<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
____________
SCHEDULE 13D
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a)
Pinnacle Entertainment, Inc. (formerly Hollywood Park, Inc.)
------------------------------------------------------------
(Name of Issuer)
Common Stock
------------
(Title of Class of Securities)
723456 10 9
(CUSIP Number)
Alvin G. Segel
Irell & Manella LLP, 1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067 (310) 277-1010
---------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
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 [_].
Note. Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Rule 13d-7(b) for
other parties to whom copies are to be sent.
(Continued on following pages)
<PAGE>
- ---------------------- ---------------------
CUSIP No. 723456 10 9 13D Page 2 of 19 Pages
- ---------------------- ---------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
R. D. Hubbard
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
N/A
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) [_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
----------------------------------------------------------
8 SHARED VOTING POWER
NUMBER OF
SHARES 2,802,817
BENEFICIALLY Includes options exercisable to purchase 182,997
OWNED BY shares which options were exercisable within 60 days
EACH of the date of this statement.
REPORTING ----------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
2,802,817
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,802,817
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10.6%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- --------------------------------------------------------------------------------
<PAGE>
- ---------------------- ---------------------
CUSIP No. 723456 10 9 13D Page 3 of 19 Pages
- ---------------------- ---------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
G. Michael Finnigan
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
N/A
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) [_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
----------------------------------------------------------
8 SHARED VOTING POWER
NUMBER OF
SHARES 113,746
BENEFICIALLY Includes options exercisable to purchase 88,331
OWNED BY shares which options were exercisable within 60 days
EACH of the date of this statement.
REPORTING ----------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
113,746
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
113,746
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.4%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- --------------------------------------------------------------------------------
<PAGE>
- ---------------------- ---------------------
CUSIP No. 723456 10 9 13D Page 4 of 19 Pages
- ---------------------- ---------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Paul R. Alanis
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
N/A
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) [_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
----------------------------------------------------------
8 SHARED VOTING POWER
NUMBER OF
SHARES 500,000
BENEFICIALLY Includes options exercisable to purchase 200,000
OWNED BY shares which options were exercisable within 60 days
EACH of the date of this statement.
REPORTING ----------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
500,000
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
500,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.9%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- --------------------------------------------------------------------------------
<PAGE>
- ---------------------- ---------------------
CUSIP No. 723456 10 9 13D Page 5 of 19 Pages
- ---------------------- ---------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Loren S. Ostrow
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
N/A
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) [_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
----------------------------------------------------------
8 SHARED VOTING POWER
NUMBER OF
SHARES 112,500
BENEFICIALLY Includes options exercisable to purchase 62,500
OWNED BY shares which options were exercisable within 60 days
EACH of the date of this statement.
REPORTING ----------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
112,500
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
112,500
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.4%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- --------------------------------------------------------------------------------
<PAGE>
- ---------------------- ---------------------
CUSIP No. 723456 10 9 13D Page 6 of 19 Pages
- ---------------------- ---------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
J. Michael Allen
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
N/A
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) [_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
----------------------------------------------------------
8 SHARED VOTING POWER
NUMBER OF
SHARES 100,000
BENEFICIALLY Includes options exercisable to purchase 100,000
OWNED BY shares which options were exercisable within 60 days
EACH of the date of this statement.
REPORTING ----------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
100,000
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
100,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.4%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- --------------------------------------------------------------------------------
<PAGE>
- ---------------------- ---------------------
CUSIP No. 723456 10 9 13D Page 7 of 19 Pages
- ---------------------- ---------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Clifford Kortman
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
N/A
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) [_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
----------------------------------------------------------
8 SHARED VOTING POWER
NUMBER OF
SHARES 46,250
BENEFICIALLY Includes options exercisable to purchase 46,250
OWNED BY shares which options were exercisable within 60 days
EACH of the date of this statement.
REPORTING ----------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
46,250
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
46,250
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.2%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- --------------------------------------------------------------------------------
<PAGE>
- ---------------------- ---------------------
CUSIP No. 723456 10 9 13D Page 8 of 19 Pages
- ---------------------- ---------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Bruce C. Hinckley
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
N/A
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) [_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
----------------------------------------------------------
8 SHARED VOTING POWER
NUMBER OF
SHARES 13,334
BENEFICIALLY Includes options exercisable to purchase 8,334
OWNED BY shares which options were exercisable within 60 days
EACH of the date of this statement.
