<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement.
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
LADY LUCK GAMING CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock, including options to purchase Common Stock
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2) Aggregate number of securities to which transaction applies:
4,881,003 shares of Common Stock and 64,000 options to purchase Common
Stock
-----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
$12.00 (negotiated consideration for Common Stock and basis to
calculate the spread in order to determine the amount of cash to be
received by holders of options to purchase Common Stock)
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4) Proposed maximum aggregate value of transaction:
$58,947,716.00
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5) Total fee paid:
$11,790.00
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-----------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
3) Filing Party:
-----------------------------------------------------------------------
4) Date Filed:
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<PAGE>
LADY LUCK GAMING CORPORATION
206 NORTH THIRD STREET
LAS VEGAS, NEVADA 89101
Dear Stockholder,
You are cordially invited to attend a Special Meeting of Stockholders of
Lady Luck Gaming Corporation to be held on , 2000 at [11:00 a.m.],
local time, at the Lady Luck Casino & Hotel located at 206 North Third Street,
Las Vegas, Nevada 89101.
At the Special Meeting, you will be asked to approve a merger of a wholly
owned subsidiary of Isle of Capri Casinos, Inc. with and into Lady Luck, with
Lady Luck surviving as a wholly owned subsidiary of Isle of Capri Casinos, Inc.
As a result of the merger, shares of Lady Luck common stock (other than those
shares as to which appraisal rights have been properly perfected) will be
converted into the right to receive $12.00 per share, in cash.
Details of the proposed merger and other important information are described
in the accompanying Notice of Special Meeting and Proxy Statement. A copy of
each of Lady Luck's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 and Lady Luck's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1999 accompany this Proxy Statement and are
incorporated herein by reference. You are urged to read these important
documents carefully before casting your vote.
We thank you for your prompt attention to this matter and appreciate your
support.
Very truly yours,
Andrew H. Tompkins
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
PROMPTLY, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.
<PAGE>
LADY LUCK GAMING CORPORATION
206 NORTH THIRD STREET
LAS VEGAS, NEVADA 89101
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
, 2000
------------------------
To the Stockholders of
LADY LUCK GAMING CORPORATION:
Notice is hereby given that a special meeting of stockholders (the "Special
Meeting") of Lady Luck Gaming Corporation ("Lady Luck" or the "Company") will be
held on , 2000 at [11:00 a.m.], local time, at the Lady Luck
Casino & Hotel located at 206 North Third Street, Las Vegas, Nevada 89101. The
purpose of the Special Meeting will be:
1. To consider and vote on a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of October 5, 1999 (the "Merger Agreement"),
among Lady Luck, Isle of Capri Casinos, Inc. ("Isle of Capri"), and Isle
Merger Corp., a wholly owned subsidiary of Isle of Capri ("Merger Sub"),
pursuant to which Merger Sub will be merged with and into Lady Luck, the
separate corporate existence of Merger Sub shall cease, and Lady Luck
shall continue as the surviving corporation and as a wholly-owned
subsidiary of Isle of Capri (the "Merger"). Pursuant to the terms of the
Merger Agreement, each share of common stock, $.006 par value ("Company
Common Stock"), of Lady Luck issued and outstanding immediately prior to
the effective time of the Merger (other than shares as to which appraisal
rights have been properly perfected) will be converted into the right to
receive $12.00 in cash, without interest (the "Merger Consideration"). A
copy of the Merger Agreement is included in the attached Proxy Statement
and is incorporated herein by reference.
2. To consider and vote on a proposal to grant the Lady Luck Board of
Directors discretionary authority to postpone or adjourn the Special
Meeting in order to solicit additional votes to approve and adopt the
Merger Agreement if the Secretary of Lady Luck determines that there are
not sufficient votes to approve and adopt the Merger Agreement (the
"Board Adjournment Authority").
3. To transact such other business as may properly come before the Special
Meeting. Management is not aware of any such business.
Any stockholder who does not wish to accept the Merger Consideration of
$12.00 per share and who properly perfects the right to an appraisal under
Delaware law will have the right to have the fair value of his, her or its
shares determined by the Delaware Court of Chancery. A copy of the relevant
provisions of Delaware law is attached as Annex V to the Proxy Statement. This
appraisal right is subject to a number of restrictions and technical
requirements described in the attached Proxy Statement.
Only stockholders of record as of the close of business on [December ],
1999 will be entitled to notice of the Special Meeting and to vote at the
Special Meeting and any adjournment or postponement thereof. Any stockholder
will be able to examine a list of holders of record, for any purpose related to
the Special Meeting, during the 10-day period before the Special Meeting. The
list will be available for inspection at the principal executive offices of Lady
Luck located at 206 North Third Street, Las Vegas, Nevada 89101. Approval and
adoption of the Merger Agreement requires the affirmative vote of at least
seventy-five percent (75%) of the outstanding shares of Company Common Stock.
Approval and adoption of the proposal to grant the Board Adjournment Authority
requires the
<PAGE>
affirmative vote of at least a majority of the shares of Company Common Stock
present in person or represented by proxy at the Special Meeting.
By Order of the Board of Directors,
Rory J. Reid
SENIOR VICE PRESIDENT, SECRETARY
AND GENERAL COUNSEL
Las Vegas, Nevada
[December 15], 1999
EACH STOCKHOLDER IS URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY
CARD IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. IF A STOCKHOLDER DECIDES TO ATTEND THE SPECIAL MEETING, HE, SHE OR IT
MAY, IF SO DESIRED, REVOKE THE PROXY AND VOTE THE SHARES IN PERSON.
<PAGE>
LADY LUCK GAMING CORPORATION
206 NORTH THIRD STREET
LAS VEGAS, NEVADA 89101
------------------------
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
, 2000
------------------------
This Proxy Statement is being furnished to holders ("Lady Luck
Stockholders") of common stock, par value $.006 per share ("Company Common
Stock"), of Lady Luck Gaming Corporation, a Delaware corporation ("Lady Luck" or
the "Company"), in connection with the solicitation of proxies by the Board of
Directors of the Company (the "Board") for use at the special meeting of Lady
Luck Stockholders, and at any adjournment or postponement thereof (the "Special
Meeting"), to be held at the Lady Luck Casino & Hotel located at 206 North Third
Street, Las Vegas, Nevada 89101 on , 2000 at [11:00 a.m.], local
time. The Special Meeting has been called to consider and vote upon a proposal
to approve and adopt the Agreement and Plan of Merger, dated as of October 5,
1999 (the "Merger Agreement"), among the Company, Isle of Capri Casinos, Inc.
("Isle of Capri") and Isle Merger Corp., a wholly owned subsidiary of Isle of
Capri ("Merger Sub"), pursuant to which Merger Sub will be merged with and into
Lady Luck, the separate corporate existence of Merger Sub shall cease, and Lady
Luck shall continue as the surviving corporation and as a wholly-owned
subsidiary of Isle of Capri (the "Merger"). A copy of the Merger Agreement is
attached to this Proxy Statement as Annex I.
Pursuant to the Merger, each share of Company Common Stock issued and
outstanding immediately prior to the effective time of the Merger (other than
shares as to which appraisal rights have been properly perfected) will be
converted into the right to receive $12.00 in cash, without interest (the
"Merger Consideration"). Subsequent to the consummation of the Merger, Lady Luck
Stockholders will no longer have an interest in the Company. The Board and its
advisors negotiated the $12.00 price and the other terms of the Merger
Agreement.
Pursuant to the Company's Certificate of Incorporation, as amended to date,
and in accordance with Delaware law (i) the affirmative vote of holders of at
least seventy-five percent (75%) of all of the outstanding shares of Company
Common Stock is required to approve and adopt the Merger Agreement and (ii) the
affirmative vote of holders of at least a majority of the outstanding shares of
Company Common Stock present in person or represented by proxy at the Special
Meeting is required to approve and adopt the proposal to grant the Board
Adjournment Authority. Andrew H. Tompkins ("Tompkins"), the Chairman of the
Board and Chief Executive Officer of the Company, and the beneficial owner of
approximately 45.6% of the outstanding shares of Company Common Stock, has
agreed to vote his shares of Company Common Stock in favor of the Merger
Agreement pursuant to the Stockholder Support Agreement, dated as of October 5,
1999 (the "Stockholder Support Agreement") by Tompkins to and for the benefit of
Isle of Capri. Tompkins intends to vote his shares of Company Common Stock in
favor of the Board Adjournment Authority.
On October 4, 1999, the Board unanimously determined that the Merger, the
Merger Agreement and the transactions contemplated thereby are fair to and in
the best interests of Lady Luck Stockholders and recommends that the Lady Luck
Stockholders approve and adopt the Merger Agreement. The Board further
recommends that the Lady Luck Stockholders approve and adopt the proposal to
grant the Board Adjournment Authority.
All shares of Company Common Stock represented by properly executed proxies
received prior to or at the Special Meeting and not revoked will be voted in
accordance with the instructions indicated
<PAGE>
in such proxies. If no instructions are indicated, such proxies will be voted
FOR the approval and adoption of the Merger Agreement, FOR the approval and
adoption of the proposal to grant the Board Adjournment Authority and in the
discretion of the persons named in the proxy with respect to such other matters
as may properly come before the Special Meeting. A Lady Luck Stockholder may
revoke his, her or its proxy at any time prior to its use by delivering to the
Secretary of the Company a signed notice of revocation or a later-dated and
signed proxy or by attending the Special Meeting and voting in person.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROXY STATEMENT DOES NOT CONSTITUTE A SOLICITATION OF A
PROXY IN ANY JURISDICTION FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
PROXY SOLICITATION IN SUCH JURISDICTION. THE DELIVERY OF THIS PROXY STATEMENT
SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
The Board knows of no additional matters that will be presented for
consideration at the Special Meeting. Execution of a proxy, however, confers on
the designated proxyholders discretionary authority to vote the shares of
Company Common Stock covered thereby on such other business, if any, that may
properly come before the Special Meeting. This Proxy Statement and the
accompanying form of proxy are first being mailed to Lady Luck Stockholders on
or about [December 29, 1999].
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF SUCH TRANSACTION NOR UPON THE ACCURACY OF THE INFORMATION CONTAINED IN THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The date of this Proxy Statement is [December 15, 1999].
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
FORWARD-LOOKING STATEMENTS.................................. -iii-
SUMMARY..................................................... 1
Isle of Capri............................................. 1
The Special Meeting....................................... 1
Time and Place of Meeting................................. 1
Matters to be Considered.................................. 1
Record Date; Required Votes............................... 2
Security Ownership of Management.......................... 2
Recommendation of the Board............................... 2
Opinion of Financial Advisor.............................. 2
The Merger................................................ 3
Effective Time of the Merger.............................. 3
Merger Consideration...................................... 3
Stock Options............................................. 3
Preferred Stock........................................... 3
Conditions to the Merger.................................. 3
No Solicitation........................................... 4
Termination............................................... 5
Appraisal Rights.......................................... 5
Interests of Certain Persons in the Merger................ 6
Certain Effects of the Merger............................. 6
Regulatory Approvals...................................... 6
Certain Federal Income Tax Consequences................... 6
SELECTED HISTORICAL CONDENSED CONSOLIDATED FINANCIAL DATA... 7
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS................................................ 9
RECENT DEVELOPMENTS......................................... 16
THE SPECIAL MEETING......................................... 17
Matters to Be Considered.................................. 17
Required Votes............................................ 17
Voting and Revocation of Proxies.......................... 18
Record Date; Stock Entitled to Vote; Quorum............... 18
Appraisal Rights.......................................... 18
Solicitation of Proxies................................... 19
SPECIAL FACTORS............................................. 20
Background of the Merger.................................. 20
Recommendation of the Board............................... 21
Reasons of Lady Luck for the Merger; Fairness of the
Merger.................................................. 21
Certain Effects of the Merger............................. 23
Opinion of Financial Advisor to the Board................. 23
THE MERGER.................................................. 29
Overview.................................................. 29
Certain Federal Income Tax Consequences................... 29
Accounting Treatment...................................... 30
Interests of Certain Persons in the Merger................ 30
Consulting, Advisory and Noncompetition Agreement......... 33
Stockholder Support Agreement and Proxy................... 33
Related Transactions between Lady Luck and Isle of
Capri................................................... 34
Merger Financing.......................................... 34
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
CERTAIN PROVISIONS OF THE MERGER AGREEMENT.................. 35
The Merger................................................ 35
The Surviving Corporation................................. 35
Merger Consideration...................................... 35
Surrender and Payment..................................... 35
Representations and Warranties............................ 36
Conduct of Business Pending the Merger.................... 37
No Solicitation........................................... 38
Director and Officer Indemnification and Insurance........ 39
Participation in Stockholder Litigation................... 39
Employee Benefits; Severance.............................. 39
Other Covenants........................................... 40
Conditions to the Merger.................................. 40
Termination............................................... 41
Termination Fees; Reimbursement of Expenses............... 42
Amendment and Waiver...................................... 44
CERTAIN TRANSACTIONS........................................ 44
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 45
REGULATORY CONSIDERATIONS................................... 46
Antitrust................................................. 46
Mississippi Gaming Regulations............................ 47
Iowa Gaming Regulations................................... 47
APPRAISAL RIGHTS............................................ 48
AVAILABLE INFORMATION....................................... 51
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 52
STOCKHOLDER PROPOSALS....................................... 52
ANNEX I--AGREEMENT AND PLAN OF MERGER
ANNEX II--OPINION OF WASSERSTEIN PERELLA & CO., INC.
ANNEX III--STOCKHOLDER SUPPORT AGREEMENT
ANNEX IV--CONSULTING, ADVISORY AND NONCOMPETITION AGREEMENT
ANNEX V--RIGHTS OF TEXT OF SECTION 262 OF THE DELAWARE
GENERAL CORPORATION LAW
ANNEX VI--CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
</TABLE>
-ii-
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain information contained in this Proxy Statement as to the future
financial or operating performance of Lady Luck may constitute "forward-looking
statements." Forward-looking statements include statements concerning plans,
objectives, goals, strategies, future events or performance, and underlying
assumptions and other statements which are other than statements of historical
facts. Forward-looking statements can be identified by, among other things, the
use of forward-looking terminology such as "believes," "expects," "may," "will,"
"should," "seeks," "pro forma," "anticipates" or "intends" or the negative of
any thereof, or other variations thereon or comparable terminology, or by
discussions of strategy or intentions. Forward-looking statements involve a
number of risks and uncertainties. A number of factors could cause actual
results, performance, achievements of Lady Luck or industry results to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. These factors include,
but are not limited to: the availability of sufficient capital to finance Lady
Luck's business plan on terms satisfactory to Lady Luck; competitive factors,
such as legalization of gaming in jurisdictions from which Lady Luck draws
significant numbers of patrons and an increase in the number of casinos serving
the markets in which Lady Luck's casinos are located; changes in labor,
equipment and capital costs; the ability of Lady Luck to consummate its
contemplated joint ventures and other transactions on terms satisfactory to Lady
Luck and to obtain necessary regulatory approvals for them; changes in
regulations affecting the gaming industry; the continued operation of the Helena
Bridge connecting Arkansas to Coahoma County, Mississippi, which is the location
of the Lady Luck Rhythm and Blues/Country Casino complex; the ability of Lady
Luck to comply with its Indenture covering the First Mortgage Notes Due 2001
(the "2001 Notes"); the ability of Lady Luck to refinance the 2001 Notes; the
ability of Lady Luck to retain or obtain Nasdaq listings; future acquisitions or
strategic partnerships; general business and economic conditions; Lady Luck's
ability to become Year 2000 compliant in a timely manner and within its cost
estimates, including the risk that one or more of the representations provided
to the Company by its suppliers may ultimately be proven false; and other
factors described at various times in the Company's reports filed with the
Securities and Exchange Commission (the "SEC"). In addition, such
forward-looking statements are necessarily dependent upon assumptions, estimates
and dates that may be incorrect or imprecise and involve known and unknown
risks, uncertainties and other factors. Accordingly, any forward-looking
statements included herein do not purport to be predictions of future events or
circumstances and may not be realized. Given these uncertainties, Lady Luck
Stockholders are cautioned not to place undue reliance on such forward-looking
statements. Lady Luck disclaims any obligation to update any such factors or to
publicly announce the results of any revisions to any of the forward-looking
statements contained herein to reflect future events or developments.
-iii-
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS INTENDED ONLY TO HIGHLIGHT CERTAIN INFORMATION
CONTAINED ELSEWHERE IN THIS PROXY STATEMENT. THIS SUMMARY IS NOT INTENDED TO BE
COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION
CONTAINED ELSEWHERE IN THIS PROXY STATEMENT, THE ANNEXES HERETO AND THE
DOCUMENTS OTHERWISE REFERRED TO HEREIN. LADY LUCK STOCKHOLDERS ARE URGED TO
REVIEW THIS ENTIRE PROXY STATEMENT CAREFULLY, INCLUDING THE ANNEXES HERETO AND
SUCH OTHER DOCUMENTS.
LADY LUCK
Lady Luck operates distinctly themed dockside and riverboat casinos and
related entertainment and lodging facilities in Mississippi and Iowa. To attract
repeat customers, Lady Luck's strategy focuses on offering spacious facilities,
ample parking, proximity to major highways, accessible hotel accommodations and
providing a value-oriented gaming experience. Lady Luck currently owns and
operates: (1) two music-themed dockside casinos, two hotels and an entertainment
center in Coahoma County, Mississippi, and a hotel less than one mile from this
complex; (2) a showboat-themed dockside casino and a hotel in Natchez,
Mississippi; and (3) through a 50% owned joint venture, a riverboat casino and a
hotel in Bettendorf, Iowa (Lady Luck also owns and leases the cruising vessel to
this joint venture). On October 29, 1999 Lady Luck purchased the Miss Marquette
riverboat casino located on the Mississippi River in Marquette, Iowa from Sodak
Gaming, Inc. Lady Luck has entered into an agreement to purchase the Lady Luck
Casino & Hotel located in Las Vegas, Nevada, together with the related
trademarks, mailing lists and intellectual property used by Lady Luck in the
operation of its business. See "Recent Developments" and "Special
Factors--Background of the Merger." In addition, Lady Luck operates a central
reservations center in Phoenix, Arizona which books reservations for Lady Luck's
hotels.
Lady Luck's principal executive offices are located at 206 North Third
Street, Las Vegas, Nevada 89101 and its telephone number is (800) 634-6580.
ISLE OF CAPRI
Isle of Capri is a leading developer, owner and operator of branded gaming
and related lodging and entertainment facilities in growing markets in the
United States. Isle of Capri wholly owns and operates five gaming facilities
located in Lake Charles and Bossier City, Louisiana and Biloxi, Tunica County
and Vicksburg, Mississippi. It also owns a 57% interest in and operates a gaming
facility in Black Hawk, Colorado. In addition, Isle of Capri wholly owns and
operates a pari-mutuel harness racing facility in Pompano Beach Florida and owns
a 50% interest in and operates gaming activities aboard a cruise ship based in
New Orleans, Louisiana.
Isle of Capri's principal executive offices are located at 711 Dr. Martin
Luther King, Jr. Blvd., Biloxi, Mississippi 39530 and its telephone number is
(228) 436-7000.
THE SPECIAL MEETING
TIME AND PLACE OF MEETING
The Special Meeting will be held at the Lady Luck Casino & Hotel located at
206 North Third Street, Las Vegas, Nevada 89101on , 2000 starting at
[11:00 a.m.], local time. See "The Special Meeting."
MATTERS TO BE CONSIDERED
The Special Meeting has been called for Lady Luck Stockholders to consider
and vote upon a proposal to approve and adopt the Merger Agreement, a proposal
to grant the Board discretionary authority to postpone or adjourn the Special
Meeting in order to solicit additional votes to approve and
1
<PAGE>
adopt the Merger Agreement if the Secretary of Lady Luck determines that there
are not sufficient votes to approve and adopt the Merger Agreement and such
other business as may properly come before the Special Meeting. See "Certain
Provisions of the Merger Agreement."
RECORD DATE; REQUIRED VOTES
Holders of record of Company Common Stock at the close of business on
[December , 1999] (the "Record Date") have the right to receive notice of and
vote at the Special Meeting. Holders of record of Lady Luck's Series A Mandatory
Cumulative Redeemable Preferred Stock, par value $25.00 per share ("Lady Luck
Series A Preferred Stock"), at the Record Date have the right to receive notice
of the Special Meeting, but do not have the right to vote at the Special
Meeting. Each share of Company Common Stock is entitled to one vote on each
matter presented to Lady Luck Stockholders for a vote at the Special Meeting.
The affirmative vote of the holders of at least seventy-five percent (75%) of
the outstanding shares of Company Common Stock is required to approve and adopt
the Merger Agreement. The affirmative vote of holders of at least a majority of
the shares of Company Common Stock present in person or represented by proxy at
the Special Meeting is required to approve and adopt the proposal to grant the
Board Adjournment Authority.
SECURITY OWNERSHIP OF MANAGEMENT
As of the Record Date, Andrew H. Tompkins ("Tompkins"), the Chief Executive
Officer and Chairman of the Board of Lady Luck, beneficially owned an aggregate
of 2,226,409 shares (approximately 45.6%, and including 11,739 shares which
Tompkins has agreed to transfer to Alain Uboldi, President, Chief Operating
Officer and a director of Lady Luck, whereby Tompkins has the right to vote such
shares and, under certain circumstances, reacquire such shares) of Company
Common Stock eligible to vote at the Special Meeting. Tompkins has agreed,
pursuant to the Stockholder Support Agreement, dated as of October 5, 1999, by
Tompkins to and for the benefit of Isle of Capri, to vote his shares of Company
Common Stock in favor of the approval and adoption of the Merger Agreement.
Tompkins intends to vote his shares of Company Common Stock in favor of the
Board Adjournment Authority. As of the Record Date, directors and executive
officers of Lady Luck and their affiliates as a group (other than Tompkins)
beneficially owned an aggregate of 70,471 shares (approximately 1%, and not
including the 11,739 shares described above that Tompkins has agreed to transfer
to Mr. Uboldi,) of Company Common Stock and directors and executive officers of
Lady Luck and their affiliates as a group (including Tompkins) beneficially
owned an aggregate of 2,296,880 shares (approximately 47%) of Company Common
Stock. See "Security Ownership of Certain Beneficial Owners and Management" and
"The Merger-Stockholder Support Agreement and Proxy."
RECOMMENDATION OF THE BOARD
The Board unanimously determined on October 4, 1999, that the Merger, the
Merger Agreement and the transactions contemplated thereby are fair to and in
the best interests of Lady Luck Stockholders and recommends that Lady Luck
Stockholders vote in favor of approval and adoption of the Merger Agreement. The
Board further recommends that Lady Luck Stockholders approve and adopt the
proposal to grant the Board Adjournment Authority. See "Special
Factors--Recommendation of the Board" and "--Reasons of Lady Luck for the
Merger; Fairness of the Merger."
OPINION OF FINANCIAL ADVISOR
Wasserstein Perella & Co., Inc. ("Wasserstein Perella") and Onyx
Partners, Inc. ("Onyx Partners") have served as financial advisors to the Board
in connection with the Merger. The Board did not request that Onyx Partners
render an opinion regarding the fairness of the Merger. Wasserstein Perella has
rendered its opinion to the Board that, as of the date of such opinion, and
based on the assumptions made therein, the consideration to be received pursuant
to the Merger by the Lady Luck
2
<PAGE>
Stockholders was fair, from a financial point of view, to the holders of such
shares of Company Common Stock. Wasserstein Perella's opinion was delivered
orally to the Board at its meeting on October 4, 1999 and subsequently confirmed
in writing as of the same date. A copy of such opinion is attached to this Proxy
Statement as Annex II (the "Wasserstein Perella Opinion"). The Wasserstein
Perella Opinion should be read carefully and in its entirety with respect to
assumptions made, matters considered, and limitations on the review undertaken
by Wasserstein Perella in rendering its opinion. See "Special Factors--Opinion
of Financial Advisor to the Board" and Annex II.
THE MERGER
EFFECTIVE TIME OF THE MERGER
Pursuant to the Merger Agreement, Merger Sub will be merged directly into
Lady Luck, the separate corporate existence of Merger Sub will cease and Lady
Luck will continue as the surviving corporation (the "Surviving Corporation")
and as the wholly-owned subsidiary of Isle of Capri. The Merger will 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 later time as is
specified in the certificate of merger (the "Effective Time").
MERGER CONSIDERATION
At the Effective Time (subject to certain provisions as described herein
with respect to shares of Company Common Stock as to which appraisal rights have
been properly perfected), each share of Company Common Stock shall be converted
into the right to receive $12.00 per share in cash, without interest (the
"Merger Consideration"). See "Certain Provisions of the Merger Agreement--The
Merger" and "--Merger Consideration."
STOCK OPTIONS
The Board will use its best efforts to take such actions as are required to
provide that each unexercised option to purchase shares of Company Common Stock
will be accelerated and canceled immediately prior to the Effective Time.
Holders of such options will receive, in cash, the amount, if any, by which
$12.00 exceeds the applicable exercise price of such option.
PREFERRED STOCK
Each share of Series A Mandatory Cumulative Redeemable Preferred Stock, par
value $25.00 per share, of Lady Luck ("Lady Luck Series A Preferred Stock")
issued and outstanding immediately prior to the Effective Time will be redeemed
by Lady Luck immediately prior to the Effective Time pursuant to its terms at
its liquidation preference.
CONDITIONS TO THE MERGER
The obligations of the parties to the Merger Agreement to consummate the
Merger are subject to the satisfaction or waiver, to the extent permitted, of a
number of conditions, including, among other things, that (i) the Lady Luck
Stockholders shall have approved and adopted the Merger Agreement, (ii) the
parties shall have entered into a credit agreement (the "Miss Marquette Credit
Agreement"), pursuant to which Isle of Capri will fund a secured bridge loan in
the principal amount of $16.3 million, for the purpose of enabling Lady Luck to
consummate its acquisition of all of the capital stock of Gamblers Supply
Management Company, which owns the Miss Marquette riverboat casino and
associated real property and assets in Marquette, Iowa, (iii) Lady Luck shall
have entered into an amendment to the Amended and Restated Purchase Agreement
dated as of August 31, 1999 by and among Lady Luck, Gemini, Inc. (d/b/a Lady
Luck Casino & Hotel)("Gemini"), International Marco Polo's Services, Inc.
("IMPS") and Tompkins, to provide, among other things, subject to the
3
<PAGE>
consummation of the Merger, that the sale of certain trademarks, mailing lists
and intellectual property owned by Gemini and used by Lady Luck in the operation
of its business (the "Trademark Assets"), which sale does not require the
approval of the Nevada Gaming Commission, be consummated at the same time as the
Merger without consummating the acquisition of the Lady Luck Casino & Hotel
located in Las Vegas, Nevada and related real property and leases (the "Las
Vegas Hotel"), which acquisition requires the approval of the Nevada Gaming
Commission (if the approval of the Nevada Gaming Commission for the acquisition
of the Las Vegas Hotel is obtained prior to the consummation of the Merger, and
all other closing conditions have been met, the acquisition of the Las Vegas
Hotel and the Trademark Assets may both occur at the same time as the
consummation of the Merger), (iv) Isle of Capri shall have been reasonably
satisfied with the results of its 45 day physical investigation and review of
the properties of Lady Luck, as described further in this Proxy Statement,
(v) Isle of Capri shall have obtained sufficient funds to complete the Merger
and the transactions provided for in the Merger Agreement, including the
redemption of the Lady Luck Series A Preferred Stock, the repayment of the 2001
Notes, and the purchase of the Trademark Assets and the Las Vegas Hotel,
(vi) the necessary gaming and other regulatory approvals shall have been
received, (vii) no orders or injunctions which would prevent the consummation of
the Merger shall have been issued and (viii) no material adverse change shall
have occurred in the business, properties, condition (financial or otherwise),
prospects or results of operations of Lady Luck and its subsidiaries, taken as a
whole, since June 30, 1999, other than any change arising out of, or resulting
from, general economic conditions in the United States or conditions generally
affecting the gaming industry in the United States. The Miss Marquette Credit
Agreement was entered into as of October 29, 1999 by the parties thereto. The
amendment to the Amended and Restated Purchase Agreement described in
clause (iii) of this paragraph was entered into as of October 5, 1999,
concurrently with the Merger Agreement. Isle of Capri's termination right based
on its physical examination and review of the properties of Lady Luck has
expired unexercised. See "Certain Provisions of the Merger Agreement--Conditions
to the Merger."
NO SOLICITATION
The Merger Agreement prevents Lady Luck and its officers and representatives
from directly or indirectly (i) soliciting, initiating or encouraging any
inquiries or proposals that are or could lead to a proposal or offer for a
merger, consolidation, business combination, sale of substantial assets, sale of
shares of capital stock or similar transaction, other than the Merger with Isle
of Capri, (ii) engaging in negotiations or discussions other than with Isle of
Capri concerning a proposal for a merger or similar transaction,
(iii) providing non-public information to any person or entity relating to a
proposal for a merger or similar transaction or (iv) agreeing to or recommending
any proposal for a merger or similar transaction.
However, Lady Luck or the Board, prior to the time that the Merger is
approved by the Lady Luck Stockholders, may (i) furnish non-public information
to, or enter into discussions or negotiations with, any person or entity in
connection with such a proposal, or (ii) recommend such a proposal to Lady Luck
Stockholders, if, in the case of either (i) or (ii), (A) the Board reasonably
believes in good faith that such proposal, after consultation with and receipt
of advice from Wasserstein Perella, is reasonably capable of being completed on
substantially the same terms proposed and, if consummated, would result in a
transaction that would be superior from a financial point of view to the Lady
Luck Stockholders, including consideration of the financial terms of the
Miss Marquette Credit Agreement, and (B) after receipt of advice from outside
legal counsel, the Board, in the exercise of its fiduciary duties, determines in
good faith that the failure to take such action would be contrary to the best
interests of the Lady Luck Stockholders. If such a proposal is accepted, Lady
Luck may terminate the Merger Agreement and pay the termination fee provided for
in the Merger Agreement and as described in this Proxy Statement. See "Certain
Provisions of the Merger Agreement--Termination Fees; Reimbursement of
Expenses."
4
<PAGE>
TERMINATION
Lady Luck may mutually agree with Isle of Capri in writing to terminate the
Merger Agreement at any time without completing the Merger, regardless of the
Merger having been approved by the Lady Luck Stockholders. In addition, either
Lady Luck or Isle of Capri may decide to terminate the Merger Agreement
regardless of the Merger having been approved by the Lady Luck Stockholders if,
among other things: (i) the Merger has not been completed by December 31, 2000,
or by June 30, 2001, if the reason it has not been completed by December 31,
2000 is because the requisite gaming approvals have not been obtained but are
being pursued and it is reasonably probable that they will be obtained by
June 30, 2001; (ii) the Merger has been legally prohibited; (iii) the other
party materially breaches its representations or fails to comply with its
obligations under the Merger Agreement and does not cure its breach or failure
to comply within 30 days; (iv) the requisite vote of the Lady Luck Stockholders
is not obtained at the Special Meeting or (v) if the initial applications with
the appropriate gaming authorities have not been filed by the other party within
60 days of the date of the Merger Agreement.
In addition, Isle of Capri may decide to terminate the Merger Agreement
(i) if it is not satisfied with its physical review and investigation of the
properties of Lady Luck, as more fully described in this Proxy Statement, which
review must take place during the forty-five (45) day period from the date of
the Merger Agreement and which has expired unexercised as of the date of this
Proxy Statement, (ii) if at any time prior to approval of the Merger by the Lady
Luck Stockholders, Lady Luck receives a more favorable acquisition proposal
which the Board accepts or which causes the Board to withdraw or change its
recommendation to the Lady Luck Stockholders concerning the Merger, (iii) if any
state gaming authority revokes any of Lady Luck's licenses or permits to operate
any of its casino riverboats or imposes certain fines or penalties against Lady
Luck or any of its current or former directors, officers, employees, agents or
representatives, or (iv) if certain material adverse changes have occurred with
respect to Lady Luck.
See "Certain Provisions of the Merger Agreement--Termination."
TERMINATION FEES; REIMBURSEMENT OF EXPENSES
Lady Luck must pay Isle of Capri a termination fee of $2.5 million upon
termination of the Merger Agreement under certain circumstances. Under other
circumstances, Lady Luck must (i) pay Isle of Capri a termination fee of
$1.5 million and reimburse Isle of Capri for all fees and expenses incurred in
connection with the Merger Agreement, or (ii) reimburse Isle of Capri for all
fees and expenses incurred in connection with the Merger Agreement.
Isle of Capri must pay Lady Luck a termination fee of $1.5 million and must
reimburse Lady Luck for all fees and expenses incurred in connection with the
Merger Agreement upon termination of the Merger Agreement under certain
circumstances.
See "Certain Provisions of the Merger Agreement -Termination Fees;
Reimbursement of Expenses."
APPRAISAL RIGHTS
If the Merger is consummated, under applicable Delaware law, Lady Luck
Stockholders who follow the appropriate procedures, including filing a written
demand for appraisal with Lady Luck prior to the taking of the vote on the
Merger at the Special Meeting, and who do not vote in favor of the Merger will
be entitled to seek payment of the fair value of their shares of Company Common
Stock as appraised by the Delaware Court of Chancery. Under certain
circumstances, a Lady Luck Stockholder may forfeit the right to appraisal, in
which case, such Lady Luck Stockholder's shares of Company Common Stock will be
treated as if they had been converted, as of the Effective Time, into a right to
receive the Merger Consideration, without interest thereon. See "Appraisal
Rights."
5
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors and officers of Lady Luck, including Tompkins, had at the
time the Merger Agreement was negotiated and executed, and currently have,
interests that are different from, or in addition to, the interests of the Lady
Luck Stockholders generally, which may cause potential conflicts of interest.
The Board was and is aware of the interests described in this Proxy Statement
and considered them in addition to the other matters described under "Special
Factors--Recommendation of the Board," "Reasons for the Merger; Fairness of the
Merger" and "The Merger--Interests of Certain Persons in the Merger."
CONSULTING, ADVISORY AND NONCOMPETITION AGREEMENT
Tompkins has agreed with Isle of Capri pursuant to the Consulting, Advisory
and Noncompetition Agreement, dated as of October 5, 1999, by and between Isle
of Capri and Tompkins, to serve as a consultant and advisor to Isle of Capri for
a period of four years after the Effective Time. Tompkins will receive an
aggregate payment over the four year period in the amount of $2.0 million
pursuant to this agreement. See "The Merger--Consulting, Advisory and
Noncompetition Agreement."
CERTAIN EFFECTS OF THE MERGER
Following the Merger, Lady Luck Stockholders will cease to have any
ownership interest in Lady Luck or rights as holders of shares of Company Common
Stock. Lady Luck Stockholders will no longer benefit from any increases in the
value of Company Common Stock and will no longer bear the risk of any decreases
in value of Company Common Stock. Isle of Capri will own 100% of Lady Luck.
REGULATORY APPROVALS
The Merger is subject to the prior approval of the gaming authorities of
Mississippi and Iowa and to the expiration or termination of the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act, as amended (the "HSR
Act").
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
For a summary of the material U.S. federal income tax consequences of the
Merger, see "The Merger--Certain Federal Income Tax Consequences."
EACH LADY LUCK STOCKHOLDER IS URGED TO CONSULT HIS, HER OR ITS OWN TAX
ADVISOR CONCERNING THE FEDERAL INCOME, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES OF THE MERGER.
6
<PAGE>
SELECTED HISTORICAL CONDENSED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The selected historical condensed consolidated financial data presented
below for, and as of the end of, each of the fiscal years in the five-year
period ended December 31, 1998 have been derived from the audited consolidated
financial statements of Lady Luck. The financial data for, and as of the end of,
the nine-month periods ended September 30, 1999 and September 30, 1998 are
derived from unaudited condensed consolidated financial statements of Lady Luck.
The unaudited financial statements include all adjustments consisting of normal
recurring adjustments which Lady Luck considers necessary for a fair
presentation of the financial position and the results of operations for these
periods. Operating results for the nine months ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1999.
<TABLE>
<CAPTION>
NINE MONTHS ENDED: FISCAL YEARS ENDED:
----------------------------- ------------------------------------------------------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1998 1997 1996 1995 1994
------------- ------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL DATA:
Gross revenues........ $123,897 $121,433 $157,184 $172,043 $175,351 $158,411 $125,134
Promotional
allowances.......... (10,660) (10,318) (13,105) (13,183) (12,527) (8,821) (7,979)
Net revenues.......... 113,237 111,115 144,079 158,860 162,824 149,590 117,155
Casino expenses....... 40,873 40,857 52,497 57,301 56,806 49,703 41,859
Food and beverage
expenses............ 3,467 3,974 4,941 6,644 6,928 8,582 7,215
Hotel expenses........ 1,333 1,210 1,640 2,236 1,925 1,667 652
Other operating
expenses............ 51 120 143 258 282 310 574
Selling, general and
administrative...... 34,371 35,260 45,252 52,939 53,786 49,539 51,926
Related party
management/license
fees................ 2,944 2,453 3,370 2,953 3,434 5,520 2,471
Depreciation and
amortization........ 6,760 6,760 8,506 12,886 11,289 9,694 7,067
Pre-opening
expenses............ 437 -- -- -- 247 -- 2,970
Litigation claims..... -- -- -- 700 1,100 -- --
Gain on sale of
assets.............. -- (2,848) (2,848) -- -- -- --
Reserve for loss on
sale of assets...... -- -- -- 7,621 -- -- --
Project development
costs, write-downs
and reserves........ -- -- -- 7,784 404 509 15,635
Asset impairment
write-down.......... -- -- -- 20,698 -- -- --
Loss on sale of
investment in
unconsolidated
affiliate........... -- -- -- 1,912 -- -- --
Abandonment loss...... -- -- -- -- -- -- 9,344
Operating income
(loss).............. 23,001 23,329 30,578 (15,072) 26,623 24,066 (22,558)
Other (expense)....... (14,807) (15,571) (20,337) (21,390) (20,415) (19,024) (15,393)
Income (loss) before
income tax and
extraordinary
items............... 8,194 7,758 10,241 (36,462) 6,208 4,862 (37,951)
Net income (loss)..... 8,104 7,713 10,166 (36,511) 6,139 6,718 (35,665)
Net cash provided by
operating
activities.......... 12,783 5,719 9,080 10,114 13,492 17,083 8,590
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED: FISCAL YEARS ENDED:
----------------------------- ------------------------------------------------------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1998 1997 1996 1995 1994
------------- ------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents......... 22,201 18,191 28,834 19,552 15,490 22,148 28,914
Restricted cash....... -- 15,230 -- 15,388 -- 8,858 7,847
Marketable
securities.......... 18,092 15,469 19,219 -- -- -- --
Current assets........ 43,272 52,507 51,194 41,930 19,523 35,219 44,679
Property and
equipment, net...... 131,874 116,149 120,904 128,375 173,119 155,664 170,345
Total assets.......... 198,177 187,224 191,685 185,306 223,718 217,281 226,963
Current liabilities... 17,059 16,838 18,701 22,258 19,892 23,702 216,954
Total liabilities..... 193,673 193,277 195,285 199,072 200,973 200,675 221,137
Series A mandatory
cumulative
redeemable
preferred........... 22,442 20,036 20,611 18,402 16,430 14,669 13,097
Stockholders' equity
(deficit)........... (17,938) (26,089) (24,211) (32,168) 6,315 1,937 (7,271)
Working capital
(deficit)........... 26,213 35,669 32,493 19,672 (369) 11,517 (172,275)
SELECTED DATA
BASIC AND DILUTED NET
INCOME (LOSS) PER
SHARE(1):
Before extraordinary
items and preferred
stock dividends..... 1.66 1.58 2.08 (7.48) 1.26 0.92 (8.72)
Extraordinary items... -- -- -- -- -- 0.47 0.26
Applicable to common
stockholders........ 1.29 1.25 1.63 (7.88) 0.90 1.07 (8.79)
Shares used in
computing net income
per share........... 4,881 4,881 4,881 4,881 4,881 4,825 4,217
Shares outstanding at
period end.......... 4,881 4,881 4,881 4,881 4,881 4,881 4,548
Cash dividends
declared per common
share............... -- -- -- -- -- -- --
Number of employees... 2,550 2,500 2,500 3,100 2,950 2,850 2,100
</TABLE>
- ------------------------------
(1) Lady Luck effected a one-for-six reverse stock split on June 4, 1998, and
the per share amounts set forth above have been restated for periods before
June 4, 1998 to reflect the decreased number of shares of Company Common
Stock outstanding.
This data should be read in conjunction with the audited consolidated
financial statements and related notes and the report of independent public
accountants included in Lady Luck's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998, and the unaudited condensed consolidated financial
statements and related notes included in Lady Luck's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 1999, both of which
accompany this Proxy Statement and are incorporated herein by reference. A copy
of the consent of Lady Luck's independent accountants is attached to this Proxy
Statement as Annex VI.
8
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated balance sheet as of
September 30, 1999 (the "9/30/99 Pro Forma Balance Sheet"), and unaudited pro
forma condensed consolidated statements of earnings for the fiscal year ended
December 31, 1998 and the nine months ended September 30, 1999 (the "12/31/98
Pro Forma Statement of Operations" and the "9/30/99 Pro Forma Statement of
Operations," respectively, and together with the 9/30/99 Pro forma Balance
Sheet, the "Pro Forma Statements") are based on the historical consolidated
financial statements of Lady Luck included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1998 and Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999, and the historical financial
statements of GSMC for the fiscal year ended December 31, 1998 and for the nine
months ended September 30, 1999. The Pro Forma Statements and the notes thereto
should be read in conjunction with such historical financial statements (and the
notes thereto). The Pro Forma Statements give effect to the Miss Marquette
Purchase and the related secured purchase money loan in the principal amount of
$16.3 million made by Isle of Capri to GSMC pursuant to the Miss Marquette
Credit Agreement. See "Recent Developments."
The 9/30/99 Pro Forma Balance Sheet gives effect to the Miss Marquette
Purchase and the related secured purchase money loan as if they occurred as of
September 30, 1999, and the 12/31/98 Pro Forma Statement of Operations and the
9/30/99 Pro Forma Statement of Operations give effect to the Miss Marquette
Purchase and the related secured purchase money loan as if they occurred as of
January 1, 1998. The Miss Marquette Purchase is accounted for as a purchase for
accounting and financial reporting purposes. Assumptions necessary to reflect
the Miss Marquette Purchase and the related secured purchase money loan and to
restate historical amounts are presented in the "Miss Marquette Acquisition
Adjustments" and the "Financing Adjustments" columns, which assumptions are
further described below and in the accompanying Notes to the Unaudited Pro Forma
Condensed Consolidated Financial Statements.
In the opinion of Lady Luck's management, all adjustments necessary to
present fairly the Pro Forma Statements have been made. The pro forma
adjustments are based upon available information and certain assumptions that
Lady Luck believes are reasonable. The Pro Forma Statements do not purport to
represent what the Company's financial position and results of operations would
actually have been had the Miss Marquette Purchase and the related secured
purchase money loan in fact occurred on such dates or to project Lady Luck's
financial position or results of operations for any future period.
