references herein to Sections,
paragraphs, subparagraphs, clauses, Annexes or Schedules shall be deemed references
to Sections, paragraphs, subparagraphs or clauses of, or Annexes or Schedules, to
this Agreement, unless the context expressly provides otherwise. Unless otherwise
expressly defined, terms defined in this Agreement have the same meanings when used
in any Exhibit or Schedule hereto, including the Company Disclosure Letter. Unless
otherwise specified, the words "herein ", "hereof ", "hereto "
and "hereunder " and other words of similar import refer to this Agreement
as a whole (including the Schedules and Annexes) and not to any particular provision
of this Agreement.
ARTICLE II
THE MERGER
Section 2.1. The Merger.
(a) At the Effective Time, in accordance with the Pennsylvania Business
Corporation Law of 1988, as amended (the "PBCL "), and upon the terms and
subject to the conditions set forth in this Agreement, Merger Sub shall be merged
with and into the Company, at which time the separate existence of Merger Sub shall
cease and the Company shall survive the Merger as a direct or indirect wholly owned
subsidiary of Parent.
(b) On the Closing Date, the Company and Merger Sub shall file the
Articles of Merger (the "Articles of Merger ") executed in accordance with,
and containing such information as is required by, the relevant provisions of the
PBCL with the Department of State of the Commonwealth of Pennsylvania. The Merger
shall become effective at such time as the Articles of Merger have been accepted
for record by the Department of State of the Commonwealth of Pennsylvania or at
such other, later date and time as is agreed between the parties and specified in
the Articles of Merger in accordance with the relevant provisions of the PBCL (such
date and time is hereinafter referred to as the "Effective Time ").
(c) The Merger shall generally have the effects set forth in Section
1929, and any other applicable provisions, of the PBCL and this Agreement. Without
limiting the generality of the foregoing, and subject thereto, from and after the
Effective Time, all property, rights, privileges, immunities, powers, franchises,
licenses and authority of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions and duties of
each of the Company and Merger Sub shall become the debts, liabilities, obligations,
restrictions and duties of the Surviving Corporation.
(d) The closing of the Merger (the "Closing ") shall take
place (i) at the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd
Street, New York, New York 10019 or (ii) at such other place and at such date and
time as the Company and Parent may agree (the actual date of the Closing, the
"Closing Date "), as soon as reasonably practicable but, in any event, no later
than the seventh Business Day after the day on which the last condition to the Merger
set forth in Article VIII is satisfied or waived (other than those conditions that
by their nature cannot be satisfied until the Closing Date, but subject to the satisfaction
or waiver of such conditions).
Section 2.2. Conversion of Securities. At the Effective Time, pursuant
to this Agreement and by virtue of the Merger and without any action on the part
of the Company, Parent, Merger Sub or the holders of the Shares:
(a) Each Share held by the Company as treasury stock or owned directly
or indirectly by Parent or Merger Sub immediately prior to the Effective Time (including
Shares acquired by Parent immediately prior to the Effective Time), if any, shall
be canceled and retired and shall cease to exist, and no payment or distribution
shall be made or delivered with respect thereto.
(b) Each share of common stock of Merger Sub, par value $0.01 per
share, issued and outstanding immediately prior to the Effective Time shall be converted
into and become one newly issued, fully paid and non-assessable share of common
stock of the Surviving Corporation. Parent (or its parent entity) shall be recapitalized
effective as of the Effective Time to implement the Dual Voting Structure. The voting
shares issuable by Parent (or its parent entity) shall be held by one or more Delaware
limited liability companies owned by the Licensed Persons, and the non-voting shares
issuable by Parent (or its parent entity) shall be held indirectly through one or
more Delaware limited liability companies held by equity providers.
(c) Each Share (including any Company Restricted Shares, except
as provided in Section 2.2(e)) issued and outstanding immediately prior to the Effective
Time (other than Shares to be canceled pursuant to Section 2.2(a)) automatically
shall be canceled and converted into the right to receive $67.00 in cash (as adjusted
by the last sentence of this Section 2.2(c) if applicable, the "Merger Consideration
"), without interest, payable to the holder thereof upon surrender of the certificate
(a "Certificate ") or the book-entry share (a "Book-Entry Share ") formerly
representing such Share in the manner provided in Section 2.3. Such Shares (including
any Company Restricted Shares, except for those which, in accordance with Section
2.2(e), are not cancelled and converted into the right to receive the Merger Consideration),
other than those canceled pursuant to Section 2.2(a) and any Shares owned by a wholly
owned Subsidiary of the Company (which Shares shall remain outstanding), sometimes
are referred to herein as the "Merger Shares. " In the event that the Effective
Time shall not have occurred by June 15, 2008 (the "Adjustment Date "), the
$67.00 cash amount per share payable pursuant to the first sentence of this Section
2.2(c) shall be increased for each day after the Adjustment Date through and including
the Closing Date, by adding thereto an amount equal to $0.0149 per day.
(d) If, between the date of this Agreement and the Effective Time,
the number of outstanding Shares is changed into a different number of shares or
a different class, by reason of any stock dividend, subdivision, reclassification,
recapitalization, split-up, combination, exchange of shares or the like, other than
pursuant to the Merger, the amount of Merger Consideration payable per Share and
any other dependent items shall be appropriately adjusted to provide the holders
of the Shares the same economic effect as contemplated by this Agreement prior to
such action and as so adjusted shall, from and after the date of such event, be
the Merger Consideration or other dependent items, subject to further adjustment
in accordance with this Section 2.2(d) .
(e) Each Share (other than those canceled pursuant to Section 2.2(a))
outstanding immediately prior to the Effective Time, granted subject to vesting
or other lapse restrictions pursuant to the Company Stock Plans or any applicable
restricted stock award agreements (collectively, the "Company Restricted Shares
"), shall, by virtue of this Agreement and in accordance with Section 2.4(b), vest
and become free of such restrictions immediately prior to the Effective Time and,
except for Company Restricted Shares as to which the treatment in the Merger is
hereafter separately agreed by Parent and the holder thereof, which Company Restricted
Shares shall be treated as so agreed, shall be canceled and converted into the right
to receive the Merger Consideration in accordance with Section 2.2(c) .
(f) The Company Options outstanding immediately prior to the Effective
Time shall be treated as provided in Section 2.4.
Section 2.3. Payment of Cash for Merger Shares and Company Options.
(a) Prior to the Closing Date, Parent shall designate a bank or
trust company that is reasonably satisfactory to the Company to serve as the disbursing
agent for the Merger Consideration and payments in respect of the Company Options
(the "Disbursing Agent "). Immediately prior to the filing of the Articles
of Merger with the Department of State of the Commonwealth of Pennsylvania, Parent
will deposit, or will cause to be deposited, with the Disbursing Agent cash in the
aggregate amount sufficient to pay the Merger Consideration in respect of all Merger
Shares outstanding immediately prior to the Effective Time plus any cash necessary
to pay for Company Options outstanding immediately prior to the Effective Time pursuant
to Section 2.4. Pending distribution of the cash deposited with the Disbursing Agent,
such cash shall be held in trust for the benefit of the holders of Merger Shares
and Company Options outstanding immediately prior to the Effective Time and shall
not be used for any other purposes; provided, however, that Parent may direct the
Disbursing Agent to invest such cash in (i) obligations of or guaranteed by the
United States of America or any agency or instrumentality thereof, (ii) money market
accounts, certificates of deposit, bank repurchase agreements or bankers acceptances
of, or demand deposits with, commercial banks having a combined capital and surplus
of at least $500,000,000, or (iii) commercial paper obligations rated P-1 or A-1
or better by Standard & Poors Corporation or Moodys Investor Services, Inc. Any
profit or loss resulting from, or interest and other income produced by, such investments
shall be for the account of Parent.
(b) As promptly as practicable after the Effective Time, the Surviving
Corporation shall send, or cause the Disbursing Agent to send, to each record holder
of Merger Shares as of immediately prior to the Effective Time a letter of transmittal
and instructions for exchanging their Merger Shares for the Merger Consideration
payable therefor. The letter of transmittal will be in customary form and will specify
that delivery of Certificates or Book-Entry Shares will be effected, and risk of
loss and title will pass, only upon delivery of the Certificates or Book-Entry Shares
to the Disbursing Agent. Upon surrender of such Certificate(s) or Book-Entry Share(s)
to the Disbursing Agent together with a properly completed and duly executed letter
of transmittal and any other documentation that the Disbursing Agent may reasonably
require, the record holder thereof shall be entitled to receive the Merger Consideration
payable in exchange therefor, without interest. Until so surrendered and exchanged,
each such Certificate or Book-Entry Share shall, after the Effective Time, be deemed
to represent only the right to receive the Merger Consideration in respect of such
Certificate or Book-Entry Share, and until such surrender and exchange, no cash
shall be paid to the holder of such outstanding Certificate or Book-Entry Share
in respect thereof.