REPORTING ----------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
13,334
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
13,334
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
less than 0.1%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- --------------------------------------------------------------------------------
<PAGE>
- ---------------------- ---------------------
CUSIP No. 723456 10 9 13D Page 9 of 19 Pages
- ---------------------- ---------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Richard Delaney
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
N/A
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) [_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
----------------------------------------------------------
8 SHARED VOTING POWER
NUMBER OF
SHARES 0
BENEFICIALLY
OWNED BY
EACH
REPORTING ----------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
0
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- --------------------------------------------------------------------------------
<PAGE>
- ---------------------- ---------------------
CUSIP No. 723456 10 9 13D Page 10 of 19 Pages
- ---------------------- ---------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Chris Plant
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
N/A
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) [_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Canada
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
----------------------------------------------------------
8 SHARED VOTING POWER
NUMBER OF
SHARES 13,349
BENEFICIALLY Includes options exercisable to purchase 13,299
OWNED BY shares which options were exercisable within 60 days
EACH of the date of this statement.
REPORTING ----------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
13,349
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
13,349
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
less than 0.1%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- --------------------------------------------------------------------------------
<PAGE>
- ---------------------- ---------------------
CUSIP No. 723456 10 9 13D Page 11 of 19 Pages
- ---------------------- ---------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Robert A. Callaway
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [_]
(b) [X]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
N/A
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) [_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
----------------------------------------------------------
8 SHARED VOTING POWER
NUMBER OF
SHARES 20,528
BENEFICIALLY Includes options exercisable to purchase 20,528
OWNED BY shares which options were exercisable within 60 days
EACH of the date of this statement.
REPORTING ----------------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
20,528
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
20,528
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
less than 0.1%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- --------------------------------------------------------------------------------
<PAGE>
- ---------------------- ---------------------
CUSIP No. 723456 10 9 13D Page 12 of 19 Pages
- ---------------------- ---------------------
Item 1. Security and Issuer.
This filing relates to the common stock, par value $0.10 per share (the "Common
Stock"), of Pinnacle Entertainment, Inc. (the "Company") whose principal
executive offices are at 330 North Brand Boulevard, Suite 1100, Glendale,
California 91203.
Item 2. Identity and Background.
(a)-(c), (f). This Statement is being filed on behalf of the persons named
below (collectively, the "Reporting Persons") pursuant to their agreement to the
joint filing of this statement. Each Reporting Person disclaims beneficial
ownership of the shares of the other Reporting Persons.
1. R. D. Hubbard
Mr. Hubbard's business address is c/o Pinnacle Entertainment, Inc., 4400
MacArthur Boulevard, Suite 380, Newport Beach, California 92660. Mr. Hubbard is
Chairman of the Board of Directors and Chief Executive Officer of the Company.
Mr. Hubbard is a citizen of the United States.
2. G. Michael Finnigan
Mr. Finnigan's business address is c/o Realty Investment Group, Inc., 4400
MacArthur Boulevard, Suite 380, Newport Beach, California 92660. Mr. Finnigan
is President and Chief Executive Officer of Realty Investment Group, Inc., a
subsidiary of the Company. Mr. Finnigan is a citizen of the
United States.
3. Paul R. Alanis
Mr. Alanis' business address is c/o Pinnacle Entertainment, Inc., 330 North
Brand Boulevard, Suite 1100, Glendale, California 91203. Mr. Alanis is the
President and Chief Operating Officer of the Company. Mr. Alanis is a citizen of
the United States.
4. Loren S. Ostrow
Mr. Ostrow's business address is c/o Pinnacle Entertainment, Inc., 330
North Brand Boulevard, Suite 1100, Glendale, California 91203. Mr. Ostrow is
Senior Vice President, General Counsel and Secretary of the Company. Mr. Ostrow
is a citizen of the United States.
5. J. Michael Allen
Mr. Allen's business address is c/o Pinnacle Entertainment, Inc., 330 North
Brand Boulevard, Suite 1100, Glendale, California 91203. Mr. Allen is the Senior
Vice President and Chief Operating Officer of the Gaming Division of the
Company. Mr. Allen is a citizen of the United States.
<PAGE>
- ---------------------- ---------------------
CUSIP No. 723456 10 9 13D Page 13 of 19 Pages
- ---------------------- ---------------------
6. Clifford Kortman
Mr. Kortman's business address is c/o Pinnacle Entertainment, Inc.,
330 North Brand Boulevard, Suite 1100, Glendale, California 91203. Mr. Kortman
is the Vice President-Construction and Development of the Gaming Division of
the Company. Mr. Kortman is a citizen of the United States.