9
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA FOR PRO FORMA FOR
MISS MARQUETTE THE MISS THE FINANCING
HISTORICAL HISTORICAL ACQUISITION MARQUETTE FINANCING AND ACQUISITION
LLGC MISS MARQUETTE ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
---------- --------------- --------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash, cash equivalents and
marketable securities........ $ 40,293 $ 2,306 $ -- $ 2,306 $(25,775)(g) $ 16,824
Accounts receivable, net....... 736 1 -- 1 -- 737
Inventories.................... 499 196 -- 196 -- 695
Prepaid expenses............... 1,744 174 -- 174 -- 1,918
-------- ------- -------- ------- -------- --------
Total current assets......... 43,272 2,677 -- 2,677 (25,775) 20,174
Property and equipment
Land and land improvements..... 15,786 923 -- (b) 923 -- 16,709
Building, boats and
improvements................. 104,334 25,759 (14,364)(b) 11,395 -- 115,729
Furniture, fixtures and
equipment.................... 39,042 9,316 (4,234)(b) 5,082 -- 44,124
-------- ------- -------- ------- -------- --------
159,162 35,998 (18,598) 17,400 -- 176,562
Less accumulated
depreciation................. (36,514) (7,675) 7,675(b) -- -- (36,514)
-------- ------- -------- ------- -------- --------
122,648 28,323 (10,923) 17,400 -- 140,048
Construction in progress....... 9,226 -- -- -- -- 9,226
-------- ------- -------- ------- -------- --------
Total property and equipment,
net........................ 131,874 28,323 (10,923) 17,400 -- 149,274
Other assets:
Deferred financing fees and
costs, net................... 1,226 -- -- -- 408(a) 1,634
Investment in unconsolidated
affiliates, net.............. 17,204 -- -- -- -- 17,204
Other.......................... 4,601 382 (282)(b) 100 -- 4,701
Goodwill....................... -- -- 29,174(b) 29,174 -- 29,174
-------- ------- -------- ------- -------- --------
Total other assets........... 23,031 382 28,892 29,274 408 52,713
TOTAL ASSETS................. $198,177 $31,382 $ 17,969 $49,351 $(25,367) $222,161
======== ======= ======== ======= ======== ========
Current liabilities:
Current portion of long-term
debt......................... 1,052 2,207 -- $ 2,207 16,300(g) 19,559
Accrued interest............... 1,859 -- -- -- -- 1,859
Accounts payable............... 2,697 344 -- 344 -- 3,041
Construction payables.......... 1,952 -- -- -- -- 1,952
Accrued property taxes......... 985 -- -- -- -- 985
Other accrued liabilities...... 8,514 1,964 500(b) 2,464 -- 10,978
Amounts due to related party... -- 11,762 (11,762)(c) -- -- --
-------- ------- -------- ------- -------- --------
Total current liabilities.... 17,059 16,277 (11,262) 5,015 16,300 38,374
Long-term debt:
Mortgage notes payable......... 173,500 -- -- -- -- 173,500
Other long-term debt........... 3,114 2,669 -- 2,669 -- 5,783
-------- ------- -------- ------- -------- --------
Total long-term debt......... 176,614 2,669 -- 2,669 -- 179,283
Total liabilities............ 193,673 18,946 (11,262) 7,684 16,300 217,657
Series A mandatory redeemable
preferred stock................ 22,442 -- -- -- -- 22,442
Stockholders' equity/(deficit):
Common stock................... 29 10 (10)(e) -- -- 29
Additional paid-in capital..... 31,382 14,677 (14,677)(e) -- -- 31,382
Purchase accounting
adjustments.................. -- -- 41,667(b) 41,667 (41,667)(g) --
Accumulated Deficit............ (49,349) (2,251) 2,251(e) -- -- (49,349)
-------- ------- -------- ------- -------- --------
Total stockholders'
equity/(deficit)........... (17,938) 12,436 29,231 41,667 (41,667) (17,938)
TOTAL LIABILITIES AND
STOCKHOLDERS'
EQUITY/(DEFICIT)........... $198,177 $31,382 $ 17,969 $49,351 $(25,367) $222,161
======== ======= ======== ======= ======== ========
</TABLE>
10
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA FOR PRO FORMA FOR
MISS MARQUETTE THE MISS THE FINANCING
HISTORICAL HISTORICAL ACQUISITION MARQUETTE FINANCING AND ACQUISITION
LLGC MISS MARQUETTE ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
---------- -------------- -------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Casino...................... $ 97,818 $24,390 $ -- $24,390 $ -- $122,208
Food and Beverage........... 11,553 3,130 -- 3,130 -- 14,683
Hotel....................... 4,281 360 -- 360 -- 4,641
Equity in net income of
unconsolidated
affiliate................. 5,242 -- -- -- -- 5,242
Management fees from
unconsolidated
affiliate................. 2,054 -- -- -- -- 2,054
Other....................... 2,949 326 326 -- 3,275
-------- ------- ------ ------- ------- --------
Gross revenues............ 123,897 28,206 -- 28,206 -- 152,103
Less: Promotional
allowances.............. (10,660) (1,614) -- (1,614) -- (12,274)
-------- ------- ------ ------- ------- --------
Net revenues.............. 113,237 26,592 -- 26,592 -- 139,829
Costs and expenses:
Casino...................... 40,873 12,597 -- 12,597 -- 53,470
Food and Beverage........... 3,467 1,374 -- 1,374 -- 4,841
Hotel....................... 1,333 125 -- 125 -- 1,458
Other....................... 51 218 -- 218 -- 269
Selling, general
administrative............ 34,371 5,105 -- 5,105 -- 39,476
Related party license fee... 2,944 -- -- -- 2,944
Depreciation and
amortization.............. 6,760 1,860 119(d) 1,979 -- 8,739
Gain on sale of assets...... -- -- -- -- -- --
Pre-opening expenses........ 437 -- -- -- -- 437
-------- ------- ------ ------- ------- --------
Totals costs and
expenses................ 90,236 21,279 119 21,398 -- 111,634
-------- ------- ------ ------- ------- --------
Operating income.............. 23,001 5,313 (119) 5,194 -- 28,195
Other income (expense):
Interest income............. 1,295 -- -- -- -- 1,295
Interest expense, net....... (15,935) (1,775) 965(f) (810) (1,605)(a) (18,350)
Other....................... (167) -- -- -- (167)
-------- ------- ------ ------- ------- --------
Total other income
(expense)............... (14,807) (1,775) 965 (810) (1,605) (17,222)
-------- ------- ------ ------- ------- --------
Income from continuing
operations.................. $ 8,194 $ 3,538 $ 846 $ 4,384 $(1,605) $ 10,973
======== ======= ====== ======= ======= ========
EBITDA(1)..................... $ 30,198 $ 7,173 $ 7,173 $ 37,371
</TABLE>
- ------------------------------
(1) EBITDA is defined as operating income adjusted for depreciation and
amortization, pre-opening expenses and any gain on sale of assets.
11
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA FOR PRO FORMA FOR
MISS MARQUETTE THE MISS THE FINANCING
HISTORICAL HISTORICAL ACQUISITION MARQUETTE FINANCING AND ACQUISITION
LLGC MISS MARQUETTE ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
---------- -------------- -------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Casino.................. $126,314 $33,182 $ -- $33,182 $ -- $159,496
Food and Beverage....... 15,535 3,954 -- 3,954 -- 19,489
Hotel................... 4,229 474 -- 474 -- 4,703
Equity in net income of
unconsolidated
affiliate............. 5,099 -- -- -- -- 5,099
Management fees from
unconsolidated
affiliate............. 2,292 -- -- -- -- 2,292
Other................... 3,715 400 -- 400 -- 4,115
-------- ------- ------ ------- ------- --------
Gross revenues........ 157,184 38,010 -- 38,010 -- 195,194
Less: Promotional
allowances.......... (13,105) (2,069) -- (2,069) -- (15,174)
-------- ------- ------ ------- ------- --------
Net revenues.......... 144,079 35,941 -- 35,941 -- 180,020
Costs and expenses:
Casino.................. 52,497 15,290 -- 15,290 -- 67,787
Food and Beverage....... 4,941 3,276 -- 3,276 -- 8,217
Hotel................... 1,640 274 -- 274 -- 1,914
Other................... 143 408 -- 408 -- 551
Selling, general
administrative........ 45,252 7,984 -- 7,984 -- 53,236
Related party license
fee................... 3,370 -- -- -- -- 3,370
Depreciation and
amortization.......... 8,506 2,421 218(d) 2,639 -- 11,145
Gain on sale of
assets................ (2,848) -- -- -- -- (2,848)
Pre-opening expenses.... -- -- -- -- -- --
-------- ------- ------ ------- ------- --------
Totals costs and
expenses............ 113,501 29,653 218 29,871 -- 143,372
-------- ------- ------ ------- ------- --------
Operating income.......... 30,578 6,288 (218) 6,070 -- 36,648
Other income (expense):
Interest income......... 2,160 -- -- -- -- 2,160
Interest expense, net... (21,960) (2,889) 1,375(f) (1,514) (2,140)(a) (25,614)
Other................... (537) -- -- -- -- (537)
-------- ------- ------ ------- ------- --------
Total other income
(expense)........... (20,337) (2,889) 1,375 (1,514) (2,140) (23,991)
-------- ------- ------ ------- ------- --------
Income from continuing
operations.............. $ 10,241 $ 3,399 $1,157 $ 4,556 $(2,140) $ 12,657
======== ======= ====== ======= ======= ========
EBITDA(1)................. $ 36,236 $ 8,709 $ 8,709 $ 44,945
</TABLE>
- --------------------------
(1) EBITDA is defined as operating income adjusted for depreciation and
amortization, pre-opening expenses and any gain on sale of assets.
12
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FINANCING ADJUSTMENTS
(a) Reflects the changes in interest expense and debt issuance costs due to the
increase in long-term debt arising from the loan from Isle of Capri
Casinos, Inc. to finance a portion of the acquisition.
MISS MARQUETTE ACQUISITION ADJUSTMENTS
(b) The following table sets forth the purchase price of Miss Marquette and the
preliminary allocation as of September 30, 1999:
<TABLE>
<S> <C>
Preliminary Allocation:
Working capital*.......................................... $(2,338)
Land and land improvements................................ 923
Building, boats and improvements.......................... 11,395
Furniture, fixtures and equipment......................... 5,082
Other assets.............................................. 100
Other long-term liabilities............................... (2,669)
-------
Subtotal (fair value of net assets acquired)............ 12,493
Goodwill (excess of purchase price over fair value of
assets acquired)........................................ 29,174
-------
$41,667
</TABLE>
- ------------------------
* The parties have agreed to adjust the above purchase price to reflect
changes in Miss Marquette's working capital from an agreed-upon amount as
compared to the amount of working capital at the closing date.
We are currently in the process of allocating the purchase price and its
allocation will be based on the discounted cash flows, quoted market prices and
estimates by management which are expected to be completed within one year
following the Miss Marquette acquisition. Upon completion of the purchase price
allocation process, to the extent the purchase price exceeds the fair value of
the net identifiable tangible and intangible assets acquired, such excess will
be allocated to goodwill.
(c) Reflects reductions for assets and liabilities, which are not included in
our purchase of Miss Marquette.
(d) Reflects the estimated expense for the amortization of the goodwill over a
period of 25 years and the incremental change in depreciation expense as a
result of the adjustment of the assets acquired to fair value. Depreciation
of assets acquired is based upon the following estimated useful lives:
<TABLE>
<S> <C>
Buildings, boats and improvements........................... 25 years
Furniture, fixtures and equipment........................... 5 years
</TABLE>
(e) Reflects the elimination necessary for the consolidation of Miss Marquette
based upon the allocation of the purchase price.
(f) Reflects the elimination of the interest expense for debt to related party
not assumed by Lady Luck Gaming Corporation in the acquisition.
13
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(g) Reflects the effects of the increase in debt and use of proceeds for the
acquisition. The following activity is reflected in the cash account as of
September 30, 1999:
<TABLE>
<S> <C>
Net proceeds from Miss Marquette Credit Agreement........... $ 15,892
Purchase of Miss Marquette for cash......................... (41,667)
--------
Net use of proceeds......................................... $ 25,775
</TABLE>
14
<PAGE>
PRICE OF THE COMPANY COMMON STOCK
The Company Common Stock is currently traded on the Nasdaq SmallCap Market.
The bid and ask prices are quoted by the Nasdaq SmallCap Market under the symbol
"LUCK". The Company Common Stock was formerly traded on the Nasdaq National
Market tier of the Nasdaq Stock Market. On June 21, 1999, Lady Luck was informed
by the Nasdaq National Market that it had determined Lady Luck was no longer
eligible for listing because the Company's Common Stock failed to maintain
market value of public float and bid price, composed of total shares outstanding
reduced by those held by directors and officers, greater than or equal to
$15.0 million, and a bid price of at least $5.00, respectively, in accordance
with Nasdaq Marketplace Rules 4450(b)(3) and 4450(b)(4). The prices listed below
represent the high and low bid sales prices reported by the Nasdaq SmallCap
Market during the period from June 21, 1999 until December 13, 1999 and the high
and low sales prices reported by the Nasdaq National Market during the periods
before June 21, 1999 as set forth in the table. The Company effected a
one-for-six reverse stock split on June 4, 1998, and the sales prices set forth
below have been restated for periods before June 4, 1998 to reflect the
decreased number of shares of Company Common Stock outstanding.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
1997
First Quarter............................................. $12.750 $10.125
Second Quarter............................................ 11.250 9.000
Third Quarter............................................. 12.750 7.125
Fourth Quarter............................................ 9.750 4.500
1998
First Quarter............................................. $10.500 $ 5.436
Second Quarter............................................ 11.628 6.750
Third Quarter............................................. 9.250 4.375
Fourth Quarter............................................ 5.500 2.813
1999
First Quarter............................................. $ 6.125 $ 2.500
Second Quarter(1)......................................... 6.000 4.063
Third Quarter............................................. 9.125 4.250
Fourth Quarter(2).........................................
</TABLE>
- --------------------------
(1) Through June 21, 1999, as reported on the Nasdaq National Market and from
June 22, 1999 through June 30, 1999, as reported on the Nasdaq SmallCap
Market.
(2) Through December 13, 1999.
On October 5, 1999, the last trading day before the public announcement of
the execution of the Merger Agreement, the closing price of Company Common Stock
was $8.13 per share. On this date, the high and low bid sales prices of Company
Common Stock were $8.13 and $7.38, respectively.
On December 13, 1999, the latest practicable trading day before the printing
of this Proxy Statement, the closing price of Company Common Stock as reported
was $10.06 per share.
On December 13, 1999, there were approximately 443 record holders of Company
Common Stock.
Lady Luck Stockholders should obtain current market price quotations for
Company Common Stock in connection with voting their shares.
Lady Luck has never paid cash dividends on Company Common Stock since its
initial public offering and it does not have any present intention to commence
payment of any cash dividends. In addition, the Indenture governing the 2001
Notes restricts Lady Luck's ability to pay dividends on Company Common Stock.
15
<PAGE>
RECENT DEVELOPMENTS
Lady Luck entered into the Amended and Restated Purchase Agreement dated as
of August 31, 1999 (the "Gemini Purchase Agreement") by and among Lady Luck,
Gemini, IMPS and Tompkins, which provides, among other things for the sale by
Tompkins, Gemini and IMPS of (i) the Las Vegas Hotel and (ii) the Trademark
Assets (the "Gemini Purchase"). In connection with the Merger, Isle of Capri
required Tompkins, Gemini and IMPS to amend the Gemini Purchase Agreement in
order to provide, among other things, subject to the consummation of the Merger,
that the sale of the Trademark Assets, which sale does not require the approval
of the Nevada Gaming Commission, be consummated at the same time as the Merger
without consummating the acquisition of the Las Vegas Hotel, which acquisition
requires the approval of the Nevada Gaming Commission and may be consummated
after obtaining the required approval (the "Gemini Amendment"). If the approval
of the Nevada Gaming Commission for the acquisition of the Las Vegas Hotel is
obtained prior to the consummation of the Merger, and all other closing
conditions have been met, the acquisition of the Las Vegas Hotel and the
Trademark Assets may both occur at the same time as the consummation of the
Merger. However, it is unlikely that such approval of the Nevada Gaming
Commission will be obtained prior to the consummation of the Merger.
The terms of the Gemini Amendment, which generally become effective only
upon consummation of the Merger, include the split of the original
$45.5 million purchase price for the Gemini Purchase into a purchase price of
$31.0 million for the Trademark Assets and $14.5 million for the Las Vegas
Hotel. Pursuant to the Gemini Amendment, Lady Luck agreed to: (a) provide an
exclusive, perpetual royalty-free license agreement to Gemini and Tompkins to
use the Trademark Assets in connection with the Las Vegas Hotel, effective upon
the closing of the Merger until the closing of the purchase of the Las Vegas
Hotel or, if Isle of Capri does not purchase the Las Vegas Hotel, effective
until terminated as provided therein, and (b) cause IMPS to enter into a
marketing agreement with Gemini effective until the earliest of (1) such time as
Gemini is acquired by Lady Luck pursuant to the Gemini Purchase Agreement, as
amended to date, (2) June 30, 2001, or (3) the termination by either party upon
90 days prior written notice. Pursuant to such marketing agreement, IMPS will
provide certain marketing and direct mailing services to Gemini with respect to
the Las Vegas Hotel on an "actual cost" basis. Both agreements described in
clauses (a) and (b) of this paragraph were entered into as of October 5, 1999,
concurrently with the Gemini Amendment and the Merger Agreement.
The Board formed a Special Committee of the Board (the "Special Committee")
which was comprised solely of directors unaffiliated with Lady Luck to negotiate
and make a recommendation to the Board regarding the Gemini Purchase Agreement.
The Board formed the Special Committee because Tompkins is the Chairman of the
Board and Chief Executive Officer of Lady Luck, the sole stockholder of both
Gemini and IMPS and the owner of the Las Vegas Hotel. The Special Committee and
its advisors negotiated the price and other terms of the Gemini Purchase
Agreement and subsequently participated in the negotiation and approval of the
Gemini Amendment.
On October 29, 1999, Lady Luck consummated the purchase (the
"Miss Marquette Purchase") of all of the outstanding capital stock of Gamblers
Supply Management Company ("GSMC"), a wholly-owned subsidiary of Sodak
Gaming, Inc. ("Sodak"), from Sodak pursuant to a Stock Purchase Agreement dated
as of July 30, 1999 (the "Miss Marquette Purchase Agreement"), by and among Lady
Luck, Sodak, and GSMC. GSMC owns the Miss Marquette riverboat casino located in
Marquette, Iowa and the associated real property and assets. The Miss Marquette
Purchase was subject to customary closing conditions, including the receipt of
the necessary gaming approvals. In connection with the Miss Marquette Purchase,
Isle of Capri made a secured purchase money loan in the principal amount of
$16.3 million to GSMC, pursuant to the Miss Marquette Credit Agreement. This
loan is secured by substantially all of the assets of GSMC, excluding the gaming
licenses.
16
<PAGE>
THE SPECIAL MEETING
MATTERS TO BE CONSIDERED
The primary purpose of the Special Meeting is to vote upon a proposal to
approve and adopt the Merger Agreement. If the Merger Agreement is approved by
the Lady Luck Stockholders and the other conditions to the Merger are satisfied
or waived, to the extent permitted, Merger Sub will merge with and into Lady
Luck, and all shares of Company Common Stock held by Lady Luck Stockholders
immediately prior to the Effective Time (other than shares as to which appraisal
rights have been properly perfected) will be converted into the right to receive
$12.00 in cash, without interest. See "Certain Provisions of the Merger
Agreement--The Merger; Merger Consideration." At the Special Meeting, the Lady
Luck Stockholders will also be asked to approve and adopt the proposal to grant
the Board Adjournment Authority and to transact such other business as properly
may come before the Special Meeting. The Board is not presently aware of any
such other business.
Representatives of the independent accountants of Lady Luck are not expected
to be present at the Special Meeting.
A copy of the Merger Agreement is attached to this Proxy Statement as Annex
I. See also "The Merger" and "Certain Provisions of the Merger Agreement." The
Board, by unanimous vote, has approved the Merger Agreement and recommends a
vote FOR the approval and adoption of the Merger Agreement and FOR the approval
and adoption of the proposal to grant the Board Adjournment Authority.
REQUIRED VOTES
Each share of Company Common Stock is entitled to one vote on each matter
presented to Lady Luck Stockholders for a vote at the Special Meeting. The
affirmative vote of the holders of at least seventy-five percent (75%) of the
outstanding shares of Company Common Stock is required to approve and adopt the
Merger Agreement and the transactions contemplated thereby. The affirmative vote
of holders of at least a majority of the shares of Company Common Stock present
in person or represented by proxy at the Special Meeting is required to approve
and adopt the proposal to grant the Board Adjournment Authority.
As of the Record Date, Tompkins, the Chief Executive Officer and Chairman of
the Board of Lady Luck, beneficially owned an aggregate of 2,226,409 shares
(approximately 45.6%, and including 11,739 shares which Tompkins has agreed to
transfer to Alain Uboldi, President, Chief Operating Officer and a director of
Lady Luck, whereby Tompkins has the right to vote such shares and, under certain
circumstances, reacquire such shares) of the outstanding shares of Company
Common Stock which are eligible to vote at the Special Meeting. Tompkins has
agreed, pursuant to the Stockholder Support Agreement, to vote his shares of
Company Common Stock in favor of the approval and adoption of the Merger
Agreement. Tompkins intends to vote his shares of Company Common Stock in favor
of the Board Adjournment Authority. As of the Record Date, directors and
executive officers of Lady Luck and their affiliates as a group (other than
Tompkins) beneficially owned an aggregate of 70,471 shares (approximately 1%,
and not including the 11,739 shares described above that Tompkins has agreed to
transfer to Mr. Uboldi,) of Company Common Stock and directors and executive
officers of Lady Luck and their affiliates as a group (including Tompkins)
beneficially owned an aggregate of 2,296,880 shares (approximately 47%) of
Company Common Stock. As of the Record Date, directors and executive officers of
Lady Luck and their affiliates as a group (including Tompkins) beneficially
owned an aggregate of 2,246,379 shares (approximately 46%) of Company Common
Stock, not including options, which are eligible to vote at the Special Meeting.
17
<PAGE>
VOTING AND REVOCATION OF PROXIES
Shares of Company Common Stock that are entitled to vote and are represented
by a Proxy properly signed and received at or prior to the Special Meeting,
unless subsequently properly revoked, will be voted in accordance with the
instructions indicated thereon. If a Proxy is signed and returned without
indicating any voting instructions, shares of Company Common Stock represented
by such Proxy will be voted FOR the proposal to approve and adopt the Merger
Agreement and FOR the proposal to approve and adopt the Board Adjournment
Authority. The Board is not currently aware of any business to be acted upon at
the Special Meeting other than as described herein. If, however, other matters
are properly brought before the Special Meeting or any adjournments or
postponements thereof, the persons appointed as proxies will have the discretion
to vote or act thereon in accordance with their best judgment, unless authority
to do so is withheld in the Proxy.
Any Proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before the shares of Company Common Stock represented by
such Proxy are voted at the Special Meeting by (i) attending and voting in
person at the Special Meeting, (ii) giving notice of revocation of the Proxy at
the Special Meeting or (iii) delivering to the Secretary of Lady Luck (a) a
written notice of revocation or (b) a duly executed Proxy relating to the same
shares and matters to be considered at the Special Meeting, bearing a date later
than the Proxy previously executed. Attendance at the Special Meeting will not
in and of itself constitute a revocation of a Proxy. All written notices of
revocation and other communications with respect to revocation of proxies should
be addressed as follows: Lady Luck Gaming Corporation, 206 North Third Street,
Las Vegas, Nevada 89101 Attention: Secretary, and must be received before the
taking of the votes at the Special Meeting.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
Only holders of shares of Company Common Stock at the Record Date will be
entitled to receive notice of and to vote at the Special Meeting. Holders of
record of Lady Luck's Series A Preferred Stock at the Record Date have the right
to receive notice of the Special Meeting, but do not have the right to vote at
the Special Meeting. At the close of business on the Record Date, there were
outstanding and entitled to vote 4,881,003 shares of Company Common Stock. The
presence, in person or by proxy, at the Special Meeting of the holders of at
least a majority of outstanding shares of Company Common Stock is necessary to
constitute a quorum for the transaction of business. Abstentions will be counted
as present for the purposes of determining whether a quorum is present but will
not be counted as votes cast in favor of approval and adoption of the Merger
Agreement. Because approval of the Merger Agreement requires the approval of at
least seventy-five percent (75%) of the outstanding shares of Company Common
Stock, abstentions, failure to attend the Special Meeting and/or deliver a Proxy
will have the same effect as a negative vote on this proposal. Because the
affirmative vote of at least a majority of the shares of Company Common Stock
present in person or represented by proxy at the Special Meeting is required to
approve and adopt the proposal to grant the Board Adjournment Authority
abstentions will have the same effect as a negative vote on this proposal.
Proxies relating to "street name" shares that are voted by brokers will be
counted as shares present for purposes of determining the presence of a quorum
on all matters, but will not be treated as shares having voted at the Special
Meeting as to any proposal as to which authority to vote is withheld by the
broker. Therefore, such "broker non-votes" will have the effect of a vote
against the proposals to be voted at the Special Meeting. Accordingly, the Board
urges all Lady Luck Stockholders to complete, date and sign the accompanying
Proxy and return it promptly in the enclosed postage-paid envelope.
APPRAISAL RIGHTS
Each Lady Luck Stockholder has a right to dissent from the Merger, and, if
the Merger is consummated, to receive "fair value" for his, her or its shares of
Company Common Stock in cash by
18
<PAGE>
complying with the provisions of Section 262 of the Delaware General Corporation
Law ("DGCL"). The dissenting stockholder must deliver to Lady Luck, prior to the
vote being taken on the Merger Agreement at the Special Meeting, written notice
of his, her or its intent to demand payment for his, her or its shares and must
not vote in favor of approval and adoption of the Merger Agreement. The full
text of Section 262 of the DGCL is attached as Annex V hereto. See "Appraisal
Rights" for a further discussion of such rights.
SOLICITATION OF PROXIES
The cost of solicitation of proxies has been or will be borne by Lady Luck.
The Company has engaged the firm of Innisfree M&A Incorporated ("Innisfree") as
proxy solicitors. The fee to be paid to such firm for solicitation services is
estimated to be $6,000 plus reimbursement of out-of-pocket expenses. Innisfree
will solicit proxies from individuals, brokers, banks, nominees and other
institutional holders. In addition, proxies may be solicited by telephone, in
person, by use of the mails or other means of communication by officers and
directors and a small number of regular employees of Lady Luck who will not be
specially compensated for such services. Lady Luck may also request banks and
brokers to solicit proxies from their customers, where appropriate, and will
reimburse such persons for reasonable expenses incurred in that regard.
If you have any questions about executing your Proxy or require assistance,
please call:
Innisfree M & A Incorporated
501Madison Avenue, 20th floor
New York, NY 10022
Call toll free: (888) 750-5835
Banks and Brokers, call collect: (212) 750-5833
19
<PAGE>
SPECIAL FACTORS
BACKGROUND OF THE MERGER
In August 1999, Lady Luck received an unsolicited offer from Isle of Capri
to acquire all of the outstanding shares of Company Common Stock for a cash
payment of $12.00 per share (the "Isle Proposal"). Lady Luck was informed by
Isle of Capri that the Isle Proposal was a result of Lady Luck's announcement
that it intended to purchase the Las Vegas Hotel and the Trademark Assets. Isle
of Capri indicated that it was attracted to the resulting ability of Lady Luck
to control its trademarks and its name and the cessation of payment of royalties
and transaction fees by Lady Luck for the use of the Trademark Assets.
At the time the Isle Proposal was made, Lady Luck was pursuing a refinancing
of Lady Luck's debt pursuant to a proposed Rule 144A private placement of debt
securities (the "Refinancing"). The Refinancing was intended partially to
provide funding for the consummation of both the Gemini Purchase and the
Miss Marquette Purchase. Lady Luck analyzed the relative merits of the Isle
Proposal and the Refinancing in order to determine the proper course of action.
Lady Luck was advised by its financial advisors that, given the deterioration of
the high yield debt market, it was questionable whether Lady Luck would be able
to complete the Refinancing, or to complete the Refinancing at an acceptable
cost, and, consequently, to consummate the Gemini Purchase and the
Miss Marquette Purchase. In addition, the Board was advised that if Lady Luck
completed the Refinancing, it would have to be prepared to accept covenants in
the Refinancing that would severely constrain Lady Luck's growth and value.
Under the terms of the Isle Proposal, Isle of Capri agreed to provide bridge
financing in an amount that would enable Lady Luck to complete the
Miss Marquette Purchase. In addition, Isle of Capri had indicated its desire to
consummate the purchase of the Trademark Assets from Gemini at the same time
that it would consummate the Merger, which would potentially cause the purchase
of the Trademark Assets to occur earlier than if the Gemini Purchase Agreement
were not amended. Lady Luck also considered Isle of Capri's publicly disclosed
intent to build a casino in Coahoma County, Mississippi, which development could
be competitive with Lady Luck's operations in Coahoma County and, therefore,
could have a negative impact on Lady Luck's earnings before interest expense,
income taxes, depreciation and amortization ("EBITDA"). Lady Luck's financial
advisors advised that such a reduction would make it even more difficult to
complete the Refinancing. Finally, Wasserstein Perella, one of the Board's
financial advisors, advised the Board that it did not expect that Lady Luck
would receive a superior offer. An analysis was made of the full range of offer
prices for Lady Luck under different circumstances in which a variety of
assumptions were made and, ultimately, Lady Luck determined that the relative
attractiveness of the Refinancing had declined as compared to the Isle Proposal.
The Board's other financial advisor, Onyx Partners, was not asked to opine on
the fairness of the $12.00 offer price.
Lady Luck considered whether it should abandon the Refinancing and pursue
solely the Isle Proposal. However, at its meeting on September 9, 1999, the
Board determined that it was in the best interest of Lady Luck to pursue both
the Isle Proposal and the Refinancing on a parallel track. The Board reasoned
that if the Isle Proposal were pursued without continuing progress on the
Refinancing, in the event that the Merger was not completed, Lady Luck would
have lost valuable time with respect to the Refinancing and would not be able to
meet its financing needs in order to complete the Gemini Purchase and the
Miss Marquette Purchase. To ensure the continuance of further work on the
Refinancing while the Board further investigated the attractiveness of the Isle
Proposal to Lady Luck and the Lady Luck Stockholders, the Board assembled a team
of Lady Luck officers and personnel, as well as outside legal and financial
advisors, to analyze the Isle Proposal.
20
<PAGE>
During the period from about September 9, 1999 to October 4, 1999, the Board
met with Wasserstein Perella and Onyx Partners on several occasions and had
numerous other discussions with Wasserstein Perella, Onyx Partners and among
themselves. At each meeting, one or more of the material factors discussed below
were discussed among the members of the Board and whichever of its advisors were
then present. In addition, the members of the Board met with Wasserstein Perella
and Onyx Partners and representatives of Isle of Capri to discuss the Merger.
At the October 4, 1999 meeting of the Board, the Board, together with
representatives from its financial advisors and legal counsel, discussed the
status of the Merger Agreement and the reasons for the Merger. See "--Reasons of
Lady Luck for the Merger; Fairness of the Merger." The Board discussed the
fairness of the Merger Consideration in light of the fact that Isle of Capri had
agreed to pay $12.00 per share in cash, a significant premium over the current
market price, in exchange for the assurance that Lady Luck would not offer to
sell Lady Luck to other third parties. In addition, Isle had indicated its
desire for, and Tompkins had agreed, that Tompkins would enter into the
Stockholder Support Agreement, pursuant to which Tompkins would agree to vote
his shares of Company Common Stock (approximately 45.6% of the outstanding
Company Common Stock) in favor of the approval and adoption of the Merger
Agreement. In addition, Tompkins agreed that under the Stockholder Support
Agreement, he would not directly or indirectly, in his individual capacity
(i) initiate, solicit or encourage the submission of any proposal to acquire
Lady Luck, (ii) agree to or recommend any other proposal to acquire Lady Luck,
or (iii) engage in negotiations or discussions concerning, or provide any
non-public information to any person or entity relating to, any other proposal
to acquire Lady Luck. In addition, Tompkins agreed that, effective upon a
failure by him to vote in favor of the Merger, he would grant to Isle of Capri
an option to purchase all of the shares of Company Common Stock owned by him. It
was noted that negotiations with Isle of Capri's representatives regarding the
representations and warranties and the termination fees in the Merger Agreement
had been extensive. The Board reviewed the negotiations that took place between
representatives of Lady Luck and Isle of Capri which resulted in the termination
fee changing from the initial requirement of $10.0 million by Isle of Capri to a
mutually acceptable $2.5 million figure. Following discussions with its
financial advisors, the Board considered it unlikely that Lady Luck would
receive an unsolicited proposal for a similar transaction on terms more
favorable than the Isle Proposal (including the terms of the Miss Marquette
Credit Agreement). Therefore, the Board, based on advice from its financial
advisors, viewed the Isle Proposal as a preemptive proposal.
RECOMMENDATION OF THE BOARD
On October 4, 1999, the Board unanimously determined that the Merger, the
Merger Agreement and the transactions contemplated thereby are fair to and in
the best interests of the Lady Luck Stockholders, and recommends that the Lady
Luck Stockholders approve and adopt the Merger Agreement.
REASONS OF LADY LUCK FOR THE MERGER; FAIRNESS OF THE MERGER
The Board determined that the Merger, including the Merger Consideration,
was fair, from a financial point of view, to the Lady Luck Stockholders based on
its consideration of a number of factors, including the following:
(i) The historical market prices and recent trading activity of Company
Common Stock and the fact that the Merger Consideration would enable the Lady
Luck Stockholders to realize a premium over the prices at which Company Common
Stock has traded in the last year; and that the Merger Consideration represented
a 80.3% premium over the prior twelve week daily average (July 9 to October 1,
1999) closing price of $6.66 per share. The historical market prices of Lady
Luck's Common Stock for the past year were deemed relevant because they indicate
the arms-length trading prices of Company Common Stock for that period as
determined in the open market.
21
<PAGE>
(ii) The opinion of Wasserstein Perella delivered at the October 4, 1999
Board meeting to the effect that, as of the date of such opinion and based on
the assumptions made, the Merger Consideration of $12.00 in cash per share of
Company Common Stock to be received by the Lady Luck Stockholders in the Merger
was fair to such Lady Luck Stockholders from a financial point of view, and also
considered the analysis underlying such opinion. See "--Opinion of Financial
Advisor to the Board." A copy of the Wasserstein Perella opinion, setting forth
the assumptions made, matters considered and limitations on the review
undertaken in connection with such opinion, is attached as Annex II to this
Proxy Statement and should be read carefully and in its entirety.
(iii) The fact that Isle of Capri had informed Lady Luck that the reason for
its offer of the Merger Consideration of $12.00 in cash per share of Company
Common Stock, which represents a significant premium over the prices at which
Company Common Stock has traded in the last year, was that Lady Luck would agree
not to solicit any other offers for a similar transaction and the fact that
Tompkins had agreed to enter into the Stockholder Support Agreement. The Board
viewed the Isle Proposal as preemptive because, based on advice from its
financial advisors, it did not expect that Lady Luck would receive a superior
proposal.
(iv) Information with respect to the financial condition, results of
operations, business and prospects of Lady Luck, including management's
projections of future earnings and growth of Lady Luck, and the inherent
uncertainties and contingencies associated with such financial projections, the
size of Lady Luck as compared to other companies in the gaming industry, and the
economic and market conditions affecting Lady Luck. Specifically, the Board
considered Lady Luck's limited ability to raise capital and/or to refinance and,
consequently, to increase Lady Luck's earnings and growth potential independent
of the proposed Merger.
(v) The likelihood of the consummation of the Merger, the proposed structure
of the transaction and anticipated closing date of the Merger, the impact on
Lady Luck of a delay or further uncertainty both with respect to the market for
Company Common Stock and the fiduciary obligations of the Board to the Lady Luck
Stockholders.
(vi) The fact that consummation of the Merger would preclude the Lady Luck
Stockholders from having the opportunity to participate in the future growth
prospects of Lady Luck. In addition, the Board recognized that Isle of Capri
will have the opportunity to benefit from any increases in the value of Lady
Luck following the Merger. Accordingly, in reaching its conclusion to approve
the Merger Agreement, the Board considered management's projections of future
earnings and growth of Lady Luck and determined that the future prospects of
Lady Luck are adequately reflected in the Merger Consideration. See "--Opinion
of Financial Advisor Board."
(vii) The fact that the Merger would afford the Lady Luck Stockholders an
opportunity to dispose of their Company Common Stock at fair value and achieve
liquidity without the possible diminution of value resulting from the lack of an
active trading market.
(viii) The fact that the Merger Consideration and the terms and conditions of
the Merger Agreement were the result of arm's-length negotiations between the
Board, on the one hand, and Isle of Capri, on the other hand.
In view of the various factors considered by the Board in connection with
its evaluation of the Merger and the Merger Consideration, the Board did not
find it necessary to quantify or otherwise attempt to assign relative importance
to the specific factors considered in making its determination, nor did it
evaluate whether such factors were of equal importance. However, based upon
these factors, the evaluation of all the relevant information provided to them
by Lady Luck's financial advisors and taking into account the existing trading
ranges for Company Common Stock, the Board determined that the Merger, including
the Merger Consideration, was fair, from a financial point of view, to the Lady
Luck Stockholders. See "--Opinion of Financial Advisor to the Board." In
considering the factors
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described above, individual members of the Board may have given different
weights to different factors. The Board did not consider any factors which led
the Board to believe that the Merger may be unfair to the Lady Luck
Stockholders.
CERTAIN EFFECTS OF THE MERGER
If the Merger Agreement is approved by the Lady Luck Stockholders, and the
other conditions to the closing of the Merger are satisfied or waived, Merger
Sub will merge with and into Lady Luck, with Lady Luck as the Surviving
Corporation and a wholly-owned subsidiary of Isle of Capri. Upon the
consummation of the Merger, the approximately 4,881,003 shares of Company Common
Stock currently held by the Lady Luck Stockholders will be converted into the
right to receive $12.00 in cash per share, without interest. In addition, upon
consummation of the Merger, the certificate of incorporation and bylaws of the
Surviving Corporation shall be amended to be substantially identical to the
certificate of incorporation and bylaws of Merger Sub until amended in
accordance with applicable law.
In the Merger, the Lady Luck Stockholders will receive cash consideration of
$12.00 per share and cease to have any ownership interest in Lady Luck or rights
as holders of shares of Company Common Stock. After the Merger, the Lady Luck
Stockholders will no longer benefit from any increases in the value of Lady Luck
or the payment of dividends on Company Common Stock and will no longer bear the
risk of any decreases in value of Lady Luck. Following the Merger, Isle of
Capri's beneficial interest in the net book value and net earnings of Lady Luck
would be 100%. At September 30, 1999, the net book value of Lady Luck was a
deficit of approximately $17,938,000 and the net income of Lady Luck for the
nine months ended September 30, 1999 was approximately $8,104,000, based on the
unaudited financial statements of Lady Luck as of and for the nine months ended
September 30, 1999. Isle of Capri will be the sole beneficiary of any future
earnings and growth of Lady Luck and will have the ability to benefit from any
divestitures, strategic acquisitions or other corporate opportunities that may
be pursued by Lady Luck in the future.
If the Merger Agreement is approved by the Lady Luck Stockholders and the
Merger is consummated thereafter, there will not be another meeting of the Lady
Luck Stockholders.
Lady Luck believes that the Merger will be treated for federal income tax
purposes as a purchase by Isle of Capri of Company Common Stock held by the Lady
Luck Stockholders and, therefore, will not give rise to gain, loss or other
income to Lady Luck. After the Merger, Isle of Capri will be able to consolidate
Lady Luck for federal income tax purposes. For information regarding certain tax
consequences to Lady Luck Stockholders, see "The Merger--Certain Federal Income
Tax Consequences."
OPINION OF FINANCIAL ADVISOR TO THE BOARD
Lady Luck initially retained Wasserstein Perella on September 15, 1999 to
assist Lady Luck in its analysis and consideration of various financial and
strategic alternatives available to it. In connection with the Merger, the Board
requested that Wasserstein Perella render its opinion as to the fairness, from a
financial point of view, to Lady Luck Stockholders of the Merger Consideration
to be received by Lady Luck Stockholders.
At the October 4, 1999 meeting of the Board, representatives of Wasserstein
Perella made a presentation with respect to the Merger and rendered to the Board
its oral opinion, subsequently confirmed in writing as of the same date, that,
as of such date, and based on the assumptions made, matters considered and
limits of the review undertaken by Wasserstein Perella, the Merger Consideration
to be received by the Lady Luck Stockholders was fair, from a financial point of
view, to such stockholders.
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THE FULL TEXT OF WASSERSTEIN PERELLA'S WRITTEN OPINION DATED OCTOBER 4, 1999
(THE "WASSERSTEIN PERELLA OPINION"), WHICH SETS FORTH, AMONG OTHER THINGS,
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITS OF THE
REVIEW UNDERTAKEN, IS ATTACHED HERETO AS ANNEX II AND INCORPORATED HEREIN BY
REFERENCE. WE URGE YOU TO READ THE WASSERSTEIN PERELLA OPINION CAREFULLY AND IN
ITS ENTIRETY. THE WASSERSTEIN PERELLA OPINION IS DIRECTED TO THE BOARD AND
ADDRESSES ONLY THE FAIRNESS OF THE MERGER CONSIDERATION TO LADY LUCK'S
STOCKHOLDERS FROM A FINANCIAL POINT OF VIEW. IT DOES NOT ADDRESS ANY OTHER
ASPECT OF THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY LADY LUCK
STOCKHOLDER AS TO HOW TO VOTE AT THE SPECIAL MEETING. THE WASSERSTEIN PERELLA
OPINION WAS RENDERED TO THE BOARD FOR ITS CONSIDERATION IN DETERMINING WHETHER
TO APPROVE THE MERGER AGREEMENT. THE DISCUSSION OF THE WASSERSTEIN PERELLA
OPINION IN THIS PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF THE WASSERSTEIN PERELLA OPINION.
In preparing the Wasserstein Perella Opinion, Wasserstein Perella reviewed
drafts of the Merger Agreement and related documents, and for purposes thereof,
assumed that the final forms of such documents would not differ in any material
respect from the drafts provided to it. Wasserstein Perella also reviewed and
analyzed certain publicly available business and financial information relating
to Lady Luck for recent years and interim periods to the date of the Wasserstein
Perella Opinion, as well as certain internal financial and operating
information, including financial forecasts, analyses, and projections prepared
by or on behalf of Lady Luck and provided to it for purposes of its analysis.
