SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------------
SCHEDULE 13D
(RULE 13D-101)
INFORMATION TO BE INCLUDED IN STATEMENT FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
PINNACLE ENTERTAINMENT, INC.
- -------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK, PAR VALUE $.10 PER SHARE
- -------------------------------------------------------------------------------
(Title of Class of Securities)
723456 10 9
- -------------------------------------------------------------------------------
(CUSIP Number)
JONATHAN H. GRUNZWEIG
C/O COLONY CAPITAL, INC.
1999 AVENUE OF THE STARS, SUITE 1200
LOS ANGELES, CALIFORNIA 90067
(310) 282-8800
- -------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
with a copy to:
NICK P. SAGGESE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
300 SOUTH GRAND AVENUE, SUITE 3400
LOS ANGELES, CALIFORNIA 90071-3144
(213) 687-5000
APRIL 17, 2000
- -------------------------------------------------------------------------------
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition that is the subject of this Schedule 13D, and
is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g),
check the following box: |_|
(Continued on following pages)
1 NAME OF REPORTING PERSON
HARVEYS CASINO RESORTS
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) | |
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) | |
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEVADA
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY
OWNED 8 SHARED VOTING POWER
BY EACH 3,000,265 (See Item 5)
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON
3,000,265 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES | |
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.4% (See Item 5)
14 TYPE OF REPORTING PERSON
CO
1 NAME OF REPORTING PERSON
COLONY HCR VOTECO, LLC
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) | |
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) |X|
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY
OWNED 8 SHARED VOTING POWER
BY EACH 3,000,265 (See Item 5)
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON
3,000,265 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES | |
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.4% (See Item 5)
14 TYPE OF REPORTING PERSON
OO
1 NAME OF REPORTING PERSON
THOMAS J. BARRACK, JR.
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) | |
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e)
o
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY
OWNED 8 SHARED VOTING POWER
BY EACH 3,000,265 (See Item 5)
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON
3,000,265 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES | |
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.4% (See Item 5)
14 TYPE OF REPORTING PERSON
IN
1 NAME OF REPORTING PERSON
KELVIN L. DAVIS
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) | |
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) | |
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY
OWNED 8 SHARED VOTING POWER
BY EACH 3,000,265 (See Item 5)
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON
3,000,265 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES | |
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.4% (See Item 5)
14 TYPE OF REPORTING PERSON
IN
ITEM 1. SECURITY AND ISSUER.
The title of the class of equity securities to which this
statement on Schedule 13D (this "Schedule 13D") relates is the common
stock, par value $.10 per share (the "Pinnacle Common Stock"), of Pinnacle
Entertainment, Inc., a Delaware corporation ("Pinnacle"). The principal
executive offices of Pinnacle are located at 330 North Brand Boulevard,
Suite 1100, Glendale, California 91203.
ITEM 2. IDENTITY AND BACKGROUND.
(a) This Schedule 13D is being filed by Harveys Casino
Resorts ("Harveys"), Colony HCR Voteco, LLC ("Voteco"), Thomas J. Barrack,
Jr. ("Mr. Barrack") and Kelvin L. Davis ("Mr. Davis" and, collectively with
Harveys, Voteco and Mr. Barrack, the "Reporting Persons"). Neither the
present filing nor anything contained herein shall be construed as an
admission that any two or more of Harveys, Voteco, Mr. Barrack or Mr. Davis
constitute a "person" or "group" for any purpose other than Section 13(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(b), (c), (f) Harveys is a Nevada corporation engaged in the
gaming industry. Through its wholly-owned subsidiaries, Harveys owns and
operates gaming establishments in Nevada, Iowa and Colorado. The address of
the principal business and principal office of Harveys is Highway 50 and
Stateline Avenue, P.O. Box 128, Lake Tahoe, Nevada 89449. With respect to
each executive officer and director of Harveys, such person's name,
citizenship, business address, present principal occupation or employment,
and the name, principal business and address of any corporation or other
organization in which such employment is conducted, are set forth on
Schedule I hereto and are incorporated by reference herein.
Voteco, a Delaware limited liability company, is the
beneficial owner of 97% of the Class A Common Stock and voting power of
Harveys. Voteco's principal business is its investment in the Class A
Common Stock of Harveys. The address of the principal business and
principal office of Voteco is 1999 Avenue of the Stars, Suite 1200, Los
Angeles, California 90067.
Mr. Barrack's principal occupation is Chairman and Chief
Executive Officer of Colony Capital, Inc. and Colony Advisors, Inc. Mr.
Barrack also is a Manager of, and holder of a minority membership interest
in, Voteco. Mr. Barrack is a citizen of the United States of America. The
business address of Mr. Barrack is 1999 Avenue of the Stars, Suite 1200,
Los Angeles, California 90067.
Mr. Davis' principal occupation is serving as a partner of
Texas Pacific Group. Mr. Davis also is a Manager of, and holds a majority
membership interest in, Voteco. Mr. Davis is a citizen of the United States
of America. The business address of Mr. Davis is 1999 Avenue of the Stars,
Suite 1200, Los Angeles, California 90067.
(d), (e) During the last five years, none of the Reporting
Persons nor, to the knowledge of the Reporting Persons, any of the
individuals named on Schedule I hereto, (i) has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors)
or (ii) has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to
such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On April 17, 2000, PH Casino Resorts, Inc., a Delaware
corporation and direct wholly owned subsidiary of Harveys ("PHCR"),
Pinnacle Acquisition Corporation, a Delaware corporation and direct wholly
owned subsidiary of PHCR ("Pinnacle Acq Corp"), and Pinnacle entered into
an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which
PHCR will acquire by merger (the "Merger") all of the outstanding shares of
capital stock of Pinnacle. Concurrently with the execution and delivery of
the Merger Agreement, PHCR and the stockholders of Pinnacle named on
Schedule II hereto (the "Stockholders") entered into a Voting and
Contribution Agreement (the "Voting Agreement"). Based on information
provided by the Stockholders, the Stockholders (i) own beneficially and of
record and have power to vote and dispose of the number of shares of
Pinnacle Common Stock set forth opposite their respective names on Schedule
II hereto under the caption "Shares Owned" (such shares of Pinnacle Common
Stock owned by the Stockholders or otherwise received after the date hereof
being the "Shares") and (ii) have the right to acquire, pursuant to
employee stock options owned by such Stockholders, the number of shares of
Pinnacle Common Stock set forth opposite their respective names on Schedule
II hereto under the caption "Options Owned" (the "Options"). An aggregate
of 722,239 Options are exercisable by Stockholders within 60 days of the
date of this Schedule 13D.
Each Stockholder agreed in the Voting Agreement to cause its
Shares to be present for quorum purposes and agreed to vote (or to cause to
be voted) its Shares in favor of the Merger, the Merger Agreement and each
of the transactions contemplated thereby and any actions required in
furtherance thereof. In addition, pursuant to the Voting Agreement, each
Stockholder granted to PHCR an irrevocable proxy coupled with an interest
to vote all of the Shares beneficially owned by such Stockholder in favor
of the Merger, the Merger Agreement and each of the transactions
contemplated by the Merger Agreement and by the Voting Agreement and any
actions required in furtherance thereof.
Each Stockholder also agreed in the Voting Agreement to vote
(or to cause to be voted) its Shares against (i) any Takeover Proposal (as
defined in the Merger Agreement) and (ii) any amendment of Pinnacle's
Certificate of Incorporation or Bylaws or other proposal or transaction
involving Pinnacle or any of its subsidiaries which amendment or other
proposal or transaction would in any manner impede, interfere with,
materially delay, frustrate, prevent or nullify or result in a breach of
any covenant, representation or warranty or any other obligation or
agreement of Pinnacle or any Stockholder under or with respect to, the
Merger, the Merger Agreement or any of the other transactions contemplated
by the Merger Agreement or the Voting Agreement.
In addition, each of the Stockholders agreed in the Voting
Agreement (i) to contribute, immediately prior to the effective time of the
Merger, a certain number of such Stockholder's Shares to PHCR in exchange
for a certain number and class of shares of PHCR's common stock and/or (ii)
to exchange a certain number of such Stockholder's Options for options to
purchase a certain number and class of shares of PHCR's common stock, in
each case on the terms and subject to the conditions set forth in the
Voting Agreement.
In order to mitigate a tax disadvantage of the transaction
structure which is unique to Mr. Hubbard, the Voting Agreement provides
that immediately prior to the effective time of the Pinnacle Merger, Mr.
Hubbard will sell to Pinnacle and Pinnacle will purchase from Mr. Hubbard,
the Shares that are not being contributed by Mr. Hubbard to PHCR as
described in the immediately preceding paragraph for a price per share
equal to the per share merger consideration that would be payable at the
effective time of the Pinnacle Merger with respect to such non-contributed
Shares.
The Voting Agreement also includes a no-solicitation
provision pursuant to which each of the Stockholders has agreed that it
shall not, nor shall it authorize or permit any affiliate, agent, partner
or employee of, or any investment banker, attorney or other advisor or
representative of, such Stockholder to, directly or indirectly, (i) solicit
or initiate, or encourage any inquiries regarding or the submission of, any
Takeover Proposal (including without limitation any proposal or offer to
Pinnacle's stockholders) or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any nonpublic information
with respect to, or take any other action to facilitate the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Takeover Proposal, in each case subject to the certain exceptions set forth
in the Voting Agreement.
Each Stockholder also agreed in the Voting Agreement not to
(including by way of any gift, sale, pledge or other disposition, including
without limitation in connection with foreclosures by lenders secured by
pledges of Shares or Options) (1) transfer, sell or pledge, encumber,
assign or otherwise dispose of, or consent to the transfer or pledge of,
any or all of the Shares or Options owned by it or of any interest therein,
(2) enter into any contract, option or other agreement or understanding
with respect to any such transfer of any such Shares or Options, or any
interest therein or result in the imposition of any lien, (3) grant any
proxy, power-of-attorney or other authorization in or with respect to any
such Shares or Options, (4) deposit any such Shares or Options into a
voting trust or enter into a voting agreement or arrangement with respect
to any such Shares or Options or (5) take any action that would in any way
restrict, limit or interfere or in any way be inconsistent with the
performance of its obligations hereunder or the transactions contemplated
by the Merger Agreement or by the Voting Agreement.
The Voting Agreement terminates (i) if the closing of the
Merger has occurred, (ii) if the Merger has been consummated in accordance
with the terms of the Merger Agreement or (iii) if the Merger Agreement has
been terminated in accordance with Article IX thereof.
The response to this Item 3 is qualified in its entirety by
reference to the Merger Agreement and to the Voting Agreement, each of
which is filed as an exhibit hereto and each of which is incorporated by
reference herein.
ITEM 4. PURPOSE OF TRANSACTION.
The purpose of the Voting Agreement was to induce PHCR to
enter into the Merger Agreement and to effect the Merger.
(a)-(c), (e)-(g) Pursuant to the Merger Agreement, Pinnacle
Acq Corp will be merged with and into Pinnacle, with Pinnacle surviving as
a wholly owned subsidiary of PHCR. Upon the closing of the Merger, PHCR
will acquire ownership of all of the outstanding shares of Pinnacle Common
Stock.
(d) At the effective time of the Merger, the directors and
executive officers of Pinnacle Acq Corp immediately prior to such effective
time will become the directors and executive officers of Pinnacle.
(h)-(i) Following the closing of the Merger, the Pinnacle
Common Stock will be delisted from the New York Stock Exchange and will
become eligible for termination of registration pursuant to Section
12(g)(4) of the Exchange Act.
(j) Not applicable.
The response to this Item 4 is qualified in its entirety by
reference to the Merger Agreement and to the Voting Agreement, each of
which is filed as an exhibit hereto and each of which is incorporated by
reference herein.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a)-(b) A total of 3,000,265 Shares, representing in the
aggregate approximately 11.4% of the outstanding shares of Pinnacle Common
Stock, are subject to the Voting Agreement. As a result of PHCR's execution
and delivery of the Voting Agreement, each of the Reporting Persons may be
deemed to have the shared power to vote or to direct the vote of the Shares,
and therefore may be deemed to beneficially own the Shares for purposes of
Section 13(d) of the Exchange Act. Each of the Reporting Persons disclaims
beneficial ownership of all of the Shares. Neither the filing of this
Schedule 13D nor anything contained herein shall be construed as an
admission that any of the Reporting Persons together with any of the
Stockholders constitute a "person" or "group" for any purpose other than
what they may be deemed to constitute under Section 13(d) of the Exchange
Act.
In addition to the 3,000,265 Shares subject to the Voting
Agreement, an aggregate of 722,239 Options are exercisable by the
Stockholders within 60 days of the date of this Schedule 13D (the
"Exercisable Options"). See Schedule II hereto. The number of Exercisable
Options is based on information set forth in the Schedule 13D, dated April
17, 2000, filed by the Stockholders with the Securities and Exchange
Commission. Taking into account beneficial ownership of the shares of
Pinnacle Common Stock underlying the Exercisable Options, the Stockholders
may be deemed to beneficially own an aggregate of 3,722,504 shares of
Pinnacle Common Stock, representing in the aggregate approximately 13.8% of
the outstanding shares of Pinnacle Common Stock.
All percentages of Pinnacle Common Stock set forth in this
Schedule 13D are based upon 26,271,678 shares of Pinnacle Common Stock
outstanding, the number reported to be outstanding on March 24, 2000, as
disclosed in Pinnacle's Form 10-K filed with the Securities and Exchange
Commission.
(c) As described in Items 3, 4 and 6 of this Schedule 13D,
on April 17, 2000, PHCR and Pinnacle Acq Corp entered into the Merger
Agreement with Pinnacle and PHCR entered into the Voting Agreement and the
MOU (as defined below) with the Stockholders.
(d) Other than with respect to the shared power to vote or to
direct the vote of the Shares, which power is described in the response to
Item 5(a)-(b) above and arises as a result of the execution and delivery of
the Voting Agreement by PHCR, none of the Reporting Persons possesses any
powers, rights or privileges with respect to the Shares. All other powers,
rights and privileges with respect to the Shares (including, without
limitation, the right to receive or the power to direct the receipt of
dividends from or the proceeds from the sale of the Shares) remain with the
Stockholders.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
The responses to Items 3 and 4 of this Schedule 13D are
incorporated in this Item 6 by reference.
On April 17, 2000, in connection with PHCR's execution of
the Merger Agreement, PHCR and the Stockholders entered into a Memorandum
of Understanding (the "MOU"), which sets forth the principal terms of
employment of such Stockholders immediately following the consummation of
the Merger and certain rights granted to such Stockholders with respect to
shares of common stock of PHCR.
Except for the Merger Agreement, the Voting Agreement and
the MOU, none of the Reporting Persons nor, to the knowledge of the
Reporting Persons, any of the persons named in Schedule I hereto has any
contracts, arrangements, understandings or relationships (legal or
otherwise) with any person with respect to any securities of Pinnacle,
including but not limited to transfer or voting of any of such securities,
finder's fees, joint ventures, loan or option agreements, puts or calls,
guarantees of profits, division of profits or loss, or the giving or
withholding of proxies.
The response to this Item 6 is qualified in its entirety by
reference to the Merger Agreement, the Voting Agreement and the MOU, each
of which is filed as an exhibit hereto and each of which is incorporated by
reference herein.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 Agreement and Plan of Merger, dated as of April 17,
2000, among PH Casino Resorts, Inc., Pinnacle
Acquisition Corporation and Pinnacle Entertainment,
Inc.
Exhibit 2 Voting and Contribution Agreement, dated as of
April 17, 2000, by and among PH Casino Resorts, Inc.
and the Stockholders signatory thereto.
Exhibit 3 Memorandum of Understanding, dated as of April 17,
2000, by and among PH Casino Resorts, Inc. and the
individuals listed on the signature pages thereto.
Exhibit 4 Joint Filing Agreement.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
HARVEYS CASINO RESORTS
Date: April 27, 2000 By: /s/ Thomas J. Barrack, Jr.
--------------------------
Thomas J. Barrack, Jr.
Chairman of the Board of Directors
and Assistant Secretary
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
COLONY HCR VOTECO, LLC
Date: April 27, 2000 By: /s/ Kelvin L. Davis
-------------------
Kelvin L. Davis
Member
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Date: April 27, 2000 /s/ Thomas J. Barrack, Jr.
--------------------------
THOMAS J. BARRACK, JR.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Date: April 27, 2000 /s/ Kelvin L. Davis
-------------------
KELVIN L. DAVIS
SCHEDULE I
The name and present principal occupation or employment of each
executive officer and director of Harveys is set forth below. The business
address of each of the persons listed below, other than Messrs. Barrack and
Davis whose business addresses are set forth in the response to Item 2 of
this Schedule 13D, is Highway 50 and Stateline Avenue, P.O. Box 128, Lake
Tahoe, Nevada 89449. Each of the persons listed below is a citizen of the
United States of America.
<TABLE>
<CAPTION>
NAME PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
- ---- ------------------------------------------
<S> <C>
Thomas J. Barrack, Jr....... Chairman of the Board of Directors and Assistant Secretary
Charles W. Scharer.......... President and Chief Executive Officer; Director
John J. McLaughlin.......... Senior Vice President, Chief Financial Officer, Secretary and
Treasurer
Gary D. Armentrout.......... Senior Vice President--Business Development and Government
Relations
James J. Rafferty........... Senior Vice President--Corporate Marketing
Edward B. Barraco........... Senior Vice President and General Manager--Harveys Wagon Wheel
Verne H. Welch, Jr.......... Senior Vice President and General Manager--Harveys Casino Hotel
John R. Bellotti............ Corporate Vice President of Human Resources
Kelvin L. Davis............. Director
</TABLE>
SCHEDULE II
Set forth below are the names of the Stockholders and the number of
Shares and Options owned by each, based on information provided by such
Stockholders.
<TABLE>
<CAPTION>
OPTIONS OWNED
THAT ARE EXERCISABLE WITHIN
NAME SHARES OWNED OPTIONS OWNED 60 DAYS OF THE DATE HEREOF 1
- ---- ------------ ------------- ----------------------------
<S> <C> <C> <C>
R.D. Hubbard 2,619,850 282,000 182,997
G. Michael Finnigan 25,415 135,000 88,331
Paul Alanis 300,000 400,000 200,000
Loren Ostrow 50,000 125,000 62,500
J. Michael Allen 0 200,000 100,000
Cliff Kortman 0 92,500 46,250
Bruce Hinckley 5,000 25,000 13,334
Richard Delaney 0 10,000 0
Chris Plant 0 18,300 13,299
Robert Callaway 0 24,663 20,528
TOTAL 3,000,265 1,312,463 727,299
</TABLE>
- -------------------
1 Based on information set forth in the Schedule 13D, dated April 17, 2000,
filed by the Stockholders with the Securities and Exchange Commission.
EXHIBIT INDEX
Page No.
--------
Exhibit 1 Agreement and Plan of Merger, dated as of April
17, 2000, among PH Casino Resorts, Inc., Pinnacle
Acquisition Corporation and Pinnacle
Entertainment, Inc.
Exhibit 2 Voting and Contribution Agreement, dated as of
April 17, 2000, by and19 among PH Casino Resorts,
Inc. and the Stockholders signatory thereto.
Exhibit 3 Memorandum of Understanding, dated as of April 17,
2000, by and among PH Casino Resorts, Inc. and the
individuals listed on the signature pages thereto.
Exhibit 4 Joint Filing Agreement.
EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
Dated as of April 17, 2000
among
PH CASINO RESORTS, INC.
PINNACLE ENTERTAINMENT, INC.
and
PINNACLE ACQUISITION CORPORATION
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS.........................................................2
ARTICLE II
THE PINNACLE MERGER................................................12
Section 2.1 The Pinnacle Merger.............................12
Section 2.2 Closing.........................................12
Section 2.3 Effective Time..................................12
Section 2.4 Effects of the Pinnacle Merger..................12
Section 2.5 Corporate Governance Documents..................12
Section 2.6 Directors.......................................13
Section 2.7 Officers........................................13
Section 2.8 Further Actions.................................13
ARTICLE III
CONVERSION OF SHARES...............................................13
Section 3.1 Effect on Capital Stock of Pinnacle and
Pinnacle Acq Corp...............................13
Section 3.2 Exchange of Certificates........................14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PINNACLE.........................16
Section 4.1 Organization, Standing and Corporate Power......16
Section 4.2 Subsidiaries....................................17
Section 4.3 Capital Structure...............................17
Section 4.4 Authority; Noncontravention.....................18
Section 4.5 Opinion of Financial Advisor....................19
Section 4.6 SEC Documents; Financial Statements.............19
Section 4.7 Absence of Certain Changes or Events............20
Section 4.8 Litigation......................................20
Section 4.9 Absence of Changes in Benefit Plans.............21
Section 4.10 Employee Benefits; ERISA........................21
Section 4.11 Taxes...........................................24
Section 4.12 Environmental Matters...........................25
Section 4.13 Permits; Compliance with Laws...................26
Section 4.14 State Takeover Statutes.........................27
Section 4.15 Brokers.........................................28
Section 4.16 Trademarks, etc.................................28
Section 4.17 Title to Properties.............................28
Section 4.18 Insurance.......................................30
Section 4.19 Contracts; Debt Instruments.....................31
Section 4.20 Board Consent and Recommendation................32
Section 4.21 Accounting Controls.............................32
Section 4.22 Affiliate Transactions..........................32
Section 4.23 Vote Required...................................33
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
HOLDING AND PINNACLE ACQ CORP......................................33
Section 5.1 Organization, Standing and Corporate Power......33
Section 5.2 Authority; Noncontravention.....................33
Section 5.3 Interim Operations of Pinnacle Acq Corp.........35
Section 5.4 Licensing Matters...............................35
Section 5.5 Litigation......................................35
Section 5.6 Financing.......................................35
Section 5.7 No Other Agreements.............................35
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS..........................36
Section 6.1 Conduct of Business.............................36
Section 6.2 Advice of Changes...............................40
Section 6.3 No Solicitation.................................41
ARTICLE VII
ADDITIONAL AGREEMENTS..............................................43
Section 7.1 Stockholders Meeting............................43
Section 7.2 Proxy Statement and Other Filings;
Auditor's Letter................................43
Section 7.3 Access to Information; Confidentiality..........45
Section 7.4 Reasonable Efforts; Notification................46
Section 7.5 Stock Option Plans; Change of Control Plan......47
Section 7.6 Indemnification and Insurance...................48
Section 7.7 Fees............................................48
Section 7.8 Public Announcement.............................49
Section 7.9 Title Insurance, Surveys........................50
Section 7.10 Transfer Taxes..................................51
Section 7.11 Financing.......................................51
Section 7.12 Tax Treatment...................................52
Section 7.13 Tender Offer and Consent Solicitations..........52
Section 7.14 Termination of Voting Agreement.................52
Section 7.15 Compliance Committees...........................52
Section 7.16 Atlantic Land Warrant...........................52
ARTICLE VIII
CONDITIONS PRECEDENT...............................................53
Section 8.1 Conditions to Each Party's Obligation To Effect
the Pinnacle Merger.............................53
Section 8.2 Conditions to Obligations of Pinnacle Acq Corp..54
Section 8.3 Conditions to Obligations of Pinnacle...........55
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER .................................56
Section 9.1 Termination.....................................56
Section 9.2 Effect of Termination...........................58
Section 9.3 Amendment.......................................58
Section 9.4 Extension; Waiver...............................58
Section 9.5 Procedure for Termination, Amendment, Extension
or Waiver.......................................59
ARTICLE X
GENERAL PROVISIONS ................................................59
Section 10.1 Nonsurvival of Representations..................59
Section 10.2 Representations and Warranties..................59
Section 10.3 Notices.........................................59
Section 10.4 Interpretation..................................61
Section 10.5 Counterparts....................................61
Section 10.6 Entire Agreement; No Third-Party Beneficiaries..61
Section 10.7 Governing Law...................................61
Section 10.8 Gaming Laws.....................................61
Section 10.9 Assignment......................................61
Section 10.10 Enforcement.....................................62
Section 10.11 Inglewood Sale; CPRs............................62
SCHEDULES
EXHIBITS
Exhibit A Material Terms of the Financing
AGREEMENT AND PLAN OF MERGER dated as of 12:01 A.M. on April
17, 2000 (this "Agreement"), among PH CASINO RESORTS, INC., a Delaware
corporation ("PHCR"), PINNACLE ENTERTAINMENT, INC., a Delaware corporation
("Pinnacle"), and PINNACLE ACQUISITION CORPORATION, a Delaware corporation
("Pinnacle Acq Corp").
W I T N E S S E T H
WHEREAS, Pinnacle Acq Corp is a direct wholly owned
subsidiary of PHCR and an indirect wholly owned subsidiary of Harveys
Casino Resorts, a Nevada corporation ("Harveys"), and Harveys is majority
owned by Colony Investors III, L.P., a Delaware limited partnership
("Colony III");
WHEREAS, the respective Boards of Directors of Pinnacle and
Pinnacle Acq Corp have determined that the merger of Pinnacle Acq Corp with
and into Pinnacle (the "Pinnacle Merger"), upon the terms and subject to
the conditions set forth in this Agreement, is advisable and in the best
interests of their respective corporations and stockholders, and have
approved this Agreement;
WHEREAS, PHCR has formed a wholly owned subsidiary, Harveys
Acquisition Corporation, a Nevada corporation ("Harveys Acq Corp"), which
will, simultaneously with the Pinnacle Merger, merge with and into Harveys
(the "Harveys Merger") so that, following the Pinnacle Merger and the
Harveys Merger, the Pinnacle Surviving Corporation (as defined below) and
the Harveys Surviving Corporation (as defined below) will each be wholly
owned subsidiaries of PHCR;
WHEREAS, for Federal income tax purposes, the parties intend
that the Pinnacle Merger, the Harveys Merger and the contribution pursuant
to the Voting Agreement (as defined below) qualify as exchanges under
section 351 of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, as a condition for PHCR and Pinnacle Acq Corp to
enter into this Agreement, those stockholders of Pinnacle listed on the
signature pages to the Voting Agreement, as defined below (the "Group"),
have entered into the Voting and Contribution Agreement as of the date
hereof with Pinnacle, Pinnacle Acq Corp and PHCR, which provides, among
other things, that, subject to the terms and conditions thereof, (a) each
member of the Group will vote its shares of Pinnacle Common Stock (as
defined below) in favor of the Pinnacle Merger and the approval and
adoption of this Agreement and (b) each member of the Group will contribute
certain securities of Pinnacle to PHCR in exchange for securities of PHCR;
WHEREAS, the Board of Directors of Pinnacle has approved the
terms of this Agreement and the transactions contemplated hereby;
WHEREAS, the parties hereto desire to make certain
representations, warranties, covenants and agreements in connection with
the Pinnacle Merger and also to prescribe various conditions to the
Pinnacle Merger.
NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants and agreements contained in this
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
Capitalized and certain other terms used in this Agreement
and not otherwise defined have the meanings set forth below. Unless the
context otherwise requires, such terms shall include the singular and
plural and the conjunctive and disjunctive forms of the terms defined.
"Affiliate" of any Person means another Person that directly
or indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, such first Person.
"Agreement" has the meaning set forth in the recitals
hereof.
"Asset Dispositions" has the meaning set forth in Section
6.1(c).
"Asset Disposition Agreements" has the meaning set forth in
Section 6.1(c).
"Atlantic Land Warrant" means that certain warrant to
purchase shares of Pinnacle Common Stock held by Atlantic Land Corporation
and originally issued by Casino Magic Corporation.
"Audit" means any audit, assessment of Taxes, other
examination by any Tax Authority, proceeding or appeal of such proceeding
relating to Taxes.
"Bank Credit Facility" means the Amended and Restated
Reducing Revolving Loan Agreement, dated as of October 14, 1998, and
amended as of June 2, 1999 and September 30, 1999, among Hollywood Park,
Inc. and the banks named therein, Societe Generale and Bank of Scotland (as
Managing Agents), First National Bank of Commerce (as Co-Agent), and Bank
of America National Trust and Savings Association (as Administrative
Agent).
"Base Balance Sheet" has the meaning set forth in Section
4.6.
"Budget" has the meaning set forth in Section 6.1(a)(v).
"Business Day" means any day excluding: Saturday, Sunday and
any day which is in the City of New York a legal holiday or a day upon
which banking institutions in the City of New York are required or
authorized by law or other governmental action to close.
"Certificate of Merger" has the meaning set forth in Section
2.1.
"Closing" has the meaning set forth in Section 2.2.
"Closing Date" has the meaning set forth in Section 2.2.
"Code" has the meaning set forth in the recitals hereto.
"Colony" has the meaning set forth in Section 5.4.
"Colony LP" has the meaning set forth in Section 5.4.
"Colony III" has the meaning set forth in the recitals
hereof.
"Commitments" has the meaning set forth in Section 7.9(a).
"Competitive Proposal" means, other than the transactions
contemplated by this Agreement, (a) any proposal or offer from any Person
relating to any direct or indirect acquisition or purchase of assets of
Pinnacle or any of its Material Subsidiaries comprising 50% or more of
Pinnacle's consolidated assets or over 50% of any class of equity
securities of Pinnacle or any of its Material Subsidiaries or (b) any
tender offer or exchange offer that, if consummated, would result in any
Person beneficially owning 50% or more of any class of equity securities of
Pinnacle or any of its Material Subsidiaries or (c) any merger,
consolidation, business combination, liquidation, dissolution or similar
transaction involving Pinnacle with a third party; provided, that the Board
of Directors of Pinnacle determines in its good faith judgment that (i) the
value of the consideration (based on the opinion, with only customary
qualifications, of an independent financial advisor of good national
reputation in such matters) of such proposal exceeds the value of each of
the Pinnacle Merger Consideration and any alternative proposal presented by
Pinnacle Acq Corp or any of its Affiliates and (ii) such proposal is more
favorable to Pinnacle's stockholders than the Pinnacle Merger and any
alternative proposal presented by Pinnacle Acq Corp or any of its
Affiliates. Notwithstanding the foregoing, the consummation of (i) the
Principal Asset Dispositions (other than the sale of the Inglewood
Property), substantially on the terms and subject to the conditions
contained in the applicable Asset Disposition Agreement in effect as of the
date hereof (or as amended or modified in accordance with this Agreement),
and (ii) the sale of the Inglewood Property and the Other Asset
Dispositions on terms approved by Pinnacle's Board of Directors, in good
faith, shall not be deemed to constitute a Competitive Proposal.
"Confidential Information" has the meaning set forth in
Section 7.3.
"Contract" means any mortgage, indenture, note, debenture,
agreement, lease, license, permit, franchise or other instrument or
obligation, whether written or oral.
"Covered Person" has the meaning set forth in Section
6.3(a).
"Current SEC Documents" has the meaning set forth in Section
4.6.
"DGCL" means the Delaware General Corporation Law, as
amended from time to time.
"Effective Time" has the meaning set forth in Section 2.3.
"Environmental Claim" has the meaning set forth in Section
4.12(c).
"Environmental Laws" has the meaning set forth in Section
4.12(a).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" has the meaning set forth in Section
4.10(a).
