SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT - February 8, 1999
(Date of Earliest Event Reported)
JACKPOT ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Commission File No. 1-9728
Nevada 88-0169922
_______________________ ___________________________________
(State of Incorporation) (I.R.S. Employer Identification No.)
1110 Palms Airport Drive
Las Vegas, Nevada 89119
__________________________ __________
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (702) 263-5555
N/A
____________________________________________________________
(Former name or former address, if changed since last report)
Item 5. Other Events
____________
A. Acquisition of Players International, Inc.
__________________________________________
On February 8, 1999, the Company and JEI Merger Corp., a
wholly-owned subsidiary of the Company, entered into an Agreement
and Plan of Merger ("Players Merger Agreement") with Players
International, Inc. ("Players") which provides for the
acquisition of Players by the Company through the merger of JEI
Merger Corp. with and into Players (the "Players Merger"). As a
result of the Players Merger, Players will become a wholly-owned
subsidiary of the Company. Players is a multi-jurisdictional
casino and entertainment gaming company which owns and operates
riverboat casino facilities on the Ohio River in Metropolis,
Illinois, in Lake Charles, Louisiana and in Maryland Heights,
Missouri, a suburb of St. Louis. Reference is made to Players'
public filings for its historical, financial and operating
results. A copy of the Players Merger Agreement is attached
hereto as an exhibit and the content thereof is incorporated
herein by reference.
In connection with the Players Merger, stockholders of
Players will receive, for each share owned by them, the sum of
(i) $6.75 in cash and (ii) a fraction of a share of common stock
of the Company, to be determined by dividing $1.50 by the average
of the daily closing prices of the Company's common stock on the
New York Stock Exchange during a period of 30 trading days ending
on the third trading day preceding the date of closing of the
transaction, except that if this fraction exceeds 3/10 of one
share, the Company shall be required to increase the cash portion
so that the sum of (i) and (ii) equals $8.25. The Company
anticipates that the cash portion of the purchase price, which is
expected to be approximately $223 million, will be funded through
a combination of the Company's existing cash reserves, bank debt
and high yield debt financing.
Closing of the Players Merger is subject to a number of
conditions, including approval by the stockholders of both
companies, receipt of all necessary regulatory approvals,
including the approvals of the Illinois, Louisiana, Missouri and
Nevada gaming authorities, and the financing of the transaction.
The Company has received a "highly confident" letter from Merrill
Lynch Pierce Fenner & Smith, Inc. with respect to the raising of
the financing needed to satisfy the cash portion of the
transaction.
B. Acquisition of CRC Holdings, Inc.
_________________________________
On February 17, 1999, the Company entered into an Agreement
and Plan of Merger ("CRC Merger Agreement") with CRC Holdings,
Inc. ("CRC"), a privately owned company operating as Carnival
Resorts and Casinos. The CRC Merger Agreement provides for the
acquisition of CRC by the Company through a direct merger of CRC
into the Company ("CRC Merger"). CRC operates Casino Rama, a
casino located on an Indian reservation outside Toronto, Canada,
owns and operates (through a majority-owned subsidiary) a
riverboat casino in Baton Rouge, Louisiana and has rights with
respect to the development and operation of certain other
potential casino properties in the States of Washington and
Massachusetts. Immediately prior to the CRC Merger, CRC will
spin off to its shareholders its non-gaming related assets and
certain liabilities, which will not be part of the CRC businesses
to be acquired by the Company.
Based on unaudited financial information provided to the
Company by management of CRC, the revenues of the businesses to
be acquired by the Company through the CRC Merger were
approximately $85 million and the earnings before interest,
income taxes, depreciation, amortization, minority interests and
other non-cash items ("EBITDA") for those businesses was
approximately $22 million for its fiscal year ended November 30,
1998. EBITDA should not be construed as an alternative to
operating income or net income (as determined in accordance with
generally accepted accounting principles), as an indicator of CRC's
operating performance, as an alternative to cash flows
provided by operating activities (as determined in accordance
with generally accepted accounting principles), or as a measure
of liquidity. EBITDA is presented solely as a supplemental
disclosure because management believes that it enhances the
understanding of the financial performance of a company with
substantial amortization and depreciation expense. A copy of the
CRC Merger Agreement is attached hereto as an exhibit and the
content thereof is incorporated herein by reference.
Each of Players and CRC currently maintain corporate offices
separate from their respective operating locations. On an
annualized basis, the unaudited consolidated corporate operating
expenses, including nonrecurring costs of Players, CRC
and Jackpot would aggregate approximately $23 million. After the
completion of both the Players Merger and the CRC Merger, the
Company intends to restructure and consolidate all such corporate
operations in Jackpot's Las Vegas headquarters in order to
enhance the effectiveness and minimize the expense of maintaining
corporate management. Based upon its preliminary review of the
above mentioned corporate operating expenses, management expects
that such restructuring and consolidation, and the elimination of
certain nonrecurring costs should result in aggregate annualized
cost savings ranging from $8 million to $11 million.
In connection with the CRC Merger, all outstanding stock and
options in CRC will be exchanged for a total of approximately
3,500,000 shares of the Company's common stock and the issuance
of senior subordinated notes in the principal amount of
approximately $25.8 million, subject to reduction in such
consideration under certain conditions. Upon consummation of the
CRC Merger, Sherwood M. Weiser and Donald E. Lefton, co-founders
of CRC, will become members of the Board of Directors of the
Company, and Mr. Weiser will become co-Chairman of the Board of
Directors. The shares of Company common stock to be issued in
the CRC Merger will be registered under the Securities Act of
1933, as amended, although Messrs Weiser and Lefton, who will
receive a majority of the shares, have agreed not to resell their
shares publicly for at least one year (subject to certain
volume limitations in subsequent periods) and the other CRC
stockholders will be restricted from publicly reselling the
shares which they receive for a minimum of six months, also with
subsequent volume limitations.
Closing of the CRC Merger is subject to a number of
conditions, including approval by the Company's stockholders and
receipt of necessary regulatory approvals, including the
approvals of the Louisiana, Nevada, the province of Ontario,
Canada and Washington State gaming authorities and the U.S.
Indian Gaming Commission. Both the Players Merger and CRC Merger
are expected to close in the second half of 1999. Neither of the
mergers is conditioned upon consummation of the other.
Certain information included in this Form 8-K and other
materials filed or to be filed by the Company with the Securities
and Exchange Commission contains statements that may be
considered forward-looking. In addition, from time to time, the
Company may release or publish forward-looking statements
relating to such matters as anticipated financial performance,
business prospects, technological developments and similar
matters. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order
to comply with the terms of the safe harbor, the Company notes
that a variety of factors could cause the Company's actual
results and experience to differ materially from the anticipated
results or other expectations expressed in the Company's forward-
looking statements. The risks and uncertainties that may affect
the operations, performance, development and results of the
Company's business include, but are not limited to, competitive
pressures, the loss or nonrenewal of any of Jackpot's significant
contracts, conditioning or suspension of any gaming license,
unfavorable changes in gaming regulations, adverse results of
significant litigation matters, possible future financial
difficulties of a significant customer and the continued growth
of the gaming industry and population in Nevada. Readers are
cautioned not to place undue reliance on any forward-looking
statements, which speak only as of the date thereof. The Company
assumes no obligation to update or supplement forward-looking
statements as a result of new circumstances or subsequent events.
Item 7. Financial Statements, Pro Forma Financial Information
_____________________________________________________
and Exhibits.
_____________
(c) Exhibits.
1. Agreement and Plan of Merger dated as of February 8,
1999 among Jackpot Enterprises, Inc., JEI Merger Corp. and
Players International, Inc.
2. Agreement and Plan of Merger dated as of February 17,
1999 between Jackpot Enterprises, Inc. and CRC Holdings, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
JACKPOT ENTERPRISES, INC.
________________________________________
(Registrant)
By: /s/ Bob Torkar
________________________________________
BOB TORKAR
Senior Vice President - Finance,
Treasurer and Chief Accounting Officer
Dated: March 8, 1999
EXHIBIT INDEX
Exhibit No. Description
___________ ___________
1. Agreement and Plan of Merger dated as
of February 8, 1999 among Jackpot Enterprises,
Inc., JEI Merger Corp. and Players
International, Inc.
2. Agreement and Plan of Merger dated as
of February 17, 1999 between Jackpot
Enterprises, Inc. and CRC Holdings, Inc.
AGREEMENT AND PLAN OF MERGER
dated as of February 8, 1999
among
Jackpot Enterprises, Inc.
JEI Merger Corp.
and
Players International, Inc.
<PAGE>
TABLE OF CONTENTS
ARTICLE I.
THE MERGER
Section 1.1. The Merger
Section 1.2. Effective Time of the Merger
Section 1.3. Closing
Section 1.4. Effect of the Merger
Section 1.5. Articles of Incorporation and Bylaws of the Surviving
Corporation
Section 1.6. Directors and Officers of the Surviving Corporation
ARTICLE II.
EFFECT OF THE MERGER ON SECURITIES OF THE CONSTITUENT
CORPORATIONS
Section 2.1. Conversion of Securities
Section 2.2. Exchange of Certificates
Section 2.3. Acceleration and Payment for Players Options
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF Players
Section 3.1. Organization of Players and its Subsidiaries
Section 3.2. Capitalization
Section 3.3. Authority; No Conflict; Required Filings and Consents
Section 3.4. Public Filings; Financial Statements
Section 3.5. No Undisclosed Liabilities
Section 3.6. Absence of Certain Changes or Events
Section 3.7. Taxes
Section 3.8. Real Property, Title and Related Matters
Section 3.9. Title to Personal Property; Liens
Section 3.10. Intellectual Property
Section 3.11. Agreements, Contracts and Commitments
Section 3.12. Litigation
Section 3.13. Environmental Matters
Section 3.14. Employee Benefit Plans
Section 3.15. Compliance
Section 3.16. Labor Matters
Section 3.17. Insurance
Section 3.18. Information in Proxy Statement/Prospectus
Section 3.19. State Takeover Statute
Section 3.20. Voting Requirements
Section 3.21. Players Rights Agreement
Section 3.22. Year 2000
Section 3.23. Opinion of Financial Advisor
Section 3.24. Brokers
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
Section 4.1. Organization of Buyer and its Subsidiaries
Section 4.2. Capitalization
Section 4.3. Authority; No Conflict; Required Filings and Consents
Section 4.4. Public Filings; Financial Statements
Section 4.5. No Undisclosed Liabilities
Section 4.6. Absence of Certain Changes or Events
Section 4.7. Taxes
Section 4.8. Real Property, Title and Related Matters
Section 4.9. Title to Personal Property; Liens
Section 4.10. Intellectual Property
Section 4.11. Agreements, Contracts and Commitments
Section 4.12. Litigation
Section 4.13. Environmental Matters
Section 4.14. Employee Benefit Plans
Section 4.15. Compliance
Section 4.16. Registration Statement; Joint Proxy Statement/Prospectus
Section 4.17. Labor Matters
Section 4.18. Insurance
Section 4.19. [Intentionally Omitted]
Section 4.20. Voting Requirements
Section 4.21. Year 2000
Section 4.22. Opinion of Financial Advisor
Section 4.23. Brokers
Section 4.24. No Operations or Liabilities of Merger Sub
Section 4.25. Ownership of Securities
ARTICLE V.
COVENANTS
Section 5.1. Conduct of Business
Section 5.2. Cooperation; Notice; Cure
Section 5.3. No Solicitation
Section 5.4. Joint Proxy Statement/ Prospectus; Registration Statement
Section 5.5. Special Meeting
Section 5.6. Access to Information
Section 5.7. Governmental Approvals
Section 5.8. Publicity
Section 5.9. Indemnification
Section 5.10. Stockholder Litigation
Section 5.11. Employee Benefits
Section 5.12. Further Assurances and Actions
Section 5.13. Rights Plan
Section 5.14. Buyer's Board of Directors
ARTICLE VI.
CONDITIONS TO MERGER
Section 6.1. Conditions to Each Party's Obligation to Effect the Merger
Section 6.2. Additional Conditions to Obligations of Players
Section 6.3. Additional Conditions to Obligations of Buyer
ARTICLE VII.
TERMINATION AND AMENDMENT
Section 7.1. Termination
Section 7.2. Effect of Termination
Section 7.3. Fees and Expenses
Section 7.4. Amendment
Section 7.5. Extension; Waiver
ARTICLE VIII.
MISCELLANEOUS
Section 8.1. Nonsurvival of Representations, Warranties and Agreements
Section 8.2. Notices
Section 8.3. Interpretation
Section 8.4. Counterparts
Section 8.5. Entire Agreement; No Third Party Beneficiaries
Section 8.6. Governing Law
Section 8.7. Assignment
Section 8.8. Severability; Enforcement
Section 8.9. Specific Performance
<PAGE>
TABLE OF DEFINED TERMS
Cross Reference
Terms in Agreement
Accountant Section 5.11(d)
Accountant's Report Section 5.11(d)
Acquisition Proposal Section 5.3
Agreement Preamble
Articles of Merger Section 1.2
Average Buyer Common Stock Price Section 2.1(a)
Buyer Preamble
Buyer Balance Sheet Section 4.4(b)
Buyer Common Stock Section 2.1(a)
Buyer Disclosure Schedule Article IV
Buyer Employee Plans Section 4.14(a)
Buyer Gaming Laws Section 4.15(b)
Buyer Material Adverse Effect Section 4.1
Buyer Material Contracts Section 4.11(a)
Buyer Options Section 4.2(a)
Buyer Permits Section 4.15(a)
Buyer Preferred Stock Section 4.2(a)
Buyer Reporting Subsidiaries Section 4.4(a)
Buyer SEC Reports Section 4.4(a)
Buyer Special Meeting Section 5.5
Buyers Stock Option Plans Section 4.2(a)
Buyer Stockholder Approval Section 4.20
Buyer Welfare Plan Section 4.14(g)
Cash Consideration Section 2.1(a)
Certificate Section 2.1(f)
Closing Section 1.3
Closing Date Section 1.3
Code Section 2.2(f)
Confidentiality Agreement Section 5.6
CRC Section 5.1(b)
CRC Transaction Section 5.1(b)
DLJ Section 3.23
Encumbrances Section 3.8(b)
Effective Time Section 1.2
Employment Agreements Section 5.11(d)
Environmental Law Section 3.13(b)
ERISA Section 3.14(a)
ERISA Affiliate Section 3.14(a)
Exchange Act Section 3.3(c)
Exchange Agent Section 2.2(a)
Exchange Fund Section 2.2(a)
Exchange Ratio Section 2.1(a)
Executives Section 5.11(d)
GAAP Section 3.4(b)
Governmental Approvals Section 5.7(a)
Governmental Entity Section 3.3(c)
Hazardous Substance Section 3.13(c)
HSR Act Section 3.3(c)
Indebtedness Section 3.11(a)
Indemnified Parties Section 5.9(a)
IRS Section 3.7(b)
Joint Proxy Statement/Prospectus Section 5.4(a)
Leased Real Property Section 3.8(b)
Liens Section 3.1
Merger Preamble
Merger Consideration Section 2.1(a)
Merger Sub Preamble
Merger Sub Common Stock Section 4.2(c)
Merrill Lynch Section 4.22
Multiemployer Plan Section 3.14(e)
Notifying Party Section 5.7(a)
NRS Section 1.1
NYSE Section 2.1(a)
Offer Documents Section 5.12(c)
Offer to Purchase Section 5.12(c)
Outside Date Section 7.1(b)
Owned Real Property Section 3.8(b)
PBGC Section 3.14(f)
Permitted Encumbrances Section 3.8(b)
Per Share Amount Section 2.1(a)
Perskie Option Section 2.3
Players Preamble
Players Balance Sheet Section 3.4(b)
Players Common Stock Section 2.1(a)
Players Disclosure Schedule Article III
Players Employee Plans Section 3.14(a)
Players Gaming Laws Section 3.15(b)
Players, Inc. Section 1.5
Players Material Adverse Effect Section 3.1
Players Material Contracts Section 3.11(a)
Players Option Section 2.3
Players Permits Section 3.15(a)
Players Preferred Stock Section 3.2(a)
Players Rights Plan Section 3.2(b)
Players SAR Section 2.3
Players SEC Reports Section 3.4(a)
Players Special Meeting Section 5.5
Players Stockholder Approval Section 3.20
Players Stock Option Plans Section 2.3
Players Welfare Plan Section 3.14(g)
Reduced Amount Section 5.11(d)
Registration Statement Section 5.4(a)
Rights Agreement Section 3.21
SEC Section 3.3(c)
Securities Act Section 3.4(a)
Senior Notes Section 5.12(c)
Software Section 3.22
Stock Consideration Section 2.1(a)
Stockholder Support Agreements Preamble
Stock Option Plan for Non-Employee Directors Section 2.3
Subsidiary Section 3.1
Superior Proposal Section 5.3
Surviving Corporation Section 1.1
Taxes Section 3.7(a)
Tender Offer Section 5.12(c)
Tender Offer and Consent Solicitation Section 5.12(c)
Terminating Buyer Breach Section 7.1(h)
Terminating Players Breach Section 7.1(g)
Third Party Section 5.3
Voting Debt Section 3.2(b)
Warrant Agreement Section 2.3
1985 Plan Section 2.3
1990 Plan Section 2.3
1993 Plan Section 2.3
1994 Plan Section 2.3<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of February 8,
1999, by and among JACKPOT ENTERPRISES, INC., a Nevada corporation ("Buyer"),
JEI MERGER CORP., a Nevada corporation and a wholly-owned subsidiary of Buyer
("Merger Sub"), and PLAYERS INTERNATIONAL, INC., a Nevada corporation
("Players").
WHEREAS, the Board of Directors of Players has determined that the merger
of Merger Sub with and into Players, upon the terms and subject to the
conditions set forth in this Agreement (the "Merger"), is fair to, and in the
best interests of, Players and its stockholders;
WHEREAS, the Boards of Directors of Buyer and Merger Sub have determined
that the Merger is in the best interests of Buyer and Merger Sub and their
respective stockholders;
WHEREAS, the Boards of Directors of Buyer, Merger Sub and Players have each
approved and adopted this Agreement and approved the Merger and the other
transactions contemplated hereby; and
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to each of Players', Buyer's and Merger Sub's
willingness to enter into this Agreement, certain stockholders of Players and of
Buyer have entered into Stockholder Support Agreements with Buyer and Players,
respectively, dated as of the date of this Agreement in the forms attached
hereto as Exhibit A (the "Stockholder Support Agreements"), pursuant to which
such stockholders have agreed, among other things, to vote all voting securities
of Players or Buyer, as the case may be, beneficially owned by them in favor of
approval of the transactions contemplated by this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE 1.
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to the provisions of
this Agreement and in accordance with Chapter 92A of the Nevada Revised Statutes
(the "NRS"), at the Effective Time (as defined in Section 1.2), Merger Sub shall
be merged with and into Players. As a result of the Merger, the separate
corporate existence of Merger Sub shall cease and Players shall continue as the
surviving corporation (the "Surviving Corporation").
Section 1.2. Effective Time of the Merger. Subject to the provisions of
this Agreement (including Section 7.1 hereof), articles of merger with respect
to the Merger in such form as is required by NRS Section 92A.200 (the "Articles
of Merger") shall be duly prepared, executed and acknowledged and thereafter
delivered to the Secretary of State of the State of Nevada for filing, as
provided in the NRS, as early as practicable on the Closing Date (as defined in
Section 1.3). The Merger shall become effective at the later of the date of
filing of the Articles of Merger or at such time within 90 days of the date of
filing as is specified in the Articles of Merger (the "Effective Time").
Section 1.3. Closing. The closing of the Merger (the "Closing") will take
place at such time and place to be agreed upon by the parties hereto, on a date
to be specified by Buyer and Players, which shall be no later than the third
business day after satisfaction or, if permissible, waiver of the conditions set
forth in Article VI (the "Closing Date"), unless another date is agreed to by
Buyer and Players.
Section 1.4. Effect of the Merger. Upon becoming effective, the Merger
shall have the effects set forth in the NRS. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all properties,
rights, privileges, powers and franchises of Merger Sub and Players shall vest
in the Surviving Corporation, and all debts, liabilities and duties of Merger
Sub and Players shall become the debts, liabilities and duties of the Surviving
Corporation.
Section 1.5. Articles of Incorporation and Bylaws of the Surviving
Corporation. At the Effective Time, the Articles of Incorporation and Bylaws of
the Surviving Corporation shall be amended to be identical to the Articles of
Incorporation and Bylaws, respectively, of Merger Sub as in effect immediately
prior to the Effective Time (except that the name of the Surviving Corporation
shall be "Players International, Inc."), in each case until duly amended in
accordance with applicable law.
Section 1.6. Directors and Officers of the Surviving Corporation. The
directors of Merger Sub immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each to hold office in
accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation. The officers of Merger Sub immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation.
ARTICLE II.
EFFECT OF THE MERGER ON SECURITIES OF THE CONSTITUENT
CORPORATIONS
Section 2.1. Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of any of the parties hereto or
the holders of any of the following:
(a) Players Common Stock. Each share of common stock, par value $0.005
per share, of Players ("Players Common Stock") issued and outstanding
immediately prior to the Effective Time (other than shares to be canceled in
accordance with Section 2.1(b)), together with all rights in respect thereto,
shall be converted, subject to Section 2.1(e) and 2.1(f), into the right to
receive from the Surviving Corporation (i) a net amount of $6.75 in cash,
without interest and subject to adjustment in accordance with the next sentence
(the "Cash Consideration") and (ii) a fraction (the "Exchange Ratio") of a share
of common stock, par value $.01 per share of Buyer ("Buyer Common Stock") equal
to the quotient (calculated to the nearest 0.0001) of $1.50 divided by the
Average Buyer Common Stock Price (as defined herein); provided that the Exchange
Ratio shall not exceed 0.30 (the "Stock Consideration" and together with the
Cash Consideration, the "Merger Consideration"). If but for the proviso in the
preceding sentence the Exchange Ratio would have exceeded 0.30, Buyer may
increase the Cash Consideration amount specified in clause (i) above by the
amount necessary so that at the Effective Time the sum of (a) the Cash
Consideration (as so increased) and (b) the Average Buyer Common Stock Price
multiplied by the Exchange Ratio is equal to $8.25. If Buyer fails to increase
the Merger Consideration to the amount set forth in the preceding sentence,
Players may terminate this Agreement.
For purposes of this Agreement, "Average Buyer Common Stock Price" shall
mean the average regular way closing price per share of Buyer Common Stock on
the New York Stock Exchange (the "NYSE") as reported on the NYSE Composite Tape
during the thirty (30) consecutive NYSE trading days immediately preceding the
second NYSE trading day prior to the Closing Date.
All shares of Buyer Common Stock issued as Merger Consideration shall be
validly issued, fully-paid and non-assessable. As of the Effective Time, all
shares of Players Common Stock upon which the Merger Consideration is payable
pursuant to this Section 2.1(a) shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares shall cease to have any ownership
or other rights with respect thereto, except the right to receive the Merger
Consideration in exchange for such shares upon the surrender of such certificate
in accordance with Section 2.2.
(b) Cancellation of Treasury Stock and Buyer-Owned Stock. All shares of
Players Common Stock that are owned by Players as treasury stock and any shares
of Players Common Stock owned by Buyer or any wholly-owned Subsidiary (as
defined in Section 3.1) of Buyer shall be canceled and retired and shall cease
to exist and no consideration shall be delivered in exchange therefor.
(c) Capital Stock of Merger Sub. Each issued and outstanding share of the
common stock, par value $.01 per share, of Merger Sub shall be converted into
and become one fully paid and nonassessable share of common stock, par value
$.01 per share, of the Surviving Corporation.
(d) Players Debt Securities. Except as otherwise repaid, redeemed or
purchased in connection with the transactions contemplated hereby, all notes and
other debt instruments of Players that are outstanding at the Effective Time
shall continue to be outstanding subsequent to the Effective Time as debt
instruments of the Surviving Corporation, subject to their respective terms and
provisions.
(e) Adjustments to Merger Consideration. The Merger Consideration shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Players Common Stock, as applicable), reorganization, recapitalization or any
other like change with respect to Players Common Stock or Buyer Common Stock
occurring after the date hereof and prior to the Effective Time.
(f) Fractional Shares. No certificates or scrip representing fractional
shares of Buyer Common Stock shall be issued in connection with the Merger, and
fractional share interests will not entitle the owner thereof to vote or to any
other rights as a stockholder of Buyer. In lieu of any such fractional shares,
each holder of a certificate evidencing Players Common Stock (a "Certificate")
upon surrender of such Certificate for exchange shall be paid an amount in cash
(without interest), rounded up to the nearest cent, determined by multiplying
(i) the Average Buyer Common Stock Price, by (ii) the fractional interest to
which such holder would otherwise be entitled (after taking into account all
shares of Players Common Stock then held of record by such holder).
Section 2.2. Exchange of Certificates.
(a) Exchange Agent. At or prior to the Effective Time, Buyer shall
deposit with a bank or trust company designated by Buyer (the "Exchange Agent"),
for the benefit of the holders of shares of Players Common Stock outstanding
immediately prior to the Effective Time, for exchange in accordance with this
Section 2.2, through the Exchange Agent, (i) certificates evidencing the shares
of Buyer Common Stock sufficient to pay the Stock Consideration and (ii) cash in
an aggregate amount sufficient to pay the Cash Consideration and for fractional
shares pursuant to Section 2.1(f) (the shares and cash so deposited being
hereinafter referred to collectively as the "Exchange Fund"). Any interest,
dividends or other income earned on the investment of cash or other property
held in the Exchange Fund shall be for the account of and payable to Buyer.
(b) Exchange Procedures. Promptly after the Effective Time, Buyer will
instruct the Exchange Agent to mail to each holder of record of Players Common
Stock (i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to a Certificate shall pass, only upon
proper delivery of the Certificate to the Exchange Agent and shall be in such
form and have such other provisions as Buyer may reasonably specify), and (ii)
instructions to effect the surrender of the Certificate in exchange for the
Merger Consideration. Upon surrender of a Certificate for cancellation to the
Exchange Agent together with such letter of transmittal, duly executed, and such
other customary documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor
cash in an amount equal to the Merger Consideration multiplied by the number of
shares represented by such Certificate, and the Certificate so registered shall
forthwith be canceled. In the event of a transfer of ownership of shares of
Players Common Stock which is not registered in the transfer records of Players
as of the Effective Time, the Merger Consideration may be issued and paid in
accordance with this Article II to a transferee if the Certificate evidencing
such shares of Players Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer
pursuant to this Section 2.2(b) and by evidence that any applicable stock
transfer taxes have been paid. Until so surrendered, each outstanding
Certificate that prior to the Effective Time represented shares of Players
Common Stock will be deemed from and after the Effective Time for all corporate
purposes (other than the payment of dividends and subject to Section 2.1(e)), to
evidence the right to receive the Merger Consideration without interest. No
interest will be paid or will accrue on the cash payable upon the surrender of
any Certificate.
(c) Transfers of Ownership. At the Effective Time, the stock transfer
books of Players shall be closed, and there shall be no further registration of
transfers of Players Common Stock thereafter on the records of Players.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the former stockholders of Players as of the date which
is twelve months after the Effective Time shall be delivered to Buyer, upon
demand, and thereafter such former stockholders of Players who have not
theretofore complied with this Section 2.2 shall be entitled to look only to
Buyer for payment of the Merger Consideration to which they are entitled
pursuant hereto.
(e) No Liability. None of Buyer, Merger Sub, Players or the Exchange
Agent shall be liable to any holder of Players Common Stock for any Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered immediately prior to the date on which the Merger Consideration
or any dividends or distributions with respect to Players Common Stock in
respect of such Certificate would otherwise escheat to or become the property of
any Governmental Entity, any such Merger Consideration, dividends or
distributions in respect of such Certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto on such date
prior to the time such escheat laws become applicable.
(f) Withholding Rights. Buyer or the Exchange Agent shall be entitled to
deduct and withhold from the Merger Consideration otherwise payable pursuant to
this Agreement to any holder of Certificates which prior to the Effective Time
represented shares of Players Common Stock such amounts as Buyer or the Exchange
Agent is required to deduct and withhold with respect to the making of such
payment under the Internal Revenue Code of 1986, as amended (the "Code"), or any
provision of state, local, or foreign tax law. To the extent that amounts are
so withheld by Buyer or the Exchange Agent and remitted to the proper authority,
such withheld amounts thereafter shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Players Common
Stock in respect of which such deduction and withholding was made by Buyer or
the Exchange Agent.
(g) Lost, Stolen or Destroyed Certificates. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall pay in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof such Merger Consideration as may be
required pursuant to Section 2.2; provided, however, that Buyer may, in its
discretion, and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against Buyer, the Surviving Corporation or the Exchange Agent with respect to
the Certificates alleged to have been lost, stolen or destroyed.
(h) Distributions with Respect to Unsurrendered Certificates. No
dividends or other distributions declared or made after the Effective Time with
respect to Buyer Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Certificate with respect to the
shares of Buyer Common Stock the holder thereof is entitled to receive upon
surrender thereof, and no cash payment in lieu of any fractional shares shall be
paid to any such holder pursuant to Section 2.1(f), until the holder of such
Certificate shall surrender such Certificate. Subject to the effect of escheat,
tax or other applicable laws, following surrender of any such Certificate, there
shall be paid to the holder of Certificates representing whole shares of Buyer
Common Stock issued in exchange therefor, without interest, (i) promptly, the
amount of any cash payable with respect to a fractional share of Buyer Common
Stock to which such holder is entitled pursuant to Section 2.1(f) and the amount
of dividends or other distributions with a record date after the Effective Time
and theretofore paid with respect to such whole shares of Buyer Common Stock,
and (ii) at the appropriate payment date, the amount of dividends or other
distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect to
such whole shares of Buyer Common Stock. After the Effective Time, each
outstanding Certificate which theretofore represented shares of Players Common
Stock shall, until surrendered for exchange in accordance with this Section 2.2,
be deemed for all purposes to evidence ownership of the number of shares of
Buyer Common Stock and cash into which the shares of Players Common Stock
(which, prior to the Effective Time, were represented thereby) shall have been
so converted.
Section 2.3. Acceleration and Payment for Players Options. Following the
execution of this Agreement, the Board of Directors of Players (or, if
appropriate, any committee administering the Players Stock Option Plans (as
defined below)) shall adopt such resolutions or use its best efforts to take
such other actions as are required to provide that each then outstanding stock
option to purchase shares of Players Common Stock (a "Players Option")
heretofore granted under any stock option or other stock-based incentive plan,
program or arrangement of Players including (i) the 1985 Incentive Stock Option
Plan ("1985 Plan"), (ii) the 1990 Incentive Stock Option and Non-Qualified
Option Plan ("1990 Plan"), (iii) the Amended and Restated 1993 Stock Incentive
Plan ("1993 Plan"), (iv) the 1994 Directors Stock Incentive Plan ("1994 Plan"),
(v) the Stock Option Plan for Non-Employee Directors (which consists of
individual option grants in 1993 to outside directors) ("Stock Option Plan for
Non-Employee Directors"), (vi) the option granted to Steven P. Perskie pursuant
to the Retirement Agreement and General Release, dated September 30, 1996
("Perskie Option") (with the plans referred to in clauses (i)-(vi) above
collectively referred to as the "Players Stock Option Plans") and (vii) the
Warrant Agreement dated as of June 16, 1994 between Players and Gem Gaming, Inc.
(the "Warrant Agreement") shall be accelerated and canceled immediately prior to
the Effective Time in exchange for payment of an amount of cash equal to the
product of (x) the number of shares of Players Common Stock subject to such
Stock Option immediately prior to the consummation of the Merger and (y) the
excess, if any, of the Merger Consideration over the per share exercise price of
such Stock Option; provided, however, that such excess shall not be less than
zero. Notwithstanding anything in this Section 2.3 to the contrary, any Players
Option or stock appreciation right ("Players SAR") granted under any stock
option or other stock-based incentive plan, program or arrangement of Players,
including, without limitation, the Players Stock Option Plans and Warrant
Agreement, having a per share exercise price that is greater than the Merger
Consideration, whether or not vested and exercisable, shall be accelerated and,
if not exercised before the Effective Time, shall be canceled as of the
Effective Time and shall have no further force or effect as of the Effective
Time, without regard to the fact that the holder of such Players Option or
Players SAR shall have received no payment for the Players Option or Players
SAR.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF Players
Players represents and warrants to Buyer and Merger Sub that the statements
contained in this Article III are true and correct except as set forth herein
and in the disclosure schedule delivered by Players to Buyer and Merger Sub on
or before the date of this Agreement (the "Players Disclosure Schedule"), or as
otherwise expressly contemplated by this Agreement. Any reference in the Merger
Agreement to Players' "best knowledge," or "the best of Players' knowledge," or
words of similar import, shall be deemed a reference to the actual knowledge of
any of the corporate officers of Players or any of its Subsidiaries, for all
purposes. The Players Disclosure Schedule has been prepared based upon the
foregoing definition.
Section 3.1. Organization of Players and its Subsidiaries. Each of
Players and its Subsidiaries (as defined below) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and has all requisite corporate, partnership or limited liability
company power and authority to carry on its business as now being conducted and
as proposed to be conducted. Each of Players and its Subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification or licensing necessary,
except where the failure to be so qualified, licensed or in good standing would
not have a material adverse effect on the business, properties, condition
(financial or otherwise) or results of operations of Players and its
Subsidiaries, taken as a whole (a "Players Material Adverse Effect"). Players
has delivered to Buyer a true and correct copy of the Articles of Incorporation
and Bylaws of Players, in each case as amended to the date of this Agreement.
Assuming regulatory compliance by Buyer, the respective organizational documents
of Players' Subsidiaries do not contain any provision that would limit or
otherwise restrict the ability of Buyer, following the Effective Time, from
owning or operating such Subsidiaries on the same basis as Players. Except as
set forth on the Players Disclosure Schedule, all the outstanding shares of
capital stock of, or other equity interests in, each such Subsidiary have been
validly issued and are fully paid and nonassessable and are owned directly or
indirectly by Players, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens") and free of any other restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests). Except as set forth in Exhibit 21(18) to
the Players Annual Report on Form 10-K for the year ended March 31, 1998,
neither Players nor any of its Subsidiaries directly or indirectly owns (other
than ownership interests in Players or in one or more of its Subsidiaries) any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for, any corporation, partnership, joint venture or other
business association or entity. As used in this Agreement, the word
"Subsidiary" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party or
any other Subsidiary of such party is a general partner or (ii) at least a
majority of the securities or other interests having by their terms ordinary
voting power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party or by any one or more
of its Subsidiaries, or by such party and one or more of its Subsidiaries.
Section 3.2. Capitalization.
The authorized capital stock of Players consists of 90,000,000 shares of
Players Common Stock, $0.005 par value per share, and 10,000,000 shares of
preferred stock, with no par value per share ("Players Preferred Stock"). As of
the date hereof, (i) 32,024,737 shares of Players Common Stock were issued and
outstanding, all of which are validly issued, fully paid and nonassessable, (ii)
672,100 shares of Players Common Stock were held in the treasury of Players or
by Subsidiaries of Players, and (iii) no shares of Players Preferred Stock are
issued and outstanding. Section 3.2(a)(i) of the Players Disclosure Schedule
sets forth the number of shares of Players Common Stock reserved for future
issuance upon exercise of Players Options granted and outstanding as of the date
hereof and under the Players Stock Option Plans. Section 3.2(a)(i) of the
Players Disclosure Schedule also sets forth as of the date hereof, for each
Players Stock Option Plan, the dates on which Options and Players SARs which are
still outstanding under such plan were granted, the number of outstanding
Options and Players SARs granted on each such date and the exercise price
thereof. Except as disclosed in Section 3.2(a)(i) of the Players Disclosure
Schedule, since September 30, 1998 through the date of this Agreement, Players
has not made any grants under any of the Players Stock Option Plans. Except as
disclosed in Section 3.2(a)(i) of the Players Disclosure Schedule with respect
to Players SARs, as of the date of this Agreement, Players has not granted any
contractual rights the value of which is derived from the financial performance
of Players or from the value of shares of Players Common Stock. Except as
disclosed in Section 3.2(a)(ii) of the Players Disclosure Schedule, there are no
obligations contingent or otherwise, of Players or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of Players Common Stock or
the capital stock or ownership interests of any Subsidiary or to provide funds
to or make any material investment (in the form of a loan, capital contribution
or otherwise) in any such Subsidiary or any other entity other than guarantees
of bank obligations or indebtedness for borrowed money of Subsidiaries entered
into in the ordinary course of business. All of the outstanding shares of
capital stock (including shares which may be issued upon exercise of outstanding
options) or other ownership interests of each of Players' Subsidiaries are duly
authorized, validly issued, fully paid and nonassessable and, except as
disclosed in Section 3.2(a)(iii) of the Players Disclosure Schedule and except
as required by gaming industry regulation, all such shares and ownership
interests are owned by Players or another Subsidiary of Players free and clear
of all security interests, liens, claims, pledges, agreements, limitations on
Players' voting rights, charges or other encumbrances or restrictions on
transfer of any nature.
(b) There are no bonds, debentures, notes or other indebtedness having
voting rights (or convertible into securities having such rights)
("Voting Debt") of Players or any of its Subsidiaries issued and outstanding.
Except as set forth in Section 3.2(a) or in this Section 3.2(b) or as reserved
for future grants of options under the Players Stock Option Plans and except
for the common stock purchase rights issued and issuable under the
Stockholders' Rights Plan dated as of January 27, 1997 (the "Players Rights
Plan"), as of the date hereof, (i) there are no shares of capital stock of
any class of Players, or any security exchangeable into or exercisable for
such equity securities, issued, reserved for issuance or outstanding; (ii)
except as set forth in Section 3.2(b) of the Players Disclosure Schedule
there are no options, warrants, equity securities, calls, rights, commitments
or agreements of any character to which Players or any of its Subsidiaries
is a party or by which it is bound obligating Players or
any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other ownership
interests (including Voting Debt) of Players or any of its Subsidiaries or
obligating Players or any of its Subsidiaries to grant, extend, accelerate the
vesting of or enter into any such option, warrant, equity security, call, right,
commitment or agreement; and (iii) there are no voting trusts, proxies or other
voting agreements or understandings with respect to the shares of capital stock
of Players. All shares of Players Common Stock subject to issuance as specified
in this Section 3.2(b) are duly authorized and, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall be validly issued, fully paid and nonassessable.
Section 3.3. Authority; No Conflict; Required Filings and Consents.
(a) Players has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby by Players have been duly authorized by all
necessary corporate action on the part of Players, subject only to the approval
and adoption of this Agreement and the Merger by a majority of Players'
stockholders. This Agreement has been duly executed and delivered by Players
and constitutes the valid and binding obligation of Players, enforceable against
Players in accordance with its terms.
(b) Other than as disclosed in Section 3.3(b) of the Players Disclosure
Schedule, the execution and delivery of this Agreement by Players does not, and
the consummation of the transactions contemplated hereby will not, (i) conflict
with, or result in any violation or breach of, any provision of the Articles of
Incorporation or Bylaws of Players or the comparable charter or organizational
documents of any of its Subsidiaries, (ii) result in any violation or breach of,
or constitute (with or without notice or lapse of time, or both) a default (or
give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any material benefit) under, or require a consent or
waiver under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which Players or any of its Subsidiaries is a party or by which
any of them or any of their properties or assets may be bound, or (iii) subject
to the governmental filings and other matters referred to in Section 3.3(c),
conflict with or violate any permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Players
or any of its Subsidiaries or any of its or their properties or assets, except
in the case of clauses (ii) and (iii) for any such conflicts, violations,
defaults, terminations, cancellations or accelerations which (x) are not,
individually or in the aggregate, reasonably likely to have a Players Material
Adverse Effect or (y) would not prevent or materially delay the consummation of
the Merger.