(c) If payment is to be made to a Person other than the registered
holder of the Merger Shares formerly represented by the Certificate(s) or Book-Entry
Share(s) surrendered in exchange therefor, it shall be a condition to such payment
that the Certificate(s) or Book-Entry Share(s) so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the Person requesting
such payment shall pay to the Disbursing Agent any applicable stock transfer taxes
required as a result of such payment to a Person other than the registered holder
of such Merger Shares or establish to the satisfaction of the Disbursing Agent that
such stock transfer taxes have been paid or are not payable.
(d) After the Effective Time, there shall be no further transfers
on the stock transfer books of the Company of the Shares that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates or Book-Entry
Shares are presented to the Surviving Corporation, Parent or the Disbursing Agent,
such Shares shall be canceled and exchanged for the consideration provided for,
and in accordance with the procedures set forth, in this Article II.
(e) If any cash deposited with the Disbursing Agent remains unclaimed
twelve months after the Effective Time, such cash shall be returned to Parent or
the Surviving Corporation upon demand, and any holder who has not surrendered such
holders Certificate(s) or Book-Entry Share(s) for the Merger Consideration payable
in respect thereof prior to that time shall thereafter look only to the Surviving
Corporation for payment of the Merger Consideration. Notwithstanding the foregoing,
none of Parent, Merger Sub, the Company, the Surviving Corporation, the Disbursing
Agent or any of their respective directors, officers, employees and agents shall
be liable to any holder of Certificates or Book-Entry Shares for an amount paid
to a public official pursuant to any applicable unclaimed property laws. Any amounts
remaining unclaimed by holders of Certificates or Book-Entry Shares as of the date
on which such amounts would otherwise escheat to or become property of any Governmental
Authority shall, to the extent permitted by applicable Law, become the property
of the Surviving Corporation on such date, free and clear of any claims or interest
of any Person previously entitled thereto.
(f) Except as provided in Section 2.2, from and after the Effective
Time, the holders of Shares outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such Shares, other than the right
to receive the Merger Consideration as provided in this Agreement.
(g) In the event that any Certificate has been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such Certificate
to be lost, stolen or destroyed, in addition to the posting by such holder of any
bond in such reasonable amount as the Surviving Corporation or the Disbursing Agent
may direct as indemnity against any claim that may be made against the Surviving
Corporation or the Disbursing Agent with respect to such Certificate, the Disbursing
Agent will issue in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration in respect thereof entitled to be received pursuant to this
Agreement.
(h) Parent, Surviving Corporation and the Disbursing Agent shall
be entitled to deduct and withhold from the consideration otherwise payable to a
holder of Shares, Company Restricted Shares or Company Options pursuant to this
Agreement any amounts required to be deducted and withheld with respect to the making
of such payment under any applicable Tax Law. To the extent any amounts are so deducted
and withheld and paid over to the applicable Governmental Authority, such deducted
or withheld amounts shall be treated for all purposes as having been paid to the
holder of the Shares, Company Restricted Shares or Company Options in respect of
which such deduction and withholding was made.
Section 2.4. Treatment of Company Options.
(a) As of the Effective Time, each Company Option that is outstanding
immediately prior to the Effective Time, whether vested or unvested, shall be accelerated
and become vested and, except for Company Options as to which the treatment in the
Merger is hereafter separately agreed by Parent and the holder thereof, which Company
Options shall be treated as so agreed, will be canceled and extinguished, and the
holder thereof will be entitled to receive an amount in cash equal to the product
of (i) the number of Shares subject to such Company Option and (ii) the excess,
if any, of the Merger Consideration over the exercise price per share of such Company
Option, without interest. All payments with respect to canceled Company Options
shall be made by the Disbursing Agent as promptly as practicable after the Effective
Time from funds deposited by or at the direction of Parent for the purpose of paying
such amounts in accordance with Section 2.3(a) .
(b) Prior to the Effective Time, the Company and Parent will adopt
such resolutions and take such other commercially reasonable actions as are reasonably
necessary in order to effectuate the actions contemplated by Section 2.2(e) and
this Section 2.4, without paying any consideration or incurring any debts or obligations
on behalf of the Company or the Surviving Corporation, provided that such resolutions
and actions shall expressly be conditioned upon the consummation of the Merger and
the other transactions contemplated hereby and shall be of no effect if this Agreement
is terminated.
ARTICLE III
THE SURVIVING CORPORATION
Section 3.1. Articles of Incorporation. The articles of incorporation
of Merger Sub as in effect immediately prior to the Effective Time, which shall
be in the form attached hereto as Annex A, shall be the articles of incorporation
of the Surviving Corporation until thereafter amended in accordance with the terms
thereof or as provided by applicable Law; provided, however, that Article I thereof
shall read as follows: "The name of the Corporation is Penn National Gaming,
Inc. ".
Section 3.2. Bylaws. The bylaws of Merger Sub as in effect immediately
prior to the Effective Time, which shall be in the form attached hereto as Annex
B, shall be the bylaws of the Surviving Corporation until thereafter amended in
accordance with the terms thereof, the articles of incorporation of the Surviving
Corporation or as provided by applicable Law.
Section 3.3. Directors and Officers. From and after the Effective
Time, (i) the directors of the Surviving Corporation at the Effective Time shall
be as specified in Annex C (and such other directors as may be designated by Parent)
and (ii) the officers of the Company at the Effective Time shall be the officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified in accordance with applicable Law.
Section 3.4. Headquarters of the Surviving Corporation. Parent intends
to maintain the headquarters of the Surviving Corporation in Wyomissing, Pennsylvania
for at least three years after the Effective Time.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except (x) as set forth in the section of the disclosure letter
delivered to Parent and Merger Sub by the Company concurrently with the execution
and delivery of this Agreement (the "CompanyDisclosure Letter ") that specifically
relates to such section, or, if disclosed in another section of the Company Disclosure
Letter, is reasonably apparent from the substance of such disclosure to relate to
such section, of this Article IV below, or (y) other than in the case of Sections
4.5 and 4.6, as may be disclosed in the Company SEC Reports filed with or furnished
to the SEC prior to the date of this Agreement, the Company hereby represents and
warrants to Parent and Merger Sub that:
Section 4.01. Corporate Existence and Power. Each of the Company
and its Subsidiaries is duly organized, validly existing and in good standing under
the laws of its jurisdiction, except where the failure to be in good standing has
not had, and would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on the Company. Each of the Company and its Subsidiaries
has all corporate or similar powers and authority required to own, lease and operate
its respective properties and carry on its business as now conducted, except where
the failure to have such power and authority has not had, and would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company. Each of the Company and its Subsidiaries is duly licensed or qualified
to do business in each jurisdiction in which the nature of the business conducted
by it or the character or location of the properties and assets owned or leased
by it makes such qualification necessary, except where the failure to be so licensed
or qualified has not had, and would not be reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on the Company.
Section 4.02. Corporate Authorization.
(a) The Company has full corporate power and authority to execute
and deliver this Agreement and, subject to receipt of the Requisite Shareholder
Vote, to consummate the Merger and to perform each of its obligations hereunder.
The execution, delivery and performance by the Company of this Agreement and the
consummation by the Company of the Merger and the other transactions contemplated
hereby have been duly and validly authorized by the Board of Directors of the Company.
Except for the approval and adoption of this Agreement by a majority of the votes
cast by all shareholders entitled to vote thereon (the "RequisiteShareholder
Vote "), no other corporate proceedings on the part of the Company are necessary
to approve and adopt this Agreement. The Board of Directors of the Company, at a
duly held meeting has (i) determined that the Merger and this Agreement are fair
to and in the best interests of the Company and its shareholders, (ii) approved
the Merger and the execution, delivery and performance of this Agreement, and (iii)
resolved to recommend that the Company shareholders approve and adopt this Agreement
and directed that such matter be submitted for the consideration of the shareholders
of the Company at the Company Shareholder Meeting.
(b) This Agreement has been duly and validly executed and delivered
by the Company and, assuming the due and valid authorization, execution and delivery
of this Agreement by Parent and Merger Sub, constitutes a legal, valid and binding
agreement of the Company enforceable against the Company in accordance with its
terms.