"ERISA Plans" has the meaning set forth in Section 4.10(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Funds" has the meaning set forth in Section
3.2(a).
"Existing Leases" has the meaning set forth in Section
4.17(b).
"Fairness Opinion" has the meaning set forth in Section 4.5.
"Financing" means debt financing on terms not less favorable
to the borrower than those set forth in Exhibit A hereto which, together
with any indebtedness of Pinnacle assumed in the Merger, is in an amount
sufficient to enable the payment, in full of (i) the Pinnacle Merger
Consideration, (ii) all payments in connection with the cancellation of the
Pinnacle Stock Options, (iii) all other related payments in connection with
the Pinnacle Merger and the Harveys Merger (including any related consent
payments to holders of and any related repurchase of outstanding
indebtedness of Pinnacle and Harveys set forth on Exhibit A), and (iv) the
related fees and expenses, estimates of which are set forth on Exhibit A.
"Gaming Approvals" " has the meaning set forth in Section
8.2(d).
"Gaming Authority" means any governmental authority or
agency with regulatory control or jurisdiction over the conduct of lawful
gaming or gambling, including, without limitation, the Arizona Racing
Commission, the California Attorney General, the California Gambling
Control Commission, the Colorado Division of Gaming, the Colorado Limited
Gaming Control Commission, the Indiana Gaming Commission, the City of
Inglewood, the Iowa Racing and Gaming Commission, the Louisiana Gaming
Control Board, the Mississippi Gaming Commission, the Mississippi State Tax
Commission, the Provincial Government of Neuquen, the Nevada State Gaming
Control Board, the National Indian Gaming Commission, the Nevada Gaming
Commission, the Washington State Gaming Commission, the Washoe County Board
of Commissioners, Nevada Gaming Commission and the Yakima Tribal Gaming
Commission.
"Gaming Laws" means any Federal, state, local or foreign
statute, ordinance, rule, regulation, permit, consent, approval,
registration, finding of suitability, license, judgment, order, decree,
injunction or other authorization governing or relating to the current or,
in the case of Pinnacle and its Subsidiaries, contemplated manufacturing,
distribution, casino gambling and gaming activities and operations of
Pinnacle and Harveys, including, without limitation, the California
Gambling Control Act and the rules and regulations promulgated thereunder,
the Colorado Limited Gaming Act and the rules and regulations promulgated
thereunder, the Indian Gaming Regulatory Act and the rules and regulations
promulgated thereunder, the Indiana Riverboat Gambling Act (as set forth at
Indiana Code 4-33) and the rules and regulations promulgated thereunder,
chapters 99D and F of the Code of Iowa and the rules and regulations
promulgated thereunder, the Louisiana Riverboat Economic Development and
Gaming Control Act and the rules and regulations promulgated thereunder,
the Mississippi Gaming Control Act and the rules and regulations
promulgated thereunder, and the Nevada Gaming Control Act and the rules and
regulations promulgated thereunder and all applicable local rules and
ordinances.
"Governmental Entity" means any Federal, state or local
government or any court, administrative or regulatory agency or commission
or other governmental authority or agency, domestic or foreign, including
any Gaming Authority.
"Group" has the meaning set forth in the recitals hereof.
"Harveys" has the meaning set forth in the recitals hereof.
"Harveys Acq Corp" has the meaning set forth in the recitals
hereof.
"Harveys Merger" has the meaning set forth in the recitals
hereof.
"Harveys Surviving Corporation" means the surviving
corporation of the Harveys Merger.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"indebtedness" means, with respect to any Person, without
duplication, (a) all obligations of such Person for borrowed money, or with
respect to deposits or advances of any kind, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c)
all obligations of such Person upon which interest charges are customarily
paid (other than trade payables incurred in the Ordinary Course of
Business), (d) all obligations of such Person under conditional sale or
other title retention agreements relating to property purchased by such
Person, (e) all obligations of such Person issued or assumed as the
deferred purchase price of property or services or for trade or barter
arrangements (excluding obligations of such Person to creditors for raw
materials, inventory, services and supplies incurred in the ordinary course
of such Person's business), (f) all lease obligations of such Person
capitalized on the books and records of such Person, (g) all obligations of
others secured by any Lien on property or assets owned or acquired by such
Person, whether or not the obligations secured thereby have been assumed,
(h) all obligations of such Person under interest rate, or currency or
commodity hedging, swap or similar derivative transactions (valued at the
termination value thereof), (i) all letters of credit issued for the
account of such Person (excluding letters of credit issued for the benefit
of suppliers or lessors to support accounts payable to suppliers incurred
in the Ordinary Course of Business) and (j) all guarantees and arrangements
having the economic effect of a guarantee by such Person of any other
Person.
"In the Money Option" has the meaning set forth in Section
10.11.
"Indemnified Parties" has the meaning set forth in Section
7.6(a).
"Indiana Project" has the meaning set forth in Section 4.6.
"Inglewood Property" means the 97 acres of vacant land in
Inglewood which was the subject of the agreement announced on November 4,
1999 (and subsequently terminated), with the Hovnanian Companies of
California, the legal description of which is contained in Schedule 1.0
hereto.
"Intellectual Property Rights" has the meaning set forth in
Section 4.16.
"knowledge" of any Person means the actual knowledge of the
executive officers of such Person after due inquiry.
"Law" means any law, statute, ordinance, regulation or rule
or any judgment, decree, order, regulation or rule of any court or
governmental authority or body.
"Leased Properties" has the meaning set forth in Section
4.17(a).
"Licensed Persons" has the meaning set forth in Section 5.4.
"Lien" means any mortgage, pledge, assessment, security
interest, lease, sublease, lien, adverse claim, levy, charge, option, right
of others or restriction (whether on voting, sale, transfer, disposition or
otherwise) or other encumbrance of any kind, whether imposed by agreement,
understanding, law or equity, or any conditional sale contract, title
retention contract or other contract to give or to refrain from giving any
of the foregoing; provided that other than with respect to Section 4.17
hereof, workers', mechanics', suppliers', carriers', materialmen's,
landlords' statutory, warehousemen's liens, liens for taxes, assessments or
government charges that are not yet delinquent or that are being contested
in good faith and for which adequate reserves have been provided in
accordance with generally accepted accounting principles (to the extent
required thereunder), or other similar liens arising in the Ordinary Course
of Business, shall not constitute a "Lien."
"material adverse change" or "material adverse effect" with
respect to any Person means any change or effect that is individually or in
the aggregate materially adverse to the business, prospects, properties,
assets or financial condition or results of operations of such Person and
its Subsidiaries, taken as a whole; provided, however, that in no event
shall the following, either individually or in the aggregate, in and of
itself be deemed to constitute a "material adverse change" or a "material
adverse effect" (i) the effects of changes that are applicable to the
national financial, banking, currency or capital markets in general,
individually or in the aggregate, solely in and of itself be deemed to
constitute a "material adverse change" or a "material adverse effect;" (ii)
the failure by Pinnacle to meet independent, third party analysts'
projections of earnings, revenue or other financial performance measures
solely in and of itself be deemed to constitute a "material adverse change"
or a "material adverse effect;" provided, however, that the underlying
facts, circumstances, operating results or prospects which cause Pinnacle
to fail to meet such projections may be considered in determining whether a
"material adverse change" or a "material adverse effect" has occurred or
(iii) the effects of any event or circumstances (including the actual
occurrence of any proposed action) listed on Schedule 1.1 hereto.
"Materials of Environmental Concern" has the meaning set
forth in Section 4.12(a).
"Material Subsidiary" shall mean each of: Boomtown Hotel &
Casino, Inc., a Nevada corporation; Louisiana - I Gaming, a Louisiana
Partnership in Commendam; Biloxi Casino Corp., a Mississippi corporation;
Casino Magic of Louisiana, Corp., a Louisiana corporation; and Belterra
Resort (Indiana), LLC, an Indiana limited liability company.
"Notice of Competitive Proposal" has the meaning set forth
in Section 6.3(b).
"NYSE" means the New York Stock Exchange, Inc., or any
successor entity.
"Ordinary Course of Business" means (unless otherwise
indicated) (i) with respect to representations and warranties contained in
Article IV or V hereof, transactions in the ordinary course of business,
and (ii) with respect to covenants and agreements contained in Article VI
or VII hereof, transactions in the ordinary course of business consistent
with past practice.
"Other Asset Dispositions" has the meaning set forth in
Section 6.1(c).
"Other Filings" has the meaning set forth in Section 7.2(b).
"Owned Properties" has the meaning set forth in Section
4.17(a).
"Paying Agent" has the meaning set forth in Section 3.2(a).
"PBGC" has the meaning set forth in Section 4.10(c).
"Permits" has the meaning set forth in Section 4.13(a).
"Permitted Liens" means (i) Liens described on Schedule
4.17(b), other than the Liens arising under the Bank Credit Facility, (ii)
Liens for current taxes not yet due and payable or being contested in good
faith by appropriate proceedings and for which adequate reserves have been
provided in accordance with generally accepted accounting principles (to
the extent required thereunder), or (iii) such Liens, encumbrances,
restrictions, leases, option to purchase, options to lease, conditions,
covenants, assessments, defects, claims or exceptions which could not
reasonably be expected to, either individually or in the aggregate,
materially impair the current use, occupancy, value, financeability, or
marketability of title to the parcels of Real Property on a
project-by-project basis or as would not reasonably be expected to have a
material adverse effect on Pinnacle or any of its Material Subsidiaries.
"Person" means any natural person, corporation, general
partnership, limited partnership, limited liability company, limited
liability partnership, proprietorship, trust, union, association, court,
tribunal, agency, government, department, commission, self-regulatory
organization, arbitrator, board, bureau, instrumentality or other entity,
enterprise, authority or business organization.
"Pinnacle" has the meaning set forth in the recitals hereof.
"Pinnacle Acq Corp" has the meaning set forth in the
recitals hereof.
"Pinnacle Certificates" has the meaning set forth in Section
3.2(b).
"Pinnacle Common Stock" means the Common Stock of Pinnacle,
par value $.10 per share.
"Pinnacle Dissenting Shares" has the meaning set forth in
Section 3.2(f).
"Pinnacle Merger" has the meaning set forth in the recitals
hereof.
"Pinnacle Merger Consideration" means $24.00 in cash,
subject to adjustment as described in Section 10.11.
"Pinnacle Preferred Stock" means the Preferred Stock of
Pinnacle, par value $1.00 per share.
"Pinnacle Stockholders Meeting" has the meaning set forth in
Section 7.1.
"Pinnacle Stock Option" has the meaning set forth in Section
7.5(a).
"Pinnacle Stock Option Plans" has the meaning set forth in
Section 7.5(a).
"Pinnacle Surviving Corporation" has the meaning set forth
in Section 2.1.
"Pinnacle Surviving Corporation Common Stock" means the
Common Stock of the Pinnacle Surviving Corporation, par value $.01.
"Plans" has the meaning set forth in Section 4.10(a).
"Principal Asset Dispositions" has the meaning set forth in
Section 6.1(c).
"Proxy Statement" has the meaning set forth in Section
7.2(a).
"Real Properties" has the meaning set forth in Section
4.17(a).
"Requisite Vote" has the meaning set forth in Section 4.24.
"Schedule 13E-3" has the meaning set forth in Section
7.2(a).
"SEC" means the Securities and Exchange Commission.
"SEC Documents" has the meaning set forth in Section 4.6.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Significant Takeover Proposal" means (other than the
transactions contemplated by this Agreement) (a) any proposal or offer from
any Person relating to any direct or indirect acquisition or purchase of
assets (including capital stock of any Subsidiaries) of Pinnacle or any of
its Subsidiaries comprising 20% or more of Pinnacle's consolidated assets
or of over 20% of any class of equity securities of Pinnacle or any of its
Material Subsidiaries or (b) any tender offer or exchange offer that if
consummated would result in any Person beneficially owning 20% or more of
any class of equity securities of Pinnacle or any of its Material
Subsidiaries or which would require approval under any Gaming Law, or (c)
any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Pinnacle (or any
of its Material Subsidiaries) and a third party. Notwithstanding the
foregoing, consummation of (i) the Principal Asset Dispositions
substantially on the terms and subject to the conditions contained in the
applicable Asset Disposition Agreement in effect as of the date hereof (or
as amended or modified in accordance with this Agreement) (ii) the sale of
the Inglewood Property and the Other Asset Dispositions on terms approved
by Pinnacle's Board of Directors, in good faith, shall not be deemed to
constitute a Significant Takeover Proposal and (iii) any transaction which
would otherwise constitute a Significant Takeover Proposal but which is
consented to by PHCR in writing prior to the initiation of any substantive
negotiations or discussions with respect thereto, shall not be deemed to
constitute a Significant Takeover Proposal.
"SPD" has the meaning set forth in Section 4.10(b)(iv).
"Special Committee" has the meaning set forth in Section
4.5.
"Subsidiary" means, with respect to any Person, (a) any
corporation with respect to which such Person, directly or indirectly
through one or more Subsidiaries, (i) owns more than 50% of the outstanding
shares of capital stock having generally the right to vote in the election
of directors or (ii) has the power, under ordinary circumstances, to elect,
or to direct the election of, a majority of the board of directors of such
corporation, (b) any partnership with respect to which (i) such Person or a
Subsidiary of such Person is a general partner, (ii) such Person and its
Subsidiaries together own more than 50% of the interests therein, or (iii)
such Person and its Subsidiaries have the right to appoint or elect or
direct the appointment or election of a majority of the directors or other
Person or body responsible for the governance or management thereof, (c)
any limited liability company with respect to which (i) such Person or a
Subsidiary of such Person is the manager or managing member, (ii) such
Person and its Subsidiaries together own more than 50% of the interests
therein, or (iii) such Person and its Subsidiaries have the right to
appoint or elect or direct the appointment or election of a majority of the
directors or other Person or body responsible for the governance or
management thereof, or (d) any other entity in which such Person has,
and/or one or more of its Subsidiaries have, directly or indirectly, (i) at
least a 50% ownership interest or (ii) the power to appoint or elect or
direct the appointment or election of a majority of the directors or other
Person or body responsible for the governance or management thereof. For
purposes of this Agreement, the term "Subsidiary" shall not include
Sunflower Racing, Inc.
"Surveys" has the meaning set forth in Section 7.9(b).
"Takeover Proposal" means (other than the transactions
contemplated by this Agreement) (a) any proposal or offer from any Person
relating to any direct or indirect acquisition or purchase of assets
(including capital stock of any Subsidiaries) of Pinnacle or any of its
Subsidiaries comprising 10% or more of Pinnacle's consolidated assets or of
over 10% of any class of equity securities of Pinnacle or any of its
Material Subsidiaries or (b) any tender offer or exchange offer that if
consummated would result in any Person beneficially owning 10% or more of
any class of equity securities of Pinnacle or any of its Material
Subsidiaries or which would require approval under any Gaming Law, or (c)
any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Pinnacle (or any
of its Material Subsidiaries) and a third party. Notwithstanding the
foregoing, consummation of (i) the Principal Asset Dispositions
substantially on the terms and subject to the conditions contained in the
applicable Asset Disposition Agreement in effect as of the date hereof (or
as amended or modified in accordance with this Agreement) and (ii) the sale
of the Inglewood Property and the Other Asset Dispositions on terms
approved by Pinnacle's Board of Directors, in good faith, and (iii) any
transaction which would otherwise constitute a Takeover Proposal but which
is consented to by PHCR in writing prior to the initiation of any
substantive negotiations or discussions with respect thereto, shall not be
deemed to constitute a Takeover Proposal.
"Tax" or "Taxes" means all Federal, state, local and foreign
taxes and other assessments and governmental charges of a similar nature,
including any property Tax (whether imposed directly or through
withholdings), including any interest, penalties and additions to Tax
applicable thereto.
"Tax Authority" means the Internal Revenue Service and any
other domestic or foreign governmental authority responsible for the
administration or collection of any Taxes.
"Tax Returns" means all Federal, state, local and foreign
returns, declarations, statements, reports, schedules, forms and
information returns relating to Taxes, and all amendments thereto.
"Termination Fee" has the meaning set forth in Section
7.7(b).
"Title Insurer" has the meaning set forth in Section 7.9(a).
"Title Policies" has the meaning set forth in Section
7.9(a).
"Transaction Documents" shall mean the Voting Agreement and
the exhibits thereto.
"Voting Agreement" means that certain Voting and
Contribution Agreement, dated the date hereof, among PHCR and the
stockholders of Pinnacle listed on the signature pages thereto, together
with the exhibits thereto.
ARTICLE II
THE PINNACLE MERGER
Section 2.1 The Pinnacle Merger. Upon the terms and subject
to the conditions set forth in this Agreement and the certificate of merger
or other appropriate documents (in any such case, the "Certificate of
Merger"), and in accordance with the applicable provisions of the DGCL,
Pinnacle Acq Corp shall be merged with and into Pinnacle. Following the
Pinnacle Merger, Pinnacle shall continue as the surviving corporation (the
"Pinnacle Surviving Corporation") and the separate existence of Pinnacle
Acq Corp will cease.
Section 2.2 Closing. The closing (the "Closing") of the
Pinnacle Merger and the contribution pursuant to the Voting Agreement will
take place at 10:00 a.m., Los Angeles time, on a date (the "Closing Date")
to be specified by PHCR, which may be on, but shall be no later than the
third business day after, the day on which there shall have been
satisfaction or waiver of the conditions set forth in Article VIII, at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, 300 South Grand
Avenue, Los Angeles, California 90071, unless another time date or place is
agreed to in writing by the parties hereto.
Section 2.3 Effective Time. On or before the Closing Date
the parties shall file the Certificate of Merger with the Secretary of
State of the State of Delaware in accordance with the provisions of DGCL
Section 251 and make all other filings or recordings required by law in
connection with the Pinnacle Merger. The Pinnacle Merger shall become
effective at such time as the Certificate of Merger is duly filed with the
Secretary of State of the State of Delaware, or at such other later time as
the parties shall agree and specify in the Certificate of Merger (the time
the Pinnacle Merger becomes effective being the "Effective Time").
Section 2.4 Effects of the Pinnacle Merger. The Pinnacle
Merger shall have the effects set forth in the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time,
all the properties, rights, privileges, powers and franchises of Pinnacle
and Pinnacle Acq Corp shall vest in the Pinnacle Surviving Corporation, and
all debts, liabilities and duties of Pinnacle and Pinnacle Acq Corp shall
become the debts, liabilities and duties of the Pinnacle Surviving
Corporation.
Section 2.5 Corporate Governance Documents. The Certificate
of Incorporation of Pinnacle Acq Corp, as in effect immediately prior to
the Effective Time of the Pinnacle Merger, shall become the Certificate of
Incorporation of the Pinnacle Surviving Corporation after the Effective
Time, except that such Certificate of Incorporation shall be amended to
provide that the name of the Pinnacle Surviving Corporation shall be a name
selected by Pinnacle Acq Corp prior to the Effective Date, and thereafter
may be amended in accordance with its terms and as provided by law. The
By-laws of Pinnacle Acq Corp as in effect on the Effective Time shall
become the By-laws of the Pinnacle Surviving Corporation and thereafter may
be amended in accordance with its terms and as provided by law.
Section 2.6 Directors. The directors of Pinnacle Acq Corp
immediately prior to the Effective Time shall become the directors of the
Pinnacle Surviving Corporation, and shall serve in such capacity until the
earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
Section 2.7 Officers. The officers of Pinnacle Acq Corp
immediately prior to the Effective Time shall become the officers of the
Pinnacle Surviving Corporation, and shall serve in such capacity until the
earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
Section 2.8 Further Actions. At and after the Effective
Time, the Pinnacle Surviving Corporation shall take all action as shall be
required in connection with the Pinnacle Merger, including, but not limited
to, the execution and delivery of any further deeds, assignments,
instruments or documentation as are necessary or desirable to carry out the
provisions of this Agreement.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Effect on Capital Stock of Pinnacle and Pinnacle
Acq Corp. As of the Effective Time, by virtue of the Pinnacle Merger and
without any action on the part of the holder of any shares of Pinnacle
Common Stock or any shares of capital stock of Pinnacle Acq Corp:
(a) Capital Stock of Pinnacle. Each issued and
outstanding share of Pinnacle Common Stock (other than (i) shares to be
canceled in accordance with Section 3.1(c) and Pinnacle Dissenting Shares,
(ii) shares to be redeemed in accordance with Section 6.1(d) of this
Agreement but only to the extent so redeemed immediately prior to the
Effective Time, and (iii) the Shares Contributed (as defined in the Voting
Agreement)) shall be converted into the right to receive from the Pinnacle
Surviving Corporation the Pinnacle Merger Consideration, without interest.
The Paying Agent shall withhold or deduct for Taxes as required under
applicable law. As of the Effective Time, all shares of Pinnacle Common
Stock upon which the Pinnacle Merger Consideration is payable pursuant to
this Section 3.1(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 of Pinnacle Common Stock shall
cease to have any rights with respect thereto, except the right to receive
the Pinnacle Merger Consideration.
(b) Capital Stock of Pinnacle Acq Corp. Each share of
the Pinnacle Acq Corp Common Stock issued and outstanding immediately prior
to the Effective Time shall be converted into and become one fully paid and
nonassessable share of Pinnacle Surviving Corporation Common Stock.
(c) Cancellation of Treasury Stock and Pinnacle Acq
Corp Owned Stock. Each share of Pinnacle Common Stock that is owned by
PHCR, Pinnacle or by any Subsidiary of Pinnacle and each share of Pinnacle
Common Stock that is owned by Pinnacle Acq Corp shall automatically be
canceled and retired and shall cease to exist.
Section 3.2 Exchange of Certificates.
(a) Paying Agent. Immediately prior to the Effective
Time, Pinnacle Acq Corp shall designate a bank or trust reasonably
satisfactory to Pinnacle to act as paying agent in the Pinnacle Merger (the
"Paying Agent"), and, on or prior to the Effective Time, Pinnacle Acq Corp
shall deposit with the Paying Agent immediately available funds (the
"Exchange Funds") in an amount necessary for the payment of the Pinnacle
Merger Consideration upon surrender of certificates representing Pinnacle
Common Stock as part of the Pinnacle Merger pursuant to Section 3.1, it
being understood that any and all interest earned on the Exchange Fund
shall be turned over to the Pinnacle Surviving Corporation.
(b) Exchange Procedure. As soon as reasonably
practicable after the Effective Time, the Pinnacle Surviving Corporation
shall cause the Paying Agent to mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Pinnacle Common Stock (the "Pinnacle
Certificates") whose shares were converted into the right to receive the
Pinnacle Merger Consideration pursuant to Section 3.1, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Pinnacle Certificates shall pass, only upon
delivery of the Pinnacle Certificates to the Paying Agent and shall be in
such form and have such other customary provisions as the Pinnacle
Surviving Corporation may reasonably specify) and (ii) instructions
for use in effecting the surrender of the Pinnacle Certificates in exchange
for the Pinnacle Merger Consideration. Upon surrender of a Pinnacle
Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by the Pinnacle Surviving Corporation, together
with such letter of transmittal, duly executed, and such other documents as
may reasonably be required by the Paying Agent, the holder of such Pinnacle
Certificate shall be entitled to receive in exchange therefor the Pinnacle
Merger Consideration into which the shares of capital stock theretofore
represented by such Pinnacle Certificate shall have been converted pursuant
to Section 3.1, and the Pinnacle Certificate so surrendered shall forthwith
be cancelled. The Exchange Agent shall accept such Pinnacle Certificates
upon compliance with such reasonable terms and conditions as the Exchange
Agent may impose to effect an orderly exchange thereof in accordance with
normal exchange practices. In the event of a transfer of ownership of such
capital stock which is not registered in the transfer records of Pinnacle,
payment may be made to a Person other than the Person in whose name the
Pinnacle Certificate so surrendered is registered, if such Pinnacle
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the Person requesting such payment shall pay any transfer or
other taxes required by reason of the payment to a Person other than the
registered holder of such Pinnacle Certificate or establish to the
satisfaction of the Pinnacle Surviving Corporation that such tax has been
paid or is not applicable. Until surrendered as contemplated by this
Section 3.2(b), each Pinnacle Certificate shall be deemed at any time after
the Effective Time to represent only the right to receive upon such
surrender the Pinnacle Merger Consideration, without interest, into which
the shares of capital stock theretofore represented by such Pinnacle
Certificate shall have been converted pursuant to Sections 3.1. No interest
will be paid or will accrue on the consideration payable upon the surrender
of any Pinnacle Certificate. The Paying Agent shall withhold or deduct for
Taxes as required under applicable law.
(c) No Further Ownership Rights in Capital Stock. All
consideration paid upon the surrender of Pinnacle Certificates in
accordance with the terms of this Article III shall be deemed to have been
paid in full satisfaction of all rights pertaining to the shares of capital
stock theretofore represented by such Pinnacle Certificates, and there
shall be no further registration of transfers on the stock transfer books
of the Pinnacle Surviving Corporation of the shares of capital stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, the Pinnacle Certificates are presented to the Pinnacle
Surviving Corporation or the Paying Agent for any reason, they shall be
cancelled and exchanged as provided in this Article III, except as
otherwise provided by law.
(d) Termination of Exchange Funds. Any portion of the
Exchange Funds which remains undistributed to the holders of the Pinnacle
Certificates for twelve months after the Effective Time shall be delivered
to an entity identified in writing to the Paying Agent by the Pinnacle
Surviving Corporation, upon demand, and any holders of the Pinnacle
Certificates who have not theretofore complied with this Article III shall
thereafter look only to the Pinnacle Surviving Corporation for payment of
their claim for the Pinnacle Merger Consideration, and any cash or
dividends or distributions payable to such holders pursuant to this Article
III.
(e) No Liability. None of PHCR, Pinnacle Acq Corp,
Pinnacle, the Pinnacle Surviving Corporation or the Paying Agent shall be
liable to any Person in respect of any cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(f) Pinnacle Dissenting Shares. Notwithstanding
Section 3.1, shares of Pinnacle Common Stock which are issued and
outstanding immediately prior to the Effective Time and which are held by a
holder who has not voted such shares in favor of the Pinnacle Merger and
who has delivered a written demand for relief as a dissenting stockholder
in the manner provided by the DGCL and who, as of the Effective Time, shall
not have effectively withdrawn or lost such right to relief as a dissenting
stockholder ("Pinnacle Dissenting Shares") shall not be converted into a
right to receive the Pinnacle Merger Consideration. The holders of such
Pinnacle Dissenting Shares shall be entitled only to such rights as are
granted by Section 262 of the DGCL. Each holder of Pinnacle Dissenting
Shares who becomes entitled to payment for such shares pursuant to Section
262 of the DGCL shall receive payment therefor from the Surviving
Corporation in accordance with the DGCL; provided, however, that if any
such holder of Pinnacle Dissenting Shares (i) shall have failed to
establish his entitlement to relief as a dissenting stockholder as provided
in Section 262 of the DGCL, (ii) shall have effectively withdrawn his
demand for relief as a dissenting stockholder with respect to such Pinnacle
Dissenting Shares or lost his right to relief as a dissenting stockholder
and payment for his Pinnacle Dissenting Shares under Section 262 of the
DGCL, or (iii) shall have failed to file a complaint with the appropriate
court seeking relief as to determination of the value of all Pinnacle
Dissenting Shares within the time provided in Section 262 of the DGCL, such
holder shall forfeit the right to relief as a dissenting stockholder with
respect to such shares of Pinnacle Common Stock and each such share shall
be converted into the right to receive the Pinnacle Merger Consideration
without interest thereon, from the Pinnacle Surviving Corporation as
provided in Section 3.1. Pinnacle shall give Pinnacle Acq Corp prompt
written notice of any demands received by Pinnacle for relief as a
dissenting stockholder and Pinnacle Acq Corp shall have the right to
participate in all negotiations and proceedings with respect to such
demands. Pinnacle shall not, except with the prior written consent of
Pinnacle Acq Corp, make any payment with respect to, or settle or offer to
settle, any such demands.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PINNACLE
Except as set forth in the corresponding numbered sections
of the disclosure schedules delivered by Pinnacle to Pinnacle Acq Corp
concurrently with the execution of this Agreement or referenced in the
particular section of this Article IV to which exception is being taken,
Pinnacle represents and warrants to Pinnacle Acq Corp as follows:
Section 4.1 Organization, Standing and Corporate Power. Each
of Pinnacle and its Subsidiaries is a corporation, partnership or limited
liability company duly formed or organized, validly existing and in good
standing under the laws of the jurisdiction in which it is formed or
organized and has the requisite corporate, partnership or limited liability
company power and authority to carry on its business as now being
conducted. Each of Pinnacle and its Subsidiaries is duly qualified or
licensed to do business and is in good standing in each jurisdiction in
which the nature of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not have a material adverse effect
on Pinnacle or any Material Subsidiary of Pinnacle. Pinnacle has made
available to Pinnacle Acq Corp complete and correct copies of the
Certificate of Incorporation and By-laws of Pinnacle and the comparable
charter and organizational documents of each of its Subsidiaries, in each
case as amended to the date of this Agreement. The respective certificates
of incorporation and by-laws or other organizational documents of the
Subsidiaries of Pinnacle do not contain any provision limiting or otherwise
restricting the ability of Pinnacle to control such Subsidiaries.
Section 4.2 Subsidiaries. Pinnacle's Subsidiaries identified
on Schedule 4.2(a) own or lease all of the material assets, hold all
material Permits and conduct all of the material business and operations of
Pinnacle and its Subsidiaries, taken as a whole (including, without
limitation, all business and operations associated with Pinnacle's
Argentina; Bossier City and Harvey, Louisiana; Bay St. Louis and Biloxi,
Mississippi; and Verdi, Nevada casino resorts and related facilities, Los
Angeles card clubs (which Pinnacle owns or subleases but does not operate),
Phoenix, Arizona horse racing facility, the project in development in
Vevay, Indiana and the potential project based in Lake Charles, Louisiana
in which Pinnacle has an option to lease, and the lending of funds to the
Yakima Tribal Gaming Corporation. Each Subsidiary of Pinnacle is identified
on Schedule 4.2(a). All the outstanding equity interests of each Subsidiary
are owned by Pinnacle, by another wholly owned Subsidiary of Pinnacle or by
Pinnacle and another wholly owned Subsidiary of Pinnacle, free and clear of
all Liens, except as set forth on Schedule 4.2(b). There are no proxies
with respect to any shares of any such Subsidiary. There are no outstanding
obligations of Pinnacle or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any outstanding securities of any of Pinnacle's
Subsidiaries or to provide funds to or make any investment (in the form of
a loan, capital contribution or otherwise) in Pinnacle or any of its
Subsidiaries or other Person.
Section 4.3 Capital Structure. The authorized capital stock
of Pinnacle consists of 40,000,000 shares of Pinnacle Common Stock and
250,000 shares of Pinnacle Preferred Stock. As of April 16, 2000, (a)
26,297,652 shares of Pinnacle Common Stock and no shares of Pinnacle
Preferred Stock were issued and outstanding, (b) no shares of Pinnacle
Common Stock were held by Pinnacle in its treasury, and (c) 2,556,667
shares of Pinnacle Common Stock were reserved for issuance upon exercise of
outstanding Pinnacle Stock Options. No other shares of capital stock or
other voting securities of Pinnacle are authorized, issued or outstanding.