7. Bruce C. Hinckley
Mr. Hinckley's business address is c/o Pinnacle Entertainment, Inc., 330
North Brand Boulevard, Suite 1100, Glendale, California 91203. Mr. Hinckley is
Chief Financial Officer, Senior Vice President and Treasurer of the Company. Mr.
Hinckley is a citizen of the United States.
8. Richard Delaney
Mr. Delaney's business address is c/o Pinnacle Entertainment, Inc., 330
North Brand Boulevard, Suite 1100, Glendale, California 91203. Mr. Delaney is
Vice President, Hotel, Food & Beverage Operations of the Company. Mr. Delaney is
a citizen of the United States.
9. Chris Plant
Mr. Plant's business address is c/o Pinnacle Entertainment, Inc., 330 North
Brand Boulevard, Suite 1100, Glendale, California 91203. Mr. Plant is Corporate
Controller of the Company. Mr. Plant is a citizen of Canada.
10. Robert A. Callaway
Mr. Callaway's business address is c/o Casino Magic Corp., 711 Casino Magic
Drive, Bay St. Louis, Mississippi 39520. Mr. Callaway is Associate General
Counsel of the Company. Mr. Callaway is a citizen of the United States.
(d) and (e). During the last five years, none of the Reporting Persons (1)
has been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (2) 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.
Not applicable.
Item 4. Purpose of Transaction.
On April 17, 2000, the Company, PH Casino Resorts, Inc. ("Holding"), a wholly-
owned subsidiary of Harveys Casino Resorts ("Harveys"), and Pinnacle Acquisition
Corp. ("PAC"), a wholly-owned subsidiary of Holding, entered into an Agreement
and Plan of Merger (the "Merger Agreement") pursuant to which PAC would merge
with and into the Company (the "Merger") and each share of the Company's Common
Stock would be
<PAGE>
- ---------------------- ---------------------
CUSIP No. 723456 10 9 13D Page 14 of 19 Pages
- ---------------------- ---------------------
converted into the right to receive $24 per fully diluted share in cash, plus up
to an additional $1 per fully diluted share, which amount is contingent upon the
sale of the Company's 97 acres of surplus land in Inglewood, California for net
after tax proceeds of at least $40.75 million. Following the closing of the
Merger, the Common Stock would be delisted from the New York Stock Exchange and
become eligible for termination of registration pursuant to Section 12(g)(4) of
the Securities Exchange Act of 1934. Simultaneously with the Merger, Harveys
Acquisition Corporation, a wholly owned subsidiary of Holding, would merge with
and into Harveys so that following these transactions the Company and Harveys
would each be a wholly owned subsidiaries of Holding.
In connection with the Merger Agreement, the Reporting Persons have entered
into a Voting and Contribution Agreement with Holding (the "Voting and
Contribution Agreement") pursuant to which the Reporting Persons have agreed to
vote their shares in favor of the Merger, have granted a proxy to Holding to
vote all of their shares in favor of the Merger and have agreed to vote their
shares against any competing proposal or certain other proposals involving the
purchase of certain assets of the Company and against charter amendments or
other proposals that would impede, interfere with, or materially delay the
Merger. The Reporting Persons have also agreed not to transfer, sell, pledge,
encumber, assign or otherwise dispose of, any of their shares of Common Stock.
Pursuant to the Voting and Contribution Agreement, and a Memorandum of
Understanding entered into among the Reporting Persons and Holding (the
"MOU") the Reporting Persons have agreed to contribute to Holding, immediately
prior to the Merger, certain shares of Common Stock in exchange for new Holding
capital stock. The Reporting Persons have also agreed to cancel certain stock
options they hold to acquire Common Stock of the Company. The Reporting Persons
will receive new stock options to acquire Holding capital stock. The value of
all Company Common Stock to be contributed by the Reporting Persons and all
Company stock options to be cancelled by the Reporting Persons will equal $50
million in the aggregate. In addition, following the Merger, under the MOU the
Reporting Persons will also be entitled to receive restricted stock grants and
be eligible to receive stock options to acquire Holding capital stock. The MOU
sets forth terms related to the employment and stock ownership of the Reporting
Persons with respect to Holding following the consummation of the Merger.