Section 4.3. Governmental Authorization. The execution, delivery
and performance by the Company of this Agreement and the consummation of the Merger
by the Company do not require any consent, approval, authorization or Permit of,
action by, filing with or notification to any Governmental Authority, other than
(i) the filing of the Articles of Merger; (ii) compliance with the applicable requirements
of the HSR Act; (iii) filings with, and approvals by, Gaming Authorities; (iv) compliance
with the applicable requirements of the Exchange Act including the filing of the
Company Proxy Statement; (v) compliance with the rules and regulations of the NASDAQ
Global Select Market; (vi) compliance with the rules of the Ontario Lottery and
Gaming Corporation and with any applicable foreign or state securities or Blue Sky
laws; and (vii) any such consent, approval, authorization, Permit, action, filing
or notification the failure of which to make or obtain would not (A) be reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on the
Company or (B) prevent or materially delay the consummation of the Merger or the
Companys ability to observe and perform its material obligations hereunder.
Section 4.4. Non-Contravention. The execution, delivery and performance
by the Company of this Agreement and the consummation by the Company of the Merger
and the other transactions contemplated hereby do not and will not (i) contravene
or conflict with the organizational or governing documents of (A) the Company or
(B) any of its Subsidiaries; (ii) assuming compliance with the matters referenced
in Section 4.3 and the receipt of the Requisite Shareholder Vote, contravene or
conflict with or constitute a violation of any provision of any Law binding upon
or applicable to the Company or any of its Subsidiaries or any of their respective
properties or assets; (iii) require the consent, approval or authorization of, or
filing with any third party with respect to, result in any breach or violation of
or constitute a default (or an event which with notice or lapse of time or both
would become a default) or result in the loss of benefit under, or give rise to
any right of termination, cancellation, amendment or acceleration of any right or
obligation of the Company or any of its Subsidiaries, or result in the creation
of any Lien on any of the properties or assets of the Company or its Subsidiaries
under any loan or credit agreement, note, bond, mortgage, indenture, contract, agreement,
lease, license, Permit or other instrument or obligation (each, a "Contract
") to which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries or its or any of their respective properties or assets
are bound, except in the case of clauses (i)(B), (ii) and (iii) above, which would
not (A) be reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on the Company or (B) prevent or materially delay the consummation
of the Merger or the Companys ability to observe and perform its material obligations
hereunder.
Section 4.5. Capitalization.
(a) As of March 31, 2007, the authorized capital stock of the Company
consists of:
(i) 200,000,000 Shares, of which 85,464,858 shares were issued and
outstanding (including 380,000 outstanding Company Restricted Shares);
(ii) 1,000,000 shares of preferred stock, par value $.01 per share,
none of which were issued and outstanding; and
(iii) outstanding Company Options to purchase an aggregate of 8,646,567
Shares, with a weighted average exercise price of $25.15 per share.
All outstanding Shares are duly authorized, validly issued, fully
paid and non-assessable, and are not subject to and were not issued in violation
of any preemptive or similar right, purchase option, call or right of first refusal
or similar right. As of March 31, 2007, 1,698,800 Shares were held in the treasury
of the Company.
(b) Except as set forth in Section 4.5(a) and except for 3,226,975
Shares reserved for issuance pursuant to the Company Stock Plans and except for
the Rights, as of the date of this Agreement, there have not been reserved for issuance,
and there are no outstanding: (i) shares of capital stock or other voting securities
of the Company; (ii) securities of the Company or any of its Subsidiaries convertible
into or exchangeable for shares of capital stock or voting securities of the Company;
(iii) Company Options or other rights or options to acquire from the Company, or
obligations of the Company to issue, any shares of capital stock, voting securities
or securities convertible into or exchangeable for shares of capital stock or voting
securities of the Company; or (iv) equity equivalent interests in the ownership
or earnings of the Company or other similar rights in respect of the Company (the
securities described in clauses (i) through (iv) are collectively referred to herein
as the "Company Securities "). There are no outstanding obligations of the
Company or any Subsidiary to repurchase, redeem or otherwise acquire any Company
Securities. There are no preemptive rights of any kind which obligate the Company
or any of its Subsidiaries to issue or deliver any Company Securities. There are
no shareholder agreements, voting trusts or other agreements or understandings to
which the Company or any of its Subsidiaries is a party or by which it is bound
relating to the voting or registration of any shares of capital stock of the Company
or preemptive rights with respect thereto.
(c) The Company or one or more of its Subsidiaries is the record
and beneficial owner of the equity interests held by it of each Subsidiary of the
Company, free and clear of any Lien other than Permitted Liens. As of the date of
this Agreement, there are no outstanding (i) securities of the Company or any of
its Subsidiaries convertible into or exchangeable for shares of capital stock or
other voting securities or ownership interests in any Subsidiary of the Company,
(ii) options, restricted stock, warrants, rights or other agreements or commitments
to acquire from the Company or any of its Subsidiaries, or obligations of the Company
or any of its Subsidiaries to issue, any capital stock, voting securities or other
ownership interests in (or securities convertible into or exchangeable for capital
stock or voting securities or other ownership interests in) any Subsidiary of the
Company, (iii) obligations of the Company or any of its Subsidiaries to grant, extend
or enter into any subscription, warrant, right, convertible or exchangeable security
or other similar agreement or commitment relating to the issuance of any capital
stock, voting securities or other ownership interests in any Subsidiary of the Company
(the items in clauses (i), (ii) and (iii), together with the capital stock of such
Subsidiaries, being referred to collectively as "Subsidiary Securities ")
or (iv) obligations of the Company or any of its Subsidiaries to make any material
payment directly or indirectly based (in whole or in part) on the value of any shares
of capital stock of any Subsidiary of the Company. As of the date of this Agreement
there are no outstanding obligations of the Company or any of its Subsidiaries to
purchase, redeem or otherwise acquire any outstanding Subsidiary Securities that
have had or would reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on the Company. There are no voting trusts or other agreements
or understandings to which the Company or any of its Subsidiaries is a party with
respect to the voting of capital stock of any Subsidiary of the Company.
(d) From March 31, 2007 to the date of this Agreement, (i) the Company
has not declared or paid any dividend or distribution in respect of any Company
Securities, and (ii) other than the issuance of Shares upon the exercise of Company
Options, neither the Company nor any Subsidiary of the Company has issued, sold
or repurchased any Company Securities, and their respective Boards of Directors
have not authorized any of the foregoing.
(e) No bonds, debentures, notes or other indebtedness having the
right to vote on any matters on which Company shareholders may vote are outstanding.
Section 4.6. Reports and Financial Statements.
(a) The Company has timely filed all forms, reports, statements,
certifications and other documents (including all exhibits, amendments and supplements
thereto) required to be filed by it with the SEC since January 1, 2005 (all such
forms, reports, statements, certificates and other documents filed with or furnished
to the SEC since January 1, 2005, with any amendments thereto, collectively, the
"Company SEC Reports "), each of which, including any financial statements or schedules
included therein, as finally amended prior to the date hereof, has complied as to
form in all material respects, as of the date filed with the SEC, with the applicable
requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act
of 2002 (the "Sarbanes-Oxley Act ") and, in each case, the rules and regulations
of the SEC promulgated thereunder. None of the Companys Subsidiaries is required
to file periodic reports with the SEC. None of the Company SEC Reports contained,
when filed with the SEC and, if amended, as of the date of such amendment, any untrue
statement of a material fact or omitted to state a material fact required to be
stated or incorporated by reference therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading.
As of the date of this Agreement, (i) there are no outstanding or unresolved comments
in comment letters received from the SEC staff with respect to the Company SEC Reports,
and (ii) to the knowledge of the Company, none of the Company SEC Reports is the
subject of ongoing SEC review, outstanding SEC comment or outstanding SEC investigation.
(b) Each of the consolidated financial statements of the Company
and its Subsidiaries included (or incorporated by reference) in the Company SEC
Reports (including the related notes and schedules, where applicable) fairly present
in all material respects the results of the consolidated operations and changes
in shareholders equity and consolidated financial position of the Company and its
Subsidiaries for the respective fiscal periods or as of the respective dates therein
set forth (subject, in the case of unaudited statements, to normal year-end adjustments
and other adjustments described therein, including the notes thereto). Each of such
consolidated financial statements (including the related notes and schedules, where
applicable) complied, as of the date of filing, in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
applicable thereto and each of such financial statements (including the related
notes and schedules, where applicable) were prepared in accordance with GAAP (except,
in the case of unaudited statements, as permitted by the rules and regulations of
the SEC) consistently applied during the periods involved, except in each case as
indicated in such statements or in the notes thereto.