There are no outstanding stock appreciation rights, restricted stock grants
or contingent stock grants and there are no other outstanding contractual
rights to which Pinnacle is a party, the value of which is derived from the
value of shares of Pinnacle Common Stock. All outstanding shares of capital
stock of Pinnacle are, and all shares which may be issued upon exercise or
conversion of any security issued by Pinnacle (or any entity in which
Pinnacle owns a direct or indirect interest) will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are no bonds, debentures, notes or other
indebtedness of Pinnacle having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on
which stockholders of Pinnacle may vote. Except as set forth above, as of
the date of this Agreement, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which Pinnacle or any of its Subsidiaries is a
party, or by which any of them is bound, obligating Pinnacle or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, shares of capital stock or other voting securities of Pinnacle or of
any of its Subsidiaries or obligating Pinnacle or any of its Subsidiaries
to issue, grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement, arrangement or undertaking.
Section 4.4 Authority; Noncontravention. Pinnacle has the
requisite corporate power and authority to enter into this Agreement and,
subject to approval of this Agreement by the Requisite Vote of the
outstanding shares of Pinnacle Common Stock, to consummate the transactions
contemplated by this Agreement. The execution and delivery of this
Agreement by Pinnacle and the consummation by Pinnacle of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of Pinnacle, subject, in the case of this
Agreement, to approval of this Agreement by the Requisite Vote of the
outstanding shares of Pinnacle Common Stock and the Pinnacle Compliance
Committee. This Agreement has been duly executed and delivered by Pinnacle
and, assuming this Agreement constitutes the valid and binding obligation
of the other parties hereto, constitutes the valid and binding obligation
of Pinnacle, enforceable against Pinnacle in accordance with its terms. The
execution and delivery of this Agreement do not, and the consummation of
the transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, require notice or consent under,
conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any Lien upon any of
the properties or assets of Pinnacle or any of its Subsidiaries under, (a)
the Certificate of Incorporation or By-laws of Pinnacle or the comparable
charter or organizational documents of any of its Subsidiaries, (b) other
than subject to the governmental filings and other matters referred to in
the following sentence and except as set forth on Schedule 4.4(a), (i) any
loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement or instrument or (ii) any permit, concession, franchise or
license applicable to Pinnacle or any of its Subsidiaries or their
respective properties or assets or (c) subject to the governmental filings
and other matters referred to in the following sentence, any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Pinnacle or any of its Subsidiaries or their respective properties or
assets, other than, in the case of clauses (b) or (c), any such conflicts,
violations, defaults, rights or Liens that individually or in the aggregate
would not (i) have a material adverse effect on Pinnacle or any of its
Material Subsidiaries, (ii) impair in any material respect the ability of
Pinnacle to perform its obligations under this Agreement or (iii) prevent
or impede in any material respect the consummation of any of the
transactions contemplated by this Agreement.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by Pinnacle
or any of its Subsidiaries in connection with the execution and delivery of
this Agreement by Pinnacle or the consummation by Pinnacle of the
transactions contemplated by this Agreement, except for (A) the filing of a
premerger notification and report form by Pinnacle under the HSR Act, (B)
the filing with the SEC of such reports under Section 14(a) and Rule 13e-3
of the Exchange Act as may be required in connection with this Agreement
and the transactions contemplated by this Agreement, (C) the filing of the
Certificate of Merger with the Delaware Secretary of State and appropriate
documents with the relevant authorities of other states in which Pinnacle
is qualified to do business, (D) the obtaining of all Gaming Approvals,
each of which is set forth in Schedule 4.4(b) hereto, (E) such filings as
may be required by any applicable state securities or "blue sky" laws, (F)
the consents described on Schedule 4.4(c) hereto and (G) such other
consents, approvals, orders, authorizations, registrations, declarations
and filings the failure of which to be obtained or made would not,
individually or in the aggregate, (1) have a material adverse effect on
Pinnacle, (2) impair, in any material respect, the ability of Pinnacle to
perform its obligations under this Agreement or (3) prevent or
significantly delay the consummation of the transactions contemplated by
this Agreement.
Section 4.5 Opinion of Financial Advisor. The Board of
Directors of Pinnacle and a special committee of the Board of Directors of
Pinnacle (the "Special Committee") have received the opinion of Jefferies &
Company, Inc., dated April 16, 2000 (the "Fairness Opinion"), to the effect
that, as of such date and subject to the assumptions and qualifications
contained therein, the Pinnacle Merger Consideration is fair to the
stockholders of Pinnacle, from a financial point of view. A copy of the
Fairness Opinion has been delivered to Pinnacle Acq Corp.
Section 4.6 SEC Documents; Financial Statements. Pinnacle
files and has filed all required reports, proxy statements, forms, and
other documents with the SEC since January 1, 1996 (the "SEC Documents").
Schedule 4.6(a) hereto sets forth a complete list of all the required
reports, proxy statements, registration statements, forms, and other
documents filed with the SEC since January 1, 1996 through the date hereof
(the "Current SEC Documents"). True and complete copies of all such SEC
Documents have been delivered or made available to Pinnacle Acq Corp. As of
their respective dates, (a) the SEC Documents complied 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 of the SEC promulgated
thereunder applicable to such SEC Documents, and (b) except to the extent
that information contained in any SEC Document has been revised or
superseded by a later filed SEC Document filed and publicly available prior
to the date of this Agreement, none of the SEC Documents contained any
untrue statement of a material fact or omitted 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 financial statements of Pinnacle included in the SEC
Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the
periods involved and fairly present the consolidated financial position of
Pinnacle and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). Except as set forth in the Current SEC
Documents and in Schedule 4.6(b), and except for liabilities and
obligations incurred in the Ordinary Course of Business, and except for the
Asset Dispositions and the transactions occurring in connection with the
construction of the Belterra Resort and Casino and the riverboat at the
site of the Belterra Resort and Casino (the "Indiana Project") and except
for transaction expenses incurred in connection with the transactions
contemplated by this Agreement, since the consolidated balance sheet as of
December 31, 1999 included in the Current SEC Documents (the "Base Balance
Sheet"), neither Pinnacle nor any of its Subsidiaries has incurred any
material liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by generally accepted
accounting principles to be set forth on a consolidated balance sheet of
Pinnacle and its consolidated Subsidiaries or in the notes thereto.
Section 4.7 Absence of Certain Changes or Events. Except as
disclosed in the Current SEC Documents, filed and publicly available
between January 1, 1999 and April 16, 2000, since the date of the Base
Balance Sheet, Pinnacle and its Subsidiaries have conducted their
respective businesses only in the Ordinary Course of Business consistent
with past practice, and, except as set forth in Schedule 4.7, there has not
been (a) any material adverse change in Pinnacle, (b) any declaration,
setting aside or payment of any dividend or other distribution with respect
to its capital stock, (c) any split, combination or reclassification of any
of its capital stock or any issuance or the authorization of any issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, (d)(i) any granting by Pinnacle or any of its
Subsidiaries to any employee or consultant of Pinnacle or any of its
Subsidiaries of any increase in compensation, except in the Ordinary Course
of Business consistent with past practice (including in connection with
promotions) or as was required under employment agreements in effect as of
the date of the Base Balance Sheet, (ii) any granting by Pinnacle or any of
its Subsidiaries to any of their respective employees or consultant of any
increase in severance or termination pay, except as part of a standard
employment package to any Person promoted or hired, or as was required
under employment, severance or termination agreements in effect as of the
date of the Base Balance Sheet or (iii) any entry by Pinnacle or any of its
Subsidiaries into any employment, severance or termination agreement with
any executive officer of Pinnacle or any of its Subsidiaries, (e) any
damage, destruction or loss affecting the businesses or assets of Pinnacle
or any of its Subsidiaries, whether or not covered by insurance, that has
or reasonably could be expected to have a material adverse effect on
Pinnacle or any Subsidiary, (f) any change in accounting methods,
principles or practices by Pinnacle affecting its assets, liabilities or
business (g) entry into any commitment or transaction material to Pinnacle
and its Subsidiaries taken as a whole (including, without limitation, any
borrowing or sale of assets) except in the Ordinary Course of Business, (h)
any incurrence, assumption or guarantee by Pinnacle or any of its
Subsidiaries of any indebtedness in excess of $1,000,000, other than in the
Ordinary Course of Business and in amounts and on terms consistent with
past practices, (i) any creation or assumption by Pinnacle or any of its
Subsidiaries of any material Lien on any material asset other than in the
Ordinary Course of Business or (j) any making of any loan, advance or
capital contributions to or investment in excess of $500,000 in any Person,
other than loans, advances or capital contributions to or investments in
wholly owned Subsidiaries of Pinnacle (and Belterra Resorts Indiana, LLC)
made in the Ordinary Course of Business consistent with past practice.
Section 4.8 Litigation. Other than the suits, actions and
proceedings set forth on Schedule 4.8(b), Schedule 4.8(a) (Section 1) sets
forth all material suits, actions and proceedings pending or, to the
knowledge of Pinnacle, threatened against Pinnacle or any of its Material
Subsidiaries, none of which, individually or in the aggregate other than as
set forth on Schedule 4.8(a) (Section 2), would reasonably be expected to
have a material adverse effect on Pinnacle or any of its Material
Subsidiaries, including with respect to its licenses, permits, registration
or other gaming approvals under the Gaming Laws. Schedule 4.8(b) sets forth
all suits, actions and proceedings pending or, to the knowledge of
Pinnacle, threatened against Pinnacle or any of its Subsidiaries in
connection with the transactions contemplated by this Agreement on the date
hereof. Schedule 4.8(c) (Section 1) sets forth all material judgments,
decrees, injunctions, rules or orders (other than rules and orders issued
in the Ordinary Course of Business of Pinnacle or its Material Subsidiaries
which do not result from a violation of law) of any Governmental Entity or
arbitrator outstanding against Pinnacle or any of its Subsidiaries, other
than as set forth on Schedule 4.8(c) (Section 2), none of which,
individually or in the aggregate, would reasonably be expected to have a
material adverse effect on Pinnacle or any of its Subsidiaries, including
with respect to its licenses, permits, registration or other gaming
approvals under the Gaming Laws.
Section 4.9 Absence of Changes in Benefit Plans. Except as
set forth in Schedule 4.9 or as otherwise expressly permitted hereunder,
there has not been any adoption or amendment by Pinnacle or any of its
Subsidiaries of any Plan since the date of the Base Balance Sheet. All
employment, consulting, severance, termination or indemnification
agreements, arrangements or understandings between Pinnacle or any of its
Subsidiaries which are required to be disclosed in the Current SEC
Documents have been fully and properly disclosed therein.
Section 4.10 Employee Benefits; ERISA.
(a) Schedule 4.10(a) contains a true and complete
list of each employment, consulting, bonus, deferred compensation,
incentive compensation, stock purchase, stock option, stock appreciation
right or other stock-based incentive, severance, change-in-control or
termination pay, hospitalization or other medical, disability, life or
other insurance, supplemental unemployment benefits, profit-sharing,
pension, or retirement plan, program, agreement or arrangement, and each
other employee benefit plan, program, agreement or arrangement, sponsored,
maintained or contributed to or required to be contributed to by Pinnacle
or any of its Subsidiaries, or by any trade or business, whether or not
incorporated, that together with Pinnacle or any of its Subsidiaries would
be deemed to comprise a controlled group or affiliated service group or be
deemed to be under common control or otherwise aggregated for purposes of
Sections 414(b), (c), (m) or (o) of the Code (an "ERISA Affiliate"), for
the benefit of any current or former employee or director of Pinnacle, or
any of its Subsidiaries or any ERISA Affiliate (the "Plans"). Schedule
4.10(a) identifies each of the Plans that is an "employee welfare benefit
plan," or "employee pension benefit plan" as such terms are defined in
Sections 3(1) and 3(2) of ERISA (such plans being hereinafter referred to
collectively as the "ERISA Plans"). None of the Plans is subject to Title
IV of ERISA. None of Pinnacle, any of its Subsidiaries nor any ERISA
Affiliate has any formal plan or commitment, whether legally binding or
not, to create any additional Plan or modify or change any existing Plan
that would affect any current or former employee or director of Pinnacle,
any of its Subsidiaries or any ERISA Affiliate.
(b) With respect to each of the Plans, Pinnacle has
heretofore delivered or as promptly as practicable after the date hereof
shall deliver to Pinnacle Acq Corp true and complete copies of each of the
following documents, as applicable:
(i) a copy of the Plan documents
(including all amendments thereto) for each written Plan or a
written description of any Plan that is not otherwise in writing;
(ii) a copy of the annual report or
Internal Revenue Service Form 5500 Series, if required under ERISA,
with respect to each ERISA Plan for the last three Plan years
ending prior to the date of this Agreement for which such a report
was filed;
(iii) a copy of the actuarial report,
if required under ERISA, with respect to each ERISA Plan for the
last three Plan years ending prior to the date of this Agreement;
(iv) a copy of the most recent Summary
Plan Description ("SPD"), together with all Summaries of Material
Modification issued with respect to such SPD, if required under
ERISA, with respect to each ERISA Plan, and all other material
employee communications relating to each ERISA Plan;
(v) if the Plan is funded through a
trust or any other funding vehicle, a copy of the trust or other
funding agreement (including all amendments thereto) and the latest
financial statements thereof, if any;
(vi) all contracts relating to the
Plans with respect to which Pinnacle, any of its Subsidiaries or
any ERISA Affiliate may have any liability, including insurance
contracts, investment management agreements, subscription and
participation agreements and record keeping agreements; and
(vii) the most recent determination
letter received from the IRS with respect to each Plan that is
intended to be qualified under Section 401(a) of the Code.
(c) No liability under Title IV of ERISA has been
incurred by Pinnacle, any of its Subsidiaries or any ERISA Affiliate since
the effective date of ERISA that has not been satisfied in full, and no
condition exists that presents a material risk to Pinnacle, or any of its
Subsidiaries or any ERISA Affiliate of incurring any liability under such
Title. To the extent this representation applies to Sections 4064, 4069 or
4204 of Title IV of ERISA, it is made not only with respect to the ERISA
Plans but also with respect to any employee benefit plan, program,
agreement or arrangement subject to Title IV of ERISA to which Pinnacle,
any of its Subsidiaries or any ERISA Affiliate made, or was required to
make, contributions during the past six years. All such plans, programs,
agreements or arrangements are listed on Schedule 4.10(c).
(d) None of Pinnacle, any of its Subsidiaries, any
ERISA Affiliate, any of the ERISA Plans, any trust created thereunder, nor
to Pinnacle's knowledge, any trustee or administrator thereof has engaged
in a transaction or has taken or failed to take any action in connection
with which Pinnacle, any of its Subsidiaries, any ERISA Affiliate, any
ERISA Plan or any such trust could be subject to any material liability for
either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA
or a tax imposed pursuant to Section 4975(a) or (b), 4976 or 4980B of the
Code.
(e) All contributions which Pinnacle, any of its
Subsidiaries or any ERISA Affiliate is required to pay under the terms of
each of the ERISA Plans have been timely paid in full or properly recorded
on the financial statements or records of Pinnacle or its Subsidiaries.
(f) Each of the Plans has been operated and
administered in all material respects in accordance with applicable Laws,
including but not limited to ERISA and the Code.
(g) There has been no material failure by any of the
ERISA Plans that is intended to be "qualified" within the meaning of
Section 401(a) of the Code to meet the requirements of such qualification.
Except as disclosed on Schedule 4.10(g) hereto, Pinnacle has applied for
and received a currently effective determination letter from the IRS
stating that it is so qualified, and no event has occurred which would
affect such qualified status.
(h) Except as disclosed on Schedule 4.10(h), no Plan
provides benefits, including without limitation death or medical benefits
(whether or not insured), with respect to current or former employees of
Pinnacle, its Subsidiaries or any ERISA Affiliate after retirement or other
termination of service (other than (i) coverage mandated by applicable
Laws, (ii) death benefits or retirement benefits under any "employee
pension plan," as that term is defined in Section 3(2) of ERISA, or (iii)
benefits, the full direct cost of which is borne by the current or former
employee (or beneficiary thereof)).
(i) Except as disclosed on Schedule 4.10(i), the
consummation of the transactions contemplated by this Agreement will not
(i) entitle any current or former employee, officer or director of
Pinnacle, any of its Subsidiaries or any ERISA Affiliate to severance pay,
unemployment compensation or any other similar termination payment, or (ii)
accelerate the time of payment or vesting, or increase the amount of or
otherwise enhance any benefit due, or any option or other equity security
held by, any such employee, officer or director.
(j) There are no pending or, to Pinnacle's knowledge,
threatened or anticipated claims by or on behalf of any Plan, by any
employee or beneficiary under any such Plan or otherwise involving any such
Plan (other than routine claims for benefits).
Section 4.11 Taxes.
(a) Each of Pinnacle and its Subsidiaries has timely
filed (or has had timely filed on its behalf) or will file or cause to be
timely filed, all material Tax Returns required by applicable law to be
filed by it prior to or as of the Closing Date. All such Tax Returns and
amendments thereto are, or will be before the Closing Date, true, complete
and correct in all material respects, except to the extent reserved as set
forth in Section 4.11(b).
(b) Each of Pinnacle and its Subsidiaries has paid
(or has had paid on its behalf), or has established (or has had established
on its behalf and for its sole benefit and recourse), or will establish or
cause to be established on or before the Closing Date, adequate reserves in
accordance with generally accepted accounting principles on the balance
sheets that are included in the Current SEC Documents for the payment of,
all material Taxes due with respect to any period ending prior to or as of
the Closing Date.
(c) Except as set forth in Schedule 4.11(c), (i) no
Audit by a Tax Authority is pending or threatened with respect to any
material Taxes due from Pinnacle or any of its Subsidiaries, (ii) there are
no outstanding waivers extending the statutory period of limitation
relating to the payment of material Taxes due from Pinnacle or any of its
Subsidiaries for any taxable period ending prior to the Closing Date which
are expected to be outstanding as of the Closing Date, and (iii) no issue
has been raised by any Tax Authority in any Audit of Pinnacle or any of its
Subsidiaries that if raised with respect to any other period not so audited
could be expected to result in a material proposed deficiency for any
period not so audited.
(d) Except as set forth on Schedule 4.11(d), no
deficiency or adjustment for any Taxes has been proposed, asserted or
assessed against Pinnacle or any of its Subsidiaries that has not been
resolved or paid or for which an adequate accrual has not been established
in accordance with generally accepted accounting principles which would
reasonably be expected to have a material adverse effect on Pinnacle. There
are no Liens for Taxes upon the assets of Pinnacle or any of its
Subsidiaries, except Liens for current Taxes not yet due and payable and
for which adequate accruals have been established in accordance with
generally accepted accounting principles.
(e) Except as set forth on Schedule 4.11(e), all Tax
sharing agreements, Tax indemnity agreements and similar agreements to
which Pinnacle or any of its Subsidiaries is a party are disclosed in the
Current SEC Documents.
Section 4.12 Environmental Matters.
(a) Each of Pinnacle and the Material Subsidiaries is
in substantial compliance with all applicable Federal, state, local and
foreign laws and regulations relating to pollution or protection of human
health or the environment, including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata, and natural
resources (together "Environmental Laws" and including, without limitation,
laws and regulations relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, wastes, toxic
or hazardous substances or wastes, petroleum and petroleum products,
polychlorinated biphenyls ("PCBs"), or asbestos or asbestos-containing
materials ("Materials of Environmental Concern")), or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern,
except for such non-compliance as would not be reasonably likely to result
in liability to Pinnacle or any Material Subsidiary of more than $100,000
on an individual basis or more than $250,000 in the aggregate. Such
compliance includes, but is not limited to, the possession by Pinnacle and
the Material Subsidiaries of all permits and other governmental
authorizations required under all applicable Environmental Laws, and
substantial compliance with the terms and conditions thereof, except for
such non-compliance as would not be reasonably likely to result in
liability to Pinnacle or any Material Subsidiary of more than $100,000 on
an individual basis or more than $250,000 in the aggregate.
(b) Neither Pinnacle nor any of its Material
Subsidiaries has received any communication (written or oral, in the case
of oral, only such as would reasonably be likely to result in a cause of
action or written claim or violation), whether from a governmental
authority, citizens group, employee or otherwise, that alleges that
Pinnacle or any such Material Subsidiary is not in substantial compliance
with any Environmental Laws, and, to the knowledge of Pinnacle, there are
no circumstances that may prevent or interfere with such compliance in the
future, except for such non-compliance as would not be reasonably likely to
result in liability to Pinnacle or any Material Subsidiary of more than
$100,000 on an individual basis or more than $250,000 in the aggregate. To
Pinnacle's knowledge after reasonable efforts, Pinnacle has provided to
Pinnacle Acq Corp all environmental site assessment reports (such as "Phase
I" or "Phase II" reports) and all reports regarding the investigation or
remediation of Materials of Environmental Concern in soil or ground water,
including documentation of soil or ground water sampling and analysis (or
portions of all of the foregoing as may exist in Pinnacle's files), in
Pinnacle's possession, except for such reports that do not reveal any
conditions not generally disclosed in reports previously provided to
Pinnacle Acq Corp or on Schedule 4.12 with respect to the Cypress
Fee/Inglewood Gas Plant Area and Boomtown, Verdi properties only, and
except for such reports that do not reveal new conditions that,
individually or in the aggregate, would be reasonably expected to result in
liability to Pinnacle or any Material Subsidiary of more than $25,000.
Notwithstanding the foregoing, Pinnacle will use its best efforts to timely
provide all such reports to Pinnacle Acq Corp.
(c) There is no claim, action, cause of action,
notice of investigation or other notice (written or oral, in the case of
oral, only such as would reasonably be likely to result in a cause of
action or written claim or violation) (together "Environmental Claim") that
has been received by Pinnacle or any Material Subsidiary by any Person or
entity alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal
injuries, or penalties) arising out of, based on or resulting from (i) the
presence, or release into the environment, of any Material of Environmental
Concern at any location, whether or not owned or operated by Pinnacle or
(ii) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law, that in either case is pending or to
Pinnacle's knowledge, threatened against Pinnacle or any of its Material
Subsidiaries or against any Person or entity whose liability for any
Environmental Claim Pinnacle or any of its Material Subsidiaries has
retained or assumed either contractually or by operation of law, which
matters referred to in clauses (i) and (ii) would be reasonably likely to
result in liability to Pinnacle or any Material Subsidiary of more than
$50,000 on an individual basis or more than $100,000 in the aggregate.
(d) To Pinnacle's knowledge, there are no past or
present actions, activities, circumstances, conditions, events or
incidents, including, without limitation, the release, emission, discharge,
presence or disposal of any Material of Environmental Concern, that would
reasonably be expected to result in liability to Pinnacle or any Material
Subsidiary of more than $250,000 on an individual basis or more than
$500,000 in the aggregate.
(e) To Pinnacle's knowledge after reasonable efforts,
all underground storage tanks located on any property owned, leased,
operated or controlled by Pinnacle or any of its Subsidiaries are
identified in Paragraph 7 of Schedule 4.12.
Section 4.13 Permits; Compliance with Laws.
(a) Since January 1, 1997, each of Pinnacle, its
Subsidiaries and their respective officers, directors and other personnel
has in effect all Federal, state, local and foreign governmental approvals,
authorizations, certificates, filings, franchises, orders, registrations,
findings of suitability, licenses, notices, permits, applications and
rights, including all authorizations under any applicable Law, including,
without limitation, any applicable Gaming Laws ("Permits"), necessary for
Pinnacle and its Subsidiaries to own, lease or operate their properties and
assets and to carry on their business as now conducted, other than such
Permits the absence of which would not, individually or in the aggregate,
have a material adverse effect on Pinnacle or any of its Material
Subsidiaries, and there has occurred no default under any such Permit other
than such defaults which, individually or in the aggregate, would not have
a material adverse effect on Pinnacle or any of its Material Subsidiaries,
result in a limitation or condition on any Permit or result in the
imposition of a fine or penalty in excess of $50,000 against Pinnacle or
any of its Material Subsidiaries. To the knowledge of Pinnacle, no event
has occurred, and no facts or circumstances exist, which would adversely
affect the ability of Pinnacle to obtain all necessary Permits to allow
Pinnacle to conduct its business with respect to the Indiana Project, in
the manner Pinnacle proposes to conduct such business. To the knowledge of
Pinnacle, no event has occurred which permits, or upon the giving of notice
or passage of time or both would permit, revocation, non-renewal,
modification, suspension or termination of any Permit that currently is in
effect the loss of which either individually or in the aggregate would
reasonably be expected to have a material adverse effect on Pinnacle or any
of its Material Subsidiaries. Neither Pinnacle nor any of its Material
Subsidiaries knows of any facts, which, if known to any Gaming Authority,
would reasonably be expected to result in the revocation or suspension of a
Permit under any Gaming Laws or would reasonably be expected to disqualify
it or them from licensing under any Gaming Laws, except such revocations,
suspensions or disqualifications as could not be reasonably expected to
have a material adverse effect on Pinnacle or any of its Material
Subsidiaries. All such Permits are held only by Pinnacle or a Subsidiary of
Pinnacle. Pinnacle, its Subsidiaries and their respective officers,
directors and other key personnel are in compliance with all applicable
statutes, laws, ordinances, rules, orders and regulations of any
Governmental Entity, except for possible noncompliance which individually
or in the aggregate would not have a material adverse effect on Pinnacle or
any of its Material Subsidiaries.
(b) Except as set forth on Schedule 4.13, each of
Pinnacle, its Subsidiaries and their respective officers, directors and
other key personnel is in compliance with all applicable Law, including any
applicable Gaming Laws, except for possible noncompliance which,
individually or in the aggregate, would not have a material adverse effect
on Pinnacle or any of its Material Subsidiaries, result in a limitation or
condition on any Permit or result in the imposition of a fine or penalty in
excess of $50,000 against Pinnacle or any of its Subsidiaries for which an
accrual has not been established under generally accepted accounting
principles.
(c) Neither Pinnacle, any Subsidiary of Pinnacle nor
any officer or director of Pinnacle or any Subsidiary of Pinnacle has
received any written claim, demand, notice, complaint, court order or
administrative order from any Governmental Entity in the past three years,
which remains unresolved on the date hereof or which was not favorably
disposed of, asserting that a material Permit of it or them, as applicable,
under any Laws, including any Gaming Laws should be limited, revoked or
suspended. No investigation or review by any Governmental Entity with
respect to Pinnacle or any of its Subsidiaries is pending, or, to the best
knowledge of Pinnacle, threatened, nor has any Governmental Entity
indicated to Pinnacle an intention to conduct the same, other than those
the outcome of which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on Pinnacle or any
of its Material Subsidiaries.
Section 4.14 State Takeover Statutes. Assuming none of
Pinnacle Acq Corp, PHCR or Colony III has owned 15% or more of Pinnacle's
capital stock at any point during the last three years, Pinnacle and the
Board of Directors of Pinnacle, including the Special Committee, have each
taken all action required to be taken in order to exempt this Agreement (as
it may be amended from time to time), and the transactions contemplated
hereby (excluding the Harveys Merger) from, and this Agreement and the
transactions contemplated hereby (excluding the Harveys Merger) are exempt
from, the requirements of the provisions of Section 203 of the DGCL and
other antitakeover laws and regulations of any U.S. state, including
without limitation the State of Delaware. Pinnacle has heretofore delivered
to Pinnacle Acq Corp complete and correct copies of a resolution of the
Board of Directors of Pinnacle, and of the Special Committee that Section
203 of the DGCL and all other antitakeover laws and regulations of any U.S.
state, including without limitation the State of Delaware, are and shall be
inapplicable to the Pinnacle Merger and the transactions contemplated by
this Agreement (excluding the Harveys Merger), as this Agreement may be
amended from time to time.
Section 4.15 Brokers. Schedule 4.15 sets forth any broker's,
finder's, financial advisor's or other similar fee or commission payable in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Pinnacle or any of its Subsidiaries.
Pinnacle has provided Pinnacle Acq Corp true and correct copies of all
agreements between Pinnacle and any Person listed on Schedule 4.15 hereto.
Section 4.16 Trademarks, etc. Except as disclosed on
Schedule 4.16, the material patents, trademarks (registered or
unregistered), trade names, service marks and copyrights and applications
therefor owned, used or filed by or licensed to Pinnacle and its Material
Subsidiaries (collectively, "Intellectual Property Rights") are sufficient
to allow each of Pinnacle and its Material Subsidiaries exclusive use
thereof and to conduct, and continue to conduct, its business as currently
conducted or as Pinnacle proposes to conduct such business. Each of
Pinnacle and its Material Subsidiaries owns or has unrestricted right to
use the Intellectual Property Rights in order to allow it to conduct, and
continue to conduct, its business as currently conducted or as Pinnacle
proposes to conduct such business, and the consummation of the transactions
contemplated hereby will not alter or impair such ability in any respect
which individually or in the aggregate would be reasonably likely to have a
material adverse effect on Pinnacle. Neither Pinnacle nor any of its
Subsidiaries has received any written notice from any other Person
pertaining to or challenging the right of Pinnacle or any of its
Subsidiaries to use any of the Intellectual Property Rights, which
challenge or other assertion, if upheld or successful, individually or in
the aggregate would be reasonably likely to have a material adverse effect
on Pinnacle. Except as disclosed on Schedule 4.16, no claims are pending by
any Person with respect to the ownership, validity, enforceability or use
of any such Intellectual Property Rights challenging or questioning the
validity or effectiveness of any of the foregoing which claims would
reasonably be expected to have a material adverse effect on Pinnacle.
Neither Pinnacle nor any of its Subsidiaries has made any claim of a
violation or infringement by others of its rights to or in connection with
the Intellectual Property Rights in any such case where such claims
(individually or in the aggregate) would reasonably be expected to have a
material adverse effect on Pinnacle.
Section 4.17 Title to Properties.
(a) Schedule 4.17(a) sets forth a complete list of
all real property and interests in real property owned in fee by Pinnacle
or one of its Subsidiaries (collectively, the "Owned Properties") and sets
forth all real property and interests in real property leases, licenses or
similar interests held by Pinnacle or any of its Subsidiaries
(collectively, the "Leased Properties" and together with the Owned
Properties, the "Real Properties") as of the date hereof.