(c) Except as disclosed in Section 3.3(c) of the Players Disclosure
Schedule, no consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency, commission, gaming
authority or other governmental authority or instrumentality ("Governmental
Entity") is required by or with respect to Players or any of its Subsidiaries in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for (i) the filing of the
pre-merger notification report under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR Act"), (ii) the filing of the
Articles of Merger with respect to the Merger with the Secretary of State of the
State of Nevada, (iii) the filing of any Joint Proxy Statement/Prospectus (as
such term is defined in Section 5.4(a) below) with the Securities and Exchange
Commission (the "SEC") in accordance with the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), (iv) any approvals and filing of notices
required under any applicable gaming industry regulation, (v) such consents,
approvals, orders, authorizations, permits, filings or registrations related to,
or arising out of, compliance with statutes, rules or regulations regulating the
consumption, sale or serving of alcoholic beverages, (vi) such immaterial
filings and consents as may be required under any environmental, health or
safety law or regulation pertaining to any notification, disclosure or required
approval triggered by the Merger, and (vii) such other filings, consents,
approvals, orders, registrations and declarations as may be required under the
laws of any jurisdiction in which Players or any of its Subsidiaries conducts
any business or owns any assets the failure of which to obtain would not have a
Players Material Adverse Effect.
Section 3.4. Public Filings; Financial Statements.
(a) None of Players' Subsidiaries is required to file forms, reports and
documents with the SEC. Players has filed with the SEC all reports, schedules,
forms, statements and other documents required to be filed by the Securities Act
and the Exchange Act since March 31, 1998. Except as set forth in Section
3.4(a) of the Players Disclosure Schedule and except for matters otherwise
corrected by the subsequent filing with the SEC of an appropriate amendment
prior to the date of this Agreement, the reports, forms, documents filed by
Players with the SEC prior to the date of this Agreement (the "Players SEC
Reports") (including any financial statements filed as a part thereof or
incorporated by reference therein) (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), and the Exchange Act, as the case may
be, and (ii) did not, at the time they were filed (or if amended or superseded
by a filing prior to the date of this Agreement, then on the date of such
filing), contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such Players SEC Reports or necessary in
order to make the statements in such Players SEC Reports, in the light of the
circumstances under which they were made, not misleading.
(b) Except as set forth in Section 3.4(a), each of the consolidated
financial statements (including, in each case, any related notes) of Players
contained in the Players SEC Reports complied as to form in all material
respects with the applicable published rules and regulations of the SEC with
respect thereto, was prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited statements, as permitted by Form 10-Q under the
Exchange Act) and fairly presented the consolidated financial position of
Players and its consolidated Subsidiaries as of the dates and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which, with respect to interim periods since
December 31, 1998, were not or are not expected to be material in amount. The
audited balance sheet of Players as of March 31, 1998 is referred to herein as
the "Players Balance Sheet."
Section 3.5. No Undisclosed Liabilities. Except as disclosed in the
Players SEC Reports or in Section 3.5 of the Players Disclosure Schedule, and
except for liabilities and obligations incurred since the date of the Players
Balance Sheet in the ordinary course of business consistent with past practices,
Players and its consolidated Subsidiaries do not have any liabilities accrued,
contingent or otherwise, of the type required to be reflected in financial
statements, including the notes thereto, in accordance with GAAP, and whether
due or to become due, which would be reasonably likely to have a Players
Material Adverse Effect.
Section 3.6. Absence of Certain Changes or Events. Except as disclosed in
the Players SEC Reports or in Section 3.6 of the Players Disclosure Schedule
since the date of the Players Balance Sheet, Players and its Subsidiaries have
conducted their respective businesses only in the ordinary course consistent
with past practice, and there has not been (i) any Players Material Adverse
Effect, (ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of
Players' capital stock, (iii) any split, combination or reclassification of any
of its capital stock or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iv) (w) any granting by Players or any of its Subsidiaries to
any director or officer of Players or its Subsidiaries of any increase in
compensation, except in the ordinary course of business consistent with prior
practice or as was required under employment agreements in effect as of the date
of the most recent financial statements included in the Players SEC Reports, (x)
any granting by Players or any of its Subsidiaries to any director or officer of
any stock options, except as was required under employment agreements in effect
as of the date of the most recent financial statements included in the Players
SEC Reports, (y) any granting by Players or any of its Subsidiaries to any
officer of any increase in severance or termination pay, except as was required
under any employment, severance or termination agreements, plans or arrangements
in effect as of the date of the most recent financial statements included in the
Players SEC Reports or (z) any entry by Players or any of its Subsidiaries into
any employment, severance or termination agreement with any officer, (v) any
change in accounting methods, principles or practices having a material adverse
effect on Players, except insofar as may have been required by a change in GAAP,
(vi) any tax election that individually or in the aggregate would have a Players
Material Adverse Effect, or (vii) any settlement of pending or threatened
litigation involving Players or any of its Subsidiaries (whether brought by a
private party or a Governmental Entity) other than any settlement which is not
reasonably likely to have a Players Material Adverse Effect.
Section 3.7. Taxes.
(a) For the purposes of this Agreement, a "Tax" or, collectively, "Taxes,"
means any and all federal, state, local and foreign taxes, assessments and other
governmental charges, duties, impositions and liabilities, including taxes based
upon or measured by gross receipts, income, profits, sales, use and occupation,
and value added, ad valorem, transfer, gains, franchise, withholding, payroll,
recapture, employment, excise, unemployment insurance, social security, business
license, occupation, business organization, stamp, environmental and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts. For purposes of this Agreement, "Taxes" also includes any
obligations under any agreements or arrangements with any other person with
respect to Taxes of such other person (including pursuant to Treas. Reg.
1.1502-6 or comparable provisions of state, local or foreign tax law) and
including any liability for Taxes of any predecessor entity.
(b) Players and each of its Subsidiaries have (i) filed all federal,
state, local and foreign Tax returns and reports required to be filed by them
prior to the date of this Agreement (taking into account all applicable
extensions) and such Tax returns and reports (taking into account all amendments
thereto) are true, correct and complete in all material respects, (ii) paid or
accrued all Taxes due and payable, and (iii) paid or accrued all Taxes for which
a notice of assessment or collection has been received (other than amounts being
contested in good faith by appropriate proceedings with the relevant taxing
authority and for which adequate reserves in accordance with GAAP are being
maintained). Except as set forth in Section 3.7(b) of the Players Disclosure
Schedule, neither the Internal Revenue Service (the "IRS") nor any other taxing
authority has asserted any claim for Taxes, or to the actual knowledge of the
executive officers of Players, is threatening to assert any claims for Taxes.
Players and its Subsidiaries have withheld or collected and paid over to the
appropriate governmental authorities (or are properly holding for such payment)
all Taxes required by law to be withheld or collected. Neither Players nor any
of its Subsidiaries has made an election under Section 341(f) of the Code.
There are no liens for Taxes upon the assets of Players or any of its
Subsidiaries (other than liens for Taxes that are not yet due or delinquent or
that are being contested in good faith by appropriate proceedings, with the
relevant taxing authority and for which adequate reserves in accordance with
GAAP are being maintained).
(c) Neither Players nor any of its Subsidiaries is or has been a member of
an affiliated group of corporations filing a consolidated federal income tax
return (or a group of corporations filing a consolidated, combined or unitary
income tax return under comparable provisions of state, local or foreign tax
law) other than a group the common parent of which is or was Players or any
Subsidiary of Players.
(d) Neither Players nor any of its Subsidiaries has any obligation under
any agreement or arrangement with any other person with respect to Taxes of such
other person (including pursuant to Treas. Reg. 1.1502-6 or comparable
provisions of state, local or foreign tax law) and including any liability for
Taxes of any predecessor entity.
Section 3.8. Real Property, Title and Related Matters.
(a) Real Property. Section 3.8 (a) of the Players Disclosure Schedule
sets forth a true and complete list as of the date of this Agreement of (i) all
contracts or agreements relating to the Leased Real Property, and (ii) a brief
description of each piece of Owned Real Property. Players or a Subsidiary of
Players, as the case may be, has (A) good and marketable title to all Owned Real
Property and to all fixtures thereon, free and clear of any Encumbrances, except
for Permitted Encumbrances, and (B) except as set forth in Section 3.8(a) of the
Players Disclosure Schedule, Item (I)(1)(c), the right to quiet enjoyment of the
Leased Real Property for the full term of the leases. Each lease or other
contract referred to in Section 3.8(a) of the Players Disclosure Schedule is a
valid contract or agreement enforceable against Players or its Subsidiary, as
the case may be, in accordance with its terms and, to the knowledge of Players,
against the other parties thereto. To the knowledge of Players, there are no
rights or options of any third party to acquire such leased property or any
ownership therein. Neither Players nor any of its Subsidiaries are in default,
nor have received any written notice alleging that it or they are in default,
under the leases, ground leases, subleases, licenses, options or other
agreements set forth in Section 3.8(a) of the Players Disclosure Schedule. To
the knowledge of Players, no other party to any such leases, ground leases,
licenses, options or other agreements is in default thereunder.
(b) Definitions. As used in this Section 3.8, the following terms shall
have the following meanings:
"Encumbrances" means all leases, mortgages, liens, pledges, charges,
options, encumbrances or defects of any kind or character.
"Leased Real Property" means all of the real property leased or subleased
by Players or a Subsidiary of Players as tenant and listed on Section 3.8(a) of
the Players Disclosure Schedule or by Buyer or a Subsidiary of Buyer as tenant
and listed on Section 4.8 of the Buyer Disclosure Schedule, as applicable,
together with, to the extent leased by Players or Buyer, as applicable, all
buildings and other structures, facilities or improvements currently or
hereafter located thereon, all fixtures, systems, equipment and personal
property of Players or Buyer attached or appurtenant thereto, and all easements,
licenses, rights and appurtenances related to the foregoing.
"Owned Real Property" means all of the real property owned by Players or
any of its Subsidiaries and listed on Section 3.8(a) of the Players Disclosure
Schedule or by Buyer or any of Buyer's Subsidiaries and listed on Section 4.8 of
the Buyer Disclosure Schedule, as applicable, together with all buildings and
other structures, facilities or improvements currently or hereafter located
thereon, all fixtures, systems, equipment and personal property attached or
appurtenant thereto and all easements, licenses, rights and appurtenances
relating to the foregoing.
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (i) Encumbrances that are disclosed in Section 3.8(a) of the
Players Disclosure Schedule or Section 4.8 of the Buyer Disclosure Schedule, as
applicable, except for (A) any Encumbrance which would prevent the use of the
subject property for its current use, or (B) any Encumbrance which secures any
indebtedness (other than indebtedness that is otherwise permitted by this
Agreement, (ii) liens for taxes, assessments, fees, and other governmental
charges or levies which are not yet due, payable or delinquent, (iii) such
survey exceptions or reciprocal easement agreements that do not prevent Players
or its Subsidiaries or Buyer or its Subsidiaries, and would not prevent the
Surviving Corporation, from conducting Players' or Buyer's business as
applicable as currently conducted and which would not have a Players Material
Adverse Effect or a Buyer Material Adverse Effect, (iv) the provisions of any
federal, state or local law, ordinance or regulation, provided the same are not
violated by the current use of the property, (v) Encumbrances imposed by law,
such as materialmen's, mechanics', carriers', workmen's and repairmen's liens
and other similar liens arising in the ordinary course of business securing
obligations that are not in excess of $250,000.00 in the aggregate at any time,
and (vi) pledges or deposits to secure obligations under workers' compensation
laws or similar legislation or to secure public or statutory obligations.
Section 3.9. Title to Personal Property; Liens. To the best knowledge of
Players, Players and each of its Subsidiaries has sufficiently good and valid
title to, or an adequate leasehold interest in, its material tangible personal
properties and assets (including all riverboats operated by Players and its
Subsidiaries) in order to allow it to conduct, and continue to conduct, its
business as and where currently conducted, except for such matters which,
individually or in the aggregate, would not be reasonably likely to have a
Players Material Adverse Effect. Except as disclosed in Section 3.9 of the
Players Disclosure Schedule, such material tangible personal assets and
properties are sufficiently free of liens to allow each of Players and its
Subsidiaries to conduct, and continue to conduct, its business as currently
conducted and to the best knowledge of Players, the consummation of the
transactions contemplated by this Agreement will not alter or impair such
ability in any respect which, individually or in the aggregate, would be
reasonably likely to have a Players Material Adverse Effect.
Section 3.10. Intellectual Property. Section 3.10 of the Players
Disclosure Schedule lists all (i) trademark and service mark registrations and
applications owned by Players or any of its Subsidiaries and (ii) trademark,
service mark and trade name license agreements to which Players or any of its
Subsidiaries is a party. Except as disclosed in Section 3.10 of the Players
Disclosure Schedule, all material trademarks, trademark applications, trade
names, service marks, trade secrets (including customer lists and customer
databases), copyrights, patents, licenses, know-how and other proprietary
intellectual property rights used in connection with the businesses of Players
and its Subsidiaries as currently conducted are without material restrictions or
material conditions on use, and there is no conflict with the intellectual
property rights of Players and its Subsidiaries therein or any conflict by them
with the intellectual property rights of others therein which, individually or
in the aggregate, would be reasonably likely to have a Players Material Adverse
Effect.
Section 3.11. Agreements, Contracts and Commitments.
(a) Except as disclosed in the Players SEC Reports or as disclosed in
Section 3.11(a) of the Players Disclosure Schedule, as of the date of this
Agreement, neither Players nor any of its Subsidiaries is a party to any oral or
written (i) agreement, contract, indenture or other instrument relating to
Indebtedness (as defined below) in an amount exceeding $1,000,000, (ii)
partnership, joint venture or limited liability or management agreement with any
person, (iii) agreement, contract, or other instrument relating to any merger,
consolidation, business combination, share exchange, business acquisition, or
for the purchase, acquisition, sale or disposition of any material assets of
Players or any of its Subsidiaries outside the ordinary course of business, (iv)
other contract, agreement or commitment to be performed after the date hereof
which would be a material contract (as defined in Item 601(b)(10) of Regulation
S-K of the SEC), (v) agreement, contract, or other instrument relating to any
"strategic alliances" (i.e., cross-marketing, affinity relationship, etc.), (vi)
contract, agreement or commitment which materially restricts (geographically or
otherwise) the conduct of any line of business by Players or any of its
Subsidiaries, (vii) any contract, agreement or other instrument having as a
party a partnership, joint venture or limited liability company in which Players
or any of its Subsidiaries is a partner, joint venture party or member which
would otherwise satisfy the criteria in clauses (i), (iii), (iv), (v) or (vi) if
Players or any of its Subsidiaries were a party to such contract, agreement or
other instrument or (viii) any other material contract requiring annual or
remaining payments in excess of $250,000 after the date hereof and which is not
cancelable on less than 30 days' notice (collectively, the "Players Material
Contracts"). "Indebtedness" means any liability in respect of (A) borrowed
money, (B) capitalized lease obligations, (C) the deferred purchase price of
property or services (other than trade payables in the ordinary course of
business) and (D) guarantees of any of the foregoing incurred by any other
person other than Players or any of its Subsidiaries.
(b) Except as disclosed in the Players SEC Reports filed prior to the date
of this Agreement or as disclosed in Section 3.11(b) of the Players Disclosure
Schedule, as of the date of this Agreement, (i) each of the Players Material
Contracts is valid and binding upon Players or any of its Subsidiaries (and, to
Players' best knowledge, on all other parties thereto) in accordance with its
terms and is in full force and effect, (ii) there is no material breach or
violation of or default by Players or any of its Subsidiaries under any of the
Players Material Contracts, whether or not such breach, violation or default has
been waived, and (iii) no event has occurred with respect to Players or any of
its Subsidiaries which, with the notice or lapse of time or both, would
constitute a material breach, violation or default, or give rise to a right of
termination, modification, cancellation, foreclosure, imposition of a lien,
prepayment or acceleration under any of the Players Material Contracts, which
breach, violation or default referred to in clauses (ii) or (iii), alone or in
the aggregate with other such breaches, violations or defaults referred to in
clauses (ii) or (iii), would be reasonably likely to have a Players Material
Adverse Effect.
Section 3.12. Litigation. Except as disclosed in the Players SEC Reports
or in Section 3.12 of the Players Disclosure Schedule, there is no action, suit
or proceeding, claim, arbitration or investigation against or affecting Players
or any of its Subsidiaries pending, or as to which Players or any of its
Subsidiaries has received any written notice of assertion against or affecting,
Players or any of its Subsidiaries or any property or asset of Players or any of
its Subsidiaries, before any court, arbitrator, or administrative, governmental
or regulatory authority or body, domestic or foreign that individually or in the
aggregate could reasonably be expected to (i) have a Players Material Adverse
Effect or (ii) prevent or materially delay the consummation of the transactions
contemplated by this Agreement.
Section 3.13. Environmental Matters.
(a) Except as disclosed in Section 3.13 of the Players Disclosure
Schedule, the Players SEC Reports and as would not be reasonably likely to have
a Players Material Adverse Effect: (i) Players and its Subsidiaries have
complied with all applicable Environmental Laws (as defined in Section 3.13(b));
(ii) the properties currently owned or operated by Players and its Subsidiaries
(including soils, groundwater, surface water, buildings or other structures) are
not contaminated with any Hazardous Substances (as defined in Section 3.13(c));
(iii) neither Players nor its Subsidiaries are subject to liability for any
Hazardous Substance disposal or contamination on any third party property;
(iv) neither Players nor any of its Subsidiaries has been associated with any
release or threat of release of any Hazardous Substance; (v) neither Players nor
any of its Subsidiaries has received any notice, demand, letter, claim or
request for information alleging that Players or any of its Subsidiaries may be
in violation of or liable under any Environmental Law; (vi) neither Players nor
any of its Subsidiaries is subject to any orders, decrees, injunctions or other
arrangements with any Governmental Entity or is subject to any indemnity or
other agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances; and (vii) there are no
circumstances or conditions involving Players or any of its Subsidiaries that
could reasonably be expected to result in any claims, liability, investigations,
costs or restrictions on the ownership, use or transfer of any property of
Players or any of its Subsidiaries pursuant to any Environmental Law.
(b) For purposes of this Agreement, the term "Environmental Law" means any
federal, state, local or foreign law, regulation, order, decree, permit,
authorization, opinion, common law or agency requirement relating to: (A) the
protection, investigation or restoration of the environment, health and safety,
or natural resources, (B) the handling, use, presence, disposal, release or
threatened release of any Hazardous Substance or (C) noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property.
(c) For purposes of this Agreement, the term "Hazardous Substance" means
any substance that is: (A) listed, classified or regulated pursuant to any
Environmental Law; (B) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (C) any other substance which is the subject
of regulatory action by any Governmental Entity pursuant to any Environmental
Law.
Section 3.14. Employee Benefit Plans.
(a) Section 3.14(a) of the Players Disclosure Schedule contains a true and
complete list of all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), all
employment, retention, change of control and severance agreements, and all
bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other similar employee benefit plans,
programs, policies and agreements, written or otherwise, in each case that is
sponsored, maintained, contributed to or required to be contributed to by
Players or any of its Subsidiaries or any trade or business (whether or not
incorporated) which, together with Players or any of its Subsidiaries, would be
deemed a "single employer" under Section 4001 (b) of ERISA (an "ERISA
Affiliate"), or to which Players, any of its Subsidiaries or any ERISA Affiliate
is a party for the benefit of any current or former employee, consultant,
director or independent contractor of Players or any of its Subsidiaries
(together, the "Players Employee Plans").
(b) Players has delivered or made available to Buyer all material
documents related to the Players Employee Plans, including, without limitation:
(i) true and complete copies of all Players Employee Plan documents and any
summary plan descriptions, summary annual reports and insurance contracts
relating thereto, (ii) detailed summaries of all unwritten Players Employee
Plans, (iii) true and complete copies of the most recent financial statements
and actuarial reports with respect to all Players Employee Plans for which
financial statements or actuarial reports are required or have been prepared;
(iv) the most recent determination letter from the IRS (if applicable) for any
such Players Employee Plan, and (v) true and complete copies of any filing with
or report to any Governmental Entity with respect to any Players Employee Plan
made by Players or any of its Subsidiaries during the twenty-four months prior
to the date of this Agreement, including, without limitation, annual reports for
Players Employee Plans, and a copy of any correspondence to Players or any of
its Subsidiaries from any Governmental Entity with respect to any such Players
Employee Plan during such period.
(c) All Players Employee Plans conform in all material respects to, and
are being administered and operated in all material respects in compliance with,
the requirements of ERISA, the Code and all other applicable laws, including
applicable laws of foreign jurisdictions. Except as set forth in Section
3.14(c) of the Players Disclosure Schedule, there have not been any "prohibited
transactions," as such term is defined in Section 4975 of the Code or Section
406 of ERISA, involving any of the Players Employee Plans that could subject
Players or any of its Subsidiaries to any penalties or taxes imposed under the
Code or ERISA. Section 3.14(c) of the Players Disclosure Schedule sets forth a
true and complete list of all outstanding loans from Players or any of its
Subsidiaries to any current or former director, officer, employee or consultant.
(d) Except as set forth in Section 3.14(d) of the Players Disclosure
Schedule, any Players Employee Plan that is intended to be qualified under
Section 401 (a) of the Code and exempt from tax under Section 501 (a) of the
Code has been determined by the Internal Revenue Service to be so qualified, has
received a favorable determination letter from the IRS covering provisions of
the Tax Reform Act of 1986, and such determination remains in effect and has not
been revoked. Nothing has occurred since the date of any such determination
that is reasonably likely to affect adversely such qualification or exemption in
any material respect, or result in the imposition of material excise taxes or
income taxes on unrelated business income under the Code or ERISA with respect
to any Players Employee Plan. All contributions or other amounts payable by
Players or any of its Subsidiaries with respect to each Players Employee Plan
have been paid or accrued in accordance with GAAP, ERISA, the Code and the terms
of each such plan.
(e) Except as set forth in Section 3.14(e) of the Players Disclosure
Schedule, neither Players, any of its Subsidiaries nor any ERISA Affiliate (i)
at any time in the past has had a current or contingent obligation to contribute
to any multiemployer plan (as defined in Section 3(37) of ERISA) ("Multiemployer
Plan") or (ii) at any time in the past has had any liability, contingent or
otherwise, under Title IV of ERISA or Section 412 of the Code. As of the date
of this Agreement, no Players Employee Plan is subject to Title IV of ERISA and
no Players Employee Plan is a Multiemployer Plan.
(f) There are no pending, or to Players' knowledge, any threatened or
anticipated claims by or on behalf of any Players Employee Plan, or by or on
behalf of any individual participants or beneficiaries of any Players Employee
Plan, alleging any breach of fiduciary duty on the part of Players or any of its
Subsidiaries or any of the officers, directors or employees of Players or any of
its Subsidiaries under ERISA or any other applicable Regulations, or claiming
benefit payments other than those made in the ordinary operation of such plans,
or alleging any violation of any other applicable Laws. To the knowledge of
Players or any of its Subsidiaries, the Players Employee Plans are not the
subject of any investigation, audit or action by the Internal Revenue Service,
the Department of Labor or the Pension Benefit Guaranty Corporation ("PBGC").
(g) With respect to any Players Employee Plan that is an employee welfare
benefit plan (within the meaning of Section 3(l) of ERISA) (a "Players Welfare
Plan"), (i) each Players Welfare Plan for which contributions are claimed as
deductions under any provision of the Code is in compliance in all material
respects with all applicable requirements pertaining to such deduction and (ii)
any Players Employee Plan that is a group health plan (within the meaning of
Section 4980B(g)(2) of the Code) complies, and in each and every case has
complied in all material respects, with all of the requirements of ERISA and
Section 4980B of the Code. No welfare benefit fund (within the meaning of
Section 419(e)(1) of the Code) or voluntary employees' beneficiary association
(within the meaning of 501 (c)(9) of the Code) has been established or
maintained in connection with a Players Welfare Plan.
Section 3.15. Compliance.
(a) Except as disclosed in Section 3.15 of the Players Disclosure
Schedule, each of Players and its Subsidiaries, and each of their respective
directors (but with respect to non-employee directors, only to Players' best
knowledge), officers, persons performing management functions similar to
officers and, to Players' best knowledge, partners hold all permits,
registrations, findings of suitability, licenses, variances, exemptions,
certificates of occupancy, orders and approvals of all Governmental Entities
(including all authorizations under Environmental Laws, the Merchant Marine Act
of 1920 and the Shipping Act of 1916, Certificates of Inspection issued by the
US Coast Guard and permits and approvals issued by the United States Army Corps
of Engineers and Players Gaming Laws (as defined below)), necessary to conduct
the business and operations of Players and each of its Subsidiaries as currently
conducted, each of which is in full force and effect in all material respects
and no notice of revocation has been received in respect thereof, except where
the failure to hold such permits, registrations, findings of suitability,
licenses, variances, exemptions, certificates of occupancy, orders and approvals
would not, individually or in the aggregate, be reasonably likely to have a
Players Material Adverse Effect (the "Players Permits"). Except as disclosed in
the Players SEC Reports, as disclosed in Section 3.15 of the Players Disclosure
Schedule, or as would not be reasonably likely to have a Players Material
Adverse Effect, the businesses of Players and its Subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity.
(b) The term "Players Gaming Laws" means any Federal, state, local or
foreign statute, ordinance, rule, regulation, permit, consent, registration,
finding of suitability, approval, license, judgment, order, decree, injunction
or other authorization, including any condition or limitation placed thereon,
governing or relating to the current or contemplated casino and gaming
activities and operations of Players or any of its Subsidiaries, including any
applicable state gaming law and any federal or state laws relating to currency
transactions.
(c) Except as disclosed in Section 3.15 of the Players Disclosure Schedule
(i) neither Players nor any of its Subsidiaries, nor any director (but with
respect to non-employee directors, only to Players' best knowledge), officer,
key employee or, to Players' best knowledge, partners of Players or any of its
Subsidiaries has received any written claim, demand notice, complaint, court
order or administrative order from any Governmental Entity in the past three
years under, or relating to any violation or possible violation of any Players
Gaming Laws which did or would be reasonably likely to result in fines or
penalties of $250,000 or more; (ii) to the best knowledge of Players, there are
no facts, which if known to the regulators under the Players Gaming Laws could
reasonably be expected to result in the revocation, limitation or suspension of
a license, finding of suitability, registration, permit or approval of it or
them, or any officer, director, other person performing management functions
similar to an officer or partner, under any Players Gaming Laws; and
(iii) neither Players nor any of its Subsidiaries has suffered a suspension or
revocation of any material license, finding of suitability, registration, permit
or approval held under the Players Gaming Laws.
Section 3.16. Labor Matters. Except as disclosed in Section 3.16 of the
Players Disclosure Schedule, (i) there are no proceedings pending between
Players or any of its Subsidiaries and any of their respective employees before
the Equal Employment Opportunity Commission, Department of Labor, or any other
Governmental Entity; (ii) to the best knowledge of Players, there are no
activities or proceedings of any labor union to organize any non-unionized
employees; (iii) neither Players nor any of its Subsidiaries has received notice
of any alleged unfair labor practice charges and/or complaints pending against
Players or any of its Subsidiaries or any of their respective representatives or
employees before the National Labor Relations Board or any current union
representation questions involving employees of Players or any of its
Subsidiaries; and (iv) Players' employment policies and practices comply in all
material respects with applicable law; and (v) there is no strike, slowdown,
work stoppage, labor dispute or lockout, or, to the best knowledge of Players,
threat thereof, by or with respect to any employees of Players or any of its
Subsidiaries. Players and its Subsidiaries are not parties to any collective
bargaining agreements or other labor union contracts applicable to individuals
employed or previously employed by Players or any of its Subsidiaries and,
except as disclosed in Players Disclosure Schedule 3.16, no collective
bargaining agreement or labor union contract is being negotiated by Players or
any such Subsidiary.
Section 3.17. Insurance. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by Players or any of its Subsidiaries are
listed on Section 3.17 of the Players Disclosure Schedule. At the Effective
Time, all such insurance policies, or replacements thereof, will be outstanding
and duly in force. To Players' knowledge, no notice of termination or non-
renewal of any such insurance policy has been received by Players.
Section 3.18. Information in Proxy Statement/Prospectus. The Joint Proxy
Statement/Prospectus, as such term is defined in Section 5.4(a) below (or any
amendment thereof or supplement thereto), at the date mailed to Players'
stockholders and at the time of the Players Special Meeting, will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, provided, however, that no representation is made by Players with
respect to statements made therein based on information supplied by Buyer or
Merger Sub for inclusion in the Proxy Statement/Prospectus. The Proxy
Statement/Prospectus will comply in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder.
Section 3.19. State Takeover Statute. The Board of Directors of Players
has approved the Merger, this Agreement and the Stockholder Support Agreements
and, assuming the accuracy of the representations contained in Section 4.25
hereof (without giving effect to the knowledge qualification therein), such
approval is sufficient to render inapplicable to the Merger, this Agreement and
the Stockholder Support Agreements and the transactions contemplated hereby and
thereby the provisions of Section 78.378 through 78.3793 of the NRS to the
extent, if any, such Sections are applicable to the Merger, this Agreement and
the Stockholder Support Agreements and the transactions contemplated hereby and
thereby.
Section 3.20. Voting Requirements. The affirmative vote of the holders of
a majority of the outstanding shares of Players Common Stock entitled to vote
thereon at the Players Special Meeting with respect to the approval of the
Merger (the "Players Stockholder Approval") is the only vote of the holders of
any class or series of Players' capital stock necessary to approve and adopt
this Agreement and the transactions contemplated by this Agreement.
Section 3.21. Players Rights Agreement. The Players Rights Agreement
dated as of January 27, 1997 (the "Rights Agreement") has been amended as of
February 8, 1999, in the form attached hereto as Exhibit B, so as to provide
that (i) no "Distribution Date," "Stock Acquisition Date," or "Trigger Event"
thereunder shall be deemed to have occurred, (ii) none of Buyer or any of its
Subsidiaries will be an "Acquiring Person" thereunder and (iii) no holder of
rights issued thereunder shall be entitled to exercise such rights under, or be
entitled to any rights or benefits pursuant to, the Rights Agreement, in each
case solely by reason of the approval and execution of this Agreement or the
execution of the Stockholder Support Agreements, or the consummation of the
transactions contemplated hereby or thereby.
Section 3.22. Year 2000. Except as disclosed in Section 3.22 of the
Players Disclosure Schedule, as of the date hereof, all computer software
necessary for the conduct of its business (the "Software") is (or will be, prior
to December 31, 1999, as provided in Section 3.22 of the Players Disclosure
Schedule) designed to be used prior to, during, and after December 31, 1999, and
the Software will operate during each such time period without error relating to
the year 2000, specifically including any error relating to, or the product of,
date data which represents or references different centuries or more than one
century. Players further represents and warrants that as of the date hereof,
the Software either does or will, prior to December 31, 1999 as provided in
Section 3.22 of the Players Disclosure Schedule accept, calculate, sort, extract
and otherwise process date inputs and date values, and return and display date
values, in a consistent manner regardless of the dates used, whether before, on,
or after January 1, 2000.
Section 3.23. Opinion of Financial Advisor. Players has received the oral
opinion of Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") as of the
date of this Agreement, to the effect that the Merger Consideration is fair to
the holders of Players Common Stock from a financial point of view.
Section 3.24. Brokers. None of Players, any of its Subsidiaries, or any
of their respective officers, directors or employees have employed any broker,
financial advisor or finder or incurred any liability for any brokerage fees,
commissions, finder's or other fees in connection with the transactions
contemplated by this Agreement, except that Players has retained DLJ as its
financial advisor.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
Buyer and Merger Sub represent and warrant to Players that the statements
contained in this Article III are true and correct except as set forth herein
and in the disclosure schedule delivered by Buyer and Merger Sub to Players on
or before the date of this Agreement (the "Buyer Disclosure Schedule"), or as
otherwise expressly contemplated by this Agreement. Any reference in the Merger
Agreement to Buyer's "best knowledge," or "the best of Buyer's knowledge," or
words of similar import, shall be deemed a reference to the actual knowledge of
any of the corporate officers of Buyer or any of its Subsidiaries, for all
purposes. The Buyer Disclosure Schedule has been prepared based upon the
foregoing definition.
Section 4.1. Organization of Buyer and its Subsidiaries. Each of Buyer
and its Subsidiaries (as defined below) is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization and has
all requisite corporate, partnership or limited liability company power and
authority to carry on its business as now being conducted and as proposed to be
conducted. Each of Buyer and its Subsidiaries is duly qualified or licensed to
do business and is in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so qualified, licensed or in good standing would not have a material adverse
effect on the business, properties, condition (financial or otherwise) or
results of operations of Buyer and its Subsidiaries, taken as a whole (a "Buyer
Material Adverse Effect"). Buyer has delivered to Players a true and correct
copy of the Certificate of Incorporation and Bylaws of Buyer, in each case as
amended to the date of this Agreement. Except as set forth on the Buyer
Disclosure Schedule, all the outstanding shares of capital stock of, or other
equity interests in, each such Subsidiary have been validly issued and are fully
paid and nonassessable and are owned directly or indirectly by Buyer, free and
clear of all liens and free of any other restriction (including any restriction
on the right to vote, sell or otherwise dispose of such capital stock or other
ownership interests). Except as set forth in Section 4.1 of the Buyer
Disclosure Schedule, neither Buyer nor any of its Subsidiaries directly or
indirectly owns (other than ownership interests in Buyer or in one or more of
its Subsidiaries) any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any corporation, partnership, joint
venture or other business association or entity.
Section 4.2. Capitalization.
(a) The authorized capital stock of Buyer consists of 30,000,000 shares of
Buyer Common Stock, $.01 par value per share, and 1,000,000 shares of preferred
stock, with $1.00 par value per share ("Buyer Preferred Stock"). As of the date
hereof, (i) 8,616,680 shares of Buyer Common Stock were issued and outstanding,
all of which are validly issued, fully paid and nonassessable, (ii) 1,243,572
shares of Buyer Common Stock were held in the treasury of Buyer or by
Subsidiaries of Buyer, and (iii) no shares of Buyer Preferred Stock are issued
and outstanding. Section 4.2(a)(i) of the Buyer Disclosure Schedule sets forth
the number of shares of Buyer Common Stock reserved for future issuance upon
exercise of options to acquire shares of Buyer Common Stock ("Buyer Options")
granted and outstanding as of the date hereof and under Buyer's stock option
plans ("Buyer Stock Option Plans"). Section 4.2(a)(i) of the Buyer Disclosure
Schedule also sets forth as of the date hereof, for each Buyer Stock Option
Plan, the dates on which Options and Buyer SARs which are still outstanding
under such plan were granted, the number of outstanding Options and Buyer SARs
granted on each such date and the exercise price thereof. Except as disclosed
in Section 4.2(a)(i) of the Buyer Disclosure Schedule, since December 31, 1998
through the date of this Agreement, Buyer has not made any grants under any of
the Buyer Stock Option Plans. Except as disclosed in Section 4.2(a)(i) of the
Buyer Disclosure Schedule, as of the date of this Agreement, Buyer has not
granted any contractual rights the value of which is derived from the financial
performance of Buyer or from the value of shares of Buyer Common Stock. Except
as disclosed in Section 4.2(a)(ii) of the Buyer Disclosure Schedule, there are
no obligations contingent or otherwise, of Buyer or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of Buyer Common Stock or the
capital stock or ownership interests of any Subsidiary or to provide funds to or
make any material investment (in the form of a loan, capital contribution or
otherwise) in any such Subsidiary or any other entity other than guarantees of
bank obligations or indebtedness for borrowed money of Subsidiaries entered into
in the ordinary course of business. All of the outstanding shares of capital
stock (including shares which may be issued upon exercise of outstanding
options) or other ownership interests of each of Buyer's Subsidiaries are duly
authorized, validly issued, fully paid and nonassessable and, except as
disclosed in Section 4.2(a)(iii) of the Buyer Disclosure Schedule and except as
required by gaming industry regulation, all such shares and ownership interests
are owned by Buyer or another Subsidiary of Buyer free and clear of all security
interests, liens, claims, pledges, agreements, limitations on Buyer's voting
rights, charges or other encumbrances or restrictions on transfer of any nature.
(b) There is no Voting Debt of Buyer or any of its Subsidiaries issued and
outstanding. Except as set forth in Section 4.2(a) or in this Section 4.2(b) or
as reserved for future grants of options or restricted stock under the Buyer
Stock Option Plans as of the date hereof, (i) there are no shares of capital
stock of any class of Buyer, or any security exchangeable into or exercisable
for such equity securities, issued, reserved for issuance or outstanding; (ii)
except as set forth in Section 4.2(b) of the Buyer Disclosure Schedule there are
no options, warrants, equity securities, calls, rights, commitments or
agreements of any character to which Buyer or any of its Subsidiaries is a party
or by which it is bound obligating Buyer or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other ownership interests (including Voting Debt) of Buyer or
any of its Subsidiaries or obligating Buyer or any of its Subsidiaries to grant,
extend, accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement; and (iii) there are no voting
trusts, proxies or other voting agreements or understandings with respect to the
shares of capital stock of Buyer. All shares of Buyer Common Stock subject to
issuance as specified in this Section 4.2(b) are duly authorized and, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, shall be validly issued, fully paid and nonassessable.
(c) The authorized capital stock of Merger Sub consists of 2,500 shares of
common stock, par value $.01 per share ("Merger Sub Common Stock"), of which
1,000 shares are issued and outstanding. Buyer owns directly all the
outstanding shares of Merger Sub Common Stock. The outstanding shares of Merger
Sub Common Stock are duly authorized, validly issued, fully paid and assessable
and free of any preemptive rights.
Section 4.3. Authority; No Conflict; Required Filings and Consents.
(a) Buyer and Merger Sub have all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by Buyer and Merger Sub
have been duly authorized by all necessary corporate action on the part of Buyer
and Merger Sub, subject only to the Buyer Stockholder Approval specified in
Section 4.20 hereof and the review by Buyer's Compliance Committee, as required
by Buyer's internal reporting system, of this Agreement, the transactions
identified herein, and the persons designated by Players to serve on Buyer's
Board of Directors, such review to be completed no later than 60 days after the
date of this Agreement. This Agreement has been duly executed and delivered by
Buyer and Merger Sub and constitutes the valid and binding obligation of Buyer
and Merger Sub, enforceable against each of them in accordance with its terms.
(b) Other than as disclosed in Section 4.3(b) of the Buyer Disclosure
Schedule, the execution and delivery of this Agreement by Buyer and Merger Sub
does not, and the consummation of the transactions contemplated hereby will not,
(i) conflict with, or result in any violation or breach of, any provision of the
Certificate of Incorporation or Bylaws of Buyer or the comparable charter or
organizational documents of any of its Subsidiaries, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of time,
or both) a default (or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any material benefit) under, or
require a consent or waiver under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, lease, contract or other agreement,
instrument or obligation to which Buyer or any of its Subsidiaries is a party or
by which any of them or any of their properties or assets may be bound, or (iii)
subject to the governmental filings and other matters referred to in Section
4.3(c), conflict with or violate any permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Buyer or any of its Subsidiaries or any of its or their properties or assets,
except in the case of clauses (ii) and (iii) for any such conflicts, violations,
defaults, terminations, cancellations or accelerations which (x) are not,
individually or in the aggregate, reasonably likely to have a Buyer Material
Adverse Effect or (y) would not impair or materially delay the consummation of
the Merger.
(c) Except as disclosed in Section 4.3(c) of the Buyer Disclosure
Schedule, no consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Buyer or any of its Subsidiaries in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, other than (i) the filing of the pre-merger notification report under
the HSR Act, (ii) the filing of the Articles of Merger with respect to the
Merger with the Secretary of State of the State of Nevada, (iii) the filing of
any Joint Proxy Statement/Prospectus (as such term is defined in Section 5.4(a)
(below) with the SEC in accordance with the Exchange Act, (iv) any approvals and
filing of notices required under any applicable gaming industry regulation, (v)
such consents, approvals, orders, authorizations, permits, filings or
registrations related to, or arising out of, compliance with statutes, rules or
regulations regulating the consumption, sale or serving of alcoholic beverages,
(vi) such immaterial filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement, and (vii) such other filings,
consents, approvals, orders, registrations and declarations as may be required
under the laws of any jurisdiction in which Buyer or any of its Subsidiaries
conducts any business or owns any assets the failure of which to obtain would
not have a Buyer Material Adverse Effect.