(c) The Company and its Subsidiaries have implemented and maintain
a system of internal accounting controls designed to provide reasonable assurances
regarding the reliability of financial reporting and the preparation of financial
statements in accordance with GAAP. The Company (i) has implemented and maintains
disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange
Act) designed to ensure that material information relating to the Company, including
its consolidated Subsidiaries, is made known to the Chief Executive Officer and
the Chief Financial Officer of the Company by others within those entities, and
(ii) has disclosed to the knowledge of the Company, based on its most recent evaluation
prior to the date of this Agreement, to the Companys outside auditors and the audit
committee of the Companys Board of Directors (A) any significant deficiencies and
material weaknesses in the design or operation of internal controls over financial
reporting (as defined in Rule 13a-15(f) of the Exchange Act) that would be reasonably
likely to adversely affect the Companys ability to record, process, summarize and
report financial information and (B) any fraud, whether or not material (unless
clearly inconsequential), that involves management or other employees who have a
significant role in the Companys internal controls over financial reporting. Since
December 31, 2004, any material change in internal control over financial reporting
or failure or inadequacy of disclosure controls required to be disclosed in any
Company SEC Report has been so disclosed.
Section 4.7. Undisclosed Liabilities. Except for (i) those liabilities
that are reflected or reserved against on the consolidated balance sheets (or the
related notes thereto) of the Company included in the Company SEC Reports, (ii)
liabilities incurred in the ordinary course of business since the date of such balance
sheets, and (iii) transactions contemplated by this Agreement, including any Taxes
incurred in connection therewith, as of the date hereof, neither the Company nor
any of its Subsidiaries has incurred any liability of any nature (whether absolute,
accrued or contingent or otherwise) that would be required by GAAP to be reflected
on a consolidated balance sheet (or the related notes thereto) of the Company and
that would reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
Section 4.8. Disclosure Documents. The Company Proxy Statement will
not, at the date it is first mailed to shareholders of the Company, at the time
of any amendments thereof or supplements thereof, and at the time of the Company
Shareholder Meeting (other than as to information supplied by Parent, Merger Sub
or any of their respective Affiliates for inclusion therein), contain any untrue
statement of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Company will cause the Company Proxy
Statement to comply as to form in all material respects with the requirements of
the Exchange Act applicable thereto and any other applicable Law as of the date
of such filing. No representation is made by the Company with respect to statements
made in the Company Proxy Statement based on information supplied by Parent, Merger
Sub or their respective Affiliates expressly for inclusion therein.
Section 4.9. Absence of Certain Changes or Events. Since January
1, 2007, no change, circumstance, event or effect has occurred which has had or
would be reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on the Company. Between January 1, 2007 and the date hereof, the
Company and its Subsidiaries have conducted their respective businesses in all material
respects only in the ordinary course consistent with past practice and have not,
(A) set aside, made or paid any dividend or distribution (whether in cash, stock
or property) on any shares of its capital stock (other than cash dividends paid
to the Company or one of its wholly owned Subsidiaries by a wholly owned Subsidiary
of the Company with regard to its capital stock), or authorized, committed or agreed
to take any of the foregoing actions, (B) except to the extent required by Law or
collective bargaining agreement, adopted, amended in any material respect or terminated
any Company Benefit Plan or any other material bonus, severance, insurance pension
or other material Employee Benefit Plan, (C) made any acquisition, by means of a
merger or otherwise, of any business, assets or securities or any sale, lease, encumbrance
or other disposition of assets or securities, in each case involving the payment
or receipt of consideration of $10 million or more, except for purchases or sales
of inventory made in the ordinary course of business and consistent with past practice,
(D) made any material change to any of the financial accounting methods, principles
or practices used by it, except to the extent required by GAAP or (E) authorized,
committed or agreed to take any of the foregoing actions.
Section 4.10. Finders Fees. No agent, broker, investment banker,
financial advisor or other firm or person retained by the Company, except Lazard
Frres & Co. LLC ( "Lazard "), is or will be entitled to any brokers or finders
fee or any other similar commission or fee payable by the Company or any Subsidiary
of the Company in connection with any of the transactions contemplated by this Agreement.
Prior to the date hereof, the Company furnished Parent with a true and complete
copy of the engagement letter entered into between the Company and Lazard.
Section 4.11. Opinion of Financial Advisor. Lazard has delivered
to the Board of Directors an opinion to the effect that, as of the date of this
Agreement, the Merger Consideration to be received by the shareholders of the Company
is fair, from a financial point of view, to such shareholders.
Section 4.12. Anti-Takeover Provisions. No "fair price, "
"merger moratorium, " "control share acquisition, " or other anti-takeover
or similar statute or regulation (each, a "Takeover Statute ") applies or
purports to apply to this Agreement, the Merger or the other transactions contemplated
hereby, except for (i) those which have been made not applicable to this Agreement,
the Merger and the other transactions contemplated hereby by valid action of the
Board of Directors of the Company prior to the execution and delivery hereof and
(ii) those which do not restrict or prohibit this Agreement, the Merger and the
transactions contemplated hereby because Parent will be the sole shareholder of
the Company upon consummation of the Merger and prior to the implementation of the
Dual Voting Structure. Prior to the execution and delivery hereof, the Board of
Directors of the Company took all action necessary to ensure that Parent, Merger
Sub and their respective Affiliates and Associates, as defined in the rights agreement
(the "Rights Agreement "), dated as of March 17, 1999, entered into by and
between the Company and Continental Stock Transfer & Trust Company, are excepted
from the definitions of Acquiring Person and Adverse Person in the Rights Agreement
only to the extent each is a Beneficial Owner (as defined in the Rights Agreement)
as a result of the approval, execution and delivery of this Agreement or consummation
of the transactions contemplated hereby or thereby.
Section 4.13. Compliance With Laws.
(a) The Company and each of its Subsidiaries is in compliance with
all Laws (including Gaming Laws) applicable to the Company, its Subsidiaries and
their respective businesses and activities, except for such noncompliance that has
not had, and would not be reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on the Company.
(b) The Company and each Subsidiary of the Company has and maintains
in full force and effect, and is in compliance with, all Permits and all orders
from Governmental Authorities necessary for the Company and each Subsidiary to carry
on their respective businesses as currently conducted and currently proposed to
be conducted, except as has not had, and would not be reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
Section 4.14. Employee Matters.
(a) Each of the Company Benefit Plans is listed on Section 4.14(a)
of the Disclosure Letter, and a true and correct copy of each of the Company Benefit
Plans, has been supplied to Parent. In the case of any Company Benefit Plan which
is not in written form, Parent has been supplied with an accurate description of
the material provisions of such Company Benefit Plan as in effect on the date hereof.
Except to the extent specifically made available to Parent, as of the date hereof
there are no material amendments to any Company Benefit Plan that have been adopted
or approved, nor has the Company or any of its Subsidiaries undertaken to make any
such amendments or to adopt or approve any new material Company Benefit Plan.
(b) With respect to each Company Benefit Plan, (i) all material
contributions due from the Company or any of its Subsidiaries to date have been
timely made and all material amounts properly accrued, (ii) each such Company Benefit
Plan which is an "employee pension benefit plan " (as defined in Section 3(2)
of ERISA) and intended to be qualified under Section 401(a) of the Code has received
a favorable determination letter, or has pending an application for such determination
from the Internal Revenue Service with respect to those provisions for which the
remedial amendment period under Section 401(b) of the Code has not expired, and
the Company is not aware of any reason why any such determination letter should
be revoked or not issued, as applicable, and (iii) there are no actions, suits or
claims pending (other than routine claims for benefits) or, to the knowledge of
the Company, threatened or anticipated with respect to any such Company Benefit
Plan which has had or would be reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
(c) Neither the Company nor its Subsidiaries nor any trade or business,
whether or not incorporated, that, together with the Company or any of its Subsidiaries
would be deemed to be a "single employer " within the meaning of Section 4001(b)
of ERISA (an "ERISAAffiliate "), (i) maintains or contributes to, or has maintained
or contributed to, (x) any Employee Benefit Plan that is subject to Section 302
or Title IV of ERISA or Section 412 of the Code, (y) a "multiemployer plan
" within the meaning of Section 3(37) and 4001(a)(3) of ERISA or (z) a "multiple
employer plan " within the meaning of Sections 4063/4064 of ERISA or Section 413(c)
of the Code or (ii) has incurred or reasonably expects to incur any material liability
pursuant to Title I or Title IV of ERISA or material penalty, excise Tax or joint
and several liability pursuant to any provisions of the Code or any foreign Law
or regulation relating to Employee Benefit Plans, whether contingent or otherwise.
With respect to each Company Benefit Plan that is a "multiemployer plan, "
no complete or partial withdrawal from such plan has been made by the Company or
any Subsidiary, or by any other person, that could result in any liability to the
Company or any Subsidiary, whether such liability is contingent or otherwise, except
for liabilities that would not be reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on the Company.