(b) Except as disclosed in Schedule 4.17(b), each of
Pinnacle and each of its Subsidiaries has sufficiently good and valid title
to the Owned Properties, an adequate leasehold, license or similar interest
in each of the Leased Properties, and such Real Properties allow Pinnacle
and each of its Subsidiaries to conduct, and continue to conduct, its
business as currently conducted or, with respect to the Indiana Project, as
Pinnacle proposes to conduct such business. Each Real Property is
sufficiently free of Liens to allow each of Pinnacle and each of its
Subsidiaries to conduct, and continue to conduct, its business as currently
conducted, or, with respect to the Indiana Project, as Pinnacle proposes to
conduct such business, and, subject to obtaining the required consents, the
consummation of the transactions contemplated by this Agreement will not
alter or impair such ability in any respect which individually or in the
aggregate would be reasonably likely to have a material adverse effect on
Pinnacle or any of its Material Subsidiaries. Pinnacle and its Subsidiaries
hold their respective interests in each of the Real Properties subject only
to the Permitted Liens and the Bank Credit Facility. Each of Pinnacle and
its Subsidiaries enjoys peaceful and undisturbed possession of each of the
Real Properties, except for such breaches of the right to peaceful and
undisturbed possession that do not materially interfere with the ability of
Pinnacle and its Subsidiaries to conduct its business as currently
conducted on such Real Property or, with respect to the Indiana Project, as
Pinnacle proposes to conduct such business. Except as disclosed on Schedule
4.17(b), there is no pending or, to Pinnacle's knowledge, contemplated
condemnation, eminent domain or similar proceeding or special assessment
which would have a material adverse effect on any of the Real Properties
owned by Pinnacle or its Subsidiaries on a project-by-project basis. Except
as disclosed in Schedule 4.17(b), each Leased Property is subject to a
lease, license or other agreement (collectively, the "Existing Leases")
which is in full force and effect and has not been amended except as
disclosed in Schedule 4.17(a), and, to Pinnacle's knowledge, no party
thereto is in default or breach under any such Existing Lease. To
Pinnacle's knowledge, no event has occurred which, with the passage of time
or the giving of notice or both, would cause a breach of or default under
any of such Existing Leases. With respect to each parcel of Real Property,
(i) except as set forth on Schedule 4.17(b), neither Pinnacle nor any of
its Subsidiaries has entered into any material outstanding contract for
construction on any such parcel other than the Indiana Project; (ii) all
improvements, buildings and systems (including, without limitation,
heating, air conditioning, electrical and plumbing) on any such parcel are
in operating condition, normal wear and tear excepted, except where such
non-operational condition would not have a material adverse effect on any
of the Real Properties owned by Pinnacle or its Subsidiaries (on a project-
by-project basis), and to Pinnacle's knowledge are safe for their current
occupancy and use; (iii) except as disclosed on the surveys previously
delivered by Pinnacle to Pinnacle Acq Corp and for minor encroachments, the
buildings and improvements located on each such parcel (A) are located
within the boundary lines of such parcel and, to Pinnacle's knowledge, are
not in violation of applicable setback requirements, local comprehensive
plan provisions, zoning laws and ordinances, building code requirements,
permits, licenses or other forms of approval, regulation or restrictions by
any Governmental Entity, and (B) do not encroach on any easement which may
burden the land, except in each of (A) and (B), where such violations or
encroachments would not have a material adverse effect on any of the Real
Properties owned by Pinnacle or its Subsidiaries(on a project-by-project
basis); and (iv) neither Pinnacle nor its Subsidiaries has received from
any party or Governmental Entity any written notice of any material
violation of applicable setback requirements, local comprehensive plan
provisions, zoning laws and ordinances, or building code requirements,
which has not been remedied; (v) all facilities located on each parcel of
the Real Properties have received all material approvals of Governmental
Entities (including, without limitation, certificates of occupancy,
licenses and permits) required in connection with the ownership, operation
or use thereof and have been operated and maintained in accordance with
applicable laws, ordinances, rules and regulations or any violations
thereof have been cured except where non-compliance would not have a
material adverse effect on any of the Real Property (on a
project-by-project basis); (vi) except as set forth on Schedule 4.17(c),
there are no leases, license or other agreements (other than concession
agreements and contracts with parties providing entertainment to the
patrons of the Real Properties) granting to any party or parties the right
of use or occupancy of any portion exceeding five percent (5%) of the gross
revenues of such Real Property on a project-by-project basis; (vii) except
as set forth on Schedule 4.17(d), there are no outstanding options or
rights of first refusal or similar rights to purchase any such parcel or
any portion thereof or interest therein; (viii) all facilities located on
each parcel of Real Property are connected to and supplied with utilities
and other services necessary for their ownership, operation or use, all of
which services are adequate to conduct business at each of the Real
Properties as currently conducted in accordance with all applicable laws,
ordinances, rules and regulations, except where non- compliance would not
have a material adverse effect on such Real Property; and (x) to Pinnacle's
knowledge, no Real Property has any physical defect or condition which
would materially impair the current use of such Real Property.
(c) The parcels constituting the Owned Properties are
assessed separately from all other adjacent property for purposes of real
property taxes.
(d) There are no material commitments to or
agreements between Pinnacle or any of its Subsidiaries and any Governmental
Entity affecting the Real Property which are not listed in any schedule to
this Agreement or described in the SEC Documents.
(e) Except as disclosed in Schedule 4.17(e) or as
shown in the policies of title insurance, surveys or preliminary title
reports (if more recent) delivered previously to Pinnacle Acq Corp, there
are no commitments, agreements, understandings or other restrictions
materially adversely affecting the ability of Pinnacle or any of its
Subsidiaries, as applicable, to continue to utilize the Real Property as it
is currently being utilized or, with respect to the Indiana Project, to
improve or develop such Real Property in the manner currently contemplated.
Section 4.18 Insurance. To the knowledge of Pinnacle,
Pinnacle and its Subsidiaries have obtained and maintained in full force
and effect insurance with responsible and reputable insurance companies or
associations in such amounts, on such terms and covering such risks,
including fire and other risks insured against by extended coverage, as is
customarily carried by Persons conducting businesses similar to those of
Pinnacle in the locations in which Pinnacle conducts its businesses and
each has maintained in full force and effect public liability insurance,
insurance against claims for personal injury or death or property damage
occurring in connection with any of the activities of Pinnacle or its
Subsidiaries or any of any properties owned, occupied or controlled by
Pinnacle or its Subsidiaries, in such amount as reasonably deemed necessary
by Pinnacle or its Subsidiaries or as may be required by a lender under any
and all documents evidencing any loan or credit facility to which Pinnacle
or its Subsidiaries is a party or by a landlord under any lease or similar
arrangement to which Pinnacle or its Subsidiaries is a party. Except as set
forth on Schedule 4.18(a), there is no claim by Pinnacle or any of its
Subsidiaries pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds, except such claims that, individually and in the
aggregate, are not having and could not reasonably be expected to have a
material adverse effect on Pinnacle. All premiums payable under all such
policies and bonds have been paid or financed by Pinnacle or one of
Pinnacle's Subsidiaries. Pinnacle does not know of any threatened
termination of, or premium increase with respect to, any of such policies
or bonds, except such terminations or premium increases that, individually
and in the aggregate could not reasonably be expected to have a material
adverse effect on Pinnacle. Except as set forth on Schedule 4.18(b),
Pinnacle does not know of any pending or threatened uninsured claims which
individually or in the aggregate could be reasonably excepted to have a
material adverse effect on Pinnacle.
Section 4.19 Contracts; Debt Instruments. Except as
disclosed in the Current SEC Documents or set forth in Schedule 4.19(a),
there are no (a) agreements of Pinnacle or any of its Subsidiaries
containing an unexpired covenant not to compete or similar restriction
applying to Pinnacle or any of its Subsidiaries, (b) interest rate,
currency or commodity hedging, swap or similar derivative transactions to
which Pinnacle is a party, (c) other material contracts or amendments
thereto that would be required to be filed as an exhibit to a Form 10-K
filed by Pinnacle with the SEC on or prior to the date of this Agreement
and which have not been so filed, (d) written agreements to which Pinnacle
or any of its Material Subsidiaries is a party which, by its terms,
directly obligates any stockholder of Pinnacle with respect to any of the
obligations of Pinnacle or any of its Material Subsidiaries under such
agreement or (e) agreements, contracts, indentures or other instruments (i)
relating to any liabilities or obligations, contingent or otherwise, of
Pinnacle or any of its Material Subsidiaries, including those (A) evidenced
by bankers' acceptances or similar instruments issued or accepted by banks,
(B) relating to any capitalized lease obligations or (C) evidenced by a
letter of credit or a reimbursement obligation of such Person with respect
to any letter of credit, (ii) in respect of borrowed money, (iii) evidenced
by bonds, notes, debentures or similar instruments, (iv) representing the
balance deferred and unpaid of the purchase price of any property or
services, except (other than accounts payable or other obligations to trade
creditors which have remained unpaid for greater than 60 days past their
original due date) those incurred in the Ordinary Course of Business that
would constitute ordinarily a trade payable to trade creditors; (v) all
liabilities and obligations of others of the kind described in the
preceding clause (i), (ii), (iii) or (iv) that Pinnacle or any of its
Material Subsidiaries has guaranteed or that is otherwise their respective
legal liability or which are secured by any assets or property of Pinnacle
or any of its Material Subsidiaries. Each of the material agreements to
which Pinnacle or any of its Material Subsidiaries is a party is a valid
and binding obligation of Pinnacle or its Material Subsidiary, as the case
may be, and, to Pinnacle's knowledge, of each other party thereto, and each
such agreement is in full force and effect and is enforceable by Pinnacle
or its Material Subsidiary in accordance with its terms, except that (i)
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) the remedy of specific performance and
injunctive relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought. Except as set forth on Schedule 4.19(b), there are no existing
defaults (or circumstances or events that, with the giving of notice or
lapse of time or both would become defaults) of Pinnacle or any of its
Material Subsidiaries (or, to the knowledge of Pinnacle, any other party
thereto) under any such agreements except for defaults that have not and
would not, individually or in the aggregate, have a material adverse effect
on Pinnacle or any Material Subsidiary.
Section 4.20 Board Consent and Recommendation. The Board of
Directors of Pinnacle has determined that the Pinnacle Merger, this
Agreement and the transactions contemplated by this Agreement are advisable
and fair to and in the best interests of the stockholders of Pinnacle and
resolved to recommend that the stockholders of Pinnacle approve the
Pinnacle Merger, this Agreement and the transactions contemplated by this
Agreement. The Special Committee has, by unanimous vote, recommended that
the Board of Directors and the stockholders of Pinnacle approve the
Pinnacle Merger, this Agreement and the transactions contemplated by this
Agreement.
Section 4.21 Accounting Controls. Since January 1, 1997,
Pinnacle and its Subsidiaries have maintained a system of internal
accounting controls sufficient to provide reasonable assurance that (a)
transactions are executed in accordance with management's general or
specific authorizations, (b) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (c)
access to assets is permitted only in accordance with management's general
or specific authorization, and (d) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
Section 4.22 Affiliate Transactions. Except as disclosed in
the Current SEC Documents or as disclosed in Schedule 4.22, there are no
contracts, liabilities, transactions or relationships that would be
required to be disclosed by Pinnacle by Item 404 of Regulation S-K of the
Securities Act and Exchange Act.
Section 4.23 Vote Required. The affirmative vote of the
holders of a majority of the outstanding shares of Pinnacle Common Stock
entitled to vote thereon (the "Requisite Vote") is the only vote of the
holders of any class or series of Pinnacle's capital stock necessary to
approve this Agreement and the transactions contemplated hereby.
Section 4.24 Material Subsidiaries. Other than with respect
to the operations of the properties that are subject to the Principal Asset
Dispositions, the Material Subsidiaries conduct all of the material
operations relating to Pinnacle's gaming facilities in Nevada, Louisiana,
Mississippi and Indiana, and, other than with respect to the properties
that are subject to the Principal Asset Dispositions, no other entity in
which Pinnacle owns a direct or indirect interest owns any material assets,
licenses, permits or personnel, or performs any material services with
respect to, such operations.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
HOLDING AND PINNACLE ACQ CORP
Except as set forth in the corresponding numbered sections
of the disclosure schedules delivered by Pinnacle Acq Corp to Pinnacle
concurrently with the execution of this Agreement or referenced in the
particular section of this Article V to which exception is being taken,
PHCR and Pinnacle Acq Corp each represents and warrants to Pinnacle as
follows:
Section 5.1 Organization, Standing and Corporate Power. Each
of PHCR and Pinnacle Acq Corp is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which
it is organized and has the requisite corporate power and authority to
carry on its business as now being conducted. Each of PHCR and Pinnacle Acq
Corp is duly qualified or licensed to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership
or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so
qualified or licensed (individually or in the aggregate) would not have a
material adverse effect on PHCR or Pinnacle Acq Corp. Each of PHCR and
Pinnacle Acq Corp has made available to Pinnacle complete and correct
copies of its certificate of incorporation and by-laws in effect on the
date of this Agreement.
Section 5.2 Authority; Noncontravention. Each of PHCR and
Pinnacle Acq Corp has the 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 by each of PHCR and
Pinnacle Acq Corp and the consummation by each of PHCR and Pinnacle Acq
Corp of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of each of PHCR
and Pinnacle Acq Corp, respectively, subject to approval of this Agreement
and the transactions contemplated hereby by the Harveys Casino Resorts
Compliance Committee. This Agreement has been duly executed and delivered
by each of PHCR and Pinnacle Acq Corp and, assuming this Agreement
constitutes the valid and binding obligation of Pinnacle, constitutes a
valid and binding obligation of each of PHCR and Pinnacle Acq Corp,
enforceable against each of PHCR and Pinnacle Acq Corp in accordance with
its terms. Except as set forth on Schedule 5.2(a), the execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will not, require notice or consent under, conflict with, or
result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation
or acceleration of any obligation or to loss of a material benefit under,
or result in the creation of any Lien upon any of the properties or assets
of PHCR or Pinnacle Acq Corp under, (a) the respective certificates of
incorporation or by-laws of PHCR or Pinnacle Acq Corp, (b) other than
subject to the governmental filings and other matters referred to in the
following sentence, (i) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument or (ii) any permit,
concession, franchise or license applicable to PHCR or Pinnacle Acq Corp or
their respective properties or assets or (c) subject to the governmental
filings and other matters referred to in the following sentence, any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to PHCR or Pinnacle Acq Corp or their respective properties or
assets, other than, in the case of clauses (b) or (c), any such conflicts,
violations, defaults, rights or Liens that individually or in the aggregate
would not (i) have a material adverse effect on PHCR or Pinnacle Acq Corp,
(ii) impair in any material respect the ability of PHCR or Pinnacle Acq
Corp to perform their respective obligations under this Agreement or (iii)
prevent or impede in any material respect the consummation of any of the
transactions contemplated by this Agreement.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by PHCR or
Pinnacle Acq Corp in connection with the execution and delivery of this
Agreement by PHCR and Pinnacle Acq Corp or the consummation by PHCR and
Pinnacle Acq Corp of any of the transactions contemplated by this
Agreement, except for (A) the filing of a premerger notification and report
form by PHCR and Pinnacle Acq Corp under the HSR Act, (B) the filing with
the SEC of such reports under Section 14(a) and Rule 13e-3 of the Exchange
Act as may be required in connection with this Agreement and the
transactions contemplated by this Agreement, (C) the filing of the
Certificate of Merger with the Delaware Secretary of State and appropriate
documents with the relevant authorities of other states in which PHCR or
Pinnacle Acq Corp is qualified to do business, (D) the obtaining of all
Gaming Approvals, each of which are set forth in Schedule 5.2(b), (E) such
filings as may be required by an applicable state securities or "blue sky"
laws, and (F) such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained
or made would not, individually or in the aggregate, (1) have a material
adverse effect on PHCR or Pinnacle Acq Corp, (2) impair, in any material
respect, the ability of PHCR or Pinnacle Acq Corp to perform their
respective obligations under this Agreement or (3) prevent or significantly
delay the consummation of the transactions contemplated by this Agreement.
Section 5.3 Interim Operations of Pinnacle Acq Corp. Each of
PHCR and Pinnacle Acq Corp was formed solely for the purpose of engaging in
the transactions contemplated hereby and has not engaged in any business
activities or conducted any operations other than in connection with the
transactions contemplated hereby.
Section 5.4 Licensing Matters. Subject to the last sentence
of this Section 5.4, none of PHCR, Pinnacle Acq Corp or any of their
respective Affiliates knows of any facts, which, if known to the Gaming
Authorities, would reasonably be expected to disqualify any of them, any of
their Subsidiaries or any of their respective officers, directors and any
other person required to make any filings or required to be found suitable
(the "Licensed Persons") from being licensed under the Gaming Laws or which
would prevent or materially delay the grant of licenses or approvals
necessary under the Gaming Laws necessary for PHCR and Pinnacle Acq Corp to
consummate the transactions contemplated hereby. Notwithstanding the
foregoing, (a) the term "Licensed Persons" as used herein shall exclude any
limited partner of any investment vehicle used by Colony Capital, Inc.
("Colony") or Colony III in connection with the transactions contemplated
hereby (each a "Colony LP"); (b) none of PHCR, Pinnacle Acq Corp or any of
their respective Affiliates makes any representation or warranty herein
regarding the likelihood of any determination by a Gaming Authority or
otherwise, that any Colony LP be required to make any filings or be found
suitable under the Gaming Laws in connection with the transactions
contemplated hereby, or the impact of any such determination on the
granting of the licenses or approvals necessary under the Gaming Laws for
PHCR and Pinnacle Acq Corp to consummate the transactions contemplated
hereby.
Section 5.5 Litigation. Except as described on Schedule 5.5,
as of the date of this Agreement, there is no action, suit or proceeding
pending or, to the knowledge of Pinnacle Acq Corp and PHCR, threatened
against PHCR or any of its Subsidiaries or affecting any of their
respective properties or assets nor are any Governmental Entity
investigations or audits pending before any court or governmental agency or
body against PHCR or any of its Subsidiaries or affecting any of their
respective assets or properties which, individually or in the aggregate
would reasonably be expected to affect adversely the ability of PHCR or
Pinnacle Acq Corp to consummate the transactions contemplated by this
Agreement.
Section 5.6 Financing. Pinnacle Acq Corp has delivered to
Pinnacle copies of a written commitment letter with respect to $900 million
aggregate principal amount of senior debt facilities and one or more
"highly confident" letters with respect to $550 million aggregate principal
amount of senior subordinated debt (the commitment letter and the highly
confident letters being referred to herein as, the "Financing Letters"). As
of the date hereof, such letters are in full force and effect and have not
been terminated.
Section 5.7 No Other Agreements. As of the date hereof,
except for this Agreement, the Voting Agreement and the transactions
contemplated hereby and thereby, none of Pinnacle Acq Corp, PHCR or any of
their Affiliates has made any other agreements or arrangements concerning
the Pinnacle Merger or Pinnacle or any of its Subsidiaries with (a) any
director, officer, employee or consultant of Pinnacle, or (b) any
stockholder beneficially owning 5% or more of the outstanding shares of
Pinnacle Common Stock.
Section 5.8 Harveys Merger. Harveys shall be the surviving
entity of the Harveys Merger.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 6.1 Conduct of Business.
(a) During the term of this Agreement, except with
the prior written consent of Pinnacle Acq Corp (requests for which shall be
considered in good faith on a timely basis under the circumstances by
Pinnacle Acq Corp) and except as specifically required by this Agreement or
permitted under subsection (b) or (c) of this Section 6.1, Pinnacle shall
and shall cause its 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 key employees and preserve their relationships
consistent with past practice with gaming 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. Except as expressly permitted
or contemplated by the terms of this Agreement, without limiting the
generality of the foregoing, Pinnacle shall not, and shall not permit any
of its Subsidiaries to:
(i) (A) declare, set aside or pay any
dividends on, or make any other distributions in respect of, any of
its capital stock, other than dividends and distributions by any
direct or indirect wholly owned Subsidiary of Pinnacle to its
Parent, (B) 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 or (C) except as shall be required under currently existing
terms of any stock-based benefit plan appearing on Schedule
4.10(a), purchase, redeem or otherwise acquire or amend the terms
of any shares of capital stock of Pinnacle or any of its
Subsidiaries or any other securities thereof or any rights,
warrants, options to acquire or any securities convertible into or
exchangeable for any such shares or other securities (other than,
after notice to Pinnacle Acq Corp, (1) redemptions, purchases or
other acquisitions required by applicable provisions under Gaming
Laws and (2) issuances or redemptions of capital stock of wholly
owned Subsidiaries occurring between Pinnacle and any of its wholly
owned Subsidiaries or occurring between wholly owned Subsidiaries
of Pinnacle);
(ii) issue, deliver, sell, grant,
pledge or otherwise encumber or amend any shares of its capital
stock, any other voting securities or any securities convertible or
exchangeable into, or any rights, warrants or options to acquire,
any such shares, voting securities or convertible or exchangeable
securities (other than the issuance of Pinnacle Common Stock upon
the exercise of employee stock options and contingent incentive
plans appearing on Schedule 4.10(a) (including with respect to
contingent shares of Pinnacle Common Stock) outstanding on the date
of this Agreement in accordance with their present terms);
(iii) amend its Certificate of
Incorporation, By-laws or other comparable charter or
organizational documents;
(iv) except in connection with the
transactions contemplated by this Agreement, voluntarily take any
action that would result in the failure to maintain the listing of
Pinnacle Common Stock on the NYSE;
(v) develop, acquire or agree to
develop or acquire any projects, assets or lines of business,
including without limitation by merging or consolidating with, or
by purchasing all or a substantial portion of the assets of, or by
any other manner, any business or any corporation, partnership,
joint venture, association or other business organization or
division thereof, or any assets that are material, individually or
in the aggregate, to Pinnacle or any of its Material Subsidiaries,
except (A) purchases of inventory, furnishings and equipment in the
Ordinary Course of Business or (B) expenditures consistent with
Pinnacle's current capital budget, as set forth in Schedule
6.1(a)(v)(B) (the "Budget") or (C) acquisitions or projects
identified on Schedule 6.1(a)(v)(C);
(vi) except as set forth on Schedule
6.1(a)(vi), sell, lease, license, swap, barter, transfer or
otherwise convey, mortgage or otherwise encumber or subject to any
Lien or prevent from becoming subject to a Lien any of its
properties or assets that are material, individually or in the
aggregate, to Pinnacle or any of its Material Subsidiaries, except
transactions in the Ordinary Course of Business;
(vii) (A) other than (1) working
capital borrowings in the Ordinary Course of Business, (2) projects
set forth in Schedule 6.1(a)(vii), (3) specific projects at
existing, operational facilities referred to and consistent with
that specified in the Budget and (4) other incurrences of
indebtedness which, in the aggregate, do not exceed $20.0 million,
incur any indebtedness, forgive any debt obligations of any Person
to Pinnacle or its Subsidiaries, issue or sell any debt securities
or warrants or other rights to acquire any debt securities of
Pinnacle or any of its Subsidiaries, guarantee any debt securities
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) to Pinnacle or any direct or
indirect Subsidiary of Pinnacle, (2) advances to employees,
suppliers or customers in the Ordinary Course of Business, (3)
projects set forth in Schedule 6.1(a)(vii), and (4) specific
projects referred to and consistent with that specified in the
Budget, make any loans, advances or capital contributions to, or
investments in, any other Person;
(viii) settle any Audit relating to
material Taxes pending as of the date hereof or arising on or after
the date hereof, make any material Tax election, or amend any
material Tax Return in any respect;
(ix) pay, discharge, settle or satisfy
any material claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the
payment, discharge, settlement or satisfaction in the Ordinary
Course of Business or in accordance with their terms of liabilities
reflected or reserved against in the Base Balance Sheet or incurred
in the Ordinary Course of Business or the optional redemption of
the 13% First Mortgage Notes due 2003 issued by Casino Magic of
Louisiana, Corp. at prices, and on terms consistent with the
Indenture governing such debt, as in effect on the date hereof, or,
except in the Ordinary Course of Business, waive the benefits of,
or agree to modify in any manner, any confidentiality, standstill
or similar agreement to which Pinnacle or any of its Subsidiaries
is a party;
(x) make any change in the compensation
payable or to become payable to any of its officers, directors,
employees, agents or consultants (other than (i) general increases
in wages to employees who are not officers, directors or Affiliates
in the Ordinary Course of Business and (ii) salary increases and
bonuses payable to Pinnacle officers pursuant to the terms of any
agreement existing as of the date hereof or disclosed on Schedule
6.1(a)(x)) or pursuant to regular annual reviews in the Ordinary
Course of Business or pursuant to or to Persons providing
management services, enter into or amend any Plan or make any loans
to any of its officers, directors, employees, Affiliates, agents or
consultants or make any change in its existing borrowing or lending
arrangements for or on behalf of any of such Persons pursuant to a
Plan or otherwise;
(xi) pay or make any accrual or
arrangement for payment of any pension, retirement allowance or
other employee benefit pursuant to any Plan, to any officer,
director, employee, consultant or Affiliate or pay or agree to pay
or make any accrual or arrangement for payment to any officers,
directors, employees, consultants or Affiliates of Pinnacle of any
amount relating to unused vacation days, except payments and
accruals made in the Ordinary Course of Business; adopt or pay,
grant, issue, accelerate or accrue salary or other payments or
benefits pursuant to any Plan 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 amend in any material respect any Plan in a
manner inconsistent with the foregoing;
(xii) except as required by Law, enter
into any collective bargaining agreement;
(xiii) except pursuant to agreements
existing on the date hereof and except as otherwise disclosed on
Schedule 6.1(a)(xiii), make any payments (other than regular
compensation payable to officers and employees of Pinnacle in the
Ordinary Course of Business) or other distributions to, or enter
into any transaction, agreement or arrangement with, any of
Pinnacle's or any of its Subsidiaries' 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 other than in the Ordinary Course
of Business;
(xiv) except in the Ordinary Course of
Business and except as otherwise permitted by this Agreement modify
or amend in a manner adverse to Pinnacle or it Subsidiaries the
material economic terms of any material contract or agreement or
terminate any material contract or agreement to which Pinnacle or
any Subsidiary is a party or waive, release or assign any material
rights or claims;
(xv) fail to make any scheduled
principal or interest payment on indebtedness evidenced by debt
instruments to which Pinnacle or any of its Subsidiaries is a
party; or
(xvi) authorize any of, or commit or
agree to take any of, the foregoing actions except as otherwise
permitted by this Agreement.
(b) Development Projects. Pinnacle, Pinnacle Acq Corp
and PHCR agree that Pinnacle, without the prior written consent of Pinnacle
Acq Corp otherwise required under Section 6.1(a), may expend amounts
consistent with and in the manner prescribed by the written budget, plans
and policies previously provided to Pinnacle Acq Corp related to the
development opportunities and activities for the Indiana Project,
including, without limitation, the hiring of employees and the entering
into of employment agreements with senior management personnel (to the
extent contained therein).
(c) Asset Dispositions. Schedule 6.1(c) sets forth
(i) certain asset sales that are presently being undertaken by Pinnacle or
its Subsidiaries (the "Principal Asset Dispositions") and (ii) the estimate
of Pinnacle's management of the net (after tax and transaction expenses and
determined substantially in accordance with the methodology used in the
financial model delivered to Pinnacle on the date hereof) proceeds to be
received by Pinnacle in connection with each such sale. Schedule 6.1(c)
also sets forth certain additional asset sales which are presently being
undertaken by Pinnacle or its Subsidiaries (the "Other Asset Dispositions"
and, together with the Principal Asset Dispositions, the "Asset
Dispositions"). Notwithstanding the foregoing clauses (a) and (b), Pinnacle
shall be permitted to consummate (i) the Principal Asset Dispositions
(other than the sale of the Inglewood Property), substantially on the terms
and subject to the conditions contained in the applicable Asset Disposition
Agreement in effect as of the date hereof (or as amended in accordance with
this Agreement), (ii) the sale of the Inglewood Property substantially in
accordance with the terms of the draft purchase agreement provided to
Pinnacle Acq Corp on April 14, 2000 (except with respect to price, which in
no event shall generate Net Proceeds of less than $13,054,000), and (iii)
the Other Asset Dispositions on terms approved by Pinnacle's Board of
Directors, in good faith. Except for amendments, waivers or modifications
which would not reasonably be expected to significantly delay the
consummation of the transactions contemplated by this Agreement, impair in
any material respect the ability of Pinnacle to perform its obligations
under this Agreement and which are not materially adverse to the original
terms of such Principal Asset Disposition, Pinnacle shall not amend, waive,
or modify any of the terms or conditions contained in the agreements (or in
the case of the Inglewood Property, the draft purchase agreement delivered
to Pinnacle Acq Corp on April 14, 2000) relating to the Principal Asset
Disposition (the "Asset Disposition Agreements") without the prior written
consent of Pinnacle Acq Corp.
(d) Redemption. Notwithstanding the foregoing
provisions of this Section 6.1, immediately prior to the Effective Time,
Pinnacle shall redeem the shares of Pinnacle Common Stock owned by R.D.
Hubbard on the date hereof that are not being contributed to PHCR under the
Voting Agreement for a price equal to the Pinnacle Merger Consideration
(including any Class A CPR that would be payable at the Effective Time).
(e) Other Actions. Pinnacle shall not, and shall not
permit any of its Subsidiaries to, take any action that would result in any
of its representations and warranties set forth in this Agreement that are
qualified as to materiality becoming untrue and those not so qualified
becoming untrue in any material respect.
Section 6.2 Advice of Changes. PHCR, Pinnacle Acq Corp and
Pinnacle shall promptly advise the other party orally and in writing of:
(a) Any representation or warranty made by it
contained in this Agreement becoming untrue or inaccurate in any material
respect;
(b) The failure by it to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied
with or satisfied by it under this Agreement; or
(c) Any change or event having, or which, insofar as
can reasonably be foreseen, would have, a material adverse effect on such
party and its Subsidiaries taken as a whole or on the truth of their
respective representations and warranties or the ability of the conditions
set forth in Article VIII to be satisfied;
provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
Additionally, Pinnacle shall furnish to Pinnacle Acq Corp, as promptly as
practicable following Pinnacle Acq Corp's request therefor, all information
reasonably necessary for Pinnacle Acq Corp accurately to determine (i) what
amounts, if any, payable under any of the Plans or any other contract,
agreement, or arrangement with respect to which Pinnacle or any of its
Subsidiaries may have any liability could fail to be deductible for Federal
income tax purposes by virtue of section 162(a)(1), section 162(m) or
section 280G of the Code, or (ii) whether Pinnacle or any of its
Subsidiaries has entered into any contract, agreement or arrangement that
would result in the disallowance of any tax deductions pursuant to section
280G of the Code.
Section 6.3 No Solicitation.