Section 4.4. Public Filings; Financial Statements.
(a) Buyer and its Subsidiaries that are required to file, or that file,
forms, reports or other documents with the SEC (the "Buyer Reporting
Subsidiaries") have filed and made available to Players all forms, reports and
documents required to be filed by Buyer and the Buyer Reporting Subsidiaries
with the SEC since January 1, 1995 (the "Buyer SEC Reports"). The Buyer SEC
Reports (including any financial statements filed as a part thereof or
incorporated by reference therein) (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Act, and
the Exchange Act, as the case may be, and (ii) did not, at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing), contain any untrue statement of a
material fact or omit to state a material fact required to be stated in such
Buyer SEC Reports or necessary in order to make the statements in such Buyer SEC
Reports, in the light of the circumstances under which they were made, not
misleading.
(b) Except as set forth in Section 4.4(a), each of the consolidated
financial statements (including, in each case, any related notes) of Buyer
contained in the Buyer SEC Reports complied as to form in all material respects
with the applicable published rules and regulations of the SEC with respect
thereto, was prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, as permitted by
Form 10-Q under the Exchange Act) and fairly presented the consolidated
financial position of Buyer and its consolidated Subsidiaries as of the dates
and the consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which, with respect to
interim periods since December 31, 1998, were not or are not expected to be
material in amount. The audited balance sheet of Buyer as of June 30, 1998 is
referred to herein as the "Buyer Balance Sheet."
Section 4.5. No Undisclosed Liabilities. Except as disclosed in the Buyer
SEC Reports or in Section 4.5 of the Buyer Disclosure Schedule, and except for
liabilities and obligations incurred since the date of the Buyer Balance Sheet
in the ordinary course of business consistent with past practices, Buyer and its
consolidated Subsidiaries do not have indebtedness, obligations, or liabilities
of any kind, whether accrued, contingent or otherwise, of the type required to
be reflected in financial statements, including the notes thereto, in accordance
with GAAP, and whether due or to become due, which would be reasonably likely to
have a Buyer Material Adverse Effect.
Section 4.6. Absence of Certain Changes or Events. Except as disclosed in
the Buyer SEC Reports or in Section 4.6 of the Buyer Disclosure Schedule, since
the date of the Buyer Balance Sheet, Buyer and its Subsidiaries have conducted
their respective businesses only in the ordinary course and in a manner
consistent with past practice, and there has not been (i) any Buyer Material
Adverse Effect, (ii) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect to any
of Buyer's capital stock, (iii) any split, combination or reclassification of
any of its capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock, (iv) (w) any granting by Buyer or any of its Subsidiaries to
any director or officer of Buyer or its Subsidiaries of any increase in
compensation, except in the ordinary course of business consistent with prior
practice or as was required under employment agreements in effect as of the date
of the most recent financial statements included in the Buyer SEC Reports, (x)
any granting by Buyer or any of its Subsidiaries to any director or officer of
any stock options, except as was required under employment agreements in effect
as of the date of the most recent financial statements included in the Buyer SEC
Reports, (y) any granting by Buyer or any of its Subsidiaries to any officer of
any increase in severance or termination pay, except as was required under any
employment, severance or termination agreements, plans or arrangements in effect
as of the date of the most recent financial statements included in the Buyer SEC
Reports or (z) any entry by Buyer or any of its Subsidiaries into any
employment, severance or termination agreement with any officer, (v) any change
in accounting methods, principles or practices having a material adverse effect
on Buyer, except insofar as may have been required by a change in GAAP, (vi) any
tax election that individually or in the aggregate would have a Buyer Material
Adverse Effect, or (vii) any settlement of pending or threatened litigation
involving Buyer or any of its Subsidiaries (whether brought by a private party
or a Governmental Entity) other than any settlement which is not reasonably
likely to have a Buyer Material Adverse Effect.
Section 4.7. Taxes.
(a) Buyer and each of its Subsidiaries have (i) filed all federal, state,
local and foreign Tax returns and reports required to be filed by them prior to
the date of this Agreement (taking into account all applicable extensions) and
such Tax returns and reports (taking into account all amendments thereto) are
true, correct and complete in all material respects, (ii) paid or accrued all
Taxes due and payable, and (iii) paid or accrued all Taxes for which a notice of
assessment or collection has been received (other than amounts being contested
in good faith by appropriate proceedings with the relevant taxing authority and
for which adequate reserves in accordance with GAAP are being maintained).
Except as set forth in Section 4.7(a) of the Buyer Disclosure Schedule, neither
the IRS nor any other taxing authority has asserted any claim for Taxes, or to
the actual knowledge of the executive officers of Buyer, is threatening to
assert any claims for Taxes. Buyer and its Subsidiaries have withheld or
collected and paid over to the appropriate governmental authorities (or are
properly holding for such payment) all Taxes required by law to be withheld or
collected. Neither Buyer nor any of its Subsidiaries has made an election under
Section 341(f) of the Code. There are no liens for Taxes upon the assets of
Buyer or any of its Subsidiaries (other than liens for Taxes that are not yet
due or delinquent or that are being contested in good faith by appropriate
proceedings, with the relevant taxing authority and for which adequate reserves
in accordance with GAAP are being maintained).
(b) Neither Buyer nor any of its Subsidiaries is or has been a member of
an affiliated group of corporations filing a consolidated federal income tax
return (or a group of corporations filing a consolidated, combined or unitary
income tax return under comparable provisions of state, local or foreign tax
law) other than a group the common parent of which is or was Buyer or any
Subsidiary of Buyer.
(c) Neither Buyer nor any of its Subsidiaries has any obligation under any
agreement or arrangement with any other person with respect to Taxes of such
other person (including pursuant to Treas. Reg. 1.1502-6 or comparable
provisions of state, local or foreign tax law) and including any liability for
Taxes of any predecessor entity.
Section 4.8. Real Property, Title and Related Matters. Section 4.8 of the
Buyer Disclosure Schedule sets forth a true and complete list as of the date of
this Agreement of (i) all contracts or agreements relating to the Leased Real
Property and (ii) a brief description of each piece of Owned Real Property.
Buyer or a Subsidiary of Buyer, as the case may be, has, except as set forth in
Section 4.8 of the Buyer Disclosure Schedule, (A) the right to quiet enjoyment
of the Leased Real Property for the full term of the leases, and (B) good and
marketable title to all Owned Real Property and to all fixtures thereon, free
and clear of any Encumbrances, except for Permitted Encumbrances. Each lease or
other contract referred to in Section 4.8 of the Buyer Disclosure Schedule is a
valid contract or agreement enforceable against Buyer or its Subsidiary, as the
case may be, in accordance with its terms and, to the knowledge of Buyer,
against the other parties thereto. To the knowledge of Buyer, there are no
rights or options of any third party to acquire such leased property or any
ownership therein. Neither Buyer nor any of its Subsidiaries are in default,
nor have received any written notice alleging that it or they are in default,
under the leases, ground leases, subleases, licenses, options or other
agreements set forth in Section 4.8 of the Buyer Disclosure Schedule. To the
knowledge of Buyer, no other party to any such leases, ground leases, licenses,
options or other agreements is in default thereunder.
Section 4.9. Title to Personal Property; Liens. To the best knowledge of
Buyer, Buyer and each of its Subsidiaries has sufficiently good and valid title
to, or an adequate leasehold interest in, its material tangible personal
properties and assets in order to allow it to conduct, and continue to conduct,
its business as and where currently conducted, except for such matters which,
individually or in the aggregate, would not be reasonably likely to have a Buyer
Material Adverse Effect. Except as disclosed in Section 4.9 of the Buyer
Disclosure Schedule, such material tangible personal assets and properties are
sufficiently free of liens to allow each of Buyer and its Subsidiaries to
conduct, and continue to conduct, its business as currently conducted and to the
best knowledge of Buyer, the consummation of the transactions contemplated by
this Agreement will not alter or impair such ability in any respect which,
individually or in the aggregate, would be reasonably likely to have a Buyer
Material Adverse Effect.
Section 4.10. Intellectual Property. Section 4.10 of the Buyer Disclosure
Schedule lists all (i) trademark and service mark registrations and applications
owned by Buyer or any of its Subsidiaries and (ii) trademark, service mark and
trade name license agreements to which Buyer or any of its Subsidiaries is a
party. Except as disclosed in Section 4.10 of the Buyer Disclosure Schedule,
all material trademarks, trademark applications, trade names, service marks,
trade secrets (including customer lists and customer databases), copyrights,
patents, licenses, know-how and other proprietary intellectual property rights
used in connection with the businesses of Buyer and its Subsidiaries as
currently conducted are without material restrictions or material conditions on
use, and there is no conflict with the intellectual property rights of Buyer and
its Subsidiaries therein or any conflict by them with the intellectual property
rights of others therein which, individually or in the aggregate, would be
reasonably likely to have a Buyer Material Adverse Effect.
Section 4.11. Agreements, Contracts and Commitments.
(a) Except as disclosed in the Buyer SEC Reports or as disclosed in
Section 4.11(a) of the Buyer Disclosure Schedule, as of the date of this
Agreement, neither Buyer nor any of its Subsidiaries is a party to any oral or
written (i) agreement, contract, indenture or other instrument relating to
Indebtedness in an amount exceeding $1,000,000, (ii) partnership, joint venture
or limited liability or management agreement with any person, (iii) agreement,
contract, or other instrument relating to any merger, consolidation, business
combination, share exchange, business acquisition, or for the purchase,
acquisition, sale or disposition of any material assets of Buyer or any of its
Subsidiaries outside the ordinary course of business, (iv) other contract,
agreement or commitment to be performed after the date hereof which would be a
material contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC),
(v) agreement, contract, or other instrument relating to any "strategic
alliances" (i.e., cross-marketing, affinity relationship, etc.), (vi) contract,
agreement or commitment which materially restricts (geographically or otherwise)
the conduct of any line of business by Buyer or any of its Subsidiaries, (vii)
any contract, agreement or other instrument having as a party a partnership,
joint venture or limited liability company in which Buyer or any of its
Subsidiaries is a partner, joint venture party or member which would otherwise
satisfy the criteria in clauses (i), (iii), (iv), (v) or (vi) if Buyer or any of
its Subsidiaries were a party to such contract, agreement or other instrument or
(viii) any other material contract requiring annual or remaining payments in
excess of $250,000 after the date hereof and which is not cancelable on less
than 30 days' notice (collectively, the "Buyer Material Contracts").
(b) Except as disclosed in the Buyer SEC Reports filed prior to the date
of this Agreement or as disclosed in Section 4.11(b) of the Buyer Disclosure
Schedule, as of the date of this Agreement, (i) each of the Buyer Material
Contracts is valid and binding upon Buyer or any of its Subsidiaries (and, to
Buyer's best knowledge, on all other parties thereto) in accordance with its
terms and is in full force and effect, (ii) there is no material breach or
violation of or default by Buyer or any of its Subsidiaries under any of the
Buyer Material Contracts, whether or not such breach, violation or default has
been waived, and (iii) no event has occurred with respect to Buyer or any of its
Subsidiaries which, with the notice or lapse of time or both, would constitute a
material breach, violation or default, or give rise to a right of termination,
modification, cancellation, foreclosure, imposition of a lien, prepayment or
acceleration under any of the Buyer Material Contracts, which breach, violation
or default referred to in clauses (ii) or (iii), alone or in the aggregate with
other such breaches, violations or defaults referred to in clauses (ii) or
(iii), would be reasonably likely to have a Buyer Material Adverse Effect.
Section 4.12. Litigation. Except as disclosed in the Buyer SEC Reports or
in Section 4.12 of the Buyer Disclosure Schedule, there is no action, suit or
proceeding, claim, arbitration or investigation against or affecting Buyer or
any of its Subsidiaries pending, or as to which Buyer or any of its Subsidiaries
has received any written notice of assertion against or affecting, Buyer or any
of its Subsidiaries or any property or asset of Buyer or any of its
Subsidiaries, before any court, arbitrator, or administrative, governmental or
regulatory authority or body, domestic or foreign that individually or in the
aggregate could reasonably be expected to (i) have a Buyer Material Adverse
Effect or (ii) prevent or materially delay the consummation of the transactions
contemplated by this Agreement.
Section 4.13. Environmental Matters. Except as disclosed in Section 4.13
of the Buyer Disclosure Schedule, the Buyer SEC Reports and as would not be
reasonably likely to have a Buyer Material Adverse Effect: (i) Buyer and its
Subsidiaries have complied with all applicable Environmental Laws (as defined in
Section 3.13(b)); (ii) the properties currently owned or operated by Buyer and
its Subsidiaries (including soils, groundwater, surface water, buildings or
other structures) are not contaminated with any Hazardous Substances (as defined
in Section 3.13(c)); (iii) neither Buyer nor its Subsidiaries are subject to
liability for any Hazardous Substance disposal or contamination on any third
party property; (iv) neither Buyer nor any of its Subsidiaries has been
associated with any release or threat of release of any Hazardous Substance;
(v) neither Buyer nor any of its Subsidiaries has received any notice, demand,
letter, claim or request for information alleging that Buyer or any of its
Subsidiaries may be in violation of or liable under any Environmental Law;
(vi) neither Buyer nor any of its Subsidiaries is subject to any orders,
decrees, injunctions or other arrangements with any Governmental Entity or is
subject to any indemnity or other agreement with any third party relating to
liability under any Environmental Law or relating to Hazardous Substances; and
(vii) there are no circumstances or conditions involving Buyer or any of its
Subsidiaries that could reasonably be expected to result in any claims,
liability, investigations, costs or restrictions on the ownership, use or
transfer of any property of Buyer or any of its Subsidiaries pursuant to any
Environmental Law.
Section 4.14. Employee Benefit Plans.
(a) Section 4.14(a) of the Buyer Disclosure Schedule contains a true and
complete list of all employee benefit plans (as defined in Section 3(3) of
ERISA), all employment, retention, change of control and severance agreements,
and all bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other similar employee benefit plans,
programs, policies and agreements, written or otherwise, in each case that is
sponsored, maintained, contributed to or required to be contributed to by Buyer
or any of its Subsidiaries or any ERISA Affiliate, or to which Buyer, any of its
Subsidiaries or any ERISA Affiliate is a party for the benefit of any current or
former employee, consultant, director or independent contractor of Buyer or any
of its Subsidiaries (together, the "Buyer Employee Plans").
(b) Buyer has delivered or made available to Players all material
documents related to the Buyer Employee Plans, including, without limitation:
(i) true and complete copies of all Buyer Employee Plan documents and any
summary plan descriptions, summary annual reports and insurance contracts
relating thereto, (ii) detailed summaries of all unwritten Buyer Employee Plans,
(iii) true and complete copies of the most recent financial statements and
actuarial reports with respect to all Buyer Employee Plans for which financial
statements or actuarial reports are required or have been prepared; (iv) the
most recent determination letter from the IRS (if applicable) for any such Buyer
Employee Plan, and (v) true and complete copies of any filing with or report to
any Governmental Entity with respect to any Buyer Employee Plan made by Buyer or
any of its Subsidiaries during the twenty-four months prior to the date of this
Agreement, including, without limitation, annual reports for Buyer Employee
Plans, and a copy of any correspondence to Buyer or any of its Subsidiaries from
any Governmental Entity with respect to any such Buyer Employee Plan during such
period.
(c) All Buyer Employee Plans conform in all material respects to, and are
being administered and operated in all material respects in compliance with, the
requirements of ERISA, the Code and all other applicable laws, including
applicable laws of foreign jurisdictions. Except as set forth in Section
4.14(c) of the Buyer Disclosure Schedule, there have not been any "prohibited
transactions," as such term is defined in Section 4975 of the Code or Section
406 of ERISA, involving any of the Buyer Employee Plans that could subject Buyer
or any of its Subsidiaries to any penalties or taxes imposed under the Code or
ERISA. Section 4.14(c) of the Buyer Disclosure Schedule sets forth a true and
complete list of all outstanding loans from Buyer or any of its Subsidiaries to
any current or former director, officer, employee or consultant.
(d) Except as set forth in Section 4.14(d) of the Buyer Disclosure
Schedule, any Buyer Employee Plan that is intended to be qualified under Section
401 (a) of the Code and exempt from tax under Section 501 (a) of the Code has
been determined by the IRS to be so qualified, has received a favorable
determination letter from the IRS covering provisions of the Tax Reform Act of
1986, and such determination remains in effect and has not been revoked.
Nothing has occurred since the date of any such determination that is reasonably
likely to affect adversely such qualification or exemption in any material
respect, or result in the imposition of material excise taxes or income taxes on
unrelated business income under the Code or ERISA with respect to any Buyer
Employee Plan. All contributions or other amounts payable by Buyer or any of
its Subsidiaries with respect to each Buyer Employee Plan have been paid or
accrued in accordance with GAAP, ERISA, the Code and the terms of each such
plan.
(e) Except as set forth in Section 4.14(e) of the Buyer Disclosure
Schedule, neither Buyer, any of its Subsidiaries nor any ERISA Affiliate (i) at
any time in the past has had a current or contingent obligation to contribute to
any Multiemployer Plan or (ii) at any time in the past has had any liability,
contingent or otherwise, under Title IV of ERISA or Section 412 of the Code. As
of the date of this Agreement, no Buyer Employee Plan is subject to Title IV of
ERISA and no Buyer Employee Plan is a Multiemployer Plan.
(f) There are no pending, or to Buyer's knowledge, any threatened or
anticipated claims by or on behalf of any Buyer Employee Plan, or by or on
behalf of any individual participants or beneficiaries of any Buyer Employee
Plan, alleging any breach of fiduciary duty on the part of Buyer or any of its
Subsidiaries or any of the officers, directors or employees of Buyer or any of
its Subsidiaries under ERISA or any other applicable Regulations, or claiming
benefit payments other than those made in the ordinary operation of such plans,
or alleging any violation of any other applicable Laws. To the knowledge of
Buyer or any of its Subsidiaries, the Buyer Employee Plans are not the subject
of any investigation, audit or action by the IRS, the Department of Labor or the
PBGC.
(g) With respect to any Buyer Employee Plan that is an employee welfare
benefit plan (within the meaning of Section 3(l) of ERISA) (a "Buyer Welfare
Plan"), (i) each Buyer Welfare Plan for which contributions are claimed as
deductions under any provision of the Code is in compliance in all material
respects with all applicable requirements pertaining to such deduction and (ii)
any Buyer Employee Plan that is a group health plan (within the meaning of
Section 4980B(g)(2) of the Code) complies, and in each and every case has
complied in all material respects, with all of the requirements of ERISA and
Section 4980B of the Code. No welfare benefit fund (within the meaning of
Section 419(e)(1) of the Code) or voluntary employees' beneficiary association
(within the meaning of 501(c)(9) of the Code) has been established or maintained
in connection with a Buyer Welfare Plan.
Section 4.15. Compliance.
(a) Except as disclosed in Section 4.15 of the Buyer Disclosure Schedule,
each of Buyer and its Subsidiaries, and each of their respective directors (but
with respect to non-employee directors, only to Buyer's best knowledge),
officers, persons performing management functions similar to officers and, to
Buyer's best knowledge, partners hold all permits, registrations, findings of
suitability, licenses, variances, exemptions, certificates of occupancy, orders
and approvals of all Governmental Entities (including all authorizations under
Environmental Laws, the Merchant Marine Act of 1920 and the Shipping Act of
1916, Certificates of Inspection issued by the US Coast Guard and permits and
approvals issued by the United States Army Corps of Engineers and Buyer Gaming
Laws (as defined below)), necessary to conduct the business and operations of
Buyer and each of its Subsidiaries as currently conducted, each of which is in
full force and effect in all material respects and no notice of revocation has
been received in respect thereof, except where the failure to hold such permits,
registrations, findings of suitability, licenses, variances, exemptions,
certificates of occupancy, orders and approvals would not, individually or in
the aggregate, be reasonably likely to have a Buyer Material Adverse Effect (the
"Buyer Permits"). Except as disclosed in the Buyer SEC Reports, as disclosed in
Section 4.15 of the Buyer Disclosure Schedule, or as would not be reasonably
likely to have a Buyer Material Adverse Effect, the businesses of Buyer and its
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity.
(b) The term "Buyer Gaming Laws" means any Federal, state, local or
foreign statute, ordinance, rule, regulation, permit, consent, registration,
finding of suitability, approval, license, judgment, order, decree, injunction
or other authorization, including any condition or limitation placed thereon,
governing or relating to the current or contemplated casino and gaming
activities and operations of Buyer or any of its Subsidiaries, including any
applicable state gaming law and any federal or state laws relating to currency
transactions.
(c) Except as disclosed in Section 4.15 of the Buyer Disclosure Schedule
(i) neither Buyer nor any of its Subsidiaries, nor any director (but with
respect to non-employee directors, only to Buyer's best knowledge), officer, key
employee or, to Buyer's best knowledge, partners of Buyer or any of its
Subsidiaries has received any written claim, demand notice, complaint, court
order or administrative order from any Governmental Entity in the past three
years under, or relating to any violation or possible violation of any Buyer
Gaming Laws which did or would be reasonably likely to result in fines or
penalties of $250,000 or more; (ii) to the best knowledge of Buyer, there are no
facts, which if known to the regulators under the Buyer Gaming Laws could
reasonably be expected to result in the revocation, limitation or suspension of
a license, finding of suitability, registration, permit or approval of it or
them, or any officer, director, other person performing management functions
similar to an officer or partner, under any Buyer Gaming Laws; and (iii) neither
Buyer nor any of its Subsidiaries has suffered a suspension or revocation of any
material license, finding of suitability, registration, permit or approval held
under the Buyer Gaming Laws.
Section 4.16. Registration Statement; Joint Proxy Statement/Prospectus.
The information supplied by Buyer for inclusion or incorporation by reference in
the Registration Statement shall not at the time the Registration Statement (as
defined in Section 5.4(a) below) is declared effective by the SEC contain any
untrue statement of a material fact or omit to state any material fact required
to be stated in the Registration Statement or necessary in order to make the
statements in the Registration Statement, in light of the circumstances under
which they were made, not misleading. The information supplied by Buyer for
inclusion or incorporation by reference in the Joint Proxy Statement/Prospectus
(as defined in Section 5.4(a) below) shall not, on the date the Joint Proxy
Statement/Prospectus is first mailed to stockholders of Players or Buyer, at the
time of the Players and the Buyer Special Meeting (as provided for in Section
5.5) and at the Effective Time, contain any statement which, at such time and in
light of the circumstances under which it shall be made, is false or misleading
with respect to any material fact, omit to state any material fact necessary in
order to make the statements made in the Joint Proxy Statement/Prospectus not
false or misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Players Special Meeting which has become false or misleading.
Section 4.17. Labor Matters. Except as disclosed in Section 4.17 of the
Buyer Disclosure Schedule, (i) there are no proceedings pending between Buyer or
any of its Subsidiaries and any of their respective employees before the Equal
Employment Opportunity Commission, Department of Labor, or any other
Governmental Entity; (ii) to the best knowledge of Buyer, there are no
activities or proceedings of any labor union to organize any non-unionized
employees; (iii) neither Buyer nor any of its Subsidiaries has received notice
of any alleged unfair labor practice charges and/or complaints pending against
Buyer or any of its Subsidiaries or any of their respective representatives or
employees before the National Labor Relations Board or any current union
representation questions involving employees of Buyer or any of its
Subsidiaries; and (iv) Buyer's employment policies and practices comply in all
material respects with applicable law; and (v) there is no strike, slowdown,
work stoppage, labor dispute or lockout, or, to the best knowledge of Buyer,
threat thereof, by or with respect to any employees of Buyer or any of its
Subsidiaries. Buyer and its Subsidiaries are not parties to any collective
bargaining agreements or other labor union contracts applicable to individuals
employed or previously employed by Buyer or any of its Subsidiaries and, except
as disclosed in Buyer Disclosure Schedule 4.17, no collective bargaining
agreement or labor union contract is being negotiated by Buyer or any such
Subsidiary.
Section 4.18. Insurance. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by Buyer or any of its Subsidiaries are
listed on Section 4.18 of the Buyer Disclosure Schedule. At the Effective
Time, all such insurance policies, or replacements thereof, will be outstanding
and duly in force. To Buyer's knowledge, no notice of termination or non-
renewal of any such insurance policy has been received by Buyer.
Section 4.19. [Intentionally Omitted].
Section 4.20. Voting Requirements. The affirmative vote of the holders of
a majority of Buyer Common Stock present at the Buyer Special Meeting (at which
a quorum is present, in favor of the issuance of Buyer Common Stock pursuant to
this Agreement, consistent with the requirements of the NYSE (the "Buyer
Stockholder Approval"), is the only vote of the holders of any class or series
of Buyer's capital stock necessary to approve the transactions contemplated by
this Agreement.
Section 4.21. Year 2000. Except as disclosed in Section 4.21 of the Buyer
Disclosure Schedule, as of the date hereof, all computer software necessary for
the conduct of its business (the "Software") is (or will be, prior to December
31, 1999, as provided in Section 4.22 of the Buyer Disclosure Schedule) designed
to be used prior to, during, and after December 31, 1999, and the Software will
operate during each such time period without error relating to the year 2000,
specifically including any error relating to, or the product of, date data which
represents or references different centuries or more than one century. Buyer
further represents and warrants that as of the date hereof, the Software either
does or will, prior to December 31, 1999 as provided in Section 4.21 of the
Buyer Disclosure Schedule accept, calculate, sort, extract and otherwise process
date inputs and date values, and return and display date values, in a consistent
manner regardless of the dates used, whether before, on, or after January 1,
2000.
Section 4.22. Opinion of Financial Advisor. Buyer has received the
opinion of Merrill, Lynch, Pierce, Fenner and Smith Incorporated ("Merrill
Lynch") dated the date of this Agreement, to the effect that the Merger
Consideration is fair to the holders of Buyer Common Stock from a financial
point of view.
Section 4.23. Brokers. None of Buyer, any of its Subsidiaries, or any of
their respective officers, directors or employees have employed any broker,
financial advisor or finder or incurred any liability for any brokerage fees,
commissions, finder's or other fees in connection with the transactions
contemplated by this Agreement, except that Buyer has retained Merrill Lynch as
its financial advisor.
Section 4.24. No Operations or Liabilities of Merger Sub. Other than in
connection with the transactions contemplated by this Agreement, since its date
of incorporation, Merger Sub has not conducted any business, has not owned,
leased or operated any real property and has not incurred, and is not subject
to, any liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise.
Section 4.25. Ownership of Securities. As of the date hereof, neither
Buyer nor, to Buyer's knowledge, any of its affiliates or associates (as such
terms are defined under the Exchange Act), (i) beneficially owns, directly or
indirectly, or (ii) is party to an agreement, arrangement or understanding
(other than this Agreement) for the purpose of acquiring, holding or disposing
of, in each case, shares of Players Common Stock representing at least 20% of
the total number of outstanding shares of Players Common Stock.
ARTICLE V.
COVENANTS
Section 5.1. Conduct of Business.
(a) By Buyer. Except as disclosed in Section 5.1 of the Buyer Disclosure
Schedule or in the Buyer SEC Reports, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, Buyer agrees as to itself and its Subsidiaries (except to
the extent that Players shall otherwise consent in writing) to carry on its
business in the usual, regular and ordinary course in substantially the same
manner as previously conducted, to pay its debts and taxes when due subject to
good faith disputes over such debts or taxes, to pay or perform its other
obligations when due, and, to the extent consistent with such business, use all
commercially reasonable efforts consistent with past practices and policies to
preserve intact its present business organization, keep available the services
of its present officers and key employees and preserve its relationships with
customers, suppliers, distributors, and others having business dealings with
it. Without limiting the generality of the foregoing, during the period from
the date of this Agreement until the Effective Time, Buyer agrees (except as
otherwise contemplated by this Agreement, or to the extent that Players shall
otherwise consent in writing) as follows:
(i) Governing Documents. Buyer shall not amend its Certificate of
Incorporation, By-laws or other charter or organizational documents.
(ii) No Acquisitions. Buyer shall not and shall cause its Subsidiaries
not to acquire or agree to acquire (including, without limitation, by merger,
consolidation or acquisition of stock or assets) any material business,
including through the acquisition of any interest in any corporation,
partnership, joint venture, association or other business organization or
division thereof nor, in the case of the pending acquisition (the "CRC
Transaction") of CRC Holdings, Inc. ("CRC"), shall it complete such acquisition
on terms and conditions materially less advantageous to Buyer or Buyer's
stockholders than those previously disclosed to Players; provided, however, that
Buyer will be permitted to acquire for fair value Nevada based route businesses
for consideration not exceeding $20,000,000 in the aggregate.
(iii) No Dispositions. Buyer shall not and shall cause its
Subsidiaries not to sell, lease, license, mortgage or otherwise encumber or
otherwise dispose of any of its material properties or assets, other than in the
ordinary course of business consistent with past practice.
(iv) Accounting Matters. Buyer shall not make any material change in
accounting methods, principles or practices except as required by GAAP, or the
applicable regulations under the Securities Act and the Exchange Act.
(v) Issuance of Securities. Buyer shall not and shall cause its
Subsidiaries not to issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than the issuance of
shares of Buyer Common Stock upon the exercise of Buyer Options outstanding on
the date of this Agreement and in accordance with their present terms, pursuant
to this Agreement or the transactions contemplated herein or in connection with
the CRC Transaction; provided, however, that Buyer will be permitted to issue
Buyer Common Stock (or securities convertible into or exercisable for Buyer
Common Stock), at a per share price not less than the then current market price;
not exceeding $15,000,000 in the aggregate in order to consummate Nevada based
route business acquisitions permitted by clause (ii) above.
(vi) Indebtedness. Buyer shall not and shall cause its Subsidiaries
not to (y) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities of Buyer or any of its Subsidiaries,
or guarantee any debt securities of another person, other than short-term bank
financing in the ordinary course of business consistent with past practice or
(z) make any loans, advances or capital contributions to, or investments in, any
other person, other than in the ordinary course of business consistent with past
practice, except as required under this Agreement and the transactions
contemplated herein or in connection with the CRC Transaction; provided,
however, that Buyer will be permitted to incur indebtedness in an aggregate
principal amount not exceeding $15,000,000 in order to consummate Nevada based
route business acquisitions permitted by clause (ii) above.
(vii) Settlement. Buyer shall not and shall cause its Subsidiaries not
to settle any pending or threatened litigation involving Buyer or any of its
Subsidiaries (whether brought by a private party or a Government Entity), except
for settlements that, in the aggregate, involve payments, not covered by
insurance, by Buyer or any Subsidiaries of less than $250,000 and which settle
entire claims or causes of action arising out of the same or similar facts and
circumstances or do not impose any material restrictions on the business or
operations of Buyer or any of its Subsidiaries.
(viii) General. Buyer shall not and shall cause its Subsidiaries not
to authorize any of, or commit or agree to take any of, the foregoing actions.
(b) By Players. Except as disclosed in Section 5.1 of the Players
Disclosure Schedule during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time, Players agrees as to itself and its respective Subsidiaries
(except to the extent that Buyer shall otherwise consent in writing) to carry on
its business in the usual, regular and ordinary course in substantially the same
manner as previously conducted, to pay its debts and taxes when due subject to
good faith disputes over such debts or taxes, to pay or perform its other
obligations when due, and, to the extent consistent with such business, use all
commercially reasonable efforts consistent with past practices and policies to
preserve intact its present business organization, keep available the services
of its present officers and key employees and preserve its relationships with
customers, suppliers, distributors, and others having business dealings with
it. Without limiting the generality of the foregoing, during the period from
the date of this Agreement until the Effective Time, Players agrees (except as
otherwise contemplated by this Agreement, or to the extent that Buyer shall
otherwise consent in writing) as follows:
(i) Dividends; Changes in Stock. Players shall not and shall cause its
Subsidiaries not to, other than dividends and distributions by a direct or
indirect wholly owned Subsidiary of Players to its parent (x) declare, set aside
or pay any dividends on, or make any other distributions (whether in cash, stock
or property), in respect of , any of its capital stock, (y) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock (other than the issuance of shares of Players Common Stock upon
the exercise of Players Options outstanding on the date of this Agreement and
in accordance with their present terms) or (z) purchase, redeem or otherwise
acquire any shares of capital stock of Players or any of its Subsidiaries or any
other securities thereof or any rights, warrants or options to acquire any such
shares or other securities.
(ii) Issuance of Securities. Players shall not and shall cause its
Subsidiaries not to issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than the issuance of
shares of Players Common Stock upon the exercise of Players Options outstanding
on the date of this Agreement and in accordance with their present terms).
(iii) Governing Documents. Players shall not and shall cause its
Subsidiaries not to amend its Certificate of Incorporation, By-Laws or other
comparable charter or organizational documents.
(iv) No Acquisitions. Players shall not and shall cause its
Subsidiaries not to acquire or agree to acquire (including, without limitation,
by merger, consolidation or acquisition of stock or assets) any business,
including through the acquisition of any interest in any corporation,
partnership, joint venture, association or other business organization or
division thereof.
(v) No Dispositions. Players shall not and shall cause its
Subsidiaries not to sell, lease, license, mortgage or otherwise encumber or
otherwise dispose of any of its material properties or assets, other than in the
ordinary course of business consistent with past practice.
(vi) Indebtedness. Players shall not and shall cause its Subsidiaries
not to (y) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities of Players or any of its
Subsidiaries, or guarantee any debt securities of another person, other than
short-term bank financing in the ordinary course of business consistent with
past practice or (z) make any loans, advances or capital contributions to, or
investments in, any other person, other than in the ordinary course of business
consistent with past practice.
(vii) Employee Benefits. Players shall not and shall cause its
Subsidiaries not to, except as required by applicable law or, with respect to
the limitations contained in subclauses (C) and (G) of this Section 5.1(b)(vii),
agreements, plans or arrangements existing on the date hereof, (A) adopt, enter
into, terminate or amend any employment, severance, retention or similar
agreement or contract; (B) negotiate or enter into any collective bargaining
agreement or labor union contract; (C) increase, in any manner, the compensation
or fringe benefits of, or pay any bonus to, any director, officer or employee
(except for normal increases of cash compensation or cash bonuses in the
ordinary course of business consistent with past practice); (D) adopt or
establish any new benefit plan; or amend any existing benefit plan, including,
without limitation, the Players Employee Plans and the Players Welfare Plan,
except as required by law; or pay any benefit not provided for under any Players
Employee Plan or Players Welfare Plan; (E) adopt, establish or amend any
severance pay plan; or increase in any manner the severance or termination pay
of any officer or employee; (F) modify the provisions of any Players Stock
Option Plan; or adjust or modify the terms of any outstanding Players Options;
or take any action to accelerate the vesting of, or cash out rights associated
with, any Players Option or Players SAR, except as contemplated by the
Employment Agreements; or remove existing restrictions in any Players Stock
Option Plan or other plan or arrangement; (G) grant any new awards under any
Players Stock Option Plan or other bonus, incentive, performance or compensation
plan or arrangement, including the grant of Players Options, Players SARs,
stock-based or stock-related awards, performance units or restricted stock; (H)
take any action to fund or, in any other way secure, the payment of compensation
or benefits under any Players Employee Plan, Players Welfare Plan or other
employee plan, agreement, contract or arrangement; or (I) hire any individual as
an employee, independent contractor or consultant who will be paid an annual
base salary that equals or exceeds $100,000, without the prior written consent
of the Buyer.
(viii) Material Contracts. Players shall not and shall cause its
Subsidiaries not to enter into any agreement of a nature that would be required
to be filed as an exhibit to Form 10-K under the Exchange Act.
(ix) Accounting Matters. Players shall not and shall cause its
Subsidiaries not to make any material change in accounting methods, principles
or practices except as required by GAAP, or the applicable regulations under the
Securities Act and the Exchange Act.
(x) ax Matters. Players shall not and shall cause its Subsidiaries not
to make any material tax election or enter into any settlement or compromise
with respect to any material income tax liability.
(xi) Settlement. Players shall not and shall cause its Subsidiaries
not to settle any pending or threatened litigation involving Players or any of
its Subsidiaries (whether brought by a private party or a Government Entity),
except for settlements that, in the aggregate, involve payments, not covered by
insurance, by Players or any Subsidiaries of less than $250,000 and which settle
entire claims or causes of action arising out of the same or similar facts and
circumstances or do not impose any material restrictions on the business or
operations of Players or any of its Subsidiaries.
(xii) Capital Expenditures. Players together with its Subsidiaries
shall not make capital expenditures in excess of $1,500,000 individually or
$10,000,000 in the aggregate.
(xiii) General. Players shall not and shall cause its Subsidiaries not
to authorize any of, or commit or agree to take any of, the foregoing actions.
Section 5.2. Cooperation; Notice; Cure. Subject to compliance with
applicable law, from the date hereof until the Effective Time, each of Buyer and
Players shall confer on a regular and frequent basis with one or more
representatives of the other party to report on the general status of ongoing
operations. Each of Players and Buyer shall promptly notify the other in
writing of, and will use all commercially reasonable efforts to cure before the
Closing Date, any event, transaction or circumstance, as soon as practical after
it becomes known to such party, that causes or will cause any covenant or
agreement of Players or Buyer under this Agreement to be breached in any
material respect or that renders or will render untrue in any material respect
any representation or warranty of Players or Buyer contained in this Agreement.
Section 5.3. No Solicitation. From and after the date hereof, Players
shall not, directly or indirectly, through any officer, director, employee,
financial advisor, representative or agent of such party (i) solicit, initiate,
or encourage (including by way of furnishing information) or take any other
action to facilitate knowingly any inquiries or proposals that constitute, or
could reasonably be expected to lead to, a proposal or offer for a merger,
consolidation, business combination, sale of substantial assets, sale of shares
of capital stock (including without limitation by way of a tender or exchange
offer) or similar transaction involving Players or any of its Subsidiaries,
other than the transactions contemplated by this Agreement (any of the foregoing
inquiries or proposals being referred to in this Agreement as an "Acquisition
Proposal"), (ii) engage in negotiations or discussions with any person (or group
of persons) other than Buyer or its respective affiliates (a "Third Party")
concerning, or provide any non-public information to any person or entity
relating to, any Acquisition Proposal, or (iii) agree to or recommend any
Acquisition Proposal; provided, however, that until approval of the Merger at
the Players Special Meeting (as defined below), nothing contained in this
Agreement shall prevent Players or its Board of Directors, from furnishing non-
public information to, or entering into discussions or negotiations with, any
person or entity in connection with an unsolicited bona fide written Acquisition
Proposal by such person or entity or modifying or withdrawing its recommendation
with respect to the transactions contemplated hereby or recommending an
unsolicited bona fide written Acquisition Proposal to the stockholders of
Players, if the Board of Directors of Players reasonably believes in good faith
that (i) such Acquisition Proposal after consultation with, and receipt of
advice from, DLJ is reasonably capable of being completed on substantially the
terms proposed and to be superior from a financial point of view to the holders
of Players Common Stock and (ii) after receipt of advice to such effect from
outside legal counsel (who may be Players' regularly engaged outside legal
counsel), determines in good faith that such action is required for the Board of
Directors of Players to comply with its duties to holders of Players Common
Stock imposed by applicable law (a "Superior Proposal").
Section 5.4. Joint Proxy Statement/ Prospectus; Registration Statement.
(a) As promptly as practicable after the execution of this Agreement,
Players and Buyer shall prepare and file with the SEC, in preliminary form, a
joint proxy statement/prospectus to be sent to the respective stockholders of
each of Players and Buyer in connection with, and to consider this Agreement and
the Merger (the "Joint Proxy Statement/Prospectus") and the related registration
statement in which the Joint Proxy Statement/Prospectus will be included as a
prospectus (the "Registration Statement"), provided that Players and Buyer may
delay the filing of the Registration Statement until approval of the Joint Proxy
Statement/Prospectus by the SEC. Players and Buyer shall use all reasonable
efforts to cause the Registration Statement to become effective as soon after
such filing as practicable.
(b) Players and Buyer shall make all necessary filings with respect to the
Merger under the Securities Act, the Exchange Act, applicable state blue sky
laws and the rules and regulations thereunder.