(d) Except as would not be reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on the Company, no deduction for
federal income Tax purposes has been or to the knowledge of the Company is expected
by the Company to be disallowed for remuneration paid by the Company or any of its
Subsidiaries by reason of Section 162(m) of the Code.
(e) No Company Benefit Plan is, to the knowledge of the Company,
as of the date hereof, the subject of an investigation by the Internal Revenue Service,
the U.S. Department of Labor, the Pension Benefit Guaranty Corporation or any other
Governmental Authority. With respect to each Company Benefit Plan for which financial
statements are required by ERISA, there has been no change in the financial status
of such Plan since the date of the most recent such statements except any of the
foregoing as would not be likely to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
(f) Neither the execution or delivery of this Agreement nor the
consummation of the transactions contemplated by this Agreement will, either alone
or in conjunction with any other event (whether contingent or otherwise), (i) result
in any payment or benefit becoming due or payable, or required to be provided, to
any director, employee or independent contractor of the Company or any of its Subsidiaries,
(ii) increase the amount or value of any benefit or compensation otherwise payable
or required to be provided to any such director, employee or independent contractor,
or (iii) result in the acceleration of the time of payment, vesting or funding of
any such benefit or compensation.
(g) Neither the Company nor any of its Subsidiaries or ERISA Affiliates
has any material liability with respect to an obligation to provide health or other
non-pension benefits to any Person beyond their retirement or other termination
of service other than coverage mandated by Section 4980B of the Code or state Law.
(h) Each Plan that is a "nonqualified deferred compensation
plan " within the meaning of Section 409A(d)(1) of the Code and any award thereunder,
in each case that is subject to Section 409A of the Code, has been operated in good
faith compliance in all material respects with Section 409A of the Code since January
1, 2005, the proposed regulations issued thereunder and the Internal Revenue Service
Notice 2005-1.
(i) Parent has been supplied with an analysis prepared by Strategic
Apex Group in connection with the preparation of the Company's 2007 annual meeting
proxy statement, regarding the applicability of Sections 280G and 4999 of the Code
to payments and benefits which could become payable and due to the individuals identified
as "named executive officers " in such proxy statement in connection with
a change in control of the Company on December 31, 2006 which qualifies as a transaction
described in Section 280G(b)(2)(A) of the Code, including any related tax
"gross-up " payment that would become payable to each such individual.
Section 4.15. Employees.
(a) Section 4.15(a) of the Company Disclosure Letter lists as of
the date hereof (i) any collective bargaining agreement or any labor union contract
that the Company or any of its Subsidiaries is a party to or bound by, and (ii)
to the knowledge of the Company, any activities or proceedings of any labor union
to organize any employees of the Company or any of its Subsidiaries or compel the
Company or any of its Subsidiaries to bargain with any labor union or labor organization.
As of the date hereof, there is no pending or, to the knowledge of the Company,
threatened organized labor strike, walkout, work stoppage, slowdown, or, to the
Companys knowledge, governmental investigation with respect to employees of the
Company or any of its Subsidiaries, in any case which would reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the Company.
No union grievance or labor arbitration demand or proceeding, or unfair labor practice
charge or proceeding, whether or not filed pursuant to a collective bargaining agreement,
has been filed, is pending or, to the knowledge of the Company, has been threatened
against the Company or its Subsidiaries that would reasonably be expected to result,
individually or in the aggregate, in a Material Adverse Effect on the Company.
(b) Neither the Company nor any of its Subsidiaries is a party to,
or otherwise bound by, any consent decree with, or citation by, any Governmental
Authority relating to its current or former employees, officers or directors or
employment practices that would reasonably be expected to result, individually or
in the aggregate, in a Material Adverse Effect on the Company.
(c) The Company and each of its Subsidiaries are in compliance with
all applicable local, state, federal and foreign Laws relating to labor and employment,
including Laws relating to discrimination, disability, labor relations, hours of
work, payment of wages, immigration, workers compensation, working conditions and
occupational safety and health, family and medical leave and employee terminations
except for such noncompliance which would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company.
Section 4.16. Litigation. There is no litigation, arbitration, claim,
investigation, suit, action or proceeding pending or, to the knowledge of the Company,
threatened in writing against or affecting the Company, any of its Subsidiaries
or any director, officer or employee of any of the Company or any of its Subsidiaries,
except as would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on the Company. The Company is not subject to any order,
judgment, writ, injunction or decree, except as would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the Company.
Section 4.17. Tax Matters. Except as would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the Company:
(a) To the knowledge of the Company (i) the Company and each of
its Subsidiaries have timely filed (taking into account extensions) all Tax Returns
required to be filed by applicable Law with respect to the Company and each of its
Subsidiaries, (ii) all such Tax Returns are true, correct and complete, and (iii)
the Company and each of its Subsidiaries have timely paid all Taxes due and payable
with respect to the Company and each of its Subsidiaries, except, in the case of
clauses (ii) and (iii) hereof, with respect to Taxes that are being contested in
good faith or have been adequately provided for in accordance with GAAP.
(b) All federal and state income Tax Returns of the Company and
its Subsidiaries have been audited and settled, or are closed to assessment. As
of the date hereof, there is no claim or assessment pending or, to the knowledge
of the Company, threatened in writing against the Company or any of its Subsidiaries
for any deficiency of Taxes where there is a reasonable possibility of an adverse
determination. There are no outstanding written agreements in effect to extend the
period of limitations for the assessment or collection of any Tax for which the
Company or any of its Subsidiaries may be liable.
(c) To the knowledge of the Company, (i) neither the Company nor
any of its Subsidiaries has been a member of an affiliated group filing a consolidated
U.S. federal income Tax Return (other than a group the common parent of which is
or was the Company or any of its Subsidiaries), and (ii) there is no obligation
of the Company or any of its Subsidiaries to contribute to the payment of any Tax
liability (or any amount calculated with reference thereto) of any Person (other
than the Company or its Subsidiaries), including under Treasury Regulations Section
1.1502 -6 (or any similar provision of state, local or foreign Tax Law), as a transferee
or successor, or by contract (other than pursuant to customary agreements to indemnify
lenders or indemnity provisions in agreements relating to the acquisition or disposition
of assets).
(d) Neither the Company nor any of its Subsidiaries has constituted
a "distributing corporation " or a "controlled corporation " (within
the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying
or intended to qualify for tax-free treatment under Section 355 of the Code in the
two years prior to the date of this Agreement.
(e) Neither the Company nor any of its Subsidiaries has engaged
in a "listed transaction " (as defined in Treasury Regulation Section 1.6011-4).
(f) The Company and each of its Subsidiaries have withheld and paid
all Taxes required to be withheld in connection with any amounts paid or owing to
any employee, creditor, independent contractor or other third party.
(g) As of the date hereof, no claim has been made by any Tax authority
in a jurisdiction where the Company or any of its Subsidiaries has not filed an
income Tax Return that it is or may be subject to income Tax by such jurisdiction.
Section 4.18. Environmental Matters.
(a) Except as would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company: (i) no notice, notification,
demand, request for information, citation, summons, complaint or order has been
received, no penalty has been assessed, and, to the knowledge of the Company, no
investigation, action, claim, suit, proceeding or review (or any basis therefor)
is pending or, to the knowledge of the Company, is threatened by any Governmental
Authority or other Person relating to the Company or any Subsidiary and relating
to or arising out of any Environmental Law; (ii) the Company and its Subsidiaries
are and have been in compliance with all Environmental Laws and, to the knowledge
of the Company, have received and are in compliance with all material Permits required
under Environmental Laws for the conduct of its business ( "Environmental Permits
"); (iii) to the knowledge of the Company, each such Environmental Permit is in
full force and effect, and all applications, notices or other documents in connection
with such Environmental Permits have been timely filed as required to effect timely
renewal, issuance or reissuance of such Environmental Permits; (iv) to the knowledge
of the Company, no Hazardous Materials have been Released into, onto or upon the
air, soil, surfacewater or groundwater at, on, to or from any property currently
or formerly owned or operated by either the Company or any Subsidiaries for which
the Company would have liability under Environmental Law (including claims for damage
or injury to persons, property or natural resources); (v) to the knowledge of the
Company, there is no currently existing fact, event, condition, circumstance, activity,
practice, incident, action or plan which would, in the ordinary course of business,
be expected to prevent either the Company or any Subsidiary's continued compliance
with Environmental Laws, result in a liability to either the Company or any Subsidiary
as a result of a violation of Environmental Laws or cause the Company or any of
its Subsidiaries to incur capital expenditures to maintain compliance with Environmental
Laws; (vi) the Company is not party to any order, judgment or decree that imposes
any obligations under any Environmental Law; and (vii) complete and accurate copies
of all material environmental site assessment reports, investigation, remediation
or compliance studies, audits, assessments or similar documents which are in the
possession of either the Company or any of its Subsidiaries and relate to the environmental
condition at any property currently or formerly owned or leased by either the Company
or any of its Subsidiaries have been made available to Parent.