Wasserstein Perella met with management of Lady Luck to review and discuss such
information and, among other matters, Lady Luck's business, operations, assets,
financial condition, and future prospects.
Wasserstein Perella reviewed and considered certain publicly available
financial and stock market data relating to Lady Luck, and compared that data
with similar data for certain other companies, the securities of which are
publicly traded, that it believed may have been relevant or comparable in
certain respects to Lady Luck or one or more of its businesses or assets.
Wasserstein Perella also reviewed and considered the financial terms, to the
extent publicly available, of certain recent acquisitions and business
combination transactions in the casino gaming industry specifically, and in
other industries generally, that it believed to be reasonably comparable to the
Merger or otherwise relevant to its inquiry. Wasserstein Perella also performed
such other financial studies, analyses, and investigations and reviewed such
other information as it considered appropriate for purposes of the Wasserstein
Perella Opinion.
In Wasserstein Perella's review and analysis and in formulating its opinion,
Wasserstein Perella assumed and relied upon the accuracy and completeness of all
of the financial and other information provided to or discussed with it or
publicly available, and Wasserstein Perella did not assume any responsibility
for independent verification of any of such information. Wasserstein Perella
also assumed and relied upon the reasonableness and accuracy of the financial
projections, forecasts and analyses provided to it, and assumed that such
projections, forecasts and analyses were reasonably prepared in good faith and
on bases reflecting the best currently available judgments and estimates of Lady
Luck's management. Wasserstein Perella expressed no opinion with respect to such
projections, forecasts and analyses or the assumptions upon which they are
based. In addition, Wasserstein Perella did not review any of the books and
records of Lady Luck, or assume any responsibility for conducting a physical
inspection of the properties or facilities of Lady Luck, or for making or
obtaining an independent valuation or appraisal of the assets or liabilities of
Lady Luck, and no such independent valuation or appraisal was provided to it.
Wasserstein Perella also assumed that the transactions described in the Merger
Agreement would be consummated without waiver or modification of any of the
material terms
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or conditions contained therein by any party thereto. The Wasserstein Perella
Opinion is necessarily based on economic and market conditions and other
circumstances as they existed and could be evaluated by it as of the date
thereof.
The following is a brief summary of certain of the quantitative analyses
performed and factors considered by Wasserstein Perella in connection with
rendering the Wasserstein Perella Opinion and reviewed with the Board at its
October 4, 1999 meeting. In rendering its opinion, Wasserstein Perella reviewed
and analyzed historical financial information of Lady Luck which included, but
was not limited to, Lady Luck's (i) balance sheets, (ii) annual income
statements, (iii) cash flow statements, (iv) operating margins, and
(v) historical growth rates. Such review served as the basis for the financial
analysis described below.
ANALYSIS OF CERTAIN OTHER PUBLICLY TRADED COMPANIES. Wasserstein Perella
compared certain financial information and commonly used valuation measurements
for Lady Luck to corresponding information for a group of publicly traded gaming
companies. The group, collectively referred to as "Small Market Capitalization
Gaming Companies" consisted of six companies: Ameristar Casinos, Inc., Argosy
Gaming Corporation, Hollywood Park, Inc., Isle of Capri Casinos, Inc., Players
International, Inc. and President Casinos, Inc. Lady Luck is classified as a
Small Market Capitalization Gaming Company. The Small Market Capitalization
Gaming Companies were selected based upon the similarity of their operations to
those of Lady Luck. Such companies were analyzed based upon their individual
Firm Values (as hereinafter defined) as of October 1, 1999. The financial
information used included ratios of common equity market value ("Equity Value")
as adjusted to include debt plus preferred stock less cash, defined as "Firm
Value," to EBITDA. These ratios were calculated using closing stock prices as of
October 1, 1999. In the case of Lady Luck, Wasserstein Perella also computed
such ratios using the Merger Consideration of $12.00 per share, Lady Luck's
Equity Value as implied in the Merger (the "Equity Merger Value") and Lady
Luck's Firm Value as implied in the Merger (the "Firm Merger Value"), where each
was appropriate. The financial information used in connection with the multiples
provided below was based on projected EBITDA and other estimated financial
projections derived from publicly available equity research analysis.
In conjunction with Lady Luck's management, Wasserstein Perella made
adjustments (described below) to Lady Luck's Firm Value and EBITDA in order to
evaluate more accurately the valuation multiple range implied by the Merger
Consideration. These adjusted figures were among the key financial figures used
to negotiate the Merger Agreement. Such figures were prepared on a pro forma
basis in an attempt to more accurately depict Lady Luck's most recent financial
results. "Pro Forma Firm Merger Value" was derived by (a) calculating Lady
Luck's Firm Merger Value, (b) adding the amount of debt necessary to complete
the Miss Marquette Purchase and finance certain required capital expenditures,
(c) adding the amount of debt necessary to complete the Gemini Purchase and
finance certain required capital expenditures, and (d) adding the amount of debt
necessary to pay estimated transaction costs associated with financing the
aforementioned purchases as well as refinancing the majority of its existing
debt and preferred stock. "Expected 1999 Pro Forma EBITDA" was derived by
(a) estimating Lady Luck's fiscal year results for January 1, 1999 to
December 31, 1999, (b) adding estimated results Lady Luck may have achieved if
it had actually operated the Miss Marquette riverboat casino (whose acquisition
was announced on August 2, 1999) from January 1, 1999 to December 31, 1999,
(c) adding estimated results Lady Luck may have achieved if it had actually
operated the Las Vegas Hotel (whose acquisition was announced by Lady Luck on
August 20, 1999) from January 1, 1999 to December 31, 1999 and (d) adjusting for
the effect of having purchased IMPS (whose acquisition was announced by Lady
Luck on August 20, 1999) on January 1, 1999. "Projected 2000 Pro Forma EBITDA"
was derived by adding projected 2000 Lady Luck results to projected results for
Miss Marquette and Gemini assuming the completion of the Miss Marquette Purchase
and the Gemini Purchase for such period and adjusting for the effect of not
having to make payments to IMPS.
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Using Company Common Stock price of $8.00 and share prices of other
comparable companies as of October 1, 1999 ("Market Price"), Wasserstein Perella
noted that (a) the multiple of Firm Value to Expected 1999 Pro Forma EBITDA was
4.8x for Lady Luck (and the multiple of Pro Forma Firm Merger Value to Expected
1999 Pro Forma EBITDA was 5.6x), compared to a range of 5.0x to 6.8x of Expected
1999 EBITDA, with a median of 5.2x, for the Small Market Capitalization Gaming
Companies (b) the multiple of Firm Value to Projected 2000 Pro Forma EBITDA was
4.5x for Lady Luck (and the multiple of Pro Forma Firm Merger Value to Projected
2000 Pro Forma EBITDA was 5.3x), compared to a range of 4.4x to 6.3x of
Projected 2000 EBITDA, with a median of 4.9x, for the Small Market
Capitalization Gaming Companies. Based on the foregoing comparisons, Wasserstein
Perella noted that the multiples implied in the Merger were generally within the
ranges and above the medians of trading multiples for the Small Market
Capitalization Gaming Companies and that this fact supported a determination
that the Merger Consideration was fair, from a financial point of view, to the
Lady Luck Stockholders.
ANALYSIS OF SELECTED PRECEDENT TRANSACTIONS. Wasserstein Perella reviewed
the financial terms, to the extent publicly available, of nine announced and/or
completed mergers and acquisitions since January 1, 1996 in the casino gaming
industry (the "Gaming Transactions"). These transactions were (i) the pending
acquisition of Players International, Inc. by Harrah's Entertainment (the
"Harrahs/ Players Transaction"), announced August 19, 1999; (ii) the pending
acquisition of Blue Chip Casino by Boyd Gaming Corporation, announced June 28,
1999; (iii) the acquisition of Dubuque Diamond Jo by AB Capital, announced
January 18, 1999; (iv) the acquisition of Casino Magic Corporation by Hollywood
Park Inc., announced February 19, 1998; (v) the acquisition of Harveys Casino
Resorts by Colony Capital Inc., announced February 2, 1998, (vi) the acquisition
of Treasure Chest by Boyd Gaming Corporation, announced October 21, 1997,
(vii) the acquisition of certain interests owned by Louisiana Downs by Casino
America, Inc., announced July 3, 1996, (viii) the acquisition of Par-A-Dice
Gaming Corporation by Boyd Gaming Corporation, announced April 26, 1999 and
(ix) the acquisition of Boomtown, Inc. by Hollywood Park, Inc., announced
March 20, 1996.
Wasserstein Perella calculated various financial multiples based on certain
publicly available information for each of the Gaming Transactions and compared
them to corresponding financial multiples for the Merger, based on the Pro Forma
Firm Merger Value. Wasserstein Perella noted that (a) the multiple of Pro Forma
Firm Merger Value was 5.6x the Expected 1999 Pro Forma EBITDA for the Merger,
versus a range of 4.1x to 7.0x of trailing 12 months EBITDA with a median of
6.0x for the Gaming Transactions and (b) the multiple of Pro Forma Firm Merger
Value was 5.3x the Projected 2000 Pro Forma EBITDA for the Merger, versus a
range of 3.8x to 6.7x of next fiscal year EBITDA with a median of 5.1x for the
Gaming Transactions. Wasserstein Perella noted that all multiples for the Gaming
Transactions were based on information available at the time of announcement of
each of such transactions, without taking into account differing market and
other conditions during the period during which each of such transactions
occurred. Wasserstein Perella noted that based on the foregoing comparisons, and
subject to the limitations of its review, the multiples implied in the Merger
were generally within the ranges of multiples implied in the Gaming Transactions
and that this fact supported a determination that the Merger Consideration was
fair, from a financial point of view, to the Lady Luck Stockholders.
DISCOUNTED CASH FLOW ANALYSIS. Wasserstein Perella performed discounted
cash flow analyses for Lady Luck using financial projections for fiscal years
2000 through 2004 provided by the management of Lady Luck and calculated present
values per share of Common Stock. Lady Luck's management endorsed two sets of
financial projections which were based on management assumptions for future
performance as defined in two cases: (i) a case in which no new competition is
to enter the Coahoma County, Mississippi gaming market (the "Base Case") and
(ii) a case in which Isle of Capri opens a new facility in Coahoma in mid-2001
(the "Coahoma Competition Case"). Wasserstein Perella noted that Isle of Capri
had secured a site and financing for its project. Wasserstein Perella aggregated
the
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present values of the cash flows from 2000 through 2004 with the present value
of a range of terminal values. All cash flows were discounted at rates ranging
from 12.0% to 14.0%. The terminal values were computed using a range of
multiples of 4.5x to 5.25x for fiscal year 2004 EBITDA. Wasserstein Perella
arrived at such discount rates based on its judgment of the weighted average
cost of capital of selected publicly traded gaming companies and arrived at such
terminal values based on its review of the trading characteristics of the common
stock of selected publicly traded gaming companies. This analysis indicated a
range of values for Company Common Stock of $10.03 and $21.34 per share in the
Base Case and $0.71 to $10.11 in the Coahoma Competition Case. Wasserstein
Perella noted that the Merger Consideration was within the foregoing valuation
range in the Base Case and above the foregoing valuation range in the Coahoma
Competition Case and that these facts supported a determination that the Merger
Consideration was fair, from a financial point of view, to the Lady Luck
Stockholders.
MERGER CONSIDERATION PREMIUM OVER HISTORICAL STOCK PRICE. Wasserstein
Perella reviewed and analyzed the average closing prices per share for Company
Common Stock for various periods prior to October 1, 1999, in order to compute
the premium over these average prices that the Merger Consideration ($12.00)
would represent. These premiums were compared to those in transactions of $250
to $500 million in size over the past calendar year for similar periods prior to
the announcement date (the "Transaction Group"). The Merger Consideration was a
47.7% premium over the October 1, 1999 single day closing price of $8.13 per
share, with a mean and median premium of the Transaction Group of 31.5% and
25.9%, respectively. The Merger Consideration was a 49.8% premium over the prior
one week daily average (September 27 to October 1, 1999) closing price of $8.01
per share, with a mean and median premium of the Transaction Group of 35.7% and
29.7%, respectively. The Merger Consideration was a 49.4% premium over the prior
four week daily average (September 3 to October 1, 1999) closing price of $8.03
per share, with a mean and median premium of the Transaction Group of 45.7% and
39.5%, respectively. This information was presented to the Board to give it
background information regarding the stock price performance of Company Common
Stock over the periods indicated. In addition, the fact that the Merger
Consideration exceeded the price per share at which Company Common Stock traded
during the periods reviewed was consistent with a determination that the Merger
Consideration was fair to the Lady Luck Stockholders.
RELEVANT MARKET AND ECONOMIC FACTORS. In rendering its opinion, Wasserstein
Perella considered, among other factors, the condition of the U.S. equity and
debt markets and the current level of economic activity, particularly in the
gaming industry. No company used in the analysis of certain other publicly
traded companies nor any transaction used in the analysis of selected mergers
and acquisitions summarized above is identical to Lady Luck or the Merger. In
addition, Wasserstein Perella believes that both the analysis of certain other
publicly traded companies and the analysis of selected mergers and acquisitions
are not simply mathematical. Rather, such analyses must take into account
differences in the financial and operating characteristics of these companies
and other factors, such as general economic conditions, weather and market
conditions in the locations in which such companies compete and strategic and
operating plans for such companies, that could affect the public trading value
and acquisition value of these companies and therefore any such analyses must be
made as of a specific date.
While the foregoing summary describes the analyses and factors that
Wasserstein Perella deemed material in its presentation to the Board, it is not
a comprehensive description of all analyses and factors considered by
Wasserstein Perella. The preparation of a fairness opinion is a complex process
involving various determinations as to the most appropriate and relevant methods
of financial analysis and the applications of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. Wasserstein Perella believes that its analyses must be
considered as a whole and that selecting portions of its analyses and of the
factors considered by it, without considering all analyses and factors, would
create an incomplete view of the evaluation process underlying the Wasserstein
Perella Opinion. In performing its analyses, Wasserstein Perella considered
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general economic, market and financial conditions and other matters, as they
existed as of the date of the Wasserstein Perella Opinion, many of which are
beyond the control of Lady Luck. The analyses performed by Wasserstein Perella
are not necessarily indicative of actual values or future results, which may be
significantly more or less favorable than those suggested by such analyses.
Accordingly, such analyses and estimates are inherently subject to substantial
uncertainty. Additionally, analyses relating to the value of a business do not
purport to be appraisals or to reflect the prices at which the business actually
may be sold. Furthermore, no opinion is being expressed as to the prices at
which Company Common Stock may trade at any future time.
The terms of the Merger were determined through negotiations between Lady
Luck and Isle of Capri and were approved by the Board. Although Wasserstein
Perella provided advice to Lady Luck during the course of these negotiations,
the decision to enter into the Merger Agreement was solely that of the Board.
The Wasserstein Perella Opinion and the Wasserstein Perella presentation to the
Board was only one of a number of factors taken into consideration by such Board
in making its determination to approve the Merger. The Wasserstein Perella
Opinion was provided to the Board to assist it in connection with its
consideration of the Merger and does not constitute a recommendation to any
holder of Company Common Stock as to how to vote with respect to the Merger. See
"--Reasons of Lady Luck for the Merger."
Pursuant to a letter agreement dated September 15, 1999 between Lady Luck
and Wasserstein Perella and a letter agreement dated September 15, 1999 among
Wasserstein Perella, Onyx Partners and Lady Luck, Wasserstein Perella earned an
initial fee of $500,000 upon the execution of the Merger Agreement. Contingent
upon consummation of the Merger, Lady Luck must pay an additional aggregate
transaction fee of $3 million to Wasserstein Perella and Onyx Partners, which
will be split evenly between Wasserstein Perella and Onyx Partners. In addition,
Lady Luck has agreed to reimburse Wasserstein Perella and Onyx Partners for
their reasonable out-of-pocket expenses incurred in connection with rendering
financial advisory services, including fees and disbursements of its legal
counsel. Lady Luck has agreed to indemnify Wasserstein Perella, Onyx Partners
and their respective directors, officers, agents, employees and controlling
persons, for certain costs, expenses, losses, claims, damages and liabilities
related to or arising out of their rendering of services under their engagement
as financial advisors.
The Board retained Wasserstein Perella to act as its advisor based upon
Wasserstein Perella's qualifications, reputation, experience and expertise.
Wasserstein Perella is an internationally recognized investment banking firm
and, as a customary part of its investment banking business, is engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwriting transactions, private placements and
valuations for corporate and other purposes. In the past, Wasserstein Perella
and its affiliates have provided financing and financial advisory services to
Isle of Capri and have received fees for rendering these services. In the
ordinary course of its business, Wasserstein Perella may actively trade the debt
and equity securities of Lady Luck and Isle of Capri for its own account and for
the account of its customers and accordingly may at any time hold a long or
short position in such securities.
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THE MERGER
OVERVIEW
For a description of the principal terms of the Merger and the Merger
Agreement, including the consideration to be received by the Stockholders of
Lady Luck, see "Certain Provisions of the Merger Agreement."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences of the
Merger to holders of Company Common Stock. The discussion is for general
information only and does not purport to consider all aspects of federal income
taxation that might be relevant to Lady Luck Stockholders. The discussion is
based on current provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), existing regulations promulgated thereunder and administrative and
judicial interpretations thereof, all of which are subject to change (possibly
with retroactive effect). The discussion applies only to Lady Luck Stockholders
who hold shares of Company Common Stock as capital assets within the meaning of
Section 1221 of the Code, and may not apply to Company Common Stock received
pursuant to compensation arrangements, Company Common Stock held as part of a
"straddle," "hedge," "conversion transaction," "synthetic security," or other
integrated investment, or to certain types of Lady Luck Stockholders (such as
financial institutions, insurance companies, tax-exempt organizations and
broker-dealers) who may be subject to special rules. This discussion does not
address the federal income tax consequences to a Lady Luck Stockholder who, for
federal income tax purposes, is a non-resident alien individual, a foreign
corporation, a foreign partnership or a foreign estate or trust (as defined in
the Code), nor does it consider the effect of any foreign, state, local or other
tax laws.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF COMPANY COMMON
STOCK SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR TO DETERMINE THE TAX
EFFECTS TO SUCH STOCKHOLDER OF THE MERGER, INCLUDING THE APPLICATION AND EFFECT
OF FOREIGN, STATE, LOCAL AND OTHER TAX LAWS.
The receipt of cash for Company Common Stock pursuant to the Merger will be
a taxable transaction for federal income tax purposes, and may also be a taxable
transaction under applicable foreign, state, local or other tax laws. In
general, for federal income tax purposes, a Lady Luck Stockholder will recognize
capital gain or loss equal to the difference between the Lady Luck Stockholder's
adjusted tax basis in his, her or its Company Common Stock and the amount of
cash received therefor. Gain or loss must be determined separately for each
block of Company Common Stock (i.e., shares acquired at the same cost in a
single transaction) held by the Lady Luck Stockholder.
Capital gain recognized by an individual Lady Luck Stockholder upon a
disposition of Company Common Stock that has been held for more than 12 months
will generally be subject to a maximum tax rate of 20% or, in the case of
Company Common Stock that has been held for 12 months or less, will be subject
to tax at ordinary income tax rates. There are also limitations on a Lady Luck
Stockholder's deductibility of capital losses.
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Payments in connection with the Merger may be subject to "backup
withholding" at a rate of 31%, unless a Lady Luck Stockholder (i) is a
corporation or comes within certain exempt categories and, when required,
demonstrates this fact or (ii) provides a correct taxpayer identification number
("TIN") (which, for an individual Lady Luck Stockholder, would be the Lady Luck
Stockholder's social security number) to the Transfer Agent (as defined below),
and otherwise complies with applicable requirements of the backup withholding
rules. A Lady Luck Stockholder who does not provide a correct TIN may be subject
to penalties imposed by the Internal Revenue Service (the "IRS"). Any amount
paid as backup withholding does not constitute an additional tax and will be
creditable against the Lady Luck Stockholder's federal income tax liability,
provided that the required information is furnished to the IRS. Each Lady Luck
Stockholder should consult with his, her or its own tax advisor as to his, her
or its qualification or exemption from backup withholding and the procedure for
obtaining such exemption. Lady Luck Stockholders may prevent backup withholding
by completing a Substitute Form W-9 and submitting it to the Transfer Agent.
ACCOUNTING TREATMENT
Lady Luck expects that Isle of Capri will account for the Merger as a
"purchase" in accordance with generally accepted accounting principles.
Therefore, the aggregate consideration paid by Isle of Capri in connection with
the Merger will be allocated to Lady Luck's assets and liabilities based upon
their fair values, with any excess being treated as goodwill.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Lady Luck Stockholders should be aware that certain directors and officers
of Lady Luck had at the time the Merger Agreement was negotiated and executed,
and currently have, interests that are different from, or in addition to, the
interests of Lady Luck Stockholders generally, which may cause potential
conflicts of interest. The Board was and is aware of the interests described
below and elsewhere in this Proxy Statement and considered them in addition to
the other matters described under "Special Factors--Recommendation of the Board"
and "Reasons for the Merger; Fairness of the Merger."
On October 24, 1994, Lady Luck entered into letter agreements (the "Letter
Agreements") with Alain J. Uboldi, President, Chief Operating Officer and a
director of Lady Luck, and Rory J. Reid, Senior Vice President, General Counsel,
Secretary and a director of Lady Luck. The Letter Agreements were for an initial
term of three years beginning on October 24, 1994, and on each October 24
thereafter, beginning October 24, 1995, the Letter Agreements are automatically
extended for one additional year, unless terminated by Lady Luck on or before
July 24 of the preceding year. The Letter Agreements provide that in the event
of a change of control of Lady Luck, as defined in the Letter Agreements, and
the subsequent termination of the employment of Mr. Uboldi or Mr. Reid, as the
case may be, under certain circumstances, Lady Luck would be required to pay to
Mr. Uboldi or Mr. Reid, as the case may be, their full base salary through the
respective termination dates and a lump sum severance payment equal to 2.99
times the sum of their respective annual base salary plus the amount of any
bonus paid in the year immediately preceding such termination. In the event of
such termination, Mr. Uboldi or Mr. Reid, as the case may be, also would be
entitled to receive, in cash, an amount equal to the difference between the
exercise price of each option held by Mr. Uboldi or Mr. Reid (whether or not
fully exercisable) and the then current price of Company Common Stock. Further,
Mr. Uboldi or Mr. Reid, as the case may be, would be entitled to receive, for a
36-month period after such termination, life, disability, accident and health
insurance benefits substantially similar to those they are receiving immediately
prior to their termination. Under the Letter Agreements, Mr. Uboldi will be
entitled to receive payments, including base salary, bonus and options, in the
aggregate amount of approximately $2,109,398 plus post termination benefits, if
the Merger is completed and his employment by Lady Luck is terminated
thereafter. Under the Letter Agreements,
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Mr. Reid will be entitled to receive payments, including base salary, bonus and
options, in the aggregate amount of approximately $1,005,475 plus post
termination benefits, if the Merger is completed and his employment by Lady Luck
is terminated thereafter. In addition, Mr. Uboldi will receive approximately
$140,868 related to 11,739 shares of Company Common Stock which Mr. Tompkins has
agreed to transfer to him as described elsewhere in this Proxy Statement.
On December 16, 1994, Lady Luck entered into a letter agreement with
Lawrence J. Tombari, formerly the Senior Vice President of Development of Lady
Luck, from July 1993 to February 1996, and currently the Chief Financial Officer
of Lady Luck (the "Tombari Agreement"). The Tombari Agreement was for an initial
term beginning on December 16, 1994 and ending on October 23, 1997, and on each
October 24 thereafter, beginning October 24, 1995, the Tombari Agreement is
automatically extended for one additional year, unless terminated by Lady Luck
on or before July 24 of the preceding year. The Tombari Agreement provides that
in the event of a change of control of Lady Luck, as defined in the Tombari
Agreement, and the subsequent termination of the employment of Mr. Tombari,
under certain circumstances, Lady Luck would be required to pay to Mr. Tombari
his full base salary through his termination date and, a lump sum severance
payment equal to $82,500. In the event of such termination, Mr. Tombari also
would be entitled to receive, in cash, an amount equal to the difference between
the exercise price of each option held by Mr. Tombari (whether or not fully
exercisable) and the then current price of Company Common Stock. Further,
Mr. Tombari would be entitled to receive, for a 36-month period after such
termination, life, disability, accident and health insurance benefits
substantially similar to those he is receiving immediately prior to his
termination. Under the Tombari Agreement, Mr. Tombari will be entitled to
receive payments, including base salary, bonus and options, in the aggregate
amount of approximately $150,979 plus post termination benefits if the Merger is
completed and his employment by Lady Luck is terminated thereafter.
On December 1, 1999, Lady Luck offered a replacement letter agreement to
Mr. Tombari whereby the Tombari Agreement would be canceled, his employment
would end January 5, 2000 and he would receive a severance benefit equal to
$115,000. Mr. Tombari has not yet accepted the offer and has at least 22 days
from the date of the replacement letter to consider signing it. If the Merger is
completed, Mr. Tombari will receive an additional $68,479 in respect of his
options to purchase shares of Company Common Stock, making his total termination
benefit equal to approximately $183,479 if he agrees to the replacement letter.
On December 1, 1999, Lady Luck entered into two letter agreements with James
D. Bowen, Vice President of Finance for Lady Luck (the "Bowen Agreements"),
which are in effect through the term of Mr. Bowen's employment with Lady Luck.
The Bowen Agreements provide that in the event that Mr. Bowen's employment by
Lady Luck is terminated for reasons other than Cause or by him for Good Reason,
as defined in the Bowen Agreements, Mr. Bowen will receive a severance benefit
equal to $70,000. Further, the Bowen Agreements provide for an additional
$70,000 lump sum payment upon completion of the Merger if Mr. Bowen
satisfactorily accomplishes certain duties prior to the closing date of the
Merger. In addition, if the Merger is completed, Mr. Bowen will receive $24,460
in respect of his options to purchase shares of Company Common Stock, making his
total termination benefit equal to approximately $164,460.
Pursuant to the Merger Agreement, certain other employees of Lady Luck may
be entitled to receive payments from Lady Luck pursuant to severance and
stay-bonus arrangements which have been agreed upon by Lady Luck and Isle of
Capri. As of the date of this Proxy Statement, some but not all of these
arrangements have been agreed upon by the employees. Lady Luck believes that the
total aggregate amount of payments due under such arrangements will be
approximately $577,500. In addition, if the Merger is completed, Wilson Carroll,
a Mississippi based employee, will receive $17,610 in respect of his options to
purchase shares of Company Common Stock.
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As of the Record Date, the executive officers and directors of Lady Luck as
a group (other than Tompkins) beneficially owned an aggregate of 82,210 shares
of the outstanding Company Common Stock (including the 11,739 shares which
Tompkins has agreed to transfer to Mr. Uboldi, as described elsewhere in this
Proxy Statement), which shares will be treated in the Merger in the same manner
as shares of Company Common Stock held by other Lady Luck Stockholders. Included
in these 82,210 beneficially owned shares are vested options to purchase 50,501
shares of Company Common Stock pursuant to Lady Luck's stock option plan. In
addition, as of the Record Date, the executive officers and directors of Lady
Luck as a group (other than Tompkins) held options to purchase 8,665 shares of
Company Common Stock, which options were not then exercisable. On August 13,
1999, the Compensation Committee of the Board of Lady Luck repriced the
following option holders' options to a price of $6.13 per share:
<TABLE>
<CAPTION>
OPTION HOLDER NUMBER OF SHARES
- ------------- ----------------
<S> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Alain Uboldi................................................ 25,000
Rory Reid................................................... 17,500
Lawrence Tombari............................................ 11,666
James Bowen................................................. 4,167
Minxin Pei.................................................. 833
OTHER EMPLOYEES
Wilson Carroll.............................................. 3,000
Neal Miller................................................. 1,667
Wendy Grandin............................................... 167
</TABLE>
Based on the Merger Consideration of $12.00 per share of Company Common
Stock, less the aggregate exercise price for the shares of Company Common Stock
represented by the options, the aggregate consideration which could be received
in the Merger by the executive officers and directors of Lady Luck (other than
Tompkins) in respect of their shares of Company Common Stock and in respect of
their options to purchase shares of Company Common Stock would be $727,812. See
"Certain Provisions of the Merger Agreement--Surrender and Payment."
As of the Record Date, Tompkins beneficially owned an aggregate of 2,214,670
shares of Company Common Stock (excluding the 11,739 shares which Tompkins has
agreed to transfer to Mr. Uboldi, as described elsewhere in this Proxy
Statement). Based on the Merger Consideration of $12.00 per share, the aggregate
consideration which would be received in the Merger by Tompkins in respect of
such shares would be $26,576,040. Tompkins does not own any options to purchase
shares of Company Common Stock. Tompkins would receive an additional $11,543,529
upon the redemption of his 216,819 shares of Lady Luck Series A Preferred Stock,
calculated as of January 1, 2000 based on a redemption price of $53.24 per
share. See "Certain Provisions of the Merger Agreement--Surrender and Payment."
Pursuant to the Merger Agreement, Isle of Capri has agreed to provide each
director and officer of Lady Luck with the following protections with respect to
acts or omissions existing or occurring at or before the Merger, whether the
claim is asserted or claimed prior to, at or after the closing of the Merger:
(a) indemnity against costs or expenses (including attorneys' fees), judgments,
fines, losses, claims, damages, liabilities or amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, and (b) directors' and
officers' liability insurance coverage for six years.
The directors' and officers' liability insurance coverage shall be at least
as favorable as Lady Luck's existing coverage. However, Isle of Capri will not
be required to spend more than twice the annual premium Lady Luck currently pays
for its existing coverage. If the premium would at any time exceed twice the
current premium, then Isle of Capri will maintain insurance policies that
provide the maximum coverage available at an annual premium equal to twice the
current premium. Isle of Capri
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shall advance expenses as incurred to the fullest extent permitted. See "Certain
Provisions of the Merger Agreement--Director and Officer Indemnification and
Insurance."
CONSULTING, ADVISORY AND NONCOMPETITION AGREEMENT
In addition, Tompkins has agreed with Isle of Capri pursuant to the
Consulting, Advisory and Noncompetition Agreement, dated as of October 5, 1999
(the "Consulting Agreement"), by and between Isle of Capri and Tompkins, to
serve as a consultant and advisor to Isle of Capri for a period of four years
after the Effective Time. Under the Consulting Agreement, Tompkins is prohibited
from competing, either directly or indirectly, with Isle of Capri or any of its
subsidiaries in any way concerning the ownership, development or management of
any gaming operation or facility within a 75-mile radius of any gaming operation
or facility in which Isle of Capri or any of its subsidiaries has an ownership
interest, or to which Isle of Capri renders or is negotiating to render
management services; provided, however, that Tompkins may not compete within a
25-mile radius of any gaming operation or facility owned or managed by Isle of
Capri or any of its subsidiaries located in Las Vegas, Nevada. Pursuant to the
Gemini Amendment, however, Tompkins and Gemini have been provided with an
exclusive, perpetual royalty-free license agreement to use the Trademark Assets
in connection with the Las Vegas Hotel, effective upon the closing of the Merger
until the closing of the purchase of the Las Vegas Hotel or, if Isle of Capri
does not purchase the Las Vegas Hotel, effective until terminated as provided
therein. Tompkins also may not (i) solicit any employee of Lady Luck or the Las
Vegas Hotel to leave the employ of Lady Luck or the Las Vegas Hotel or
(ii) solicit the business of any person known to Tompkins to be a customer of
Lady Luck, Isle of Capri or the Las Vegas Hotel (assuming Isle of Capri has not
purchased the Las Vegas Hotel). The Consulting Agreement does not prohibit
Tompkins from continuing to operate the Las Vegas Hotel prior to its sale to
Lady Luck, or to Isle of Capri, if the Merger has been completed. Tompkins will
receive compensation in an aggregate amount of $2.0 million pursuant to the
Consulting Agreement, as follows: $125,000 upon the Effective Time and $125,000
on the last day of each calendar quarter beginning with the full calendar
quarter immediately following the quarter in which the Effective Time occurs,
until the $2.0 million has been paid in full. A copy of the Consulting Agreement
is attached to this Proxy Statement as Annex III and is incorporated herein by
reference.
STOCKHOLDER SUPPORT AGREEMENT AND PROXY
As an inducement and condition to the willingness of Isle of Capri to enter
into the Merger Agreement, Tompkins entered into the Stockholder Support
Agreement. At the Record Date for the Special Meeting, Tompkins held
approximately 45.6% of the voting power and outstanding Company Common Stock.
Tompkins is able to significantly influence the vote on the approval and
adoption of the Merger Agreement and the approval of the Merger. A copy of the
Stockholder Support Agreement is attached to this Proxy Statement as Annex IV
and is incorporated herein by reference.
Under the Stockholder Support Agreement, at the Special Meeting or any other
meeting of Lady Luck Stockholders, however called, and in any action by written
consent of the Lady Luck Stockholders, Tompkins agreed, in his capacity as a
Lady Luck Stockholder:
(i) to vote all of his Company Common Stock in favor of the adoption of the
Merger Agreement and approval of the Merger;
(ii) to vote all of his Company Common Stock against any proposal for any
significant transaction which would result in a breach of any of Lady
Luck's covenants, representations, warranties, agreements or other
obligations, or the nonfulfillment of any conditions under the Merger
Agreement;
(iii) to vote all of his Company Common Stock in favor of any matter
necessary to approve the Merger;
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(iv) not to sell, assign, transfer, pledge, encumber or otherwise dispose
of any of his Company Common Stock other than to Isle of Capri, except
for the 11,739 shares of Company Common Stock which Tompkins has
agreed to transfer to Alain Uboldi, Lady Luck's President and Chief
Operating Officer and a director of Lady Luck;
(v) not to deposit any Company Common Stock into any voting trust or enter
into a voting agreement or arrangement inconsistent with the
Stockholder Support Agreement;
(vi) not to enter into any contract, option or other arrangement or
undertaking with respect to the sale, assignment, transfer or other
disposition of any Company Common Stock;
(vii) not to initiate, solicit or encourage the submission of any proposal
to acquire Lady Luck;
(viii) not to agree to or recommend any other proposal to acquire Lady Luck;
and
(ix) not to engage in negotiations or discussions concerning, or provide
any non-public information to any person or entity relating to, any
other proposal to acquire Lady Luck.
The Stockholder Support Agreement also grants an irrevocable proxy to Isle
of Capri if Tompkins fails to vote his shares of Company Common Stock as
required. In such event, this proxy allows Isle of Capri to vote all of
Tompkins' Company Common Stock in favor of the adoption of the Merger Agreement.
Pursuant to the Stockholder Support Agreement, Tompkins has granted Isle of
Capri an option to purchase for the Merger Consideration such number of shares
of Company Common Stock owned by Tompkins (i) as is equal to 34.99% of the
issued and outstanding Company Common Stock and (ii) effective upon a failure by
Tompkins to vote in favor of the Merger at the Special Meeting, the remainder of
the shares of Company Common Stock owned by Tompkins. Isle of Capri has agreed
that if it purchases the shares of Company Common Stock from Tompkins pursuant
to the Stockholder Support Agreement, and it disposes of those shares within six
months of such purchase, Isle of Capri will pay Tompkins one-half of its net
profit (after reduction for brokerage expenses) in connection with such purchase
and sale.
The Stockholder Support Agreement terminates upon the earlier of (i) the
Effective Time of the Merger, (ii) certain terminations of the Merger Agreement
as set forth in the Stockholder Support Agreement and (iii) December 31, 2000.
RELATED TRANSACTIONS BETWEEN LADY LUCK AND ISLE OF CAPRI
Lady Luck currently operates a riverboat casino and hotel in Bettendorf,
Iowa through a 50/50 joint venture between Lady Luck and Bettendorf Riverfront
Development Company, L.C. Bettendorf Riverfront Development Company, L.C. is
indirectly wholly owned by members of the family of Bernard Goldstein, Isle of
Capri's Chairman of the Board and Chief Executive Officer. Isle of Capri has
entered into a letter of intent, dated as of October 5, 1999, to acquire the 50%
interest in the Bettendorf joint venture owned by the Bettendorf Riverfront
Development Company, L.C. in exchange for approximately 6.3 million shares of
Isle of Capri common stock, subject to adjustment in certain circumstances, and
the option to receive up to $10 million of their consideration in cash rather
than Isle of Capri common stock. This transaction is contingent on the
completion of the Merger, the approval of Isle of Capri's stockholders and other
contingencies. The parties to the letter of intent anticipate entering into a
definitive agreement by the end of December 1999.
MERGER FINANCING
Lady Luck currently expects that approximately $59 million will be required
to pay the aggregate consideration payable to Lady Luck Stockholders and option
holders by Isle of Capri in connection with the Merger (assuming no Lady Luck
Stockholders exercise appraisal rights). Lady Luck anticipates
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<PAGE>
that a substantial portion of this aggregate consideration will be provided from
the proceeds of financial arrangements entered into by Isle of Capri. Isle of
Capri has provided a commitment letter from an external financing source with
respect to the Merger. Assuming that the external financing source loans the
amounts designated for the transactions provided for in the Merger Agreement,
Isle of Capri will have sufficient funds available to it to make the cash
payment of the Merger Consideration to the Lady Luck Stockholders and option
holders.
CERTAIN PROVISIONS OF THE MERGER AGREEMENT
The following summarizes certain material provisions of the Merger
Agreement. A copy of the Merger Agreement is attached as Annex I to this Proxy
Statement and is incorporated herein by reference. Such summary is qualified in
its entirety by reference to the Merger Agreement.
THE MERGER
The Merger Agreement provides that as soon as practicable after satisfaction
or, to the extent permitted, waiver of all conditions to the Merger, but not
prior to January 4, 2000, Lady Luck and Isle of Capri will file a certificate of
merger with the Secretary of State of the State of Delaware and make all other
filings or recordings required by Delaware law in connection with the Merger.
The Merger will 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 later
time as is specified in the certificate of merger by agreement of Isle of Capri
and Lady Luck. Pursuant to such certificate, Merger Sub shall be merged at the
Effective Time with and into Lady Luck, the separate existence of Merger Sub
shall cease, and Lady Luck shall be the Surviving Corporation and a wholly-owned
subsidiary of Isle of Capri. From and after the Effective Time, the Surviving
Corporation will possess all the rights, privileges, powers and franchises and
be subject to all of the restrictions, disabilities and duties of Lady Luck, all
as provided under Delaware law.
THE SURVIVING CORPORATION
At the Effective Time, the certificate of incorporation and bylaws of Merger
Sub shall be amended to be substantially identical to the certificate of
incorporation and bylaws of the Surviving Corporation until amended in
accordance with applicable law. From and after the Effective Time, until
successors are duly elected or appointed and qualified in accordance with
applicable law or their earlier resignation or removal, the directors and
officers of Isle of Capri at the Effective Time shall be the directors and
officers of the Surviving Corporation.
MERGER CONSIDERATION
At the Effective Time, each share of Company Common Stock outstanding
immediately prior to the Effective Time (except shares as to which appraisal
rights have been properly perfected) shall be converted into the right to
receive $12.00 in cash, without interest.
SURRENDER AND PAYMENT
Prior to the Effective Time, Isle of Capri shall appoint an agent (the
"Exchange Agent") for the purpose of exchanging certificates representing shares
of Company Common Stock for the Merger Consideration. At or prior to the
Effective Time, Isle of Capri will deliver to the Exchange Agent the Merger
Consideration to be paid in respect of the shares of Company Common Stock.
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<PAGE>
DO NOT SEND IN YOUR STOCK CERTIFICATES AT THIS TIME. YOU WILL RECEIVE A LETTER
OF TRANSMITTAL AND FURTHER INSTRUCTIONS REGARDING THE EXCHANGE OF YOUR STOCK
CERTIFICATES AS SOON AS PRACTICABLE AFTER THE MERGER IS EFFECTIVE.
Each record holder of Company Common Stock will be entitled to receive
$12.00 per share in cash upon surrender of the holder's Company Common Stock
certificate or certificates and a properly executed letter of transmittal to the
Exchange Agent. The Company Common Stock certificate or certificates surrendered
will be canceled. After the Merger is effective, Company Common Stock
certificates will represent only the right to receive $12.00 per share of
Company Common Stock in cash (other than certificates representing shares as to
which appraisal rights have been properly perfected). All cash issued in
exchange for certificates of Company Common Stock will be considered to have
been exchanged in full payment for the shares of Company Common Stock. After the
Effective Time, Lady Luck's stock transfer books will not register transfers of
shares that were outstanding prior to the Effective Time. If shares of Company
Common Stock are presented to Isle of Capri after the Merger for any reason, the
certificates will be canceled and exchanged for $12.00 per share in cash.
None of Isle of Capri, Lady Luck or the Exchange Agent will be liable to any
Lady Luck Stockholder for any cash delivered to a public official pursuant to
abandoned property, escheat or similar laws.
If any Company Common Stock certificates are lost, stolen, or destroyed
prior to the Effective Time, the owner may be required to submit an affidavit of
that fact to the Exchange Agent. Isle of Capri may also require the owner to
post a bond in a reasonable amount as indemnity against any potential claim
regarding the lost certificates. In exchange for lost, stolen or destroyed stock
certificates, after the owner has submitted an affidavit and posted a bond
acceptable to Isle of Capri, the Exchange Agent will issue to the owner $12.00
per share in cash.
Immediately prior to the Effective Time, the Board will use its best efforts
to cause all outstanding stock options granted under any stock option or other
stock-based incentive plan to be accelerated and canceled and holders of such
options will be entitled to receive a cash payment equal to the product of
(i) the number of shares of Company Common Stock subject to each option and
(ii) the excess, if any, of $12.00 over the per share exercise price of such
option.
It is estimated that the aggregate cash payments required to be made in
respect of options will be approximately $376,000.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties of
Lady Luck and Isle of Capri relating to, among other things, (a) the
organization, valid existence and good standing of Isle of Capri, Lady Luck and
their subsidiaries, and similar corporate matters, (b) the capital structure of
Lady Luck, (c) the authorization, execution, delivery and enforceability of the
Merger Agreement and the transactions contemplated by the Merger Agreement and
that the Merger Agreement and the transactions contemplated thereby do not
conflict with charter documents, material contracts or applicable licenses,
statutes or orders, (d) the required consents and approvals for the Merger,
(e) the documents and financial statements filed by Lady Luck with the SEC and
the accuracy of information contained in them, (f) the absence of undisclosed
liabilities of Lady Luck, (g) the absence of material adverse events or changes
to Lady Luck, (h) taxes and tax returns of Lady Luck, (i) properties of Lady
Luck, (j) intellectual property of Lady Luck, (k) agreements, contracts and
commitments of Lady Luck, (l) litigation of Lady Luck and Isle of Capri,
(m) environmental matters and hazardous substances of Lady Luck, (n) employee
benefit plans of Lady Luck, (o) compliance with laws by Lady Luck, (p) labor
matters of Lady Luck, (q) insurance of Lady Luck, (r) the material accuracy of
information supplied by Lady Luck and Isle of Capri in connection with this
Proxy Statement, (s) opinion of Lady Luck's
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<PAGE>
financial advisor, (t) voting requirements for Lady Luck Stockholders to approve
the Merger, (u) Year 2000 computer issues of Lady Luck, (v) the inapplicability
to the Merger of certain provisions of the DGCL, (w) the absence of any brokers,
(x) Isle of Capri's ability to finance the Merger and related transactions, and
(y) the ownership of Lady Luck securities by Isle of Capri.