In addition, in order to mitigate a tax disadvantage of this
transaction structure which is unique to Mr. Hubbard, the Voting and
Contribution Agreement contemplates that, immediately prior to the Merger, the
Company would purchase from Mr. Hubbard the shares of Common Stock owned by Mr.
Hubbard which are not being contributed to Holding for a price equal to the
merger consideration (including a contingent payment right on terms
<PAGE>
- ---------------------- ---------------------
CUSIP No. 723456 10 9 13D Page 15 of 19 Pages
- ---------------------- ---------------------
identical to that being received by the Company's stockholders in respect of the
Inglewood land sale) in the Merger.
The Voting and Contribution Agreement shall terminate if the closing under
the Merger Agreement has occurred, if the Merger has been consummated or if the
Merger Agreement has been terminated in accordance with its terms.
Other than as described above, the Reporting Persons have no plans or
proposals which relate to, or may result in, any of the matters listed in Items
4(a) - (j) of Schedule 13D.
The foregoing description of the Merger Agreement, the Voting and
Contribution Agreement and the MOU is qualified in its entirety by reference to
such documents, copies of which are included as Exhibits 1, 2 and 3 to this
Statement and are hereby incorporated herein by reference.
Item 5. Interest in Securities of the Issuer.
The aggregate number and percentage of outstanding shares of Common Stock
beneficially owned by the Reporting Persons is 3,722,474 or 13.8%, although the
Reporting Persons each disclaim beneficial ownership of the shares beneficially
owned by each other Reporting Person. This amount includes options exercisable
by the Reporting Persons to purchase 722,239 shares which options were
exercisable within 60 days of the date of this Statement. In addition, the
Reporting Persons hold unvested options to acquire an additional 590,194 shares
of the Company's Common Stock which will vest over time.
Table A
<TABLE>
<CAPTION>
Amount Beneficially Owned
-----------------------------------------------------
Number
(including Options
vested options Vested options unvested &
and options and options not vesting
vesting vesting w/in Voting Voting Dispositive Dispositive w/in
Name w/in 60 days) 60 days Percent Sole Shared Sole Shared 60 days
- ----- -------------- ------- -------- ------ -------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Hubbard 2,802,817(1) 182,997 10.6% 0 2,802,817(1) 2,802,817(1) 0 99,003
Finnigan 113,746 88,331 0.4% 0 113,746 113,746 0 46,669
Alanis 500,000 200,000 1.9% 0 500,000 500,000 0 200,000
Ostrow 112,500 62,500 0.4% 0 112,500 112,500 0 62,500
Allen 100,000 100,00 0.4% 0 100,000 100,000 0 100,000
Kortman 46,250 46,250 0.2% 0 46,250 46,250 0 46,250
Hinckley 13,334 8,334 less than 0.1% 0 13,334 13,334 0 16,666
Delaney 0 0 less than 0.1% 0 0 0 0 10,000
Plant 13,349 13,349 less than 0.1% 0 13,349 13,349 0 5,001
Callaway 20,528 20,528 less than 0.1% 0 20,528 20,528 0 4,105
(1) Includes 249,990 owned by the R. D. and Joan Dale Hubbard Foundation, a non-profit organization.
</TABLE>
<PAGE>
- ---------------------- ---------------------
CUSIP No. 723456 10 9 13D Page 16 of 19 Pages
- ---------------------- ---------------------
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer.
1. R. D. Hubbard
Mr. Hubbard holds options to acquire 282,000 shares of Common Stock at
exercise prices ranging from $8.75 to $14.75 per share.
2. G. Michael Finnigan
Mr. Finnigan holds options to acquire 135,000 shares of Common Stock at
exercise prices ranging from $9.625 to $14.75 per share.
3. Paul R. Alanis
Mr. Alanis holds options to acquire 400,000 shares of Common Stock at
exercise prices ranging from $10.1875 to $18.00 per share.
4. Loren S. Ostrow
Mr. Ostrow holds options to acquire 125,000 shares of Common Stock at
exercise prices ranging from $10.1875 to $18.00 per share.
5. J. Michael Allen
Mr. Allen holds options to acquire 200,000 shares of Common Stock at
exercise prices ranging from $10.1875 to $18.00 per share.
6. Clifford Kortman
Mr. Kortman holds options to acquire 92,500 shares of Common Stock at
exercise prices ranging from $10.1875 to $18.00 per share.
7. Bruce C. Hinckley
Mr. Hinckley holds options to acquire 25,000 shares of Common Stock at an
exercise price of $9.6875 per share.