(b) For purposes of this Agreement:
(i) "Environment " means any ambient workplace or indoor air, surface water,
drinking water, groundwater, land surface (whether below or above water), subsurface
strata, sediment, plant or animal life and natural resources.
(ii) "Environmental Law " means any Law or any binding agreement or memorandum
of understanding issued or entered by or with any Governmental Authority relating
to: (a) the Environment, including, pollution, contamination, cleanup, preservation,
protection and reclamation of the Environment, (b) any Release or threatened Release
of any Hazardous Materials, including investigation, assessment, testing, monitoring,
containment, removal, remediation and cleanup of any such Release or threatened
Release, (c) the management of any Hazardous Materials, including the use, labeling,
processing, disposal, storage, treatment, transport, or recycling of any Hazardous
Materials; (d) the presence of Hazardous Materials in any building, physical structure,
product or fixture; or (e) health and safety and such matters related to human exposure
to Hazardous Materials.
(iii) "Hazardous Materials " means any pollutant or contaminant (including
any constituent, raw material, product or by-product thereof), petroleum products
or by-products, asbestos or asbestos-containing material, polychlorinated biphenyls,
mold, fungi, toxic growth, urea formaldehyde, lead paint, any hazardous, industrial
or solid waste, and any toxic, radioactive, infectious or hazardous substance, material,
or agent or any other material, substance or waste that is regulated under Environmental
Laws as being toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous.
(iv) "Release " means the active or passive, intentional or unintentional,
spillage, emission, leaking, pumping, pouring, emptying, discharging, injecting,
escape, leaching, dumping or disposal of any Hazardous Material into the Environment.
Section 4.19. Intellectual Property. Except as would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company, the Company and its Subsidiaries own, or are validly licensed or
otherwise have the right to use, the patents, patent rights, trademarks, trademark
applications, trade names, service marks, service mark applications, logos, domain
name registrations, registered copyrights and applications therefor, and other proprietary
intellectual property rights arising under the laws of the United States to operate
the business of the Company or any Subsidiary of the Company as operated as of the
date of this Agreement (the "Company Intellectual Property "). Except as has
not had and would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on the Company, as of the date hereof, (a) no written
claim by a third party of invalidity or conflicting ownership rights with respect
to any Company Intellectual Property has been received by the Company and no such
Company Intellectual Property is the subject of any pending or, to the Companys
knowledge, threatened action, suit, claim, investigation, arbitration, interference,
opposition or other proceeding, and (b) no Person has given written notice to the
Company or any Subsidiary of the Company that the use of any Company Intellectual
Property by the Company, any Subsidiary of the Company or any licensee is infringing
or has infringed any domestic or foreign registered patent, trademark, service mark,
trade name, or copyright or design right, or that the Company, any Subsidiary of
the Company or any licensee has misappropriated or disclosed any trade secret, confidential
information or knowhow.
Section 4.20. Real Property; Vessels.
(a) Section 4.20(a) of the Company Disclosure Letter sets forth
a true, correct and complete list of all material real property owned by the Company
or any Subsidiary as of the date hereof (the "Owned Real Property ") and each
Vessel owned by the Company or any Subsidiary. With respect to each Owned Real Property
and each Vessel, (i) either the Company or a Subsidiary of the Company has good
and marketable title to such Owned Real Property or Vessel, free and clear of all
Liens other than Permitted Liens and (ii) there are no outstanding options or rights
of first refusal in favor of any other party to purchase such Owned Real Property
or Vessel or any portion thereof or interest therein, other than, in the case of
clauses (i) and (ii) above, any which have not had and would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the Company.
There are no physical conditions or defects at any of the Owned Real Properties
or Vessels at which gaming or hotel operations are conducted which have had or would
be reasonably expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company. As of the date hereof, neither the Company nor any of its
Subsidiaries has received notice of any pending, and to the knowledge of the Company
there is no threatened, condemnation proceeding with respect to any of the Owned
Real Properties or Vessels.
(b) Section 4.20(b) of the Company Disclosure Letter sets forth
a true, correct and complete list of all material leases, subleases and other agreements
under which the Company or any of its Subsidiaries uses or occupies or has the right
to use or occupy any material real property at which gaming or hotel operations
are conducted as of the date of this Agreement (the "Real Property Leases
"). Except as has not had and would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company, (i) each Real Property
Lease is valid, binding and in full force and effect and all rent and other sums
and charges payable by the Company or any of its Subsidiaries as tenants thereunder
are current and (ii) no termination event (other than expirations in the ordinary
course) or condition or uncured default of a material nature on the part of the
Company or, if applicable, its Subsidiary or, to the knowledge of the Company, the
landlord thereunder exists under any Real Property Lease. Except as has not had
and would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on the Company, the Company and each of its Subsidiaries
has a good and valid leasehold interest in each parcel of real property which is
subject to a Real Property Lease free and clear of all Liens, except for Permitted
Liens. As of the date hereof, neither the Company nor any of its Subsidiaries has
received notice of any pending, and to the knowledge of the Company there is no
threatened, condemnation with respect to any property leased pursuant to any of
the Real Property Leases.
Section 4.21. Material Contracts.
(a) The Company has made available to Parent (or Parent has otherwise
had access to) true, correct and complete copies of each contract, agreement, commitment,
arrangement, lease (including with respect to personal property) and other instruments
to which the Company or any of its Subsidiaries is a party or by which the Company,
any of its Subsidiaries or any of their respective properties or assets is bound
(other than Real Property Leases), as of the date hereof, that:
(i) would be required to be filed by the Company as a "material contract
" pursuant to Item 601(b)(10) of Regulation S-K promulgated under the Securities
Act or disclosed by the Company on a Current Report on Form 8-K;
(ii) contains covenants that materially limit the ability of the Company or any
of its Subsidiaries (or which, following the consummation of the Merger, could restrict
the ability of the Surviving Corporation or any of its Affiliates) to compete in
any material business or with any person or in any geographic area, except any such
contract, agreement, commitment, arrangement, lease (including with respect to personal
property) and other instruments that may be cancelled without any penalty or other
liability to the Company or any of its Subsidiaries upon notice of 60 days or less;
(iii) relates to the formation, creation, operation, management or control of
any partnership or joint venture with a third party that is material to the business
of the Company and the Subsidiaries, taken as a whole;
(iv) relates to (A) indebtedness for borrowed money or the deferred purchase
price of property and having an outstanding principal amount in excess of $5 million
or (B) the sale, securitization or servicing of loans or loan portfolios, in each
case in connection with which the aggregate actual or contingent obligations of
the Company and its Subsidiaries under such contract are greater than $50 million;
(v) involves the acquisition or disposition, directly or indirectly (by merger
or otherwise), not yet consummated, of assets or capital stock or other equity interests
of another person for aggregate consideration under such contract in excess of $50
million (other than acquisitions or dispositions of assets in the ordinary course
of business, including acquisitions and dispositions of inventory);
(vi) by its terms calls for aggregate payment or receipt by the Company and its
Subsidiaries under such contract of more than $25 million over the remaining term
of such contract other than ordinary course of business procurement for supplies
or services;
(vii) obligates the Company to make any capital commitment or expenditure (including
pursuant to any development project or joint venture) in excess of $25 million;
or
(viii) obligates the Company to manage any gaming assets on behalf of an unrelated
third party.
Each contract of the type described in clauses (i) through (viii)
above is referred to herein as a "Material Contract. "
(b) Except as has not had and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the Company,
(i) each Material Contract is valid and binding on the Company and any Subsidiary
of the Company that is a party thereto and, to the knowledge of the Company, each
other party thereto and is in full force and effect, and (ii) the Company and its
Subsidiaries have performed and complied with all obligations required to be performed
or complied with by them under each Material Contract. There is no default under
any Material Contract by the Company or any of its Subsidiaries or, to the knowledge
of the Company, by any other party, and no event has occurred that with the lapse
of time or the giving of notice or both would constitute a default thereunder by
the Company or any of its Subsidiaries, or to the knowledge of the Company, by any
other party, except in any such case which has not had and would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company.
Section 4.22. Insurance. Section 4.22 of the Company Disclosure
Letter sets forth a true and complete list of the material insurance policies covering
the Company and its Subsidiaries as of the date hereof, and as of the date of this
Agreement each such insurance policy is in full force and effect.