(a) Pinnacle shall not, nor shall it permit any of
its Subsidiaries to, nor shall it authorize or permit any agent, officer,
director or employee of, or any investment banker, attorney or other
advisor or representative of, Pinnacle or any of its Subsidiaries to,
directly or indirectly, (i) solicit or initiate, or encourage any inquiries
regarding or the submission of, any Takeover Proposal (including, without
limitation, any proposal or offer to Pinnacle's stockholders) or (ii)
participate in any discussions or negotiations regarding, or furnish to any
Person any non-public information with respect to, or take any other action
to facilitate the making of any proposal that would constitute a Takeover
Proposal; provided, if in the opinion of the Board of Directors of
Pinnacle, after consultation with outside legal counsel, such failure to
act would be inconsistent with its fiduciary duties to Pinnacle's
stockholders under applicable law, Pinnacle may, in response to an
unsolicited, written Competitive Proposal (or Takeover Proposal which,
based on the advice of its financial advisors, the Board of Directors of
Pinnacle determines in good faith is reasonably likely to result in a
Competitive Proposal), and subject to compliance with Section 6.3(c) and
pursuant to an executed confidentiality agreement with customary terms and
conditions and, in any case, which includes customary standstill provisions
which prohibit such party from seeking to directly or indirectly accomplish
a Takeover Proposal except with the consent of the Board of Directors of
Pinnacle, and which expressly permits Pinnacle to fulfill its obligations
under Section 6.3(c), (A) furnish information with respect to Pinnacle to
the Person who made such unsolicited proposal and (B) participate in
negotiations with such Person regarding such Competitive Proposal (or
Takeover Proposal which, based on the advice of its financial advisors, the
Board of Directors of Pinnacle determines in good faith is reasonably
likely to result in a Competitive Proposal). Without limiting the
foregoing, it is understood that any violation of the restrictions set
forth in the preceding sentence by any director, officer, employee,
Affiliate or agent, of Pinnacle or any of its Subsidiaries (each a "Covered
Person"), whether or not such Person is purporting to act on behalf of
Pinnacle or any of its Subsidiaries or otherwise, shall be deemed to be a
breach of this Section 6.3(a) by Pinnacle; provided that it is understood
that this Section 6.3(a) shall not be deemed to have violated if in
response to an unsolicited inquiry, a Covered Person states solely that he
or she is subject to the terms of this Agreement and provides only public
information in response to the inquiry. All Covered Persons shall
immediately cease and cause to be terminated any existing activities,
discussions and negotiations with any parties conducted heretofore with
respect to, or that could reasonably be expected to lead to, any of the
foregoing.
(b) Neither the Board of Directors of Pinnacle nor
any committee thereof shall (i) withdraw or modify, or publicly propose to
withdraw or modify in a manner adverse to Pinnacle Acq Corp the approval or
recommendation by such Board of Directors or any such committee of this
Agreement or the Pinnacle Merger, (ii) approve or recommend, or publicly
propose to approve or recommend, any Takeover Proposal or (iii) cause
Pinnacle to enter into any agreement with respect to any Takeover Proposal.
Notwithstanding the foregoing, the Board of Directors of Pinnacle or the
Special Committee, prior to the approval of this Agreement or the Pinnacle
Merger (including as the same may be modified hereafter) by the Requisite
Vote, to the extent required by the fiduciary duties to Pinnacle's
stockholders under applicable Law, after consultation with outside legal
counsel, may, subject to the terms of this and the following sentences of
this Section 6.3(b), withdraw or modify its approval or recommendation of
this Agreement or the Pinnacle Merger, or approve or recommend a
Competitive Proposal, in each case at any time after 12:00 noon, Los
Angeles time, on the fifth day following Pinnacle Acq Corp's receipt of
written notice (a "Notice of Competitive Proposal") advising Pinnacle Acq
Corp that the Board of Directors of Pinnacle has received a Competitive
Proposal, specifying the material terms and conditions of such Competitive
Proposal and identifying the Person making such Competitive Proposal.
Pinnacle Acq Corp shall have the opportunity, until the end of the fifth
day after it receives a Notice of Competitive Proposal, to make an offer to
the Board of Directors of Pinnacle. Neither the Board of Directors of
Pinnacle nor any committee of the Board of Directors may withdraw, or
modify or publicly propose to withdraw, or modify in a manner adverse to
Pinnacle Acq Corp, its approval or recommendation of this Agreement or the
Pinnacle Merger or approve or recommend a Competitive Proposal unless and
until it shall have determined, in its good faith judgment (i) the value of
the consideration (based on the opinion, with only customary
qualifications, of an independent financial advisor of good national
reputation in such matters) of such proposal exceeds the value of each of
the Pinnacle Merger Consideration and any alternative proposal presented by
Pinnacle Acq Corp or any of its Affiliates and (ii) such proposal is more
favorable to Pinnacle's stockholders than the Pinnacle Merger and any
alternative proposal presented by Pinnacle Acq Corp or any of its
Affiliates. In addition, if Pinnacle enters into an agreement with respect
to any Competitive Proposal, it shall, concurrently with entering into such
agreement, pay, or cause to be paid, to Pinnacle Acq Corp the Termination
Fee.
(c) In addition to the obligations of Pinnacle set
forth in paragraph (b), Pinnacle shall advise Pinnacle Acq Corp promptly of
any request for non-public information or of any Takeover Proposal, or any
proposal with respect to any Takeover Proposal, the material terms and
conditions of such request or Takeover Proposal, and the identity of the
Person making any such Takeover Proposal or inquiry. Pinnacle will use
reasonable efforts to keep Pinnacle Acq Corp informed of the status and
details (including amendments or proposed amendments) of any such request,
Takeover Proposal or inquiry.
(d) Rule 14e-2 Disclosure. Nothing contained in this
Section 6.3 shall prohibit Pinnacle from taking and disclosing to its
stockholders a position contemplated by and in accordance with Rule 14e-2
promulgated under the Exchange Act if, in the good faith judgment of the
Board of Directors of Pinnacle or the Special Committee, following
consultation with outside counsel, failure so to disclose would be a
violation of its obligations under applicable law; provided, however, that,
neither Pinnacle nor its Board of Directors, the Special Committee, nor any
other committee thereof shall withdraw or modify, or propose publicly to
withdraw or modify, its position with respect to the Pinnacle Merger or
this Agreement, except in accordance with the provisions of Section 6.3(b).
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Stockholders Meeting. Pinnacle will, as soon as
practicable, and in no event later than 120 days after the date hereof,
duly call, give notice of, convene and hold a meeting of the holders of
Pinnacle Common Stock (the "Pinnacle Stockholders Meeting"); provided
however, the time period set forth in this Section 7.1 shall toll from the
51st day to the 80th day that the Proxy Statement (as defined below) and
the Schedule 13E-3 (as defined below) are filed with the SEC and remain
under review by the SEC (but in no event shall such period toll for more
than 30 days in total or the Pinnacle Stockholders Meeting occur later than
the 150th day after the date hereof); provided further that such tolling
period shall only be available if the Proxy Statement and the Schedule
13E-3 are filed in accordance with the provisions of Section 7.2 hereof and
Pinnacle has used its reasonable best efforts to respond to SEC comments to
such disclosure documentation promptly and completely. Subject to the
provisions of Section 6.3(b), Pinnacle will, through its Board of
Directors, recommend to its stockholders approval of this Agreement, the
Pinnacle Merger and the other transactions contemplated by this Agreement.
Section 7.2 Proxy Statement and Other Filings; Auditor's
Letter.
(a) Pinnacle shall, as promptly as practicable after
the execution of this Agreement, and in no event later than 45 days after
the date hereof, prepare and file with the SEC a proxy statement (together
with any amendments or supplements thereto, the "Proxy Statement") and a
Rule 13E-3 Transaction Statement on Schedule 13E-3 (together with any
amendments or supplements thereto, the "Schedule 13E-3") in connection with
the Pinnacle Merger. Pinnacle Acq Corp shall, upon request of Pinnacle,
furnish Pinnacle with such information concerning itself, PHCR and Colony
as may be required by law or any Governmental Entity in connection with the
Proxy Statement and Schedule 13E-3. Pinnacle shall cause the Proxy
Statement and the Schedule 13E-3 to comply as to form in all material
respects with the applicable provisions of the Exchange Act. Pinnacle
agrees that the Proxy Statement, the Schedule 13E-3 and each amendment or
supplement thereto at the time it is filed shall not include an untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however,
that the foregoing shall not apply to the extent that any untrue statement
of a material fact or omission to state material fact was made by Pinnacle
in reliance upon and in conformity with information concerning Pinnacle Acq
Corp, PHCR, Colony III or their Affiliates furnished to Pinnacle by
Pinnacle Acq Corp or its attorneys or advisors specifically for use in the
Proxy Statement or Schedule 13E-3. As promptly as possible after clearance
by the SEC of the Proxy Statement, Pinnacle shall mail the Proxy Statement
to its stockholders. Pinnacle Acq Corp and the Pinnacle Surviving Corp
shall indemnify and hold harmless Pinnacle, its Subsidiaries and their
respective officers, directors, employees and agents from and against any
and all losses, liabilities, costs, and expenses (including reasonable
attorneys' fees) directly arising out of any untrue statement of material
fact (or omission of a statement of material fact necessary in order to
make the statements therein not materially misleading) made in the Proxy
Statement, Schedule 13E-3 or any amendment or supplement thereto in
reliance upon and in conformity with information concerning Pinnacle Acq
Corp, PHCR, Colony III or their Affiliates furnished to Pinnacle in writing
by Pinnacle Acq Corp specifically for use in the Proxy Statement or
Schedule 13E-3. Pinnacle shall indemnify and hold harmless Pinnacle Acq
Corp, the Pinnacle Surviving Corp, PHCR, Colony, their respective
Subsidiaries and Affiliates and their respective officers, directors,
stockholders, partners, members, equityholders, employees and agents from
and against any and all losses, liabilities, costs, and expenses (including
reasonable attorneys' fees) directly arising out of any untrue statement of
material fact (or omission of a statement of material fact necessary in
order to make the statements therein not materially misleading) made in the
Proxy Statement, Schedule 13E-3 or any amendment or supplement thereto and
directly attributable to information provided by Pinnacle.
(b) As promptly as practicable, each party hereto
shall properly prepare and file any other filings required under the
Exchange Act, the Securities Act or any other Laws relating to the Pinnacle
Merger (collectively, "Other Filings").
(c) PHCR and Pinnacle Acq Corp shall furnish Pinnacle
with all information concerning them as Pinnacle may reasonably request in
connection with the preparation of the Proxy Statement, the Schedule 13E-3
and the Other Filings.
(d) Pinnacle shall provide copies of drafts of the
Proxy Statement and the Schedule 13E-3 to Pinnacle Acq Corp and its counsel
at least 5 Business Days prior to the date of any filing of such document
with the SEC (including with respect to each amendment or supplement
thereto) so as to allow Pinnacle Acq Corp to comment on such documents.
Prior to filing any Proxy Statement or Schedule 13E-3 with the SEC,
Pinnacle shall consider in good faith any comments on such Proxy Statement
or Schedule 13E-3, as the case may be, made by, or changes requested by,
Pinnacle Acq Corp or its attorneys or advisors. Pinnacle shall also
promptly provide Pinnacle Acq Corp with copies of any correspondence
received from the SEC, and shall permit representatives of Pinnacle Acq
Corp to attend any telephone call with the SEC which discusses comments
made by the staff.
Section 7.3 Access to Information; Confidentiality.
(a) Pinnacle shall afford to Pinnacle Acq Corp, and
to its officers, employees, accountants, counsel, financial advisers and
other representatives, reasonable access during normal business hours
during the period prior to the Effective Time to all the properties, books,
contracts, commitments and records of Pinnacle and its Subsidiaries and,
during such period, Pinnacle shall furnish promptly to Pinnacle Acq Corp
(a) a copy of each report, schedule, registration statement and other
document filed by it or its Subsidiaries during such period pursuant to the
requirements of Federal or state securities laws and (b) all other
information concerning its or its Subsidiaries' business, properties and
personnel as Pinnacle Acq Corp may reasonably request. Except as otherwise
agreed to by Pinnacle, notwithstanding termination of this Agreement,
Pinnacle Acq Corp will keep, and will cause its officers, employees,
accountants, counsel, financial advisers and other representatives and
affiliates to keep, all Confidential Information (as defined below)
confidential and not to disclose any Confidential Information to any Person
other than Pinnacle Acq Corp or Pinnacle Acq Corp's directors, officers,
employees, affiliates or agents, and then only on a confidential basis;
provided, however, that Pinnacle Acq Corp may disclose Confidential
Information (i) as required by law, rule, regulation or judicial process,
(ii) to its attorneys, accountants, financial advisors, lenders, placement
agents and underwriters on a confidential basis or (iii) as required by any
Governmental Entity. For purposes of this Agreement, "Confidential
Information" shall include all information about Pinnacle which has been
furnished by Pinnacle to Pinnacle Acq Corp; provided, however, that
Confidential Information does not include information which (A) is or
becomes generally available to the public other than as a result of a
disclosure by Pinnacle Acq Corp, its attorneys, accountants or financial
advisors not permitted by this Agreement, (B) was available to Pinnacle Acq
Corp on a non-confidential basis prior to its disclosure to Pinnacle Acq
Corp by Pinnacle or (C) becomes available to Pinnacle Acq Corp on a
non-confidential basis from a Person other than Pinnacle who, to the
knowledge of Pinnacle Acq Corp, is not otherwise bound by a confidentiality
agreement with Pinnacle or is not otherwise prohibited from transmitting
the relevant information to Pinnacle Acq Corp. In the event of termination
of this Agreement for any reason, Pinnacle Acq Corp shall promptly return
all Confidential Information to Pinnacle.
(b) Pinnacle Acq Corp shall use reasonable efforts to
keep Pinnacle informed of the status of its application for Gaming
Approvals and its activities related to obtaining the Financing.
(c) All permits and other governmental authorizations
currently held by Pinnacle and its Material Subsidiaries pursuant to the
Environmental Laws will be identified in writing to Pinnacle Acq Corp prior
to Closing.
Section 7.4 Reasonable Efforts; Notification. Upon the terms
and subject to the conditions set forth in this Agreement, each of the
parties agrees to use all reasonable efforts to take, or cause to be taken
(including through its officers and directors and other appropriate
personnel), all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Pinnacle Merger, the Financing and the other transactions
contemplated by this Agreement, including (a) the obtaining of all
necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and
filings (including filings with Governmental Entities, if any) and the
taking of all reasonable steps as may be necessary to obtain Permits or
waivers from, or to avoid an action or proceeding by, any Governmental
Entity (including in respect of any Gaming Law), (b) the seeking of all
necessary consents, approvals or waivers from third parties, (c) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of any of
the transactions contemplated by this Agreement, including seeking to have
any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed and (d) the execution and delivery
of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement. In
connection with and without limiting the foregoing, Pinnacle and its Board
of Directors shall (including through its officers and directors and other
appropriate personnel) (i) take all reasonable action necessary to ensure
that no U.S. state takeover, business combination, control share, fair
price or fair value statute or similar statute or regulation is or becomes
applicable to the Pinnacle Merger, this Agreement or any of the other
transactions contemplated by this Agreement, (ii) if any U.S. state
takeover, business combination, control share, fair price or fair value
statute or similar statute or regulation becomes applicable to the Pinnacle
Merger, this Agreement or any other transaction contemplated by this
Agreement, take all reasonable action to ensure that the Pinnacle Merger
and the other transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or
regulation on the Pinnacle Merger, this Agreement and the other
transactions contemplated by this Agreement, and (iii) take all reasonable
action to assist PHCR and Pinnacle Acq Corp in connection with efforts
reasonably related to obtaining and effectuating the Financing for the
Pinnacle Merger and related transactions including, but not limited to,
successful syndication of the credit facility and sale of subordinated
notes, participation in road shows, preparation of offering circulars and
information memoranda (including providing all financial and other
information necessary therefor), delivery of officers' certificates and
opinions as are customary in financings of this type, delivery of
guarantees by Pinnacle and its Subsidiaries and granting of pledges and
security interests in and liens on assets of Pinnacle and its Subsidiaries;
provided that no obligation of Pinnacle and its Subsidiaries under any
guarantee or security document shall be effective until the Effective Time.
Notwithstanding the foregoing, the parties acknowledge that none of
Pinnacle Acq Corp or its Affiliates are obligated by this Section 7.4(a) or
any other provision of this Agreement to obtain any consent, approval,
license, waiver, order, decree, determination of suitability or other
authorization or to make any filing with respect to any limited partner of
Colony III or any of its Affiliates. Nothing herein shall be deemed to
require Pinnacle Acq Corp or its Affiliates to take any steps (including
without limitation the expenditure of funds) or provide any information to
obtain any consent, approval, license, waiver, order, decree, determination
of suitability or other authorization, other than is customary in Argentina
and the States of Arizona, California, Colorado, Indiana, Iowa, Louisiana,
Mississippi and Nevada for such matters.
Section 7.5 Stock Option Plans; Change of Control Plan.
(a) As soon as practicable following the date of this
Agreement, but in any event no later than 30 days before the Closing Date,
the Board of Directors of Pinnacle (or, if appropriate, any committee
administering the Pinnacle Stock Option Plans) shall adopt such resolutions
or use all reasonable efforts to take such other actions as are required to
provide that except as set forth in the Voting Agreement each then
outstanding stock option (whether or not vested) to purchase shares of
Pinnacle Common Stock (a "Pinnacle Stock Option") heretofore granted under
any stock option or other stock-based incentive plan, program or
arrangement of Pinnacle (collectively, the "Pinnacle Stock Option Plans")
shall be canceled immediately prior to the Effective Time in exchange for
payment of an amount in cash equal to the product of (i) the number of
shares of Pinnacle Common Stock subject to such Pinnacle Stock Option
immediately prior to the fifth Business Day prior to the Closing Date and
(ii) the excess, if any, of the cash amount of the Pinnacle Merger
Consideration over the per share exercise price of such Pinnacle Stock
Option. In addition, in the event that the Inglewood Sale shall not have
closed on or prior to the fifth Business Day prior to the Closing Date,
holders of In the Money Pinnacle Stock Options (as defined in Section
10.11) also shall receive one Class A CPR for each share issuable upon
exercise. A listing of all outstanding Pinnacle Stock Options as of the
date hereof, showing what portions of such Pinnacle Stock Options are
exercisable as of such date, the dates upon which such Pinnacle Stock
Options were granted, and the exercise price of such Pinnacle Stock
Options, is set forth in Schedule 7.5.
(b) All Pinnacle Stock Option Plans shall terminate
as of the Effective Time, and the provisions in any other Plan providing
for the issuance, transfer or grant of any capital stock of Pinnacle or any
interest in respect of any capital stock of Pinnacle shall be deleted as of
the Effective Time. Immediately following the Effective Time, no holder of
a Pinnacle Stock Option or any participant in any Pinnacle Stock Option
Plan shall have any right thereunder to acquire any capital stock of
Pinnacle, Pinnacle Acq Corp, PHCR or the Pinnacle Surviving Corporation.
Section 7.6 Indemnification and Insurance.
(a) The indemnification obligations set forth in
Pinnacle's Certificate of Incorporation and By-laws on the date of this
Agreement shall be duplicated, to the extent permissible under the DGCL, in
the Pinnacle Surviving Corporation's Certificate of Incorporation and
By-laws and shall not be amended, repealed or otherwise modified for a
period of six years after the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who on or prior to
the Effective Time were directors, officers, employees or agents of
Pinnacle. The indemnification obligations set forth in Pinnacle's
Certificate of Incorporation and By-laws on the date of this Agreement and
in the respective organizational documents of Pinnacle's Subsidiaries shall
not be amended, repealed or otherwise modified for a period of six years
after the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who on or prior to the Effective Time were
directors, officers, employees or agents of Pinnacle or any of its
Subsidiaries (together with the persons listed in the previous sentence,
the "Indemnified Parties").
(b) Prior to the Effective Time, Pinnacle shall have
procured directors' and officers' liability insurance for a period of six
years from the Effective Time, (which policy shall be of at least the same
coverage, with carriers comparable to Pinnacle's and its Subsidiaries'
existing carriers, containing terms and conditions which are no less
favorable to those covered in Pinnacle's and its Subsidiaries' existing
directors' and officers' liability policy) to cover those Persons who are
covered on the date of this Agreement by Pinnacle's and its Subsidiaries'
directors' and officers' liability insurance policy with respect to those
matters covered by Pinnacle's and its Subsidiaries' directors' and
officers' liability policy.
(c) Section 7.6 shall survive the consummation of the
Pinnacle Merger at the Effective Time, is intended to benefit Pinnacle, the
Pinnacle Surviving Corporation and the Indemnified Parties (and the heirs
and representatives of the Indemnified Parties), and shall be binding on
all successors and assigns of Pinnacle Acq Corp and the Pinnacle Surviving
Corporation and shall be enforceable by each Indemnified Party and his or
her heirs and representatives.
Section 7.7 Fees.
(a) Except as provided below, all fees and expenses
incurred in connection with the Pinnacle Merger, this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
fees or expenses, whether or not the Pinnacle Merger is consummated.
(b) Pinnacle shall pay, or cause to be paid, in same
day funds to Pinnacle Acq Corp $25 million (the "Termination Fee") upon
demand if (A) Pinnacle Acq Corp or Pinnacle, as applicable, terminates this
Agreement pursuant to Section 9.1 (f) and prior to such termination a
Significant Takeover Proposal shall have been made; (B) Pinnacle Acq Corp
terminates this Agreement pursuant to Section 9.1(e); (C) Pinnacle
terminates this Agreement pursuant to Section 9.1(g); or (D) prior to any
other termination of this Agreement pursuant to Section 9.1(d) or Section
9.1(c)(A) (which termination does not follow from the failure of Pinnacle
Acq Corp to cause any condition specified in Section 8.3 to be satisfied),
(x) a Competitive Proposal (disregarding for this purpose the proviso in
the definition thereof) or (y) a Significant Takeover Proposal ("Triggering
Proposal"), shall have been made on or after March 2, 2000 and within 12
months of such termination, a transaction constituting a Significant
Takeover Proposal is consummated or Pinnacle enters into an agreement
(which is thereafter consummated) with respect to, or the Board of
Directors of Pinnacle or a committee thereof approves or recommends, or
publicly proposes to approve or recommend, a Significant Takeover Proposal
(which is thereafter consummated).
(c) Notwithstanding Section 7.7(b)(D)(y) above, the
Termination Fee in such event shall not be payable by Pinnacle in the event
that Pinnacle makes a good faith demonstration, reasonably satisfactory to
Pinnacle Acq Corp, that (A) such Significant Takeover Proposal is made by a
Person (i) who is unaffiliated with the Person that made the Triggering
Proposal, and (ii) who did not solicit, have significant discussions or
engage in any negotiations with, or receive any non-public information from
Pinnacle, its Subsidiaries or any of Pinnacle's Covered Persons during the
period in which this Agreement was in effect, (B) such Significant Takeover
Proposal is not related to, contemplated by, or otherwise connected,
directly or indirectly, with the Triggering Proposal and (C) there is no
direct or indirect nexus or causal effect between the Triggering Proposal
and the Significant Takeover Proposal (which Pinnacle may demonstrate
(X)(1) by establishing the Triggering Proposal has been terminated or
withdrawn, (2) the initial contact relating to such Significant Takeover
Proposal is made to or by Pinnacle, any of its Subsidiaries or any of
Pinnacle's Covered Persons a significant time after such termination or
withdrawal, and (3) during the period beginning on the date the Triggering
Proposal is terminated or withdrawn and ending on the date of the initial
contact regarding the Significant Takeover Proposal, neither Pinnacle, its
Subsidiaries nor its Covered Persons shall have solicited, initiated,
encouraged or entertained any inquiries regarding or the submission of, or
participated in any discussions or negotiations regarding, or furnished any
information with respect to, any Significant Takeover Proposal or (Y)
otherwise.
(d) Only one Termination Fee shall be payable to
Pinnacle Acq Corp pursuant to the terms hereof.
Section 7.8 Public Announcement. PHCR and Pinnacle Acq Corp
and their respective Affiliates, on the one hand, and Pinnacle, on the
other hand, will consult with each other before issuing, and provide each
other the opportunity to review and comment upon, any press release or
other public statements with respect to the transactions contemplated by
this Agreement, including the Pinnacle Merger, and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange or national securities quotation system (in which case the parties
will use reasonable efforts to cooperate in good faith with respect to such
press release or other public statement). The parties agree that the
initial press release to be issued with respect to the transactions
contemplated by this Agreement shall be in the form heretofore agreed to by
the parties.
Section 7.9 Title Insurance, Surveys, and Flood Insurance.
(a) As promptly as practicable after the date hereof but in
no event later than ninety (90) days prior to the Effective Time, Pinnacle
shall deliver copies of previous owner policies or other title evidence
sufficient to obtain commitments (the "Commitments") to be issued by a
title company acceptable to Pinnacle Acq Corp (the "Title Insurer") for the
issuance of an ALTA Leasehold Policy of Title Insurance, an ALTA Owner's or
Lender's Policy of Title Insurance or a "date-down" of such policies, as
applicable, for such of the Real Properties as Pinnacle Acq Corp shall
designate (collectively, the "Title Policies"). Each of the Title Policies
shall name an entity designated by Pinnacle Acq Corp as insured and shall
show leasehold title or fee simple title to each of the Real Properties
vested at the Effective Time in Pinnacle or its Subsidiaries, subject only
to the Permitted Liens, provided, however, no monetary liens (other than
those being contested by Pinnacle or its Subsidiaries in good faith) shall
encumber the title to any Real Property, including, without limitation, the
Bank Credit Facility. The Commitments and the Title Policies to be issued
by the Title Insurer shall have all standard and general exceptions deleted
so as to afford full "extended form coverage" and shall contain contiguity
(where appropriate), survey, and such other endorsements as may be
reasonably requested by Pinnacle Acq Corp or its lender. At the Closing,
Pinnacle and its Subsidiaries shall deliver such affidavits or other
instruments as the Title Insurer may reasonably require to delete standard
and general exceptions and to provide the endorsements reasonably required
hereunder. Pinnacle and its Subsidiaries shall cause the Commitments to be
later-dated to cover the Closing and to cause the Title Insurer to delete
all Schedule B-1 requirements and all standard and general exceptions in
the Commitment at the Closing as directed by Pinnacle Acq Corp.
(b) As promptly as practicable after the date hereof but in
no event later than ninety (90) days prior to the Effective Time, Pinnacle
and its Subsidiaries shall deliver to Pinnacle Acq Corp and Title Insurer
an as-built survey of each of the Owned Properties and the Leased
Properties which constitute ground leases, except the Asset Dispositions
other than the property located in Compton, California (collectively, the
"Surveys"), prepared by a registered land surveyor or engineer, licensed in
the state where such Owned Property or Leased Property is located, dated on
or after the date hereof, certified to Pinnacle Acq Corp, Title Insurer,
and such other entities as Pinnacle Acq Corp may designate in writing to
Pinnacle, and conforming to current ALTA/ACSM Minimum Detail Requirements
for Land Title Surveys, sufficient to cause Title Insurer to delete the
standard printed survey exception. The Surveys shall show only Permitted
Liens. Each Survey shall show access from the land to dedicated roads and
shall include a flood plain certification. Any survey may be a
recertification of a prior survey, provided that it meets the
above-described criteria.
(c) To the extent any Real Property is located within an
area designated as "flood prone" or a "special flood hazard area" (as
defined under the regulations adopted under the National Flood Insurance
Act of 1968 and the Flood Disaster Protection Act of 1973), at Pinnacle Acq
Corp's request, Pinnacle shall obtain and maintain flood insurance, if
available, in an amount specified by Pinnacle Acq Corp with respect to such
Real Property.
(d) Pinnacle and its Subsidiaries shall use reasonable
efforts to obtain prior to Closing estoppel certificates in form and
substance reasonably satisfactory to Pinnacle Acq Corp and its lenders from
each of the lessors under the leases described on Schedule 4.17(b).
(e) If the Commitments reveal any mortgages, deeds of trust,
ground leases or similar matters affecting the Leased Properties which will
remain of record after the Closing and are senior in priority to the
respective Lease and for which Pinnacle or its Subsidiary has not
previously obtained a nondisturbance and attornment agreement, then
Pinnacle and its Subsidiaries shall use their reasonable efforts to obtain
non-disturbance and attornment agreements in form and substance reasonably
acceptable to Pinnacle Acq Corp and its lenders, from the applicable
mortgagees, holders of beneficial interests under the deeds of trust,
ground lessors and similar parties.
(f) Pinnacle and its Subsidiaries shall use their reasonable
efforts and shall cooperate with Pinnacle Acq Corp to obtain, prior to
Closing, (i) any required consents to any assignments and/or financing of
any of the Leased Properties, and (ii) any modifications reasonably and
customarily required by Pinnacle Acq Corp's lender to the leases for the
Leased Properties.
Section 7.10 Transfer Taxes. All liability for any transfer
or other similar taxes in connection with the exchange of Pinnacle Common
Stock to the Pinnacle Acq Corp or the consummation of any other transaction
contemplated by this Agreement shall be borne by Pinnacle.
Section 7.11 Financing.
(a) Pinnacle Acq Corp shall use its commercially reasonable
efforts to obtain and effectuate the Financing. Pinnacle shall use its
commercially reasonable efforts to cooperate with and assist Pinnacle Acq
Corp in obtaining and effectuating the Financing; provided that
"commercially reasonable efforts" shall not require Pinnacle Acq Corp to
expend money in excess of the expenses set forth in Exhibit A hereto, seek
or provide any equity or supplemental investment in connection with the
transactions contemplated hereby, or amend in any manner adverse to
Pinnacle Acq Corp any of the terms set forth on Exhibit A hereto.
(b) Neither Pinnacle Acq Corp nor PHCR shall, and each shall
cause Harveys not to, voluntarily enter into any agreement, commitment or
understanding with respect to or concerning any financing, acquisition,
disposition or corporate transaction not contemplated hereby or by the
Voting Agreement which would, as of the date of such transaction,
reasonably be expected to materially impair the ability of PHCR to obtain
the Financing. Pinnacle shall have no remedy with respect to this Section
7.11, and Pinnacle shall not be permitted to claim a breach under this
Section 7.11 unless and until such time as this Agreement is terminated (i)
by Pinnacle Acq Corp solely because of the failure of the condition Section
8.2(f) hereof to be satisfied, or (ii) by Pinnacle or by Pinnacle Acq Corp
pursuant to Section 9.1(h) hereof.
Section 7.12 Tax Treatment. Each of PHCR and Pinnacle shall
use its reasonable best efforts to cause the Harveys Merger, the Pinnacle
Merger and the contributions described in the Voting Agreement to qualify
as an exchange governed by section 351 of the Code.
Section 7.13 Tender Offer and Consent Solicitations. To the
extent required in connection with the transactions contemplated hereby,
Pinnacle Acq Corp shall use its reasonable best efforts to obtain the
consent or valid tender, without subsequent withdrawal, of not less than
50% of each tranche of the outstanding principal amount of debt of Pinnacle
pursuant to a consent solicitation and/or tender offer for such debt;
provided that "reasonable best efforts" shall not require Pinnacle Acq Corp
to expend money in excess of the expenses set forth in Exhibit A hereto,
seek or provide any equity or supplemental investment in connection with
the transactions contemplated hereby, or amend in any manner adverse to
Pinnacle Acq Corp any of the terms set forth in Exhibit A hereto.
Section 7.14 Termination of Voting Agreement. Upon any
termination of this Agreement pursuant to the terms of Article IX hereof,
the Voting Agreement shall also terminate and become void and have no
effect, without any liability, or obligation on the part of the parties
thereto.