CONDUCT OF BUSINESS PENDING THE MERGER
From the date of the Merger Agreement until the earlier of the closing of
the Merger or the termination of the Merger Agreement, Lady Luck shall:
(a) continue to operate its business in the usual, regular and ordinary course
substantially consistent with past practices, (b) pay its debts and taxes when
due, (c) pay or perform other obligations when due and (d) use commercially
reasonable efforts to preserve its business organization, management team and
business relationships.
The Merger Agreement also provides that, from the date of the Merger
Agreement until the earlier of the closing of the Merger or the termination of
the Merger Agreement, subject to certain exceptions, Lady Luck will not, and
will cause its subsidiaries not to: (a) other than dividends and distributions
by a direct or indirect wholly-owned subsidiary of Lady Luck to its parent
(i) declare, set aside or pay any dividends on, or make any other distributions
(whether in cash, stock or property) in respect of, any of its capital stock,
(ii) split, combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock (other than the issuance of shares
of Company Common Stock upon the exercise of Lady Luck stock options outstanding
on the date of the Merger Agreement and in accordance with their present terms),
or (iii) purchase, redeem or otherwise acquire any shares of capital stock of
Lady Luck or any of its subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities,
(b) issue, deliver, sell, pledge or otherwise encumber any shares of its capital
stock, any other voting securities or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting securities or
convertible securities (other than the issuance of shares of Company Common
Stock upon the exercise of Lady Luck options outstanding on the date of the
Merger Agreement and in accordance with their present terms), (c) amend its
Certificate of Incorporation, Bylaws or other comparable charter or
organizational documents, (d) make any material acquisitions, except for the
Miss Marquette Purchase and the Gemini Purchase, (e) sell, lease, license,
mortgage or otherwise encumber or otherwise dispose of any of its properties or
assets, (f) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities of Lady Luck or any of its
subsidiaries, or guarantee any debt securities of another person, other than
short-term bank financing in the ordinary course of business consistent with
past practice and certain immaterial loans to employees, or make any loans,
advances or capital contributions to, or investments in, any other person,
(g) adopt, enter into, terminate or amend any employment, severance, retention
or similar agreement or contract; negotiate or enter into any collective
bargaining agreement or labor union contract; increase, in any manner, the
compensation or fringe benefits of, or pay any bonus to, any director, officer
or employee (except for normal increases of cash compensation or cash bonuses in
the ordinary course of business, consistent with past practice); adopt or
establish any new benefit plan; amend any existing benefit plan, except as
required by law; pay any benefit not provided for under any existing benefit
plan; adopt, establish or amend any severance pay plan; increase in any manner
the severance or termination pay of any officer or employee; modify the
provisions of any Lady Luck stock option plan, adjust or modify the terms of any
outstanding Lady Luck stock options; or take any action to accelerate the
vesting of, or cash out rights associated with, any Lady Luck stock options; or
remove existing restrictions in any Lady Luck stock option plan or other plan or
arrangement; grant any new awards under any Lady Luck stock option plan or other
bonus, incentive, performance or compensation plan or arrangement; take any
action to fund or, in any other way secure, the payment of compensation or
benefits under any Lady Luck employee plan, agreement, contract or arrangement;
hire any individual as an employee who will be paid an annual base salary that
equals or exceeds $75,000 or
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who will be other than an "at will" employee; or hire any independent contractor
or consultant; in the case of each phrase in this clause (g) without the prior
written consent of Isle of Capri, (h) enter into any lease or agreement of any
nature that would obligate Lady Luck or a subsidiary to pay $50,000 or more that
is not terminable by Lady Luck or a subsidiary upon 90 days' notice without
penalty, or modify, amend or terminate any existing agreement of such type
except in the ordinary course of business consistent with past practice,
(i) make any material change in accounting methods, principles or practices,
except as required by generally accepted accounting principles or applicable
law, (j) make any material tax election, enter into any settlement or compromise
with respect to any material income tax liability or waive or extend the statute
of limitations in respect of any taxes, (k) settle any pending or threatened
litigation involving Lady Luck or any of its subsidiaries, except for
settlements that, in the aggregate, involve payments not covered by insurance,
by Lady Luck or any subsidiaries, of less than $50,000 and which settle entire
claims or causes of action arising out of the same or similar facts and
circumstances or do not impose any restrictions on the business or operations of
Lady Luck or any of its subsidiaries, (l) make capital expenditures in excess of
$50,000 individually or $100,000 in the aggregate, and (m) except for the Gemini
Amendment and as contemplated thereby, enter into or amend the terms of any
transaction of any nature whatsoever with its or its subsidiaries' directors,
officers, employees, stockholders or their respective affiliates.
The Merger Agreement further requires Lady Luck to (i) enter into the Gemini
Amendment and the related license and marketing agreements, (ii) use its best
efforts to cause the owners and operators of the Las Vegas Hotel to maintain, at
no expense to Lady Luck or any of its subsidiaries, the condition of the Las
Vegas Hotel and its related facilities such that, upon the purchase and sale of
the Las Vegas Hotel, the condition of the Las Vegas Hotel and related facilities
is at least as good as on the date of the Merger Agreement and (iii) take all
actions (including the transmittal of notices) as directed by Isle of Capri to
enable Isle of Capri to repay Lady Luck's outstanding 2001 Notes (and to obtain
releases of the collateral securing the 2001 Notes) and redeem Lady Luck's
outstanding Lady Luck Series A Preferred Stock, in each case as of the Effective
Time.
NO SOLICITATION
The Merger Agreement provides that, from the date of the Merger Agreement
until the earlier of the closing of the Merger or the termination of the Merger
Agreement, Lady Luck will not, directly or indirectly: (a) solicit, initiate or
encourage or take any action to facilitate any inquiries or proposals that are
or could lead to a proposal or offer for a merger, consolidation, business
combination, sale of substantial assets, sale of shares of capital stock
(including, without limitation, by way of a tender or exchange offer) or similar
transaction, other than the Merger with Isle of Capri, (b) engage in
negotiations or discussions other than with Isle of Capri concerning a proposal
for a merger or similar transaction, (c) provide non-public information to any
person or entity relating to a proposal for a merger or similar transaction or
(d) agree to or recommend any proposal for a merger or similar transaction.
However, Lady Luck or the Board may, prior to the time that the Merger is
approved by the Lady Luck Stockholders, (i) furnish non-public information to,
or enter into discussions or negotiations with, any person or entity in
connection with an unsolicited bona fide written proposal or offer for a merger,
consolidation, business combination, sale of substantial assets, sale of shares
of capital stock (including, without limitation, by way of a tender or exchange
offer) or similar transaction by such person or entity, or (ii) recommend such a
proposal to the Lady Luck Stockholders, if in the case of either (i) or (ii),
(A) the Board reasonably believes in good faith that such proposal, after
consultation with and receipt of advice from Wasserstein Perella, is reasonably
capable of being completed on substantially the terms proposed and, if
consummated, would result in a transaction that would be superior from a
financial point of view to the Lady Luck Stockholders, including consideration
of the financial terms of the Miss Marquette Credit Agreement, and (B) after
receipt of advice to such effect from outside legal
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<PAGE>
counsel, the Board, in the exercise of its fiduciary duties, determines in good
faith that the failure to take such action would be contrary to the best
interests of the Lady Luck Stockholders.
Lady Luck must notify Isle of Capri promptly (and no later than 48 hours)
after receipt by Lady Luck, or any officer, director, employee, financial
advisor, representative or agent of Lady Luck, of any such proposal or any
request for non-public information in connection with such a proposal or for
access to the properties, books or records of Lady Luck by any third party that
informs Lady Luck that it is considering making, or has made, such a proposal.
DIRECTOR AND OFFICER INDEMNIFICATION AND INSURANCE
After the Merger, Isle of Capri has agreed to provide each director and
officer of Lady Luck with the following protections with respect to acts or
omissions existing at or before the Merger, whether the claim is asserted or
claimed prior to, at or after the closing of the Merger: (a) indemnity against
costs or expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities or amounts paid in settlement in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, and (b) directors' and officers' liability
insurance coverage for six years.
The directors' and officers' liability insurance coverage shall be at least
as favorable as Lady Luck's existing coverage. However, Isle of Capri will not
be required to spend more than twice the annual premium Lady Luck currently pays
for its existing coverage. If the premium would at any time exceed twice the
current premium, then Isle of Capri will maintain insurance policies that
provide the maximum coverage available at an annual premium equal to twice the
current premium. Isle of Capri shall advance expenses as incurred to the fullest
extent permitted.
PARTICIPATION IN STOCKHOLDER LITIGATION
Lady Luck must give Isle of Capri the reasonable opportunity to participate
in the defense or settlement of any stockholder litigation against Lady Luck and
its directors relating to the transactions contemplated by the Merger Agreement;
provided, however, that no such settlement shall be agreed to without Isle of
Capri's consent.
EMPLOYEE BENEFITS; SEVERANCE
After the Merger, Isle of Capri will cause Lady Luck, as the Surviving
Corporation in the Merger, to honor all written employment, severance and
termination agreements (including change in control provisions) between Lady
Luck and its employees disclosed to Isle of Capri on or prior to the date of the
Merger Agreement and those approved by Isle of Capri after the date of the
Merger Agreement. For purposes where length of service is relevant, except for
pension benefit accruals, under any employee benefit plan, the plans of Isle of
Capri will recognize credit for service with Lady Luck and any of its
subsidiaries to the same extent that such service was recognized before the
Merger. In addition, pursuant to the Merger Agreement, certain other officers
and employees of Lady Luck may be entitled to receive payments from Lady Luck
pursuant to severance and stay-bonus arrangements to be agreed upon by Lady Luck
and Isle of Capri, which, as of the date of this Proxy Statement, had not been
agreed upon.
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OTHER COVENANTS
The Merger Agreement provides that each of Lady Luck and Isle of Capri will:
(a) promptly provide the other party with copies of all filings made with
governmental entities in connection with the Merger, (b) give prompt notice to
the other of, and use commercially reasonable efforts to cure, any circumstance
which causes a breach of any representation, warranty, covenant or agreement,
(c) file this Proxy Statement, (d) obtain all permits, registrations, licenses,
findings of suitability, consents, variances, exemptions, orders, approvals and
authorizations of all governmental entities or other third parties in connection
with the Merger, (e) make all necessary filings and submissions with respect to
the Merger under federal, state and foreign securities laws, antitrust laws and
other applicable laws and file promptly all initial applications and documents
required in connection with obtaining governmental approvals, (f) consult with
the other party, and use reasonable efforts to agree upon press releases or
other public statements concerning the Merger, (g) use their best efforts to
consummate the Merger as promptly as practicable, (h) immediately prior to the
consummation of the transactions contemplated by the Miss Marquette Purchase
Agreement, enter into the Miss Marquette Credit Agreement, pursuant to which a
secured bridge loan will be made by Isle of Capri in the principal amount of
$16.3 million, for the purpose of enabling Lady Luck to consummate the
Miss Marquette Purchase, and (i) subject to the financing contingency set forth
in the Merger Agreement and Isle of Capri's and Lady Luck's obligations under
the terms of the Las Vegas Agreement, immediately prior to the Effective Time,
Isle of Capri will allocate sufficient funds (1) to close both the transactions
contemplated thereunder, or (2) if all approvals necessary to acquire the Las
Vegas Hotel and the capital stock of Gemini have not been granted at or before
the Effective Time, to consummate at the Effective Time the acquisition of the
Trademark Assets and, at such time as permitted, the Las Vegas Hotel and the
capital stock of Gemini. The Miss Marquette Credit Agreement was entered into on
October 29, 1999, concurrently with the consummation of the Miss Marquette
Purchase and, therefore, the covenant contained in clause (h) of this paragraph
has been fulfilled.
The Merger Agreement further provides that (a) Lady Luck will give Isle of
Capri access to all its personnel, properties, books, contracts, commitments and
records, and to furnish related information reasonably requested by Isle of
Capri, subject to the confidentiality agreements signed by Isle of Capri,
(b) Tompkins will fully perform his obligations under the Stockholder Support
Agreement, and (c) to the extent not prohibited by applicable law, Lady Luck
shall consult with Isle of Capri as to any pre-closing and post-closing
determinations and actions related to the Miss Marquette Purchase Agreement and
the Gemini Purchase Agreement and Gemini Amendment, and agrees to exercise any
rights Lady Luck has, and take or omit to take all actions to be taken or not
taken by it, under such agreements in accordance with Isle of Capri's reasonable
directions and requests.
CONDITIONS TO THE MERGER
The Merger is subject to satisfaction or waiver of certain conditions to the
extent permitted. The following conditions must be satisfied before either Isle
of Capri or Lady Luck is obligated to effect the Merger: (a) the Merger shall
have been approved by the Lady Luck Stockholders, (b) any applicable
Hart-Scott-Rodino Act waiting period shall have expired or been terminated,
(c) necessary approvals from government entities or regulatory bodies as do not
contain any conditions, limitations or restrictions which would have a material
adverse effect on Lady Luck or the Buyer shall have been received, and (d) no
government entity or regulatory body shall have taken any action which has the
effect of making the Merger illegal or otherwise prohibits the Merger.
The obligation of Isle of Capri to effect the Merger is subject to the
satisfaction or waiver, to the extent permitted, of the following additional
conditions: (a) Lady Luck's representations and warranties set forth in the
Merger Agreement shall be true and correct in all material respects (except for
those qualified as to materiality, which shall be true and correct) as of the
date of the Merger Agreement and, except to the extent such representations and
warranties explicitly speak as of an earlier date, as
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<PAGE>
of the closing date of the Merger as though made on and as of the closing date
of the Merger, and Isle of Capri shall have received a certificate signed on
behalf of Lady Luck by the Chief Executive Officer and a senior financial
officer of Lady Luck to such effect, (b) Lady Luck shall have performed in all
material respects all material obligations required to be performed by it under
the Merger Agreement at or prior to the closing date of the Merger, and Isle of
Capri shall have received a certificate signed on behalf of Lady Luck by the
Chief Executive Officer and a senior financial officer of Lady Luck to such
effect, (c) Isle of Capri shall have obtained financing on terms satisfactory to
it and sufficient to allow Isle of Capri to complete the transactions
contemplated by the Merger Agreement, including the consummation of the
transactions contemplated by the Las Vegas Agreement, the repayment of the 2001
Notes and the redemption of the Lady Luck Series A Preferred Stock, (d) Isle of
Capri shall have been reasonably satisfied with the results of its physical
investigation and review of the physical condition of the properties including
hull inspections, engine inspections, engineering surveys (including inspection
of the structural integrity of all improvements to such properties) and
environmental reports and such other environmental and structural integrity
tests and inspections as Isle of Capri may reasonably desire, including a Phase
II environmental inspection, that includes sampling and report with respect to
the properties of Lady Luck and its subsidiaries described in the Merger
Agreement, which review shall extend for a period of forty five (45) days after
the date of the Merger Agreement, and (e) no material adverse change shall have
occurred in the business, properties, condition (financial or otherwise),
prospects or results of operations of Lady Luck and its subsidiaries, taken as a
whole, since June 30, 1999 other than any change arising out of, or resulting
from, general economic conditions in the United States or conditions generally
affecting the gaming industry in the United States. Isle of Capri's termination
right based on its physical examination and review of the properties of Lady
Luck has expired unexercised.
Lady Luck's obligation to effect the Merger is subject to the satisfaction
or waiver of the following additional conditions: (a) the representations and
warranties of Isle of Capri and Merger Sub set forth in the Merger Agreement
shall be true and correct in all material respects (except for those qualified
as to materiality, which shall be true and correct) as of the date of the Merger
Agreement and, except to the extent such representations explicitly speak as of
an earlier date, as of the closing date of the Merger as though made on and as
of the closing date of the Merger, and Lady Luck shall have received a
certificate signed on behalf of Isle of Capri by the Chief Executive Officer and
the Chief Financial Officer of Isle of Capri to such effect, (b) Isle of Capri
shall have performed in all material respects all material obligations required
to be performed by it under the Merger Agreement at or prior to the closing date
of the Merger including, without limitation, that Isle of Capri shall not be in
default under the Miss Marquette Credit Agreement, and Lady Luck shall have
received a certificate signed on behalf of Isle of Capri by the Chief Executive
Officer and the Chief Financial Officer of Isle of Capri to such effect, and
(c) immediately prior to the Effective Time (i) Isle of Capri shall have, and
shall have made available to Lady Luck, funds sufficient under the Gemini
Purchase Agreement and the Gemini Amendment (x) to close both the transactions
contemplated thereunder or (y) if all approvals necessary to acquire the Las
Vegas Hotel and the capital stock of Gemini have not been granted on or before
the Effective Time, then to acquire the Trademark Assets and, at such times as
permitted, the Las Vegas Hotel and the capital stock of Gemini and (ii) Isle of
Capri shall have caused Lady Luck to have consummated at the Effective Time the
acquisition of the Trademark Assets and, if all necessary approvals have been
obtained, the Las Vegas Hotel and the capital stock of Gemini.
TERMINATION
The Merger Agreement may be terminated at any time before the Merger becomes
effective, whether before or after approval of the Merger by the Lady Luck
Stockholders: (a) by mutual written consent of Lady Luck and Isle of Capri,
(b) by either Lady Luck or Isle of Capri if the Merger has not been completed by
December 31, 2000, although either Lady Luck or Isle of Capri may extend the
termination date to June 30, 2001 if the requisite governmental approvals (not
including the Nevada
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<PAGE>
gaming approval) have not been obtained, the party requesting such extension has
not violated any of its obligations under the Merger Agreement, and the
requisite governmental approvals are being pursued and it is reasonably probable
that they will be obtained by the extended date, (c) by either Lady Luck or Isle
of Capri if a court of competent jurisdiction or other governmental entity has
issued a nonappealable final order or taken any other nonappealable final action
permanently restraining, enjoining or prohibiting the Merger, (d) by either Lady
Luck or Isle of Capri, if the Lady Luck Stockholders have not approved the
Merger, (e) by Lady Luck, if any of the following occurs: (i) after the Board
exercises its fiduciary duties with respect to an unsolicited superior
acquisition proposal in accordance with its rights under the no-solicitation
provisions of the Merger Agreement, Lady Luck delivers to Isle of Capri, prior
to approval of the Merger by the Lady Luck Stockholders, a written notice
regarding such acquisition proposal and completes a waiting period of at least
three business days from the date of notice, (ii) upon material breach of any
representation, warranty, covenant or agreement on the part of Isle of Capri, or
if any representation or warranty of Isle of Capri shall become untrue, and such
breach, if curable, is not cured within 30 days, or (iii) upon 30 days notice,
if Isle of Capri has not filed its initial applications with the Mississippi,
Iowa and Nevada gaming authorities in connection with obtaining required
approvals within 60 days after the date of the Merger Agreement, and (f) by Isle
of Capri, if any of the following occurs: (i) the Board has withdrawn or
modified its recommendation of the Merger to the Lady Luck Stockholders or
recommends a merger or similar transaction with another entity, (ii) Isle of
Capri requests that the Board reconfirm its recommendation of the Merger to the
Lady Luck Stockholders and it fails to do so after it receives Isle of Capri's
request, (iii) upon material breach of any representation, warranty, covenant or
agreement on the part of Lady Luck or if any representation or warranty of Lady
Luck shall become untrue and such breach, if curable, is not cured within
30 days, (iv) (A) any state gaming authority revokes any of Lady Luck's licenses
or permits to operate any of its casino riverboats, or (B) one or more gaming
regulatory authorities imposes fines or penalties against, or requires other
payments by, Lady Luck and/or any of its current or former directors, officers,
employees, agents or representatives (to the extent that Lady Luck is
responsible for any such fines, penalties or other payments and such fines,
penalties or other payments are not covered by insurance policies of Lady Luck)
relating to the actions of Lady Luck and/or its current or former directors,
officers, agents or representatives in an aggregate amount or which impose
restrictions upon the operations in the case of (A) or (B), as applicable, that
would reasonably be expected to have a material adverse effect on the business
of any Lady Luck casino (with materiality determined with respect to the
enterprise value of such business), (v) if a material adverse change has
occurred with respect to Lady Luck, (vi) upon 30 days notice, if Lady Luck has
not filed any required applications with the Mississippi, Iowa and Nevada gaming
authorities in connection with obtaining any approvals required for Lady Luck
within 60 days after the date of the Merger Agreement, or (vii) if Isle of Capri
is not satisfied with the physical investigation and review described above.
In the event the Merger Agreement is terminated by Lady Luck or Isle of
Capri as provided above, the Merger Agreement will become void and, except as
set forth below or in the event of a willful breach of the Merger Agreement,
there will be no liability or obligation on the part of Lady Luck, Isle of
Capri, Merger Sub or their respective officers, directors, stockholders or
affiliates as a result of termination. The termination provisions described
below will remain in full force and effect and survive any termination of the
Merger Agreement.
TERMINATION FEES; REIMBURSEMENT OF EXPENSES
Lady Luck must pay Isle of Capri a termination fee of $2.5 million upon
termination of the Merger Agreement in any of the following circumstances
(assuming a proposal for a merger, consolidation, business combination, sale of
substantial assets, sale of shares of capital stock or similar transaction with
a third party involving Lady Luck exists or an intention to make such a proposal
has been communicated to Lady Luck or directly to any of its directors, legal
counsel or financial
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<PAGE>
advisors): (a) termination by either Isle of Capri or Lady Luck because Lady
Luck Stockholders fail to approve the Merger and if a proposal for a merger,
consolidation, business combination, sale of substantial assets, sale of shares
of capital stock or similar transaction with a third party involving Lady Luck
has been communicated to Lady Luck Stockholders generally, (b) termination by
Isle of Capri if the Board (1) withdraws or modifies its merger recommendation,
(2) fails to reconfirm its recommendation at the request of Isle of Capri, or
(3) recommends an alternative transaction to Lady Luck Stockholders, or
(c) termination by Lady Luck if, prior to the Special Meeting, the Board, after
consultation with its financial and legal advisors, has recommended a merger or
similar transaction with another entity that is superior to the Merger with Isle
of Capri.
Lady Luck must pay Isle of Capri a termination fee of $1.5 million and must
reimburse Isle of Capri for all fees and expenses incurred in connection with
the Merger Agreement, upon the occurrence of any of the following events:
(a) termination of the Merger Agreement by Isle of Capri upon breach of any
representation, warranty, covenant or agreement on the part of Lady Luck which,
in the case of any representations or warranties, would cause them not to be
true and correct in all material respects and which breach, if curable, is not
cured within 30 days, (b) termination of the Merger Agreement by Isle of Capri
because Lady Luck's required applications for gaming approvals were not filed
within 60 days of the date of the Merger Agreement or (c) termination of the
Merger Agreement by Isle of Capri because the Merger has not been consummated by
December 31, 2000 or by June 30, 2001, as such termination date may be extended
pursuant to the Merger Agreement, on account of the failure to receive the
governmental approvals required to consummate the Merger if such governmental
approvals have not been obtained due to facts or circumstances relating to Lady
Luck, its employees or operations.
Lady Luck must reimburse Isle of Capri for all fees and expenses incurred in
connection with the Merger Agreement, upon the occurrence of any of the
following events: (a) termination of the Merger Agreement by Isle of Capri or
Lady Luck because Lady Luck Stockholders fail to approve the Merger (other than
under the circumstances provided for in the second preceding paragraph) or
(b) termination of the Merger Agreement by Isle of Capri because a material
adverse change has occurred with respect to the business, properties, condition
(financial or otherwise), prospects or results of operations of Lady Luck taken
as a whole since June 30, 1999 other than any change arising out of, or
resulting from, general economic conditions in the United States or conditions
generally affecting the gaming industry in the United States.
Isle of Capri must pay Lady Luck a termination fee of $1.5 million and must
reimburse Lady Luck for all fees and expenses incurred in connection with the
Merger Agreement, upon the occurrence of any of the following events:
(a) termination of the Merger Agreement by Lady Luck upon breach of any
representation, warranty, covenant or agreement on the part of Isle of Capri
which, in the case of any representations or warranties, would cause them not to
be true and correct in all material respects and which breach, if curable, is
not cured within 30 days, (b) termination of the Merger Agreement by Lady Luck
because Isle of Capri's required applications for gaming approvals were not
filed within 60 days of the date of the Merger Agreement or (c) termination of
the Merger Agreement by Lady Luck because the Merger has not been consummated by
December 31, 2000 or by June 30, 2001 as such termination date may be extended
pursuant to the Merger Agreement, on account of the failure to receive the
governmental approvals required to consummate the Merger if such governmental
approvals have not been obtained due to facts or circumstances relating to Isle
of Capri, its employees or operations.
Except as set forth above, whether or not the Merger is consummated, all
fees, costs and expenses incurred in connection with the Merger will be paid by
the party incurring the expenses.
Lady Luck currently expects that approximately $59 million will be required
to pay the aggregate consideration payable to Lady Luck Stockholders by Isle of
Capri in connection with the Merger
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(assuming no Lady Luck Stockholders exercise appraisal rights). For a
description of the sources of such funds, see "The Merger--Merger Financing."
AMENDMENT AND WAIVER
The Merger Agreement may be amended by Isle of Capri and Lady Luck at any
time before or after approval of the Merger by the Lady Luck Stockholders.
However, certain amendments may require further stockholder approval under
Delaware law or the organizational documents of Lady Luck or Isle of Capri.
Amendments must be in a written document signed by each of the parties.
At any time prior to the closing of the Merger, Isle of Capri and Lady Luck
may: (a) extend the time for performing any of the obligations or other acts of
the other parties, (b) waive any inaccuracies in the representations and
warranties in the Merger Agreement or in any of the other documents for the
Merger, and (c) waive compliance with any of the agreements or conditions
contained in any of the documents relating to the Merger.
The above actions must be properly approved or authorized by the respective
boards of directors of Isle of Capri and Lady Luck and must be in writing.
CERTAIN TRANSACTIONS
Effective January 1, 1996, Lady Luck entered into several agreements with
entities controlled by Tompkins, the Chairman of the Board and Chief Executive
Officer of Lady Luck, replacing other agreements that were less favorable to
Lady Luck. Under a license agreement with IMPS (formerly known as Lady Luck
Casino, Inc. and Marco Polo's International Marketing, Inc. which merged in
1996), a corporation owned and controlled by Tompkins, Lady Luck pays IMPS an
annual licensing fee with respect to the "Lady Luck" name and the mailing list
developed by Gemini, an S corporation wholly-owned by Tompkins that does
business as the Lady Luck Casino & Hotel in Las Vegas, Nevada. The licensing fee
is equal to the greater of (a) 9% of Lady Luck's EBITDA as defined (calculated
as EBITDA of Lady Luck and all its subsidiaries and joint ventures (multiplied,
in the case of Lady Luck's joint ventures, by Lady Luck's ownership interest),
excluding, among other things, all revenues and expenses arising from any casino
or casino/hotel for which Lady Luck is not the operator and which does not
utilize the mailing list or Lady Luck name and excluding revenues from the lease
of equipment owned by Lady Luck to third parties or unconsolidated entities),
and (b) $1,700,000 per year (as adjusted based on the Consumer Price Index).
Lady Luck has agreed to use the Lady Luck name on all existing and future
casinos that it operates. The license agreement provides that during any period
of default in the payment of principal or interest on the 2001 Notes, Lady Luck
will not pay (but will accrue on its books) any licensing fee due to IMPS. For
1998, the licensing fees paid to IMPS by Lady Luck were approximately
$3.4 million. For the period ended September 30, 1999, the licensing fees paid
to IMPS by Lady Luck were approximately $2,944,000.
Under an office lease with Gemini, Lady Luck pays Gemini $300,000 per year,
as adjusted based on the Consumer Price Index, for corporate office facilities
and services. In addition, Lady Luck reimburses Gemini for the approximate
retail value of hotel rooms, food and beverage, and other items provided to Lady
Luck by Gemini. Net rent expense and reimbursable items paid to Gemini were
$315,000 and $104,000, respectively, for 1998, and were $240,578 and $37,000,
respectively, for the nine month period ended September 30, 1999. In addition,
Lady Luck incurred $304,000 of marketing and other expenses reimbursed by Gemini
for 1998 and $249,924 for the nine month period ended September 30, 1999.
IMPS provides marketing services to Lady Luck under a reimbursement
agreement with Lady Luck. Mr. Uboldi, Lady Luck's President and Chief Operating
Officer and a director of Lady Luck, is the Vice President of IMPS. For 1998,
Lady Luck paid IMPS $870,000 and for the nine month period ended September 30,
1999, paid $533,200 for the cost of marketing services based on allocated
payroll,
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overhead, direct advertising and other marketing costs. In addition, IMPS
reimbursed Lady Luck for $405,000 of expenses paid by Lady Luck on behalf of
IMPS related to 1998 marketing costs and $254,642 related to marketing costs for
the period ended September 30, 1999.
With respect to the Company's Bettendorf joint venture, pursuant to an
assignment and assumption agreement between IMPS and Lady Luck, IMPS assigned to
Lady Luck its rights to receive a management fee for services performed for the
Bettendorf joint venture and its obligation to pay part of that fee to its joint
venture partner.
The Company has also entered into the Gemini Amendment, which is subject to
the consummation of the Merger, and the Stockholder Support Agreement, as
previously described in this Proxy Statement. See "Recent Developments" and "The
Merger--Stockholder Support Agreement and Proxy."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of Company Common Stock as of December 13, 1999 by (i) each person who
is known by Lady Luck to beneficially own 5% or more of the Common Stock,
(ii) each director and executive officer of Lady Luck and (iii) all directors
and executive officers of Lady Luck as a group. Unless otherwise indicated, all
persons listed have sole voting power and investment power with respect to such
shares. The address of all persons other than the State of Wisconsin Investment
Board and Isle of Capri is Lady Luck Gaming Corporation, 206 North Third Street,
Las Vegas, Nevada 89101. The address of the State of Wisconsin Investment Board
is P.O. Box 7842, Madison, Wisconsin 53707. The address of Isle of Capri is 711
Dr. Martin Luther King, Jr. Blvd., Biloxi, Mississippi 39530.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP PERCENT OF CLASS
-------------------- ----------------
<S> <C> <C>
Andrew H. Tompkins.......................... 2,226,409(a)(h) 45.6%
Alain Uboldi................................ 33,406(a)(b) *
Rory J. Reid................................ 15,167(c) *
Lawrence P. Tombari......................... 13,433(d) *
James Bowen................................. 3,417(e) *
James H. Bilbray............................ 6,464 *
Charles Brewer.............................. 8,333 *
Minxin Pei.................................. 990(f) *
Norman Little............................... 1,000 *
State of Wisconsin Investment Board......... 417,500(g) 8.6
Isle of Capri Casinos, Inc.................. 1,707,863(h) 34.99%
All executive officers and directors
as a group (9 persons).................... 2,296,880 47.0
</TABLE>
- ------------------------
* Less than 1%
(a) Includes 11,739 shares of Company Common Stock which Tompkins has agreed to
transfer to Mr. Uboldi and which shares are subject to an agreement between
Mr. Uboldi and Tompkins whereby Tompkins has the right to vote such shares,
and under certain circumstances, reacquire such shares. Isle of Capri may be
deemed to beneficially own 1,707,863 shares of Company Common Stock owned by
Tompkins as described in footnote (h).
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<PAGE>
(b) Includes 21,667 shares of Company Common Stock which Mr. Uboldi has the
right to acquire pursuant to either currently exercisable options or within
the next 60 days. Excludes 3,333 shares of Company Common Stock which are
subject to options held by Mr. Uboldi which are not exercisable currently or
within the next 60 days.
(c) Includes 15,167 shares of Company Common Stock which Mr. Reid has the right
to acquire pursuant to either currently exercisable options or within the
next 60 days. Excludes 2,333 shares of Company Common Stock which are
subject to options held by Mr. Reid which are not exercisable currently or
within the next 60 days.
(d) Includes 10,333 shares of Company Common Stock which Mr. Tombari has the
right to acquire pursuant to either currently exercisable options or within
the next 60 days. Excludes 1,333 shares of Common Stock which are subject to
options held by Mr. Tombari which are not exercisable currently or within
the next 60 days.
(e) Includes 2,834 shares of Company Common Stock which Mr. Bowen has the right
to acquire pursuant to either currently exercisable options or within the
next 60 days. Excludes 1,333 shares of Company Common Stock which are
subject to options held by Mr. Bowen which are not exercisable currently or
within the next 60 days.
(f) Includes 500 shares of Company Common Stock which Mr. Pei has the right to
acquire pursuant to either currently exercisable options or within the next
60 days. Excludes 333 shares of Common Stock which are subject to options
held by Mr. Pei which are not exercisable currently or within the next
60 days.
(g) Based solely upon a Schedule 13G/A dated February 1, 1999.
(h) Based solely upon a Schedule 13D dated October 15, 1999. As a result of the
Stockholder Support Agreement, Isle of Capri may be deemed to be the
beneficial owner of 1,707,863 shares of Company Common Stock owned by
Tompkins for purposes of Rule 13d-1(a) promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which represents
approximately 34.99% of the shares of Company Common Stock outstanding
(based on the number of shares of Company Common Stock outstanding on
June 30, 1999). Isle of Capri disclaims beneficial ownership of the
additional 506,807 shares (which represent approximately 10.4% of the shares
of Company Common Stock outstanding) which are subject to the terms of the
Stockholder Support Agreement because Isle of Capri cannot exercise its
option to purchase such shares until such time as Tompkins breaches his
obligations under the Stockholder Support Agreement. All of Tompkins' shares
of Company Common Stock have been placed in escrow for the benefit of Isle
of Capri pursuant to an Escrow Agreement dated October 5, 1999 among
Tompkins, Isle of Capri and Swidler Berlin Shereff Friedman, LLP as escrow
agent.
REGULATORY CONSIDERATIONS
ANTITRUST
Under the HSR Act and the rules promulgated thereunder, certain merger
transactions, including the Merger, may not be consummated unless certain
information has been furnished to the Antitrust Division of the United States
Department of Justice and the Federal Trade Commission and certain waiting
periods have expired. Lady Luck and Isle of Capri intend to file notification
reports, together with requests for early termination of the waiting period,
with the United States Department of Justice and the Federal Trade Commission as
soon as practicable.
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MISSISSIPPI GAMING REGULATIONS
The ownership and operation of casino facilities in Mississippi are subject
to extensive state and local regulation, but primarily the licensing and
regulatory control of the Mississippi Gaming Commission (the "Mississippi
Commission") under the Mississippi Gaming Control Act (the "Mississippi Act")
and the Mississippi State Tax Commission. The laws, regulations and supervisory
procedures of Mississippi and the Mississippi Commission seek to (i) prevent
unsavory or unsuitable persons from having any direct or indirect involvement
with gaming at any time or in any capacity; (ii) establish and maintain
responsible accounting practices and procedures; (iii) maintain effective
control over the financial practices of licensees, including establishing
minimum procedures for internal fiscal affairs and safeguarding of assets and
revenues, providing reliable record keeping and making periodic reports to the
Mississippi Commission; (iv) prevent cheating and fraudulent practices;
(v) provide a source of state and local revenues through taxation and licensing
fees; and (vi) ensure that gaming licensees, to the extent practicable, employ
Mississippi residents. The regulations are subject to amendment and
interpretation by the Mississippi Commission.
The Mississippi Act requires that a person (including any corporation or
other entity) must be licensed to conduct gaming activities in Mississippi. A
license will be issued only for a specified location that has been approved as a
gaming site by the Mississippi Gaming Commission prior to issuing a license. The
Mississippi Act also requires that each officer or director of a gaming
licensee, or other person who is actively and directly engaged in the
administration or supervision of gaming, or who has any other significant
involvement with the activities of any gaming subsidiary, or who exercises a
material degree of control over the licensee, either directly or indirectly,
must be found suitable by the Mississippi Gaming Commission.
Changes in control of a public gaming company licensed in Mississippi
through merger, consolidation, acquisition of assets, management or consulting
agreements or any form of takeover, and certain recapitalizations and stock
repurchases by a public gaming company, cannot occur without the prior approval
of the Mississippi Commission. Entities seeking to acquire control of a
registered corporation must satisfy the Mississippi Commission in a variety of
stringent standards prior to assuming control of such registered corporation.
The Mississippi Commission may also require controlling stockholders, officers,
directors and other persons having a material relationship or involvement with
the entity proposing to acquire control, to be investigated and licensed as part
of the approval process relating to the transaction. Lady Luck is currently
licensed in Mississippi and, therefore, the Merger will be subject to approvals
by the Mississippi Commission. Pursuant to the terms of the Merger Agreement,
initial applications must be filed within 60 days after the date of the Merger
Agreement. Initial applications have been filed with the Mississippi Commission
as of the date of this Proxy Statement. However, no assurances can be given that
the Mississippi Commission will approve the Merger or as to the timing of any
such approval.
IOWA GAMING REGULATIONS
In 1989, the State of Iowa legalized riverboat gaming on the Mississippi
River and other waterways located in Iowa. The legislation authorized the
granting of licenses to not-for-profit corporations which, in turn, are
permitted to enter into operating agreements with qualified persons who also
actually conduct riverboat gaming operations. Such operators must likewise be
approved and licensed by the Iowa Racing and Gaming Commission (the "Iowa Gaming
Commission").
The ownership and operation of gaming facilities in Iowa are subject to
extensive state laws, regulations of the Iowa Gaming Commission and various
county and municipal ordinances (collectively, the "Iowa Gaming Laws"),
concerning the responsibility, financial stability and character of gaming
operators and persons financially interested or involved in gaming operations.
Iowa Gaming Laws seek to: (i) prevent unsavory or unsuitable persons from having
direct or indirect involvement with gaming
47
<PAGE>
at any time or in any capacity; (ii) establish and maintain responsible
accounting practices and procedures; (iii) maintain effective control over the
financial practices of licensees (including the establishment of minimum
procedures for internal fiscal affairs, the safeguarding of assets and revenues,
the provision of reliable record keeping and the filing of periodic reports with
the Iowa Gaming Commission); (iv) prevent cheating and fraudulent practices; and
(v) provide a source of state and local revenues through taxation and licensing
fees.
The Iowa Gaming Commission may require any individual who has a material
relationship with any Iowa gaming operation to be investigated and licensed or
found suitable. The Iowa Gaming Commission, prior to the acquisition, must
approve any person who acquires a 5% or more beneficial interest in Lady Luck's
Iowa gaming operations, including the Bettendorf joint venture and the
Miss Marquette riverboat casino. The applicant is required to pay all costs of
this investigation. At the Effective Time, Isle of Capri will acquire Lady
Luck's interest in Lady Luck's Iowa gaming operations, and the Iowa Gaming
Commission must approve such acquisition. Pursuant to the terms of the Merger
Agreement, initial applications must be filed within 60 days after the date of
the Merger Agreement. Initial applications have been filed with the Iowa Gaming
Commission as of the date of this Proxy Statement. However, no assurances can be
given that the Iowa Gaming Commission will approve the Merger or as to the
timing of any such approval.
APPRAISAL RIGHTS
Holders of shares of Company Common Stock are entitled to appraisal rights
in connection with the Merger under Section 262 ("Section 262") of the DGCL,
provided that they comply with the conditions established by Section 262.
Section 262 is reprinted in its entirety as Annex V to this Proxy Statement. The
following discussion does not purport to be a complete statement of the law
relating to appraisal rights and is qualified in its entirety by reference to
Annex V. This discussion and Annex V should be reviewed carefully by any Lady
Luck Stockholder who wishes to exercise statutory appraisal rights or who wishes
to preserve the right to do so, as failure to comply with the procedures set
forth herein or therein may result in the loss of appraisal rights.
Lady Luck Stockholders of record who desire to exercise their appraisal
rights must: (i) hold shares of Company Common Stock on the date of making a
demand for appraisal; (ii) continuously hold such shares through the Effective
Time; (iii) deliver a properly executed written demand for appraisal to Lady
Luck prior to the vote by the Lady Luck Stockholders on the Merger; (iv) not
vote in favor of the Merger or consent thereto in writing; (v) file any
necessary petition in the Delaware Court of Chancery (the "Delaware Court"), as
more fully described below, within 120 days after the Effective Time; and
(vi) otherwise satisfy all of the conditions described more fully below and in
Annex V.
A Lady Luck Stockholder of record who makes the demand for appraisal
described below with respect to his, her or its shares of Company Common Stock,
who continuously is the record holder of such shares through the Effective Time,
who otherwise complies with the statutory requirements of Section 262 of the
DGCL and who neither votes in favor of the Merger nor consents thereto in
writing will be entitled, if the Merger is consummated, to receive payment of
the fair value of his, her or its shares of Company Common Stock as appraised by
the Delaware Court. All references in Section 262 and in this summary of
appraisal rights to a "stockholder" or "holders of shares of Company Common
Stock" are to the record holder or holders of shares of Company Common Stock.
Under Section 262, not less than 20 days prior to the Special Meeting, Lady
Luck is required to notify each Lady Luck Stockholder eligible for appraisal
rights of the availability of such appraisal rights. This Proxy Statement
constitutes notice to holders of Company Common Stock that appraisal rights are
available to them. Lady Luck Stockholders of record who desire to exercise their
appraisal rights must satisfy all of the conditions set forth in Section 262 of
the DGCL. A written demand for appraisal of any shares of Company Common Stock
must be filed with Lady Luck before the taking of
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<PAGE>
the vote on the Merger. Such written demand must reasonably inform Lady Luck of
the identity of the Lady Luck Stockholder of record and of such Lady Luck
Stockholder's intention to demand appraisal of Company Common Stock held by such
Lady Luck Stockholder. This written demand for appraisal of shares must be in
addition to and separate from any proxy or vote abstaining from or voting
against the Merger. Voting against, abstaining from voting on, failing to return
a proxy with respect to, or failing to vote on the Merger will not constitute a
demand for appraisal within Section 262.
Lady Luck Stockholders who desire to exercise appraisal rights must not vote
in favor of the Merger or consent thereto in writing. Voting in favor of the
Merger or delivering a proxy in connection with the Special Meeting (unless the
proxy votes against, or expressly abstains from the vote on, the approval of the
Merger), will constitute a waiver of the Lady Luck Stockholder's right of
appraisal and will nullify any written demand for appraisal submitted by the
Lady Luck Stockholder.