Section 4.23. Gaming Approvals. Except as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company, (i) there have been no adversarial proceedings to rescind or suspend
the Companys gaming licenses since January 1, 2006, and (ii) to the knowledge of
the Company, no Gaming Authority is investigating or has concluded that the Company
has breached any relevant Gaming Law.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the section of the disclosure letter delivered
to the Company by Parent and Merger Sub concurrently with the execution and delivery
of this Agreement (the "Parent Disclosure Letter ") that specifically relates
to such section, or, if disclosed in another section of the Parent Disclosure Letter,
is reasonably apparent from the substance of such disclosure to relate to such section,
of this Article V below, Parent and Merger Sub jointly and severally hereby represent
and warrant to the Company that:
Section 5.01. Entity Existence and Power. Parent is a corporation
validly existing and in good standing under the laws of Delaware. Merger Sub is
a corporation, is duly organized, validly existing and in good standing under the
laws of Pennsylvania. Parent has all corporate power and authority, and Merger Sub
has all corporate power and authority, required to execute and deliver this Agreement
and to consummate the Merger and the other transactions contemplated hereby and
to perform each of its obligations hereunder.
Section 5.2. Corporate Authorization. The execution, delivery and
performance by Parent and Merger Sub of this Agreement and the consummation by Parent
and Merger Sub of the Merger and the other transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of each of Parent and
Merger Sub. No other corporate or other proceedings other than those previously
taken or conducted on the part of Parent or Merger Sub are necessary to approve
this Agreement or to consummate the Merger and the other transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by Parent
and Merger Sub and, assuming the due and valid execution and delivery of the Agreement
by the Company, constitutes a legal, valid and binding agreement of Parent and Merger
Sub, respectively, enforceable against Parent and Merger Sub in accordance with
its terms.
Section 5.3. Governmental Authorization. The execution, delivery
and performance by Parent and Merger Sub of this Agreement and the consummation
by Parent and Merger Sub of the Merger and other transactions contemplated by this
Agreement do not require any consent, approval, authorization or Permit of, action
by, filing with or notification to any Governmental Authority, other than (i) the
filing of the Articles of Merger; (ii) compliance with the applicable requirements
of the HSR Act; (iii) filings with, and approvals by, Gaming Authorities specified
in Section 5.3(iii) of the Parent Disclosure Letter, (iv) compliance with the applicable
requirements of the Exchange Act; (v) compliance with the rules of the Ontario Lottery
and Gaming Corporation and with any applicable state securities or Blue Sky laws;
and (vi) any such consent, approval, authorization, Permit, action, filing or notification
the failure of which to make or obtain would not be reasonably likely to adversely
affect in any material respect, or prevent or materially delay, the consummation
of the Merger or Parents or Merger Subs ability to observe and perform its material
obligations hereunder.
Section 5.4. Non-Contravention. The execution, delivery and performance
by Parent and Merger Sub of this Agreement and the consummation by Parent and Merger
Sub of the Merger and the other transactions contemplated hereby do not and will
not (i) contravene or conflict with the organizational or governing documents of
Parent or Merger Sub or their respective Affiliates, (ii) assuming compliance with
the items specified in Section 5.3, contravene, conflict with or constitute a violation
of any provision of any Law binding upon or applicable to Parent or Merger Sub or
any of their respective properties or assets or their respective Affiliates, or
(iii) require the consent, approval or authorization of, or notice to or filing
with any third party with respect to, result in any breach or violation of or constitute
a default (or an event which with notice or lapse of time or both would become a
default), or give rise to any right of termination, cancellation, amendment or acceleration
of any right or obligation of Parent or Merger Sub or their respective Affiliates
or to a loss of any material benefit to which Parent or Merger Sub or their respective
Affiliates is entitled under any Contract.
Section 5.5. Disclosure Documents. None of the information supplied
or to be supplied by Parent or Merger Sub or any of their respective Affiliates
specifically for inclusion in the Company Proxy Statement will, at the date it is
first mailed to shareholders of the Company, at the time of any amendments thereof
or supplements thereof and at the time of the Company Shareholder Meeting, contain
any untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading.
Section 5.6. Finders Fees. No agent, broker, investment banker,
financial advisor or other firm or person except Deutsche Bank Securities Inc. and
Wachovia Capital Markets, LLC (or their designated Affiliates) is or will be entitled
to any brokers or finders feeor any other similar commission or fee payable by
Parent or Merger Sub in connection with any of the transactions contemplated by
this Agreement.
Section 5.7. Financing. Parent has delivered to the Company true
and complete copies of (i) the executed commitment letters, dated as of the date
hereof, among Parent, Deutsche Bank Securities Inc., Deutsche Bank AG New York Branch,
Wachovia Capital Markets, LLC, Wachovia Bank, National Association and Wachovia
Investment Holdings, LLC (collectively, the "Debt Financing Commitments "),
pursuant to which the lenders party thereto committed, subject to the terms thereof,
to lend the debt amounts set forth therein (the "DebtFinancing "), and (ii)
the executed equity commitment letters, dated as of the date hereof, from affiliates
of Fortress Investment Group LLC and Centerbridge Partners, L.P. (collectively,
(the "Equity Financing Commitments " and, together with the Debt Financing
Commitments, the "Financing Commitments "), pursuant to which such parties
have committed, subject to the terms thereof, to invest the cash amounts set forth
therein (the "Equity Financing " and, together with the Debt Financing, the
"Financing "). The Financing Commitments are in full force and effect, are legal,
valid and binding obligations of Parent and, to the knowledge of Parent, the other
parties thereto, and the Company is a third party beneficiary of the Equity Financing
Commitments. Under the Equity Financing Commitments, each of the parties thereto
has guaranteed to the Company the payment of certain obligations specified therein
(the "LimitedGuarantee Provisions "). The Limited Guarantee Provisions are
in full force and effect and are legal, valid and binding obligations of the parties
thereto and are enforceable in accordance with their terms by the parties thereto
and by the Company as a third party beneficiary thereof. None of the Financing Commitments
has been or will be amended or modified, except as consistent with Section 7.9(c),
and the respective commitments contained in the Financing Commitments have not been
withdrawn or rescinded in any respect as of the date hereof. As of the date of this
Agreement, no event has occurred or circumstance exists which, with or without notice,
lapse of time or both, would constitute a default or breach on the part of Parent
or Merger Sub under any Financing Commitment and subject to the satisfaction of
the conditions set forth in Sections 8.1 and 8.2 hereof, neither Parent nor Merger
Sub has any reason to believe that it will be unable to satisfy on a timely basis
any term or condition of closing to be satisfied by it in any of the Financing Commitments
on or prior to the Closing Date. The funds contemplated to be provided by the Financing
Commitments would be sufficient to enable Parent to make or cause to be made payments
of the Merger Consideration as provided herein (including for the Company Options
as provided herein), all other necessary payments by it, Merger Sub or the Surviving
Corporation in connection with the Merger (including the repurchase or repayment
of outstanding indebtedness of the Surviving Corporation) and all of the related
fees and expenses. There are no conditions precedent or other contingencies to the
funding of the Financing other than as set forth in the Financing Commitments. There
are no side letters or other agreements, contracts or arrangements related to the
funding or investing, as applicable, of the full amount of the Debt Financing other
than as expressly set forth in the Debt Financing Commitments and delivered to the
Company prior to the date hereof. As of the date hereof, Parent or Merger Sub has
fully paid, or caused to be fully paid, any and all commitment fees which are due
and payable with respect to the Debt Financing Commitments.
Section 5.8. Gaming Approvals and Licensing Matters. Upon the Effective
Time, the equity interests in Parent (or its parent entity) will be divided into
voting interests and non-voting interests (the "Dual Voting Structure ").
Section 5.8 of the Parent Disclosure Letter sets forth the list of individuals and
entities whom Parent is advised are reasonably likely to be the Licensed Persons,
and sets forth those Gaming Approvals which such individuals and entities have obtained
in the past. None of Parent, Merger Sub or any other entity under common control
with Parent or Merger Sub, or any of the individuals and entities listed in Section
5.8 of the Parent Disclosure Letter, or, to Parents knowledge, any other existing
or prospective beneficial owner of 5% or more of the economic or voting interests
in Parent, or any lender or underwriter under the Debt Financing Commitments, has
ever been denied a gaming license, approval, or related finding of suitability by
any Gaming Authority, or had any gaming license revoked or suspended. To Parents
knowledge, as of the date hereof, following consultation with the individuals and
entities listed in Section 5.8 of the Parent Disclosure Letter and Parents legal
and regulatory advisors, the representations set forth on Section 5.8 of the Parent
Disclosure Letter are true and correct in all material respects.