8. Richard Delaney
Mr. Delaney holds options to acquire 10,000 shares of Common Stock at an
exercise price of $14.75 per share.
9. Chris Plant
Mr. Plant holds options to acquire 18,300 shares of Common Stock at
exercise prices ranging from $10.00 to $14.75 per share.
10. Robert A. Callaway
Mr. Callaway holds options to acquire 24,633 shares of Common Stock at
exercise prices ranging from $7.19 to $15.45 per share.
<PAGE>
- ---------------------- ---------------------
CUSIP No. 723456 10 9 13D Page 17 of 19 Pages
- ---------------------- ---------------------
See Table A set forth in Item 5 above for a description of each Reporting
Person's options outstanding.
See the description of the Merger Agreement, the Voting and Contribution
Agreement and the MOU set forth in Item 4 above, which is incorporated herein by
reference.
Item 7. Material to be Filed as Exhibits.
1. Agreement and Plan of Merger, dated as of April 17, 2000, among PH Casino
Resorts, Inc., Pinnacle Acquisition Corporation and Pinnacle Entertainment,
Inc.
2. Voting and Contribution Agreement, dated as of April 17, 2000, by and among
PH Casino Resorts, Inc. and the Reporting Persons.
3. Memorandum of Understanding, dated as of April 17, 2000, by and among PH
Casino Resorts, Inc. and the Reporting Persons.
4. Joint Filing Statement.
<PAGE>
- ---------------------- ---------------------
CUSIP No. 723456 10 9 13D Page 18 of 19 Pages
- ---------------------- ---------------------
SIGNATURE
After reasonable inquiry and to the best of our knowledge and belief, the
undersigned certify that the information set forth in this Statement is true,
complete and correct. The undersigned signatories hereby agree that the
foregoing statement is filed on behalf of each of them.
Date: April 27, 2000
/s/ R. D. Hubbard
-------------------------------
R. D. Hubbard
/s/ G. Michael Finnigan
-------------------------------
G. Michael Finnigan
/s/ Paul R. Alanis
-------------------------------
Paul R. Alanis
/s/ Loren S. Ostrow
-------------------------------
Loren S. Ostrow
/s/ J. Michael Allen
-------------------------------
J. Michael Allen
/s/ Clifford Kortman
-------------------------------
Clifford Kortman
/s/ Bruce C. Hinckley
-------------------------------
Bruce C. Hinckley
/s/ Richard Delaney
-------------------------------
Richard Delaney
/s/ Chris Plant
-------------------------------
Chris Plant
/s/ Robert A. Callaway
-------------------------------
Robert A. Callaway
<PAGE>
- ---------------------- ----------------------
CUSIP No. 723456 10 9 13D Page 19 of 19 Pages
- ---------------------- ----------------------
Exhibit Index
Exhibit Number Description
- -------------- -----------
1. Agreement and Plan of Merger, dated as of April 17, 2000,
among PH Casino Resorts, Inc., Pinnacle Acquisition
Corporation and Pinnacle Entertainment, Inc.
2. Voting and Contribution Agreement, dated as of April 17,
2000, by and among PH Casino Resorts, Inc. and the
Reporting Persons.
3. Memorandum of Understanding, dated as of April 17, 2000,
by and among PH Casino Resorts, Inc. and the Reporting
Persons.
4. Joint Filing Statement.
<PAGE>
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
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
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
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
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 OFHOLDING 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
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
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
</TABLE>
iii
<PAGE>
SCHEDULES
EXHIBITS
Exhibit A Material Terms of the Financing
iv
<PAGE>
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;
1
<PAGE>
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.
2
<PAGE>
"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.
3
<PAGE>
"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.
4
<PAGE>
"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.
5
<PAGE>
"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).
6
<PAGE>
"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.
7
<PAGE>
"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.
8
<PAGE>
"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
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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).
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"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.
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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
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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.
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(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
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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
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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
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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
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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
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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
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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.
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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
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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.
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(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,
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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.
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(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
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$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
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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
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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.
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(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
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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.
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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,
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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
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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
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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
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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.
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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)
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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
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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
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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,
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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:
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(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
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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
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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 51/st/ day to the
80/th/ 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.
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(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").
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(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
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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
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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
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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.
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(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
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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
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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
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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
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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.
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ARTICLE VII
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
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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
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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
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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
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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 51/st/ day to the 80/th/ 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.
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(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.