Section 7.15 Compliance Committees. Pinnacle shall, and
Pinnacle Acq Corp shall cause Harveys to, use their reasonable best efforts
to cause the compliance committees of the Boards of Directors of Pinnacle
and Harveys, respectively, to review and approve this Agreement and the
transactions contemplated hereby as promptly as practicable after the date
hereof.
Section 7.16 Atlantic Land Warrant. Pinnacle shall use its
commercially reasonable efforts to cause the warrant agreement governing
the Atlantic Land Warrant to be amended to provide for each of the
following: (i) in the event that the Inglewood Sale shall have closed on or
prior to the fifth Business Day prior to the Closing Date, then, as of the
Effective Time, the Atlantic Land Warrant shall be converted into the right
to receive from the Pinnacle Surviving Corporation an amount in cash equal
to the product of (x) the number of shares of Pinnacle Common Stock that
were subject to the Atlantic Land Warrant immediately prior to the
Effective Time and (y) the excess (if any) of the cash amount of the
Pinnacle Merger Consideration over the exercise price per share of the
Atlantic Land Warrant immediately prior to the Effective Time; (ii) in the
event that the Inglewood Sale shall not have closed on or prior to the
fifth Business Day prior to the Closing Date, the holder of the Atlantic
Land Warrant shall not receive the amount contemplated by clause (i) above
and shall instead be deemed to have received a number of Class B CPRs (as
defined in Section 10.11 hereof) equal to the number of shares of Pinnacle
Common Stock that were subject to the Atlantic Land Warrant immediately
prior to the Effective Time; and (iii) as of the Effective Time, the
Atlantic Land Warrant shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and the holder of the
Atlantic Land Warrant shall cease to have any rights with respect thereto,
except the right to receive the consideration (if any) described in clause
(i) above which such holder is entitled to receive.
Section 7.17 Filing of Corporate Gaming License
Applications. PHCR and Pinnacle Acq Corp shall, and PHCR shall cause
Harveys and Harveys Acq Corp to, file, within sixty days of the date of
this Agreement, corporate applications for gaming licenses in each
jurisdiction in which Gaming Approvals are required to permit such persons
to consummate the transactions contemplated by this Agreement and the
Harveys Merger Agreement; provided that if advised by any of their gaming
counsel that filing any such corporate application for gaming licenses in
such 60-day period is not conducive to the timely satisfaction of the
condition set forth in Section 8.3(d), then PHCR and Pinnacle Acq Corp
shall, and PHCR shall cause Harveys and Harveys Acq Corp to, file such
corporate applications for gaming licenses as soon after such 60-day period
as is appropriate; provided, further, that Pinnacle and each of its
Affiliates shall reasonably cooperate to the extent needed to facilitate
the approval of such application. Nothing in this Section 7.17 shall
require any of PHCR, Pinnacle Acq Corp, Harveys or Harveys Acq Corp to file
during such 60-day period any gaming license applications with respect to
any individual. In addition, nothing in this Section 7.17 shall obligate
any of PHCR, Pinnacle Acq Corp, Harveys, Harveys Acquisition Corporation,
or any of their respective Affiliates to obtain any consent, approval,
license, waiver, order, decree, determination of suitability or other
authorization or make any filing or application with respect to any limited
partner of Colony III or its Affiliates.
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 Conditions to Each Party's Obligation To Effect
the Pinnacle Merger. The respective obligations of each party to effect the
Pinnacle Merger is subject to the satisfaction or waiver on or prior to the
Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement shall have
been approved and adopted by the Requisite Vote in accordance with
applicable Law and the Certificate of Incorporation of Pinnacle.
(b) No Injunctions or Restraints. No statute, rule,
regulation, executive order, decree, temporary restraining order,
preliminary or permanent injunction or other order enacted, entered,
promulgated, enforced or issued by any Governmental Entity or other legal
restraint or prohibition preventing the consummation of the Pinnacle Merger
or the transactions contemplated hereby shall be in effect; provided, in
the case of a decree, injunction or other order, each of the parties shall
have used their best efforts to prevent the entry of any such injunction or
other order and to appeal as promptly as possible any decree, injunction or
other order that may be entered.
(c) HSR Act. Any waiting period (and any extension
thereof) applicable to the transaction contemplated by this Agreement under
the HSR Act shall have expired or shall have been terminated.
Section 8.2 Conditions to Obligations of Pinnacle Acq Corp.
The obligations of Pinnacle Acq Corp to effect the Pinnacle Merger are
further subject to the satisfaction or waiver on or prior to the Closing
Date of the following conditions:
(a) Representations and Warranties. The
representations and warranties of Pinnacle contained herein that are
qualified as to materiality shall be true and accurate, and those not so
qualified shall be true and accurate in all material respects, in each case
on the date hereof and at and as of the Effective Time with the same force
and effect as though made at and as of the Effective Time (except to the
extent a representation or warranty speaks specifically as of an earlier
date or except as contemplated by this Agreement), and Pinnacle Acq Corp
shall have received a certificate signed on behalf of Pinnacle by its
President and its Chief Financial Officer to such effect.
(b) Covenants. Pinnacle shall have performed, in all
material respects, all obligations and complied, in all material respects,
with all covenants required by this Agreement to be performed or complied
with by it at or prior to the Effective Time, and Pinnacle Acq Corp shall
have received certificates signed on behalf of Pinnacle by its President
and its Chief Financial Officer to such effect.
(c) No Material Adverse Effect. From the date hereof
through and including the Effective Time, no event or events shall have
occurred which, individually or in the aggregate, would reasonably be
expected to have a material adverse effect on Pinnacle or the transactions
contemplated hereby.
(d) Gaming Authority Approval. All licenses, permits,
registrations, authorizations, consents, waivers, orders, findings of
suitability or other approvals required to be obtained from, and all
filings, notices or declarations required to be made with, any Gaming
Authority or Governmental Entity to permit Pinnacle Acq Corp and Pinnacle
to consummate the Pinnacle Merger, to permit Harveys Acq Corp and Harveys
to complete the Harveys Merger, and to permit the Pinnacle Surviving
Corporation and the Harveys Surviving Corporation and each of their
respective Subsidiaries to conduct their respective businesses in the
jurisdictions regulated by such Gaming Authorities after the Effective Time
in the same manner as conducted by Pinnacle and Harveys and their
respective Subsidiaries prior to the Effective Time (collectively, the
"Gaming Approvals") shall have been obtained or made, as applicable;
provided that this condition shall not be deemed satisfied if any Gaming
Approval obligates Pinnacle Acq Corp or Harveys Acq Corp, or any of their
respective Affiliates to obtain any consent, approval, license, waiver,
order, decree, determination of suitability or other authorization or make
any filing or application with respect to any limited partner of Colony III
or its Affiliates.
(e) Consents. All consents, waivers, orders,
approvals, authorizations, registrations, findings of suitability,
licensing and action of (i) any Governmental Entity other than a Gaming
Authority required to permit the consummation of the Pinnacle Merger, and
(ii) any third party listed on Schedule 4.4(a) or 4.4(b) hereof with
respect to which consent is indicated on such Schedule to be obtained,
shall have been obtained or made, free of any condition that would be
materially adverse to Pinnacle or the transactions contemplated hereby.
(f) Financing. Pinnacle Acq Corp and Harveys Acq Corp
shall have received the cash proceeds of the Financing.
(g) Tender Offers and Consent Solicitations. To the
extent required in connection with the transactions contemplated hereby,
Pinnacle Acq Corp shall have received valid consents and related tenders
under the outstanding principal amount of debt of Pinnacle and Harveys
pursuant to tender offers for such debt. Pinnacle Acq Corp shall have
received the requisite consents under the instruments under which such debt
was issued for any amendments of such instruments necessary in connection
with the transactions contemplated hereby and such amendments shall have
become effective in accordance with the terms of such instruments.
(h) Principal Asset Dispositions. The Principal Asset
Dispositions (other than the Inglewood Sale) shall have been consummated on
substantially the terms and subject to the conditions contained in the
applicable Asset Disposition Agreement, Pinnacle shall have received
therefrom not less than the net proceeds indicated on Schedule 6.1(c)
hereto, and the Chief Financial Officer of Pinnacle shall have delivered a
certificate to Pinnacle Acq Corp certifying that his good faith reasonable
estimate of net proceeds from such Principal Asset Dispositions are not
less than the amounts set forth on Schedule 6.1(c) hereto.
(i) Transaction Documents. The transactions
contemplated by the Transaction Documents shall have been consummated
immediately prior to the Effective Time.
(j) Dissenting Shares. The aggregate number of
Pinnacle Dissenting Shares shall not exceed 5% of the total number of
shares of Pinnacle Common Stock outstanding immediately prior to the
Pinnacle Stockholders Meeting.
(k) Indiana Project. (i) All material phases of the
Indiana Project (other than the golf course and performance theater) shall
have been substantially completed and opened to the public by not later
than September 15, 2000; and (ii) the costs associated with the Indiana
Project shall not be, in the aggregate, more than $207 million, and the
project (other than the golf course and performance theater) will have been
completed in substantial conformity with the written budgets, plans and
policies relating to the Indiana Project provided to Pinnacle Acq Corp
prior to the date hereof.
Section 8.3 Conditions to Obligations of Pinnacle. The
obligations of Pinnacle to effect the Pinnacle Merger are further subject
to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Representations and Warranties. The
representations and warranties of Pinnacle Acq Corp contained herein that
are qualified as to materiality shall be true and accurate, and those not
so qualified shall be true and accurate in all material respects, in each
case at and as of the Effective Time with the same force and effect as
though made at and as of the Effective Time (except to the extent a
representation or warranty speaks specifically as of an earlier date or
except as contemplated by this Agreement), and Pinnacle shall have received
certificates signed on behalf of Pinnacle Acq Corp by its President to such
effect.
(b) Agreements and Covenants. Pinnacle Acq Corp shall
have performed, in all material respects, all obligations and complied, in
all material respects, with all covenants required by this Agreement to be
performed or complied with by it at or prior to the Effective Time, and
Pinnacle shall have received a certificate signed on behalf of Pinnacle Acq
Corp by its President to such effect.
(c) Gaming Authority Approval. All licenses, permits,
registrations, authorizations, consents, waivers, orders, findings of
suitability or other approvals required to be obtained from, and all
filings, notices or declarations required to be made with, any Gaming
Authority to permit Pinnacle Acq Corp to consummate the Pinnacle Merger
shall have been obtained or made, as applicable.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after approval of
matters presented in connection with the Pinnacle Merger by the
stockholders of Pinnacle:
(a) by mutual written consent of each of the parties;
(b) by either Pinnacle Acq Corp or Pinnacle if any
Governmental Entity shall have issued an order, decree or ruling or taken
any other action permanently enjoining, restraining or otherwise
prohibiting the acceptance for payment of, or payment for, shares of
Pinnacle Common Stock pursuant to the Pinnacle Merger and such order,
decree or ruling or other action shall have become final and nonappealable;
provided, in the case of an order, decree, ruling or other order, each of
the parties shall have used their best efforts to prevent the entry of any
such order, decree, ruling or other order and to appeal as promptly as
possible any order, decree, ruling or other order that may be entered;
provided further, the right to terminate this Agreement pursuant to the
foregoing clause shall not be available to any party that fails to comply
with Section 7.4;
(c) (A) by either Pinnacle Acq Corp or Pinnacle, at
any time after January 15, 2001 if the Effective Time shall not have
occurred on or prior to such date other than due to the failure of the
party seeking to terminate this Agreement to perform its obligations under
this Agreement required to be performed at or before the Closing; provided,
however, that, Pinnacle Acq Corp may, at its option, (x) extend such date
for up to six months if (i) it can demonstrate to Pinnacle's reasonable
good faith satisfaction that there is a reasonable likelihood that it will
receive the Gaming Approvals by such date, and (ii) Pinnacle Acq Corp
delivers to Pinnacle commitment letter(s) and highly confident letter(s)
reflecting amounts that are at least sufficient to cover the Financing with
expiration dates that are at least coextensive with the date of such
extension (and "Extended Commitment"); or (y) extend the January 15,2001
date for up to two months if the parties shall have received from any
responsible individual of each Gaming Authority (i) the approval of which
is required to be obtained to permit Pinnacle Acq Corp and Harveys Acq Corp
to consummate the Pinnacle Merger and Harveys Merger, respectively and (ii)
which has not prior to January 15, 2001 finally determined whether such
approval shall be granted, reasonable assurance (written or oral) that a
hearing is scheduled or can reasonably be expected to be scheduled prior to
March 15, 2001;
(B) Notwithstanding the foregoing, in the event that
Pinnacle or Pinnacle Acq Corp receives a final and nonappealable written
statement from any of the Gaming Authorities that states that such Gaming
Authority has disapproved or will not give approval to this Agreement,
which disapproval would cause Pinnacle Acq Corp to be unable to consummate
the Pinnacle Merger, or if Pinnacle Acq Corp has finally withdrawn (with no
intent to resubmit) its gaming application with such Gaming Authority, such
party may terminate this Agreement with written notice of such termination
given to the other party hereto; provided that no party may terminate this
Agreement pursuant to the terms of this sentence if such party is in
material breach of this Agreement;
(d) by Pinnacle Acq Corp, if this Agreement has not
been approved by the Requisite Vote of the outstanding shares of Pinnacle
Common Stock within 120 days after the date hereof; provided however, the
time period set for in this Section shall toll from the 51st day to the
80th day that the Proxy Statement and the Schedule 13E-3 are filed with the
SEC and remain under review by the SEC (but in no event shall such period
toll for more than 30 days in total or the Pinnacle Stockholders Meeting
occur later than the 150th day after the date hereof); provided further
that such tolling period shall only be available if the Proxy Statement and
the Schedule 13E-3 are filed in accordance with the provisions of Section
7.2 hereof and Pinnacle has used its reasonable best efforts to respond to
SEC comments to such disclosure documentation promptly and completely;
(e) by Pinnacle Acq Corp if the Board of Directors of
Pinnacle amends, modifies or withdraws its recommendation or publicly
proposes to amend, modify in a manner adverse to Pinnacle Acq Corp, or
withdraw its recommendation of the Pinnacle Merger or this Agreement or if,
following a Takeover Proposal, Pinnacle fails to comply with its
obligations under Sections 6.3 and 7.4 hereof;
(f) by either Pinnacle or Pinnacle Acq Corp if, at a
duly held stockholders meeting of Pinnacle or any adjournment thereof at
which this Agreement is voted upon, the Requisite Vote in favor of the
adoption of this Agreement shall not have been obtained; or
(g) by Pinnacle in connection with simultaneously
entering into a definitive agreement in accordance with Section 6.3(b);
provided, it has complied with all provisions thereof, including the notice
provisions therein, and that it simultaneously makes payment of the
Termination Fee.
(h) by Pinnacle Acq Corp or Pinnacle in the event
that the Financing Letters shall have been withdrawn or terminated by the
issuing lenders, and Pinnacle Acq Corp is unable, despite the exercise of
its reasonable efforts, to obtain a replacement commitment letter(s) and/or
highly confident letter(s) reflecting amounts that are at least sufficient
to cover the Financing, within 20 Business Days following such withdrawal
or termination.
Section 9.2 Effect of Termination. In the event of
termination of this Agreement by either Pinnacle or Pinnacle Acq Corp as
provided in Section 9.1, this Agreement shall forthwith become void and
have no effect, without any liability or obligation on the part of Pinnacle
Acq Corp or Pinnacle, other than the provisions of Section 7.2, Section
7.3, Section 7.7, this Section 9.2 and Article X (other than Section 10.11)
and except to the extent that such termination results from the wilful and
material breach by a party of any of its representations, warranties,
covenants or agreements set forth in this Agreement, in which case each
other party shall be entitled to recover all damages allowable at law and
all relief available in equity; provided that, upon receipt by Pinnacle Acq
Corp of the Termination Fee in accordance with the provisions hereof,
Pinnacle Acq Corp shall have no further rights hereunder, at law or in
equity, to damages or other relief and shall release and forever discharge
Pinnacle, and each of its past, present and future representatives,
affiliates, stockholders, directors, officers, employees, subsidiaries,
successors and assigns from any and all claims, demands, proceedings or
other obligations, known or unknown, both at law and in equity, which
Pinnacle Acq Corp may ever have against such persons arising out of any
matter, cause or event occurring at or prior to the Effective Time;
provided further that the limitation set forth in the previous proviso is
not intended to act as a limitation of liability in the event that the
Termination Fee is not payable pursuant to the terms hereof.
Section 9.3 Amendment. This Agreement may be amended by the
mutual agreement of the parties at any time before or after any required
approval of matters presented in connection with the Pinnacle Merger by the
stockholders of Pinnacle; provided, that after any such approval, there
shall not be made any amendment that by law requires further approval by
such stockholders without the further approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties.
Section 9.4 Extension; Waiver. At any time prior to the
Effective Time, the parties may (a) extend the time for the performance of
any of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties of the other party
contained in this Agreement or in any document delivered pursuant to this
Agreement or (c) subject to the proviso of Section 9.3, waive compliance by
the other party with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed
on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of those rights.
Section 9.5 Procedure for Termination, Amendment, Extension
or Waiver. A termination of this Agreement pursuant to Section 9.1, an
amendment of this Agreement pursuant to Section 9.3 or an extension or
waiver pursuant to Section 9.4 shall, in order to be effective, require in
the case of Pinnacle Acq Corp or Pinnacle, action by its Board of Directors
or the duly authorized designee of its Board of Directors.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Nonsurvival of Representations. None of the
representations and warranties in this Agreement shall survive the
Effective Time. This Section 10.1 shall not limit any covenant or agreement
of the parties which by its terms contemplates performance after the
Effective Time of the Pinnacle Merger.
Section 10.2 Representations and Warranties. Notwithstanding
anything in this Agreement to the contrary, the disclosure of any
information on any schedule to this Agreement shall be deemed to constitute
the disclosure of such information for all other schedules to this
Agreement to the extent that it is clear from a reading of such information
that it is applicable to such other schedules.
Section 10.3 Notices. All notices, requests, claims, demands
and other communications under this Agreement shall be in writing and shall
be deemed given if delivered personally or sent by overnight courier
(providing proof of delivery) to the parties or sent by telecopy (providing
confirmation of transmission) at the following addresses or telecopy number
(or at such other address or telecopy number for a party as shall be
specified by like notice):
(a) if to Pinnacle Acq Corp or PHCR, to:
c/o Harveys Casino Resorts
Highway 50 & Stateline Avenue
Lake Tahoe, Nevada 89449
Attention: Charles W. Scharer
Telephone: 775-586-6756
Facsimile: 775-586-6852
and
c/o Colony Capital, Inc.
1999 Avenue of the Stars, Suite 1200
Los Angeles, California 90067
Telephone: 310-282-8820
Facsimile: 310-282-8813
Attention: Jonathan H. Grunzweig
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: Nick P. Saggese, Esq.
Telephone: 213-687-5550
Facsimile: 213-687-5600
(b) if to Pinnacle, to
Pinnacle Entertainment, Inc.
330 North Brand Boulevard, Suite 1100
Glendale, California 91203
Attention: Loren Ostrow, Esq.
Telephone: 818-662-5900
Facsimile: 818-662-5901
with a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067
Attention: Alvin Segel, Esq.
Telephone: 310-203-7069
Facsimile: 310-203-7199
and
Munger, Tolles & Olson LLP
355 South Grand Avenue, Suite 3500
Los Angeles, California 90071
Attention: Simon Lorne, Esq.
Telephone: 213-683-9100
Facsimile: 213-687-3702
Section 10.4 Interpretation. When a reference is made in
this Agreement to an Article, Section or Schedule, such reference shall be
to an Article or Section of or a Schedule to, 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 Transaction
Documents and the consummation of the transactions contemplated by such
Transaction Documents are transactions contemplated by this Agreement. To
the extent any restriction on the activities of Pinnacle or its
Subsidiaries under the terms of this Agreement requires prior approval
under any Gaming Law, such restriction shall be of no force or effect
unless and until such approval is obtained. If any provision of this
Agreement is illegal or unenforceable under any Gaming Law, such provision
shall be void and of no force or effect.
Section 10.5 Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties.
Section 10.6 Entire Agreement; No Third-Party Beneficiaries.
This Agreement and the Voting Agreement constitute the entire agreements,
and supersede all prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter of these
agreements and are not intended to confer upon any Person other than the
parties any rights or remedies hereunder, except that (i) officers,
directors, employees and agents of Pinnacle and its Subsidiaries are
intended beneficiaries of the covenants and agreements set forth in Section
7.6 and (ii) the holders of Pinnacle Stock Options are the intended
beneficiaries of the covenants and agreements set forth in Section 7.5.
Section 10.7 Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE,
WITHOUT REGARD TO ANY APPLICABLE CONFLICTS OF LAW.
Section 10.8 Gaming Laws. Each of the provisions of this
Agreement is subject to and shall be enforced in compliance with the Gaming
Laws.
Section 10.9 Assignment. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be
assigned, in whole or in part, by operation of law or otherwise by any of
the parties without the prior written consent of the other parties, except
that Pinnacle Acq Corp may assign, in its sole discretion, any of or all
its rights, interests and obligations under this Agreement to any
controlled affiliate of Colony Capital, Inc., provided such party assumes
Pinnacle Acq Corp's obligations hereunder, and Pinnacle Acq Corp remains
liable 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 10.10 Enforcement. The parties agree that
irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms
or were otherwise breached. It is accordingly agreed that the parties shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the United States located in the State of
Delaware or in Delaware state court, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of
the parties hereto (a) consents to commit itself to the personal
jurisdiction of any Federal court located in the State of Delaware or any
Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that
it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court and (c) agrees that it will
not bring any action relating to this Agreement or any of the
transactions contemplated by this Agreement in any court other than a
Federal or state court sitting in the State of Delaware.
Section 10.11 Inglewood Sale; CPRs.
(a) Upon the occurrence of an event set forth below, the
Pinnacle Merger Consideration shall be adjusted in the manner set forth
below with respect to such event:
(i) In the event that the Inglewood Sale shall have
closed on or prior to the fifth Business Day prior to the Closing
Date and the Net Proceeds to Pinnacle from the Inglewood Sale are
equal to or greater than $40,750,000, then the Pinnacle Merger
Consideration shall equal $25.00 in cash.
(ii) In the event that the Inglewood Sale shall have
closed on or prior to the fifth Business Day prior to the Closing
Date and the Net Proceeds to Pinnacle from the Inglewood Sale are
greater than $13,054,000 but less than $40,750,000, then the
Pinnacle Merger Consideration shall equal the sum of (x) $24.00 in
cash, and (y) the Proceeds Adjustment, in cash.
(iii) In the event that the Inglewood Sale shall have
closed on or prior to the fifth Business Day prior to the Closing
Date and the Net Proceeds to Pinnacle from the Inglewood Sale are
less than or equal to $13,054,000, then there shall be no
adjustment to the Pinnacle Merger Consideration.
(iv) In the event that the Inglewood Sale shall not
have closed on or prior to the fifth Business Day prior to the
Closing Date, then the Pinnacle Merger Consideration shall equal
(i) $24.00 in cash, and (ii) one Class A CPR; provided that, the
holder of the Atlantic Land Warrant shall not receive the Pinnacle
Merger Consideration and shall instead receive that number of Class
B CPRs equal to the number of shares issuable upon exercise of the
Atlantic Land Warrant immediately prior to the Effective Time and
no other consideration.
(b) As used in this Agreement, the following terms shall
have the following respective meanings:
"Class A CPR" means a contingent payment right
representing the right to receive from the Pinnacle Surviving
Corporation (or, at its option, PHCR), in cash, the Class A CPR
Amount, if any. The Paying Agent shall distribute to holders of
Class A CPRs the Class A CPR Amount, if any, as soon as practicable
following the closing of the Inglewood Sale. Payments in respect of
Class A CPRs shall be without interest and less any withholding or
deduction for Taxes required under applicable law. The CPRs shall
not represent an equity or other ownership interest in PHCR or the
Pinnacle Surviving Corporation, shall not be transferable by the
holders thereof, except by operation of law or will, shall not be
represented by any form of certificate or instrument, and shall not
bear interest. Holders of Class A CPRs shall have no voting or
other rights as stockholders of PHCR or the Pinnacle Surviving
Corporation. No amount shall be payable with respect to the Class A
CPRs if the Inglewood Sale shall not have closed prior to December
31, 2001 (the "Expiration Date"). If the Inglewood Sale shall not
have closed prior to the Expiration Date, no further obligations
shall be owing in respect of the Class A CPRs or the provisions of
this Section 10.11.
"Class B CPR" means a contingent payment right
representing the right to receive from the Pinnacle Surviving
Corporation (or, at its option, PHCR), in cash the Class B CPR
Amount, if any. The Paying Agent shall distribute to holders of
Class B CPRs the Class B CPR Amount, if any, as soon as practicable
following the closing of the Inglewood Sale. Payments in respect of
Class B CPRs shall be without interest and less any withholding or
deduction for Taxes required under applicable law. The Class B CPRs
shall not represent an equity or other ownership interest in PHCR
or the Pinnacle Surviving Corporation, shall not be transferable by
the holders thereof, except by operation of law or will, shall not
be represented by any form of certificate or instrument, and shall
not bear interest. Holders of Class B CPRs shall have no voting or
other rights as stockholders of PHCR or the Pinnacle Surviving
Corporation. No amount shall be payable with respect to the Class B
CPRs if the Inglewood Sale shall not have closed prior to the
Expiration Date. If the Inglewood Sale shall not have closed prior
to the Expiration Date, no further obligations shall be owing in
respect of the Class B CPRs or the provisions of this Section
10.11.
"Class A CPR Adjustment" means the quotient
determined by dividing (a) the difference of (1) the Net Proceeds
to the Pinnacle Surviving Corporation from the Inglewood Sale,
minus (2) $13,054,000, minus (3) the product of (x) the Class B CPR
Amount, and (y) the number of Class B CPRs outstanding, by (b) the
sum of (1) the total number of shares of Pinnacle Common Stock
outstanding immediately prior to the Effective Time, plus (2) the
Implied Option Shares Number plus (3) the number of shares redeemed
in accordance with Section 6.1(d) of this Agreement; provided that,
if such number is negative, it shall be deemed to be zero.
"Class A CPR Amount" means, with respect to an event
described below, the amount set forth below with respect to such
event:
(A) In the event that Net Proceeds to the
Pinnacle Surviving Corporation from the Inglewood Sale are
equal to or greater than $40,750,000, then the Class A CPR
Amount shall equal $1.00.
(B) In the event that the Net Proceeds to the
Pinnacle Surviving Corporation from the Inglewood Sale are
greater than $13,054,000 but less than $40,750,000, then the
Class A CPR Amount shall equal the Class A CPR Adjustment.
(C) In the event that the Net Proceeds to the
Pinnacle Surviving Corporation from the Inglewood Sale are
less than or equal to $13,054,000, then the Class A CPR
Amount shall equal zero dollars ($0).
"Class B CPR Adjustment" means the difference of (a)
the quotient determined by dividing (1) the difference of (x) Net
Proceeds to the Pinnacle Surviving Corporation from the Inglewood
Sale, minus (y) $13,054,000, by (2) the total number of Class A
CPRs and Class B CPRs outstanding, minus (b) $0.78; provided that,
if such number is negative, it shall be deemed to be zero.
"Class B CPR Amount" means, with respect to an event
described below, the amount set forth below with respect to such
event:
(A) In the event that Net Proceeds to the
Pinnacle Surviving Corporation from the Inglewood Sale are
equal to or greater than $40,750,000, then the Class B CPR
Amount shall equal $0.22.
(B) In the event that the Net Proceeds to the
Pinnacle Surviving Corporation from the Inglewood Sale are
greater than $13,054,000 but less than $40,750,000, then the
Class B CPR Amount shall equal the Class B CPR Adjustment.
(C) In the event that the Net Proceeds to the
Pinnacle Surviving Corporation from the Inglewood Sale are
less than or equal to $13,054,000, then the Class B CPR
Amount shall equal zero dollars ($0).
"Gross Proceeds" means the aggregate dollar amount of
any and all gross proceeds to Pinnacle or the Pinnacle Surviving
Corporation, as the case may be, from the Inglewood Sale.
"Implied Option Shares Number" means the number
obtained by multiplying (a) the quotient derived by dividing (1)
the difference of (x) the Maximum Option Consideration, minus (y)
the aggregate exercise price of all In the Money Pinnacle Options,
by (2) the Maximum Option Consideration, times (b) the total number
of shares of Pinnacle Common Stock issuable upon exercise of the In
the Money Pinnacle Options.
"In the Money Pinnacle Options" means Pinnacle
Options with an exercise price less than $24.00 per share.
"Inglewood Sale" means the sale or other disposition
for value of the entire Inglewood Property, whether accomplished in
a single transaction or in more than one transaction; provided,
however, that if the Inglewood Sale is accomplished in more than
one transaction, the Inglewood Sale shall not be deemed to have
been closed until such time as the transaction with respect to the
last remaining portion of the Inglewood Property shall have closed.
"Maximum Option Consideration" means the product
derived by multiplying (a) $24.00, times (b) the total number of
shares of Pinnacle Common Stock issuable upon exercise of the In
the Money Pinnacle Options.
"Net Proceeds" means the sum of (a) the product
determined by multiplying (i) 0.58 by (ii) the difference of (x)
the Gross Proceeds, minus (y) Pinnacle's inside tax basis in the
Inglewood Property, plus (b) Pinnacle's inside tax basis in the
Inglewood Property.
"Proceeds Adjustment" means an amount of cash equal
to the quotient determined by dividing (a) the difference of (1)
the Net Proceeds to Pinnacle from the Inglewood Sale, minus (2)
$13,054,000, minus (3) the Warrant Adjustment Amount, by (b) the
sum of (1) the total number of shares of Pinnacle Common Stock
outstanding immediately prior to the Effective Time, plus (2) the
Implied Option Shares Number, plus (3) the number of shares
redeemed in accordance with Section 6.1(d) of this Agreement;
provided that, if such number is negative, it shall be deemed to be
zero.
"Warrant Adjustment Amount" means the difference of
(a) the quotient determined by dividing (1) the difference of (x)
Net Proceeds to the Pinnacle Surviving Corporation from the
Inglewood Sale, minus (y) $13,054,000, by (2) the sum of (x) the
total number of shares of Pinnacle Common Stock outstanding, plus
(y) the total number of shares of Pinnacle Common Stock issuable
upon exercise of the In the Money Options plus (c) the total number
of shares of Pinnacle Common Stock issuable upon exercise of the
Atlantic Land Warrant, plus (d) the number of shares redeemed in
accordance with Section 6.1(d) of this Agreement minus (b) $0.78;
provided that, if such number is negative, it shall be deemed to be
zero.
(c) In the event that the Inglewood Sale shall not have
closed on or prior to the fifth Business Day prior to the Closing Date, the
Pinnacle Surviving Corporation shall use its commercially reasonable
efforts to consummate the Inglewood Sale during the period beginning on the
date following the Closing Date and continuing through to but not including
the Expiration Date; provided, however, that none of PHCR, Pinnacle Acq
Corp or the Pinnacle Surviving Corporation shall have any liability for
breach of this Section 10.11(c) except to the extent that any such breach
shall have resulted from a willful and material breach by such party.