(c) Buyer agrees that the Registration Statement shall enable resales of
Buyer Common Stock by former "affiliates" (as defined in Rule 405 under the
Securities Act) of Players so that such former Players affiliates are not
subject to any volume limitation on resale pursuant to Rule 145(d) under the
Securities Act.
Section 5.5. Special Meeting. Players shall duly call, give notice of,
convene and hold a special meeting of its stockholders for the purpose of voting
upon this Agreement and the Merger (the "Players Special Meeting") and Buyer
shall duly call, give notice of, convene and hold a special meeting of its
stockholders for the purpose of voting upon and approving the transactions
contemplated by this Agreement (the "Buyer Special Meeting"), in each case as
promptly as reasonably practicable after the date hereof. Except as expressly
otherwise provided in Section 5.3 hereof, Players shall, through its Board of
Directors, recommend to its stockholders adoption and approval of this Agreement
and the Merger. Buyer shall through its Board of Directors, recommend to its
stockholders approval of the transactions contemplated by this Agreement, and
each party shall use all reasonable efforts to solicit from its stockholders
proxies in favor of such matters.
Section 5.6. Access to Information. Upon reasonable notice, each of Buyer
and Players (and each of their respective Subsidiaries) shall afford to the
other party and its officers, employees, accountants, counsel and other
representatives, reasonable access, during normal business hours during the
period prior to the Effective Time, to all its personnel, properties, books,
contracts, commitments and records and, during such period, each of Buyer and
Players shall, and shall cause each of its respective Subsidiaries to, furnish
promptly to the other (a) copies of monthly financial reports and development
reports, (b) a copy of each report, schedule, registration statement and other
documents filed or received by it during such period pursuant to the
requirements of federal or state securities laws and (c) all other information
concerning its business, properties and personnel as the other party may
reasonably request. Each party making such requests will hold any such
information furnished to it by the other party in confidence in accordance with
the confidentiality agreement between the parties (the "Confidentiality
Agreement"). No information or knowledge obtained in any investigation pursuant
to this Section 5.6 shall affect or be deemed to modify any representation or
warranty contained in this Agreement or the conditions to the obligations of the
parties to consummate the Merger.
Section 5.7. Governmental Approvals.
(a) The parties hereto shall cooperate with each other and use all
commercially reasonable efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable without conditions, restrictions or
limitations that are more restrictive than those conditions, restrictions and
limitations applicable to Players on the date hereof, all permits,
registrations, licenses, findings of suitability, consents, variances,
exemptions, orders, approvals and authorizations of all third parties and
Governmental Entities which are necessary or advisable to consummate the
transactions contemplated by this Agreement ("Governmental Approvals"). Each of
the parties hereto and their respective officers, directors and affiliates shall
file within 60 days after the date hereof, all required initial applications and
documents in connection with obtaining the Governmental Approvals and shall act
reasonably and promptly thereafter in responding to additional requests in
connection therewith. Players and Buyer shall have the right to review in
advance, and to the extent practicable each will consult the other on, in each
case subject to applicable laws relating to the exchange of information, all the
information relating to Players or to Buyer, as the case may be, and any of
their respective Subsidiaries, directors, officers and stockholders which appear
in any filing made with, or written materials submitted to, any third party or
any Governmental Entity in connection with the transactions contemplated by this
Agreement. Without limiting the foregoing, each of Players and Buyer (the
"Notifying Party") will notify the other reasonably promptly of the receipt of
material comments or requests from Governmental Entities relating to
Governmental Approvals, and will supply the other party with copies of all
material correspondence between the Notifying Party or any of its
representatives and Governmental Entities with respect to Governmental
Approvals; provided, however, that it shall not be required to supply the other
party with copies of correspondence relating to the personal applications of
individual applicants except for evidence of filing.
(b) Players and Buyer shall promptly advise each other upon receiving any
communication from any Governmental Entity whose consent or approval is required
for consummation of the transactions contemplated by this Agreement which causes
such party to believe that there is a reasonable likelihood that any approval
needed from a Governmental Entity will not be obtained or that the receipt of
any such approval will be materially delayed. Players and Buyer shall take any
and all actions reasonably necessary to vigorously defend, lift, mitigate and
rescind the effect of any litigation or administrative proceeding adversely
affecting this Agreement or the transactions contemplated hereby or thereby,
including, limitation, promptly appealing any adverse court or administrative
order or injunction to the extent reasonably necessary for the foregoing
purposes.
Section 5.8. Publicity. Players and Buyer shall agree on the form and
content of the initial press release regarding the transactions contemplated
hereby and thereafter shall consult with each other before issuing, and use all
reasonable efforts to agree upon, any press release or other public statement
with respect to any of the transactions contemplated hereby and shall not issue
any such press release or make any such public statement prior to such
consultation, except as may be required by law.
Section 5.9. Indemnification.
(a) From and after the Effective Time, Buyer agrees that it will, and will
cause the Surviving Corporation to, indemnify and hold harmless each present and
former director and officer of Players (the "Indemnified Parties"), against any
costs or expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities or amounts paid in settlement incurred in connection with
any claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent that
Players would have been permitted under Nevada law and its Articles of
Incorporation or Bylaws in effect on the date hereof to indemnify such
Indemnified Party.
(b) For a period of three years after the Effective Time, Buyer shall
maintain or shall cause the Surviving Corporation to maintain in effect a
directors' and officers' liability insurance policy covering those persons who
are currently covered by Players' directors' and officers' liability insurance
policy (copies of which have been heretofore delivered by Players to Buyer) with
coverage in amount and scope at least as favorable as Players' existing
coverage; provided that in no event shall Buyer or the Surviving Corporation be
required to expend in the aggregate in excess of 200% of the annual premium
currently paid by Players for such coverage; and if such premium would at any
time exceed 200% of the such amount, then Buyer or the Surviving Corporation
shall maintain insurance policies which provide the maximum and best coverage
available at an annual premium equal to 200% of such amount.
(c) The provisions of this Section 5.9 are intended to be an addition to
the rights otherwise available to the current officers and directors of Players
by law, charter, statute, bylaw or agreement, and shall operate for the benefit
of, and shall be enforceable by, each of the Indemnified Parties, their heirs
and their representatives.
Section 5.10. Stockholder Litigation. Players shall give Buyer the
reasonable opportunity to participate in the defense or settlement of any
stockholder litigation against Players and its directors relating to the
transactions contemplated hereby, provided, however, that no such settlement
shall be agreed to without Buyer's consent.
Section 5.11. Employee Benefits.
(a) Buyer shall cause the Surviving Corporation to honor all written
employment, severance and termination agreements (including change in control
provisions) of the employees of Players and its Subsidiaries provided to Buyer
on or prior to the date of this Agreement and which are identified on Players
Disclosure Schedule 3.14(a).
(b) For purposes of determining eligibility for participation and vesting
under any employee benefit plan or arrangement of Buyer or the Surviving
Corporation, employees of Players and its Subsidiaries as of the Effective Time
shall receive service credit for service with Players and any of its
Subsidiaries to the same extent such service was granted under the Employee
Plans but not for purposes of determining benefit accruals. This Section 5.11
shall not obligate the Buyer or Surviving Corporation to provide duplicate
benefits to employees of Players and its Subsidiaries.
(c) Nothing in this Agreement is intended to create any right of
employment for any person or to create any obligation for Buyer or the Surviving
Corporation to continue any Plan of Players following the Effective Time.
(d) Players shall obtain and deliver to Buyer prior to the Closing Date a
written resignation letter from each of Howard A. Goldberg, Peter J. Aranow,
John Groom and Patrick Madamba, Jr. (the "Executives") which shall be effective
as of the Effective Time, and Buyer agrees that it will, and will cause the
Surviving Corporation to, (i) treat each such resignation as a "Termination Upon
a Change of Control" for purposes of the respective Employment Agreement or
Agreement with Players governing the terms of each Executive's employment and
severance from employment with Players, and for purposes of all related option
and other agreements affecting the terms and conditions of such Executive's
employment (collectively, the "Employment Agreements"), and (ii) pay at Closing
the amounts, and provide the benefits, required to be paid or provided to each
such Executive upon a Termination Upon a Change of Control under the applicable
Employment Agreement, in each case, without the need for any further action by
any Executive. To the extent permitted by and in accordance with the Employment
Agreements, the Buyer shall reduce the amounts required to be paid to each
Executive due to a Termination Upon Change of Control or otherwise (the "Reduced
Amount") to the extent necessary to avoid any limitation of the Buyer's federal
income tax deduction under Section 280G of the Code and the rulings and
regulations thereunder. The Reduced Amount shall represent the maximum
severance payment that an Executive may receive without causing such payment to
be subject to an excise tax and the limitations on deductions under Section 280G
of the Code. To the extent necessary to avoid any limitation on the Buyer's
deductions under Section 280G of the Code, after determination of the Reduced
Amount, the Buyer may also cause an Executive's "parachute payments" (within the
meaning of Code Section 280G) to be reduced to the Reduced Amount, after
consulting with each affected Executive to determine which payments shall be
reduced. At least ninety days before the Closing Date, a report (the
"Accountant's Report"), setting for the Reduced Amount, as described in Section
5.11(d) hereof, for each Executive, prepared by Ernst & Young (the "Accountant")
shall be delivered to Buyer for its review.
Section 5.12. Further Assurances and Actions.
(a) Subject to the terms and conditions herein, each of the parties hereto
agrees to use its reasonable best efforts to take, or cause to be taken, all
appropriate action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including, without
limitation, (i) using their respective reasonable best efforts to obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Entities and parties to contracts with each party hereto
as are necessary for consummation of the transactions contemplated by this
Agreement, and (ii) to fulfill all conditions precedent applicable to such party
pursuant to this Agreement.
(b) In case at any time after the Effective Date any further action is
necessary or desirable to carry out the purposes of this Agreement or to vest
the Surviving Corporation with full title to all properties, assets, rights,
approvals, immunities, franchises of any of the parties to the Merger, the
proper officers and/or directors of Buyer, Players and the Surviving Corporation
shall take all such necessary action.
(c) Notwithstanding the foregoing, if Buyer reasonably determines that it
is necessary or desirable to consummate the Merger or any of the other
transactions contemplated by this Agreement, Buyer (or any Subsidiary of Buyer)
or, at Buyer's request, Players shall commence an offer (the "Tender Offer") to
purchase all of the outstanding 10 % Senior Notes due 2005 (the "Senior Notes")
and a solicitation of consents to eliminate substantially all of the restrictive
covenants contained in the indenture governing the Senior Notes (collectively,
the "Tender Offer and Consent Solicitation"), which Tender Offer and Consent
Solicitation shall be commenced in sufficient time in advance of the Closing
Date so that the Tender Offer can be consummated on the Closing Date and shall
be on such terms as are reasonably designed to result in the acceptance of such
offer and consent by the holder of the Senior Notes representing at least 662/3%
of the aggregate principal amount of Senior Notes outstanding at the time the
Tender Offer and Consent Solicitation is consummated. If Players commences the
Tender Offer and Consent Solicitation, Players shall prepare, subject to advice
and comments of Buyer, an offer to purchase and consent solicitation for the
Senior Notes and forms of related letters of transmittal (collectively, the
"Offer to Purchase") and summary advertisement, as well as all other information
and exhibits (collectively, the "Offer Documents"). All mailings to the holder
of the Senior Notes in connection with the Tender Offer and Consent Solicitation
shall be subject to prior review, comment and approval of Buyer. Players will
use commercially reasonable efforts to cause the Offer Documents to be mailed to
the holders of the Senior Notes as promptly as practicable following receipt of
the request from Buyer to do so. Players agrees to promptly correct any
information in the Offer Documents that shall or have become false or misleading
in any material respect. Players shall waive any of the conditions to the
Tender Offer and Consent Solicitation and make any other changes in the terms
and conditions of the Tender Offer and Consent Solicitation as may be reasonably
requested by Buyer; provided that the Tender Offer and Consent Solicitation are
not required to be consummated unless the Merger is consummated. If Players
commences the Tender Offer and Consent Solicitation at Buyer's request pursuant
to this Section 5.12(c) and this Agreement is subsequently terminated under
circumstances in which Buyer is entitled to neither the Termination Fee pursuant
to Section 7.3(b) nor reimbursement of expenses pursuant to Section 7.3(c), then
Buyer shall reimburse Players for all its expenses related thereto.
Section 5.13. Rights Plan. Prior to the Effective Date and at Buyer's
request, Players shall take all necessary action (i) to redeem, for .005 per
Right (as defined in the Rights Agreement), all of the outstanding Rights under
the Rights Agreement, effective immediately prior to the Effective Time, and to
ensure that after such redemption (A) neither Buyer nor Merger Sub shall have
any obligations under the Rights or Rights Agreement and (B) none of the holders
of the Rights shall have any rights under the Rights or Rights Agreement or (ii)
to amend the Rights Agreement to provide that the Rights expire without any
payment in respect thereof immediately prior to the Effective Time.
Section 5.14. Buyer's Board of Directors. Buyer and Players shall use
their reasonable efforts to agree on two individuals to be appointed as
additional directors to serve on Buyer's Board of Directors commencing the
Effective Time. If, prior to the Effective Time, the CRC Transaction has not
closed, Players and Buyer shall agree on a third additional director to serve on
the Buyer's Board of Directors in the event the CRC Transaction ultimately fails
to close.
ARTICLE VI.
CONDITIONS TO MERGER
Section 6.1. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction or waiver by each party prior to the
Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have been
approved by the stockholders of Players in the manner required under the NRS and
the Articles of Incorporation of Players. The Buyer Stockholder Approval shall
have been received in accordance with the requirements of the NYSE.
(b) No Injunctions. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any order, executive order, stay, decree,
judgment or injunction or statute, rule, regulation which is in effect and which
has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
(c) Governmental Approvals. All Governmental Approvals required to
consummate the transactions contemplated by this Agreement shall have been
obtained, all such approvals shall remain in full force and effect, all
statutory waiting periods in respect thereof (including, without limitation,
under the HSR Act) shall have expired and no such approval shall contain any
conditions, limitations or restrictions which either party reasonably determines
in good faith will have or would reasonably be expected to have a Players
Material Adverse Effect or a Buyer Material Adverse Effect.
(d) Registration Statement. The Registration Statement shall have been
declared effective, and no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for such purpose
shall be pending before or threatened by the SEC.
(e) NYSE. The shares of Buyer Common Stock to be issued in the Merger
shall have been authorized for listing on the NYSE, subject to official notice
of issuance.
Section 6.2. Additional Conditions to Obligations of Players. The
obligation of Players to effect the Merger is subject to the satisfaction of
each of the following conditions prior to the Effective Time, any of which may
be waived in writing exclusively by Players:
(a) Representations and Warranties. The representations and warranties
of Buyer and Merger Sub set forth in this Agreement shall be true and correct in
all material respects (except for those qualified as to materiality or a Buyer
Material Adverse Effect, which shall be true and correct) as of the date of this
Agreement and, except to the extent such representations speak as of an earlier
date, as of the Closing Date as though made on and as of the Closing Date,
except for changes contemplated by this Agreement; provided, that
notwithstanding anything contained herein, no condition involving the accuracy
of representations and warranties made by Buyer shall be deemed not fulfilled if
the respects in which the representations and warranties are inaccurate, in the
aggregate, are not materially adverse to the business, financial condition or
results of operations of Buyer and its Subsidiaries, taken as a whole. Players
shall have received a certificate signed on behalf of Buyer by the Chief
Executive Officer and the Chief Financial Officer of Buyer to such effect.
(b) Performance of Obligations of Buyer. Buyer shall have performed in
all material respects all material obligations required to be performed by it
under this Agreement at or prior to the Closing Date, and Players shall have
received a certificate signed on behalf of Buyer by the Chief Executive Officer
and the Chief Financial Officer of Buyer to such effect.
(c) Buyer Acquisition. Buyer shall not have completed the CRC Transaction
on terms which are materially less advantageous to Buyer or Buyer's
stockholders than those contained in the form of agreement (including the forms
of agreements referenced therein) previously supplied to Players.
Section 6.3. Additional Conditions to Obligations of Buyer. The
obligations of Buyer and Merger Sub to effect the Merger are subject to the
satisfaction of each of the following conditions prior to the Effective Time,
any of which may be waived in writing exclusively by Buyer:
(a) Representations and Warranties. The representations and warranties of
Players set forth in this Agreement shall be true and correct in all material
respects (except for those qualified as to materiality or a Players Material
Adverse Effect, which shall be true and correct) as of the date of this
Agreement and, except to the extent such representations and warranties speak as
of an earlier date, as of the Closing Date as though made on and as of the
Closing Date, except for changes contemplated by this Agreement; provided that,
notwithstanding anything contained herein, no condition involving the accuracy
of representations and warranties made by Players shall be deemed not fulfilled
if the respects in which the representations and warranties are inaccurate, in
the aggregate, are not materially adverse to the business, financial condition
or results of operations of Players and its Subsidiaries, taken as a whole.
Buyer shall have received a certificate signed on behalf of Players by the Chief
Executive Officer and the Chief Financial Officer of Players to such effect.
(b) Performance of Obligations of Players. Players shall have performed
in all material respects all material obligations required to be performed by it
under this Agreement at or prior to the Closing Date. Buyer shall have received
a certificate signed on behalf of Players by the Chief Executive Officer and the
Chief Financial Officer of Players to each such effect.
(c) Financing. Buyer shall have obtained financing sufficient to allow
Buyer to complete the transactions contemplated in this Agreement.
ARTICLE VII.
TERMINATION AND AMENDMENT
Section 7.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time (with respect to Sections 7.1(b) through 7.1(k), by
written notice by the terminating party to the other party), whether before or
after approval of the matters presented in connection with the Merger by the
stockholders of the parties:
(a) by mutual written consent of Players and Buyer; or
(b) by either Buyer or Players if the Merger shall not have been
consummated by September 30, 1999 (the "Outside Date"); provided that either
Buyer or Players may extend the Outside Date to December 31, 1999 by providing
written notice thereof to the other party within five (5) business days prior to
and including September 30, 1999 if (i) the Merger shall not have been
consummated by such date because the requisite Governmental Approvals required
under Section 6.1(c) have not been obtained and are still being pursued, (ii)
the party requesting such extension has not violated any of its obligations
under this Agreement in a manner that was the cause of or resulted in the
failure of the Merger to occur on or before September 30, 1999, (iii) it is
reasonably probable, based on, among other things, the status of completed
regulatory filings, scheduled regulatory meetings and the advice of regulatory
counsel to such party, that the requisite Governmental Approvals will be
obtained within such extension period; and (iv) in the event such extension is
requested by Buyer, Buyer either (A) has furnished to Players a letter, dated as
of the date Buyer requests such extension, from Merrill Lynch to the effect that
Merrill Lynch is, as of the date of such letter, highly confident that Merrill
Lynch (or another nationally recognized investment banking firm of comparable
stature) will be able to raise funds sufficient for Buyer to meet all of its
financial obligations under this Agreement, or (B) has permanently waived the
condition to closing set forth in Section 6.3(c); provided further that the
right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause or resulted in the failure of the Merger to occur
on or before such date; or
(c) by either Buyer or Players if a court of competent jurisdiction or
other Governmental Entity shall have issued an order, decree or ruling or taken
any other final action not subject to appeal, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger; or
(d) by either Buyer or Players, if, at the Players Special Meeting
(including any adjournment or postponement), the requisite vote of the
stockholders of Players in favor of the approval and adoption of this Agreement
and the Merger shall not have been obtained; or
(e) by Buyer, if the Board of Directors of Players shall have (i)
withdrawn or modified its recommendation of this Agreement or the Merger, (ii)
recommended an Acquisition Proposal to the stockholders of Players, or (iii)
failed to reaffirm its recommendation of this Agreement and the Merger upon the
request of Buyer at any time, in the case of (i), (ii) and (iii) in accordance
with the proviso in Section 5.3; or
(f) by Players, in accordance with Section 5.3; provided that no
termination under this Section 7.1(f) shall be effective until (i) the
termination fee required by Section 7.3(b) shall be paid and (ii) at least three
Business Days shall have elapsed after delivery to Buyer of a written notice
from Players providing a complete and accurate description of material terms of
the Superior Proposal, including the identity of all parties thereto.
(g) by Buyer, upon breach of any material representation, warranty,
covenant or agreement on the part of Players set forth in this Agreement, or if
any representation or warranty of Players shall have become untrue, in either
case such that the conditions set forth in Section 6.3 would not be satisfied
("Terminating Players Breach"); provided, however, that, if such Terminating
Players Breach is curable by Players through best efforts within 30 days and for
so long as Players continues to exercise such best efforts during such 30 day
period, Buyer may not terminate this Agreement under this Section 7.1(g); or
(h) by Players, upon breach of any material representation, warranty,
covenant or agreement on the part of Buyer set forth in this Agreement, or if
any representation or warranty of Buyer shall have become untrue, in either case
such that the conditions set forth in Section 6.2 would not be satisfied
("Terminating Buyer Breach"); provided, however, that, if such Terminating
Buyer Breach is curable by Buyer through best efforts within 30 days and for so
long as Buyer continues to exercise such best efforts during such 30 day period,
Players may not terminate this Agreement under this Section 7.1(h); or
(i) by Players, if Buyer has not filed all required initial applications
and documents in connection with obtaining the Governmental Approvals within 60
days after the date of this Agreement, as further set forth in Section 5.7
hereof; provided, however, that Players shall not be permitted to terminate this
Agreement pursuant to this Section 7.1(i) if Buyer has filed all such required
initial applications and documents;
(j) by either Buyer or Players if, at the Buyer Special Meeting (including
any adjournment or postponement), the requisite vote of the stockholders of
Buyer in favor of the transactions contemplated by this Agreement shall not have
been obtained; or
(k) by Players pursuant to Section 2.1(a).
Neither Players nor Buyer shall have the right to terminate this Agreement based
on any findings of Buyer's Compliance Committee referenced in Section 4.3(a).
Section 7.2. Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of Buyer, Merger
Sub or Players, or their respective officers, directors, stockholders or
Affiliates, except as set forth in Section 7.3 and except that such termination
shall not limit liability for (i) a willful breach of this Agreement or (ii) a
breach by Buyer or Merger Sub of its obligations pursuant to the second sentence
of Section 5.7(a); provided that the provisions of this Section 7.2 and Section
7.3 of this Agreement and the Confidentiality Agreement shall remain in full
force and effect and survive any termination of this Agreement.
Section 7.3. Fees and Expenses.
(a) Except as set forth in this Section 7.3 and the last sentence of
Section 5.12(c), all fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses, whether or not the Merger is consummated. Fees and
expenses payable under this Section 7.3 to any party hereunder shall include all
costs of collection and interest from the date such payment is due at a rate per
annum of London Interbank Offered Rate plus 2%.
(b) Players shall pay Buyer a termination fee of $13,500,000 via wire
transfer of same-day funds on the date of the earliest to occur of the following
events:
(i) the termination of this Agreement by Buyer or Players pursuant
to Section 7.1(d), if an Acquisition Proposal involving Players shall have
been publicly announced and be pending at the time of the Special Meeting;
(ii) the termination of this Agreement by Buyer pursuant to
Section 7.1(e); or
(iii) the termination of this Agreement by Players pursuant to
Section 7.1(f).
Players' payment of a termination fee pursuant to this subsection shall
be the sole and exclusive remedy of Buyer against Players and any of its
Subsidiaries and their respective directors, officers, employees, agents,
advisors or other representatives with respect to the occurrences giving rise to
such payment; provided that this limitation shall not apply in the event of a
willful breach of this Agreement by Players.
(c) In addition to the provisions of Section 7.3(b), if (i) Buyer or
Players terminates the Agreement pursuant to Section 7.1(d), (ii) Buyer
terminates this Agreement pursuant to Section 7.1(g) or (iii) Players or Buyer
terminates this Agreement pursuant to Section 7.1(b) and the condition specified
in Section 6.1(c) shall not have been satisfied because of facts or
circumstances relating to Players, its employees or operations not previously
disclosed to Buyer by Players, Players shall immediately thereafter reimburse
Buyer and Merger Sub all fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby up to an amount equal to
$1,000,000 plus, in the case of (i) above, a termination fee of $3,000,000;
provided, further, that Players shall reimburse Buyer and Merger Sub one-half of
all fees (i) incurred by Buyer in respect of Buyer's financing under this
Agreement and (ii) approved in writing by Players prior to the time incurred.
(d) If (i) Players terminates this Agreement pursuant to Section 7.1(i),
(ii) Buyer or Players terminates this Agreement pursuant to Section 7.1(j),
(iii) Players terminates this Agreement pursuant to Section 7.1(h) or
(iv) Players or Buyer terminates this Agreement pursuant to Section 7.1(b) and
the condition specified in Section 6.1(c) shall not have been satisfied because
of facts or circumstances relating to Buyer, its employees or operations, Buyer
shall immediately thereafter reimburse Players all fees and expenses incurred in
connection with this Agreement and the transactions contemplated hereby up to an
amount equal to $1,000,000 plus, in the case of (ii) above, a termination fee of
$3,000,000.
(e) If this Agreement is terminated by either Buyer or Players pursuant to
Section 7.1(b), and all conditions to closing other than that contained in
Section 6.3(c) are or would have been satisfied (or, with respect to the
conditions under Section 6.2, are capable of being waived by Players) at a
closing held on the date of termination, Buyer shall pay Players a termination
fee of $3,000,000 and shall reimburse Players all fees and expenses incurred in
connection with this Agreement and the transactions contemplated hereby up to an
amount equal to $1,000,000.
Section 7.4. Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of Players, but, after any such approval, no
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 7.5. Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained here. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE VIII.
MISCELLANEOUS
Section 8.1. Nonsurvival of Representations, Warranties and Agreements.
None of the representations, warranties, covenants and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for the agreements contained in Sections 1.4,
1.5, 1.6, 2.1, 2.2, 2.3, 5.9, and 5.11 and Article VIII. The Confidentiality
Agreement shall survive the execution and delivery of this Agreement.
Section 8.2. Notices. Any and all notices, demands or other
communications required or desired to be given hereunder by any party shall be
in writing and shall be validly given or made to another party if served
personally, or by facsimile or air courier, or deposited in the United States
mail, certified or registered, postage prepaid, return receipt requested. If
such notice, demand or other communications be served personally, or by
facsimile or air courier, service shall be conclusively deemed made at the time
of such service. If such notice, demand or other communications be given by
mail, it shall be conclusively deemed given three (3) days after the deposit
thereof in the United States mail, addressed to the party to whom such notice,
demand or other communication is to be given as hereinafter set forth:
if to Players, to
Players International, Inc.
Attention: Chief Executive Officer
1300 Atlantic Avenue, Suite 800
Atlantic City, NJ 08401
with a copy to
Morgan, Lewis & Bockius LLP
Attention: Peter P. Wallace, Esq.
300 South Grand Avenue, 22nd Floor
Los Angeles, CA 90071
if to Buyer or Merger Sub, to
Jackpot Enterprises, Inc.
Attention: Don R. Kornstein
1110 Palms Airport Drive
Las Vegas, NV 89119
with a copy to:
Camhy Karlinsky & Stein LLP
Attention: Alan I. Annex, Esq.
1740 Broadway, 16th Floor
New York, NY 10019
Shearman & Sterling
Attention: John A. Marzulli, Jr., Esq.
599 Lexington Avenue
New York, NY 10022
Section 8.3. Interpretation. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
phrases "the date of this Agreement," "the date hereof," and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to
February 8, 1999.
Section 8.4. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 8.5. Entire Agreement; No Third Party Beneficiaries. This
Agreement and all documents and instruments referred to herein (a) constitute
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (b) except as provided in Section 5.9, are not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder;
provided that the Confidentiality Agreements shall survive the execution and
delivery of this Agreement. Each party hereto agrees that, except for the
representations and warranties contained in this Agreement, none of Buyer,
Merger Sub or Players makes any other representations or warranties, and each
hereby disclaims any other representations and warranties made by itself or any
of its officers, directors, employees, agents, financial and legal advisors or
other representatives, with respect to the execution and delivery of this
Agreement or the transactions contemplated hereby, notwithstanding the delivery
or disclosure to any of them or their respective representatives of any
documentation or other information with respect to any one or more of the
foregoing.
Section 8.6. Governing Law. Except to the extent that Nevada law applies
to the Merger as a matter of law, this Agreement shall be governed and
construed, and the obligations, rights and remedies of the parties hereunder
shall be determined, in accordance with the laws of the State of New York
without reference to the conflicts of law or choice of law doctrine of such
state.
Section 8.7. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party, except that Merger Sub may assign its rights and
obligations hereunder to any direct or indirect wholly-owned subsidiary of
Buyer; provided that no such assignment shall relieve Buyer of its obligations
hereunder. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
Section 8.8. Severability; Enforcement. Except to the extent that the
application of this Section 8.8 would have a Buyer Material Adverse Effect with
respect to Buyer or a Players Material Adverse Effect with respect to Players,
the invalidity of any portion hereof shall not affect the validity, force or
effect of the remaining portions hereof. If it is ever held that any covenant
hereunder is too broad to permit enforcement of such covenant to its fullest
extent, each party agrees that a court of competent jurisdiction may enforce
such covenant to the maximum extent permitted by law, and each party hereby
consents and agrees that such scope may be judicially modified accordingly in
any proceeding brought to enforce such covenant.
Section 8.9. Specific Performance. Except as provided in Sections 7.3(b),
the parties hereto agree that the remedy at law for any breach of this Agreement
will be inadequate and that any party by whom this Agreement is enforceable
shall be entitled to specific performance in addition to any other appropriate
relief or remedy. Such party may, in its sole discretion, apply to a court of
competent jurisdiction for specific performance or injunctive or such other
relief as such court may deem just and proper in order to enforce this Agreement
or prevent any violation hereof and, to the extent permitted by applicable laws,
each party hereto waives any objection to the imposition of such relief.
Signatures Begin Next Page<PAGE>
IN WITNESS WHEREOF, Buyer, Inc., Buyer Sub Corp. and Players
International, Inc. have caused this Agreement to be signed by their respective
duly authorized officers as of the date first written above.
JACKPOT ENTERPRISES, INC.
/s/ Don R. Kornstein
___________________________________
By: Don R. Kornstein
Its: Chief Executive Officer
JEI MERGER CORP.
/s/ Don R. Kornstein
___________________________________
By: Don R. Kornstein
Its: Chief Executive Officer
PLAYERS INTERNATIONAL, INC.
/s/ Howard A. Goldberg
__________________________________
By: Howard A. Goldberg
Its: Chief Executive Officer
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BETWEEN
JACKPOT ENTERPRISES, INC.
AND
CRC HOLDINGS, INC.
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of February
17, 1999, between Jackpot Enterprises Inc., a Nevada corporation whose address
is 1110 Palms Airport Drive, Las Vegas, Nevada 89119-3730 ("JEI"), and CRC
Holdings, Inc., a Florida corporation whose address is 3250 Mary Street, Miami,
Florida 33133 ("CRC"). JEI in its capacity as the surviving corporation is
herein sometimes called the "Surviving Corporation," and JEI and CRC are herein
sometimes called the "Constituent Corporations."
W I T N E S S E T H :
WHEREAS, the Boards of Directors of JEI and CRC have each determined
that it is advisable and in the best interests of their respective stockholders
for JEI, following the consummation of the Spinoff (as defined below) and
subject to certain consents and approvals, including but not limited to
approvals by certain appropriate governmental gaming regulatory authorities, to
acquire the businesses of CRC which CRC shall continue to own immediately
following the Spinoff (the "Acquired Businesses") and to effect such acquisition
through a merger of CRC with and into JEI (the "Merger") following the Spinoff;
WHEREAS, prior to Closing (as such term is defined in Section 1.04
below) CRC intends to (i) contribute the Spinco Businesses (as defined in the
Reorganization Agreement referred to below) to a Florida limited liability
company to be formed prior to the Closing ("Spinco"), and (ii) to distribute all
of the ownership interests in Spinco pro rata to the stockholders of CRC (the
"Spinoff"), all in accordance with that certain Reorganization Agreement between
CRC and Spinco substantially in the form attached hereto as Exhibit A (the
"Reorganization Agreement");
WHEREAS, concurrently with the execution of this Agreement and as a
condition and inducement to JEI's willingness to enter into this Agreement, the
three largest stockholders of CRC have entered into an agreement with JEI of
even date herewith (the "CRC Stockholders Agreement") pursuant to which such
stockholders have agreed to vote their shares of CRC Common Stock (as defined in
Section 2.01) in favor of the CRC Merger Proposal (as defined in Section 3.04),
and any other matter which may require approval by the stockholders of CRC in
order to consummate the transactions contemplated hereby.
WHEREAS, concurrently with the execution of this Agreement and as a
condition and inducement of CRC's willingness to enter into this Agreement,
certain stockholders of JEI have entered into an agreement with CRC of even date
herewith (the "JEI Stockholders Agreement") pursuant to which such stockholders
have agreed to vote their shares of JEI Common Stock (as defined in Section
2.01) in favor of the JEI Merger Proposal (as defined in Section 3.04), and any
other matter which may require approval by the stockholders of JEI in order to
consummate the transactions contemplated hereby.
WHEREAS, for United States Federal income tax purposes, it is intended
that the Merger qualify as a reorganization under the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended (together with the rules
and regulations promulgated thereunder, the "Code"), unless the parties agree to
modify the structure of the transaction in accordance with Section 1.08 of this
Agreement, in which case the parties intend that Section 351 of the Code apply
to the transaction; and
WHEREAS, JEI and CRC desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
I. THE MERGER.
1.01 The Merger.
At the Effective Time (as defined in Section 1.03), upon the terms and
subject to the conditions of this Agreement, CRC shall be merged with and into
JEI in accordance with the Nevada Revised Statutes ("NRS") and the Florida
Business Corporation Act (the "FBCA"). JEI shall be the surviving corporation
in the Merger. As a result of the Merger, the outstanding shares of capital
stock of CRC shall be converted or canceled, as the case may be, in the manner
provided in Article II.
1.02 Spinoff.
Immediately prior to the consummation of the Merger, CRC shall
contribute to Spinco the Spinco Businesses (the "Contribution"), in exchange for
all of the ownership interests in Spinco (the "Spinco Interests"). Immediately
following the Contribution, CRC shall distribute pro rata to its stockholders
and holders of CRC Options (as defined in Section 2.03(a)) all of the issued and
outstanding Spinco Interests. The businesses of CRC which CRC will continue to
own following the Spinoff (constituting the Acquired Businesses), including the
assets and liabilities in respect thereof, are listed on Schedule 1.02
1.03 Effective Time.
Subject to the terms and conditions hereof, on the Closing Date, CRC
and JEI shall file (a) Articles of Merger (the "Florida Articles") in the form
attached hereto as Exhibit 1.03(a) with the Secretary of State of the State of
Florida in accordance with the relevant provisions of the FBCA and (b) Articles
of Merger (the "Nevada Articles") in the form attached hereto as Exhibit 1.03(b)
with the Secretary of State of the State of Nevada in accordance with the
relevant provisions of the NRS. A form of the Nevada Articles, to the extent
practicable, shall be precleared with the Secretary of State of the State of
Nevada prior to the Closing Date and a form of the Florida Articles, to the
extent practicable, shall be precleared with the Secretary of State of the State
of Florida prior to the Closing Date. The Merger shall be effective at such
time as provided in the Nevada Articles (the "Effective Time") but in no event
later than the Release Time (as hereinafter defined).
1.04 Closing.
The closing of the Merger (the "Closing") will take place at the
offices of Camhy Karlinsky & Stein LLP, 1740 Broadway, New York, New York 10019-
4315, or at such other place as the parties hereto mutually agree, on a date and
at a time to be specified by the parties, which shall in no event be later than
10:00 a.m., local time, on the next business day following satisfaction of the
condition set forth in Section 5.01(a), provided that the other closing
conditions set forth in Article V have been satisfied or, if permissible, waived
in accordance with this Agreement, or on such other date as the parties hereto
mutually agree (the "Closing Date"). At the Closing there shall be delivered to
JEI and CRC the certificates and other documents and instruments required to be
delivered under Article V.
1.05 Directors of the Surviving Corporation.
At the Effective Time, each person who is a director of JEI
immediately prior to the Effective Time and each person who is listed on
Schedule 1.05 hereto shall be a director of the Surviving Corporation.
1.06 Certificate of Incorporation and Bylaws.
The articles of incorporation and Bylaws of JEI as in effect
immediately prior to the Effective Time shall be the articles of incorporation
and Bylaws of the Surviving Corporation until thereafter amended in accordance
with applicable law.
1.07 Effects of the Merger.
The separate corporate existence of JEI, as the Surviving Corporation,
shall continue unimpaired by the Merger. From and after the Effective Time, the
Surviving Corporation shall possess all the rights, privileges, powers,
immunities and franchises and be subject to all of the restrictions,
disabilities and duties of the Constituent Corporations, all as provided under
the NRS. The Surviving Corporation shall, except as otherwise specifically
provided herein, succeed to all the properties and assets of the Constituent
Corporations and to all debts, choses in action and other interests of, due to
or belonging to the Constituent Corporations with the effect and as more fully
set forth in Section 92A.250 of the NRS.
1.08 Modification of Structure.
Following execution of this Agreement and at any time prior to the
mailing of the Joint Proxy Statement (as defined in Section 4.01(i)), if
mutually agreed to by JEI and CRC, the parties may change the form of
transaction pursuant to which JEI will acquire the Acquired Businesses to a
transaction to which Section 351 of the Code will apply, and the parties agree,
in such circumstances, to use their best efforts to enter into an amendment to
this Agreement consistent with such change.
II. STATUS AND CONVERSION OF SECURITIES.
2.01 Conversion of CRC Common Stock and CRC Options.
(a) Share Merger Consideration. Except for Dissenting Shares (as
defined in Section 2.05 below) and except as provided in paragraph (c) of this
Section 2.01, each holder of shares of common stock, par value $0.005 per share,
of CRC ("CRC Common Stock") and each holder of CRC Options issued and
outstanding at the Effective Time shall, by virtue of the Merger and without any
action on the part of any such holder, be entitled to receive a portion of the
Share Merger Consideration as set forth in the last sentence of this paragraph,
except that shares of CRC Common Stock held in CRC's treasury or owned by JEI at
the Effective Time shall be canceled without payment of any consideration
thereof. The "Share Merger Consideration" means an aggregate of 3,516,530
shares of common stock, par value $.01 per share, of JEI ("JEI Common Stock"),
together with any and all rights attached thereto or associated therewith,
including but not limited to the rights to purchase Series A Junior Preferred
Stock of JEI as set forth in that certain Rights Agreement dated as of July 11,
1994, subject to (i) adjustment by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination, exchange or similar
stock event, (ii) reduction for any adjustment effected pursuant to Section 2.02
and (iii) a holdback of such number of shares of JEI Common Stock that would be
issuable in respect of all Dissenting Shares if such Dissenting Shares were
ultimately deemed to be converted into the right to receive the portion of the
Share Merger Consideration attributable to such Dissenting Shares (the "Withheld
Shares"). The Share Merger Consideration shall be distributed in accordance
with instructions delivered by CRC to JEI not less than three (3) business days
prior to the Closing Date. The Withheld Shares shall be distributed or canceled
as provided in paragraph (d) of this Section 2.01.
(b) Exchange of CRC Common Stock Pledged to Carnival for JEI
Assignable Notes. All shares of CRC Common Stock currently pledged by the
record holders of such shares to Carnival Corporation ("Carnival") to secure
notes payable by such holders to Carnival (collectively, the "CCL Notes") will,
by virtue of the Merger and without any action on the part of such record
holders, be exchanged for promissory notes of JEI (the "JEI Assignable Notes")
in the aggregate principal amount of $13,208,441 and having the terms set forth
on Exhibit 2.01(b). Such JEI Assignable Notes have been assigned by the holders
who will receive them, effective immediately following the Effective Time, to
Carnival in partial satisfaction of the CCL Notes. The aggregate principal
amount of the JEI Assignable Notes shall be subject to reduction in the
aggregate principal amount thereof for any adjustment effected pursuant to
Section 2.02. Upon the issuance by JEI (or any affiliate) for cash, pursuant to
Rule 144A of not less than $175,000,000 of indebtedness ("144A Notes") to
finance the Players Merger (as defined in Section 3.02(a)) as contemplated by
the merger agreement related thereto, JEI shall, at its option, either (i)
exchange the JEI Assignable Notes and the JEI Note (as defined in Section
2.01(c)) for an equal principal amount of 144A Notes (to be supplemented, if the
issue price of such 144A Notes is at a discount to the face amount thereof
(without regard to any applicable underwriting discount), by additional 144A
Notes having an aggregate face amount equal to the discount in respect of 144A
Notes having a face amount equal to the principal amount of the JEI Assignable
Notes) and concurrent therewith pay to Carnival all accrued and unpaid interest
under the JEI Assignable Notes and the JEI Note; or (ii) pay in cash to Carnival
all principal and accrued and unpaid interest on the JEI Assignable Notes and
the JEI Note.