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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
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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
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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
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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:
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"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:
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(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
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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
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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]
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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:
------------------------------
Name: Charles W. Scharer
Title: President
PINNACLE ENTERTAINMENT, INC.
By:
-------------------------------
Name:
Title:
PINNACLE ACQUISITION CORPORATION
By:
-------------------------------
Name: Charles W. Scharer
Title: President
<PAGE>
Exhibit 2
---------
================================================================================
VOTING AND CONTRIBUTION AGREEMENT
by
and
among
PH CASINO RESORTS, INC.
and
THE STOCKHOLDERS SIGNATORY HERETO
Dated as of April 17 , 2000
================================================================================
<PAGE>
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");
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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
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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
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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
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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
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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.
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<PAGE>
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
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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, (ii 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
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<PAGE>
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
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<PAGE>
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.
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<PAGE>
(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.
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<PAGE>
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 VII
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:
c/o Colony Capital, Inc.
1999 Avenue of the Stars, Suite 1200
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<PAGE>
Los Angeles, California 90067
Telephone: 310-552-7207
Facsimile: 310-843-3663
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: 213-687-5000
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.
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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
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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]
15
<PAGE>
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: _______________________________________
Name: Charles W. Scharer
Title: President
STOCKHOLDERS
___________________________________________
R. D. HUBBARD
___________________________________________
G. MICHAEL FINNIGAN
___________________________________________
PAUL ALANIS
___________________________________________
LOREN OSTROW
___________________________________________
J. MICHAEL ALLEN
___________________________________________
CLIFF KORTMAN
___________________________________________
BRUCE C. HINCKLEY
<PAGE>
___________________________________________
RICHARD DELANEY
___________________________________________
CHRIS PLANT
___________________________________________
ROBERT CALLAWAY
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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.
<PAGE>
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/
- --------------------
/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 Agreement 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
(continued...)
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<PAGE>
(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
- --------------------
/2/(...continued)
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.
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<PAGE>
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
4
<PAGE>
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
- ----------------
/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
(continued...)
5
<PAGE>
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.
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
- ----------------------
/3/(...continued)
health coverage under Section 4980B(f)(3)(B) of the Code.
6
<PAGE>
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.
7
<PAGE>
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.
8
<PAGE>
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.
9
<PAGE>
(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:
10
<PAGE>
(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
11
<PAGE>
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.
12
<PAGE>
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
<PAGE>
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.
14
<PAGE>
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: ___________________________
Name: Charles W. Scharer
Title: President
STOCKHOLDERS
- -----------------------------
R. D. HUBBARD
- -----------------------------
G. MICHAEL FINNIGAN
- -----------------------------
PAUL ALANIS
- -----------------------------
LOREN OSTROW
- -----------------------------
J. MICHAEL ALLEN
- -----------------------------
CLIFF KORTMAN
<PAGE>
- -----------------------------
BRUCE C. HINCKLEY
- -----------------------------
RICHARD DELANEY
- -----------------------------
CHRIS PLANT
- -----------------------------
ROBERT CALLAWAY
16
<PAGE>
Exhibit 4
JOINT FILING STATEMENT
PURSUANT TO RULE 13d-1(k)(1)
The undersigned acknowledge and agree that the foregoing Statement on
Schedule 13D is filed on behalf of each of the undersigned and that all
subsequent amendments to this Statement on Schedule 13D shall be filed on behalf
of each of the undersigned without the necessity of filing additional joint
filing statements. The undersigned acknowledge that each shall be responsible
for the timely filing of such amendments, and for the completeness and accuracy
of the information concerning him or it contained therein, but shall not be
responsible for the completeness and accuracy of the information concerning the
other, except to the extent that he, she or it knows or has reason to believe
that such information is inaccurate.
Date: April 27, 2000
/s/ R. D. Hubbard
-------------------------------
R. D. Hubbard
/s/ G. Michael Finnigan
-------------------------------
G. Michael Finnigan
/s/ Paul R. Alanis
-------------------------------
Paul R. Alanis
/s/ Loren S. Ostrow
-------------------------------
Loren S. Ostrow
/s/ J. Michael Allen
-------------------------------
J. Michael Allen
/s/ Clifford Kortman
-------------------------------
Clifford Kortman
/s/ Bruce C. Hinckley
-------------------------------
Bruce C. Hinckley
/s/ Richard Delaney
-------------------------------
Richard Delaney
/s/ Chris Plant
-------------------------------
Chris Plant
/s/ Robert A. Callaway
-----------------------
Robert A. Callaway