A demand for appraisal must be executed by or on behalf of the Lady Luck
Stockholder of record, fully and correctly, as such Lady Luck Stockholder's name
appears on the certificate or certificates representing the shares of Company
Common Stock. A person having a beneficial interest in shares of Company Common
Stock that are held of record in the name of another person, such as a broker,
fiduciary (such as a trustee, guardian or custodian) or other nominee, must act
promptly to cause the record holder to follow the steps summarized herein
properly and in a timely manner to perfect any appraisal rights. If the shares
of Company Common Stock are owned of record by a person other than the
beneficial owner, including a broker, fiduciary (such as a trustee, guardian or
custodian) or other nominee, such demand must be executed by or for the record
owner. If the shares of Company Common Stock are owned of record by more than
one person, as in a joint tenancy or tenancy in common, such demand must be
executed by or for all such joint owners. An authorized agent, including an
agent for two or more joint owners, may execute the demand for appraisal for a
Lady Luck Stockholder of record; however, the agent must identify the record
owner and expressly disclose the fact that, in exercising the demand, such
person is acting as agent for the record owner. A record owner, such as a
broker, fiduciary or other nominee, who holds shares of Company Common Stock as
a nominee for others, may exercise appraisal rights with respect to the shares
held for all or less than all beneficial owners of shares as to which such
person is the record owner. In such case, the written demand must set forth the
number of shares covered by such demand. Where the number of shares is not
expressly stated, the demand will be presumed to cover all shares of Company
Common Stock outstanding in the name of such record owner. A Lady Luck
Stockholder who elects to exercise appraisal rights should mail or deliver his,
her or its written demand to: Lady Luck Gaming Corporation, 206 North Third
Street, Las Vegas, Nevada 89101, Attention: Secretary. The written demand for
appraisal should specify the Lady Luck Stockholder's name and mailing address,
the number of shares of Company Common Stock owned, and that the Lady Luck
Stockholder is thereby demanding appraisal of his, her or its shares. A proxy or
vote against the Merger will not constitute such a demand.
Within ten days after the Effective Time, the Surviving Corporation must
provide notice of the Effective Time to all Lady Luck Stockholders who have
complied with Section 262 of the DGCL. Within 120 days after the Effective Time,
either the Surviving Corporation or any Lady Luck Stockholder who has complied
with the required conditions of Section 262 of the DGCL may file a petition in
the Delaware Court, with a copy served on the Surviving Corporation in the case
of a petition filed by a Lady Luck Stockholder, demanding a determination of the
fair value of the shares of all dissenting Lady Luck Stockholders. The Surviving
Corporation does not currently intend to file an appraisal petition and Lady
Luck Stockholders seeking to exercise appraisal rights should not assume that
the Surviving Corporation will file such a petition or that the Surviving
Corporation will initiate any negotiations with respect to the fair value of
such shares. Accordingly, Lady Luck Stockholders who desire to have their shares
appraised should initiate any petitions necessary for the perfection of their
appraisal rights within the time periods and in the manner prescribed in
Section 262 of the DGCL.
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Within 120 days after the Effective Time, any Lady Luck Stockholder who has
theretofore complied with the applicable provisions of Section 262 of the DGCL
will be entitled, upon written request, to receive from the Surviving
Corporation a statement setting forth the aggregate number of shares of Company
Common Stock not voted in favor of the Merger and with respect to which demands
for appraisal were received by Lady Luck and the number of holders of such
shares. Such statement must be mailed within 10 days after the written request
therefor has been received by the Surviving Corporation or within 10 days after
expiration of the time for delivery of demands for appraisal under Section 262
of the DGCL, whichever is later.
If a petition for an appraisal is timely filed, at the hearing on such
petition, the Delaware Court will determine which Lady Luck Stockholders are
entitled to appraisal rights. The Delaware Court may require the Lady Luck
Stockholders who have demanded an appraisal for their shares and who hold stock
represented by certificates to submit their stock certificates to the Register
in Chancery for notation thereon of the pendency of the appraisal proceedings;
and if any Lady Luck Stockholder fails to comply with such direction, the
Delaware Court may dismiss the proceedings as to such Lady Luck Stockholder.
Where proceedings are not dismissed, the Delaware Court will appraise the shares
of Company Common Stock owned by such Lady Luck Stockholders, determining the
fair value of such shares exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value. In
determining fair value, the Delaware Court is to take into account all relevant
factors. In WEINBERGER V. UOP, INC., the Delaware Supreme Court discussed the
factors that could be considered in determining fair value in an appraisal
proceeding, stating that "proof of value by any techniques or methods which are
generally considered acceptable in the financial community and otherwise
admissible in court" should be considered, and that, "fair price obviously
requires consideration of all relevant factors involving the value of a
company." The Delaware Supreme Court stated that in making this determination of
fair value the court must consider market value, asset value, dividends,
earnings prospects, the nature of the enterprise and any other facts which are
known or which can be ascertained as of the date of the merger and which throw
any light on future prospects of the merged corporation. In WEINBERGER, the
Delaware Supreme Court further stated that "elements of future value, including
the nature of the enterprise, which are known or susceptible of proof as of the
date of the merger and not the product of speculation, may be considered."
Section 262, however, provides that fair value is to be "exclusive of any
element of value arising from the accomplishment or expectation of the merger."
In CEDE & CO. V. TECHNICOLOR, INC., the Delaware Supreme Court stated that such
exclusion is a "narrow exclusion [that] does not encompass known elements of
value," but which rather "applies only to the speculative elements of value
arising from such accomplishment or expectation."
Lady Luck Stockholders considering seeking appraisal should recognize that
the fair value of their shares as determined under Section 262 of the DGCL could
be more than, the same as or less than the Merger Consideration to be received
if they do not seek appraisal of their shares of Company Common Stock. The cost
of the appraisal proceeding may be determined by the Delaware Court and taxed
against the parties as the Delaware Court deems equitable in the circumstances.
Upon application of a Lady Luck Stockholder demanding appraisal, the Delaware
Court may order that all or a portion of the expenses incurred by any Lady Luck
Stockholder demanding appraisal in connection with the appraisal proceeding,
including without limitation, reasonable attorneys' fees and the fees and
expenses of experts, be charged pro rata against the value of all shares of
stock entitled to appraisal.
Any Lady Luck Stockholder who has duly demanded appraisal in compliance with
Section 262 of the DGCL will not, after the Effective Time, be entitled to vote
for any purpose any shares of Company Common Stock subject to such demand or to
receive payment of dividends or other distributions on such shares, except for
dividends or distributions payable to Lady Luck Stockholders of record at a date
prior to the Effective Time.
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At any time within 60 days after the Effective Time, any Lady Luck
Stockholder will have the right to withdraw such demand for appraisal and to
accept the terms offered in the Merger; after this period, the Lady Luck
Stockholder may withdraw such demand for appraisal only with the consent of the
Surviving Corporation. No appraisal proceeding in the Delaware Court shall be
dismissed as to any Lady Luck Stockholder without the approval of the Delaware
Court, and such approval may be conditioned upon such terms as the Delaware
Court deems just. If no petition for appraisal is filed with the Delaware Court
within 120 days after the Effective Time, Lady Luck Stockholders' rights to
appraisal will cease, and all holders of shares of Company Common Stock will be
entitled to receive the Merger Consideration. Inasmuch as the Surviving
Corporation has no obligation to file such a petition, and has no present
intention to do so, any holder of shares of Company Common Stock who desires
such a petition to be filed is advised to file it on a timely basis.
Failure to take any required step in connection with the exercise of
appraisal rights may result in termination of such rights. In view of the
complexity of these provisions of the DGCL, Lady Luck Stockholders who are
considering exercising their rights under Section 262 of the DGCL should consult
with their legal advisors.
AVAILABLE INFORMATION
Lady Luck is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports, proxy statements and other
information with the SEC. Reports, proxy statements and other information filed
by Lady Luck with the SEC can be inspected and copied at the public reference
facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's Regional Offices at (i) Seven World
Trade Center, 13th Floor, New York, New York 10048, (ii) Suite 500 East, Tishman
Building, 5757 Wilshire Boulevard, Los Angeles, California, 90036, and
(iii) 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such materials also can be obtained at prescribed rates from the
Public Reference Section of the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The SEC maintains an Internet site on the World Wide Web
at "http://www.sec.gov." which contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the SEC.
A copy of the written opinion of Wasserstein Perella, the financial advisor
to Lady Luck, is attached as Annex II to this Proxy Statement. Such opinion
shall also be made available for inspection and copying during regular business
hours at the principal executive offices of Lady Luck by any interested Lady
Luck Stockholder or the representative of such Lady Luck Stockholder who has
been so designated in writing.
This Proxy Statement incorporates by reference documents which are not
presented herein or delivered herewith. These documents other than exhibits to
such documents, are available, without charge, to any person to whom this Proxy
Statement is delivered, upon written or oral request, to: Lady Luck at its
principal offices located at 206 North Third Street, Las Vegas, Nevada 89101,
Attention: Secretary (telephone number (800) 634-6580).
Except as otherwise indicated herein, all information appearing in this
Proxy Statement concerning Lady Luck has been supplied by Lady Luck, and all
information appearing in this Proxy Statement concerning Merger Sub or Isle of
Capri has been supplied by Isle of Capri or is based upon publicly available
documents on file with the SEC and other public records. Lady Luck assumes no
responsibility for the accuracy or completeness of the information furnished by
Isle of Capri or contained in such documents and records other than those filed
by Lady Luck or for any failure of Isle of Capri to disclose events that may
have occurred and may affect the significance or accuracy of such information
and that are unknown to Lady Luck.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by Lady Luck pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Proxy Statement and prior to
the date of the Special Meeting shall be deemed to be incorporated by reference
into this Proxy Statement and to be a part hereof from the date of filing of
such documents.
In addition, the following documents previously filed with the SEC are
hereby incorporated by reference into this Proxy Statement:
1. Lady Luck's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998.
2. Lady Luck's Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1999, June 30, 1999 and September 30, 1999.
3. Lady Luck's Proxy Statement for its Annual Meeting of Stockholders held on
April 27, 1999.
4. Lady Luck's Current Reports on Form 8-K dated July 30, 1999, August 19,
1999, October 5, 1999, and October 29, 1999.
Any statement contained herein or in a document incorporated herein by
reference will be deemed to be modified or superseded for the purpose of this
Proxy Statement to the extent that a statement contained herein or in any
subsequently filed document which also is incorporated herein by reference
modifies or supersedes such statement. Any such statement so modified or
superseded will not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement.
Any statement contained herein or incorporated herein by reference
concerning the provisions of documents are summaries of such documents and each
statement is qualified in its entirety by reference to the copy of the
applicable document if filed with the SEC or attached as an appendix hereto.
STOCKHOLDER PROPOSALS
Because of the proposed completion of the Merger, Lady Luck does not
currently expect to hold any further Annual Meetings of Stockholders, as the
Company Common Stock will not be publicly traded following the Merger. If the
Merger is not completed, any proposal of a Lady Luck Stockholder intended to be
presented at the 2000 Annual Meeting of Stockholders (the "2000 Annual Meeting")
must be properly received by Lady Luck at the address appearing on the first
page of this Proxy Statement in order to be considered for inclusion in Lady
Luck's proxy statement and form of proxy relating to that meeting.
In accordance with Article II, Section 2 of the By-Laws of Lady Luck, Lady
Luck Stockholders must give timely notice of any proposed matter, in writing, to
the Secretary of Lady Luck not less than 50 days nor more than 75 days prior to
the meeting; provided, however, that in the event that less than 65 days' notice
or prior public disclosure of the date of the annual meeting is given or made to
stockholders, notice by stockholders to be timely must be received not later
than the close of business on the 15th day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made, whichever first occurs. Therefore, provided the 2000 Annual Meeting is
held on April 27, 2000 (assuming it is held on the same date as the 1999 Annual
Meeting of Stockholders), Lady Luck Stockholders must give written notice of any
proposed matter to the Secretary of Lady Luck between February 12, 2000 and
March 8, 2000.
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ANNEX I
AGREEMENT AND PLAN OF MERGER
dated as of October 5, 1999
among
ISLE OF CAPRI CASINOS, INC.,
ISLE MERGER CORP.
AND
LADY LUCK GAMING CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE I
THE MERGER
Section 1.1. THE MERGER.................................................. I-1
Section 1.2. EFFECTIVE TIME OF THE MERGER................................ I-1
Section 1.3. CLOSING..................................................... I-1
Section 1.4. EFFECT OF THE MERGER........................................ I-1
CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING
Section 1.5. CORPORATION............................................... I-2
Section 1.6. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION......... I-2
Section 1.7. SUBSIDIARIES OF THE SURVIVING CORPORATION................... I-2
ARTICLE II
EFFECT OF THE MERGER ON SECURITIES OF THE CONSTITUENT CORPORATIONS
Section 2.1. CONVERSION OF SECURITIES.................................... I-2
Section 2.2. EXCHANGE OF CERTIFICATES.................................... I-3
Section 2.3. ACCELERATION AND PAYMENT FOR LADY LUCK OPTIONS.............. I-4
Section 2.4. DISSENTING SHARES........................................... I-4
Section 2.5. LADY LUCK PREFERRED STOCK................................... I-5
Section 2.6. LADY LUCK DEBT SECURITIES................................... I-5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LADY LUCK
Section 3.1. ORGANIZATION OF LADY LUCK AND ITS SUBSIDIARIES.............. I-5
Section 3.2. CAPITALIZATION.............................................. I-6
Section 3.3. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS....... I-7
Section 3.4. PUBLIC FILINGS; FINANCIAL STATEMENTS........................ I-8
Section 3.5. NO UNDISCLOSED LIABILITIES.................................. I-9
Section 3.6. ABSENCE OF CERTAIN CHANGES OR EVENTS........................ I-9
Section 3.7. TAXES....................................................... I-9
Section 3.8. REAL PROPERTY, TITLE AND RELATED MATTERS.................... I-10
Section 3.9. TITLE TO PERSONAL PROPERTY; LIENS........................... I-11
Section 3.10. INTELLECTUAL PROPERTY....................................... I-12
Section 3.11. AGREEMENTS, CONTRACTS AND COMMITMENTS....................... I-12
Section 3.12. LITIGATION.................................................. I-13
Section 3.13. ENVIRONMENTAL MATTERS....................................... I-13
Section 3.14. EMPLOYEE BENEFIT PLANS...................................... I-13
Section 3.15. COMPLIANCE.................................................. I-15
Section 3.16. LABOR MATTERS............................................... I-16
Section 3.17. INSURANCE................................................... I-16
Section 3.18. INFORMATION IN PROXY STATEMENT.............................. I-16
Section 3.19. STATE TAKEOVER STATUTE...................................... I-17
Section 3.20. VOTING REQUIREMENTS......................................... I-17
Section 3.21. YEAR 2000................................................... I-17
Section 3.22. OPINION OF FINANCIAL ADVISOR................................ I-17
Section 3.23. BROKERS..................................................... I-17
</TABLE>
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<TABLE>
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
Section 4.1. ORGANIZATION OF BUYER AND MERGER SUB........................ I-18
Section 4.2. CAPITALIZATION OF MERGER SUB................................ I-18
Section 4.3. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS....... I-18
Section 4.4. BROKERS..................................................... I-19
Section 4.5. OWNERSHIP OF SECURITIES..................................... I-19
Section 4.6. PROXY STATEMENT............................................. I-19
Section 4.7. LITIGATION.................................................. I-19
Section 4.8. FINANCING................................................... I-20
ARTICLE V
COVENANTS
Section 5.1. CONDUCT OF BUSINESS OF LADY LUCK............................ I-20
Section 5.2. COOPERATION; NOTICE; CURE................................... I-23
Section 5.3. NO SOLICITATION............................................. I-23
Section 5.4. PROXY STATEMENT............................................. I-24
Section 5.5. SPECIAL MEETING............................................. I-24
Section 5.6. ACCESS TO INFORMATION....................................... I-24
Section 5.7. GOVERNMENTAL APPROVALS...................................... I-24
Section 5.8. PUBLICITY................................................... I-25
Section 5.9. INDEMNIFICATION............................................. I-25
Section 5.10. STOCKHOLDER LITIGATION...................................... I-26
Section 5.11. EMPLOYEE BENEFITS........................................... I-26
Section 5.12. OTHER AGREEMENTS............................................ I-26
Section 5.13. MISS MARQUETTE LOANS........................................ I-26
Section 5.14. FURTHER ASSURANCES AND ACTIONS.............................. I-26
Section 5.15. PENDING ACQUISITIONS........................................ I-27
Section 5.16. ALLOCATION OF FUNDS......................................... I-27
ARTICLE VI
CONDITIONS TO MERGER
CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
Section 6.1. MERGER.................................................... I-27
Section 6.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF LADY LUCK........... I-28
Section 6.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF BUYER............... I-28
ARTICLE VII
TERMINATION AND AMENDMENT
Section 7.1. TERMINATION................................................. I-29
Section 7.2. EFFECT OF TERMINATION....................................... I-31
Section 7.3. FEES AND EXPENSES........................................... I-31
Section 7.4. AMENDMENT................................................... I-32
Section 7.5. EXTENSION; WAIVER........................................... I-32
ARTICLE VIII
MISCELLANEOUS
NONSURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
Section 8.1. AGREEMENTS................................................ I-32
Section 8.2. NOTICES..................................................... I-32
Section 8.3. INTERPRETATION.............................................. I-33
</TABLE>
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Section 8.4. COUNTERPARTS................................................ I-33
Section 8.5. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES.............. I-33
Section 8.6. GOVERNING LAW............................................... I-34
Section 8.7. ASSIGNMENT.................................................. I-34
Section 8.8. SEVERABILITY; ENFORCEMENT................................... I-34
Section 8.9. SPECIFIC PERFORMANCE........................................ I-34
</TABLE>
INDEX OF DEFINED TERMS
The following terms have the respective meanings specified in the indicated
Sections of the Agreement:
<TABLE>
<CAPTION>
TERM AGREEMENT SECTION
- ---- -----------------
<S> <C>
Acquisition Proposal........................................ 5.3(a)
Agreement................................................... Recitals
best knowledge.............................................. Article III
Buyer....................................................... Recitals
Buyer Disclosure Schedule................................... Article IV
Buyer Material Adverse Effect............................... 4.1
Certificate of Merger....................................... 1.2
CIBC........................................................ 4.4
Closing..................................................... 1.3
Closing Date................................................ 1.3
Code........................................................ 2.2(f)
Confidentiality Agreement................................... 5.6
DGCL........................................................ 1.1
Dissenting Shares........................................... 2.4
Due Diligence Period........................................ 6.3
Effective Time.............................................. 1.2
Encumbrances................................................ 3.8(b)
Environmental Law........................................... 3.13(b)
ERISA....................................................... 3.14(a)
ERISA Affiliate............................................. 3.14(a)
Exchange Act................................................ 3.3(c)
Exchange Agent.............................................. 2.2(a)
Exchange Fund............................................... 2.2(a)
foreign person.............................................. 3.7(i)
GAAP........................................................ 3.4(b)
Gemini...................................................... 5.1(n)
Gemini Trademark Assets..................................... 5.1(n)
Governmental Approvals...................................... 5.7(a)
Governmental Entity......................................... 3.3(c)
GSMC........................................................ 3.7(e)
Hazardous Substance......................................... 3.13(c)
HSR Act..................................................... 3.3(c)
IMPS........................................................ 5.1(n)
include, includes or including.............................. 8.3
Indebtedness................................................ 3.11(a)
Indemnified Parties......................................... 5.9(a)
IRS......................................................... 3.7(c)
</TABLE>
I-iii
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<TABLE>
<CAPTION>
TERM AGREEMENT SECTION
- ---- -----------------
<S> <C>
knowledge................................................... Article III
Lady Luck................................................... Recitals
Lady Luck Balance Sheet..................................... 3.4(b)
Lady Luck Common Stock...................................... 2.1(a)
Lady Luck Disclosure Schedule............................... Article III
Lady Luck Employee Plans.................................... 3.14(a)
Lady Luck Gaming Laws....................................... 3.15(b)
Lady Luck Interim Financial Statements...................... 3.4(b)
Lady Luck Las Vegas Agreement............................... 5.1(n)
Lady Luck Material Contracts................................ 3.11(a)
Lady Luck Material Adverse Effect........................... 3.1
Lady Luck Notes............................................. 5.1(p)
Lady Luck Option............................................ 2.3
Lady Luck Option Plan....................................... 2.3
Lady Luck Permits........................................... 3.15(a)
Lady Luck Preferred Stock................................... 3.2(a)
Lady Luck Series A Preferred Stock.......................... 2.1(c)
Lady Luck Series A Preferred Stock Redemption Amount........ 2.5
Lady Luck SEC Reports....................................... 3.4(a)
Lady Luck Special Meeting................................... 5.5
Lady Luck Stockholder Approval.............................. 3.20
Lady Luck Welfare Plan...................................... 3.14(g)
Las Vegas Hotel............................................. 5.1(n)
Leased Real Property........................................ 3.8(b)
Liens....................................................... 3.1
made available.............................................. 8.3
Merger...................................................... Recitals
Merger Consideration........................................ 2.1(a)
Merger Sub.................................................. Recitals
Merger Sub Common Stock..................................... 4.2
Miss Marquette Agreement.................................... 5.1(d)
Miss Marquette Credit Agreement............................. 5.13
Multiemployer Plan.......................................... 3.14(e)
Nevada Approval............................................. 6.1(c)
Notifying Party............................................. 5.7(a)
Onyx Partners............................................... 3.23
Outside Date................................................ 7.1(b)
Owned Real Property......................................... 3.8(b)
PBGC........................................................ 3.14(f)
Permitted Encumbrances...................................... 3.8(b)
Physical Inspection and Review.............................. 6.3(d)
prohibited transactions..................................... 3.14(c)
Proxy Statement............................................. 5.4(a)
Redemption Agent............................................ 2.5
SEC......................................................... 3.3(c)
Securities Act.............................................. 3.4(a)
Services.................................................... 3.21
single employer............................................. 3.14(a)
Sodak....................................................... 3.7(e)
strategic alliances......................................... 3.11(a)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
TERM AGREEMENT SECTION
- ---- -----------------
<S> <C>
Stockholder Support Agreement............................... Recitals
Subsidiary.................................................. 3.1
Superior Proposal........................................... 5.3(a)
Surviving Corporation....................................... 1.1
Tax or Taxes................................................ 3.7(a)
Terminating Buyer Breach.................................... 7.1(h)
Terminating Lady Luck Breach................................ 7.1(g)
the date of this Agreement, the date hereof................. 8.3
Third Party................................................. 5.3(a)
Tompkins.................................................... 5.1(m)
Voting Debt................................................. 3.2(b)
Wasserstein Perella......................................... 3.22
without limitation.......................................... 8.3
Year 2000 Ready............................................. 3.21
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of October 5, 1999,
by and among ISLE OF CAPRI CASINOS, INC., a Delaware corporation ("Buyer"), ISLE
MERGER CORP., a Delaware corporation and a wholly owned subsidiary of Buyer
("Merger Sub"), and LADY LUCK GAMING CORPORATION, a Delaware corporation ("Lady
Luck").
WHEREAS, the Board of Directors of Lady Luck has determined that the merger
of Merger Sub with and into Lady Luck, upon the terms and subject to the
conditions set forth in this Agreement (the "Merger"), is fair to, and in the
best interests of, Lady Luck and its stockholders;
WHEREAS, the Boards of Directors of Buyer and Merger Sub have determined
that the Merger is in the best interests of Buyer and Merger Sub and their
respective stockholders;
WHEREAS, the Boards of Directors of Buyer, Merger Sub and Lady Luck have
each approved and adopted this Agreement and approved the Merger and the other
transactions contemplated hereby; and
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to each of Buyer's and Merger Sub's willingness to
enter into this Agreement, the principal stockholder of Lady Luck will enter
into a Stockholder Support Agreement with Buyer, dated as of the date of this
Agreement in the form attached hereto as EXHIBIT A (the "Stockholder Support
Agreement"), pursuant to which such stockholder will agree, among other things,
to vote all voting securities of Lady Luck owned by him beneficially or of
record in favor of approval of the transactions contemplated by this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1. THE MERGER. Upon the terms and subject to the provisions of
this Agreement and in accordance with Section 251 of the Delaware General
Corporation Law (the "DGCL"), at the Effective Time (as defined in SECTION 1.2),
Merger Sub shall be merged with and into Lady Luck. As a result of the Merger,
the separate corporate existence of Merger Sub shall cease and Lady Luck shall
continue as the surviving corporation (the "Surviving Corporation").
Section 1.2. EFFECTIVE TIME OF THE MERGER. Subject to the provisions of
this Agreement (including SECTION 7.1 hereof), a certificate of merger with
respect to the Merger in appropriate form (the "Certificate of Merger") shall be
duly prepared, executed and acknowledged and thereafter delivered to the
Secretary of State of the State of Delaware for filing, as provided in the DGCL,
as early as practicable on the Closing Date (as defined in SECTION 1.3). The
Merger shall become effective at the later of the date of filing of the
Certificate of Merger or at such time within 90 days of the date of filing as is
specified in the Certificate of Merger (the "Effective Time").
Section 1.3. CLOSING. The closing of the Merger (the "Closing") will take
place at such time and place to be agreed upon by the parties hereto, on a date
to be specified by Buyer and Lady Luck, which shall be no later than the third
business day after satisfaction or, if permissible, waiver of the conditions set
forth in ARTICLE VI (the "Closing Date") and no earlier than January 4, 2000,
unless another date is agreed to by Buyer and Lady Luck.
Section 1.4. EFFECT OF THE MERGER. Upon becoming effective, the 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 properties,
rights, privileges, powers and franchises of Merger Sub and Lady Luck shall vest
in the Surviving Corporation, and all debts, liabilities and duties of Merger
Sub and Lady Luck shall become the debts, liabilities and duties of the
Surviving Corporation.
<PAGE>
Section 1.5. CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATION. At the Effective Time, the Certificate of Incorporation and Bylaws
of the Surviving Corporation shall be amended to be substantially identical to
the Certificate of Incorporation and Bylaws, respectively, of Merger Sub as in
effect immediately prior to the Effective Time, in each case until duly amended
in accordance with applicable law; provided the name of the Surviving
Corporation as set forth in its Certificate of Incorporation shall be changed to
a new name to be determined by Merger Sub prior to the Effective Time.
Section 1.6. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
directors of Merger Sub immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation. The directors of Lady Luck immediately prior to the Effective Time
shall each have resigned as of the Effective Time. The officers of Merger Sub
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation.
Section 1.7. SUBSIDIARIES OF THE SURVIVING CORPORATION. The Surviving
Corporation may distribute shares of stock of the Subsidiaries of the Surviving
Corporation to the Buyer, or undertake similar transactions having the effect of
reorganizing the corporate structure of Buyer and its Subsidiaries, from time to
time after the Effective Time.
ARTICLE II
EFFECT OF THE MERGER ON SECURITIES OF THE CONSTITUENT CORPORATIONS
Section 2.1. CONVERSION OF SECURITIES. At the Effective Time, by virtue of
the Merger and without any action on the part of any of the parties hereto or
the holders of any of the following:
(a) LADY LUCK COMMON STOCK. Each share of common stock, par value
$0.006 per share, of Lady Luck ("Lady Luck Common Stock") issued and
outstanding immediately prior to the Effective Time (other than shares to be
canceled and retired in accordance with SECTION 2.1(b) and any Dissenting
Shares (as defined in SECTION 2.4), together with all rights in respect
thereto, shall be converted, subject to SECTION 2.1(e), into the right to
receive from the Surviving Corporation a net amount of $12.00 in cash (the
"Merger Consideration"). As of the Effective Time, all shares of Lady Luck
Common Stock upon which the Merger Consideration is payable pursuant to this
SECTION 2.1(a) shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any ownership
or other rights with respect thereto, except the right to receive the Merger
Consideration in exchange for such shares upon the surrender of such
certificate in accordance with SECTION 2.2.
(b) CANCELLATION OF TREASURY STOCK AND BUYER-OWNED STOCK. All shares of
Lady Luck Common Stock that are owned by Lady Luck as treasury stock and any
shares of Lady Luck Common Stock owned by Buyer or any wholly-owned
Subsidiary (as defined in SECTION 3.1) of Buyer shall be canceled and
retired and shall cease to exist, and no consideration shall be delivered in
exchange therefor.
(c) CAPITAL STOCK OF MERGER SUB. Each issued and outstanding share of
the common stock, par value $.01 per share, of Merger Sub shall be converted
into and become one fully paid and nonassessable share of common stock, par
value $.01 per share, of the Surviving Corporation.
(d) ADJUSTMENTS TO MERGER CONSIDERATION. The Merger Consideration shall
be adjusted to reflect fully the effect of any stock split, reverse split,
stock dividend (including any dividend or distribution of securities
convertible into Lady Luck Common Stock, as applicable), reorganization,
recapitalization or any other like change with respect to Lady Luck Common
Stock occurring after the date hereof and prior to the Effective Time.
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<PAGE>
Section 2.2. EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. At or prior to the Effective Time, Buyer shall
deposit with a bank or trust company designated by Buyer and reasonably
acceptable to Lady Luck (the "Exchange Agent"), for the benefit of the
holders of shares of Lady Luck Common Stock outstanding immediately prior to
the Effective Time, for exchange in accordance with this SECTION 2.2,
through the Exchange Agent, cash in an aggregate amount sufficient to pay
the Merger Consideration (the cash so deposited being hereinafter referred
to as the "Exchange Fund"). Any interest, dividends or other income earned
on the investment of cash or other property held in the Exchange Fund shall
be for the account of and payable to Buyer.
(b) EXCHANGE PROCEDURES. Promptly after the Effective Time, Buyer will
instruct the Exchange Agent to mail to each holder of record of Lady Luck
Common Stock (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to a Certificate shall pass,
only upon proper delivery of the Certificate to the Exchange Agent and shall
be in such form and have such other provisions as Buyer may reasonably
specify), and (ii) instructions to effect the surrender of the Certificate
in exchange for the Merger Consideration. Upon surrender of a Certificate
for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions, the holder of such Certificate shall
be entitled to receive in exchange therefor cash in an amount equal to the
Merger Consideration multiplied by the number of shares represented by such
Certificate, and the Certificate so registered shall forthwith be canceled.
In the event of a transfer of ownership of shares of Lady Luck Common Stock
which is not registered in the transfer records of Lady Luck as of the
Effective Time, the Merger Consideration may be issued and paid in
accordance with this ARTICLE II to a transferee if the Certificate
evidencing such shares of Lady Luck Common Stock is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer pursuant to this SECTION 2.2(b) and by evidence that any
applicable stock transfer taxes have been paid. Until so surrendered, each
outstanding Certificate that prior to the Effective Time represented shares
of Lady Luck Common Stock (other than Certificates representing Dissenting
Shares) will be deemed from and after the Effective Time for all corporate
purposes (other than the payment of dividends and subject to SECTION
2.1(e)), to evidence the right to receive the Merger Consideration without
interest. No interest will be paid or will accrue on the cash payable upon
the surrender of any Certificate.
(c) TRANSFERS OF OWNERSHIP. At the Effective Time, the stock transfer
books of Lady Luck shall be closed, and there shall be no further
registration of transfers of Lady Luck Common Stock thereafter on the
records of Lady Luck.
(d) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the former stockholders of Lady Luck as of
the date which is twelve months after the Effective Time shall be delivered
to Buyer, upon demand, and thereafter such former stockholders of Lady Luck
who have not theretofore complied with this SECTION 2.2 shall be entitled to
look only to Buyer for payment of the Merger Consideration to which they are
entitled pursuant hereto.
(e) NO LIABILITY. None of Buyer, Merger Sub, Lady Luck or the Exchange
Agent shall be liable to any holder of Lady Luck Common Stock for any Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not
have been surrendered immediately prior to the date on which the Merger
Consideration or any dividends or distributions with respect to Lady Luck
Common Stock in respect of such Certificate would otherwise escheat to or
become the property of any Governmental Entity, any such Merger
Consideration, dividends or distributions in respect of such Certificate
shall, to the extent permitted by applicable law, become the property of the
Surviving
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<PAGE>
Corporation, free and clear of all claims or interest of any person
previously entitled thereto on such date prior to the time such escheat laws
become applicable.
(f) WITHHOLDING RIGHTS. Buyer or the Exchange Agent shall be entitled
to deduct and withhold from the Merger Consideration otherwise payable
pursuant to this Agreement to any holder of Certificates which prior to the
Effective Time represented shares of Lady Luck Common Stock such amounts as
Buyer or the Exchange Agent is required to deduct and withhold with respect
to the making of such payment under the Internal Revenue Code of 1986, as
amended (the "Code"), or any provision of state, local or foreign tax law.
To the extent that amounts are so withheld by Buyer or the Exchange Agent
and remitted to the proper authority, such withheld amounts thereafter shall
be treated for all purposes of this Agreement as having been paid to the
holder of the shares of Lady Luck Common Stock in respect of which such
deduction and withholding was made by Buyer or the Exchange Agent.
(g) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall pay in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof such Merger
Consideration as may be required pursuant to SECTION 2.2; provided, however,
that Buyer may, in its discretion, and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
Certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Buyer, the Surviving
Corporation or the Exchange Agent with respect to the Certificates alleged
to have been lost, stolen or destroyed.
Section 2.3. ACCELERATION AND PAYMENT FOR LADY LUCK OPTIONS. Following the
execution of this Agreement, the Board of Directors of Lady Luck (or, if
appropriate, any committee administering the Lady Luck Stock Option Plan (as
defined below)) shall adopt such resolutions or use its best efforts to take
such other actions as are required to provide that each then outstanding stock
option to purchase shares of Lady Luck Common Stock (a "Lady Luck Option")
heretofore granted under any stock option or other stock-based incentive plan,
program or arrangement of Lady Luck, including the 1993 Stock Option Plan and
the 1996 Director Stock Option Plan (collectively, the "Lady Luck Option Plan")
shall be accelerated and canceled immediately prior to the Effective Time in
exchange for payment of an amount of cash equal to the product of (x) the number
of shares of Lady Luck Common Stock subject to such Lady Luck Option immediately
prior to the consummation of the Merger and (y) the excess, if any, of the
Merger Consideration over the per share exercise price of such Lady Luck Option;
provided, however, that such excess shall not be less than zero. Notwithstanding
anything in this SECTION 2.3 to the contrary, with respect to any Lady Luck
Option granted under the Lady Luck Stock Option Plan having a per share exercise
price that is greater than the Merger Consideration, whether or not vested and
exercisable, the Board of Directors of Lady Luck (or, if appropriate, any
committee administering the Lady Luck Stock Option Plan), shall adopt such
resolutions or use its best efforts to take such other actions as are required
to provide that each such Lady Luck Option shall be accelerated and, if not
exercised before the Effective Time, shall be canceled as of the Effective Time
and shall have no further force or effect as of the Effective Time, without
regard to the fact that the holder of such Lady Luck Option shall have received
no payment for the Lady Luck Option.
Section 2.4. DISSENTING SHARES. Notwithstanding SECTION 2.1, all shares of
Lady Luck Common Stock issued and outstanding immediately prior to the Effective
Time and held by a holder who has not voted in favor of the Merger or consented
thereto in writing and who has demanded appraisal for such shares of Lady Luck
Common Stock in accordance with the DGCL (collectively, the "Dissenting Shares")
shall not be converted into a right to receive the Merger Consideration, unless
such holder fails to perfect or withdraws or otherwise loses such holder's right
to appraisal. If after the Effective Time such holder fails to perfect or
withdraws or loses such holder's right to appraisal, such shares of Lady Luck
Common Stock shall be treated as if they had been converted as of the Effective
Time into a right to receive the Merger Consideration without interest thereon.
Lady Luck shall give Buyer
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<PAGE>
prompt notice of any demands received by Lady Luck for appraisal of shares of
Lady Luck Common Stock, and Buyer shall have the right to participate in all
negotiations and proceedings with respect to such demands. Lady Luck shall not,
except with the prior written consent of Buyer, make any payment with respect
to, or settle or offer to settle, any such demands.
Section 2.5. LADY LUCK PREFERRED STOCK. Each share of Series A Mandatory
Cumulative Redeemable Preferred Stock, par value $25.00 per share, of Lady Luck
("Lady Luck Series A Preferred Stock") issued and outstanding immediately prior
to the Effective Time, shall be redeemed in connection with the transactions
contemplated hereby immediately prior to the Effective Time pursuant to its
terms at its liquidation preference. Immediately prior to the Effective Time,
Buyer shall deposit with a bank or trust company designated by Lady Luck and
reasonably acceptable to Buyer (the "Redemption Agent") for the benefit of the
holders of shares of Lady Luck Series A Preferred Stock outstanding immediately
prior to the Effective Time, for redemption by Lady Luck through the Redemption
Agent, cash in an aggregate amount sufficient to redeem all outstanding shares
of Lady Luck Series A Preferred Stock at the liquidation preference as of such
date (the "Lady Luck Series A Preferred Stock Redemption Amount"). Lady Luck
shall call the Lady Luck Series A Preferred Stock for redemption pursuant to its
terms at the Lady Luck Series A Preferred Stock Redemption Price at the
direction of Buyer and conditioned upon closing of the Merger. Any interest,
dividends or other income earned on the investment of cash or other property
held in the Exchange Fund shall be for the account of and payable to Buyer.
Section 2.6. LADY LUCK DEBT SECURITIES. Except as otherwise repaid,
redeemed or purchased in connection with the transactions contemplated hereby,
all notes and other debt instruments of Lady Luck that are outstanding at the
Effective Time shall continue to be outstanding subsequent to the Effective Time
as debt instruments of the Surviving Corporation, subject to their respective
terms and provisions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LADY LUCK
Lady Luck represents and warrants to Buyer and Merger Sub that the
statements contained in this ARTICLE III are true and correct except as set
forth herein and in the disclosure schedule delivered by Lady Luck to Buyer and
Merger Sub on or before the date of this Agreement (the "Lady Luck Disclosure
Schedule"). Any reference in the Merger Agreement to Lady Luck's "knowledge" or
"best knowledge," or to "the best of Lady Luck's knowledge," or words of similar
import, shall be deemed a reference to the actual knowledge of any of the (i)
corporate officers of Lady Luck or any of its Subsidiaries and (ii) general
managers of any gaming property of Lady Luck or any of its Subsidiaries for all
purposes. The Lady Luck Disclosure Schedule has been prepared based upon the
foregoing definition.
Section 3.1. ORGANIZATION OF LADY LUCK AND ITS SUBSIDIARIES. Each of Lady
Luck and its Subsidiaries (as defined below) is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization and
has all requisite corporate, partnership or limited liability company power and
authority to carry on its business as now being conducted. Each of Lady Luck and
its Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so qualified, licensed or in
good standing would not have a material adverse effect on the business,
properties, condition (financial or otherwise), prospects or results of
operations of Lady Luck and its Subsidiaries, taken as a whole other than any
effect arising out of, or resulting from, general economic conditions in the
United States or conditions generally affecting the gaming industry in the
United States (a "Lady Luck Material Adverse Effect"). Lady Luck has delivered
to Buyer a true and correct copy of the Certificate of Incorporation and Bylaws
of Lady Luck, in each case as amended to the date of this Agreement.
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<PAGE>
Assuming regulatory compliance by Buyer, the respective organizational documents
of Lady Luck's Subsidiaries do not contain any provision that would limit or
otherwise restrict the ability of Buyer, following the Effective Time, from
owning or operating such Subsidiaries on the same basis as Lady Luck. Except as
set forth on the Lady Luck Disclosure Schedule, all the outstanding shares of
capital stock of, or other equity interests in, each such Subsidiary have been
validly issued and are fully paid and nonassessable and are owned directly or
indirectly by Lady Luck, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens") and free of any other restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests). As used in this Agreement, the word
"Subsidiary" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party or
any other Subsidiary of such party is a general partner or (ii) at least fifty
percent (50%) of the securities or other interests having by their terms
ordinary voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
Section 3.2. CAPITALIZATION.
(a) The authorized capital stock of Lady Luck consists of 75,000,000
shares of Lady Luck Common Stock, $0.006 par value per share, and 4,000,000
shares of preferred stock, $25.00 par value per share ("Lady Luck Preferred
Stock"). As of the date hereof, (i) 4,881,003 shares of Lady Luck Common
Stock were issued and outstanding, all of which are validly issued, fully
paid and nonassessable, (ii) no shares of Lady Luck Common Stock were held
in the treasury of Lady Luck or by Subsidiaries of Lady Luck, and
(iii) 433,638 shares of Lady Luck Series A Preferred Stock were the only
Lady Luck Preferred Stock issued and outstanding. SECTION 3.2(a)(i) of the
Lady Luck Disclosure Schedule sets forth the number of shares of Lady Luck
Common Stock reserved for future issuance upon exercise of Lady Luck Options
granted and outstanding as of the date hereof and under the Lady Luck Stock
Option Plans.
SECTION 3.2(a)(i) of the Lady Luck Disclosure Schedule also sets forth
as of the date hereof, for each Lady Luck Stock Option Plan, the dates on
which Options which are still outstanding under such plan were granted, the
number of outstanding Options granted on each such date and the exercise
price thereof. Except as disclosed in SECTION 3.2(a)(i) of the Lady Luck
Disclosure Schedule, since December 31, 1998 through the date of this
Agreement, Lady Luck has not made any grants under any of the Lady Luck
Stock Option Plans. Except as disclosed in SECTION 3.2(a)(i) of the Lady
Luck Disclosure Schedule, as of the date of this Agreement, Lady Luck has
not granted any contractual rights the value of which is derived from the
financial performance of Lady Luck or from the value of shares of Lady Luck
Common Stock. Except as disclosed in SECTION 3.2(a)(ii) of the Lady Luck
Disclosure Schedule, there are no obligations, contingent or otherwise, of
Lady Luck or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any shares of Lady Luck Common Stock or the capital stock or
ownership interests of any Subsidiary or to provide funds to or make any
investment in an amount greater than $250,000 in the aggregate (in the form
of a loan, capital contribution or otherwise) in any such Subsidiary or any
other entity other than guarantees of bank obligations or indebtedness for
borrowed money of Subsidiaries entered into in the ordinary course of
business. All of the outstanding shares of capital stock (including shares
which may be issued upon exercise of outstanding options) or other ownership
interests of each of Lady Luck's Subsidiaries are duly authorized, validly
issued, fully paid and nonassessable and, except as disclosed in SECTION
3.2(a)(iii) of the Lady Luck Disclosure Schedule and except as required by
gaming industry regulations, all such shares and ownership interests are
owned by Lady Luck or another Subsidiary of Lady Luck, free and clear of all
security interests, liens, claims, pledges, agreements, limitations on Lady
Luck's voting rights, charges or other encumbrances or restrictions on
transfer of any nature.