(c) Exchange of CRC Common Stock held by Carnival for the JEI Note.
All shares of CRC Common Stock registered in the name of Carnival at the
Effective Time shall, by virtue of the Merger and without any action on the part
of Carnival, be exchanged for a promissory note of JEI in the principal amount
of $12,601,156 and having the same terms and conditions as the JEI Assignable
Notes (the "JEI Note", and, together with the Share Merger Consideration and the
JEI Assignable Notes, the "Merger Consideration"), subject to reduction in the
aggregate principal amount thereof for any adjustment effected pursuant to
Section 2.02.
(i) Distribution or Cancellation of Withheld Shares. To the
extent any holder (a "Dissenting Holder") of Dissenting Shares, following the
Effective Time, withdraws a demand for payment, fails to comply fully with the
requirements of Florida law, or otherwise fails to establish the right of such
Dissenting Holder to be paid the value of such Dissenting Holder's Dissenting
Shares under Florida law, that portion of the Withheld Shares relating to such
Dissenting Shares shall thereupon be delivered to such Dissenting Holder. In
the event a Dissenting Holder is paid the value of the Dissenting Shares, the
portion of the Withheld Shares attributable to such Dissenting Shares shall
thereupon be canceled.
2.02 Adjustments to the Merger Consideration.
(a) Adjustment Based on Assumed Assets and Liabilities.
(i) CRC has delivered to JEI an unaudited balance sheet of the
Acquired Businesses as of November 30, 1998 (the "Initial November 30 Balance
Sheet"), a copy of which is included as part of the CRC Financial Statements
attached as Schedule 4.01(e). The Initial November 30 Balance Sheet has been
prepared in accordance with generally accepted accounting principles ("GAAP"),
provided that the selection of certain categories of assets and liabilities to
be included and/or omitted from the Initial November 30 Balance Sheet may not be
in accordance with GAAP. Pursuant to Section 3.01(f)(i), CRC will deliver an
updated balance sheet of the Acquired Businesses as of November 30, 1998 (the
"Updated November 30 Balance Sheet") which shall have been prepared based on the
audited financial statements of the Acquired Businesses to be delivered pursuant
to Section 3.01(f), as adjusted on a basis consistent with the Initial November
30 Balance Sheet. The parties acknowledge and agree that, for purposes of
preparing the Initial November 30 Balance Sheet and Updated November 30 Balance
Sheet, (A) the amount accrued for redemption of warrants to purchase Common
Stock of Louisiana Casino Cruises, Inc., a Louisiana corporation ("LCC"), will
be fixed at $4,376,000, notwithstanding any determination after the date hereof
that the actual amount to be accrued or expended is more or less than that
amount and (B) the maximum amount which CRC may pay or accrue for bonuses for
the fiscal year ended November 30, 1998 shall not exceed $700,000. Subject to
the procedures set forth in Section 2.02(a)(ii) below in the event of any
dispute with respect to any item on the Updated November 30 Balance Sheet, if
the net worth of the Acquired Businesses as reflected in the Updated November 30
Balance Sheet is less than $74,000 (i.e., the net worth of the Acquired
Businesses as reflected on the Initial November 30 Balance Sheet), then the
Merger Consideration shall be reduced as follows:
(A) the Share Merger Consideration shall be reduced to the
number of shares of JEI Common Stock equal to the product of 55.758% and the
quotient of (x) the amount by which the net worth of the Acquired Businesses at
November 30, 1998 is less than $74,000 (the "Net Worth Deficit") and (y) $9.25.
(B) The aggregate principal amount of the JEI Assignable
Notes shall be reduced by an amount equal to 22.641% of the Net Worth Deficit.
(C) The aggregate principal amount of the JEI Note shall be
reduced by an amount equal to 21.601% of the Net Worth Deficit.
(ii) Within 30 days following receipt of the Updated November 30
Balance Sheet from CRC, JEI shall notify CRC in writing whether it accepts or
disputes the amounts set forth on said balance sheet. If the Updated November
30 Balance Sheet is acceptable to JEI, it shall be utilized to determine whether
an adjustment to the Merger Consideration pursuant to this Section 2.02(a) is
necessary and, if so, the amount of such adjustment. If JEI disputes any
amounts set forth on said balance sheet, it shall state its specific objections
in its notice, which objections must be made in good faith. If the parties and
their advisors cannot resolve the objections of JEI within 30 days following
delivery by JEI of its objections to CRC, then the Updated November 30 Balance
Sheet must be submitted to a nationally recognized accounting firm acceptable to
both CRC and JEI, which shall conduct a review of the items in said balance
sheet which are in dispute and determine whether, in each instance, the amount
of any item as proposed by CRC or JEI is more appropriate. Such determination
shall be final and binding on the parties hereto.
(iii) Notwithstanding (i) and (ii) above, the parties
acknowledge that any reduction in the line items entitled "Deferred Income
Taxes" on the Initial November 30 Balance Sheet which is reflected in the
Updated November 30 Balance Sheet shall, in lieu of a reduction in the Merger
Consideration, be offset, on a dollar-for-dollar basis, by a reduction in the
line items entitled "Due to CRC" on the Updated November 30 Balance Sheet
(referred to hereinafter as the "Due to CRC Line Items").
(iv) The parties further agree and acknowledge that any tax
savings realized by the Acquired Businesses from and after December 1, 1998
through the Closing Date which are attributable to expenses of the Spinco
Businesses (which expenses shall, for this purpose, be deemed allocated between
the Acquired Businesses and the Spinco Businesses in accordance with Schedule
3.01(f) attached hereto) shall be paid by JEI to Spinco within 10 business days
following the date on which the tax return for the period during which such tax
savings have been realized is filed by JEI; provided, however, if the Acquired
Businesses would not have generated taxable income during the period between
December 1, 1998 and the Closing Date without giving effect to the deductions
attributable to the expenses of the Spinco Businesses during that period, JEI
will have no obligation to pay Spinco pursuant to this clause (iv).
(b) Adjustments Based on Pre-November 30, 1998 Liabilities Not
Reflected on Updated November 30 Balance Sheet.
(i) In the event that, subsequent to delivery of the Updated
November 30 Balance Sheet for the Acquired Businesses and prior to the Closing,
CRC notifies JEI as set forth in clause (ii) below of the existence of
liabilities (whether absolute, accrued, contingent, estimated, deferred, fixed
or otherwise) of the Acquired Businesses, or an impairment of the carrying value
of any asset of the Acquired Businesses, relating to or arising out of events
or circumstances occurring on or before November 30, 1998 and which, had such
events and circumstances been known at the time of preparation of the Updated
November 30 Balance Sheet, would have been required, in accordance with GAAP as
modified to the extent provided in Section 2.02(a)(i) above, to have been
reflected or reserved against on the Updated November 30 Balance Sheet, there
shall be a reduction in the Merger Consideration at the Closing for the amount
of any Net Worth Deficit, if any, caused by such liability or impairment of
value or, if the Updated November 30 Balance Sheet prior to this adjustment
already reflected a Net Worth Deficit, by the amount of such liability or
impairment of value. Any such adjustment shall be determined in accordance with
the formulas set forth in Section 2.02(a) above for determining a reduction in
the Merger Consideration.
(ii) CRC shall notify JEI in writing if CRC becomes aware of any
liability or impairment of value that could result in an adjustment under
Section 2.02(b)(i). Such notice shall specify in reasonable detail the nature
and amount of such liability or impairment of value and the amount of the
proposed adjustments to the Share Merger Consideration, the aggregate principal
amount of the JEI Assignable Notes and the aggregate principal amount of the JEI
Note as a result thereof. Within 15 days following receipt of such notification,
JEI shall notify CRC in writing whether it accepts or disputes the proposed
adjustment. If JEI disputes the amount of the proposed adjustment, it shall
state its specific objection in its notice, which objection must be made in good
faith. If the parties cannot resolve such objection, the parties shall submit
their dispute to a nationally recognized accounting firm acceptable to JEI and
CRC (which shall be the same firm, if any, selected pursuant to Section
2.01(a)(ii)), which shall determine whether the adjustments are appropriate or
not. Such determination shall be binding on the parties hereto.
(c) Adjustments Based on Payments Made in Respect of Liabilities of
the Spinco Businesses Prior to Closing and Transaction Expenses.
(i) In the event that liabilities of the Spinco Businesses are
paid, discharged or otherwise satisfied by CRC or any of the CRC Acquired
Subsidiaries using assets of the Acquired Businesses from and after December 1,
1998, including cash from the operations of the Acquired Businesses from and
after December 1, 1998, there shall be a reduction in the Merger Consideration
as follows:
(A) The number of shares of JEI Common Stock constituting
the Share Merger Consideration shall be reduced by 55.758% of the quotient of
(x) the amount of all assets of the Acquired Businesses used to pay, discharge
or otherwise satisfy liabilities of the Spinco Businesses (the "Diverted Asset
Amount") and (y) $9.25.
(B) The aggregate principal amount of the JEI Assignable
Notes shall be reduced by an amount equal to 22.641% of the Diverted Asset
Amount.
(C) The aggregate principal amount of the JEI Note shall be
reduced by an amount equal to 21.601% of the Diverted Asset Amount.
The Diverted Asset Amount shall be determined as follows. Within five business
days prior to the Closing Date, the chief financial officer of CRC shall deliver
to JEI an income statement for the Acquired Businesses for the period from
December 1, 1998 through the last day of the most recent month preceding the
Closing Date for which such statements are available (the "Pre-Closing Income
Statement"), and a balance sheet for the Acquired Businesses as of the end of
such month (the "Pre-Closing Balance Sheet"), along with a certification that
(x) such Pre-Closing Income Statement and Pre-Closing Balance Sheet were
prepared in accordance with the books and records of CRC and the CRC Acquired
Subsidiaries and on a basis consistent with the Initial November 30 Balance
Sheet (without regard to any changes in accounting principles) and (y)
accurately reflect the items shown thereon. In addition, on the Closing Date,
CRC and JEI shall estimate the amount, if any, of assets of the Acquired
Businesses which have been used to satisfy any liabilities of the Spinco
Businesses since the date of the Pre-Closing Balance Sheet (the "Stub Period
Diverted Asset Amount"). The Diverted Asset Amount shall be equal to the sum of
(i) the amount, if any, by which net income for the period from December 1, 1998
to the date of the Pre-Closing Balance Sheet exceeds the increase in
"Stockholders' Equity" on the Pre-Closing Balance Sheet compared to
"Stockholders' Equity" on the Updated November 30 Balance Sheet (or, if there is
a net loss for the period from December 1, 1998 to the date of the Pre-Closing
Balance Sheet, the amount, if any, by which the net loss for such period is less
than the decrease in "Stockholders' Equity" on the Pre-Closing Balance Sheet
compared to "Stockholders' Equity" on the Updated November 30 Balance Sheet)
plus (ii) the Stub Period Diverted Asset Amount. Notwithstanding the foregoing,
the parties acknowledge and agree that (I) the calculation of Diverted Asset
Amount shall be made without regard to severance benefits paid to certain CRC
personnel on or prior to the Closing Date up to the amounts set forth in
Schedule 2.02(c) hereto, which payments (from whatever source) will in no event
result in a reduction to the Merger Consideration and (II) with respect to any
Diverted Asset Amount in excess of $800,000, in lieu of the reduction of the
Merger Consideration that would be effected pursuant to this subparagraph
(c)(i), CRC shall have the option (which option shall be exercised by written
notice delivered to JEI not less than three (3) business days prior to the
Closing Date) to have the Due to CRC Line Items reduced by the amount of such
excess; provided that the amount of such reduction, plus the amount of all other
reductions in the Due to CRC Line Items which CRC elects to make as permitted
hereunder, shall not cause the Due to CRC Line Items to be reduced below zero;
provided, further, that if any amount of such excess remains after the Due to
CRC Line Items have been reduced to zero, CRC shall have the further option to
satisfy such excess with cash.
(ii) In the event the aggregate expenses of the Merger and the
other transactions contemplated by this Agreement incurred by CRC and the CRC
Acquired Subsidiaries (inclusive of the amount reserved on the Updated November
30 Balance Sheet in respect thereof) exceed $800,000, there shall be a reduction
at Closing in the Merger Consideration as follows:
(A) The number of shares of JEI Common Stock constituting
the Share Merger Consideration shall be reduced by 55.758% of the quotient of
(y) the amount of expenses in excess of $800,000 (the "Excess Expenses") and (z)
$9.25.
(B) The aggregate principal amount of the JEI Assignable
Notes shall be reduced by an amount equal to 22.641% of the Excess Expenses.
(C) The aggregate principal amount of the JEI Note shall be
reduced by an amount equal to 21.601% of the Excess Expenses.
For purposes of this Section 2.02(c)(ii), CRC agrees that all expenses incurred
by CRC and the CRC Acquired Subsidiaries related to matters arising from the
merger of CHC International, Inc. with and into Patriot American Hospitality
Operating Company and the transactions consummated in connection therewith, or
in connection with the formation of Spinco and development of the Spinco
Businesses prior to the Effective Time, shall not be considered expenses of the
Merger. In lieu of the reduction of the Merger Consideration that would be
effected pursuant to this subparagraph (c)(ii), CRC shall have the option (which
option shall be exercised by written notice delivered to JEI not less than three
(3) business days prior to the Closing Date) to have the Due to CRC Line Items
reduced by the amount of such Excess Expenses; provided that the amount of such
reduction, plus the amount of all other reductions in the Due to CRC Line Items
which CRC elects to make as permitted hereunder, shall not cause the Due to CRC
Line Items to be reduced below zero; provided, further, that if any amount of
such Excess Expenses remains after the Due to CRC Line Items have been reduced
to zero, CRC shall have the further option to satisfy such Excess Expenses with
cash.
(d) Adjustment Based on Tax Liabilities Attributable to Spinoff.
(i) In the event there shall be a tax liability to CRC as a
result of the Contribution and Spinoff (the "Spinoff Tax Liability") as
calculated below, there shall be an adjustment at the Closing in the Merger
Consideration as follows:
(A) The number of shares of JEI Common Stock constituting
the Share Merger Consideration shall be reduced by 55.758% of the quotient of
(x) the Spinoff Tax Liability and (y) $9.25.
(B) The aggregate principal amount of the JEI Assignable
Notes shall be reduced by an amount equal to 22.641% of the Spinoff Tax
Liability.
(C) The aggregate principal amount of the JEI Note shall be
reduced by an amount equal to 21.601% of the Spinoff Tax Liability.
(ii) The Spinoff Tax Liability shall be calculated in accordance
with the following procedures:
(A) No later than 45 days prior to the expected Closing
Date, PricewaterhouseCoopers LLP ("PWC") shall make an estimate of the fair
market value of the Spinco Businesses as of the date of the Spinoff, taking into
account in the valuation the best estimate of the Spinco Businesses' share of
the expenses attributable to the transactions contemplated by this Agreement.
(B) PWC shall estimate the tax items of CRC which are
available to reduce such liability (including operating losses, net operating
and capital loss carryovers) (collectively, the "Tax Attributes"). The Tax
Attributes shall be calculated without taking into account the operations of the
Acquired Businesses for periods after November 30, 1998.
(C) PWC shall then calculate the difference between (i) the
estimated value of the Spinco Businesses and (ii) CRC's adjusted tax basis in
the stock of Spinco (assuming that the Contribution is a tax free transaction)
at such time and then subtract from that difference the Tax Attributes. It
shall then multiply such remainder, if any, by the applicable Federal, state,
foreign and local tax rates applicable to income of CRC, and the product shall
be the tentative Spinoff Tax Liability.
(D) The foregoing calculation shall be submitted in writing
by PWC (the "PWC Report") to JEI. JEI shall then have the opportunity to review
the determination of the tentative Spinoff Tax Liability.
(E) Within 15 business days of the receipt of the PWC
Report, JEI shall notify CRC as to whether it accepts or disputes the tentative
Spinoff Tax Liability reflected in the PWC Report. JEI must make such
determination in good faith.
(F) If the tentative Spinoff Tax Liability is acceptable to
JEI, it shall be deemed to be the Spinoff Tax Liability.
(G) If JEI disputes the tentative Spinoff Tax Liability, it
shall state its specific objections in its notice, which objections must be made
in good faith. If the parties and their respective advisors cannot resolve the
objections of JEI, then the PW Report must be submitted to a nationally
recognized accounting firm acceptable to both JEI and CRC (which shall be the
same firm, if any, selected pursuant to Section 2.02(a)(ii)). Such firm shall
then submit its determination of the Spinoff Tax Liability, which determination
will be binding on both parties. In lieu of the reduction of the Merger
Consideration that would be effected pursuant to this paragraph (d), CRC shall
have the option (which shall be exercised by written notice delivered to JEI not
less than three (3) business days prior to the Closing Date) to have the Due to
CRC Line Items reduced by the amount of such Spinoff Tax Liability; provided
that the amount of such reduction, along with the amount of all other reductions
to the Due to CRC Line Items as permitted hereunder, shall not cause the Due to
CRC Line Items to be reduced below zero; provided, further, if any amount of
such Spinoff Tax Liability remains after the Due to CRC Line Items have been
reduced to zero, CRC shall have the further option to satisfy such excess with
cash.
(e) No Reduction in Merger Consideration. Notwithstanding anything
in this Section 2.02 to the contrary, there shall not be an adjustment in any of
the Share Merger Consideration, the aggregate principal amount of the JEI
Assignable Notes or the aggregate amount of the JEI Note if and to the extent
the liability causing such adjustment is paid, discharged or assumed on or prior
to the Closing by Spinco or any stockholder of CRC (without liability to JEI or
any of the Acquired Businesses following the Effective Time and subject, in the
case of an assumption only, to Spinco or such assuming stockholder, as the case
may be, agreeing in writing to indemnify JEI with respect thereto) or is
otherwise paid or discharged from funds which are not assets of the Acquired
Businesses or funds other than revenues generated by operations of the Acquired
Businesses, in either case from and after December 1, 1998.
2.03 Stock Options.
(a) Schedule 2.03 sets forth a list of each outstanding
subscription, option, warrant, right (including "phantom" stock rights),
preemptive right or other contract, commitment, understanding or arrangement,
including any right of conversion or exchange under any outstanding security,
instrument or agreement (collectively, "Options"), obligating CRC to issue or
sell any shares of capital stock of CRC or to grant, extend or enter into any
Option with respect thereto to which CRC is a party ("CRC Options"), whether
granted under the CSMC Management Services Inc. Stock Option Plan (the "Stock
Plan") or otherwise, which has not been exercised by the date of this Agreement,
and for each CRC Option sets forth (i) the name of the holder of such CRC
Option, (ii) the maximum number of shares of CRC Common Stock for which such CRC
Option is exercisable, (iii) the exercise price per share of CRC Common Stock of
such CRC Option and (iv) the vesting schedule of such CRC Option.
(b) Prior to the Effective Time, CRC shall take all actions
(including, without limitation, amending the provisions of the Stock Plan or
option agreements issued thereunder to the extent permitted thereunder)
necessary to provide that:
(i) each CRC Option which has not previously been exercised,
canceled or otherwise satisfied shall, immediately prior to the Effective Time,
be canceled and each holder of such CRC Option shall be entitled to receive an
amount of consideration at the Closing as set forth in a schedule to be
delivered to JEI with the instructions referred to in the last sentence of
Section 2.01(a); and
(ii) as of the Effective Time, the Stock Plan shall be
terminated.
2.04 Affiliates of CRC.
CRC and JEI agree that each will use its best efforts so that the
Merger and other transactions contemplated hereby shall be consummated without
violating the securities laws of the United States or of any state or other
jurisdiction. Not later than twenty (20) days after the date of this Agreement,
CRC shall deliver to JEI a letter (the "Affiliates Letter") identifying all
persons who are "affiliates" of CRC for purposes of Rule 145 under the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations promulgated thereunder ("Affiliates"). CRC agrees that it will use
its best efforts to cause all persons identified in the Affiliates Letter to
enter into an agreement with JEI (and JEI hereby agrees to enter into such an
agreement with such persons) in the form attached hereto as Exhibit 2.04 (the
"Affiliates Agreement").
2.05 Dissenting Shares.
Any shares of CRC Common Stock held by a Dissenting Holder who demands
payment for his or her shares pursuant to and in accordance with the applicable
provisions of Florida law shall be herein called "Dissenting Shares." Any
Dissenting Shares shall not, after the Effective Time, be entitled to vote for
any purpose or receive any dividends or other distributions and shall not be
converted into the right to receive any portion of the Share Merger
Consideration; provided, however, that Dissenting Shares held by a Dissenting
Holder who subsequently withdraws a demand for payment, fails to comply fully
with the requirements of Florida law, or otherwise fails to establish the right
of such Dissenting Holder to be paid the value of such Dissenting Shares under
Florida law shall be deemed to be converted into the right to receive a portion
of the Share Merger Consideration pursuant to the terms and conditions referred
to above.
2.06 Section 16 Matters.
CRC and JEI shall take all such steps as may be required to provide
that, with respect to each Section 16 Affiliate (as defined below), (i) the
transactions contemplated by this Article II and (ii) any other dispositions of
CRC equity securities (including derivative securities) or other acquisitions of
JEI equity securities (including derivative securities) in connection with this
Agreement, shall be exempt under Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended, in accordance with the terms and conditions
set forth in that certain No-Action Letter, dated January 12, 1999, issued by
the SEC to Skadden, Arps, Slate, Meagher & Flom LLP. For purposes of this
Agreement, "Section 16 Affiliate" shall mean each individual who (x) immediately
prior to the Effective Time is a director or officer of CRC or (y) at the
Effective Time will become a director or officer of JEI.
II. COVENANTS.
3.01 Covenants of CRC.
From and after the date hereof until the earlier of the Effective Time
and the termination of this Agreement pursuant to Article VI (the "Release
Time"), unless JEI otherwise agrees in writing, CRC agrees, and agrees to cause
the CRC Acquired Subsidiaries, to comply with the following covenants and
agreements (it being understood that (i) such covenants and agreements apply
solely with respect to the Acquired Businesses, (ii) such covenants and
agreements are subject to applicable gaming laws and (iii) with respect to LCC,
CRC shall only be required to use reasonable best efforts to cause LCC to comply
with the following covenants and agreements (and shall be subject to fiduciary
duties and contractual restrictions, in each case as they relate to the minority
shareholders of LCC)):
(a) Articles of Incorporation and By-laws. No amendment will be made
to the articles of incorporation or by-laws of CRC or of any CRC Acquired
Subsidiary.
(b) Shares and Options. No share of capital stock of any CRC
Acquired Subsidiary, or any option, warrant for, right to subscribe to or other
right to purchase any such share or security convertible into or exchangeable
for any such share (collectively, "CRC Subsidiary Options") shall be issued or
sold by CRC or any CRC Acquired Subsidiary, nor shall CRC or any CRC Acquired
Subsidiary enter into any agreement or commitment to effect any such issuance or
sale, except as set forth in Schedule 3.01(b) hereto.
(c) Dividends and Purchases of Stock. Except for the Spinoff and
except for any dividend or distribution consisting solely of funds generated by
the Spinco Businesses, no cash or non-cash dividend or liquidating or other
distribution shall be authorized, declared, paid, or effected by CRC in respect
of the outstanding shares of CRC Common Stock or any other shares of capital
stock of CRC. Except as set forth in Schedule 3.01(c) or as required by law or
the charter documents of CRC or any CRC Acquired Subsidiary as in effect on the
date hereof, no direct or indirect redemption, purchase, or other acquisition
shall be made by CRC or any CRC Acquired Subsidiary of shares of CRC Common
Stock, any capital stock of any CRC Acquired Subsidiary, any CRC Option or any
CRC Subsidiary Option.
(d) Access. Subject to the confidentiality letter agreement, dated
August 25, 1998, from CRC to JEI (the "CRC Confidentiality Agreement") and
reasonable notice to CRC, CRC will afford the officers, directors, employees,
counsel, agents, investment bankers, accountants, and other representatives of
JEI or any JEI Subsidiary (as defined in Section 3.02) and JEI's lenders and
prospective lenders (if any) reasonable access during normal business hours to
the plants, properties, books, and records of CRC and the CRC Acquired
Subsidiaries, will permit them to make extracts from and copies of such books
and records, and will from time to time furnish JEI with such additional
financial and operating data and other information as to the financial
condition, results of operations, businesses, properties, assets, liabilities,
or future prospects of CRC and the CRC Acquired Subsidiaries as are prepared by
CRC in the ordinary course consistent with past practice on a calendar month
basis, as well as the income statements and balance sheets of the Acquired
Businesses set forth in Section 3.01(f)(ii). CRC will use its reasonable best
efforts to cause the independent certified public accountants of CRC and the CRC
Acquired Subsidiaries to make available to JEI and its independent certified
public accountants the work papers relating to the financial statements of the
Acquired Businesses referred to in Sections 3.01(f) and 4.01(e); provided,
however, that the use of reasonable best efforts shall not require the payment
of a material amount of money not ordinarily incidental to such process. All
information furnished by or on behalf of CRC pursuant to this Section 3.01(d) or
otherwise obtained from CRC as contemplated by this Section 3.01(d) shall be
subject to the CRC Confidentiality Agreement.
(e) Conduct of Business. Except as specifically required or
contemplated by this Agreement, CRC shall and shall cause the CRC Acquired
Subsidiaries to carry on their respective businesses in the ordinary course of
business and use all reasonable efforts to preserve intact their current
business organizations, keep available the services of their current officers
and employees and preserve their relationships consistent with past practice
with desirable customers, suppliers, licensors, licensees, distributors and
others having business dealings with them to the end that their goodwill and
ongoing businesses shall be unimpaired in all material respects at the Effective
Time; provided, however, that the use of reasonable efforts shall not require
the payment of a material amount of money not ordinarily incidental to such
process. Except as expressly permitted or contemplated by the terms of this
Agreement, without limiting the generality of the foregoing, CRC shall not, and
shall not permit any of the CRC Acquired Subsidiaries to (without JEI's prior
written consent, which consent may not be unreasonably withheld):
(i) (A) reclassify any of its capital stock or issue or
authorize the issuance of any capital stock, other than (x) additional shares of
CRC Common Stock or (y) shares of LCC Common Stock issued upon the exercise of
warrants to purchase LCC Common Stock outstanding on the date hereof or (B)
amend any shares of capital stock of CRC or any of the CRC Acquired Subsidiaries
or any other securities thereof, or any CRC Options or CRC Subsidiary Options to
acquire any such shares or other securities;
(ii) issue, deliver or sell, or pledge or otherwise encumber
(unless such pledge or other encumbrance is released or eliminated at or prior
to Closing), any shares of capital stock or any other voting securities of CRC
or any CRC Acquired Subsidiary, or any CRC Options or CRC Subsidiary Options to
acquire any such shares, voting securities or convertible or exchangeable
securities (other than the issuance of (A) additional shares of CRC Common Stock
and (B) additional CRC Options);
(iii) develop, acquire or agree to develop or acquire any
projects, assets or lines of business which would be part of the Acquired
Businesses, including without limitation, by merging or consolidating with, or
by purchasing all or a substantial portion of the assets of, any corporation,
partnership, joint venture, association or other business organization or
division thereof, or make any capital expenditures relating to the Acquired
Businesses, except (u) purchases of inventory, furnishings and equipment in the
ordinary course of business and consistent with past practice, (v) expenditures
consistent with CRC's fiscal 1999 capital budget (the "Budget") unless expressly
otherwise limited hereby, (w) expenditures in excess of $200,000 in the
aggregate for the Kalispel project, $100,000 in the aggregate for the Wampanoag
project and $100,000 in the aggregate for the Lake Las Vegas project (provided
that JEI's consent to expenditures in excess of the respective maximum amounts
listed for each project will not be unreasonably withheld), (x) expenditures for
expansion projects involving either Casino Rama or LCC (provided that (1) JEI's
consent to such expenditures for such expansion projects will not be
unreasonably withheld and (2) the parties understand and agree that this clause
(x) as it relates to Casino Rama is intended only to limit expenditures by CRC
or any CRC Acquired Subsidiary and shall not in any manner whatsoever affect
existing contractual arrangements or the operation of the casino generally), (y)
any capital expenditures with respect to CRC's Miami office, other than those
expenditures which CRC is legally obligated to make as of the date hereof, or
(z) except as set forth on Schedule 3.01(e)(iii);
(iv) sell, lease, license, swap, barter, mortgage or otherwise
encumber or subject to any liens, claims, mortgages, encumbrances, pledges,
security interests, equities and charges of any kind (each a "Lien"), or
otherwise dispose of any of its properties or assets which are part of the
Acquired Businesses, except Liens for taxes not currently due or those currently
being contested in good faith or for transactions in the ordinary course of
business and consistent with past practice;
(v) (A) other than indebtedness available under any line of
credit or other lending arrangement existing on the date hereof which will be
for the benefit of the Acquired Businesses following the Closing Date, incur any
indebtedness (including any capital or operating lease which would be classified
as indebtedness on the financial statements of the Acquired Businesses), forgive
any debt obligations of any person to CRC or the CRC Acquired Subsidiaries,
issue or sell any debt securities or warrants or other rights to acquire any
debt securities of CRC or any of the CRC Acquired Subsidiaries, guarantee any
indebtedness of another person, enter into any "keep well" or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing or (B) other than
(1) advances to employees, suppliers or customers in the ordinary course of
business and consistent with past practice, and (2) expenditures consistent with
the Budget, make any loans, advances or capital contributions to, or investments
in, any other person, other than loans or advances to directors, officers,
employees, consultants, Affiliates or agents in accordance with clause (viii)
below.
(vi) (A) settle any claim, action, or lawsuit relating to
material Taxes (as hereinafter defined) pending as of the date hereof or arising
on or after the date hereof, (B) make any material Tax (as hereinafter defined)
election, or (C) amend any material Tax return in any respect (except, in each
case, to the extent relating solely to Spinco);
(vii) (A) pay, discharge, settle or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) (other than those relating to Taxes, which are covered
by clause (vi) above), other than the payment, discharge, settlement or
satisfaction of liabilities reflected or reserved against in the Updated
November 30 Balance Sheet (for an amount not in excess of the amount reflected
or reserved) or incurred by the Acquired Businesses in the ordinary course of
business and consistent with past practice after November 30, 1998, or (B)
waive the benefits of, or agree to modify in any manner, any confidentiality,
standstill or similar agreement to which CRC or any of the CRC Acquired
Subsidiaries is a party;
(viii) make any change in the compensation payable or to become
payable to any of its officers, directors, employees, agents or consultants or
other persons providing any services to the Acquired Businesses, or enter into
or amend any employment, severance, consulting, termination or similar agreement
or employee benefit plan or make any loans or advances to any of its officers,
directors, employees, Affiliates, agents or consultants that are not repaid on
or prior to Closing, or make any change in its existing borrowing or lending
arrangements for or on behalf of any of such persons pursuant to an employee
benefit plan or otherwise (other than (A) increases or other changes in wages to
employees who are not officers, directors or Affiliates in the ordinary course
of business and consistent with past practice, (B) payment of annual bonuses in
the ordinary course of business and consistent with past practice (provided,
however, that bonuses paid in respect of the fiscal year ended November 30, 1998
shall not exceed $700,000) and (C) increases or other modifications to salary
for officers pursuant to regular annual reviews in the ordinary course of
business and consistent with past practice and approved pursuant to Board
authority; provided, however, that no compensation described in this clause (C)
shall be in the form of capital stock of any CRC Acquired Subsidiary or any CRC
Subsidiary Options;
(ix) pay or make any accrual or arrangement for payment of any
pension, retirement allowance or other employee benefit pursuant to any existing
plan, agreement or arrangement to any officer, director, employee or Affiliate
or pay or agree to pay or make any accrual or arrangement for payment to any
officer, director, employee or Affiliate of any amount relating to unused
vacation days, except payments and accruals made in the ordinary course of
business and consistent with past practice; adopt or pay, grant, issue,
accelerate or accrue salary or other payments or benefits pursuant to any
pension, profit-sharing, bonus, extra compensation, incentive, deferred
compensation, stock purchase, stock option, stock appreciation right, group
insurance, severance pay, retirement or other employee benefit plan, agreement
or arrangement, or any employment or consulting agreement with or for the
benefit of any director, officer, employee, agent or consultant, whether past or
present, other than as required under applicable law or the current terms of any
plan or agreement identified in Schedule 4.01(n) or as permitted pursuant to
clause (viii) above, provided that CRC may establish and pay or accrue benefits
pursuant to bonus plan targets and incentive amounts consistent with past
practice (provided, however, that bonuses paid in respect of the fiscal year
ended November 30, 1998 shall not be considered in determining what is
consistent with past practice for this purpose) and, provided further, CRC shall
be entitled to pay severance or other separation payments up to the maximum
amounts provided for in the Reorganization Agreement; or amend in any material
respect any such existing plan, agreement or arrangement in a manner
inconsistent with the foregoing;
(x) enter into any collective bargaining agreement;
(xi) enter into any transaction, agreement or arrangement with,
any Affiliates, officers, directors, stockholders or their Affiliates,
associates or family members or do or enter into any of the foregoing with
respect to employees, agents or consultants except as permitted by clauses
(viii) and (ix) above;
(xii) modify or amend any CRC Material Contract (including any
CRC Material Contract relating to indebtedness), as such term is defined in
Section 4.01(x), if such modification or amendment is reasonably likely to have
a Material Adverse Effect, as such term is defined in Section 4.01(a), on the
Acquired Businesses taken as a whole;
(xiii) make any cash disbursement or series of related cash
disbursements, in excess of $100,000 in the aggregate, other than disbursements
(a) made in the ordinary course of business consistent with past practice, (b)
reflected in the Budget, unless expressly otherwise limited hereunder, (c)
otherwise permitted hereunder and (d) as may be required by any agreement
outstanding on the date hereof;
(xiv) make any change in accounting principles (except as may be
required by GAAP, in which event CRC shall fully disclose any such change to JEI
and the reasons therefor);
(xv) authorize any of, or commit or agree to take any of, the
foregoing actions, except as otherwise permitted or contemplated by this
Agreement.
(f) Financial Statements.
(i) CRC shall furnish to JEI, within 45 days following the date
of this Agreement, the following financial statements: (i) audited financial
statements, including balance sheets, statements of income and shareholders'
equity and statements of cash flows, of CRC for the fiscal year ended November
30, 1998, (ii) audited financial statements of the Acquired Businesses for the
three fiscal years ended November 30, 1998, which shall include balance sheets
as of November 30, 1998 and 1997 and statements of income, shareholders' equity
and cash flows for each of the three years ended November 30, 1998, and (iii)
the Updated November 30 Balance Sheet.
(ii) CRC shall prepare a monthly balance sheet and income
statement for the Acquired Businesses, beginning with the month ended December
31, 1998, and a report detailing the allocation of overhead expenses between the
Acquired Businesses and the Spinco Businesses, with such allocations being made
in the manner set forth in Schedule 3.01(f) attached hereto. Each monthly
balance sheet, income statement and allocation report shall be certified by
CRC's chief financial officer as being true and correct and shall be delivered
to JEI within 30 days following each month, except that the monthly balance
sheet and income statement for the month ended December 31, 1998 shall be
delivered by no later than the fifteenth day following the date of this
Agreement.
(g) Advice of Changes. CRC will, as promptly as practicable, advise
JEI in a reasonably detailed written notice of any fact or occurrence or any
pending or threatened occurrence of which it obtains knowledge and which
either: (i) would reasonably be expected to have a Material Adverse Effect on
the Acquired Businesses, taken as a whole or (ii) if existing and known at the
Effective Time, would cause a condition to any party's obligations under this
Agreement not to be fully satisfied.
(h) Public Statements. Before CRC releases any information
concerning this Agreement, the Merger, or any of the other transactions
contemplated by this Agreement which is intended for or is reasonably expected
to result in public dissemination thereof, CRC shall cooperate with JEI, shall
furnish drafts of all documents or proposed oral statements to JEI for comments,
and shall not release any such information without the prior consent of JEI;
provided, however, that the foregoing shall not be deemed to prevent CRC from
(i) releasing any information or making any disclosure to the extent that CRC
reasonably determines that it is required to do so by law or (ii) complying with
its periodic reporting obligations under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), with respect to LCC.
(i) Consents. CRC will use its reasonable best efforts to obtain or
cause to be obtained prior to the Closing Date all necessary consents and
approvals to the performance of the obligations of CRC under this Agreement,
including, without limitation, the consents and approvals described in Schedule
4.01(d); provided, however, that the use of reasonable best efforts shall not
require the payment of a material amount of money not otherwise or ordinarily
incidental to such process. CRC will cooperate in all reasonable respects with
JEI with a view toward obtaining timely satisfaction of the conditions to the
Closing set forth herein. CRC shall use its reasonable best effort to make all
filings, document submissions, applications, statements and reports to all
Federal, state or local government agencies or entities which are required to be
made by it prior to the Closing Date pursuant to any applicable statute, rule or
regulation in connection with the Agreement and the transactions contemplated
hereby, including any filings with any Governmental or Regulatory Authority (as
defined in Section 4.01(d)); provided, however, that the use of reasonable best
efforts shall not require the payment of a material amount of money not
ordinarily incidental to such process. CRC shall (i) furnish to JEI copies of
all filings and such necessary information and assistance as may be requested by
JEI in connection with its preparation of required filings or submissions to any
Governmental or Regulatory Authority and (ii) as promptly as practicable upon
CRC becoming aware of any inquiries made of it or any CRC Acquired Subsidiary by
any Federal, state or local agency or authority with respect to this Agreement
or the transactions contemplated hereby, shall give detailed written notice
thereof to JEI and shall use its reasonable best efforts to update JEI of the
status of such inquiries. CRC shall not make any agreement or reach any
understanding, not approved in writing by JEI, as a condition for obtaining any
consent, authorization, approval, order, license, certificate, or permit
required for the consummation of the transactions contemplated by this
Agreement, unless such agreement or understanding shall not require the payment
of a material amount of money and could not otherwise reasonably be expected to
have a Material Adverse Effect on the Acquired Businesses taken as a whole.
(j) Lake Las Vegas. CRC shall use commercially reasonable efforts to
obtain an extension with respect to the contracts listed on Schedule 3.01(j)
related to Lake Las Vegas until the later of July 1, 1999 and sixty (60) days
after the Closing.
(k) Budget. JEI hereby acknowledges that CRC has previously
delivered to JEI the Budget for fiscal 1999 for CRC and each of the CRC Acquired
Subsidiaries, which includes all capital expenditures with appropriate details
and back-up schedules and assumptions for CRC and each CRC Acquired Subsidiary.
3.02 Covenants of JEI.
From and after the date hereof until the earlier of the Effective Time
and the Release Time, unless CRC otherwise agrees in writing, JEI agrees, and
agrees to cause each direct and indirect subsidiary of JEI (collectively, the
"JEI Subsidiaries"), to comply with the following covenants and agreements
(subject to applicable gaming laws):
(a) Certificate of Incorporation and By-laws; Ratification of Prior
Acts. No amendment will be made to the certificate of incorporation of JEI,
other than to change the corporate name of JEI and other than as may be required
to consummate the merger (the "Players Merger") contemplated by that certain
Agreement and Plan of Merger dated as of February 8, 1999 among JEI, JEI Merger
Corp. and Players International, Inc. (the "Players Merger Agreement"); provided
that any amendment to the certificate of incorporation which is proposed in
connection with the Players Merger, other than amendments to change the
capitalization of JEI to accommodate such transaction, shall require the prior
consent of CRC (which consent shall not be unreasonably withheld) and no
amendment will be made to the by-laws of JEI unless CRC has been afforded the
opportunity to review such proposed amendment and such amendment is consented to
by CRC (which consent shall not be unreasonably withheld). The by-laws of all
applicable JEI Subsidiaries will be amended to delete the requirement therein
that contracts for goods or services involving payments in excess of a fixed
amount be authorized and approved by the board of directors of such JEI
Subsidiary, and the board of directors of each such JEI Subsidiary will take all
necessary action to confirm and ratify any contract heretofore entered into by
such JEI Subsidiary in violation of said requirement.