(d) The obligation of the Pinnacle Surviving Corporation to
pay the Class A CPR Amount and the Class B CPR Amount shall be secured by a
letter of credit in an amount of $27,696,000 to be obtained at or prior to
the Effective Time issued in favor of the Paying Agent (or in the event
that the Paying Agent is unwilling to act in such capacity, a bank or title
company reasonably acceptable to Pinnacle and Pinnacle Acq Corp), which
shall expire on the Expiration Date.
(e) A committee comprised of member of the present Board of
Directors of Pinnacle or their designee(s) (the "Inglewood Sale Committee")
shall have approval rights over any proposed sale of the Inglewood Property
and such sales effort shall be managed by the present president of Realty
Investment Group, Inc., or such other person as may be mutually agreed to
by the Pinnacle Surviving Corporation and the Inglewood Sale Committee.
[signature pages follow]
IN WITNESS WHEREOF, PHCR, Pinnacle and Pinnacle Acq Corp
have caused this Agreement to be signed by their respective officers
thereunto duly authorized, all as of the date first written above.
PH CASINO RESORTS, INC.
By: /s/ Charles W. Scharer
-----------------------------
Name: Charles W. Scharer
Title: President
PINNACLE ENTERTAINMENT, INC.
By: /s/ Paul Alanis
-----------------------------
Name: Paul Alanis
Title: President
PINNACLE ACQUISITION CORPORATION
By: /s/ Charles W. Scharer
-----------------------------
Name: Charles W. Scharer
Title: President
EXHIBIT 2
VOTING AND CONTRIBUTION AGREEMENT
BY
AND
AMONG
PH CASINO RESORTS, INC.
AND
THE STOCKHOLDERS SIGNATORY HERETO
DATED AS OF APRIL 17, 2000
VOTING AND CONTRIBUTION AGREEMENT
VOTING AND CONTRIBUTION AGREEMENT (this "Agreement"), dated
as of April 17, 2000, by and among PH Casino Resorts, Inc., a Delaware
corporation (together with its assignees or designees,"PHCR"), and the
other signatories hereto (together with any Additional Stockholders, the
"Stockholders").
W I T N E S S E T H
WHEREAS, concurrently with the execution and delivery of this
Agreement, Pinnacle Entertainment, Inc., a Delaware corporation
("Pinnacle") is entering into an agreement and plan of merger, dated as of
the date hereof (the "Merger Agreement"), with Pinnacle Acquisition
Corporation, a Delaware corporation ("Pinnacle Acq Corp"), pursuant to
which Pinnacle Acq Corp shall merge with and into Pinnacle (the "Merger"),
upon the terms and conditions set forth therein;
WHEREAS, each Stockholder severally desires that the Pinnacle
Acq Corp and Pinnacle enter into the Merger Agreement;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Harveys Casino Resorts, a Nevada corporation ("Harveys") is
entering into an agreement and plan of merger, dated as of the date hereof
(the "Harveys Merger Agreement"), with Harveys Acquisition Corporation, a
Nevada corporation ("Harveys Acq Corp"), pursuant to which Harveys Acq Corp
shall merge with and into Harveys (the "Harveys Merger") upon the terms and
conditions set forth therein;
WHEREAS, each Stockholder severally desires that Harveys and
Harveys Acq Corp enter into the Harveys Merger Agreement;
WHEREAS, concurrently with the execution and delivery of this
Agreement, PHCR and the Stockholders are entering into a Memorandum of
Understanding (the "MOU"), which sets forth certain principal terms with
respect to incentive equity and other employment matters related to the
Merger and the Harveys Merger;
WHEREAS, the Stockholders own beneficially and of record and
have the sole power to vote and dispose of the number of shares of common
stock, par value $.10 per share, of Pinnacle ("Pinnacle Common Stock") set
forth under the caption "Shares Owned," opposite their respective names on
Schedule I hereto (such shares of Pinnacle Common Stock owned by the
Stockholders or acquired or otherwise received after the date hereof being
the "Shares");
WHEREAS, opposite each Stockholder's name on Schedule II
under the caption "Options Owned" is (i) the number of shares of Pinnacle
Common Stock acquirable pursuant to employee stock options owned by the
Stockholders (the "Options") and (ii) the exercise price of each such
Option (the "Exercise Price");
WHEREAS, each Stockholder severally desires to contribute its
shares of Pinnacle Common Stock to PHCR as part of a transaction that,
together with the Merger and the Harveys Merger, is intended to qualify as
exchanges under section 351 of the Internal Revenue Code of 1986, as
amended;
WHEREAS, as a condition to its willingness to enter into the
Merger Agreement, PHCR has requested that the Stockholders enter into this
Agreement; and
WHEREAS, from time to time prior to the consummation of the
Merger, additional Stockholders may be joined as signatories to this
Agreement either in substitution of or in addition to, the Stockholders, in
each case subject to the terms and conditions herein described.
NOW, THEREFORE, in consideration of the foregoing premises
and the representations, warranties and agreements contained herein, and
for other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain capitalized terms used and not
otherwise defined herein have the meanings ascribed to them in the Merger
Agreement. Unless the context otherwise requires, such terms shall include
the singular and plural and the conjunctive and disjunctive forms of the
terms defined.
ARTICLE II
VOTING AGREEMENTS
SECTION 2.01. Stockholder Meetings. Each Stockholder agrees
that at any meeting of stockholders of Pinnacle called to vote upon the
Merger or the Merger Agreement, or at any adjournment thereof, or in any
other circumstances upon which a vote, consent or other approval of the
stockholders of Pinnacle with respect to the Merger, the Merger Agreement
or any of the other transactions contemplated thereby or hereby is sought,
such Stockholder shall cause its Shares to be present for quorum purposes
and to vote (or caused to be voted) its Shares in favor of the terms
thereof and each of the other transactions contemplated by the Transaction
and this Agreement and any actions required in furtherance thereof and
hereof. Each Stockholder hereby grants to PHCR a proxy to vote all of the
Shares then beneficially owned by such Stockholder as indicated in this
Section 2.01. Each Stockholder agrees that this proxy shall be irrevocable
and coupled with an interest, agrees to take such further action or execute
such other instruments as may be necessary to effectuate the intent of this
proxy and hereby revokes any proxy previously granted by such Stockholder
with respect to any of the Shares.
SECTION 2.02. Competing Transaction. Subject to the
provisions of Article VI, each Stockholder agrees that at any meeting of
stockholders of Pinnacle, or at any adjournment thereof, or in any other
circumstances upon which their vote, consent or other approval is sought,
such Stockholder shall vote (or cause to be voted) its Shares against (i)
any Takeover Proposal and (ii) any amendment of Pinnacle's Certificate of
Incorporation or Bylaws or other proposal or transaction involving Pinnacle
or any of its subsidiaries which amendment or other proposal or transaction
would in any manner impede, interfere with, materially delay, frustrate,
prevent or nullify or result in a breach of any covenant, representation or
warranty or any other obligation or agreement of Pinnacle or any
Stockholder under or with respect to, the Merger, the Merger Agreement or
any of the other transactions contemplated by the Merger Agreement or by
this Agreement.
ARTICLE III
CONTRIBUTION
SECTION 3.01. Contribution of Shares by Stockholders. Each
Stockholder agrees that immediately prior to the effective time of the
Merger (the "Effective Time"), each such Stockholder shall contribute the
number of Shares listed opposite such Stockholder's name under the caption
"Shares Contributed" on Schedule I hereto (and, to the extent that the
Options Exchanged (as defined below) are exercised prior to the Effective
Time, each such Stockholder also shall contribute such Shares received upon
such exercise), to PHCR. PHCR shall issue to each contributing Stockholder,
a number of shares of PHCR's Class A Common Stock, par value $.01 per share
(the "PHCR Class A Common Stock"), equal to the product of (A) the Merger
Consideration, (B) divided by 45.77707, (C) multiplied by .009901 (the
foregoing calculation, the "Class A Conversion Ratio"), and a number of
shares of PHCR's Class B Common Stock, par value $.01 per share (the "PHCR
Class B Common Stock" and, together with the PHCR Class A Common Stock, the
"PHCR Common Stock"), equal to the product of (A) the Merger Consideration,
(B) divided by 45.77707, (C) multiplied by .990099 (the foregoing
calculation, the "Class B Conversion Ratio"), for each Share contributed.
SECTION 3.02. Termination of Options by Stockholders. Each
Stockholder agrees that immediately prior to the Effective time, the
Options listed opposite such Stockholder's name under the caption "Options
Exchanged" on Schedule I hereto shall be cancelled, except to the extent
that the Options Exchanged are exercised prior to the Effective Time, in
which case such Stockholder also shall contribute to PHCR in accordance
with Section 3.01 the Shares received upon such exercise. In connection
with such cancellation, PHCR shall issue to such Stockholder one or more
fully vested options to acquire (i) a number of shares of PHCR Class A
Common Stock equal to the number of shares of Pinnacle Common Stock
issuable upon exercise of such Options, multiplied by the Class A
Conversion Ratio, and (ii) a number of shares of PHCR Class B Common Stock
equal to the number of shares of Pinnacle Common Stock issuable upon
exercise of such Options, multiplied by the Class B Conversion Ratio, in
each case subject to the restrictions set forth in an option agreement to
be entered into between the parties. With respect to each Stockholder, the
exercise price of each option issued to purchase PHCR Common Stock shall be
set at an amount so that the aggregate value of all such options will, as
of the Effective Time, be equal to (i) the product of (a) the cash amount
of the Pinnacle Merger Consideration multiplied by (b) the aggregate number
of Shares which may be acquired upon exercise of the Options contributed by
such Stockholder, minus (ii) the aggregate Exercise Price of such Options.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Stockholders. Each of the Stockholders severally and not jointly represents
and warrants to Pinnacle Acq Corp as follows:
(a) Power, Organization and Standing. Such Stockholder
has all requisite power and authority to enter into and perform its
obligations under this Agreement and, if such Stockholder is not a
natural person, such Stockholder is duly organized, validly existing
and in good standing under the laws of its state of organization.
(b) Authority and Capacity. The execution and delivery
of this Agreement, and the performance by such Stockholder of its
obligations hereunder, have been duly authorized by all necessary
action on the part of such Stockholder. This Agreement has been duly
executed and delivered by such Stockholder and, assuming the due
execution and delivery hereof by PHCR and assuming that approval of
this Agreement by Pinnacle remains effective, this Agreement
constitutes a legal, valid and binding obligation of such
Stockholder, enforceable against such Stockholder in accordance with
its terms.
(c) Ownership. Such Stockholder is the record and
beneficial owner of, and has good and valid title to, the number of
Shares and Options listed opposite such Stockholder's name under the
captions "Shares Owned" and "Options Owned," respectively on
Schedule I hereto, free and clear of all Liens or other adverse
interests (including any restrictions on the right to vote, sell or
otherwise dispose of such Shares and Options). Except for this
Agreement, there are no outstanding warrants, subscriptions, rights
(including preemptive rights), options, calls, commitments or other
agreements or Liens or other adverse interests to encumber, purchase
or acquire any of the Shares or Options of such Stockholder or
securities convertible into or exchangeable for the Shares of such
Stockholder. Except as indicated in Schedule I, neither such
Stockholder nor any of its affiliates or associates (as such terms
are defined in Rule 12b-2 promulgated under the Exchange Act) holds
either of record or beneficially any securities, capital stock,
warrants, subscriptions, rights (including preemptive rights),
options, calls, commitments or other instruments of Pinnacle or any
of Pinnacle's direct or indirect subsidiaries other than such
Stockholder's Shares. Such Stockholder has the exclusive power to
vote such Shares.
(d) No Conflict. The execution of this Agreement and
the consummation of the transactions contemplated hereby will not
require notice to, or the consent of, any party to any contract to
which such Stockholder is a party or by which it is bound, or the
consent, approval, order or authorization of, or the registration,
declaration or filing with, any governmental authority, except for
those (i) required under the HSR Act, if any; (ii) required by any
Gaming Authority; and (iii) pertaining to approval by the Pinnacle
Board of Directors (which the Stockholders represent has been
granted). Assuming that the notices, consents and approvals referred
to in the preceding sentence have been given, made or obtained and
remain effective, the execution, delivery and performance by such
Stockholder of this Agreement and the consummation of the
transactions contemplated hereby will not (i) violate any Laws, (ii)
result in a breach or violation of any provision of, constitute a
default under, or result in the termination of, or an acceleration
of indebtedness or creation of any Lien under, any contract to which
such Stockholder is a party or by which it is bound or (iii)
conflict with or violate any provision of the organizational or
similar documents of such Stockholder.
(e) Brokers, Finders, etc. No broker, investment
banker, financial advisor, finder or other person (other than fees
and expenses of which are the responsibility of PHCR or Pinnacle Acq
Corp) is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on
behalf of the Stockholders.
(f) Investment Representations. Each Stockholder:
(i) is an "Accredited Investor," as
such term is defined in Regulation D under the Securities Act of
1933, as amended (the "Securities Act");
(ii) has had access to such financial
and other information, and has been afforded the opportunity to ask
questions of representatives of PHCR, and to receive answers to
those questions, as it has deemed necessary in connection with its
acquisition of PHCR Common Stock;
(iii) acknowledges that the shares of
PHCR Common Stock that will be acquired pursuant to this Agreement
are being acquired in a transaction not involving any public
offering within the meaning of the Securities Act, and the shares of
PHCR Common Stock, have not been, and may never be, registered under
the Securities Act;
(iv) agrees not to offer, sell,
transfer or otherwise dispose of the PHCR Common Stock in the
absence of registration under the Securities Act unless it delivers
to PHCR an opinion of counsel reasonably satisfactory to PHCR, in
form and substance satisfactory to PHCR, to the effect that the
proposed sale, transfer or other disposition may be effected without
registration under the Securities Act and under applicable state
securities and blue sky laws;
(v) acknowledges that unless and until
such PHCR Common Stock shall have been registered under the
Securities Act, the certificates will bear a legend to the following
effect:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR
DELIVERS TO THE COMPANY AN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY
SATISFACTORY TO THE COMPANY, IN FORM AND SUBSTANCE SATISFACTORY TO THE
COMPANY, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER
DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT
AND UNDER APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS.
(vi) has such knowledge and experience
in financial and business matters that it is capable of evaluating
the merits and risks of an acquisition of the PHCR Common Stock and
is able to bear the economic risk of a loss of an investment in the
PHCR Common Stock and is not acquiring any PHCR Common Stock with a
view to the distribution thereof or any present intention of
offering or selling any thereof in a transaction that would violate
the Securities Act or the securities laws of any state or any other
applicable jurisdiction; and
(vii) has been advised by its own
counsel with respect to this Agreement and the tax implications of
the contributions and transactions contemplated hereby.
(g) Stockholders Agreement. Such Stockholder has
reviewed the provisions of the Stockholders Agreement, dated as of
February 2, 1999 by and among Harveys, Colony HCR Voteco LLC, a
Delaware limited liability company, Colony Investors III, L.P., a
Delaware limited partnership and the persons listed on Schedule A
thereto (the "Colony Stockholders Agreement"), and acknowledge that
such Stockholder shall enter into an agreement with substantially
similar terms (except as may be specified in the MOU) on the Closing
Date, by and among PHCR and the stockholders of PHCR named therein
(the "Stockholders Agreement") and such Stockholder acknowledges
that the PHCR Common Stock to be issued to such Stockholder pursuant
to Article III hereof shall be subject to the Stockholders
Agreement.
SECTION 4.02. Representations and Warranties of PHCR. PHCR
hereby represents and warrants to each of the Stockholders as follows:
(a) Organization, Standing and Power. PHCR is duly
organized, validly existing and in good standing under the laws of
its state of incorporation, and has all requisite power and
authority to enter into and perform its obligations under this
Agreement.
(b) Capitalization. The authorized capital stock of
PHCR consists of 20,000,000 shares of PHCR Class A Common Stock,
20,000,000 shares of PHCR Class B Common Stock and 1,000,000 shares
of preferred stock, par value $.01 per share ("PHCR Preferred
Stock"). As of the date hereof, 1,000 shares of PHCR Class A Common
Stock are issued and outstanding and no shares of PHCR Preferred
Stock are issued and outstanding. Immediately following the
Effective Time, the authorized capital stock of PHCR shall consist
of 20,000,000 shares of PHCR Class A Common Stock, 20,000,000 shares
of PHCR Class B Common Stock and 1,000,000 shares of PHCR Preferred
Stock. Assuming Pinnacle Merger Consideration of $24 per share in
cash, immediately following the Effective Time, 105,388 shares of
PHCR Class A Common Stock, 10,538,798 shares of PHCR Class B Common
Stock and no shares of PHCR Preferred Stock shall be issued and
outstanding; and 11,399 shares of PHCR Class A Common Stock and
1,139,875 shares of PHCR Class B Common Stock shall be reserved for
issuance upon exercise of outstanding employee stock options;
provided, that such numbers do not include any shares of PHCR Class
A Common Stock or PHCR Class B Common Stock which may be issued to
holders of Harveys' preferred stock in lieu of accrued but unpaid
dividends; provided further that such numbers shall be adjusted to
take into account any adjustment in the Pinnacle Merger
Consideration pursuant to Section 10.11 of the Merger Agreement.
(c) Authority and Capacity. The execution and delivery
of this Agreement, and the performance by PHCR of its obligations
hereunder, have been duly authorized by all necessary action on the
part of PHCR. This Agreement has been duly executed and delivered on
behalf of PHCR and, assuming the due execution and delivery hereof
by the Stockholders and assuming that approval of this Agreement by
Pinnacle remains effective, this Agreement constitutes a legal,
valid and binding obligation of PHCR, enforceable against PHCR in
accordance with its terms.
(d) No Conflict. The execution of this Agreement and
the consummation of the transactions contemplated hereby will not
require notice to, or the consent of, any party to any contract to
which PHCR or any of its affiliates is a party or by which any of
them is bound, or the consent, approval, order or authorization of,
or the registration, declaration or filing with, any governmental
authority, except for (i) those required under the HSR Act, if any,
(ii) approvals, as necessary, by any Gaming Authority, (iii)
approval by the Pinnacle Board of Directors (which the Stockholders
represent has been granted); and (iv) as set forth on Schedule
3.02(c). Assuming that the notices, consents and approvals referred
to in the preceding sentence have been given, made or obtained and
remain effective, the execution, delivery and performance by PHCR of
this Agreement and the consummation of the transactions contemplated
hereby will not (i) violate any Laws, (ii) result in a breach or
violation of any provision of, or constitute a default under, any
contract to which PHCR is a party or by which it is bound or (iii)
conflict with any provision of the certificate of incorporation or
bylaws of PHCR.
ARTICLE V
COVENANTS
SECTION 5.01. No Solicitation. Each Stockholder agrees that
it shall not, nor shall it authorize or permit any Affiliate, agent,
partner or employee of, or any investment banker, attorney or other advisor
or representative of, such Stockholder to, directly or indirectly, (i)
solicit or initiate, or encourage any inquiries regarding or the submission
of, any Takeover Proposal (including without limitation any proposal or
offer to Pinnacle's stockholders) or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any nonpublic information
with respect to, or take any other action to facilitate the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Takeover Proposal. Notwithstanding the foregoing, a Stockholder may (A)
furnish nonpublic information with respect to Pinnacle to the person who
made such Takeover Proposal and (B) participate in negotiations with such
person regarding such Takeover Proposal, if such Stockholder is instructed
in writing to do so by the Board of Directors of Pinnacle; provided that it
is understood that this Section 5.01 shall not be deemed to have been
violated if in response to an unsolicited inquiry, such Stockholder states
solely that he or she is subject to the limits of this Agreement and
provides only public information in response to such unsolicited inquiry.
SECTION 5.02. No Transfer; No Inconsistent Arrangements. Each
Stockholder agrees that it shall not (including by way of any gift, sale,
pledge or other disposition, including without limitation in connection
with foreclosures by lenders secured by pledges of Shares or Options) (i)
transfer, sell or pledge, encumber, assign or otherwise dispose of, or
consent to the transfer or pledge of, any or all of the Shares or Options
owned by it or of any interest therein, (ii) enter into any contract,
option or other agreement or understanding with respect to any such
transfer of any such Shares or Options, or any interest therein or result
in the imposition of any Lien, (iii) grant any proxy, power-of-attorney or
other authorization in or with respect to any such Shares or Options, (iv)
deposit any such Shares or Options into a voting trust or enter into a
voting agreement or arrangement with respect to any such Shares or Options
or (v) take any action that would in any way restrict, limit or interfere
or in any way be inconsistent with the performance of its obligations
hereunder or the transactions contemplated hereby or by the Merger
Agreement.
SECTION 5.03. Further Assurances. From time to time, whether
before, at, or after the Closing, each party hereto agrees to execute and
deliver, or cause to be executed and delivered, such additional
instruments, certificates and other documents, and to take such other
action, as may be necessary or advisable in order to carry out the terms
and provisions of this Agreement and the transactions contemplated hereby
(including voting the Shares in favor of any such transaction) or to cause
the elimination of any circumstance that would cause a condition under
Article V hereof not to be satisfied on the Closing Date.
SECTION 5.04. Expenses. All fees and expenses incurred in
connection with this Agreement and the transactions contemplated hereby
(other than fees and expenses incurred in connection with obtaining
necessary gaming licenses which shall be paid by Pinnacle) shall be paid by
the party incurring such fees or expenses, whether or not the Merger is
consummated.
SECTION 5.05. Publicity. Each Stockholder and PHCR agree
that, prior to the Closing, no public release or announcement concerning
this Agreement shall be issued by any such party without the prior written
consent (which consent shall not be unreasonably withheld) of the other
parties hereto, except as such release or announcement may be required by
law (in which event the other parties hereto shall have the right to
comment promptly on the form and content of the disclosure).
SECTION 5.06. Notice of Certain Events. PHCR and each
Stockholder agrees to notify each other party hereto promptly of (a) any
event or condition that, with or without notice or lapse of time, would or
could reasonably be expected to cause any of the representations and
warranties made by such party herein to be no longer complete and accurate
as of any date on or before the Closing Date, or (b) any failure, with or
without notice or lapse of time, on the part of such party to comply with
any of the covenants or agreements on its part contained herein at any time
on or before the Closing Date.
SECTION 5.07. R.D. Hubbard Approval Right. From the date
hereof until the Effective Time or earlier termination of this Agreement,
R.D. Hubbard shall have the right to reasonably approve any equity
investment in, or material acquisition by, Holding, Pinnacle Acq Corp,
Harveys or any of their respective subsidiaries; provided that Mr. Hubbard
shall consider any request to take such actions in good faith and such
approval shall not be unreasonably withheld.
SECTION 5.08. Sale of Hubbard Shares. Immediately prior to
the Effective Time, Mr. Hubbard shall sell to Pinnacle, and Pinnacle shall
purchase from Mr. Hubbard, the shares of Pinnacle Common Stock owned by Mr.
Hubbard on the date hereof that are not Shares Contributed (the "Hubbard
Shares") for a price equal to the Pinnacle Merger Consideration (including
a contingent payment right on terms substantially identical to that being
received by Pinnacle's stockholders under Section 10.11 of the Merger
Agreement), if any, that would be payable at the Effective Time in respect
of the Hubbard Shares. Mr. Hubbard shall use commercially reasonable
efforts to obtain a comparable economic and tax position with respect to
the sale of the Hubbard Shares if, for any reason, PHCR does not redeem the
Hubbard Shares. In connection with implementing its financing, PHCR and
Pinnacle Acq Corp shall use their commercially reasonable efforts to secure
elimination of covenants in Indentures governing Pinnacle's public debt and
waivers from its banks under the Bank Credit Facility which would prohibit
or limit Pinnacle's ability to effectuate the purchase of the Hubbard
Shares as contemplated herein.
ARTICLE VI
CONDITIONS PRECEDENT TO
OBLIGATIONS UNDER ARTICLE III
SECTION 6.01. Stockholders' Conditions. The obligation of
each of the Stockholders pursuant to Article III shall be subject to the
satisfaction or waiver on the Closing Date of each of the following
conditions precedent:
(a) No Injunctions or Restraints. No temporary
restraining order or preliminary or permanent injunction of any
court or administrative agency of competent jurisdiction prohibiting
the transactions contemplated by this Agreement shall be in effect.
(b) No Violation of Law. The performance of the
obligations of each of the Stockholders pursuant to Article III
shall not constitute a violation of any Laws.
(c) Representations and Warranties. The
representations and warranties of PHCR set forth in this Agreement
shall be true and correct in all material respects on and as of the
Closing Date an as of the date hereof, as though made on and as of
the Closing Date.
(d) Covenants and Agreements. PHCR shall have
performed, in all material respects, all obligations and complied,
in all material respects, with all covenants required by this
Agreement to be performed or complied with it at or prior to the
Closing Date.
(e) Merger Agreement. Each of the conditions to
closing contained in the Merger Agreement (other than the
consummation of the transactions contemplated by this Agreement)
shall have been satisfied or waived.
(f) Certificates for PHCR Common Stock. PHCR shall
have delivered to each Stockholder certificates representing shares
of PHCR Common Stock, free and clear of all Liens or other adverse
interests (including any restriction on the right to vote, sell or
otherwise dispose of the PHCR Common Stock).
(g) Stockholders Agreement. PHCR shall have executed
and delivered the Stockholders Agreement to the Stockholders.
(h) Purchase of Hubbard Shares. The Hubbard Shares
shall have been redeemed by Pinnacle for an amount equal to the
Pinnacle Merger Consideration (including a contingent payment right
on terms substantively identical to that being received by
Pinnacle's stockholders under Section 10.11 of the Merger Agreement)
so that after such redemption his percentage ownership interest in
Pinnacle, including any ownership arising from the exercise of stock
options held by him and any other shares the ownership of which is
attributed to him under section 318 of the Internal Revenue Code of
1986, as amended, is less than 80% of such percentage ownership
interest prior to such redemption, or, in his good faith
determination, Mr. Hubbard shall have obtained a comparable economic
and tax position with respect to the sale of the Hubbard Shares.
SECTION 6.02. PHCR's Conditions. The obligation of PHCR
pursuant to Article III shall be subject to the satisfaction or waiver on
the Closing Date of each of the following conditions precedent:
(a) No Injunctions or Restraints. No temporary
restraining order or preliminary or permanent injunction of any
court or administrative agency of competent jurisdiction prohibiting
the transactions contemplated by this Agreement shall be in effect.
(b) No Violation of Law. The performance of the
obligations of PHCR pursuant to Article III shall not constitute a
violation of any Laws.
(c) Representations and Warranties. The
representations and warranties of the Stockholders set forth in this
Agreement shall be true and correct in all material respects on and
as of the Closing Date, as though made on and as of the Closing
Date.
(d) Covenants and Agreements. Each of the Stockholders
shall have performed, in all material respects, all obligations and
complied, in all material respects, with all covenants required by
this Agreement to be performed or complied with it at or prior to
the Closing Date.
(e) Merger Agreement. Each of the conditions to
closing contained in the Merger Agreement (other than the
consummation of the transactions contemplated by this Agreement)
shall have been satisfied or waived.
(f) Certificates for Shares. Each Stockholder shall
have delivered to PHCR certificates representing its Shares with all
necessary indorsements, free and clear of all Liens or other adverse
interests (including any restriction on the right to vote, sell or
otherwise dispose of such Shares).
(g) Stockholders Agreement. Each Stockholder shall
have executed and delivered the Stockholders Agreement to PHCR.
ARTICLE VII
TERMINATION, AMENDMENT AND INDEMNIFICATION
SECTION 7.01. Termination. This Agreement shall terminate
without any further action on the part of PHCR or any of the Stockholders
(i) if the Closing has occurred, (ii) if the Merger has been consummated in
accordance with the terms of the Merger Agreement, or (iii) if the Merger
Agreement has been terminated in accordance with Article 9 thereunder.
SECTION 7.02. Effect of Termination. In the event this
Agreement shall have been terminated in accordance with Section 7.01 of
this Agreement, this Agreement shall forthwith become void and have no
effect, without any liability or obligation on the part of any party
hereto, except to the extent that such termination results from the wilful
and material breach by a party of any of its representations, warranties,
covenants or agreements set forth in this Agreement, in which case each
other party shall be entitled to recover all damages allowable at law and
all relief available in equity, subject, however, to the limitation in
Section 9.2 of the Merger Agreement.
SECTION 7.03. Amendment. This Agreement and the Schedules and
Exhibits hereto may not be amended except by an instrument or instruments
in writing signed and delivered on behalf of each of the parties hereto. At
any time prior to the Closing Date, any party hereto which is entitled to
the benefits hereof may (a) extend the time for the performance of any of
the obligations or other acts of any other party, (b) waive any inaccuracy
in the representations and warranties of any other party contained herein,
in any Schedule and Exhibit hereto, or in any document delivered pursuant
hereto, and (c), subject to applicable law, waive compliance with any of
the agreements of any other party hereto or any conditions contained
herein. Any agreement on the part of any of the parties hereto to any such
extension or waiver (i) shall be valid only if set forth in an instrument
in writing signed and delivered on behalf of each such party, and (ii)
shall not be construed as a waiver or extension of any subsequent breach or
time for performance hereunder.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Notices. All notices, requests, claims, demands
and other communications under this Agreement shall be in writing and shall
be deemed given if delivered personally or sent by overnight courier
(providing proof of delivery) to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to PHCR, to:
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: Nick P. Saggese, Esq.
Telephone: 213-687-5000
Facsimile: 213-687-5600
(b) if to the Stockholders, to the addresses set forth
on the books and records of Pinnacle.
SECTION 8.02. Interpretation. When a reference is made in
this Agreement to an Article, Section or Schedule, such reference shall be
to an Article, Section or Schedule of this Agreement, unless otherwise
indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of this Agreement. 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 Merger Agreement and the consummation of
the transactions contemplated by such Merger Agreement are transactions
contemplated by this Agreement. To the extent any restriction on the
activities of Pinnacle or its subsidiaries under the terms of this
Agreement requires prior approval under any Gaming Law, such restriction
shall be of no force or effect unless and until such approval is obtained.
If any provision of this Agreement is illegal or unenforceable under any
Gaming Law, such provision shall be void and of no force or effect.
SECTION 8.03. Severability. If any provision of this
Agreement or the application of any such provision shall be held invalid,
illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not
affect any other provision hereof. In lieu of any such invalid, illegal or
unenforceable provision, the parties hereto intend that there shall be
added as part of this Agreement a valid, legal and enforceable provision as
similar in terms to such invalid, illegal or unenforceable provision as may
be possible or practicable under the circumstances.
SECTION 8.04. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties.
SECTION 8.05. Entire Agreement; No Third-Party Beneficiaries.
This Agreement, the MOU, the Merger Agreement, and the Schedules and
Exhibits thereto, constitute the entire agreements, and supersede all prior
agreements and understandings, both written and oral, among the parties
with respect to the subject matter of these agreements and neither this
Agreement nor the Merger Agreement, is intended to confer upon any person
other than the parties any rights or remedies thereunder.