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<PAGE>
(b) There are no bonds, debentures, notes or other indebtedness having
voting rights (or convertible into securities having such rights) in
connection with the Merger or the transactions contemplated by this
Agreement ("Voting Debt") of Lady Luck or any of its Subsidiaries issued and
outstanding, other than the debt securities disclosed in SECTION 3.2(b) of
the Lady Luck Disclosure Schedule. Except as set forth in SECTION 3.2(a) or
in this SECTION 3.2(b) or as reserved for future grants of options under the
Lady Luck Stock Option Plans as of the date hereof, (i) there are no shares
of capital stock of any class of Lady Luck, or any security exchangeable
into or exercisable for such equity securities, issued, reserved for
issuance or outstanding; (ii) except as set forth in SECTION 3.2(b) of the
Lady Luck Disclosure Schedule, there are no options, warrants, equity
securities, calls, rights, commitments or agreements of any character to
which Lady Luck or any of its Subsidiaries is a party or by which it is
bound obligating Lady Luck or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other ownership interests (including Voting Debt) of Lady Luck or
any of its Subsidiaries or obligating Lady Luck or any of its Subsidiaries
to grant, extend, accelerate the vesting of or enter into any such option,
warrant, equity security, call, right, commitment or agreement; and
(iii) except for the Stockholder Support Agreement being entered into on the
date hereof, there are no voting trusts, proxies or other voting agreements
or understandings with respect to the shares of capital stock of Lady Luck.
All shares of Lady Luck Common Stock subject to issuance as specified in
this SECTION 3.2(b) are duly authorized and, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall be validly issued, fully paid and nonassessable.
Section 3.3. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Lady Luck has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby by Lady Luck have been duly
authorized by all necessary corporate action on the part of Lady Luck,
subject only to the approval and adoption of this Agreement and the Merger
by Lady Luck's common stockholders holding at least 75% of the outstanding
shares of Lady Luck Common Stock. This Agreement has been duly executed and
delivered by Lady Luck and constitutes the valid and binding obligation of
Lady Luck, enforceable against Lady Luck in accordance with its terms.
(b) Other than as disclosed in SECTION 3.3(b) of the Lady Luck
Disclosure Schedule, the execution and delivery of this Agreement by Lady
Luck does not, and the consummation of the transactions contemplated hereby
will not, (i) conflict with, or result in any violation or breach of, any
provision of the Certificate of Incorporation or Bylaws of Lady Luck or the
comparable charter or organizational documents of any of its Subsidiaries,
(ii) result in any violation or breach of, or constitute (with or without
notice or lapse of time, or both) a default (or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
material benefit) under, or require a consent or waiver under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, contract or other agreement, instrument or obligation to which Lady
Luck or any of its Subsidiaries is a party or by which any of them or any of
their properties or assets may be bound, or (iii) subject to the
governmental filings and other matters referred to in SECTION 3.3(c),
conflict with or violate any permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Lady Luck or any of its Subsidiaries or any of its or their
properties or assets, except in the case of clauses (ii) and (iii) for any
such conflicts, violations, defaults, terminations, cancellations or
accelerations which (x) are not, individually or in the aggregate,
reasonably likely to have a Lady Luck Material Adverse Effect or (y) would
not prevent or materially delay the consummation of the Merger.
(c) Except as disclosed in SECTION 3.3(c) of the Lady Luck Disclosure
Schedule, no consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency, commission,
gaming authority or other governmental authority or
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instrumentality ("Governmental Entity") is required by or with respect to
Lady Luck or any of its Subsidiaries in connection with the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the pre-merger
notification report under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended ("HSR Act"), (ii) the filing of the Certificate of
Merger with respect to the Merger with the Secretary of State of the State
of Delaware, (iii) the filing of any Proxy Statement (as such term is
defined in SECTION 5.4(a) below) with the Securities and Exchange Commission
(the "SEC") in accordance with the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (iv) any approvals and filing of notices
required under any applicable gaming industry regulation, (v) such consents,
approvals, orders, authorizations, permits, filings or registrations related
to, or arising out of, compliance with statutes, rules or regulations
regulating the consumption, sale or serving of alcoholic beverages, and
(vi) such immaterial filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger.
Section 3.4. PUBLIC FILINGS; FINANCIAL STATEMENTS.
(a) None of Lady Luck's Subsidiaries is required to file forms, reports
and documents with the SEC. Lady Luck has filed with the SEC all reports,
schedules, forms, statements and other documents required to be filed by the
Securities Act of 1933, as amended (the "Securities Act") and the Exchange
Act since December 31, 1998. Except as set forth in SECTION 3.4(a) of the
Lady Luck Disclosure Schedule and except for matters otherwise corrected by
the subsequent filing with the SEC of an appropriate amendment prior to the
date of this Agreement, the reports, forms, documents filed by Lady Luck
with the SEC prior to the date of this Agreement (the "Lady Luck SEC
Reports") (including any financial statements filed as a part thereof or
incorporated by reference therein) (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Act and
the Exchange Act, as the case may be, and (ii) did not, at the time they
were filed (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing), contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such Lady Luck SEC Reports or necessary in order to make the
statements in such Lady Luck SEC Reports, in the light of the circumstances
under which they were made, not misleading.
(b) Except as set forth in SECTION 3.4(a), each of the consolidated
financial statements (including, in each case, any related notes) of Lady
Luck contained in the Lady Luck SEC Reports complied as to form in all
material respects with the applicable rules and regulations of the SEC with
respect thereto; was prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form
10-Q under the Exchange Act), and fairly presented the consolidated
financial position of Lady Luck and its Subsidiaries as of the dates, and
the consolidated results of its operations and cash flows for the periods,
indicated, except that the unaudited interim financial statements were or
are subject to normal and recurring year-end adjustments which, with respect
to interim periods since December 31, 1998, were not or are not expected to
be material in amount. The audited balance sheet of Lady Luck as of
December 31, 1998 is referred to herein as the "Lady Luck Balance Sheet."
The unaudited consolidated balance sheet and consolidated income statement
of Lady Luck as of and for the period ended June 30, 1999 are referred to
herein as the "Lady Luck Interim Financial Statements."
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Section 3.5. NO UNDISCLOSED LIABILITIES. Except as disclosed in the Lady
Luck SEC Reports or in SECTION 3.5 of the Lady Luck Disclosure Schedule, and
except for liabilities and obligations incurred since the date of the Lady Luck
Balance Sheet in the ordinary course of business consistent with past practices,
Lady Luck and its consolidated Subsidiaries do not have any liabilities accrued,
contingent or otherwise, of the type required to be reflected in financial
statements, including the notes thereto, in accordance with GAAP, and whether
due or to become due.
Section 3.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Lady Luck SEC Reports or in SECTION 3.6 of the Lady Luck Disclosure
Schedule, since the date of the Lady Luck Balance Sheet, Lady Luck and its
Subsidiaries have conducted their respective businesses only in the ordinary
course consistent with past practice, and there has not been (a) any event,
series of events, condition or series of conditions that has had a Lady Luck
Material Adverse Effect; (b) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to any of Lady Luck's 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 Lady
Luck or any of its Subsidiaries to any director or officer of Lady Luck or its
Subsidiaries of any increase in compensation, except in the ordinary course of
business consistent with prior practice, or as was required under employment
agreements in effect as of the date of the most recent financial statements
included in the Lady Luck SEC Reports, (ii) any granting by Lady Luck or any of
its Subsidiaries to any director or officer of any stock options, (iii) any
granting by Lady Luck or any of its Subsidiaries to any officer of any increase
in severance or termination pay, or (iv) any entry by Lady Luck or any of its
Subsidiaries into any employment, severance or termination agreement with any
director, officer or other employee, consultant or independent contractor; (e)
any material change in accounting methods, principles or practices of Lady Luck,
except insofar as may have been required by a change in GAAP; (f) any tax
election that individually or in the aggregate would be reasonably likely to
have a Lady Luck Material Adverse Effect; or (g) any settlement of pending or
threatened litigation involving Lady Luck or any of its Subsidiaries (whether
brought by a private party or a Governmental Entity) in amounts of $10,000 or
more.
Section 3.7. TAXES.
(a) For the purposes of this Agreement, a "Tax" or, collectively,
"Taxes," means any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, gains, franchise, withholding, payroll, recapture, employment,
excise, unemployment insurance, social security, business license,
occupation, business organization, stamp, environmental and property taxes,
together with all interest, penalties and additions imposed with respect to
such amounts.
(b) Lady Luck and each of its Subsidiaries have: (i) filed all federal,
state, local and foreign Tax returns and reports required to be filed by
them prior to the date of this Agreement (taking into account all applicable
extensions), and such Tax returns and reports (taking into account all
amendments thereto) are true, correct and complete in all material respects;
(ii) paid or accrued all Taxes due and payable; and (iii) paid or accrued
all Taxes for which a notice of assessment or collection has been received
(other than amounts being contested in good faith by appropriate proceedings
with the relevant taxing authority and for which adequate reserves in
accordance with GAAP are being maintained).
(c) Except as set forth in SECTION 3.7(c) of the Lady Luck Disclosure
Schedule, no Tax return of Lady Luck or any of its Subsidiaries is under
examination by the Internal Revenue Service (the "IRS") nor any other taxing
authority and neither the IRS nor any other taxing authority has asserted
any claim for Taxes, or to the actual knowledge of the executive officers of
Lady Luck, is threatening to assert any claims for Taxes. No material issues
relating to Taxes were raised by the
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relevant taxing authority in any completed audit or examination that can
reasonably be expected to recur in a later taxable period.
(d) Lady Luck and its Subsidiaries have withheld or collected and paid
over to the appropriate governmental authorities (or are properly holding
for such payment) all Taxes required by law to be withheld or collected.
There are no liens for Taxes upon the assets of Lady Luck or any of its
Subsidiaries (other than liens for Taxes that are not yet due or delinquent
or that are being contested in good faith by appropriate proceedings, with
the relevant taxing authority and for which adequate reserves in accordance
with GAAP are being maintained).
(e) Except as disclosed in SECTION 3.7(c) of the Lady Luck Disclosure
Schedule and Gamblers Supply Management Company ("GSMC"), which currently is
a subsidiary of Sodak Gaming, Inc. ("Sodak"), and which is expected to be
acquired by Lady Luck after the date hereof but prior to Closing pursuant to
the Miss Marquette Agreement (as herein defined), neither Lady Luck nor any
of its Subsidiaries is or has been a member of an affiliated group of
corporations filing a consolidated federal income tax return (or a group of
corporations filing a consolidated, combined or unitary income tax return
under comparable provisions of state, local or foreign tax law) other than a
group the common parent of which is or was Lady Luck or any Subsidiary of
Lady Luck.
(f) Neither Lady Luck nor any of its Subsidiaries has any obligation
under any agreement or arrangement with any other person with respect to
Taxes of such other person (including pursuant to Treas. Reg. Section
1.1502-6 or comparable provisions of state, local or foreign tax law) and
including any liability for Taxes of any predecessor entity.
(g) Except as disclosed in SECTION 3.7(g) of the Lady Luck Disclosure
Schedule, neither Lady Luck nor any of its Subsidiaries shall be required to
include in a taxable period ending after the Effective Time taxable income
attributable to income that accrued in a Tax period prior to the Effective
Time but that was not recognized in any such prior Tax period as a result of
the installment method of accounting, the completed contract or percentage
contract methods of accounting (including the look-back method under Section
460(b)(2) of the Code), the cash method of accounting or Section 481 of the
Code or any comparable provision of state, local, or foreign Tax law, or for
any other reason. Neither Lady Luck nor any of its Subsidiaries has made an
election under Section 341(f) of the Code.
(h) Except as disclosed in SECTION 3.7(h) of the Lady Luck Disclosure
Schedule, (i) there are no outstanding agreements or waivers extending, or
having the effect of extending, the statutory period of limitation
applicable to any Tax returns required to be filed with respect to Lady Luck
or any of its Subsidiaries, (ii) neither Lady Luck nor any of its
Subsidiaries, nor any affiliated group, within the meaning of Section 1504
of the Code, of which Lady Luck or any of its Subsidiaries is or has ever
been a member, has requested any extension of time within which to file any
Tax return, which return has not yet been filed, and (iii) no power of
attorney with respect to any Taxes has been executed or filed with any
taxing authority by or on behalf of Lady Luck or any of its Subsidiaries
which is still in effect.
(i) Except as set forth in SECTION 3.7(i) of the Lady Luck Disclosure
Schedule, no person who holds five percent or more of the stock of Lady Luck
is a "foreign person" as defined in Section 1445 of the Code.
Section 3.8. REAL PROPERTY, TITLE AND RELATED MATTERS.
(a) REAL PROPERTY. SECTION 3.8(a) of the Lady Luck Disclosure Schedule
sets forth a true and complete list as of the date of this Agreement of
(i) all contracts or agreements (including leases, ground leases, licenses,
options and other agreements) relating to Leased Real Property, and (ii) a
brief description of each piece of Owned Real Property. Lady Luck or a
Subsidiary of Lady Luck, as the case may be, has (A) good and marketable
title to all Owned Real Property and to all
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fixtures thereon, free and clear of any Encumbrances, except for Permitted
Encumbrances, and (B) except as set forth in SECTION 3.8(a) of the Lady Luck
Disclosure Schedule, the right to quiet enjoyment of the Leased Real
Property for the full term of the leases. Each lease or other contract
referred to in SECTION 3.8(a) of the Lady Luck Disclosure Schedule relating
to Leased Real Property is a valid contract or agreement enforceable against
Lady Luck or its Subsidiary, as the case may be, in accordance with its
terms and, to the knowledge of Lady Luck, against the other parties thereto.
To the knowledge of Lady Luck, there are no rights or options of any third
party to acquire such Leased Real Property or any ownership therein. Neither
Lady Luck nor any of its Subsidiaries are in default, nor have received any
written notice alleging that it or they are in default, under the leases,
ground leases, subleases, licenses, options or other agreements set forth in
SECTION 3.8(a) of the Lady Luck Disclosure Schedule relating to Leased Real
Property. To the knowledge of Lady Luck, no other party to any such leases,
ground leases, licenses, options or other agreements is in default
thereunder.
(b) DEFINITIONS. As used in this SECTION 3.8, the following terms shall
have the following meanings:
"Encumbrances" means all leases, mortgages, liens, pledges, charges,
options, encumbrances or defects of any kind or character.
"Leased Real Property" means all of the real property leased or subleased by
Lady Luck or a Subsidiary of Lady Luck as tenant, together with, to the extent
leased by Lady Luck, all buildings and other structures, facilities or
improvements currently or hereafter located thereon, all fixtures, systems,
equipment and personal property of Lady Luck attached or appurtenant thereto,
and all easements, licenses, rights and appurtenances related to the foregoing.
"Owned Real Property" means all of the real property owned by Lady Luck or
any of its Subsidiaries, together with all buildings and other structures,
facilities or improvements currently or hereafter located thereon, all fixtures,
systems, equipment and personal property attached or appurtenant thereto, and
all easements, licenses, rights and appurtenances relating to the foregoing.
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (i) Encumbrances that are disclosed in SECTION 3.8(a) of the
Lady Luck Disclosure Schedule, except for (A) any Encumbrance which would
prevent or impair in any way the use of the subject property for its current use
or (B) any Encumbrance which secures any indebtedness (other than indebtedness
that is otherwise permitted by this Agreement), (ii) liens for taxes,
assessments, fees and other governmental charges or levies which are not yet
due, payable or delinquent, (iii) such survey exceptions or reciprocal easement
agreements that do not prevent Lady Luck or its Subsidiaries, and would not
prevent the Surviving Corporation, from conducting Lady Luck's business as
applicable as currently conducted and which would not have a Lady Luck Material
Adverse Effect, (iv) the provisions of any federal, state or local law,
ordinance or regulation, provided the same are not violated by the current use
of the property, (v) Encumbrances imposed by law, such as materialmen's,
mechanics', carriers', workmen's and repairmen's liens and other similar liens
arising in the ordinary course of business, securing obligations that are not in
excess of $50,000 in the aggregate at any time, and (vi) pledges or deposits to
secure obligations under workers' compensation laws or similar legislation or to
secure public or statutory obligations.
Section 3.9. TITLE TO PERSONAL PROPERTY; LIENS. Lady Luck and each of its
Subsidiaries has sufficiently good and valid title to, or an adequate leasehold
interest in, its material tangible personal properties and assets (including all
river boats operated by Lady Luck and its Subsidiaries) in order to allow it to
conduct, and continue to conduct, its business as and where currently conducted.
SECTION 3.9 of the Lady Luck Disclosure Schedule is a full and complete list of
all leases, licenses and similar agreements relating to all tangible personal
property used by Lady Luck and its Subsidiaries in the conduct of their business
that is not owned by them. Except as disclosed in SECTION 3.9 of the Lady
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Luck Disclosure Schedule, all such material tangible personal assets and
properties are sufficiently free of liens to allow each of Lady Luck and its
Subsidiaries to conduct, and continue to conduct, its business as currently
conducted, and 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 have a Lady Luck Material Adverse
Effect.
Section 3.10. INTELLECTUAL PROPERTY. SECTION 3.10 of the Lady Luck
Disclosure Schedule lists all (i) trademark and service mark registrations and
applications owned by Lady Luck or any of its Subsidiaries, and (ii) trademark,
service mark and trade name license agreements to which Lady Luck or any of its
Subsidiaries is a party. Except as disclosed in SECTION 3.10 of the Lady Luck
Disclosure Schedule, all material trademarks, trademark applications, trade
names, service marks, trade secrets (including customer lists and customer
databases), copyrights, patents, licenses, know-how and other proprietary
intellectual property rights used in connection with the businesses of Lady Luck
and its Subsidiaries as currently conducted are without material restrictions or
material conditions on use, and there is no conflict with the intellectual
property rights of Lady Luck and its Subsidiaries therein or any conflict by
them with the intellectual property rights of others therein which, individually
or in the aggregate, would be reasonably likely to have a Lady Luck Material
Adverse Effect.
Section 3.11. AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Except as listed as an exhibit to the Lady Luck SEC Reports or as
disclosed in SECTION 3.11(a) of the Lady Luck Disclosure Schedule, as of the
date of this Agreement, neither Lady Luck nor any of its Subsidiaries is a
party to any oral or written (i) agreement, contract, indenture or other
instrument relating to Indebtedness (as defined below) in an amount
exceeding $100,000, (ii) partnership, joint venture or limited liability or
management agreement with any person, (iii) agreement, contract or other
instrument relating to any merger, consolidation, business combination,
share exchange or business acquisition, or for the purchase, acquisition,
sale or disposition of any material assets, of Lady Luck or any of its
Subsidiaries outside the ordinary course of business, (iv) agreement,
contract or other instrument relating to any "strategic alliances" (i.e.,
cross-marketing, affinity relationship, etc.), (v) contract, agreement or
commitment which materially restricts (geographically or otherwise) the
conduct of any line of business by Lady Luck or any of its Subsidiaries,
(vi) any contract, agreement or other instrument having as a party a
partnership, joint venture or limited liability company in which Lady Luck
or any of its Subsidiaries is a partner, joint venture party or member which
would otherwise satisfy the criteria in clauses (i), (iii), (iv) or (v) if
Lady Luck or any of its Subsidiaries were a party to such contract,
agreement or other instrument, (vii) any other contract, agreement or
commitment that requires annual or remaining payments in excess of $50,000
after the date hereof or (viii) any other contract, agreement or commitment
that is not cancelable by Lady Luck or its Subsidiaries without penalty on
30 days' notice or less (collectively, the "Lady Luck Material Contracts").
"Indebtedness" means any liability in respect of (A) borrowed money,
(B) capitalized lease obligations, (C) the deferred purchase price of
property or services (other than trade payables in the ordinary course of
business), and (D) guarantees of any of the foregoing incurred by any other
person other than Lady Luck or any of its Subsidiaries. Except as set forth
in SECTION 3.11(a) of the Lady Luck Disclosure Schedule and except for the
Lady Luck Las Vegas Agreement and the Consulting, Advisory and
Non-Competition Agreement described in SECTION 5.12, from and after the
Effective Time there will be no contract, agreement, other instrument or
commitment, written or oral, between the Surviving Corporation or any of its
Subsidiaries, on the one hand, and any former or present officer, director,
shareholder or employee of Lady Luck or any of its Subsidiaries.
(b) Except as disclosed in SECTION 3.11(b) of the Lady Luck Disclosure
Schedule, as of the date of this Agreement, (i) each of the Lady Luck
Material Contracts is valid and binding upon Lady Luck or any of its
Subsidiaries (and, to Lady Luck's best knowledge, on all other parties
thereto) in accordance with its terms and is in full force and effect,
(ii) there is no breach or
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violation of or default by Lady Luck or any of its Subsidiaries under any of
the Lady Luck Material Contracts, whether or not such breach, violation or
default has been waived, and (iii) no event has occurred with respect to
Lady Luck or any of its Subsidiaries which, with notice or lapse of time or
both, would constitute a breach, violation or default, or give rise to a
right of termination, modification, cancellation, foreclosure, imposition of
a lien, prepayment or acceleration under any of the Lady Luck Material
Contracts.
Section 3.12. LITIGATION. Except as specifically disclosed in the Lady
Luck SEC Reports or in SECTION 3.12 of the Lady Luck Disclosure Schedule,
(a) there is no action, suit or proceeding, claim, arbitration or investigation
against or affecting Lady Luck or any of its Subsidiaries pending, or as to
which Lady Luck or any of its Subsidiaries has received any written notice of
assertion against or affecting, Lady Luck or any of its Subsidiaries, or any
property or asset of Lady Luck or any of its Subsidiaries, before any court,
arbitrator, or administrative, governmental or regulatory authority or body,
domestic or foreign that is not fully covered by insurance subject to deductible
amounts under the applicable insurance policies; and (b) there is no judgment,
order, injunction or decree of any Governmental Entity outstanding against Lady
Luck or any of its Subsidiaries.
Section 3.13. ENVIRONMENTAL MATTERS.
(a) Except as disclosed in SECTION 3.13(a) of the Lady Luck Disclosure
Schedule: (i) Lady Luck and its Subsidiaries have complied with all
applicable Environmental Laws (as defined in SECTION 3.13(b)); (ii) the
properties currently owned, leased or operated by Lady Luck and its
Subsidiaries (including soils, groundwater, surface water, buildings or
other structures) are not contaminated with any Hazardous Substances (as
defined in SECTION 3.13(c)); (iii) neither Lady Luck nor its Subsidiaries
are subject to liability for any Hazardous Substance disposal or
contamination on any third party property; (iv) neither Lady Luck nor any of
its Subsidiaries has been associated with any release or threat of release
of any Hazardous Substance; (v) neither Lady Luck nor any of its
Subsidiaries has received any notice, demand, letter, claim or request for
information alleging that Lady Luck or any of its Subsidiaries may be in
violation of or liable under any Environmental Law; (vi) neither Lady Luck
nor any of its Subsidiaries is subject to any orders, decrees, injunctions
or other arrangements with any Governmental Entity or is subject to any
indemnity or other agreement with any third party relating to liability
under any Environmental Law or relating to Hazardous Substances; and
(vii) there are no circumstances or conditions involving Lady Luck or any of
its Subsidiaries that could reasonably be expected to result in any claims,
liability, investigations, costs or restrictions on the ownership, use or
transfer of any property of Lady Luck or any of its Subsidiaries pursuant to
any Environmental Law.
(b) For purposes of this Agreement, the term "Environmental Law" means
any federal, state, local or foreign law, regulation, order, decree, permit,
authorization, opinion, common law or agency requirement relating to:
(A) the protection, investigation or restoration of the environment, health
and safety, or natural resources, (B) the handling, use, presence, disposal,
release or threatened release of any Hazardous Substance, or (C) noise,
odor, wetlands, pollution, contamination or any injury or threat of injury
to persons or property.
(c) For purposes of this Agreement, the term "Hazardous Substance" means
any substance that is: (A) listed, classified or regulated pursuant to any
Environmental Law; (B) any petroleum product or by-product,
asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials or radon; or (C) any other
substance which is the subject of regulatory action by any Governmental
Entity pursuant to any Environmental Law.
Section 3.14. EMPLOYEE BENEFIT PLANS.
(a) SECTION 3.14(a) of the Lady Luck Disclosure Schedule contains a true
and complete list of all employee benefit plans (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), all employment, retention, change of control and
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severance agreements, and all bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, severance and
other similar employee benefit plans, programs, policies and agreements,
written or otherwise, in each case that is sponsored, maintained,
contributed to or required to be contributed to by Lady Luck or any of its
Subsidiaries or any trade or business (whether or not incorporated) which,
together with Lady Luck or any of its Subsidiaries, would be deemed a
"single employer" under Section 4001(b) of ERISA (an "ERISA Affiliate"), or
to which Lady Luck, any of its Subsidiaries or any ERISA Affiliate is a
party for the benefit of any current or former employee, consultant,
director or independent contractor of Lady Luck or any of its Subsidiaries
(together, the "Lady Luck Employee Plans").
(b) Lady Luck has delivered or made available to Buyer all documents
related to the Lady Luck Employee Plans, including, without limitation:
(i) true and complete copies of all Lady Luck Employee Plan documents and
any summary plan descriptions, summary annual reports and insurance
contracts relating thereto, (ii) detailed summaries of all unwritten Lady
Luck Employee Plans, (iii) true and complete copies of the most recent
financial statements, actuarial reports and annual reports with respect to
all Lady Luck Employee Plans for which financial statements, actuarial
reports or annual reports are required or have been prepared, (iv) the most
recent determination letter from the IRS (if applicable) for any such Lady
Luck Employee Plan, and (v) true and complete copies of any correspondence
during the twenty-four month period which ends on the date of this Agreement
between any Governmental Entity and Lady Luck or any of its Subsidiaries
relating to any of the documents described above.
(c) All Lady Luck Employee Plans conform in all material respects to,
and are being administered and operated in all material respects in
compliance with, the requirements of ERISA, the Code and all other
applicable laws, including applicable laws of foreign jurisdictions. Except
as set forth in SECTION 3.14(c) of the Lady Luck Disclosure Schedule, there
have not been any "prohibited transactions," as such term is defined in
Section 4975 of the Code or Section 406 of ERISA, involving any of the Lady
Luck Employee Plans that could subject Lady Luck or any of its Subsidiaries
to any penalties or taxes imposed under the Code or ERISA. SECTION
3.14(c) of the Lady Luck Disclosure Schedule sets forth a true and complete
list of all outstanding loans from Lady Luck or any of its Subsidiaries to
any current or former director, officer, employee or consultant which
exceeds $3,500 per employee. Loans to employees in the aggregate do not
exceed $25,000.
(d) Except as set forth in SECTION 3.14(d) of the Lady Luck Disclosure
Schedule, any Lady Luck Employee Plan that is intended to be qualified under
Section 401(a) of the Code and exempt from tax under Section 501(a) of the
Code has been determined by the IRS to be so qualified, has received a
favorable determination letter from the IRS covering any provision for which
the remedial amendment period (within the meaning of Section 401(b) of the
Code) has not expired, and such determination remains in effect and has not
been revoked. Nothing has occurred since the date of any such determination
that is reasonably likely to affect adversely such qualification or
exemption in any material respect or result in the imposition of material
excise taxes or income taxes on unrelated business income under the Code or
ERISA with respect to any Lady Luck Employee Plan. Except as set forth in
SECTION 3.14(d) of the Lady Luck Disclosure Schedule, all contributions or
other amounts payable by Lady Luck or any of its Subsidiaries with respect
to each Lady Luck Employee Plan have been paid or accrued in accordance with
GAAP, ERISA, the Code and the terms of each such plan.
(e) Except as set forth in SECTION 3.14(e) of the Lady Luck Disclosure
Schedule, none of Lady Luck, any of its Subsidiaries nor any ERISA Affiliate
(i) at any time in the past has had a current or contingent obligation to
contribute to any multiemployer plan (as defined in Section 3(37) of ERISA)
("Multiemployer Plan"), or (ii) at any time in the past has had any
liability, contingent or otherwise, under Title IV of ERISA or Section 412
of the Code. As of the date of
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this Agreement, no Lady Luck Employee Plan is subject to Title IV of ERISA
and no Lady Luck Employee Plan is a Multiemployer Plan.
(f) There are no pending, or to Lady Luck's knowledge, any threatened or
anticipated claims by or on behalf of any Lady Luck Employee Plan, or by or
on behalf of any individual participants or beneficiaries of any Lady Luck
Employee Plan, alleging any breach of fiduciary duty on the part of Lady
Luck or any of its Subsidiaries or any of the officers, directors or
employees of Lady Luck or any of its Subsidiaries under ERISA or any other
applicable Regulations, or claiming benefit payments other than those made
in the ordinary operation of such plans, or alleging any violation of any
other applicable laws. The Lady Luck Employee Plans are not the subject of
any investigation, audit or action by the Internal Revenue Service, the
Department of Labor or the Pension Benefit Guaranty Corporation ("PBGC").
(g) With respect to any Lady Luck Employee Plan that is an employee
welfare benefit plan (within the meaning of Section 3(l) of ERISA) (a "Lady
Luck Welfare Plan"), (i) each Lady Luck Welfare Plan for which contributions
are claimed as deductions under any provision of the Code is in compliance
in all material respects with all applicable requirements pertaining to such
deductions, and (ii) any Lady Luck Employee Plan that is a group health plan
(within the meaning of Section 4980B(g)(2) of the Code) complies, and in
each and every case has complied, in all material respects with all of the
requirements of ERISA and Section 4980B of the Code. No welfare benefit fund
(within the meaning of Section 419(e)(1) of the Code) or voluntary
employees' beneficiary association (within the meaning of Section
501(c)(9) of the Code) has been established or maintained in connection with
a Lady Luck Welfare Plan.
Section 3.15. COMPLIANCE.
(a) Except as disclosed in SECTION 3.15(a) of the Lady Luck Disclosure
Schedule, each of Lady Luck and its Subsidiaries, and each of their
respective directors, officers, persons performing management functions
similar to officers and, to Lady Luck's best knowledge, partners, hold all
permits, registrations, findings of suitability, licenses, variances,
exemptions, certificates of occupancy, orders and approvals of all
Governmental Entities (including all authorizations under Environmental
Laws, the Merchant Marine Act of 1920 and the Shipping Act of 1916,
Certificates of Inspection issued by the US Coast Guard and permits and
approvals issued by the United States Army Corps of Engineers and pursuant
to the Lady Luck Gaming Laws (as defined below)), necessary to conduct the
business and operations of Lady Luck and each of its Subsidiaries as
currently conducted, each of which is in full force and effect in all
material respects, and no notice of revocation has been received in respect
thereof, (the "Lady Luck Permits") except where the failure to hold such
permits, registrations certificates of occupancy, findings of suitability,
licenses, variances not issued or required pursuant to any Lady Luck Gaming
Law would not, individually or in the aggregate, be reasonably likely to
have a Lady Luck Material Adverse Effect. Except as disclosed in the Lady
Luck SEC Reports or as disclosed in SECTION 3.15(a) of the Lady Luck
Disclosure Schedule or as would not reasonably be likely to have a Lady Luck
Material Adverse Effect, the businesses of Lady Luck and its Subsidiaries
are not being conducted in violation of any law, ordinance or regulation of
any Governmental Entity. Except as disclosed in SECTION 3.15(a) of the Lady
Luck Disclosure Schedule, no investigation or review by any Governmental
Entity with respect to Lady Luck or any of its Subsidiaries is pending or,
to Lady Luck's best knowledge, threatened, nor has any Governmental Entity
indicated any intention to conduct the same.
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(b) The term "Lady Luck Gaming Laws" means any federal, state, local or
foreign statute, ordinance, rule, regulation, permit, consent, registration,
finding of suitability, approval, license, judgment, order, decree,
injunction or other authorization, including any condition or limitation
placed thereon, governing or relating to the current or contemplated casino
and gaming activities and operations of Lady Luck or any of its
Subsidiaries, including any applicable state gaming law and any federal or
state laws relating to currency transactions.
(c) Except as disclosed in SECTION 3.15(c) of the Lady Luck Disclosure
Schedule, (i) neither Lady Luck nor any of its Subsidiaries, nor any
director, officer, key employee or, to Lady Luck's best knowledge, partners
of Lady Luck or any of its Subsidiaries, has received any written claim,
demand notice, complaint, court order or administrative order from any
Governmental Entity in the past three years under, or relating to any
violation or possible violation of, any Lady Luck Gaming Laws which did or
would be reasonably likely to result in fines or penalties of $10,000 or
more; (ii) to the best knowledge of Lady Luck, there are no facts, which, if
known to the regulators under the Lady Luck Gaming Laws, could reasonably be
expected to result in the revocation, limitation or suspension of a license,
finding of suitability, registration, permit or approval of it or them, or
any officer, director or other person performing management functions
similar to an officer or partner, under any Lady Luck Gaming Laws; and
(iii) neither Lady Luck nor any of its Subsidiaries has suffered a
suspension or revocation of any material license, finding of suitability,
registration, permit or approval held under the Lady Luck Gaming Laws.
Section 3.16. LABOR MATTERS. Except as disclosed in SECTION 3.16 of the
Lady Luck Disclosure Schedule, (i) there are no proceedings pending between Lady
Luck or any of its Subsidiaries and any of their respective employees before the
Equal Employment Opportunity Commission, Department of Labor or any other
Governmental Entity; (ii) to the best knowledge of Lady Luck, there are no
activities or proceedings of any labor union to organize any non-unionized
employees; (iii) neither Lady Luck nor any of its Subsidiaries has received
notice of any alleged unfair labor practice charges and/or complaints pending
against Lady Luck or any of its Subsidiaries or any of their respective
representatives or employees before the National Labor Relations Board or any
current union representation questions involving employees of Lady Luck or any
of its Subsidiaries; (iv) Lady Luck's employment policies and practices comply
in all material respects with applicable law; and (v) there is no strike,
slowdown, work stoppage, labor dispute or lockout or, to the best knowledge of
Lady Luck, threat thereof, by or with respect to any employees of Lady Luck or
any of its Subsidiaries. Lady Luck and its Subsidiaries are not parties to any
collective bargaining agreements or other labor union contracts applicable to
individuals employed or previously employed by Lady Luck or any of its
Subsidiaries and, except as disclosed in SECTION 3.16 of the Lady Luck
Disclosure, no collective bargaining agreement or labor union contract is being
negotiated by Lady Luck or any such Subsidiary.
Section 3.17. INSURANCE. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by Lady Luck or any of its Subsidiaries are
listed on SECTION 3.17 of the Lady Luck Disclosure Schedule. At the Effective
Time, all such insurance policies, or replacements thereof, will be outstanding
and duly in force. To Lady Luck's knowledge, no notice of termination or
non-renewal of any such insurance policy has been received by Lady Luck.
Section 3.18. INFORMATION IN PROXY STATEMENT. The Proxy Statement, as such
term is defined in SECTION 5.4(a) below (or any amendment thereof or supplement
thereto), at the date mailed to Lady Luck's stockholders and at the time of the
Lady Luck Special Meeting, will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading; provided, however, that no
representation is made by Lady Luck with respect to statements made therein
based on information supplied in writing by Buyer or Merger Sub for
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inclusion in the Proxy Statement. The Proxy Statement will comply with the
provisions of the Exchange Act and the rules and regulations thereunder.
Section 3.19. STATE TAKEOVER STATUTE. The Board of Directors of Lady Luck
has approved the Merger, this Agreement and the Stockholder Support Agreement
and, assuming the accuracy of the representations contained in SECTION 4.5
hereof (without giving effect to the knowledge qualification therein), such
approval is sufficient to render inapplicable to the Merger, this Agreement, the
Stockholder Support Agreement and the transactions contemplated hereby and
thereby the provisions of Section 203 of the DGCL to the extent, if any, that
such Sections are applicable to the Merger, this Agreement, the Stockholder
Support Agreement and the transactions contemplated hereby and thereby. Except
for Section 203 of the DGCL, no "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation enacted under
any federal or state law applicable to Lady Luck is applicable to the Merger or
the other transactions contemplated hereby.
Section 3.20. VOTING REQUIREMENTS. The affirmative vote of the holders of
at least 75% of the outstanding shares of Lady Luck Common Stock entitled to
vote thereon at the Lady Luck Special Meeting with respect to the approval of
the Merger (the "Lady Luck Stockholder Approval") is the only vote of the
holders of any class or series of Lady Luck's capital stock necessary to approve
and adopt this Agreement and the transactions contemplated by this Agreement.
Section 3.21. YEAR 2000. Lady Luck has conducted an initial review of
whether its systems, processes, products, equipment and services are "Year 2000
Ready." Interim results of such review are disclosed in SECTION 3.21 of the Lady
Luck Disclosure Schedule. Lady Luck has provided to Buyer all reports prepared
by it or its outside consultants regarding its Year 2000 Readiness. "Year 2000
Ready" means that the systems, processes, products, equipment and services of
Lady Luck and each of its Subsidiaries (including any software embedded in any
products) ("Services"), will correctly identify, recognize and process
four-digit year dates, and the Services will: (a) continue to function properly
with regard to dates before, during and after the transition to year 2000
including, but not limited to, the ability to roll dates from December 31, 1999
to January 1, 2000 and beyond with no errors or system interruptions; (b)
accurately perform calculations and comparisons on dates that span centuries;
(c) accept and properly process dates that could span more than 100 years (e.g.,
calculating a person's age from their birth date and the current date); (d)
properly sort and sequence dates that span centuries; (e) understand that the
year 2000 starts on a Saturday; (f) recognize that February 29, 2000 is a valid
date and that the year 2000 has 366 days; (g) prohibit use of date fields for
any purpose other than to store valid dates; (h) preclude the use of 12/31/99 or
any other valid date to indicate something other than a date (e.g., 12/31/99 in
a date field means "do not ever cancel"); and (i) comply with and conform to the
specifications of American National Standard ANSI X3.30-1985, Representation for
Calendar Date and Ordinal Date for Information Interchange. Each of Lady Luck
and its Subsidiaries has made no express or implied warranties regarding the
Year 2000 Readiness of themselves, or any of their Services, except as disclosed
in SECTION 3.21 of the Lady Luck Disclosure Schedule.
Section 3.22. OPINION OF FINANCIAL ADVISOR. Lady Luck has received the
written opinion of Wasserstein Perella & Co., Inc. ("Wasserstein Perella") as of
the date of this Agreement to the effect that the Merger Consideration is fair
to the holders of Lady Luck Common Stock from a financial point of view.
Section 3.23. BROKERS. None of Lady Luck, any of its Subsidiaries nor any
of their respective officers, directors or employees have employed any broker,
financial advisor or finder, or incurred any liability for any brokerage fees,
commissions, finder's or other fees or expenses in connection with any pending
capital markets or strategic transaction or the transactions contemplated by
this Agreement, except, as disclosed in SECTION 3.23 of the Lady Luck Disclosure
Schedule and except that Lady Luck has retained Wasserstein Perella and Onyx
Partners, Inc. ("Onyx Partners") as its financial advisors and has delivered to
Buyer copies of all written agreements, and written descriptions of any oral
agreements, with Wasserstein Perella and Onyx Partners.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
Buyer and Merger Sub represent and warrant to Lady Luck that the statements
contained in this Article IV are true and correct, except as set forth herein
and in the disclosure schedule delivered by Buyer and Merger Sub to Lady Luck on
or before the date of this Agreement (the "Buyer Disclosure Schedule"). Any
reference in the Merger Agreement to Buyer's "knowledge" or "best knowledge," or
to "the best of Buyer's knowledge," or words of similar import, shall be deemed
a reference to the actual knowledge of any of the corporate officers of Buyer or
any of its Subsidiaries for all purposes. The Buyer Disclosure Schedule has been
prepared based upon the foregoing definition.
Section 4.1. ORGANIZATION OF BUYER AND MERGER SUB. Each of Buyer and
Merger Sub is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has all requisite corporate,
partnership or limited liability company power and authority to carry on its
business as now being conducted and as proposed to be conducted. Each of Buyer
and Merger Sub is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so qualified, licensed or in
good standing would not have a material adverse effect on the business,
properties, condition (financial or otherwise), prospects or results of
operations of Buyer and its Subsidiaries, taken as a whole (a "Buyer Material
Adverse Effect"). Buyer has delivered to Lady Luck a true and correct copy of
the Certificate of Incorporation and Bylaws of Buyer, in each case as amended to
the date of this Agreement.
Section 4.2. CAPITALIZATION OF MERGER SUB. The authorized capital stock of
Merger Sub consists of 2,500 shares of common stock, par value $.01 per share
("Merger Sub Common Stock"), of which 1,000 shares are issued and outstanding.
Buyer owns directly all the outstanding shares of Merger Sub Common Stock. The
outstanding shares of Merger Sub Common Stock are duly authorized, validly
issued, fully paid and assessable and free of any preemptive rights.
Section 4.3. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Buyer and Merger Sub have all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by Buyer and
Merger Sub have been duly authorized by all necessary corporate action on
the part of Buyer and Merger Sub. This Agreement has been duly executed and
delivered by Buyer and Merger Sub and constitutes the valid and binding
obligation of Buyer and Merger Sub, enforceable against each of them in
accordance with its terms.
(b) Other than as disclosed in SECTION 4.3(b) of the Buyer Disclosure
Schedule, the execution and delivery of this Agreement by Buyer and Merger
Sub do not, and the consummation of the transactions contemplated hereby
will not, (i) conflict with, or result in any violation or breach of, any
provision of the Certificate of Incorporation or Bylaws of Buyer or the
comparable charter or organizational documents of any of its Subsidiaries,
(ii) result in any violation or breach of, or constitute (with or without
notice or lapse of time, or both), a default (or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
material benefit) under, or require a consent or waiver under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, contract or other agreement, instrument or obligation to which Buyer
or any of its Subsidiaries is a party or by which any of them or any of
their properties or assets may be bound, or (iii) subject to the
governmental filings and other matters referred to in SECTION 4.3(c),
conflict with or violate any permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Buyer or any of its Subsidiaries or any of its or their
properties or assets, except in the case of clauses (ii) and (iii) for any
such conflicts, violations, defaults, terminations, cancellations or
accelerations which (x) are not, individually or in
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the aggregate, reasonably likely to have a Buyer Material Adverse Effect, or
(y) would not impair or materially delay the consummation of the Merger.
(c) Except as disclosed in SECTION 4.3(c) of the Buyer Disclosure
Schedule, no consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Buyer or any of its Subsidiaries in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby, other than (i) the filing of the pre-merger
notification report under the HSR Act, (ii) the filing of the Certificate of
Merger with respect to the Merger with the Secretary of State of the State
of Delaware, (iii) any approvals and filing of notices required under any
applicable gaming industry regulation, (iv) such consents, approvals,
orders, authorizations, permits, filings or registrations related to, or
arising out of, compliance with statutes, rules or regulations regulating
the consumption, sale or serving of alcoholic beverages, (v) such immaterial
filings and consents as may be required under any environmental, health or
safety law or regulation pertaining to any notification, disclosure or
required approval triggered by the Merger or the transactions contemplated
by this Agreement, and (vi) such other filings, consents, approvals, orders,
registrations and declarations as may be required under the laws of any
jurisdiction in which Buyer or any of its Subsidiaries conducts any business
or owns any assets the failure of which to obtain would not have a Buyer
Material Adverse Effect.
Section 4.4. BROKERS. None of Buyer, any of its Subsidiaries, nor any of
their respective officers, directors or employees have employed any broker,
financial advisor or finder or incurred any liability for any brokerage fees,
commissions, finder's or other fees, in connection with the transactions
contemplated by this Agreement, except that Buyer has retained CIBC World
Markets Corp. ("CIBC") as its financial advisor.