(b) Dividends. No cash or non-cash dividend or liquidating or other
distribution shall be authorized, declared, paid, or effected by JEI in respect
of the outstanding shares of JEI Common Stock or any other capital stock of JEI
or any JEI Subsidiary.
(c) Access. Subject to the confidentiality letter agreement, dated
November 3, 1998, from JEI to CRC (the "JEI Confidentiality Agreement") and
reasonable notice to JEI, JEI will afford the officers, directors, employees,
counsel, agents, investment bankers, accountants, and other representatives of
CRC or any CRC Acquired Subsidiary reasonable access, during normal business
hours, to the plants, properties, books, and records of JEI and the JEI
Subsidiaries, will permit them to make extracts from and copies of such books
and records (except for the agreements listed on Schedule 3.02(c), as to which
agreements CRC will not be entitled to make extracts or copies thereof), and
will from time to time furnish CRC with such additional financial and operating
reports as are prepared by JEI in the ordinary course of business on a calendar
month basis. JEI will use its reasonable best efforts to cause the independent
certified public accountants of JEI Subsidiaries to make available to CRC and
its independent certified public accountants the work papers relating to the
financial statements of JEI and the JEI Subsidiaries; provided, however, that
the use of reasonable best efforts shall not require the payment of a material
amount of money not ordinarily incidental to such process. All information
furnished by or on behalf of JEI pursuant to this Section 3.02(c) or otherwise
obtained from JEI as contemplated by this Section 3.02(c) shall be subject to
the JEI Confidentiality Agreement.
(d) Conduct of Business. JEI shall, and shall cause the JEI
Subsidiaries to, carry on their respective businesses in the ordinary course
(except as otherwise contemplated by the Players Merger Agreement) and will use
all reasonable efforts to preserve intact their current business organizations,
keep available the services of their current officers and employees, and
preserve their relationships consistent with past practice with desirable
customers, suppliers, licensors, licensees, distributors and others having
business relations with any of them to the end that their goodwill and ongoing
businesses shall be unimpaired in all material respects at the Effective Time.
Without limiting the generality of the foregoing, JEI will not (without the
consent of CRC, which consent may not be unreasonably withheld) (i) issue any
JEI Option (as defined in Section 4.02(b)(i)) at an exercise price which is less
than 100% of the closing sale price of the JEI Common Stock as reported on the
New York Stock Exchange on the date of grant and which is not otherwise granted
in the ordinary course of business consistent with past practice or as may be
granted to employees of Players International, Inc. and its subsidiaries
(collectively referred to herein as "Players") following consummation of the
Players Merger or (ii) modify or amend any JEI Material Contract (as defined in
Section 4.02(v)), unless such modification or amendment is reasonably likely to
have no material adverse effect on the rights and benefits of JEI under such JEI
Material Contract.
(e) Advice of Changes. JEI will, as promptly as practicable, advise
CRC in a reasonably detailed written notice of any fact or occurrence or any
pending or threatened occurrence of which it obtains knowledge and which either
(i) would reasonably be expected to have a Material Adverse Effect on JEI and
the JEI Subsidiaries, taken as a whole, or (ii) if existing and known at the
time of the Effective Time, would cause a condition to any party's obligations
under this Agreement not to be fully satisfied.
(f) Public Statements. Before JEI releases any information
concerning this Agreement, the Merger, or any of the other transactions
contemplated by this Agreement which is intended for or is reasonably expected
to result in public dissemination thereof, JEI shall cooperate with CRC, shall
furnish drafts of all documents or proposed oral statements to CRC for comments,
and shall not release any such information without the prior consent of CRC;
provided, however, that the foregoing shall not be deemed to prevent JEI from
(i) releasing any information or making any disclosure to the extent that JEI
reasonably determines that it is required to do so by law or (ii) complying with
its periodic reporting obligations under the Exchange Act.
(g) Consents. JEI will use its reasonable best efforts to obtain or
cause to be obtained prior to the Closing Date all necessary consents and
approvals to the performance of the obligations of JEI under this Agreement,
including, without limitation, the consents and approvals required under Section
4.02(d); provided, however, that the use of reasonable best efforts shall not
require the payment of a material amount of money not otherwise or ordinarily
incidental to such process. JEI will cooperate in all reasonable respects with
CRC and the CRC Acquired Subsidiaries with a view toward obtaining timely
satisfaction of the conditions to the Closing set forth herein. JEI shall use
its reasonable best efforts to make all filings, document submissions,
applications, statements and reports to all Federal, state or local government
agencies or entities which are required to be made by it prior to the Closing
Date pursuant to any applicable statute, rule or regulation in connection with
this Agreement and the transactions contemplated hereby, including any filings
with any Governmental or Regulatory Authority; provided, however, that the use
of reasonable best efforts shall not require the payment of a material amount of
money not otherwise or ordinarily incidental to such process. JEI shall (i)
furnish to CRC copies of all filings and such necessary information and
assistance as may be requested by CRC in connection with its preparation of
required filings or submissions to any Governmental or Regulatory Authority and
(ii) as promptly as practicable upon JEI becoming aware of any inquiries made of
it by any Federal, state or local agency or authority with respect to this
Agreement or the transactions contemplated hereby, shall give detailed written
notice thereof to CRC and shall use its reasonable best efforts to update CRC of
the status of such inquiries.
(h) JEI will not consummate the Players Merger on terms which are
materially less favorable to JEI than those which are set forth in the Players
Merger Agreement as in effect on the date hereof.
3.03 Preparation of Registration Statement and Joint Proxy Statement.
(a) CRC and JEI shall prepare and file with the Securities and
Exchange Commission (the "SEC"), as soon as reasonably practicable after the
date hereof, the Joint Proxy Statement (as defined in Section 4.01(i)) and JEI
shall prepare and file with the SEC, as soon as practicable after the date
hereof, a Registration Statement on Form S-4 in connection with the issuance of
the JEI Common Stock in the Merger, as amended and supplemented from time to
time (as so amended and supplemented, the "Registration Statement"), in which
the Joint Proxy Statement will be included as part of the Registration
Statement. JEI will use its best efforts (and CRC will use its best efforts to
cooperate, to the extent necessary), to have the Registration Statement declared
effective by the SEC as promptly as practicable after such filing. JEI also
shall take any action (other than qualifying as a foreign corporation or taking
any action that would subject it to service of process in any jurisdiction where
JEI is not now so qualified or subject) required to be taken under applicable
state blue sky or securities laws in connection with the issuance of JEI Common
Stock in connection with the Merger. JEI and CRC shall cooperate with each
other in the preparation of the Registration Statement and the Joint Proxy
Statement and any amendment or supplement thereto, and each shall notify the
other of the receipt of any comments of the SEC with respect to the Registration
Statement or the Joint Proxy Statement and of any requests by the SEC for any
amendment or supplement thereto or for additional information, and shall
promptly provide to the other copies of all correspondence between JEI or CRC,
as the case may be, or any of its representatives with respect to the
Registration Statement or the Joint Proxy Statement. Each of CRC and JEI agrees
to use its best efforts, after consultation with the other party hereto, to
respond promptly to all such comments of and requests by the SEC and to cause
the Registration Statement to be declared effective by the SEC and the Joint
Proxy Statement to be mailed to the holders of JEI Common Stock and, to the
extent a separate information statement is not prepared by CRC for use in
soliciting CRC Stockholders' Approval (as defined below), holders of CRC Common
Stock entitled to vote at the meetings of the stockholders of JEI and CRC,
respectively, at the earliest practicable time.
(b) CRC and JEI shall each use its best efforts to cause to be
delivered to the other a letter of their respective independent auditors, dated
a date within two business days before the date on which the Registration
Statement shall become effective and addressed to the other, customary in form,
scope and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration Statement,
and JEI shall use its best efforts to cause any similar letter of the
independent auditors of Players International Inc. which is delivered in
connection with the Players Merger to also be addressed and delivered to CRC or,
if required by internal procedures of such auditors, a substantially identical
letter prepared under the "agreed upon procedures" guidelines.
3.04 Approval of Stockholders.
(a) JEI shall, through its Board of Directors, duly call, give notice
of, convene and hold a meeting of its stockholders (the "JEI Stockholders'
Meeting") for the purpose of voting on the ratification and approval of this
Merger Agreement and the issuance of the shares of JEI Common Stock pursuant to
the Merger (the "JEI Merger Proposal"), as soon as reasonably practicable
following the date hereof. Subject to the exercise of fiduciary obligations
under applicable law as advised by independent legal counsel, JEI shall, through
its Board of Directors, include in the Joint Proxy Statement the recommendation
of the Board of Directors of JEI that the stockholders of JEI vote in favor of
the JEI Merger Proposal (the "JEI Stockholders' Approval") and shall use its
best efforts to obtain such approval.
(b) (i) CRC shall, through its Board of Directors, duly call, give
notice of, convene and hold a meeting of its stockholders (the "CRC
Stockholders' Meeting" and, together with the JEI Stockholders' Meeting, the
"Stockholders' Meetings") for the purpose of approving this Agreement and the
approval of the Merger (the "CRC Merger Proposal") as soon as reasonably
practicable after the date hereof; and (ii) subject to the exercise of fiduciary
obligations under applicable law as advised by independent counsel, CRC shall,
through its Board of Directors, include in the Joint Proxy Statement (or, if
applicable, a separate information statement prepared by CRC for use in
soliciting the CRC Stockholders' Approval) the recommendation of the Board of
Directors of CRC that the stockholders of CRC vote in favor of the CRC Merger
Proposal (the "CRC Stockholders' Approval"), and shall use its best efforts to
obtain such approval.
(c) JEI and CRC shall coordinate and cooperate with respect to the
timing of the Stockholders' Meetings and shall use their reasonable best efforts
to cause the Stockholders' Meetings to be held by no later than July 15, 1999.
3.05 Certain Filings.
CRC and JEI shall (a) cooperate with one another as soon as
practicable in determining whether any action by or in respect of, or filing
with, any Governmental or Regulatory Authority (including, without limitation,
any filing requirements under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended ("HSR Act")), or any actions, consents, approvals or waivers
are required to be obtained from parties to any CRC Material Contracts or JEI
Material Contracts, as the case may be, in connection with the consummation of
the transactions contemplated by this Agreement and (b) promptly take all
actions necessary or make filings with any Governmental or Regulatory Authority
and third parties. JEI will endeavor in good faith and use all reasonable best
efforts to cause any Governmental or Regulatory Authority in the State of
Louisiana which is to review the transactions with CRC contemplated hereby to
review such transactions separately from the Players Merger.
3.06 Directors' and Officers' Indemnification.
(a) From and after the Effective Time, JEI shall indemnify, defend
and hold harmless each person who is now, or has been at any time prior to the
date hereof or who becomes prior to the Effective Time, a director or officer of
CRC or any of the CRC Acquired Subsidiaries (the "Indemnified Parties") against
(i) all losses, claims, damages, costs, and expenses (including reasonable
attorneys' fees), liabilities, judgments, and settlement amounts that are paid
or incurred in connection with any claim, action, suit, proceeding, or
investigation (whether civil, criminal, administrative or investigative and
whether asserted or claimed prior to, at, or after the Effective Time) that is
(x) based in whole or in part on, or arises in whole or in part out of, the fact
that such Indemnified Party is or was a director or officer of CRC or any of the
CRC Acquired Subsidiaries, (y) relates to or arises out of an action or
omission occurring at or prior to the Effective Time relating to the Acquired
Businesses ("Indemnified Liabilities"), and (z) is asserted on or before the
third anniversary of the Effective Time and (ii) all Indemnified Liabilities
which are asserted on or before the third anniversary of the Effective Time
based in whole or in part on, or arising in whole or in part out of or
pertaining to, this Agreement or the transactions contemplated hereby,
including, without limitation, any statement or omission in the Registration
Statement or the Joint Proxy Statement, in each case to the fullest extent a
corporation is permitted to indemnify its own directors, officers, employees or
agents, as the case may be, under Nevada law; provided, however, that JEI shall
not be liable for any settlement of any claim effected without its written
consent, which consent shall not be unreasonably withheld. Without limiting the
foregoing, in the event that any such claim, action, suit, proceeding, or
investigation is brought against any Indemnified Party (whether arising prior to
or after the Effective Time), (w) JEI will pay expenses in advance of the final
disposition of any such claim, action, suit, proceeding, or investigation to
each Indemnified Party to the full extent permitted by applicable law, provided
that the person to whom expenses are advanced provides an undertaking to repay
such advance if it is ultimately determined that such person is not entitled to
indemnification; (x) the Indemnified Parties shall retain counsel reasonably
satisfactory to JEI; (y) JEI shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties (subject to the final sentence of this
paragraph) promptly as statements therefor are received; and (z) JEI shall use
all commercially reasonable efforts to assist in the vigorous defense of any
such matter. Any Indemnified Party wishing to claim indemnification under this
Section 3.06, upon learning of any such claim, action, suit, proceeding, or
investigation, shall notify JEI, but the failure to so notify JEI shall not
relieve it from any liability which it may have under this paragraph except to
the extent such failure irreparably prejudices such party. The Indemnified
Parties as a group may retain only one law firm to represent them with respect
to each such matter unless there is a conflict of defenses or positions among
the Indemnified Parties (including any impleaded parties), in which case the
Indemnified Parties who have a conflict shall each have the right to retain one
separate counsel, reasonably satisfactory to JEI, and JEI shall be responsible
for the reasonable fees and expenses of each such counsel.
(b) The provisions of this Section 3.06 (i) are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and legal representatives, (ii) and shall be in addition to any other
rights an Indemnified Party may have under the Articles of Incorporation or
Bylaws of JEI, CRC or any of the CRC Acquired Subsidiaries, under the NRS, FBCA
or otherwise and (iii) shall survive the Closing.
(c) In the event JEI (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of JEI shall assume
the obligations set forth in this Section 3.06.
3.07 Election of Directors.
(a) Effective as of the Closing Date, JEI will take all necessary and
appropriate actions to cause (i) the number of directors comprising the Board of
Directors of JEI to be increased by two (2) members, (ii) two (2) persons
selected by CRC (who are identified on Schedule 1.05) to be elected or appointed
as directors of JEI to fill the positions resulting from such increase, and
(iii) Sherwood M. Weiser to be elected as Co-chairman of the Board of
Directors. At JEI's next regular meeting of stockholders after the Closing Date
at which directors are elected, JEI shall use its best efforts to ensure that
the slate of persons nominated by the Board of Directors for election as
directors of JEI at that meeting includes any such persons whose term on the
Board of Directors has or would expire at that meeting. The Board of Directors
will solicit proxies from the stockholders of JEI for such persons and will vote
all such proxies in favor of such nominees, except for such proxies that
specifically indicate to the contrary.
(b) In the event the Players Merger is not consummated and the
Players Merger Agreement is terminated, the Board of Directors of JEI shall be
increased following the Closing Date by an additional one (1) member, who shall
be designated by the persons identified in Schedule 1.05 after consultation with
the existing JEI Board of Directors.
(c) In the event any of the persons elected or appointed as a
director of JEI pursuant to Section 3.07 is unable to continue to serve as a
director during the remainder of that person's term, there will be no right to
designate any successor for such director.
3.08 Employee Matters.
(a) Any severance or other separation payments in respect of
terminated employees of CRC or any CRC Acquired Subsidiaries to be paid by CRC
(or JEI following the Effective Time) will not exceed the amount set forth in
Schedule 2.02(c).
(b) On the Closing Date, JEI shall enter into three year consulting
agreements with each of Sherwood Weiser and Donald Lefton having the terms set
forth on Exhibit 3.08.
3.09 Further Action.
CRC and JEI each shall, and each shall cause the their respective
subsidiaries to, subject to the fulfillment at or before the Effective Time of
each of the conditions of performance set forth herein or the waiver thereof,
perform such further acts and execute such documents as may reasonably be
required to effect the Merger and the transactions contemplated by this
Agreement; provided, however, that the performance of such further acts and the
execution of such further documents shall not require the payment of a material
amount of money not otherwise or ordinarily incidental to such process.
IV. REPRESENTATIONS AND WARRANTIES.
4.01 Certain Representations and Warranties of CRC.
Except as disclosed in the LCC SEC Reports (as defined below), CRC
represents and warrants, solely with respect to the Acquired Businesses, to JEI
as follows:
(a) Organization and Qualification. Each of CRC and each direct or
indirect subsidiary of CRC which is to become a direct or indirect subsidiary of
JEI as a result of the Merger (the "CRC Acquired Subsidiaries"), as listed on
Schedule 4.01 (a), is a corporation duly organized, validly existing, and in
good standing under the laws of its jurisdiction of incorporation and has full
corporate power and authority to conduct its business as and to the extent now
conducted and to own, use, and lease its assets and properties. Each of CRC and
the CRC Acquired Subsidiaries is duly qualified, licensed, or admitted to do
business and is in good standing in each jurisdiction listed on Schedule
4.01(a), which is each jurisdiction in which the ownership, use, or leasing of
its assets and properties, or the conduct or nature of its businesses, makes
such qualification, licensing, or admission necessary, except for such failures
to be so qualified, licensed, or admitted and in good standing which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a Material Adverse Effect on CRC and the CRC Acquired
Subsidiaries taken as a whole. As used in this Agreement, a "Material Adverse
Effect" shall mean a material adverse effect on the businesses, properties,
assets, liabilities, condition (financial or otherwise) or results of operations
of an entity (or group of entities taken as a whole). Except as disclosed in
Schedule 4.01(a) hereto, CRC does not directly or indirectly own any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
(b) Capital Stock.
(i) The authorized capital stock of CRC consists solely of
20,000,000 shares of CRC Common Stock and 1,000,000 shares of preferred stock,
par value $.01 per share, of CRC ("CRC Preferred Stock"). As of December 31,
1998, 10,741,802 shares of CRC Common Stock were issued and outstanding, no
shares were held in the treasury of CRC and 1,700,000 shares were reserved for
issuance pursuant to the Stock Plan. No CRC Options have been issued other than
pursuant to the Stock Plan. As of the date hereof, there has been no change in
the number of issued and outstanding shares of CRC Common Stock or shares of CRC
Common Stock held in treasury or reserved for issuance since such date, other
than changes arising from the exercise of CRC Options. As of the date hereof, no
shares of CRC Preferred Stock are issued and outstanding. All of the issued and
outstanding shares of CRC Common Stock are, and all shares reserved for issuance
will be, upon issuance in accordance with the terms specified in the instruments
or agreements pursuant to which they are issuable, duly authorized, validly
issued, fully paid, and nonassessable. As of the date hereof, except as set
forth in Schedule 2.03, there are no outstanding CRC Options.
(ii) Except as disclosed in Schedule 4.01(b) hereto, there are no
outstanding contractual obligations of CRC or any CRC Acquired Subsidiary to
repurchase, redeem, or otherwise acquire any shares of CRC Common Stock or any
capital stock of any CRC Acquired Subsidiary, or any CRC Options or CRC
Subsidiary Options, or to provide funds to, or make any investment (in the form
of a loan, capital contribution or otherwise) in, any CRC Acquired Subsidiary or
any other person in which CRC or any CRC Acquired Subsidiary owns an interest.
(c) Authority Relative to this Agreement. CRC has full corporate
power and authority to enter into this Agreement and, subject to obtaining the
CRC Stockholders' Approval and the approvals of any Governmental or Regulatory
Authority as identified on Schedule 4.01(c) hereto, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution, delivery, and performance of this Agreement by CRC and the
consummation by CRC of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of CRC, the Board of Directors of
CRC has adopted a resolution recommending approval of this Agreement and the
Merger by the stockholders of CRC and directing that this Agreement be submitted
to the stockholders of CRC for their consideration, and no other corporate
proceedings on the part of CRC or its stockholders are necessary to authorize
the execution, delivery and performance of this Agreement by CRC and the
consummation by CRC of the transactions contemplated hereby, except for the CRC
Stockholders' Approval. This Agreement has been duly and validly executed and
delivered by CRC and, subject to obtaining the CRC Stockholders' Approval and
any required approvals of any Governmental or Regulatory Authority, constitutes
a legal, valid, and binding obligation of CRC enforceable against CRC in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and except to the extent that indemnification
provisions may be unenforceable due to public policy. Stockholders of CRC who
are parties to the CRC Stockholders Agreement own not less than a majority of
the outstanding shares of CRC Common Stock.
(d) Non-Contravention; Approvals and Consents.
(i) Subject to obtaining the CRC Stockholders' Approval and the
taking of the actions described in paragraph (ii) of this Section 4.01(d), the
execution and delivery of this Agreement by CRC do not, and the performance by
CRC of its obligations hereunder and the consummation of the transactions
contemplated hereby will not, conflict with, result in a violation or breach of,
constitute (with or without notice or lapse of time or both) a default under,
result in or give to any person any right of payment or reimbursement,
termination, cancellation, modification or acceleration of, or result in the
creation or imposition of any Lien upon any of the assets or properties of CRC
or any of the CRC Acquired Subsidiaries under, any of the terms, conditions or
provisions of (x) the certificates or articles of incorporation or by-laws (or
other comparable charter documents) of CRC or any of the CRC Acquired
Subsidiaries, (y) any statute, law, rule, regulation, or ordinance
(collectively, "Laws"), or any judgment, decree, order, writ, permit, or license
(collectively, "Orders"), of any court, tribunal, arbitrator, authority, agency,
commission, official, or other instrumentality of the United States, any foreign
country, or any domestic or foreign state, county, city, or other political
subdivision (a "Governmental or Regulatory Authority"), applicable to CRC or any
of the CRC Acquired Subsidiaries or any of their respective assets or properties
which are part of the Acquired Businesses or (z) any note, bond, mortgage,
security agreement, indenture, license (except for the license agreement with
Carnival, which shall terminate at Closing), franchise, permit, concession,
contract, lease (capital or operating) or other instrument, obligation or
agreement of any kind (collectively, "Contracts") to which CRC or any of the CRC
Acquired Subsidiaries is a party or by which CRC or any of the CRC Acquired
Subsidiaries or any of their respective assets or properties which are part of
the Acquired Businesses is bound, except for any of the foregoing matters which,
individually or in the aggregate, would not reasonably be expected to have
Material Adverse Effect on the Acquired Business, taken as a whole, or on the
ability of CRC to consummate the transactions contemplated by this Agreement.
(ii) Except for (v) the filing of a premerger notification and
report form by CRC under the HSR Act, (w) the filing of the Joint Proxy
Statement with the SEC pursuant to the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder (the "Exchange
Act"), and filings with various state securities authorities that may be
required in connection with the transactions contemplated by this Agreement, (x)
the filing of the Nevada Articles and Florida Articles and other appropriate
merger documents pursuant to and in accordance with the laws of the States of
Nevada and Florida, and appropriate documents with the relevant authorities of
other states in which CRC is qualified to do business, (y) the licensing,
permitting, registration or other approval of, or written consent or no action
letter from, each Governmental or Regulatory Authority with regulatory control
or jurisdiction over the conduct of lawful gaming or gambling by CRC and the CRC
Acquired Subsidiaries, including, without limitation the Louisiana State Police,
the Louisiana Gaming Control Board, the Ontario Casino Corporation, the Alcohol
and Gaming Commission of Ontario, the State of Washington Gambling Commission
and the U.S. National Indian Gaming Commission (a "CRC Gaming Authority"),
within each municipality, state or commonwealth, or subdivision thereof, wherein
CRC or any of the CRC Acquired Subsidiaries conducts business on the date hereof
and (z) obtaining the consents and approvals described in Schedule 4.01(d)
hereto (which shall include, but not be limited to, consents to the assignment
of Contracts with the Wampanoag and Kalispel Tribes), no consent, approval, or
action of, filing with, or notice to any Governmental or Regulatory Authority or
other public or private third party is necessary or required under any of the
terms, conditions or provisions of any Law or Order of any Governmental or
Regulatory Authority or any Contract to which CRC or any of the CRC Acquired
Subsidiaries is a party or by which CRC or any of the CRC Acquired Subsidiaries
or any of their respective assets or properties which are part of the Acquired
Businesses is bound for the execution and delivery of this Agreement by CRC, the
performance by CRC of its obligations hereunder or the consummation of the
transactions contemplated hereby, except for such consents, approvals, or
actions of, filings with or notices to any Governmental or Regulatory Authority
or other public or private third party the failure of which to make or obtain
could not be reasonably expected to have a Material Adverse Effect on the
Acquired Businesses taken as a whole or on the ability of CRC to consummate the
transactions contemplated by this Agreement.
(e) Financial Statements; SEC Reports.
(i) Attached hereto as Schedule 4.01(e) are (A) the audited
financial statements of CHC International, Inc. for the three fiscal years ended
November 30, 1997, (B) the unaudited consolidated balance sheet and statements
of income (excluding footnotes) of CRC as, of and for the fiscal year ended
November 30, 1998 and (C) the Initial November 30 Balance Sheet for the Acquired
Businesses (collectively, the "CRC Financial Statements"). The CRC Financial
Statements (including the notes thereto, to the extent not excluded therefrom)
have been prepared in accordance with GAAP applied on a consistent basis during
the periods involved (except as may be indicated therein or in the notes
thereto), and except that the selection of categories of assets and liabilities
included in the Initial November 30 Balance Sheet may not be made in accordance
with GAAP and fairly present (subject to normal, recurring year-end audit
adjustments which are not expected to be, individually or in the aggregate,
materially adverse to the entities and businesses to which they relate) the
consolidated financial position of the entities and businesses, as the case may
be, as of the respective dates thereof and the results of their operations and
cash flows for the respective periods then ended. Each CRC Acquired Subsidiary
is treated as a consolidated subsidiary of CRC in the CRC Financial Statements.
(ii) Other than LCC, none of CRC or the CRC Acquired
Subsidiaries files or is required to file any reports, or registration
statements with the SEC. CRC delivered to JEI prior to the execution of this
Agreement a true, correct, and complete copy (exclusive of schedules or
exhibits) of each form, report, schedule, registration statement, definitive
proxy statement and other document (together with all amendments thereof and
supplements thereto) filed by LCC with the SEC since January 1, 1996 (as such
documents have since the time of their filing been amended or supplemented, the
"LCC SEC Reports"), which are all the documents (other than preliminary
material) that LCC was required to file with the SEC since such date. As of
their respective dates, to CRC's knowledge the LCC SEC Reports (consisting of
periodic reports on Forms 10-K, 10-Q and 8-K filed under the Exchange Act and
registration statements filed under the Securities Act and/or the Exchange Act)
(i) complied as to form in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited financial statements and unaudited interim financial
statements (including, in each case, the notes, if any, thereto) included in the
LCC SEC Reports complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto and except with
respect to unaudited statements as permitted by Form 10-Q) and fairly present in
all material respects (subject, in the case of the unaudited interim financial
statements, to normal, recurring year-end audit adjustments which are not
expected to be, individually or in the aggregate, materially adverse to LCC) the
financial position of LCC as at the respective dates thereof and the results of
its operations and cash flows for the respective periods then ended.
(f) Events Subsequent to November 30, 1998. Since November 30, 1998,
except as disclosed in the LCC SEC Reports or as described in Schedule 4.01(f),
there has not been any adverse change in the business, financial condition,
operations, results of operations, or future prospects of any of the Acquired
Businesses (other than any change as a consequence of the economy generally or
in the industries in which CRC and the CRC Acquired Subsidiaries operate not
specific to the Acquired Businesses) which could, individually or the aggregate,
reasonably be expected to have a Material Adverse Effect on the Acquired
Businesses taken as a whole (a "Material Adverse Change in the Acquired
Businesses"). Without limiting the generality of the foregoing, except as set
forth on Schedule 4.01(f), or as otherwise permitted elsewhere in this
agreement, since that date through the date hereof (it being understood that any
exceptions to (i) through (xii) below which are required to be set forth on
Schedule 4.01(f) shall only relate to activities, assets and liabilities of the
Acquired Businesses):
(i) none of CRC or any of the CRC Acquired Subsidiaries has
sold, leased, transferred, or assigned any of its assets, tangible or
intangible, other than in the ordinary course of business consistent with past
practice;
(ii) none of CRC or any of the CRC Acquired Subsidiaries has
entered into any agreement, contract, lease, or license involving the payment or
receipt of more than $50,000 (or series of related agreements, contracts, leases
and licenses) other than in the ordinary course of business consistent with past
practice;
(iii) none of CRC or any of the CRC Acquired Subsidiaries has
permitted any security interest to be imposed upon any of its assets, tangible
or intangible;
(iv) none of CRC or any of the CRC Acquired Subsidiaries has
made any capital expenditure (or series of related capital expenditures);
(v) none of CRC or any of the CRC Acquired Subsidiaries
has made any capital investment in, any loan to, or any acquisition of the
securities or assets of, any other person (or series of related capital
investments, loans, and acquisitions) except in the ordinary course consistent
with past practice;
(vi) none of CRC or any of the CRC Acquired Subsidiaries has
declared, set aside, or paid any dividend or made any distribution with respect
to its capital stock (whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its capital stock;
(vii) none of CRC or any of the CRC Acquired Subsidiaries has
entered into any employment contract or collective bargaining agreement, written
or oral, or modified the terms of any existing such contract or agreement;
(viii) none of CRC or any of the CRC Acquired Subsidiaries has
made any loan to, or entered into any other transaction with any of its
directors, officers and employees;
(ix) none of CRC or any of the CRC Acquired Subsidiaries has
granted any increase in the base compensation of any of its directors, officers,
and employees, except in the ordinary course of business consistent with past
practice;
(x) none of CRC or any of the CRC Acquired Subsidiaries has
adopted, amended, modified, or terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan, as defined in Section 4.01(n) below);
(xi) none of CRC or any of the CRC Acquired Subsidiaries has
made any other change in employment terms for any of its directors, officers,
and employees outside the ordinary course of business; and
(xii) none of CRC or any of the CRC Acquired Subsidiaries
has committed to any of the foregoing.
(g) Absence of Undisclosed Liabilities. Except for liabilities which
will not be liabilities of the Acquired Businesses after the Merger,
neither CRC nor any of the CRC Acquired Subsidiaries has any liabilities or
obligations (whether absolute, accrued, contingent or otherwise, or whether due
or to become due) of any nature that would be required by GAAP to be reflected
or reserved against on a consolidated balance sheet of the Acquired Businesses,
other than liabilities or obligations reflected or reserved against on the
Initial November 30 Balance Sheet and liabilities incurred since November 30,
1998 in the ordinary course of business consistent with past practice on behalf
of the Acquired Businesses.
(h) Legal Proceedings. Except as disclosed in Schedule 4.01(h),
(i) there are no actions, suits, arbitrations or proceedings involving a claim
in excess of $10,000 pending or, to the knowledge of CRC, threatened against
nor, to the knowledge of CRC, are there any Governmental or Regulatory Authority
investigations or audits pending or threatened against, any of CRC or any of the
CRC Acquired Subsidiaries or any of their respective assets and properties which
are part of the Acquired Businesses, including, without limitation, any
affecting their licenses, permits, registrations or other gaming approvals under
any CRC Gaming Laws (as defined in Section 4.01(j)), (ii) neither CRC nor any of
the CRC Acquired Subsidiaries is subject to any Order of any Governmental or
Regulatory Authority and (iii) neither CRC, any of the CRC Acquired
Subsidiaries nor, to the knowledge of CRC (without specific inquiry), any
director, officer, gaming manager or key employee of CRC or any CRC Acquired
Subsidiary has received any written claim, demand, notice, complaint, or Order
from any Governmental or Regulatory Authority in the past three years asserting
that a license of it or them as applicable under CRC Gaming Laws should be
revoked or suspended. None of any of the actions, suits, arbitrations or
proceedings, investigations, audits, claims, demands, notices, complaints or
Orders disclosed on Schedule 4.01(h) could reasonably be expected to have a
Material Adverse Effect on the Acquired Businesses taken as a whole or on the
ability of CRC to consummate the transactions contemplated by this Agreement.
(i) Information Supplied. The information furnished by CRC for use
in connection with joint proxy statement/prospectus relating to the
Stockholders' Meetings, as amended or supplemented from time to time (as so
amended and supplemented, the "Joint Proxy Statement"), and the Registration
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the Securities Act and will not, on the date of filing
of the Registration Statement or, in the case of the Joint Proxy Statement, at
the date it is mailed to stockholders of JEI, at the time of the JEI
Stockholders Meetings and at the Effective Time, 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.
(j) Compliance with Laws, Orders, etc. CRC, the CRC Acquired
Subsidiaries and, to the knowledge of CRC (without specific inquiry), each of
their respective directors, officers and gaming managers hold all permits,
licenses, variances, exemptions, orders and approvals of all Governmental and
Regulatory Authorities necessary for the lawful conduct of the Acquired
Businesses, including all authorizations under applicable CRC Gaming Laws (the
"CRC Permits"), except where the failure to obtain such CRC Permits would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Acquired Businesses taken as a whole, and no event has
occurred which permits, or upon the giving of notice or passage of time or both
would permit, revocation, non-renewal, modification, suspension or termination
(other than expiration of any CRC Permit in the ordinary course) of any CRC
Permit that currently is in effect with respect to any of the Acquired
Businesses. CRC and the CRC Acquired Subsidiaries and, to the knowledge of CRC
(without specific inquiry), each of their respective directors, officers and
gaming managers, are in compliance in all material respects with the material
terms of the CRC Permits relating to the Acquired Businesses. Except as
disclosed in Schedule 4.01(j), CRC and the CRC Acquired Subsidiaries are not in
violation of or default under any Law or Order of any Governmental or Regulatory
Authority applicable to the Acquired Businesses, including all applicable CRC
Gaming Laws, except for violations or defaults which, individually or in the
aggregate, are not having and could not reasonably be expected to have a
Material Adverse Effect on the Acquired Businesses taken as a whole. The term
"CRC Gaming Laws" means any Federal, state, local or foreign statute, ordinance,
rule, regulation, permit, consent, registration, finding of suitability,
approval, license, judgment, order, decree, injunction or other authorization,
including any condition or limitation placed thereon, governing or relating to
the current or contemplated casino activities and operations of CRC and the CRC
Acquired Subsidiaries, including without limitation the rules and regulations of
all applicable state or local casino commissions.
(k) Compliance with Charter Documents and Certain Agreements.
Except as disclosed in Schedule 4.01(k), neither CRC nor any of the CRC Acquired
Subsidiaries nor, to the knowledge of CRC (without specific inquiry), any other
party thereto is in breach or violation of, or in default in the performance or
observance of any term or provision of, and no event has occurred which, with
notice or lapse of time or both, could be reasonably expected to result in a
default under (x) the certificate or articles of incorporation or by-laws (or
other comparable charter documents) of CRC or any of the CRC Acquired
Subsidiaries or (y) any CRC Material Contract to which CRC or any of the CRC
Acquired Subsidiaries is a party or by which CRC or any of the CRC Acquired
Subsidiaries or any of their respective assets or properties is bound, which
breach, violation or default could reasonably be expected to have a Material
Adverse Effect on the Acquired Businesses taken as a whole.
(l) Tax Matters. For the purposes of this Agreement: "Audit"
means any audit, assessment, or other examination relating to Taxes by any Tax
Authority or any judicial or administrative proceedings relating to Taxes; "Tax"
or "Taxes" means all Federal, state, local, and foreign taxes, and other
assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties applicable
thereto, imposed by any Tax Authority including, without limitation, liability
imposed pursuant to Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law) which may be imposed upon an entity as
a transferee or successor; "Tax Authority" means the Internal Revenue Service
and any other domestic or foreign governmental authority responsible for the
administration of any Taxes; and "Tax Returns" mean all Federal, state, local
and foreign tax returns, declarations, statements, reports, schedules, forms,
and information returns and any amendments thereto.
Except as set forth in Schedule 4.01(l) hereto:
(i) CRC and each of the CRC Acquired Subsidiaries and any
combined, consolidated, unitary or affiliated group of which CRC and each of the
CRC Acquired Subsidiaries have been a member prior to the Closing Date have
timely filed, or have had timely filed on their behalf, or will timely file or
cause to be timely filed, all Tax Returns required by applicable law to be filed
by any of them prior to or as of the Closing Date. All such Tax Returns and
amendments thereto are or will be true, complete and correct in all material
respects. CRC and each of the CRC Acquired Subsidiaries have established (and
until the Closing Date will maintain) on their books and records reserves
adequate to pay all Taxes not yet due and payable.
(ii) CRC and each of the CRC Acquired Subsidiaries have
paid, or have had paid on their behalf, or where payment is not yet due, have
established, or have had established on their behalf and for their sole benefit
and recourse, or will establish or cause to be established on or before the
Closing Date, an adequate accrual for the payment of all Taxes due with respect
to any period ending prior to or as of the Closing Date.
(iii) No Audit is pending with respect to any Tax Returns
filed by, or Taxes due from, CRC or any of the CRC Acquired Subsidiaries. No
deficiency or adjustment for any Taxes has been proposed, asserted, or assessed
against CRC or any of the CRC Acquired Subsidiaries. There are no material
liens for Taxes upon the assets of CRC or any of the CRC Acquired Subsidiaries,
except for statutory liens for current Taxes not yet due and those being
contested in good faith.
(iv) Neither CRC nor any of the CRC Acquired Subsidiaries
has given or been requested to give any waiver of statutes of limitations
relating to the payment of Taxes or have executed powers of attorney with
respect to Tax matters, which will be outstanding as of the Closing Date.
(v) Neither CRC nor any of the CRC Acquired Subsidiaries
is a party to, is bound by, or has any obligation to any other member of an
affiliated or combined group of which CRC or any of the CRC Acquired
Subsidiaries is or has been a member, for Taxes under any tax sharing, cost
sharing, or similar agreement or policy.
(vi) CRC and each of the CRC Acquired Subsidiaries have
delivered to JEI correct and complete copies of all Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by CRC and
each of the CRC Acquired Subsidiaries that were requested by JEI.
(vii) To the knowledge of CRC, no claim has been made by
an authority in a jurisdiction where CRC or any of the CRC Acquired Subsidiaries
does not file a Tax Return that it is or may be subject to taxation in that
jurisdiction.
(viii) Neither CRC nor any of the CRC Acquired
Subsidiaries has made any payments, is obligated to make any payments, or is
party to anyagreement that under certain circumstances could obligate it to make
any payments that will not be deductible under Section 280G of the Code.
(ix) There has been no written assertion of a Tax due from
CRC or any of the CRC Acquired Subsidiaries for the Taxes of any person under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign law) as a transferee or successor.
(x) The federal Tax Return of CHC International, Inc. and
subsidiaries for the period from December 1, 1997 through June 30, 1998 to be
filed by CRC with the IRS will not be materially different
from the draft form of such Tax Return previously furnished to JEI.
(m) Environmental Matters.
(i) As of the date hereof, to the knowledge of CRC, no
underground storage tanks are present under any property that CRC or any CRC
Acquired Subsidiaries has at any time owned, operated, occupied or leased and
which is part of the Acquired Businesses. To the knowledge of CRC, as of the
date hereof no material amount of any substance that has been designated by any
Governmental or Regulatory Authority or by applicable Federal, state or local
law to be radioactive, toxic, hazardous or otherwise a danger to health or other
environment, including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde, and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, a ("Hazardous Material"), but excluding
office and janitorial supplies, are present, as a result of the actions of CRC
or any of the CRC Acquired Subsidiaries in, on or under any property, including
the land and the improvements, ground water and surface water, that CRC or any
of the CRC Acquired Subsidiaries has at any time owned, operated, occupied or
leased and which is part of the Acquired Businesses.