Section 5.9. Parent and Merger Sub. Each of Parent and Merger Sub
has been formed solely for the purpose of engaging in the transactions contemplated
hereby and prior to the Effective Time will have engaged in no other business activities
and will have incurred no liabilities or obligations other than as contemplated
herein or in connection with the transactions contemplated hereby, including in
connection with arranging the Financing. As of the date hereof, there were 100 shares
of common stock of Merger Sub issued and outstanding, representing the only shares
of capital stock of Merger Sub outstanding and entitled to vote on the Merger.
Section 5.10. Ownership of Shares. None of Parent, Merger Sub or
their respective Affiliates owns (directly or indirectly, beneficially or of record)
any Shares, and none of Parent, Merger Sub or their respective Affiliates has any
rights to acquire any Shares except pursuant to this Agreement.
Section 5.11. Interest in Competitors. As of the date of this Agreement,
neither Parent or Merger Sub owns any interest(s), nor do any of their respective
Affiliates, insofar as such interests would be attributed to Parent or Merger Sub
under the HSR Act or the Gaming Laws, in any entity or Person doing business in
the United States that derives a substantial portion of its revenues from a line
of business within the Companys principal line of business.
Section 5.12. No Other Representations and Warranties. Parent and
Merger Sub acknowledge that the Company makes no representations or warranties as
to any matter whatsoever except as expressly set forth in this Agreement or in any
certificate delivered by the Company to Parent or Merger Sub in accordance with
the terms hereof and specifically (but without limiting the generality of the foregoing)
that the Company makes no representations or warranties with respect to (i) any
projections, estimates or budgets delivered to or made available to Parent or Merger
Sub (or any of their respective Affiliates or Representatives) of future revenues,
results of operations (or any component thereof), cash flows or financial condition
(or any component thereof) of the Company and its Subsidiaries or (ii) the future
business and operations of the Company and its Subsidiaries.
Section 5.13. Solvency. Immediately following the Effective Time
and after giving effect to the Merger, the Surviving Corporation and each of its
Subsidiaries will not (i) be insolvent (either because its financial condition is
such that the sum of its debts, including contingent and unliquidated debts, is
greater than its assets, at a fair valuation, or because the present fair saleable
value of its assets is less than the amount required to pay its probable liability
on its existing debts, including contingent and unliquidated debts, as they become
absolute and matured); (ii) have unreasonably small capital with which to engage
in its business; or (iii) have intended to incur, or believed or reasonably should
have believed that it would incur, debts beyond its ability to pay them as they
become due.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1. Conduct of the Company and Subsidiaries. Except for
matters (x) set forth in Section 6.1 of the Company Disclosure Letter or as otherwise
contemplated by or specifically provided in this Agreement, or (y) consented to
in writing by Parent (which consent shall not be unreasonably withheld, conditioned
or delayed), from the date hereof until the Effective Time, the Company shall, and
shall cause its Subsidiaries to, conduct their respective businesses in the ordinary
course consistent with past practice, perform the maintenance capital expenditures
set forth in the 2007 Budget (as defined below) and Annex B of Section 6.1 of the
Company Disclosure Letter, as applicable, consistent with past practice and use
all commercially reasonable efforts to maintain and preserve intact its business
organization, including the services of its key employees on terms and conditions
substantially comparable to those currently in effect and the goodwill of any Governmental
Authorities, customers, lenders, distributors, suppliers and other Persons with
which it has material business relationships. Without limiting the generality of
the foregoing, and except as required by Law or except for matters set forth in
Section 6.1 of the Company Disclosure Letter or as otherwise contemplated by or
specifically provided in this Agreement, without the prior written consent of Parent
(which consent shall not be unreasonably withheld, conditioned or delayed), the
Company shall not, and shall not permit its Subsidiaries to:
(a) propose or adopt any change in the organizational or governing
documents of the Company;
(b) merge or consolidate the Company or any of its Subsidiaries
with any Person, other than the Merger and other than any mergers or consolidations
among the Company and its Subsidiaries or among the Companys Subsidiaries;
(c) sell or otherwise dispose of assets or securities of third parties
having a value in excess of $25 million in the aggregate, including by merger, consolidation,
asset sale or other business combination, except as required by existing Contracts;
(d) redeem, repurchase, defease, cancel or otherwise acquire any
indebtedness for borrowed money of the Company or any Subsidiary (other than at
stated maturity and any required amortization payments and mandatory prepayments,
in each case in accordance with the terms of the instrument governing such indebtedness
as in effect on the date hereof or as modified with the consent of Parent);
(e) incur, create, assume or otherwise become liable for any indebtedness
for borrowed money (including the issuance of any debt security); provided that,
notwithstanding the above, the Company may incur, repay, prepay, amend or modify
any indebtedness for borrowed money as set forth in Section 6.1(e) of the Company
Disclosure Letter;
(f) make any acquisitions of any other Person or business, or make
any loans, advances or capital contributions to, or investments in, any other Person,
with an aggregate value in excess of $100 million, except loans, advances or capital
contributions to, or investments in, any other Person made in connection with any
transaction solely between the Company and a wholly owned Subsidiary of the Company
or between wholly owned Subsidiaries of the Company;
(g) authorize any capital expenditures in excess of $25 million
in the aggregate, except for (i) expenditures contemplated by the 2007 Budget or
(ii) expenditures made in response to any emergency, whether caused by war, terrorism,
weather events, public health events or otherwise;
(h) pledge or otherwise encumber shares of capital stock or other
voting securities of the Company or any of its Subsidiaries;
(i) mortgage, pledge or otherwise encumber any of its assets, tangible
or intangible, having a value in excess of $15 million, or create or assume any
material Lien thereupon (other than Permitted Liens), in each case which are not
prepayable or able to be released without premium or penalty on or before the Closing
Date, except in connection with indebtedness (including facilities providing for
indebtedness) which is permitted by Section 6.1(e);
(j) enter into or amend any Contract with any executive officer
or director of the Company, other than (x) any Employment Agreements with persons
who are newly hired as executive officers in the ordinary course of business consistent
with past practice, provided, however, such agreements shall not contain a change
of control or similar provision that would be triggered by the consummation of the
transactions contemplated hereby, (y) any Employment Agreements entered into in
the ordinary course of business consistent with past practice with the individuals
listed on Section 6.1(j) of the Company Disclosure Letter in connection with the
expiration of such individuals existing Employment Agreement, or (z) any immaterial
amendments to such Contracts;
(k) (i) split, combine or reclassify any Company Securities or amend
the terms of any Company Securities, (ii) declare, set aside or pay any dividend
or other distribution (whether in cash, stock or property or any combination thereof)
in respect of Company Securities other than a dividend or distribution by a wholly
owned Subsidiary of the Company to its parent corporation, or (iii) issue or offer
to issue any Company Securities, or redeem, repurchase or otherwise acquire or offer
to redeem, repurchase, or otherwise acquire, any Company Securities, other than
in connection with (A) the exercise of Company Options, (B) the withholding of Company
Securities to satisfy Tax obligations with respect to Company Equity Awards, (C)
the acquisition by the Company of Company Securities in connection with the forfeiture
of Company Equity Awards, (D) the acquisition by the Company of Company Securities
in connection with the net exercise of Company Options in accordance with the terms
thereof, (E) the issuance of (x) Company Options to purchase up to an aggregate
of 1,400,000 Shares in the aggregate in connection with annual grants or grants
made to newly hired or promoted employees, in each case made in the ordinary course
of business or (y) up to 100,000 Company Restricted Shares under the terms of the
Companys Annual Incentive Plan and (F) any transaction solely between the Company
and a wholly owned Subsidiary of the Company or between wholly owned Subsidiaries
of the Company;
(l) except (i) as required pursuant to existing Contracts or any
Company Benefit Plan, Employment Agreement or collective bargaining agreement in
effect on the date hereof, (ii) as effected in the ordinary course of business or
(iii) as required by applicable Law (including Section 409A of the Code) or as deemed
advisable to prevent an inclusion of income or imposition of penalties under Section
409A of the Code or as deemed advisable to amend Plans in order to facilitate compliance
with such Section 409A, (A) adopt, amend or terminate any Company Benefit Plan or
enter into or amend any collective bargaining agreement (except for new collective
bargaining agreements entered into in connection with the expiration of existing
collective bargaining agreements or as a result of elections to recognize a bargaining
unit) or any Employment Agreement with any officer or director of the Company (other
than entry into Employment Agreements with persons who are not executive officers
or directors or who are newly hired as executive officer) or (B) take any action
to accelerate the vesting or payment, or fund or in any other way secure the payment,
of compensation or benefits under any Company Benefit Plan;
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