Section 4.5. OWNERSHIP OF SECURITIES. As of the date hereof, neither Buyer
nor, to Buyer's knowledge, any of its affiliates or associates (as such terms
are defined under the Exchange Act), (i) beneficially owns, directly or
indirectly, or (ii) is party to an agreement, arrangement or understanding
(other than this Agreement and the Stockholder Support Agreement) for the
purpose of acquiring, holding or disposing of, in each case, shares of Lady Luck
Common Stock representing at least 15% of the total number of outstanding shares
of Lady Luck Common Stock.
Section 4.6. PROXY STATEMENT. The information supplied by Buyer for
inclusion in the Proxy Statement (as defined in SECTION 5.4(a) below) shall not,
on the date the Proxy Statement is first mailed to stockholders of Lady Luck, at
the time of the Lady Luck Special Meeting (as defined in SECTION 5.5) and at the
Effective Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, omit to state any material fact necessary in order to make
the statements made in the Proxy Statement not false or misleading, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Lady Luck
Special Meeting which has become false or misleading.
Section 4.7. LITIGATION. Except as specifically disclosed by Buyer in the
reports, forms or documents filed by the Buyer with the SEC prior to the date of
this Agreement or as set forth in SECTION 4.7 of the Buyer Disclosure Schedule,
there is no (i) claim, action, suit or proceeding pending or, to the best of the
Buyer's knowledge, threatened against the Buyer or any of its Subsidiaries or
their respective properties, assets or operations before any court or
governmental or regulatory authority or body or arbitration tribunal or
(ii) outstanding judgment, order, writ, injunction or decree of any court,
governmental agency or arbitration tribunal in a proceeding to which the Buyer,
any of its Subsidiaries or any of their respective assets was or is a party,
which would prevent, impair or materially alter, delay or impair the Buyer's
ability to consummate the Merger or the other transactions contemplated hereby.
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Section 4.8. FINANCING. Attached under Section 4.8 of the Buyer Disclosure
Schedule are copies of all commitment letters from external financing sources
with respect to financing of the Merger and the transactions contemplated
thereby. Assuming that the external financing sources loan the amounts
designated for the transactions contemplated by this Agreement to the Buyer as
described in the commitment letter, the Buyer will have sufficient funds to
complete the transactions contemplated by this Agreement including the repayment
of the Lady Luck Notes and redemption of the Lady Luck Series A Preferred Stock.
ARTICLE V
COVENANTS
Section 5.1. CONDUCT OF BUSINESS OF LADY LUCK. Except as set forth in
SECTION 5.1 of the Lady Luck Disclosure Schedule, during the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, Lady Luck agrees as to itself and its
respective Subsidiaries (except to the extent that Buyer shall otherwise consent
in writing) to carry on its business in the usual, regular and ordinary course
in substantially the same manner as previously conducted, to pay its debts and
taxes when due subject to good faith disputes over such debts or taxes, to pay
or perform its other obligations when due, and, to the extent consistent with
such business, use all commercially reasonable efforts consistent with past
practices and policies to preserve intact its present business organization,
keep available the services of its present officers and key employees and
preserve its relationships with customers, suppliers, distributors and others
having business dealings with it. Without limiting the generality of the
foregoing, during the period from the date of this Agreement until the Effective
Time, Lady Luck agrees (except as otherwise contemplated by this Agreement or to
the extent that Buyer shall otherwise consent in writing) as follows:
(a) DIVIDENDS; CHANGES IN STOCK. Lady Luck shall not, and shall cause
its Subsidiaries not to, other than dividends and distributions by a direct
or indirect wholly owned Subsidiary of Lady Luck to its parent, (x) declare,
set aside or pay any dividends on, or make any other distributions (whether
in cash, stock or property) in respect of, any of its capital stock, (y)
split, combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock (other than the issuance of
shares of Lady Luck Common Stock upon the exercise of Lady Luck Options
outstanding on the date of this Agreement and in accordance with their
present terms), or (z) purchase, redeem or otherwise acquire any shares of
capital stock of Lady Luck or any of its Subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities.
(b) ISSUANCE OF SECURITIES. Lady Luck shall not, and shall cause its
Subsidiaries not to, issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than the issuance
of shares of Lady Luck Common Stock upon the exercise of Lady Luck Options
outstanding on the date of this Agreement and in accordance with their
present terms).
(c) GOVERNING DOCUMENTS. Lady Luck shall not, and shall cause its
Subsidiaries not to, amend its Certificate of Incorporation, Bylaws or other
comparable charter or organizational documents.
(d) NO ACQUISITIONS. Lady Luck shall not, and shall cause its
Subsidiaries not to, (i) enter into any agreement to acquire, or
(ii) subject to the provisions of SECTION 5.15, except for the transactions
contemplated by (x) the Stock Purchase Agreement by and among Lady Luck,
Sodak and GSMC (the "Miss Marquette Agreement") and (y) the Lady Luck Las
Vegas Agreement (which if consummated in accordance with the terms of the
Lady Luck Las Vegas Agreement shall be consummated immediately prior to the
Effective Time), acquire (including, without limitation,
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by merger, consolidation or acquisition of stock or assets), any business or
any interest therein, including through the acquisition of any interest in
any corporation, partnership, joint venture, association or other business
organization or division thereof.
(e) NO DISPOSITIONS. Lady Luck shall not, and shall cause its
Subsidiaries not to, sell, lease, license, mortgage or otherwise encumber or
otherwise dispose of any of its properties or assets.
(f) INDEBTEDNESS. Lady Luck shall not, and shall cause its Subsidiaries
not to, (y) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of Lady Luck or any
of its Subsidiaries, or guarantee any debt securities of another person,
other than short-term bank financing in the ordinary course of business
consistent with past practice and loans to employees in the amount of no
more than $3,500 per employee which are subject to a documented repayment
obligation and which for all employees of Lady Luck do not exceed an
aggregate of $25,000 outstanding at any time, or (z) make any loans,
advances or capital contributions to, or investments in, any other person.
(g) EMPLOYEE BENEFITS. Lady Luck shall not, and shall cause its
Subsidiaries not to, (A) adopt, enter into, terminate or amend any
employment, severance, retention or similar agreement or contract;
(B) negotiate or enter into any collective bargaining agreement or labor
union contract; (C) increase, in any manner, the compensation or fringe
benefits of, or pay any bonus to, any director, officer or employee (except
for normal increases of cash compensation or cash bonuses in the ordinary
course of business, consistent with past practice); (D) adopt or establish
any new benefit plan; or amend any existing benefit plan, including, without
limitation, the Lady Luck Employee Plans and the Lady Luck Welfare Plan,
except as required by law; or pay any benefit not provided for under any
Lady Luck Employee Plan or Lady Luck Welfare Plan; (E) adopt, establish or
amend any severance pay plan; or increase in any manner the severance or
termination pay of any officer or employee; (F) modify the provisions of any
Lady Luck Stock Option Plan, adjust or modify the terms of any outstanding
Lady Luck Options; or take any action to accelerate the vesting of, or cash
out rights associated with, any Lady Luck Option; or remove existing
restrictions in any Lady Luck Stock Option Plan or other plan or
arrangement; (G) grant any new awards under any Lady Luck Stock Option Plan
or other bonus, incentive, performance or compensation plan or arrangement,
including the grant of Lady Luck Options, stock appreciation rights,
stock-based or stock-related awards, performance units or restricted stock;
(H) take any action to fund or, in any other way secure, the payment of
compensation or benefits under any Lady Luck Employee Plan, Lady Luck
Welfare Plan or other employee plan, agreement, contract or arrangement; (I)
hire any individual as an employee who will be paid an annual base salary
that equals or exceeds $75,000 or who will be other than an "at will"
employee; or (J) hire any independent contractor or consultant, in each case
without the prior written consent of the Buyer.
(h) LEASES OR MATERIAL CONTRACTS. Lady Luck shall not, and shall cause
its Subsidiaries not to, (i) enter into any lease or agreement of any nature
that would obligate Lady Luck or its Subsidiary to pay $50,000 or more,
(ii) enter into any lease or agreement of any nature that is not terminable
by Lady Luck or its Subsidiary upon 90 days' notice without penalty, or
(iii) modify, amend or terminate any existing agreement of such type or
waive, release or assign any material rights or claims contained therein,
except in the ordinary course of business consistent with past practice.
(i) ACCOUNTING MATTERS. Lady Luck shall not, and shall cause its
Subsidiaries not to, make any material change in accounting methods,
principles or practices, except as required by GAAP or the applicable
regulations under the Securities Act and the Exchange Act.
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(j) TAX MATTERS. Lady Luck shall not, and shall cause its Subsidiaries
not to, make any material tax election, enter into any settlement or
compromise with respect to any material income tax liability or waive or
extend the statute of limitations in respect of any Taxes.
(k) SETTLEMENT. Lady Luck shall not, and shall cause its Subsidiaries
not to, settle any pending or threatened litigation involving Lady Luck or
any of its Subsidiaries (whether brought by or against a private party or a
Government Entity), except for settlements that, in the aggregate, involve
payments not covered by insurance, by Lady Luck or any Subsidiaries, of less
than $50,000 and which settle entire claims or causes of action arising out
of the same or similar facts and circumstances or do not impose any
restrictions on the business or operations of Lady Luck or any of its
Subsidiaries.
(l) CAPITAL EXPENDITURES. Except as set forth in SECTION 5.1(L) of the
Lady Luck Disclosure Schedule, Lady Luck, together with its Subsidiaries,
shall not make capital expenditures in excess of $50,000 individually or
$100,000 in the aggregate.
(m) RELATED PARTY TRANSACTIONS. Except pursuant to SECTION 5.1(N), Lady
Luck shall not, and shall cause its Subsidiaries not to, enter into or amend
the terms of any transaction of any nature whatsoever with its or its
Subsidiaries' directors, officers, employees, stockholders or their
respective affiliates.
(n) LADY LUCK HOTEL & CASINO. Lady Luck agrees, pursuant to the Amended
and Restated Purchase Agreement dated as of August 31, 1999, by and among
Lady Luck and Gemini, Inc. (d/b/ a Lady Luck Casino Hotel) ("Gemini"),
International Marco Polo's Services, Inc. ("IMPS"), and Andrew H. Tompkins
("Tompkins"), that such agreement will be amended concurrently with the
execution of this Agreement and with the approval of Buyer (as so amended,
the "Lady Luck Las Vegas Agreement") to provide that (i) the sale of all of
the outstanding capital stock of IMPS and the sale of those certain
trademarks, mailing lists and other intellectual property owned by Gemini
(the "Gemini Trademark Assets") that are related to the operation of the
Lady Luck Casino & Hotel located in Las Vegas, Nevada (the "Las Vegas
Hotel") can be consummated immediately prior to the Effective Time without
consummating the acquisition of the Las Vegas Hotel and related real
property and leases and Gemini stock, which provision shall become effective
only upon consummation of the Merger; (ii) the Lady Luck Las Vegas Agreement
will not be amended without the prior approval of Buyer; (iii) pursuant to
the Lady Luck Las Vegas Agreement, Lady Luck will provide an exclusive
perpetual royalty free license agreement to Gemini to use the Gemini
Trademark Assets in connection with the Las Vegas Hotel and will enter into
a marketing agreement with Gemini until such time as it is acquired by Lady
Luck pursuant to the Lady Luck Las Vegas Agreement, which provision shall
become effective only with consummation of the Merger; (iv) Lady Luck will
not consummate the transactions contemplated by the Lady Luck Las Vegas
Agreement prior to the Effective Time; and (v) for a period of thirty (30)
days following the date of this Agreement, Buyer shall have the opportunity
to conduct due diligence on Gemini and the Las Vegas Hotel; at the end of
that period, and effective if the Merger is consummated, Buyer may determine
that Lady Luck shall not acquire Gemini, IMPS, the Las Vegas Hotel or the
Gemini Trademark Assets. In the event this Agreement is terminated, the
provisions of the Lady Luck Las Vegas Agreement included as a result of the
amendment described above will be of no effect except as expressly stated
therein and the original Lady Luck Las Vegas Agreement shall continue in
effect. Tompkins shall, however, have the right to require Buyer to
consummate the acquisition of the Gemini Trademark Assets at the price and
on the terms provided in the Lady Luck Las Vegas Agreement and the Lady Luck
license agreement with IMPS shall be amended to give effect to Lady Luck's
ownership of the Gemini Trademark Assets.
(o) MAINTENANCE OF LAS VEGAS HOTEL. Pursuant to the amendment of the
Lady Luck Las Vegas Agreement referred to in SECTION 5.1(n), Lady Luck shall
be afforded the right to require, and pursuant to the Lady Luck Las Vegas
Agreement as so amended, Lady Luck shall use its best
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efforts to cause, the owners and operators of the Las Vegas Hotel to
maintain, at no expense to Lady Luck or any of its Subsidiaries, the
condition of the Las Vegas Hotel and its related facilities such that upon
the purchase and sale of the Las Vegas Hotel, the condition of the Las Vegas
Hotel and related facilities is at least as good as on the date hereof.
(p) INDEBTEDNESS AND PREFERRED STOCK. As directed by Buyer, Lady Luck
will, from time to time, take all actions (including the transmittal of
notices) as may be required from time to time in order to enable Buyer to
repay Lady Luck's outstanding 11-7/8% First Mortgage Notes due 2001 (the
"Lady Luck Notes") (and to obtain releases of the collateral securing the
Lady Luck Notes) and redeem Lady Luck's outstanding Lady Luck Preferred
Stock, in each case as of the Effective Time.
(q) GENERAL. Lady Luck shall not, and shall cause its Subsidiaries not
to, authorize any of, or commit or agree to take any of, the foregoing
actions.
Section 5.2. COOPERATION; NOTICE; CURE. Subject to compliance with
applicable law, from the date hereof until the Effective Time, each of Buyer and
Lady Luck shall confer on a regular and frequent basis with one or more
representatives of the other party to report on the general status of ongoing
operations. Each of Lady Luck and Buyer shall promptly notify the other in
writing of, and will use all commercially reasonable efforts to cure before the
Closing Date, any event, transaction or circumstance, as soon as practical after
it becomes known to such party, that causes or will cause any covenant or
agreement of Lady Luck or Buyer under this Agreement to be breached in any
material respect or that renders or will render untrue in any material respect
any representation or warranty of Lady Luck or Buyer contained in this
Agreement.
Section 5.3. NO SOLICITATION.
(a) From and after the date hereof, Lady Luck shall not, directly or
indirectly, through any officer, director, employee, financial advisor,
representative or agent of such party (i) solicit, initiate, or encourage
(including by way of furnishing information) or take any other action to
facilitate any inquiries or proposals that constitute, or could reasonably
be expected to lead to, a proposal or offer for a merger, consolidation,
business combination, sale of substantial assets, sale of shares of capital
stock (including, without limitation, by way of a tender or exchange offer)
or similar transaction involving Lady Luck or any of its Subsidiaries, other
than the transactions contemplated by this Agreement (any of the foregoing
inquiries or proposals being referred to in this Agreement as an
"Acquisition Proposal"), (ii) engage in negotiations or discussions with any
person (or group of persons) other than Buyer or its respective affiliates
(a "Third Party") concerning, or provide any non-public information to any
person or entity relating to, any Acquisition Proposal, or (iii) agree to or
recommend any Acquisition Proposal; provided, however, that until approval
of the Merger at the Lady Luck Special Meeting (as defined below), nothing
contained in this Agreement shall prevent Lady Luck or its Board of
Directors from furnishing non-public information to, or entering into
discussions or negotiations with, any person or entity in connection with an
unsolicited bona fide written Acquisition Proposal by such person or entity
or recommending an unsolicited bona fide written Acquisition Proposal to the
stockholders of Lady Luck, if (and only if) the Board of Directors of Lady
Luck reasonably believes in good faith that (i) such Acquisition Proposal,
after consultation with and receipt of advice from Wasserstein Perella, is
reasonably capable of being completed on substantially the terms proposed
and if consummated, would result in a transaction that would be superior
from a financial point of view to the holders of Lady Luck Common Stock
including consideration of the financial terms of the Miss Marquette Credit
Agreement provided to Lady Luck by Buyer (a "Superior Proposal"), and
(ii) after receipt of advice to such effect from outside legal counsel (who
may be Lady Luck's regularly engaged outside legal counsel), the Board of
Directors of Lady Luck, in the exercise of its fiduciary duties, determines
in good faith that the failure to take such action would be contrary to the
best interests of holders of Lady Luck Common Stock. Nothing in this
Agreement shall
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prevent Lady Luck from complying with the provisions of Rule 14e-2
promulgated under the Exchange Act with respect to an Acquisition Proposal.
(b) Lady Luck shall notify Buyer promptly (and no later than 48 hours)
after receipt by Lady Luck, or any officer, director, employee, financial
advisor, representative or agent of Lady Luck, of any Acquisition Proposal
or any request for non-public information in connection with an Acquisition
Proposal or for access to the properties, books or records of Lady Luck or
its Subsidiaries by any Third Party that informs Lady Luck that it is
considering making, or has made, an Acquisition Proposal. Such notice shall
be made orally and shall indicate the identity of the Third Party and the
terms and conditions of such proposal, inquiry or contract.
Section 5.4. PROXY STATEMENT.
(a) As promptly as practicable after the execution of this Agreement,
Lady Luck shall prepare and file with the SEC, in preliminary form, a proxy
statement to be sent to Lady Luck's common stockholders in connection with,
and for their consideration of, this Agreement and the Merger (the "Proxy
Statement").
(b) Lady Luck shall make all other necessary filings with respect to the
Merger under the Exchange Act, applicable state blue sky laws and the rules
and regulations thereunder.
Section 5.5. SPECIAL MEETING. Lady Luck shall duly call, give notice of,
convene and hold a special meeting of its common stockholders for the purpose of
voting upon this Agreement and the Merger (the "Lady Luck Special Meeting") as
promptly as reasonably practicable after the date hereof. Except as expressly
otherwise provided in SECTION 5.3 hereof or as otherwise required to comply with
the fiduciary duties of the Board of Directors of Lady Luck, Lady Luck shall,
through its Board of Directors, recommend to its stockholders adoption and
approval of this Agreement and the Merger and shall use all reasonable efforts
to solicit from its stockholders proxies in favor of such matters.
Section 5.6. ACCESS TO INFORMATION. Upon reasonable notice, Lady Luck (and
each of its Subsidiaries) shall afford to Buyer, and its officers, employees,
accountants, counsel and other representatives, reasonable access, during normal
business hours during the period prior to the Effective Time, to all its
personnel, properties, books, contracts, commitments and records, and during
such period, Lady Luck shall, and shall cause each of its Subsidiaries to,
furnish promptly to Buyer (a) copies of monthly financial reports and
development reports, (b) a copy of each report, schedule, registration statement
and other document filed or received by it during such period pursuant to the
requirements of federal or state securities laws, and (c) all other information
concerning its business, properties and personnel as Buyer may reasonably
request. Buyer will hold any such information furnished to it by Lady Luck in
confidence in accordance with the confidentiality agreement between the parties
(the "Confidentiality Agreement"). No information or knowledge obtained in any
investigation pursuant to this SECTION 5.6 shall affect or be deemed to modify
any representation or warranty contained in this Agreement or the conditions to
the obligations of the parties to consummate the Merger.
Section 5.7. GOVERNMENTAL APPROVALS.
(a) The parties hereto shall cooperate with each other and use all
commercially reasonable efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings,
to obtain as promptly as practicable without conditions, restrictions or
limitations that are more restrictive than those conditions, restrictions
and limitations applicable to Lady Luck on the date hereof, all permits,
registrations, licenses, findings of suitability, consents, variances,
exemptions, orders, approvals and authorizations of all third parties and
Governmental Entities which are necessary or advisable to consummate the
transactions contemplated by this Agreement ("Governmental Approvals"). Each
of the parties hereto and their respective officers, directors and
affiliates shall file within 60 days after the date hereof (without the
applicability of
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any grace periods set forth elsewhere in this Agreement and with Buyer's
efforts to complete and file regulatory applications under Lady Luck Gaming
Laws focused on expeditiously complying with the requirements to obtain the
Nevada approval), all required initial applications and documents in
connection with obtaining approvals under the Lady Luck Gaming Laws and
shall file initial applications and documents related to all other
Governmental Approvals within such time as necessary for such Governmental
Approvals to be granted on or before the effective date of the respective
approvals required under the Lady Luck Gaming Laws and shall act reasonably
and promptly thereafter in responding to additional requests in connection
therewith. Each of Lady Luck and Buyer (the "Notifying Party") will notify
the other reasonably promptly of the receipt of material comments or
requests from Governmental Entities relating to Governmental Approvals, and
will supply the other party with copies of all material correspondence
documents or descriptions of communications between the Notifying Party or
any of its representatives and Governmental Entities with respect to
Governmental Approvals; provided, however, that it shall not be required to
supply the other party with copies of correspondence, documents or
descriptions of communications relating to the personal applications of
individual applicants except for evidence of filing.
(b) Lady Luck and Buyer shall promptly advise each other upon receiving
any communication from any Governmental Entity whose consent or approval is
required for consummation of the transactions contemplated by this Agreement
which causes such party to believe that there is a reasonable likelihood
that any approval needed from a Governmental Entity will not be obtained or
that the receipt of any such approval will be materially delayed. Lady Luck
and Buyer shall take any and all actions reasonably necessary to vigorously
defend, lift, mitigate and rescind the effect of any litigation or
administrative proceeding adversely affecting this Agreement or the
transactions contemplated hereby or thereby, including, without limitation,
promptly appealing any adverse court or administrative order or injunction
to the extent reasonably necessary for the foregoing purposes.
(c) Notwithstanding any other provision of this Agreement (but without
limiting the obligations set forth in SECTIONS 5.7(a) and (b)), Buyer shall
have no obligation or affirmative duty under this SECTION 5.7 to cease or
refrain from the ownership of any assets or properties (including any of the
assets and properties to be acquired from Lady Luck) or the association with
any person or entity which association is material to the operations of
Buyer, whether on the date hereof or at any time in the future.
Section 5.8. PUBLICITY. Lady Luck and Buyer shall agree on the form and
content of the initial press release regarding the transactions contemplated
hereby and thereafter shall consult with each other before issuing, and use all
reasonable efforts to agree upon, any press release or other public statement
with respect to any of the transactions contemplated hereby and shall not issue
any such press release or make any such public statement prior to such
consultation, except as may be required by law or in connection with
presentations or discussions with or before gaming regulators.
Section 5.9. INDEMNIFICATION.
(a) From and after the Effective Time, Buyer agrees that it will, and
will cause the Surviving Corporation to, indemnify and hold harmless each
present and former director and officer of Lady Luck (the "Indemnified
Parties"), against any costs or expenses (including attorneys' fees),
judgments, fines, losses, claims, damages, liabilities or amounts paid in
settlement incurred in connection with any claim, action, suit, proceeding
or investigation, whether civil, criminal, administrative or investigative,
arising out of or pertaining to matters existing or occurring at or prior to
the Effective Time, whether asserted or claimed prior to, at or after the
Effective Time, to the fullest extent that Lady Luck would have been
permitted under the DGCL and its Certificate of Incorporation or Bylaws in
effect on the date hereof to indemnify and to provide advancement of
expenses to such Indemnified Party.
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(b) The provisions of this SECTION 5.9 are intended to be in addition to
the rights otherwise available to the current officers and directors of Lady
Luck by law, charter, statute, bylaw or agreement, and shall operate for the
benefit of, and shall be enforceable by, each of the Indemnified Parties,
their heirs and their representatives.
(c) For a period of six years after the Effective Time, Buyer shall
maintain or shall cause the Surviving Corporation to maintain in effect a
directors' and officers' liability insurance policy covering those persons
who are currently covered by Lady Luck's directors' and officers' liability
insurance policy (copies of which have been heretofore delivered by Lady
Luck to Buyer) with coverage in amount and scope at least as favorable as
Lady Luck's existing coverage; provided that in no event shall Buyer or the
Surviving Corporation be required to expend in the aggregate in excess of
200% of the annual premium currently paid by Lady Luck for such coverage;
and if such premium would at any time exceed 200% of the such amount, then
Buyer or the Surviving Corporation shall maintain insurance policies which
provide the maximum and best coverage available at an annual premium equal
to 200% of such amount.
Section 5.10. STOCKHOLDER LITIGATION. Lady Luck shall give Buyer the
reasonable opportunity to participate in the defense or settlement of any
stockholder litigation against Lady Luck and its directors relating to the
transactions contemplated hereby; provided, however, that no such settlement
shall be agreed to without Buyer's consent.
Section 5.11. EMPLOYEE BENEFITS.
(a) Buyer shall cause the Surviving Corporation to honor all written
employment, severance and termination agreements (including change in
control provisions) of the employees of Lady Luck and its Subsidiaries
provided to Buyer on or prior to the date of this Agreement and which are
identified in SECTION 3.14(a) of the Lady Luck Disclosure Schedule or which
may be otherwise agreed to by Buyer after the date hereof. Buyer agrees to
confer with Lady Luck and evaluate the appropriateness of severance and stay
bonuses for key employees of Lady Luck and its Subsidiaries.
(b) For purposes of determining eligibility for participation and
vesting under any employee benefit plan or arrangement of Buyer or the
Surviving Corporation, employees of Lady Luck and its Subsidiaries as of the
Effective Time shall receive service credit for service with Lady Luck and
any of its Subsidiaries as if such service had been rendered to the Buyer or
Surviving Corporation, but not for purposes of determining benefit accruals.
This SECTION 5.11 shall not obligate the Buyer or Surviving Corporation to
provide duplicate benefits to employees of Lady Luck and its Subsidiaries.
(c) Nothing in this Agreement is intended to create any right of
employment for any person or to create any obligation for Buyer or the
Surviving Corporation to continue any Plan of Lady Luck following the
Effective Time.
Section 5.12. OTHER AGREEMENTS. Buyer and Tompkins shall enter into a
Consulting, Advisory and Non-Competition Agreement in the form attached hereto
as EXHIBIT B, which shall become effective at the Effective Time.
Section 5.13. MISS MARQUETTE LOANS. Immediately prior to the consummation
of the transactions contemplated by the Miss Marquette Agreement, the parties
shall enter into a credit agreement in the form attached as EXHIBIT C (the
"Miss Marquette Credit Agreement"), relating to the making of a secured bridge
loan by Buyer in the principal amount of $16.3 million, for the purpose of
enabling Lady Luck to consummate the transactions contemplated by the
Miss Marquette Agreement.
Section 5.14. FURTHER ASSURANCES AND ACTIONS.
(a) Subject to the terms and conditions herein, each of the parties
hereto agrees to use its reasonable best efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to
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be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
by this Agreement, including, without limitation, (i) using their respective
reasonable best efforts to obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental
Entities and parties to contracts with each party hereto as are necessary
for consummation of the transactions contemplated by this Agreement, and
(ii) to fulfill all conditions precedent applicable to such party pursuant
to this Agreement.
(b) In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement or to
vest the Surviving Corporation with full title to all properties, assets,
rights, approvals, immunities and franchises of any of the parties to the
Merger, the proper officers and/or directors of Buyer, Lady Luck and the
Surviving Corporation shall take all such necessary action.
Section 5.15. PENDING ACQUISITIONS. To the extent not prohibited by
applicable law, Lady Luck shall consult with Buyer as to any pre-closing and
post-closing determinations and actions related to the Miss Marquette Agreement
and the Lady Luck Las Vegas Agreement, and agrees to exercise any rights it has,
and take or omit to take all actions to be taken or not taken by it, under such
agreements in accordance with the Buyer's reasonable directions and requests.
Section 5.16. ALLOCATION OF FUNDS. Subject to the financing contingency
set forth in SECTION 6.3(c) and Buyer's and Lady Luck's obligations under the
terms of the Las Vegas Agreement, immediately prior to the Effective Time, Buyer
agrees to allocate sufficient funds (i) to close both the transactions
contemplated thereunder or, (ii) if all approvals necessary to acquire the Las
Vegas Hotel and the capital stock of Gemini have not been granted at or before
the Effective Time, then to consummate at the Effective Time the acquisition of
the Gemini Trademark Assets and, at such times as permitted, the Las Vegas Hotel
and the capital stock of Gemini.
ARTICLE VI
CONDITIONS TO MERGER
Section 6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to this Agreement to effect
the Merger shall be subject to the satisfaction or waiver by each party prior to
the Effective Time of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger shall have been
approved by the stockholders of Lady Luck in the manner required under the
DGCL and the Certificate of Incorporation of Lady Luck.
(b) NO INJUNCTIONS. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any order, executive order, stay, decree,
judgment or injunction or statute, rule, regulation which is in effect and
which has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
(c) GOVERNMENTAL APPROVALS. All Governmental Approvals required to
consummate the transactions contemplated by this Agreement shall have been
obtained, all such approvals shall remain in full force and effect, all
statutory waiting periods in respect thereof (including, without limitation,
under the HSR Act) shall have expired and no such approval shall contain any
conditions, limitations or restrictions which Buyer reasonably determines in
good faith will have or would reasonably be expected to have a Lady Luck
Material Adverse Effect or a Buyer Material Adverse Effect. Notwithstanding
the foregoing, Lady Luck agrees that if the Nevada Gaming Commission has not
issued all approvals necessary to be obtained in connection with the
purchase and sale of the Las Vegas Hotel pursuant to the terms of the Lady
Luck Las Vegas Agreement (the "Nevada Approval") on or before the
fulfillment or waiver of all other conditions precedent
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to the parties' obligations to effect the Merger, it will, at Buyer's
request, for purposes of SECTION 6.1(c), consummate the purchase of the
Gemini Trademark Assets pursuant to the terms of the Lady Luck Las Vegas
Agreement for which the Nevada Approval is not required as described in
SECTION 5.1(n) and proceed with its obligations to effect the Merger.
Section 6.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF LADY LUCK. The
obligations of Lady Luck to effect the Merger is subject to the satisfaction of
each of the following conditions prior to the Effective Time, any of which may
be waived in writing exclusively by Lady Luck:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Buyer and Merger Sub set forth in this Agreement shall be true and
correct in all material respects (except for those qualified as to
materiality or a Buyer Material Adverse Effect, which shall be true and
correct) as of the date of this Agreement and, except to the extent such
representations explicitly speak as of an earlier date, as of the Closing
Date as though made on and as of the Closing Date. Lady Luck shall have
received a certificate signed on behalf of Buyer by the Chief Executive
Officer and the Chief Financial Officer of Buyer to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF BUYER. Buyer shall have performed in
all material respects all material obligations required to be performed by
it under this Agreement at or prior to the Closing Date including, without
limitation, that Buyer shall not be in default under the Miss Marquette
Credit Agreement, and Lady Luck shall have received a certificate signed on
behalf of Buyer by the Chief Executive Officer the Chief Financial Officer
of Buyer to such effect. Immediately prior to the Effective Time (i) Buyer
shall have, and shall have made available to Lady Luck, funds sufficient
under the Lady Luck Las Vegas Agreement (x) to close both the transactions
contemplated thereunder or, (y) if all approvals necessary to acquire the
Las Vegas Hotel and the capital stock of Gemini have not been granted on or
before the Effective Time, then to acquire the Gemini Trademark Assets and,
at such times as permitted, the Las Vegas Hotel and the capital stock of
Gemini and (ii) Buyer shall have caused Lady Luck to have consummated at the
Effective Time the acquisition of the Gemini Trademark Assets and, if all
necessary approvals have been obtained, the Las Vegas Hotel and the capital
stock of Gemini.
Section 6.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF BUYER. The
obligations of Buyer and Merger Sub to effect the Merger are subject to the
satisfaction of each of the following conditions prior to the Effective Time,
any of which may be waived in writing exclusively by Buyer:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Lady Luck set forth in this Agreement shall be true and correct in all
material respects (except for those qualified as to materiality or a Lady
Luck Material Adverse Effect, which shall be true and correct) as of the
date of this Agreement and, except to the extent such representations and
warranties explicitly speak as of an earlier date, as of the Closing Date as
though made on and as of the Closing Date. Buyer shall have received a
certificate signed on behalf of Lady Luck by the Chief Executive Officer and
a senior financial officer of Lady Luck to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF LADY LUCK. Lady Luck shall have
performed in all material respects all material obligations required to be
performed by it under this Agreement at or prior to the Closing Date. Buyer
shall have received a certificate signed on behalf of Lady Luck by the Chief
Executive Officer and a senior financial officer of Lady Luck to each such
effect.
(c) FINANCING. Buyer shall have obtained financing on terms
satisfactory to it and sufficient to allow Buyer to complete the
transactions contemplated by this Agreement, including the consummation of
the transactions contemplated in the Las Vegas Agreement the repayment of
the Lady Luck Notes and the redemption of the Lady Luck Series A Preferred
Stock.
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(d) DUE DILIGENCE REVIEW.
(i) Buyer shall have been reasonably satisfied with the results of
the Physical Investigation and Review (as defined below) of the
properties of Lady Luck and its Subsidiaries described below. Buyer and
its consultants shall have the right for a period of forty five (45) days
after the date hereof (the "Due Diligence Period") to enter all
properties of Lady Luck and its Subsidiaries during reasonable hours for
the purpose of inspection of the physical condition of the properties
including hull inspections, engine inspections, engineering surveys
(including inspection of the structural integrity of all improvements to
such properties) and environmental reports and such other environmental
and structural integrity tests and inspections as the Buyer may
reasonably desire, including a Phase II environmental inspection, that
includes sampling and report (collectively, the "Physical Investigation
and Review"). Any such inspections and tests shall be performed at the
sole cost of the Buyer. The Buyer will not create or cause to be created
any claim against or Lien for third party contractors upon the
properties, nor otherwise impair Lady Luck's estate or unreasonably
interfere in any manner with the regular conduct or business upon the
properties. The Buyer shall repair and restore to its original condition
any portion of the properties physically damaged, altered or disturbed as
a result of such inspections and shall indemnify and hold Lady Luck
harmless from any and all liability damage, claims or injury lawsuits
resulting from the acts or omissions of the Buyer, its employees, agents
or contractors related to such inspection of the properties. The Buyer's
obligations under this SECTION 6.3(d) shall survive the termination of
this Agreement;
(ii) Lady Luck shall, as promptly as practicable after the execution
of this Agreement, to the extent not previously provided and to the
extent in Lady Luck's possession or control, provide or cause to be
provided to the Buyer copies of all documents reasonably related to the
Physical Investigation and Review.
(e) NO MATERIAL ADVERSE CHANGE. No material adverse change shall have
occurred in the business, properties, condition (financial or otherwise),
prospects or results of operations of Lady Luck and its Subsidiaries, taken
as a whole, since the date of the Lady Luck Interim Financial Statements
other than any change arising out of, or resulting from, general economic
conditions in the United States or conditions generally affecting the gaming
industry in the United States.
ARTICLE VII
TERMINATION AND AMENDMENT
Section 7.1. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time (with respect to SECTIONS 7.1(b) through 7.1(l), by
written notice by the terminating party to the other party), whether before or
after approval of the matters presented in connection with the Merger by the
stockholders of Lady Luck:
(a) by mutual written consent of Lady Luck and Buyer; or
(b) by either Buyer or Lady Luck if the Merger shall not have been
consummated by December 31, 2000 (the "Outside Date"); provided that either
Buyer or Lady Luck may extend the Outside Date to June 30, 2001 by providing
written notice thereof to the other party between three (3) and five (5)
business days prior to and including December 31, 2000 if (i) the Merger
shall not have been consummated by such date because the requisite
Governmental Approvals required under SECTION 6.1(c) (not including the
Nevada Approval) have not been obtained and are still being pursued,
(ii) the party requesting such extension has not violated any of its
obligations under this Agreement in a manner that was the cause of or
resulted in the failure of the Merger to occur on or before December 31,
2000, and (iii) it is reasonably probable, based on, among other things, the
status of completed regulatory filings, scheduled regulatory meetings and
the
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advice of regulatory counsel to such party, that the requisite Governmental
Approvals will be obtained within such extension period; provided, further,
that the right to terminate this Agreement under this SECTION 7.1(b) shall
not be available to any party whose failure to fulfill any obligation under
this Agreement has been the cause or resulted in the failure of the Merger
to occur on or before such date; or
(c) by either Buyer or Lady Luck if a court of competent jurisdiction or
other Governmental Entity shall have issued an order, decree or ruling or
taken any other final action not subject to appeal, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger; or
(d) by Buyer or Lady Luck, if, at the Lady Luck Special Meeting
(including any adjournment or postponement), the requisite vote of the
stockholders of Lady Luck in favor of the approval and adoption of this
Agreement and the Merger shall not have been obtained; or
(e) by Buyer, if the Board of Directors of Lady Luck shall have (i)
withdrawn or modified its recommendation of this Agreement or the Merger,
(ii) recommended an Acquisition Proposal to the stockholders of Lady Luck,
or (iii) failed to reaffirm its recommendation of this Agreement and the
Merger upon the request of Buyer at any time, in the case of (i), (ii) and
(iii) in accordance with the proviso in SECTION 5.3; or
(f) by Lady Luck, as a result of the exercise of fiduciary duties by its
Board of Directors in accordance with SECTION 5.3; provided that no
termination under this SECTION 7.1(f) shall be effective until (i) the
termination fee required by SECTION 7.3(b) shall be paid, and (ii) at least
three Business Days shall have elapsed after delivery to Buyer of a written
notice from Lady Luck providing a complete and accurate description of
material terms of the Superior Proposal, including the identity of all
parties thereto; or
(g) by Buyer, upon breach of any representation, warranty, covenant or
agreement on the part of Lady Luck set forth in this Agreement, or if any
representation or warranty of Lady Luck shall have become untrue, in either
case such that the conditions set forth in SECTION 6.3(a) or SECTION
6.3(b) would not be satisfied ("Terminating Lady Luck Breach"); provided,
however, that, if such Terminating Lady Luck Breach is curable by Lady Luck
through reasonable best efforts within 30 days and for so long as Lady Luck
continues to exercise such reasonable best efforts during such 30 day
period, Buyer may not terminate this Agreement under this SECTION 7.1(g); or
(h) by Lady Luck, upon breach of any representation, warranty, covenant
or agreement on the part of Buyer set forth in this Agreement, or if any
representation or warranty of Buyer shall have become untrue, in either case
such that the conditions set forth in SECTION 6.2 would not be satisfied
("Terminating Buyer Breach"); provided, however, that, if such Terminating
Buyer Breach is curable by Buyer through reasonable best efforts within 30
days and for so long as Buyer continues to exercise such reasonable best
efforts during such 30 day period, Lady Luck may not terminate this
Agreement under this SECTION 7.1(h); or
(i) by Buyer, if (A) any state gaming authority revokes any of Lady
Luck's licenses or permits to operate any of its casino river boats, or
(B) one or more gaming regulatory authorities imposes fines or penalties
against, or requires other payments by, Lady Luck and/or any of its current
or former directors, officers, employees, agents or representatives (to the
extent that Lady Luck is responsible for any such fines, penalties or other
payments and such fines, penalties or other payments are not covered by
insurance policies of Lady Luck) relating to the actions of Lady Luck and/or
its current or former directors, officers, agents or representatives in an
aggregate amount or which impose restrictions upon operations in the case of
(A) or (B), as applicable, that would reasonably be expected to have a
material adverse effect on the business of any Lady Luck casino (with
materiality determined with respect to the enterprise value of such
business); or
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(j) by Buyer, if a material adverse change as described in SECTION
6.3(e) has occurred; or
(k) by Lady Luck, if Buyer has not filed its initial applications with
the Mississippi, Iowa and Nevada gaming authorities in connection with
obtaining required approvals within 60 days after the date of this
Agreement; provided, however, that Lady Luck shall not be permitted to
terminate the Agreement pursuant to this Section 7.1(k) until it has given
Buyer 30 days' notice of its intent to terminate this Agreement pursuant to
this SECTION 7.1(K), setting forth the initial applications that it believes
have not been filed, or if Buyer has filed all such initial applications and
documents; or
(l) by Buyer, if Lady Luck has not filed any required applications with
the Mississippi, Iowa and Nevada gaming authorities in connection with
obtaining any approvals required for Lady Luck within 60 days after the date
of this Agreement; provided, however, that Buyer shall not be permitted to
terminate this Agreement pursuant to this Section 7.1(l) until it has given
Lady Luck 30 days' notice of its intent to terminate this Agreement pursuant
to this SECTION 7.1(l), setting forth the initial applications that it
believes have not been filed, or if Lady Luck has filed all such initial
applications and documents; or
(m) by Buyer, if it is not satisfied with the Physical Investigation and
Review as described in SECTION 6.3(d).
Section 7.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in SECTION 7.1, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of Buyer, Merger
Sub or Lady Luck, or their respective officers, directors, stockholders or
affiliates, except as set forth in SECTION 7.3, and except that such termination
shall not limit liability for a willful breach of this Agreement; provided that
the provisions of this SECTION 7.2 and SECTION 7.3 of this Agreement and the
Confidentiality Agreement shall remain in full force and effect and survive any
termination of this Agreement.
Section 7.3. FEES AND EXPENSES.
(a) Except as set forth in this SECTION 7.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not
the Merger is consummated. Fees and expenses payable under this SECTION 7.3
to any party hereunder shall include all costs of collection and interest
from the date such payment is due at a rate per annum of London Interbank
Offered Rate plus 2%.
(b) Where an Acquisition Proposal exists or where an intention (whether
or not conditional) to make an Acquisition Proposal has been communicated to
Lady Luck or shall have been communicated directly to a director, Lady
Luck's counsel or financial advisors, Lady Luck shall pay Buyer a
termination fee of $2,500,000 via wire transfer of same-day funds on the
date of the earliest to occur one of the following events:
(i) the termination of this Agreement by Buyer or Lady Luck pursuant
to SECTION 7.1(d) provided the Acquisition Proposal has been communicated
to stockholders of Lady Luck generally;
(ii) the termination of this Agreement by Buyer pursuant to SECTION
7.1(e); or
(iii) the termination of this Agreement by Lady Luck pursuant to
SECTION 7.1(f).
Lady Luck's payment of a termination fee pursuant to this subsection
shall be the sole and exclusive remedy of Buyer against Lady Luck and any of
its Subsidiaries and their respective directors, officers, employees,
agents, advisors or other representatives with respect to the occurrences
giving rise to such payment; provided that this limitation shall not apply
in the event of a willful breach of this Agreement by Lady Luck.
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(c) In addition to the provisions of SECTION 7.3(b), if (i) Buyer or
Lady Luck terminates this Agreement pursuant to SECTION 7.1(d), (ii) Buyer
terminates this Agreement pursuant to SECTION 7.1(g) or SECTION 7.1(l),
(iii) Lady Luck or Buyer terminates this Agreement pursuant to SECTION
7.1(b) and the condition specified in SECTION 6.1(c) shall not have been
satisfied because of facts or circumstances relating to Lady Luck, its
employees or operations, or (iv) Buyer terminates this Agreement pursuant to
SECTION 7.1(j), Lady Luck shall immediately thereafter reimburse Buyer and
Merger Sub all fees and expenses incurred in connection with this Agreement
and the transactions contemplated hereby plus, in the case of (ii) or
(iii) above, a termination fee of $1,500,000.