(ii) At no time has CRC or any of the CRC Acquired Subsidiaries
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any Law in effect on
or before the Effective Time, which has had or is reasonably likely to have a
Material Adverse Effect on the CRC Acquired Businesses taken as a whole, nor has
CRC or any of the CRC Acquired Subsidiaries disposed of, transported, sold, or
manufactured any product containing a Hazardous Material (collectively,
"Hazardous Materials Activities") in violation of any Law or Order promulgated
by any Governmental or Regulatory Authority to prohibit, regulate or control
Hazardous Materials or any Hazardous Materials Activity, which has or is
reasonably likely to have a Material Adverse Effect on the CRC Acquired
Businesses taken as a whole.
(iii) CRC and any of the CRC Acquired Subsidiaries currently
hold all environmental approvals, permits, licenses, clearances and consents
(the "Environmental Permits") necessary for the conduct of its Hazardous
Materials Activities and other businesses of CRC or any of the CRC Acquired
Subsidiaries which are part of the Acquired Businesses as such activities and
businesses are currently being conducted, the absence of which would be
reasonable likely to have a Material Adverse Effect on the Acquired Businesses
taken as a whole.
(iv) No action, proceeding, revocation proceeding, amendment
procedure, writ, injunction or claim is pending or, to the knowledge of CRC as
of the date hereof, threatened concerning any Environmental Permit or any
Hazardous Materials Activity of CRC or any of the CRC Acquired Subsidiaries
which would be reasonably likely to have a Material Adverse Effect on the
Acquired Businesses taken as a whole. Except as set forth on Schedule 4.01(m)
or as otherwise would not be reasonably likely to have a Material Adverse Effect
on the Acquired Businesses as a whole, CRC is not aware of any fact or
circumstance which would involve CRC or any of the CRC Acquired Subsidiaries in
any environmental litigation or impose upon CRC or any of the CRC Acquired
Subsidiaries any environmental liability. None of the items disclosed on
Schedule 4.01(m) would be reasonably likely to have a Material Adverse Effect on
the Acquired Businesses taken as a whole.
(n) Employee Benefit Plans.
(i) Neither CRC nor any CRC Acquired Subsidiaries (A) sponsors,
maintains or contributes to any pension, retirement, profit-sharing, deferred
compensation, stock option, other incentive plan, or any other type of employee
benefit plan (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) ("Employee Benefit Plan"), or (B)
has any obligation to or customary arrangement with employees for bonuses,
incentive compensation, vacations, severance pay, sick pay, sick leave,
insurance, service award, relocation, disability, tuition refund, or other
benefits, whether oral or written ("Benefit Obligation"), except, in each case
(a "CRC Employee Benefit Plan" or "CRC Benefit Obligation," as the case may be),
as set forth in Schedule 4.01(n) or except as shall be transferred in its
entirety to Spinco (which Employee Benefit Plan or Benefit Obligation being
transferred to Spinco shall be separately identified on Schedule 4.01(n)). CRC
has furnished to JEI: (A) true, correct, and complete copies of all documents
evidencing plans, obligations, or arrangements referred to in Schedule 4.01(n)
(or true, correct, and complete written summaries of such plans, obligations, or
arrangements to the extent not evidenced by documents) and true, correct, and
complete copies of all documents evidencing trusts related to such plans or
arrangements, and all summary plan descriptions of such plans or arrangements;
(B) the two most recent annual reports (Form 5500's), if any, including all
schedules thereto and the most recent annual and periodic accounting of related
plan assets, if any, with respect to each CRC Employee Benefit Plan; (C) the two
most recent actuarial valuations with respect to each pension plan (as defined
in Section 3(2) of ERISA) (a "Pension Plan") sponsored or contributed to by CRC
or any CRC Acquired Subsidiary (a "CRC Pension Plan") subject to Title IV of
ERISA; and (D) the most recent determination letter issued by the Internal
Revenue Service (the "IRS") with respect to each CRC Pension Plan.
(ii) All material liabilities for contributions of CRC or any CRC
Acquired Subsidiary to each CRC Employee Benefit Plan (including any CRC Pension
Plan) and with respect to each CRC Benefit Obligation that in each case are due
on or prior to November 30, 1998, have been paid or accrued in the financial
records of CRC or such CRC Acquired Subsidiary.
(iii) Except as has not had and could not be reasonably expected
to have a Material Adverse Effect on the Acquired Businesses taken as a whole,
(A) there has been no violation of the reporting and disclosure requirements
imposed under either ERISA or the Code for which a penalty has been or may be
imposed with respect to any CRC Employee Benefit Plan; (B) there has been no
breach of fiduciary duty or responsibility with respect to any CRC Employee
Benefit Plan; (C) no CRC Employee Benefit Plan or related trust has any material
liability of any nature, accrued or contingent, including without limitation
liabilities for Taxes, other than for routine payments to be made in due course
to participants and beneficiaries, except as set forth in Schedule 4.01(n); (D)
neither CRC nor any CRC Acquired Subsidiary has any formal plan or commitment to
create any additional, or modify in any material respect any existing, CRC
Employee Benefit Plan or Benefit Obligation described in Section 4.01(n)(i); (E)
each CRC Employee Benefit Plan which is a group health plan within the meaning
of Section 5000(b)(1) of the Code is and has been maintained in full compliance
in all material respects with the applicable requirements of Section 4980B of
the Code; (F) other than the health care continuation requirements of Section
4980B of the Code, neither CRC nor any CRC Acquired Subsidiary has any
obligation to provide post-retirement medical benefits or life insurance
coverage or any deferred compensation benefits to any present or former
employees; (G) there is no litigation, arbitration, claim (other than routine
claims for benefits), governmental or other proceeding (formal or informal), or
investigation pending or, to the knowledge of CRC, threatened with respect to
any CRC Employee Benefit Plan or related trust or with respect to any fiduciary,
administrator, or sponsor (in its capacity as such) of any CRC Employee Benefit
Plan; (H) no CRC Employee Benefit Plan or related trust and no Benefit
Obligation is in material violation of, or in default in any material respect
with respect to, any Law or Order, nor is CRC, any CRC Acquired Subsidiary, any
CRC Employee Benefit Plan or any related trust required to take any action in
order to avoid such a violation or default; and (I) no event has occurred or, to
the knowledge of CRC, is threatened or about to occur which would constitute a
prohibited transaction under Section 406 of ERISA.
(iv) Except as set forth on Schedule 4.01(n), a determination
letter of the IRS has been issued with respect to each CRC Pension Plan to the
effect that such CRC Pension Plan is qualified under Section 401(a) of the Code,
and to the knowledge of CRC, no event has occurred that would materially
adversely affect such determination. Each CRC Pension Plan has been operated in
accordance with its terms in all material respects. No CRC Pension Plan which is
subject to Title IV of ERISA has a material accumulated or waived funding
deficiency within the meaning of Section 412 of the Code. No investigation or
review by the Internal Revenue Service is currently pending or, to the knowledge
of CRC, is threatened in which the IRS has asserted or may reasonably be
expected to assert that any CRC Pension Plan is not qualified under Section
401(a) of the Code or that any related trust is not exempt under Section 501 of
the Code. Neither CRC nor any CRC Acquired Subsidiary, nor any organization to
which CRC or any CRC Acquired Subsidiary is a successor or parent corporation,
within the meaning of Section 4069(b) of ERISA, has, at any time within the
immediately preceding three years, divested itself of any entity maintaining or
with an obligation to contribute to any CRC Pension Plan which had an "amount of
unfunded benefit liabilities," as defined in Section 4001(a)(18) of ERISA, at
the time of such divestiture. No material assessment of any Federal Taxes with
respect to any Employee Benefit Plan has been made and remains unpaid or, to the
knowledge of CRC, is threatened against CRC, any CRC Acquired Subsidiary, or any
related trust of any CRC Employee Benefit Plan and nothing has occurred which
could reasonably be expected to result in a material assessment of unrelated
business taxable income under the Code with respect to any Employee Benefit
Plan. Form 5500's for the immediately preceding three years have been timely
filed with respect to all CRC Pension Plans. No event has occurred or (to the
knowledge of CRC) is threatened or about to occur which would constitute a
reportable event within the meaning of Section 4043(b) of ERISA with respect to
any CRC Pension Plan. No notice of termination has been filed by the plan
administrator pursuant to Section 4041 of ERISA or issued by the Pension Benefit
Guaranty Corporation pursuant to Section 4042 of ERISA with respect to any CRC
Pension Plan.
(v) Neither CRC nor any CRC Acquired Subsidiary has at any time
within the immediately preceding five years contributed to or effectuated either
a complete or partial withdrawal from any multiemployer pension plan within the
meaning of Section 3(37) of ERISA.
(o) Patents, Trademarks, Etc. Schedule 4.01(o) sets forth all
patents, patent applications, trademarks, trademark applications, trade names,
service marks, copyrights, copyright applications, franchises, trade secrets,
computer programs (in object or source code form), or other intangible property
or asset (collectively, "Intangibles") which are individually or in the
aggregate material to the conduct of the business of the Acquired Businesses
taken as a whole. Except as set forth on Schedule 4.01(o), CRC and the CRC
Acquired Subsidiaries have all right, title and interest in, or a valid and
binding license to use all such Intangibles. Neither CRC nor any CRC Acquired
Subsidiary is in default (or with the giving of notice or lapse of time or both,
would be in default) in any material respect under any license to use such
Intangible, such Intangible is not, to the knowledge of CRC, being infringed by
any third party, and neither CRC nor any CRC Acquired Subsidiary is infringing
any Intangible of any third party, except for such defaults and infringements
which, individually or in the aggregate, are not having and could not reasonably
be expected to have a Material Adverse Effect on the Acquired Businesses taken
as a whole.
(p) Insurance. Schedule 4.01(p) is a true and complete list of
all liability, property, workers' compensation, directors' and officers'
liability and other insurance policies currently in effect on the date hereof
that insure the business, operations, properties, assets, or employees of CRC or
any of the CRC Acquired Subsidiaries that relates to any of the Acquired
Businesses, as well as any self-insurance arrangements affecting any of CRC or
any of the CRC Acquired Subsidiaries. Such insurance policies are placed with
financially sound and reputable insurers and, in light of the respective
business, operations, assets, and properties of CRC and the CRC Acquired
Subsidiaries, are in amounts and have coverages that are reasonable and
customary for persons engaged in such businesses and operations and having such
assets and properties.
(q) Labor Matters. Except as disclosed in Schedule 4.01(q)
hereto, there are no material controversies pending or, to the knowledge of CRC,
threatened between CRC or any of the CRC Acquired Subsidiaries and any
representatives of its employees, and, to the knowledge of CRC, there are no
material organizational efforts presently being made involving any of the now
unorganized employees of CRC or any of the CRC Acquired Subsidiaries. There is
no work stoppage, strike or similar concerted action by employees of CRC or any
of the CRC Acquired Subsidiaries currently pending or, to the knowledge of CRC,
threatened.
(r) Property and Assets. Except as disclosed in Schedule
4.01(r), CRC and the CRC Acquired Subsidiaries have good and marketable title
to, or have valid leasehold interests in or valid rights under contract to use,
all property and assets used in the conduct of the CRC Acquired Businesses, free
and clear of all Liens other than (i) any statutory Lien arising in the ordinary
course of business by operation of Law with respect to a liability that is not
yet due or delinquent, (ii) Liens for Taxes not delinquent or being contested in
good faith, (iii) deposits or pledges for goods or services made in the ordinary
course of business, (iv) customary Liens in favor of mechanics, materialmen and
landlords which arise by operation of Law and which are incurred in the ordinary
course of business and (v) any minor imperfection of title or similar Lien which
individually or in the aggregate with other such Liens does not materially
impair the value of the property or asset subject to such Lien or the use of
such property or asset in the conduct of the business of CRC or any such CRC
Acquired Subsidiary, as the case may be (collectively, "Permitted Liens"). To
the best knowledge of CRC, the facilities, structures, and equipment of CRC and
the CRC Acquired Subsidiaries which are part of the Acquired Businesses are
structurally sound with no known defects and are in good operating condition and
repair and are adequate for the uses to which they are being put; and none of
such facilities, structures, or equipment is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs. Except as set forth on
Schedule 4.01(r), neither CRC nor any of the CRC Acquired Subsidiaries has
received notification that it is in violation of any applicable building,
zoning, anti-pollution, health, or other Laws in respect of its facilities or
structures or their operations and no such violation exists.
(s) Vote Required. The affirmative vote of the holders of
record of a majority of the outstanding shares of CRC Common Stock entitled to
vote on the CRC Merger Proposal is the only vote of the holders of any class or
series of the capital stock of CRC required to approve the Merger and the other
transactions contemplated hereby, including but not limited to the Spinoff.
(t) Subsidiaries. Schedule 4.01(t) sets forth for each CRC Acquired
Subsidiary (i) its name and jurisdiction of incorporation, (ii) the number of
shares of authorized capital stock of each class of its capital stock, (iii)
the number of issued and outstanding shares of each class of its capital stock,
the names of the holders thereof, and the number of shares held by each such
holder, (iv) the number of shares of its capital stock held in treasury, and (v)
its directors and officers. CRC has delivered to JEI correct and complete
copies of the charter and by-laws of each CRC Acquired Subsidiary (as amended to
date). All of the issued and outstanding shares of capital stock of each CRC
Acquired Subsidiary have been duly authorized and are validly issued, fully
paid, and nonassessable. Except as set forth on Schedule 4.01(t), CRC or one of
the CRC Acquired Subsidiaries holds of record and owns beneficially all of the
outstanding shares of each such CRC Acquired Subsidiary, free and clear of any
Liens (other than Permitted Liens) or any restrictions on transfer (other than
restrictions under the Securities Act and state securities laws), security
interests, options, warrants, purchase rights, contracts, commitments, equities,
claims, and demands. There are no outstanding or authorized CRC Subsidiary
Options that could require any of CRC or the CRC Acquired Subsidiaries to sell,
transfer, or otherwise dispose of any capital stock of any of the CRC Acquired
Subsidiaries or that could require any such subsidiary to issue, sell, or
otherwise cause to become outstanding any of its own capital stock. There are
no outstanding stock appreciation, phantom stock, profit participation, or
similar rights with respect to any capital stock of any CRC Acquired
Subsidiary. Except as disclosed in Schedule 4.01(t), there are no voting
trusts, proxies, or other commitments, undertakings, restrictions or
arrangements in favor of any person other than CRC or a CRC Acquired
Subsidiary with respect to the voting of, or the right to participate in,
dividends or other earnings on any capital stock of any CRC Acquired
Subsidiary. The minute books (containing the records of meetings of the
stockholders, the board of directors and any committees of the board of
directors), the stock certificate books, and the stock record books of each
CRC Acquired Subsidiary are correct and complete in all material
respects. None of the CRC Acquired Subsidiaries is in default under or in
violation of any provision of its charter or bylaws. Schedule 4.01(t) also sets
forth any direct or indirect control or equity participation in any corporation,
partnership, trust, or other business association of CRC and each CRC Acquired
Subsidiary which is not one of the CRC Acquired Subsidiaries. CRC is the owner,
free and clear of any Liens (other than Permitted Liens), of approximately
fifty-nine (59%) of the outstanding capital stock of LCC on a fully diluted
basis.
(u) Brokers. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by CRC directly with
JEI without the intervention of any person on behalf of CRC in such manner as to
give rise to any valid claim by any person against CRC, any CRC Acquired
Subsidiaries or JEI for a finder's fee, brokerage commission or similar payment.
(v) Agreements Not to Compete. CRC has delivered to JEI true,
complete and accurate copies of all Contracts in full force and effect as of the
date hereof between CRC or any CRC Acquired Subsidiary and its respective
directors, officers, employees, agents (including sales agents), dealers or
distributors which prevent or restrict any such person from competing with CRC
or any CRC Acquired Subsidiary in any manner.
(w) Notes and Accounts Receivable. All notes and accounts
receivable of CRC and the CRC Acquired Subsidiaries shown on the Initial
November 30 Balance Sheet included with the CRC Financial Statements are
reflected properly on their books and records, are valid receivables subject to
no setoff or counterclaims, and are current and collectible, subject only to the
reserve for bad debts set forth on the face of such balance sheet (rather than
in any notes thereto).
(x) Contracts. Schedule 4.01(x)(i) lists the following
contracts and other agreements to which any of CRC and the CRC Acquired
Subsidiaries is a party which relate in any way to any of the Acquired
Businesses (each a "CRC Material Contract"):
(i) any agreement (or group of related agreements) for
the lease of personal property to or from any person providing for lease
payments in excess of $50,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year, result in a loss to
any of CRC and the CRC Acquired Subsidiaries, or involve consideration in excess
of $50,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of $50,000 or
under which it has granted a Lien on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any collective bargaining agreement;
(vii) any agreement for the employment of any individual on a
full-time, part-time, consulting or other basis providing annual
compensation in excess of $50,000 or providing severance benefits;
(viii) any agreement under which it has advanced or
loaned in excess of $10,000 to any of its directors, officers or employees;
(ix) any agreement with, or plan covering, any officer or
employee of CRC or any CRC Acquired Subsidiary the benefits of which are
contingent or vest, or the terms of which are materially altered, upon the
occurrence of a transaction involving CRC or any of the CRC Acquired
Subsidiaries of the nature contemplated by this Agreement;
(x) any agreement under which the consequences of a
default or termination could have a Material Adverse Effect on the Acquired
Businesses;
(xi) any other agreement (or group of related
agreements) the performance of which involves consideration in excess of $50,000
during any consecutive 12 month period.
CRC has delivered to JEI (i) a correct and complete copy of each CRC
Material Contract (as amended to date) and (ii) a written summary setting forth
the terms and conditions of each oral agreement referred to in Schedule
4.01(x)(i). With respect to each such agreement: (A) the agreement is legal,
valid, binding, enforceable and in full force and effect, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, or other similar laws affecting the enforcement of creditors' rights
generally, by general equitable principals (regardless of whether such
enforceability is considered in a proceeding in equity or as law), and except to
the extent that indemnification provisions may be unenforceable due to public
policy; (B) subject to the receipt of any necessary approvals and consents for
the transfer of the rights thereunder to JEI (which approvals and consents are
listed on Schedule 4.01(d)), the agreement will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby; (C) except as
otherwise set forth on Schedule 4.01(x)(ii)(C) and except for the license
agreement with Carnival, which will be terminated at the Closing, no party is in
breach or default, and no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement, except for any of the foregoing matters
which, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on the Acquired Businesses taken as a whole; and
(D) to the best of CRC's knowledge, no party has repudiated any provision of the
agreement.
(y) Inventory. The inventory of CRC and the CRC Acquired
Subsidiaries which is part of the Acquired Businesses is merchantable and fit
for the purpose for which it was procured or manufactured, and none of such
inventory is slow-moving, obsolete, damaged, or defective.
(z) Product Liability. None of CRC and the CRC Acquired
Subsidiaries has any liability (and there is no basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of them giving rise to any liability) arising out of any
injury to individuals or property as a result of the ownership, possession or
use of any product manufactured, sold, leased, or delivered by CRC or any of the
CRC Acquired Subsidiaries.
4.02 Certain Representations and Warranties of JEI.
JEI represents and warrants to CRC as follows (it being understood
that any representation or warranty which relates to a JEI Subsidiary shall not
be deemed to apply to Players or any of its subsidiaries):
(a) Organization and Qualification. Each of JEI and the JEI
Subsidiaries, as listed on Schedule 4.02(a), is a corporation duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
incorporation and has full corporate power and authority to conduct its business
as and to the extent now conducted and to own, use, and lease its assets and
properties. Each of JEI and the JEI Subsidiaries is duly qualified, licensed,
or admitted to do business and is in good standing in each jurisdiction listed
on Schedule 4.02 (a), which is each jurisdiction in which the ownership, use, or
leasing of its assets and properties, or the conduct or nature of its
businesses, makes such qualification, licensing or admission necessary, except
for such failures to be so qualified, licensed, or admitted and in good standing
which, individually or in the aggregate, are not having and could not be
reasonably expected to have a Material Adverse Effect on JEI and the JEI
Subsidiaries taken as a whole. Except as disclosed in Schedule 4.02(a) hereto,
JEI does not directly or indirectly own any equity or similar interest in, or
any interest convertible into or exchangeable or exercisable for, any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity.
(b) Capital Stock.
(i) The authorized capital stock of JEI consists solely of
30,000,000 shares of JEI Common Stock and 1,000,000 shares of preferred stock,
par value $1.00 per share, of JEI ("JEI Preferred Stock"). As of December 31,
1998, 8,616,680 shares of JEI Common Stock were issued and outstanding,
1,243,572 shares of JEI Common Stock were held in the treasury of JEI and
1,753,972 shares of JEI Common Stock were reserved for issuance pursuant to
Options to acquire JEI Common Stock (the "JEI Options"). All JEI Options
currently issued and outstanding are described in Schedule 4.02(b)(i). As of
the date hereof, there has been no change in the number of issued and
outstanding shares of JEI Common Stock or shares of JEI Common Stock held in
treasury or reserved for issuance since such date, other than changes arising
from the conversion or exercise of the JEI Options described in Schedule
4.02(b)(i) hereto and other than as contemplated to be issued pursuant to the
Players Merger Agreement. As of the date hereof, no shares of JEI Preferred
Stock are issued and outstanding. All of the issued and outstanding shares of
JEI Common Stock are, and all shares reserved for issuance will be, upon
issuance in accordance with the terms specified in the instruments or agreements
pursuant to which they are issuable, duly authorized, validly issued, fully paid
and nonassessable. Except pursuant to this Agreement and except as set forth in
Schedule 4.02(b)(i) hereto, there are no outstanding JEI Options. The shares of
JEI Common Stock issuable to the holders of CRC Common Stock pursuant to Article
II hereof will be, when issued in accordance with this Agreement, duly
authorized, validly issued, fully paid and nonassessable. JEI has reserved for
issuance the number of shares of JEI Common Stock required to be issued at the
Closing to the holders of the CRC Common Stock and CRC Options.
(ii) Except as disclosed in Schedule 4.02(b)(ii) and except for
cancellation of shares of JEI Merger Corp. as contemplated by the Players Merger
Agreement, there are no outstanding contractual obligations of JEI or any JEI
Subsidiary to repurchase, redeem, or otherwise acquire any shares of JEI Common
Stock or any capital stock of any JEI Subsidiary or any JEI Options or any
Options to purchase any capital stock of any JEI Subsidiary or to provide funds
to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any JEI Subsidiary or any other person.
(c) Authority Relative to this Agreement. JEI has full
corporate power and authority to enter into this Agreement and, subject to
obtaining the JEI Stockholders' Approval and the approvals of any Governmental
or Regulatory Authority identified in Schedule 4.02(c), to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by JEI and the
consummation by JEI of the transactions contemplated hereby have been duly and
validly authorized by its Board of Directors. The Board of Directors of JEI has
adopted a resolution recommending approval of the JEI Merger Proposal by the
stockholders of JEI, declaring the advisability of the issuance of JEI Common
Stock in connection with the Merger and directing that the JEI Merger Proposal
be submitted for consideration by the stockholders of JEI. Except for the
review by JEI's Compliance Committee (the "Compliance Committee") of this
Agreement, the transactions identified herein, and the principals of CRC and the
CRC Acquired Subsidiaries as required by JEI's internal reporting system and no
exception taken to any of the foregoing by said Compliance Committee, and except
for the JEI Stockholders Approval, no other corporate proceedings on the part of
JEI or its stockholders are necessary to authorize the execution, delivery and
performance of this Agreement by JEI and the consummation by JEI of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by JEI and, subject to obtaining the JEI Stockholders'
Approval and any required approvals of any Governmental or Regulatory Authority,
constitutes a legal, valid, and binding obligation of JEI enforceable against
JEI in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except to the extent that indemnification
provisions may be unenforceable due to public policy.
(d) Non-Contravention; Approvals and Consents.
(i) Subject to obtaining the JEI Stockholders' Approval and the
taking of the actions described in paragraph (ii) of this Section 4.02(d), the
execution and delivery of this Agreement by JEI do not, and the performance by
JEI of its obligations hereunder and the consummation of the transactions
contemplated hereby will not, conflict with, result in a violation or breach of,
constitute (with or without notice or lapse of time or both) a default under,
result in or give to any person any right of payment or reimbursement,
termination, cancellation, modification or acceleration of, or result in the
creation or imposition of any Lien upon any of the assets or properties of JEI
or any of the JEI Subsidiaries under, any of the terms, conditions or provisions
of (x) the certificates or articles of incorporation or Bylaws (or other
comparable charter documents) of JEI or any of the JEI Subsidiaries, or (y) any
Law or Order of any Governmental or Regulatory Authority applicable to JEI or
any of the JEI Subsidiaries or any of their respective assets or properties, or
(z) any Contracts to which JEI or any of the JEI Subsidiaries is a party or by
which JEI or any of the JEI Subsidiaries or any of their respective assets or
properties is bound, except for any of the foregoing matters which, individually
or in the aggregate, could not be reasonably expected to have a Material Adverse
Effect on JEI and the JEI Subsidiaries taken as a whole or on the ability of JEI
to consummate the transactions contemplated by this Agreement.
(ii) Except for (v) the filing of a premerger notification and
report form by JEI under the HSR Act, (w) the filing of the Registration
Statement and Joint Proxy Statement with the SEC pursuant to the Securities Act
and the Exchange Act, respectively, and filings with various state securities
authorities that may be required in connection with the transactions
contemplated by this Agreement, (x) the filing of the Nevada Articles and
Florida Articles and other appropriate merger documents pursuant to and in
accordance with the laws of the States of Nevada and Florida and appropriate
documents with the relevant authorities of other states in which CRC is
qualified to do business, (y) the licensing, permitting, registration or other
approval of, or written consent or no action letter from, each Governmental or
Regulatory Authority with regulatory control or jurisdiction over the conduct of
lawful gaming or gambling by JEI and the JEI Subsidiaries, including, without
limitation the Nevada Gaming Commission (a "JEI Gaming Authority"), within each
municipality, state or commonwealth, or subdivision thereof, wherein JEI or any
of the JEI Subsidiaries conducts business on the date hereof and (z) obtaining
the consents and approvals described in Schedule 4.02(d) hereto, no consent,
approval, or action of, filing with, or notice to any Governmental or Regulatory
Authority or other public or private third party is necessary or required under
any of the terms, conditions or provisions of any Law or Order of any
Governmental or Regulatory Authority or any Contract to which JEI or any of the
JEI Subsidiaries is a party or by which JEI or any of the JEI Subsidiaries or
any of their respective assets or properties is bound for the execution and
delivery of this Agreement by JEI, the performance by JEI of its obligations
hereunder or the consummation of the transactions contemplated hereby, except
for such consents, approvals, or actions of, filings with or notices to any
Governmental or Regulatory Authority or other public or private third party the
failure of which to make or obtain could not be reasonably expected to have a
Material Adverse Effect on the JEI and the JEI Subsidiaries taken as a whole or
on the ability of JEI to consummate the transactions contemplated by this
Agreement.
(e) SEC Reports and Financial Statements. JEI delivered to CRC prior
to the execution of this Agreement a true, correct, and complete copy of each
form, report, schedule, registration statement, definitive proxy statement and
other document (together with all amendments thereof and supplements thereto)
filed by JEI or any of the JEI Subsidiaries with the SEC since January 1, 1996
(as such documents have since the time of their filing been amended or
supplemented, the "JEI SEC Reports"), which are all the documents (other than
preliminary material) that JEI and the JEI Subsidiaries were required to file
with the SEC since such date. As of their respective dates, the JEI SEC Reports
(i) complied as to form in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations promulgated thereunder and (ii) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim consolidated financial
statements (including, in each case, the notes, if any, thereto) included in the
JEI SEC Reports (the "JEI Financial Statements") complied as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated therein or in the
notes thereto and except with respect to unaudited statements as permitted by
Form 10-Q) and fairly present (subject, in the case of the unaudited interim
financial statements, to normal, recurring year-end audit adjustments which are
not expected to be, individually or in the aggregate, materially adverse to JEI
and the JEI Subsidiaries taken as a whole) the consolidated financial position
of JEI and its consolidated subsidiaries as at the respective dates thereof and
the consolidated results of their operations and cash flows for the respective
periods then ended. Each JEI Subsidiary is treated as a consolidated subsidiary
of JEI in the JEI Financial Statements for all periods covered thereby.
(f) Absence of Certain Changes or Events. Except as disclosed in the
JEI SEC Reports filed prior to the date of this Agreement, since September 30,
1998 there has not been any adverse change in the business, financial condition,
operations or results of operations of JEI or the JEI Subsidiaries (other than
any change as a consequence of the economy generally or in the industries in
which JEI and the JEI Subsidiaries operate not specific to JEI and the JEI
Subsidiaries) which could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on JEI and the JEI Subsidiaries
taken as a whole (a "Material Adverse Change in JEI").
(g) Absence of Undisclosed Liabilities. Except for matters
reflected or reserved against in the balance sheet for the period ended
September 30, 1998 included in the JEI Financial Statements or as filed
pursuant to a more recently filed JEI SEC Report which includes a consolidated
balance sheet of JEI and the JEI Subsidiaries, neither JEI nor any of the JEI
Subsidiaries had at such date, or has incurred since that date, any liabilities
or obligations (whether absolute, accrued, contingent or otherwise, asserted or
unasserted, or whether due or to become due) of any nature that would be
required by GAAP to be reflected or reserved against on a consolidated balance
sheet of JEI and the JEI Subsidiaries, except liabilities or obligations which
were incurred in the ordinary course of business consistent with past practice
since such date.
(h) Legal Proceedings. Except as disclosed in the JEI SEC
Reports filed prior to the date of this Agreement or pursuant to Schedule
4.02(h), (i) there are no actions, suits, arbitrations or proceedings pending
or, to the knowledge of JEI, threatened against, nor to the knowledge of JEI are
there any Governmental or Regulatory Authority investigations or audits pending
or threatened against JEI or any of the JEI Subsidiaries or any of their
respective assets and properties, including any affecting its licenses, permits,
registrations or other gaming approvals under JEI Gaming Laws (as defined in
Section 4.01(l)), (ii) neither JEI nor any of the JEI Subsidiaries is subject to
any Order of any Governmental or Regulatory Authority and (iii) neither JEI nor
any JEI Subsidiary nor, to the knowledge of JEI (without specific inquiry), any
director, officer, gaming manager or key employee of JEI or any JEI Subsidiary
has received any written claim, demand, notice, complaint, or Order from any
Governmental or Regulatory Authority in the past three years asserting that a
license of it or them under JEI Gaming Laws should be revoked or suspended.
None of any of the actions, suits, arbitrations or proceedings, investigations,
audits, claims, demands, notices, complaints or Orders disclosed on Schedule
4.02(h) could reasonably be expected to have a Material Adverse Effect on JEI
and the JEI Subsidiaries taken as a whole or on the ability of CRC to consummate
the transactions contemplated by this Agreement.
(i) Vote Required. The affirmative vote of the holders of record of
at least a majority of the outstanding shares of JEI Common Stock with respect
to the JEI Merger Proposal and the approval of the issuance of JEI Common Stock
in connection with the Merger is the only vote of the holders of any class or
series of the capital stock of JEI required to approve the Merger and the other
transactions contemplated hereby.
(j) State Securities Laws. No state securities or "Blue Sky" permits
or other authorizations are necessary to issue the Share Merger Consideration
pursuant to the Merger.
(k) Joint Proxy Statement and Registration Statement. The Joint
Proxy Statement and the Registration Statement and any other document to be
filed by JEI with the SEC under the Exchange Act or the Securities Act will
comply as to form in all material respects with the requirements of the Exchange
Act and the Securities Act, as the case may be, and will not, on the date of its
filing or, in the case of the Joint Proxy Statement, at the date it is mailed to
stockholders of JEI, at the time of the JEI Stockholders Meetings and at the
Effective Time, 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, except that no representation is made by JEI with respect to
information supplied by or on behalf of CRC expressly for inclusion therein and
information incorporated by reference therein from documents filed by CRC or any
of the CRC Acquired Subsidiaries with the SEC.
(l) Compliance with Laws, Orders, etc. JEI, the JEI
Subsidiaries and, to the knowledge of JEI (without specific inquiry), each of
their respective directors, officers and gaming managers hold all permits,
licenses, variances, exemptions, orders and approvals of all Governmental and
Regulatory Authorities necessary for the lawful conduct of their businesses,
including all authorizations under applicable JEI Gaming Laws (the "JEI
Permits"), except where the failure to obtain such JEI Permits would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on JEI and the JEI Subsidiaries taken as a whole, and no event
has occurred which permits, or upon the giving of notice or passage of time or
both would permit, revocation, non-renewal, modification, suspension or
termination (other than expiration of any JEI Permit in the ordinary course) of
any JEI Permit that currently is in effect with respect to any of the businesses
of JEI or any of the JEI Subsidiaries. JEI and the JEI Subsidiaries and, to the
knowledge of JEI (without specific inquiry), each of their respective directors,
officers and gaming managers, are in compliance in all material respects with
the material terms of the JEI Permits relating to their businesses. Except as
disclosed in Schedule 4.02(l), JEI and the JEI Subsidiaries are not in violation
of or default under any Law or Order of any Governmental or Regulatory Authority
applicable to JEI or any of the JEI Subsidiaries, including all applicable JEI
Gaming Laws, except for violations or defaults which, individually or in the
aggregate, are not having and could not reasonably be expected to have a
Material Adverse Effect on JEI and the JEI Subsidiaries taken as a whole. The
term "JEI Gaming Laws" means any Federal, state, local or foreign statute,
ordinance, rule, regulation, permit, consent, registration, finding of
suitability, approval, license, judgment, order, decree, injunction or other
authorization, including any condition or limitation placed thereon, governing
or relating to the current or contemplated casino activities and operations of
JEI and the JEI Subsidiaries, including without limitation the rules and
regulations of all applicable state or local casino commissions.
(m) Tax Matters. Except as set forth in Schedule 4.02(m) hereto:
(i) JEI and each of the JEI Subsidiaries and any combined,
consolidated, unitary or affiliated group of which JEI and the JEI Subsidiaries
have been a member prior to the Closing Date have timely filed, or have had
timely filed on their behalf, or will timely file or cause to be timely filed,
all Tax Returns required by applicable law to be filed by any of them prior to
or as of the Closing Date. All such Tax Returns and amendments thereto are or
will be true, complete and correct, in all material respects. JEI and each of
the JEI Subsidiaries have established (and until the Closing Date will maintain)
on their books and records reserves adequate to pay all Taxes not yet due and
payable.
(ii) JEI and each of the JEI Subsidiaries have paid, or
have hadpaid on their behalf, or where payment is not yet due, have established,
or have had established on their behalf and for their sole benefit and recourse,
or will establish or cause to be established on or before the Closing Date, an
adequate accrual for the payment of all Taxes due with respect to any period
ending prior to or as of the Closing Date.
(iii) No Audit is pending with respect to any Tax Returns
filed by, or Taxes due from JEI or any JEI Subsidiary. No deficiency or
adjustment for any Taxes has been proposed, asserted, or assessed against JEI or
any of the JEI Subsidiaries. There are no material liens for Taxes upon the
assets of JEI or any of the JEI Subsidiaries, except for statutory liens for
current Taxes not yet due and those being contested in good faith.
(iv) Neither JEI nor any of the JEI Subsidiaries has
given or been requested to give any waiver of statutes of limitations relating
to the payment of Taxes or have executed powers of attorney with respect to Tax
matters, which will be outstanding as of the Closing Date.
(v) Neither JEI nor any of the JEI Subsidiaries is a party
to, is bound by, or has any obligation to any other member of an affiliated or
combined group of which JEI or any of the JEI Subsidiaries is or has been a
member, for Taxes under any tax sharing, cost sharing, or similar agreement or
policy.
(vi) JEI and each of the JEI Subsidiaries have delivered to
CRC correct and complete copies of all Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by JEI and each of the
JEI Subsidiaries that were requested by CRC.
(vii) To the knowledge of JEI, no claim has been made by
an authority in a jurisdiction where JEI or any of the JEI Subsidiaries does not
file a Tax Return that it is or may be subject to taxation in that jurisdiction.
(viii) Neither JEI nor any of the JEI Subsidiaries has
made any payments, is obligated to make any payments, or is party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Section 280G of the Code.
(ix) There has been no written assertion of a Tax due
from JEI nor any of the JEI Subsidiaries for the Taxes of any person under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign law) as a transferee or successor.
(n) Environmental Matters.
(i) As of the date hereof, to the knowledge of JEI, no
underground storage tanks are present under any property that JEI or any JEI
Subsidiary has at any time owned, operated, occupied or leased. To the
knowledge of JEI, as of the date hereof no material amount of any substance that
has been designated by any Governmental or Regulatory Authority or by applicable
Federal, state or local law to be radioactive, toxic, hazardous or otherwise a
danger to health or other environment, including, without limitation, PCBs,
asbestos, petroleum, urea-formaldehyde, and all Hazardous Material, but
excluding office and janitorial supplies, are present, as a result of the
actions of JEI or any of the JEI Subsidiaries in, on or under any property,
including the land and the improvements, ground water and surface water, that
JEI or any of the JEI Subsidiaries has at any time owned, operated, occupied or
leased.
(ii) At no time has JEI or any of the JEI Subsidiaries
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any Law in effect on
or before the Effective Time, which has had or is reasonably likely to have a
Material Adverse Effect on JEI and the JEI Subsidiaries taken as a whole, nor
has JEI or any of the JEI Subsidiaries engaged in Hazardous Materials Activities
in violation of any Law or Order promulgated by any Governmental or Regulatory
Authority to prohibit, regulate or control Hazardous Materials or any Hazardous
Materials Activity, which has or is reasonably likely to have a Material Adverse
Effect on JEI and the JEI Subsidiaries taken as a whole.
(iii) JEI and any of the JEI Subsidiaries currently
hold all Environmental Permits necessary for the conduct of its Hazardous
Materials Activities and other businesses of JEI or any of the JEI
Subsidiaries as such activities and businesses are currently being conducted,
the absence of which would be reasonably likely to have a Material Adverse
ffect on JEI and the JEI Subsidiaries taken as a whole.
(iv) No action, proceeding, revocation proceeding,
amendment procedure, writ, injunction or claim is pending or, to the
knowledge of JEI as of the date hereof, threatened concerning any
Environmental Permit or any Hazardous Materials Activity of JEI or any of the
JEI Subsidiaries which would be reasonably likely to have a Material Adverse
Effect on JEI or the JEI Subsidiaries taken as a whole. JEI is not aware of
any fact or circumstance which would involve JEI or any of the JEI
Subsidiaries in any environmental litigation or impose upon JEI or any of
the JEI Subsidiaries any environmental liability which in either case would
be reasonably likely to have a Material Adverse Effect on JEI and the JEI
Subsidiaries taken as a whole.
(o) Patents, Trademarks, Etc. JEI and the JEI Subsidiaries have all
right, title and interest in, or a valid and binding license to use all
Intangibles which are individually or in the aggregate material to the conduct
of the business of JEI and the JEI Subsidiaries taken as a whole. Neither JEI
nor any JEI Subsidiary is in default (or with the giving of notice or lapse of
time or both, would be in default) in any material respect under any license to
use such Intangible, such Intangible is not, to the knowledge of JEI, being
infringed by any third party, and neither JEI nor any JEI Subsidiary is
infringing any Intangible of any third party, except for such defaults and
infringements which, individually or in the aggregate, are not having and could
not reasonably be expected to have a Material Adverse Effect on JEI and the JEI
Subsidiaries taken as a whole.
(p) Insurance. The insurance maintained by JEI and the JEI
Subsidiaries on its business, operations, properties, assets and employees is
placed with financially sound and reputable insurers and, in light of the
respective business, operations, assets, and properties of JEI and the JEI
Subsidiaries, are in amounts and have coverages that are reasonable and
customary for persons engaged in such businesses and operations and having such
assets and properties.