SECTION 8.06. Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE,
WITHOUT REGARD TO ANY APPLICABLE CONFLICTS OF LAW AND EXCEPT THAT GAMING
LAWS SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
RESPECTIVE JURISDICTIONS IN WHICH APPROVALS FROM GAMING AUTHORITIES ARE
REQUIRED TO BE OBTAINED.
SECTION 8.07. Gaming Laws. Each of the provisions of this
Agreement is subject to and shall be enforced in compliance with the Gaming
Laws.
SECTION 8.08. Assignment. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be
assigned, in whole or in part, by operation of law or otherwise by any of
the parties without the prior written consent of the other parties, except
that PHCR may assign, in its sole discretion and without any Stockholder's
consent, any of or all its rights, interests and obligations under this
Agreement to any controlled affiliate of Colony Capital, Inc., but no such
assignment shall relieve PHCR of any of its obligations under this
Agreement. 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 8.09. Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the United States located in the State of
Delaware or in any Delaware state court, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto (a) consents to submit itself to the personal
jurisdiction of any Federal court located in the State of Delaware or any
Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that
it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court and (c) agrees that it will
not bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a Federal or state
court sitting in the State of Delaware.
SECTION 8.10. Stockholder Capacity. Notwithstanding anything
herein to the contrary, the Stockholders enter into this Agreement solely
in their respective capacities as stockholders of Pinnacle. No person
executing this Agreement who is or becomes a director or officer of
Pinnacle shall be deemed to make any agreement herein in his or her
capacity as director or officer of Pinnacle. Nothing herein shall limit or
affect (a) actions taken by any Stockholder in his or her capacity as
director or officer of Pinnacle or (b) the rights and remedies PHCR may
have other than pursuant to this Agreement in respect of such conduct
undertaken in the capacity of director or officer of Pinnacle.
[signature pages follow]
IN WITNESS WHEREOF, each of the parties hereto has caused its
duly authorized officers to execute this Voting and Contribution Agreement
as of the date first above written.
PH CASINO RESORTS, INC.
By: /s/ Charles W. Scharer
-----------------------------------
Name: Charles W. Scharer
Title: President
STOCKHOLDERS
/s/ R.D. Hubbard
------------------------------------------
R. D. HUBBARD
/s/ G. Michael Finnigan
------------------------------------------
G. MICHAEL FINNIGAN
/s/ Paul Alanis
------------------------------------------
PAUL ALANIS
/s/ Loren Ostrow
------------------------------------------
LOREN OSTROW
/s/ J. Michael Allen
------------------------------------------
J. MICHAEL ALLEN
/s/ Cliff Kortman
------------------------------------------
CLIFF KORTMAN
/s/ Bruce C. Hinckley
------------------------------------------
BRUCE C. HINCKLEY
/s/ Richard Delaney
------------------------------------------
RICHARD DELANEY
/s/ Chris Plant
------------------------------------------
CHRIS PLANT
/s/ Robert Callaway
------------------------------------------
ROBERT CALLAWAY
EXHIBIT 3
MEMORANDUM OF UNDERSTANDING
April 17, 2000
THIS MEMORANDUM OF UNDERSTANDING confirms the
agreements among the individuals listed on the signature pages hereto
(collectively, the "Executives"), and PH Casino Resorts, Inc., a Delaware
corporation ("PHCR"), a wholly owned subsidiary of Harveys Casino Resorts,
a Nevada corporation ("Harveys"), in connection with PHCR's agreement to
acquire Pinnacle Entertainment, Inc., a Delaware corporation (the
"Company"), pursuant to the Agreement and Plan of Merger (the "Merger
Agreement") by and among PHCR, Pinnacle Acquisition Corporation, a Delaware
corporation ("Pinnacle Acq Corp"), and the Company. For all purposes herein
(including the schedules attached hereto), references to the Executives'
employment agreements (including all forms of compensation due thereunder)
shall be deemed to include adjustments, amendments or restatements thereof
to the extent such adjustments, amendments or restatements are permitted by
the terms of the documents governing an Acquisition Transaction (as defined
below) or are otherwise agreed to in writing by PHCR prior to the
consummation of such Acquisition Transaction. Capitalized terms used but
not defined herein shall have the respective meanings ascribed to such
terms in the Merger Agreement.
1. General Statement of Purpose. The Executives and PHCR have
conducted discussions with respect to an acquisition by merger of
all of the outstanding shares of the Company, except for those
shares that the Company will repurchase from R.D. Hubbard (as
contemplated in the Merger Agreement) and/or those which the
Executives will contribute directly to PHCR in exchange for shares
of its stock, and/or those options held by the Executives to
acquire shares of the Company, which shall be fully vested and
canceled in exchange for the issuance of options of PHCR
(collectively an "Acquisition Transaction"). The Executives and
PHCR have concluded that it would be desirable to effect an
Acquisition Transaction. To that end, the parties hereto have
executed this Memorandum of Understanding and a Voting and
Contribution Agreement to confirm their binding agreements. The
Executives and PHCR agree that this Memorandum of Understanding
shall terminate and cease to be of effect upon the termination of
the Merger Agreement or upon the execution of definitive agreements
with respect to the matters set forth herein.
2. Rollover of Equity.
(a) PINNACLE STOCK. In exchange for the shares of Pinnacle
common stock ("Pinnacle Stock") rolled over, Executives will
receive a number of shares of voting and nonvoting stock
("PHCR Stock") of PHCR equal to the product of (i) the
number of shares of Pinnacle Stock contributed to PHCR and
(ii) $24.00 per share 1, divided by $45.77707, the per share
price of PHCR Stock to be issued in exchange for all
outstanding shares of common stock of Harveys Casino
Resorts, assuming a 10 million share fully diluted PHCR
Stock capitalization before giving effect to any issuances
hereunder.
(b) PINNACLE OPTIONS. In the event that options held by the
Executives are not converted into Pinnacle Stock prior to
the consummation of the Acquisition Transaction, Executives
with options to purchase Pinnacle Stock (the "Pinnacle
Options") will exchange such options for options to purchase
PHCR Stock, with the exercise price and number of shares
adjusted appropriately to preserve the value of each
Executive's Spread. 2
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1 If the Inglewood Land is sold on or prior to the fifth Business Day
prior to the Closing Date of the Acquisition Transaction, such
number will be increased in the same manner provided for holders of
Pinnacle Stock under the Merger Agreement. If the Inglewood Land is
sold after the fifth Business Day prior to the Closing Date of the
Acquisition Transaction, Executives will receive a cash payment for
each share contributed equal to any amount paid to a holder of a
share of Pinnacle Stock upon such event pursuant to the Merger
Agree ment and one Class A CPR.
2 The Spread for each Pinnacle Option is equal to the product of (i)
the number of unexercised shares subject to a Pinnacle Option and
(ii) the difference between (A) $24.00 per share (subject to
adjustment in the event that the Inglewood Land is sold on or prior
to the fifth Business Day prior to the Closing Date of the
Acquisition Transaction as set forth in the first sentence of
footnote 1) and (B) the per share option exercise price. If the
Inglewood Land is sold after the fifth Business Day prior to the
Closing Date of the Acquisition Transaction, Executives will
receive a cash payment for each share of Pinnacle Stock subject to
the exchanged Pinnacle Option equal to any amount paid to a holder
of a share of Pinnacle Stock upon such event pursuant to the Merger
Agreement and one Class A CPR.
(i) Executives who so chose may, immediately following
the Acquisition Transaction, perform a cashless
exercise of their options to purchase PHCR Stock.
(ii) PHCR will make available to the Executives (other
than Messrs. Hubbard, Finnigan and Alanis) loans, in
an aggregate amount not to exceed $2.5 million, to
pay taxes incurred by the Executives in connection
with the cashless exercise of their options either
before or after the Acquisition Transaction. Such
loans would be made upon the following terms:
(1) secured by all present and future equity
interests in PHCR,
(2) interest rate of 8%, with interest to be
compounded and payable annually, with bonus
payments (net of taxes on such bonus payments)
earned by Executive to be offset by such
interest payments due,
(3) 4 year maturity, with respect to the entire
principal balance, and any accrued but unpaid
interest,
(4) prepayable without penalty,
(5) will accelerate upon the termination of the
Executive's employment.
(iii) PHCR will represent and warrant that it has no
present plan or intention to liquidate either the
Company or Harveys, and PHCR will not liquidate
Pinnacle or Harveys within two (2) years after the
Closing Date unless it provides to the Executives an
opinion of its representing counsel, based on
customary assumptions but otherwise substantially
unqualified that the liquidation would not cause the
contributions of Pinnacle Stock to PHCR pursuant to
the Voting Agreement to fail to qualify as exchanges
under Section 351 of the Internal Revenue Code of
1986, as amended (the "Code"). The immediately
foregoing representations, warranties or covenants
shall survive any transfer of the ownership of 51% of
Colony's (as defined in Section 4) total equity
interest in PHCR (whether voting or nonvoting) held
by Colony (or an affiliate of Colony).
(iv) PHCR shall deliver or cause to be delivered to each
Stockholder at the Closing a letter dated as of the
Closing Date from Colony Investors III, L.P. and each
other investment vehicle used by Colony Capital, Inc.
that holds an interest in PHCR immediately following
the Harveys Merger (each a "Colony LP") representing
and warranting to such Stockholder that such Colony
LP has no present intention or plan to sell, exchange
or otherwise dispose of any of its interests in PHCR.
(v) When making future infusions of funds to Pinnacle Acq
Corp and/or the Pinnacle Surviving Corporation, if
any, PHCR shall endeavor in good faith to provide
such funds to Pinnacle Acq Corp and/or the Pinnacle
Surviving Corporation by means of intercompany loans
unless PHCR determines in its reasonable judgment
that to do so would be inadvisable.
(c) RIGHTS OF REPURCHASE/PUT RIGHTS.
(i) Each of the Executives who is also an employee of the
Company regardless of whether he is a party to a
written employment agreement with the Company (other
than Messrs. Finnigan and Hubbard) will have the
right, individually, to require PHCR to repurchase
his shares of PHCR stock and PHCR will have the right
acquire such shares, each in accordance with the
provisions set forth in this paragraph (i), upon the
termination of an Executive's employment with PHCR
for any reason other than one specified in
subparagraph (ii) below. The repurchase price shall
be paid 1/3 upon exercise, and 1/3 on the first and
second anniversary of such termination. For purposes
of such repurchase, the fair market value of the
shares of PHCR stock to be repurchased shall be
calculated based upon the following formula: 6.45
times the 12 month trailing EBITDA of PHCR (including
the combined EBITDAs of Harveys and the Company for
an appropriate number of months in the event that
there are less than twelve months of EBITDA for the
operating subsidiaries of PHCR following the closing
of the Acquisition Transaction), minus net debt (or
other liabilities that would customarily be treated
as debt for valuation purposes), divided by the total
number of shares of PHCR stock outstanding, times the
number of shares of PHCR stock to be repurchased. For
purposes of calculating net debt, the amount of
capital invested in any uncompleted development
projects, including expansions of existing
properties, shall be included in the calculation of
cash on hand. For purposes of calculating EBITDA and
net debt, such calculation will be made in a manner
substantially consistent with the past practices of
Harveys and the Company including in connection with
equity valuations for this transaction. The unpaid
purchase price will bear interest at the rate of 12%
per year, compounded annually. The right to trigger
such repurchase process shall constitute an absolute
right and obligation of the Executives and PHCR,
respectively, in accordance with the terms hereof. No
other claims (other than repayment of the loans
described in Section 2(b)(ii) above) shall either:
(A) be asserted by either party in such repurchase
process; or (B) be deemed to have been waived as a
result of such repurchase.
(ii) In the event that an Executive described in
subsection (i) above either: (x) is terminated for
cause 3; or (y) voluntarily terminates (1) in the
case of an Executive who is a party to an effective
employment agreement with the Company that defines
good reason or a similar standard, without good
reason as defined in his employment agreement or (2)
in the case of any other Executive (other than
Messrs. Hubbard and Finnigan), for any reason, then
PHCR will have the right to acquire, and the
Executive will have the right to require PHCR to
repurchase such shares on the same terms and
conditions set forth in subparagraph (ii) above,
except such repurchase shall be paid 20% upon
exercise and 20% on each of the first four
anniversaries of such termination and will bear
interest at the rate of 8% per annum (rather than
12%), compounded annually from date of termination to
the date of repurchase by PHCR.
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3 In the case of an Executive who is a party to a written employment
agreement with the Company, the determination of whether he has
been terminated for cause shall be governed by the terms of his
employment agreement, to the extent specified therein. In the case
of an Executive who is a party to a written employment agreement
with the Company but where the standard is not so specified, and in
the case of an Executive who is not a party to a written employment
agreement with the Company, such Executive shall be deemed to have
been terminated for cause if the Company had the right to terminate
such Executive's employment for "gross misconduct" as such term is
used for purposes of determining an employee's right to
continuation of health coverage under Section 4980B(f)(3)(B) of the
Code.
3. Incentive Grants of Restricted Stock and Stock Options. If the
Acquisition Transaction is consummated, then, at the Closing PHCR
shall grant 604,464 shares of restricted PHCR Common Stock (the
"PHCR Restricted Stock"), to the Executives in accordance with
Schedule A hereto. The agreements evidencing the PHCR Restricted
Stock will, except as otherwise provided herein, contain
substantially the same terms (with respect to the issuance of
restricted stock only) as that certain management stock option and
restricted stock agreement, dated February 2, 1999, by and between
Harveys and John McLaughlin. An additional 530,223 shares of PHCR
Common Stock shall be reserved for issuance of stock options (the
"New Options") pursuant to a stock option plan for the benefit
members of senior management of the Company (the "Key Managers").
The division of such New Options among the Key Managers shall
reasonably be determined by Mr. Alanis, consistent with industry
standards and subject to the approval of PHCR. The per share
exercise price of the New Options shall be at $43.17, the implied
share value determined in accordance with the Bear Stearns model.
As set forth above, the incentive grants of PHCR Restricted Stock
will, except as otherwise provided herein, contain substantially
the same terms (with respect to the issuance of restricted stock
only) as that certain management stock option and restricted stock
agreement, dated February 2, 1999, by and between Harveys and John
McLaughlin, which is intended to defer the imposition of federal
and state tax to the extent set forth therein or, subject to the
terms of Section 5(f) below, the termination of the Executive's
employment with PHCR (either as a member of management or a
director) occurs for whatever reason. At all times following the
date the incentive grants of PHCR Restricted Stock are awarded the
Executive shall be fully vested in such awards and the stock
represented by such incentive grant shall, except as set forth in
Section 5(f) below, be fully includable in the stock to be
repurchased by PHCR pursuant to the terms set forth in Section 2
above. Except as specifically set forth above, shares issued or
issuable under this Section 3 (except to Messrs. Hubbard and
Finnigan) shall be subject to a right of repurchase by PHCR
pursuant to the terms of the Stockholders Agreement (as defined in
Section 4).
The New Options granted to each of Messrs. Alanis, Allen, Ostrow
and Kortman shall vest in accordance with the following schedule:
20% on each of the first five anniversaries of the Closing;
provided, however, that if prior to the expiration of the current
term of his existing employment agreement with the Company (or upon
the earlier replacement or extension, as the case may be) (i) he is
terminated without cause (as defined in his employment agreement,
if defined, or if not defined, as defined in footnote 3 hereof);
(ii) he voluntarily terminates his employment for good reason (as
defined in his employment agreement, if defined); or (iii) the
Company does not offer to renew his employment agreement on
reasonable terms (provided, however, that for purposes of this
Memorandum of Understanding, no offer shall be deemed unreasonable
solely because it offers vesting and forfeiture provisions with
respect to incentive equity that are on substantially the same
terms as other employees) and such agreement is allowed to expire,
then such New Options shall become fully vested and exercisable
immediately upon such termination or expiration and the all of
shares subject to the New Options shall be subject to the
repurchase rights set forth in Section 2 above. In the event of
termination of employment for any other reason (or failure to renew
an employment agreement following a reasonable offer by the
Company), then such New Options as have not become vested and
exercisable in accordance with the schedule set forth above shall
be forfeited and only the shares subject to the New Options that
have become vested and exercisable in accordance with such schedule
shall be subject to the repurchase rights set forth in Section 2
above.
All other New Options shall vest 20% on each of the first five
anniversaries of the Closing and shall otherwise have the same
terms as options issued under Harveys' current plan.
4. Stockholders Agreement. Any PHCR Stock or options issued hereunder
shall be subject to a stockholders agreement (the "Stockholders
Agreement") with substantially the same provisions as the
Stockholders Agreement in effect at Harveys on the date hereof,
except to the extent that the provisions of the Stockholders
Agreement are inconsistent with the provisions hereof, in which
case the provisions set forth herein shall govern and control, and
be deemed to supercede such contrary provisions in the Stockholders
Agreement.
In connection with the Stockholders Agreement, Colony Investors
III, L.P. ("Colony") shall enter into an appropriate agreement with
Mr. Hubbard which shall grant to Mr. Hubbard the following rights:
(1) the right to sell or dispose of his Tag-Along Shares (as
defined in the Stockholders Agreement) pursuant to Subsection
2.5(a) of the Stockholders Agreement without giving effect to
Subsection 2.5(b) of the Stockholders Agreement; (2) a "lock-up"
restriction pursuant to Section 2.6 of the Stockholders Agreement
which shall be co- extensive with that of Colony; and (3) one
demand registration right, subject to customary terms and
conditions and any lockup required in connection with an IPO. So
long as Mr. Hubbard beneficially owns at least 50% of the
outstanding PHCR Stock (including PHCR Restricted Stock and New
Options, if any) owned by him immediately following the Effective
Time, without Mr. Hubbard's approval (which approval shall not be
unreasonably withheld or delayed), Colony shall not consent to any
waiver of the Stockholders Agreement or the Memorandum of
Understanding or any of the agreements contemplated by either of
them that would materially adversely affect Mr. Hubbard's rights
under the Stockholders Agreement.
In connection with the Stockholders Agreement, Colony also shall
enter into an appropriate agreement with Mr. Finnigan which shall
grant to Mr. Finnigan the following rights: (1) the right to sell
or dispose of his Tag-Along Shares (as defined in the Stockholders
Agreement) pursuant to Subsection 2.5(a) of the Stockholders
Agreement without giving effect to Subsection 2.5(b) of the
Stockholders Agreement; and (2) a "lock-up" restriction pursuant to
Section 2.6 of the Stockholders Agreement which shall be
co-extensive with that of Colony.
5. Non-Competition Agreements.
(a) Each of the Executives who is a party to an employment
agreement, in addition to entering into the Stockholders
Agreement, shall enter into a non-competition agreement with
the Company, pursuant to which such person shall agree, on
the terms set forth herein, not to: (i) engage in owning,
operating and developing casinos, hotels or race track
interests associated or materially competitive with casinos,
hotels or race track interests owned directly or indirectly
by PHCR (or where PHCR has announced its present intention
to develop such properties or interests), (ii) solicit any
employee, agent or consultant of the Company to terminate
such person's relationship with the Company or (iii) solicit
any counterparty to any contract with the Company to
terminate such counterparty's contract or other relationship
with the Company. Notwithstanding the foregoing, in the case
of Mr. Hubbard, (A) the restrictions of subsections 5(a)(i),
(ii) and (iii) shall be effective during the period that he
serves as a member of the Board of Directors and shall
continue, in the case of subsection 5(a)(i), for a period of
one year, and in the case of subsection 5(a)(ii) and (iii),
for a period of two years, from the date that Mr. Hubbard
ceases to be a member of the Board of Directors, (B) the
restrictions of subsections 5(a)(i), (ii) and (iii) shall
not restrict Mr. Hubbard's ownership, operation and
development of casinos, hotels or race track interests in
New Mexico so long as PHCR or any of its affiliates does not
own any casinos, hotels or race track interests in New
Mexico or in a market outside of New Mexico that competes
directly with the markets inside New Mexico, and (C) if PHCR
or any of its Affiliates acquires a material interest in or
otherwise develops any casinos, hotels or race track
interests in New Mexico or in a market outside of New Mexico
that competes directly with the markets inside New Mexico,
Mr. Hubbard shall be permitted to continue to operate and
develop casinos, hotels or race track interests, located in
New Mexico and owned or operated in whole or in part by him
on the date of such acquisition or development or as to
which Mr. Hubbard has announced a present intention to
acquire or develop. Notwithstanding the foregoing, in the
case of Mr. Finnigan, the restrictions of subsection 5(a)(i)
shall only be effective during the period that he serves as
an employee of the Company.
(b) In the case of each of the Executives (other than Mr.
Finnigan) who is a party to an employment agreement with the
Company, the restrictions of subsections 5(a)(i), (ii) and
(iii) shall be effective during the period that he serves as
an employee of the Company and shall continue to be
effective following his termination of employment (i) in the
event he is terminated for cause (as determined in his
employment agreement) or voluntarily resigns without good
reason (if and as defined in his employment agreement) for a
period of one year, in the case of subsection 5(a)(i), and,
in the case of subsections 5(a)(ii) and (iii) for a period
of two years, following such date of termination; or (ii) in
the event he is terminated other than for cause or
voluntarily terminates employment for good reason, or if the
Company does not offer to renew his then existing employment
agreement on reasonable terms and such agreement is allowed
to expire, then the provisions of subsection 5(a)(i) shall
not apply and subsections 5(a)(ii) and (iii) shall apply for
a period of two years following the Executive's termination
of employment.
(c) Each of the Executives (other than Mr. Hubbard) who is not a
party to an employment agreement, in addition to entering
into the Stockholders Agreement, shall enter into a
non-competition agreement with the Company, pursuant to
which such persons shall agree not to: (i) engage in owning,
operating and developing casinos, hotels or race track
interests associated or materially competitive with casinos,
hotels or race track interests owned directly or indirectly
by PHCR (or where PHCR has announced its intention to
develop such properties or interests), (ii) solicit any
employee, agent or consultant of the Company to terminate
such person's relationship with the Company or (iii) solicit
any counterparty to any contract with the Company to
terminate such counterparty's contract or other relationship
with the Company.
(d) In the case of each of the Executives (other than Mr.
Hubbard) who is not a party to an employment agreement with
the Company, the restrictions of subsections 5(c)(i), (ii)
and (iii) shall be effective during the period that he
serves as an employee of the Company and shall continue to
be effective following his termination of employment as
follows:
(i) in the event he is terminated for cause (as defined
in footnote 3 above) or he voluntarily resigns on or
prior to December 31, 2001, the provisions of
subsection 5(c)(i) shall apply for a period of one
year following such date of termination and the
provisions of , subsections 5(c) (ii) and (iii) shall
apply for a period of two years following such date
of termination.
(ii) in the event he is terminated other than for cause
after December 31, 2001, the provisions of subsection
5(c)(i) shall not apply and the provisions of
subsections 5(c)(ii) and (iii) shall apply for a
period of two years following such date of
termination.
(iii) in the event he is terminated for any reason or he
resigns after December 31, 2001, the provisions of
subsection 5(c)(i) shall not apply and the provisions
of subsections 5(c)(ii) and (iii) shall apply for a
period of two years following such date of
termination.
(e) In the event that any Executive (other than Mr. Hubbard)
that does not have an employment agreement with the Company
is terminated or resigns under the circumstances described
in Section 5(d)(i) above, then such Executive shall not be
entitled to payout of his PHCR Restricted Stock upon
termination of employment, but will continue to hold such
PHCR Restricted Stock in accordance with the terms thereof.
(f) Key Managers who are not Executives and who receive New
Options, shall, as a condition to receiving such New
Options, shall be required to agree not to (i) engage in
owning, operating and developing casinos, hotels or race
track interests within 100 miles of the principal gaming
facility at which such Key Manager was employed, (ii)
solicit any employee, agent or consultant of the Company to
terminate such person's relationship with the Company or
(iii) solicit any counterparty to any contract with the
Company to terminate such counterparty's contract or other
relationship with the Company. The restrictions contained in
this Section 5(f) shall continue for a period of one year
from the date of termination of such Key Manager's
employment.
(g) Except to the extent of the specific exceptions applicable
to any individual in subsections 5(a) and 5(f) above,
reasonable exceptions to the non-competition restrictions
will be provided in respect of (i) activities not materially
competitive with the specific gaming properties or interests
owned directly or indirectly by PHCR (or where PHCR has
announced its intention to develop such properties or
interests) and (ii) passive ownership of less than 5% of
public companies.
6. Employment Agreements. The employment agreements of the Executives
that have employment agreements as of the date hereof shall be
assumed without modification except to the extent necessary to
reflect the terms of this transaction and the structure of the
Company and its affiliates. The employment agreements assumed by
the Company shall terminate on the respective dates set forth
therein. There shall be no obligation, express or implied, of PHCR
or the Executives to renew such contracts, and any such renewal
shall be on such reasonable terms and conditions as shall be agreed
to by the Executive and PHCR.
7. Certain Governance Matters. Subject to licensing and regulatory
restrictions, the Board of Directors of PHCR upon consummation of
the Merger (the "PHCR Board") shall include R. D. Hubbard, Chairman
of the PHCR Board, and Paul Alanis as well as Thomas J. Barrack,
Jr. and other nominees determined by Colony (the "Colony
Nominees"), provided that if affiliates of Colony designated for
the board of directors (other than employees of PHCR and its
subsidiaries) would cease to constitute a majority of the board,
Messrs. Hubbard and Alanis shall resign from the Board (and any
committee thereof) and become non-voting observers until such time
as Colony may legally appoint additional Board members under
applicable law; provided further that prior thereto, PHCR will take
such action as is reasonably necessary to avoid triggering the end
of deferral under the Deferred Compensation Agreements between PHCR
and Mr. Hubbard and Mr. Alanis, respectively. Mr. Hubbard shall be
a member of, and Mr. Barrack shall be designated as the chairman
of, the Executive Committee of the PHCR Board. The PHCR Board shall
delegate to the Executive Committee (to the extent permitted under
applicable law) substantially all of its powers to govern the
business and affairs of the Company. Affiliates of Colony
designated for the board of directors (other than PHCR and its
subsidiaries) shall also constitute a majority of the compensation
committee of the board, if any. Unless otherwise determined by the
Colony Nominees, members of the PHCR Board shall not be entitled to
any compensation for services as members of the PHCR Board.
8. Disclosure Requirements. In connection with their execution and
delivery of this Memorandum of Understanding, the Executives
acknowledge and agree to comply with all applicable disclosure
requirements relating thereto imposed under Federal and state
securities laws.
9. Form of PHCR Common Stock. All issuances hereunder of PHCR Common
Stock, including options therefor, shall be comprised of a
combination of voting and non-voting securities so that each such
class of security constitutes the applicable percentage of all such
shares of such class of security outstanding at the time of
issuance.
10. Fees and Expenses. The Executives, on the one hand (jointly and
severally), and PHCR, on the other hand, shall each be responsible
for their respective expenses incurred in connection with the
consideration of the contemplated Acquisition Transaction.
11. Binding Agreement; Standard of Conduct. The terms of the agreements
herein shall be more fully set forth in definitive documentation,
which each of the parties hereto agrees to negotiate in good faith.
Subject to the negotiation and execution of such definitive
documentation and the reaching of agreement on other matters
contemplated but not specifically addressed herein, each of the
parties hereto acknowledges and agrees that this Memorandum of
Understanding is intended as a binding agreement among them with
respect to the matters set forth herein.
12. Parties in Interest. This Memorandum of Understanding shall be
binding upon and inure solely to the benefit of each party hereto,
and nothing in this Memorandum of Understanding, express or
implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this
Memorandum of Understanding. Neither this Memorandum of
Understanding nor any of the rights, interests or obligations
hereunder shall be assigned, in whole or in part, by operation of
law or otherwise by any of the parties without the prior written
consent of the other parties, except that PHCR may assign, in its
sole discretion, any or all of its rights, interests and
obligations under this Memorandum of Understanding to any
controlled affiliate of Colony. Subject to the preceding sentence,
this Memorandum of Understanding shall be binding upon, inure to
the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
13. Equitable Adjustment. References herein to numbers of securities to
be issued shall be deemed to include such equitable adjustments, if
any, as may be required in the event of any subdivision, split,
combination or reclassification of such securities or securities
into which such securities are exercisable so that the parties
hereto entitled to receive such securities shall receive the number
of such securities that such parties would have owned or been
entitled to receive after the happening of any the events described
above had it owned such securities immediately prior to such time.
14. Governing Law. THIS MEMORANDUM OF UNDERSTANDING SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
DELAWARE, WITHOUT REGARD TO ANY APPLICABLE CONFLICTS OF LAW.
IN WITNESS WHEREOF, each of the parties hereto has executed
this Memorandum of Understanding as of the date first above written.
PH CASINO RESORTS, INC.
By: /s/ Charles W. Scharer
-------------------------------
Name: Charles W. Scharer
Title: President
STOCKHOLDERS
/s/ R.D. Hubbard
- -------------------------
R. D. HUBBARD
/s/ G. Michael Finnigan
- -------------------------
G. MICHAEL FINNIGAN
/s/ Paul Alanis
- -------------------------
PAUL ALANIS
/s/ Loren Ostrow
- -------------------------
LOREN OSTROW
/s/ J. Michael Allen
- -------------------------
J. MICHAEL ALLEN
/s/ Cliff Kortman
- -------------------------
CLIFF KORTMAN
/s/ Bruce C. Hinckley
- -------------------------
BRUCE C. HINCKLEY
/s/ Richard Delaney
- -------------------------
RICHARD DELANEY
/s/ Chris Plant
- -------------------------
CHRIS PLANT
/s/ Robert Callaway
- -------------------------
ROBERT CALLAWAY
EXHIBIT 4
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(k) under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), each of the persons named below
agreed to the joint filing on behalf of each of them of a Statement on
Schedule 13D (including amendments thereto) with respect to the common
stock, par value $.10 per share, of Pinnacle Entertainment, Inc., a
Delaware corporation, and further agrees that this Joint Filing Agreement
be included as an exhibit to such filings provided that, as contemplated by
Rule 13d-1(k)(1)(ii), no person shall be responsible for the completeness
or accuracy of the information concerning the other persons making the
filing, unless such person knows or has reason to believe that such
information is inaccurate. Neither the filing of this Schedule 13D nor
anything contained herein shall be construed as an admission that any of
the persons named below constitute a "person" or "group" for any purpose
other than Section 13(d) of the Exchange Act. This Joint Filing Agreement
may be executed in any number of counterparts, all of which taken together
shall constitute one and the same instrument.
Date: April 27, 2000
HARVEYS CASINO RESORTS
By: /s/ Thomas J. Barrack, Jr.
----------------------------------
Thomas J. Barrack, Jr.
Chairman of the Board of Directors
and Assistant Secretary
COLONY HCR VOTECO, LLC
By: /s/ Kelvin L. Davis
-----------------------------------
Kelvin L. Davis
Manager
/s/ Kelvin L. Davis
----------------------------------------
KELVIN L. DAVIS
/s/ Thomas J. Barrack, Jr.
----------------------------------------
THOMAS J. BARRACK, JR.