(d) If (i) Lady Luck terminates this Agreement pursuant to SECTION
7.1(h) or SECTION 7.1(k) or (ii) Lady Luck or Buyer terminates this
Agreement pursuant to SECTION 7.1(b) and the condition specified in SECTION
6.1(c) shall not have been satisfied because of facts or circumstances
relating to Buyer, its employees or operations, Buyer shall immediately
thereafter reimburse Lady Luck all fees and expenses incurred in connection
with this Agreement and the transactions contemplated hereby plus a
termination fee of $1,500,000.
Section 7.4. AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of Lady Luck; but, after any such approval, no
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 7.5. EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, and (iii) waive compliance
with any of the agreements or conditions contained here. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. None of the representations, warranties, covenants and agreements
in this Agreement or in any instrument delivered pursuant to this Agreement
shall survive the Effective Time, except for the agreements contained in
SECTIONS 1.4, 1.5, 1.6, 1.7, 2.1, 2.2, 2.3, 2.4, 5.9, 5.11, 5.14 and the last
sentence SECTION 6.3(d)(i) and ARTICLE VIII. The Confidentiality Agreement shall
survive the execution and delivery of this Agreement.
Section 8.2. NOTICES. Any and all notices, demands or other communications
required or desired to be given hereunder by any party shall be in writing and
shall be validly given or made to another party if served personally, or by
facsimile or air courier, or deposited in the United States mail, certified or
registered, postage prepaid, return receipt requested. If such notice, demand or
other communications be served personally, or by facsimile or air courier,
service shall be conclusively deemed made at the time of such service. If such
notice, demand or other communications be given by mail, it shall be
conclusively deemed given three (3) days after the deposit thereof in the United
States
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<PAGE>
mail, addressed to the party to whom such notice, demand or other communication
is to be given as hereinafter set forth:
(a) if to Lady Luck, to:
Lady Luck Gaming Corporation
206 North Third Street
Las Vegas, Nevada 89101
Attention: Chief Executive Officer
with a copy to:
Swidler Berlin Shereff Friedman, LLP
919 Third Avenue
New York, New York 10022
Attention: Martin Nussbaum
(b) if to Buyer or Merger Sub, to:
Isle of Capri Casinos, Inc.
711 Dr. Martin Luther King, Jr. Boulevard
Biloxi, Mississippi 39530
Attention: Chief Executive Officer
with copies to:
Isle of Capri Casinos, Inc.
2200 Corporate Boulevard, N.W.
Suite 310
Boca Raton, Florida 33431
Attention: Allan B. Solomon
Mayer, Brown & Platt
190 South LaSalle Street, Suite 3100
Chicago, Illinois 60603
Attention: Paul W. Theiss
Section 8.3. INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
phrases "the date of this Agreement," "the date hereof," and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to
October 5, 1999.
Section 8.4. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 8.5. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement and all documents and instruments referred to herein (a) constitute
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (b) except as provided in SECTION 5.9, are not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder;
provided that the Confidentiality
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<PAGE>
Agreements shall survive the execution and delivery of this Agreement. Each
party hereto agrees that, except for the representations and warranties
contained in this Agreement, none of Buyer, Merger Sub or Lady Luck makes any
other representations or warranties, and each hereby disclaims any other
representations and warranties made by itself or any of its officers, directors,
employees, agents, financial and legal advisors or other representatives, with
respect to the execution and delivery of this Agreement or the transactions
contemplated hereby, notwithstanding the delivery or disclosure to any of them
or their respective representatives of any documentation or other information
with respect to any one or more of the foregoing.
Section 8.6. GOVERNING LAW. This Agreement shall be governed by and
construed, and the obligations, rights and remedies of the parties hereunder
shall be determined, in accordance with the laws of the State of Delaware
without reference to the conflicts of law or choice of law doctrine of such
state.
Section 8.7. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party, except that Merger Sub may assign its rights and
obligations hereunder to any direct or indirect wholly-owned subsidiary of
Buyer; provided that no such assignment shall relieve Buyer of its obligations
hereunder. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
Section 8.8. SEVERABILITY; ENFORCEMENT. Except to the extent that the
application of this SECTION 8.8 would have a Buyer Material Adverse Effect with
respect to Buyer or a Lady Luck Material Adverse Effect with respect to Lady
Luck, the invalidity of any portion hereof shall not affect the validity, force
or effect of the remaining portions hereof. If it is ever held that any covenant
hereunder is too broad to permit enforcement of such covenant to its fullest
extent, each party agrees that a court of competent jurisdiction may enforce
such covenant to the maximum extent permitted by law, and each party hereby
consents and agrees that such scope may be judicially modified accordingly in
any proceeding brought to enforce such covenant.
Section 8.9. SPECIFIC PERFORMANCE. Except as provided in SECTION 7.3(b),
the parties hereto agree that the remedy at law for any breach of this Agreement
will be inadequate and that any party by whom this Agreement is enforceable
shall be entitled to specific performance in addition to any other appropriate
relief or remedy. Such party may, in its sole discretion, apply to a court of
competent jurisdiction for specific performance or injunctive or such other
relief as such court may deem just and proper in order to enforce this Agreement
or prevent any violation hereof and, to the extent permitted by applicable laws,
each party hereto waives any objection to the imposition of such relief.
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<PAGE>
IN WITNESS WHEREOF, Isle of Capri Casinos, Inc., Isle Merger Corp. and Lady
Luck Gaming Corporation have caused this Agreement to be signed by their
respective duly authorized officers as of the date first written above.
ISLE OF CAPRI CASINOS, INC.
By: /s/ ALLAN B. SOLOMON
--------------------------------------
Its: Executive Vice President,
General Counsel and Secretary
ISLE MERGER CORP.
By: /s/ ALLAN B. SOLOMON
--------------------------------------
Its: Executive Vice President,
General Counsel and Secretary
LADY LUCK GAMING CORPORATION
By: /s/ RORY J. REID
--------------------------------------
Its: Senior Vice President
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<PAGE>
EXHIBIT A
STOCKHOLDER SUPPORT AGREEMENT
ATTACHED AS ANNEX III TO THIS PROXY STATEMENT
<PAGE>
EXHIBIT B
CONSULTING, ADVISORY AND NONCOMPETITION AGREEMENT
ATTACHED AS ANNEX IV TO THIS PROXY STATEMENT
<PAGE>
EXHIBIT C
CREDIT AGREEMENT, DATED AS OF OCTOBER 29, 1999, BETWEEN GAMBLERS SUPPLY
MANAGEMENT COMPANY, AS THE BORROWER, AND ISLE OF CAPRI CASINOS, INC., AS THE
LENDER, FILED AS EXHIBIT 10.2 OF LADY LUCK'S CURRENT REPORT ON FORM 8-K FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 18, 1999.
<PAGE>
ANNEX II
October 4, 1999
Board of Directors
Lady Luck Gaming Corporation
206 North Third Street
Las Vegas, NV 89101
Members of the Board:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders of the common stock, par value $.006 per
share (the "Shares"), of Lady Luck Gaming Corporation (the "Company") of the
consideration to be received by such holders pursuant to the terms of the
Agreement and Plan of Merger, dated as of October 4, 1999 (the "Merger
Agreement"), between Lady Luck, Isle of Capri Casinos, Inc. ("Parent") and Isle
Merger Corp., a wholly owned subsidiary of Parent ("Sub"). The Merger Agreement
provides for, among other things, a merger of Sub with and into Lady Luck
pursuant to which each share (other than any such Shares held in the treasury of
Lady Luck or owned by Parent, Sub or their respective subsidiaries) will be
converted into the right to receive $12.00 in cash (the "Merger"). The terms and
conditions of the Merger are set forth in more detail in the Merger Agreement.
In connection with rendering our opinion, we have reviewed a draft of the
Merger Agreement, and for purposes hereof, we have assumed that the final form
of this document will not differ in any material respect from the draft provided
to us. We have also reviewed and analyzed certain publicly available business
and financial information relating to Lady Luck for recent years and interim
periods to date, as well as certain internal financial and operating
information, including financial forecasts, analyses and projections prepared by
or on behalf of Lady Luck and provided to us for purposes of our analysis, and
we have met with management of Lady Luck to review and discuss such information
and, among other matters, Lady Luck's business, operations, assets, financial
condition and future prospects.
We have reviewed and considered certain financial and stock market data
relating to Lady Luck, and we have compared that data with similar data for
certain other companies, the securities of which are publicly traded, that we
believe may be relevant or comparable in certain respects to Lady Luck or one or
more of its businesses or assets, and we have reviewed and considered the
financial terms of certain recent acquisitions and business combination
transactions in the casino gaming industry specifically, and in other industries
generally, that we believe to be reasonably comparable to the Merger or
otherwise relevant to our inquiry. We have also performed such other financial
studies, analyses, and investigations and reviewed such other information as we
considered appropriate for purposes of this opinion.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to or discussed with us or publicly available, and we have
not assumed any responsibility for independent verification of any of such
information. We have also assumed and relied upon the reasonableness and
accuracy of the financial projections, forecasts and analyses provided to us,
and we have assumed that such projections, forecasts and analyses were
reasonably prepared in good faith and on bases reflecting the best currently
available judgments and estimates of Lady Luck's management. We express no
opinion with respect to such projections, forecasts and analyses or the
assumptions upon which they are based. In addition, we have not reviewed any of
the books and records of Lady Luck, or assumed any responsibility for conducting
a physical inspection of the properties or facilities of Lady Luck, or for
making or obtaining an independent valuation or appraisal of the assets or
liabilities of Lady Luck. We also have assumed that obtaining all regulatory and
other approvals and third party consents required for consummation
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<PAGE>
of the Merger will not have an adverse impact on Lady Luck, and we have assumed
that the transactions described in the Merger Agreement will be consummated
without waiver or modification of any of the material terms or conditions
contained therein by any party thereto. Our opinion is necessarily based on
economic and market conditions and other circumstances as they exist and can be
evaluated by us as of the date hereof.
It should be noted that in the context of our engagement by Lady Luck, we
did not solicit third party indications of interest in acquiring all or any part
of Lady Luck.
In the ordinary course of our business, we may actively trade the debt and
equity securities of Lady Luck and Parent for our own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities. We are acting as financial advisor to Lady Luck in
connection with the proposed Merger and will receive a fee for our services, a
significant portion of which is contingent upon the consummation of the Merger.
We have performed various investment banking services for Parent from time to
time in the past and have received customary fees for rendering such services.
Our opinion addresses only the fairness from a financial point of view to
the shareholders of Lady Luck of the consideration to be received by such
shareholders pursuant to the Merger Agreement, and we do not express any views
on any other term of the Merger. Specifically, our opinion does not address Lady
Luck's underlying business decision to effect the transactions contemplated by
the Merger Agreement.
It is understood that this letter is for the benefit and use of the Board of
Directors of Lady Luck in its consideration of the Merger and, except for
inclusion in its entirety in any registration statement or proxy statement
required to be circulated to shareholders of Lady Luck relating to the Merger,
may not be quoted, referred to or reproduced at any time or in any manner
without our prior written consent. This opinion does not constitute a
recommendation to any shareholder or as to how such holder should vote with
respect to the Merger, and should not be relied upon by any shareholder as such.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that as of the date hereof
the $12.00 per share cash consideration to be received by the shareholders of
Lady Luck pursuant to the Merger Agreement is fair to the shareholders of Lady
Luck from a financial point of view.
Very truly yours,
/s/ Wasserstein Perella & Co., Inc.
Wasserstein Perella & Co., Inc.
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<PAGE>
ANNEX III
STOCKHOLDER SUPPORT AGREEMENT
STOCKHOLDER SUPPORT AGREEMENT, dated as of October 5, 1999 (this
"Agreement"), by Andrew H. Tompkins ("Stockholder") to and for the benefit of
Isle of Capri Casinos, Inc., a Delaware corporation ("Buyer").
WHEREAS, as of the date hereof, Stockholder owns of record and beneficially
2,226,409 shares (such shares, together with any other voting or equity
securities of Lady Luck Gaming Corporation, a Delaware corporation ("Lady
Luck"), hereafter acquired by Stockholder prior to the termination of this
Agreement, being referred to herein collectively as the "Shares") of common
stock, par value $0.006 per share ("Lady Luck Common Stock");
WHEREAS, concurrently with the execution of this Agreement, Buyer, Isle
Merger Corp., a Delaware corporation and a wholly owned subsidiary of Buyer
("Merger Sub"), and Lady Luck are entering into an Agreement and Plan of Merger,
dated as of the date hereof (the "Merger Agreement"; capitalized terms used and
not otherwise defined herein shall have the respective meanings assigned to them
in the Merger Agreement), pursuant to which, upon the terms and subject to the
conditions thereof, Merger Sub will be merged with and into Lady Luck such that
Lady Luck will become a wholly owned subsidiary of Buyer (the "Merger"); and
WHEREAS, as a condition to the willingness of Buyer and Merger Sub to enter
into the Merger Agreement, Buyer has requested that the Stockholder agree, and
in order to induce Buyer and Merger Sub to enter into the Merger Agreement the
Stockholder is willing to agree, to vote in favor of adopting the Merger
Agreement and approving the Merger, upon the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereby agree, severally and not jointly, as follows:
Section 1. VOTING OF SHARES. Until the termination of this Agreement in
accordance with the terms hereof, Stockholder hereby agrees that, at the Lady
Luck Stockholders' Meeting or any other meeting of the stockholders of Lady
Luck, however called, and in any action by written consent of the stockholders
of Lady Luck, Stockholder will vote all of his Shares (a) in favor of adoption
of the Merger Agreement and approval of the Merger and the other transactions
contemplated by the Merger Agreement, (b) against any proposal for any
recapitalization, merger (other than the Merger), sale of assets or other
business combination between Lady Luck and any person or entity (other than
Buyer or any subsidiary of Buyer) or any other action or agreement that would
result in a breach of any covenant, representation or warranty or any other
obligation or agreement of Lady Luck under the Merger Agreement or which could
result in any of the conditions to the Merger Agreement not being fulfilled and
(c) in favor of any other matter necessary to the consummation of the
transactions contemplated by the Merger Agreement and considered and voted upon
by the stockholders of Lady Luck (or any class thereof). In addition,
Stockholder agrees that he will, upon request by Buyer, furnish written
confirmation, in form and substance reasonably acceptable to Buyer, of such
Stockholder's vote in favor of the Merger Agreement and the Merger. Stockholder
acknowledges receipt and review of a copy of the Merger Agreement.
Section 2. PROXY. Subject to any required approval under the Lady Luck
Gaming Laws, the Stockholder, by this Agreement, and for so long as this
Agreement shall remain in effect, does hereby constitute and appoint Buyer, or
any nominee of Buyer, with full power of substitution, as such Stockholder's
irrevocable proxy and attorney-in-fact to vote the Shares as indicated in
SECTION 1, in the
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<PAGE>
event such Stockholder fails to comply with his obligations under such section.
Stockholder intends this proxy to be irrevocable and coupled with an interest
and will take such further action and execute such other instruments as may be
necessary to effectuate the intent of this proxy and hereby revokes any proxy
previously granted by him with respect to its Shares.
Section 3. TRANSFER OF SHARES. Stockholder covenants and agrees that he
will not, without the consent of Buyer, prior to the termination of this
Agreement in accordance with the terms hereof, directly or indirectly,
(a) sell, assign, transfer (including by merger, testamentary disposition,
interspousal disposition pursuant to a domestic relations proceeding or
otherwise by operation of law), pledge, encumber or otherwise dispose of any of
the Shares, (b) deposit any of the Shares into a voting trust or enter into a
voting agreement or arrangement with respect to the Shares or grant any proxy or
power of attorney with respect thereto which is inconsistent with this Agreement
or (c) other than the Option (as defined below), enter into any contract, option
or other arrangement or undertaking with respect to the direct or indirect sale,
assignment, transfer (including by merger, testamentary disposition,
interspousal disposition pursuant to a domestic relations proceeding or
otherwise by operation of law) or other disposition of any Shares. The consent
of the Buyer shall not be unreasonably withheld with respect to (i) transfers in
connection with Stockholder's estate planning or (ii) testamentary transfers by
the Stockholder, in which in both cases, each transferee agrees to be bound by
the terms of this Agreement prior to the acceptance of any transfer. Buyer shall
be deemed to have consented to the transfer of 11,739 shares of Lady Luck Common
Stock to Alain Uboldi pursuant to his agreement with the Stockholder (the
"Uboldi Agreement").
Section 4. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER. Stockholder
hereby represents and warrants to Buyer with respect to himself and his
ownership of the Shares as follows:
a. OWNERSHIP OF SHARES. On the date hereof, the Shares are owned of
record and beneficially by Stockholder, are not subject to a pledge and do
not otherwise serve as collateral for any indebtedness. Upon the exercise of
the Option, except with respect to 11,739 shares of Lady Luck Common Stock
which are subject to the Uboldi Agreement, Buyer will receive good and
marketable title to the Shares, free and clear of all liens, claims,
encumbrances and security interests of any kind. Stockholder has sole power
and authority to vote and to sell the Shares, without restrictions, with
respect to all of the Shares.
b. POWER, BINDING AGREEMENT. Stockholder has the legal capacity, power
and authority to enter into and perform all of his obligations under this
Agreement. The execution, delivery and performance of this Agreement by
Stockholder will not violate any other agreement to which Stockholder is a
party, including, without limitation, any voting agreement, stockholders'
agreement, partnership agreement or voting trust. This Agreement has been
duly and validly executed and delivered by Stockholder and constitutes a
valid and binding obligation of Stockholder, enforceable against Stockholder
in accordance with its terms.
c. NO CONFLICTS. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated hereby will not,
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, any provision of any loan or credit agreement, note,
bond, mortgage, indenture, lease, or other agreement, instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Stockholder or any of his
properties or assets, other than such conflicts, violations or defaults or
terminations, cancellations or accelerations which individually or in the
aggregate do not materially impair the ability of Stockholder to perform his
obligations hereunder. No consent, approval, order or authorization of, or
registration, declaration, or filing with, any governmental entity is
required by or with respect to
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<PAGE>
the execution and delivery of this Agreement by Stockholder and the
consummation by Stockholder of the transactions contemplated hereby.
Section 5. OPTION TO PURCHASE SHARES. Stockholder hereby grants to Buyer
(i) an option to purchase that portion of the Shares equal to 34.99% of the
issued and outstanding shares of the Lady Luck Common Stock and (ii) effective
upon a breach by Stockholder of the provisions of Section 1, an option to
purchase the remainder of the Shares, except for Shares subject to the Uboldi
Agreement (each, an "Option" and collectively, the "Options"), at a price of
$12.00 per Share (or such higher price as Buyer may determine), until the
termination of this Agreement in accordance with Section 7 hereof. Buyer agrees
that if either of the Options are exercised (which exercise shall be evidenced
by payment for the Shares) and Buyer disposes of the Shares within six months
after the date of the exercise of such Option, Buyer will pay to Stockholder
one-half of the net profit (after reduction for Buyer's expenses incurred for
brokerage commissions (net of any reimbursements) in connection with the
exercise of such Option and disposition of such Shares) to Buyer from such
disposition (the "Profit Amount"), provided that the Profit Amount is not
subject to disgorgement under Section 16 of the Securities Exchange Act of 1934,
as amended. Solely for income tax purposes, Buyer and Stockholder shall treat
any portion of the Profit Amount paid to Stockholder as additional consideration
paid by Buyer to Stockholder for purchase of the Shares. Subject to any required
approval under the Lady Luck Gaming Laws, either Option may be exercised by
Buyer at any time upon two (2) business days' prior written notice to
Stockholder, against payment of the purchase price for the Shares that are
subject to such Option. Stockholder agrees to cooperate with Buyer at Buyer's
expense and use all commercially reasonable efforts to assist Buyer in obtaining
any approvals required under the Lady Luck Gaming Laws.
Section 6. NO SOLICITATION. Stockholder agrees that (i) in his individual
capacity, as opposed to his capacity as a director of Lady Luck, he will not,
nor will he authorize or permit any of his employees, agents and representatives
to, directly or indirectly, (a) initiate, solicit or encourage (including by way
of furnishing information) or take any other action to facilitate any inquiries
or proposals that constitute, or could reasonably be expected to lead to, an
Acquisition Proposal, (b) agree to or recommend any Acquisition Proposal, or (c)
engage in negotiations or discussions with a Third Party concerning, or provide
any non-public information to any person or entity relating to, any Acquisition
Proposal and (ii) he will notify Buyer as soon as possible (and in any event
within 48 hours) if any such inquiries or proposals are received by, any
information or document is requested from, or any negotiations or discussions
are sought to be initiated or continued with him, any of his affiliates or his
legal or financial advisors
Section 7. TERMINATION. This Agreement shall terminate upon the earliest
to occur of (i) the Effective Time, (ii) the termination of the Merger Agreement
pursuant to SECTION 7.1(a), SECTION 7.1(c), SECTION 7.1(e), SECTION 7.1(g),
SECTION 7.1(h), SECTION 7.1(i), SECTION 7.1(j), SECTION 7.1(k) or
SECTION 7.1(l) of the Merger Agreement, and (iii) December 31, 2000; provided
that the provisions of SECTION 9 of this Agreement shall survive any termination
of this Agreement; and provided further that no such termination shall relieve
any party of liability for a breach hereof prior to termination.
Section 8. ESCROW OF SHARES. On the date hereof, Stockholder has deposited
with Swidler Berlin Shereff Friedman, LLP (the "Escrow Agent") certificates
representing all of the Shares. Buyer and Stockholder agree that the Escrow
Agent shall hold the Shares as escrowee in accordance with the terms and
conditions of the Escrow Agreement, dated the date hereof, among Buyer,
Stockholder and the Escrow Agent.
Section 9. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
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Section 10. MISCELLANEOUS.
a. This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, both written and oral, between the parties
with respect thereto. This Agreement may not be amended, modified or
rescinded except by an instrument in writing signed by each of the parties
hereto.
b. If any term or other provision of this Agreement is invalid, illegal
or incapable of being enforced by any rule of law, or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain
in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the
fullest extent permitted by applicable law in a mutually acceptable manner
in order that the terms of this Agreement remain as originally contemplated
to the fullest extent possible.
c. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to the principles of
conflicts of law thereof.
d. This Agreement may be executed in counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed as of the date first written above.
ANDREW H. TOMPKINS
/s/ Andrew H. Tompkins
Agreed and Acknowledged:
ISLE OF CAPRI CASINOS, INC.
By: /s/ Allan B. Solomon
Its: EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY
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<PAGE>
ANNEX IV
CONSULTING, ADVISORY AND NONCOMPETITION AGREEMENT
This Consulting, Advisory and Noncompetition Agreement (this "Agreement") is
made as of October 5, 1999, by and between Isle of Capri Casinos, Inc., a
Delaware corporation ("Buyer"), and Andrew H. Tompkins, a Nevada resident
("Tompkins").
RECITALS
WHEREAS, concurrently with the execution and delivery of this Agreement,
Buyer is entering into an agreement and plan of merger with Lady Luck Gaming
Corporation, a Delaware corporation (the "Merger Agreement");
WHEREAS, Tompkins founded Lady Luck and is its Chairman;
WHEREAS, Tompkins owns all the shares of Gemini, Inc. ("Gemini") and
International Marco Polo's Services, Inc. ("IMPS") and owns the Lady Luck Las
Vegas Hotel & Casino (the "Hotel"). Buyer will have the right to acquire Gemini,
IMPS and the Hotel from Tompkins after the consummation of the Merger;
WHEREAS, Buyer desires to retain Tompkins' services as a consultant and
advisor to Buyer, and Tompkins desires to perform such services for Buyer;
NOW, THEREFORE, in consideration of the foregoing and the representations,
covenants and agreements set forth below, the parties, intending to be legally
bound, agree as follows:
1. EFFECTIVENESS AND INTERPRETATION. This Agreement shall become effective
upon the Effective Time of the Merger (as defined in the Merger Agreement). Upon
the earlier termination of the Merger Agreement, this Agreement shall terminate
automatically and be of no further force and effect. Until such date as the
Buyer has acquired the Hotel from Tompkins, this Agreement shall be interpreted
as not restricting Tompkins' operation of the Hotel or ownership and use of
Confidential Information (as defined below) as it relates to the Hotel and the
terms of this Agreement as it relates to the Hotel shall be effective only upon
Buyer's closing of the acquisition of the Hotel.
2. ACKNOWLEDGMENTS BY TOMPKINS. Tompkins acknowledges that (a) Tompkins
has occupied a position of trust and confidence with Lady Luck Gaming
Corporation, its subsidiaries and its affiliates including, without limitation,
Gemini and IMPS (collectively, "Lady Luck") prior to the date hereof and has
become familiar with the following, any and all of which constitute confidential
information of Lady Luck and the Hotel (collectively the "Confidential
Information," which in all instances does not include information to the extent
such information is reflected in publicly available filings with the Securities
and Exchange Commission and which is otherwise generally known by management in
the gaming industry in the jurisdictions in which Lady Luck and the Gemini have
casino properties): (i) any and all trade secrets concerning the business and
affairs of Lady Luck, data, know-how, processes, photographs, inventions and
ideas, customer lists, business and technical information, current and
anticipated customer requirements, price lists, market studies and plans,
business plans, systems, methods and information of Lady Luck and the Hotel and
any other information, however documented, of Lady Luck and the Hotel that is a
trade secret under Nevada, Iowa or Mississippi law; (ii) any and all information
concerning the business and affairs of Lady Luck and the Hotel (which includes
historical financial statements, financial projections and budgets, historical
and projected sales, capital spending budgets and plans, the names and
backgrounds of key personnel, personnel training and techniques and materials,
however documented); and (iii) any and all notes, analysis, compilations,
studies, summaries, and other material prepared by or for Lady Luck and the
Hotel containing or based, in whole or in part, on any information included in
the foregoing, (b) although the businesses of
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<PAGE>
Buyer, Lady Luck and the Hotel have regional customer bases, the expansion and
development opportunities are national and international in scope, (c) Buyer has
required that Tompkins make the covenants set forth in Sections 3 and 4 of this
Agreement in consideration of the Buyer entering into the Merger Agreement with
Lady Luck; (d) the provisions of Sections 3 and 4 of this Agreement are
reasonable and necessary to protect and preserve Lady Luck's and the Hotel's
business, and (e) Buyer and Lady Luck and the Hotel would be irreparably damaged
if Tompkins were to breach the covenants set forth in Sections 3 and 4 of this
Agreement.
3. CONFIDENTIAL INFORMATION. Tompkins acknowledges and agrees that all
Confidential Information known or obtained by Tompkins, whether before or after
the date hereof, is the property of Lady Luck or the Hotel, as applicable.
Therefore, Tompkins agrees that Tompkins will not, at any time, disclose to any
unauthorized persons or use for his own account (except as contemplated in
Section 1 with respect to the Hotel) or for the benefit of any third party any
Confidential Information, whether Tompkins has such information in Tompkins'
memory or embodied in writing or other physical form, without Buyer's written
consent, unless and to the extent that the Confidential Information is or
becomes generally known to and available for use by the public other than as a
result of Tompkins' fault or the fault of any other person bound by a duty of
confidentiality to Buyer or Lady Luck. Except with respect to the Hotel in the
event that Buyer does not acquire the Hotel at the Effective Time, Tompkins
agrees to deliver to Buyer at the Effective Time, and at any other time Buyer
may request, all documents, memoranda, notes, plans, records, reports, and other
documentation, models, components, devices, or computer software, whether
embodied in a disk or in other form (and all copies of all of the foregoing),
relating to the businesses, operations, or affairs of Lady Luck and the Hotel
and any other Confidential Information that Tompkins may then possess or have
under Tompkins' control.
4. NONCOMPETITION. In connection with Buyer entering into the Merger
Agreement and for the consideration to be paid under this Agreement, Tompkins
agrees that:
a. For a period of four years after the Effective Time of the Merger:
i. Tompkins agrees not to compete, directly or indirectly
(including as an officer, director, partner, employee,
consultant, independent contractor, or equity holder of any
entity) with Buyer or any of its subsidiaries in any way
concerning (including by permitting his name to be used in
connection with) the ownership, development or management of any
gaming operation or facility within a 75-mile radius of any
gaming operation or facility with respect to which Buyer or any
of its subsidiaries has an ownership interest or renders or is
actively negotiating to render management services; provided,
however, that Tompkins may purchase or otherwise acquire up to
(but not more than) 5% of any class of securities of any gaming
enterprise which owns a facility within such radius (but without
otherwise participating in the activities of such enterprise) if
such securities are listed on any national or regional
securities exchange or have been registered under Section
12(g) of the Securities Exchange Act of 1934. Notwithstanding
the preceding sentence, with regard to any gaming operation or
facility owned or managed by Buyer: (i) located in Las Vegas,
Nevada, such radius shall be a 25-mile radius; or (ii) with
respect to which Buyer has not filed regulatory applications or
publicly indicated an intention to conduct business in such
location prior to Tompkins entering into a written agreement for
gaming activities within a 75-mile radius of such location,
Tompkins shall not be deemed to be in breach of the provisions
hereof. Tompkins agrees that this covenant is reasonable with
respect to its duration, geographical area, and scope.
ii. Tompkins will not, directly or indirectly, either for himself
or any other person or entity, (A) induce or attempt to induce
any employee of Lady Luck or Buyer or any of their subsidiaries
or the Hotel to leave the employ of Lady Luck or Buyer or any
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of their subsidiaries or the Hotel, (B) in any way interfere
with the relationship between Lady Luck or Buyer and any
employee of Lady Luck or Buyer or their subsidiaries or the
Hotel, (C) employ, or otherwise engage as an employee,
independent contractor, or otherwise, any then current employee
of Lady Luck, Buyer or any of their subsidiaries or the Hotel,
or (D) induce or attempt to induce any customer, supplier,
licensee, or business relation to cease doing business with, or
in any way interfere with the relationship between any
customer, supplier, licensee, or business relation of Lady Luck
or Buyer or their subsidiaries or the Hotel.
iii. Tompkins will not, directly or indirectly, either for himself
or any other person or entity, solicit the business of any
person known to Tompkins to be a customer of Lady Luck or Buyer
or any of their subsidiaries or the Hotel, whether or not
Tompkins had personal contact with such person, with respect to
activities which compete in whole or in part with the Buyer;
b. In the event of a breach by Tompkins of any covenant set forth in
subsection 4(a) of this Agreement, the term of such covenant will be
extended by the period of the duration of such breach; and
c. Tompkins and Buyer hereby agree not to make any statements, in
writing or otherwise, that may disparage the reputation or character
of the other (and Gemini if Tompkins shall retain ownership) or any
of Buyer's or Gemini's subsidiaries, affiliates, officers, directors,
employees, agents, stockholders, partners, members, successors and
assigns both individually and in their official capacities with such
party at any time for any reason whatsoever, except as required by
law or as required in connection with any litigation or
administrative proceeding by or between Buyer and Tompkins in which
the party making such statement has been subpoenaed and is required
by law to give testimony and in any litigation or administrative
proceeding by and between Buyer and Tompkins.
5. CONSULTING DUTIES. Tompkins will have such consulting and advisory
duties as are assigned or delegated to him by the Chairman of Buyer and as
agreed to by Tompkins in his sole and absolute discretion. Tompkins will devote
such time, attention, skill, and energy to the business of Buyer as is
appropriate, and will cooperate fully with the Chairman of Buyer as reasonably
requested in the advancement of the best interests of Buyer. Nothing in this
Section 5, however, will (i) require Tompkins to travel outside of the Las Vegas
area at Buyer's request, or (ii) prevent Tompkins from engaging in additional
activities in connection with employment, consulting, personal investments and
community affairs that are not inconsistent with Tompkins' duties under this
Agreement.
6. COMPENSATION. As consideration for the covenants in Section 3 and
Section 4 of this Agreement and the duties to be performed by Tompkins pursuant
to Section 5 of this Agreement, Buyer will pay Tompkins the sum of Two Million
Dollars ($2,000,000) (the "Total Consideration") payable as follows:
a. The sum of One Hundred Twenty-Five Thousand Dollars ($125,000) upon
the Effective Time of the Merger; and
b. The sum of One Hundred Twenty-Five Thousand Dollars ($125,000) on the
last day of each calendar quarter beginning with the full calendar
quarter immediately following the quarter in which the Effective Time
occurs, until the Total Consideration has been paid in full.
In addition, Buyer will permit Tompkins and his immediate family to enroll
in any welfare benefit plans available to management of Buyer and its
subsidiaries at Tompkins' expense and subject to the enrollment and eligibility
requirements of such plans.
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7. REMEDIES. If Tompkins breaches the covenants set forth in Sections 3 or
4 of this Agreement, Buyer will be entitled to the following remedies:
a. Damages from Tompkins;
b. To offset against any and all amounts owing to Tompkins under
Subsection 6(b) of this Agreement any and all amounts which Buyer
claim under Subsection 7(a) of this Agreement;
c. In addition to its right to damages and any other rights it may have,
to obtain injunctive or other equitable relief to restrain any breach
or threatened breach or otherwise to specifically enforce the
provisions of Sections 3 and 4 of this Agreement; it being agreed
that money damages alone would be inadequate to compensate the Buyer
and would be an inadequate remedy for such breach; and
d. The rights and remedies of the parties to this Agreement are
cumulative and not alternative.
8. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon Buyer and
Tompkins and will inure to the benefit of Buyer and its affiliates, successors
and assigns and Tompkins and Tompkins' assigns, heirs and legal representatives.
9. WAIVER. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement will operate as a waiver of
such right, power, or privilege, and no single or partial exercise of any such
right, power, or privilege will preclude any other or further exercise of such
right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement can be discharged by one party, in whole or
in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement.
10. GOVERNING LAW AND JURISDICTION. This Agreement will be governed by the
laws of the State of Mississippi without regard to conflicts of laws principles.
11. SEVERABILITY. Whenever possible each provision and term of this
Agreement will be interpreted in a manner to be effective and valid but if any
provision or term of this Agreement is held to be prohibited by law or invalid,
then such provision or term will be ineffective only to the extent of such
prohibition or invalidity, without invalidating or affecting in any manner
whatsoever the remainder of such provision or term or the remaining provisions
or terms of this Agreement. If any of the covenants set forth in Section 4 of
this Agreement are held to be unreasonable, arbitrary, or against public policy,
such covenants will be considered divisible with respect to scope, time, and
geographic area, and in such lesser scope, time and geographic area, will be
effective, binding and enforceable against Tompkins.
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
13. SECTION HEADINGS; CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement unless otherwise specified.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
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14. NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt),
(b) sent by facsimile (with written confirmation of receipt), provided that a
copy is mailed by registered mail, return receipt requested, or (c) when
received by the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested), in each case to the appropriate addresses and
facsimile numbers set forth below (or to such other addresses and facsimile
numbers as a party may designate by notice to the other parties):
<TABLE>
<S> <C>
Tompkins: Andrew H. Tompkins
220 Stewart Avenue
Las Vegas, NV 89101
Facsimile No.: (702) 258-8175
with a copy to:
Swidler Berlin Shereff Friedman, LLP
919 Third Avenue
New York, NY 10022
Attention: Martin Nussbaum
Facsimile No.: (212) 891-9442
Buyer: Isle of Capri Casinos, Inc.
711 Dr. Martin Luther King, Jr. Boulevard
Biloxi, Mississippi 39530
Attention: Chief Executive Officer
Facsimile No.: (228) 435-5998
with a copy to:
Mayer Brown & Platt
190 South LaSalle Street
Chicago, IL 60603
Attention: Paul W. Theiss
Facsimile No.: (312) 701-7711
</TABLE>
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter of this Agreement and
supersedes all prior written and oral agreements and understandings between
Buyer and Tompkins with respect to the subject matter of this Agreement. This
Agreement may not be amended except by a written agreement executed by the party
to be charged with the amendment.
16. INDEMNIFICATION. Buyer agrees to indemnify Tompkins to the fullest
extent provided to any member of management of Buyer consistent with the
provisions of its Certificate of Incorporation and Bylaws against any liability
arising out of his performance of any obligations under Section 5 hereof.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
<TABLE>
<S> <C>
ISLE OF CAPRI CASINOS, INC. ANDREW H. TOMPKINS
By: /s/ Allan B. Solomon /s/ Andrew H. Tompkins
Its: EXECUTIVE VICE PRESIDENT, GENERAL
COUNSEL AND SECRETARY
</TABLE>
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ANNEX V
General Corporation Law of the State of Delaware 262. Appraisal Rights
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to Section 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Sections 252, 254, 257, 258, 263 or 264 of this
title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to Sections
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
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(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections
(d) and (e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are
available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholders shares shall deliver
to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such stockholder's shares. A proxy or vote against
the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall notify
each stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section 228
or Section 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of stock
of such constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective
date of the merger or consolidation, such notice shall be given by the
surviving or resulting corporation to all such holders of any class or
series of stock of a constituent corporation that are entitled to appraisal
rights. Such notice may, and, if given on or after the effective date of the
merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such
notice, demand in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the effective
date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the
merger or consolidation notifying each of the holders of any class or series
of stock of such constituent corporation that are entitled to appraisal
rights of the effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second notice to all
such holders on or within 10 days after such effective date; provided,
however, that if
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such second notice is sent more than 20 days following the sending of the
first notice, such second notice need only be sent to each stockholder who
is entitled to appraisal rights and who has demanded appraisal of such
holder's shares in accordance with this subsection. An affidavit of the
secretary or assistant secretary or of the transfer agent of the corporation
that is required to give either notice that such notice has been given
shall, in the absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance, a record
date that shall be not more than 10 days prior to the date the notice is
given, provided, that if the notice is given on or after the effective date
of the merger or consolidation, the record date shall be such effective
date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day
next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value , the
Court shall take
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into account all relevant factors. In determining the fair rate of interest, the
Court may consider all relevant factors, including the rate of interest which
the surviving or resulting corporation would have had to pay to borrow money
during the pendency of the proceeding. Upon application by the surviving or
resulting corporation or by any stockholder entitled to participate in the
appraisal proceeding, the Court may, in its discretion, permit discovery or
other pretrial proceedings and may proceed to trial upon the appraisal prior to
the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded such stockholder's appraisal rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the stock
(except dividends or other distributions payable to stockholders of record at a
date which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal of
such stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
V-4
<PAGE>
ANNEX VI
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our reports (and to all references to our Firm) included in or made
a part of this proxy statement dated December 15, 1999.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
December 13, 1999
VI-1
<PAGE>
PROXY LADY LUCK GAMING CORPORATION COMMON STOCK
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE CORPORATION FOR SPECIAL MEETING OF STOCKHOLDERS
----------------------------------------, 2000
The undersigned hereby acknowledge(s) receipt of the Notice of Special
Meeting of Stockholders and Proxy Statement, each dated [December 15, 1999], and
does constitute and appoint ANDREW H. TOMPKINS, ALAIN UBOLDI and RORY J. REID,
and each of them, with full power of substitution, attorneys and proxies to
represent and to vote all of the shares of common stock, par value $.006 per
share, of LADY LUCK GAMING CORPORATION that the undersigned would be entitled to
vote, with all powers the undersigned would possess if personally present, at
the Special Meeting of the Stockholders of LADY LUCK GAMING CORPORATION, to be
held at the Lady Luck Casino & Hotel, located at 206 North Third Street, Las
Vegas, Nevada 89101, on , 2000 at [11:00 o'clock a.m.], local time,
and at any adjournment(s) or postponement(s) thereof, on all matters coming
before said meeting, hereby revoking all proxies heretofore given with respect
to such stock.
THE SHARES REPRESENTED HEREBY WILL BE VOTED WITH THE INSTRUCTIONS CONTAINED
IN THIS PROXY. IF NO INSTRUCTION IS GIVEN, THE SHARES WILL BE VOTED "FOR"
PROPOSAL 1 AND PROPOSAL 2, ALL SAID ITEMS BEING FULLY DESCRIBED IN THE NOTICE OF
SUCH MEETING AND THE ACCOMPANYING PROXY STATEMENT, RECEIPT OF WHICH IS
ACKNOWLEDGED. THE UNDERSIGNED RATIFIES AND CONFIRMS ALL THAT SAID PROXIES OR
THEIR SUBSTITUTES MAY LAWFULLY DO BY VIRTUE HEREOF.
1. TO APPROVE THE PROPOSED AGREEMENT AND PLAN OF MERGER, DATED AS OF
OCTOBER 5, 1999 (THE "MERGER AGREEMENT"), AMONG LADY LUCK, ISLE OF CAPRI
CASINOS, INC. ("ISLE OF CAPRI"), AND ISLE MERGER CORP., A WHOLLY OWNED
SUBSIDIARY OF ISLE OF CAPRI ("MERGER SUB"), PURSUANT TO WHICH MERGER SUB
WILL BE MERGED WITH AND INTO LADY LUCK, THE SEPARATE CORPORATE EXISTENCE OF
MERGER SUB SHALL CEASE, AND LADY LUCK SHALL CONTINUE AS THE SURVIVING
CORPORATION AND AS A WHOLLY-OWNED SUBSIDIARY OF ISLE OF CAPRI (THE
"MERGER").
/ / FOR / / AGAINST / / ABSTAIN
2. TO APPROVE THE PROPOSAL TO GRANT THE LADY LUCK BOARD OF DIRECTORS
DISCRETIONARY AUTHORITY TO POSTPONE OR ADJOURN THE SPECIAL MEETING IN ORDER
TO SOLICIT ADDITIONAL VOTES TO APPROVE AND ADOPT THE MERGER AGREEMENT IF THE
SECRETARY OF LADY LUCK DETERMINES THAT THERE ARE NOT SUFFICIENT VOTES TO
APPROVE AND ADOPT THE MERGER AGREEMENT (THE "BOARD ADJOURNMENT AUTHORITY").
/ / FOR / / AGAINST / / ABSTAIN
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE ON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT(S) OR
POSTPONEMENT(S) THEREOF.
TO BE SIGNED ON OTHER SIDE
<PAGE>
(CONTINUED FROM FRONT)
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH THE
DIRECTIONS GIVEN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, IT
WILL BE VOTED IN FAVOR OF THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND
THE APPROVAL AND ADOPTION OF THE BOARD ADJOURNMENT AUTHORITY.
(SIGNATURE(S))
__________________________________
__________________________________
__________________________________
DATED: ___________________________
PLEASE SIGN EXACTLY AS NAME(S)
APPEARS HEREON, AND WHEN SIGNING
AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR
GUARDIAN, GIVE YOUR FULL TITLE AS
SUCH. IF THE SIGNATORY IS A
CORPORATION, A DULY AUTHORIZED
OFFICER MUST SIGN THE FULL
CORPORATE NAME. WHEN SHARES ARE
HELD BY JOINT TENANTS, BOTH SHOULD
SIGN.