(q) Property and Assets. JEI and the JEI Subsidiaries have good
and marketable title to, or have valid leasehold interests in or valid rights
under contract to use, all property and assets used in the conduct of the
businesses of JEI and the JEI Subsidiaries, free and clear of all Liens other
than (i) any statutory Lien arising in the ordinary course of business by
operation of Law with respect to a liability that is not yet due or delinquent,
(ii) Liens for Taxes not delinquent or being contested in good faith, (iii)
deposits or pledges for goods or services made in the ordinary course of
business, (iv) customary Liens in favor of mechanics, materialmen and landlords
which arise by operation of Law and which are incurred in the ordinary course of
business and (v) any minor imperfection of title or similar Lien which
individually or in the aggregate with other such Liens does not materially
impair the value of the property or asset subject to such Lien or the use of
such property or asset in the conduct of the business of JEI or any such JEI
Subsidiary. To the best knowledge of JEI, the facilities, structures and
equipment of JEI and the JEI Subsidiaries are structurally sound with no known
defects and are in good operating condition and repair and are adequate for the
uses to which they are being put; and none of such facilities, structures or
equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs. Except as set forth on Schedule 4.02(r), neither JEI
nor any of the JEI Subsidiaries has received notification that it is in
violation of any applicable building, zoning, anti-pollution, health, or other
Laws in respect of its facilities or structures or their operations and no such
violation exists.
(r) Brokers. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by JEI directly with
CRC without the intervention of any person on behalf of JEI in such manner as to
give rise to any valid claim by any person against JEI, any JEI Subsidiaries or
CRC for a finder's fee, brokerage commission or similar payment.
(s) Labor Matters. Except as disclosed in Schedule 4.02(s)
hereto, there are no material controversies pending or, to the knowledge of JEI,
threatened between JEI or any of the JEI Subsidiaries and any representatives
of its employees, and, to the knowledge of JEI, there are no material
organizational efforts presently being made involving any of the now unorganized
employees of JEI or any of the JEI Subsidiaries. There is no work stoppage,
strike or similar concerted action by employees of JEI or any of the JEI
Subsidiaries currently pending or, to the knowledge of JEI, threatened.
(t) Compliance with Charter Documents and Certain Agreements. Except
as disclosed in Schedule 4.02(t), neither JEI nor any of the JEI Subsidiaries
nor, to the knowledge of JEI (without specific inquiry), any other party thereto
is in breach or violation of, or in default in the performance or observance of
any term or provision of, and no event has occurred which, with notice or lapse
of time or both, could be reasonably expected to result in a default under, (x)
the certificate or articles of incorporation or by-laws (or other comparable
charter documents) of JEI or any of the JEI Subsidiaries or (y) any JEI
Material Contract to which JEI or any of the JEI Subsidiaries is a party or by
which JEI or any of the JEI Subsidiaries or any of their respective assets or
properties is bound which breach, violation or default could reasonably be
expected to have a Material Adverse Effect on JEI and the JEI Subsidiaries taken
as a whole.
(u) Employee Benefit Plans.
(i) Neither JEI nor any JEI Subsidiaries (A) sponsors, maintains
or contributes to any Employee Benefit Plan or has any Benefit Obligation
except, in each case (a "JEI Employee Benefit Plan" or "JEI Benefit Obligation,"
as the case may be) as set forth in Schedule 4.02(u). JEI has furnished to CRC:
(A) true, correct, and complete copies of all documents evidencing plans,
obligations, or arrangements referred to in Schedule 4.02(u) (or true, correct,
and complete written summaries of such plans, obligations, or arrangements to
the extent not evidenced by documents) and true, correct, and complete copies of
all documents evidencing trusts related to such plans or arrangements, and all
summary plan descriptions of such plans or arrangements; (B) the two most recent
annual reports (Form 5500's), if any, including all schedules thereto and the
most recent annual and periodic accounting of related plan assets, if any, with
respect to each JEI Employee Benefit Plan; (C) the two most recent actuarial
valuations with respect to each Pension Plan sponsored or contributed to by JEI
subject to Title IV of ERISA (a "JEI Pension Plan"); and (D) the most recent
determination letter issued by the IRS with respect to each JEI Pension Plan.
(ii) All material liabilities for contributions of JEI or any JEI
Subsidiary to each JEI Employee Benefit Plan (including any JEI Pension Plan)
and with respect to each Benefit Obligation that in each case are due on or
prior to September 30, 1998, have been paid or accrued in the financial records
of JEI or such JEI Subsidiary.
(iii) Except as has not had and could not be reasonably expected
to have a Material Adverse Effect on JEI and the JEI Subsidiaries taken as a
whole, (A) there has been no violation of the reporting and disclosure
requirements imposed under either ERISA or the Code for which a penalty has been
or may be imposed with respect to any JEI Employee Benefit Plan; (B) there has
been no breach of fiduciary duty or responsibility with respect to any JEI
Employee Benefit Plan; (C) no JEI Employee Benefit Plan or related trust has any
material liability of any nature, accrued or contingent, including without
limitation liabilities for Taxes, other than for routine payments to be made in
due course to participants and beneficiaries, except as set forth in Schedule
4.02(u); (D) neither JEI nor any JEI Subsidiary has any formal plan or
commitment to create any additional, or modify in any material respect any
existing, JEI Employee Benefit Plan or JEI Benefit Obligation described in
Section 4.02(u); (E) each JEI Employee Benefit Plan which is a group health plan
within the meaning of Section 5000(b)(1) of the Code is and has been maintained
in full compliance in all material respects with the applicable requirements of
Section 4980B of the Code; (F) other than the health care continuation
requirements of Section 4980B of the Code, neither JEI nor any JEI Subsidiary
has any obligation to provide post-retirement medical benefits or life insurance
coverage or any deferred compensation benefits to any present or former
employees; (G) there is no litigation, arbitration, claim (other than routine
claims for benefits), governmental or other proceeding (formal or informal), or
investigation pending or, to the knowledge of JEI, threatened with respect to
any JEI Employee Benefit Plan or related trust or with respect to any fiduciary,
administrator, or sponsor (in its capacity as such) of any JEI Employee Benefit
Plan; (H) no JEI Employee Benefit Plan or related trust and no Benefit
Obligation is in material violation of, or in default in any material respect
with respect to, any Law or Order, nor is JEI, any JEI Subsidiary, any JEI
Employee Benefit Plan or any related trust required to take any action in order
to avoid such a violation or default; and (I) no event has occurred or, to the
knowledge of JEI, is threatened or about to occur which would constitute a
prohibited transaction under Section 406 of ERISA.
(iv) Except as set forth on Schedule 4.02(u), a determination
letter of the IRS has been issued with respect to each JEI Pension Plan to the
effect that such JEI Pension Plan is qualified under Section 401(a) of the Code,
and to the knowledge of JEI, no event has occurred that would materially
adversely affect such determination. Each JEI Pension Plan has been operated in
accordance with its terms in all material respects. No JEI Pension Plan which is
subject to Title IV of ERISA has a material accumulated or waived funding
deficiency within the meaning of Section 412 of the Code. No investigation or
review by the Internal Revenue Service is currently pending or, to the knowledge
of JEI, is threatened in which the IRS has asserted or may reasonably be
expected to assert that any JEI Pension Plan is not qualified under Section
401(a) of the Code or that any related trust is not exempt under Section 501 of
the Code. Neither JEI nor any JEI Subsidiary, nor any organization to which JEI
or any JEI Subsidiary is a successor or parent corporation, within the meaning
of Section 4069(b) of ERISA, has, at any time within the immediately preceding
three years, divested itself of any entity maintaining or with an obligation to
contribute to any JEI Pension Plan which had an "amount of unfunded benefit
liabilities," as defined in Section 4001(a)(18) of ERISA, at the time of such
divestiture. No material assessment of any Federal Taxes with respect to any
JEI Employee Benefit Plan has been made or remains unpaid, or, to the knowledge
of JEI, is threatened against JEI, any JEI Subsidiary, or any related trust of
any JEI Employee Benefit Plan and nothing has occurred which could reasonably be
expected to result in a material assessment of unrelated business taxable income
under the Code with respect to any JEI Employee Benefit Plan. Form 5500's for
the immediately preceding three years have been timely filed with respect to all
JEI Pension Plans. No event has occurred or (to the knowledge of JEI) is
threatened or about to occur which would constitute a reportable event within
the meaning of Section 4043(b) of ERISA with respect to any JEI Pension Plan. No
notice of termination has been filed by the plan administrator pursuant to
Section 4041 of ERISA or issued by the Pension Benefit Guaranty Corporation
pursuant to Section 4042 of ERISA with respect to any JEI Pension Plan.
(v) Neither JEI nor any JEI Subsidiary has at any time within
the immediately preceding five years contributed to or effectuated either a
complete or partial withdrawal from any multiemployer JEI Pension Plan within
the meaning of Section 3(37) of ERISA.
(v) Contracts. Schedule 4.02(v) lists the following contracts
and other agreements to which any of JEI and the JEI Subsidiaries is a party
(each a "JEI Material Contract"):
(i) any agreement (or group of related agreements) for
the lease of personal property to or from any person providing for lease
payments in excess of $50,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year, result in a loss to
any of JEI and the JEI Subsidiaries, or involve consideration in excess of
$50,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of $50,000 or
under which it has granted a Lien on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any collective bargaining agreement;
(vii) any agreement for the employment of any
individual on a full-time, part-time, consulting or other basis providing annual
compensation in excess of $50,000 or providing severance benefits;
(viii) any agreement under which it has advanced or loaned
in excess of $10,000 to any of its directors, officers or employees;
(ix) any agreement with, or plan covering, any officer or
employee of JEI or any JEI Subsidiary, the benefits of which are contingent or
vest, or the terms of which are materially altered upon the occurrence of a
transaction involving JEI or any of the JEI Subsidiaries of the nature
contemplated by this Agreement.
(x) any agreement under which the consequences of a
default or termination could have a Material Adverse Effect on JEI;
(xi) any other agreement (or group of related agreements)
the performance of which involves consideration in excess of $50,000 during any
consecutive 12 month period.
JEI has delivered to CRC (i) a correct and complete copy of each JEI
Material Contract (as amended to date), other than those for which a written
summary has been prepared, (ii) a written summary setting forth the terms and
conditions of each oral agreement referred to in Schedule 4.02(v) and (iii) in
the case of JEI Material Contracts summarized under clause (i) above, a written
confirmation of the accuracy of the summary of such JEI Material Contract. With
respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable and in full force and effect, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium, or other similar
laws affecting the enforcement of creditors' rights generally, by general
equitable principals (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and except to the extent that indemnification
provisions may be unenforceable due to public policy; (B) the agreement will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (C) no party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration (unless such right of termination,
modification or acceleration has been waived in connection with the transactions
contemplated hereby) under the agreement, except for any of the foregoing
matters which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on JEI and the JEI Subsidiaries taken
as a whole; and (D) to the best of JEI's knowledge, no party has repudiated any
provision of the agreement.
V. CONDITIONS.
5.01 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is
subject to the fulfillment, at or prior to the Closing, of each of the following
conditions:
(a) Stockholder Approval. The CRC Merger Proposal shall have been
duly approved by the requisite vote of the stockholders of CRC and the JEI
Merger Proposal shall have been duly approved by the requisite vote of the
stockholders of JEI.
(b) HSR Act. Any waiting period (and any extension thereof) under
the HSR Act applicable to the transactions contemplated by this Agreement shall
have expired or been terminated.
(c) NYSE Listing Application. JEI shall have received approval
of an amendment to the New York Stock Exchange listing application filed by JEI
with respect to the JEI Common Stock.
(d) No Injunctions or Restraints. No court of competent jurisdiction
or other competent Governmental or Regulatory Authority shall have enacted,
issued, promulgated, enforced or entered any Law or Order (whether temporary,
preliminary or permanent) which is then in effect and has the effect of making
illegal or otherwise restricting, preventing or prohibiting consummation of the
Merger or the other transactions contemplated by this Agreement; provided, in
the case of any such Order, each of the parties shall have used its best efforts
to prevent the entry of any such Order and to appeal as promptly as possible any
Order that may be entered.
(e) Consents and Approvals. Other than the filing provided for by
Section 1.03, all consents, approvals and actions of, filings with and notices
to any Governmental or Regulatory Authority (other than any CRC Gaming Authority
or JEI Gaming Authority, which is covered by paragraph (f) below) or any other
person required of JEI, CRC or any of their respective subsidiaries to
consummate the Merger and the other matters contemplated hereby (including,
without limitation, those listed on Schedules 4.01(d) and 4.02(d)), the failure
of which to be obtained or taken could be reasonably expected to have a Material
Adverse Effect either on JEI and the JEI Subsidiaries taken as a whole or the
Acquired Businesses taken as a whole, or on the ability of JEI and CRC to
consummate the transactions contemplated hereby shall have been obtained, all in
form and substance reasonably satisfactory to JEI and CRC, and no such consent,
approval or action shall contain any term or condition which could be reasonably
expected to result in a material diminution of the benefits of the Merger to the
stockholders of JEI and CRC.
(f) Gaming Authority Approval. All licenses, permits, registrations,
authorizations, consents, waivers, orders, finding of suitability or other
approvals required to be made with or given by any CRC Gaming Authority or JEI
Gaming Authority to permit the Merger to be consummated and to permit the
Surviving Corporation and each of its subsidiaries to conduct their businesses
in the jurisdictions regulated by such Gaming Authorities after the Effective
Time in the same manner as conducted by JEI and the JEI Subsidiaries, on the one
hand, and the Acquired Businesses, on the other hand, prior to the Effective
Time shall have been obtained or made, as applicable.
(g) Registration Statement. The Registration Statement shall
have been declared effective by the SEC under the Securities Act and no stop
order suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and no proceeding for that purpose shall have been initiated
by the SEC and not concluded or withdrawn.
(h) Spinoff. The Spinoff shall have been consummated in
accordance with the Reorganization Agreement.
5.02 Conditions to Obligation of JEI to Effect the Merger.
The obligation of JEI to effect the Merger is further subject to the
fulfillment, at or prior to the Closing, of each of the following additional
conditions (all or any of which may be waived in whole or in part by JEI in its
sole discretion):
(a) Representations and Warranties. The representations and
warranties made by CRC in this Agreement that are qualified as to materiality
shall be true and correct and such representations and warranties that are not
so qualified shall be true and correct in all material respects as of the
Closing Date, in each case as though made on and as of the Closing Date or, in
the case of representations and warranties made as of a specified date earlier
than the Closing Date, on and as of such earlier date, and CRC shall have
delivered to JEI a certificate, dated the Closing Date and executed on behalf of
CRC by its Chairman of the Board or Chief Financial Officer, to such effect.
Notwithstanding the foregoing, a representation and warranty shall not be
required to be true and correct on the Closing Date or such specified date
earlier than the Closing Date if and to the extent failure of such
representation and warranty to be true and correct shall have resulted in an
adjustment to the Merger Consolidation under Section 2.02 hereof.
(b) Performance of Obligations. CRC shall have performed and
complied with, in all material respects, each agreement, covenant, and
obligation required by this Agreement to be so performed or complied with by CRC
at or prior to the Closing, and CRC shall have delivered to JEI a certificate
dated the Closing Date and executed on behalf of the Company by its Chairman of
the Board or Chief Financial Officer, to such effect.
(c) Other Closing Documents. CRC shall have delivered to JEI at
or prior to the Effective Time such other documents as JEI may reasonably
request in order to enable JEI to determine whether the conditions to their
obligations under this Agreement have been met and otherwise to carry out the
provisions of this Agreement.
(d) No Governmental Action. There shall not have been any action
taken, or any Law or Order proposed, promulgated, enacted, entered, enforced or
deemed applicable to the transactions contemplated by this Agreement by any
Governmental or Regulatory Authority (excluding any CRC Gaming Authority or JEI
Gaming Authority), including the entry of a preliminary or permanent injunction,
which, in the reasonable judgment of JEI, either (i) requires the divestiture by
JEI of a material portion of the business of either JEI and the JEI Subsidiaries
taken as a whole, or of the Acquired Businesses taken as a whole, or (ii)
otherwise materially impairs the contemplated benefits to JEI of this Agreement,
the Merger, or any of the other transactions contemplated by this Agreement.
(e) Affiliates of CRC. JEI shall have received the Affiliates
Agreement from each Affiliate.
(f) Cancellation of CRC Options. Prior to the Effective Time, JEI
shall have received evidence of the cancellation of all of CRC Options, as
detailed in Section 2.03 above.
(g) Material Adverse Change. There shall not have been a
Material Adverse Change in the Acquired Businesses since November 30, 1998.
(h) Relicensing of Louisiana Facility. JEI shall have received
evidence reasonably satisfactory to it that the license held by LCC with respect
to the Louisiana facility has been renewed on terms no less favorable to LCC
than the terms contained in the license in effect on the date hereof, except
that such renewal shall be for a term specified under applicable Louisiana law
as in effect on the date of such renewal (it being understood and agreed that
such license renewal may be subject to certain conditions as provided by Law,
including without limitation, suitability investigations of one or more
directors, officers and key employees of the Surviving Corporations and/or LCC).
(i) Business Plan. CRC shall have delivered to JEI a business plan,
acceptable to JEI, related to the Acquired Businesses, which, upon
implementation, would result in a permanent reduction of cash expenses of the
Acquired Businesses of at least $2 million per annum without a Material Adverse
Effect on the Acquired Businesses taken as a whole.
(j) Indemnification Agreement. Except for Dissenting Holders, each
of the stockholders of CRC set forth on Schedule 5.02(j) shall enter into an
indemnification agreement with JEI in the form attached hereto as Exhibit
5.02(j) ("Indemnification Agreement").
(k) Lockup Agreements. The recipients of the Share Merger
Consideration shall enter into the Registration Rights and Lockup Agreement with
JEI in the form attached hereto to as Exhibit 5.02(k).
(l) Opinion of CRC's Counsel. On the Closing Date, JEI shall
have received an opinion of special Florida counsel for CRC (who shall be
reasonably acceptable to JEI and shall not be an employee of CRC), dated as of
such date, addressed to JEI in form and substance reasonably satisfactory to JEI
regarding various customary corporate matters and JEI shall have received an
opinion of Arvin Peltz, Esq., CRC's General Counsel (or such other counsel to
CRC, who may be an employee of CRC), regarding information furnished by CRC to
JEI for use in the Joint Proxy Statement and Registration Statement.
(m) Tax Sharing Agreement. CRC and Spinco shall have entered
into the Tax Sharing Agreement in the form attached hereto as Exhibit 5.02(m)
("Tax Sharing Agreement").
5.03 Conditions to Obligation of CRC to Effect the Merger.
The obligation of CRC to effect the Merger is further subject to the
fulfillment, at or prior to the Closing, of each of the following additional
conditions (all or any of which may be waived in whole or in part by CRC in its
sole discretion):
(a) Representations and Warranties. The representations and
warranties made by JEI in this Agreement that are qualified as to materiality
shall be true and correct and such representations and warranties that are not
so qualified shall be true and correct in all material respects as of the
Closing Date as though made on and as of the Closing Date or, in the case of
representations and warranties made as of a specified date earlier than the
Closing Date, on and as of such earlier date, and JEI shall have delivered to
CRC a certificate, dated the Closing Date and executed on behalf of JEI by its
Chairman of the Board or President to such effect.
(b) Performance of Obligations. JEI shall have performed and
complied with, in all material respects, each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by JEI at or
prior to the Closing, and JEI shall have delivered to CRC a certificate, dated
the Closing Date and executed on behalf of JEI by its Chairman of the Board or
President to such effect.
(c) Other Closing Documents. JEI shall have delivered to CRC
at or prior to the Effective Time such other documents as CRC may reasonably
request in order to enable CRC to determine whether the conditions to its
obligations under this Agreement have been met and otherwise to carry out the
provisions of this Agreement.
(d) No Governmental Action. There shall not have been any action
taken, or any Law or Order proposed, promulgated, enacted, entered, enforced, or
deemed applicable to the transactions contemplated by this Agreement by any
Governmental or Regulatory Authority (excluding any CRC Gaming Authority or JEI
Gaming Authority), including the entry of a preliminary or permanent injunction.
which, in the reasonable judgment of CRC, materially impairs the contemplated
benefits to CRC and the stockholders of CRC of this Agreement, the Merger, or
any of the other transactions contemplated by this Agreement.
(e) Registration Rights Agreement. At the Effective Time, JEI shall
have entered into the Registration Rights and Lockup Agreement with the
recipients of the Share Merger Consideration in the form attached hereto as
Exhibit 5.02(k).
(f) Material Adverse Change. There shall not have been a Material
Adverse Change in JEI since September 30, 1998.
(g) Tax Opinion. CRC shall have received at the Effective Time
an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to CRC,
to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code (or, if the parties elect to restructure
the transaction as contemplated by Section 1.08 of this Agreement, to the effect
that the Merger constitutes a transaction to which Section 351 of the Code
applies).
(h) Opinion of JEI's Counsel. CRC and Carnival shall each have
received on the Closing Date an opinion of Camhy Karlinsky & Stein LLP, counsel
for JEI, dated as of such date, addressed to CRC and Carnival (except with
respect to the information in the Joint Proxy Statement and Registration
Statement) in form and substance reasonably satisfactory to CRC regarding
customary corporate matters, enforceability of the JEI Assignable Notes and the
JEI Note and certain information set forth in the Joint Proxy Statement and
Registration Statement.
VI. TERMINATION.
6.01 Termination.
This Agreement may be terminated, and the transactions contemplated
hereby may be abandoned, at any time prior to the Effective Time, whether prior
to or after the CRC Stockholders' Approval or the JEI Stockholders' Approval:
(a) by mutual written agreement of the parties hereto duly authorized
by action taken by or on behalf of their respective Boards of Directors; or
(b) by either CRC or JEI upon written notification to the
non-terminating party by the terminating party:
(i) at any time after December 31, 1999 if the Merger
shall not have been consummated on or prior to such date and such failure to
consummate the Merger is not caused by a breach of this Agreement by the
terminating party;
(ii) if the JEI Stockholders' Approval shall not be
obtained on or before December 31, 1999 by reason of the failure to obtain
the requisite vote upon a vote held at a meeting of such stockholders, or any
adjournment thereof, called therefor; or
(iii) if facts exist which render impossible the
satisfaction of one or more of the conditions set forth in Section 5.01 and
such are not waived by CRC and JEI; provided that Section 5.01(f) is not
subject to waiver by either CRC or JEI.
(c) by CRC upon written notification to JEI, if:
(i) there has been a material breach of any
representation, warranty, covenant or agreement on the part of JEI set forth
in this Agreement which breach has not been cured within ten (10) business
days following receipt by JEI of notice of such breach from CRC or assurance
of such cure reasonably satisfactory to CRC shall not have been given by or
on behalf of JEI within such ten (10) business day period; or
(ii) facts exist which render impossible the satisfaction
of one or more of the conditions set forth in Section 5.03 and such are not
waived by CRC.
(d) by JEI, upon written notification to CRC, if:
(i) there has been a material breach of any
representation, warranty, covenant or agreement on the part of CRC set forth
in this Agreement which breach has not been cured within ten (10) business
days following receipt by CRC of notice of such breach from JEI or assurance
of such cure reasonably satisfactory to JEI shall not have been given by or
on behalf of CRC within such ten (10) business day period; or
(ii) stockholders of CRC who own more than 10% of the
issued and outstanding CRC Common Stock in the aggregate have dissented from
the Merger pursuant to Florida law; or
(iii) facts exists which render impossible the
satisfaction of one or more of the conditions set forth in Section 5.02 and
such are not waived by JEI.
6.02 Effect of Termination.
If this Agreement is validly terminated by either CRC or JEI pursuant
to Section 6.01;
(a) This Agreement shall forthwith become null and void and there
shall be no liability or obligation on the part of either CRC or JEI (or any of
their respective officers, directors, representatives or affiliates), except
that (i) the provisions of this Section 6.02, and the CRC Confidentiality
Agreement and the JEI Confidentiality Agreement (collectively, the
"Confidentiality Agreements"), will continue to apply following any such
termination, and (ii) nothing contained herein shall relieve CRC or JEI from
liability to the extent that such termination results from the wilful or grossly
negligent and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement or in the
Confidentiality Agreement, in which case the other party shall be entitled to
recover all damages allowable at law and all relief available in equity.
(b) Subject to paragraph (a) of this Section 6.02 above and Section
2.02(c)(ii), and except as provided in paragraph (c) of this Section 6.02 below,
each of JEI and CRC shall pay and bear its own fees and expenses incident to the
negotiation, preparation, and execution of this Agreement, its meeting of
stockholders and the transactions contemplated by this Agreement, including fees
and expenses of its counsel, accountants, investment banking firms, and other
experts; provided, however, that JEI and CRC shall each pay and bear 50% of all
printing costs, including the cost of printing this Agreement, the Proxy
Statement, the Registration Statement, and any amendment or supplement thereto.
(c) In the event CRC or JEI terminates this Agreement pursuant
to Section 6.01(b)(ii), JEI shall pay to CRC all of CRC's actual out-of-pocket,
reasonably documented expenses, plus $1,000,000.
VII. MISCELLANEOUS.
7.01 Further Actions.
Each party hereto will execute such further documents and instruments
and take such further actions as may reasonably be requested by the other party
to consummate the Merger, to vest the Surviving Corporation with full title to
all assets, properties, rights, approvals, immunities, and franchises of either
of the Constituent Corporations or to effect the other purposes of this
Agreement.
7.02 Availability of Equitable Remedies.
Since a breach of the provisions of this Agreement could not
adequately be compensated by money damages, any party shall be entitled, either
before or after the Effective Time, in addition to any other right or remedy
available to it, to an injunction restraining such breach or threatened breach
and to specific performance of any such provision of this Agreement, and, in
either case, no bond or other security shall be required in connection
therewith, and the parties hereby consent to the issuance of such an injunction
and to the ordering of specific performance.
7.03 Survival of Representations, Warranties, Etc.
All representations and warranties in this Agreement shall terminate
as of the Effective Time. This Section 7.03 shall not limit any covenant or
agreement set forth herein which by its terms contemplates performance after the
Effective Time.
7.04 Modification.
This Agreement may be amended, supplemented or modified by action
taken by or on behalf of the respective Board of Directors of each of the
parties hereto at any time prior to the Effective Time, whether prior to or
after adoption of this Agreement at the CRC Stockholders' Meeting or at the JEI
Stockholders' Meeting, but after such adoption and approval only to the extent
permitted by applicable law. No such amendment, supplement or modification shall
be effective unless set forth in a written instrument duly executed by or on
behalf of each party hereto. Notwithstanding the foregoing, no amendment,
supplement or modification to this Agreement which would have an adverse effect
on Carnival shall be made without the written consent of Carnival.
7.05 Notices.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested or by Federal Express, express mail, or similar overnight
delivery or courier service or delivered (in person or by telecopy, telex, or
similar telecommunications equipment) against receipt to the party to which it
is to be given at the address of such party set forth in the preamble to this
Agreement (or to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 7.05), provided that, from and
after the Closing Date, notices to CRC shall be given to Spinco at the address
given in the preamble for CRC, with copies as follows:
If to JEI:
Camhy Karlinsky & Stein LLP
1740 Broadway, 16th Floor
New York, New York 10019-4315
Attention: Alan I. Annex, Esq.
Fax No.: (212) 977-8389
If to CRC:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, 34th Floor
Los Angeles, California 90071
Attention: Jonathan H. Grunzweig, Esq.
Fax No.: (213) 687-5600
Any notice shall be addressed to the attention of the Chairman. Any notice or
other communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which will
be deemed given at the time of receipt thereof. Any notice given by other means
permitted by this Section 7.05 shall be deemed given at the time of receipt
thereof.
7.06 Waiver.
Any waiver by any party of a breach of any term of this Agreement
shall not operate as or be construed to be a waiver of any other breach of that
term or of any breach of any other term of this Agreement. The failure of a
party to insist upon strict adherence to any term of this Agreement on one or
more occasions will not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing and be authorized by a
resolution of the Board of Directors or by an officer of the waiving party.
7.07 Binding Effect.
The provisions of this Agreement shall be binding upon and inure to
the benefit of JEI and CRC and their respective successors and assigns.
7.08 No Third-Party Beneficiaries.
This Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person not a party to this Agreement,
except for the CRC stockholders and the holders of CRC Options with respect to
Section 2.01, the Indemnified Parties with respect to Section 3.06 and Carnival
with respect to the last sentence of Section 7.04.
7.09 Severability.
If any provision of this Agreement is hereafter held to be invalid,
illegal, or unenforceable for any reason, such provision shall be reformed to
the maximum extent permitted so as to preserve the parties' original intent,
failing which, it shall be severed from this Agreement, with the balance of this
Agreement continuing in full force and effect. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable. If any provision is inapplicable to any
person or circumstance, it shall nevertheless remain applicable to all other
persons and circumstances.
7.10 Headings.
The headings in this Agreement are solely for convenience of reference
and shall be given no effect in the construction or interpretation of this
Agreement.
7.11 Counterparts; Governing Law.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. It shall be governed by, and construed in
accordance with, the laws of the State of Nevada, without giving effect to the
rules governing conflict of laws. Any action, suit, or proceeding arising out
of, based on, or in connection with this Agreement, any document relating hereto
or delivered in connection with the transactions contemplated hereby, any
statement, certificate, or other instrument delivered by or on behalf of, or
delivered to, any party hereto or thereto in connection with the transactions
contemplated hereby or thereby, any breach of this Agreement or such other
document, the Merger, or the other transactions contemplated hereby or thereby
may be brought only in the United States District Court for the District of
Nevada and each party covenants and agrees not to assert, by way of motion, as a
defense, or otherwise, in any such action, suit, or proceeding, any claim that
it is not subject personally to the jurisdiction of such court if it has been
duly served with process, that its property is exempt or immune from attachment
or execution, that the action, suit, or proceeding is brought in an inconvenient
forum, that the venue of the action, suit, or proceeding is improper, or that
this Agreement or the subject matter hereof may not be enforced in or by such
court.
VIII. CROSS REFERENCES
8.01 Cross References for Defined Terms..
Definitions for the following defined terms can be found as follows:
"Acquired Businesses" shall have the meaning set forth in the first "Whereas"
clause;
"Affiliates" shall have the meaning set forth in Section 2.04;
"Affiliates Agreement" shall have the meaning set forth in Section 2.04;
"Affiliates Letter" shall have the meaning set forth in Section 2.04;
"Agreement" shall have the meaning set forth in the Preamble;
"Audit" shall have the meaning set forth in Section 4.01(l);
"Benefit Obligation" shall have the meaning set forth in Section 4.01(n)(i);
"Budget" shall have the meaning set forth in Section 3.01(e)(iii);
"Carnival" shall have the meaning set forth in Section 2.01(b);
"CCL Notes" shall have the meaning set forth in Section 2.01(b);
"Closing" shall have the meaning set forth in Section 1.04;
"Closing Date" shall have the meaning set forth in Section 1.04;
"Code" shall have the meaning set forth in the fifth "Whereas" clause;
"Compliance Committee" shall have the meaning set forth in Section 4.02(c);
"Confidentiality Agreements" shall have the meaning set forth in Section
6.02(a);
"Constituent Corporations" shall have the meaning set forth in the Preamble;
"Contracts" shall have the meaning set forth in Section 4.01(d)(i);
"Contribution" shall have the meaning set forth in Section 1.02;
"CRC" shall have the meaning set forth in the Preamble;
"CRC Acquired Subsidiaries" shall have the meaning set forth in Section 4.01(a);
"CRC Benefit Obligations" shall have the meaning set forth in Section
4.01(n)(i);
"CRC Common Stock" shall have the meaning set forth in Section 2.01(a);
"CRC Confidentiality Agreement" shall have the meaning set forth in Section
3.01(d);
"CRC Employee Benefit Plans" shall have the meaning set forth in Section
4.01(n)(i);
"CRC Financial Statements" shall have the meaning set forth in Section
4.01(e)(i);
"CRC Gaming Authority" shall have the meaning set forth in Section 4.01(d)(ii);
"CRC Gaming Laws" shall have the meaning set forth in Section 4.01(j);
"CRC Material Contracts" shall have the meaning set forth in Section 4.01(x);
"CRC Merger Proposal" shall have the meaning set forth in Section 3.04(b);
"CRC Options" shall have the meaning set forth in Section 2.03(a);
"CRC Pension Plans" shall have the meaning set forth in Section 4.01(n)(i);
"CRC Permits" shall have the meaning set forth in Section 4.01(j);
"CRC Preferred Stock" shall have the meaning set forth in Section 4.01(b);
"CRC Stockholders Agreement" shall have the meaning set forth in the third
"Whereas" clause;
"CRC Stockholders' Approval" shall have the meaning set forth in Section
3.04(b);
"CRC Stockholders' Meeting" shall have the meaning set forth in Section 3.04(b);
"Dissenting Holder" shall have the meaning set forth in Section 2.01(c);
"Dissenting Shares" shall have the meaning set forth in Section 2.05;
"Diverted Asset Amount" shall have the meaning set forth in Section
2.02(c)(i)(A);
'Due to CRC Line Items" shall have the meaning set forth in Section
2.02(a)(iii);
"Effective Time" shall have the meaning set forth in Section 1.03;
"Employee Benefit Plan" shall have the meaning set forth in Section 4.01(n)(i);
"Environmental Permits" shall have the meaning set forth in Section
4.01(m)(iii);
"ERISA" shall have the meaning set forth in Section 4.01(n)(i);
"Excess Expenses" shall have the meaning set forth in Section 2.02(c)(ii)(A);
"Exchange Act" shall have the meaning set forth in Section 3.01(h);
"FBCA" shall have the meaning set forth in Section 1.01;
"Florida Articles" shall have the meaning set forth in Section 1.03;
"GAAP" shall have the meaning set forth in Section 2.02(a)(i);
"Governmental or Regulatory Authority" shall have the meaning set forth in
Section 4.01(d)(i);
"Hazardous Material" shall have the meaning set forth in Section 4.01(m)(i);
"Hazardous Materials Activities" shall have the meaning set forth in Section
4.01(m)(ii);
"HSR Act" shall have the meaning set forth in Section 3.05;
"Indemnified Liabilities" shall have the meaning set forth in Section 3.06(a);
"Indemnified Parties" shall have the meaning set forth in Section 3.06(a);
"Initial November 30 Balance Sheet" shall have the meaning set forth in Section
2.02(a)(i);
"Intangibles" shall have the meaning set forth in Section 4.01(o);
"IRS" shall have the meaning set forth in Section 4.01(n)(i);
"JEI" shall have the meaning set forth in the Preamble;
"JEI Assignable Notes" shall have the meaning set forth in Section 2.01(b);
"JEI Benefit Obligations" shall have the meaning set forth in Section
4.01(n)(i);
"JEI Common Stock" shall have the meaning set forth in Section 2.01(a);
"JEI Confidentiality Agreement" shall have the meaning set forth in Section
3.02(c);
"JEI Employee Benefit Plans" shall have the meaning set forth in Section
4.01(n)(i);
"JEI Financial Statements" shall have the meaning set forth in Section 4.02(e);
"JEI Gaming Authority" shall have the meaning set forth in Section 4.02(d)(ii);
"JEI Gaming Laws" shall have the meaning set forth in Section 4.02(l);
"JEI Material Contracts" shall have the meaning set forth in Section 4.02(v);
"JEI Merger Proposal" shall have the meaning set forth in Section 3.04(a);
"JEI Note" shall have the meaning set forth in Section 2.01(c)(i);
"JEI Options" shall have the meaning set forth in Section 4.02(b)(i);
"JEI Pension Plans" shall have the meaning set forth in Section 4.01(n)(i);
"JEI Permits" shall have the meaning set forth in Section 4.02(l);
"JEI Preferred Stock" shall have the meaning set forth in Section 4.02(b)(i);
"JEI SEC Reports" shall have the meaning set forth in Section 4.02(e);
"JEI Stockholders Agreement" shall have the meaning set forth in the fourth
"Whereas" clause;
"JEI Stockholders' Approval" shall have the meaning set forth in Section
3.04(a);
"JEI Stockholders' Meeting" shall have the meaning set forth in Section 3.04(a);
"JEI Subsidiaries" shall have the meaning set forth in Section 3.02;
"Joint Proxy Statement" shall have the meaning set forth in Section 4.01(i);
"Laws" shall have the meaning set forth in Section 4.01(d)(i);
"LCC" shall have the meaning set forth in Section 2.02(a)(i);
"LCC Notes" shall have the meaning set forth in Section 5.02(k);
"LCC SEC Reports" shall have the meaning set forth in Section 4.01(e)(ii);
"Lien" shall have the meaning set forth in Section 3.01(e)(iv);
"Material Adverse Effect" shall have the meaning set forth in Section 4.01(a);
"Material Adverse Change in JEI" shall have the meaning set forth in Section
4.02(f);
"Material Adverse Change in the Acquired Businesses" shall have the meaning set
forth in Section 4.01(f);
"Merger" shall have the meaning set forth in the first "Whereas" clause;
"Merger Consideration" shall have the meaning set forth in Section 2.01(c)(i);
"Net Worth Deficit" shall have the meaning set forth in Section 2.02(a)(i)(A);
"Nevada Articles" shall have the meaning set forth in Section 1.03;
"NRS" shall have the meaning set forth in Section 1.01;
"144A Notes" shall have the meaning set forth in Section 2.01(b);
"Options" shall have the meaning set forth in Section 2.03(a);
"Option Transaction Value" shall have the meaning set forth in Section
2.03(b)(i);
"Orders" shall have the meaning set forth in Section 4.01(d)(i);
"Pension Plan" shall have the meaning set forth in Section 4.01(n)(i);
"Permitted Liens" shall have the meaning set forth in Section 4.01(f);
"Players" shall have the meaning set forth in Section 3.02(d);
"Players Merger" shall have the meaning set forth in Section 3.02(a);
"Players Merger Agreement" shall have the meaning set forth in Section 3.02(a);
"Pre-Closing Balance Sheet" shall have the meaning set forth in Section
2.02(c)(i);
"Pre-Closing Income Statement" shall have the meaning set forth in Section
2.02(c)(i);
"PWC" shall have the meaning set forth in Section 2.02(d)(i)(A);
"PWC Report" shall have the meaning set forth in Section 2.02(d)(i)(D);
"Registration Statement" shall have the meaning set forth in Section 3.03(a);
"Release Time" shall have the meaning set forth in Section 3.01;
"Reorganization Agreement" shall have the meaning set forth in the second
"Whereas" clause.
"SEC" shall have the meaning set forth in Section 3.03(a);
"Section 16 Affiliate" shall have the meaning set forth in Section 2.06;
"Securities Act" shall have the meaning set forth in Section 2.04;
"Share Merger Consideration" shall have the meaning set forth in Section
2.01(a);
"Spinco" shall have the meaning set forth in the second "Whereas" clause;
"Spinco Businesses" shall have the meaning set forth in the second "Whereas"
clause;
"Spinco Interests" shall have the meaning set forth in Section 1.02;
"Spinoff" shall have the meaning set forth in the second "Whereas" clause;
"Spinoff Tax Liability" shall have the meaning set forth in Section 2.02(d)(i);
"Stockholders' Meetings" shall have the meaning set forth in Section 3.04(b);
"Stock Plan" shall have the meaning set forth in Section 2.03(a);
"Stub Period Diverted Asset Amount" shall have the meaning set forth in Section
2.02(c)(i)(A);
"Surviving Corporation" shall have the meaning set forth in the Preamble;
"Tax" or "Taxes" shall have the meaning set forth in Section 4.01(l);
"Tax Attributes" shall have the meaning set forth in Section 2.02(d)(ii)(B);
"Tax Authority" shall have the meaning set forth in Section 4.01(l);
"Tax Returns" shall have the meaning set forth in Section 4.01(l);
"Tax Sharing Agreement" shall have the meaning set forth in Section 5.02(m);
"Updated November 30 Balance Sheet" shall have the meaning set forth in Section
2.02(a)(i);
"Withheld Shares" shall have the meaning set forth in Section 2.01(a).
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by duly
authorized officers of each of the parties hereto as of the date first above
written.
JACKPOT ENTERPRISES INC.
By /s/ Don R. Kornstein
___________________________________________
Name: Don R. Kornstein
Title: President and Chief Executive Officer
Attest:
CRC HOLDINGS, INC.
By /s/ Sherwood M. Weiser
___________________________________________
Name: Sherwood M. Weiser
Title: Chariman and CEO
Attest:
